<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION NO. 333-4164
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GREENWICH AIR SERVICES, INC.
(Exact name of registrant as specified in its charter)
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
--------------------------
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<S> <C> <C>
DELAWARE 3724 58-1758941
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
--------------------------
P.O. BOX 522187
MIAMI, FLORIDA 33152
(305) 526-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ROBERT J. VANARIA
SENIOR VICE PRESIDENT OF ADMINISTRATION AND CHIEF FINANCIAL OFFICER
GREENWICH AIR SERVICES, INC.
P.O. BOX 522187
MIAMI, FLORIDA 33152
(305) 526-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
ANDREW HULSH, Esq.
Greenberg, Traurig, Hoffman, HOWARD L. SHECTER, Esq.
Lipoff, Rosen & Quentel, P.A. Morgan, Lewis & Bockius LLP
1221 Brickell Avenue 101 Park Avenue
Miami, Florida 33131 New York, New York 10178
(305) 579-0500 (212) 309-6000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same
offering. / / _____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _____________________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / _____________________
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP
STATE OR OTHER PRIMARY STANDARD CODE, AND TELEPHONE NUMBER,
JURISDICTION INDUSTRIAL INCLUDING AREA CODE, OF
OF CLASSIFICATION I.R.S. EMPLOYER REGISTRANT'S PRINCIPAL
NAME INCORPORATION CODE NUMBER IDENTIFICATION NUMBER EXECUTIVE OFFICES
- --------------------------- -------------- ------------------- --------------------- ------------------------------
<S> <C> <C> <C> <C>
Gas Turbine Corporation Delaware 3724 06-1391887 51 Bardley Park Rd.
P.O. Box 1258
East Granby, CT 06026
(305) 526-7000
Greenwich Turbine, Inc. Delaware 1629 06-1419037 51 Bardley Park Rd
P.O. Box 1258
East Granby, CT 06026
(305) 526-7000
GASI Engine Services Delaware 3724 -- P.O. Box 522187
Corporation Miami, FL 33152
(305) 526-7000
Gas Turbine Test Delaware 3724 11-3137992 51 Bardley Park Rd
Corporation P.O. Box 1258
East Granby, CT 06026
(305) 526-7000
Greenwich Foreign Sales Barbados 3724 -- P.O. Box 522187
Corporation Miami, FL 33152
(305) 526-7000
Greenwich Air Delaware 3724 -- P.O. Box 522187
Services -- Texas, L.P. Miami, FL 33152
(305) 526-7000
McAllen Components, L.P. Delaware 3724 -- P.O. Box 522187
Miami, FL 33152
(305) 526-7000
</TABLE>
<PAGE>
GREENWICH AIR SERVICES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF FORM S-1.
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ------------------------------------------------------------------ ----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus........................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges...................................... Prospectus Summary; Risk Factors; Selected
Historical Financial Data
4. Use of Proceeds........................................ Prospectus Summary; Use of Proceeds; Management's
Discussion and Analysis of Financial Condition and
Results of Operations
5. Determination of Offering Price........................ Underwriting
6. Dilution............................................... Not Applicable
7. Selling Security Holders............................... Not Applicable
8. Plan of Distribution................................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered............. Prospectus Summary; Capitalization; Dividend Policy;
Description of Notes
10. Interests of Named Experts and Counsel................. Legal Matters
11. Information with Respect to the Registrant............. Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; The Aviall
Acquisition; Concurrent Transactions;
Capitalization; Unaudited Pro Forma Combined
Financial Information; Selected Historical
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Industry Overview; Business;
Management; Certain Transactions; Principal
Stockholders; Description of Capital Stock;
Description of Certain Indebtedness; Description of
Notes; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities........................ Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
SUBJECT TO COMPLETION
JUNE 4, 1996
PROSPECTUS
$150,000,000
[LOGO]
GREENWICH AIR SERVICES, INC.
% SENIOR NOTES DUE 2006
The % Senior Notes Due 2006 (the "Notes") are being offered (the "Note
Offering") by Greenwich Air Services, Inc. ("Greenwich" or the "Company") and
will mature on , 2006. Interest on the Notes will be payable
semi-annually on and of each year, commencing
, 1996. The Notes will be redeemable at the option of the Company at
any time, in whole or in part, on or after , 2001, at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. Upon a Change in Control (as defined herein), holders of the
Notes may require the Company to purchase all or a portion of the Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase. See "Description of
Notes--Repurchase at the Option of Holders Upon a Change of Control."
The Notes will be senior unsecured obligations of the Company, will rank PARI
PASSU with all unsubordinated, unsecured indebtedness of the Company, and will
rank senior in right of payment to all existing and future subordinated
indebtedness of the Company. The Notes will also be guaranteed on a senior
unsecured basis by the Subsidiary Guarantors (as defined) and jointly secured on
a PARI PASSU basis with indebtedness under the New Credit Facility (as defined)
by a pledge of 65% of the capital stock of Aviall U.K. As of March 31, 1996,
after giving effect to the Note Offering and the Initial Drawdown (as defined)
under the New Credit Facility, the total consolidated indebtedness of the
Company would have been $239.6 million.
Concurrent with the Note Offering, the Company is offering 3,400,000 shares and
a selling stockholder is offering 600,000 shares of Class B Common Stock of the
Company (the "Class B Common Stock") to the public (the "Common Stock
Offering"). Consummation of the Note Offering is not contingent upon
consummation of the Common Stock Offering, and there can be no assurance that
the Common Stock Offering will be consummated. Consummation of the Note Offering
is contingent upon, and will occur simultaneously with, the consummation of the
New Credit Facility and the Aviall Acquisition (as defined).
SEE "RISK FACTORS" BEGINNING ON PAGE 12 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(2)
Per Note........................................ % % %
<S> <C> <C> <C>
Total........................................... $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from , 1996 to the date of
delivery.
(2) Before deducting expenses payable by the Company estimated to be
$ .
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made through the facilities of The Depository
Trust Company, on or about , 1996.
SALOMON BROTHERS INC
OPPENHEIMER & CO., INC.
DILLON, READ & CO. INC.
The date of this Prospectus is , 1996
<PAGE>
One of the Company's four 100,000-pound thrust test cells with computerized
real-time data retrieval and trim balance systems used to performance test high
by-pass engines. The Company operates a total of ten engine test cells.
IN CONNECTION WITH THE NOTE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) AND PRO FORMA
FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. THE CONSUMMATION
OF THE NOTE OFFERING WILL OCCUR CONCURRENTLY WITH, AND IS CONDITIONED UPON, THE
CONSUMMATION OF (I) GREENWICH'S ACQUISITION (THE "AVIALL ACQUISITION") OF THE
COMMERCIAL GAS TURBINE ENGINE SERVICE AND ENGINE COMPONENTS REPAIR BUSINESS OF
AVIALL, INC. AND AVIALL SERVICES, INC. (COLLECTIVELY, "AVIALL") AND (II) A
$175.0 MILLION SENIOR SECURED REVOLVING CREDIT FACILITY (THE "NEW CREDIT
FACILITY"). THE NOTE OFFERING IS ANTICIPATED TO OCCUR CONCURRENTLY WITH, BUT IS
NOT CONTINGENT UPON, THE COMMON STOCK OFFERING. IN THE EVENT THAT THE COMMON
STOCK OFFERING IS NOT CONSUMMATED, BUT THE NOTE OFFERING AND THE NEW CREDIT
FACILITY ARE CONSUMMATED, GREENWICH WILL PAY $80.4 MILLION OF THE PURCHASE PRICE
FOR THE AVIALL BUSINESS (AS DEFINED BELOW) BY THE DELIVERY OF UP TO $55.0
MILLION IN SHARES OF ITS CLASS B COMMON STOCK TO AVIALL, AND THE BALANCE WILL BE
PAID IN CASH THROUGH ADDITIONAL BORROWINGS UNDER THE NEW CREDIT FACILITY. ALL
INFORMATION IN THIS PROSPECTUS ASSUMES (I) A PUBLIC OFFERING PRICE IN THE COMMON
STOCK OFFERING OF $25 1/4 PER SHARE, THE CLOSING PRICE OF THE CLASS B COMMON
STOCK AS REPORTED BY THE NASDAQ NATIONAL MARKET ON MAY 10, 1996, (II) NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN CONNECTION WITH THE
COMMON STOCK OFFERING AND (III) THE DISTRIBUTION ON MAY 8, 1996 BY GREENWICH OF
ONE SHARE OF CLASS B COMMON STOCK FOR EACH SHARE OF GREENWICH'S CLASS A COMMON
STOCK OUTSTANDING ON APRIL 18, 1996. PRO FORMA INFORMATION IN THIS PROSPECTUS
GIVES EFFECT TO (I) THE NOTE OFFERING, (II) THE AVIALL ACQUISITION, (III)
INITIAL BORROWINGS UNDER THE NEW CREDIT FACILITY OF $74.4 MILLION (THE "INITIAL
DRAWDOWN") AND (IV) THE COMMON STOCK OFFERING, IN EACH CASE AS IF IT HAD
OCCURRED ON OCTOBER 1, 1994, UNLESS OTHERWISE INDICATED. ALL REFERENCES TO
FISCAL YEARS REFER TO THE FISCAL YEAR OF GREENWICH ENDED SEPTEMBER 30 UNLESS THE
CONTEXT OTHERWISE INDICATES.
ALL REFERENCES TO (I) COMMON STOCK INCLUDE BOTH THE COMPANY'S CLASS A COMMON
STOCK AND CLASS B COMMON STOCK, (II) "GREENWICH" MEAN GREENWICH AIR SERVICES,
INC. AND ITS CONSOLIDATED SUBSIDIARIES BEFORE GIVING EFFECT TO THE AVIALL
ACQUISITION, (III) THE "AVIALL BUSINESS" MEAN THE COMMERCIAL GAS TURBINE ENGINE
SERVICE AND ENGINE COMPONENTS REPAIR BUSINESS OF AVIALL BEFORE GIVING EFFECT TO
THE AVIALL ACQUISITION AND (IV) THE "COMPANY" MEAN GREENWICH AND ITS
CONSOLIDATED SUBSIDIARIES AFTER GIVING EFFECT TO THE AVIALL ACQUISITION.
THE COMPANY
On April 19, 1996, Greenwich and Aviall signed a definitive purchase
agreement for the acquisition by Greenwich of the gas turbine engine service and
engine components repair business of Aviall. The combination of Greenwich and
the Aviall Business will create the largest and most diversified independent gas
turbine engine repair and overhaul company in the world. On a pro forma basis,
the Company would have had combined sales of $701.1 million and EBITDA (as
defined below) of $63.1 million in fiscal 1995.
GREENWICH
Greenwich is a leading independent provider of repair and overhaul services
for gas turbine aircraft engines used to power Boeing 707, 727, 737 and 747;
McDonnell Douglas DC-8, DC-9, DC-10 and MD-80; Airbus A-300; Lockheed L-1011;
and a variety of military aircraft. Greenwich also services aeroderivative
engines used in a variety of industrial and marine applications. In addition,
Greenwich manages government and military service and maintenance programs and
provides for the sale and refurbishment of gas turbine power plants (with
electrical power output of up to 120 megawatts) in various countries around the
world.
Greenwich provides services to more than 400 customers including passenger
airlines such as Carnival Airlines, Continental Airlines and VASP Brazilian
Airlines; freight and package air carriers such as Emery Worldwide Airlines and
United Parcel Service; banks and leasing companies such as The CIT Group and
International Air Leases; utilities and industrial users such as Commonwealth
Edison, Dow Chemical and Southern California Gas; and military and government
programs such as those involving the United States government, Boeing and
Lockheed Martin. Greenwich's principal engine repair,
3
<PAGE>
overhaul and testing facilities are located at Miami International Airport,
Miami, Florida; Bradley International Airport, East Granby, Connecticut; JFK
International Airport, New York, New York; and Westover Airport, Chicopee,
Massachusetts. Greenwich's net sales have increased from $75.8 million in fiscal
1991 to $196.3 million in fiscal 1995.
THE AVIALL BUSINESS
The Aviall Business is the leading independent provider of gas turbine
aircraft engine maintenance and engine components repair services. The Aviall
Business provides repair and overhaul services for gas turbine engines used to
power Boeing 727, 737, 747 and 767; McDonnell Douglas DC-9, DC-10, MD-11, MD-80
and MD-90; and Airbus A-300, A-319, A-320, A-321, A-330 and A-340 aircraft, and
also services turboprop engines predominantly used by regional air carriers. The
primary customer base of the Aviall Business includes major and regional
commercial air and freight and package carriers such as America West, British
Airways, Continental Airlines, Federal Express, Southwest Airlines and USAir.
The engine repair and overhaul operations of the Aviall Business are located in
Dallas, Texas; Fort Worth, Texas; and Prestwick, Scotland, and its components
repair operations are located in McAllen, Texas.
Aviall's engine repair and overhaul operations date back to 1932, and in
1955, it became the world's first major independent gas turbine engine repair
facility. These operations have been owned by Aviall since Aviall was spun-off
from Ryder System, Inc. ("Ryder") in 1993. The Aviall Business' net sales have
increased to $504.8 million in 1995 from $482.9 million in 1993. The Aviall
Business has spent in excess of $84.0 million over the last five calendar years
to build state-of-the-art engine repair and overhaul facilities and to develop
programs designed to provide the fastest overhaul turnaround time in the engine
repair and overhaul industry. However, its operating income has declined
significantly over this period. These declines in profitability can be
attributed to a variety of factors, including unfavorable pricing granted to
certain customers, inefficiencies in its overhaul operations, expenses
associated with reengineering its facilities, and significant costs and
penalties on specific contracts where the Aviall Business was unable to meet
contractual requirements.
THE INDUSTRY
The Company believes that the worldwide market for aircraft gas turbine
engine repair and overhaul services is approximately $6.5 billion. Growth of the
engine repair and overhaul market is primarily driven by the activity of the
commercial aviation industry. Such market is projected to grow over the next ten
years at an annual rate of 4% in North America, 8% in the Asia-Pacific region
and 6% in Latin America. Approximately 55% of this market is currently serviced
by operators of the engines, principally major commercial airlines, for their
own engine needs. The remaining gas turbine engines are serviced by commercial
airlines, the original equipment manufacturers ("OEMs") and by a limited number
of independent operators, including the Company. Commercial airlines, OEMs and
independent operators compete on the ability to provide services tailored to
each customer's requirements, turnaround times, breadth of services offered and
price.
The repair and overhaul of aircraft engines is regulated by governmental
agencies throughout the world, including the Federal Aviation Administration
(the "FAA") and the British Civil Aviation Authority (the "BCAA"), and is
supplemented by guidelines established by OEMs which generally require that
engines be overhauled and certain engine components and parts be replaced after
a certain number of flight hours or cycles (take-offs and landings). Engine
maintenance costs can range from $100,000 for certain repairs to as much as $1.5
million or more for a complete engine overhaul.
Certain trends within the aviation industry favoring independent overhaul
providers include:
-OUTSOURCING OF COMMERCIAL ENGINE SERVICES. In order to lower costs, many
passenger airlines and freight and package carriers are seeking to
outsource their engine servicing. Airlines such as British Airways,
Continental Airlines, Southwest Airlines and USAir currently utilize third
parties, and other airlines are expected to follow as labor agreements
allow.
-OUTSOURCING OF MILITARY MAINTENANCE SERVICES. It is estimated that the U.S.
military market is greater than the commercial aircraft market for engine
and aircraft maintenance and related
4
<PAGE>
services. The closing of military bases and reductions in personnel have
resulted in an increase in the demand for these services in the commercial
marketplace. As additional bases are closed or realigned, this trend is
expected to continue.
-INCREASED AIR TRAVEL. It is estimated that world air travel will grow by
70% by 2005 and the number of passenger and freight and package delivery
aircraft in service will increase by 47%, which should substantially
increase the demand for engine repair and overhaul services.
-START-UP AIRLINES. Deregulation of the aviation industry in the United
States and the European Community, relatively low barriers to entry and
excess capacity in equipment, as well as increased consumer demand for air
travel, has led to the emergence of several low cost start-up airlines.
Because start-up airlines generally do not invest in the infrastructure
necessary to service their aircraft, many outsource all of their engine
repair and overhaul services. Start-up airlines also tend to use older
aircraft with engines that require greater servicing. Consequently, the
Company believes that the growth of start-up airlines is increasing demand
for independent engine repair and overhaul services.
-GROWTH OF DEMAND FOR AIR FREIGHT AND PACKAGE DELIVERY. The demand for air
freight and package delivery is projected to grow at an average annual rate
of 7% over the next 20 years. This trend is expected to result in the
continued growth of established carriers such as Airborne Express, Emery
Worldwide Airlines, Federal Express and United Parcel Service, and has
caused the emergence of new cargo carriers such as Atlas Air and Polar Air.
Many of these carriers also use older aircraft, increasing the demand for
engine repair and overhaul services.
-LEASING COMPANIES. The number of aircraft owned by financial institutions
or leasing companies, many of which use independent engine repair and
overhaul services, has grown from just over 200 aircraft in 1986 to over
1,000 aircraft in 1995.
THE AVIALL ACQUISITION
On April 19, 1996, Greenwich entered into a definitive agreement to acquire
the gas turbine engine service and engine components repair business of Aviall
for a purchase price estimated to be approximately $239.0 million (net of
assumed liabilities). The purchase price of the Aviall Business, $5.6 million in
estimated expenses related to the Aviall Acquisition and the New Credit Facility
and amounts needed to repay certain existing indebtedness of $55.3 million will
be financed through approximately $80.4 million of net proceeds from the Common
Stock Offering, approximately $145.1 million of net proceeds of the Note
Offering and approximately $74.4 million from the Initial Drawdown. In the event
that the Common Stock Offering is not consummated, but the Note Offering and the
New Credit Facility are consummated, Greenwich will pay $80.4 million of the
purchase price for the Aviall Business by the delivery of up to $55.0 million in
shares of its Class B Common Stock to Aviall, and the balance will be paid in
cash through additional borrowings under the New Credit Facility.
COMPETITIVE ADVANTAGES
The Company believes that its principal competitive advantages are:
-WORLDWIDE LEADER. The Company will be the world's largest independent gas
turbine engine repair and overhaul company and will have major facilities
strategically located in the United States and in Europe. In addition, the
Company believes that its base of over 500 customers will be the largest
and most diversified of all independent providers of gas turbine repair and
overhaul services.
-FULL SERVICE PROVIDER. Upon consummation of the Aviall Acquisition, the
Company will provide repair and overhaul services on 14 engine lines and 50
engine models, supporting the world's five leading gas turbine engine
manufacturers -- CFM International, General Electric, International Aero
Engines, Pratt & Whitney and Rolls Royce. The Company believes that no
other independent overhaul company or OEM has this breadth of capabilities.
5
<PAGE>
-EFFICIENT PROVIDER. The Company believes that it will continue to provide
its customers with a high level of service at competitive prices, as a
result of existing and anticipated productivity of its work force,
efficient production techniques and the ability to acquire inventory and
fixed assets at costs which will improve combined profit margins and reduce
the cost of entry into new product lines.
-STRONG ENTREPRENEURIAL MANAGEMENT TEAM. Greenwich's operating income has
grown at a compound annual growth rate of 43% since 1993. In 1994,
Greenwich acquired the assets of Gas Turbine Corporation East Granby
Division (the "GTC Division"), a company with revenues of approximately 83%
of Greenwich's revenues at the time of the acquisition. Greenwich
successfully integrated the GTC Division and improved its operating
performance and profitability through the reduction of personnel, the
elimination of duplicate functions, the rationalization of product lines
and the realignment of overhaul services among Greenwich's facilities.
COMPANY STRATEGY
INTEGRATION PLAN
The Company's strategy following the Aviall Acquisition is to improve the
profitability of the Aviall Business, enhance services offered to the Company's
customers and to maintain Greenwich's historical efficiency. The Company intends
to implement this strategy by:
-ACHIEVING COST REDUCTIONS. The Aviall Acquisition will enable the Company
to eliminate duplicative functions currently being performed by both
Greenwich and the Aviall Business in the areas of administration, finance,
sales, marketing, purchasing, technical and field services, and management
information systems ("MIS systems"). The Company will also eliminate a
portion of certain other corporate overhead charges which have historically
been allocated by Aviall to the Aviall Business. In addition, the Company
will benefit by having Greenwich utilize the Aviall Business' components
repair facility to perform work that Greenwich formerly contracted out to
third parties.
-IMPROVING OPERATING EFFICIENCIES. Greenwich believes that it is one of the
most efficient providers of gas turbine engine repair and overhaul
services. The Company intends to achieve greater production and operating
efficiencies by realigning engine repair and overhaul services among its
several facilities. The Company also intends to integrate the MIS systems
which have been successfully utilized by Greenwich with those of the Aviall
Business. These MIS systems are expected to provide the Company's
management with the ability to monitor operating costs utilizing real-time
data while enhancing the information flow to the Company's customers.
-IMPROVING CONTRACTUAL PERFORMANCE. Greenwich believes that its experienced
and entrepreneurial management team will enable the Aviall Business to
improve engine turnaround time and reduce related contractual penalties
through increased productivity of the Aviall Business' domestic workforce
and improved operating and production efficiencies. The Aviall Business
incurred contractual penalties of approximately $6.2 million in 1995,
primarily for late deliveries on scheduled engine overhauls.
STRATEGIC OBJECTIVES
Upon integration of Greenwich and the Aviall Business, the Company's
long-term strategic objectives will be to improve its profitability, maintain
its position as the world's largest independent provider of gas turbine engine
repair and overhaul services, and accelerate its growth. The Company's strategic
objectives may be summarized as follows:
-SERVICE NEW ENGINE LINES AND MODELS. Greenwich has successfully implemented
a strategy to increase the number of engine lines and models serviced by
its facilities, thereby creating new market opportunities while offering
its customers one-stop shopping capability. The Company will continue this
strategy and seek to develop servicing capabilities for additional high
by-pass and high horsepower gas turbine engines. Many of the Company's
existing customers use engines
6
<PAGE>
for which the Company currently has no servicing capabilities and
development of such capabilities would present the Company with
opportunities to expand the services provided to these customers.
-OFFER ADDITIONAL SERVICES TO EXISTING CUSTOMERS. Many of the engine lines
and models serviced by the Aviall Business are not currently serviced by
Greenwich and many of the engine lines and models serviced by Greenwich are
not currently serviced by the Aviall Business. The Company believes that
opportunities exist to provide services to customers of both Greenwich and
the Aviall Business for engine lines and models previously serviced by
competitors. Continental Airlines is the only major customer serviced by
both Greenwich and the Aviall Business.
-SERVICE AERODERIVATIVE ENGINE LINES. Certain of the engine lines serviced
by the Company for its airline and cargo customers have aeroderivative
engine lines used in industrial, marine and military applications.
Greenwich has been successful in providing service to the aeroderivative
gas turbine engine market, resulting in sales growth in these services from
$10.5 million in 1992 to $19.0 million in 1995.
-EXPAND SERVICE TO REGIONAL CARRIERS. The Aviall Business is a leading
provider of engine repair and overhaul services for the PW-100, an engine
predominantly used by regional carriers. The Company believes that this
market has the potential for substantial growth and that the Company will
be well-positioned to capture a larger share of this market.
The Company maintains its principal executive offices at 4590 N.W. 36th
Street, Building 23, Miami International Airport, Miami, Florida, 33122, and its
telephone number is (305) 526-7000.
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Notes Offered..................... $150,000,000 principal amount of % Senior Notes due
2006.
Maturity.......................... The Notes will mature on , 2006.
Interest Payment Dates............ Interest on the Notes is payable semiannually on each
and , commencing , 1996.
Optional Redemption............... The Notes will be redeemable at the option of the
Company at any time, in whole or in part, on or after
, 2001, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the
date of redemption.
Sinking Fund...................... None.
Change of Control................. Upon a Change of Control (as defined), the Company will
be required to make an offer to purchase the Notes at a
purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the
date of purchase. See "Description of Notes --
Repurchase at the Option of Holders Upon a Change of
Control."
Ranking........................... The Notes are senior unsecured obligations of the
Company, will rank PARI PASSU with other unsubordinated,
unsecured indebtedness of the Company, and will rank
senior in right of payment to all existing and any
future subordinated indebtedness of the Company. The
Notes will also be guaranteed on a senior unsecured
basis by the Subsidiary Guarantors (as defined) and
jointly secured on a PARI PASSU basis with indebtedness
under the New Credit Facility by a pledge of 65% of the
capital stock of Aviall Limited. As of March 31, 1996,
after giving effect to the Note Offering, Common Stock
Offering, the Aviall Acquisition and the Initial
Drawdown, the total consolidated indebtedness of the
Company would have been approximately $239.6 million.
See "Risk Factors -- Substantial Leverage; Restrictive
Covenants," "Capitalization," "Description of Certain
Indebtedness" and "Description of Notes."
Certain Covenants................. The Indenture (as defined) for the Notes will contain
limitations on, among other things, (a) the Incurrence
of additional Company Indebtedness, (b) the Incurrence
of Indebtedness or the issuance of Preferred Stock by
Restricted Subsidiaries, (c) the payment of dividends
and other distributions with respect to Capital Stock of
the Company and the purchase, redemption or retirement
of Capital Stock of the Company, (d) the making of
certain Investments, (e) the incurrence of certain
Liens, (f) sale and leaseback transactions, (g) the
issuance and sale of Capital Stock of, and certain
payments by, Restricted Securities, (h) Asset Sales (as
defined) by the Company or the Restricted Subsidiaries,
(i) transactions with Affiliates, (j) the designation of
Restricted and Unrestricted Subsidiaries, (k) Guar-
antees of Indebtedness by the Company's Restricted
Subsidiaries and (l) consolidations, mergers and
transfers of assets. See "Description of Notes."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Concurrent Transactions........... Concurrently with the Note Offering, the Company is con-
ducting the Common Stock Offering by means of a separate
Prospectus (the Note Offering and the Common Stock
Offering are together referred to herein as the
"Offerings"). The Note Offering will occur concurrently
with, and is contingent upon, consummation of the Aviall
Acquisition and the New Credit Facility. The Note
Offering is anticipated to occur concurrently with, but
is not contingent upon, the consummation of the Common
Stock Offering, and no assurance can be given that the
Common Stock Offering will be consummated. Concurrently
with the consummation of the Note Offering and the
Aviall Acquisition, the Company will refinance certain
existing indebtedness through the New Credit Facility, a
$175.0 million senior secured revolving credit facility.
Pursuant to the Initial Drawdown, the Company
anticipates that it will initially borrow approximately
$74.4 million under the New Credit Facility. In the
event that the Common Stock Offering is not consummat-
ed, but the Note Offering and the New Credit Facility
are consummated, Greenwich will pay $80.4 million of the
purchase price for the Aviall Business by the delivery
of up to $55.0 million in shares of its Class B Common
Stock to Aviall, and the balance will be paid in cash
through additional borrowings under the New Credit
Facility. See "Concurrent Transactions," "Management's
Discussion and Analysis of Financial Condition and
Results of Operations -- Pro Forma Liquidity and Capital
Resources" and "Description of Certain Indebtedness."
Use of Proceeds................... The net proceeds from the Offerings and the Initial
Drawdown are estimated to be approximately $299.9
million ($314.3 million if the Underwriters'
over-allotment option is exercised in full). The net
proceeds from the Offerings and the Initial Drawdown
will be used to pay the purchase price for the Aviall
Acquisition of $239.0 million and $5.6 million in
expenses relating to the New Credit Facility and the
Aviall Acquisition and to refinance certain existing
indebtedness of $55.3 million. See "Use of Proceeds."
Risk Factors...................... An investment in the Notes offered hereby involves
certain risks including (i) Substantial Leverage;
Restrictive Covenants; (ii) Risks of Business
Integration; (iii) Declining Operating Income of Aviall
Business; (iv) Dependence Upon Key Customers; (v)
Unfavorable Agreements and Penalties; (vi) Competition;
(vii) Potential Labor Issues; (viii) Dependence on Key
Suppliers; (ix) Dependence on Key Management; (x)
Control by Principal Stockholders; (xi) Defense Spending
Reductions; (xii) Airline Industry Risks; (xiii)
Government Regulation; (xiv) Environmental Regulation;
(xv) Product Liability Risks; (xvi) Risks Relating to a
Change of Control and (xvii) Absence of a Previous
Market for the Notes. See "Risk Factors."
</TABLE>
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary historical and pro forma financial data should be read
in conjunction with Greenwich's Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus and the Aviall Business' Combined
Financial Statements and Notes thereto included elsewhere in this Prospectus as
well as the information appearing in "Unaudited Pro Forma Combined Financial
Information," "Selected Historical Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1995
--------------------------------------------------------
HISTORICAL
---------------------------- PRO FORMA
AVIALL --------------------------
GREENWICH BUSINESS (1) ADJUSTMENTS COMBINED
----------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................................... $ 196,320 $ 504,755 $ $ 701,075
Gross profit........................................ 31,362 42,196 20,394 93,952
Income from operations.............................. 17,725 12,150 25,084 54,959
Interest expense.................................... 7,951 19,216 (2,227) 24,940
Net income (loss)................................... 6,201 (9,780) 22,130 18,551
Fully-diluted weighted average number of shares..... 12,836,406 16,236,406
Fully-diluted earnings per share.................... $ 0.54 $ 1.18
Ratio of earnings to fixed charges (2).............. 2.1x 2.1x
OTHER FINANCIAL DATA:
EBITDA (3).......................................... $ 19,932 $ 31,809 $ 11,407 $ 63,148
Depreciation and amortization....................... 1,815 19,659 (13,677) 7,797
Capital expenditures................................ 2,725 13,246 15,971
Pro forma total debt to EBITDA...................... 3.8x
Pro forma EBITDA to interest expense................ 2.5x
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1996
--------------------------------------------------------
HISTORICAL
---------------------------- PRO FORMA
AVIALL --------------------------
GREENWICH BUSINESS (4) ADJUSTMENTS COMBINED
----------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................................... $ 118,625 $ 264,749 $ $ 383,374
Gross profit........................................ 18,703 11,097 12,993 42,793
Income (loss) from operations....................... 10,961 (6,392) 15,641 20,210
Interest expense.................................... 3,635 9,087 (593) 12,129
Net income (loss)................................... 4,418 (56,219) 56,730 4,929
Fully-diluted weighted average number of shares..... 12,844,590 16,244,590
Fully-diluted earnings per share.................... $ 0.35 $ 0.31
Cash dividends declared per share of common stock... $ 0.01 $ 0.01
Ratio of earnings to fixed charges (2).............. 2.6x 1.6x
OTHER FINANCIAL DATA:
EBITDA (3).......................................... $ 11,980 $ 3,636 $ 8,604 $ 24,220
Depreciation and amortization....................... 1,019 10,028 (7,037) 4,010
Capital expenditures................................ 1,737 4,530 6,267
Pro forma EBITDA to interest expense................ 2.0
BALANCE SHEET DATA (AT PERIOD END):
Working capital..................................... $ 98,178 $ 132,331 $ 18,901 $ 249,410
Total assets........................................ 188,298 463,038 (84,901) 566,435
Total debt.......................................... 65,653 17,954 155,947 239,554
Stockholders' equity (Aviall investment)............ 50,873 300,829 (220,479) 131,223
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
--------------------------------------------------------------- ------------------------
GREENWICH 1991 1992 1993 1994 1995 1995 1996
- -------------------------------- ------------- ---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL OPERATING DATA:
Net sales..................... $ 75,821(5) $ 62,009 $ 69,467 $ 105,233 $ 196,320 $ 83,147 $ 118,625
Gross profit.................. 13,576 12,779 14,391 17,259 31,362 13,228 18,703
Income from operations........ 9,150 6,902 8,698 10,253 17,725 7,757 10,961
Interest expense.............. 3,678 2,950 3,039 4,758 7,951 3,813 3,635
Net income.................... 3,469 2,506 3,374 3,346 6,201 2,359 4,418
Fully-diluted weighted average
number of shares............. 9,972,000 9,648,000 8,000,000 12,574,654 12,836,406 13,102,190 12,844,590
Fully-diluted earnings per
share........................ $ 0.35 $ 0.26 $ 0.42 $ 0.33 $ 0.54 $ 0.21 $ 0.35
Cash dividends declared per
share of common stock........ $ 0.01
Ratio of earnings to fixed
charges (2).................. 2.3x 2.2x 2.5x 1.9x 2.1x 1.9x 2.6x
OTHER FINANCIAL DATA:
EBITDA (3).................... $ 10,090 $ 7,803 $ 9,696 $ 11,609 $ 19,932 $ 8,676 $ 11,980
Depreciation and
amortization................. 829 807 950 1,285 1,815 875 1,019
Capital expenditures.......... 243 1,791 5,128 1,691 2,725 586 1,737
BALANCE SHEET DATA (AT PERIOD
END)
Working capital............... $ 33,329 $ 39,430 $ 46,010 $ 76,078 $ 87,829 $ 83,480 $ 98,178
Total assets.................. 50,376 59,102 67,708 138,423 185,620 160,210 188,298
Total debt.................... 26,338 29,411 35,686 74,985 67,880 79,537 65,653
Stockholders' equity.......... 10,620 13,126 15,951 27,963 36,788 30,322 50,873
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------- --------------------
AVIALL BUSINESS 1993 1994 1995 1995 (4) 1996 (4)
- ---------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
HISTORICAL OPERATING DATA:
Net sales............................................... $ 482,938 $ 490,390 $ 504,755 $ 267,067 $ 264,749
Gross profit............................................ 62,374 53,167 42,196 30,342 11,097
Income (loss) from operations........................... 32,368 17,776 12,150 14,048 (6,392)
Interest expense........................................ 13,984 18,171 19,216 9,958 9,087
Net income (loss)....................................... 7,606 (4,407) (9,780) 2,459 (56,219)
Ratio of earnings to fixed charges (2).................. 2.2x 1.4x
OTHER FINANCIAL DATA:
EBITDA (3).............................................. $ 48,545 $ 35,031 $ 31,809 $ 23,377 $ 3,636
Depreciation and amortization........................... 16,177 17,255 19,659 9,329 10,028
Capital expenditures.................................... 14,501 21,572 13,246 9,807 4,530
BALANCE SHEET DATA (AT PERIOD END)
Working capital......................................... $ 194,602 $ 226,000 $ 175,436 $ 195,033 $ 132,331
Total assets............................................ 482,255 500,376 463,337 479,861 463,038
Total debt.............................................. 25,299 19,731 17,509 23,061 17,954
Aviall investment....................................... 343,311 390,888 347,786 365,206 300,829
</TABLE>
- ------------------------------
(1) Historical financial information presented for the Aviall Business is for
the year ended December 31, 1995.
(2) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, change in accounting,
extraordinary items and fixed charges. Fixed charges consist of interest on
indebtedness, including, if any, the amortization of debt issue costs,
accretion of debt discount, interest expense accrued in accordance with
EITF Issue No. 86-15 and one-third of rental expense (which is deemed
representative of the interest factor therein). Earnings for the Aviall
Business were insufficient to cover fixed charges in the historical fiscal
years ended December 31, 1994 and 1995 and for the six months ended March
31, 1996 by $395, $7,066 and $55,046 (including $39,567 of restructuring
costs), respectively.
(3) EBITDA represents net income (loss) before the cumulative effect of change
in accounting plus provisions for income taxes, interest expense,
depreciation and amortization, restructuring costs, and any charge related
to any premium or penalty paid in connection with redeeming and retiring
any indebtedness prior to its stated maturity. While EBITDA should not be
construed as a substitute for income from operations, net income (loss) or
cash flows from operating activities in analyzing the Company's operating
performance, financial position and cash flows, the Company has included
EBITDA because it is commonly used by certain investors to analyze and
compare companies on the basis of operating performance, leverage and
liquidity, and to determine the Company's ability to service debt.
(4) Historical financial information presented for the Aviall Business for the
six months ended March 31, 1995 and 1996 includes the three months ended
December 31, 1994 and 1995, respectively, which is also included in the
summary historical financial information of the Aviall Business for the
fiscal years ended December 31, 1994 and 1995, respectively.
(5) Includes $7,075 in revenues derived from the de-emphasized structural
aircraft services business.
11
<PAGE>
RISK FACTORS
In evaluating an investment in the Notes offered hereby, prospective
investors should carefully consider the following factors together with the
other information in this Prospectus.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS. On a pro forma basis, the
Company's total indebtedness on March 31, 1996 would have been $239.6 million,
and the ratio of total debt to total capitalization as of March 31, 1996 would
have been 0.65:1 ($264.9 million and 0.71:1, respectively, if the Company elects
to issue Class B Common Stock as partial payment of the purchase price for the
Aviall Acquisition in lieu of consummating the Common Stock Offering). The
consequences of such leverage include, but are not limited to, the following:
(i) the Company will have significantly increased cash requirements for debt
service; (ii) financial and other covenants and operating restrictions imposed
by the terms of the New Credit Facility and the indenture (the "Indenture")
entered into in connection with the Note Offering will require the Company to
meet certain financial tests and will limit, among other things, its ability to
borrow additional funds or to dispose of assets; (iii) the Company may be at a
competitive disadvantage if the Company is more highly leveraged than its
competitors; (iv) a downturn in the Company's business will have a more
significant impact on its results of operations and (v) the Company will have
approximately $86.0 million of indebtedness ranking pari passu to the Notes
which will be secured by certain assets of the Company. The Notes will be
effectively subordinated to all secured indebtedness of the Company to the
extent of the assets securing such indebtedness. If the Company is in default
under the New Credit Facility, the lenders thereunder could foreclose upon such
collateral, which would have a material adverse effect upon the Company and the
holders of Notes. The Company's ability to meet its debt service obligations
will depend upon its ability successfully to integrate the Aviall Business with
existing operations and other factors, many of which are not within its control,
including fluctuating interest rates and general economic conditions. See "The
Aviall Acquisition," "Concurrent Transactions," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Pro
Forma Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
RISKS OF BUSINESS INTEGRATION. There can be no assurance that the Company
will be able to integrate the operations of Greenwich and the Aviall Business
successfully. The full benefits of a business combination of Greenwich and the
Aviall Business will require the integration of administrative, finance,
purchasing, engineering, sales and marketing organizations; the coordination of
production efforts; and the implementation of appropriate operational, financial
and management systems and controls. Such benefits will also be dependent upon
an increase in the productivity of the workforce of the Aviall Business and the
ability to meet performance requirements under specific contracts. These will
require substantial attention from the senior management of Greenwich which has
limited experience integrating the operations of acquired companies. Greenwich
also has limited experience in conducting foreign operations such as the
operations of the Aviall Business in Prestwick, Scotland. If the Company fails
successfully to integrate Greenwich and the Aviall Business, the Company's
business, results of operations and financial condition would be materially
adversely affected. In addition, the Unaudited Pro Forma Combined Financial
Information contains adjustments relating to the integration of the Aviall
Business. Although these adjustments are based upon available information and
certain assumptions the Company considers reasonable as of the date of this
Prospectus, actual amounts could differ from those set forth therein. Moreover,
no assurance can be given that the anticipated impact of the integration of the
Aviall Business upon the Company's financial condition and results of operations
as presented in such pro forma information will be as presented. See "Unaudited
Pro Forma Combined Financial Information."
DECLINING OPERATING INCOME OF AVIALL BUSINESS. During each of the three
years ended December 31, 1993, 1994 and 1995, operating income of the Aviall
Business was $32.4 million, $17.8 million and $12.2 million, respectively. This
decline in operating income was primarily due to unprofitable results at certain
of the Aviall Business' domestic engine service facilities, which the Company
believes can be attributed to a variety of factors, including unfavorable
pricing granted to certain customers, inefficiencies in its overhaul operations,
high operating costs, contractual penalties for failing to meet agreed-
12
<PAGE>
upon turnaround times on completion of engine services and unfavorable customer
contracts. A combination of price pressure from key commercial airline customers
and inefficiencies or high operating costs could contribute to further declines
in operating income or losses from certain of the domestic engine service
operations purchased from Aviall, as well as erosion of the profit contributions
from the Company's other operating facilities. No assurance can be given that
the cost-saving and other measures intended to be implemented by the Company
will be sufficient to enable these facilities to increase their level of
profitability or to operate profitably in the future. A substantial reduction in
anticipated consolidated earnings as a result of the occurrence of losses from
consolidated operations of the Company could result in defaults under the New
Credit Facility, the Notes or its 8% Convertible Subordinated Debentures due
2000 (the "Debentures"). Any such default would have a material adverse effect
upon the Company's business and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Pro
Forma Liquidity and Capital Resources."
DEPENDENCE ON KEY CUSTOMERS. The Company is dependent upon certain of its
principal customers. USAir, Continental Airlines and Southwest Airlines
accounted for approximately 19%, 17% and 12%, respectively, of the net sales
derived by the Aviall Business, and the top five customers of the Aviall
Business accounted for approximately 59% of its combined net sales, during the
year ended December 31, 1995. Continental Airlines and Emery Worldwide Airlines
accounted for approximately 18% and 10%, respectively, of Greenwich's net sales,
and the top five customers of Greenwich accounted for approximately 44% of
Greenwich's net sales, during fiscal 1995. On a pro forma basis, Continental
Airlines would have accounted for approximately 17% of the Company's net sales,
and the top five customers of the Company would have accounted for approximately
47% of the Company's net sales in fiscal 1995. The Aviall Business is currently
seeking to renegotiate or extend certain long-term agreements under which engine
repair and overhaul services are being provided to certain of its customers,
including the agreement with USAir which will expire in October 1996. In
addition, a significant engine repair and a overhaul agreement with CFM
International, Inc. will expire on December 31, 1996 unless renewed. No
assurance can be given that any or all of these agreements will be modified,
renewed or extended on terms which are commercially favorable to the Company.
The loss of any one or more of the Company's major customers could have a
material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview" and
"Business -- Customers."
UNFAVORABLE AGREEMENTS AND PENALTIES. The pricing and related terms of
certain of the Aviall Business' long-term agreements with major customers,
including penalties for failure to achieve agreed-upon turnaround times, have
contributed to the significant declines in profitability of the Aviall Business.
The Aviall Business suffered turnaround time penalties under certain engine
services agreements of approximately $700,000 and $6.2 million in 1994 and 1995,
respectively. Agreements, which represented net sales aggregating approximately
$62.8 million in 1995 (12% of net sales) of the Aviall Business, provide for
payments based upon revenue per flight hour of a customer's entire fleet of a
specified engine type. Under such agreements, commonly referred to as
"power-by-the-hour" agreements, the Aviall Business performs required repair and
overhaul services for the engines covered by such agreement and receives a
specified fee for each hour those engines are operated. Profitability under this
type of agreement is dependent upon accurate estimates, including the number of
hours to be flown and the extent of repairs required to be made to the engines
covered by the agreement. The Company believes that certain of such
"power-by-the-hour" agreements contributed negative cash flow and low gross
margins to the Aviall Business in its fiscal year ended December 31, 1995. In
December 1995, the Aviall Business adjusted its estimates under certain of these
agreements and recorded a charge to earnings of $5.2 million. No assurance can
be given that the adjusted estimates are accurate or that the Company will not
incur similar charges or experience negative cash flow or low gross margins
under these agreements. Furthermore, no assurance can be given that the Company
will be able to improve operating efficiencies sufficiently or to renegotiate
more favorable terms under such agreements so as to enable the Company to
improve its overall profit margins and avoid continuing penalties or losses
under certain of these agreements.
13
<PAGE>
COMPETITION. The Company is subject to intense competition in providing
engine repair and overhaul services from certain of the major domestic and
international commercial airlines, OEMs and other independent service centers,
certain of which competitors have substantially greater capital and other
resources than the Company. OEMs may also link the sale of aircraft engines with
packages providing for financing terms and repair and overhaul services for both
new engines and engines which are currently in use. See "Industry Overview" and
"Business -- Competition."
POTENTIAL LABOR ISSUES. The Aviall Business located at the Dallas, Texas
engine service facility and the Fort Worth, Texas repair and test facility are
represented by separate unions. Under the terms of the Purchase Agreement with
Aviall, neither Greenwich nor the Company will assume Aviall's collective
bargaining agreements with such unions. The Company intends to offer employment
to those hourly employees of the Dallas and Fort Worth facilities as the Company
requires and deems qualified. Recently, proposals were made to the unions
representing the Dallas and Fort Worth employees to accept certain contractual
concessions. Although the concessions were ratified by the Fort Worth employees
subject to approval by the Dallas employees, the Dallas employees rejected such
proposals. Following consummation of the Aviall Acquisition, no assurance can be
given that the Company will be able to initially hire a sufficient number of
hourly employees upon acceptable terms to meet its immediate needs, or that the
Company would not be subject to labor disruption or other labor disputes which
could materially adversely affect operations. In addition, no assurance can be
given that, if the Company elects to reduce or shut down operations in Dallas or
Fort Worth, the relocation of engine services to its other facilities will be
accepted by major customers, or that such relocation can be accomplished without
significant expense or disruption of operations. See "Business -- Employees."
DEPENDENCE ON KEY SUPPLIERS. The Company is dependent on certain domestic
and international OEMs for many of the key parts and components for the engines
which it services. Many of these OEMs maintain their own gas turbine engine
overhaul and repair facilities and compete with the Company for business from
major commercial airlines and other customers. Although the Company believes
that these manufacturers will continue to adhere to their current policy of
supporting qualified independently-owned engine service providers, if their
policy should change or if certain OEMs require scarce parts for their own
overhaul and repair operations, the Company may incur shortages in the supply of
required parts and components. An inability by the Company to maintain access to
parts and components on commercially reasonable terms would have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON KEY MANAGEMENT. The Company's operations are dependent in
part upon the expertise of certain key employees. Loss of the services of such
employees, particularly Eugene P. Conese, the Chairman and Chief Executive
Officer, or Eugene P. Conese, Jr., the President and Chief Operating Officer,
could adversely affect the Company. The Company does not maintain key man life
insurance for any of its executive officers.
CONTROL BY PRINCIPAL STOCKHOLDERS. As of March 31, 1996, Eugene P. Conese,
the Chairman of the Board and Chief Executive Officer of the Company, and his
wife own of record and beneficially an aggregate of 55% of the Class A Common
Stock and 55% of the Class B Common Stock and Eugene P. Conese, Jr., the
President and Chief Operating Officer of the Company, owns of record and
beneficially 3% of the Company's outstanding Class A Common Stock and 3% of the
Class B Common Stock. Upon consummation of the Common Stock Offering, Eugene P.
Conese and members of his immediate family will own in the aggregate
approximately 58% of the outstanding Class A Common Stock and will control all
decisions on matters submitted to a vote of the Company's stockholders. See
"Principal Stockholders."
DEFENSE SPENDING REDUCTIONS. Approximately 14% and 13% of Greenwich's net
sales in fiscal 1995 and for the six months ended March 31, 1996, respectively,
were derived from services provided for the United States military and other
domestic and foreign government agencies, either directly or to prime
contractors under military and government contracts. On a pro forma basis, sales
to military and government agencies would have accounted for approximately 6% of
sales in fiscal 1995. To date,
14
<PAGE>
reductions in the federal government's defense spending have not resulted in a
decrease in net sales from military and other governmental programs. The Company
believes that recent closings of military aircraft bases and reductions in
personnel may increase the number of military gas turbine engines available for
servicing by independent contractors, such as the Company, although no assurance
can be given in this regard. Nevertheless, the Company cannot predict whether
reductions in defense and governmental spending in general will adversely affect
the Company's results of operations in the future. See "Business -- Engine
Services -- Government Programs."
AIRLINE INDUSTRY RISKS. In past years, the airline industry has been
adversely affected by a number of factors, including increased fuel and labor
costs and intense price competition. Several passenger airline carriers have
encountered significant financial difficulties, resulting in certain of such
carriers ceasing to conduct business or seeking protection from creditors under
the federal bankruptcy laws. Certain passenger airline carriers have continued
to operate under the protection of the federal bankruptcy laws and have
continued to provide business to engine service providers such as the Company.
However, in the event that any of the Company's customers cease to conduct
business or seek protection from creditors under the federal bankruptcy laws,
the Company would be classified as a general unsecured creditor to the extent
that it does not have a priority mechanic's lien on the engines of such customer
being serviced by the Company and may be forced to incur substantial losses from
the write-off of accounts receivable. The loss of any of the Company's
significant customers could result in a decrease in the Company's net sales and
could have a material adverse effect upon the Company's business. In addition, a
number of the historical customers of Greenwich are smaller domestic and foreign
passenger airlines, freight and package carriers, charter airlines and aircraft
leasing companies, which may also suffer from the factors adversely affecting
the airline industry generally. As a result, certain of the Company's customers
may pose credit risks to the Company. The Company's inability to collect
receivables from a large engine repair, refurbishment or overhaul project could
adversely affect its results of operations for a particular period. Although the
bad debt losses of both Greenwich and the Aviall Business have averaged less
than 1% of net sales in each of their respective last three fiscal years, there
can be no assurance that such bad debt losses will not materially increase in
the future.
GOVERNMENT REGULATION. FAA and BCAA regulations require that aircraft
engines serviced in the United States and the United Kingdom be serviced by a
certified provider such as the Company. The Company is also required to maintain
certifications from other foreign governments in order to service their local
aircraft. Although the Company believes that it possesses all required domestic
and foreign governmental certifications, including FAA certifications entitling
it to service all gas turbine aircraft engine lines and models in its domestic
facilities, the revocation or limitation of its FAA or BCAA certification would
have a material adverse effect on its operations. See "Business -- Government
Regulation."
ENVIRONMENTAL REGULATION. The Company's business operations and facilities
are subject to a number of federal, state, local and foreign environmental laws
and regulations, including requirements under the Clean Air Act Amendments of
1990 relating to the discharge of air pollutants into the environment. Although
the Company believes that its operations and facilities are in material
compliance with all federal, state, local and foreign environmental laws and
regulations, no assurance can be given that future changes either in such laws,
regulations or interpretations thereof or in the nature of the Company's
operations will not require the Company to make significant additional capital
expenditures in order to effect compliance. See "Business -- Environmental
Matters."
PRODUCT LIABILITY RISKS. The Company currently has in force aviation
products, premises and hangarkeepers insurance, which the Company believes
provides coverage in amounts and on terms that are generally consistent with
industry practice. The Company also has insurance coverage for liability in
connection with the industrial or marine gas turbine engines that it services.
To date, the Company has not experienced any significant uninsured or insured
aviation-related claims and has not experienced any material product liability
claims related to its industrial and marine engine services.
15
<PAGE>
However, the Company is subject to a material loss to the extent that a claim is
made against the Company which is not covered in whole or in part by insurance
and for which third-party indemnification is not available.
RISKS RELATING TO A CHANGE OF CONTROL. In the event of a Change of Control
(as defined), the Company will be required, subject to certain conditions, to
make an offer to purchase all outstanding Notes at a price equal to 101 percent
of the principal amount of the Notes, plus accrued and unpaid interest. See
"Description of Notes -- Repurchase at the Option of Holders Upon a Change of
Control." Existing Indebtedness (as defined) includes, and future Indebtedness
(including indebtedness to be incurred under the New Credit Facility) may
include, change of control provisions pursuant to which the Company would be
required upon a change in control to repurchase, or the lender could demand
repayment of, the Indebtedness due thereunder. No assurance can be given that
the Company would have sufficient funds available or could obtain the financing
required, or would be contractually permitted, to purchase the Notes tendered by
holders following a Change of Control. If a Change of Control occurred and the
Company had inadequate funds or financing available to pay for, or was otherwise
prohibited from purchasing, Notes tendered for purchase, an Event of Default (as
defined) would be triggered under the Indenture. See "Description of Notes."
ABSENCE OF A PREVIOUS MARKET FOR THE NOTES. The Notes are a new issue of
securities with no established trading market, and the Company does not intend
to apply for listing of the Notes on any securities exchange. The Company has
been advised by the Underwriters that, subject to applicable laws and
regulations, each of them currently intends to make a market in the Notes;
however, they are not obligated to do so and may discontinue any such market
making at any time without notice. No assurance can be given as to the
development or liquidity of any trading market in the Notes. If an active market
does not develop, the market price and liquidity of the Notes may be adversely
affected.
RECENT DEVELOPMENT. Under a long-term technical assistance agreement with
General Electric, the engine components repair operation of the Aviall Business
located in McAllen, Texas licenses certain propriety GE technology to provide
gas turbine engine blade and vane repairs primarily to the engine repair and
overhaul service centers located in Dallas, Texas and Prestwick, Scotland. GE
has consented to the assignment of this license to the Company in connection
with the Aviall Acquisition, but such license will terminate on September 3,
1996 unless the Company and GE are able to renegotiate new economic and other
terms of a new long-term license. Although the Company believes that it will be
able to enter into a new license arrangement with GE within the next 90 days,
failing which it will be able to purchase such technical services and
proprietary items directly from GE and other sources, the inability to negotiate
such technical license on commercially attractive terms could adversely affect
the profit margins of its components operation. In 1995, the Components
operation contributed less than 5% to the combined net sales revenues of the
Aviall Business. See "Business -- Engine Component and Accessory Refurbishment."
16
<PAGE>
THE AVIALL ACQUISITION
On April 19, 1996, Greenwich, its wholly-owned subsidiary GASI Engine
Services Corporation and Aviall entered into an Agreement of Purchase and Sale
(the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company
agreed to acquire the Aviall Business, which consists of: (a) substantially all
of the assets and business of the commercial engine services divisions (the "CES
Divisions") of Aviall and (b) all of the issued and outstanding shares of
capital stock of Aviall Limited ("Aviall UK"), a subsidiary of Aviall. The CES
Divisions include (i) all of the engine repair and overhaul operations of Aviall
located in Dallas and Fort Worth, Texas and (ii) the components and parts repair
business of Aviall located in McAllen, Texas (the "Components Division"). Aviall
UK operates an engine repair and overhaul facility in Prestwick, Scotland (the
"Caledonian Operation"). The Company has agreed to assume, pay and discharge,
when due, only certain specified obligations and liabilities of Aviall as they
exist at the closing date. The purchase price for the Aviall Business is
estimated to be approximately $239.0 million (net of assumed liabilities) based
upon the March 31, 1996 balance sheet of the Aviall Business. Such estimated
purchase price is subject to adjustment based upon the balance sheet of the
Aviall Business on the date that the Aviall Acquisition is consummated. As part
of the Aviall Acquisition, Aviall has agreed to provide the Company with certain
MIS and related accounting services for the CES Divisions on a short-term basis.
The Company intends to pay the entire purchase price for the Aviall
Acquisition in cash at the closing. The purchase price is being financed with
the proceeds from the Offerings and the Initial Drawdown. In the event that the
Common Stock Offering is not consummated, but the Note Offering and the New
Credit Facility are consummated, Greenwich will pay $80.4 million of the
purchase price for the Aviall Business by the delivery of up to $55.0 million in
shares of its Class B Common Stock, and the balance will be paid in cash through
additional borrowings under the New Credit Facility. See "Use of Proceeds."
CONCURRENT TRANSACTIONS
Concurrently with the Note Offering, the Company is conducting the Common
Stock Offering. The consummation of the Common Stock Offering is anticipated to
occur concurrently with, but is not a condition to, the consummation of the Note
Offering.
Concurrently with the consummation of the Note Offering and the Aviall
Acquisition, the Company will refinance substantially all indebtedness under its
existing credit facility through the New Credit Facility, a $175.0 million
senior secured revolving credit facility with a commercial lender, individually
and as agent for other lenders. Pursuant to the Initial Drawdown, the Company
anticipates that it will initially borrow approximately $74.4 million under the
New Credit Facility. Funds advanced and repaid under the New Credit Facility may
be reborrowed through May 2001, subject to the conditions specified in the New
Credit Facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Pro Forma Liquidity and Capital
Resources" and "Description of Certain Indebtedness."
17
<PAGE>
USE OF PROCEEDS
The net proceeds from the Offerings and the Initial Drawdown, after
deducting underwriting discounts and other expenses of the Offerings, are
estimated to be approximately $299.9 million ($314.3 million if the
Underwriters' over-allotment option is exercised in full). The consummation of
the Note Offering is contingent upon, and will occur concurrently with, the
Aviall Acquisition and the Initial Drawdown. Consummation of the Note Offering
is anticipated to occur concurrently with, but is not contingent upon, the
consummation of the Common Stock Offering. See "The Aviall Acquisition." The
estimated sources and uses of funds from the Offerings and the Initial Drawdown
are summarized as follows (dollars in thousands):
<TABLE>
<S> <C>
SOURCES
- -------------------------------------------------------
Initial Drawdown.......................... $ 74,429
Note Offering, net of underwriting
discounts and expenses................... 145,150
Common Stock Offering, net of underwriting
discounts and expenses................... 80,350
-----------
Total................................... $ 299,929
-----------
-----------
USES
- -------------------------------------------------------
Payment of purchase price for Aviall
Business (1)............................. $ 239,000
Repayment of outstanding advances under
existing credit facilities (2)........... 55,347
Expenses (3)(4)........................... 5,582
-----------
Total................................... $ 299,929
-----------
-----------
</TABLE>
- ------------------------
(1) The estimated purchase price is subject to adjustment based upon the balance
sheet of the Aviall Business on the date that the Aviall Acquisition is
consummated.
(2) Includes $50,528 outstanding under Greenwich's existing credit facility and
$4,819 outstanding under the Aviall U.K. overdraft facility as of March 31,
1996.
(3) Includes estimated expenses relating to the New Credit Facility and the
Aviall Acquisition.
(4) Does not include expenses relating to the integration of Greenwich and the
Aviall Business, estimated to be approximately $8.5 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Pro Forma Liquidity and Capital Resources."
18
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1996, (i) the actual
capitalization of Greenwich as of such date and (ii) the capitalization of the
Company as adjusted to give effect to the Aviall Acquisition, the Initial
Drawdown and the Offerings as if each occurred on March 31, 1996 and the
application of the estimated net proceeds from the Initial Drawdown and the
Offerings. See "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Combined Financial Information" and the
Consolidated and Combined Financial Statements of each of Greenwich and the
Aviall Business and Notes thereto included in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED
----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
DEBT
Current portion of long-term debt....................................................... $ 3,181 $ 3,181
----------- -----------
Long-term debt:
Term loans............................................................................ 7,004 7,004
Loan payable.......................................................................... 1,379 1,379
Existing credit facility.............................................................. 50,528 --
New Credit Facility................................................................... -- 74,429
% Senior Notes due 2006............................................................ -- 150,000
Debentures............................................................................ 3,561 3,561
----------- -----------
Total long-term debt.............................................................. 62,472 236,373
----------- -----------
Total debt........................................................................ $ 65,653 $ 239,554
----------- -----------
STOCKHOLDERS' EQUITY
Class A Common Stock, $.01 par value (25,000,000 shares authorized; 6,279,841 shares
issued and outstanding).............................................................. $ 63 $ 63
Class B Common Stock, $.01 par value (25,000,000 shares authorized; none outstanding;
9,679,841 shares issued and outstanding, as adjusted)................................ 63 97
Preferred stock, $.01 par value (2,500,000 shares authorized; none
outstanding)......................................................................... -- --
Capital in excess of par value........................................................ 22,463 102,779
Retained earnings..................................................................... 28,284 28,284
----------- -----------
Total stockholders' equity........................................................ $ 50,873 $ 131,223
----------- -----------
Total capitalization.............................................................. $ 116,526 $ 370,777
----------- -----------
----------- -----------
</TABLE>
19
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following sets forth the Company's Unaudited Pro Forma Combined
Financial Information for the fiscal year ended September 30, 1995, and the six
months ended March 31, 1996, and the Company's Unaudited Pro Forma Combined
Balance Sheet Information at March 31, 1996, in each case giving effect to the
Aviall Acquisition under the "purchase" method of accounting, the Offerings and
the Initial Drawdown. The Company's Unaudited Pro Forma Combined Income
Statement Information presents the Aviall Acquisition, the Offerings and the
Initial Drawdown, in each case as if it or they had been consummated at the
beginning of the periods presented. The Company's Unaudited Pro Forma Combined
Balance Sheet Information presents the Aviall Acquisition, the Offerings and the
Initial Drawdown, in each case as if it or they had been consummated on March
31, 1996. The Unaudited Pro Forma Combined Financial Information of the Company
are presented for illustrative purposes only, and therefore do not purport to
present the financial position or results of operations of the Company had the
Aviall Acquisition, the Offerings and the Initial Drawdown occurred on the dates
indicated, nor are they necessarily indicative of the results of operations
which may be expected to occur in the future.
The historical balance sheet information for Greenwich and the Aviall
Business has been derived from the unaudited March 31, 1996 balance sheet of
Greenwich and the Aviall Business included in this Prospectus. The data for the
six months ended March 31, 1996 have been derived from Greenwich's unaudited
income statement for the six months ended March 31, 1996 included elsewhere
herein and the unaudited income statement of the Aviall Business for the six
months ended March 31, 1996 not included elsewhere herein. The pro forma
adjustments relating to the integration of the Aviall Business represent the
Company's preliminary determinations of these adjustments and are based upon
available information and certain assumptions the Company considers reasonable
under the circumstances. Final amounts could differ from those set forth
therein. The unaudited historical financial statements of Greenwich referred to
above, in the opinion of management of Greenwich, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of Greenwich for the unaudited interim periods. The
unaudited historical financial statements of the Aviall Business referred to
above, in the opinion of management of Aviall, include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results of the Aviall Business for the unaudited interim
periods.
20
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
INCOME STATEMENT
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
HISTORICAL(1)
--------------------------- PRO FORMA(2)
AVIALL --------------------------------------
GREENWICH BUSINESS ADJUSTMENTS COMBINED
-------------- ----------- ------------ -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales..................................... $ 196,320 $ 504,755 $ $ 701,075
Cost of sales................................. 164,958 462,559 (20,394) 3(b,d) 607,123
-------------- ----------- ------------ -------------
Gross profit.................................. 31,362 42,196 20,394 93,952
Selling, general and administrative
expenses..................................... 13,637 30,046 (4,690) 3(b,c) 38,993
-------------- ----------- ------------ -------------
Income from operations........................ 17,725 12,150 25,084 54,959
Nonoperating (income) expense:
Interest expense............................ 7,951 19,216 (2,227) 3(a) 24,940
Other expense (income), net................. (392) (392)
-------------- ----------- ------------ -------------
Total nonoperating (income) expense..... 7,559 19,216 (2,227) 24,548
-------------- ----------- ------------ -------------
Income (loss) before provision for income
taxes........................................ 10,166 (7,066) 27,311 30,411
Provision for income taxes.................... 3,965 2,714 5,181 3(f) 11,860
-------------- ----------- ------------ -------------
Net income (loss)............................. $ 6,201 $ (9,780) $ 22,130 $ 18,551
-------------- ----------- ------------ -------------
-------------- ----------- ------------ -------------
OTHER OPERATING DATA:
Ratio of earnings to fixed charges (note
7)......................................... 2.1x 2.1x
Depreciation and amortization............... $ 1,815 $ 19,659 $ (13,677) 3(b,c) $ 7,797
EBITDA (note 6)............................. 19,932 31,809 11,407 63,148
PRIMARY EARNINGS PER SHARE:
Net income per share........................ $ 0.61 $ 1.36
-------------- -------------
-------------- -------------
Weighted average shares of common stock
outstanding................................ 10,233,234 13,633,234
-------------- -------------
-------------- -------------
FULLY DILUTED EARNINGS PER SHARE:
Net income per share........................ $ 0.54 $ 1.18
-------------- -------------
-------------- -------------
Weighted average common shares
outstanding................................ 12,836,406 16,236,406
-------------- -------------
-------------- -------------
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
21
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
INCOME STATEMENT
SIX MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL(1)
--------------------------- PRO FORMA(2)
AVIALL --------------------------------------
GREENWICH BUSINESS ADJUSTMENTS COMBINED
-------------- ----------- ------------ -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales..................................... $ 118,625 $ 264,749 $ $ 383,374
Cost of sales................................. 99,922 253,652 (12,993) 3(b,d) 340,581
-------------- ----------- ------------ -------------
Gross profit.................................. 18,703 11,097 12,993 42,793
Selling, general and administrative
expenses..................................... 7,742 17,489 (2,648) 3(b,c) 22,583
-------------- ----------- ------------ -------------
Income (loss) from operations................. 10,961 (6,392) 15,641 20,210
-------------- ----------- ------------ -------------
Nonoperating (income) expense:
Interest expense............................ 3,635 9,087 (593) 3(a) 12,129
Restructuring costs......................... 39,567 (39,567) 3(e)
-------------- ----------- ------------ -------------
Total nonoperating (income) expense..... 3,635 48,654 (40,160) 12,129
-------------- ----------- ------------ -------------
Income (loss) before provision for income
taxes........................................ 7,326 (55,046) 55,801 8,081
Provision for income taxes.................... 2,908 1,173 (929) 3(f) 3,152
-------------- ----------- ------------ -------------
Net income (loss)............................. $ 4,418 $ (56,219) $ 56,730 $ 4,929
-------------- ----------- ------------ -------------
-------------- ----------- ------------ -------------
OTHER OPERATING DATA:
Ratio of earnings to fixed charges (note
7)......................................... 2.6x 1.6x
Depreciation and amortization............... $ 1,019 $ 10,028 $ (7,037) 3(b,c) $ 4,010
EBITDA (note 6)............................. $ 11,980 $ 3,636 $ 8,604 $ 24,220
PRIMARY EARNINGS PER SHARE:
Net income per share........................ $ 0.36 $ 0.32
-------------- -------------
-------------- -------------
Weighted average shares of common stock
outstanding................................ 12,105,468 15,505,468
-------------- -------------
-------------- -------------
FULLY DILUTED EARNINGS PER SHARE:
Net income per share........................ $ 0.35 $ 0.31
-------------- -------------
-------------- -------------
Weighted average common shares
outstanding................................ 12,844,590 16,244,590
-------------- -------------
-------------- -------------
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
22
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
BALANCE SHEET
MARCH 31, 1996
ASSETS
<TABLE>
<CAPTION>
HISTORICAL (1)
-------------------------- PRO FORMA (2)
AVIALL --------------------------------------
GREENWICH BUSINESS ADJUSTMENTS COMBINED
----------- ------------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash......................................... $ 268 $ 30 $ (26) 4(a) $ 272
Accounts and notes receivable................ 47,256 109,249 (2,439) 4(b) 154,066
Inventories.................................. 111,673 151,739 (11,746) 4(c) 251,666
Prepaid expenses and other current assets.... 1,256 3,729 (1,230) 4(d) 3,755
----------- ------------- ------------ -------------
Total current assets..................... 160,453 264,747 (15,441) 409,759
Deferring financing costs...................... 741 7,720 4(e) 8,461
Property, plant and equipment.................. 26,376 120,040 (11,376) 4(f) 135,040
Other assets................................... 728 78,251 (65,804) 4(g) 13,175
----------- ------------- ------------ -------------
Total assets............................. $ 188,298 $ 463,038 $ (84,901) $ 566,435
----------- ------------- ------------ -------------
----------- ------------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 36,001 $ 58,529 $ $ 94,530
Accrued expenses and current portion of
long-term liabilities....................... 16,475 34,320 (22,761) 4(i) 28,034
Customer deposits and deferred revenue....... 9,777 9,777
Accrued restructuring cost................... 39,567 (39,567) 4(h)
Other liabilities, current................... 26,905 4(j) 26,905
Income taxes payable......................... 23 23
----------- ------------- ------------ -------------
Total current liabilities................ 62,276 132,416 (35,423) 159,269
Deferred taxes payable......................... 4,305 11,891 16,196
Other liabilities, long-term................... 8,372 10,649 9,172 4(j) 28,193
Long-term debt................................. 58,911 7,253 161,829 4(k) 227,993
Debentures..................................... 3,561 3,561
----------- ------------- ------------ -------------
Total liabilities........................ 137,425 162,209 135,578 435,212
----------- ------------- ------------ -------------
Aviall, Inc.'s investment in and advances to
the Aviall Business........................... 300,829 (300,829) 4(l)
Stockholders' equity........................... 50,873 80,350 5 131,223
----------- ------------- ------------ -------------
Total liabilities and stockholders'
equity.................................. $ 188,298 $ 463,038 $ (84,901) $ 566,435
----------- ------------- ------------ -------------
----------- ------------- ------------ -------------
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
1. The pro forma periods for the year ended September 30, 1995 and for the six
months ended March 31, 1996 are Greenwich's historical financial reporting
periods. For the pro forma year ended September 30, 1995, the Aviall
Business has been included for the twelve months ended December 31, 1995
because they have historically reported on a calendar year end as part of
Aviall. Historical financial information of the Aviall Business for the six
months ended March 31, 1996 included in the pro forma financial information
for the six months ended March 31, 1996, includes the three months ended
December 31, 1995, which has also been included in the pro forma year ended
September 30, 1995. For the three months ended December 31, 1995, net sales
were $130,004 and net income (loss) was ($11,216). The Company believes the
effect of the difference in these reporting periods is not significant and
is not reflected in the Unaudited Pro Forma Combined Financial Information.
The purchase price will be determined based upon an audit as of the closing
date. The purchase price is $330,000 less certain adjustments based on the
difference between the actual current assets as of the closing date and
$271,000 and less the value of certain assumed liabilities as of the closing
date. Based upon the Aviall Business' March 31, 1996 balance sheet, the
purchase price would have been calculated as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE DETERMINATION:
<S> <C>
Gross purchase price........................................... $ 330,000
Less:
Current assets adjustment.................................... 10,000
Value of assumed liabilities................................. 81,000
---------
Net purchase price......................................... $ 239,000
---------
---------
PURCHASE PRICE ALLOCATION:
Current assets................................................. $ 249,306
Property, plant and equipment.................................. 108,664
Other assets................................................... 12,447
Accounts payable and accrued expenses.......................... (70,088)
Deferred taxes................................................. (11,891)
Liabilities for fair value adjustments of certain long-term
engine maintenance contracts, and liabilities related to
engine product line relocation costs, customer or supplier
transfer approvals or accommodations, licenses and other...... (49,438)
---------
Net purchase price......................................... $ 239,000
---------
---------
</TABLE>
The foregoing purchase price determination and allocation are based on the
March 31, 1996 Aviall Business balance sheet and preliminary estimates of
fair value. The final purchase price determination and allocation will be
contingent upon final assessment or appraisal of the fair value of the net
assets acquired, and the audited balance sheet of the Aviall Business as it
relates to certain items being acquired or assumed as of the closing date.
2. The Unaudited Pro Forma Combined Financial Information is presented for
illustrative purposes only, giving effect to the Aviall Acquisition, the
Offerings and the Initial Drawdown by Greenwich, accounted for as a
"purchase," as such term is used under generally accepted accounting
principles.
Certain amounts reported in the Aviall Business' historical combined
financial information have been reclassified to conform with the Greenwich
presentations in the Unaudited Pro Forma Combined Balance Sheet and
Statements of Income.
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
(DOLLARS IN THOUSANDS)
3. The Company's pro forma income statement data for the year ended September
30, 1995 and the six month period ended March 31, 1996 present the effects
on the historical combined financial statements of the Aviall Acquisition,
the Offerings and the Initial Drawdown, in each case as if they occurred as
of the beginning of such periods, including:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED
1995 MARCH 31, 1996
-------------- ---------------
<S> <C> <C> <C>
a. The pro forma adjustments to interest expense arising from the Aviall
Acquisition, the Offerings and the Initial Drawdown are presented below.
The pro forma interest expense adjustment assumes that $55,347 of the
proceeds from the New Credit Facility of $74,429 will be used to retire
indebtedness under the existing revolving credit facility
Elimination of interest expenses related to the repayment of:
Existing Greenwich revolving credit facility.............................. $ 4,926 $ 2,463
Existing Aviall Business indebtedness and advances from Aviall............ 19,216 9,087
Additional interest cost related to:
Initial Drawdown and the Notes............................................ (21,143) (10,571)
Amortization of deferred financing costs.................................. (772) (386)
-------------- ---------------
Pro forma adjustment...................................................... 2,227 593
Interest savings associated with the repayment of $55,347 under the
existing revolving credit facility was calculated based on an average
interest rate of 9.75%. Interest on the initial borrowing under the New
Credit Facility was computed at an assumed interest rate of 7.75% per
annum.
A 0.25% increase or decrease in the interest rates used above would result
in an increase or decrease in annual interest expense of $561.
b. Decrease in depreciation expense to reflect the fair value and useful
lives of the acquired property, plant and equipment as allocated to:
Cost of sales............................................................. 8,987 4,389
Selling, general and administrative....................................... 919 449
c. Elimination of amortization expense of goodwill and other intangible
assets of the Aviall Business............................................ 3,771 2,199
d. Increase in gross profit resulting from the adjustment to fair value of
long-term engine maintenance contracts which expire within from one to
three years.............................................................. 11,407 8,604
e. Elimination of restructuring costs incurred by Aviall on behalf of the
Aviall Business, as a result of the Aviall Acquisition................... -- 39,567
f. Adjustment to the provision for income taxes to the combined expected
effective rate of 39%.................................................... (5,181) 929
-------------- ---------------
Pro forma income statement adjustments.................................... $ 22,130 $ 56,730
-------------- ---------------
-------------- ---------------
</TABLE>
PRO FORMA INCOME STATEMENT ADJUSTMENTS NOT MADE -- Included in the operating
results for the Aviall Business, for which pro forma adjustments have not
been made, are certain pension costs (U.S. operations only) and severance
expenses for which Greenwich does not have similar pension plans
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
(DOLLARS IN THOUSANDS)
or severance arrangements, salaries and expenses attributable to the
departments run by the President, Senior Vice President and Chief Financial
Officer of Aviall which are not contractually being assumed by Greenwich,
and non-recurring reengineering expenses as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED
1995 MARCH 31, 1996
--------------- ---------------
<S> <C> <C>
Pension and severance expenses........................................ $ 3,581 $ 3,525
Certain salaries and expenses......................................... 2,865 1,526
Non-recurring reengineering expenses.................................. 2,061 2,313
------- -------
Total............................................................. $ 8,507 $ 7,364
------- -------
------- -------
</TABLE>
In addition to the above, the Company believes additional cost savings will
be realized through the combination of the two companies.
4. For purposes of preparing the Unaudited Pro Forma Combined Balance Sheet,
the Aviall Business' assets and liabilities acquired or assumed have been
recorded at their estimated fair values. A final determination of the
required purchase accounting adjustments and of the fair value of the assets
and liabilities of the Aviall Business acquired or assumed has not yet been
made. Accordingly, the purchase accounting adjustments made in connection
with the development of the unaudited pro forma financial information
reflect Greenwich management's best estimate based upon currently available
information.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1996
---------------
<S> <C> <C> <C>
a. Cash of the Aviall Business has been adjusted to reflect the cash balances
being contractually acquired............................................. $ (26)
b. Accounts receivable of the Aviall Business have been adjusted to eliminate
accounts not being contractually acquired by Greenwich................... (2,439)
c. Inventories have been adjusted to reflect their fair value to the combined
entity based on Greenwich's accounting and valuation policies, including
analysis of the anticipated combined inventory needs..................... (11,746)
d. Prepaid expenses and other current assets of the Aviall Business have been
adjusted to eliminate accounts not being contractually acquired by
Greenwich................................................................ (1,230)
e. Deferred financing costs have been recorded related to the New Credit
Facility and the Note Offering associated with the Aviall Acquisition,
the Offerings and the Initial Drawdown................................... 7,720
f. Property, plant and equipment have been recorded at their estimated fair
value.................................................................... (11,376)
g. Other assets (principally goodwill) of the Aviall Business have been
written off.............................................................. (65,804)
h. Restructuring liabilities not assumed, including severance, pension
termination, insurance and environmental................................. (39,567)
i. Accrued expenses and current portion of long term liabilities of the
Aviall Business have been adjusted to eliminate certain liabilities not
being contractually assumed.............................................. (22,761)
</TABLE>
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1996
---------------
j. Other liabilities includes adjustments under Accounting Principles Board
Opinion No. 16 for:
<S> <C> <C> <C>
- Fair value adjustments of certain long-term engine maintenance
contracts which expire within one to three years...................... $ 33,598
- Costs to be incurred in connection with required customer
and supplier transfer approvals or accommodations..................... 5,794
- Relocation of certain of the Aviall Business' engine line repair
capabilities and related inventories incidental to the Aviall
Acquisition........................................................... 4,250
- Liabilities for contractual management services incidental to
the Aviall Acquisition................................................ 2,443
- Stamp tax and other miscellaneous items incidental to the
acquisition........................................................... 561
- The elimination of certain other Aviall Business liabilities,
including pension and post-retirement benefits not being
contractually assumed................................................. (10,569) 36,077
Other liabilities, current portion........................................ 26,905
---------------
Other liabilities, long-term.............................................. 9,172
k. Adjustments to long-term debt and notes payable include the impact of the
following:
- Initial Drawdown under the New Credit Facility......................... $ 74,429
- The Note Offering...................................................... 150,000
- Repayment of the Company's existing credit facilities (55,347)
- Adjustment for certain indebtedness of the Aviall Business
not assumed.......................................................... (7,253) 161,829
l. Elimination of Aviall's investment in and advances to the Aviall
Business................................................................. 300,829
</TABLE>
5. Stockholders' equity has been adjusted to reflect issuance of shares of
Greenwich Class B Common Stock at an assumed price of $25 1/4 per share, net
of expenses of approximately $5,500.
6. EBITDA represents net income (loss) before the cumulative effect of change
in accounting plus provisions for income taxes, interest expense,
depreciation and amortization, restructuring costs and any charge related to
any premium or penalty paid in connection with redeeming and retiring any
indebtedness prior to its stated maturity. While EBITDA should not be
construed as a substitute for income from operations, net income (loss) or
cash flows from operating activities in analyzing the Company's operating
performance, financial position and cash flows, the Company has included
EBITDA because it is commonly used by certain investors to analyze and
compare companies on the basis of operating performance, leverage and
liquidity, and to determine the Company's ability to service debt.
7. For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, change in accounting,
extraordinary items and fixed charges. Fixed charges consist of interest on
indebtedness, including, if any, the amortization of debt issue costs,
accretion of debt discount, interest expense accrued in accordance with EITF
Issue No. 86-15 and one-third of rental expense (which is deemed
representative of the interest factor therein). Earnings for the Aviall
Business were insufficient to cover fixed charges in the historical fiscal
year ended December 31, 1995 and for the six months ended March 31, 1996 by
$7,066 and $55,046 (including $39,567 of restructuring costs), respectively.
27
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected historical financial data for Greenwich as of September 30,
1994 and 1995 and for each of the three years in the period ended September 30,
1995, and for the Aviall Business as of December 31, 1994 and 1995 and for each
of the three years in the period ended December 31, 1995, have been derived from
Greenwich's Audited Consolidated Financial Statements and Notes thereto and the
Aviall Business' Audited Combined Financial Statements and Notes thereto,
respectively, included in this Prospectus and should be read in conjunction
therewith. The selected historical financial data for Greenwich as of and for
the six months ended March 31, 1996 and for the six months ended March 31, 1995
have been derived from Greenwich's Unaudited Consolidated Financial Statements
and Notes thereto included elsewhere in this Prospectus and should be read in
conjunction therewith. The summary historical financial data for Greenwich as of
March 31, 1995 has been derived from unaudited financial information prepared by
Greenwich and not included in this Prospectus. The selected historical financial
data for Greenwich as of September 30, 1993 and for the fiscal years 1991 and
1992 have been derived from Greenwich's audited consolidated financial
statements and notes thereto not included in this Prospectus. The selected
historical financial data for the Aviall Business for the six months ended March
31, 1995 and as of and for the six months ended March 31, 1996 have been derived
from unaudited financial information prepared by the Aviall Business and not
included in this Prospectus. The summary historical financial data for the
Aviall Business as of March 31, 1996, have been derived from the Aviall
Business' Unaudited Financial Statements and Notes thereto included in this
Prospectus and should be read in conjunction therewith. The unaudited historical
information of Greenwich contained herein includes, in the opinion of management
of Greenwich, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information of Greenwich for the
unaudited interim periods. The unaudited historical financial statements of the
Aviall Business contained herein, in the opinion of management of Aviall,
include all adjustments, (consisting only of normal recurring adjustments),
necessary for a fair presentation of the information of the Aviall Business for
the unaudited interim periods. The operating results of Greenwich for the six
months ended March 31, 1996 may not be indicative of the operating results for
the full year. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
--------------------------------------------------------------- ------------------------
GREENWICH 1991 1992 1993 1994 1995 1995 1996
- -------------------------------- ------------- ---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Operating Data:
Net sales..................... $ 75,821(1) $ 62,009 $ 69,467 $ 105,233 $ 196,320 $ 83,147 $ 118,625
Gross profit.................. 13,576 12,779 14,391 17,259 31,362 13,228 18,703
Income from operations........ 9,150 6,902 8,698 10,253 17,725 7,757 10,961
Interest expense.............. 3,678 2,950 3,039 4,758 7,951 3,813 3,635
Net income.................... 3,469 2,506 3,374 3,346 6,201 2,359 4,418
Fully-diluted weighted average
number of shares............. 9,972,000 9,648,000 8,000,000 12,574,654 12,836,406 13,102,190 12,844,590
Fully-diluted earnings per
share........................ $ 0.35 $ 0.26 $ 0.42 $ 0.33 $ 0.54 $ 0.21 $ 0.35
Cash dividends declared per
common share................... $ 0.01
Ratio of earnings to fixed
charges (2).................. 2.3x 2.2x 2.5x 1.9x 2.1x 1.9x 2.6x
Other Financial Data:
EBITDA (3).................... $ 10,090 $ 7,803 $ 9,696 $ 11,609 $ 19,932 $ 8,676 $ 11,980
Depreciation and
amortization................. 829 807 950 1,285 1,815 875 1,019
Capital expenditures.......... 243 1,791 5,128 1,691 2,725 586 1,737
Balance Sheet Data (at period
end)
Working capital............... $ 33,329 $ 39,430 $ 46,010 $ 76,078 $ 87,829 $ 83,480 $ 98,178
Total assets.................. 50,376 59,102 67,708 138,423 185,620 160,210 188,298
Total debt.................... 26,338 29,411 35,686 74,985 67,880 79,537 65,653
Stockholders' equity.......... 10,620 13,126 15,951 27,963 36,788 30,322 50,873
</TABLE>
28
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------- -------------------- --------------------
AVIALL BUSINESS 1993 1994 1995 1995 1996 1995 (4) 1996 (4)
- ------------------------------------ --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Operating Data:
Net sales......................... $ 482,938 $ 490,390 $ 504,755 $ 120,572 $ 134,745 $ 267,067 $ 264,749
Gross profit...................... 62,374 53,167 42,196 13,838 7,882 30,342 11,097
Income (loss) from operations..... 32,368 17,776 12,150 6,241 (910) 14,048 (6,392)
Interest expense.................. 13,984 18,171 19,216 5,415 4,283 9,958 9,087
Net income (loss)................. 7,606 (4,407) (9,780) 363 (45,003) 2,459 (56,219)
Ratio of earnings to fixed charges
(2).............................. 2.2x 1.2x 1.4x
Other Financial Data:
EBITDA (3)........................ $ 48,545 $ 35,031 $ 31,809 $ 10,982 $ 4,208 $ 23,377 $ 3,636
Depreciation and amortization..... 16,177 17,255 19,659 4,741 5,123 9,329 10,028
Capital expenditures.............. 14,501 21,572 13,246 4,093 1,444 9,807 4,530
Balance Sheet Data (at period end)
Working capital................... $ 194,602 $ 226,000 $ 175,436 $ 195,033 $ 132,331 $ 195,033 $ 132,331
Total assets...................... 482,255 500,376 463,337 479,861 463,038 479,861 463,038
Total debt........................ 25,299 19,731 17,509 23,061 17,954 23,061 17,954
Aviall investment................. 343,311 390,888 347,786 365,206 300,829 365,206 300,829
</TABLE>
- --------------------------
(1) Includes $7,075 in revenues derived from the de-emphasized structural
aircraft services business.
(2) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, change in accounting,
extraordinary items and fixed charges. Fixed charges consist of interest on
indebtedness, including, if any, the amortization of debt issue costs,
accretion of debt discount, interest expense accrued in accordance with EITF
Issue No. 86-15 and one-third of rental expense (which is deemed
representative of the interest factor therein). Earnings for the Aviall
Business were insufficient to cover fixed charges in the historical fiscal
years ended December 31, 1994 and 1995 and for the three and six months
ended March 31, 1996 by $395, $7,066, $44,756 and $55,046 (the 1996 amounts
include $39,567 of restructuring costs), respectively.
(3) EBITDA represents net income (loss) before the cumulative effect of change
in accounting plus provisions for income taxes, interest expense,
depreciation and amortization, restructuring costs, and any charge related
to any premium or penalty paid in connection with redeeming and retiring any
indebtedness prior to its stated maturity. While EBITDA should not be
construed as a substitute for income from operations, net income (loss) or
cash flows from operating activities in analyzing the Company's operating
performance, financial position and cash flows, the Company has included
EBITDA because it is commonly used by certain investors to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine the Company's ability to service debt.
(4) Historical financial information presented for the Aviall Business for the
six months ended March 31, 1995 and 1996 includes the three months ended
December 31, 1994 and 1995, respectively, which is also included in the
selected historical financial data of the Aviall Business for the fiscal
years ended December 31, 1994 and 1995, respectively. For the three months
ended December 31, 1994 and 1995, net sales were $146,495 and $130,004,
respectively, and net income (loss) was $2,096 and ($11,216), respectively.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
GENERAL
Greenwich is a leading independent provider of repair and overhaul services
for gas turbine engines used in both aviation and industrial applications and
provides management services for government and military agencies, as well as
for the worldwide installation of gas turbine powered electrical generation
plants. Under current management's direction, internal growth and strategic
acquisitions have increased Greenwich's net sales from $75.8 million in 1991 to
$196.3 million in 1995. Similarly, net income has increased 78.8% from $3.5
million in 1991 to $6.2 million in 1995. The acquisition of the Aviall Business
is expected to diversify further the Company's servicing capabilities, increase
market share and provide access to previously unavailable markets. Management
believes that these factors, coupled with Greenwich's entrepreneurial approach
and commitment to remain a high-quality, efficient provider of gas turbine
engine services, will enable the Company to maintain its position as a
successful competitor in the global marketplace.
In April 1994, Greenwich, through its newly-formed subsidiary Gas Turbine
Corporation ("GTC"), acquired the operating assets and business of the Gas
Turbine Corporation East Granby Division (the "GTC Division") from Chromalloy
Gas Turbine Corporation, a competitor of Greenwich that had the capability to
repair certain engine models that Greenwich did not then service, including the
Pratt & Whitney JT8D-200 medium by-pass aircraft engine and GG4 industrial
engine. In fiscal 1994, the operations of the GTC Division contributed sales of
$28.9 million for the five and one-half months during which it was owned by
Greenwich, which increased in fiscal 1995 to $72.4 million, reflecting a full
year of operations.
Income from operations as a percentage of sales declined from 12.5% in
fiscal 1993 to 9.0% in fiscal 1995, primarily as a result of the acquisition of
the GTC Division, which had significantly lower operating margins than Greenwich
at the time of such acquisition. On a pro forma basis, however, fiscal 1993
income from operations would have been 7.4% of net sales, had the GTC
acquisition taken place as of October 1, 1992. The integration of the GTC
Division generated cost savings from productivity improvements and the
elimination of duplicative overhead expenses. A portion of these cost savings
were, however, offset by:
-A shift in product mix to a greater proportion of low and medium by-pass
engines, which historically have provided lower gross margins compared with
high by-pass (wide body aircraft) engines;
-Competitive pricing pressures within Greenwich's markets; and
-Lower gross margins under a five-year agreement with Continental Airlines,
which Greenwich entered into in January 1995.
After the Aviall Acquisition, the Company will derive a greater percentage
of its net sales under long-term contracts which historically carry lower gross
margins but provide more predictable and steady streams of revenue. However, no
assurance can be given that any or all of these agreements (including the
contract with USAir which expires in October 1996 and is currently being
renegotiated) will be renewed or extended on terms which are commercially
favorable to the Company.
30
<PAGE>
RESULTS OF OPERATIONS
GREENWICH
The following table sets forth, for the periods indicated, the relative
percentages that certain income and expense items of Greenwich bear to its net
sales.
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH
YEARS ENDED SEPTEMBER 30, 31,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................. 79.3% 83.6% 84.0% 84.1% 84.2%
----- ----- ----- ----- -----
Gross profit............................................ 20.7% 16.4% 16.0% 15.9% 15.8%
Selling, general and administrative expenses.............. 8.2% 6.6% 7.0% 6.6% 6.5%
----- ----- ----- ----- -----
Income from operations.................................. 12.5% 9.8% 9.0% 9.3% 9.3%
Interest expense.......................................... 4.4% 4.5% 4.0% 4.6% 3.1%
Other income.............................................. (.1)% (.1)% (.2)% (.1)% (.0)%
----- ----- ----- ----- -----
Income (loss) before provision for income taxes......... 8.2% 5.4% 5.2% 4.8% 6.2%
Provision for income taxes................................ 3.3% 2.2% 2.0% 2.0% 2.5%
----- ----- ----- ----- -----
Net income.............................................. 4.9% 3.2% 3.2% 2.8% 3.7%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
SIX MONTHS ENDED MARCH 31, 1996 COMPARED WITH SIX MONTHS ENDED MARCH 31,
1995
Net sales increased $35.5 million or 42.7% to $118.6 million in the first
six months of fiscal 1996 from $83.1 million in the first six months of fiscal
1995. The increase was due to increased sales in all four of Greenwich's
marketing and technical units.
Gross profit for the first six months of fiscal 1996 increased to $18.7
million, or 15.8% of net sales, from $13.2 million or 15.9% of net sales for the
first six months of fiscal 1995. The increase was primarily due to the increase
in net sales in the first six months of 1996 from the corresponding period in
1995.
Selling, general and administrative expenses for the first six months of
fiscal 1996 increased to $7.7 million, or 6.5% of net sales, from $5.5 million,
or 6.6% of net sales for the first six months of fiscal 1995. The increase in
the first six months of 1996 from the corresponding period in 1995 is primarily
attributable to the increase in net sales in the first six months of 1996 from
the corresponding period in 1995.
Interest expense for the first six months of fiscal 1996 decreased to $3.6
million, or 3.1% of net sales, from $3.8 million or 4.6% of net sales for the
first six months of fiscal 1995, primarily due to a reduction in interest paid
on the Company's Debentures as a result of the conversion of more than $13.0
million principal amount of the Debentures since March 31, 1995. This reduction
was partially offset by $1.2 million increase in average borrowings under the
Company's existing credit facility during the first six months of 1996.
Income taxes for the first six months of fiscal 1996 increased to $2.9
million, or 2.5% of net sales, from $1.6 million, or 2.0% of net sales for the
first six months of fiscal 1995, primarily due to an increase in income before
taxes.
As a result of the above factors, net income increased to a record $4.4
million, or 3.7% of net sales for the first six months of 1996, from $2.4
million, or 2.8% of net sales for the first six months of 1995.
FISCAL 1995 COMPARED WITH FISCAL 1994
Net sales for fiscal 1995 increased 86.6% to $196.3 million, from $105.2
million for fiscal 1994. This increase resulted from strong sales gains in all
four of Greenwich's marketing and technical units and Greenwich's ability to
capitalize on the trend toward outsourcing in the commercial aviation and
military markets. Additionally, fiscal 1995 marked Greenwich's first full year
of sales produced by the GTC Division, with GTC Division sales of $72.4 million
in fiscal 1995, as compared to sales of $28.9 million for only five and one-half
months of fiscal 1994.
31
<PAGE>
Gross profit for fiscal 1995 increased 81.7% to $31.4 million, or 16.0% of
net sales, from $17.3 million or 16.4% of net sales, for fiscal 1994. This
increase in gross profit is primarily due to Greenwich's increased net sales
during the period. The decrease as a percentage of net sales was primarily due
to the timing of the integration of the operations of the GTC Division and a
shift in product mix to a greater proportion of low and medium by-pass engines.
Selling, general and administrative expenses for fiscal 1995 increased 94.7%
to $13.6 million, or 7.0% of net sales, from $7.0 million, or 6.6% of net sales
for fiscal 1994. The increase was primarily due to the addition of marketing and
administrative expenses from increased business activity, a full year of GTC
Division operations, the write-off of uncollectible accounts and the higher
incentive bonus expense related to Greenwich's financial performance.
Interest expense for fiscal 1995 increased 67.1% to $8.0 million, or 4.0% of
net sales, from $4.8 million, or 4.5% of net sales, for fiscal 1994, primarily
due to an increase in Greenwich's average borrowings during the period as a
result of increased business activity and the acquisition of the GTC Division.
Net other non-operating income for fiscal 1995 increased 450.7% to $391,000,
or 0.2% of net sales, from $71,000, or 0.1% of net sales, for fiscal 1994,
primarily due to an approximately $319,000 foreign exchange rate gain on the
sale of approximately $1.4 million in notes receivable related to the
installation of a 25 megawatt power station in Senegal, West Africa.
Income taxes for fiscal 1995 increased 78.6% to $4.0 million, or 2.0% of net
sales, from $2.2 million, or 2.2% of net sales, for fiscal 1994. The increase is
attributed primarily to the increase in Greenwich's business for fiscal 1995 as
compared with fiscal 1994.
As a result of the above factors, net income increased 85.3% to $6.2
million, or 3.2% of net sales, for fiscal 1995, from $3.3 million, or 3.2% of
net sales, for fiscal 1994.
FISCAL 1994 COMPARED WITH FISCAL 1993
Net sales for fiscal 1994 increased 50.0% to $105.2 million, from $69.5
million for fiscal 1993. The increase resulted from sales of $28.9 million
generated by the GTC Division subsequent to the acquisition, as well as a 10.0%
increase in net sales at Greenwich's Miami Facility from the servicing of medium
and high by-pass aircraft turbine engines and increased activity in connection
with government programs.
Gross profit for fiscal 1994 increased 20.0% to $17.3 million, or 16.4% of
net sales, from $14.4 million or 20.7% of net sales, for fiscal 1993. This
increase in gross profit is primarily due to Greenwich's increased net sales
during the period. The decrease as a percentage of net sales was due to a shift
in product mix to a larger percentage of low and medium by-pass engines and
fewer high by-pass and industrial engines, competitive pricing pressures within
the airline industry and the inclusion of progress billings for power station
installations, which historically carry lower gross profits.
Selling, general and administrative expenses for fiscal 1994 increased 22.8%
to $7.0 million, or 6.6% of net sales, from $5.7 million, or 8.2% of net sales,
for fiscal 1993. The increase was primarily due to the addition of marketing and
administrative expenses from the GTC Division's operations and an increase in
professional and other expenses associated with operating as a public company.
Greenwich incurred no relocation or hurricane expenses in 1994, as compared
with $140,000 or 0.2% of net sales, in fiscal 1993.
Interest expense for fiscal 1994 increased 56.6% to $4.8 million, or 4.5% of
net sales, from $3.0 million, or 4.4% of net sales, for fiscal 1993, primarily
due to an increase in Greenwich's average borrowings during the period as a
result of the acquisition of the GTC Division and increased borrowings to
support growth in the Miami operations. Interest expense was also affected by an
increase in interest rates in fiscal 1994 compared to fiscal 1993.
32
<PAGE>
Net other non-operating income for fiscal 1994 increased 48.2% to $71,000 or
0.1% of net sales, from $48,000, or 0.1% of net sales, for fiscal 1993.
Income taxes for fiscal 1994 decreased 4.3% to $2.2 million, or 2.2% of net
sales, from $2.3 million, or 3.4% of net sales, for fiscal 1993. This decrease
was attributed primarily to a decrease in Greenwich's effective tax rate to
39.8% for fiscal 1994, as compared with 40.9% of income before taxes for fiscal
1993.
As a result of the factors described above, net income decreased 0.8% to
$3.3 million, or 3.2% of net sales, for fiscal 1994, from $3.4 million, or 4.9%
of net sales, for fiscal 1993.
AVIALL BUSINESS
The following table sets forth, for the periods indicated, the relative
percentages that certain income and expense items of the Aviall Business bear to
its net sales. This information does not purport to present the results of
operations that may be expected following the Aviall Acquisition.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................. 87.1% 89.2% 91.6% 88.5% 94.2%
----- ----- ----- ----- -----
Gross profit.............................................. 12.9% 10.8% 8.4% 11.5% 5.8%
Selling and administrative expenses....................... 6.2% 7.2% 6.0% 6.3% 6.5%
----- ----- ----- ----- -----
Income (loss) from operations before restructuring
costs, interest and taxes.............................. 6.7% 3.6% 2.4% 5.2% (0.7)%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
Net sales in the first three months of 1996 increased 11.8% to $134.7
million from $120.6 million in the first three months of 1995. The net increase
resulted primarily from higher CFM56 sales to USAir, which were partially offset
by lower CFM56 sales to Southwest Airlines. Sales related to CF6 and V2500
engines were higher as well, the former primarily to Federal Express and others,
partially offset by lower sales to Continental Airlines.
Gross profit in the first three months of 1996 decreased 43.0% to $7.9
million, or 5.8% of net sales, from $13.8 million, or 11.5% of net sales, in the
first three months of 1995. This decline was primarily attributable to
re-engineering related expenses at the Dallas facility, higher quality costs and
a less favorable customer mix at Aviall U.K.
Selling and administrative expenses in the first three months of 1996
increased 15.7% to $8.8 million, or 6.5% of net sales, from $7.6 million, or
6.3% of net sales, in the first three months of 1995. This increase was
primarily due to expenses associated with severance costs in the first three
months of 1996.
Restructuring costs approximating $55.0 million will be incurred in 1996 by
Aviall on behalf of the Aviall Business. The combined financial statements of
the Aviall Business for the three months ended March 31, 1996 include $39.6
million of such restructuring costs incurred by Aviall. To the extent any
additional amount of such restructuring costs are incurred by Aviall prior to
consummation of the Aviall Acquisition, such expense will be reflected in any
financial statements of the Aviall Business compiled for the period between
March 31, 1996 and the date of consummation of the Aviall Acquisition. No
amounts in respect of such restructuring costs will be reflected in the
Company's financial statements after consummation of the Aviall Acquisition
except for certain expenses in respect of Aviall U.K. for which the Company has
been indemnified by Aviall.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Net sales for 1995 increased 2.9% to $504.8 million from $490.4 million for
1994. The net increase resulted primarily from higher CFM56 engine repair and
overhaul service sales to USAir, offset by declines in sales from the servicing
of both low by-pass JT8D engines for Continental Airlines and high by-pass V2500
engines.
33
<PAGE>
Gross profit for 1995 decreased 20.6% to $42.2 million, or 8.4% of net
sales, from $53.2 million, or 10.8% of net sales, for 1994. The decrease was
principally attributable to unfavorable performance against assumptions used in
certain long-term maintenance contracts and the disruptive effects of re-
engineering programs at its Dallas facilities, which resulted in turnaround time
penalties in 1995 of $5.7 million under certain long-term agreements with
commercial airlines.
Selling and administrative expenses for 1995 decreased 15.1% to $30.0
million, or 6.0% of net sales, from $35.4 million, or 7.2% of net sales, for
1994. The decrease was primarily attributable to a reduction in re-engineering
related consulting expenses and lower provisions for uncollectible accounts.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Net sales for 1994 increased 1.5% to $490.4 million from $482.9 million for
1993. This increase was primarily attributable to increases in the servicing of
the CFM56 engine product line offset by decreases in servicing other engine
product lines including CF6, PW100, JT8D and V2500.
Gross profit for 1994 decreased 14.8% to $53.2 million, or 10.8% of net
sales, from $62.4 million, or 12.9% of net sales, for 1993. A competitive 1994
pricing environment reduced gross profit percentages on most major contracts
signed during the year. Voluntary severance payments at the Dallas engine
facility also adversely affected gross profits, partially offset by lower UK
currency exchange losses in 1994 compared with 1993.
Selling and administrative expenses for 1994 increased 17.9% to $35.4
million, or 7.2% of net sales, from $30.0 million, or 6.2% of net sales, for
1993. The increase was primarily due to re-engineering related expenses,
additional marketing expenses and higher allocated corporate expenses associated
with Aviall operating as a public company.
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
Upon consummation of the Offerings, the Initial Drawdown and the Aviall
Acquisition, the Company's primary sources of liquidity will be cash flow from
operations and borrowings under the New Credit Facility. In addition, other
sources of liquidity are anticipated to be advance payments for power station
installations and other customer progress payments. Under the New Credit
Facility, lenders will provide the Company with a $175.0 million senior secured
revolving credit facility secured by the Company's accounts receivable,
inventories and contract rights. Advances under the New Credit Facility will be
based upon percentages of outstanding eligible accounts receivable and
inventories. Pursuant to the New Credit Facility, it is anticipated that an
aggregate of approximately $74.4 million will be borrowed initially pursuant to
the Initial Drawdown and approximately $3.0 million will be utilized for
outstanding letters of credit and that approximately $97.6 million will be
available for future borrowings. See "Use of Proceeds" and "Description of
Certain Indebtedness -- New Credit Facility." The Company may be required to
borrow additional amounts under the New Credit Facility in the six months
following consummation of the Aviall Acquisition in order to reduce accounts
payable and build inventory acquired in the Aviall Acquisition, as well as to
purchase additional inventory required to service certain customers under new
contracts being negotiated or under existing contracts. The New Credit Facility
will require the Company to comply with certain financial covenants (relating to
minimum ratios of cash flow to fixed charges, minimum ratio of funded debt to
cash flow and minimum tangible net worth) and other covenants, including
limitations on additional debt (in excess of the Notes, Debentures and other
currently outstanding debt), dividends and changes in control.
Under the New Credit Facility, the Company may elect to borrow at either the
lender's prime rate, plus 0.875% (subject to reduction to 0.5% or increase to
1.125% based upon the Company's achieving or failing to achieve certain
financial goals), or (ii) the LIBOR rate (adjustable every three months) plus
2.375%. As at March 31, 1996, the lender's prime rate was 7.75% and the
three-month LIBOR rate was 5.44%.
Concurrently with the Note Offering, the Company is offering 3,400,000
shares and a selling stockholder is offering 600,000 of Class B Common Stock to
the public by means of a separate Prospectus. The Company will not receive any
of the proceeds from the sale of Class B Common Stock
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<PAGE>
by the selling stockholder. The Company will, however, receive the proceeds from
the sale of its Class B Common Stock. The consummation of the Note Offering is
not contingent upon the consummation of the Common Stock Offering, and no
assurance can be given that the Common Stock Offering will be consummated. See
"Concurrent Transactions," "Principal Stockholders" and "Description of Capital
Stock."
Greenwich's aggregate capital expenditures for fiscal 1994 and fiscal 1995
and the six months ended March 31, 1996 were $1.7 million, $2.7 million and $1.7
million, respectively. The capital expenditures of the Aviall Business for 1994
and 1995 were $21.6 million and $13.2 million, respectively. Management
anticipates that the total capital expenditures for the balance of fiscal 1996
and fiscal 1997 will be approximately $6.0 million, which will be used to fund
the purchase of production tooling and data processing equipment. Management
plans to fund these capital expenditures from cash flow from operations and, if
necessary, borrowings under the New Credit Facility.
The Company's liquidity will also be affected by the substantial
indebtedness the Company will incur in connection with the financing of the
Aviall Acquisition, which will substantially increase the Company's cash
requirements for debt service and will impose various operating restrictions.
The New Credit Facility and the Indenture contain certain restrictions that,
among other things, limit the Company's ability to incur additional
indebtedness, create liens, pay dividends and make other restricted payments,
make certain investments, transact with affiliates, and consolidate, merge or
transfer assets. See "Description of Certain Indebtedness."
The success of the Company's expansion plan and its ability to meet
operating forecasts will depend in part upon its acquisition and maintenance of
adequate inventories of parts. The Company believes that its ability to stock a
broad parts inventory, including the availability of satisfactory credit and
other supplier arrangements, will enhance its efficiency and turnaround time on
overhaul, emergency repair and refurbishment work. The Company intends to fund
increases in its parts inventory, as needed, from cash flow from operations and
borrowings under the New Credit Facility. In connection with its January 1995
five-year engine service agreement with Continental Airlines, Greenwich entered
into an inventory purchase agreement with Continental Airlines in May 1995.
Under the terms of this agreement, Greenwich acquired substantially all of
Continental Airlines' JT8D engine parts inventory. The purchase price for the
inventory was negotiated as a bulk sale, with approximately 5.7% of the purchase
price paid in cash and 8.5% credited against outstanding receivables owed to
Greenwich by Continental Airlines. The remaining obligation, 85.8%, is being
satisfied in the form of service credits applied against future invoices for
services provided to Continental Airlines under the engine service agreement. As
of March 31, 1996, an aggregate of $11.9 million was owed by Greenwich to
Continental Airlines for such inventory.
On a pro forma basis, for the fiscal year ended September 30, 1995, the
Company's cash flow from operations was $154.9 million; cash used for investing
activities was $8.4 million; cash generated by financing activities was $230.3
million; and the ratio of earnings to fixed charges was 2.1:1.
Based upon current and anticipated levels of operations and plans for
integrating the Aviall Business, the Company believes that its cash flow from
operations, combined with borrowings available under the New Credit Facility,
will be sufficient to enable the Company to meet its current and anticipated
cash operating requirements, including scheduled interest and principal
payments, capital expenditures and working capital needs. On a pro forma basis,
the Company's (i) income from operations (excluding non-recurring charges) for
the twelve months ended September 30, 1995 and the six months ended March 31,
1996 totaled $55.0 million and $20.2 million, respectively and (ii) working
capital as of March 31, 1996 was $250.5 million.
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<PAGE>
The Company believes that the integration of the operations of Greenwich and
the Aviall Business following the Aviall Acquisition will result in
opportunities to improve cash flows by capitalizing on the cost savings
resulting from the elimination of duplicative functions in the areas of
administration, sales, marketing, purchasing, technical and field services and
management information systems. The Company anticipates, however, that it will
incur expenditures of approximately $8.5 million related to the integration of
the operations of Greenwich and the Aviall Business, which is expected to be
completed within the first year following the Aviall Acquisition. Such
non-recurring expenditures include amounts related to integration of management
information systems and other costs of consolidation. These non-recurring
expenditures initially will be funded through cash flow from operations and
borrowings under the New Credit Facility.
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INDUSTRY OVERVIEW
Gas turbine engines are used to power aircraft, industrial equipment and
marine vessels and to generate electrical power. A gas turbine aircraft engine
compresses air and mixes it with fuel which is ignited to create thrust. Land
based ("aeroderivative") gas turbine engines use the same technology, but
instead of creating thrust, the engine turns a drive shaft or pump to power
marine vessels, or is used in a variety of industrial applications such as power
plants. The major manufacturers of gas turbine engines are CFM International,
General Electric, International Aero Engines, Pratt & Whitney and Rolls Royce.
The need for more powerful and fuel efficient engines has led to the creation of
the larger "high by-pass" aircraft engine which captures and compresses larger
amounts of air with increases in thrust.
The Company believes that the worldwide market for aircraft gas turbine
engine repair and overhaul services is approximately $6.5 billion. Growth of the
engine repair and overhaul market is primarily driven by the activity of the
commercial aviation industry. Such market is projected to grow over the next ten
years at an annual rate of 4% in North America, 8% in the Asia-Pacific region
and 6% in Latin America. Approximately 55% of this market is currently serviced
by operators of the engines, principally major commercial airlines, for their
own engine needs. The remaining gas turbine engines are serviced by commercial
airlines, the OEMs and by a limited number of independent operators, including
the Company. Commercial airlines, OEMs and independent operators compete on the
ability to provide services tailored to each customer's requirements, turnaround
times, breadth of services offered and price.
The repair and overhaul of aircraft engines are regulated by governmental
agencies throughout the world, including the FAA and the BCAA, and is
supplemented by guidelines established by OEMs which generally require that
engines be overhauled and certain engine components and parts be replaced after
a certain number of flight hours or cycles (take-offs and landings). Engine
maintenance costs can range from $100,000 for certain repairs to as much as $1.5
million or more for a complete engine overhaul.
Certain trends within the aviation industry favoring independent overhaul
providers include:
-OUTSOURCING OF COMMERCIAL ENGINE SERVICES. In order to lower costs, many
passenger airlines and freight and package carriers are seeking to
outsource their engine servicing. Airlines such as British Airways,
Continental Airlines, Southwest Airlines and USAir currently utilize third
parties, and other airlines are expected to follow as labor agreements
allow.
-OUTSOURCING OF MILITARY MAINTENANCE SERVICES. It is estimated that the
U.S. military market is greater than the commercial aircraft market for
engine and aircraft maintenance and related services. The closing of
military bases and reductions in personnel have resulted in an increase in
the demand for these services in the commercial marketplace. As additional
bases are closed or realigned, this trend is expected to continue.
-INCREASED AIR TRAVEL. It is estimated that world air travel will grow by
70% by 2005, and the number of passenger and freight and package delivery
aircraft in service will increase by 47%, which should substantially
increase the demand for engine repair and overhaul services.
-START-UP AIRLINES. Deregulation of the aviation industry in the United
States and the European Community, relatively low barriers to entry and
excess capacity in equipment, as well as increased consumer demand for air
travel, has led to the emergence of several low cost start-up airlines.
Because start-up airlines generally do not invest in the infrastructure
necessary to service their aircraft, many outsource all of their engine
repair and overhaul services. Start-up airlines also tend to use older
aircraft with engines that require greater servicing. Consequently, the
Company believes that the growth of start-up airlines is increasing demand
for independent engine repair and overhaul services.
-GROWTH OF DEMAND FOR AIR FREIGHT AND PACKAGE DELIVERY. The demand for air
freight and package delivery is projected to grow at an average annual rate
of 7% over the next 20 years. This trend is expected to result in the
continued growth of established carriers such as Airborne Express,
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Emery Worldwide Airlines, Federal Express and United Parcel Service, and
has caused the emergence of new cargo carriers such as Atlas Air and Polar
Air. Many of these carriers also use older aircraft, increasing the demand
for engine repair and overhaul services.
-LEASING COMPANIES. The number of aircraft owned by financial institutions
or leasing companies, many of which use independent engine repair and
overhaul services, has grown from just over 200 aircraft in 1986 to over
1,000 aircraft in 1995.
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BUSINESS
GENERAL
On April 19, 1996, Greenwich and Aviall signed a definitive purchase
agreement for the acquisition by Greenwich of the gas turbine engine service and
engine components repair business of Aviall. The combination of Greenwich and
the Aviall Business will create the largest and most diversified independent gas
turbine engine repair and overhaul company in the world. On a pro forma basis,
the Company would have had combined sales of $701.1 million and EBITDA of
approximately $63.1 million in fiscal 1995.
The Company provides its services on a worldwide basis through four major
engine repair and overhaul service centers located in Dallas, Texas; Miami,
Florida; East Granby, Connecticut; and Prestwick, Scotland, supported by an
engine components repair facility in McAllen, Texas, an engine repair and
testing facility in Fort Worth, Texas and an engine testing facility at JFK
International Airport in New York.
GREENWICH
Greenwich is a leading independent provider of repair and overhaul services
for gas turbine aircraft engines used to power Boeing 707, 727, 737 and 747;
McDonnell Douglas DC-8, DC-9, DC-10 and MD-80; Airbus A-300; Lockheed L-1011;
and a variety of military aircraft. Greenwich also services aeroderivative
engines used in a variety of industrial and marine applications. In addition,
Greenwich manages government and military service and maintenance programs and
provides for the sale and refurbishment of gas turbine power plants (with
electrical power output of up to 120 megawatts) in various countries around the
world.
Greenwich provides services to more than 400 customers including passenger
airlines such as Carnival Airlines, Continental Airlines and VASP Brazilian
Airlines; freight and package air carriers such as Emery Worldwide Airlines and
United Parcel Service; banks and leasing companies such as The CIT Group and
International Air Leases; utilities and industrial users such as Commonwealth
Edison, Dow Chemical and Southern California Gas; and military and government
programs such as those involving the United States government, Boeing and
Lockheed Martin. Greenwich's principal engine repair, overhaul and testing
facilities are located at Miami International Airport, Miami, Florida; Bradley
International Airport, East Granby, Connecticut; JFK International Airport, New
York, New York; and Westover Airport, Chicopee, Massachusetts. Greenwich's net
sales have increased from $75.8 million in fiscal 1991 to $196.3 million in
fiscal 1995.
Greenwich is organized into four marketing and technical units: (i)
commercial aircraft engines, (ii) government programs, (iii) industrial and
marine engines and (iv) power stations. These groups comprised 71%, 14%, 10% and
5%, respectively, of fiscal 1995 net sales.
In October 1987, Greenwich acquired substantially all of the operating
assets and business of a Miami-based aircraft service corporation. At the time
of the acquisition, the corporation was primarily engaged in structural airframe
maintenance and the repair and servicing of low by-pass Pratt & Whitney JT3D
engines and components operated by affiliates of its former owners, with sales
to such entities accounting for approximately 30% of its net sales. Upon
obtaining control, Greenwich's management established the strategic goals of
expanding the number and lines of gas turbine engines serviced and increasing
the existing customer base to include more package and freight air carriers,
industrial and marine users, and military and government agencies.
In order to focus on the higher profit margin gas turbine engine repair and
related services business, Greenwich sold in 1990 the assets of a division that
serviced small turboprop engines. In 1991, management decided to de-emphasize
Greenwich's efforts in the highly competitive and labor-intensive structural
airframe business and continued to diversify into additional engine lines and
models in order to reduce Greenwich's dependence on the low by-pass JT3D engine,
an older engine which was out of production and supported by a diminishing
market. Servicing of the JT3D engine represented 12% of Greenwich's net sales in
fiscal 1995.
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In 1992, Greenwich moved its principal operations from a 200,000 square foot
facility near the cargo center of Miami International Airport to the 480,000
square foot engine service center formerly operated by Eastern Airlines.
Concurrent with entering into a favorable thirty-year lease for the larger
facility, which includes three on-site engine test cells, Greenwich acquired
from the Eastern Airlines estate substantially all of the equipment and tooling
necessary for the repair and maintenance of Rolls Royce RB211-22B and General
Electric CF6-6 and CF6-50 high by-pass aircraft engines. This paved the way for
Greenwich's entry into the servicing market for these larger and more efficient
engines, which are used to power wide-body aircraft such as the Airbus A300,
Boeing 747, Lockheed L-1011 and McDonnell-Douglas DC-10.
In late 1993, Greenwich raised approximately $23.7 million in capital
through its initial public offering of Class A Common Stock and the Debentures.
Using the proceeds from that offering along with additional bank financing, in
April 1994 Greenwich, through its newly-formed subsidiary GTC, acquired the
operating assets and business of the GTC Division from Chromalloy Gas Turbine
Corporation, a competitor of Greenwich that had the capability to repair certain
engine lines and models that Greenwich did not then service, including the Pratt
& Whitney JT8D-200 medium by-pass aircraft engine and GG4 industrial engine. The
acquisition also provided Greenwich with additional test cell capabilities for
high by-pass engines, including the Pratt & Whitney JT9D. Greenwich also
acquired the GTC Division's well-established power station design and
installation operation. In fiscal 1994, the operations of the GTC Division
contributed sales of $28.9 million for the five and one-half months during which
it was owned by Greenwich, which increased in fiscal 1995 to $72.4 million,
reflecting a full year of operations.
As a result of these actions:
- Net sales (excluding the de-emphasized structural aircraft services
business) increased from $68.7 million in fiscal 1991 to $196.3 million in
fiscal 1995;
- Net income and EBITDA increased from $3.5 million and $10.1 million,
respectively, in fiscal 1991, to $6.2 million and $19.9 million,
respectively, in fiscal 1995;
- Net sales from the servicing of high by-pass engines increased to $24.1
million in fiscal 1995, or 12% of Greenwich's total sales, since
initiation of these services in fiscal 1992;
- Net sales from the low by-pass engine services and lower margin aircraft
structural services decreased from $45.8 million, or 64% of total sales,
in fiscal 1989 to $24.2 million, or 12% of total sales, in fiscal 1995;
- Net sales from the servicing of industrial and marine gas turbine engines
and related services increased from $2.5 million, or 3% of total sales, in
fiscal 1989 to $19.0 million, or 10% of Greenwich's total sales, in fiscal
1995;
- Net sales from programs supporting military and government agencies
increased from $3.7 million, or 5% of total sales, in fiscal 1989 to $27.9
million, or 14% of total sales, in fiscal 1995; and
- Net sales from power station installations were $10.5 million, or 5% of
total sales, in the first full year following the acquisition of the GTC
Division.
THE AVIALL BUSINESS
The Aviall Business is the leading independent provider of gas turbine
aircraft engine maintenance and engine components repair services. The Aviall
Business provides repair and overhaul services for gas turbine engines used to
power Boeing 727, 737, 747 and 767; McDonnell Douglas DC-9, DC-10, MD-11, MD-80
and MD-90; and Airbus A-300, A-319, A-320, A-321, A-330 and A-340 aircraft, and
also services turboprop engines predominantly used by regional air carriers. The
primary customer base of the Aviall Business includes major and regional
commercial air and freight and package carriers such as America West, British
Airways, Continental Airlines, Federal Express, Southwest Airlines and USAir.
The engine repair and overhaul operations of the Aviall Business are located in
Dallas, Texas; Fort Worth, Texas; and Prestwick, Scotland, and its components
repair operations are located in McAllen, Texas.
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Aviall's engine repair and overhaul operations date back to 1932, and in
1955 it became the world's first major independent gas turbine engine repair
facility. These operations have been owned by Aviall since Aviall was spun-off
from Ryder in 1993. The Aviall Business' net sales have increased to $504.8
million in 1995 from $482.9 million in 1993. The Aviall Business has spent in
excess of $84.0 million over the last five calendar years to build
state-of-the-art engine repair and overhaul facilities and to develop programs
designed to provide the fastest overhaul turnaround time in the engine repair
and overhaul industry. However, its operating income has declined significantly
over this period. These declines in profitability can be attributed to a variety
of factors, including unfavorable pricing granted to certain customers,
inefficiencies in its overhaul operations, expenses associated with
reengineering its facilities, and significant costs and penalties on specific
contracts where the Aviall Business was unable to meet contractual requirements.
COMPANY STRATEGY
INTEGRATION PLAN
The Company's strategy following the Aviall Acquisition is to improve the
profitability of the Aviall Business, enhance services offered to the Company's
customers and to maintain Greenwich's historical efficiency. The Company intends
to implement this strategy by:
- ACHIEVING COST REDUCTIONS. The Aviall Acquisition will enable the Company
to eliminate duplicative functions currently being performed by both
Greenwich and the Aviall Business in the areas of administration, finance,
sales, marketing, purchasing, technical and field services, and MIS
systems. The Company will also eliminate a portion of certain other
corporate overhead charges which have historically been allocated by
Aviall to the Aviall Business. In addition, the Company will benefit by
having Greenwich utilize the Aviall Business' components repair facility
to perform work that Greenwich formerly contracted out to third parties.
- IMPROVING OPERATING EFFICIENCIES. Greenwich believes that it is one of
the most efficient providers of gas turbine engine repair and overhaul
services. The Company intends to achieve greater production and operating
efficiencies by realigning engine repair and overhaul services among its
several facilities. The Company also intends to integrate the MIS systems
which have been successfully utilized by Greenwich with those of the
Aviall Business. These MIS systems are expected to provide the Company's
management with the ability to monitor operating costs utilizing real-time
data while enhancing the information flow to the Company's customers.
- IMPROVING CONTRACTUAL PERFORMANCE. Greenwich believes that its
experienced and entrepreneurial management team will enable the Aviall
Business to improve engine turnaround time and reduce related contractual
penalties through increased productivity of the Aviall Business' domestic
workforce and improved operating and production efficiencies. The Aviall
Business incurred contractual penalties of approximately $6.2 million in
1995, primarily for late deliveries on scheduled engine overhauls.
STRATEGIC OBJECTIVES
Upon integration of Greenwich and the Aviall Business, the Company's
long-term strategic objectives will be to improve its profitability, maintain
its position as the world's largest independent provider of gas turbine engine
repair and overhaul services, and accelerate its growth. The Company's strategic
objectives may be summarized as follows:
- SERVICE NEW ENGINE LINES AND MODELS. Greenwich has successfully
implemented a strategy to increase the number of engine lines and models
serviced by its facilities, thereby creating new market opportunities
while offering its customers one-stop shopping capability. The Company
will continue this strategy and seek to develop servicing capabilities for
additional high by-pass and high horsepower gas turbine engines. Many of
the Company's existing customers use engines for which the Company
currently has no servicing capabilities and development of such
capabilities would present the Company with opportunities to expand the
services provided to these customers.
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- OFFER ADDITIONAL SERVICES TO EXISTING CUSTOMERS. Many of the engine lines
and models serviced by the Aviall Business are not currently serviced by
Greenwich and many of the engine lines and models serviced by Greenwich
are not currently serviced by the Aviall Business. The Company believes
that opportunities exist to provide services to customers of both
Greenwich and the Aviall Business for engine lines and models previously
serviced by competitors. Continental Airlines is the only major customer
serviced by both Greenwich and the Aviall Business.
- SERVICE AERODERIVATIVE ENGINE LINES. Certain of the engine lines serviced
by the Company for its airline and cargo customers have aeroderivative
engine lines used in industrial, marine and military applications.
Greenwich has been successful in providing service to the aeroderivative
gas turbine engine market, resulting in sales growth in these services
from $10.5 million in 1992 to $19.0 million in 1995.
- EXPAND SERVICE TO REGIONAL CARRIERS. The Aviall Business is a leading
provider of engine repair and overhaul services for the PW-100, an engine
predominantly used by regional carriers. The Company believes that this
market has the potential for substantial growth and that the Company will
be well-positioned to capture a larger share of this market.
ENGINE SERVICES
GENERAL
The gas turbine engine services provided by the Company include (i) engine
disassembly, (ii) cleaning of parts, (iii) inspection and nondestructive testing
for wear and damage, including cracks, erosion and sizing, (iv) evaluation of
necessary repairs, (v) the repair or replacement of parts, accessories or
components, (vi) reassembly and (vii) performance testing. The Company
identifies and tracks the parts from each individual engine throughout the
overhaul process in order to maintain the integrity of the engines it services.
The engine services offered by the Company also include 24-hour emergency
repairs whereby the Company will dispatch its personnel to repair engine
components or replace parts while the engine is mounted on the aircraft. The
Company also provides customers with quick engine change ("QEC") services on an
emergency basis. QEC services enable the customer to remove the aircraft engine
with its components attached. The Company then replaces or repairs components
while the engine is being serviced, tests the engine and components assembly,
and returns the refurbished product to the customer, ready for remounting on the
aircraft.
There are three primary reasons for removing an engine from an aircraft for
servicing: (i) an engine has been utilized to the point where the life limit for
one of its parts has been reached and the part must be replaced, (ii) the engine
has been damaged or (iii) the aircraft instrumentation system indicates that the
engine is not performing optimally. The cost of servicing an engine that has
been removed for these or other reasons may vary from $100,000 to more than $1.5
million, depending upon the age, size and model of engine, and the extent of the
repairs being performed.
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ENGINES SERVICED BY THE COMPANY
The following table sets forth: (i) the lines of gas turbine engines which
the Company services as of the date of this Prospectus, (ii) the number of such
engines currently in service as estimated by Greenwich, (iii) the principal
applications of such engines and (iv) whether such engines are currently being
serviced by Greenwich and/or the Aviall Business.
<TABLE>
<CAPTION>
SERVICED BY
------------------------------
NUMBER IN AVIALL
LINES SERVICE PRINCIPAL ENGINE APPLICATION (1) GREENWICH BUSINESS
- -------------------------------- ----------- ---------------------------------------------- --------------- -------------
<S> <C> <C> <C> <C>
PRATT & WHITNEY
JT3D 1,888 DC-8, 707 yes no
JT8D-7-17 10,300 DC-9, 727, 737 yes yes
-200 2,600 727, MD-80 yes yes
JT9D 2,683 747,767,DC-10, A300, A310 yes no
PW100; 118-127(2) 3,000 ATR-42, ATR-72, DHC-8, EMB-120, F50 no yes
GG3 83 Industrial yes no
GG4 1,013 Industrial and marine yes no
J52 1,100 Military aircraft yes no
GENERAL ELECTRIC
CF6-6 466 DC-10 yes yes
-50 2,181 DC-10, 747, A300 yes yes
-80 2,000 MD-11, 747, 767, A300, A310, A330 no yes
LM1500 74 Industrial and marine yes no
LM2500 1,200 Industrial and marine yes no
ROLLS ROYCE
RB211-22B 500 L-1011 yes no
Avon 1,120 Industrial and marine yes no
CFM INTERNATIONAL
CFM56-3, -5 6,000 737, A320, A321, A340 no yes
INTERNATIONAL AERO ENGINES
V2500 400 A319, A320, A321, MD-90 no yes
</TABLE>
- ------------------------
(1) Aircraft designated as (i) DC-8 through DC-10 or MD-11 through MD-90 are
manufactured by McDonnell Douglas, (ii) 707 through 767 are manufactured by
Boeing, (iii) L-1011 are manufactured by Lockheed Martin; (iv) A300 through
A340 are manufactured by Airbus; (v) ATR-42 and -72 are manufactured by
Aerospatiale; (vi) DHC-8 are manufactured by De Havilland; (vii) EMB-120 are
manufactured by Embraer Brasilia; and (viii) F50 are manufactured by Fokker.
(2) Excludes the PW 119B, 123AF and 124A models.
The Company continues to overhaul and provide repair services for the low
by-pass Pratt & Whitney JT3D line of engines at its Miami, Florida and East
Granby, Connecticut facilities. Although production of this line of engines was
discontinued in 1978, a number of smaller charter and cargo carriers continue to
utilize these engines, which require increasing amounts of service as they age.
Although net sales from JT3D engine servicing originally represented a
substantial percentage of Greenwich's engine service net sales, Greenwich has
significantly reduced its dependence on such sales over the past five years.
The Pratt & Whitney JT8D engine line includes the modern medium by-pass
engine models (-209, -217 and -219), which are currently in production, and the
low by-pass engine models (-7 to -17) which are no longer in production. The
total market for medium by-pass JT8D-200s is approximately 2,600 units and the
Company expects this market to grow moderately in the next five years.
Approximately 10,300 low by-pass JT8D engines are currently in use worldwide.
Certain of the low by-pass JT8D engines do not meet present and future
regulatory noise reduction requirements in the United States
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and in Europe. However, there are several noise reduction kits available to JT8D
operators. The Company expects the number of low by-pass JT8D engines will
decline as they are replaced by newer, more fuel-efficient engines and as noise
reduction restrictions are phased in.
The PW100 turboprop engine, manufactured by Pratt & Whitney of Canada, was
introduced into commercial service in 1985. This engine line has approximately
3,000 units in use and is overhauled at the engine repair and testing facility
of the Aviall Business in Fort Worth, Texas.
International Aero Engines ("IAE") received certification from the FAA for
the V2500 engine line in 1988. Manufacturing participants in the IAE consortium
include Pratt & Whitney, Rolls Royce, MTU, Japanese Aero Engine Corporation and
FiatAvio. The Aviall Business began developing the first authorized V2500
maintenance facility in the western hemisphere in 1989 and completed its first
overhaul of that engine in 1992. There are currently approximately 400 V2500
engines in use, and the Company expects the number of such engines in use to
increase significantly over the next five years.
While manufacturers introduce new engine lines infrequently, they routinely
offer derivative models of existing engines. The Company continually evaluates
new engine lines, models and derivatives to determine whether the potential
demand for overhaul services justifies the expenditures required for inventory
and modifications to tooling and equipment. The Company has acquired tooling
required to service Rolls Royce RB211-524, and -535E4 engine models used on the
L-1011, 747, 757 and 767 aircraft, and is presently developing strategies to
enter these markets.
The Company also maintains a limited inventory of aircraft engines for
short-term rental to its overhaul customers. Such rental engines are generally
rented to customers for the period during which the customers' engines are
undergoing service by the Company's repair and overhaul operations.
GOVERNMENT PROGRAMS
Greenwich has, since 1987, provided engine, aircraft and accessory services
to the United States military and other domestic and foreign government
agencies. Greenwich acts as a subcontractor to major defense contractors, and in
fiscal 1993, Greenwich began actively bidding as a prime contractor to manage
military and government programs related to engine and aircraft services,
material distribution and logistics. During 1995, the Company was awarded two
major long-term contracts. The first was a three-year contract from Lockheed
Martin Aircraft Services to provide engine maintenance, training and logistics
support for 36 A-4M Skyhawk aircraft for the Argentina Air Force. The Company
anticipates that net sales under this contract will exceed $20.0 million. The
second was a three-year contract from Warner Robins Air Logistics Center to
overhaul and modify Pratt & Whitney JT3D engines in support of the U.S. Air
Force and U.S. Army E-8 Joint STARS aircraft. The Company anticipates that net
sales under this contract will approximate $22.0 million. The Aviall Business
also services aircraft engines used in military applications.
In fiscal 1993, 1994 and 1995, Greenwich's net sales to military and other
government agencies accounted for 21%, 20% and 14% of Greenwich's net sales,
respectively. On a pro forma basis, sales to military and other government
agencies accounted for approximately 6% of the Company's net sales in fiscal
1995.
INDUSTRIAL AND MARINE GAS TURBINE ENGINES
Industrial and marine gas turbine engines are used for an increasing variety
of applications, including driving pumps and compressors for oil and gas
pipelines, generating electric power for electric utilities, cogeneration
projects and industrial applications, and powering commercial and naval vessels.
The gas turbine engine, coupled with an exhaust heat recovery steam generator,
is an attractive technology for energy cogeneration (the production of
electricity and heat for process applications in a common facility) because it
is thermodynamically efficient and has a relatively low capital cost.
The number of high horsepower gas turbine engines for industrial and marine
use has increased significantly over the last ten years. For example, according
to General Electric, the number of General
44
<PAGE>
Electric LM2500 industrial and marine engines in use has increased from
approximately 440 in 1981 to approximately 1,200 in 1995. Gas turbine industrial
and marine engines generally require an initial major overhaul after five years
of use and more frequently thereafter.
In fiscal 1993, fiscal 1994, and fiscal 1995, Greenwich's net sales from the
servicing of industrial and marine gas turbine engines and components accounted
for approximately 20%, 14% and 10%, respectively, of Greenwich's net sales. On a
pro forma basis, such sales accounted for approximately 3% of the Company's net
sales during fiscal 1995.
In addition to engine manufacturers, industrial and marine gas turbine
engines are serviced by a number of independently owned service providers,
including the Company. Based upon actual overhaul and refurbishment operations
performed in 1993, 1994 and 1995, and estimates received from General Electric
as to the number of General Electric LM2500 engines scheduled for overhaul or
refurbishment for the balance of calendar 1996 and in calendar 1997 and 1998,
the Company believes that the opportunity to service these engines will continue
to increase.
ENGINE COMPONENT AND ACCESSORY REFURBISHMENT
In addition to its gas turbine engine repair and overhaul services, the
Company also maintains an engine components repair operation in McAllen, Texas.
This operation provides gas turbine engine blade and vane repairs which require
a high level of expertise, advanced technology and sophisticated equipment.
These services were primarily provided to the engine repair and overhaul service
centers of the Aviall Business in Dallas, Texas and Prestwick, Scotland as
support for the engine repair and overhaul operations conducted at those
facilities. Upon completion of the Aviall Acquisition, such support will be
offered to all of the Company's service center operating facilities, including
those in Miami, Florida and East Granby, Connecticut. The accessory
refurbishment services offered by the Company also include the repair,
refurbishment and overhaul of numerous accessories and components mounted on gas
turbine engines, aircraft wings and frames or fuselages. Engine accessories
include fuel pumps, generators and fuel controls. Components include pneumatic
valves, starters and actuators, turbo compressors and constant speed drives,
hydraulic pumps, valves and actuators, electro-mechanical equipment and
auxiliary power unit accessories.
POWER STATIONS
The Company, through its wholly-owned subsidiary Greenwich Turbine, Inc.
("GTi"), provides worldwide management services for the design, sale,
refurbishment, and installation of complete gas turbine power plants with
electrical power output of up to 120 megawatts. The services provided include
the repair and overhaul of industrial and marine engines, and free turbines and
modules, as well as the installation of the equipment, start up, training, and
on-site testing. Depending on customer needs, GTi offers complete turnkey
operations or equipment only. In addition, GTi offers total turbine on-site
services worldwide.
During fiscal 1994, Greenwich had net sales of $3.0 million from power
station design work related to the installation of a 25 megawatt power station
for the national power company of the West African nation of Senegal. This
installation was completed in the second quarter of fiscal 1995, and Greenwich
had net sales of $7.0 million related to the completion of this project during
fiscal 1995. The Company is also designing and installing a 40 megawatt power
station for a municipal utility company in the United States, which installation
is planned to be completed in fiscal 1996. Greenwich generated $1.9 million in
net sales from this project in fiscal 1995.
ENGINES SERVICES AGREEMENTS
The Company generally provides services for regular customers under service
agreements providing for payments based upon any one of the following
arrangements:
- A time and materials formula normally predicated upon a negotiated hourly
labor rate multiplied by the actual hours expended plus a charge for
materials used and other subcontracted vendor services;
45
<PAGE>
- Fixed price arrangements for components, modules and accessories, as well
as total engine overhauls based on specific work scopes; and
- For customers who wish to enter into long-term arrangements for scheduled
engine overhauls with predefined and scheduled payment terms, the Company
offers "power-by-the-hour" ("PBTH") agreements. A PBTH agreement requires
the customer to pay an hourly rate for engine services over the life of
the agreement based on the greater of actual flight hours or a minimum
number of monthly flight hours established in advance.
SALES AND MARKETING
The Company's marketing organization is comprised of four marketing and
technical groups: (i) commercial aircraft engine services, (ii) government
programs development, (iii) industrial and marine engine services and (iv) power
station sales. Members of the Company's senior management are responsible for
the coordination and overall performance of each of these groups. Direct sales
personnel include key employees with contacts in their respective industries. In
addition, the Company advertises in trade, technical and industrial journals and
maintains close working relationships with engine and aircraft manufacturers, as
well as with industrial and marine engine users.
The Company believes that the critical factors for customers in selecting an
engine repair and overhaul vendor are dependable performance through prompt
turnaround time and engine reliability, as well as responsiveness, price and
flexibility. The Company's gas turbine engine repair and overhaul operation
attempts to differentiate itself from the competition through flexibility and
customer responsiveness. This includes meeting delivery commitments, providing
around-the-clock service, customizing workscopes to the specific requirements of
each engine overhauled and offering state-of-the-art technical facilities and
expertise, including the development of new repairs. In marketing its services,
the Company emphasizes its experience in the repair, maintenance, refurbishment
and overhaul of aircraft gas turbine engines of various sizes and thrust
capacities and aeroderivative gas turbine engines. The Company also emphasizes
its domestic and international service capabilities; its turnaround time
performance; quality of work performed; extensive technical libraries; employee
training programs; and competitive pricing structures. The Company's turnaround
time for completing a gas turbine engine overhaul depends primarily upon the
size of the engine, availability of tooling, equipment and required parts, the
amount of repair needed for key components or accessories and the Company's
ability to perform such repairs in-house. The Company believes that following
the Aviall Acquisition, its Miami, Florida and East Granby, Connecticut
facilities will be able to improve their turnaround time by having access to the
engine components repair facility in McAllen, Texas.
CUSTOMERS
The Company provides services to more than 500 customers, primarily in the
commercial aviation industry, the natural resources and electrical utility
industries and government and military agencies. On a pro forma basis,
Continental Airlines would have accounted for 17% of the Company's net sales,
the top five customers of the Company would have accounted for $332.5 million,
or 47% of the Company's net sales, and sales to foreign customers would have
accounted for $184.6 million, or 26% of the Company's net sales, during fiscal
1995. On a pro forma basis, during fiscal 1995, the Company generated $412.3
million in net sales under long-term agreements. Four of the Company's top five
46
<PAGE>
customers were rendered services under these long-term agreements. No assurance
can be given that these agreements will be renewed upon commercially reasonable
terms or at all. The Company's principal customers are noted below:
<TABLE>
<CAPTION>
ALASKA AIRLINES DHL AIRWAYS NORTHWEST AIRLINES
<S> <C> <C>
AMERICA WEST DOW CHEMICAL PETROLEOS MEXICANOS (PEMEX)
ARCO ALASKA EMERY WORLDWIDE PROCTER & GAMBLE
BOEING FEDERAL EXPRESS SOUTHERN CALIFORNIA GAS
BRITANNIA FLORIDA POWER SOUTHWEST AIRLINES
BRITISH AIRWAYS GULF AIR TRANSCANADA PIPELINES
BURLINGTON AIR EXPRESS HAWAIIAN AIRLINES UNITED PARCEL SERVICE
CARNIVAL AIRLINES INTERNATIONAL AIR LEASES UNITED STATES GOVERNMENT
COMMONWEALTH EDISON LOCKHEED MARTIN USAIR
CONTINENTAL AIRLINES NORTHROP GRUMMAN VASP BRAZILIAN AIRLINES
</TABLE>
COMPETITION
The Company believes that the primary competitive factors in its industry
are quality, turnaround time, overall customer service and price. The Company
believes that it competes favorably on the basis of the foregoing factors.
Additionally, the Company believes that the large number of engine lines and
models it services provide it with a competitive advantage. The Company does not
believe that the location of its facilities is a significant factor to its
customers in selecting the Company, because substantially all of the engines
serviced by the Company are transported by common carrier to the Company's
facilities for service.
Competition for large airline engine repair and overhaul business comes from
three primary sources: major commercial airlines, OEMs and other independent
engine service companies. Certain major commercial airlines own and operate
engine and aircraft maintenance service centers. The engine repair and overhaul
services provided by domestic airlines are primarily for their own engines,
although these airlines outsource a limited amount of engine repair and overhaul
services to third parties. Foreign airlines which provide engine repair and
overhaul services typically provide these services for their own engines and for
third parties. The Company estimates that commercial airlines service
approximately 67% of the total aircraft engine repair and overhaul service
market, of which 12% of such total market represents engine repair and overhaul
services performed for third parties. OEMs such as General Electric, Pratt &
Whitney, Rolls Royce and CFM International also maintain gas turbine engine
service centers which provide repair and overhaul services for the aircraft and
aeroderivative gas turbine engines they manufacture. Other independent engine
service organizations also compete for the repair and overhaul business of other
users of large engines.
GOVERNMENT REGULATION
The FAA and the BCAA regulate providers of services on aircraft engines and
frames. As the holder of FAA Class 3 power plant repair station certificates for
its facilities in Dallas, Texas; Miami, Florida; and East Granby, Connecticut,
the Company is authorized to service all lines and models of gas turbine
aircraft engines. These certificates provide the Company with the competitive
advantage of not being required to obtain separate FAA certification of each
line of gas turbine aircraft engine it elects to service. The Company also has
separate FAA airframe and accessory class ratings. The Company's FAA
certificates cover all of the Company's operating facilities in the United
States. The Caledonian Operation holds a certification from the BCAA. Aside from
its FAA and BCAA certifications, the Company does not hold any material patents,
trademarks or licenses.
MANUFACTURER'S AUTHORIZATIONS
The Company has contractual relationships with OEMs that enable it to
provide services to its customers on favorable terms. These agreements enhance
the Company's ability to service such engines and outline the training and
support services which the manufacturer will furnish to the Company. Such
contractual relationships take the form of general terms agreements or more
formal approval and authorization agreements and licensing authorizations to
perform proprietary repairs.
47
<PAGE>
The Company's management believes that its relations with OEMs are
excellent. The Company knows of no reason for OEMs to fail to renew or terminate
these agreements. However, no assurance can be given that these agreements will
be renewed upon commercially reasonable terms or at all.
EMPLOYEES
As of March 31, 1996, on a pro forma basis, the Company had approximately
3,110 full-time employees.
The Company's employees located in Miami, Florida; East Granby, Connecticut;
McAllen, Texas; and Prestwick, Scotland are not represented by any labor union.
The Company believes that its relations with employees at these locations are
good.
The Aviall Business has approximately 570 hourly employees in Dallas and
Fort Worth, Texas, who are covered by collective bargaining agreements. Under
the Purchase Agreement with Aviall, neither Greenwich nor the Company will
assume these collective bargaining agreements. See "Risk Factors -- Potential
Labor Issues."
In order to respond to changes in technology and new types of engines,
accessories and components, the Company conducts both formal classroom and
on-the-job training programs. The training programs include instruction on gas
turbine engines, components and airframes. Customers and vendors often utilize
the Company's training department to assist them in training both their
experienced personnel and apprentices on newly assigned equipment.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive, and frequently changing,
federal, state and local environmental laws and substantial related regulation
by government agencies, including the United States Environmental Protection
Agency (the "EPA") and the United States Occupational Safety and Health
Administration. Among other matters, these regulatory authorities impose
requirements that regulate the operation, handling, transportation, and disposal
of hazardous materials, the health and safety of workers, and require the
Company to obtain and maintain licenses and permits in connection with its
operations. This extensive regulatory framework imposes significant compliance
burdens and risks on the Company. Notwithstanding these burdens, the Company
believes that it is in material compliance with all federal, state, and local
laws and regulations governing its operations.
The Company is principally subject to the requirements of the Clean Air Act
of 1970 (the "CAA"), as amended in 1990; the Clean Water Act of 1977; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"); the Resource Conservation Recovery Act of 1976 (the "RCRA"); and the
Hazardous and Solid Waste Amendments of 1984 ("HSWA"). The following is a
summary of the material regulations that are applicable to the Company:
The CAA imposes significant requirements upon owners and operators of
facilities that discharge air pollutants into the environment. The CAA mandates
that facilities which emit air pollutants comply with certain operational
criteria and secure appropriate permits. Additionally, authorized states such as
Florida, Connecticut, Texas, and New York may implement various aspects of the
CAA and develop their own regulations for air pollution control. The Miami
facility presently holds an air emission permit for its engine test cells issued
by Dade County, Florida. The Company intends to conduct an air emissions
inventory and health and safety audit of the facility within the next six months
and, depending upon the results of such assessments, may find it necessary to
secure additional permits and/or to install additional control technology, which
could result in the initiation of an enforcement action, the imposition of
penalties and the possibility of substantial capital expenditures.
CERCLA, as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), is designed to respond to the release of hazardous substances.
CERCLA's most notable objectives are to provide criteria and funding for the
cleanup of sites contaminated by hazardous substances and impose strict
liability on parties responsible for such contamination namely, owners and
operators of
48
<PAGE>
facilities or vessels from which such releases or threatened releases occur, and
persons who generated, transported, or arranged for the transportation of
hazardous substances to a facility from which such release or threatened release
occurs.
Ground water contamination was documented at the Company's Miami facility
and surrounding areas prior to the Company's occupation of the facility. Ground
water contamination is also suspected at the western portion of the Miami
International Airport (where the Company formerly conducted operations) and
adjoining areas. Remediation of the impacted ground water by Dade County is
currently underway. Under the terms of its lease of the Miami facility, Dade
County has agreed to indemnify the Company for all remediation and cleanup costs
associated with pre-existing contamination, unless such contamination occurred
as a result of the Company's operations. If Dade County were to default in its
indemnification obligations, the Company could potentially incur liability under
CERCLA or Florida law for hazardous substances released at or from the Miami
facility and for conditions in existence prior to the Company's occupancy. To
date, the Company has not been held liable for any investigation or cleanup
costs at either of these sites.
Ground water and soil contamination was also detected at the New York
facility prior to the Company's occupancy. The sources of contamination were not
positively identified and may be related to past facility operations or
originating from off-site. The site leases with the Port of Authority of New
York ("PANY") provide that the Company will be fully indemnified for
pre-existing conditions and for any off-site contamination migrating onto the
leasehold. The Company will be responsible for any increase in contamination
above the levels established as pre-existing conditions. If PANY defaults in its
indemnification obligations, the Company could incur liability under CERCLA and
New York law for the remediation of the contamination.
On April 19, 1996, the Texas Natural Resource Conservation Commission issued
a letter to Aviall requiring the submittal of a plan and associated schedule for
the characterization, assessment and potential remediation of documented levels
of trichlorethylene in the ground water at the Dallas facility. The Company
intends to submit its plan and schedule in a timely manner. Depending upon the
results of the characterization and assessment, remediation of the ground water
may be required. Under the terms of the Purchase Agreement, Aviall has agreed to
indemnify the Company for all remediation and cleanup costs associated with
preexisting conditions at the Dallas facility prior to the consummation of the
Aviall Acquisition. If remediation of the ground water is required and if Aviall
defaults on its indemnification obligations, then the Company could incur costs
associated with such remediation.
RCRA and EPA's implementing regulations establish the basic framework for
federal regulation of hazardous waste. RCRA governs the generation,
transportation, treatment, storage and disposal of hazardous waste through a
comprehensive system of hazardous waste management techniques and requirements.
RCRA requires facilities such as the Company's that treat, store, or dispose of
hazardous waste to comply with enumerated operating standards. The Company
believes that its facilities are in material compliance with all currently
applicable RCRA requirements, hold all applicable permits required under RCRA,
and are operating in material compliance with the terms of all such permits.
Many states, including Florida, have created programs similar to RCRA for
the purpose of issuing annual operating permits and conducting routine
inspections of such facilities to ensure regulatory compliance. A routine
inspection in October 1995 by the Florida Department of Environmental Protection
("FDEP") of the Miami facility identified several hazardous waste concerns,
including, without limitation, the Company's alleged failure to provide the
required personnel training, spill prevention program, and profiles of certain
stored waste, which may result in the initiation of an enforcement action and
the assessment of substantial penalties. The Company has subsequently addressed
each of the items identified in the FDEP inspection.
As part of the HSWA which amended RCRA, Congress enacted federal regulations
governing the underground storage of petroleum products and hazardous
substances. The federal underground storage tank ("UST") regulatory scheme
mandates that EPA establish requirements for leak detection, construction
standards for new USTs, reporting of releases, corrective actions, on-site
practices and record-keeping, closure standards, and financial responsibility.
Some states, including Florida, have
49
<PAGE>
promulgated their own performance criteria for new USTs, including requirements
for spill and overfill protection, UST location, as well as primary and
secondary containment. The Company believes that its facilities are in material
compliance with the federal and state UST regulatory requirements and
performance criteria.
The three USTs at the Miami facility (which have been tested tight and are
properly permitted and registered) are steel tanks that are required under
Florida law to be retrofitted with secondary containment and leak detection
devices. To date, Dade County, which regulates the tanks on a local level, has
not directed that the tanks be retrofitted nor has it assessed any penalties for
operation without secondary containment or leak detection devices. Under the
terms of the lease of the Miami facility, Dade County agreed to indemnify the
Company for liabilities due to pre-existing conditions, which may include the
USTs. If Dade County does not provide this indemnification under the lease, the
Company could be subject to an enforcement action and penalties for failure to
replace or upgrade the tanks and could incur additional costs in replacing or
upgrading the tanks.
The USTs at the New York facility were transferred to the Company at the
time of sale, and the Company assumed all associated risks. In October 1994, a
jet fuel spill occurred during the filling of one of the tanks. The Company
completed remediation activities in 1995. Although the New York Department of
Environmental Conservation was notified within a week of the spill, there is a
possibility that the Company could be subject to an enforcement action and
penalties. During a recent audit conducted at the New York facility, two
additional USTs were identified; the status and permitting requirements for
these tanks and potential discharges are currently being assessed. Although
unknown at this point, the Company could be subject to an enforcement action and
penalties, as well as be required to make capital expenditures, the amount of
which cannot be estimated, to replace or upgrade these tanks in the future.
Ground water and soil contamination from spills and leaking USTs was also
documented at the Company's Fort Worth, Texas and Prestwick, Scotland
facilities. Remediation of the impacted ground water and soil at the Fort Worth
facility was undertaken by the Company's predecessor in interest, Aviall, which
intends to seek closure from the Texas Natural Resource Conservation Commission.
Based upon the Company's recent environmental assessment activities at its
Prestwick facility, the Company anticipates that remediation of the contaminated
soil and ground water will be immaterial. Under the terms of the Purchase
Agreement, Aviall has agreed to remediate the contamination and has agreed to
indemnify the Company for all remediation and cleanup costs associated with
pre-existing conditions at the facility prior to the acquisition. If Aviall were
to default on its indemnification obligations, then the Company could incur
liability for petroleum product releases at or from the Fort Worth, Texas and
Prestwick, Scotland facilities or from conditions in existence prior to the
Company's occupancy of these facilities.
The Company is also subject to a variety of environmental-related worker and
community safety laws. The Occupational Safety and Health Act of 1970 ("OSHA")
mandates general requirements for safe workplaces for all employees. In
particular, OSHA provides special procedures and measures for the handling of
certain hazardous and toxic substances. In addition, specific safety standards
have been promulgated for workplaces engaged in the treatment, disposal or
storage of hazardous waste. Requirements under state law, in some circumstances,
may mandate additional measures for facilities handling materials specified as
extremely dangerous. The Company believes that its operations are in material
compliance with OSHA's health and safety requirements, and anticipates upgrading
its facilities at a cost that may exceed $100,000; however, the Company believes
that such expenditures will not materially affect the Company's financial
conditions or operating results.
50
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PROPERTIES
The following table sets forth the principal operating facilities of the
Company. The Company will, in the normal course of business, from time to time
rent additional properties for warehousing and short-term maintenance
activities.
<TABLE>
<CAPTION>
SQUARE OWNED/
LOCATION FOOTAGE LEASED FUNCTION
- ------------------------------------------------ --------- --------- ------------------------------------------
<S> <C> <C> <C>
Miami International Airport 497,000 Leased Engine repair, overhaul, and testing;
Miami, FL executive offices
Bradley International Airport 112,000 Both Engine overhaul
East Granby, CT
Westover Airport, 91,000 Leased Warehouses, parts storage
Chicopee, MA
JFK Airport, New York, NY 21,000 Leased Engine test cell
Love Field, Dallas, TX 438,000 Both Engine repair and overhaul
Carter Field, Fort Worth, TX 80,000 Owned Engine repair, overhaul, and testing
Prestwick, Scotland 224,000 Owned Engine repair, overhaul, and testing
McAllen, TX 100,200 Owned Components repair
</TABLE>
The Company believes that its facilities, machinery and equipment will be
suitable for the purposes for which they are employed, are adequately maintained
and will be adequate for current requirements and projected normal growth.
LEGAL PROCEEDINGS
On June 25, 1990, Aeronautics & Astronautics Services U.S.A., Inc. ("AAS")
filed a complaint in the Dade County Circuit Court, Eleventh Judicial Circuit,
Dade County, Florida, alleging a breach of an agreement dated February 22, 1989
for the servicing by the Company of a DC-10 aircraft and its CF6 engine. AAS is
seeking damages in excess of $1,000,000. Based upon legal proceedings, discovery
to date, and the advice of legal counsel, management believes that the Company's
liability, if any, will not exceed $300,000 as a result of this action. It is
the Company's intention to defend this lawsuit vigorously.
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<PAGE>
MANAGEMENT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Eugene P. Conese 66 Chairman of the Board and Chief Executive Officer
Eugene P. Conese, Jr. 36 President, Chief Operating Officer and Director
Robert J. Vanaria 50 Senior Vice President of Administration and Chief Financial
Officer
Orlando M. Machado 36 Vice President, Finance
Dard F. Stagg 47 Vice President, General Counsel and Secretary
Charles A. Gabriel 68 Director
Charles J. Simons 78 Director
Chesterfield Smith 78 Director
</TABLE>
EUGENE P. CONESE has been the Chairman of the Board of Directors and Chief
Executive Officer of the Company since October 1987. Mr. Conese was also the
founder, principal stockholder, Chief Executive Officer and Chairman of the
Board of The Greenwich Company, Ltd. ("GCL"), a private holding company formed
in 1980, that acquired Greenwich in October 1987. Prior to acquiring Greenwich,
GCL acquired Haskon Corporation ("Haskon"), a manufacturer of specialized seals
for aircraft and aircraft engines, and founded EPCO Technologies, Inc. ("EPCO"),
a company which produces specialty plastic components for consumer products.
Haskon and EPCO have since been sold, and GCL was merged with and into the
Company as of December 30, 1995. From 1970 to 1979, Mr. Conese served as
President, Chief Executive Officer and member of the Board of Directors of Irvin
Industries, Inc., a company listed on the American Stock Exchange engaged in the
manufacture and distribution of a number of products for the aerospace and
automotive industries. Mr. Conese is a member of the Board of Directors of Trans
World Airlines, Inc., and is a member of the Board of Trustees of Iona College.
EUGENE P. CONESE, JR. has served as President and Chief Operating Officer of
the Company since November 1990. Mr. Conese, Jr. has also served as Vice
President of the Company from March 1989 to November 1990, and he has served as
a director of the Company continuously since 1987. From 1984 through December
1995, Mr. Conese, Jr. served in various capacities for GCL, including President,
which position he held at the time GCL was merged with and into the Company. Mr.
Conese, Jr. also served as President and Chief Operating Officer and member of
the Board of Directors of Haskon, and as President of EPCO. Mr. Conese, Jr. is
the son of Eugene P. Conese.
ROBERT J. VANARIA joined the Company in March 1995 as Senior Vice President
of Administration and Chief Financial Officer. Prior to joining the Company, Mr.
Vanaria served as Senior Vice President of Finance and Chief Financial Officer
from 1982 to 1994 of Foamex International, Inc. Before joining Foamex, Mr.
Vanaria spent eight years at Quaker Fabric Corporation as Corporate Controller
and earlier held several management positions in finance with three other
companies.
ORLANDO M. MACHADO joined the Company in December 1987 as Vice President and
Controller, was promoted to Vice President and Treasurer in September 1991, and
became Vice President of Finance in December 1992. Prior to joining the Company,
Mr. Machado was employed by Coopers & Lybrand, L.L.P. as an audit manager.
DARD F. STAGG joined the Company in November 1993 as Vice President, General
Counsel and Secretary. Prior to joining the Company, Mr. Stagg was Counsel to
the Washington D.C. law firm of Galland, Kharasch, Morse & Garfinkle from 1991
through 1993 where he specialized in aviation matters including international
law and finance. From 1990 to 1991, he was Vice President -- Law for United
Aviation Services, and, from 1978 through 1988, Mr. Stagg served as counsel for
British Airways.
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<PAGE>
CHARLES A. GABRIEL became a member of the Board of Directors in November
1992. He is a retired four-star General of the United States Air Force, and
served from June 1982 to June 1986 as Chief of Staff of the United States Air
Force and as a member of the Joint Chiefs of Staff. Prior to his appointment as
Chief of Staff, General Gabriel served as Commander in Chief, United States Air
Forces in Europe and commander of the Allied Air Forces, Central Europe. A
36-year veteran of the United States Air Force, General Gabriel is the recipient
of numerous honors, awards and medals offered by the United States Armed Forces.
General Gabriel serves as a member of the Board of Directors of GEC-Marconi and
Electronic Systems, Inc. and on the Board of Advisors of Riggs National Bank of
Virginia.
CHARLES J. SIMONS became a member of the Board of Directors in March 1988.
He is Chairman of the Board of Directors of G.W. Plastics, Inc. and is a
management and financial consultant. For over 40 years Mr. Simons was employed
by Eastern Airlines and served at various times during such period as Vice-
Chairman, Executive Vice President and director. Mr. Simons serves as a member
of the Board of Directors of Royce Laboratories, Inc., Calspan Corporation, and
Bessemer Trust Co. of Florida. Mr. Simons became Chairman, President and Chief
Executive Officer of General Development Corporation, a land developer, just
prior to that corporation's Chapter 11 bankruptcy filing in 1990. Mr. Simons
resigned all of his positions as President, Chief Executive Officer and Chairman
by the time General Development Corporation emerged from bankruptcy in 1992.
CHESTERFIELD SMITH became a member of the Board of Directors in March 1988.
Mr. Smith is a senior partner of the Florida law firm of Holland & Knight, which
firm has rendered certain legal services to the Company since 1990. He has
served as President of the American Bar Association, and as President of the
Florida Bar Association. Mr. Smith presently serves as a director and Chairman
of the Executive Committee of the Citrus & Chemical Bancorporation, Bartow,
Florida, and as Chairman of the Board of Trustees of The Emerald Funds.
The other key employees of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Graham P. Bell 52 Senior Vice President, Operations
R. Frank Leftwich 59 Senior Vice President and President of Texas Operations
Robert J. Loffredo 55 President of GTi
Mordechai Volovelsky 53 Senior Vice President, Commercial Aircraft, Marine and
Industrial Engine Services
Gerald Waltman 65 Senior Vice President, Government Programs
</TABLE>
GRAHAM P. BELL joined the Company in April 1994, as Senior Vice President,
Commercial Engines, and became Senior Vice President, Operations in July 1995,
and is responsible for overseeing all engine service center and related support
shop operations at the Company's Miami and East Granby facilities. Prior to
joining the Company, Mr. Bell served as President of Chromalloy Gas Turbine
Corporation East Granby Division, which position he held from 1990 through 1994.
Prior to 1990, Mr. Bell was employed by Pacific Southwest Airlines' engine
overhaul subsidiary where he served as Vice President and General Manager, and
was also a Board member.
R. FRANK LEFTWICH will join the Company as Senior Vice President and
President of Texas Operations and will retain his current role of President-Asia
operations upon completion of the Aviall Acquisition. Mr. Leftwich is currently
President of Aviall Asia Limited and also serves as Aviall's Executive Vice
President, Sales and Marketing -- Engine Services, which position he held at the
time Aviall was spun-off from Ryder. Mr. Leftwich has held various key
operational and marketing roles with Aviall and its predecessor companies.
ROBERT J. LOFFREDO joined the Company in April 1994 as President of
Greenwich Turbine, Inc., a wholly-owned subsidiary of the Company ("GTi"), where
Mr. Loffredo is responsible for overseeing all aspects of GTi's business. Prior
to joining the Company, Mr. Loffredo served in a similar capacity for Chromalloy
Gas Turbine Corporation from 1989 to 1994 and as that company's Vice President
of
53
<PAGE>
Industrial Sales and Marketing from 1985 to 1989. Mr. Loffredo was also employed
by United Technologies Corporation for 15 years, where he served in many
capacities including engineering, product control, sales and project management.
MORDECHAI VOLOVELSKY joined the Company in October 1991 as Senior Vice
President, New Business Development and became Senior Vice President, Commercial
Aircraft, Marine and Industrial Engine Services in July 1995. He is responsible
for the Company's marketing and sales and customer support for all commercial
engine overhaul and repair services. From 1967 to 1990, Mr. Volovelsky was
employed by Israel Aircraft Industries ("IAI"), with responsibility for
management of the engine shops, and also served as General Director of Quality
Control and Engineering and as President of IAI-Latin America with
responsibility for all South and Central American operations. Mr. Volovelsky
also held the position of President of Commodore Aviation, an IAI subsidiary, a
company active in the overhaul and maintenance of commercial and military
aircraft. From 1990 to October 1991, he was employed by The Ages Group, a
partnership engaged in the sale and leasing of aircraft, and aircraft engines,
parts and components.
GERALD WALTMAN joined the Company in August 1992 as Vice President, Customer
Satisfaction, and became Senior Vice President, Operations in November 1992. In
July 1995, he became Senior Vice President, Government Programs, and is
responsible for the development of all of the Company's government-related
operations. From 1981 to 1992 and prior to joining the Company, Mr. Waltman was
employed by Pratt & Whitney Inc. as Director of Customer Support for Pratt &
Whitney's Commercial Engine Business in addition to being responsible for
technical direction of the entire JT8D/JT8D-200 engine fleet (approximately
14,000 engines). Prior to joining Pratt & Whitney, Mr. Waltman served in the
United States Air Force for 26 years, rising to the rank of Colonel. His last
assignment was Director of San Antonio Air Logistics Center Depot Maintenance
for aircraft and engines.
DIRECTORS' FEES AND COMPENSATION
Directors who are not employees of the Company each receive an annual
retainer of $20,000. No director of the Company receives any directors' fees for
attendance at meetings of the Board of Directors or committees thereof, although
members of the Board do receive reimbursement for actual expenses of such
attendance. Members of the Board of Directors of the Company serve for a
one-year term or until their successors are duly elected and qualified.
Directors who are also officers of the Company do not receive a retainer or any
other additional compensation for attendance at meetings of the Board of
Directors or any committees thereof.
54
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and certain other compensation paid
by the Company to the Company's Chief Executive Officer and the four other most
highly-compensated executive officers of the Company (together with the Chief
Executive Officer, the "Named Executive Officers") during fiscal 1995, fiscal
1994 and fiscal 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------- LONG-TERM ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL COMPENSATION COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1) AWARDS (#)(2) ($)(3)
- ------------------------- --------- ----------- ----------- --------------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Eugene P. Conese 1995 400,001 394,846 80,000 0 100
Chairman and Chief 1994 381,527 46,000 103,502 0 100
Executive Officer 1993 152,870 25,000 315,880 0 100
Eugene P. Conese, Jr. 1995 175,001 172,745 20,000 0 100
President, Chief 1994 178,403 23,000 18,333 26,000 100
Operating Officer and 1993 132,902 25,000 49,767 0 100
Director
Robert J. Vanaria 1995 86,544 52,500 0 20,000 0
Senior Vice President of 1994 -- -- -- -- --
Administration and Chief 1993 -- -- -- -- --
Financial Officer (4)
Orlando M. Machado 1995 100,354 25,000 0 0 100
Vice President, Finance 1994 102,080 389 0 20,000 100
1993 86,792 10,000 0 0 100
Dard F. Stagg 1995 98,842 20,000 0 0 0
Vice President, General 1994 78,192 22,500 0 10,000 0
Counsel and Secretary 1993 -- -- -- -- --
(5)
</TABLE>
- --------------------------
(1) Includes deferred compensation of $80,000, $73,333 and $0 received by Eugene
P. Conese from the Company in fiscal 1995, 1994, and 1993, respectively.
Includes deferred compensation of $20,000, $18,333, and $0 received by
Eugene P. Conese, Jr. from the Company in fiscal 1995, 1994 and 1993,
respectively. Includes both direct and deferred compensation received by
each of Eugene P. Conese and Eugene P. Conese, Jr. from GCL in 1994 and
1993. In such years, the Company paid to GCL management fees aggregating
$120,000 and $840,000, respectively. The Company's management agreement with
GCL terminated upon consummation of the Company's initial public offering in
November 1993 and simultaneous with the commencement of the term of
employment agreements between the Company and each of Eugene P. Conese and
Eugene P. Conese, Jr. See "-- Employment Agreements." Until consummation of
the merger of GCL with and into the Company, Eugene P. Conese was the
principal stockholder and Chairman of the Board of Directors and Chief
Executive Officer of GCL, and Eugene P. Conese, Jr. was also a stockholder
and the President of GCL. Excludes personal benefits and other forms of
non-cash compensation that, in the opinion of management, do not in the
aggregate exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for such named executive officers.
(2) The amounts in this column represent options granted pursuant to the
Company's 1992 Employee Incentive Stock Option Plan.
(3) Includes matching contributions expended by the Company under its 401(k)
Retirement Plan on behalf of the specified named executive officers.
(4) Mr. Vanaria joined the Company in March 1995. Therefore, compensation
information for fiscal 1995 represents the period from March to September
1995, and no compensation information is presented for Mr. Vanaria for
fiscal 1994 or 1993.
(5) Mr. Stagg joined the Company in November 1993. Therefore, compensation
information for fiscal 1994 represents the period from November 1993 to
September 1994, and no compensation information for Mr. Stagg is presented
for fiscal 1993.
55
<PAGE>
STOCK OPTIONS
The following table sets forth certain information concerning options
granted in fiscal 1995 to the Company's Named Executive Officers under the
Company's 1992 Employee Incentive Stock Option Plan (the "1992 Plan"). The
Company has no outstanding stock appreciation rights and granted no stock
appreciation rights during fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
% OF TOTAL APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE OR FOR OPTION TERM
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------------------------- ----------- ------------------- ------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Vanaria...................... 20,000(1) 55.6% $ 3.50 April 5, 2000 $ 19,340 $ 42,736
</TABLE>
- ------------------------
(1) Represents 10,000 shares of each of Class A and Class B Common Stock. These
options were granted on March 6, 1995 pursuant to the 1992 Plan and are
exercisable beginning one year from the date of grant for 25% of the shares,
with the balance to become exercisable cumulatively in two installments each
year thereafter of 25% and 50% in years two and three, respectively. Upon
announcement of a change in control (pursuant to and as defined in the 1992
Plan), all options granted under the 1992 Plan will become immediately
exercisable. Upon consummation of a change in control, all unexercised
options will terminate.
The following table sets forth certain information concerning the value of
unexercised options held under the 1992 Plan at September 30, 1995 by the
Company's Named Executive Officers. None of the Named Executive Officers
exercised options during fiscal 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END (#) FY-END ($)(1)
-------------------------- --------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------ -------------------------- --------------------------
<S> <C> <C>
Eugene P. Conese................................ 0/0 $0/$0
Eugene P. Conese, Jr............................ 6,500/19,500 $47,125/$141,375
Robert J. Vanaria............................... 0/20,000 $0/$135,000
Orlando M. Machado.............................. 5,000/15,000 $36,250/$108,750
Dard F. Stagg................................... 2,500/7,500 $18,125/$54,375
</TABLE>
- ------------------------
(1) Represents the value of unexercised, in-the-money options at September 29,
1995, the last trading day of fiscal 1995, using the closing price of the
Class A Common Stock on that date of $10. Amounts are rounded to the nearest
dollar.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Eugene P. Conese,
Chairman of the Board and Chief Executive Officer, and Eugene P. Conese, Jr.,
President and Chief Operating Officer. Mr. Conese's and Mr. Conese, Jr.'s
employment agreements are each for terms of three years which expire September
30, 1996, and provide for an annual base salary of $400,000 plus deferred
compensation of $80,000 per annum and $200,000 plus deferred compensation of
$20,000 per annum, respectively.
In addition to their base salaries and deferred compensation, Eugene P.
Conese and Eugene P. Conese, Jr. are entitled to share, in proportion to their
respective base salaries, an annual bonus equal to varying percentages of the
Company's income before taxes, after deducting the amount of the annual
56
<PAGE>
bonus, in each of the three years during the term of their employment
agreements. For fiscal 1996, the aggregate annual bonus amount that may be paid
under both agreements may not exceed $1,000,000. The bonus for each year of
these agreements is equal to 2% of the Company's income before taxes, after
deducting the amount of the annual bonus, in the event that such income is equal
to or in excess of $5.5 million (the "Base Income") but less than $6.5 million,
and 5% of such income in the event that such income is equal to or in excess of
$6.5 million.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since 1992, the Company's Compensation Committee has decided all
compensation matters relating to the Company's Chairman and Chief Executive
Officer, and President and Chief Operating Officer, whose employment contracts
with the Company were approved by the Compensation Committee. Messrs. Charles J.
Simons and Chesterfield Smith have been members of the Compensation Committee
since its formation in 1992. General Charles A. Gabriel became a member of the
Compensation Committee in December 1993.
CERTAIN TRANSACTIONS
In September 1993, Greenwich adopted a policy with respect to future
related-party transactions which requires that all such transactions be approved
by both a majority of the entire Board of Directors as well as by a majority of
the independent outside directors or by a majority vote of the Greenwich's
disinterested stockholders. This policy is set forth in Greenwich's Bylaws.
In December 1995, Greenwich's stockholders approved the merger of GCL with
and into Greenwich, pursuant to which Greenwich acquired and cancelled 7,900,000
shares of its Common Stock from GCL and issued 7,900,620 shares of its Common
Stock to the stockholders of GCL.
Greenwich paid GCL management fees aggregating $840,000 and $120,000 for the
years ended September 30, 1993 and 1994, respectively. Greenwich's management
agreement with GCL terminated upon the completion of the Greenwich's initial
public offering in November 1993.
Interest expense on the $1 million GCL Subordinated Note amounted to
approximately $62,000 and $8,000 for the fiscal years ended September 30, 1993
and 1994, respectively.
In April 1993, Greenwich entered into simultaneous lease agreements with GCL
and an unrelated third party for the use of an aircraft engine. Under these
agreements, Greenwich leased the engine from GCL and sublet the engine to an
unrelated third party under an identical fee schedule. In accordance with the
lease terms, Greenwich paid a monthly rent of approximately $11,250 plus a fee
based on engine usage of which a minimum of $5,000 a month was required. This
agreement terminated in August 1993.
During fiscal 1994 and 1995 and for the six months ended March 31, 1996,
Greenwich purchased engine parts from World Air Lease, Inc. ("WAL") for amounts
totaling $136,691, $171,930 and $8,000, respectively. In addition, during fiscal
1994, Greenwich performed engine repair services for WAL amounting to $88,708
and received commissions amounting to $7,452 from WAL for the sale of an engine
to an unrelated third party. Such terms are believed by Greenwich's management
to have been on a market basis not materially different from those which would
have prevailed in a transaction on an arm's-length basis with an unrelated
person. WAL is wholly-owned by Eugene P. Conese, the Chairman and Chief
Executive Officer of the Company, and members of his immediate family, including
Eugene P. Conese, Jr., directly and through trusts.
During fiscal 1994 and 1995 and for the six months ended March 31, 1996,
Greenwich completed engine repair services on gas turbine aircraft engines owned
by Universal Air Lease, Inc. ("Universal"), amounting to $105,000, $103,000 and
$150,000, respectively. Such terms are believed by the Company's management to
have been on a market basis not materially different from those which would
57
<PAGE>
have prevailed in a transaction on an arm's-length basis with an unrelated
person. Universal is wholly-owned by Eugene P. Conese, the Chairman and Chief
Executive Officer of the Company, and members of his immediate family including
Eugene P. Conese, Jr.
In March 1995, Greenwich purchased an aircraft engine for a purchase price
of $1,170,000 from Universal and concurrently entered into an agreement to sell
the engine to a customer of Greenwich under substantially the same terms.
Greenwich received a fee of $10,000 and was reimbursed for its costs and
expenses. An added benefit of the transaction was that Greenwich was thereby
enabled to sell parts to, and obtain certain additional overhaul service
business from, the customer.
In June 1995, Greenwich entered into a 30-day aircraft engine lease
agreement with Pinnacle Partners One, Inc., a company in which the Chairman and
Chief Executive Officer of the Company holds a 38.5% equity interest, to provide
a replacement engine for a customer while the customer's engine was being
serviced by Greenwich. Concurrently with the entering into of such lease,
Greenwich and the customer entered into a lease at the same rental rate and on
substantially the same other terms.
In June 1995, Greenwich purchased an unserviceable General Electric CF6-50
engine for $550,000 from Universal. This engine was disassembled to provide
parts for an engine being repaired by the Company for an unaffiliated third
party. The terms of the purchase of such engine by Greenwich are believed by the
Company's management to have been on a market basis not materially different
from those which would have prevailed in a transaction on an arm's-length basis
with an unrelated person.
Chesterfield Smith, a director of the Company, is a senior partner in a law
firm which has received legal fees from Greenwich in connection with
professional services provided to Greenwich.
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information, as of March 31, 1996, regarding
the beneficial ownership of Class A Common Stock and Class B Common Stock by (i)
those persons known to the Company to be the beneficial owners of more than 5%
of the outstanding shares of Class A Common Stock and Class B Common Stock, (ii)
each of the Company's directors and the Named Executive Officers and (iii) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP PRIOR TO COMMON STOCK BENEFICIAL OWNERSHIP AFTER COMMON
OFFERING (12) NUMBER OF STOCK OFFERING
---------------------------------------------- SHARES OF ---------------------------------
CLASS B
NUMBER OF SHARES % OF CLASS COMMON STOCK NUMBER OF SHARES % OF CLASS
-------------------- ------------------------ OFFERED -------------------- -----------
NAME(1) CLASS A CLASS B CLASS A CLASS B CONCURRENTLY CLASS A CLASS B CLASS A
- ---------------------------- --------- --------- ----------- ----------- ------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eugene P. Conese (2)........ 3,468,028 3,450,934 55.1 55.0 600,000 3,468,028 2,850,934 55.1
Anna May Conese (3)......... 262,696 262,696 4.2 4.2 0 262,696 262,696 4.2
Eugene P. Conese, Jr. (4)... 190,222 185,094 3.0 3.0 0 190,222 185,094 3.0
Charles A. Gabriel (5)...... 4,473 4,473 * * 0 4,473 4,473 *
Charles J. Simons (6)....... 7,000 7,000 * * 0 7,000 7,000 *
Chesterfield Smith (7)...... 6,000 6,000 * * 0 6,000 6,000 *
Robert J. Vanaria (8)....... 2,500 2,500 * * 0 2,500 2,500 *
Orlando M. Machado (9)...... 5,241 3,532 * * 0 5,241 3,532 *
Dard F. Stagg (10).......... 1,405 1,405 * * 0 1,405 1,405 *
All Directors and Executive
Officers as a Group (8
persons) (11).............. 3,684,869 3,660,938 58.2 58.0 600,000 3,684,869 3,060,938 58.2
<CAPTION>
NAME(1) CLASS B
- ---------------------------- -----------
<S> <C>
Eugene P. Conese (2)........ 29.5
Anna May Conese (3)......... 2.7
Eugene P. Conese, Jr. (4)... 1.9
Charles A. Gabriel (5)...... *
Charles J. Simons (6)....... *
Chesterfield Smith (7)...... *
Robert J. Vanaria (8)....... *
Orlando M. Machado (9)...... *
Dard F. Stagg (10).......... *
All Directors and Executive
Officers as a Group (8
persons) (11).............. 31.5
</TABLE>
- ------------------------------
* Less than 1%
(1) The mailing address of each stockholder identified above is c/o Greenwich
Air Services, Inc., Post Office Box 522187, Miami, Florida 33152. Except as
indicated, each person listed has the sole voting and investment power with
respect to all shares of Common Stock listed above.
(2) Includes 17,094 shares of Class A Common Stock issuable upon conversion of
Debentures and 262,696 shares of each of Class A and Class B Common Stock
held beneficially by Anna May Conese, the wife of Eugene P. Conese.
(3) Does not include shares owned by Eugene P. Conese, the husband of Anna May
Conese. See (2), above.
(4) Mr. Conese and Anna May Conese are the parents of Eugene P. Conese, Jr.
Includes 6,500 shares of each of Class A and Class B Common Stock issuable
upon exercise of options and 5,128 shares of Class A Common Stock issuable
upon conversion of Debentures.
(5) Includes 4,000 shares of each of Class A and Class B Common Stock issuable
upon the exercise of stock options.
(6) Includes 5,000 shares of each of Class A and Class B Common Stock issuable
upon the exercise of stock options.
(7) Includes 5,000 shares of each of Class A and Class B Common Stock issuable
upon the exercise of stock options.
(8) Includes 2,500 shares of each of Class A and Class B Common Stock issuable
upon the exercise of stock options.
(9) Includes 2,500 shares of each of Class A and Class B Common Stock issuable
upon the exercise of stock options and 1,709 shares of Class A Common Stock
issuable upon conversion of Debentures.
(10) Includes 1,250 shares of each of Class A and Class B Common Stock issuable
upon the exercise of stock options.
(11) Includes 26,750 shares of each of Class A and Class B Common Stock issuable
upon the exercise of options and 23,931 shares of Class A Common Stock
issuable upon the conversion of Debentures.
(12) The Common Stock Offering is scheduled to occur concurrently with, but is
not a condition to, the consummation of the Note Offering. See "Concurrent
Transactions."
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 52,500,000 shares of
capital stock, consisting of (i) 25,000,000 shares of Class A Common Stock, par
value $.01 per share, (ii) 25,000,000 shares of Class B Common Stock, par value
$.01 per share, and (iii) 2,500,000 shares of Preferred Stock, par value $.01
per share. As of March 31, 1996, an aggregate of 6,279,841 shares of Class A
Common Stock and no shares of Class B Common Stock were outstanding. No shares
of Preferred Stock have been issued or are currently outstanding.
CLASS A COMMON STOCK
The Class A Common Stock has no preemptive rights and no redemption, sinking
fund or conversion provisions. All shares of Class A Common Stock have one vote
on any matter submitted to the vote of stockholders. The Class A Common Stock
does not have cumulative voting rights. Upon any liquidation of the Company, the
holders of Class A Common Stock are entitled to receive, share for share with
the holders of Class B Common Stock on a pro rata basis, all assets then legally
available for distribution after payment of debts and liabilities and
preferences on preferred stock, if any. Holders of Class A Common Stock are
entitled to receive dividends share for share with the holder's shares of Class
B Common Stock when and as declared by the Board of Directors out of funds
legally available therefor (subject to the prior rights of preferred stock, if
any). All shares of Common Stock are fully paid and nonassessable.
CLASS B COMMON STOCK
In April 1996, the Company declared a dividend to holders of record of its
Class A Common Stock on April 18, 1996 of one share of its Class B Common Stock
for each outstanding share of Class A Common Stock. As a result, an aggregate of
approximately 6.3 million shares of Class B Common Stock were issued on May 8,
1996.
The Class B Common Stock has no preemptive rights and no redemption, sinking
fund or conversion provisions. Except as otherwise required by law, the shares
of Class B Common Stock have no voting rights. Under Delaware law, holders of
Class B Common Stock are permitted to vote on amendments to the Company's
certificate of incorporation, whether or not entitled to vote thereon by the
certificate of incorporation, if such amendment would, among other things, alter
or change powers, preferences, or special rights of such class.
Upon any liquidation of the Company, the holders of Class B Common Stock are
entitled to receive, share for share with the holders of shares of Class A
Common Stock on a pro rata basis, all assets then legally available for
distribution after payments of debts of liabilities and preferences on preferred
stock, if any. Holders of Class B Common Stock are entitled to receive dividends
share for share with the holders of shares of Class A Common Stock when, as and
if declared by the Board of Directors out of funds legally available therefor
(subject to the prior rights of preferred stock, if any).
PREFERRED STOCK
The Board of Directors has the authority to issue up to 2,500,000 shares of
Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designation, preferences and
relative participation, optional or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights and dividend
rate, terms of redemption (including sinking fund provisions), redemption price
or prices, conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by the shareholders.
The issuance of Preferred Stock by the Board of Directors could affect the
rights of the holders of Common Stock. For example, such issuance could result
in a class of securities outstanding that would have preferences with respect to
voting rights and dividends, and in liquidation, over the Common Stock, and
could (upon conversion or otherwise) enjoy all of the rights appurtenant to
Common Stock.
60
<PAGE>
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control of
the Company through merger, tender offer, proxy contest or otherwise by making
such attempts more difficult to achieve or more costly. The Board of Directors
may issue the Preferred Stock with voting and conversion rights that could
adversely affect the voting power of the holders of Class A Common Stock. There
are no agreements or understandings for the issuance of Preferred Stock and the
Board of Directors has no present intention to issue Preferred Stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law prevents an "interested
stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved either the transaction in which
the interested stockholder became an interested stockholder or the business
combination; (ii) upon consummation of the transactions that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding stock held by directors who are
also officers of the corporation or by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer); or (iii) following
the transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the corporation
and authorized at a meeting of the stockholders by the affirmative vote of the
holders of two-thirds of the outstanding voting stock of the corporation not
owned by the interested stockholder.
TRANSFER AGENT
The transfer agent for the Common Stock is American Stock Transfer & Trust
Company, New York, New York.
61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Common Stock Offering, the Company will have
outstanding 6,279,841 shares of Class A Common Stock and 9,679,841 shares of
Class B Common Stock (excluding 600,000 shares of Class B Common Stock issuable
upon exercise of the Underwriter's over-allotment option). Of these shares,
6,103,747 shares of Class A Common Stock and 9,503,747 shares of Class B Common
Stock will be freely tradeable without restriction or further registration under
the Securities Act. The remaining 176,094 shares of Class A Common Stock and
176,094 shares of Class B Common Stock held by an existing stockholder are
"restricted securities" as defined in Rule 144 promulgated under the Securities
Act, and may only be sold in the public market if such shares are registered
under the Securities Act or sold in accordance with Rule 144 or another
exemption from registration under the Securities Act.
In general, under Rule 144 a person (or group of persons whose shares are
aggregated) who has beneficially owned restricted securities for at least two
years, including persons who may be deemed "affiliates" (as defined in Rule 144)
of the Company, will be entitled to sell, within any three month period, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of the Class A Common Stock or Class B Common Stock (expected
to be equal to approximately 62,798 shares and 96,798 shares, respectively,
following the Common Stock Offering) or (ii) the average weekly trading volume
in the Class A Common Stock or Class B Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
manner of sale limitations, notice requirements and the availability of current
public information about the Company. A person who has not been an "affiliate"
of the Company for the 90 days preceding a sale and who has beneficially owned
restricted securities for at least three years will be entitled to sell such
shares in the public market without restriction. Restricted securities properly
sold in reliance upon Rule 144 are thereafter freely tradeable without
restrictions or registration under the Securities Act, unless thereafter held by
an "affiliate" of the Company. For purposes of Rule 144, 126,095 of the
restricted shares of Class A Common Stock and 126,095 of the restricted shares
of Class B Common Stock outstanding have been beneficially owned by its holder
for over two years.
The Company is unable to estimate the amount, timing or nature of future
sales of outstanding Class A Common Stock or Class B Common Stock. Although the
shares of Class B Common Stock offered pursuant to the Common Stock Offering
will trade separately from the shares of Class A Common Stock, sales of
substantial amounts of either the Class A or Class B Common Stock in the public
market may have an adverse effect on the market price of both the Class A Common
Stock and the Class B Common Stock, because such classes are identical in all
respects, except that the Class B Common Stock has no voting rights. The Company
and its executive officers, directors and principal stockholders have agreed
that for a period of 90 days from the date of this Prospectus, they will not
offer for sale, sell, solicit an offer to buy, contract to sell, distribute,
grant any option for the sale of or otherwise transfer or dispose of, directly
or indirectly, any shares of Common Stock or any securities convertible into,
exercisable for or exchangeable for any shares of Common Stock without the prior
written consent of the underwriters of the Common Stock Offering.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
Under the New Credit Facility, lenders will provide the Company with a
$175.0 million senior secured revolving credit facility secured by the Company's
accounts receivable, inventories and contract rights. Advances under the New
Credit Facility will be based upon percentages of outstanding eligible accounts
receivable, inventories and other contract rights. Pursuant to the New Credit
Facility, it is anticipated that an aggregate of approximately $74.4 million
will be initially borrowed pursuant to the Initial Drawdown, $3.0 million will
be utilized for outstanding letters of credit and that approximately $97.6
million will be available for future borrowings. The New Credit Facility will
require the Company to comply with certain financial covenants (relating to
minimum ratios of cash flow to fixed charges, minimum ratio of funded debt to
cash flow and minimum tangible net worth) and other covenants, including
limitations on additional debt (in excess of the Notes, Debentures and other
outstanding debt), dividends and changes in control. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Pro Forma Liquidity and Capital Resources."
Under the New Credit Facility, the Company may elect to borrow at either the
lender's prime rate, plus 0.875% (subject to reduction to 0.5% or increase to
1.125% based upon the Company's achieving or failing to achieve certain
financial goals), or (ii) the LIBOR rate (adjustable every three months) plus
2.375%. As at March 31, 1996, the lender's prime rate was 7.75% and the
three-month LIBOR rate was 5.44%.
8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2000
In November and December 1993, Greenwich issued $16,999,000 principal amount
of the Debentures. The Debentures are convertible into shares of Class A Common
Stock at any time prior to maturity, unless previously redeemed by the Company,
at a conversion price of $5.85 per share, subject to adjustment in certain
events. The Debentures are not redeemable by the Company prior to November 15,
1996. Thereafter, the Debentures are redeemable at a redemption price equal to
100% of the principal amount thereof plus accrued interest, provided that the
Debentures may not be redeemed unless the closing price of the Company's Class A
Common Stock has equaled or exceeded $6.75 for the previous 20 consecutive
trading days. As of March 31, 1996, there was $3,561,000 principal amount of the
Debentures outstanding, which are convertible into an aggregate of 608,716
shares of Class A Common Stock. The Debentures are subordinated in right of
payment to the Notes and to all present and future senior indebtedness of the
Company to commercial lenders.
The Company anticipates that if the price of its Class A Common Stock
exceeds $6.75 in November 1996, it will call all outstanding Debentures for
redemption. The Company expects that substantially all of the Debentures will
have been converted into Common Stock prior to redemption.
TERM LOANS
TERM LOAN. In November 1992, Greenwich entered into a loan and security
agreement with a commercial lender for a five-year, $9.0 million term loan
expiring in November 1997 (the "Term Loan"). The Term Loan is secured by the
Company's equipment and tooling, and bears interest at 8.75% per annum, payable
in 59 monthly installments (including principal and interest) of $143,205 each,
and a final payment of approximately $3.3 million due on November 1, 1997. As of
March 31, 1996, the balance of the Term Loan was $5.4 million.
GTC TERM LOAN. On May 26, 1994 Greenwich and GTC entered into a separate
loan and security agreement with a lender for a five-year, $8.0 million term
loan expiring in May, 1999 (the "GTC Term Loan"). The GTC Term Loan is secured
by substantially all of GTC's fixed assets (excluding real estate), and bears
interest at a rate of 8.99% per annum, payable monthly in arrears. Principal
repayments under this agreement are to be made in 24 consecutive monthly
installments of $166,667 each and an additional 36 consecutive monthly
installments of $111,111 each, with all such payments ending in May 1999. As of
March 31, 1996, the balance of the GTC Term Loan was $4.3 million.
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LOAN PAYABLE TO WAL. In November 1992, Greenwich entered into a loan and
security agreement with WAL for a five-year, $3.0 million term loan expiring in
November 1997 (the "WAL Loan"). The WAL Loan is secured by the Company's
equipment and tooling, and bears interest at 10.25% per annum, payable in 59
monthly installments (including principal and interest) of $50,519 each, and a
final payment of approximately $1.1 million due on November 1, 1997. On April 1,
1994, subject to the terms and conditions of the GTC Term Loan, WAL agreed to
grant a priority lien position to the lender under the GTC Term Loan on the
Company's tooling and equipment. In return, WAL was granted a priority lien
position on specific tooling and a first mortgage on certain real property that
the Company owns in East Granby, Connecticut. As of March 31, 1996, the balance
of the WAL loan was $1.8 million.
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DESCRIPTION OF NOTES
The Notes are to be issued under the Indenture dated as of ,
1996, between the Company, the Subsidiary Guarantors and American Stock Transfer
& Trust Company, as Trustee (the "Trustee"). A copy of the Indenture has been
filed as an exhibit to the Registration Statement. The Indenture is subject to
and is governed by the Trust Indenture Act of 1939, as amended (the "1939 Act").
The following summaries of certain provisions of the Indenture do not purport to
be complete and are subject, and are qualified in their entirety by reference,
to the 1939 Act and to all the provisions of the Notes and the Indenture,
including the definitions therein of certain terms. Wherever particular Sections
or defined terms of the Indenture are referred to herein, such Sections or
defined terms are incorporated by reference herein. For purposes of this
Section, references to the "Company" shall mean Greenwich Air Services, Inc.
excluding its subsidiaries, after giving effect to the Aviall Acquisition.
Certain terms used in this Section are defined under "-- Certain Definitions."
GENERAL
The Notes will mature on , 2006, and will be limited to an
aggregate principal amount of $150,000,000. The Notes will bear interest at the
rate set forth on the cover page of this Prospectus from , 1996 (the
"Issue Date"), or from the most recent date to which interest has been paid,
payable semiannually on and of each year, commencing on ,
1996, to the persons in whose names the Notes (or any predecessor Notes) are
registered at the close of business on the preceding or , as the
case may be. Interest on the Notes will be computed on the basis of a 360-day
year of twelve 30-day months.
Principal of, premium, if any, and interest on, the Notes will be payable,
and the Notes will be exchangeable and transferable, at an office or agency of
the Company, one of which will be maintained for such purpose in The City of New
York (which initially will be the Corporate Trust Office of the Trustee), or
such other office or agency permitted under the Indenture; PROVIDED, HOWEVER,
that payment of interest may be made at the option of the Company by check
mailed to the persons entitled thereto as shown on the Security Register. The
Notes will be issued only in fully registered form without coupons in
denominations of $1,000 or any integral multiple thereof. No service charge will
be made for any registration of transfer or exchange of Notes, except for any
tax or other governmental charge that may be imposed in connection therewith.
RANKING
The Notes will be senior unsecured obligations of the Company, will rank
PARI PASSU in right of payment with all existing and future senior indebtedness
of the Company and will be senior in right of payment to all existing and future
subordinated debt of the Company. However, the Notes will be effectively
subordinated to all secured indebtedness of the Company to the extent of the
assets securing such indebtedness, including indebtedness as of March 31, 1996
after giving effect to the Aviall Acquisition, the Offerings and the Initial
Drawdown of: (i) $74.4 million under the New Credit Facility, which will be
secured by the Company's inventory and accounts receivable; (ii) $4.3 million
under the GTC Term Loan, which is secured by all of GTC's fixed assets
(excluding real estate); (iii) $5.4 million under the Term Loan, which is
secured by certain of the Company's equipment and tooling; and (iv) $1.8 million
under the WAL Loan, which is secured by certain tooling not securing the GTC
Term Loan and certain real property owned by GTC in East Granby, Connecticut. As
of March 31, 1996, on a pro forma basis after giving effect to the Offerings,
the Initial Drawdown and the Aviall Acquisition, such secured indebtedness would
have aggregated approximately $86.0 million, the total consolidated indebtedness
of the Company and its subsidiaries would have been $239.6 million, and the
Company would have had the ability to borrow up to an additional $97.6 million
under the New Credit Facility.
The Notes will be guaranteed (each a "Subsidiary Guarantee") on a senior
unsecured basis by the Subsidiary Guarantors and will also be jointly secured on
a PARI PASSU basis with Indebtedness under the New Credit Facility by a pledge
of 65% of the capital stock of Aviall Limited pursuant to a pledge and security
agreement dated as of , 1996 (the "Pledge and Security Agreement")
between the
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Company, the Trustee and the lenders under the New Credit Facility. Each
Subsidiary Guarantee will be effectively subordinated to all secured
indebtedness of the related Subsidiary Guarantor to the extent of the assets
securing such indebtedness.
SUBSIDIARY GUARANTEES AND OTHER SECURITY
Each Subsidiary Guarantor will unconditionally Guarantee (each, a
"Subsidiary Guarantee"), jointly and severally, to each holder of Notes and the
Trustee, the full and punctual performance of the Company's obligations under
the Indenture and the Notes, including the payment of principal of and interest
on the Notes. Each of the Subsidiary Guarantees will be a senior unsecured
obligation of the respective Subsidiary Guarantor, and will rank PARI PASSU with
all existing and future senior unsecured indebtedness of such Subsidiary
Guarantor. However, each Subsidiary Guarantee will be effectively subordinated
(to the extent of the respective Subsidiary Guarantor's assets securing the New
Credit Facility) to the respective Subsidiary Guarantor's obligations under the
New Credit Facility, which will be secured by such Subsidiary Guarantor's
inventory, accounts receivable and certain contract rights.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount which, after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations under the Indenture, will result in the obligations
of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Subsidiary Guarantor that makes a payment or distribution under a Subsidiary
Guarantee shall be entitled to a pro rata contribution from each other
Subsidiary Guarantor based on the net assets of each Subsidiary Guarantor,
determined in accordance with GAAP.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation,
PROVIDED that such consolidation, merger or sale is otherwise in accordance with
the Indenture. Each Subsidiary Guarantor may consolidate with or merge into or
sell substantially all its assets to a corporation other than the Company or
another Subsidiary Guarantor (whether or not affiliated with the Subsidiary
Guarantor) and such Subsidiary Guarantor shall be released from all obligations
under its Subsidiary Guarantee if (a) such transaction would be permitted under
the "Limitation on Assets Sales" covenant described below and (b) immediately
before and after giving effect to such transaction on a pro forma basis, no
Default or Event of Default shall have occurred and be continuing.
Separate financial statements of the Subsidiary Guarantors are not included
herein because such Subsidiary Guarantors are jointly and severally liable with
respect to Greenwich's obligations pursuant to the Notes, and the aggregate
total assets, net income and stockholder's equity of the Subsidiary Guarantors
and Greenwich are substantially equivalent to the total assets, net income and
stockholder's equity of Greenwich on a consolidated basis.
Pursuant to the Pledge and Security Agreement, the Notes will be jointly
secured on a PARI PASSU basis with Indebtedness under the New Credit Facility by
a pledge of 65% of the capital stock of Aviall U.K. Such security will be in
addition to the accounts receivable, inventories and other contract rights of
Aviall U.K. securing Indebtedness under the New Credit Facility. Upon
declaration of a default under the New Credit Facility or under the Indenture
and, in each case, acceleration of the Indebtedness thereunder, the Collateral
Agent named in the Pledge and Security Agreement will either (a) liquidate the
accounts receivable, inventory and other contract rights securing Indebtedness
under the New Credit Facility or (b) sell the capital stock of Aviall U.K.
pledged pursuant to the Pledge and Security Agreement, whichever is determined
to be likely to generate more proceeds for the repayment of Aviall U.K.'s
Indebtedness. The lenders under the New Credit Facility will be entitled to
receive from such liquidation or sale proceeds equal to the value of the
accounts receivable, inventory and other contract rights to the extent of the
total Indebtedness outstanding under the New Credit Facility. All proceeds in
excess of such amount, if any, will be shared PARI PASSU on a pro rata basis
with the holders of the Notes. The Pledge and Security Agreement establishes
certain procedures to be followed by the Collateral Agent designed to provide
the maximum possible proceeds as a result of such a liquidation or sale.
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Separate financial information relating to Aviall Limited has been included
in the Aviall Business' Audited Combined Financial Statements and Notes thereto
included in this Prospectus.
OPTIONAL REDEMPTION
The Notes are not redeemable prior to , 2001. At any time on or
after , 2001, the Notes are redeemable at the option of the Company,
in whole or in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices expressed as percentages of principal amount, plus
accrued and unpaid interest, if any, to the date of redemption.
If redeemed during the 12-month period commencing of the years
indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ------------------------------------------------------------ ------------
<S> <C>
2001........................................................ %
2002........................................................ %
2003........................................................ %
</TABLE>
and thereafter, beginning , 2004, at 100% of the principal amount
of the Notes.
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined below), each holder
of Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the purchase date (the "Change of Control
Payment").
Within 30 days following any Change of Control, the Company will mail a
notice to each holder of Notes stating, among other things: (1) that a Change of
Control has occurred, that a Change of Control Offer is being made pursuant to
the covenant in the Indenture entitled "Mandatory Repurchase at the Option of
Holders Upon a Change of Control" and that all Notes (or portions thereof)
timely tendered will be accepted for payment; (2) the purchase price and the
purchase date, which will be, subject to any contrary requirements of applicable
law, no earlier than 30 days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"); (3) that any Note (or portion
thereof) accepted for payment (and duly paid on the Change of Control Payment
Date) pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control Payment Date; (4) that any Notes (or portions
thereof) not tendered will continue to accrue interest; (5) a description of the
transaction or transactions constituting the Change of Control; (6) that holders
accepting the offer to have their Notes purchased pursuant to a Change of
Control Offer will be required to surrender such Notes (or portions thereof) to
the Paying Agent at the address specified in the notice prior to the close of
business on the business day preceding the Change of Control Payment Date; (7)
that holders will be entitled to withdraw their acceptance if the Paying Agent
receives, not later than the close of business on the third business day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of such Notes delivered for purchase, and a statement that such holder is
withdrawing such holder's election to have such Notes (or portions thereof)
purchased; (8) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, provided that each Note purchased and each such new Note
issued shall be in an original principal amount in denominations of $1,000 and
integral multiples thereof; and (9) any other procedures that holders must
follow to accept a Change of Control Offer or effect withdrawal of such
acceptance.
On the Change of Control Payment Date, the Company shall (i) accept for
payment the Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (ii) irrevocably deposit with the Trustee or with a Paying
Agent money sufficient to pay the purchase price of all Notes or portions
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thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
the Notes so accepted together with an Officers' Certificate identifying such
Notes or portions thereof. The Trustee or a Paying Agent shall, on the Change of
Control Payment Date, mail or deliver to each tendering holder of the purchase
price of the Notes so accepted, and the Trustee shall promptly authenticate and
mail (and the Company and the Subsidiary Guarantors shall execute) to such
holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered; provided that each such new Note shall be issued in an
original principal amount in denominations of $1,000 and integral multiples
thereof.
The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 14e-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any other securities laws and regulations to the extent
such laws and regulations are applicable in connection with the purchase of
Notes in connection with a Change of Control. To the extent that the provisions
of any securities laws or regulations conflict with the provisions relating to
the Change of Control Offer, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described above by virtue thereof.
Except as described above with respect to a Change of Control, the Indenture
does not contain any other provisions that permit the holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
There can be no assurance that the Company will be able to fund any such
repurchase of Notes. The New Credit Facility contains, and any future credit
agreements or other agreements relating to indebtedness of the Company may
contain, prohibitions or restrictions on the Company's ability to effect a
Change of Control Payment. In the event a Change of Control occurs at a time
when such prohibitions or restrictions are in effect, the Company could seek the
consent of its lenders to the purchase of Notes or could attempt to repay or
refinance the borrowings governed by the agreements that contain such
prohibitions or restrictions. If the Company does not obtain such a consent or
repay or refinance such borrowings, the Company will be effectively prohibited
from purchasing Notes. In such case, the Company's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture.
A "Change of Control" will be deemed to occur if (i) (a) the Specified
Holders cease in the aggregate to "beneficially own" (as such term is used in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, at least
50% of the total voting power of the Voting Stock of the Company, whether as a
result of any issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of the Company or otherwise, and (b) any "person"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing, including any group acting for
the purpose of acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(1) under the Exchange Act), other than an underwriter engaged
in a firm commitment underwriting on behalf of the Company and other than the
Specified Holders, becomes the "beneficial owner" (as defined in clause (a)
above, except that for the purposes of this clause (b) a person other than a
Specified Holder shall be deemed to have beneficial ownership of all shares that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
either (x) 35% or more of the total voting power of the Voting Stock of the
Company or (y) a greater percentage of the total voting power of the Voting
Stock of the Company than the Specified Holders in the aggregate "beneficially
own" (as defined in clause (a) above), directly or indirectly; (ii) the
stockholders of the Company shall have approved any plan of liquidation or
dissolution of the Company; or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Company's Board
of Directors (together with any new directors whose election or appointment by
such board or whose nomination for election by the stockholders of the Company
was approved by a vote of at least 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's Board of Directors then in office.
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BOOK-ENTRY SYSTEM
The Notes will initially be issued in the form of one or more Global
Securities (as defined in the Indenture) held in book-entry form. Accordingly,
The Depository Trust Company or its successor ("DTC") or DTC's nominee will
initially be the sole registered holder of the Notes for all purposes under the
Indenture.
Upon the issuance of a Global Security, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the Notes represented by such Global Security purchased by such persons in this
Offering. Such accounts shall be designated by the Underwriters with respect to
Notes placed by the Underwriters for the Company. Ownership of beneficial
interests in a Global Security will be limited to persons that have accounts
with DTC ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests by participants in a Global
Security will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by DTC for such Global Security.
Ownership of beneficial interests in a Global Security by persons that hold
through participants will be shown on, and the transfer of those ownership
interests within each participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
Payment of principal and interest on Notes represented by any such Global
Security will be made to DTC or its nominee, as the case may be, as the sole
registered owner and the sole holder of the Notes represented thereby for all
purposes under the Indenture. None of the Company, the Subsidiary Guarantors,
the Trustee, the Underwriters or any of their respective agents will have any
responsibility or liability for (a) any aspect of DTC's records relating to, or
payments made by DTC or its nominee on account of, beneficial ownership
interests in a Global Security representing any Notes or (b) maintaining,
supervising or reviewing any of DTC's records relating to such beneficial
ownership interests.
The Company has been advised by DTC that upon receipt of any payment of
principal of, or interest on, any Global Security, DTC will immediately credit,
on its book-entry registration and transfer system, the accounts of participants
with payments in amounts proportionate to their respective beneficial interests
in the principal or face amount of such Global Security as shown on the records
of DTC. Payments by participants to owners of beneficial interests in a Global
Security held through such participants will be governed by standing
instructions and customary practices as is now the case with securities held for
customer accounts registered in "street name" and will be the sole
responsibility of such participants.
A Global Security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC. A Global Security is exchangeable
for certificated Notes only if (i) DTC notifies the Company that it is unwilling
or unable to continue as a depositary for such Global Security or if at any time
DTC ceases to be a clearing agency registered under the Exchange Act, (ii) the
Company executes and delivers to the Trustee a notice that such Global Security
shall be so transferable and exchangeable, and such transfers shall be
registrable, or (iii) there shall have occurred and be continuing an Event of
Default or an event which, with the giving of notice or lapse of time or both,
would constitute an Event of Default with respect to the Notes represented by
such Global Security. Any Global Security that is exchangeable for certificated
Notes pursuant to the preceding sentence will be exchanged for certificated
Notes in such authorized denominations and registered in such names as the
depositary holding such Global Security may direct. Subject to the foregoing, a
Global Security is not exchangeable except for a Global Security of like
denomination to be registered in the name of the depositary or its nominee. In
the event that a Global Security becomes exchangeable for certificated Notes,
(i) certificated Notes will be issued only in fully registered form in
denominations of $1,000 or integral multiples thereof, (ii) payment of
principal, premium, if any, and interest on the certificated Notes will be
payable, and the transfer of the certificated Notes will be registrable, at the
office or agency of the Company maintained
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for such purposes, and (iii) no service charge will be made for any registration
of transfer or exchange of the certificated Notes, although the Company may
require payment of a sum sufficient to cover any tax or governmental charge
imposed in connection therewith.
So long as the depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Notes
represented by such Global Security for the purposes of receiving payment on the
Notes and receiving notices, and for all other purposes under the Indenture and
the Notes. Beneficial interests in Notes will be evidenced only by, and
transfers thereof will be effected only through, records maintained by the
depositary and its participants. Cede & Co. has been appointed as the nominee of
DTC. Except as provided above, owners of beneficial interests in a Global
Security will not be considered the holders thereof for any purposes under the
Indenture. Accordingly, each person owning a beneficial interest in a Global
Security must rely on the procedures of the depositary, and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder of Notes under the
Indenture. The Company understands that under existing industry practices, in
the event that the Company requests any action of holders or that an owner of a
beneficial interest in a Global Security desires to give or take any action
which a holder of Notes is entitled to give or take under the Indenture, the
depositary would authorize the participants holding the relevant beneficial
interest to give or take such action and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
DTC has advised the Company that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
CERTAIN COVENANTS
LIMITATION ON COMPANY INDEBTEDNESS. The Indenture provides that the Company
will not, directly or indirectly, incur any Indebtedness unless no Default or
Event of Default shall have occurred and be continuing at the time of such
Incurrence and, after giving pro forma effect to the application of the proceeds
thereof, no Default or Event of Default would occur as a consequence of such
Incurrence and either (a) after giving pro forma effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds thereof, the
Consolidated Interest Coverage Ratio exceeds 2.0 or (b) such Indebtedness is
Permitted Company Indebtedness.
Permitted Company Indebtedness means any and all of the following: (a)
Indebtedness evidenced by the Notes; (b) Indebtedness under the New Credit
Facility, PROVIDED that the aggregate principal amount of all such Indebtedness
under the New Credit Facility, together with all Indebtedness Incurred pursuant
to clause (i) of this paragraph in respect of Indebtedness previously Incurred
pursuant to this clause (b), and all Indebtedness Incurred pursuant to clause
(a) of "Limitation on Restricted Subsidiary Indebtedness and Preferred Stock"
together with all Indebtedness Incurred and Preferred Stock issued pursuant to
clause (g) of such paragraph in respect of Indebtedness previously Incurred
pursuant to such clause (a), at any one time outstanding does not exceed the sum
of 80% of the aggregate amount of receivables (including unbilled accounts
receivable) and 60% of the aggregate amount of inventory as of the end of the
most recent fiscal quarter, in each case of the Company and its Restricted
Subsidiaries, as determined on a consolidated basis in accordance with GAAP; (c)
Indebtedness of the Company to
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any of its Wholly Owned Subsidiaries (but only so long as such Indebtedness is
held by a Wholly Owned Subsidiary); (d) Indebtedness in connection with one or
more standby letters of credit, statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature Incurred in the ordinary
course of business consistent with past practice and not in connection with the
borrowing of money or the obtaining of advances or credit; (e) Indebtedness
under Currency Agreements and Interest Rate Protection Agreements entered into
for the purpose of limiting currency rate or interest rate risks, PROVIDED that
such Currency Agreements and Interest Rate Protection Agreements do not increase
the Indebtedness of the Company or its Restricted Subsidiaries outstanding at
any time other than as a result of fluctuations in currency rates or interest
rates or by reason of customary fees, indemnities and compensation payable
thereunder and either, with respect to Currency Agreements, are entered into for
the purpose of limiting currency exchange rate risks in connection with
transactions entered into in the ordinary course of business, or, with respect
to Interest Rate Protection Agreements, are related to payment obligations on
Indebtedness otherwise permitted by the terms of the "Limitation on Company
Indebtedness" covenant; (f) certain specified Indebtedness outstanding on the
Issue Date not otherwise permitted in clauses (a) through (e) above or clause
(g) below; (g) Indebtedness in respect of Capital Lease Obligations directly
Incurred by the Company, PROVIDED that the aggregate principal amount of such
Indebtedness Incurred under this clause (g) and clause (f) under "Limitation on
Restricted Subsidiary Indebtedness and Preferred Stock" does not exceed $10
million at any one time outstanding; (h) Indebtedness Incurred in connection
with a repurchase of Notes pursuant to a Change of Control, PROVIDED that the
principal amount of such Indebtedness does not exceed 101% of the principal
amount of the Notes repurchased and the reasonable and customary expenses, fees
and costs of the Company in connection therewith, and such Indebtedness (i) has
an Average Life to Stated Maturity that is equal to or greater than the
remaining Average Life to Stated Maturity of the Notes and (ii) has a Stated
Maturity no earlier than the Stated Maturity of the Notes; (i) Indebtedness
Incurred in exchange for, or the proceeds of which are used to refinance,
Indebtedness referred to in clauses (a) through (f) or clause (h) of this
paragraph (including Indebtedness previously Incurred pursuant to this clause
(i)); PROVIDED, HOWEVER, that (i) such Indebtedness is in an aggregate principal
amount not in excess of the sum of (A) the aggregate principal amount then
outstanding of the Indebtedness being exchanged or refinanced and (B) an amount
necessary to pay any reasonable fees and expenses, including premiums, related
to such exchange or refinancing, (ii) such Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being exchanged or
refinanced, (iii) such Indebtedness has an Average Life to Stated Maturity at
the time such Indebtedness is Incurred that is equal to or greater than the
Average Life to Stated Maturity of the Indebtedness being exchanged or
refinanced, and (iv) such Indebtedness is subordinated in right of payment to
the Notes to at least the same extent, if any, as the Indebtedness being
exchanged or refinanced and the covenants relating to such Indebtedness are no
more restrictive in the aggregate than those relating to the Indebtedness being
exchanged or refinanced; and (j) Indebtedness not otherwise permitted to be
Incurred pursuant to clauses (a) through (i) above, PROVIDED that the aggregate
principal amount of all Indebtedness Incurred and Preferred Stock issued
pursuant to this clause (j) and clause (h) under "Limitation on Restricted
Subsidiary Indebtedness and Preferred Stock" does not exceed $25 million at any
one time outstanding.
LIMITATION ON RESTRICTED SUBSIDIARY INDEBTEDNESS AND PREFERRED STOCK. The
Indenture provides that the Company will not permit any of its Restricted
Subsidiaries, directly or indirectly, to Incur any Indebtedness or issue any
Preferred Stock unless no Default or Event of Default shall have occurred and be
continuing at the time of such Incurrence or issuance, and, after giving pro
forma effect to the application of the proceeds thereof, no Default or Event of
Default would occur as a consequence of such Incurrence or issuance and such
Indebtedness or such Preferred Stock is Permitted Restricted Subsidiary
Indebtedness or Preferred Stock.
Permitted Restricted Subsidiary Indebtedness or Preferred Stock means any
and all of the following: (a) Indebtedness under the New Credit Facility,
PROVIDED that the aggregate principal amount of all such Indebtedness under the
New Credit Facility, together with all Indebtedness Incurred and Preferred Stock
issued pursuant to clause (g) of this paragraph in respect of Indebtedness
previously Incurred pursuant to this clause (a) and all Indebtedness Incurred
pursuant to clause (b) of "Limitation on
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Company Indebtedness" together with all Indebtedness Incurred pursuant to clause
(i) of such paragraph in respect of Indebtedness previously Incurred pursuant to
such clause (b), at any one time outstanding does not exceed the sum of 80% of
the aggregate amount of receivables (including unbilled accounts receivable) and
60% of the aggregate amount of inventory as of the end of the most recent fiscal
quarter in each case of the Company and its Restricted Subsidiaries, as
determined on a consolidated basis in accordance with GAAP; (b) Indebtedness or
Preferred Stock held by the Company or any of its Wholly Owned Subsidiaries (but
only so long as such Indebtedness or Preferred Stock is held by the Company or a
Wholly Owned Subsidiary); (c) Indebtedness in connection with one or more
standby letters of credit, statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature Incurred in the ordinary
course of business consistent with past practice and not in connection with the
borrowing of money or the obtaining of advances or credit; (d) Indebtedness
under Currency Agreements and Interest Rate Protection Agreements entered into
for the purpose of limiting currency rate or interest rate risks, PROVIDED that
such Currency Agreements and Interest Rate Protection Agreements do not increase
the Indebtedness of such Restricted Subsidiary outstanding at any time other
than as a result of fluctuations in currency rates or interest rates or by
reason of customary fees, indemnities and compensation payable thereunder and
either, with respect to Currency Agreements, are entered into for the purpose of
limiting currency exchange rate risks in connection with transactions entered
into in the ordinary course of business, or, with respect to Interest Rate
Protection Agreements, are related to payment obligations on Indebtedness
otherwise permitted by the terms of the "Limitation on Restricted Subsidiary
Indebtedness and Preferred Stock" covenant; (e) certain specified Indebtedness
or Preferred Stock of Restricted Subsidiaries outstanding on the Issue Date not
otherwise permitted in clauses (a) through (d) above or clause (f) below; (f)
Indebtedness in respect of Capital Lease Obligations directly Incurred by a
Restricted Subsidiary, PROVIDED that the aggregate principal amount of such
Indebtedness Incurred under this clause (f) and clause (g) under "Limitation on
Company Indebtedness" does not exceed $10 million at any one time outstanding;
(g) Indebtedness Incurred or Preferred Stock issued in exchange for, or the
proceeds of which are used to refinance, Indebtedness or Preferred Stock
referred to in clauses (a) through (e) of this paragraph (including Indebtedness
previously Incurred and Preferred Stock previously issued pursuant to this
clause (g)); PROVIDED, HOWEVER, that (i) such Indebtedness or Preferred Stock is
in an aggregate principal amount not in excess of the sum of (A) the aggregate
principal amount then outstanding of the Indebtedness or Preferred Stock being
exchanged or refinanced and (B) an amount necessary to pay any reasonable fees
and expenses, including premiums, related to such exchange or refinancing, (ii)
such Indebtedness or such Preferred Stock, as the case may be, has a Stated
Maturity or final redemption date (if any) no earlier than the Stated Maturity
or final redemption date (if any) of the Indebtedness or Preferred Stock being
exchanged or refinanced, (iii) such Indebtedness or such Preferred Stock, as the
case may be, has an Average Life to Stated Maturity at the time such
Indebtedness is Incurred or such Preferred Stock is issued, as the case may be,
that is equal to or greater than the Average Life to Stated Maturity of the
Indebtedness or Preferred Stock being exchanged or refinanced, and (iv) such
Indebtedness or such Preferred Stock, as the case may be, is subordinated in
right of payment to the Notes to at least the same extent, if any, as the
Indebtedness or Preferred Stock being exchanged or refinanced and the covenants
relating to such Indebtedness or Preferred Stock are no more restrictive in the
aggregate than those relating to the Indebtedness or Preferred Stock being
exchanged or refinanced; and (h) Indebtedness or Preferred Stock not otherwise
permitted to be Incurred or issued pursuant to clauses (a) through (g) above,
PROVIDED that the aggregate principal amount of all Indebtedness Incurred or
Preferred Stock issued pursuant to this clause (h) and clause (j) under
"Limitation on Company Indebtedness" does not exceed $25 million at any one time
outstanding.
LIMITATION ON LIENS. The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries, directly or indirectly, to
Incur any Lien (other than Permitted Liens) on or with respect to any Property
or assets of the Company or any Restricted Subsidiary owned on the Issue Date or
thereafter acquired with the proceeds of any Asset Sale, or any interest therein
or any income or profits therefrom, unless the Notes are secured equally and
ratably with (or prior to) any and all other obligations secured by such Lien;
PROVIDED, HOWEVER, that the Company and each Restricted Subsidiary
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may incur other Liens to secure Indebtedness as long as the sum, without
duplication, of (x) the amount of outstanding Indebtedness secured by Liens
Incurred pursuant to this proviso plus (y) the Attributable Indebtedness with
respect to all outstanding leases in connection with Sale and Leaseback
Transactions entered into pursuant to the proviso to the covenant described
under "-- Limitation on Sale and Leaseback Transactions" does not exceed 5% of
Consolidated Net Tangible Assets as determined by reference to the consolidated
balance sheet of the Company and its Restricted Subsidiaries as of the end of
the most recent fiscal quarter for which financial statements are available.
Permitted Liens means any or all of the following: (a) Liens existing as of
the Issue Date; (b) any Lien existing on any Property at the time of the
acquisition thereof (and not Incurred in anticipation of such acquisition),
PROVIDED that such Liens are not extended to other Property of the Company or
any Restricted Subsidiary; (c) Liens securing Indebtedness Incurred under the
New Credit Facility; PROVIDED that (i) such Indebtedness was Incurred in
compliance with clause (b) of the definition of Permitted Company Indebtedness
or clause (a) of the definition of Permitted Restricted Subsidiary Indebtedness
or Preferred Stock and (ii) such Liens on assets of any Restricted Subsidiary
extend only to the assets of such Restricted Subsidiary that Incurred such
Indebtedness; (d) Liens securing standby letters of credit, statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature Incurred in compliance with clause (d) of the definition of
Permitted Company Indebtedness or clause (c) of the definition of Permitted
Restricted Subsidiary Indebtedness and Preferred Stock; PROVIDED, that such
Liens on assets of any Restricted Subsidiary extend only to the assets of such
Restricted Subsidiary that Incurred such Indebtedness; (e) Liens securing
Indebtedness in respect of Capital Lease Obligations permitted under clause (g)
of the definition of Permitted Company Indebtedness or clause (f) of the
definition of Permitted Restricted Subsidiary Indebtedness and Preferred Stock;
PROVIDED that (i) the amount of Indebtedness Incurred in any specific case does
not, at the time such Indebtedness is Incurred, exceed the Fair Market Value of
the Property or asset acquired or constructed in connection with such Capital
Lease Obligation and (ii) no Property or assets of the Company or any of its
Restricted Subsidiaries (other than the Property or asset acquired or
constructed in connection with such Capital Lease Obligation) are subject to any
Lien securing such Indebtedness; (f) Liens on Property of a Person (including an
Unrestricted Subsidiary) existing at the time such Person is merged with or into
or consolidated with the Company or a Restricted Subsidiary or otherwise becomes
a Restricted Subsidiary (and not Incurred in anticipation of any such
transaction); PROVIDED that such Liens are not extended to any other Property or
assets of the Company and its Restricted Subsidiaries; (g) Liens to secure any
permitted extension, renewal, refinancing, refunding or exchange (or successive
extensions, renewals, refinancings, refundings or exchanges), in whole or in
part, of or for any Indebtedness secured by Liens referred to in the foregoing
clauses (a) through (f); PROVIDED, HOWEVER, that (i) such new Lien shall be
limited to all or part of the same Property that secured the original Lien and
(ii) the Indebtedness secured by such Lien at such time is not increased.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Indenture provides that
the Company will not, and will not permit any of its Restricted Subsidiaries,
directly or indirectly, to enter into any Sale and Leaseback Transaction unless
(i) the Indebtedness of the Company or such Restricted Subsidiary with respect
thereto would be permitted under the "Limitation on Company Indebtedness"
covenant or under the "Limitation on Restricted Subsidiary Indebtedness and
Preferred Stock" covenant, (ii) the net proceeds from such Sale and Leaseback
Transaction are at least equal to the Fair Market Value of such Property being
transferred, and (iii) the net proceeds from such Sale and Leaseback Transaction
are applied in accordance with the "Limitation on Asset Sales" covenant;
PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may enter into
a Sale and Leaseback Transaction as long as the sum, without duplication, of (x)
the Attributable Indebtedness with respect to such Sale and Leaseback
Transaction and all other Sale and Leaseback Transactions entered into pursuant
to this proviso, plus (y) the amount of outstanding Indebtedness secured by
Liens Incurred pursuant to the proviso to the first paragraph under "--
Limitation on Liens," does not exceed 5% of Consolidated Net Tangible Assets as
determined by reference to the consolidated balance sheet of the Company and its
Restricted Subsidiaries as of the end of the most recent fiscal quarter for
which financial statements are available.
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LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries, directly or
indirectly, to make any Restricted Payment if, at the time of and after giving
effect to the proposed Restricted Payment, (a) any Default or Event of Default
would have occurred and be continuing, (b) the Company could not Incur at least
$1.00 of additional Indebtedness pursuant to clause (a) of the first paragraph
of the "Limitation on Company Indebtedness" covenant, or (c) the aggregate
amount expended or declared for all Restricted Payments from and after the Issue
Date would exceed the sum of $2.5 million plus (i) 50% of the aggregate
Consolidated Net Income of the Company (or, if Consolidated Net Income shall be
a deficit, less 100% of such deficit) commencing on the first day of the fiscal
quarter in which the Issue Date occurs, and ending on the last day of the fiscal
quarter ending on or immediately preceding the date of such Restricted Payment,
(ii) 100% of the aggregate net cash proceeds received by the Company subsequent
to the Issue Date from the issuance or sale (other than to a Subsidiary of the
Company) of Capital Stock of the Company, including, without limitation, Capital
Stock of the Company issued upon conversion of convertible debt or convertible
Redeemable Stock or upon the exercise of options, warrants or rights to purchase
Capital Stock, and (iii) an amount equal to the aggregate net reduction in
Investments made by the Company and its Restricted Subsidiaries subsequent to
the Issue Date in other Persons (other than the Company and its Restricted
Subsidiaries) resulting from (A) payments of interest on debt, dividends,
repayment of loans or advances, or other transfers or distributions of Property
(but only to the extent the Company excludes such transfers or distributions
from the calculation of Consolidated Net Income for purposes of clause (i)
above), in each case to the Company or any Restricted Subsidiary from any such
Person, or (B) the designation of any Unrestricted Subsidiary as a Restricted
Subsidiary, not to exceed, in the case of clauses (A) and (B), taken together,
the aggregate amount of such Investments previously made in such other Persons
which were treated as Restricted Payments.
The foregoing limitations do not prevent the Company or any Restricted
Subsidiary from (a) paying a dividend on its Capital Stock within 60 days after
declaration thereof if, on the declaration date, such dividend could have been
paid in compliance with the Indenture, or (b) making Permitted Investments so
long as no Default or Event of Default shall have occurred and be continuing.
Permitted Investments means any and all of the following: (a) Permitted
Short-Term Investments; (b) Investments in property, plant and equipment used in
the ordinary course of business; (c) Investments in any other Person, as a
result of which such other Person becomes a Restricted Subsidiary in compliance
with the "Restricted and Unrestricted Subsidiaries" covenant; and (d)
Investments in joint ventures in the Aerospace Industry and Gas Turbine Engine
Business, whether in the form of cash or through the contribution of assets (the
value of any payment other than cash is to be determined by the Board of
Directors and evidenced by a board resolution), in an amount not to exceed $10
million.
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not (a) permit any
Restricted Subsidiary to issue any Capital Stock other than to the Company or
one of its Wholly Owned Subsidiaries or (b) permit any Person other than the
Company or a Wholly Owned Subsidiary to own any Capital Stock of any Restricted
Subsidiary of the Company (other than directors' qualifying shares), except, in
each case, for (i) a sale of all of the Capital Stock of a Restricted Subsidiary
owned by the Company and its Restricted Subsidiaries effected in accordance with
the "Limitation on Asset Sales" covenant and (ii) Preferred Stock permitted
under the "Limitation on Restricted Subsidiary Indebtedness and Preferred Stock"
covenant.
LIMITATION ON ASSET SALES. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the Property subject to such Asset Sale, (ii) at least 75% of
the consideration paid to the Company or such Restricted Subsidiary for such
Property is in the form of cash and cash equivalents and (iii) the Company or
such Restricted Subsidiary, as the case may be, uses the Net Cash Proceeds from
such Asset Sale in the manner set forth in the next two paragraphs.
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The Net Cash Proceeds, or any portion thereof, from Asset Sales may be
applied by the Company or a Restricted Subsidiary, to the extent the Company or
such Restricted Subsidiary elects, (A) to reinvest in additional assets in the
Aerospace Industry and Gas Turbine Engine Business ("Replacement Assets")
(including by means of an Investment in Replacement Assets by a Restricted
Subsidiary with Net Cash Proceeds received by the Company or another Restricted
Subsidiary); and (B) to prepay, repay or purchase Indebtedness of the Company
ranking PARI PASSU to the Notes in right of payment or Indebtedness of a
Restricted Subsidiary ranking PARI PASSU to such Restricted Subsidiary's
Subsidiary Guarantee, if any, in right of payment (in each case excluding
Indebtedness owed to the Company or an Affiliate of the Company).
Any Net Cash Proceeds from an Asset Sale not applied in accordance with the
preceding paragraph within 270 days from the date of such Asset Sale will
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10 million, the Company will be required to make an offer to purchase
(the "Prepayment Offer") the Notes at a purchase price in cash of at least 100%
of their principal amount plus accrued and unpaid interest thereon (if any) to
the Purchase Date (as defined below) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate principal amount of Notes surrendered by holders
thereof exceeds the amount of Excess Proceeds, then the Excess Proceeds will be
allocated pro rata according to the principal amount of the Notes surrendered
and the Trustee will select the Notes to be purchased in accordance with the
Indenture. To the extent that any Excess Proceeds remain after compliance with
the preceding sentences of this paragraph, and PROVIDED that all holders of
Notes have been given the opportunity to tender their Notes for purchase as
described in the next succeeding paragraph in accordance with the Indenture, the
Company or such Restricted Subsidiary may use such remaining Excess Proceeds for
general corporate purposes and the amount of Excess Proceeds will be reset to
zero.
Within five Business Days after 270 days from the date of an Asset Sale, the
Company will, if it is obligated to apply an amount equal to any Excess Proceeds
to fund an offer to purchase the Notes, send a written Prepayment Offer notice,
by first-class mail, to the holders of the Notes (the "Prepayment Offer
Notice"), accompanied by such information regarding the Company and its
Subsidiaries as the Company in good faith believes will enable such holders to
make an informed decision with respect to the Prepayment Offer. The Prepayment
Offer Notice will state, among other things, (a) that the Company is offering to
purchase Notes pursuant to the provisions of the Indenture described herein
under "-- Limitation on Asset Sales," (b) that any Note (or any portion thereof)
accepted for payment (and duly paid on the Purchase Date) pursuant to the
Prepayment Offer will cease to accrue interest after the Purchase Date, (c) the
purchase price and purchase date, which will be, subject to any contrary
requirements of applicable law, no less than 30 days nor more than 60 days after
the date the Prepayment Offer Notice is mailed (the "Purchase Date"), (d) the
maximum aggregate principal amount of Notes to be purchased and (e) the
procedures which holders of Notes must follow in order to tender their Notes (or
portions thereof) and the procedures that holders of Notes must follow in order
to withdraw an election to tender their Notes for payment.
The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws and
regulations to the extent such laws and regulations are applicable in connection
with the purchase of Notes as described above. To the extent that the provisions
of any securities laws or regulations conflict with the provisions relating to a
Prepayment Offer, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations
described above by virtue thereof.
TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, conduct any business or enter into any transaction or series of
transactions (including, but not limited to, the sale, transfer, disposition,
purchase, exchange or lease of Property, the making of any Investment, the
giving of any Guarantee or the rendering of any service) with or for the benefit
of any Affiliate of the Company, unless (a) such transaction or series of
transactions is in the best interest of the Company or such Restricted
Subsidiary,
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(b) such transaction or series of transactions is on terms which in the
aggregate are no less favorable to the Company or such Restricted Subsidiary
than those that could be obtained in a comparable arm's-length transaction with
a Person that is not an Affiliate of the Company or such Restricted Subsidiary
and (c) with respect to a transaction or series of transactions involving
aggregate payments or other consideration to or from the Company and its
Restricted Subsidiaries having a Fair Market Value equal to or in excess of (i)
$5 million but less than $10 million, the Board of Directors of the Company
(including a majority of the disinterested members of the Board of Directors of
the Company) approves such transaction or series of transactions and, in its
good faith judgment, believes that such transaction or series of transactions
complies with clauses (a) and (b) of this paragraph, as evidenced by a certified
resolution delivered to the Trustee, or (ii) $10.0 million, (A) the Company
receives the written opinion of an independent appraisal firm or investment
banking firm nationally recognized in the United States that such transaction
(or series of transactions) is fair, from a financial point of view, to the
Company or such Restricted Subsidiary and (B) the Board of Directors of the
Company (including a majority of the disinterested members of the Board of
Directors of the Company) approves such transaction or series of transactions
and, in its good faith judgment, believes that such transaction or series of
transactions complies with clauses (a) and (b) of this paragraph, as evidenced
by a certified resolution delivered to the Trustee.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective, or enter into any
agreement with any Person that would cause to become effective, any encumbrance
or restriction (other than pursuant to law or regulation) on the legal right of
any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make
any distributions on or in respect of its Capital Stock or Redeemable Stock, or
pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary, (b) make any loans or advances to the Company or any
other Restricted Subsidiary or (c) transfer any of its property or assets to the
Company or any other Restricted Subsidiary.
The limitation contained in the foregoing paragraph will not apply to: (i)
any encumbrance or restriction existing under certain specified agreements in
effect on the Issue Date; (ii) any encumbrance or restriction in connection with
an acquisition of Property, so long as such encumbrance or restriction relates
solely to the Property so acquired and was not created in connection with or in
anticipation of such acquisition; (iii) any encumbrance or restriction existing
in connection with Indebtedness permitted under the Indenture of a Restricted
Subsidiary at the date on which such Restricted Subsidiary became a Restricted
Subsidiary (other than Indebtedness Incurred by such Restricted Subsidiary in
connection with or in anticipation of its becoming a Restricted Subsidiary,
whether upon its acquisition by the Company or otherwise); (iv) any encumbrance
or restriction existing under an agreement effecting a permitted refinancing of
Indebtedness issued pursuant to an agreement creating an encumbrance or
restriction permitted by clauses (i) through (iii) above, so long as the
encumbrances and restrictions existing under any such refinancing agreement are
no more restrictive in the aggregate than the encumbrances and restrictions
existing under the agreement pursuant to which the refinanced Indebtedness was
issued; (v) customary provisions restricting subletting or assignment of leases
and customary provisions in other agreements that restrict assignment of such
agreements or rights thereunder; and (vi) any restriction on the sale or other
disposition of assets or Property securing Indebtedness as a result of a
Permitted Lien on such assets or Property.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES. Unless defined or designated as
an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company
or any of its Restricted Subsidiaries shall be classified as a Restricted
Subsidiary subject to the provisions of the next paragraph. The Company may
designate a Subsidiary (including a newly formed or newly acquired Subsidiary)
of the Company or any of its Restricted Subsidiaries as an Unrestricted
Subsidiary if (i) such Subsidiary does not have any Indebtedness or other
obligations which, if in default, would result (with the passage of time or
notice or otherwise) in a default on any Indebtedness of the Company or any
Restricted Subsidiary and (ii)(A) such designation is effective immediately upon
such Subsidiary becoming a Subsidiary of the
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Company or of a Restricted Subsidiary or (B) the Subsidiary to be so designated
has total assets of $1,000 or less. Except as provided in clause (ii)(B) of this
paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. An Unrestricted Subsidiary may be redesignated as a Restricted
Subsidiary upon compliance with the provisions described in the next paragraph;
PROVIDED, HOWEVER, that once a Restricted Subsidiary has been redesignated an
Unrestricted Subsidiary, it may not thereafter be redesignated a Restricted
Subsidiary. The designation of an Unrestricted Subsidiary or removal of such
designation is required to be made by the Board of Directors of the Company or a
committee thereof pursuant to a certified resolution delivered to the Trustee
and shall be effective as of the date specified in the applicable certified
resolution, which shall not be prior to the date such certified resolution is
delivered to the Trustee.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition or otherwise) unless, after giving effect to such action,
transaction or series of transactions, on a pro forma basis, (i) the Company
could Incur at least $1.00 of additional Indebtedness pursuant to clause (a) of
the first paragraph under "-- Limitation on Company Indebtedness," (ii) such
Restricted Subsidiary could then Incur or issue, pursuant to the "-- Limitation
on Restricted Subsidiary Indebtedness and Preferred Stock" covenant, all
Indebtedness and Preferred Stock as to which it is obligated at such time, (iii)
no Default or Event of Default would occur or be continuing and (iv) such
Restricted Subsidiary could then Incur, pursuant to the "-- Limitation on Liens"
covenant, all liens with respect to its Property in existence at such time.
GUARANTEES OF CERTAIN INDEBTEDNESS. The Company will not permit any of its
Restricted Subsidiaries, directly or indirectly, to Incur, Guarantee or secure
through the granting of Liens or pledge of Property the payment of any
Indebtedness under the New Credit Facility or any refunding or refinancing
thereof in each case unless such Restricted Subsidiary (if it has not already
done so) enters into a Subsidiary Guarantee and becomes a Subsidiary Guarantor
pursuant to the terms of the Indenture. Such Subsidiary Guarantee will be a
senior unsecured obligation of such Restricted Subsidiary as described under
"Subsidiary Guarantees and Other Security" above. Neither the Company nor any
Subsidiary Guarantor shall be required to make a notation on the Notes or the
Subsidiary Guarantees to reflect any such subsequent Subsidiary Guarantee. This
covenant is not intended to permit any Restricted Subsidiary of the Company to
incur any Indebtedness or grant any Lien otherwise prohibited by the "Limitation
on Restricted Subsidiary Indebtedness and Preferred Stock" covenant or the
"Limitation on Liens" covenant.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, merge or consolidate with or into any other entity
(other than a merger of a Restricted Subsidiary into the Company or into another
Restricted Subsidiary), or (in the case of the Company), directly or indirectly,
sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all of its Property or assets in any one transaction or series of
transactions, unless: (a) the entity formed by or surviving any such
consolidation or merger (if the Company is a party to the transaction and is not
the surviving entity) or the Person to which such sale, assignment, transfer,
lease or conveyance is made (the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America or a State
thereof or the District of Columbia and such corporation expressly assumes, by
supplemental indenture satisfactory to the Trustee, executed and delivered to
the Trustee by such corporation, the due and punctual payment of the principal
of, premium, if any, and interest on all the Notes, according to their tenor,
and the due and punctual performance and observance of all of the covenants and
conditions of the Indenture to be performed by the Company; (b) in the case of a
sale, transfer, assignment, lease, conveyance or other disposition of all or
substantially all of the Company's Property or assets, such Property and assets
shall have been transferred as an entirety or virtually as an entirety to one
Person; (c) immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), no Default or Event of Default shall
have occurred
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and be continuing; (d) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), the Company or the Surviving Entity, as
the case may be, would be able to Incur at least $1.00 of additional
Indebtedness under clause (a) of the first paragraph under "-- Limitation on
Company Indebtedness"; and (e) immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness Incurred or anticipated to be Incurred in
connection with such transaction or series of transactions), the Company or the
Surviving Entity, as the case may be, shall have a Consolidated Net Worth equal
to or greater than the Consolidated Net Worth of the Company immediately prior
to the transaction or series of transactions.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"AEROSPACE INDUSTRY AND GAS TURBINE ENGINE BUSINESS" means a business
engaged in airline or aircraft related support services as well as a business
based on gas turbine engines used in the aerospace industry and military,
marine, industrial and power plant applications.
"AFFILIATE" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of any class
of the Voting Stock of such specified Person or of any Subsidiary of such
specified Person. For the purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the management and
policies of such Person directly or indirectly, whether through the ownership of
Voting Stock, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"ASSET SALE" means, with respect to any Person, any transfer, conveyance,
sale, lease or other disposition (including, without limitation, dispositions
pursuant to any consolidation or merger but excluding any Sale and Leaseback
Transaction) by such Person or any of its Restricted Subsidiaries, in any single
transaction or series of transactions, of (a) shares of Capital Stock or other
ownership interests of another Person (including Capital Stock of Unrestricted
Subsidiaries) or (b) any other Property or assets of such Person or any of its
Restricted Subsidiaries; PROVIDED, HOWEVER, that the aggregate Fair Market Value
of the Property and assets transferred, conveyed, sold, leased or otherwise
disposed of, exceeds $2 million. Notwithstanding the foregoing, the term "Asset
Sale" shall not include (i) any asset disposition permitted pursuant to the
covenant described under "-- Merger, Consolidation and Sale of Assets" which
constitutes a disposition of all or substantially all of the Company's Property
or assets; (ii) the sale or transfer of Permitted Short-Term Investments or
inventory in the ordinary course of business; (iii) the liquidation of Property
received in settlement of Indebtedness owing to the Company or any Restricted
Subsidiary as a result of foreclosure, perfection or enforcement of any Lien or
Indebtedness, which Indebtedness was owing to the Company or any Restricted
Subsidiary in the ordinary course of business of the Company or such Restricted
Subsidiary; or (iv) the sale or transfer of any Property by the Company or a
Restricted Subsidiary to the Company or a Wholly-Owned Subsidiary.
"ATTRIBUTABLE INDEBTEDNESS" means Indebtedness deemed to be incurred in
respect of a Sale and Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually), of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for which such
lease has been extended).
"AVERAGE LIFE" means as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date
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of determination to the dates of each successive scheduled principal payment of
such Indebtedness or scheduled redemption payment in respect of such Preferred
Stock, as the case may be, multiplied by the amount of such payment by (ii) the
sum of all such principal or redemption payments.
"CAPITAL LEASE OBLIGATION" of any Person means an obligation which is
required to be classified and accounted for as a capital lease or liability on
the face of a balance sheet of such Person in accordance with GAAP. For purposes
of the "Limitation on Liens" covenant, a Capital Lease Obligation shall be
deemed to be secured by a Lien on the property being leased.
"CAPITAL STOCK" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; PROVIDED, HOWEVER, that "Capital Stock" shall not
include Redeemable Stock.
"CONESE FAMILY" means collectively Eugene P. Conese, Sr. and members of his
immediate family, any of their respective spouses, estates, lineal descendants,
heirs, executors, personal representatives, administrators, trusts for any of
their benefit and charitable foundations to which shares of the Company's
Capital Stock beneficially owned by any of the foregoing have been transferred.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date to (ii) the
aggregate Consolidated Interest Expense of the Company and its Restricted
Subsidiaries that is anticipated to accrue during a period consisting of the
fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately subsequent thereto (based upon the pro forma amount and
maturity of, and interest payments in respect of, Indebtedness of the Company
and its Restricted Subsidiaries expected by the Company to be outstanding on the
Transaction Date), assuming for the purposes of this measurement the
continuation of market interest rates prevailing on the Transaction Date and
base interest rates in respect of floating interest rate obligations equal to
the base interest rates on such obligations in effect as of the Transaction
Date; PROVIDED, that if the Company or any of its Restricted Subsidiaries is a
party on the Transaction Date to any Interest Rate Protection Agreement which
would have the effect of changing the interest rate on any Indebtedness of the
Company or any of its Restricted Subsidiaries for such four-quarter period (or a
portion thereof), the resulting rate shall be used for such four-quarter period
or portion thereof; PROVIDED FURTHER that any Consolidated Interest Expense with
respect to Indebtedness Incurred or retired by the Company or any of its
Restricted Subsidiaries during the fiscal quarter in which the Transaction Date
occurs shall be calculated as if such Indebtedness was so Incurred or retired on
the first day of the fiscal quarter in which the Transaction Date occurs; and
PROVIDED FURTHER that if the transaction giving rise to the need to calculate
the Consolidated Interest Coverage Ratio would have the effect of increasing or
decreasing EBITDA in the future, EBITDA shall be calculated on a pro forma basis
as if such transaction had occurred on the first day of the four fiscal quarters
referred to in clause (i) of this definition, and if, during the same four
fiscal quarters, (x) the Company or any of its Restricted Subsidiaries shall
have engaged in any Asset Sale, EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive), or increased by an amount equal to the
EBITDA (if negative), directly attributable to the assets which are the subject
of such Asset Sale for such period calculated on a pro forma basis as if such
Asset Sale and any related retirement of Indebtedness had occurred on the first
day of such period or (y) the Company or any of its Restricted Subsidiaries
shall have acquired any material assets outside of the ordinary course of
business, EBITDA shall be calculated on a pro forma basis as if such asset
acquisitions and any related Incurrence of Indebtedness had occurred on the
first day of such four fiscal quarter period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, without duplication, (i) the sum of (a) the aggregate amount of cash and
noncash interest expense (including capitalized interest) of such Person and its
Restricted Subsidiaries for such period as determined on a consolidated
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basis in accordance with GAAP in respect of Indebtedness (including, without
limitation, (A) any amortization of debt discount, (B) net costs associated with
Interest Rate Protection Agreements (including any amortization of discounts),
(C) the interest portion of any deferred payment obligation, (D) all accrued
interest, and (E) all commissions, discounts, commitment fees, origination fees
and other fees and charges owed with respect to the New Credit Facility
(including any refinancing thereof) and other Indebtedness) paid, accrued or
scheduled to be paid or accrued during such period; (b) Preferred Stock
dividends and Redeemable Stock dividends of such Person (and of its Restricted
Subsidiaries, if paid to a Person other than such Person or its Wholly Owned
Subsidiaries) declared and payable other than in kind; (c) the portion of any
Capital Lease Obligation of such Person or its Restricted Subsidiaries allocable
to interest expense in accordance with GAAP; (d) the portion of any rental
obligation of such Person or its Restricted Subsidiaries in respect of any Sale
and Leaseback Transaction allocable to interest expense (determined as if such
obligation were treated as a Capital Lease Obligation); and (e) to the extent
any Indebtedness of any other Person (other than Restricted Subsidiaries) is
Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate
amount of interest paid, accrued or scheduled to be paid or accrued by such
other Person during such period attributable to such Indebtedness; less (ii) to
the extent included in clause (i) above, amortization or write-off of deferred
financing costs of such Person and its Restricted Subsidiaries during such
period and any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness of such Person and its Restricted
Subsidiaries prior to its Stated Maturity; in the case of both clauses (i) and
(ii) above, after elimination of intercompany accounts among such Person and its
Restricted Subsidiaries and as determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the aggregate
net income (or net loss, as the case may be) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom, without duplication,
(i) items classified as extraordinary; (ii) the net income of any Restricted
Subsidiary of such Person to the extent the transfer to that Person of that
income is restricted by contract or otherwise, except for any cash dividends or
cash distributions actually paid by such Restricted Subsidiary to such Person
during such period; (iii) the net income (or loss) of any other Person in which
such specified Person or any of its Restricted Subsidiaries has an interest
(which interest does not cause the net income of such other Person to be
consolidated with the net income of such specified Person in accordance with
GAAP or is an interest in a consolidated Unrestricted Subsidiary), except to the
extent of the amount of cash dividends or other cash distributions actually paid
to such Person or its Restricted Subsidiaries by such other Person during such
period; (iv) the net income of any Person acquired by such Person or any of its
Restricted Subsidiaries in a pooling-of-interests transaction for any period
prior to the date of such acquisition; (v) any gain or loss realized on the
termination of any employee pension benefit plan; (vi) gains (but not losses) in
respect of Asset Sales by such Person or any of its Restricted Subsidiaries
other than gains resulting from the sale of inventory; (vii) restructuring
costs; and (viii) the cumulative effect of a change in accounting principles and
the effect of the adoption of Statement of Financial Accounting Standards No.
106 to the extent expenses recognized pursuant to such adoption exceed the
amounts with respect to such expenses which would have been recognized during
such period using the "pay as you go" accounting method.
"CONSOLIDATED NET WORTH" of any Person means the stockholders' equity of
such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or any of its
Restricted Subsidiaries.
"CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of determination,
the sum of the amounts that would appear on a consolidated balance sheet of the
Company and its consolidated Subsidiaries (other than Unrestricted Subsidiaries)
as the total assets (less accumulated depreciation and amortization, allowances
for doubtful receivables, other applicable reserves and other properly
deductible items) of the Company and its consolidated Subsidiaries (other than
Unrestricted Subsidiaries), determined on a consolidated basis in accordance
with GAAP, after giving effect to purchase accounting and after
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deducting therefrom, to the extent otherwise included, the amounts of (without
duplication): (i) the excess of cost over fair market value of assets or
businesses acquired; (ii) any revaluation or other write-up in book value of
assets subsequent to the last day of the fiscal quarter of the Company
immediately preceding the Issue Date as a result of a change in the method of
valuation in accordance with GAAP; and (iii) unamortized debt discount and
expenses, other unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, licenses, organization or developmental
expenses and other intangible items (if included in total assets).
"CURRENCY AGREEMENT" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar arrangement designed to
protect such Person or its Restricted Subsidiaries against fluctuations in
currency values, as in effect from time to time.
"DEFAULT" means any event, act or condition the occurrence or existence of
which is, or after notice or the passage of time or both would be, an Event of
Default.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person and its consolidated Restricted Subsidiaries for such
period, plus the sum of, to the extent reflected in the consolidated income
statement of such Person and its Restricted Subsidiaries for such period from
which Consolidated Net Income is determined and deducted in the determination of
such Consolidated Net Income, without duplication, (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation and amortization expense and
(iv) any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness prior to its Stated Maturity.
"EVENT OF DEFAULT" has the meaning set forth under the caption "-- Events of
Default and Notice."
"FAIR MARKET VALUE" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash
consideration or property transferred or received by any Person, the fair market
value of such assets, consideration or property as determined in good faith by
(i) any officer of the Company if such fair market value is less than $5 million
and (ii) the Board of Directors of the Company as evidenced by a certified
resolution delivered to the Trustee if such fair market value is equal to or in
excess of $5 million.
"GAAP" means generally accepted accounting principles in the United States
as in effect on the date of the Indenture, unless stated otherwise.
"GUARANTEE" means, with respect to any Person, any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation, (a)
any Lien on the assets of such Person securing any Indebtedness of the primary
obligor and (b) any obligation of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) any Indebtedness of the primary
obligor or to purchase (or to advance or supply funds for the purchase of) any
security for the payment of such Indebtedness, (ii) to purchase Property or
services for the purpose of assuring the holder of such Indebtedness of the
payment of such Indebtedness, or (iii) to maintain working capital, equity
capital, any other financial statement condition or the liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness (and
"Guaranteed," "Guaranteeing" and "Guarantor" shall have meanings correlative to
the foregoing); PROVIDED, HOWEVER, that a Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or to record, as required pursuant to GAAP or otherwise, any
such Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed to be an Incurrence of such Indebtedness. For purposes of this
definition, Indebtedness of the Company or a
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Restricted Subsidiary held by a Wholly Owned Subsidiary or the Company shall be
deemed to be Incurred by the Company or such Restricted Subsidiary in the event
such Wholly Owned Subsidiary ceases to be a Wholly Owned Subsidiary or in the
event such Indebtedness is transferred to a Person other than the Company or a
Wholly Owned Subsidiary.
"INDEBTEDNESS" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (i) any obligation of such Person for borrowed
money, (ii) any obligation of such Person evidenced by bonds, debentures, notes,
Guarantees or other similar instruments, including, without limitation, any such
obligations Incurred in connection with the acquisition of Property, assets or
businesses, (iii) any reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (iv) any obligation of such Person issued or assumed as
the deferred purchase price of Property or services (but excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business), (v) any Capital Lease Obligation of such Person, (vi) the maximum
fixed redemption or repurchase price of Redeemable Stock of such Person at the
time of determination, (vii) any payment obligation of such Person under
Currency Agreements or Interest Rate Protection Agreements at the time of
determination, (viii) any obligation to pay rent or other amounts of such Person
with respect to any Sale and Leaseback Transaction to which such Person is a
party and (ix) any obligation of the type referred to in clauses (i) through
(viii) of this paragraph of another Person and all dividends of another Person
the payment of which, in either case, such Person has Guaranteed or is
responsible or liable for, directly or indirectly, as obligor, Guarantor or
otherwise. For purposes of the preceding sentence, the maximum fixed repurchase
price of any Redeemable Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Redeemable Stock as if such
Redeemable Stock were repurchased on any date on which Indebtedness is required
to be determined pursuant to the Indenture; PROVIDED, HOWEVER, that if such
Redeemable Stock is not then permitted to be repurchased, the repurchase price
shall be the book value of such Redeemable Stock. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability at such
date in respect of any contingent obligations described above.
"INTEREST RATE PROTECTION AGREEMENT" means, with respect to any Person, any
interest rate swap agreement, forward rate agreement, interest rate cap or
collar agreement or other financial agreement or arrangement designed to protect
such Person or its Restricted Subsidiaries against fluctuations in interest
rates, as in effect from time to time.
"INVESTMENT" means, with respect to any Person, (a) any advance, loan or
capital contribution to any other Person, (b) the acquisition, by purchase or
otherwise, of any stock, bonds, notes, debentures or other securities or
evidence of beneficial ownership of, any other Person or (c) the acquisition, by
purchase or otherwise, of all or substantially all of the business or assets of
any other Person; PROVIDED, HOWEVER, that Investments shall not include
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices or any increase in the equity ownership in any Person
resulting solely from retained earnings of such Person.
"ISSUE DATE" means the date upon which the Notes first were issued and
authenticated under the Indenture.
"LIEN" means, with respect to any Property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or other), charge, easement, encumbrance, preference,
priority or other security or similar agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing). For
purposes of the "Limitation on Liens" covenant, a Capital Lease Obligation shall
be deemed to be secured by a Lien on the property being leased.
"NET CASH PROCEEDS" from an Asset Sale, by any Person or any of its
Restricted Subsidiaries, means cash and cash equivalents received, net of (i)
all reasonable out-of-pocket expenses of such Person or
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such Restricted Subsidiary Incurred in connection with such Asset Sale,
including, without limitation, all legal, title and recording tax expenses,
commissions and other fees and expenses Incurred (but excluding any finder's fee
or brokers' fee payable to any Affiliate of such Person), and all Federal,
state, provincial, foreign and local taxes that are paid or required to be
accrued as liabilities under GAAP by such Person or such Restricted Subsidiary
as a consequence of such Asset Sale, (ii) all payments made by such Person or
such Restricted Subsidiary on any Indebtedness which is secured by any assets
subject to such Asset Sale in accordance with the terms of any Lien upon or with
respect to such assets, or which must, by its terms, or in order to obtain a
necessary consent to such Asset Sale or by applicable law, be repaid out of the
proceeds from such Asset Sale, and (iii) all contractually required
distributions and other payments made to minority interest holders (but
excluding distributions and payments to Affiliates of such Person) in Restricted
Subsidiaries of such Person as a result of such Asset Sale; PROVIDED that, in
the event that any consideration for an Asset Sale (which would otherwise
constitute Net Cash Proceeds) is required to be held in escrow pending
determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Cash Proceeds only at
such time as it is released to such Person or its Restricted Subsidiaries from
escrow, and PROVIDED that any non-cash or non-cash equivalent consideration
received in connection with an Asset Sale, which is subsequently converted to
cash or cash equivalents, shall be deemed to be Net Cash Proceeds at such time
and shall thereafter be applied in accordance with the covenant described under
"Certain Covenants -- Limitation on Asset Sales."
"NEW CREDIT FACILITY" means, for the purposes of the Indenture, any credit
facility or agreement (including the $175 million senior secured revolving
credit facility known elsewhere in this Prospectus as the New Credit Facility)
with a bank or syndicate of banks or other financial institutions (including
working capital or revolving credit facilities) including any related
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such agreements may be amended, renewed, extended,
substituted, refinanced, restructured, replaced, supplemented or otherwise
modified from time to time (including without limitation, any successive
renewals, extensions, substitutions, refinancings, restructurings, replacements,
supplementations or other modifications of the foregoing). For all purposes
under the Indenture, "New Credit Facility" shall include any amendments,
renewals, extensions, substitutions, refinancings, restructurings, replacements,
supplements or any other modifications that increase the principal amount of
Indebtedness thereunder or commitments to lend thereunder and have been made in
compliance with the "Limitation on Company Indebtedness" and "Limitation on
Restricted Subsidiary Indebtedness and Preferred Stock" covenants; PROVIDED that
for the purposes of the definitions of "Permitted Company Indebtedness" and
"Permitted Restricted Subsidiary Indebtedness or Preferred Stock," no such
increase may result in the principal amount of Indebtedness of the Company or
its Restricted Subsidiaries under the New Credit Facility exceeding the amount
permitted by clause (b) of "Permitted Company Indebtedness" or by clause (a) of
"Permitted Restricted Subsidiary Indebtedness or Preferred Stock", respectively.
"PERMITTED SHORT-TERM INVESTMENTS" means (a) Investments in U.S. Government
Obligations maturing within one year of the date of acquisition thereof, (b)
Investments in certificates of deposit or Eurodollar deposits maturing within
one year of the date of acquisition thereof issued by a bank or trust company
which is organized under the laws of the United States of America or any State
thereof and is a member of the Federal Reserve System having capital, surplus
and undivided profits aggregating in excess of $500 million and whose long-term
indebtedness is rated "A" (or higher) according to Moody's Investors Service
Inc. and its successors ("Moody's"), and (c) Investments in commercial paper,
maturing not more than one year after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized and in existence
under the laws of the United States of America or any State thereof with a
rating at the time as of which any Investment therein is made of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to Standard & Poor's
Ratings Group and its successors.
"PERSON" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization, other business entity or government or any
agency or political subdivision thereof.
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"PREFERRED STOCK" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person; PROVIDED, HOWEVER, that "Preferred
Stock" shall not include Redeemable Stock.
"PROPERTY" means, with respect to any Person, any interest of such Person in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, including, without limitation, Capital Stock in any other Person
(but excluding Capital Stock or other securities issued by such first-mentioned
Person).
"REDEEMABLE STOCK" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), (a) is or could become required to be redeemed for cash or other
Property or is or could become redeemable for cash or other Property at the
option of the holder thereof, in whole or in part, prior to the Stated Maturity
of the Notes or (b) is or could become exchangeable at the option of the holder
thereof for Indebtedness at any time, in whole or in part, prior to the Stated
Maturity of the Notes.
"RESTRICTED PAYMENT" means (i) a dividend or other distribution declared or
paid on the Capital Stock or Redeemable Stock of the Company or to the Company's
stockholders (other than dividends and distributions paid solely in Capital
Stock of the Company), or declared and paid to any Person other than the Company
or any of its Wholly Owned Subsidiaries on the Capital Stock or Redeemable Stock
of any Restricted Subsidiary, (ii) a payment made by the Company or any of its
Restricted Subsidiaries (other than to the Company or any Wholly Owned
Subsidiary) to purchase, redeem, acquire or retire any Capital Stock or
Redeemable Stock of the Company or of a Restricted Subsidiary, (iii) a payment
made by the Company or any of its Restricted Subsidiaries to redeem, repurchase,
defease or otherwise acquire or retire for value (including pursuant to
mandatory repurchase covenants), prior to any scheduled maturity, scheduled
sinking fund or scheduled mandatory redemption, Indebtedness of the Company
which is subordinate (whether pursuant to its terms or by operation of law) in
right of payment to the Notes other than payments made by the Company to redeem
the Debentures, or (iv) an Investment by the Company or a Restricted Subsidiary
in any Person other than the Company or a Wholly Owned Subsidiary and other than
Investments by the Company or a Restricted Subsidiary in any Person who becomes
a Wholly Owned Subsidiary as a result of such Investment.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that the Company
has not designated an Unrestricted Subsidiary in the manner provided in the
covenant described under "-- Certain Covenants -- Restricted and Unrestricted
Subsidiaries."
"SALE AND LEASEBACK TRANSACTION" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement between
such Person and a Wholly Owned Subsidiary of such Person or between two or more
Wholly Owned Subsidiaries of such Person) pursuant to which Property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Restricted Subsidiaries.
"SPECIFIED HOLDERS" means the Conese Family and any corporation organized
and existing under the laws of the United States of America or any State thereof
or the District of Columbia, the capital stock of which is wholly owned by the
Conese Family.
"STATED MATURITY," when used with respect to any security or any installment
of principal thereof or interest thereon, means the date specified in such
security as the fixed date on which the principal of such security or such
installment of principal or interest is due and payable, including, without
limitation, pursuant to any mandatory redemption provision (but excluding any
provision providing for the repurchase of such security at the option of the
holder thereof upon the happening of any contingency unless such contingency has
occurred).
84
<PAGE>
"SUBSIDIARY" of a Person means (a) another Person which is a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned or
controlled by (i) the first Person, (ii) the first Person and one or more of its
Subsidiaries, or (iii) one or more of the first Person's Subsidiaries or (b)
another Person which is not a corporation (x) at least 50% of the ownership
interest of which and (y) the power to elect or direct the election of a
majority of the directors or members of any other governing body of which are
controlled by Persons referred to in clause (i), (ii) or (iii) above.
"SUBSIDIARY GUARANTORS" means GTC; GTi; GASI Engine Services Corporation, a
Delaware corporation; Gas Turbine Test Corporation, a Delaware corporation;
Greenwich Foreign Sales Corporation, a Barbados corporation; Greenwich Air
Services--Texas, L.P., a Delaware limited partnership; and McAllen Components,
L.P., a Delaware limited partnership; PROVIDED, HOWEVER, that any Subsidiary of
the Company, including Aviall U.K. (which is not a Subsidiary Guarantor), may
become a Subsidiary Guarantor by delivering a supplemental indenture subjecting
the Subsidiary to the provisions of the Indenture as a Subsidiary Guarantor and
an opinion of counsel to the effect that such supplemental indenture constitutes
a legal, valid and binding obligation of such Subsidiary, each in accordance
with the provisions of the Indenture.
"UNRESTRICTED SUBSIDIARY" means (i) each Subsidiary of the Company
designated as an Unrestricted Subsidiary as of the Issue Date including but not
limited to GTi, (ii) each Subsidiary of the Company that the Company has
designated pursuant to the covenant described under "-- Certain Covenants --
Restricted and Unrestricted Subsidiaries" as an Unrestricted Subsidiary and
(iii) any Subsidiary of an Unrestricted Subsidiary.
"VOTING STOCK" of any Person means Capital Stock and Redeemable Stock of
such Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such person whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary all of
the Voting Stock of which (except directors' qualifying shares) is at the time
owned, directly or indirectly, by the Company and its other Wholly Owned
Subsidiaries.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company will be discharged from all its
obligations with respect to the Notes (except for certain obligations to
exchange or register the transfer of Notes, to replace stolen, lost or mutilated
Notes, to maintain paying agencies and to hold moneys for payment in trust) upon
the deposit in trust for the benefit of the holders of the Notes of money or
U.S. Government Obligations, or a combination thereof, which, through the
payment of principal and interest in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of and
any premium and interest on the Notes at Stated Maturity or on earlier
redemption in accordance with the terms of the Indenture and the Notes. Such
defeasance or discharge may occur only if, among other things, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that (a) (i) the
Company has received from, or there has been published by, the United States
Internal Revenue Service a ruling or (ii) since the date of the Indenture there
has been a change in the applicable Federal income tax law, in either case to
the effect that holders of the Notes will not recognize gain or loss for Federal
income tax purposes as a result of such deposit, defeasance and discharge and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such deposit, defeasance
and discharge were not to occur; and (b) the resulting trust will not be an
"Investment Company" within the meaning of the Investment Company Act of 1940
unless such trust is qualified thereunder or exempt from regulation thereunder.
The Indenture provides that the Company may omit to comply with certain
covenants, including those described under "-- Certain Covenants" and in clauses
(d) and (e) under "-- Merger, Consolidation and Sale of Assets", and that the
occurrence of certain Events of Default, which are described below in clause (c)
(with respect to such covenants) and clauses (d) and (e) under "-- Events of
Default and
85
<PAGE>
Notice," will be deemed not to be or result in an Event of Default. The Company,
in order to exercise such option, will be required to deposit, in trust for the
benefit of the holders of the Notes, money or U.S. Government Obligations, or a
combination thereof, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes at
Stated Maturity or on earlier redemption in accordance with the terms of the
Indenture and the Notes. The Company will also be required, among other things,
to deliver to the Trustee an Opinion of Counsel to the effect that (a) holders
of the Notes will not recognize gain or loss for Federal income tax purposes as
a result of such deposit and defeasance of certain obligations and will be
subject to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such deposit and defeasance were not
to occur; and (b) the resulting trust will not be an "Investment Company" within
the meaning of the Investment Company Act of 1940 unless such trust is qualified
thereunder or exempt from regulation thereunder. In the event the Company were
to exercise this option and the Notes were declared due and payable because of
the occurrence of any Event of Default, the amount of money and U.S. Government
Obligations so deposited in trust would be sufficient to pay amounts due on the
Notes at the time of their Stated Maturity but may not be sufficient to pay
amounts due on the Notes upon any acceleration resulting from such Event of
Default. In such case, the Company would remain liable for such payments.
EVENTS OF DEFAULT AND NOTICE
The following are summaries of Events of Default under the Indenture with
respect to the Notes: (a) failure to pay any interest on the Notes when due,
continued for 30 days; (b) failure to pay principal of (or premium, if any, on)
the Notes when due; (c) failure to perform any other covenant or agreement of
the Company in the Indenture, continued for 60 days after written notice as
provided in the Indenture; (d) a default under any Indebtedness by the Company
or any Restricted Subsidiary which results in acceleration of the maturity of
such Indebtedness, or failure to pay any such Indebtedness at maturity within
any applicable grace period, in an aggregate outstanding principal amount
greater than $10 million if such Indebtedness is not discharged or such
acceleration is not rescinded or annulled within 10 days after written notice as
provided in the Indenture; (e) one or more judgments or orders by a court of
competent jurisdiction are entered against the Company or any Restricted
Subsidiary in an uninsured aggregate amount in excess of $10 million and such
judgments or orders are not discharged, waived, stayed, satisfied or bonded for
a period of 45 consecutive days; and (f) certain events of bankruptcy,
insolvency or reorganization of the Company or any Restricted Subsidiary.
The Indenture provides that if an Event of Default (other than an Event of
Default described in clause (f) above) shall occur and be continuing, either the
Trustee or the holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by notice as provided in the Indenture, may declare the
principal amount of the Notes to be due and payable immediately. If an Event of
Default described in clause (f) above shall occur, the principal amount of the
Notes will automatically, and without any action by the Trustee or any holder of
Notes, become immediately due and payable. After any such acceleration, but
before a judgment or decree based on acceleration, the holders of a majority in
aggregate principal amount of the Notes then outstanding may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal (or other specified amounts),
have been cured or waived as provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of the Notes, unless
such holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the holders of a
majority in aggregate principal amount of the Notes then outstanding will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee with respect to the Notes.
86
<PAGE>
No holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (i) such holder has previously given to
the Trustee written notice of a continuing Event of Default with respect to the
Notes, (ii) the holders of at least 25% in aggregate principal amount of the
Notes then outstanding have made written request, and such holder or holders
have offered reasonable indemnity, to the Trustee to institute such proceeding
as trustee and (iii) the Trustee has failed to institute such proceeding, and
has not received from the holders of a majority in aggregate principal amount of
the Notes then outstanding a direction inconsistent with such request, within 60
days after such notice, request and offer. However, such limitations do not
apply to a suit instituted by a holder of Notes for the enforcement of payment
of the principal of or any premium or interest on such Notes on or after the
applicable due date specified in such Notes.
MODIFICATION OF THE INDENTURE; WAIVER
The Indenture provides that modifications and amendments of the Indenture
may be made by the Company, the Subsidiary Guarantors and the Trustee without
the consent of any holders of Notes in certain limited circumstances, including
(a) to cure any ambiguity, omission, defect or inconsistency, (b) to provide for
the assumption of the obligations of the Company under the Indenture upon the
merger, consolidation or sale or other disposition of all or substantially all
of the assets of the Company, (c) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (d) to comply with any
requirement of the Commission in order to effect or maintain the qualification
of the Indenture under the 1939 Act, (e) to reflect the release of any
Subsidiary Guarantor from its Subsidiary Guarantee or to add as a Subsidiary
Guarantor any Subsidiary of the Company in each case pursuant to the terms of
the Indenture or (f) to make any change that does not adversely affect the
rights of any holder of Notes in any material respect.
The Indenture contains provisions permitting the Company, the Subsidiary
Guarantors and the Trustee, with the written consent of the holders of not less
than a majority in aggregate principal amount of the Notes then outstanding, to
execute supplemental indentures, amendments or waivers adding any provisions to
or changing or eliminating any of the provisions of the Indenture or modifying
the rights of the holders of the Notes, except that no such supplemental
indenture, amendment or waiver may, without the consent of all the holders of
the Notes then outstanding, among other things, (a) reduce the principal amount
of Notes whose holders must consent to an amendment or waiver; (b) reduce the
rate of or change the time for payment of interest on any Notes; (c) change the
currency in which any amount due in respect of the Notes is payable; (d) reduce
the principal of or any premium on or change the Stated Maturity of any Notes or
alter the redemption or repurchase provisions with respect thereto; (e) modify
or eliminate any of the provisions of the Indenture relating to a Change of
Control or the obligation of the Company to offer to purchase the Notes as set
forth in the "Limitation on Asset Sales" covenant; (f) reduce the relative
ranking of any Notes or (g) release any security that may have been granted in
respect of the Notes.
The holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance by the Company with certain restrictive
provisions of the Indenture. The holders of a majority in aggregate principal
amount of the Notes then outstanding may waive any past default under the
Indenture, except a default in the payment of principal, premium or interest and
a default under the other covenants and provisions of the Indenture which cannot
be amended without the consent of the holder of each Note then outstanding.
REPORTS
The Indenture provides that, whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto,
so long as any Notes are outstanding, the Company will file with the Commission
the annual reports, quarterly reports and other documents which the Company
would have been required to file with the Commission pursuant to such Section
13(a) or 15(d), or any successor provision thereto, if the Company were subject
thereto, on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been required to file them. The
87
<PAGE>
Company will also (whether or not it is required to file reports with the
Commission), within 30 days of each Required Filing Date, file with the Trustee,
copies of the annual reports, quarterly reports and other documents (without
exhibits) which the Company has filed or would have filed with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act, any successor provisions
thereto or the covenant described in this paragraph. The Company will not be
required to file any report with the Commission if the Commission does not
permit such filing.
NOTICES
Notices to holders of Notes will be given by mail to the addresses of such
holders as they may appear in the Security Register.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance with
the internal laws of the State of New York without reference to principles of
conflicts of law.
THE TRUSTEE
American Stock Transfer & Trust Company is the Trustee under the Indenture.
The Trustee maintains normal banking relationships with the Company and its
subsidiaries and may perform certain services for and transact other business
with the Company and its subsidiaries from time to time in the ordinary course
of business.
88
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Company has agreed to issue and sell to the
Underwriters listed below and each of the Underwriters has agreed to purchase,
the principal amount of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Salomon Brothers Inc....................................................... $
Oppenheimer & Co., Inc.....................................................
Dillon, Read & Co. Inc.....................................................
-----------------
Total..................................................................
$ 150,000,000
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions set forth therein. The Underwriters will be
obligated to purchase all the Notes offered hereby if any Notes are purchased.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering prices set forth on the
cover page of this Prospectus and to certain dealers at such prices less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of % of such principal amount to certain other dealers. After the initial
public offering, the public offering price and such concession may be changed.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
The Company has been advised by the Underwriters that they presently intend
to make a market in the Notes, as permitted by applicable laws and regulations,
although they are under no obligation to do so. There is no existing market for
the Notes and there can be no assurance that a market will develop. See "Risk
Factors -- Absence of Active Trading Market."
Salomon Brothers Inc has from time to time rendered investment banking and
financial advisory services to Aviall and rendered financial advisory services
to Aviall in connection with the Aviall Acquisition. Oppenheimer & Co., Inc. has
rendered financial advisory services to Greenwich in connection with the Aviall
Acquisition.
LEGAL MATTERS
The validity of the Notes offered hereby is being passed upon for the
Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami,
Florida. Certain legal matters relating to the Note Offering will be passed upon
for the Underwriters by Morgan, Lewis & Bockius LLP, New York, New York.
EXPERTS
The consolidated financial statements of Greenwich Air Services, Inc. as of
September 30, 1994 and 1995 and for each of the three years in the period ended
September 30, 1995 included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein.
Such financial statements have been included herein in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
The combined financial statements of the Engine Services Division of Aviall,
Inc. as of December 31, 1994 and 1995 and for each of the years then ended
included in this Prospectus have been so included in reliance upon the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
89
<PAGE>
The combined financial statements of the Engine Services Division of Aviall,
Inc. for the year ended December 31, 1993 have been included herein in reliance
upon the report of KPMG Peat Marwick LLP and upon their authority as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP refers to changes
in the methods of accounting for income taxes and postretirement benefits other
than pensions.
The consolidated financial statements of Aviall Limited as of November 30,
1994 and 1995 and for each of the years then ended included in this Prospectus
have been so included in reliance upon the report of Price Waterhouse, Glasgow,
Scotland, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and its Regional Offices located in the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and at 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of those filings can be obtained from the Commission's Public
Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
A Registration Statement on Form S-1, including amendments thereto, relating
to the Notes offered hereby has been filed by the Company and the Subsidiary
Guarantors with the Commission. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Notes offered hereby, reference is made to such Registration Statement, exhibits
and schedules. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respect by such reference. A copy of the Registration Statement may be
inspected without charge at the Commission's principal offices in Washington,
D.C., and copies of all or any part thereof may be obtained from the Commission
upon the payment of certain fees prescribed by the Commission.
90
<PAGE>
INDEX TO FINANCIAL STATEMENTS
GREENWICH AIR SERVICES, INC. -- HISTORICAL
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of September 30, 1994 and
1995 and March 31, 1996 (Unaudited)........................ F-3
Consolidated Statements of Income for the years ended
September 30, 1993, 1994 and 1995 and for the six months
ended March 31, 1995 (Unaudited) and 1996 (Unaudited)...... F-4
Consolidated Statements of Stockholders' Equity for the
years ended September 30, 1993, 1994 and 1995 and for the
six months ended March 31, 1996 (Unaudited)................ F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1993, 1994 and 1995 and for the six months
ended March 31, 1995 (Unaudited) and 1996 (Unaudited)...... F-6
Notes to Consolidated Financial Statements.................. F-7
AVIALL, INC. ENGINE SERVICES DIVISION -- HISTORICAL
Combined Financial Statements for the years ended December
31, 1993, 1994 and 1995
Report of Independent Accountants......................... F-24
Independent Auditors' Report.............................. F-25
Combined Statements of Operations and Changes in Aviall
Investment for the years ended December 31, 1993, 1994,
and 1995................................................. F-26
Combined Balance Sheets as of December 31, 1994 and
1995..................................................... F-27
Combined Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995......................... F-28
Notes to Combined Financial Statements.................... F-29
Unaudited Combined Financial Statements for the three months
ended March 31, 1995 and 1996
Combined Statements of Operations and Changes in Aviall
Investment for the three months ended March 31, 1995 and
1996..................................................... F-42
Combined Balance Sheets as of December 31, 1995 and March
31, 1996................................................. F-43
Combined Statements of Cash Flows for the three months
ended March 31, 1995 and 1996............................ F-44
Notes to Unaudited Combined Financial Statements.......... F-45
AVIALL LIMITED -- HISTORICAL
Report of Independent Accountants........................... F-46
Consolidated Statements of Operations for the years ended
November 30, 1994 and 1995................................. F-47
Consolidated Balance Sheets as of November 30, 1994 and
1995....................................................... F-48
Consolidated Statements of Shareholder's Equity for the
years ended November 30, 1994 and 1995..................... F-49
Consolidated Statements of Cash Flows for the years ended
November 30, 1994 and 1995................................. F-50
Notes to Consolidated Financial Statements.................. F-51
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Greenwich Air Services, Inc:
We have audited the accompanying consolidated balance sheets of Greenwich
Air Services, Inc. and subsidiaries (the "Company") as of September 30, 1994 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended September 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of September 30,
1994 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended September 30, 1995 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Miami, Florida
December 18, 1995, except for Note 16
as to which the date is April 26, 1996
F-2
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND 1995 AND MARCH 31, 1996 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------
1994 1995
---------------- ---------------- MARCH 31, 1996
----------------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash...................................................... $ 469,755 $ 179,521 $ 267,567
Accounts and notes receivable............................. 38,033,171 35,175,995 47,255,688
Inventories............................................... 70,118,843 120,933,107 111,673,536
Prepaid expenses and other current assets................. 702,207 1,267,214 1,256,470
---------------- ---------------- ----------------
Total current assets.................................... 109,323,976 157,555,837 160,453,261
---------------- ---------------- ----------------
Deferred financing costs.................................... 2,512,328 1,717,128 741,108
Property, plant and equipment............................... 24,747,508 25,657,656 26,375,701
Other assets................................................ 677,868 689,384 728,014
Notes receivable............................................ 1,161,544
---------------- ---------------- ----------------
Total Assets.......................................... $ 138,423,224 $ 185,620,005 $ 188,298,084
---------------- ---------------- ----------------
---------------- ---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 15,647,426 $ 37,683,348 $ 36,001,215
Accrued expenses and current portion of long term
liabilities.............................................. 13,153,377 16,102,199 16,475,380
Customer deposits and deferred revenues................... 4,378,182 15,675,325 9,776,556
Income taxes payable...................................... 66,815 266,347 22,379
---------------- ---------------- ----------------
Total current liabilities............................... 33,245,800 69,727,219 62,275,530
---------------- ---------------- ----------------
Deferred income taxes....................................... 4,701,019 4,839,686 4,304,981
Other liabilities........................................... 1,043,357 9,821,678 8,371,679
Long term debt.............................................. 52,448,461 48,781,897 57,532,685
Long term debt -- WAL....................................... 2,022,683 1,604,494 1,378,839
8% Convertible subordinated debentures...................... 16,999,000 14,057,000 3,561,000
Stockholders' Equity:
Common stock.............................................. 50,780 53,384 125,596
Capital in excess of par value............................ 10,064,646 12,697,141 22,463,487
Retained earnings......................................... 17,847,478 24,048,966 28,284,622
Treasury stock, at cost (11,460) (335)
---------------- ---------------- ----------------
Total stockholders' equity.............................. 27,962,904 36,788,031 50,873,370
---------------- ---------------- ----------------
Total Liabilities and Stockholders' Equity............ $ 138,423,224 $ 185,620,005 $ 188,298,084
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED) AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------- --------------------------------
1993 1994 1995 1995 1996
-------------- ---------------- ---------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................. $ 69,466,903 $ 105,233,461 $ 196,319,722 $ 83,146,538 $ 118,624,872
Cost of sales.............. 55,075,719 87,973,668 164,957,125 69,918,090 99,921,793
-------------- ---------------- ---------------- -------------- ----------------
Gross profit............... 14,391,184 17,259,793 31,362,597 13,228,448 18,703,079
Selling, general and
administrative expenses... 5,693,066 7,005,815 13,637,054 5,471,744 7,741,795
-------------- ---------------- ---------------- -------------- ----------------
Income from operations..... 8,698,118 10,253,978 17,725,543 7,756,704 10,961,284
-------------- ---------------- ---------------- -------------- ----------------
Nonoperating (income)
expense:
Interest expense......... 3,038,998 4,758,455 7,950,613 3,813,454 3,635,069
Other (income)/ expense,
net..................... (47,987) (71,096) (391,444) (44,263) (514)
-------------- ---------------- ---------------- -------------- ----------------
Total Nonoperating
(Income)Expense........... 2,991,011 4,687,359 7,559,169 3,769,191 3,634,555
-------------- ---------------- ---------------- -------------- ----------------
Income before provision for
income taxes.............. 5,707,107 5,566,619 10,166,374 3,987,513 7,326,729
Provision for income
taxes..................... 2,332,676 2,220,291 3,964,886 1,628,186 2,908,384
-------------- ---------------- ---------------- -------------- ----------------
Net income................. $ 3,374,431 $ 3,346,328 $ 6,201,488 $ 2,359,327 $ 4,418,345
-------------- ---------------- ---------------- -------------- ----------------
-------------- ---------------- ---------------- -------------- ----------------
Earnings per share:
Primary.................. $ 0.42 $ 0.34 $ 0.61 $ 0.23 $ 0.36
-------------- ---------------- ---------------- -------------- ----------------
-------------- ---------------- ---------------- -------------- ----------------
Fully diluted............ $ 0.42 $ 0.33 $ 0.54 $ 0.21 $ 0.35
-------------- ---------------- ---------------- -------------- ----------------
-------------- ---------------- ---------------- -------------- ----------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995 AND
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
-------------------------- EXCESS OF PAR RETAINED TREASURY
SHARES AMOUNT VALUE EARNINGS STOCK TOTAL
------------- ----------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
AT SEPTEMBER 30, 1992........... 4,000,000 $ 40,000 $ 1,410,000 $ 11,676,002 $ 13,126,002
Preferential distribution....... (549,283) (549,283)
Net income...................... 3,374,431 3,374,431
------------- ----------- -------------- -------------- ------------ --------------
AT SEPTEMBER 30, 1993........... 4,000,000 40,000 1,410,000 14,501,150 15,951,150
Issuance of common stock in
public offering................ 1,078,000 10,780 8,654,646 8,665,426
Net income...................... 3,346,328 3,346,328
------------- ----------- -------------- -------------- ------------ --------------
AT SEPTEMBER 30, 1994........... 5,078,000 50,780 10,064,646 17,847,478 27,962,904
Cost of treasury shares
purchased...................... $ (216,634) (216,634)
Issuance of treasury shares
under stock purchase plan...... (74,282) 205,174 130,892
Warrant transactions............ 9,000 90 (90)
Conversion of convertible
debentures..................... 251,445 2,514 2,706,867 2,709,381
Net income...................... 6,201,488 6,201,488
------------- ----------- -------------- -------------- ------------ --------------
AT SEPTEMBER 30, 1995........... 5,338,445 53,384 12,697,141 24,048,966 (11,460) 36,788,031
Cost of treasury shares
purchased...................... (108,981) (108,981)
Issuance of treasury shares
under stock purchase plan...... (20,023) 120,106 100,083
Warrant transactions............ 28,148 281 (281)
Options exercised............... 15,875 159 95,091 95,250
Cash dividends paid............. (119,891) (119,891)
GCL Merger...................... 310 3 7,127 7,130
Conversion of convertible
debentures..................... 897,063 8,971 9,684,432 9,693,403
One for one Class B stock
dividend declared April 1996... 6,279,841 62,798 (62,798)
Net income...................... 4,418,345 4,418,345
------------- ----------- -------------- -------------- ------------ --------------
AT MARCH 31, 1996 (UNAUDITED)... 12,559,682 $ 125,596 $ 22,463,487 $ 28,284,622 $ (335) $ 50,873,370
------------- ----------- -------------- -------------- ------------ --------------
------------- ----------- -------------- -------------- ------------ --------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED) AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31,
---------------
1995
YEARS ENDED SEPTEMBER 30, ---------------
------------------------------------------------
1993 1994 1995 (UNAUDITED)
-------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 3,374,431 $ 3,346,328 $ 6,201,488 $ 2,359,327
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization.................... 1,199,152 1,761,892 2,452,546 1,223,788
Provision for doubtful accounts receivable....... 195,000 174,000 2,806,418
Loss on disposal of fixed assets................. 80,124
Changes in assets and liabilities:
Accounts and notes receivable.................. (1,807,751) (5,464,419) 50,758 (742,505)
Inventories.................................... (2,933,632) (8,497,103) (50,814,264) (21,436,860)
Prepaid expenses and other current assets...... 131,684 (90,767) (565,007) 57,377
Other assets................................... 185,369 (264,363) (11,516) (196,828)
Notes receivable............................... (1,161,544) 1,161,544
Accounts payable............................... (1,413,824) 3,736,379 22,035,921 4,829,260
Accrued expenses............................... (1,529,832) (1,459,802) 2,948,822 6,719,293
Customer deposits and deferred revenues........ (349,541) 2,874,531 11,297,143 3,234,834
Other non current liabilities.................. 1,043,357 8,778,321
Income taxes payable........................... 552,468 (485,653) 199,532 416,516
Deferred income taxes payable.................. 1,395,043 1,146,053 138,667 (253,830)
-------------- --------------- --------------- ---------------
Net cash provided (used) by operating
activities.................................. (921,309) (3,341,111) 6,680,373 (3,789,628)
Cash flows from investing activities:
Capital expenditures........................... (5,127,579) (1,691,028) (2,724,515) (586,025)
Acquisition of net assets...................... (41,071,615)
-------------- --------------- --------------- ---------------
Net cash used by investing activities........ (5,127,579) (42,762,643) (2,724,515) (586,025)
-------------- --------------- --------------- ---------------
Cash flows from financing activities:
Net change in revolving credit facility........ 2,460,403 17,350,126 (647,985) 6,292,296
Proceeds from issuance of long-term debt....... 12,000,000 8,000,000
Repayments of long-term debt................... (7,333,877) (2,049,904) (3,436,768) (1,810,640)
Issuance of common stock, net of expenses...... 8,665,426
Issuance of convertible subordinated debt...... 16,999,000
Purchase of treasury shares.................... (216,634)
Proceeds from sale of treasury shares.......... 130,892
Deferred financing costs....................... (267,786) (1,821,013) (75,597) (57,082)
Subordinated debt repaid....................... (1,000,000)
Preferential distribution...................... (549,283)
Options exercised..............................
GCL merger.....................................
Cash dividends paid............................
-------------- --------------- --------------- ---------------
Net cash provided (used) by financing
activities.................................. 6,309,457 46,143,635 (4,246,092) 4,424,574
-------------- --------------- --------------- ---------------
Net (decrease) increase in cash.................. 260,569 39,881 (290,234) 48,921
Cash, beginning of period........................ 169,305 429,874 469,755 469,755
-------------- --------------- --------------- ---------------
Cash, end of period.............................. $ 429,874 $ 469,755 $ 179,521 $ 518,676
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
1996
---------------
<S> <C>
Cash flows from operating activities:
Net income....................................... $ 4,418,345
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization.................... 1,192,420
Provision for doubtful accounts receivable.......
Loss on disposal of fixed assets.................
Changes in assets and liabilities:
Accounts and notes receivable.................. (12,079,693)
Inventories.................................... 9,259,571
Prepaid expenses and other current assets...... 10,744
Other assets................................... (38,630)
Notes receivable...............................
Accounts payable............................... (1,682,133)
Accrued expenses............................... 629,335
Customer deposits and deferred revenues........ (5,898,769)
Other non current liabilities.................. (1,449,999)
Income taxes payable........................... (243,968)
Deferred income taxes payable.................. (534,705)
---------------
Net cash provided (used) by operating
activities.................................. (6,417,482)
Cash flows from investing activities:
Capital expenditures........................... (1,737,042)
Acquisition of net assets......................
---------------
Net cash used by investing activities........ (1,737,042)
---------------
Cash flows from financing activities:
Net change in revolving credit facility........ 10,079,621
Proceeds from issuance of long-term debt.......
Repayments of long-term debt................... (1,810,642)
Issuance of common stock, net of expenses......
Issuance of convertible subordinated debt......
Purchase of treasury shares.................... (108,981)
Proceeds from sale of treasury shares.......... 100,083
Deferred financing costs.......................
Subordinated debt repaid.......................
Preferential distribution......................
Options exercised.............................. 95,250
GCL merger..................................... 7,130
Cash dividends paid............................ (119,891)
---------------
Net cash provided (used) by financing
activities.................................. 8,242,570
---------------
Net (decrease) increase in cash.................. 88,046
Cash, beginning of period........................ 179,521
---------------
Cash, end of period.............................. $ 267,567
---------------
---------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
ORGANIZATION -- Greenwich Air Services, Inc. and its subsidiaries (the
"Company") overhauls, repairs and refurbishes gas turbine aircraft engines and
services aeroderivative gas turbine engines used in a variety of industrial and
marine applications including driving pumps and compressors on oil and gas
pipelines, generating electric power for electric utilities and powering naval
vessels. The Company also manages government and military service and
maintenance programs, and through its wholly owned subsidiary, Greenwich
Turbine, Inc. ("GTi"), provides management services for the sale, refurbishment,
and worldwide installation of complete gas turbine power plants with electrical
output of up to 120 megawatts. As of September 30, 1995, the Company was a 74.1%
owned subsidiary of The Greenwich Company, Ltd. ("GCL") (see note 14). The
Company's results of operations include all expenses on a stand-alone basis.
In April 1994, the Company, through its newly-formed, wholly-owned
subsidiary Gas Turbine Corporation, a Delaware corporation ("GTC"), purchased
for approximately $41 million, exclusive of acquisition cost, substantially all
of the assets of the Gas Turbine Corporation East Granby Division (the
"Division") of Chromalloy Gas Turbine Corporation (the "Seller"), and the
capital stock of Gas Turbine Test Corporation ("GTT") and the assumption by GTC
of certain liabilities of the Division and GTT.
The acquisition was accounted for using the purchase method of accounting.
The purchase price (including the approximate $1.5 million acquisition payable
discussed in note 8) was allocated based on the fair market value of assets
acquired and liabilities assumed. The following is a summary of assets and
liabilities acquired, taking into consideration the allocation of the purchase
acquisition costs and the related financing:
<TABLE>
<S> <C>
Accounts receivable................................................... $16,410,000
Inventories........................................................... 18,991,000
Property and equipment................................................ 17,365,000
Other assets.......................................................... 847,000
-----------
Total Assets...................................................... 53,613,000
Less: Current liabilities............................................. 12,541,000
-----------
Net assets acquired................................................... $41,072,000
-----------
-----------
</TABLE>
The following summarized, unaudited pro forma results of operations for the
years ended September 30, 1993 and 1994, assume the acquisition occurred as of
the beginning of the respective periods:
<TABLE>
<CAPTION>
1993 1994
---------------- ----------------
<S> <C> <C>
Net sales........................................................... $ 126,900,325 $ 141,135,869
Net income.......................................................... 2,309,823 3,520,028
Earnings per share.................................................. $ .29 $ .36
</TABLE>
These pro forma results are not indicative of either future financial
performance or actual results which would have occurred had the acquisition been
made as of those dates.
BASIS OF PRESENTATION -- Financial statements for the year ending September
30, 1994 and 1995 and the unaudited six months ended March 31, 1995 and 1996 are
presented on a consolidated basis, which include the Company and its
subsidiaries GTC, GTT and GTi. Financial statements for the year ended September
30, 1993, include only the Company because GTC, GTT and GTi were formed or
acquired subsequent to September 30, 1993. All significant inter-company
transactions and accounts have been eliminated.
F-7
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
UNAUDITED FINANCIAL STATEMENTS -- The consolidated financial statements as
of March 31, 1996 and for the six months ended March 31, 1995 and 1996 are
unaudited. In the opinion of management, the unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the balance sheet and statements
of income, stockholders' equity and cash flows for such interim periods
presented. The results of operations for the six months ended March 31, 1996 are
not necessarily indicative of the results which may be expected for the entire
fiscal year. The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ALLOWANCE FOR DOUBTFUL ACCOUNTS -- The allowance for doubtful accounts is
established by charges to income through the provision for doubtful accounts
receivable. Trade accounts receivables which are considered by management to be
uncollectible are charged off to the allowance and recoveries of amounts
previously charged off are credited to the allowance. The provision for doubtful
accounts totaled approximately $195,000, $174,000 and $2,806,000 for the years
ended September 30, 1993, 1994 and 1995, respectively and trade accounts
receivables charged off, net of recoveries, totaled approximately $319,000,
$283,000 and $2,170,000 for the years ended September 30, 1993, 1994 and 1995,
respectively. The provision for doubtful accounts totaled approximately
$1,334,000 and $1,288,000 for the six months ended March 31, 1995 and 1996,
respectively, and trade accounts receivable recoveries, net of charge offs,
totaled approximately $75,000 and $55,000 for the six months ended March 31,
1995 and 1996, respectively.
INVENTORIES -- Inventories are stated at the lower of cost or market. Cost
of spare parts is determined by the moving weighted-average method. Reserves for
inventory obsolescence are recorded when, in the opinion of management, the
value of specific inventory items has been impaired.
DEFERRED FINANCING COSTS -- Debt issuance costs and transaction fees, which
are associated with the issuance of notes payable, are being amortized (and
charged to interest expense) over the term of the related loan (see Notes 3 and
7) on a method which approximates the level yield method.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is carried at
cost. Depreciation and amortization is provided using the straight-line and
accelerated methods over the estimated useful lives of the assets (5 to 30
years). When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized for the period. The cost of maintenance and repairs is
charged to income as incurred, and significant renewals and betterments that
extend the lives of the assets are capitalized.
The technical library represents service manuals purchased from original
equipment manufacturers which provide detailed information on the repair and
maintenance of engines and components. Depreciation is computed over the
estimated useful life of 5 years.
REVENUE RECOGNITION -- Revenue from engine maintenance services which are
short-term in nature, is recognized at the time of performance test acceptance
of engines (completed contract method). Revenues from power plant installations
and from long-term contracts and programs are recognized under the percentage of
completion method. Revenue from part sales is recognized upon shipment of the
product to customers. Revenues billed but not earned are deferred, reflected as
a
F-8
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
current liability, and are recognized in the period the cost is incurred. At
September 30, 1994 and 1995, and March 31, 1996 such deferred revenues amounted
to $694,843, $1,853,123, and $552,873, respectively.
WARRANTY COSTS -- Warranty costs are accrued based on management's estimate
of such costs and historical sales percentages.
INCOME TAXES -- The Company is included in a consolidated tax return filed
by its parent GCL for the period ending November 6, 1993, after such date the
Company has filed a separate return. Provision for income taxes is computed on a
separate return basis limited by consolidated realizability factors, which
to-date have not had a material impact on the Company's provision for income
taxes.
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based upon differences
between financial reporting and tax bases of assets and liabilities, and are
measured using the tax rates and laws that will be in effect when the
differences are expected to reverse. Additionally, deferred tax balances are
adjusted in periods that include the enactment of tax rate changes.
Prior to the adoption of Statement No. 109, income tax expense was
determined using the liability method prescribed by Statement of Financial
Accounting Standards No. 96, Accounting for Income Taxes. The adoption of
Statement 109 was made on a prospective basis and did not have a material impact
on the Company for the year ended September 30, 1994.
CAPITAL STOCK -- The Company is authorized to issue 25,000,000 shares of
Class A common stock, $.01 par value, 25,000,000 shares of Class B common stock,
$.01 par value, and 2,500,000 shares of preferred stock, $.01 par value. No
preferred stock has been issued to date. There were 2,116 and 32 treasury shares
as of September 30, 1995 and March 31, 1996, respectively.
On April 26, 1996, the Company declared a dividend to its Class A Common
Stock holders of record of one share of its Class B Common Stock for each
outstanding share of Class A Common Stock. Retained earnings was charged $62,798
in 1996 as a result of the issuance of the 6,279,841 shares of Class B Common
Stock (based on the number of shares of Class A Common Stock outstanding as of
March 31, 1996). All income per share, dividend per share, common shares
outstanding and price per share information has been retroactively restated to
reflect this stock dividend.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE -- Earnings per common and
common equivalent shares are computed by dividing net income by the weighted
average number of common shares and dilutive common share equivalents
outstanding for each period. Common share equivalents include the dilutive
effect of stock warrants and stock options using the treasury stock method, in
applicable periods. Fully diluted earnings per common share assumes, in addition
to the above, (i) that convertible debentures were converted at the beginning of
each period with earnings being increased for interest expense, net of taxes,
that would not have been incurred had conversion taken place at the beginning of
each period and (ii) the additional dilutive effect from the stock warrants and
stock options discussed above. Quarterly and year-to-date computations of per
share amounts are made independently; therefore, the sum of per share amounts
for the quarters may not equal per share amounts for the year.
F-9
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
Shares used to calculate earnings per share are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
---------------------------- ----------------------------
1994 1995 1995 1996
------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Weighted average shares outstanding.................. 9,934,302 10,153,452 10,156,000 11,843,133
Dilutive stock options and warrants.................. 13,498 79,782 25,748 262,335
------------- ------------- ------------- -------------
Shares for primary earnings per share................ 9,947,800 10,233,234 10,181,748 12,105,468
Assumed conversion of debentures..................... 2,626,854 2,402,906 2,905,812 608,718
Additional dilution of stock options and warrants.... -- 200,266 14,630 130,404
------------- ------------- ------------- -------------
Shares for fully diluted earnings per share.......... 12,574,654 12,836,406 13,102,190 12,844,590
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In March 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (SFAS No. 121), effective for fiscal years
beginning after December 15, 1995. SFAS No. 121 establishes accounting standards
for the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this statement will apply to the Company as of the
fiscal year ended September 30, 1997. The Company has not assessed the impact of
adopting this pronouncement.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). SFAS No. 123
does not rescind or interpret existing accounting rules for employee stock-based
arrangements. Under SFAS No. 123, the Company may continue to follow existing
rules to recognize and measure compensation, but they will now be required to
disclose the pro forma amounts of net income and earnings per share that would
have to be reported had the Company elected to follow the "fair value"
recognition provisions of SFAS No. 123. SFAS No. 123 will apply to the Company
for the year ended September 30, 1997. The Company has not determined whether it
will elect to recognize and measure compensation expense under SFAS No. 123 and
has not yet determined its effect on the Company's financial position or results
of operations.
2. ACCOUNTS AND NOTES RECEIVABLE AND INVENTORIES
Accounts and notes receivable consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1994 1995
-------------- -------------- MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables............................................... $ 36,541,267 $ 36,049,970 $ 48,543,438
Current portion of notes receivable............................. 819,914 -- --
Long-term contracts and programs................................ 909,581 -- --
-------------- -------------- --------------
Trade receivables............................................... 38,270,762 36,049,970 48,543,438
Less: Allowance for doubtful accounts........................... 237,591 873,975 1,287,750
-------------- -------------- --------------
Accounts and notes receivable............................... $ 38,033,171 $ 35,175,995 $ 47,255,688
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
F-10
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
2. ACCOUNTS AND NOTES RECEIVABLE AND INVENTORIES (CONTINUED)
As of September 30, 1994, the Company had notes receivable (denominated in
CFA and French Francs) outstanding of approximately $1.7 million related to the
installation of a 25 megawatt power station in Senegal, West Africa. During the
fiscal year ended September 30, 1995 the remaining balance of these notes
receivable (approximately $1.4 million) was sold, without recourse, and an
approximate $300,000 foreign exchange gain was realized on such sale.
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------
1994 1995
-------------- ---------------- MARCH 31, 1996
----------------
(UNAUDITED)
<S> <C> <C> <C>
Parts......................................................... $ 35,395,019 $ 48,296,785 $ 60,498,792
Engines....................................................... 10,746,202 11,624,360 12,024,351
Work in process............................................... 23,400,841 46,662,602 37,433,972
Inventories substantially applicable to long-term programs.... 576,781 14,349,360 1,716,421
-------------- ---------------- ----------------
Total..................................................... $ 70,118,843 $ 120,933,107 $ 111,673,536
-------------- ---------------- ----------------
-------------- ---------------- ----------------
</TABLE>
As of September 30, 1995, inventories substantially applicable to long-term
programs consists primarily of inventories acquired from Continental Airlines,
Inc. (see note 8).
3. DEFERRED FINANCING COSTS
Deferred financing costs consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1994 1995
------------- ------------- MARCH 31,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Transaction fees.................................................... $ 1,385,000 $ 1,000,000 $ 1,000,000
Debentures issue costs.............................................. 1,821,013 1,505,852 381,470
Debt issuance costs................................................. 1,308,090 1,383,687 1,383,686
------------- ------------- -------------
Total............................................................. 4,514,103 3,889,539 2,765,156
Less accumulated amortization....................................... 2,001,775 2,172,411 2,024,048
------------- ------------- -------------
Deferred financing costs............................................ $ 2,512,328 $ 1,717,128 $ 741,108
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Amortization expense (charged to interest expense) for deferred financing
costs for the years ended September 30, 1993, 1994 and 1995, and the six months
ended March 31, 1995 and 1996, were $249,000, $477,000, $638,000, $348,000 and
$173,000, respectively.
F-11
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1994 1995
-------------- -------------- MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment......................................... $ 24,515,012 $ 26,316,716 $ 26,707,607
Furniture and fixtures.......................................... 626,841 712,089 740,283
Leasehold improvements.......................................... 1,499,144 2,297,768 3,615,725
Technical library............................................... 1,017,798 1,024,756 1,024,756
Land and building............................................... 2,574,734 2,595,757 2,595,757
-------------- -------------- --------------
Total......................................................... 30,233,529 32,947,086 34,684,128
Less accumulated depreciation and amortization.................. 5,486,021 7,289,430 8,308,427
-------------- -------------- --------------
Property, plant and equipment................................... $ 24,747,508 $ 25,657,656 $ 26,375,701
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Depreciation and amortization expense for property, plant and equipment for
the years ended September 30, 1993, 1994 and 1995, and the six months ended
March 31, 1995 and 1996 approximated $975,000, $1,285,000, $1,814,000, $875,000
and $1,019,000, respectively.
5. ACCRUED EXPENSES AND CURRENT PORTION OF LONG TERM DEBT
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1994 1995
-------------- -------------- MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and related expenses............................ $ 2,094,625 $ 4,236,787 $ 4,051,500
Estimated expenses accrued...................................... 1,747,241 1,353,496 1,281,342
Other accrued expenses.......................................... 1,754,847 3,712,399 5,819,223
Reserve for warranty costs...................................... 1,822,499 1,246,343 294,960
Accrued acquisition costs....................................... 1,697,667 1,594,726 1,516,594
Current portion of acquisition payable.......................... 521,679 521,679 331,146
Current portion of long term debt............................... 3,137,207 3,018,579 2,740,530
Current portion of long term debt to WAL........................ 377,612 418,190 440,085
-------------- -------------- --------------
Total....................................................... $ 13,153,377 $ 16,102,199 $ 16,475,380
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
6. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
------------------------------------------- ----------------------------
INCOME TAX PROVISION 1993 1994 1995 1995 1996
- -------------------------------------- ------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CURRENT:
FEDERAL............................. $ 783,236 $ 634,655 $ 3,076,933 $ 1,263,547 $ 2,961,935
STATE............................... 39,291 239,192 749,286 307,695 481,155
------------- ------------- ------------- ------------- -------------
822,527 873,847 3,826,219 1,571,242 3,443,090
------------- ------------- ------------- ------------- -------------
DEFERRED:
FEDERAL............................. 1,296,597 1,116,536 48,623 19,967 (505,994)
STATE............................... 213,552 229,908 90,044 36,977 (28,712)
------------- ------------- ------------- ------------- -------------
1,510,149 1,346,444 138,667 56,944 (534,706)
------------- ------------- ------------- ------------- -------------
TOTAL............................. $ 2,332,676 $ 2,220,291 $ 3,964,886 $ 1,628,186 $ 2,908,384
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
F-12
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
6. INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount obtained by applying
the statutory federal income tax rate to pretax income as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH
YEARS ENDED SEPTEMBER 30, 31,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income tax at statutory rate..................................... 34.0% 34.0% 34.0% 34.0% 35.0%
State taxes, net of federal income tax benefit................... 3.6% 5.6% 5.4% 5.4% 4.0%
Other............................................................ 3.2% 0.3% (0.4)% 1.4% 0.7%
--- --- --- --- ---
Provision for income taxes....................................... 40.8% 39.9% 39.0% 40.8% 39.7%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax liability consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1994 1995
-------------- -------------- MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................................. $ 93,204 $ 251,830 $ 302,325
Accrued expenses................................................ 242,790 489,338 499,561
Property, plant and equipment................................... -- 94,206 94,962
Other........................................................... 63,392 3,871 2,411
-------------- -------------- --------------
Total deferred tax assets..................................... 399,386 839,245 899,259
-------------- -------------- --------------
Deferred tax liabilities:
Inventory....................................................... 2,777,555 2,929,252 2,201,817
Property, plant and equipment................................... 2,278,134 2,736,387 2,990,349
Other........................................................... 44,716 13,292 12,074
-------------- -------------- --------------
Total deferred tax liabilities................................ 5,100,405 5,678,931 5,204,240
-------------- -------------- --------------
Net deferred tax liability.................................... $ (4,701,019) $ (4,839,686) $ (4,304,981)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
F-13
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
7. DEBT
Loans payable consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1994 1995
-------------- -------------- MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit facility....................................... $ 41,096,360 $ 40,448,375 $ 50,527,996
Term loan....................................................... 7,155,975 6,018,768 5,411,886
GTC term loan................................................... 7,333,333 5,333,333 4,333,333
Loan payable to WAL............................................. 2,400,295 2,022,684 1,818,924
-------------- -------------- --------------
Total........................................................... 57,985,963 53,823,160 62,092,139
Less current portion
-- Term loans................................................. 3,137,207 3,018,579 2,740,530
-- Loan payable to WAL........................................ 377,612 418,190 440,085
-------------- -------------- --------------
Total current portion (included in accrued expenses)............ 3,514,819 3,436,769 3,180,615
-------------- -------------- --------------
Long term debt -- net of current portion........................ $ 54,471,144 $ 50,386,391 $ 58,911,524
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
REVOLVING CREDIT FACILITY
In November 1992, the Company's revolving credit lender amended and extended
the terms of the then Revolving Credit Facility to a $25,000,000 maximum
borrowing capacity expiring in November 1995. Advances under the Revolving
Credit Facility were based on percentages of eligible accounts receivable and
inventories. Interest payable monthly, was calculated at the greater of (i) a
certain bank's prime rate of interest, plus 1.5%, or (ii) the federal funds
interest rate, plus 2.0%.
In April 1994, simultaneous with the closing of the acquisition of GTC, the
Company's Revolving Credit Facility was amended and extended to include GTC as a
borrower, and to include GTC's inventories and accounts receivable balances as
security. The Revolving Credit Facility now expires in April 1999. Maximum
borrowings under the Revolving Credit Facility were increased to $45,000,000,
and the interest rate calculation was amended to be calculated as (i) a certain
bank's prime rate of interest, plus 1.0%, or (ii) the federal funds interest
rate, plus 1.5%. In addition, the Company was granted the option to fund up to
50% of the loan borrowings at either 30, 60, or 90 day LIBOR plus 2.75%.
In March 1995, the Company's Revolving Credit Facility, which expires in
April 1999, was amended and restated to, among other things, increase maximum
borrowings from $45 to $55 million.
As of September 30, 1994 and 1995 and March 31, 1996, the prevailing prime
interest rate under the Revolving Credit Facility was 8.75%, 9.75% and 9.25%,
respectively. As of September 30, 1994 and 1995 and March 31, 1996, the
prevailing LIBOR interest rate under the Revolving Credit Facility was 7.75% ,
8.56% and 8.19%, respectively.
Revolving Credit Facility at September 30, 1995 and March 31, 1996, was
classified as long-term, as the Company had the intent and the ability,
supported by the terms of its existing Revolving Credit Facility, to maintain
through April 1997, principal amounts outstanding under the agreement.
PROTECTED INTEREST RATE AGREEMENTS
Because the Company's obligations under the Revolving Credit Facility bears
interest at floating rates, the Company is subject to changes in prevailing
interest rates. In September 1994, the Company entered into protected interest
rate agreements ("Cap Agreements") with a financial institution in order to
reduce the Company's exposure to interest rate fluctuations. Under the Cap
Agreements, which
F-14
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
7. DEBT (CONTINUED)
expire in September 1997, the Company has $12,500,000 of prime rate coverage
protection, and $12,500,000 of 90 day LIBOR rate protection. If the prevailing
interest rate exceeds the contracted rate, the financial institution will pay to
the Company an amount equal to the excess. For the remainder period of coverage,
the Cap Agreements are structured as follows:
<TABLE>
<CAPTION>
PERIOD OF COVERAGE 90 DAY LIBOR RATE PRIME RATE
- --------------------------------------------------------------------- --------------------- -------------
<S> <C> <C>
September 1, 1995 - August 31, 1996.................................. 8.00% 10.75%
September 1, 1996 - August 31, 1997.................................. 9.00% 11.75%
</TABLE>
Transaction fees paid in connection with the Cap Agreements are being
amortized to interest expense over the life of the Cap Agreements on a method
which approximates the level yield method. Any payments by the financial
institution will reduce the interest costs associated with the borrowings
protected.
TERM LOANS
TERM LOAN. In November 1992, the Company entered into a loan and security
agreement with a commercial lender (the "Term Lender") for a five year, $9
million term loan expiring in November 1997 (the "Term Loan"). The Term Loan is
secured by the Company's equipment and tooling, and bears interest at 8.75% per
annum, payable in 59 monthly installments (including principal and interest) of
$143,205 each, and a final payment of approximately $3.3 million due on November
1, 1997.
GTC TERM LOAN. On May 26, 1994 the Company and GTC entered into a separate
loan and security agreement with the Term Lender for a five year, $8 million
term loan expiring on May 26, 1999 (the "GTC Term Loan"). The GTC Term Loan is
secured by substantially all of GTC's fixed assets (excluding real estate), and
bears interest at a rate of 8.99% per annum, payable monthly in arrears.
Principal repayments under this agreement are to be made in 24 consecutive
monthly installments of $166,667 each and an additional 36 consecutive monthly
installments of $111,111 each, with all such payments ending on May 26, 1999.
LOAN PAYABLE TO WAL. In November 1992, the Company entered into a loan and
security agreement with World Air Lease, Inc. ("WAL"), an affiliate of the
Company, for a five year, $3 million term loan expiring in November 1997 (the
"WAL Loan"). The WAL Loan is secured by the Company's equipment and tooling, and
bears interest at 10.25% per annum, payable in 59 monthly installments
(including principal and interest) of $50,519 each, and a final payment of
approximately $1.1 million due on November 1, 1997. On April 1, 1994, subject to
the terms and conditions of the GTC Term Loan, WAL agreed to grant a priority
lien position to the Term Lender on the Company's tooling and equipment. In
return, WAL was granted a priority lien position on specific tooling, and was
granted a first mortgage on certain real property that the Company owns in East
Granby, Connecticut.
RESTRICTIVE COVENANTS, COLLATERAL AND MATURITIES
The Company's credit agreements each contain various restrictive covenants
which include, among other things, minimum tangible net worth, maintenance of
minimum working capital, limitations on the payment of dividends, restrictions
on capital expenditures, restrictions on certain additional indebtedness and
requirements to maintain certain financial ratios.
Substantially all of the Company's assets are pledged as collateral under
the above credit agreements.
F-15
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
7. DEBT (CONTINUED)
Scheduled debt maturities subsequent to September 30, 1995, are as follows:
<TABLE>
<CAPTION>
PERIOD ENDING SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------------------------ --------------
<S> <C>
1996.......................................................................... $ 3,436,769
1997.......................................................................... 3,150,292
1998.......................................................................... 5,898,833
1999.......................................................................... 41,337,266
--------------
Total..................................................................... $ 53,823,160
--------------
--------------
</TABLE>
8. OTHER LIABILITIES
Other liabilities consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
1994 1995
------------- -------------- MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C>
Acquisition payable............................................... $ 1,565,036 $ 1,043,357 $ 852,825
Inventory purchase payable........................................ 13,300,000 11,850,000
------------- -------------- --------------
Total......................................................... $ 1,565,036 $ 14,343,357 $ 12,702,825
Less current portion.............................................. 521,679 4,521,679 4,331,146
------------- -------------- --------------
Other liabilities, net of current portion......................... $ 1,043,357 $ 9,821,678 $ 8,371,679
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
ACQUISITION PAYABLE
In connection with the Company's acquisition of GTC, the Company has agreed
to pay the Seller the remaining purchase price due of $1,565,036 in three equal
annual non-interest bearing installments of $521,679 each, starting in fiscal
year 1995. The current portion as of September 30, 1995 and March 31, 1996 of
$521,679 and $331,146, respectively, has been included in accrued expenses.
INVENTORY PURCHASE PAYABLE
On May 1, 1995, the Company purchased approximately $17.6 million of engine
parts inventories from Continental Airlines, Inc. (Continental Airlines), the
Company paid $2.5 million in cash and offsets against receivables and agreed to
pay Continental Airlines the balance due of $15.1 million in the form of service
credits applied against qualified invoices for services to be provided to
Continental Airlines under the terms of the engine service agreement entered
into on January 30, 1995. Management estimates that approximately $4,000,000 of
service credits will be utilized within one year and has therefore included
$4,000,000 in customer deposits as of September 30, 1995 and March 31, 1996.
9. SUBORDINATED DEBENTURES
The Company's $14,057,000 publicly-traded debentures (the "Debentures")
outstanding as of September 30, 1995, ($16,999,000 outstanding as of September
30, 1994) mature on November 15, 2000 and pay interest at 8% per annum, payable
on March 15 and September 15 every year until maturity. The Debentures are
convertible into shares of the Company's Common Stock at any time prior to
maturity, unless previously redeemed by the Company, at a conversion price of
$5.85 per share, subject to adjustment in certain events. The Debentures are not
redeemable by the Company prior to November 15, 1996. Thereafter, the Debentures
are redeemable at a redemption price equal to 100% of the principal amount
thereof plus accrued interest, provided that the Debentures may not be redeemed
unless the closing price of the Company's common stock has equaled or exceeded
$6.75 for 20 consecutive trading days.
F-16
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
9. SUBORDINATED DEBENTURES (CONTINUED)
In 1995, $2,942,000 principal amount of debentures, were converted into
502,890 shares of the Company's common stock at $5.85 per share or approximately
171 common shares for each $1,000 face amount of debentures.
During the six months ended March 31, 1996, $10,496,000 principal amount of
debentures, were converted into 1,794,126 shares of the Company's common stock
at $5.85 per share. Had the additional conversions occurred as of October 1,
1995, primary earnings per share for the six months ended March 31, 1996 would
have been $0.35.
10. STOCK OPTION, STOCK WARRANTS, AND OTHER PLANS
1992 STOCK OPTION PLAN
In July 1992, the Company's Board of Directors and stockholders approved the
establishment by the Company of the 1992 Employee Incentive and Non-Qualified
Stock Option Plan (the "1992 Stock Option Plan"), pursuant to which officers and
other key employees of the Company can receive incentive options and
non-qualified options to purchase an aggregate of 600,000 shares of the
Company's Common Stock.
The exercise price for shares purchased upon the exercise of non-qualified
options granted under the 1992 Stock Option Plan is determined by the
Compensation Committee at the time of option grant. The exercise price of an
incentive stock option granted under the 1992 Stock Option Plan must be at least
equal to 100% of the fair market value of the Common Stock on the date such
option is granted (110% of the fair market value for stockholders who, at the
time the option is granted, own more than 10% of the total combined classes of
stock of the Company or any subsidiary). No employees may be granted incentive
stock options in any year for shares having a fair market value, determined as
of the date of grant, in excess of $100,000.
No incentive option granted under the 1992 Stock Option Plan may have a term
of more than 10 years (five years for 10% or greater stockholders). Options,
whether incentive or nonqualified options, generally may be exercised only if
the option holder remains continuously associated with the Company or a
subsidiary from the date of grant to the date of exercise. However, options may
be exercised upon termination of employment or upon the death or disability of
an employee within certain specified periods.
The Company may grant non-qualified options with exercise prices which are
less than the fair market value of the Common Stock on the date of grant. The
Company does not intend to grant non-qualified options at exercise prices which
are less than 85% of the fair market value of the Common Stock on the date of
grant.
On May 20, 1994, the Company granted certain officers and other key
employees the option to purchase an aggregate of 213,000 shares of the Company's
common stock. These incentive options were granted at an exercise price of $3.00
per share and are exercisable beginning one year after the date of grant for 25%
of the shares, with the balance to become exercisable cumulatively in two
installments each year thereafter of 25% and 50% in years two and three,
respectively. During fiscal 1995, the Company granted other key employees the
option to purchase an additional 36,000 shares of common stock at an option
price of $3.50 for 20,000 shares and $6.19 for 16,000 shares. During the six
months ended March 31, 1996, the Company granted the option to purchase an
additional 130,000 shares of common stock to key employees at an average option
price per share of $11.31.
F-17
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
10. STOCK OPTION, STOCK WARRANTS, AND OTHER PLANS (CONTINUED)
1992 Stock Option Plan activity is shown below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
--------------------
SHARES UNDER OPTION 1994 1995
- ------------------------------------------------------------------ --------- --------- SIX MONTHS
ENDED MARCH
31, 1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Outstanding at beginning of period................................ -- 213,000 244,000
Granted........................................................... 213,000 36,000 130,000
Exercised......................................................... -- -- (31,750)
Canceled.......................................................... -- (5,000) (5,250)
--------- --------- ------------
Outstanding at end of period.................................. 213,000 244,000 337,000
--------- --------- ------------
--------- --------- ------------
</TABLE>
As of September 30, 1995, options for 52,000 shares were exercisable at an
option price of $3.00.
As of March 31, 1996, options for 50,250 shares were exercisable at an
option price of $3.00 and options for 5,000 shares were exercisable at an option
price of $3.50.
1994 STOCK OPTION PLAN
In August 1994, the Company's Board of Directors approved the establishment
of a stock option plan (the "1994 Stock Option Plan") pursuant to which outside
directors of the Company can receive incentive options and non-qualified options
to purchase an aggregate of 30,000 shares of the Company's common stock. As of
September 30, 1995 and March 31, 1996 all 30,000 options had been granted and
were outstanding, and as of September 30, 1995 and March 31, 1996, 26,000 and
28,000, respectively, were exercisable under this plan at an exercise price of
$2.69 per share.
STOCK WARRANTS
In connection with the Company's initial public offering in November 1993,
the Company agreed to sell to underwriters (or its assigns) warrants to purchase
up to $1,500,000 principal amount of debentures at 130% of their initial public
offering price and up to 200,000 shares of the Company's common stock at $5.85
per share. These warrants are exercisable through November 1998.
As of March 31, 1996, 74,296 shares of the Company common stock (18,000 as
of September 30, 1995) were issued in connection with the cashless exercise of
warrants to purchase $750,000 of debentures and 130,000 shares of common stock.
As of March 31, 1996, warrants to purchase of up to $750,000 in debentures and
up to 70,000 shares of common stock remain outstanding and exercisable.
1995 STOCK PURCHASE PLAN
In July 1992, the Company's Board of Directors authorized and directed the
Compensation Committee of the Board and the officers of the Company to develop a
stock purchase plan available to Company employees to serve as an additional
employment incentive.
During 1995, the Company's Board of Directors and stockholders approved the
adoption of the "1995 Stock Purchase Plan" as developed by Company's management.
Under this plan all full-time employees with at least one year of service may
purchase up to an aggregate of 200,000 shares of the Company's common stock. The
1995 Stock Purchase Plan allows participating employees to purchase, through
payroll deductions, shares of the Company's common stock at 85 percent of the
fair market value at specified times. During fiscal 1995, employees have
purchased a total of 37,884 shares at $3.46 per share and at September 30, 1995,
162,116 shares remained available for purchase through the plan. During the six
months ended March 31, 1996, employees have purchased an additional 24,000
shares at $9.27 per share and at March 31, 1996, 138,116 shares remain available
for purchase through the plan.
F-18
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
10. STOCK OPTION, STOCK WARRANTS, AND OTHER PLANS (CONTINUED)
401(K) PLAN
During 1990, the Company adopted a 401(K) Plan (the "Plan") which allows
eligible employees to contribute to the Plan up to 25% of their compensation for
services rendered in any year, not to exceed amounts prescribed under statutory
limits. The Company may elect to make contributions to the Plan at its
discretion. The Company contributions to the Plan for the years ended September
30, 1993, 1994, and 1995 were approximately $18,000, $20,000 and $28,000
respectively. The Company has made no such contribution for the six months ended
March 31, 1996.
11. RELATED PARTY TRANSACTIONS
In connection with the acquisition of its assets in 1987, and the
refinancing of its loans in 1990, the Company paid to GCL transaction fees of
$385,000 and $1,000,000, respectively. Such amounts are included in deferred
financing costs in the accompanying balance sheets and are being amortized,
using a method which approximates the level yield method, over the life of the
assets (seven years) or the period the applicable financing is outstanding (not
to exceed three years), respectively.
The Company paid GCL management fees aggregating $840,000 and $120,000 for
the years ended September 30, 1993 and 1994, respectively. The Company's
management agreement with GCL terminated effective with the initial public
offering in November 1993, as such, no management fees were paid in fiscal year
ended September 30, 1995.
In April 1993, the Company entered into simultaneous lease agreements with
GCL and an unrelated third party, for the use of an aircraft engine. Under these
agreements, the Company leased the engine from GCL and sublet the engine to an
unrelated third party under an identical fee schedule. In accordance with the
lease terms, the Company both paid and received a monthly fee of approximately
$11,250, plus a fee based on engine usage of which a minimum of $5,000 a month
was required. This agreement terminated in August of 1993.
During fiscal 1994, 1995 and for the six months ended March 31, 1996 the
Company purchased engine parts from WAL totaling $136,691, $171,930 and $8,000
respectively. During 1994, the Company received brokerage commissions amounting
to $7,452 from WAL for the sale of an engine to an unrelated third party.
During fiscal 1994, 1995 and for the six months ended March 31, 1996, the
Company performed engine parts repair services for WAL and another company
affiliated through common ownership aggregating approximately $105,000, $103,000
and $150,000, respectively.
In March 1995, the Company purchased an aircraft engine from another company
affiliated through common ownership and concurrently entered into an agreement
to sell the engine to a customer under substantially the same terms. The Company
received a brokerage fee of $10,000 and was reimbursed for its costs and
expenses.
In June 1995, the Company entered into an aircraft engine lease agreement
with a company affiliated through common ownership to provide a replacement
engine while a customer's engine was being served by the Company. Concurrent to
entering into the lease, the Company and the customer entered into a sub-lease
under substantially the same terms.
In June 1995, the Company purchased an unserviceable engine at its
approximate fair market value of $550,000 from an affiliated company. This
engine was disassembled to provide parts for an engine being repaired by the
Company for an unaffiliated third party.
A director of the Company is a senior partner in a law firm which has
received legal fees from the Company in connection with professional services
provided to the Company.
F-19
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
12. COMMITMENTS AND CONTINGENCIES
As security for performance and advances on long term contracts, the Company
is contingently liable as of September 30, 1995 and March 31, 1996, in the
amount of $4,079,960 and $3,031,550, respectively, under standby letter of
credits and bonds.
On January 14, 1992, the Company entered into a lease for office and
operating facilities. Under the terms of the lease, as amended: (1) the
Company's initial lease term would be for five years, commencing August 1, 1992;
(2) the Company has the option for five additional renewals of five years each;
and (3) rent phases in at approximately $1,135,000, $1,581,000, $2,027,000,
$2,710,000 and $3,126,000 in years 1992, 1993, 1994, 1995 and thereafter. This
lease is secured by a stand-by letter of credit with a financial institution
which is collateralized by a certificate of deposit in the amount of
approximately $523,000 which is included in other assets at September 30, 1995
and March 31, 1996.
The Company, through its GTC subsidiary, leases three (3) buildings
totalling approximately 60,000 square feet at a site adjacent to Bradley
International Airport in East Granby, Connecticut. These leases are each for a
five year term, with all three expiring between 1998 and 1999. Annual lease
payments for the facility currently approximates $350,000.
The Company, through its GTC subsidiary, leases from Westover Metropolitan
Development Corporation, as lessor, two (2) warehouses of approximately 30,000
square feet. Each lease is subject to successive one year renewable lease terms.
Current annual lease payments for these facilities total approximately $144,000.
The Company, through GTT, leases from the Port Authority of New York, as
lessor, an approximately 21,000 square foot test cell at John F. Kennedy
International Airport for a term of five years which commenced as of January 1,
1993. Current annual lease payments for the JFK test cell approximate $390,000.
Rent expense for the years ended September 30, 1993,1994 and 1995, under
these leases was approximately $2,176,000, $1,974,000 and $5,142,000,
respectively. Rent expense amounted to $2,458,000 and $2,891,000 for the six
months ended March 31, 1995 and 1996, respectively.
Aggregate future minimum lease payments under these noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------------------------ --------------
<S> <C>
1996.......................................................................... $ 4,773,000
1997.......................................................................... 4,356,000
1998.......................................................................... 797,000
1999.......................................................................... 335,000
--------------
Total..................................................................... $ 10,261,000
--------------
--------------
</TABLE>
The Company's existing and anticipated customers include passenger airlines,
air freight and package carriers, industrial and marine users, government and
leasing companies. Currently, economic and other factors may adversely affect
the airline industry, particularly the major passenger airlines. As a result,
certain of these customers may pose credit risks to the Company. To date, the
Company has not been significantly impacted by these factors. However, the
Company cannot predict whether these conditions will adversely affect the
Company's results of operations in the future.
The Company has entered into employment agreements with two of its officers
expiring on September 30, 1996. Under such agreements, as amended, the Company
will pay the officers base salaries of
F-20
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
$400,000 and $200,000 per annum, plus deferred compensation of $80,000 and
$20,000, respectively. Additionally these officers are entitled to annual
bonuses, based on the Company achieving certain pre-determined base income. For
fiscal 1996 the bonuses are not to exceed an aggregate of $1,000,000 per annum.
The Company is a generator of hazardous waste and is therefore subject to
many Federal and State environmental laws and regulations. The Company believes
that its waste management practices have been and continue to be in compliance
with all applicable environmental laws and regulations and that this limits the
potential for releases of hazardous substances at each of its facilities.
Although unaware of any violations, the Company could be held liable as a former
operator for releases of hazardous substances at the location where the Company
formerly conducted all of its operations. In addition, at certain facilities the
Company may be operating without adequate permits or may have exceeded certain
permit limits. As a result, the Company may be subject to enforcement actions,
environmental remediation, installation of appropriate control technology and/or
penalties. The ultimate outcome of these matters are not certain and no
provision has been made in the accompanying financial statements.
It is anticipated that new regulations, or new interpretations of existing
environmental regulations, which the Company is subject to, may be promulgated
which may necessitate material capital expenditures on the part of the Company.
The Company is currently unable to estimate the extent of any capital
expenditures that may be required in the future to effect such compliance.
The Company is a defendant in a lawsuit with a previous customer in
connection with an aircraft maintenance service agreement, for the repair of an
aircraft and engine in which damages in excess of $1,000,000 against the Company
are claimed. Based upon legal proceedings, discovery to date, and the advice of
legal counsel management believes that the Company's liability, if any, will not
exceed $300,000 as a result of this action, and it is the Company's intention to
defend this suit vigorously.
13. MAJOR CUSTOMERS
Sales to one major unaffiliated customer during the year ended September 30,
1995, amounted to $34,779,000 representing approximately 18% of the Company's
net sales for such period. No one customer represented over 10% of sales for the
years ended September 30, 1993 and 1994 and for the six months ended March 31,
1995. Sales to two major unaffiliated customers during the six month period
ended March 31, 1996, amounted to $11,954,000 and $12,272,000, respectively,
representing approximately 10% each of the Company's net sales for such period.
Sales under government contracts and sub-contracts aggregated 21%, 20%, 14%,
13% and 13% of total net sales for the years ended September 30, 1993, 1994 and
1995 and for the six months ended March 31, 1995 and 1996, respectively.
Government contracts are customarily subject to cancellation or renegotiation at
the Government's election. However, the Company is not aware of any such actions
or pending actions that would have a material affect on the Company's financial
position or results of operations.
Sales to foreign customers aggregated 13%, 21%, 18%, 19% and 14% of total
net sales for the years ended September 30, 1993, 1994 and 1995 and for the six
months ended March 31, 1995 and 1996, respectively. The Company's customers are
located throughout the world, and those outside the United States are not
concentrated in any one geographic area.
F-21
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
14. SUBSEQUENT EVENTS
On October 18, 1995, the Company filed with the Securities and Exchange
Commission a Registration Statement on Form S-3, registering the offering of
$1,050,000 principal amount of the Company's debentures and up to 341,138 shares
of Company common stock, by the holders of the Company's warrants (see note 10).
On November 7, 1995, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with GCL, the owner of 7,900,000 shares of the
Company's issued and outstanding capital stock. Such investment in the capital
stock of the Company constitutes substantially all the assets of GCL. The Merger
Agreement provides for the merger of GCL into the Company, with the Company
being the corporation surviving the Merger.
In the Merger, the Company will acquire and cancel 7,900,000 shares of its
common stock from GCL and, in turn, issue to GCL stockholders 7,900,620 new
shares (a net increase of 620 shares at payment for net other assets received)
from GCL.
Consummation of the Merger will require the approval of the stockholders of
the Company and GCL. The Board of Directors of the Company has set November 20,
1995 as the Record Date for a Special Meeting of the Stockholders of the Company
to be held on December 30, 1995 at the offices of the Company. Approval of the
Merger will require the affirmative vote of a majority of the Common Stock
outstanding. The merger will not have any significant impact on the Company's
financial position or results of operations.
On December 18, 1995, the Company's Board of Directors elected to declare a
cash dividend of $0.01 per share of common stock to stockholders of record as of
January 10, 1996, payable on January 30, 1996.
15. OTHER STATEMENT OF CASH FLOWS INFORMATION
Cash paid for interest was $2,819,769, $4,008,009, $7,072,199 , $2,162,672
and $3,571,135 in 1993, 1994 and 1995, and for the six months ended March 31,
1995 and 1996, respectively. Cash paid for income taxes was $115,000,
$1,576,000, $4,435,968, $928,982 and $3,687,056 in 1993, 1994 , 1995 and for the
six months ended March 31, 1995 and 1996, respectively.
In 1995 and for the six months ended March 31, 1996, $2,942,000 and
$10,496,000, respectively, of Convertible Subordinated Debentures were converted
into 502,890 and 1,794,126 shares of common stock, respectively. The related
unamortized deferred issue costs for the debentures converted of $(232,619) and
$(802,597) for 1995 and for the six months ended March 31, 1996, respectively,
were charged to additional paid in capital. The unamortized deferred issue costs
is determined as of the date of conversion.
In 1995 and during six months ended March 31, 1996, 18,000 and 56,296
shares, respectively, of the Company common stock were issued in connection with
the cashless exercise of warrants to purchase debentures and shares of common
stock (see note 10).
16. PROPOSED ACQUISITION AND STOCK DIVIDEND
On April 19, 1996, the Company signed a definitive purchase agreement to
acquire the engine service and engine components repair business of Aviall, Inc.
for $239 million, net of the value of certain liabilities to be assumed. The
transaction will be accounted for as purchase.
On April 26, 1996, the Company declared a dividend to its Class A Common
Stock holders of record of one share of its Class B Common Stock for each
outstanding share of Class A Common Stock. Retained earnings was charged $62,798
during the six months ended March 31, 1996 as a result of the
F-22
<PAGE>
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE SIX MONTHS ENDED MARCH 31, 1995
AND 1996 IS UNAUDITED)
16. PROPOSED ACQUISITION AND STOCK DIVIDEND (CONTINUED)
assumed issuance of the 6,279,841 shares of Class B Common Stock. All income per
share, dividend per share, common shares outstanding and price per share
information has been retroactively restated to reflect this stock dividend.
17. OTHER INFORMATION
The following information is being presented for (i) Greenwich Air Services,
Inc. ("GASI") on a stand-alone basis, (ii) its subsidiaries combined, and (iii)
the Company on a consolidated basis
<TABLE>
<CAPTION>
GASI SUBSIDIARIES CONSOLIDATED
---------------- ---------------- ----------------
<S> <C> <C> <C>
FOR THE YEAR ENDED SEPTEMBER 30, 1993:
Net sales................................................. $ 69,466,903 $ 69,466,903
Gross profit.............................................. 14,391,184 14,391,184
Income from operations.................................... 8,698,118 8,698,118
Net income................................................ 3,374,431 3,374,431
FOR THE YEAR ENDED SEPTEMBER 30, 1994:
Net sales................................................. 76,315,027 28,918,434 105,233,461
Gross profit.............................................. 11,302,306 5,957,487 17,259,793
Income from operations.................................... 5,767,322 4,486,656 10,253,978
Net income................................................ 1,433,006 1,913,322 3,346,328
Total assets (at period end).............................. 76,334,390 62,088,834 138,423,224
Total liabilities (at period end)......................... 50,284,807 60,175,513 110,460,320
FOR THE YEAR ENDED SEPTEMBER 30, 1995:
Net sales................................................. 120,692,808 75,626,914 196,319,722
Gross profit.............................................. 17,888,003 13,474,594 31,362,597
Income from operations.................................... 8,050,377 9,675,166 17,725,543
Net income................................................ 3,168,516 3,032,972 6,201,488
Total assets (at period end).............................. 119,255,188 66,364,817 185,620,005
Total liabilities (at period end)......................... 87,413,451 61,418,523 148,831,974
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED):
Net sales................................................. 52,265,701 30,880,837 83,146,538
Gross profit.............................................. 7,784,645 5,443,803 13,228,448
Income from operations.................................... 4,001,427 3,755,277 7,756,704
Net income................................................ 1,591,221 768,106 2,359,327
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED):
Net sales................................................. 81,893,574 36,731,298 118,624,872
Gross profit.............................................. 12,856,414 5,846,665 18,703,079
Income from operations.................................... 6,898,295 4,062,989 10,961,284
Net income................................................ 3,193,980 1,224,365 4,418,345
Total assets (at period end).............................. 139,141,200 49,156,884 188,298,084
Total liabilities (at period end)......................... 94,438,488 42,986,226 137,424,714
</TABLE>
F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Aviall, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and changes in Aviall investment and of cash
flows present fairly, in all material respects, the financial position of the
Engine Services Division of Aviall, Inc. (the "Company") at December 31, 1994
and 1995, and the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Dallas, Texas
April 10, 1996
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Aviall, Inc.:
We have audited the accompanying combined statements of operations and
changes in Aviall investment and cash flows of the Engine Services Division of
Aviall, Inc. (the "Company") for the year ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of the Engine
Services Division of Aviall for the year ended December 31, 1993, in conformity
with generally accepted accounting principles.
As discussed in Notes 2 and 11 to the financial statements, the Company
changed its method of accounting for income taxes and postretirement benefits
other than pensions in 1993.
KPMG PEAT MARWICK LLP
Dallas, Texas
April 10, 1996
F-25
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN AVIALL INVESTMENT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................................. $ 482,938 $ 490,390 $ 504,755
Cost of sales.............................................................. 420,564 437,223 462,559
----------- ----------- -----------
Gross profit............................................................... 62,374 53,167 42,196
Operating and other expenses:
Selling and administrative expenses...................................... 30,006 35,391 30,046
Interest expense......................................................... 13,984 18,171 19,216
----------- ----------- -----------
43,990 53,562 49,262
----------- ----------- -----------
Earnings (loss) before income taxes and cumulative effect of change in
accounting................................................................ 18,384 (395) (7,066)
Provision for income taxes................................................. 8,928 4,012 2,714
----------- ----------- -----------
Earnings (loss) before cumulative effect of change in accounting........... 9,456 (4,407) (9,780)
Cumulative effect of change in accounting (net of income tax benefit of
$1,304)................................................................... 1,850 -- --
----------- ----------- -----------
Net earnings (loss)........................................................ $ 7,606 $ (4,407) $ (9,780)
----------- ----------- -----------
----------- ----------- -----------
Aviall investment:
Aviall investment at beginning of period................................. $ 347,383 $ 343,311 $ 390,888
Net earnings (loss)...................................................... 7,606 (4,407) (9,780)
Additional minimum pension liability..................................... -- -- (3,198)
Other changes in Aviall investment....................................... (11,678) 51,984 (30,124)
----------- ----------- -----------
Aviall investment at end of period....................................... $ 343,311 $ 390,888 $ 347,786
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to combined financial statements.
F-26
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash.................................................................................. $ 1,369 $ 32
Receivables........................................................................... 117,824 96,082
Inventories........................................................................... 177,928 160,842
Prepaid expenses and other current assets............................................. 2,174 4,012
Deferred income taxes................................................................. 2,414 --
----------- -----------
Total current assets................................................................ 301,709 260,968
----------- -----------
Property, plant and equipment........................................................... 125,890 123,946
Intangible assets....................................................................... 67,621 66,712
Other assets............................................................................ 5,156 10,956
Deferred income taxes................................................................... -- 755
----------- -----------
Total assets........................................................................ $ 500,376 $ 463,337
----------- -----------
----------- -----------
LIABILITIES AND AVIALL INVESTMENT
Current liabilities:
Current portion of long-term debt..................................................... $ 6,596 $ 10,117
Accounts payable...................................................................... 49,876 50,713
Accrued expenses...................................................................... 19,237 23,942
Deferred income taxes................................................................. -- 760
----------- -----------
Total current liabilities........................................................... 75,709 85,532
----------- -----------
Long-term debt.......................................................................... 13,135 7,392
Other liabilities....................................................................... 7,107 10,741
Deferred income taxes................................................................... 13,537 11,886
Aviall investment....................................................................... 390,888 347,786
----------- -----------
Total liabilities and Aviall investment............................................. $ 500,376 $ 463,337
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to combined financial statements.
F-27
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................................................... $ 7,606 $ (4,407) $ (9,780)
Depreciation and amortization............................................. 16,177 17,255 19,659
Deferred income taxes..................................................... (2,765) 2,949 (52)
Changes in:
Receivables............................................................. 1,419 (39,732) 21,234
Inventories............................................................. 30,189 10,572 9,354
Accounts payable........................................................ (29,539) 11,732 4,362
Accrued expenses........................................................ 2,022 (7,739) (48)
Other, net.............................................................. 948 (3,869) 271
---------- ---------- ----------
26,057 (13,239) 45,000
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................................... (14,501) (21,572) (13,246)
Sales of property, plant and equipment.................................... 1,274 1,499 1,004
Other, net................................................................ 2,510 (1,008) (1,702)
---------- ---------- ----------
(10,717) (21,081) (13,944)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Aviall investment.............................. (14,994) 40,351 (30,171)
Net change in foreign revolving credit facility........................... (1,066) (527) 3,224
Debt repaid............................................................... (4,670) (5,041) (5,446)
---------- ---------- ----------
(20,730) 34,783 (32,393)
---------- ---------- ----------
Change in cash.............................................................. (5,390) 463 (1,337)
Cash, beginning of year..................................................... 6,296 906 1,369
---------- ---------- ----------
Cash, end of year........................................................... $ 906 $ 1,369 $ 32
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to combined financial statements.
F-28
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BACKGROUND
Aviall, Inc.'s ("Aviall") engine services division (the "Division" or
"Engine Services") is engaged in the maintenance and overhaul of turbine engines
and components used primarily in commercial aviation and provides its services
on a worldwide basis through two major repair facilities in Dallas, Texas and
Prestwick, Scotland, supported by a components repair facility in McAllen,
Texas. The engine repair and components repair operations located in Dallas, Ft.
Worth and McAllen, Texas are U.S. divisions of Aviall Services, Inc., which is a
wholly owned subsidiary of Aviall. The Prestwick, Scotland engine repair
operation, or Aviall Limited ("Aviall Ltd"), is a wholly owned foreign
subsidiary of Aviall.
Based on a decision by the Aviall Board of Directors on January 24, 1996,
Aviall signed a letter of intent with Greenwich Air Services, Inc. ("GASI") for
the sale of the Division. Aviall expects to sign a definitive agreement in April
1996 and to complete the sale in 1996. In accordance with Accounting Principles
Board Opinion No. 30, Aviall recorded in its consolidated financial statements a
"discontinued operations" charge of $212.5 million as of December 31, 1995 to
reflect its estimate of the loss it will incur upon sale of the discontinued
operations, primarily related to the Division. These costs have not been
recorded in the separate Division 1995 financial statements since this
discontinued operations treatment is not appropriate at the Division level.
Direct costs approximating $55 million will be incurred by Aviall on behalf of
the Division and, accordingly, will be reflected in the Division's financial
statements in 1996. Upon completion of the sale, GASI will allocate its purchase
price in accordance with Accounting Principles Board Opinion No. 16 and thus
will establish different bases of certain assets and liabilities than are
reflected in these financial statements.
Aviall operated as a wholly owned subsidiary of Ryder System, Inc. ("Ryder")
until December 7, 1993 (the "Distribution Date"), when Ryder distributed Aviall
stock to Ryder shareholders (four shares to one share) as a tax free dividend
(the "Distribution"). The Distribution established Aviall as a publicly held
corporation separate from Ryder.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The accompanying combined financial statements
include the operations, assets and liabilities of the Division as a stand-alone
entity. The financial statements exclude Aviall's corporate assets and
liabilities not specifically identifiable to the Division, except for certain
prepaid expenses and accrued expenses which were allocated based on consistent
and reasonable allocation methods. All significant intercompany transactions and
accounts have been eliminated in combination. These financial statements are
presented on a combined rather than consolidated basis because the controlling
financial interest did not rest directly or indirectly in one of the businesses
included in these combined financial statements. Aviall Ltd has a fiscal year
end of November 30 to facilitate combination of its financial statements. The
fair value of current assets and liabilities approximates carrying value.
Principally due to the use of estimates and allocations, the financial
information included herein may not necessarily reflect the financial position
and results of operations of the Division in the future or what the financial
position and results of operations of the Division would have been had it been a
separate, stand-alone entity during the periods presented. Management does not
consider it practicable to estimate what the results of operations would have
been had the Division operated as a separate, stand-alone entity.
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
F-29
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION. Income from engine maintenance services is recognized
at the time of performance test acceptance of engines (the "completed contract"
method). Revenue from long-term fixed-price contracts, such as
"power-by-the-hour" or "flat-rate" contracts, is recognized under the
"percentage-of-completion" method.
INVENTORIES. Inventories are valued at the lower of cost or market. Cost is
determined on the basis of average cost of materials and supplies and actual
cost for labor and overhead included in work-in-process. Provision is made for
estimated excess and obsolete inventories. All inventory available for sale
during the course of the normal business cycle has been included in current
assets.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are carried at
cost and depreciated over the estimated useful lives of the related assets using
the straight-line method. Lives assigned to asset categories are 10 to 20 years
for buildings and improvements and 5 to 12 years for machinery, equipment and
tooling.
INTANGIBLE ASSETS. Intangible assets, principally goodwill, are reported
net of accumulated amortization of $22.3 million in 1994 and $26.1 million in
1995. Goodwill represents the excess of the purchase price over the fair value
of the net assets acquired and is amortized using the straight-line method over
forty years.
The Division has reviewed the net realizable value of its intangible assets,
including goodwill, through an assessment of the estimated future cash flows
related to such assets and has concluded that there is no impairment of the net
carrying value.
ENVIRONMENTAL COSTS. A liability for environmental assessments and cleanup
is accrued when it is probable a loss has been incurred and is estimable.
Generally, the timing of these accruals coincides with the identification of an
environmental obligation through the Division's internal procedures or upon
notification from regulatory agencies.
FOREIGN EXCHANGE AND FORWARD EXCHANGE CONTRACTS. Aviall Ltd utilizes the
U.S. dollar as its functional currency. Translation gains and losses are
included in the Division's earnings. Aviall enters into forward exchange
contracts on behalf of the Division to hedge certain of its foreign currency
commitments. Gains and losses on forward contracts are recognized by the
Division concurrently with the related transaction gains and losses (see Note
3). Total translation and transaction gains or (losses) included in the
Division's earnings were $(3.4) million, $(0.5) million and $1.2 million in
1993, 1994 and 1995, respectively.
INCOME TAXES. The Division accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which was adopted effective January 1, 1993. The adoption was made on a
prospective basis and did not have a material impact on the Division for the
year ended December 31, 1993.
Prior to the Distribution Date, the Division was included in Ryder's
consolidated federal income tax return. Thereafter, the Division was included in
Aviall's consolidated federal income tax return. However, the income tax
provision of the Division was calculated as if the Division had filed a separate
consolidated federal income tax return (see Note 10).
IMPAIRMENT OF LONG-LIVED ASSETS. In March 1995, the Financial Accounting
Standards Board ("FASB") issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
effective for fiscal years beginning after December 15, 1995. FASB Statement No.
121 requires that long-lived assets be reviewed for impairment whenever events
or
F-30
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. The adoption of this statement in 1996 is not expected to have a
material effect on the Division's financial position or results of operations.
AVIALL INVESTMENT. Aviall investment represents Aviall's investment in the
Division and includes the Division's equity as well as its net payable to Aviall
resulting from cash and non-cash transfers and intercompany allocations.
NOTE 3 -- TRANSACTIONS WITH AVIALL
GENERAL AND ADMINISTRATIVE SERVICES. Aviall provided certain corporate
general and administrative services to the Division, including legal, treasury,
human resources and finance, among others. Prior to the Distribution, Ryder
provided certain corporate general and administrative services to Aviall. Costs
related to these services were allocated to the Division on a basis that
approximated either the proportional share of the Division's usage of the actual
services provided or a representative share of certain corporate fixed expenses.
Management believes these allocations are reasonable.
Total allocated expenses included in "Selling and Administrative Expenses"
in the accompanying Combined Statements of Operations were $10.9 million, $14.3
million and $16.0 million in 1993, 1994 and 1995, respectively. These historical
amounts are not necessarily representative of the costs that the Division would
have incurred as a stand-alone entity.
INTERCOMPANY FINANCING AND INTEREST EXPENSE. Aviall manages cash and
financing requirements of all its business segments. The accompanying Combined
Balance Sheets reflect Aviall's total investment in the Division, a portion of
which represents general corporate financing. Aviall has allocated its corporate
interest expense to the Division based on Aviall's average consolidated interest
rate applied to the debt portion of the "Aviall Investment" which was calculated
based on Aviall's consolidated debt to equity ratio. Information relating to
interest bearing advances from Aviall and related interest allocations is
presented below (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest-bearing advance at period end........................... $ 167,486 $ 196,743 $ 148,041
Average annual interest-bearing advance.......................... $ 168,796 $ 182,115 $ 172,392
Average annual interest rate..................................... 7.1% 8.9% 10.1%
</TABLE>
"Interest Expense" reflected in the Combined Statements of Operations does
not necessarily reflect the interest expense the Division would have incurred as
a stand-alone entity.
Because Aviall manages the cash and financing requirements of the Division,
it is not practicable to estimate cash paid for interest and income taxes.
CORPORATE INSURANCE AND EMPLOYEE BENEFIT PROGRAMS. The Division
participated in Aviall's combined risk management programs for property and
casualty insurance and certain employee health benefit programs, including
medical and dental benefits. The Division was charged amounts which primarily
represented an allocation of third party premiums and self-insured losses,
including estimates of claims incurred but not reported. Costs allocated under
these programs were $8.7 million, $7.8 million and $9.0 million in 1993, 1994
and 1995, respectively.
GUARANTEES OF DEBT BY AVIALL. "Long-Term Debt" reflected in the Combined
Balance Sheets is an obligation of Aviall Ltd. Aviall Ltd's debt with the
European Investment Bank ("EIB") is supported by letters of credit issued under
Aviall's credit facility. In addition, Aviall Ltd's L4.0 million (British
pounds) unsecured bank overdraft facility is guaranteed by Aviall.
F-31
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- TRANSACTIONS WITH AVIALL (CONTINUED)
SECURITY FOR AVIALL DEBT. On March 25, 1996, Aviall amended its credit
facilities to provide for a maturity date of April 30, 1997. The amended credit
facilities contain various covenants, including financial covenants, limitations
on debt and limitations on capital expenditures. In the absence of obtaining the
amended agreement, Aviall would have been in default of the financial covenants
of its previously outstanding credit facilities. Aviall's amended credit
facilities are secured by substantially all of the Division's domestic assets
and 65% of the stock of Aviall Ltd.
FORWARD EXCHANGE CONTRACTS. Aviall has forward exchange contracts in place
to minimize exposure from foreign exchange fluctuations for certain Aviall Ltd
British pound denominated expenditures and debt. Aviall does not use derivative
financial instruments for trading purposes. Aviall had foreign currency forward
contracts outstanding at December 31, 1994 and 1995 to purchase L21.4 million
and L11.9 million (British pounds), respectively, at various future dates
through September 1996. At December 31, 1994, contract exchange rates ranged
from U.S. $1.54/L1 to $1.60/L1 and at December 31, 1995, contract exchange rates
ranged from U.S. $1.53/L1 to $1.60/L1. At December 31, 1994 and 1995, the
estimated fair value of these contracts was $33.5 million and $18.4 million,
respectively, which approximates the contracts' nominal amounts. Although Aviall
is exposed to certain losses in the event of nonperformance by the financial
institutions which are counter parties to these forward exchange contracts, it
does not anticipate nonperformance.
NOTE 4 -- ACCOUNTS RECEIVABLE ALLOWANCES
The Division provides services to a wide variety of aviation-related
businesses, including several commercial airlines. Economic conditions within
the commercial airline industry have been weak over the past several years due
to a number of factors. Management believes that sufficient allowances for
doubtful accounts have been provided as of December 31, 1993, 1994 and 1995 in
relation to its total accounts receivable balance as of each date. However, the
Division would incur significant losses in the event of bankruptcy or
liquidation of one of its major customers. The following is a summary of the
accounts receivable allowances (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year.......................................... $ 2,854 $ 2,441 $ 3,917
Provision for doubtful accounts....................................... 2,707 3,504 1,265
Write-off of doubtful accounts, net of recoveries..................... (3,120) (2,028) (2,399)
--------- --------- ---------
Balance at end of year................................................ $ 2,441 $ 3,917 $ 2,783
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 5 -- INVENTORIES
<TABLE>
<CAPTION>
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Repair parts.................................................................. $ 154,811 $ 134,099
Work-in-process............................................................... 36,534 34,068
----------- -----------
191,345 168,167
Reserves for excess and obsolete inventories.................................. (13,417) (7,325)
----------- -----------
$ 177,928 $ 160,842
----------- -----------
----------- -----------
</TABLE>
F-32
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- INVENTORIES (CONTINUED)
The following is a summary of the reserve for excess and obsolete
inventories (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year......................................... $ 12,176 $ 10,363 $ 13,417
Provision for excess and obsolete inventory.......................... 3,062 5,055 1,956
Write-off of excess and obsolete inventory........................... (4,875) (2,001) (8,048)
--------- --------- ---------
Balance at end of year............................................... $ 10,363 $ 13,417 $ 7,325
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 6 -- LONG-TERM ENGINE MAINTENANCE CONTRACTS
The Division is a party to several long-term engine maintenance contracts
with customers for specified engine fleets over specific periods of time. These
contracts, with remaining terms at December 31, 1995 of one to three years, use
long-term contract accounting which requires various estimates to predict the
contract profitability over the life of the contract. Revenues are recognized
upon test acceptance based on rates per hour (power-by-the-hour) applied to each
completed engine's hours flown since last shop visit. Customers are billed
monthly for fleet hours flown during the period. Costs are recognized for
completed engines based on an average gross margin assumption over the life of
the contract.
Estimates used include failure removal rates, productivity changes, overhaul
cost projections and customer and fleet specific variables. Changes to these
estimates and the resulting cumulative contract-to-date catchup adjustments may
result in material changes to profitability in any given time period. During
1995, negative operating results produced a cumulative contract-to-date catchup
adjustment of $5.9 million. The current estimates used represent management's
best estimate of expected future contract results based on available
information. Actual results could differ significantly (positive or negative)
from estimates currently used should operating performance or other factors
change.
The balance sheet components associated with these long-term contracts
include deferred receivables, costs, charges and revenues. Deferred receivable
is the contract-to-date cumulative variance between the amounts invoiced at
contract rates and the average rate over the contract's life. Deferred cost is
the cumulative difference between the costs projected to date based on the total
estimated contract profitability and the actual costs incurred to date. This
amount is classified according to the remaining term of the related contract.
Deferred charge (revenue) is the cumulative variance between the fleet hours
flown at the contract rate per hour and the revenue recognized to date.
The following table sets forth the balance sheet components of the
Division's long-term engine maintenance contracts:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current deferred receivable....................................................... $ 1,051 $ 5,413
Current deferred cost............................................................. -- 506
Long-term deferred cost........................................................... 4,828 7,231
Current deferred charge........................................................... 51 848
Long-term deferred charge (revenue)............................................... (633) 3,323
--------- ---------
$ 5,297 $ 17,321
--------- ---------
--------- ---------
</TABLE>
F-33
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Land.......................................................................... $ 5,985 $ 5,985
Buildings and improvements.................................................... 49,724 50,836
Machinery and equipment....................................................... 124,524 135,257
Rental engines................................................................ 20,658 19,343
Capital projects in progress.................................................. 4,062 4,203
----------- -----------
204,953 215,624
Accumulated depreciation...................................................... (79,063) (91,678)
----------- -----------
$ 125,890 $ 123,946
----------- -----------
----------- -----------
</TABLE>
NOTE 8 -- ACCRUED EXPENSES
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and benefits..................................................... $ 5,592 $ 7,215
Ad valorem and other taxes....................................................... 2,790 5,269
Self-insurance reserve........................................................... 3,339 4,216
Current income taxes............................................................. 1,813 1,516
Other............................................................................ 5,703 5,726
--------- ---------
$ 19,237 $ 23,942
--------- ---------
--------- ---------
</TABLE>
Salaries, wages and benefits, ad valorem and other taxes, and the
self-insurance reserve were allocated to the Division based on headcount, which
management believes is a reasonable allocation method.
NOTE 9 -- DEBT
<TABLE>
<CAPTION>
1994 1995
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Loan A.......................................................................... $ 2,624 $ 1,350
Loan B.......................................................................... 2,655 1,371
Loan C.......................................................................... 13,302 10,414
Overdraft Facility.............................................................. 1,150 4,374
--------- ----------
19,731 17,509
Less current portion............................................................ (6,596) (10,117)
--------- ----------
$ 13,135 $ 7,392
--------- ----------
--------- ----------
</TABLE>
The Division's financing is provided primarily by Aviall's credit
facilities. In addition, Aviall Ltd has borrowings directly from financial
institutions in the United Kingdom. Aviall Ltd's credit facilities consist of
(1) two ten-year amortizing unsecured term loans with the EIB payable
semiannually through 1996 ("Loan A and Loan B"); (2) a ten-year amortizing
unsecured term loan with the EIB payable semiannually through 1998 ("Loan C");
and (3) a L4.0 million unsecured overdraft facility with a bank payable on
demand (the "Overdraft Facility").
F-34
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- DEBT (CONTINUED)
The interest rates on Loan A and Loan B are 7% and 7.5%, respectively, and
the interest rate on Loan C is 9.3%. Borrowings under the Overdraft Facility
bear interest at the London Interbank Offering Rate plus 1.625%.
Scheduled debt maturities for years subsequent to December 31, 1995 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
- ---------------------------------------------------------------------------------------------
<S> <C>
1996......................................................................................... $ 10,117
1997......................................................................................... 3,464
1998......................................................................................... 3,928
---------
$ 17,509
---------
---------
</TABLE>
If the transaction described in Note 1 is completed, it is likely the EIB
loans will be repaid in 1996. At December 31, 1994 and 1995, the estimated fair
value of the Division's debt approximated the outstanding net book value.
NOTE 10 -- INCOME TAXES
Prior to the Distribution Date, the Division was included in Ryder's
consolidated federal income tax return. Thereafter, the Division was included in
Aviall's consolidated federal income tax return.
For the periods presented, the income tax provision has been determined as
if the Division was a stand-alone entity filing a separate tax return, with the
exception of the treatment of Net Operating Losses (NOL's). In connection with
the Distribution, Ryder and Aviall entered into a tax sharing agreement which
provided for the payment of taxes and receipt of tax refunds for periods up
through the Distribution Date and provided for various administrative matters.
Because of the terms of this agreement, Aviall elected to carry forward its
subsequent NOL's. Similarly, the tax provision for the Division has been
determined assuming no carry back of the 1994 and 1995 NOL's.
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense:
Federal.............................................................. $ 7,622 $ -- $ --
State................................................................ 486 -- --
Foreign.............................................................. 2,281 1,063 2,766
--------- --------- ---------
10,389 1,063 2,766
--------- --------- ---------
Deferred tax expense (benefit):
Federal.............................................................. (2,928) 2,529 --
State................................................................ (200) (260) --
Foreign.............................................................. 363 680 (52)
--------- --------- ---------
(2,765) 2,949 (52)
--------- --------- ---------
Provision for income taxes............................................. $ 7,624 $ 4,012 $ 2,714
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-35
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- INCOME TAXES (CONTINUED)
A reconciliation of expected statutory tax expense (benefit) using the
federal statutory tax rate of 35% to actual tax expense follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Expected statutory tax expense (benefit)............................... $ 6,434 $ (138) $ (2,473)
Change in valuation allowance, principally U.S. losses not
benefitted............................................................ -- 3,924 4,355
Amortization and write-off of goodwill................................. 626 626 626
State income taxes, net of federal income tax benefit.................. 186 (168) (293)
Foreign rate differential.............................................. (205) (172) 99
Fuel tax credit........................................................ (37) (103) (95)
U.K. group relief adjustment........................................... -- (332) --
Transfer of stock in foreign subsidiary................................ 1,969 -- --
Change in accounting method............................................ (1,304) -- --
Miscellaneous items, net............................................... (45) 375 495
--------- --------- ---------
Actual tax expense..................................................... $ 7,624 $ 4,012 $ 2,714
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effect of the increase in the federal income tax rate on the Division's
deferred income tax liability as of January 1, 1993 was not material to the
results of operations for the year ended December 31, 1993.
The significant temporary differences which gave rise to deferred income
taxes as of December 31, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Loss carry forward........................................................... $ 7,288 $ 13,922
Inventory related items...................................................... 2,657 1,396
Accounts receivable allowances............................................... 389 125
Other items.................................................................. 7,177 7,574
---------- ----------
17,511 23,017
Valuation allowance............................................................ (3,924) (8,279)
---------- ----------
Net deferred income tax assets................................................. 13,587 14,738
---------- ----------
Deferred income tax liabilities:
Property and equipment basis differences..................................... (19,242) (18,620)
Other items.................................................................. (5,468) (8,009)
---------- ----------
Deferred income tax liabilities................................................ (24,710) (26,629)
---------- ----------
Net deferred income tax liability.............................................. $ (11,123) $ (11,891)
---------- ----------
---------- ----------
</TABLE>
Aviall has an NOL carryforward for U.S. income tax purposes related to the
Division of $41.1 million expiring in 2009 and 2010. Based on historical
earnings levels, the Division believes that near term taxable income may not be
sufficient to realize all deferred tax assets, including the NOL's. Accordingly,
a valuation allowance has been established to reflect the amount of deferred tax
assets considered realizable. The Division's NOL carryforward will not transfer
to the buyer.
F-36
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- INCOME TAXES (CONTINUED)
Deferred taxes have not been provided on temporary differences related to
the Division's investment in Aviall Ltd. These temporary differences consist
primarily of undistributed earnings of $31.7 million and $36.0 million at
December 31, 1994 and 1995, respectively. These earnings could become subject to
additional tax if they were remitted as dividends to the U.S. parent. It is not
practicable to estimate the amount of additional tax that might be payable on
the foreign earnings.
NOTE 11 -- PENSION PLANS AND POSTRETIREMENT BENEFITS
PENSION PLANS. Substantially all employees are covered by defined benefit
plans maintained by Aviall, or Ryder for the period prior to the Distribution.
Pension expense includes an allocation of amounts related to the plans
maintained by Aviall as well as, for 1993, amounts allocated and charged to
Aviall by Ryder for participants in the Ryder System, Inc. Retirement Plan
("Ryder Salaried Plan").
Aviall's primary plan ("Aviall Pension Plan") provides benefits for
domestic, non-union employees for services subsequent to the Distribution. These
employees of Aviall were given credit under the Aviall Pension Plan for prior
service in the Ryder Salaried Plan. Ryder retained the pension fund assets and
accumulated benefit obligation related to participants in the Ryder Salaried
Plan for services rendered through the Distribution Date.
In addition to the Aviall Pension Plan, Aviall maintains two defined benefit
pension plans directly attributable to the Division: a U.S. plan covering
certain union employees and a plan for employees of Aviall Ltd in the United
Kingdom. The benefits for these plans are based upon years of service for the
domestic plan and a final-pay benefit formula for the United Kingdom plan. The
funding policy for these plans is to contribute such amounts as are necessary on
an actuarial basis to provide the plans with sufficient assets to meet the
benefits payable to plan participants. The plans' assets are primarily invested
in equities and interest-bearing accounts.
The following tables reflect the components of net pension expense and the
funded status for the two plans directly attributable to the Division (in
thousands):
NET PENSION EXPENSE
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost -- benefits earned during the year................................. $ 1,937 $ 2,585 $ 1,724
Interest cost on projected benefit obligation................................... 1,605 1,863 2,465
Actual return on plan assets.................................................... (2,750) 223 (3,084)
Net amortization and deferral................................................... 637 (2,829) 1,379
--------- --------- ---------
Net pension expense............................................................. $ 1,429 $ 1,842 $ 2,484
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-37
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- PENSION PLANS AND POSTRETIREMENT BENEFITS (CONTINUED)
FUNDED STATUS
<TABLE>
<CAPTION>
1994 1995
-------------------- --------------------
ASSETS BENEFITS ASSETS BENEFITS
EXCEED EXCEED EXCEED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Plan assets at fair value.......................................... $ 19,030 $ 3,914 $ 23,607 $ 5,656
--------- --------- --------- ---------
Actuarial present value of benefit obligations:
Vested benefits.................................................. 12,953 6,469 16,819 11,909
Nonvested benefits............................................... 136 352 178 1,819
--------- --------- --------- ---------
Accumulated benefit obligation................................... 13,089 6,821 16,997 13,728
Additional benefits based on projected future salary increases... 4,979 -- 6,464 --
--------- --------- --------- ---------
Projected benefit obligation....................................... 18,068 6,821 23,461 13,728
--------- --------- --------- ---------
Plan assets greater (less) than projected benefit obligation....... 962 (2,907) 146 (8,072)
Unrecognized net (gains) losses.................................... (199) 241 876 3,209
Unrecognized prior service cost.................................... 23 1,681 20 4,318
Unrecognized transition amount..................................... -- 597 -- 498
--------- --------- --------- ---------
Prepaid (accrued) pension expense.................................. $ 786 $ (388) $ 1,042 $ (47)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Separate calculations of the components of net pension expense for employees
of the Division covered by the Aviall Pension Plan and the Ryder Salaried Plan,
as well as the Division's funded status within such plans, are not available.
Pension expense included in the Combined Statements of Operations includes
amounts allocated to the Division by both Aviall and Ryder, based on headcount,
of approximately $0.3 million, $0.7 million and $0.7 million in 1993, 1994 and
1995, respectively.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," the Division has
recorded an additional minimum liability at December 31, 1994 and 1995
representing the excess of the accumulated benefit obligation over the fair
value of plan assets and accrued pension liability. The additional liability has
been offset by intangible assets to the extent of previously unrecognized prior
service cost. Amounts in excess of previously unrecognized prior service cost
were recorded as a $3.2 million reduction in Aviall investment.
The following table sets forth the year end actuarial assumptions used in
the accounting for the two plans directly attributable to the Division:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Discount rate for determining projected benefit obligation:
Domestic........................................................................... 8.75% 7.00%
Foreign............................................................................ 9.00% 8.00%
Rate of increase in compensation levels:
Domestic........................................................................... 4.50% 4.50%
Foreign............................................................................ 6.50% 5.50%
Expected long-term rate of return on plan assets:
Domestic........................................................................... 7.75% 7.75%
Foreign............................................................................ 9.50% 9.50%
</TABLE>
F-38
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- PENSION PLANS AND POSTRETIREMENT BENEFITS (CONTINUED)
Actuarial gains and losses and plan amendments are amortized over the
average remaining service lives of participants expected to receive benefits and
transition amounts are amortized over 13 to 19 years.
Aviall also maintains a qualified defined contribution plan. Contribution
expense allocated to the Division by Aviall, based on headcount, amounted to
$0.2 million, $0.2 million and $0.2 million in 1993, 1994 and 1995,
respectively.
POSTRETIREMENT BENEFITS. Aviall maintains plans which provide retired
employees with certain health care and life insurance benefits. Substantially
all domestic employees are eligible for these benefits. Generally, these plans
require employee contributions, limit company contributions to $95 per month for
nonunion employees and provide for a $10,000 lifetime maximum benefit for union
employees. Effective January 1, 1993, Aviall adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." As a result, approximately $1.9 million, net of taxes, was
allocated to the Division and recorded as the cumulative effect of a change in
accounting principle to establish a liability for the present value of expected
future benefits attributed to employees' service rendered prior to January 1,
1993. Periodic postretirement benefit expense included in the Combined
Statements of Operations includes amounts allocated to the Division by Aviall,
based on headcount, of approximately $0.3 million, $0.4 million and $0.3 million
in 1993, 1994 and 1995, respectively. Separate calculations of the components of
net periodic postretirement benefit expense and the unfunded status for the
Division are not available.
NOTE 12 -- ENVIRONMENTAL MATTERS
The Division uses certain chemicals classified by various state and federal
agencies as hazardous substances. Aviall is involved in various stages of
investigation and cleanup to comply with state and federal regulations at
facilities operated by the Division. These financial statements have been
prepared on the basis of the Division operating as a stand-alone going concern
entity and accordingly do not reflect environmental exit costs expected to be
incurred by Aviall. Such costs will be accrued by the Division in 1996 to
reflect Aviall's decision to sell the Division.
Aviall has been named a potentially responsible party ("PRP") under the
Comprehensive Environmental Response, Compensation and Liability Act and the
Superfund Amendments and Reauthorization Act at four third-party disposal sites
to which wastes were allegedly sent by the previous owner of assets used by the
Division. Aviall did not use the identified disposal sites. Accordingly, the
previous owner has retained, and has been discharging, all liability associated
with the cleanup of these sites pursuant to the sales agreement. Although Aviall
could be potentially liable in the event of nonperformance by the previous
owner, it does not anticipate nonperformance. Based on this information, neither
Aviall nor the Division has accrued any costs associated with third party sites.
At December 31, 1994 and 1995, accrued environmental liabilities related to
the ongoing operations of the Division amounted to $1.1 million and $0.8
million, respectively. Total environmental expense included in earnings amounted
to $0.9 million and $0.7 million in 1993 and 1994, respectively and was
immaterial in 1995. The Division's probable environmental loss estimates are
based on information obtained from independent environmental engineers and from
Division experts regarding the nature and extent of environmental contamination,
remediation alternatives available, and the cleanup criteria required by
relevant governmental agencies. The estimated costs include anticipated site
testing, consulting, remediation, disposal, post-remediation monitoring and
legal fees as appropriate, based on available information. These amounts
represent the undiscounted costs to fully resolve the environmental matters in
accordance with prevailing federal, state and local requirements.
F-39
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- ENVIRONMENTAL MATTERS (CONTINUED)
Based on information presently available and Division programs to detect and
minimize contamination, management believes the ultimate disposition of these
matters, although potentially material to the results of operations in any one
year, will not have a material affect on the Division's financial condition or
cash flows.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
The Division leases certain facilities and equipment under agreements which
are classified as operating leases. Rental expense under these leases was $0.9
million, $1.1 million and $0.9 million in 1993, 1994 and 1995, respectively.
Future minimum payments under non-cancelable operating leases with initial or
remaining terms of one year or more at the end of 1995 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING
- ------------------------------------------------------------------------------------
<S> <C>
1996................................................................................ $ 806
1997................................................................................ 824
1998................................................................................ 790
1999................................................................................ 673
2000................................................................................ 624
Thereafter.......................................................................... 1,963
---------
Total minimum lease payments.................................................... $ 5,680
---------
---------
</TABLE>
The Division is a party to various claims, legal actions and complaints
arising in the ordinary course of business. Management believes that the
disposition of these matters will not have a material impact on the financial
condition or cash flows of the Division.
NOTE 14 -- OTHER INFORMATION
The Division operates in the aviation industry and reports its activities as
one business segment. The Division's foreign sales and pretax earnings eminate
entirely from its repair facility in Prestwick, Scotland. Financial information
by geographic area follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales:
United States.................................................. $ 277,944 $ 289,586 $ 294,459
United Kingdom................................................. 204,994 200,804 210,296
----------- ----------- -----------
$ 482,938 $ 490,390 $ 504,755
----------- ----------- -----------
----------- ----------- -----------
Earnings (loss) before income taxes and cumulative effect of
change in accounting:
United States.................................................. $ 11,091 $ (9,346) $ (13,362)
United Kingdom................................................. 7,293 8,951 6,296
----------- ----------- -----------
$ 18,384 $ (395) $ (7,066)
----------- ----------- -----------
----------- ----------- -----------
Identifiable assets:
United States.................................................. $ 277,049 $ 293,245 $ 255,208
United Kingdom................................................. 205,206 207,131 208,129
----------- ----------- -----------
$ 482,255 $ 500,376 $ 463,337
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-40
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 -- OTHER INFORMATION (CONTINUED)
Sales to customers in excess of 10% of total net sales were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
USAir............................................................ $ 76,872 $ 77,447 $ 98,063
Continental Airlines............................................. 133,298 112,282 83,952
Southwest Airlines............................................... 32,244 53,554 62,722
All others....................................................... 240,524 247,107 260,018
----------- ----------- -----------
$ 482,938 $ 490,390 $ 504,755
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-41
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN AVIALL INVESTMENT
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Net sales............................................................................... $ 120,572 $ 134,745
Cost of sales........................................................................... 106,734 126,863
----------- -----------
Gross profit............................................................................ 13,838 7,882
Operating and other expenses:
Selling and administrative expenses................................................... 7,597 8,792
Restructuring costs................................................................... -- 39,567
Interest expense...................................................................... 5,415 4,283
----------- -----------
Earnings (loss) before income taxes..................................................... 826 (44,760)
Provision for income taxes.............................................................. 463 243
----------- -----------
Net earnings (loss)..................................................................... $ 363 $ (45,003)
----------- -----------
----------- -----------
Aviall investment:
Aviall investment at beginning of period.............................................. $ 390,888 $ 347,786
Net earnings (loss)................................................................... 363 (45,003)
Other changes in Aviall investment.................................................... (26,045) (1,954)
----------- -----------
Aviall investment at end of period.................................................... $ 365,206 $ 300,829
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to combined financial statements.
F-42
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------- MARCH 31,
1996
------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash.............................................................................. $ 32 $ 30
Receivables....................................................................... 96,082 109,249
Inventories....................................................................... 160,842 151,739
Prepaid expenses and other current assets......................................... 4,012 3,729
-------------- ------------
Total current assets............................................................ 260,968 264,747
-------------- ------------
Property, plant and equipment....................................................... 123,946 120,040
Intangible assets................................................................... 66,712 65,454
Other assets........................................................................ 10,956 12,797
Deferred income taxes............................................................... 755 --
-------------- ------------
Total assets.................................................................... $ 463,337 $ 463,038
-------------- ------------
-------------- ------------
LIABILITIES AND AVIALL INVESTMENT
Current liabilities:
Current portion of long-term debt................................................. $ 10,117 $ 10,701
Accounts payable.................................................................. 50,713 58,529
Accrued expenses.................................................................. 23,942 23,619
Accrued restructuring costs....................................................... -- 39,567
Deferred income taxes............................................................. 760 --
-------------- ------------
Total current liabilities....................................................... 85,532 132,416
-------------- ------------
Long-term debt...................................................................... 7,392 7,253
Other liabilities................................................................... 10,741 10,649
Deferred income taxes............................................................... 11,886 11,891
Aviall investment................................................................... 347,786 300,829
-------------- ------------
Total liabilities and Aviall investment......................................... $ 463,337 $ 463,038
-------------- ------------
-------------- ------------
</TABLE>
See accompanying notes to combined financial statements.
F-43
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).................................................................... $ 363 $ (45,003)
Restructuring costs.................................................................... -- 39,567
Depreciation and amortization.......................................................... 4,741 5,123
Changes in:
Receivables.......................................................................... 14,947 (8,865)
Inventories.......................................................................... (198) 5,431
Accounts payable..................................................................... (4,400) (2,291)
Accrued expenses..................................................................... 4,198 (323)
Other, net........................................................................... (4,745) (1,647)
---------- ----------
14,906 (8,008)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................................... (4,093) (1,444)
Sales of property, plant and equipment................................................. 187 77
Other, net............................................................................. (294) (2)
---------- ----------
(4,200) (1,369)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Aviall investment........................................... (10,328) 8,930
Net change in foreign revolving credit facility........................................ 3,330 445
---------- ----------
(6,998) 9,375
---------- ----------
Change in cash........................................................................... 3,708 (2)
Cash, beginning of period................................................................ 1,369 32
---------- ----------
Cash, end of period...................................................................... $ 5,077 $ 30
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to combined financial statements.
F-44
<PAGE>
AVIALL, INC.
ENGINE SERVICES DIVISION
NOTES TO UNAUDITED COMBINED 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 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 and
should be read in conjunction with Aviall, Inc. Engine Services Division
combined financial statements and notes thereto for the year ended December 31,
1995. 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, 1996 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996.
NOTE 2 -- RESTRUCTURING COSTS
Based on a decision by the Aviall, Inc. ("Aviall") Board of Directors on
January 24, 1996, Aviall signed a definitive agreement on April 19, 1996 to sell
the engine services division ("Division") to Greenwich Air Services, Inc. and
expects to complete the sale in 1996. Accordingly, income taxes have been
calculated on a discrete period basis. In accordance with Accounting Principles
Board Opinion No. 30, Aviall recorded in its consolidated financial statements a
"discontinued operations" charge of $212.5 million as of December 31, 1995 to
reflect its estimate of the loss it will incur upon sale of the discontinued
operations, primarily related to the Division. These costs were not recorded in
the separate Division 1995 financial statements since this discontinued
operations treatment is not appropriate at the Division level. Restructuring
costs approximating $55 million, incurred by Aviall on behalf of the Division,
will be reflected in the Division's financial statements in 1996. The combined
financial statements for the three months ended March 31, 1996 include $39.6
million of such expenses.
NOTE 3 -- INVENTORIES
<TABLE>
<CAPTION>
DECEMBER
31, MARCH 31,
1995 1996
----------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Repair parts............................................... $ 134,099 $ 123,723
Work-in-process............................................ 34,068 37,121
----------- -----------
168,167 160,844
----------- -----------
Reserves for excess and obsolete inventories............... (7,325) (9,105)
----------- -----------
$ 160,842 $ 151,739
----------- -----------
----------- -----------
</TABLE>
F-45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholder of Aviall Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Aviall
Limited and its subsidiaries (the "Company") at November 30, 1994 and 1995, and
the results of their operations and their cash flows for the years then ended,
in conformity with United States generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United Kingdom and the United
States which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chartered Accountants
Glasgow, Scotland
May 14, 1996
F-46
<PAGE>
AVIALL LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Net sales............................................................................ $ 204,505 $ 217,120
Cost of sales........................................................................ 178,224 193,736
----------- -----------
Gross profit......................................................................... 26,281 23,384
Operating and other expenses:
Selling and administrative expenses................................................ 12,099 9,784
Interest expense................................................................... 6,080 7,143
----------- -----------
18,179 16,927
Earnings before income taxes......................................................... 8,102 6,457
Provision for income taxes........................................................... 2,825 2,714
----------- -----------
Net earnings......................................................................... $ 5,277 $ 3,743
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-47
<PAGE>
AVIALL LIMITED
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash.................................................................................. $ 1,755 $ 359
Receivables........................................................................... 49,069 63,815
Inventories........................................................................... 87,306 74,049
Prepaid expenses and other current assets............................................. 982 1,313
----------- -----------
Total current assets.................................................................... 139,112 139,536
Property, plant and equipment........................................................... 48,572 51,650
Intangible assets....................................................................... 21,310 20,649
----------- -----------
Total assets...................................................................... $ 208,994 $ 211,835
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt..................................................... $ 6,596 10,117
Accounts payable...................................................................... 33,971 46,198
Accrued expenses...................................................................... 6,782 6,866
----------- -----------
Total current liabilities......................................................... 47,349 63,181
----------- -----------
Long-term debt.......................................................................... 13,135 7,392
Due to Aviall........................................................................... 51,625 39,454
Deferred income taxes................................................................... 10,706 11,886
Shareholder's equity (includes A Ordinary Shares of L1.00 par value with shares
outstanding at November 30, 1994 and 1995 - 1,000,000 and B Ordinary Shares of $1.00
par value with shares outstanding at November 30, 1994 and 1995 - 22,069,272).......... 86,179 89,922
----------- -----------
Total liabilities and shareholder's equity........................................ $ 208,994 $ 211,835
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-48
<PAGE>
AVIALL LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
At November 30, 1993.............................................. $ 23,632 $ 30,399 $ 26,871 $ 80,902
Net earnings...................................................... -- -- 5,277 5,277
--------- ----------- --------- ---------
At November 30, 1994.............................................. 23,632 30,399 32,148 86,179
Net earnings...................................................... -- -- 3,743 3,743
--------- ----------- --------- ---------
At November 30, 1995.............................................. $ 23,632 $ 30,399 $ 35,891 $ 89,922
--------- ----------- --------- ---------
--------- ----------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-49
<PAGE>
AVIALL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER
30,
---------------------
1994 1995
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................................................ $ 5,277 $ 3,743
Depreciation and amortization........................................................... 5,435 5,634
Deferred income taxes................................................................... 240 (52)
Changes in:
Receivables........................................................................... (7,351) (14,746)
Inventories........................................................................... (7,233) 13,257
Accounts payable...................................................................... 5,331 12,228
Accrued expenses...................................................................... 5,231 1,568
Other, net............................................................................ 181 (661)
--------- ----------
7,111 20,971
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................................... (6,821) (8,092)
Sales of property, plant and equipment.................................................. 148 150
Other, net.............................................................................. 44 (27)
--------- ----------
(6,629) (7,969)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Due to Aviall................................................ 5,986 (12,176)
Net change in revolving credit facility................................................. (527) 3,224
Debt repaid............................................................................. (5,041) (5,446)
--------- ----------
418 (14,398)
--------- ----------
Change in cash............................................................................ 900 (1,396)
Cash, beginning of year................................................................... 855 1,755
--------- ----------
Cash, end of year......................................................................... $ 1,755 $ 359
--------- ----------
--------- ----------
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest................................................................................ $ 2,740 $ 2,068
Income taxes............................................................................ $ 596 $ 1,665
</TABLE>
See accompanying notes to consolidated financial statements.
F-50
<PAGE>
AVIALL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BACKGROUND
Aviall Limited (the "Company") is engaged in the maintenance and overhaul of
turbine engines used primarily in commercial aviation and provides its services
on a worldwide basis. The engine repair operation located in Prestwick, Scotland
is a wholly owned United Kingdom foreign subsidiary of Aviall, Inc. ("Aviall").
Based on a decision by the Aviall Board of Directors on January 24, 1996,
Aviall signed a letter of intent with Greenwich Air Services, Inc. ("GASI") for
the sale of its commercial engine services business which includes the Company.
A definitive agreement was signed on April 19, 1996. The sale is expected to be
completed in 1996. In accordance with Accounting Principles Board Opinion No.
30, Aviall recorded in its consolidated financial statements a "discontinued
operations" charge of $212.5 million as of December 31, 1995 to reflect its
estimate of the loss it will incur upon the sale of the discontinued commercial
engine services operations. The Company has not recorded in its 1995 financial
statements any amounts included in the charge related to the Company since this
discontinued operations treatment is not appropriate at this level. Direct costs
approximating $3.7 million will be incurred by Aviall on behalf of the Company
and, accordingly, will be reflected in the Company's financial statements in
1996. Upon completion of the sale, GASI will allocate its purchase price in
accordance with Accounting Principles Board Opinion No. 16 and thus will
establish different bases of certain assets and liabilities than are reflected
in these financial statements.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. The Company's
fiscal year ends on November 30. The accompanying financial statements are
prepared in U.S. dollars. The fair value of current assets and liabilities
approximates carrying value.
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
REVENUE RECOGNITION. Income from engine maintenance services is recognized
at the time of performance test acceptance of engines (the "completed contract"
method). Revenue from long-term fixed-price contracts, such as
"power-by-the-hour" or "flat-rate" contracts, is recognized under the
"percentage-of-completion" method.
INVENTORIES. Inventories are valued at the lower of cost or market. Cost is
determined on the basis of average cost of materials and supplies and actual
cost for labor and overhead included in work-in-process. Provision is made for
estimated excess and obsolete inventories. All inventory available for sale
during the course of the normal business cycle has been included in current
assets.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are carried at
cost and depreciated over the estimated useful lives of the related assets using
the straight-line method. Lives assigned to asset categories are 40 years for
buildings and improvements and 4 to 15 years for machinery, equipment and
tooling.
INTANGIBLE ASSETS. Goodwill is reported net of accumulated amortization of
$5.2 million and $5.9 million as of November 30, 1994 and 1995, respectively.
Goodwill represents the excess of the purchase price over the fair value of the
net assets acquired and is amortized using the straight-line method over forty
years.
F-51
<PAGE>
AVIALL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has reviewed the net realizable value of its goodwill through an
assessment of the estimated future cash flows related to such assets and has
concluded that there is no impairment of the net carrying value.
ENVIRONMENTAL COSTS. A liability for environmental assessments and cleanup
is accrued when it is probable a loss has been incurred and is estimable.
Generally, the timing of these accruals coincides with the identification of an
environmental obligation through the Company's internal procedures or upon
notification from regulatory agencies. The Company is not aware of any exposure
to environmental costs arising from its continuing operations and thus has not
accrued any such liability.
FOREIGN EXCHANGE AND FORWARD EXCHANGE CONTRACTS. The Company utilizes the
U.S. dollar as its functional currency. Translation gains and losses are
included in earnings. Aviall enters into forward exchange contracts on behalf of
the Company to hedge certain of its foreign currency commitments including loan
commitments with the European Investment Bank ("EIB") and certain labor costs.
Gains and losses on forward contracts are recognized by the Company concurrently
with the related transaction gains and losses. Total translation and transaction
gains or (losses) included in earnings were $(0.5) million and $1.2 million in
1994 and 1995, respectively.
INCOME TAXES. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
IMPAIRMENT OF LONG-LIVED ASSETS. In March 1995, the Financial Accounting
Standards Board ("FASB") issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
effective for fiscal years beginning after December 15, 1995. FASB Statement No.
121 requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset may
not be recoverable. The adoption of this statement is not expected to have a
material effect on the Company's financial position or results of operations.
NOTE 3 -- TRANSACTIONS WITH AVIALL
GENERAL AND ADMINISTRATIVE SERVICES. Aviall provided certain corporate
general and administrative services to the Company, including legal, treasury,
human resources and finance, among others. Costs related to these services were
allocated to the Company on a basis that approximated either the proportional
share of the Company's usage of the actual services provided or a representative
share of certain corporate fixed expenses. Management believes these allocations
are reasonable.
Total allocated expenses included in "Selling and Administrative Expenses"
in the accompanying Consolidated Statements of Operations were $2.9 million and
$3.7 million in 1994 and 1995, respectively.
INTERCOMPANY FINANCING AND INTEREST EXPENSE. "Due to Aviall" reflected in
the Consolidated Balance Sheets represents Aviall's net advances to the Company
resulting from cash and non-cash transfers and intercompany allocations. The
intercompany advances by Aviall to the Company are evidenced by a promissory
note dated December 7, 1993 maturing on December 31, 2000. The annual interest
rate is agreed upon between the parties and was equal to the quarterly floating
London Interbank Offering Rate ("LIBOR") plus 3%. At November 30, 1994 and 1995,
the interest rate was 8.6% and 8.9%, respectively. Total intercompany interest
charged by Aviall to the Company in 1994 and 1995 was $3.4 million and $4.4
million, respectively. The note may be prepaid without penalty at the option of
the Company. If the transaction in Note 1 is completed, the note will be repaid
by GASI immediately after close.
F-52
<PAGE>
AVIALL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- TRANSACTIONS WITH AVIALL (CONTINUED)
CORPORATE INSURANCE PROGRAMS. The Company participated in Aviall's combined
risk management programs for property and casualty insurance, including aviation
products liability. The Company was charged $1.4 million and $1.6 million in
1994 and 1995, respectively, which represented an allocation of third party
premiums.
GUARANTEES OF DEBT BY AVIALL. The Company's debt with the EIB is supported
by letters of credit issued under Aviall's credit facility. In addition, the
Company's L4.0 million unsecured bank overdraft facility is guaranteed by
Aviall.
SECURITY FOR AVIALL DEBT. On March 25, 1996, Aviall amended its credit
facilities to provide for a maturity date of April 30, 1997. The amended credit
facilities contain various covenants, including financial covenants, limitations
on debt and limitations on capital expenditures. In the absence of obtaining the
amended agreement, Aviall would have been in default of the financial covenants
of its previously outstanding credit facilities. Aviall's amended credit
facilities are secured in part by a pledge of 65% of the stock of the Company.
NOTE 4 -- ACCOUNTS RECEIVABLE ALLOWANCES
The Company provides services to a wide variety of aviation-related
businesses, including several commercial airlines. Management believes that
sufficient allowances for doubtful accounts have been provided as of November
30, 1994 and 1995. In addition, a substantial portion of the Company's accounts
receivable balance is covered by credit insurance. The following is a summary of
the accounts receivable allowances (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Balance at beginning of year.......................................................... $ 677 $ 644
Provision for doubtful accounts....................................................... 125 168
Write-off of doubtful accounts, net of recoveries..................................... (158) (560)
--------- ---------
Balance at end of year................................................................ $ 644 $ 252
--------- ---------
--------- ---------
</TABLE>
NOTE 5 -- INVENTORIES
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Repair parts..................................................................... $ 74,302 $ 64,353
Work-in-process.................................................................. 15,770 12,521
Distribution parts............................................................... 454 488
--------- ---------
90,526 77,362
--------- ---------
Reserves for excess and obsolete inventories..................................... (3,220) (3,313)
--------- ---------
$ 87,306 $ 74,049
--------- ---------
--------- ---------
</TABLE>
The following is a summary of the reserve for excess and obsolete
inventories (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Balance at beginning of year....................................................... $ 2,014 $ 3,220
Provision for excess and obsolete inventory........................................ 1,557 423
Write-off of excess and obsolete inventory......................................... (351) (330)
--------- ---------
Balance at end of year............................................................. $ 3,220 $ 3,313
--------- ---------
--------- ---------
</TABLE>
F-53
<PAGE>
AVIALL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................................... $ 461 $ 461
Buildings and improvements..................................................... 17,892 18,241
Machinery and equipment........................................................ 43,320 49,452
Rental engines................................................................. 10,418 11,320
Capital projects in progress................................................... 4,062 4,202
---------- ----------
76,153 83,676
Accumulated depreciation....................................................... (27,581) (32,026)
---------- ----------
$ 48,572 $ 51,650
---------- ----------
---------- ----------
</TABLE>
NOTE 7 -- ACCRUED EXPENSES
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and benefits....................................................... $ 1,403 $ 1,187
Current income taxes............................................................... 1,373 1,516
Other.............................................................................. 4,006 4,163
--------- ---------
$ 6,782 $ 6,866
--------- ---------
--------- ---------
</TABLE>
NOTE 8 -- DEBT
The Company's financing is provided primarily by Aviall's credit facilities.
In addition, the Company has borrowings directly from financial institutions in
the United Kingdom. The Company's credit facilities consist of (1) two ten-year
amortizing unsecured term loans with the EIB payable semiannually through 1996
("Loans A and B"), (2) a ten-year amortizing unsecured term loan with the EIB
payable semiannually through 1998 ("Loan C"), and (3) a L4.0 million unsecured
overdraft facility with a bank payable on demand (the "Overdraft Facility").
<TABLE>
<CAPTION>
1994 1995
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Loans A and B................................................................... $ 5,279 $ 2,721
Loan C.......................................................................... 13,302 10,414
Overdraft Facility.............................................................. 1,150 4,374
--------- ----------
19,731 17,509
Less current portion............................................................ (6,596) (10,117)
--------- ----------
$ 13,135 $ 7,392
--------- ----------
--------- ----------
</TABLE>
The interest rates on Loan A and Loan B are 7% and 7.5%, respectively, and
the interest rate on Loan C is 9.3%. Borrowings under the Overdraft Facility
bear interest at LIBOR plus 1.625%.
Scheduled debt maturities for years subsequent to November 30, 1995 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
- ---------------------------------------------------------------------------------------------
<S> <C>
1996......................................................................................... $ 10,117
1997......................................................................................... 3,464
1998......................................................................................... 3,928
---------
$ 17,509
---------
---------
</TABLE>
F-54
<PAGE>
AVIALL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- DEBT (CONTINUED)
If the transaction described in Note 1 is completed, it is likely the EIB
loans will be repaid in 1996. At November 30, 1994 and 1995, the estimated fair
value of the Company's debt approximated the outstanding net book value.
NOTE 9 -- INCOME TAXES
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
--------------------
<S> <C> <C>
Current tax expense................................................................ $ 2,585 $ 2,766
Deferred tax expense (benefit)..................................................... 240 (52)
--------- ---------
Provision for income taxes......................................................... $ 2,825 $ 2,714
--------- ---------
</TABLE>
A reconciliation of expected statutory tax expense using the statutory tax
rate of 33% to actual tax expense follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Expected statutory tax expense..................................................... $ 2,674 $ 2,131
Amortization of goodwill........................................................... 218 218
Meals and entertainment............................................................ 97 116
Miscellaneous items, net........................................................... (164) 249
--------- ---------
Actual tax expense................................................................. $ 2,825 $ 2,714
--------- ---------
--------- ---------
</TABLE>
At November 30, 1994 and 1995, substantially all of the deferred tax
liability arises from temporary differences related to property and equipment
basis differences.
The Company's income tax returns are subject to review by Inland Revenue.
Returns through 1993 have been settled, and the 1994 return is currently under
discussion.
NOTE 10 -- PENSION PLANS
The Company maintains a defined benefit pension plan. The benefits for this
plan are based upon a final-pay benefit formula. The funding policy for the plan
is to contribute such amounts as are necessary on an actuarial basis to provide
the plan with sufficient assets to meet the benefits payable to plan
participants. The plan's assets are primarily invested in equities and
interest-bearing accounts.
F-55
<PAGE>
AVIALL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- PENSION PLANS (CONTINUED)
The following tables reflect the components of net pension expense and the
funded status for the plan (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
NET PENSION EXPENSE
Service cost -- benefits earned during the year............................................ $ 2,332 $ 1,203
Interest cost on projected benefit obligation.............................................. 1,344 1,585
Actual return on plan assets............................................................... 390 (2,993)
Net amortization and deferral.............................................................. (3,005) 1,131
--------- ---------
Net pension expense........................................................................ $ 1,061 $ 926
--------- ---------
--------- ---------
FUNDED STATUS
Plan assets at fair value.................................................................. $ 19,030 $ 23,607
--------- ---------
Actuarial present value of benefit obligations:
Vested benefits.......................................................................... 12,953 16,819
Nonvested benefits....................................................................... 136 178
--------- ---------
Accumulated benefit obligation........................................................... 13,089 16,997
Additional benefits based on projected future salary increases........................... 4,979 6,464
--------- ---------
Projected benefit obligation............................................................... 18,068 23,461
--------- ---------
Plan assets greater than projected benefit obligation...................................... 962 146
Unrecognized net (gains) losses............................................................ (199) 876
Unrecognized prior service cost............................................................ 23 20
--------- ---------
Prepaid pension expense.................................................................... $ 786 $ 1,042
--------- ---------
--------- ---------
</TABLE>
The following table sets forth the year end actuarial assumptions used in
the accounting for the plan:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Discount rate for determining projected benefit obligation........................... 9.00% 8.00%
Rate of increase in compensation levels.............................................. 6.50% 5.50%
Expected long-term rate of return on plan assets..................................... 9.50% 9.50%
</TABLE>
Actuarial gains and losses and plan amendments are amortized over the
average remaining service lives of active members expected to receive benefits,
and transition amounts are amortized over 19 years.
NOTE 11 -- COMMON STOCK
The Company is authorized to issue 1,000,000 L1 par value shares ("A
Ordinary Shares") and 36,000,000 $1 par value shares ("B Ordinary Shares"). Each
A Ordinary Share has 1.8 votes per share and each B Ordinary Share has 1 vote
per share. Dividends or other amounts payable to holders, whether on liquidation
or otherwise, are apportioned so that 1.8 times the amount payable in respect of
each B Ordinary Share is payable in respect of each A Ordinary Share. All
1,000,000 A Ordinary Shares are issued and outstanding and 22,069,272 B Ordinary
Shares are issued and outstanding.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. Management believes that the
disposition of these matters will not have a material impact on the financial
condition, results of operations or cash flows of the Company.
F-56
<PAGE>
AVIALL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- OTHER INFORMATION
The Company operates in the aviation industry and reports its activities as
one business segment. For the years ended November 30, 1994 and 1995, sales to
Continental Airlines amounted to 34% and 24%, respectively, of total net sales
and sales to Federal Express amounted to 19% and 15%, respectively, of total net
sales. Net sales by geographic area were as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Export sales:
North America............................................................... $ 125,668 $ 111,889
Europe...................................................................... 15,546 23,620
Other....................................................................... 32,376 43,942
----------- -----------
173,590 179,451
United Kingdom................................................................ 30,915 37,669
----------- -----------
$ 204,505 $ 217,120
----------- -----------
----------- -----------
</TABLE>
F-57
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 12
The Aviall Acquisition......................... 17
Concurrent Transactions........................ 17
Use of Proceeds................................ 18
Capitalization................................. 19
Unaudited Pro Forma Combined Financial
Information................................... 20
Selected Historical Financial Data............. 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 30
Industry Overview.............................. 37
Business....................................... 39
Management..................................... 52
Certain Transactions........................... 57
Principal Stockholders......................... 59
Description of Capital Stock................... 60
Shares Eligible for Future Sale................ 62
Description of Certain Indebtedness............ 63
Description of Notes........................... 65
Underwriting................................... 89
Legal Matters.................................. 89
Experts........................................ 89
Available Information.......................... 90
Index to Financial Statements.................. F-1
</TABLE>
--------------------------
UNTIL , 1996 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THE
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
$150,000,000
GREENWICH AIR
SERVICES, INC.
% SENIOR NOTES
DUE 2006
[LOGO]
SALOMON BROTHERS INC
OPPENHEIMER & CO., INC.
DILLON, READ & CO. INC.
PROSPECTUS
DATED , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses (other than selling
commissions) which will be paid by the Registrant in connection with the
issuance and distribution of the securities being registered. With the exception
of the Registration fee and the NASD filing fee, all amounts shown are
estimates.
<TABLE>
<S> <C>
Registration fee................................................. $ 51,725
NASD filing Fee.................................................. 15,500
Printing and engraving expenses.................................. 75,000
Legal fees and expenses.......................................... 150,000
Accounting fees and expenses..................................... 150,000
Registrar and Transfer Agent fees and expenses................... 50,000
Fees and expenses (including legal fees) for qualifications under
state securities laws........................................... 25,000
Miscellaneous expenses........................................... 7,775
---------
Total...................................................... $ 500,000
---------
---------
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Twelfth of the Amended and Restated Certificate of Incorporation of
Greenwich Air Services, Inc. (the "Registrant") eliminates the personal
liability of directors and/or officers to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director; provided that such
elimination of the personal liability of a director and/or officer of the
Registrant does not apply to (i) any breach of such person's duty of loyalty to
the Registrant or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
actions prohibited under Section 174 of the Delaware General Corporation Law
(i.e., liabilities imposed upon directors who vote for or assent to the unlawful
payment of dividends, unlawful repurchases or redemption of stock, unlawful
distribution of assets of the Registrant to the stockholders without the prior
payment or discharge of the Registrant's debts or obligations, or unlawful
making or guaranteeing of loans to directors and/or officers), or (iv) any
transaction from which the director derived an improper personal benefit. In
addition, Article Thirteenth of the Registrant's Amended and Restated Articles
of Incorporation provides that the Registrant shall indemnify its corporate
personnel, directors and officers to the fullest extent permitted by the
Delaware General Corporation Law, as amended from time to time.
The Registrant has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director and executive officer of the
Registrant (the "Indemnities"). The Indemnity Agreements provide that the
Registrant will indemnify each Indemnitee against any amounts that he becomes
legally obligated to pay in connection with any claim against him based upon any
act, omission, neglect or breach of duty that he may commit, omit or suffer
while acting in his capacity as a director and/or officer of the Registrant;
provided, that such claim: (i) is not based upon the Indemnitee's gaining any
personal profit or advantage to which he is not legally entitled; (ii) is not
for an accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Registrant within the meaning of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or similar provisions of any state
law; and (iii) is not based upon the Indemnitee's knowingly fraudulent,
deliberately dishonest or willful misconduct. The Indemnity Agreements also
provide that all costs and expenses incurred by the Indemnitee in defending or
investigating such claim shall be paid by the Registrant in advance of the final
disposition thereof, unless the Registrant, independent legal counsel, the
stockholders of the Registrant or a court of competent jurisdiction determines
that: (x) the Indemnitee did not act in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
Registrant; (y) in the case of any criminal action or proceeding, the Indemnitee
had reasonable cause to
II-1
<PAGE>
believe his conduct was unlawful; or (z) the Indemnitee intentionally breached
his duty to the Registrant or its stockholders. Each Indemnitee has undertaken
to repay the Registrant for any costs or expenses so advanced if it shall
ultimately be determined by a court of competent jurisdiction in a final,
nonappealable adjudication that he is not entitled to indemnification under an
Indemnity Agreement.
ITEM 15. EXHIBITS RECENT SALES OF UNREGISTERED SECURITIES.
No securities that were not registered under the Securities Act have been
issued or sold by the Registrant within the past three years.
ITEM 16. EXHIBITS
A. EXHIBITS.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement (7)
3.1 Amended and Restated Certificate of Incorporation of the Registrant (6)
3.2 Amended and Restated By-laws of the Registrant (2)
4.1 Indenture, dated , 1996, relating to the Notes (7)
4.2 Form of Subsidiary Guaranty (included in Exhibit 4.1)
4.3 Specimen Note (included in Exhibit 4.1)
4.4 Form of Collateral Sharing Agreement (7)
4.5 Form of Shares Pledge (7)
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of the Notes
being registered (7)
10.1 Air Agency Certificate No. RH2R135L issued by the Federal Aviation Administration to the Registrant and
related Repair Station Operations Specifications (1)
10.2 General Terms Agreement, dated as of April 23, 1992, between General Electric Company ("GE") and
Registrant relating to GE CF6 turbofan jet engines (1)
10.3 Maintenance and Support Agreement between GE and Registrant, dated February 21, 1992, relating to GE
LM1500 engines, components and accessories (1)
10.4 Maintenance and Support Agreement, between GE and Registrant, dated June 19, 1985, as amended June 21,
1990, and as further amended November 1, 1991, related to GE LM2500 engines, components and accessories
(1)
10.5 Agreement, dated as of July 15, 1992, between Registrant and Rolls-Royce, plc. and Rolls-Royce, Inc.
relative to the repair and overhaul of Rolls Royce RB211-22B engines (1)
10.6 Lease Agreement, dated January 14, 1992, between Registrant, as lessee, and Dade County, Florida, as
lessor, in respect of former Eastern Airlines engines service center (1)
10.7 Lease Agreement, dated as of March 15, 1988, as amended, between Dade County, Florida, as lessor, and
the predecessor to the Registrant, as Lessee, in respect of buildings 2146 and 2169 in the westside
cargo area of Miami International Airport (1)
10.8 1992 Stock Option Plan, including form of Stock Option Agreement (1)
10.9 Loan and Security Agreement, dated November 5, 1992, between the Registrant, World Air Leases, Inc. and
CIT Group/Equipment Financing, Inc. as agent (2)
10.10 Agreement between the Registrant and the United States Army Foreign Military Sales Program (2)
10.11 Form of Indenture between Registrant and American Stock Transfer & Trust Company, as Trustee relating to
the Debentures (2)
10.12 Form of Representatives' Warrant (2)
10.13 Form of Employment Agreement, dated as of September 15, 1993, between Registrant and Eugene P. Conese
(3)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.14 Form of Employment Agreement, dated as of November 15, 1993, between Registrant and Eugene P. Conese,
Jr. (3)
10.15 Form of Indemnity Agreement (3)
10.16 Agreement of Purchase and Sale, dated March 21, 1994, by and among GTC, the Registrant and the Seller
(4)
10.17 Disclosure Package to Agreement of Purchase and Sale (4)
10.18 Supplemental Letter Agreement dated March 21, 1994 between the Registrant and the Seller (4)
10.19 Letter Agreement, Letter of Credit, and Escrow Agreement, all delivered on and as of April 22, 1994 (4)
10.20 Second Amended and Restated Revolving Credit and Security Agreement, dated as of April 21, 1994 (4)
10.21 Agreement and Plan of Merger dated November 7, 1995 by and between the Registrant and GCL (5)
10.22 Amendment to Employment Agreement with Eugene P. Conese dated December 18, 1995 (5)
10.23 Amendment to Employment Agreement with Eugene P. Conese, Jr., dated December 18, 1995 (5)
10.24 Third Amended and Restated Revolving Credit and Security Agreement dated as of March 14, 1995 by and
between Registrant, Gas Turbine Corporation and Greenwich Turbine, Inc. and the Bank of New York
Commercial Corporation (5)
10.25 Agreement of Purchase and Sale dated April 19, 1996, as amended, between GASI Engine Services
Corporation and the Registrant and Aviall Services, Inc. and Aviall, Inc. (6)
10.26 Form of Fourth Amended and Restated Revolving Credit and Security Agreement (7)
10.27 Form of Revolving Credit Agreement (7)
11.1 Statement re computation of per share earnings (6)
12.1 Statement re computation of ratios (6)
21.1 Subsidiaries of the Company (5)
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (included in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP (7)
23.3 Consent of Price Waterhouse LLP (7)
23.4 Consent of KPMG Peat Marwick LLP (7)
23.5 Consent of Price Waterhouse (7)
25 Statement of Eligibility of Qualification of Trustee for the Notes under the Trust Indenture Act of 1939
(7)
</TABLE>
- ------------------------
(1) Incorporated by reference and filed as Exhibits to Registrant's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
September 10, 1992 (File No. 33-51854)
(2) Incorporated by reference and filed as Exhibits to Registrant's Amendment
No. 1 to Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on September 22, 1993 (File No. 33-51854)
(3) Incorporated by reference and filed as Exhibits to Registrant's Amendment
No. 2 to Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on October 28, 1993
(4) Incorporated by reference and filed as Exhibits to Registrant's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
September 22, 1993 (File No. 33-51854)
(5) Incorporated by reference and filed as Exhibits to Registrant's Form 10-K
filed with the Securities and Exchange Commission on December 27, 1995
II-3
<PAGE>
(6) Previously filed
(7) Filed herewith
ITEM 17. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(2) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
4. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4), or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
GREENWICH AIR SERVICES, INC.
By: /s/ EUGENE P. CONESE*
-----------------------------------
Eugene P. Conese
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ EUGENE P. CONESE*
------------------------------------------- Chairman, Chief Executive Office and June 4, 1996
Eugene P. Conese Director (principal executive officer)
/s/ EUGENE P. CONESE, JR.
------------------------------------------- President, Chief Operating Officer and June 4, 1996
Eugene P. Conese, Jr. Director
/s/ ROBERT J. VANARIA*
------------------------------------------- Senior Vice President of administration June 4, 1996
Robert J. Vanaria and Chief Financial Officer
/s/ ORLANDO M. MACHADO*
------------------------------------------- Vice President, Finance (principal June 4, 1996
Orlando M. Machado accounting officer)
/s/ GENERAL CHARLES A. GABRIEL*
------------------------------------------- Director June 4, 1996
General Charles A. Gabriel USAF (Ret.)
------------------------------------------- Director June , 1996
Charles J. Simons
------------------------------------------- Director June , 1996
Chesterfield Smith
*By: /s/ROBERT J. VANARIA
Rovert J. Vanaria
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
GAS TURBINE CORPORATION
By: /s/ EUGENE P. CONESE*
-----------------------------------
Eugene P. Conese
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ EUGENE P. CONESE*
------------------------------------------- Chairman, Chief Executive Office and June 4, 1996
Eugene P. Conese Director (principal executive officer)
/s/ EUGENE P. CONESE, JR.
------------------------------------------- President, Chief Operating Officer and June 4, 1996
Eugene P. Conese, Jr. Director
/s/ ROBERT J. VANARIA*
------------------------------------------- Senior Vice President of administration June 4, 1996
Robert J. Vanaria and Chief Financial Officer
/s/ ORLANDO M. MACHADO*
------------------------------------------- Vice President, Finance (principal June 4, 1996
Orlando M. Machado accounting officer)
*By: /s/EUGENE P. CONESE, JR.
Eugene P. Conese, Jr.
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
GREENWICH TURBINE, INC.
By: /s/ EUGENE P. CONESE*
-----------------------------------
Eugene P. Conese
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ EUGENE P. CONESE*
------------------------------------------- Chairman, Chief Executive Office and June 4, 1996
Eugene P. Conese Director (principal executive officer)
------------------------------------------- President and Director June 4, 1996
Robert Loffredo
/s/ EUGENE P. CONESE, JR.
------------------------------------------- Vice President and Director (principal June 4, 1996
Eugene P. Conese, Jr. accounting officer)
*By: /s/EUGENE P. CONESE, JR.
Eugene P. Conese, Jr.
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
GASI ENGINE SERVICES CORPORATION
By: /s/ EUGENE P. CONESE*
-----------------------------------
Eugene P. Conese
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ EUGENE P. CONESE*
------------------------------------------- Chairman, Chief Executive Office and June 4, 1996
Eugene P. Conese Director (principal executive officer)
/s/ EUGENE P. CONESE, JR.
------------------------------------------- President, Chief Operating Officer and June 4, 1996
Eugene P. Conese, Jr. Director
Senior Vice President of
/s/ ROBERT J. VANARIA* administration, Chief Financial
------------------------------------------- Officer and Director (principal June 4, 1996
Robert J. Vanaria accounting officer)
*By: /s/EUGENE P. CONESE, JR.
Eugene P. Conese, Jr.
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
GAS TURBINE TEST CORPORATION
By: /s/ EUGENE P. CONESE*
-----------------------------------
Eugene P. Conese
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ EUGENE P. CONESE*
------------------------------------------- Chairman, Chief Executive Office and June 4, 1996
Eugene P. Conese Director (principal executive officer)
/s/ EUGENE P. CONESE, JR.
------------------------------------------- President, Chief Operating Officer and June 4, 1996
Eugene P. Conese, Jr. Director
Senior Vice President of
/s/ ROBERT J. VANARIA* administration, Chief Financial
------------------------------------------- Officer and Director (principal June 4, 1996
Robert J. Vanaria accounting officer)
/s/ ORLANDO M. MACHADO*
------------------------------------------- Vice President, Treasurer and Director June 4, 1996
Orlando M. Machado
*By: /s/EUGENE P. CONESE, JR.
Eugene P. Conese, Jr.
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
GREENWICH FOREIGN SALES CORPORATION
By: /s/ EUGENE P. CONESE*
-----------------------------------
Eugene P. Conese
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ EUGENE P. CONESE*
------------------------------------------- Chairman, Chief Executive Office and June 4, 1996
Eugene P. Conese Director (principal executive officer)
/s/ EUGENE P. CONESE, JR.
------------------------------------------- President, Chief Operating Officer and June 4, 1996
Eugene P. Conese, Jr. Director
/s/ ORLANDO M. MACHADO*
------------------------------------------- Vice President, Treasurer and Director June 4, 1996
Orlando M. Machado
*By: /s/EUGENE P. CONESE, JR.
Eugene P. Conese, Jr.
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
GREENWICH AIR SERVICES -- TEXAS, L.P.
By: GASI Engine Services Corporation,
General Partner
By: /s/ EUGENE P. CONESE, JR.
-----------------------------------
Eugene P. Conese, Jr.,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Eugene P. Conese, Jr. and Robert J.
Vanaria his true and lawful attorneys-in-fact, each acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and any registration
statement filed pursuant to Rule 462(b) of the Act prepared in connection
therewith, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------------- ----------------
/s/ EUGENE P. CONESE
------------------------------------------- Chairman, Chief Executive Officer and June 4, 1996
Eugene P. Conese Director (principal executive officer)
/s/ EUGENE P. CONESE, JR.
------------------------------------------- President, Chief Operating Officer and June 4, 1996
Eugene P. Conese, Jr. Director
/s/ ROBERT J. VANARIA Senior Vice President of administration
------------------------------------------- and Chief Financial Officer and June 4, 1996
Robert J. Vanaria Director
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on June 4, 1996.
MCALLEN COMPONENTS, L.P.
By: GASI Engine Services Corporation,
General Partner
By: /s/ EUGENE P. CONESE, JR.
--------------------------------
Eugene P. Conese, Jr.,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Eugene P. Conese, Jr. and Robert J.
Vanaria his true and lawful attorneys-in-fact, each acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and any registration
statement filed pursuant to Rule 462(b) of the Act prepared in connection
therewith, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
/s/ EUGENE P. CONESE Chairman, Chief Executive Officer and
------------------------------------------- Director (principal executive June 4, 1996
Eugene P. Conese officer)
/s/ EUGENE P. CONESE, JR.
------------------------------------------- President and Director (principal June 4, 1996
Eugene P. Conese, Jr. accounting officer)
/s/ ROBERT J. VANARIA Senior Vice President of
------------------------------------------- administration, Chief Financial June 4, 1996
Robert J. Vanaria Officer and Director
</TABLE>
II-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ----------- ------------------------------------------------------------------------------------------------ -----
<S> <C> <C>
1.1 Form of Underwriting Agreement (7)
3.1 Amended and Restated Certificate of Incorporation of the Registrant (6)
3.2 Amended and Restated By-laws of the Registrant (2)
4.1 Indenture, dated , 1996, relating to the Notes (7)
4.2 Form of Subsidiary Guaranty (included in Exhibit 4.1)
4.3 Specimen Note (included in Exhibit 4.1)
4.4 Form of Collateral Sharing Agreement (7)
4.5 Form of Shares Pledge (7)
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of the
Notes being registered (7)
10.1 Air Agency Certificate No. RH2R135L issued by the Federal Aviation Administration to the
Registrant and related Repair Station Operations Specifications (1)
10.2 General Terms Agreement, dated as of April 23, 1992, between General Electric Company ("GE") and
Registrant relating to GE CF6 turbofan jet engines (1)
10.3 Maintenance and Support Agreement between GE and Registrant, dated February 21, 1992, relating
to GE LM1500 engines, components and accessories (1)
10.4 Maintenance and Support Agreement, between GE and Registrant, dated June 19, 1985, as amended
June 21, 1990, and as further amended November 1, 1991, related to GE LM2500 engines,
components and accessories (1)
10.5 Agreement, dated as of July 15, 1992, between Registrant and Rolls-Royce, plc. and Rolls-Royce,
Inc. relative to the repair and overhaul of Rolls Royce RB211-22B engines (1)
10.6 Lease Agreement, dated January 14, 1992, between Registrant, as lessee, and Dade County,
Florida, as lessor, in respect of former Eastern Airlines engines service center (1)
10.7 Lease Agreement, dated as of March 15, 1988, as amended, between Dade County, Florida, as
lessor, and the predecessor to the Registrant, as Lessee, in respect of buildings 2146 and 2169
in the westside cargo area of Miami International Airport (1)
10.8 1992 Stock Option Plan, including form of Stock Option Agreement (1)
10.9 Loan and Security Agreement, dated November 5, 1992, between the Registrant, World Air Leases,
Inc. and CIT Group/Equipment Financing, Inc. as agent (2)
10.10 Agreement between the Registrant and the United States Army Foreign Military Sales Program (2)
10.11 Form of Indenture between Registrant and American Stock Transfer & Trust Company, as Trustee
relating to the Debentures (2)
10.12 Form of Representatives' Warrant (2)
10.13 Form of Employment Agreement, dated as of September 15, 1993, between Registrant and Eugene P.
Conese (3)
10.14 Form of Employment Agreement, dated as of November 15, 1993, between Registrant and Eugene P.
Conese, Jr. (3)
10.15 Form of Indemnity Agreement (3)
10.16 Agreement of Purchase and Sale, dated March 21, 1994, by and among GTC, the Registrant and the
Seller (4)
10.17 Disclosure Package to Agreement of Purchase and Sale (4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ----------- ------------------------------------------------------------------------------------------------ -----
<S> <C> <C>
10.18 Supplemental Letter Agreement dated March 21, 1994 between the Registrant and the Seller (4)
10.19 Letter Agreement, Letter of Credit, and Escrow Agreement, all delivered on and as of April 22,
1994 (4)
10.20 Second Amended and Restated Revolving Credit and Security Agreement, dated as of April 21, 1994
(4)
10.21 Agreement and Plan of Merger dated November 7, 1995 by and between the Registrant and GCL (5)
10.22 Amendment to Employment Agreement with Eugene P. Conese dated December 18, 1995 (5)
10.23 Amendment to Employment Agreement with Eugene P. Conese, Jr., dated December 18, 1995 (5)
10.24 Third Amended and Restated Revolving Credit and Security Agreement dated as of March 14, 1995 by
and between Registrant, Gas Turbine Corporation and Greenwich Turbine, Inc. and the Bank of New
York Commercial Corporation (5)
10.25 Agreement of Purchase and Sale dated April 19, 1996, as amended, between GASI Engine Services
Corporation and the Registrant and Aviall Services, Inc. and Aviall, Inc. (6)
10.26 Form of Fourth Amended and Restated Revolving Credit and Security Agreement (7)
10.27 Form of Revolving Credit Agreement (7)
11.1 Statement re computation of per share earnings (6)
12.1 Statement re computation of ratios (6)
21.1 Subsidiaries of the Company (5)
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (included in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP (7)
23.3 Consent of Price Waterhouse LLP (7)
23.4 Consent of KPMG Peat Marwick LLP (7)
23.5 Consent of Price Waterhouse (7)
25 Statement of Eligibility of Qualification of Trustee for the Notes under the Trust Indenture Act
of 1939 (7)
</TABLE>
- ------------------------
(1) Incorporated by reference and filed as Exhibits to Registrant's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
September 10, 1992 (File No. 33-51854)
(2) Incorporated by reference and filed as Exhibits to Registrant's Amendment
No. 1 to Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on September 22, 1993 (File No. 33-51854)
(3) Incorporated by reference and filed as Exhibits to Registrant's Amendment
No. 2 to Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on October 28, 1993
(4) Incorporated by reference and filed as Exhibits to Registrant's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
September 22, 1993 (File No. 33-51854)
(5) Incorporated by reference and filed as Exhibits to Registrant's Form 10-K
filed with the Securities and Exchange Commission on December 27, 1995
(6) Previously filed
(7) Filed herewith
<PAGE>
DRAFT OF MAY 31, 1996
Greenwich Air Services, Inc.
$150,000,000
% Senior Notes Due 2006
Underwriting Agreement
New York, New York
, 1996
Salomon Brothers Inc
Oppenheimer & Co., Inc.
Dillon, Read & Co. Inc.
as Representatives of the several Underwriters,
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Greenwich Air Services, Inc., a Delaware corporation (the "Company"),
proposes to sell to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, $150,000,000 principal amount of its _______% Senior Notes Due
2006 ("Notes"), to be issued under an indenture (the "Indenture") to be dated as
of __________________, 1996, among the Company, the Subsidiary Guarantors (as
defined therein) and American Stock Transfer & Trust Company, as trustee (the
"Trustee"). The Notes are to be fully and unconditionally guaranteed, jointly
and severally, on a senior unsecured basis by the Subsidiary Guarantors in
accordance with the terms of the Indenture and will also be secured by a pledge
of 65% of the capital stock of Greenwich Caledonian, Limited (formerly known as
Aviall Limited and hereinafter "Aviall U.K.") pursuant to a pledge and security
agreement (the "Pledge and Security Agreement") to be dated as of _______, 1996,
among the Company, Aviall U.K. and the Bank of New York Commercial Corporation.
Such guarantees are hereinafter collectively referred to as "Guarantees" and the
Notes and the Guarantees are hereinafter collectively referred to as
"Securities".
The Notes are being issued and sold and the Guarantees are being
issued in connection with (i) the acquisition by the Company through a wholly-
owned subsidiary (the "Aviall Acquisition") of the gas turbine engine services
and engine components repair business (the "Aviall Business") of Aviall, Inc.
and Aviall Services, Inc. ("Aviall") pursuant to a purchase and sale agreement
dated April 19, 1996, between GASI Engine Services Corporation, the Company and
Aviall (the "Purchase
<PAGE>
Agreement"); and (ii) the refinancing by the Company of substantially all of its
indebtedness under its existing credit facility with The Bank of New York
Commercial Corporation (the "Refinancing") through a $175 million senior secured
revolving credit facility dated ______________, 1996 between the Company and The
Bank of New York Commercial Corporation, individually and as agent for other
lenders (the "New Credit Facility"). The Aviall Acquisition and the Refinancing
are referred to herein as the "Transactions" and the Purchase Agreement and the
New Credit Facility are referred to herein as the "Transaction Documents".
It is understood and agreed that prior to or concurrently with the
Closing Date (as defined in Section 3 hereof) the Company will consummate the
Transactions. For the purposes of this Agreement, at the Closing Date the term
the "Company" shall mean the Company as it would exist immediately following the
Aviall Acquisition.
1. REPRESENTATIONS AND WARRANTIES. The Company and the Subsidiary
Guarantors jointly and severally represent and warrant to, and agree with, each
Underwriter as set forth below in this Section 1. Certain terms used in this
Section 1 are defined in paragraph (aa) hereof.
(a) The Company and the Subsidiary Guarantors have filed with the
Securities and Exchange Commission (the "Commission") a registration
statement (file number 333-4164) on Form S-1, including a related
preliminary prospectus, for the registration under the Securities Act of
1933 (the "Act") of the offering and sale of the Securities. The Company
and the Subsidiary Guarantors may have filed one or more amendments
thereto, including the related preliminary prospectus, each of which has
previously been furnished to you. The Company and the Subsidiary
Guarantors will next file with the Commission either (i) prior to
effectiveness of such registration statement, a further amendment to such
registration statement (including the form of final prospectus) or (ii)
after effectiveness of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4). In the case of clause
(ii), the Company and the Subsidiary Guarantors have included in such
registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information) required by the Act and the rules
thereunder to be included in the Prospectus with respect to the Securities
and the offering thereof. As filed, such amendment and form of final
prospectus, or such final prospectus, shall contain all Rule 430A
Information, together with all other such required information, with
respect to the Securities and the offering thereof and, except to the
extent the Representatives shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to you
2
<PAGE>
prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus)
as the Company has advised you, prior to the Execution Time, will be
included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable
requirements of the Act and the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the respective rules thereunder; on the Effective Date,
the Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; on the Effective Date and on the Closing Date the Indenture did
or will comply in all material respects with the applicable requirements of
the Trust Indenture Act and the rules thereunder; and, on the Effective
Date, the Prospectus, if not filed pursuant to Rule 424(b), did not or will
not, and on the date of any filing pursuant to Rule 424(b) and on the
Closing Date, the Prospectus (together with any supplement thereto) will
not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that the Company and the Subsidiary Guarantors make no
representations or warranties as to (i) that part of the Registration
Statement which shall constitute the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of the Trustee or
(ii) the information contained in or omitted from the Registration
Statement or the Prospectus (or any supplement thereto) in reliance upon
and in conformity with information furnished in writing to the Company and
the Subsidiary Guarantors by or on behalf of any Underwriter through the
Representatives specifically for inclusion in the Registration Statement or
the Prospectus (or any supplement thereto).
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, other than where the
failure to so
3
<PAGE>
qualify would not, individually or in the aggregate, have a material
adverse effect on the financial condition or business, properties, net
worth or results of operations of the Company and its subsidiaries, taken
as a consolidated whole.
(d) Each subsidiary of the Company (including each Subsidiary
Guarantor) has been duly incorporated or formed and is an existing
corporation or partnership in good standing under the laws of the
jurisdiction of its incorporation or organization, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Prospectus; each subsidiary of the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, other than where the
failure to qualify would not, individually or in the aggregate, have a
material adverse effect on the financial condition or business, properties,
net worth or results of operations of the Company and its subsidiaries,
taken as a consolidated whole; all of the issued and outstanding capital
stock of each subsidiary of the Company has been duly authorized and
validly issued and is fully paid and nonassessable; the capital stock of
each subsidiary owned by the Company, directly or through subsidiaries, is
owned free from liens, encumbrances and defects other than pursuant to the
Pledge and Security Agreement; the Company has no subsidiaries other than
the Subsidiary Guarantors and Aviall U.K., and does not control, directly
or indirectly, any other corporation, partnership, joint venture,
association or other business or organization.
(e) Each of the Indenture and the Pledge and Security Agreement has
been duly authorized; the Securities have been duly authorized; and when
the Securities are delivered and paid for pursuant to this Agreement on the
Closing Date, the Indenture and the Pledge and Security Agreement will have
been duly executed and delivered, the Securities will have been duly
executed, authenticated, issued and delivered and will conform to the
description thereof contained in the Prospectus and the Indenture, the
Pledge and Security Agreement and the Securities will constitute valid and
legally binding obligations of the Company and the Subsidiary Guarantors,
enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium and similar laws
general applicability relating to or affecting creditors' rights and to
general equity principles.
(f) This Agreement has been duly authorized, executed and delivered
by the Company and each Subsidiary Guarantor.
4
<PAGE>
(g) The Company and each subsidiary have all necessary power and
authority to enter into and consummate the Transactions and execute,
deliver and perform their obligations under the Transaction Documents to
which they are a party; each Transaction Document has been or, by the
Closing Date, will be duly executed and delivered by the Company and each
of its subsidiaries party thereto substantially in the form previously
delivered to you and, when executed and delivered by the Company or such
subsidiary, will constitute legal, valid and binding obligations of the
Company and such subsidiary enforceable against the Company or such
subsidiary, as the case may be, in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(h) Each of the Company and its subsidiaries (including the
Subsidiary Guarantors) is not in violation of any term or provision of its
charter or by-laws.
(i) Except to the extent set forth in the Registration Statement and
the Prospectus, the Company and each of the Subsidiary Guarantors have not
received any written notice of, nor does any of them have any actual
knowledge of, any failure by it or any of its subsidiaries to be in
substantial compliance with all existing statutes and regulations
applicable to it or such subsidiaries, which failure could materially and
adversely affect the financial condition or business, properties, net worth
or results of operations of the Company and its subsidiaries, taken as a
consolidated whole.
(j) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Securities by the Company and
the Subsidiary Guarantors, except such as have been obtained and made under
the Act and the Trust Indenture Act and such as may be required under state
securities laws.
(k) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them other than
those the absence of which could not, individually or in the aggregate,
have a material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and its
subsidiaries, taken as a consolidated whole, and have not received any
written notice of
5
<PAGE>
proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the
Company or any of its subsidiaries, could individually or in the aggregate
have a material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and its
subsidiaries, taken as a consolidated whole.
(l) The execution, delivery and performance of the Indenture, the
Pledge and Security Agreement, the Transaction Documents and this
Agreement, and issuance and sale of the Securities and compliance with the
terms and provisions hereof and thereof, will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over
the Company or any subsidiary of the Company or any of their properties or
any material agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is
bound or to which any of the properties of the Company or any such
subsidiary is subject, or the charter or by-laws of the Company or any such
subsidiary, and the Company and Subsidiary Guarantors have full power and
authority to authorize, issue and sell the Securities as contemplated by
this Agreement.
(m) Except as disclosed in the Registration Statement and the
Prospectus, the Company and its subsidiaries have good and marketable title
to all real properties and all other material properties and assets owned
by them, in each case free from liens, encumbrances and defects that could
materially affect the value thereof or materially interfere with the use
made or presently contemplated to be made thereof by them; and except as
disclosed in the Registration Statement and the Prospectus, the Company and
its subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that are material or could materially
interfere with the use made or presently contemplated to be made thereof by
them.
(n) Except as disclosed in the Registration Statement and the
Prospectus, there are no pending actions, suits or proceedings
(governmental or otherwise) against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, could individually or
in the aggregate have a material adverse effect on the financial condition
or business, properties, net worth or results of operations of the Company
and its subsidiaries taken as a consolidated whole, or would materially and
6
<PAGE>
adversely affect the ability of the Company or any of its subsidiaries
(including the Subsidiary Guarantors) to perform their respective
obligations under the Indenture, the Pledge and Security Agreement or this
Agreement, or which are otherwise material in the context of the sale of
the Securities; and, to the Company's knowledge, no such actions, suits or
proceedings are threatened.
(o) Except as disclosed in the Registration Statement and the
Prospectus, no labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
could, individually or in the aggregate, have a material adverse effect on
the assets or any real property of the Company or its subsidiaries
("Property" or "Properties"), financial condition or business, net worth or
results of operations of the Company and its subsidiaries taken as a
consolidated whole.
(p) Except as disclosed in the Registration Statement and the
Prospectus, the Company owns or possesses adequate and enforceable rights
to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how and other similar rights and proprietary
knowledge (collectively, "Intangibles") materially necessary for the
conduct of its business as described in the Registration Statement and the
Prospectus. The Company has not received any notice of, or to its
knowledge is not aware of, any infringement of or conflict with asserted
rights of others with respect to any Intangibles which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect upon the assets or properties,
business, results of operations, prospects or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a consolidated
whole.
(q) The financial statements included in the Registration Statement
and the Prospectus present fairly the financial position of the Company and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods and as of the dates shown, and
such consolidated financial statements have been prepared in conformity
with generally accepted accounting principles in the United States applied
on a consistent basis, except as otherwise stated therein and except for
the unaudited financial statements to the extent such unaudited financial
statements omit certain footnote disclosures and may be subject to year-end
audit adjustment which would not, individually or in the aggregate, be
material. The schedules included in the Registration Statement present
fairly in all material respects the information required to be stated
therein; and the
7
<PAGE>
historical financial information and statistical data set forth in the
Prospectus under the captions "Summary Historical and Pro Forma Financial
Data," "Capitalization," "Unaudited Pro Forma Financial Data," and
"Selected Historical Financial Data" are fairly stated in all material
respects in relation to the financial statements from which they have been
derived. The pro forma data included in the Registration Statement and the
Prospectus present fairly the information shown therein, comply in all
material respects with the requirements of the Act and the Rules and
Regulations with respect to pro forma financial statements, have been
properly compiled on the pro forma basis described therein and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
or circumstances referred to therein.
(r) Each of Deloitte & Touche LLP, Price Waterhouse LLP and KPMG Peat
Marwick LLP, whose reports are filed with the Commission as a part of the
Registration Statement, are and, during the periods covered by their
reports, were independent public accountants as required by the Act and the
Rules.
(s) There is no document or contract of a character required to be
described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required by the Securities Act and the Rules. Each agreement listed in the
Exhibits to the Registration Statement is in full force and effect and is
valid and enforceable by and against the Company and each of its
subsidiaries party thereto in accordance with its terms, assuming the due
authorization, execution and delivery thereof by each of the other parties
thereto except where the failure to be in full force and effect or valid
and enforceable in accordance with its terms does not materially adversely
affect the assets or properties, business, results of operations, prospects
or condition (financial or otherwise) of the Company and its subsidiaries,
taken as a consolidated whole. Neither the Company, nor to the best of the
Company's knowledge, any other party is in default in the observance or
performance of any material term or obligation to be performed by it under
any such agreement, and no event has occurred which with notice or lapse of
time or both would constitute such a default, in any such case which
default or event would have a material adverse effect on the assets or
properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and its subsidiaries taken as a
consolidated whole. No default exists, and no event has occurred which with
notice or lapse of time or both would constitute a default, in the due
performance and
8
<PAGE>
observance of any term, covenant or condition, by the Company and its
subsidiaries, of any other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which it or its subsidiaries'
properties or business may be bound or affected which default or event
would have a material adverse effect on the assets or properties, business,
results of operations, prospects or condition (financial or otherwise) of
the Company and its subsidiaries, taken as a consolidated whole.
(t) Subject to the disclosure set forth in the Registration Statement
and Prospectus under the heading "Business - Environmental Matters," to the
best knowledge of the Company, the Company's operations and facilities are
in material compliance with all federal, state and local environmental laws
and regulations. To the best knowledge of the Company the disclosure set
forth in the Registration Statement and the Prospectus under the heading
"Business - Environmental Matters" is true, complete and correct in all
material respects.
(u) As of March 31, 1996, the Company had an authorized and
outstanding capitalization as set forth under the caption "Capitalization"
in the Registration Statement and the Prospectus.
(v) No transaction has occurred between or among the Company or any
Subsidiary Guarantor and any of their respective officers or directors or
any affiliate or affiliates of any such officer or director that is
required to be described in and is not described in the Registration
Statement and the Prospectus.
(w) The Company has filed all Federal, state, local and foreign tax
returns which are required to be filed through the date hereof, or has
received extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it, to the extent that the same are
material and have become due, except where the failure to so file or so pay
could not have a material adverse effect on the financial condition or
business, properties, net worth or results of operations of the Company and
its subsidiaries, taken as a consolidated whole.
(x) To the best knowledge of the Company the disclosure set forth in
the Registration Statement and the Prospectus under the heading "Risk
Factors - Product Liability Risks" is true, complete and correct in all
material respects; neither the Company nor any of its subsidiaries has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from
9
<PAGE>
similar insurers as may be necessary to continue its business at a cost
that would not materially and adversely affect the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries, except as described in or contemplated by the
Prospectus.
(y) The Company will apply the net proceeds from the sale of its
Securities substantially in accordance with the description set forth in
the Prospectus and any Preliminary Prospectus under the heading "Use of
Proceeds."
(z) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as described
therein, (a) there has not been any material adverse change in the assets
or properties, business, results of operations, prospects or condition
(financial or otherwise), of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business; (b) the Company and its subsidiaries have not sustained any loss
or interference which would have a material adverse effect on its assets,
businesses or properties (whether owned or leased) from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree; and (c) and since the date of the latest balance
sheet included in the Registration Statement and the Prospectus, except as
reflected therein, the Company has not (1) issued any securities or
incurred any liability or obligation, direct or contingent, for borrowed
money, except for securities issued upon conversion or exercise of
convertible debentures, warranties or stock options outstanding on the date
of the Registration Statement and the Prospectus and disclosed therein
liabilities or obligations incurred in the ordinary course of business, (2)
entered into any transaction not in the ordinary course of business or (3)
declared or paid any dividend or made any distribution on any shares of its
stock or redeemed, purchased or otherwise acquired or agreed to redeem,
purchase or otherwise acquire any shares of its stock.
(aa) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean
the date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in paragraph (a) above and any preliminary
prospectus included
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in the Registration Statement at the Effective Date that omits Rule 430A
Information. "Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is required, shall mean the
form of final prospectus relating to the Securities included in the
Registration Statement at the Effective Date. "Registration Statement"
shall mean the registration statement referred to in paragraph (a) above,
including exhibits and financial statements, as amended at the Execution
Time (or, if not effective at the Execution Time, in the form in which it
shall become effective) and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended. Such
term shall include any Rule 430A Information deemed to be included therein
at the Effective Date as provided by Rule 430A. "Rule 424" and "Rule 430A"
refer to such rules under the Act. "Rule 430A Information" means
information with respect to the Securities and the offering thereof
permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A.
2. PURCHASE AND SALE. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company, at a purchase price of % of
the principal amount thereof, the principal amount of the Securities set forth
opposite such Underwriter's name in Schedule I hereto.
3. DELIVERY AND PAYMENT. Delivery of and payment for the Securities
shall be made at 10:00 AM, New York City time, on , 1996, or such
later date (not later than 1996) as the Representatives shall
designate, which date and time may be postponed by agreement between the
Representatives and the Company or as provided in Section 9 hereof (such date
and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the
Representatives for the respective accounts of the several Underwriters against
payment by the several Underwriters through the Representatives of the purchase
price thereof to or upon the order of the Company by certified or official bank
check or checks drawn on or by a New York Clearing House bank and payable in
next day funds; provided, however, that payment of the purchase price of the
Securities shall, at the option of the Company, be made by wire transfer of same
day (Federal) funds so long as (i) such option is exercised by written notice to
the Representatives no later than two business days prior to the Closing Date
and (ii) the Company reimburses the Representatives for their overnight funding
costs
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at or prior to the Closing Date. Delivery of the Securities shall be made at
such location as the Representatives shall reasonably designate at least one
business day in advance of the Closing Date and payment for the Securities shall
be made at the office of Morgan, Lewis & Bockius LLP, New York, New York.
Certificates for the Securities shall be registered in such names and in such
denominations as the Representatives may request not less than two full business
days in advance of the Closing Date.
The Company agrees to have the Securities available for
inspection, checking and packaging by the Representatives in New York, New York,
not later than 1:00 PM on the business day prior to the Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. AGREEMENTS. The Company and unless, otherwise specified,
each Subsidiary Guarantor, jointly and severally agrees with the several
Underwriters that:
(a) The Company and the Subsidiary Guarantors will use their
best efforts to cause the Registration Statement, if not effective at
the Execution Time, and any amendment thereof, to become effective.
Prior to the termination of the offering of the Securities, the
Company and the Subsidiary Guarantors will not file any amendment of
the Registration Statement or supplement to the Prospectus without
your prior consent. Subject to the foregoing sentence, if the
Registration Statement has become or becomes effective pursuant to
Rule 430A, or filing of the Prospectus is otherwise required under
Rule 424(b), the Company and the Subsidiary Guarantors will cause the
Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule
424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The
Company and the Subsidiary Guarantors will promptly advise the
Representatives (i) when the Registration Statement, if not effective
at the Execution Time, and any amendment thereto, shall have become
effective, (ii) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule
424(b), (iii) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have
been filed or become effective, (iv) of any request by the Commission
for any amendment of the Registration Statement or supplement to the
Prospectus or for any additional information, (v) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration
12
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Statement or the institution or threatening of any proceeding for that
purpose and (vi) of the receipt by the Company and the Subsidiary
Guarantors of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company and the Subsidiary Guarantors will use their best efforts to
prevent the issuance of any such stop order and, if issued, to obtain
as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it
shall be necessary to amend the Registration Statement or supplement
the Prospectus to comply with the Act or the rules thereunder, the
Company and the Subsidiary Guarantors promptly will prepare and file
with the Commission, subject to the second sentence of paragraph (a)
of this Section 5, an amendment or supplement which will correct such
statement or omission or effect such compliance.
(c) As soon as practicable, the Company and the Subsidiary
Guarantors will make generally available to the Company's security
holders and to the Representatives an earnings statement or statements
of the Company and its subsidiaries which will satisfy the provisions
of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representatives and counsel
for the Underwriters, without charge, signed copies of the
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Act, as many copies of each Preliminary
Prospectus and the Prospectus and any supplement thereto as the
Representatives may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to
the offering.
(e) The Company and the Subsidiary Guarantors will arrange for
the qualification of the Securities for sale under the laws of such
jurisdictions as the Representatives may designate, will maintain such
qualifications in effect so long as required for the distribution of
the Securities, will arrange for the determination of the legality of
the Securities for purchase by institutional investors.
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<PAGE>
(f) The Company and the Subsidiary Guarantors confirm as of the
date hereof that each of them is in compliance with all provisions of
Section 1 of Laws of Florida, Chapter 92-198, AN ACT RELATING TO
DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company further agrees
that if it or any Subsidiary Guarantor commences engaging in business
with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become
effective with the Securities and Exchange Commission or with the
Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported in the
Prospectus, if any, concerning the Company's business with Cuba or
with any person or affiliate located in Cuba changes in any material
way, the Company will provide the Department notice of such business
or change, as appropriate, in a form acceptable to the Department.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Securities shall be subject to
the accuracy of the representations and warranties on the part of the Company
and the Subsidiary Guarantors contained herein as of the Execution Time and the
Closing Date, to the accuracy of the statements of the Company and the
Subsidiary Guarantors made in any certificates pursuant to the provisions
hereof, to the performance by the Company and the Subsidiary Guarantors of their
obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior
to the Execution Time, unless the Representatives agree in writing to
a later time, the Registration Statement will become effective not
later than (i) 6:00 PM New York City time on the date of determination
of the public offering price, if such determination occurred at or
prior to 3:00 PM New York City time on such date or (ii) 12:00 Noon on
the business day following the day on which the public offering price
was determined, if such determination occurred after 3:00 PM New York
City time on such date; if filing of the Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the Prospectus, and any
such supplement, will be filed in the manner and within the time
period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
threatened;
(b) The Company shall have furnished to the Representatives the
opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
counsel for the Company and
14
<PAGE>
the Subsidiary Guarantors, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to
own its properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its
business requires such qualification, other than where the
failure to so qualify could not, individually or in the
aggregate, have a material adverse effect on the financial
condition or business, properties, net worth or results of
operations of the Company and its subsidiaries taken as a
consolidated whole;
(ii) each subsidiary of the Company has been duly
incorporated or formed and is an existing corporation or
partnership in good standing under the laws of the jurisdiction
of its incorporation or organization, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus; and each subsidiary of
the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business
requires such qualification, other than where the failure to
qualify could not, individually or in the aggregate, have a
material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and
its subsidiaries taken as a whole; all of the issued and
outstanding capital stock of each subsidiary of the Company has
been duly authorized and validly issued and is fully paid and
nonassessable; the capital stock of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from
liens, encumbrances and defects other than pursuant to the Pledge
and Security Agreement. To such counsel's knowledge after due
investigation, neither the Company nor any of its subsidiaries is
in violation of any term or provision of their charter or by-laws
and neither the Company nor any of its subsidiaries is in
violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation, where the consequences of
such violation would have a material adverse effect on the assets
or properties, business, results of operations or financial
condition of the Company and its subsidiaries, taken as a
consolidated whole.
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<PAGE>
(iii) each of the Indenture and the Pledge and Security
Agreement has been duly authorized; the Securities have been duly
authorized; and when the Securities are delivered and paid for
pursuant to this Agreement on the Closing Date, the Indenture and
the Pledge and Security Agreement will have been duly executed
and delivered, the Securities will have been duly executed,
authenticated, issued and delivered and will conform to the
description thereof contained in the Prospectus and the
Indenture, the Pledge and Security Agreement and the Securities
will constitute valid and legally binding obligations of the
Company and the Subsidiary Guarantors, enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, moratorium and similar laws general
applicability relating to or affecting creditors' rights and to
general equity principles;
(iv) this Agreement has been duly authorized, executed
and delivered by the Company and each Subsidiary Guarantor;
(v) the Company and each subsidiary has all necessary
corporate power and authority to enter into and consummate the
Transactions and execute, deliver and perform its obligations
under the Transaction Documents to which it is a party; each
Transaction Document has been or, by the Closing Date, will be
duly executed and delivered by the Company and each of its
subsidiaries party thereto substantially in the form previously
delivered to you and, when executed and delivered by the Company
or such subsidiary, will constitute legal, valid and binding
obligations of the Company and such subsidiary enforceable
against the Company or such subsidiary, as the case may be, in
accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles;
(vi) no consent, approval, authorization, or order of,
or filing with, any governmental agency or body or any court is
required for the consummation of the transactions contemplated by
this Agreement in connection with the issuance and sale of the
Securities by the Company and the Subsidiary Guarantors, except
such as have been obtained and made under the Act and the Trust
Indenture Act and such as may be required under state securities
laws;
(vii) to such counsel's knowledge after due
investigation, the Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to
16
<PAGE>
conduct the business now operated by them other than those the
absence of which would not, individually or in the aggregate,
have a material adverse effect on the financial condition or
business, properties, net worth or results of operations of the
Company and its subsidiaries taken as a whole and, to such
counsel's knowledge after due investigation, the Company and its
subsidiaries have not received any notice of proceedings relating
to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company
or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the financial
condition or business, properties, net worth or results of
operations of the Company and its subsidiaries, taken as a whole;
(viii) the execution, delivery and performance of the
Indenture, the Pledge and Security Agreement, the Transaction
Documents and this Agreement, and issuance and sale of the
Securities and compliance with the terms and provisions hereof
and thereof, will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any
statute, any rule, regulation or order of any governmental agency
or body or any court, domestic or foreign, having jurisdiction
over the Company or any subsidiary of the Company or any of their
properties or, to such counsel's knowledge after due
investigation, any material agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company
or any such subsidiary is bound or to which any of the properties
of the Company or any such subsidiary is subject, or the charter
or by-laws of the Company or any such subsidiary, and the Company
and Subsidiary Guarantors have full power and authority to
authorize, issue and sell the Securities as contemplated by this
Agreement;
(ix) to such counsel's knowledge after due
investigation, no default exists, and no event has occurred which
with notice or lapse of time or both would constitute a default,
in the due performance and observance of any term, covenant or
condition, by the Company and its subsidiaries, of any agreement
or instrument or other document to which the Company or any of
its subsidiaries is a party or by which it or its subsidiaries'
properties or business may be bound or affected which default or
event would have a material adverse effect on the assets or
properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company and its
subsidiaries, taken as a consolidated whole;
(x) except as disclosed in the Registration Statement
and the Prospectus, to such counsel's knowledge
17
<PAGE>
after due investigation, there are no pending actions, suits or
proceedings (governmental or otherwise) against or affecting the
Company, any of its subsidiaries or any of their respective
properties that, if determined adversely to the Company or any of
its subsidiaries, could individually or in the aggregate have a
material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and
its subsidiaries taken as a consolidated whole, or would
materially and adversely affect the ability of the Company or any
of the Subsidiary Guarantors to perform their respective
obligations under the Indenture or this Agreement, or which are
otherwise material in the context of the sale of the Securities;
and, to such counsel's knowledge after due investigation, no such
actions, suits or proceedings are threatened;
(xi) the Registration Statement has become effective
under the Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the best
knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial statements and
other financial and statistical information contained therein as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Trust Indenture Act and the respective rules thereunder; and such
counsel has no reason to believe that at the Effective Date the
Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or
that the Prospectus includes any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(xii) the statements in the Prospectus under
"Business--Government Regulation"; "--Environmental Matters";
"--Legal Proceedings"; "Certain Transactions"; "Description of
Capital Stock"; "Shares Eligible For Future Sale"; and
"Description of Certain Indebtedness" insofar as such statements
constitute a summary of documents referred to therein or matters
of law, are accurate summaries of the material provisions thereof
and accurately present the information required with respect to
such documents and matters. All contracts and other documents
required to be filed as exhibits to, or described in, the
Registration
18
<PAGE>
Statement have been so filed with the Commission or are described
as required in the Registration Statement, as the case may be;
(xiii) as of March 31, 1996, the Company had an
authorized and outstanding capitalization as set forth under the
caption "Capitalization" in the Registration Statement and the
Prospectus.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Delaware or the
United States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company, the Subsidiary Guarantors and public officials.
References to the Prospectus in this paragraph (b) include any supplements
thereto at the Closing Date.
(c) The Representatives shall have received from Morgan, Lewis &
Bockius LLP, counsel for the Underwriters, such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of the
Securities, this Agreement, the Indenture, the Registration Statement,
the Prospectus (together with any supplement thereto) and other
related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of
such certificate have carefully examined the Registration Statement,
the Prospectus, any supplement to the Prospectus and this Agreement
and that:
(i) the representations and warranties of the Company
and the Subsidiary Guarantors in this Agreement are true and
correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date and the
Company and each Subsidiary Guarantor has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no
19
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proceedings for that purpose have been instituted or, to the
Company's knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any
supplement thereto), there has been no material adverse change in
the condition (financial or other), earnings, business or
properties of the Company and its subsidiaries, whether or not
arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(e) At the Execution Time and at the Closing Date, Deloitte &
Touche LLP shall have furnished to the Representatives a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, confirming that they are independent accountants
within the meaning of the Act and the applicable published rules and
regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules and pro forma financial
statements included in the Registration Statement and the
Prospectus and reported on by them comply in form in all material
respects with the applicable accounting requirements of the Act
and the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review in accordance with standards
established by the American Institute of Certified Public
Accountants of the unaudited interim financial information for
the six month period ended March 31, 1996 and as at March 31,
1996, as indicated in their report dated March 31, 1996; carrying
out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which
would not necessarily reveal matters of significance with respect
to the comments set forth in such letter; a reading of the
minutes of the meetings of the stockholders, directors and
finance and audit committees of the Company and inquiries of
certain officials of the Company who have responsibility for
financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to
September 30, 1995, nothing came to their attention which caused
them to believe that:
20
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(A) any unaudited financial statements included in the
Registration Statement and the Prospectus do not comply in
form in all material respects with applicable accounting
requirements of the Act and with the published rules and
regulations of the Commission with respect to registration
statements on Form S-1; and said unaudited financial
statements are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included in the Registration Statement and the Prospectus;
or
(B) with respect to the period subsequent to March 31,
1996, there were any changes, at a specified date not more
than five business days prior to the date of the letter, in
the long term debt of the Company and its subsidiaries or
capital stock of the Company or decreases in the
stockholders' equity of the Company as compared with the
amounts shown on the March 31, 1996 consolidated balance
sheet included in the Registration Statement and the
Prospectus, or for the period from April 1, 1996 to such
specified date there were any decreases, as compared with
the corresponding period in the preceding fiscal year, in
net sales, gross profit, income from operations, or in total
or per share net income of the Company and its subsidiaries,
except in all instances for changes or decreases set forth
in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Representatives;
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration
Statement and the Prospectus and in Exhibits 11 and 12 to the
Registration Statement, including the information set forth under
the captions "Summary Historical and Pro Forma Financial Data",
"Capitalization", "Unaudited Pro Forma Combined Financial
Information", "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Prospectus, agrees with the
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accounting records of the Company and its subsidiaries, excluding
any questions of legal interpretation; and
(iv) On the basis of a reading of the unaudited pro
forma financial statements included in the Registration Statement
and the Prospectus (the "pro forma financial statements");
carrying out certain specified procedures; inquiries of certain
officials of the Company and Aviall who have responsibility for
financial and accounting matters; and proving the arithmetic
accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma financial statements, nothing
came to their attention which caused them to believe that the pro
forma financial statements do not comply in form in all material
respects with the applicable accounting requirements of Rule 11-
02 of Regulation S-X or that the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of such statements.
References to the Prospectus in this paragraph (e) include any
supplement thereto at the date of the letter.
(f) At the Execution Time and at the Closing Date, Price
Waterhouse LLP shall have furnished to the Representatives a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, confirming that they are independent accountants
within the meaning of the Act and the applicable published rules and
regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Registration
Statement and the Prospectus and reported on by them comply in
form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Aviall Business; their
limited review in accordance with standards established by the
American Institute of Certified Public Accountants of the
unaudited interim financial information for the three month
period ended March 31, 1996 and as at March 31, 1996, as
indicated in their report dated March 31, 1996; carrying out
certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which
would not necessarily reveal matters of
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<PAGE>
significance with respect to the comments set forth in such
letter; and inquiries of certain officials of the Aviall Business
who have responsibility for financial and accounting matters of
the Aviall Business and its subsidiaries as to transactions and
events subsequent to December 31, 1995, nothing came to their
attention which caused them to believe that:
(A) any unaudited financial statements of the Aviall
Business included in the Registration Statement and the
Prospectus do not comply in form in all material respects
with applicable accounting requirements of the Act and with
the published rules and regulations of the Commission with
respect to registration statements on Form S-1; and said
unaudited financial statements are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Registration Statement and the
Prospectus; or
(B) with respect to the period subsequent to March 31,
1996, there were any changes, at a specified date not more
than five business days prior to the date of the letter, in
the total debt of the Aviall Business and its subsidiaries
or decreases in the Aviall investment of the Aviall Business
or total assets of the Aviall Business as compared with the
amounts shown on the March 31, 1996 consolidated balance
sheet included in the Registration Statement and the
Prospectus, or for the period from April 1, 1996 to such
specified date there were any decreases, as compared with
the corresponding period in the preceding fiscal year, in
net sales, gross profits or in earnings (loss) of the Aviall
Business and its subsidiaries, except in all instances for
changes or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said
explanation is not deemed necessary by the Representatives;
and
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration
Statement and the Prospectus agrees with
23
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the accounting records of the Aviall Business excluding any
questions of legal interpretation.
References to the Prospectus in this paragraph (f) include any
supplement thereto at the date of the letter.
(g) At the Execution Time, KPMG Peat Marwick LLP shall have
furnished to the Representatives a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in
form and substance reasonably satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of
the Act and the applicable published rules and regulations thereunder
and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Registration
Statement and the Prospectus and reported on by them comply in
form in all material respects with the applicable accounting
requirements of the Act and the related published rule and
regulations; and
(ii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration
Statement and the Prospectus agrees with the accounting records
of the Company and its subsidiaries, excluding any questions of
legal interpretation.
(h) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been (i) any change or
decrease specified in the letter or letters referred to in paragraphs
(e) and (f) of this Section 6 or (ii) any change, or any development
involving a prospective change, in or affecting the business or
properties of the Company and its subsidiaries the effect of which, in
any case referred to in clause (i) or (ii) above, is, in the judgment
of the Representatives, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of
the Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto).
24
<PAGE>
(i) Subsequent to the Execution Time, there shall not have been
any decrease in the rating of any of the Company's debt securities by
any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act) or any notice given
of any intended or potential decrease in any such rating or of a
possible change in any such rating that does not indicate the
direction of the possible change.
(j) Prior to the Closing Date, the Company shall have furnished
to the Representatives such further information, certificates and
documents as the Representatives may reasonably request.
(k) At or prior to the Closing Date, the Company shall have
entered into the New Credit Facility; no event shall have occurred and
be continuing, the occurrence or continuance of which would relieve
the lenders named therein of their obligation to advance funds, or
preclude them from advancing funds, to the Company pursuant to the
terms of the New Credit Facility; the New Credit Facility shall
conform in all material respects to the terms and provisions described
in the Prospectus; and the Company shall have provided to you and your
counsel copies of such closing documents delivered to the lenders as
you or your counsel may reasonably request (including originals
addressed to you of any legal opinions of counsel for the Company).
(l) At the Closing Date, the Purchase Agreement shall be in full
force and effect; the closing contemplated by the Purchase Agreement
shall have been consummated in accordance with the terms thereof in
all material respects (except to the extent any conditions precedent
have been waived with your prior written consent, which consent shall
not be unreasonably withheld); and the Company shall have provided to
you or your counsel copies of all closing documents delivered to the
parties to the transactions contemplated by the Purchase Agreement
(including originals addressed to you of any legal opinions of counsel
for the Company).
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be cancelled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in
writing or by telephone or telegraph confirmed in writing.
25
<PAGE>
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or any Subsidiary
Guarantor to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Securities.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and each
of the Subsidiary Guarantors, on a joint and several basis, agree to indemnify
and hold harmless each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls any Underwriter within
the meaning of either the Act or the Securities Exchange Act of 1934 (the
"Exchange Act") against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company and the Subsidiary
Guarantors will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Company and the Subsidiary Guarantors may
otherwise have.
(b) Each Underwriter severally and not jointly, agrees to
indemnify and hold harmless the Company and each Subsidiary Guarantor, each of
their directors, each of their officers who
26
<PAGE>
signs the Registration Statement, and each person who controls the Company or a
Subsidiary Guarantor within the meaning of either the Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Company and each
Subsidiary Guarantor to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or on
behalf of such Underwriter through the Representatives specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any Underwriter
may otherwise have. The Company acknowledges that the statements set forth in
the last paragraph of the cover page and under the heading "Underwriting" in any
Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Prospectus, and you, as the
Representatives, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available
27
<PAGE>
to the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Subsidiary Guarantors on
the one hand and the Underwriters on the other agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and the Subsidiary Guarantors on
the one hand and one or more of the Underwriters on the other may be subject in
such proportion as is appropriate to reflect the relative benefits received by
the Company and its Subsidiary Guarantors on the one hand and by the
Underwriters on the other from the offering of the Securities; PROVIDED,
HOWEVER, that in no case shall any Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the Securities) be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Securities purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Subsidiary Guarantors on the one hand and the
Underwriters on the other shall contribute in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the Subsidiary Guarantors on the one hand and of the Underwriters on
the other in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Company and the Subsidiary Guarantors shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses),
and benefits received by the Underwriters shall be deemed to be equal to the
total underwriting discounts and commissions, in each case as set forth on the
cover page of the Prospectus. Relative fault shall be determined by reference
to whether any alleged untrue statement or omission relates to information
provided by the
28
<PAGE>
Company and the Subsidiary Guarantors or the Underwriters. The Company and the
Subsidiary Guarantors and the Underwriters agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person who controls an Underwriter within the meaning of either the Act or
the Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such Underwriter, and
each person who controls the Company or a Subsidiary Guarantor within the
meaning of either the Act or the Exchange Act, each officer of the Company or a
Subsidiary Guarantor who shall have signed the Registration Statement and each
director of the Company or a Subsidiary Guarantor shall have the same rights to
contribution as the Company and the Subsidiary Guarantors, subject in each case
to the applicable terms and conditions of this paragraph (d).
9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Underwriters) the Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase; PROVIDED, HOWEVER, that in the event
that the aggregate principal amount of Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate principal amount of Securities set forth in Schedule I hereto, the
remaining Underwriters shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the Securities, and if such
nondefaulting Underwriters do not purchase all the Securities, this Agreement
will terminate without liability to any nondefaulting Underwriter or the Company
and the Subsidiary Guarantors. In the event of a default by any Underwriter as
set forth in this Section 9, the Closing Date shall be postponed for such
period, not exceeding seven days, as the Representatives shall determine in
order that the required changes in the Registration Statement and the Prospectus
or in any other documents or arrangements may be effected. Nothing contained in
this Agreement shall relieve any defaulting Underwriter of its liability, if
any,
29
<PAGE>
to the Company and any nondefaulting Underwriter for damages occasioned by its
default hereunder.
10. TERMINATION. This Agreement shall be subject to termination
in the absolute discretion of the Representatives, by notice given to the
Company prior to delivery of and payment for the Securities, if prior to such
time (i) trading in the Company's Common Stock shall have been suspended by the
Commission or the National Association of Securities Dealers Automated Quotation
National Market System or trading in securities generally on the New York Stock
Exchange or the National Association of Securities Dealers Automated Quotation
National Market System shall have been suspended or limited or minimum prices
shall have been established on either of such Exchange or Market System, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the judgment of the Representatives, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Prospectus (exclusive of any supplement thereto).
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Company and the Subsidiary Guarantors and their officers and of the Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any Subsidiary Guarantor or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. NOTICES. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telegraphed and confirmed to them, care of Salomon Brothers
Inc, at Seven World Trade Center, New York, New York, 10048; or, if sent to the
Company or any Subsidiary Guarantor, will be mailed, delivered or telegraphed
and confirmed to it at 4590 N.W. 36th Street, Building 23, Miami International
Airport, Miami, Florida 33122, attention of the legal department.
13. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
30
<PAGE>
14. APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
31
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the Subsidiary Guarantors and the several Underwriters.
Very truly yours,
Greenwich Air Services, Inc.
By:
---------------------------------------
[Title]
Greenwich Turbine, Inc.
By:
---------------------------------------
[Title]
Gas Turbine Corporation
By:
---------------------------------------
[Title]
Gas Turbine Test Corporation
By:
---------------------------------------
[Title]
Greenwich Foreign Sales Corporation
By:
---------------------------------------
[Title]
GASI Engine Services Corporation
By:
---------------------------------------
[Title]
32
<PAGE>
Greenwich Air Services-Texas, L.P.
By:
---------------------------------------
[Title]
McAllen Components, L.P.
By:
---------------------------------------
[Title]
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
Oppenheimer & Co., Inc.
Dillon, Read & Co. Inc.
By: Salomon Brothers Inc
By: . . . . . . . . . . . . . . . .
Vice President
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
33
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT
OF SECURITIES
UNDERWRITERS TO BE PURCHASED
----------- ----------------
Salomon Brothers Inc . . . . . . . . . .
Oppenheimer & Co., Inc. . . . . . . . . .
Dillon, Read & Co. Inc. . . . . . . . . .
-------------
Total . . . . . . . . . . . . . $ 150,000,000
-------------
-------------
34
<PAGE>
Draft of May 29, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GREENWICH AIR SERVICES, INC.
AND
THE SUBSIDIARY GUARANTORS NAMED HEREIN
TO
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRUSTEE
INDENTURE
DATED AS OF [____________], 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH
318, INCLUSIVE OF THE TRUST INDENTURE ACT OF 1939:
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
Section 310(a)(1) 609
(a)(2) 609
(a)(3) Not
Applicable
(a)(4) Not
Applicable
(b) 608
610
Section 311(a) 613
(b) 613
Section 312(a) 701
702
(b) 702
(c) 702
Section 313(a) 703
(b) 703
(c) 703
(d) 703
Section 314(a) 1019
(a)(4) 102
1004
(b) Not
Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not
Applicable
(d) Not
Applicable
(e) 102
<PAGE>
Section 315(a) 601
(b) 602
(c) 601
(d) 601
(e) 514
Section 316(a) 104
(a)(1)(A) 502
512
(a)(1)(B) 513
(a)(2) Not
Applicable
(b) 508
(c) 104
Section 317(a)(1) 503
(a)(2) 504
(b) 1003
Section 318(a) 107
- -----------------
NOTE: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
<PAGE>
INDENTURE, dated as of [____________], 1996, between GREENWICH AIR SERVICES,
INC., a Delaware corporation (herein called the "Company"), having its principal
office at 4590 N.W. 36th Street, Miami, Florida 33122, the SUBSIDIARY GUARANTORS
(as hereinafter defined) and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York
banking corporation, having its principal office at 40 Wall Street, New York,
New York 10005, as Trustee (herein called the "Trustee").
Each party agrees as follows for the benefit of the other parties and for the
equal and ratable benefit of the Holders of the Company's [__]% Senior Notes Due
2006 (the "Securities").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with U.S. GAAP; PROVIDED, HOWEVER,
that for the avoidance of any possible doubt, any act or condition in
accordance herewith and permitted hereunder when taken, created or
occurring shall not become a violation of any provision of this Indenture
as a result of a subsequent change in U.S. GAAP;
(4) any reference to an "Article" or a "Section" refers to an Article
or a Section, as the case may be, of this Indenture;
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(6) all dollar amounts are expressed in United States dollars.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Aerospace Industry and Gas Turbine Engine Business" means a business
engaged in airline or aircraft related support services as well as a business
based on gas turbine engines used in the aerospace industry and military,
marine, industrial and power plant applications.
"Affiliate" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of any class
of the Voting Stock of such specified Person or of any Subsidiary of such
specified Person. For the purposes of this definition, "control," when used with
respect to
<PAGE>
any specified Person, means the power to direct the management and policies of
such Person directly or indirectly, whether through the ownership of Voting
Stock, by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Asset Sale" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (including, without limitation,
dispositions pursuant to any consolidation or merger (but excluding any Sale and
Leaseback Transaction)) by such Person or any of its Restricted Subsidiaries, in
any single transaction or series of transactions, of (a) shares of Capital Stock
or other ownership interests of another Person (including Capital Stock of
Unrestricted Subsidiaries) or (b) any other Property or assets of such Person or
any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that the aggregate Fair
Market Value of the Property and assets transferred, conveyed, sold, leased or
otherwise disposed of, exceeds $2 million. Notwithstanding the foregoing, the
term "Asset Sale" shall not include (i) any asset disposition permitted pursuant
to Section 801 which constitutes a disposition of all or substantially all of
the Company's Property or assets; (ii) the sale or transfer of Permitted Short-
Term Investments or inventory in the ordinary course of business; (iii) the
liquidation of Property received in settlement of Indebtedness owing to the
Company or any Restricted Subsidiary as a result of foreclosure, perfection or
enforcement of any Lien or Indebtedness, which Indebtedness was owing to the
Company or any Restricted Subsidiary in the ordinary course of business of the
Company or such Restricted Subsidiary; or (iv) the sale or transfer of any
Property by the Company or a Restricted Subsidiary to the Company or a Wholly-
Owned Subsidiary.
"Attributable Indebtedness" means Indebtedness deemed to be incurred
in respect of a Sale and Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually), of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for which such
lease has been extended).
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate the
Securities.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
scheduled redemption payment in respect of such Preferred Stock, as the case may
be, multiplied by the amount of such payment, by (ii) the sum of all such
principal or redemption payments.
"Bankruptcy Code" shall have the meaning specified in Section 1301.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each day that is not a Legal Holiday.
"Capital Lease Obligation" of any Person means an obligation which is
required to be classified and accounted for as a capital lease or liability on
the face of a balance sheet of such Person in accordance with GAAP. For
purposes of Section 1010, a Capital Lease Obligation shall be deemed to be
secured by a Lien on the property being leased.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; PROVIDED, HOWEVER, that "Capital Stock" shall not
include Redeemable Stock.
-2-
<PAGE>
"Change of Control" means the occurrence of any of the following
events: (i) (a) the Specified Holders cease in the aggregate to "beneficially
own" (as such term is used in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, at least 50% of the total voting power of the Voting
Stock of the Company, whether as a result of any issuance of securities of the
Company, any merger, consolidation, liquidation or dissolution of the Company or
otherwise, and (b) any "person" (within the meaning of Sections 13(d)(3) and
14(d)(2) of the Exchange Act or any successor provision to either of the
foregoing, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than an underwriter engaged in a firm commitment
underwriting and other than the Specified Holders, becomes the "beneficial
owner" (as defined in clause (a) above, except that for the purposes of this
clause (b) a person other than a Specified Holder shall be deemed to have
beneficial ownership of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of either (x) 35% or more of the total voting
power of the Voting Stock of the Company or (y) a greater percentage of the
total voting power of the Voting Stock of the Company than the Specified Holders
in the aggregate "beneficially own" (as defined in clause (a) above), directly
or indirectly; (ii) the stockholders of the Company shall have approved any plan
of liquidation or dissolution of the Company; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Company's Board of Directors (together with any new directors whose election
or appointment by such board or whose nomination for election by the
stockholders of the Company was approved by a vote of at least 66-2/3% of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Company's Board
of Directors then in office.
"Change of Control Offer" has the meaning specified in Section 1021.
"Change of Control Payment Date" has the meaning specified in
Section 1021.
"Commission" means the Securities and Exchange Commission, from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Conese Family" means collectively Eugene P. Conese, Sr. and members
of his immediate family, any of their respective spouses, estates, lineal
descendants, heirs, executors, personal representatives, administrators, trusts
for any of their benefit and charitable foundations to which shares of the
Company's Capital Stock beneficially owned by any of the foregoing have been
transferred.
"Consolidated Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date to (ii) the
aggregate Consolidated Interest Expense of the Company and its Restricted
Subsidiaries that is anticipated to accrue during a period consisting of the
fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately subsequent thereto (based upon the pro forma amount and
maturity of, and interest payments in respect of, Indebtedness of the Company
and its Restricted Subsidiaries expected by the Company to be outstanding on the
Transaction Date), assuming for the purposes of this measurement the
continuation of market interest rates prevailing on the Transaction Date and
base interest rates in respect of floating interest rate obligations equal to
the base interest rates on such obligations in effect as of the Transaction
Date; PROVIDED, that if the Company or any of its Restricted Subsidiaries is a
party on the Transaction Date to any Interest Rate Protection Agreement which
would have the effect of changing the interest rate on any Indebtedness of the
Company or any of its Restricted Subsidiaries for such
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four-quarter period (or a portion thereof), the resulting rate shall be used for
such four-quarter period or portion thereof; PROVIDED FURTHER that any
Consolidated Interest Expense with respect to Indebtedness Incurred or retired
by the Company or any of its Restricted Subsidiaries during the fiscal quarter
in which the Transaction Date occurs shall be calculated as if such Indebtedness
was so Incurred or retired on the first day of the fiscal quarter in which the
Transaction Date occurs; and PROVIDED FURTHER, that if the transaction giving
rise to the need to calculate the Consolidated Interest Coverage Ratio would
have the effect of increasing or decreasing EBITDA in the future, EBITDA shall
be calculated on a pro forma basis as if such transaction had occurred on the
first day of the four fiscal quarters referred to in clause (i) of this
definition, and if, during the same four fiscal quarters, (x) the Company or any
of its Restricted Subsidiaries shall have engaged in any Asset Sale, EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive), or
increased by an amount equal to the EBITDA (if negative), directly attributable
to the assets which are the subject of such Asset Sale for such period
calculated on a pro forma basis as if such Asset Sale and any related retirement
of Indebtedness had occurred on the first day of such period or (y) the Company
or any of its Restricted Subsidiaries shall have acquired any material assets
outside the ordinary course of business, EBITDA shall be calculated on a pro
forma basis as if such asset acquisitions and any related Incurrence of
Indebtedness had occurred on the first day of such four fiscal quarter period.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, (i) the sum of (a) the aggregate amount of cash
and non-cash interest expense (including capitalized interest) of such Person
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP in respect of Indebtedness (including, without
limitation, (A) any amortization of debt discount, (B) net costs associated with
Interest Rate Protection Agreements (including any amortization of discounts),
(C) the interest portion of any deferred payment obligation, (D) all accrued
interest, and (E) all commissions, discounts, commitment fees, origination fees
and other fees and charges owed with respect to the New Credit Facility
(including any refinancing thereof) and other Indebtedness) paid, accrued or
scheduled to be paid or accrued during such period; (b) Preferred Stock
dividends and Redeemable Stock dividends of such Person (and of its Restricted
Subsidiaries, if paid to a Person other than such Person or its Wholly Owned
Subsidiaries) declared and payable other than in kind; (c) the portion of any
Capital Lease Obligation of such Person or its Restricted Subsidiaries allocable
to interest expense in accordance with GAAP; (d) the portion of any rental
obligation of such Person or its Restricted Subsidiaries in respect of any Sale
and Leaseback Transaction allocable to interest expense (determined as if such
obligation were treated as a Capital Lease Obligation); and (e) to the extent
any Indebtedness of any other Person (other than Restricted Subsidiaries) is
Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate
amount of interest paid, accrued or scheduled to be paid or accrued by such
other Person during such period attributable to such Indebtedness; less (ii) to
the extent included in clause (i) above, amortization or write-off of deferred
financing costs of such Person and its Restricted Subsidiaries during such
period and any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness of such Person and its Restricted
Subsidiaries prior to its Stated Maturity; in the case of both clauses (i) and
(ii) above, after elimination of intercompany accounts among such Person and its
Restricted Subsidiaries and as determined in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; PROVIDED that there shall be excluded therefrom, without
duplication, (i) items classified as extraordinary; (ii) the net income of any
Restricted Subsidiary of such Person to the extent the transfer to that Person
of that income is restricted by contract or otherwise, except for any cash
dividends or cash distributions actually paid by such Restricted Subsidiary to
such Person during such period; (iii) the net income (or loss) of any other
Person in which such Person or any of its Restricted Subsidiaries has an
interest (which interest does not cause the net income of such other Person to
be consolidated with the net income of such specified Person in accordance with
GAAP or is an interest in a consolidated Unrestricted Subsidiary), except to the
extent of the amount of cash dividends or other cash distributions actually paid
to such Person or its Restricted Subsidiaries by such other Person during such
period; (iv) the net income of any Person acquired by such Person or any of its
Restricted Subsidiaries in a pooling-of-interests transaction for any period
prior to the date of such acquisition; (v) any gain or loss realized on the
termination of any employee pension benefit plan; (vi) gains (but not losses) in
respect of Asset Sales by such Person or any of its Restricted Subsidiaries
other than gains resulting from the sale of inventory; (vii) restructuring
costs; and (viii) the cumulative effect of a change in accounting principles and
the effect of the adoption of Statement of Financial Accounting Standards No.
106 to the extent expenses recognized pursuant to such adoption exceed the
amounts with respect to such expenses which would have been recognized during
such period using the "pay as you go" accounting method.
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"Consolidated Net Worth" of any Person means the stockholders' equity
of such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or any of its
Restricted Subsidiaries.
"Consolidated Net Tangible Assets" means, as of any date of
determination, the sum of the amounts that would appear on a consolidated
balance sheet of the Company and its consolidated Subsidiaries (other than
Unrestricted Subsidiaries) as the total assets (less accumulated depreciation
and amortization, allowances for doubtful receivables, other applicable reserves
and other properly deductible items) of the Company and its consolidated
Subsidiaries (other than Unrestricted Subsidiaries), determined on a
consolidated basis in accordance with GAAP, after giving effect to purchase
accounting and after deducting therefrom, to the extent otherwise included, the
amounts of (without duplication): (i) the excess of cost over fair market value
of assets or businesses acquired; (ii) any revaluation or other write-up in book
value of assets subsequent to the last day of the fiscal quarter of the Company
immediately preceding the Issue Date as a result of a change in the method of
valuation in accordance with GAAP; and (iii) unamortized debt discount and
expenses, other unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, licenses, organization or developmental
expenses and other intangible items (if included in total assets).
"Corporate Trust Office" means the office of the Trustee in The
Borough of Manhattan, The City of New York, at which at any particular time its
corporate trust business shall be principally administered and which at the date
hereof is located at 40 Wall Street, New York, New York 10005.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1202.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar arrangement designed
to protect such Person or its Restricted Subsidiaries against fluctuations in
currency values, as in effect from time to time.
"CUSIP Number" means, with respect to the Securities, an
identification number assigned to the Securities pursuant to the procedures of
the Committee on Uniform Security Identification Procedures and by the CUSIP
Service Bureau.
"Default" means any event, act or condition the occurrence or
existence of which is, or after notice or the passage of time or both would be,
an Event of Default.
"Defaulted Interest" has the meaning specified in Section 306.
"Defeasance" has the meaning specified in Section 1201.
"Depositary" means, with respect to Securities issuable in whole or in
part in the form of one or more Global Securities, a clearing agency registered
under the Exchange Act that is designated by the Company to act as Depositary
for such Securities. Initially, the Depositary shall be The Depository Trust
Company, its nominees and their respective successors.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person and its consolidated Restricted
Subsidiaries for such period, plus the sum of, to the extent reflected in the
consolidated income statement of such Person and its Restricted Subsidiaries for
such period from which Consolidated Net Income is determined and deducted in the
determination of such Consolidated Net Income, without duplication, (i) income
tax expense, (ii) Consolidated Interest Expense, (iii) depreciation and
amortization expense and (iv) any charge related to any premium or penalty paid
in connection with redeeming or retiring any Indebtedness prior to its Stated
Maturity.
"Event of Default" has the meaning specified in Section 501.
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"Excess Proceeds" has the meaning specified in Section 1014.
"Exchange Act" means the United States Securities Exchange Act of 1934
and any statute successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Expiry Date" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"Fair Market Value" means, with respect to any assets to be
transferred pursuant to any Asset Sale or Sale and Leaseback Transaction or any
non-cash consideration or property transferred or received by any Person, the
fair market value of such assets, consideration or property as determined in
good faith by (i) any officer of the Company if such fair market value is less
than $5 million and (ii) the Board of Directors as evidenced by a Board
Resolution if such fair market value is equal to or in excess of $5 million.
"GAAP" means generally accepted accounting principles in the United
States as in effect on the date of this Indenture, unless stated otherwise in
this Indenture.
"Global Security" means a Security that evidences all or part of the
Securities and bears the legend set forth in Section 202.
"Guarantee" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including, without
limitation, (a) any Lien on the assets of such Person securing any Indebtedness
of the primary obligor and (b) any obligation of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) any Indebtedness
of the primary obligor or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness, (ii) to purchase
Property or services for the purpose of assuring the holder of such Indebtedness
of the payment of such Indebtedness, or (iii) to maintain working capital,
equity capital, any other financial statement condition or the liquidity of the
primary obligor so as to enable the primary obligor to pay such Indebtedness
(and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that a Guarantee by any Person
shall not include endorsements by such Person for collection or deposit, in
either case, in the ordinary course of business.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
extend, assume, Guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or to record, as required pursuant to GAAP or
otherwise, any such Indebtedness or obligation on the balance sheet of such
Person (and "Incurrence", "Incurred", "Incurrable" and "Incurring" shall have
meanings correlative to the foregoing); PROVIDED, HOWEVER, that a change in GAAP
that results in an obligation of such Person that exists at such time, and is
not theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness. For purposes of this definition,
Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned
Subsidiary or the Company shall be deemed to be Incurred by the Company or such
Restricted Subsidiary in the event such Wholly Owned Subsidiary ceases to be a
Wholly Owned Subsidiary or in the event such Indebtedness is transferred to a
Person other than the Company or a Wholly Owned Subsidiary.
"Indebtedness" means at any time (without duplication), with respect
to any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such Person for
borrowed money, (ii) any obligation of such Person evidenced by bonds,
debentures, notes, Guarantees or other similar instruments, including, without
limitation, any such obligations Incurred in connection with the acquisition of
Property, assets or businesses, (iii) any reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) any obligation of such
Person issued or assumed as the
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deferred purchase price of Property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business),
(v) any Capital Lease Obligation of such Person, (vi) the maximum fixed
redemption or repurchase price of Redeemable Stock of such Person at the time of
determination, (vii) any payment obligation of such Person under Currency
Agreements or Interest Rate Protection Agreements at the time of determination,
(viii) any obligation to pay rent or other amounts of such Person with respect
to any Sale and Leaseback Transaction to which such Person is a party and
(ix) any obligation of the type referred to in clauses (i) through (viii) of
this paragraph of another Person and all dividends of another Person the payment
of which, in either case, such Person has Guaranteed or is responsible or liable
for, directly or indirectly, as obligor, Guarantor or otherwise. For purposes
of this definition, the maximum fixed repurchase price of any Redeemable Stock
that does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Redeemable Stock as if such Redeemable Stock were
repurchased on any date on which Indebtedness is required to be determined
pursuant to this Indenture; PROVIDED, HOWEVER, that if such Redeemable Stock is
not then permitted to be repurchased, the repurchase price shall be the book
value of such Redeemable Stock. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability at such date in respect
of any contingent obligations described above.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Interest Rate Protection Agreement" means, with respect to any
Person, any interest rate swap agreement, forward rate agreement, interest rate
cap or collar agreement or other financial agreement or arrangement designed to
protect such Person or its Restricted Subsidiaries against fluctuations in
interest rates, as in effect from time to time.
"Investment" means, with respect to any Person, directly or indirectly
(a) any advance, loan or capital contribution to any other Person, (b) the
acquisition, by purchase or otherwise, of any stock, bonds, notes, debentures or
other securities or evidence of beneficial ownership of any other Person or (c)
the acquisition, by purchase or otherwise, of all or substantially all of the
business or assets of any other Person; PROVIDED, HOWEVER, that investments
shall not include extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices or any increase in the equity ownership
in any Person resulting solely from retained earnings of such Person.
"Issue Date" means the date upon which the Securities first were
issued and authenticated hereunder.
"Investment Company Act" means the United States Investment Company
Act of 1940 and any statute successor thereto, in each case as amended from time
to time.
"Legal Holiday" has the meaning specified in Section 113.
"Lien" means, with respect to any Property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or other), charge, easement, encumbrance, preference,
priority or other security or similar agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing). For
purposes of Section 1010, a Capital Lease Obligation shall be deemed to be
secured by a Lien on the property being leased.
"Maturity" means the date on which the principal of the Securities or
an installment of principal becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, pursuant to a Prepayment Offer or Change of Control Offer or
otherwise.
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"Moody's" means Moody's Investors Service Inc., and any successor to
its business or operations.
"Net Cash Proceeds" from an Asset Sale, by any Person or any of its
Restricted Subsidiaries, means cash and cash equivalents received, net of (i)
all reasonable out-of-pocket expenses of such Person or such Restricted
Subsidiary Incurred in connection with such Asset Sale, including, without
limitation, all legal, title and recording tax expenses, commissions and other
fees and expenses Incurred (but excluding any finder's fee or brokers' fee
payable to any Affiliate of such Person), and all Federal, state, provincial,
foreign and local taxes that are paid or required to be accrued as liabilities
under GAAP by such Person or such Restricted Subsidiary as a consequence of such
Asset Sale, (ii) all payments made by such Person or such Restricted Subsidiary
on any Indebtedness which is secured by any assets subject to such Asset Sale in
accordance with the terms of any Lien upon or with respect to such assets, or
which must, by its terms, or in order to obtain a necessary consent to such
Asset Sale or by applicable law, be repaid out of the proceeds from such Asset
Sale, and (iii) all contractually required distributions and other payments made
to minority interest holders (but excluding distributions and payments to
Affiliates of such Person) in Restricted Subsidiaries of such Person as a result
of such Asset Sale; PROVIDED that, in the event that any consideration for an
Asset Sale (which would otherwise constitute Net Cash Proceeds) is required to
be held in escrow pending determination of whether a purchase price adjustment
will be made, such consideration (or any portion thereof) shall become Net Cash
Proceeds only at such time as it is released to such Person or its Restricted
Subsidiaries from escrow, and PROVIDED that any non-cash or non-cash equivalent
consideration received in connection with an Asset Sale, which is subsequently
converted to cash or cash equivalents, shall be deemed to be Net Cash Proceeds
at such time and shall thereafter be applied in accordance with Section 1014.
"New Credit Facility" means any credit facility or agreement
(including, without limitation, the $175 million senior secured revolving credit
facility, dated as of __________, 1996, between the Company and The Bank of New
York Commercial Corporation) with a bank or syndicate of banks or other
financial institutions (including working capital or revolving credit
facilities) including any related guarantees, collateral documents, instruments
and agreements executed in connection therewith, as such agreements may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing). "New Credit Facility" shall include any amendments, renewals,
extensions, substitutions, refinancings, restructurings, replacements,
supplements or any other modifications that increase the principal amount of
Indebtedness thereunder or commitments to lend thereunder and have been made in
compliance with Section 1008 and Section 1009; PROVIDED that for the purposes of
the definitions of "Permitted Company Indebtedness" and "Permitted Restricted
Subsidiary Indebtedness or Preferred Stock," no such increase may result in the
principal amount of Indebtedness of the Company or its Restricted Subsidiaries
under the New Credit Facility exceeding the amount permitted by clause (b) of
the definition of "Permitted Company Indebtedness" or by clause (a) of the
definition of "Permitted Restricted Subsidiary Indebtedness or Preferred Stock",
respectively.
"Notice of Default" means a written notice of the kind specified in
Section 501.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or any Vice President,
together with any one of the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Assistant Secretary, of the Company, and delivered to the
Trustee. One of the officers signing an Officers' Certificate given pursuant to
Section 1004 shall be the principal executive, financial or accounting officer
of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
internal legal counsel for the Company, who shall be acceptable to the Trustee
and who may rely as to factual matters on Officers' Certificates.
"Outstanding" means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture, EXCEPT:
(1) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
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(2) Securities for which payment or redemption money in the
necessary amount has been theretofore deposited with the Paying Agent
(other than the Company or its Wholly Owned Subsidiaries) in trust for the
Holders of such Securities, PROVIDED that the Paying Agent is not
prohibited from paying such money to the Holders of Securities on that date
pursuant to the terms of this Indenture; and PROVIDED FURTHER that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(3) Securities as to which Defeasance has been effected pursuant to
Section 1201; and
(4) Securities which have been paid pursuant to Section 305 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee actually knows to be so owned shall be
so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Participants" has the meaning specified in Section 304.
"Paying Agent" has the meaning specified in Section 1002.
"PARI PASSU", when used with respect to the ranking of any
Indebtedness of any Person in relation to other Indebtedness of such Person,
means that each such Indebtedness (a) either (i) is not subordinated in right of
payment to any other Indebtedness of such Person or (ii) is subordinate in right
of payment to the same Indebtedness of such person as is the other and is so
subordinate to the same extent and (b) is not subordinate in right of payment to
the other or to any Indebtedness of such Person as to which the other is not so
subordinated.
"Permitted Company Indebtedness" means any and all of the following:
(a) Indebtedness evidenced by the Securities; (b) Indebtedness under the New
Credit Facility, PROVIDED that the aggregate principal amount of all such
Indebtedness under the New Credit Facility, together with all Indebtedness
Incurred pursuant to clause (i) of this paragraph in respect of Indebtedness
previously Incurred pursuant to this clause (b), and all Indebtedness Incurred
pursuant to Section 1009 under clause (a) of the definition of "Permitted
Restricted Subsidiary Indebtedness or Preferred Stock" together with all
Indebtedness Incurred and Preferred Stock issued pursuant to Section 1009 under
clause (g) of such definition in respect of Indebtedness previously Incurred
pursuant to Section 1009 under such clause (a), at any one time outstanding does
not exceed the sum of 80% of the aggregate amount of receivables (including
unbilled accounts receivable) and 60% of the aggregate amount of inventory as of
the end of the most recent fiscal quarter, in each case of the Company and its
Restricted Subsidiaries, as determined on a consolidated basis in accordance
with GAAP; (c) Indebtedness of the Company to any of its Wholly Owned
Subsidiaries (but only so long as such Indebtedness is held by a Wholly Owned
Subsidiary); (d) Indebtedness in connection with one or more standby letters of
credit, statutory obligations, surety or appeal bonds, performance bonds or
other obligations of a like nature Incurred in the ordinary course of business
consistent with past practice and not in connection with the borrowing of money
or the obtaining of advances or credit; (e) Indebtedness under Currency
Agreements and Interest Rate Protection Agreements entered into for the purpose
of limiting currency rate or interest rate risks, PROVIDED that such Currency
Agreements and Interest Rate Protection Agreements do not increase the
Indebtedness of the Company or its Restricted Subsidiaries outstanding at any
time other than as a result of fluctuations in currency rates or interest rates
or by reason of customary fees, indemnities and compensation payable thereunder
and either, with respect to Currency Agreements, were entered into for the
purpose
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of limiting currency exchange rate risks in connection with transactions entered
into in the ordinary course of business, or, with respect to Interest Rate
Protection Agreements, are related to payment obligations on Indebtedness
otherwise permitted by the terms of Section 1008; (f) certain specified
Indebtedness outstanding on the Issue Date not otherwise permitted in clauses
(a) through (e) above or clause (g) below and set forth on Schedule 1008 to this
Indenture; (g) Indebtedness in respect of Capital Lease Obligations directly
Incurred by the Company, PROVIDED that the aggregate principal amount of such
Indebtedness Incurred under this clause (g) and pursuant to Section 1009 under
clause (f) of the definition of "Permitted Restricted Subsidiary Indebtedness or
Preferred Stock" does not exceed $10 million at any one time outstanding; (h)
Indebtedness Incurred in connection with a repurchase of Securities pursuant to
a Change of Control, PROVIDED that the principal amount of such Indebtedness
does not exceed 101% of the principal amount of the Securities repurchased and
the reasonable and customary expenses, fees and costs of the Company in
connection therewith, and such Indebtedness (i) has an Average Life to Stated
Maturity that is equal to or greater than the remaining Average Life to Stated
Maturity of the Securities and (ii) has a Stated Maturity no earlier than the
Stated Maturity of the Securities; (i) Indebtedness Incurred in exchange for, or
the proceeds of which are used to refinance, Indebtedness referred to in clauses
(a) through (f) or clause (h) of this paragraph (including Indebtedness
previously Incurred pursuant to this clause (i)); PROVIDED, HOWEVER, that (i)
such Indebtedness is in an aggregate principal amount not in excess of the sum
of (A) the aggregate principal amount then outstanding of the Indebtedness being
exchanged or refinanced and (B) an amount necessary to pay any reasonable fees
and expenses, including premiums, related to such exchange or refinancing, (ii)
such Indebtedness has a Stated Maturity no earlier than the Stated Maturity of
the Indebtedness being exchanged or refinanced, (iii) such Indebtedness has an
Average Life to Stated Maturity at the time such Indebtedness is Incurred that
is equal to or greater than the Average Life to Stated Maturity of the
Indebtedness being exchanged or refinanced, and (iv) such Indebtedness is
subordinated in right of payment to the Securities to at least the same extent,
if any, as the Indebtedness being exchanged or refinanced and the covenants
relating to such Indebtedness are no more restrictive in the aggregate than
those relating to the Indebtedness being exchanged or refinanced; and (j)
Indebtedness not otherwise permitted to be Incurred pursuant to clauses (a)
through (i) above, PROVIDED that the aggregate principal amount of all
Indebtedness Incurred and Preferred Stock issued pursuant to this clause (j) and
pursuant to Section 1009 under clause (h) of the definition of "Permitted
Restricted Subsidiary Indebtedness or Preferred Stock" does not exceed $25
million at any one time outstanding.
"Permitted Investments" means any and all of the following: (a)
Permitted Short-Term Investments; (b) Investments in property, plant and
equipment used in the ordinary course of business; (c) Investments in any other
Person, as a result of which such other Person becomes a Restricted Subsidiary
in compliance with Section 1017; and (d) Investments in joint ventures in the
Aerospace Industry and Gas Turbine Engine Business, whether in the form of cash
or through the contribution of assets (the value of any payment other than cash
is to be determined by the Board of Directors and evidenced by a Board
Resolution), in an amount not to exceed $10 million.
"Permitted Liens" means any or all of the following: (a) Liens
existing as of the Issue Date;(b) any Lien existing on any Property at the time
of the acquisition thereof (and not Incurred in anticipation of such
acquisition), PROVIDED that such Liens are not extended to other Property of the
Company or any Restricted Subsidiary;(c) Liens securing Indebtedness Incurred
under the New Credit Facility; PROVIDED that (i) such Indebtedness was Incurred
in compliance with Section 1008 pursuant to clause (b) of the definition of
Permitted Company Indebtedness or Section 1009 pursuant to clause (a) of the
definition of Permitted Restricted Subsidiary Indebtedness or Preferred Stock
and (ii) such Liens on assets of any Restricted Subsidiary extend only to the
assets of such Restricted Subsidiary that Incurred such Indebtedness;(d) Liens
securing standby letters of credit, statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature Incurred in
compliance with Section 1008 pursuant to clause (d) of the definition of
Permitted Company Indebtedness or Section 1009 pursuant to clause (c) of the
definition of Permitted Restricted Subsidiary Indebtedness or Preferred Stock;
PROVIDED, that such Liens on assets of any Restricted Subsidiary extend only to
the assets of such Restricted Subsidiary that Incurred such Indebtedness;(e)
Liens securing Indebtedness in respect of Capital Lease Obligations permitted
under Section 1008 pursuant to clause (g) of the definition of Permitted Company
Indebtedness or Section 1009 pursuant to clause (f) of the definition of
Permitted Restricted Subsidiary Indebtedness or Preferred Stock; PROVIDED that
(i) the amount of Indebtedness Incurred in any specific case does not, at the
time such Indebtedness is Incurred, exceed the Fair Market Value of the Property
or asset acquired or constructed in connection with such Capital Lease
Obligation and (ii) no Property or assets of the Company or any of its
Restricted Subsidiaries (other than the Property or asset acquired or
constructed in connection with such Capital Lease Obligation) are subject
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to any Lien securing such Indebtedness;(f) Liens on Property of a Person
(including an Unrestricted Subsidiary) existing at the time such Person is
merged with or into or consolidated with the Company or a Restricted Subsidiary
or otherwise becomes a Restricted Subsidiary (and not Incurred in anticipation
of any such transaction); PROVIDED that such Liens are not extended to any other
Property or assets of the Company and its Restricted Subsidiaries;(g) Liens to
secure any permitted extension, renewal, refinancing, refunding or exchange (or
successive extensions, renewals, refinancing, refundings or exchanges), in whole
or in part, of or for any Indebtedness secured by Liens referred to in the
foregoing clauses (a) through (f); PROVIDED, HOWEVER, that (i) such new Lien
shall be limited to all or part of the same Property that secured the original
Lien and (ii) the Indebtedness secured by such Lien at such time is not
increased.
"Permitted Restricted Subsidiary Indebtedness or Preferred Stock"
means any and all of the following: (a) Indebtedness under the New Credit
Facility, PROVIDED that the aggregate principal amount of all such Indebtedness
under the New Credit Facility, together with all Indebtedness Incurred and
Preferred Stock issued pursuant to clause (g) of this paragraph in respect of
Indebtedness previously Incurred pursuant to this clause (a) and all
Indebtedness Incurred pursuant to Section 1008 under clause (b) of the
definition of "Permitted Company Indebtedness" together with all Indebtedness
Incurred pursuant to Section 1008 under clause (i) of such definition in respect
of Indebtedness previously Incurred pursuant to Section 1008 under such clause
(b), at any one time outstanding does not exceed the sum of 80% of the aggregate
amount of receivables (including unbilled accounts receivable) and 60% of the
aggregate amount of inventory as of the end of the most recent fiscal quarter,
in each case of the Company and its Restricted Subsidiaries, as determined on a
consolidated basis in accordance with GAAP; (b) Indebtedness or Preferred Stock
held by the Company or any of its Wholly Owned Subsidiaries (but only so long as
such Indebtedness or Preferred Stock is held by the Company or a Wholly Owned
Subsidiary); (c) Indebtedness in connection with one or more standby letters of
credit, statutory obligations, surety or appeal bonds, performance bonds or
other obligations of a like nature Incurred in the ordinary course of business
consistent with past practice and not in connection with the borrowing of money
or the obtaining of advances or credit; (d) Indebtedness under Currency
Agreements and Interest Rate Protection Agreements entered into for the purpose
of limiting currency rate or interest rate risks, PROVIDED that such Currency
Agreements and Interest Rate Protection Agreements do not increase the
Indebtedness of such Restricted Subsidiary outstanding at any time other than as
a result of fluctuations in currency rates or interest rates or by reason of
customary fees, indemnities and compensation payable thereunder and either, with
respect to Currency Agreements, were entered into for the purpose of limiting
exchange rate risks in connection with transactions entered into in the ordinary
course of business, or, with respect to Interest Rate Protection Agreements, are
related to payment obligations on Indebtedness otherwise permitted by the terms
of Section 1009; (e) Indebtedness or Preferred Stock of Restricted Subsidiaries
outstanding on the Issue Date not otherwise permitted in clauses (a) through (d)
above or clause (f) below and set forth on Schedule 1009 to this Indenture; (f)
Indebtedness in respect of Capital Lease Obligations directly Incurred by a
Restricted Subsidiary, PROVIDED that the aggregate principal amount of such
Indebtedness Incurred under this clause (f) and Section 1008 under clause (g) of
the definition of "Permitted Company Indebtedness" does not exceed $10 million
at any one time outstanding; (g) Indebtedness Incurred or Preferred Stock issued
in exchange for, or the proceeds of which are used to refinance, Indebtedness or
Preferred Stock referred to in clauses (a) through (e) of this paragraph
(including Indebtedness previously Incurred and Preferred Stock previously
issued pursuant to this clause (g)); PROVIDED, HOWEVER, that (i) such
Indebtedness or Preferred Stock is in an aggregate principal amount not in
excess of the sum of (A) the aggregate principal amount then outstanding of the
Indebtedness or Preferred Stock being exchanged or refinanced and (B) an amount
necessary to pay any reasonable fees and expenses, including premiums, related
to such exchange or refinancing, (ii) such Indebtedness or such Preferred Stock,
as the case may be, has a Stated Maturity or final redemption date (if any) no
earlier than the Stated Maturity or final redemption date (if any) of the
Indebtedness or Preferred Stock being exchanged or refinanced, (iii) such
Indebtedness or such Preferred Stock, as the case may be, has an Average Life to
Stated Maturity at the time such Indebtedness is Incurred or such Preferred
Stock is issued, as the case may be, that is equal to or greater than the
Average Life to Stated Maturity of the Indebtedness or Preferred Stock being
exchanged or refinanced, and (iv) such Indebtedness or such Preferred Stock, as
the case may be, is subordinated in right of payment to the Securities to at
least the same extent, if any, as the Indebtedness or Preferred Stock being
exchanged or refinanced and the covenants relating to such Indebtedness or
Preferred Stock are no more restrictive in the aggregate than those relating to
the Indebtedness or Preferred Stock being exchanged or refinanced; and (h)
Indebtedness or Preferred Stock not otherwise permitted to be Incurred or issued
pursuant to clauses (a) through (g) above, PROVIDED that the aggregate principal
amount of all Indebtedness Incurred or Preferred Stock issued pursuant to this
clause (h) and pursuant to Section 1008 under clause (j) of the definition of
"Permitted Company Indebtedness" does not exceed $25 million at any one time
outstanding.
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"Permitted Short-Term Investments" means (a) Investments in
U.S. Government Obligations maturing within one year of the date of acquisition
thereof, (b) Investments in certificates of deposit or Eurodollar deposits
maturing within one year of the date of acquisition thereof issued by a bank or
trust company which is organized under the laws of the United States of America
or any State thereof and is a member of the Federal Reserve System having
capital, surplus and undivided profits aggregating in excess of $500 million and
whose long-term indebtedness is rated "A" (or higher) according to Moody's, and
(c) Investments in commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America or any State thereof with a rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization, other business entity or government
or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 305 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person; PROVIDED, HOWEVER, that "Preferred
Stock" shall not include Redeemable Stock.
"Prepayment Offer" has the meaning specified in Section 1014(c).
"Prepayment Offer Notice" means a written notice of a Prepayment Offer
sent by the Company by first-class mail, postage prepaid, to each Holder at his
address appearing in the Security Register on the date of the Prepayment Offer
offering to purchase up to the principal amount of Securities specified in such
Prepayment Offer at the purchase price specified in such Prepayment Offer (as
determined pursuant to this Indenture). Unless otherwise required by applicable
law, the Prepayment Offer Notice shall specify an expiry date (the "Expiry
Date") of the Prepayment Offer which shall be, subject to any contrary
requirements of applicable law, and a settlement date (the "Purchase Date") for
purchase of the Securities which shall be, subject to any contrary requirements
of applicable law, not less than 30 days nor more than 60 days after the date
the Prepayment Offer Notice is mailed. The Prepayment Offer Notice shall
contain information concerning the business of the Company and its Subsidiaries
which the Company in good faith believes will enable such Holders to make an
informed decision with respect to the Prepayment Offer, which at a minimum will
include (i) the Company's most recent annual and quarterly financial statements
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" (which requirements may be satisfied by delivery of such documents
together with the Prepayment Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such financial
statements referred to in clause (i), (iii) if applicable, appropriate PRO FORMA
financial information concerning the Prepayment Offer, (iv) a description of the
events requiring the Company to make the Prepayment Offer, (v) a description of
the procedure which Holders must follow and any other information necessary to
enable such Holders to tender Securities pursuant to the Prepayment Offer,
(vi) a description of the procedure which Holders must follow and any other
information necessary to enable such Holders to withdraw an election to tender
Securities for payment, and (vi) any other information required by applicable
law to be included therein. The Prepayment Offer Notice shall also state:
(1) the Expiry Date and the Purchase Date;
(2) that any Securities (or any portion thereof) accepted for payment
(and duly paid on the Purchase Date) pursuant to the Prepayment Offer shall
cease to accrue interest after the Purchase Date;
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(3) the maximum aggregate principal amount of the Securities offered
to be purchased by the Company pursuant to the Prepayment Offer (including,
if less than 100%, the manner by which such has been determined pursuant to
the Indenture) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Prepayment Offer;
(7) that each Holder electing to tender a Security pursuant to the
Prepayment Offer will be required to surrender such Security at the place
or places specified in the Prepayment Offer Notice prior to the close of
business on the Expiry Date (such Security being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly authorized in
writing);
(8) that Holders will be entitled to withdraw all or any portion of
the Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the Expiry Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security the Holder tendered, the certificate number of the
Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(9) that if Securities in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Prepayment Offer, the Company shall purchase all such Securities;
and
(10) that in case of any Holder whose Security is purchased only in
part, the Company and the Subsidiary Guarantors shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate principal amount
equal to and in exchange for the unpurchased portion of the Security so
tendered.
Any Prepayment Offer Notice shall be governed by and effected in accordance with
Section 1014.
"primary obligor" has the meaning specified in the definition of
"Guarantee" set forth in this Section 101.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person (but excluding Capital Stock or other securities issued by such
first mentioned Person).
"Purchase Amount" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"Purchase Date" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"Purchase Price" has the meaning specified in the definition of
"Prepayment Offer Notice" set forth in this Section 101.
"Redeemable Stock" of any Person means any equity security of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including on the
happening of an event), (a) is or could become required to be redeemed for cash
or other Property or is or could become redeemable for cash or other Property at
the option of the holder thereof, in whole or in part, prior to the Stated
Maturity of the
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Securities or (b) is or could become exchangeable at the option of the holder
thereof for Indebtedness at any time, in whole or in part, prior to the Stated
Maturity of the Securities;
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning specified in Section 1002.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities means the date specified for that purpose in the
Securities.
"Replacement Assets" has the meaning specified in Section 1014(b).
"Restricted Payment" means (i) a dividend or other distribution
declared or paid on the Capital Stock or Redeemable Stock of the Company or to
the Company's stockholders (other than dividends and distributions paid solely
in Capital Stock of the Company), or declared and paid to any Person other than
the Company or any of its Wholly Owned Subsidiaries on the Capital Stock or
Redeemable Stock of any Restricted Subsidiary, (ii) a payment made by the
Company or any of its Restricted Subsidiaries (other than to the Company or any
Wholly Owned Subsidiary) to purchase, redeem, acquire or retire any Capital
Stock or Redeemable Stock of the Company or of a Restricted Subsidiary, (iii) a
payment made by the Company or any of its Restricted Subsidiaries to redeem,
repurchase, defease or otherwise acquire or retire for value (including pursuant
to mandatory repurchase covenants), prior to any scheduled maturity, scheduled
sinking fund or scheduled mandatory redemption, Indebtedness of the Company
which is subordinate (whether pursuant to its terms or by operation of law) in
right of payment to the Securities other than payments made by the Company to
redeem its 8% convertible subordinated debentures due 2000, or (iv) an
Investment by the Company or a Restricted Subsidiary in any Person other than
the Company or a Wholly Owned Subsidiary and other than Investments by the
Company or a Restricted Subsidiary in any Person who becomes a Wholly Owned
Subsidiary as a result of such Investment.
"Restricted Subsidiary" means any Subsidiary of the Company that the
Company has not designated an Unrestricted Subsidiary in the manner provided in
Section 1017.
"Sale and Leaseback Transaction" means, with respect to any Person,
any direct or indirect arrangement (excluding, however, any such arrangement
between such Person and a Wholly Owned Subsidiary of such Person or between two
or more Wholly Owned Subsidiaries of such Person) pursuant to which Property is
sold or transferred by such Person or a Restricted Subsidiary of such Person and
is thereafter leased back from the purchaser or transferee thereof by such
Person or one of its Restricted Subsidiaries.
"Securities" has the meaning stated in the preamble of this Indenture,
as amended or supplemented from time to time in accordance with the terms
hereof, and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the United States Securities Act of 1933 and
any statute successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 304.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 306.
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"Specified Holders" means the Conese Family and any corporation
organized and existing under the laws of the United States of America or any
State thereof or the District of Columbia, the capital stock of which is wholly
owned by the Conese Family.
"S&P" means Standard & Poor's Ratings Group and any successor to its
business or operations.
"Stated Maturity", when used with respect to any security or any
installment of principal thereof or interest thereon, means the date specified
in such security as the fixed date on which the principal of such security or
such installment of principal or interest is due and payable, including, without
limitation, pursuant to any mandatory redemption provision (but excluding any
provision providing for the repurchase of such security at the option of the
holder thereof upon the happening of any contingency unless such contingency has
occurred).
"Subsidiary" of a Person means (a) another Person which is a
corporation a majority of whose Voting Stock is at the time, directly or
indirectly, owned or controlled by (i) the first Person, (ii) the first Person
and one or more of its Subsidiaries, or (iii) one or more of the first Person's
Subsidiaries or (b) another Person which is not a corporation (x) at least 50%
of the ownership interest of which and (y) the power to elect or direct the
election of a majority of the directors or members of any other governing body
of which are controlled by Persons referred to in clauses (i), (ii) or
(iii) above.
"Subsidiary Guarantors" means Gas Turbine Corporation, a Delaware
corporation, Greenwich Turbine, Inc., a Delaware corporation, GASI Engine
Services Corporation, a Delaware corporation, Gas Turbine Test Corporation, a
Delaware corporation, Greenwich Foreign Sales Corporation, a Barbados
corporation, Greenwich Air Services-Texas, L.P., a Delaware limited
partnership, and McAllen Components, L.P., a Delaware limited partnership;
PROVIDED, HOWEVER, that any Subsidiary of the Company may become a Subsidiary
Guarantor pursuant to Section 1305.
"Surviving Entity" has the meaning specified in Section 801.
"Transaction Date" has the meaning specified in the definition of
"Consolidated Interest Coverage Ratio" set forth in this Section 101.
"Trust Indenture Act" means the United States Trust Indenture Act of
1939 as in force at the date as of which this instrument was executed; PROVIDED,
HOWEVER, that in the event the United States Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent required by
any such amendment, the United States Trust Indenture Act of 1939 as so amended.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include the successor.
"Unrestricted Subsidiary" means (i) each Subsidiary of the Company
designated as an Unrestricted Subsidiary as of the Issue Date including but not
limited to Greenwich Turbine, Inc., a Delaware corporation, (ii) each Subsidiary
of the Company that the Company has designated pursuant to Section 1017 as an
Unrestricted Subsidiary and (iii) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligation" means (x) any security which is (i) a
direct obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation which is specified in
clause (x) above and held by such bank for the account of the holder of such
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depositary receipt, or with respect to any specific payment of principal of or
interest on any U.S. Government Obligation which is so specified and held,
PROVIDED that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or interest evidenced
by such depositary receipt.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock and Redeemable Stock
of such Person which ordinarily has voting power for the election of directors
(or persons performing similar functions) of such Person whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary
all of the Voting Stock of which (except directors' qualifying shares) is at the
time owned, directly or indirectly, by the Company and its other Wholly Owned
Subsidiaries.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company or a Subsidiary
Guarantor to the Trustee to take any action under any provision of this
Indenture, the Company or such Subsidiary Guarantor, as applicable, shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company or
a Subsidiary Guarantor, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and any other
requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 1004) shall include,
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing or alternatively, may be embodied in and evidenced by the
record of Holders voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders duly called and held in
accordance with the provisions of Article Fifteen, or a combination of such
instruments and any such record; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
or record or both are delivered to the Trustee and, where it is hereby expressly
required, to the Company and the Subsidiary Guarantors. Such instrument or
instruments and any such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments or so voting at any such meeting. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee, the Company and the Subsidiary Guarantors,
if made in the manner provided in this Section. The record of any meeting of
Holders shall be proved in the manner provided in Section 1506.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Except as provided in Section 1402, any request, demand,
authorization, direction, notice, consent, waiver or other Act of the Holder of
any Security shall bind every future Holder of the same Security and the Holder
of every Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee, the Company or the Subsidiary Guarantors in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities; PROVIDED that the Company may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next paragraph. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities on such record date, and no other Holders,
shall be entitled to take or revoke the relevant action, whether or not such
Holders remain Holders after such record date; PROVIDED
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that no such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Securities on such record date. Nothing in this paragraph shall be
construed to prevent the Company from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be cancelled and of no effect), and nothing in this paragraph
shall be construed to render ineffective any action taken by Holders of the
requisite principal amount of Outstanding Securities on the date such action is
taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities in the manner set forth in
Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512, in each
case with respect to the Securities. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to join in such notice, declaration, request or
direction or to revoke the same, whether or not such Holders remain Holders
after such record date; PROVIDED that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities on such record date.
Nothing in this paragraph shall be construed to prevent the Trustee from setting
a new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities on the date such action is taken. Promptly after any record date is
set pursuant to this paragraph, the Trustee, at the Company's expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Company in writing and to each
Holder of Securities in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record date may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; PROVIDED that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other parties hereto
in writing, and to each Holder of Securities in the manner set forth in Section
106, on or prior to the existing Expiration Date; provided, further, that the
Expiration Date shall be no later than 180 days following the record date
relating to such Expiration Date. If an Expiration Date is not designated with
respect to any record date set pursuant to this Section, the party hereto which
set such record date shall be deemed to have designated the 180th day after such
record date as the Expiration Date with respect thereto, subject to its right to
change the Expiration Date to any earlier day as provided in this paragraph.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to the Securities may do so with regard to all
or any part of the principal amount of such Securities or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY AND THE SUBSIDIARY GUARANTORS.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or any Subsidiary
Guarantor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trustee Administration, or
(2) the Company or any Subsidiary Guarantor by the Trustee or by any
Holder shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-class postage
prepaid,
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to the Company or any Subsidiary Guarantor addressed to it at the address
of the Company's principal office specified in the first paragraph of this
instrument, Attention: President, or at any other address previously
furnished in writing to the Trustee by the Company or any Subsidiary
Guarantor.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification shall constitute a sufficient notification for every
purpose hereunder if made, given, furnished or filed in writing by facsimile
transmission or otherwise to or with the Company or any Subsidiary Guarantor at
the Company's principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company or any Subsidiary Guarantor.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act which is required under the Trust Indenture
Act to be a part of and govern this Indenture, the latter provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act which may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
SECTION 108. EFFECT OF HEADINGS, TABLE OF CONTENTS AND CROSS-REFERENCE SHEET.
The Article and Section headings herein, the Table of Contents and the
Cross-Reference Sheet are for convenience only and shall not affect the
construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company and the
Subsidiary Guarantors shall bind their successors and assigns, whether so
expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities or the
Subsidiary Guarantees endorsed thereon shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities or the Subsidiary
Guarantees endorsed thereon, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, and the Holders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities and the Subsidiary Guarantees
endorsed thereon shall be governed by and construed in accordance with the
internal laws of the State of New York without reference to principles of
conflicts of laws.
SECTION 113. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date, Change of Control Payment Date or Stated Maturity of any Security shall be
a Legal Holiday, then (notwithstanding any other provision of this Indenture or
of the Securities other than a provision in the Securities which expressly
states that such provision shall apply in lieu of this Section) payment of
interest or principal (and premium, if any) need not be made on such date, but
may be made on the next succeeding day that is not a Legal Holiday with the same
force and effect as if made on the Interest Payment Date, Redemption Date,
Purchase Date, Change of Control Payment Date or at the Stated Maturity,
PROVIDED that no interest shall accrue from and after such Interest Payment
Date, Redemption Date, Purchase Date, Change of Control Payment Date or Stated
Maturity, as the case may be. If a regular record date is a Legal Holiday, the
record date shall not be affected.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORM OF SECURITIES.
The Securities, the Subsidiary Guarantees to be endorsed thereon and
the Trustee's certificate of authentication shall be in substantially the form
set forth in this Article with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or Depositary therefor or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof.
The Securities and Subsidiary Guarantees endorsed thereon shall be
issued initially in the form of one or more permanent Global Securities in
definitive, fully registered form without interest coupons in substantially the
form set forth in Sections 202 and 203 hereof, which shall be deposited on
behalf of the purchasers of the Securities represented thereby with the Trustee,
at its New York office, as custodian for the Depositary, and registered in the
name of the Depositary or a nominee of the Depositary, duly executed by the
Company and the Subsidiary Guarantors and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee in the limited
circumstances hereinafter provided.
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The Securities and Subsidiary Guarantees endorsed thereon shall be
typed, printed, lithographed or engraved or may be produced in any other manner,
all as determined by the officers executing the Securities, as evidenced by
their execution of the Securities.
SECTION 202. FORM OF FACE OF GLOBAL SECURITY.
THIS SECURITY WITH THE SUBSIDIARY GUARANTEES ENDORSED HEREON IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER
OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
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GREENWICH AIR SERVICES, INC.
___% SENIOR NOTE DUE 2006
GUARANTEED AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST BY CERTAIN
SUBSIDIARIES OF GREENWICH AIR SERVICES, INC.
.....................................
[__]% Senior Note Due 2006
...............................................
No. ...... $ .....
CUSIP No. _____
GREENWICH AIR SERVICES, INC., a Delaware corporation (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
............................. or registered assigns, the principal sum
of ...................... on ____________, 2006, and to pay interest thereon
from [_______________], 1996, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semiannually in arrears
on [_______________] and [______________] in each year, commencing
[_______________], 1996, at the rate of [__]% per annum, both before and after
default, with interest upon overdue interest at the same rate (to the extent
legally permitted) until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the [_______________] or [_______________] (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan in The City of New York,
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; PROVIDED,
HOWEVER, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
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Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
GREENWICH AIR SERVICES, INC.
By...........................................
By...........................................
SECTION 203. FORM OF REVERSE OF GLOBAL SECURITY.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued under an Indenture, dated as of
[_______________], 1996 (herein called the "Indenture", which term shall have
the meaning assigned to it in such instrument), between the Company, the
Subsidiary Guarantors named therein and American Stock Transfer & Trust Company,
as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), and reference is hereby made to the Indenture for
a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee,
and the Holders of the Securities and of the terms upon which the Securities
are, and are to be, authenticated and delivered. This Security is one of the
Securities issued pursuant to the Indenture limited in aggregate principal
amount to $150,000,000 .
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail, at any time on or after [_______________]
2001, in whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount): If
redeemed during the 12-month period beginning [_______________] of the years
indicated:
Redemption
YEAR PRICE
---- ----------
2001 [_____]%
2002 [_____]%
2003 [_____]%
and thereafter, beginning [_______________], 2004, at a Redemption Price equal
to 100% of the principal amount, together, in the case of any such redemption,
with accrued and unpaid interest (if any) to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of the Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
In the event of redemption of this Security in part only, a new
Security or Securities of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
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Upon a Change of Control, any Holder of Securities will have the right
to cause the Company to repurchase all or any part of the Securities of such
Holder at a purchase price equal to 101% of the principal amount of the
Securities to be purchased plus accrued and unpaid interest thereon to the
Change of Control Payment Date as provided in, and subject to the terms of, the
Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the obligations of the Company under this Security are
Guaranteed pursuant to Subsidiary Guarantees endorsed hereon and as provided in
the Indenture. Each Holder, by holding this Security, agrees to all of the
terms and provisions of said Guarantees. The Indenture provides that a
Subsidiary Guarantor shall be released from its Subsidiary Guarantee upon
compliance with certain conditions.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default with respect to the Securities shall occur and
be continuing, the principal of and accrued and unpaid interest on the
Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture provides that modifications and amendments of the
Indenture may be made by the Company, the Subsidiary Guarantors and the Trustee
without the consent of any Holders of Securities in certain limited
circumstances. The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Subsidiary Guarantors and the rights of the
Holders of the Securities under the Indenture at any time by the Company, the
Subsidiary Guarantors and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all Securities, to waive compliance by
the Company or the Subsidiary Guarantors with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar
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duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Securities of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1000 or any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of like
tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of
the Company, the Subsidiary Guarantors or the Trustee may treat the Person in
whose name this Security is registered as the owner hereof for all purposes,
whether or not this Security be overdue, and none of the Company, the Subsidiary
Guarantors the Trustee and any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Company's [__]% Senior Notes Due 2006 referred to
in the within-mentioned Indenture.
Dated:
American Stock Transfer &
Trust Company, AS TRUSTEE
By.......................................
AUTHORIZED OFFICER
SECTION 205. FORM OF GUARANTEE
For value received, each of the Subsidiary Guarantors listed below
hereby jointly and severally unconditionally Guarantees to the Holder of the
Security upon which this Guarantee is endorsed, and to the Trustee on behalf of
such Holder, the full and punctual payment of the principal of (and premium, if
any) and interest on such Security when and as the same shall become due and
payable, whether at the Stated Maturity, by acceleration, call for redemption,
purchase or otherwise, according to the terms thereof and of the Indenture
referred to therein. In case of the failure of the Company punctually to make
any such payment, each of the Subsidiary Guarantors hereby jointly and severally
agrees to cause such payment to be made punctually when and as the same shall
become due and payable, whether a Stated Maturity or by acceleration, call for
redemption, purchase or otherwise, and as if such payment were made by the
Company.
Each of the Subsidiary Guarantors hereby jointly and severally agrees
that its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of such Security or the Indenture, the
absence of any action to enforce the same, any exchange, release or
non-perfection of any Lien on any collateral for, or any release or amendment or
waiver of any term of any other Guarantee of all or any of the Securities, or
any consent to departure
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from any requirement of any other Guarantee of, all or of any of the Securities,
the election by the Trustee or any of the Holders in any proceeding under
Chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 101-1330, as amended (the
"Bankruptcy Code"), of the application of Section 1111(b)(2) of the Bankruptcy
Code, any borrowing or grant of a security interest by the Company, as
debtor-in-possession, under Section 364 of the Bankruptcy Code, the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
the claims of the Trustee or any of the Holders for payment of any of the
Securities (including, without limitation, any interest or premium thereon), any
waiver or consent by the Holder of such Security or by the Trustee with respect
to any provisions thereof or of the Indenture or with respect to the provisions
hereof as they apply to any other Subsidiary Guarantor, the obtaining of any
judgment against the Company or any action to enforce the same or any other
circumstances which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Subsidiary Guarantors hereby waives the
benefits of diligence, presentment, demand of payment, any requirement that the
Trustee or any of the Holders protect, secure, perfect or insure any security
interest in or other Lien on any property subject thereto or exhaust any right
or take action against the Company or any other Person, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest or notice with respect
to such Security or the Indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Subsidiary Guarantee will not be discharged
except by complete performance of the obligations contained in such Security and
in this Subsidiary Guarantee. Each of the Subsidiary Guarantors hereby agrees
that, in the event of a default in payment of principal (or premium, if any) or
interest on such Security, whether at its Stated Maturity, by acceleration, call
for redemption, purchase or otherwise, legal proceedings may be instituted by
the Trustee on behalf of, or by, the Holder of such Security, subject to the
terms and conditions set forth in the Indenture, directly against all or any of
the Subsidiary Guarantors to enforce this Subsidiary Guarantee without first
proceeding against the Company. Each Subsidiary Guarantor agrees that if, after
the occurrence and during the continuance of an Event of Default, the Trustee or
any of the Holders are prevented by applicable law from exercising their
respective rights to accelerate the maturity of the Securities, to collect
interest on the Securities, or to enforce or exercise any other right or remedy
with respect to the Securities, such Subsidiary Guarantor agrees to pay to the
Trustee for the account of the Holders, upon demand therefor, the amount that
would otherwise have been due and payable had such rights and remedies been
permitted to be exercised by the Trustee or any of the Holders.
No reference herein to the Indenture and no provision of this
Subsidiary Guarantee or of the Indenture shall alter or impair the Subsidiary
Guarantee of any Subsidiary Guarantor, which is absolute and unconditional, of
the full and punctual payment of the principal (and premium, if any) and
interest on the Security upon which this Subsidiary Guarantee is endorsed.
Each Subsidiary Guarantor shall be subrogated to all rights of the
Holder of this Security against the Company in respect of any amounts paid by
such Subsidiary Guarantor on account of this Security pursuant to the provisions
of this Subsidiary Guarantee or the Indenture; PROVIDED, HOWEVER, that such
Subsidiary Guarantor shall not be entitled to enforce or to receive any payments
arising out of, or based upon, such right of subrogation until the principal of
(and premium, if any) and interest on this Security and all other Securities
issued under the Indenture shall have been paid in full.
This Subsidiary Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Securities is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee on the Securities, whether as a "voidable
preference," "fraudulent transfer," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Securities shall, to
the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
The Subsidiary Guarantors shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under this Subsidiary Guarantee.
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The Subsidiary Guarantors or any particular Subsidiary Guarantor shall
be released from this Subsidiary Guarantee upon the terms and subject to certain
conditions provided in the Indenture.
By delivery of a supplemental indenture to the Trustee in accordance
with the terms of the Indenture, each Person that became a Subsidiary Guarantor
after the date of the Indenture will be deemed to have executed and delivered
this Subsidiary Guarantee for the benefit of the Holder of this Security with
the same effect as if such Subsidiary Guarantor was named below.
All terms used in this Subsidiary Guarantee which are defined in the
Indenture referred to in the Security upon which this Subsidiary Guarantee is
endorsed shall have the meanings assigned to them in such Indenture.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Security upon which this
Subsidiary Guarantee is endorsed shall have been executed by the Trustee under
the Indenture by manual signature.
Reference is made to Article Thirteen of the Indenture for further
provisions with respect to this Subsidiary Guarantee.
THIS SUBSIDIARY GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO PRINCIPLES OF CONFLICTS OF LAWS.
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IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this
Subsidiary Guarantee to be duly executed.
Gas Turbine Corporation
Greenwich Turbine, Inc.
GASI Engine Services Corporation
Gas Turbine Test Corporation
Greenwich Foreign Sales Corporation
Greenwich Air Services-Texas, L.P.
McAllen Components, L.P.
Each as Subsidiary Guarantor
By.................................
Title:
Attest:
...................................
Title:
ARTICLE THREE
THE SECURITIES
SECTION 301. DENOMINATIONS.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1000 or an integral multiple thereof.
SECTION 302. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or by any
Vice President, together with any one of the Treasurer, any Assistant Treasurer,
the Secretary or any Assistant Secretary of the Company. The signature of any
of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
Each Security shall be dated the date of its authentication.
No Security or Subsidiary Guarantee endorsed thereon shall be entitled
to any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the Trustee by manual
signature of an authorized officer, and such certificate upon any Security shall
be conclusive evidence, and the only evidence, that such Security and the
Subsidiary Guarantees endorsed thereon have been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security
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shall have been authenticated and delivered hereunder but never issued and sold
by the Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 308, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of $150,000,000, upon Company Order.
Such Company Order shall specify the date on which the original issue of
Securities is to be authenticated and shall further provide instructions
concerning registration, amounts for each Holder and delivery. The aggregate
principal amount of Securities outstanding at any time may not exceed
$150,000,000, except as provided in Section 305.
SECTION 303. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and having
endorsed thereon the Subsidiary Guarantees substantially of the tenor of the
definitive Subsidiary Guarantees in lieu of which they are issued duly executed
by the Subsidiary Guarantors and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company maintained for that purpose, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company and each Subsidiary Guarantor shall execute and the
Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities with the Subsidiary Guarantees endorsed thereon, of any
authorized denominations and of like tenor and aggregate principal amount.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as definitive Securities.
SECTION 304. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office or in any other office or
agency of the Company maintained pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company maintained for such purpose, the Company and
each Subsidiary Guarantor shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities with the Subsidiary Guarantees endorsed thereon, of any
authorized denominations and of like tenor and aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities with the Subsidiary Guarantees endorsed thereon, of any authorized
denominations and of like tenor and aggregate principal amount, upon surrender
of the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company and each Subsidiary
Guarantor shall execute, and the Trustee shall authenticate and deliver, the
Securities with the Subsidiary Guarantees endorsed thereon which the Holder
making the exchange is entitled to receive.
All Securities with the Subsidiary Guarantees endorsed thereon issued
upon any registration of transfer or exchange of Securities shall be the valid
obligations of the Company and each Subsidiary Guarantor, evidencing the same
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debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 303, 906 or 1106 not involving any transfer.
If the Securities are to be redeemed in part, the Company shall not be
required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption under Section 1102 and ending at the close of business on the day of
such mailing, or (B) to register the transfer of or exchange any Security so
selected for redemption, in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
With respect to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and deposited with such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) A Global Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary. A Global Security is exchangeable for certificated
Securities only if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for such Global Security or
if at any time the Depositary ceases to be a clearing agency registered
under the Exchange Act, (ii) the Company executes and delivers to the
Trustee a notice that such Global Security shall be so transferable,
registrable, and exchangeable, and such transfers shall be registrable or
(iii) there shall have occurred and be continuing an Event of Default or an
event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default with respect to the Securities represented
by such Global Security. Any Global Security that is exchangeable for
certificated Securities pursuant to the preceding sentence will be
transferred to, and registered and exchanged for, certificated Securities
in authorized denominations, without legends applicable to a Global
Security, and registered in such names as the Depositary holding such
Global Security may direct. Subject to the foregoing, a Global Security is
not exchangeable, except for a Global Security of like denomination to be
registered in the name of the Depositary or its nominee. In the event that
a Global Security becomes exchangeable for certificated Securities,
(i) certificated Securities will be issued only in fully registered form in
denominations of $1,000 or integral multiples thereof, (ii) payment of
principal, premium (if any) and interest on the certificated Securities
will be payable, and the transfer of the certificated Securities will be
registerable, at the office or agency of the Company maintained for such
purposes, and (iii) no service charge will be made for any registration of
transfer or exchange of the certificated Securities, although the Company
may require payment of a sum sufficient to cover any tax or governmental
charge imposed in connection therewith.
(3) Securities issued in exchange for a Global Security or any
portion thereof shall have an aggregate principal amount equal to that of
such Global Security or portion thereof to be so exchanged, shall be
registered in such names and be in such authorized denominations as the
Depositary shall designate and shall bear the applicable legends provided
for herein. Any Global Security to be exchanged in whole shall be
surrendered by the Depositary to the Trustee. With respect to any Global
Security to be exchanged in part, either such Global Security shall be so
surrendered for exchange or, if the Trustee is acting as custodian for the
Depositary or its nominee with respect to such Global Security, the
principal amount thereof shall be reduced, by an amount equal to the
portion thereof to be
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so exchanged, by means of an appropriate adjustment made on the records of
the Trustee. Upon any such surrender or adjustment, the Trustee shall
authenticate and deliver the Security issuable on such exchange to or upon
the order of the Depositary or an authorized representative thereof.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 303, 305, 906 or
1106 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.
Members of, or participants in, the Depositary ("Participants") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Subsidiary Guarantors, the Trustee and any agent of the
Company, the Subsidiary Guarantors or the Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Participants, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
SECTION 305. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
and each Subsidiary Guarantor shall execute and the Trustee shall authenticate
and deliver in exchange therefor a new Security with the Subsidiary Guarantees
endorsed thereon of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the
Trustee (i) evidence to their satisfaction of the destruction, loss or theft of
any Security and (ii) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the absence
of notice to the Company or the Trustee that such Security has been acquired by
a bona fide purchaser, the Company and each Subsidiary Guarantor shall execute
and the Trustee shall authenticate and deliver, in lieu of any such destroyed,
lost or stolen Security, a new Security with the Subsidiary Guarantees endorsed
thereon of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company and the Subsidiary Guarantors, whether or
not the destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 306. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
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Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to each
Holder of Securities in the manner set forth in Section 106, not less than
10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 307. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Security is registered as
the owner of such Security for the purpose of receiving payment of principal of
and any premium and (subject to Section 306) any interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Subsidiary Guarantors, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
SECTION 308. CANCELLATION.
All Securities surrendered for payment, redemption or registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly
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permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of as directed by a Company Order; PROVIDED, HOWEVER, that the
Trustee shall not be required to destroy such cancelled Securities.
SECTION 309. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 310. CUSIP NUMBERS.
The Company in issuing the Securities may use CUSIP numbers, and, if
so, the Trustee shall use CUSIP numbers in notices of redemption, any Prepayment
Offer Notice or any notice of a Change of Control Offer as a convenience to
Holders; PROVIDED that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of redemption, Prepayment Offer Notice or any notice of
a Change of Control Offer and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption,
prepayment or offer shall not be affected by any defect in or omission of such
numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 305 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company;
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee, as trust funds in trust for the purpose, money in an amount
sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation
(and the Company is not prohibited from depositing such money for such
purpose on that date pursuant to the terms of this Indenture) for
principal and any premium and interest to the date of such deposit (in
the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
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(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614, the obligation of the
Company under the last paragraph of Section 1003 and, if money shall have been
deposited with the Trustee pursuant to subclause (B) of Clause (1) of this
Section, the obligations of the Trustee under Section 402 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Persons entitled thereto, of the principal and any
premium and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of principal of (or premium, if any, on)
any Security at its Maturity; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with) and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(4) a default under any Indebtedness by the Company or any Restricted
Subsidiary, or under any mortgage, indenture or instrument (including this
Indenture) under which there may be issued or by which there may be secured
or evidenced any such Indebtedness, which default shall have resulted in an
aggregate outstanding principal amount greater than $10 million of such
Indebtedness becoming or being accelerated and declared due and payable
prior to the date on which it would otherwise have become due and payable,
or a failure to pay any Indebtedness in an aggregate outstanding principal
amount greater than $10 million at maturity, in each case without such
Indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after there shall have
been given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice specifying
such default and requiring the Company to cause such Indebtedness to be
discharged or cause such
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acceleration to be rescinded or annulled, as the case may be, and stating
that such notice is a "Notice of Default" hereunder; or
(5) a judgment or order or judgments or orders for the payment of
money are entered against the Company or any Restricted Subsidiary in an
uninsured aggregate amount in excess of $10 million by a court or courts of
competent jurisdiction, which judgments or orders are not discharged,
waived, stayed, satisfied or bonded within a period (during which execution
shall not be effectively stayed) of 45 consecutive days after the right to
appeal all such judgments or orders has expired; or
(6) the Company or any Restricted Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency; or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted Subsidiary in
an involuntary case;
(B) appoints a Custodian of the Company or any Restricted Subsidiary
or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Restricted Subsidiary; or
(D) any similar relief is granted under any foreign laws
and the order, decree or relief remains unstayed and in effect for 45 days.
The term "Bankruptcy Law" means Title 11, UNITED STATES CODE, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 501(6) or 501(7)) shall occur and be continuing, then in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal amount of and accrued and
unpaid interest on all the Securities to be due and payable immediately, by a
notice in writing to the Company and the Subsidiary Guarantors (and to the
Trustee if given by Holders), and upon any such declaration such principal
amount and accrued and unpaid interest shall become immediately due and payable.
If an Event of Default specified in Section 501(6) or 501(7) occurs, the
principal amount of and interest on all the Securities shall automatically, and
without any declaration or other action on the part of the Trustee or any
Holder, become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree based on acceleration for payment of the money due
has been obtained by the Trustee as hereinafter in this Article provided, the
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Holders of a majority in aggregate principal amount of the Outstanding
Securities, by written notice to the Company and the Subsidiary Guarantors and
the Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) to the extent that payment of such interest is lawful
and is required hereunder, interest upon overdue interest at the rate
borne by such Securities, and
(C) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal or interest of the Securities which has become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on the Securities
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) the Securities at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of the Securities, the whole amount then due and payable on the
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate borne by the
Securities, and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders of the Securities by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly
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to the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; PROVIDED,
HOWEVER, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
or Subsidiary Guarantees endorsed thereon may be prosecuted and enforced by the
Trustee without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Securities.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee under
Section 607; and
SECOND: to the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal and any premium and interest,
respectively; and
THIRD: to the Company.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
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(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST.
Notwithstanding any other provision in this Indenture, a Holder of the
Securities shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 306)
interest on the Securities on the Stated Maturities expressed in the Securities
(or, in the case of redemption, prepayment or Change of Control, on the
Redemption Date, Purchase Date or Change of Control Payment Date, respectively)
and to institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 305, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of the Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee with respect to the Securities;
PROVIDED that
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(1) such direction shall not be in conflict with any rule of law or
with this Indenture and would not involve the Trustee in personal
liability, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may by Act of such Holders on behalf of the Holders of
all the Securities waive any past or existing Default or Event of Default
hereunder and its consequences, except a Default
(1) in the payment of the principal of or any premium or interest on
the Securities, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereto.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; PROVIDED that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee.
SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.
Each of the Company and the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any usury, stay or extension law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and each of the Company and the Subsidiary Guarantors (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers,
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if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Holder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of
principal of or interest on any Security (including payments pursuant to the
mandatory redemption provisions of such Security, if any), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of Holders.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel reasonably selected by it
and the written advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
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SECTION 604. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
in any document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication. The Trustee
shall not be charged with notice or knowledge of any Default or Event of Default
unless (i) a Trust Officer shall have actual knowledge thereof or (ii) the
Trustee shall have received notice thereof in accordance with Section 105 from
the Company or any Holder.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company. So long as no Event of Default
shall have occurred and be continuing, all interest allowed on any such money
shall be paid to the Company from time to time upon receipt by the Trustee of a
Company Order except as otherwise provided in this Indenture.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time such compensation as
shall be agreed to in writing by the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, liability, damage, claim
or expense incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of the trust
or trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
Without limiting any rights available to the Trustee under applicable
law, when the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(6) or Section 501(7), the expenses
(including the reasonable fees and expenses of its counsel) and the compensation
for the services are intended to constitute expenses of administration under any
applicable Federal or State bankruptcy, insolvency or other similar law.
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To secure the Company's payment obligations under this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee as such, except money or property held in trust to
pay the principal of or interest on particular Securities.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be one (and only one) Trustee hereunder. The
Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act
to act as such and has a combined capital and surplus of at least $10,000,000.
If any such Person publishes reports of condition at least annually, pursuant to
law or to the requirements of its supervising or examining authority, then for
the purposes of this Section and to the extent permitted by the Trust Indenture
Act, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
The Trustee may resign at any time by giving written notice thereof to
the Company.
The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee, or (B) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
(i) the giving of such notice of resignation or (ii) the removal of the Trustee
by the Company pursuant to a Board Resolution, the Trustee who has so resigned
or been removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any reason, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee (it
being understood that at any time there shall be only one Trustee) and shall
comply with the applicable requirements of Section 611. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 611, become the successor Trustee and to that
extent supersede the successor Trustee appointed by the Company. If no
successor Trustee shall have been so appointed by the Company or the Holders and
accepted appointment in the manner required by Section 611, any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders of
Securities in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
In case of the appointment hereunder of a successor Trustee, every
such successor Trustee so appointed shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; PROVIDED that, on the request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
preceding paragraph.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
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SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee, with the prior written consent of the Company and after
giving notice of the appointment described in this Section 614 in the manner
provided in Section 106 to all Holders of Securities, may appoint an
Authenticating Agent or Agents which shall be authorized to act on behalf of the
Trustee to authenticate Securities issued upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section 305, and the
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $10,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate agency or corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent, PROVIDED such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
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If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Company's [__]% Senior Notes Due 2006 referred to
in the within-mentioned Indenture.
American Stock Transfer &
Trust Company, AS TRUSTEE
By,.....................................
AS AUTHENTICATING AGENT
By,.....................................
AUTHORIZED OFFICER
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(1) semiannually, not later than [____________] and [____________] in
each year, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders of Securities as of the preceding
[____________] or [____________], as the case may be, and
(2) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
If required by Section 313(a) of the Trust Indenture Act, the Trustee shall,
within 60 days after each [____________] following the date of this Indenture,
deliver to Holders a brief report, dated as of such [____________], which
complies with the provisions of such Section 313(a).
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when the Securities are listed on any stock
exchange.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
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SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, merge or consolidate with or into any other entity (other than a merger of a
Restricted Subsidiary into the Company or into another Restricted Subsidiary) or
(in the case of the Company), directly or indirectly, sell, transfer, assign,
lease, convey or otherwise dispose of all or substantially all of its Property
or assets in any one transaction or series of transactions, unless:
(a) the entity formed by or surviving any such consolidation or merger
(if the Company is a party to the transaction and is not the surviving
entity) or the Person to which such sale, assignment, transfer, lease or
conveyance is made (the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America or a
State thereof or the District of Columbia and such corporation expressly
assumes, by supplemental indenture in form satisfactory to the Trustee,
executed and delivered to the Trustee by such corporation, the due and
punctual payment of the principal of, premium, if any, and interest on all
the Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of the
Indenture to be performed by the Company;
(b) in the case of a sale, transfer, assignment, lease, conveyance or
other disposition of all or substantially all of the Company's Property or
assets, such Property and assets shall have been transferred as an entirety
or virtually as an entirety to one Person;
(c) immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation,
any Indebtedness Incurred or anticipated to be incurred in connection with
such transaction or series of transactions), no Default or Event of Default
shall have occurred and be continuing;
(d) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), the Company or the Surviving
Entity, as the case may be, would be able to Incur at least $1.00 of
additional Indebtedness under clause (a) of Section 1008;
(e) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), the Company or the Surviving Entity
shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to the transaction
or series of transactions; and
(f) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
sale, assignment, conveyance, transfer, lease or other disposition and, if
a supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with this Article and that all
conditions precedent herein provided for relating to such transaction have
been complied with.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any sale, conveyance, transfer, assignment, lease or
other disposition of all or substantially all of the Property or assets of the
Company in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, assignment, transfer, lease or other disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a sale, conveyance, assignment, transfer or lease of the Property or assets
of the Company, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, the Subsidiary Guarantors and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto or
otherwise amend this Indenture, in form satisfactory to the Trustee, for any of
the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of the Securities or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of the Securities; or
(4) to reflect the release of any Subsidiary Guarantor from its
Subsidiary Guarantee pursuant to Section 1303 or to add as a Subsidiary
Guarantor any Subsidiary of the Company pursuant to Section 1305 in the
manner provided by this Indenture; or
(5) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(6) to secure the Securities pursuant to the requirements of
Section 1010 or otherwise; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 611; or
(8) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, PROVIDED that such action pursuant
to this Clause (8) shall not adversely affect the interests of the Holders
of Securities in any material respect; or
(9) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the Trust Indenture Act; or
(10) to make any other change that does not adversely affect the
interests of any Holder of Securities in any material respect.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of Securities a notice briefly describing such amendment.
The failure to give such notice to all Holders of Securities, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, the Subsidiary Guarantors when authorized by resolutions of their
respective boards of directors (certified copies of which
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shall be delivered to the Trustee), and the Trustee may enter into an indenture
or indentures supplemental hereto, amendments to this Indenture or waivers for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders of the Securities under this Indenture; PROVIDED, HOWEVER, that
no such supplemental indenture, amendment or waiver shall, without the consent
of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of any Security
which would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502 or alter the redemption or, except
as provided in clause (5) below, repurchase provisions with respect
thereto, or change the coin or currency in which any Security or any
premium or interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, prepayment or Change of
Control, on or after the Redemption Date, Purchase Date or Change of
Control Payment Date, respectively);
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and or their consequences provided for in this
Indenture;
(3) modify any of the provisions of this Section, Section 513 or
Section 1020, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby;
(4) modify any of the provisions of this Indenture to reduce the
relative ranking of any Securities in a manner adverse to Holders;
(5) following the mailing of a Prepayment Offer pursuant to
Section 1014 or a Change of Control Offer pursuant to Section 1021, modify
the provisions of this Indenture with respect to such Prepayment Offer or
Change of Control Offer in a manner adverse in any material respect to such
Holder; or
(6) release any security that may have been granted in respect of the
Securities.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment, waiver or supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of Securities a notice briefly describing such amendment.
The failure to give such notice to all Holders of Securities, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
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SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture or amendment executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities with the Subsidiary Guarantees endorsed thereon so modified as to
conform, in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and each Subsidiary
Guarantor and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. PAYMENT FOR CONSENT.
Neither the Company nor any Affiliate of the Company shall, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid to all Holders
that so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees for the benefit of the Holders of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities in accordance with the terms of the Securities
and this Indenture. Principal, premium, if any, and interest shall be
considered paid on the date due if on such date the Trustee or Paying Agent
(other than the Company or its Wholly Owned Subsidiaries) holds in accordance
with this Indenture money sufficient to pay all principal, premium, if any, and
interest then due and the Trustee or such Paying Agent, as the case may be, is
not prohibited from paying such money to the Holders of Securities on that date
pursuant to the terms of this Indenture.
SECTION 1002. REGISTRAR AND PAYING AGENT.
The Company shall maintain in The City of New York an office or agency
where Securities may be presented for registration of transfer or for exchange
(the "Registrar") and an office or agency where Securities may be presented for
payment (the "Paying Agent"). The Registrar shall keep a register of the
Securities and of their transfer and
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exchange. The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the Trust Indenture Act. Such agreement shall
implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of any such agent. If
the Company fails to maintain or act as Registrar or Paying Agent, the Trustee
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 607. The Company or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or
transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company or any of its Wholly Owned Subsidiaries shall at any
time act as Paying Agent, it will, on or before each due date of the principal
of or any premium or interest on any of the Securities, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any premium and interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or prior to each due date of the principal of or any
premium or interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay such amount, such sum to be held as provided by the Trust
Indenture Act, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for the Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (1) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (2) during the continuance
of any default by the Company (or any other obligor upon the Securities) in the
making of any payment in respect of the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent for payment in respect of the Securities.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
The Trustee and the Paying Agent shall promptly pay to the Company
upon Company Request any money or securities held by them at any time in excess
of amounts required to pay principal of, premium, if any, or interest on the
Securities.
Any money deposited with the Trustee or any other Paying Agent, or
then held by the Company, in trust for the payment of the principal of or any
premium or interest on any Security and remaining unclaimed for one year after
such principal, premium or interest has become due and payable may be paid to
the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company and the Subsidiary
Guarantors for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or
such Paying Agent, before being required to make any such repayment, shall at
the expense of the Company cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in The City of New York, notice that
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such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and
(2) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a Lien upon the property of the Company or any Subsidiary;
PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1008. LIMITATION ON COMPANY INDEBTEDNESS.
The Company shall not, directly or indirectly, Incur any Indebtedness
unless no Default or Event of Default shall have occurred and be continuing at
the time of such Incurrence and, after giving pro forma effect to the
application of the proceeds thereof, no Default or Event of Default would occur
as a consequence of such Incurrence and either (a) after giving pro forma effect
to the Incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the Consolidated Interest Coverage Ratio exceeds 2.0 or (b)
such Indebtedness is Permitted Company Indebtedness.
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SECTION 1009. LIMITATION ON RESTRICTED SUBSIDIARY INDEBTEDNESS AND PREFERRED
STOCK.
The Company shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, Incur any Indebtedness or issue any Preferred Stock
unless no Default or Event of Default shall have occurred and be continuing at
the time of such Incurrence or issuance and, after giving pro forma effect to
the application of the proceeds thereof, no Default or Event of Default would
occur as a consequence of such Incurrence or issuance and such Indebtedness or
such Preferred Stock is Permitted Restricted Subsidiary Indebtedness or
Preferred Stock.
SECTION 1010. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Lien (other than a Permitted
Lien) on or with respect to any Property or assets of the Company or any
Restricted Subsidiary owned on the Issue Date or thereafter acquired with the
proceeds of any Asset Sale, or any interest therein or any income or profits
therefrom, unless the Securities are secured equally and ratably with (or prior
to) any and all other obligations secured by such Lien; PROVIDED, HOWEVER, that
the Company and each Restricted Subsidiary may incur other Liens to secure
Indebtedness as long as the sum, without duplication, of (x) the amount of
outstanding Indebtedness secured by Liens Incurred pursuant to this proviso plus
(y) the Attributable Indebtedness with respect to all outstanding leases in
connection with Sale and Leaseback Transactions entered into pursuant to the
proviso to Section 1011 does not exceed 5% of Consolidated Net Tangible Assets
as determined by reference to the consolidated balance sheet of the Company and
its Restricted Subsidiaries as of the end of the most recent fiscal quarter for
which financial statements are available.
SECTION 1011. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into any Sale and Leaseback Transaction unless
(i) the Indebtedness of the Company or such Restricted Subsidiary with respect
thereto would be permitted under Section 1008 or under Section 1009, (ii) the
net proceeds from such Sale and Leaseback Transaction are at least equal to the
Fair Market Value of such Property being transferred, and (iii) the net proceeds
from such Sale and Leaseback Transaction are applied in accordance with Section
1014; PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may enter
into a Sale and Leaseback Transaction as long as the sum, without duplication,
of (x) the Attributable Indebtedness with respect to such Sale and Leaseback
Transaction and all other Sale and Leaseback Transactions entered into pursuant
to this proviso, plus (y) the amount of outstanding Indebtedness secured by
Liens Incurred pursuant to the proviso to Section 1010, does not exceed 5% of
Consolidated Net Tangible Assets as determined by reference to the consolidated
balance sheet of the Company and its Restricted Subsidiaries as of the end of
the most recent fiscal quarter for which financial statements are available.
SECTION 1012. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment if, at the
time of and after giving effect to the proposed Restricted Payment:
(a) any Default or Event of Default would have occurred and be
continuing;
(b) the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of Section 1008; or
(c) the aggregate amount expended or declared for all Restricted
Payments from and after the Issue Date would exceed the sum of $2.5 million plus
(i) 50% of the aggregate Consolidated Net Income of the Company (or, if
Consolidated Net Income shall be a deficit, less 100% of such deficit)
commencing on the first day of the fiscal quarter in which the Issue Date
occurs, and ending on the last day of the fiscal quarter ending on or
immediately preceding the
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date of such Restricted Payment, (ii) 100% of the aggregate net cash proceeds
received by the Company on or subsequent to the Issue Date, from the issuance or
sale (other than to a Subsidiary of the Company) of Capital Stock of the
Company, including, without limitation, Capital Stock of the Company issued upon
conversion of convertible debt or convertible Redeemable Stock or upon the
exercise of options, warrants or rights to purchase Capital Stock of the
Company, and (iii) an amount equal to the aggregate net reduction in Investments
made by the Company and its Restricted Subsidiaries subsequent to the Issue Date
in other Persons (other than the Company and its Restricted Subsidiaries)
resulting from (A) payments of interest on debt, dividends, repayment of loans
or advances, or other transfers or distributions of Property (but only to the
extent the Company excludes such transfers or distributions from the calculation
of Consolidated Net Income for purposes of clause (i) above), in each case to
the Company or any Restricted Subsidiary from any such Person, or (B) the
designation of any Unrestricted Subsidiary as a Restricted Subsidiary, not to
exceed, in the case of clauses (A) and (B), taken together, the amount of such
Investments previously made in such other Persons which were treated as
Restricted Payments.
The foregoing limitations do not prevent the Company or any Restricted
Subsidiary from (a) paying a dividend on its Capital Stock within 60 days after
declaration thereof if, on the declaration date, such dividend could have been
paid in compliance with the Indenture, or (b) making Permitted Investments so
long as no Default or Event of Default shall have occurred and be continuing.
SECTION 1013. LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES.
The Company will not (a) permit any Restricted Subsidiary to issue any
Capital Stock other than to the Company or one of its Wholly Owned Subsidiaries
or (b) permit any Person other than the Company or a Wholly Owned Subsidiary to
own any Capital Stock of any Restricted Subsidiary of the Company (other than
directors' qualifying shares), except, in each case, for (i) a sale of all of
the Capital Stock of a Restricted Subsidiary owned by the Company and its
Restricted Subsidiaries effected in accordance with Section 1014 and (ii)
Preferred Stock permitted under Section 1009.
SECTION 1014. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, consummate any Asset Sale after the Issue Date, unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the Property subject to such Asset Sale, (ii) at least 75% of the
consideration paid to the Company or such Restricted Subsidiary for such
Property is in the form of cash and cash equivalents and (iii) the Company or
such Restricted Subsidiary, as the case may be, uses the Net Cash Proceeds from
such Asset Sale in the manner set forth in clauses (b) and (c) of this Section.
(b) The Net Cash Proceeds, or any portion thereof, from Asset Sales
may be applied by the Company or a Restricted Subsidiary, to the extent the
Company or such Restricted Subsidiary elects (A) to reinvest in additional
assets in the Aerospace Industry and Gas Turbine Engine Business ("Replacement
Assets") (including by means of an investment in Replacement Assets by a
Restricted Subsidiary with Net Cash Proceeds received by the Company or another
Restricted Subsidiary); and (B) to prepay, repay or purchase Indebtedness of the
Company ranking PARI PASSU to its Securities in right of payment or Indebtedness
of a Restricted Subsidiary ranking PARI PASSU to such Restricted Subsidiary's
Subsidiary Guarantee, if any, in right of payment (in each case excluding
Indebtedness owed to the Company or an Affiliate of the Company).
(c) Any Net Cash Proceeds from an Asset Sale not applied in accordance
with clause (b) of this Section within 270 days from the date of such Asset Sale
shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10 million, the Company will be required to make an offer to purchase
(the "Prepayment Offer") the Securities at a purchase price in cash of at least
100% of their principal amount plus accrued and unpaid interest thereon (if any)
to the Purchase Date in accordance with the procedures (including prorating in
the event of oversubscription) set forth herein. If the aggregate principal
amount of Securities surrendered for purchase by Holders thereof exceeds the
amount of Excess Proceeds, then the Trustee shall select the Securities to be
purchased pro rata according to principal
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amount with such adjustments as may be deemed appropriate by the Company so
that any Securities in denominations of $1,000, or integral multiples thereof,
shall be purchased. To the extent that any portion of the amount of Excess
Proceeds remain after compliance with the preceding sentences and PROVIDED that
all Holders of Securities have been given the opportunity to tender their
Securities for purchase as described in the clause (d) of this Section, the
Company or such Restricted Subsidiary may use such remaining Excess Proceeds for
general corporate purposes and the amount of Excess Proceeds will be reset to
zero.
(d) Within five Business Days after 270 days from the date of an Asset
Sale, the Company shall, if it is obligated to apply an amount equal to any
Excess Proceeds to fund an offer to purchase the Securities, send a Prepayment
Offer Notice to the Holders of Securities. The Company shall notify the Trustee
at least 15 Business Days (or such shorter period as is acceptable to the
Trustee) prior to the mailing of the Prepayment Offer Notice of the Company's
obligation to make a Prepayment Offer, and the Prepayment Offer Notice shall be
mailed by the Company or, at the Company's request, by the Trustee in the name
and at the expense of the Company.
The Company will comply, to the extent applicable, with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of Securities as
described above. To the extent that the provisions of any securities laws or
regulations conflict with the provisions relating to a Prepayment Offer, the
Company will comply with the applicable securities laws and regulations and will
not be deemed to have breached its obligations described above by virtue
thereof.
Notwithstanding the foregoing provisions of this clause (d), if any
Security (or any portion thereof) accepted for payment shall not be so paid
pursuant to the provisions of the preceding paragraph, then, from the Purchase
Date until the date on which the principal of and premium (if any) and interest
on such Security is paid, interest shall be paid on the unpaid principal and
premium (if any) and, to the extent permitted by law, on any accrued but unpaid
interest thereon, in each case, at the rate borne by such Security.
SECTION 1015. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, conduct any business or enter into any
transaction or series of transactions (including, but not limited to, the sale,
transfer, disposition, purchase, exchange or lease of Property, the making of
any Investment, the giving of any Guarantee or the rendering of any service)
with or for the benefit of any Affiliate of the Company, unless (a) such
transaction or series of transactions is in the best interest of the Company or
such Restricted Subsidiary, (b) such transaction or series of transactions is on
terms which in the aggregate are no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with a Person that is not an Affiliate of the Company
or such Restricted Subsidiary and (c) with respect to a transaction or series of
transactions involving aggregate payments or other consideration to or from the
Company and its Restricted Subsidiaries having a Fair Market Value equal to or
in excess of (i) $5.0 million but less than $10.0 million, the Board of
Directors of the Company (including a majority of the disinterested members of
the Board of Directors of the Company) approves such transaction or series of
transactions and, in its good faith judgment, believes that such transaction or
series of transactions complies with clauses (a) and (b) of this paragraph, as
evidenced by a Board Resolution or (ii) $10.0 million, (A) the Company receives
the written opinion of an independent appraisal firm or investment banking firm
nationally recognized in the United States that such transaction (or series of
transactions) is fair, from a financial point of view, to the Company or such
Restricted Subsidiary and (B) the Board of Directors of the Company (including a
majority of the disinterested members of the Board of Directors of the Company)
approves such transaction or series of transactions and, in its good faith
judgment, believes that such transaction or series of transactions complies with
clauses (a) and (b) of this paragraph, as evidenced by a Board Resolution.
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SECTION 1016. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective, or enter into any agreement with any Person that
would cause to become effective, any encumbrance or restriction (other than
pursuant to law or regulation) on the legal right of any Restricted Subsidiary
to (a) pay dividends, in cash or otherwise, or make any other distributions on
or in respect of its Capital Stock or Redeemable Stock, or pay any Indebtedness
or other obligation owed to the Company or any other Restricted Subsidiary, (b)
make any loans or advances to the Company or any other Restricted Subsidiary or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary. Such limitation will not apply to: (i) any encumbrance
or restriction existing under certain agreements in effect on the Issue Date and
set forth in Schedule 1016 hereto; (ii) any encumbrance or restriction in
connection with an acquisition of Property, so long as such encumbrance or
restriction relates solely to the Property so acquired and was not created in
connection with or in anticipation of such acquisition; (iii) any encumbrance or
restriction existing in connection with Indebtedness permitted under the
indenture of a Restricted Subsidiary at the date on which such Restricted
Subsidiary became a Restricted Subsidiary (other than Indebtedness Incurred by
such Restricted Subsidiary in connection with or in anticipation of its becoming
a Restricted Subsidiary, whether upon its acquisition by the Company or
otherwise); (iv) any encumbrance or restriction existing under an agreement
effecting a permitted refinancing of Indebtedness issued pursuant to an
agreement creating an encumbrance or restriction permitted by clauses (i)
through (iii) above, so long as the encumbrances and restrictions existing under
any such refinancing agreement are no more restrictive in the aggregate than the
encumbrances and restrictions existing under the agreement pursuant to which the
refinanced Indebtedness was issued; (v) customary provisions restricting
subletting or assignment of leases and customary provisions in other agreements
that restrict assignment of such agreements or rights thereunder; and (vi) any
restriction on the sale or other disposition of assets or Property securing
Indebtedness as a result of a Permitted Lien on such assets or Property.
SECTION 1017. RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
Unless defined or designated as an Unrestricted Subsidiary, any Person
that becomes a Subsidiary of the Company or any of its Restricted Subsidiaries
shall be classified as a Restricted Subsidiary subject to the provisions of the
next paragraph. The Company may designate a Subsidiary (including a newly formed
or newly acquired Subsidiary) of the Company or any of its Restricted
Subsidiaries as an Unrestricted Subsidiary if (i) such Subsidiary does not have
any Indebtedness or other obligations which, if in default, would result (with
the passage of time or notice or otherwise) in a default on any Indebtedness of
the Company or any Restricted Subsidiary and (ii)(A) such designation is
effective immediately upon such Subsidiary becoming a Subsidiary of the Company
or of a Restricted Subsidiary, or (B) the Subsidiary to be so designated has
total assets of $1,000 or less. Except as provided in clause (ii)(B) of this
paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. An Unrestricted Subsidiary may be redesignated as a Restricted
Subsidiary upon compliance with the provisions of the next paragraph, PROVIDED,
HOWEVER, that once a Restricted Subsidiary has been redesignated an Unrestricted
Subsidiary, it may not thereafter be redesignated a Restricted Subsidiary. The
designation of an Unrestricted Subsidiary or removal of such designation shall
be made by the Board of Directors of the Company pursuant to a Board Resolution
and shall be effective as of the date specified in the applicable certified
resolution, which shall not be prior to the date such certified resolution is
delivered to the Trustee.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition or otherwise) unless, after giving effect to
such action, transaction or series of transactions, on a pro forma basis, (i)
the Company could Incur at least $1.00 of additional Indebtedness pursuant to
clause (a) of Section 1008, (ii) such Restricted Subsidiary could then Incur or
issue, pursuant to Section 1009, all Indebtedness and Preferred Stock as to
which it is obligated at such time, (iii) no Default or Event of Default would
occur or be continuing and (iv) such Restricted Subsidiary could then Incur,
pursuant to Section 1010, all Liens with respect to its Property in existence of
such time.
SECTION 1018. GUARANTEES OF CERTAIN INDEBTEDNESS.
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The Company shall not permit any of its Restricted Subsidiaries,
directly or indirectly, to (i) Incur, Guarantee or secure through the granting
of Liens or pledge of Property the payment of any Indebtedness Incurred pursuant
to Section 1008 under clause (b) of the definition of Permitted Company
Indebtedness or under clause (i) of such definition in respect of Indebtedness
previously Incurred under such clause (b) or Section 1009 under clause (a) of
the definition of Permitted Restricted Subsidiary Indebtedness or Preferred
Stock or under clause (g) of such definition in respect of Indebtedness
previously Incurred under such clause (a) unless such Restricted Subsidiary is
then a party to this Indenture as a Subsidiary Guarantor or such Subsidiary, the
Company, the Subsidiary Guarantors and the Trustee execute and deliver a
supplemental indenture evidencing such Subsidiary's Subsidiary Guarantee
pursuant to the provisions of Section 1305. Neither the Company nor any
Subsidiary Guarantor shall be required to make a notation on the Securities to
reflect any such subsequent Subsidiary Guarantee. Nothing in this Section 1018
shall be construed to permit any Restricted Subsidiary of the Company to incur
Indebtedness otherwise prohibited by Section 1009 or Section 1010.
SECTION 1019. COMMISSION REPORTS.
The Company shall, whether or not it is subject to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto, file with the
Commission the annual reports, quarterly reports, and other documents which the
Company would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) of the Exchange Act or any successor provision thereto,
if the Company were subject thereto, on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required to file
them. The Company shall also (whether or not it is required to file reports
with the Commission), within 30 days of each Required Filing Date, file with the
Trustee, copies of the annual reports, quarterly reports and other documents
(without exhibits) which the Company has filed or would have filed with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act, any successor
provisions thereto or this Section. The Company shall not be required to file
any report with the Commission if the Commission does not permit such filing.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates). The Company
also shall comply with the other provisions of Section 314(a) of the Trust
Indenture Act.
SECTION 1020. WAIVER OF CERTAIN COVENANTS.
The Company and the Subsidiary Guarantors may omit in any particular
instance to comply with any term, provision or condition set forth in any
covenant provided pursuant to Sections 901(2) for the benefit of the Holders or
in any of Sections 1008 through 1018, inclusive, if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders and on behalf of the
Holders of all Securities, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition, but no such
waiver shall extend to or affect such term, provision or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the Subsidiary Guarantors and the duties of the
Trustee in respect of any such term, provision or condition shall remain in full
force and effect.
SECTION 1021. MANDATORY REPURCHASE UPON A CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company will, in
accordance with Section 1021(b), notify each Holder, with a copy of such notice
to the Trustee, in writing of the occurrence of a Change of Control and
accompanying such notice will be an offer to purchase the Securities (a "Change
of Control Offer") at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the date of
purchase.
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder stating: (1) that a Change of Control has occurred
and a Change of Control Offer is being made pursuant to this Section and that
all Securities (or portions thereof) timely tendered will be accepted for
payment; (2) the purchase price and the purchase date, which shall be, subject
to any contrary requirements of applicable law, no earlier than 30 days nor
later than 60 days
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from the date such notice is mailed (the "Change of Control Payment Date"); (3)
that any Security (or portion thereof) accepted for payment (and duly paid on
the Change of Control Payment Date) pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date; (4)
that any Securities (or portions thereof) not tendered will continue to accrue
interest; (5) a description of the transaction or transactions constituting the
Change of Control; (6) that Holders accepting the offer to have their Securities
purchased pursuant to a Change of Control Offer will be required to surrender
such Securities (or portions thereof) to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
preceding the Change of Control Payment Date; (7) that Holders will be entitled
to withdraw their acceptance if the Paying Agent receives, not later than the
close of business on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of such Securities delivered for
purchase, and a statement that such Holder is withdrawing such Holder's election
to have such Securities (or portions thereof) purchased; (8) that Holders whose
Securities are being purchased only in part will be issued new Securities with
the Subsidiary Guarantees endorsed thereon equal in principal amount to the
unpurchased portion of the Securities surrendered, provided that each Security
purchased and each such new Security issued shall be in an original principal
amount in denominations of $1,000 and integral multiples thereof; and (9) any
other procedures that Holders must follow to accept a Change of Control Offer or
effect withdrawal of such acceptance.
(c) On the Change of Control Payment Date, the Company shall accept
for payment the Securities or portions thereof properly tendered pursuant to the
Change of Control Offer and irrevocably deposit with the Trustee or with a
Paying Agent (or, if the Company or any of its Wholly Owned Subsidiaries is
acting as Paying Agent, segregate and hold in trust) in cash an amount equal to
the purchase price plus accrued and unpaid interest, if any, payable to the
Holders entitled thereto, to be held for payment in accordance with the
provisions of this Section. Holders electing to have a Security (or portion
thereof) purchased will be required to surrender the Security, with an
appropriate form duly completed, to the Company at the address specified in the
notice at the close of business on the Business Day preceding the Change of
Control Payment Date. Holders will be entitled to withdraw their election if
the Trustee or the Company receives not later than the close of business on the
third Business Day prior to the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security which was delivered for purchase by the
Holder and a statement that such Holder is withdrawing his election to have such
Security (or portion thereof) purchased.
(d) On the Change of Control Payment Date, the Company shall deliver
to the Trustee the Securities or portions thereof which have been properly
tendered to and are to be accepted by the Company for payment together with an
Officers' Certificate identifying such Securities or portions thereof. The
Trustee or a Paying Agent shall, on the Change of Control Payment Date, mail or
deliver payment to each tendering Holder of the purchase price of the Securities
so accepted, and the Trustee shall promptly authenticate (and the Company and
the Subsidiary Guarantors shall execute) and mail to such Holder a new Security
with the Subsidiary Guarantees endorsed thereon equal in principal amount to any
unpurchased portion of the Securities surrendered; PROVIDED, that each such new
Security shall be issued in an original principal amount in denominations of
$1,000 and integral multiples thereof. In the event that the aggregate purchase
price of the Securities delivered by the Company to the Trustee is less than the
amount deposited with the Trustee, the Trustee shall deliver the excess to the
Company immediately after the Change of Control Payment Date.
(e) The Company will comply, to the extent applicable, with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act, and any other
securities laws and regulations to the extent such laws and regulations are
applicable in connection with the purchase of Securities in connection with a
Change of Control. To the extent that the provisions of any securities laws or
regulations conflict with the provisions relating to the Change of Control
Offer, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations described
above by virtue thereof.
Notwithstanding the foregoing provisions of this Section, if any
Security (or any portion thereof) accepted for payment shall not be so paid
pursuant to the provisions of paragraph (d), then, from the Change of Control
Payment Date until the date on which the principal of and premium (if any) and
interest on such Security is paid, interest shall be paid on the unpaid
principal and premium (if any) and, to the extent permitted by law, on any
accrued but unpaid interest thereon, in each case, at the rate borne by such
Security.
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SECTION 1022. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of (i) less than all the Securities (including any such redemption
affecting only a single Security), the Company shall, at least 60 days prior to
the Redemption Date fixed by the Company or (ii) all the Securities, the Company
shall, at least 45 days prior to the Redemption Date fixed by the Company (in
either case, unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed.
SECTION 1102. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of a portion of the principal
amount of any Security, PROVIDED that the unredeemed portion of the principal
amount of any Security shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) for such Security.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1103. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and state:
(1) the Redemption Date,
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(2) the Redemption Price,
(3) if less than all the Outstanding Securities consisting of more
than a single Security are to be redeemed, the identification (and, in the
case of partial redemption of any such Securities, the principal amounts)
of the particular Securities to be redeemed and, if less than all the
Outstanding Securities consisting of a single Security are to be redeemed,
the principal amount of the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date, and
(5) the place or places where each such Security is to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
SECTION 1104. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company or any of its Wholly Owned
Subsidiaries is acting as Paying Agent, segregate and hold in trust as provided
in Section 1003) an amount of money sufficient to pay the Redemption Price of,
and (except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date. Upon
Company Order, the Paying Agent shall promptly return to the Company any money
so deposited which is not required for such purpose.
SECTION 1105. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest or the Paying Agent is prohibited from making such payment pursuant to
the terms of this Indenture) such Securities shall cease to bear interest.
Upon surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; PROVIDED, HOWEVER, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of
Section 306.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate borne by the Security.
SECTION 1106. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company and each Subsidiary Guarantor shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities (in each case, with the Subsidiary
Guarantors endorsed thereon) of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
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SECTION 1107. PURCHASE OF SECURITIES.
The Company shall have the right at any time and from time to time to
purchase Securities in the open market or otherwise at any price.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. DEFEASANCE AND DISCHARGE.
The Company and the Subsidiary Guarantors shall be deemed to have been
discharged from their obligations with respect to the Securities and Subsidiary
Guarantees as provided in this Section on and after the date the conditions set
forth in Section 1203 are satisfied (hereinafter called "Defeasance"). For this
purpose, such Defeasance means that (i) the Company shall be deemed to have paid
and discharged the entire indebtedness represented by the Securities and to have
satisfied all its other obligations under the Securities and this Indenture
insofar as the Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same) and (ii) the
Subsidiary Guarantors shall each be released from their respective Subsidiary
Guarantees and under Article Thirteen of this Indenture, subject to the
following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of the Securities to receive, solely from
the trust fund described in Section 1203 and as more fully set forth in such
Section, payments in respect of the principal of and any premium and interest on
the Securities when payments are due, (2) the Company's obligations with respect
to the Securities under Sections 303, 304, 305, 1002 and 1003, (3) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (4) this
Article. Subject to compliance with this Article, the Company may exercise its
option (if any) to have this Section applied to any Securities notwithstanding
the prior exercise of its option (if any) to have Section 1202 applied to the
Securities.
SECTION 1202. COVENANT DEFEASANCE.
(1) The Company shall be released from its obligations under
Sections 1007 through 1017, inclusive, and 1021, and Sections 801(d) and 801(e),
and any covenants provided pursuant to Section 901(2) for the benefit of the
Holders of the Securities, and (2) the occurrence of any event specified in
Sections 501(3) (with respect to any of Sections 801(d) and 801(e), Sections
1007 through 1017, inclusive, and 1021, and any such covenants provided pursuant
to Section 901(2)), 501(4) and 501(5) shall be deemed not to be or result in an
Event of Default, in each case with respect to the Securities as provided in
this Section on and after the date the conditions set forth in Section 1203 are
satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such
Covenant Defeasance means that (i) the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such specified Section (to the extent so specified in the case of
Section 501(3)), whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document and (ii) the Subsidiary Guarantors shall each be released under their
respective Subsidiary Guarantees and under Article Thirteen of this Indenture,
but the remainder of this Indenture and the Securities shall be unaffected
thereby.
SECTION 1203. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
Section 1201 or Section 1202 to the Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefits of the Holders of the Securities, money
in an amount, or U.S. Government Obligations, or a combination thereof,
which through the payment of principal and interest in respect thereof in
accordance with their terms will
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provide, not later than one day before the due date of any payment, money
in an amount, in each case sufficient, in the opinion of a United States
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee to pay and discharge,
the principal of and any premium and interest on the Securities at Stated
Maturity or on earlier redemption in accordance with the terms of this
Indenture and the Securities.
(2) With respect to Section 1201, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that (a) (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the Securities will not recognize gain or loss for Federal
income tax purposes as a result of the deposit, Defeasance and discharge to
be effected with respect to the Securities and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such deposit, Defeasance and discharge were not
to occur and (b) the trust arising from such deposit will not be an
"investment company" within the meaning of the Investment Company Act of
1940 unless such trust is qualified thereunder or exempt from registration
thereunder.
(3) With respect to Section 1202, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that (a) the Holders will
not recognize gain or loss for Federal income tax purposes as a result of
the deposit and Covenant Defeasance to be effected with respect to the
Securities and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would be the case if such
deposit and Covenant Defeasance were not to occur and (b) the trust arising
from such deposit will not be an "investment company" within the meaning of
the Investment Company Act of 1940 unless such trust is qualified
thereunder or exempt from registration thereunder.
(4) The Company shall have delivered to the Trustee an Officers'
Certificate to the effect that the Securities, if then listed on any
securities exchange, will not be delisted as a result of such deposit.
(5) No Default shall have occurred and be continuing at the time of
such deposit or, with regard to any such event specified in Sections 501(6)
and 501(7), at any time on or prior to the 90th day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the meaning of
such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the
trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act of 1940 unless such trust is
qualified thereunder or exempt from registration thereunder.
(9) If the Securities are to be redeemed prior to their Stated
Maturity, notice of such redemption shall have been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee shall have
been made.
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
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SECTION 1204. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee pursuant to Section 1203 in respect of any Securities shall be
held in trust and applied by the Trustee, in accordance with the provisions of
the Securities and this Indenture, to the payment, either directly or through
any such Paying Agent as the Trustee may determine, to the Holders of the
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1203 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1203 with
respect to any Securities which, in the opinion of a United States nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to the Securities.
SECTION 1205. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and the Securities from which the Company has been discharged or
released pursuant to Section 1201 or 1202 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to the
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1204 with respect to the Securities
in accordance with this Article; PROVIDED, HOWEVER, that if the Company makes
any payment of principal of or any premium or interest on any Security following
such reinstatement of its obligations, the Company shall be subrogated to the
rights (if any) of the Holders of the Securities to receive such payment from
the money so held in trust.
ARTICLE THIRTEEN
SUBSIDIARY GUARANTEES
SECTION 1301. SUBSIDIARY GUARANTEES.
Each of the Subsidiary Guarantors hereby jointly and severally
unconditionally Guarantees to each Holder of a Security authenticated and
delivered by the Trustee, and to the Trustee on behalf of such Holder, the full
and punctual payment of the principal of (and premium, if any) and interest on
such Security when and as the same shall become due and payable, whether at the
Stated Maturity, by acceleration, call for redemption, purchase or otherwise, in
accordance with the terms of such Security and of this Indenture. In case of
the failure of the Company punctually to make any such payment, each of the
Subsidiary Guarantors hereby jointly and severally agrees to cause such payment
to be made punctually when and as the same shall become due and payable, whether
at the Stated Maturity or by acceleration, call for redemption, purchase or
otherwise, and as if such payment were made by the Company.
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Each of the Subsidiary Guarantors hereby jointly and severally agrees
that its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of such Security or this Indenture, the
absence of any action to enforce the same, any exchange, release or
non-perfection of any Lien on any collateral for, or any release or amendment or
waiver of any term of any other Guarantee of all or any of, the Securities, or
any consent to departure from any requirement of any other Guarantee of all or
any of the Securities, the election by the Trustee or any of the Holders in any
proceeding under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 101-1330,
as amended (the "Bankruptcy Code"), of the application of Section 1111(b)(2) of
the Bankruptcy Code, any borrowing or grant of a security interest by the
Company, as debtor-in-possession, under Section 364 of the Bankruptcy Code, the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
the claims of the Trustee or any of the Holders for payment of any of the
Securities (including, without limitation, any interest or premium thereon), any
waiver or consent by the Holder of such Security or by the Trustee with respect
to any provisions thereof or of this Indenture or with respect to the provisions
of this Article Thirteen as they apply to any other Subsidiary Guarantor, the
obtaining of any judgment against the Company or any action to enforce the same
or any other circumstances which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each of the Subsidiary Guarantors hereby
waives the benefits of diligence, presentment, demand of payment, any
requirement that the Trustee or any of the Holders protect, secure, perfect or
insure any security interest in or other Lien on any property subject thereto or
exhaust any right or take any action against the Company or any other Person,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest or
notice with respect to such Security or the Indebtedness evidenced thereby and
all demands whatsoever, and covenants that its Subsidiary Guarantee will not be
discharged in respect of such Security except by complete performance of the
obligations contained in such Security and in such Subsidiary Guarantee. Each
of the Subsidiary Guarantors hereby agrees that, in the event of a default in
payment of principal (or premium, if any) or interest on such Security, whether
at their Stated Maturity, by acceleration, call for redemption, purchase or
otherwise, legal proceedings may be instituted by the Trustee on behalf of, or
by, the Holder of such Security, subject to the terms and conditions set forth
in this Indenture, directly against all or any of the Subsidiary Guarantors to
enforce their respective Subsidiary Guarantees without first proceeding against
the Company. Each Subsidiary Guarantor agrees that if, after the occurrence and
during the continuance of an Event of Default, the Trustee or any of the Holders
are prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Securities, to collect interest on the
Securities, or to enforce or exercise any other right or remedy with respect to
the Securities, such Subsidiary Guarantor agrees to pay to the Trustee for the
account of the Holders, upon demand therefor, the amount that would otherwise
have been due and payable had such rights and remedies been permitted to be
exercised by the Trustee or any of the Holders.
Each Subsidiary Guarantor shall be subrogated to all rights of the
Holders of the Securities against the Company in respect of any amounts paid by
such Subsidiary Guarantor on account of such Securities pursuant to the
provisions of its Subsidiary Guarantee or this Indenture; PROVIDED, HOWEVER,
that no Subsidiary Guarantor shall be entitled to enforce or to receive any
payments arising out of, or based upon, such right of subrogation until the
principal of (and premium, if any) and interest on all Securities issued
hereunder shall have been paid in full.
Each Subsidiary Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Securities is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by an obligee on the Securities whether as a "voidable
preference," "fraudulent transfer," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Securities shall, to
the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
No stockholder, officer, director, employee or incorporator, past,
present or future, of any Subsidiary Guarantor, as such, shall have any personal
liability under this Subsidiary Guarantee by reason of his, her or its status as
such stockholder, officer, director, employee or incorporator.
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The Subsidiary Guarantors shall have the right to seek contribution from
any non-paying Subsidiary Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Subsidiary Guarantees or under
this Article Thirteen in accordance with Section 1307.
SECTION 1302. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
The Subsidiary Guarantees to be endorsed on the Securities shall
include the terms of the Subsidiary Guarantee set forth in Section 1301 and any
other terms that may be set forth in the form established pursuant to Section
205. Each of the Subsidiary Guarantors hereby agrees to execute its Subsidiary
Guarantee, in a form established pursuant to Section 205, to be endorsed on each
Security authenticated and delivered by the Trustee.
The Subsidiary Guarantee shall be executed on behalf of each
respective Subsidiary Guarantor by any one of such Subsidiary Guarantor's
Chairman of the Board, Vice Chairman of the Board, President or Vice Presidents,
attested by its Secretary or Assistant Secretary. The signature of any or all
of these officers on the Subsidiary Guarantee may be manual or facsimile.
A Subsidiary Guarantee bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of a Subsidiary Guarantor
shall bind such Subsidiary Guarantor, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of the Security on which such Subsidiary Guarantee is endorsed or did
not hold such offices at the date of such Subsidiary Guarantee.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee
endorsed thereon on behalf of the Subsidiary Guarantors. Each of the Subsidiary
Guarantors hereby jointly and severally agrees that its Subsidiary Guarantee set
forth in Section 1301 shall remain in full force and effect notwithstanding any
failure to endorse a Subsidiary Guarantee on any Security.
SECTION 1303. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
Except as set forth in Section 1304 and in Articles Eight and Ten
hereof, nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor or shall prevent any sale or conveyance
of the property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company or a Subsidiary Guarantor.
SECTION 1304. RELEASE OF SUBSIDIARY GUARANTORS.
(a) Concurrently with any consolidation or merger of a Subsidiary
Guarantor or any sale or conveyance of the Property or assets of a Subsidiary
Guarantor as an entirety or substantially as an entirety, in each case as
permitted by Section 1303 hereof, and upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
such consolidation, merger, sale or conveyance was made in accordance with
Section 1303 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of such Subsidiary Guarantor from its
obligations under its Subsidiary Guarantees endorsed on the Securities and under
this Article Thirteen. Any Subsidiary Guarantor not released from its
obligations under its Subsidiary Guarantees endorsed on the Securities and under
this Article Thirteen shall remain liable for the full amount of principal of
(and premium, if any) and interest on the Securities and for the other
obligations of a Subsidiary Guarantor under its Subsidiary Guarantee endorsed on
the Securities and under this Article Thirteen.
(b) Concurrently with the defeasance of the Securities under Section
1201 hereof or the covenant defeasance of the Securities under Section 1202
hereof, the Subsidiary Guarantors shall be released from all of their
obligations under their Subsidiary Guarantees endorsed on the Securities and
under this Article Thirteen.
(c) Upon the sale or disposition (by merger or otherwise) of any
Subsidiary Guarantor by the Company or any Restricted Subsidiary of the Company
to any entity that is not a Restricted Subsidiary of the Company and which sale
or
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disposition is otherwise in compliance with the terms of this Indenture,
including, without limitation, Section 801 and Section 1014 of this Indenture,
such Subsidiary Guarantor shall automatically be released from all obligations
under its Subsidiary Guarantees endorsed on the Securities and under this
Article Thirteen, PROVIDED THAT such Subsidiary Guarantor is sold or disposed of
for fair market value (evidenced by a Board Resolution and set forth in an
Officers' Certificate delivered to the Trustee).
(d) Upon the redesignation by the Company of a Subsidiary Guarantor
from Restricted Subsidiary to an Unrestricted Subsidiary in compliance with the
provisions of this Indenture, including, without limitation, Section 1017 of
this Indenture, such Subsidiary may, at its option, cease to be a Subsidiary
Guarantor and shall be released from all of the obligations of a Subsidiary
Guarantor under its Subsidiary Guarantees endorsed on the Securities and under
this Article Thirteen, which release shall be evidenced by a supplemental
indenture executed by the Company, the Subsidiary Guarantors and the Trustee.
SECTION 1305. ADDITIONAL SUBSIDIARY GUARANTORS.
The Company may cause any Subsidiary to become a Subsidiary Guarantor
with respect to the Securities. Any such Subsidiary shall become a Subsidiary
Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture, in form and substance satisfactory to, and executed by, the Trustee
and executed by the Company, which subjects such Subsidiary to the provisions of
this Indenture as a Subsidiary Guarantor and (b) an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized and executed by
such Subsidiary and constitutes the legal, valid, binding and enforceable
obligation of such Subsidiary (subject to such customary exceptions concerning
creditors' rights and equitable principles as may be reasonably acceptable to
the Trustee in its discretion).
SECTION 1306. LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the Guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to Section 1307, result in
the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not
constituting such a fraudulent transfer or conveyance.
SECTION 1307. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, INTER SE, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Subsidiary Guarantor") under the Guarantee, and so long as the exercise
of such right does not impair the rights of the Holders under the Subsidiary
Guarantees or under this Article Thirteen, such Funding Subsidiary Guarantor
shall be entitled to a contribution from all other Subsidiary Guarantors in a
PRO RATA amount, based on the net assets of each Subsidiary Guarantor (including
the Funding Subsidiary Guarantor), determined in accordance with GAAP, subject
to Section 1306, for all payments, damages and expenses incurred by that Funding
Subsidiary Guarantor in discharging the Company's obligations with respect to
the Securities or any other Subsidiary Guarantor's obligations with respect to
its Subsidiary Guarantee.
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ARTICLE FOURTEEN
CONCERNING THE HOLDERS
SECTION 1401. IDENTIFICATION OF COMPANY-OWNED SECURITIES.
Upon request of the Trustee, the Company shall furnish to the Trustee
promptly an Officers' Certificate listing and identifying all Securities, if
any, known by the Company to be owned or held by or for the account of the
Company, the Subsidiary Guarantors or any other obligor on the Securities or by
any Affiliate of the Company or any Subsidiary Guarantor or any other obligor on
the Securities; and, subject to the provisions of Section 601, the Trustee shall
be entitled to accept such Officers' Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such determination.
SECTION 1402. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 104, of the taking of any action by the Holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any Holder of a Security, except as
provided in Section 104 with respect to record dates, the serial number of which
is shown by the evidence to be included in the Securities the Holders of which
have consented to or are bound by consents to such action may, by filing written
notice with the Trustee at its Corporate Trust Office and upon proof of holding
as provided in Section 104, revoke such action so far as concerns such Security.
ARTICLE FIFTEEN
HOLDERS' MEETINGS
SECTION 1501. PURPOSES OF MEETINGS.
A meeting of Holders of Securities may be called at any time and from
time to time pursuant to the provisions of this Article Fifteen for any of the
following purposes:
(1) to give any notice to the Company, the Subsidiary Guarantors or
to the Trustee, or to give any directions to the Trustee, or to consent to
the waiving of any Default hereunder and its consequences, or to take any
other action authorized to be taken by Holders of Securities pursuant to
any of the provisions of Article Five;
(2) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article Six;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 902; or
(4) to take any other action authorized to be taken by or on behalf
of the Holders of any specified aggregate principal amount of the
Securities under any other provision of this Indenture or under applicable
law.
SECTION 1502. CALL OF MEETINGS BY TRUSTEE.
The Trustee may at any time call a meeting of Holders of Securities to
take any action specified in Section 1501, to be held at such time and at such
place in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of the Holders of Securities, setting forth
the time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be mailed to all Holders of Securities at
their addresses as they shall appear on the Security Register. Such notice
shall be mailed not less than 20 nor more than
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180 days prior to the date fixed for the meeting (or, in the case of a meeting
of Holders with respect to the Securities all or part of which are represented
by a Global Security, not less than 20 nor more than 40 days).
Upon the calling of a meeting of Holders with respect to the
Securities all or part of which are represented by a Global Security, a record
date shall be established for determining Holders of Outstanding Securities
entitled to vote at such meeting, which record date shall be the close of
business on the day the Trustee mails the notice of the Meeting of Holders. The
Holders on such record date, and their designated proxies, and only such
Persons, shall be entitled to vote at such meeting of Holders.
SECTION 1503. CALL OF MEETINGS BY COMPANY OR HOLDERS.
In case at any time the Company, pursuant to a resolution of its Board
of Directors, or the Holders, or their designated proxies, of at least 25% in
aggregate principal amount of the Outstanding Securities, shall have requested
the Trustee to call a meeting of the Holders, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then the Company or such Holders may determine the time
and the place in said Borough of Manhattan for such meeting and may call such
meeting to take any action authorized in Section 1501, by mailing notice thereof
as provided in Section 1502.
SECTION 1504. QUALIFICATIONS FOR VOTING.
To be entitled to vote at any meeting of Holders a Person shall (a) be
a Holder of one or more Securities or (b) be a Person appointed by an instrument
in writing as proxy by a Holder of one or more Securities; PROVIDED, HOWEVER,
that in the case of any meeting of Holders with respect to the Securities all or
part of which are represented by a Global Security, only Holders, or their
designated proxies, of record of Outstanding Securities on the record date
established pursuant to Section 1502 hereof shall be entitled to vote at such
meeting. The only Persons who shall be entitled to be present or to speak at
any meeting of Holders shall be the Persons entitled to vote at such meeting and
their counsel and any representatives of the Trustee and its counsel and any
representatives of the Company, the Subsidiary Guarantors' and their respective
counsel.
SECTION 1505. REGULATIONS.
Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders, in regard to proof of the holding of Securities and of the appointment
of proxies, and in regard to the appointment and duties of inspectors of votes,
the submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the meeting
as it shall think fit. Except as otherwise permitted or required by any such
regulation, the holding of Securities shall be proved in the manner specified in
Section 104 and the appointment of any proxy shall be proved in the manner
specified in said Section 104 or by having the signature of the Person executing
the proxy witnessed or guaranteed.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman and a temporary secretary of the meeting, unless the meeting shall have
been called by the Company or by Holders as provided in Section 1503, in which
case the Company or the Holders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman and a temporary secretary. A
permanent chairman and a permanent secretary of the meeting shall be elected by
the Persons holding or representing a majority of the Outstanding Securities
represented at the meeting.
Subject to the provisions of Section 1504, at any meeting each Holder
or proxy shall be entitled to one vote for each $1,000 principal amount of
Securities held or represented by him; PROVIDED, HOWEVER, that no vote shall be
cast or counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the permanent chairman (or the temporary chairman, if
no permanent chairman shall have been elected pursuant to this Section) of the
meeting
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to be not Outstanding. Neither the temporary chairman nor the permanent
chairman of the meeting shall have a right to vote other than by virtue of
Securities held by him or instruments in writing as aforesaid duly designating
him as the Person to vote on behalf of other Holders. Any meeting of Holders
duly called pursuant to the provisions of Section 1502 or 1503 may be adjourned
from time to time by the Persons holding or representing a majority of the
Securities represented at the meeting, whether or not constituting a quorum, and
the meeting may be held as so adjourned without further notice.
At any meeting of the Holders of Securities a quorum shall consist of
Holders present in person or by proxy and representing at least 25% in principal
amount of the Outstanding Securities. If a quorum of the Holders of Securities
shall not be present within 30 minutes from the time fixed for holding any
meeting, the meeting, if summoned by the Holders or pursuant to a request of the
Holders, shall be dissolved; but in any other case the meeting shall be
adjourned to the same day in the next week (unless such day is a Legal Holiday
in which case it shall be adjourned to the next following day thereafter that is
not a Legal Holiday) at the same time and place and no notice shall be required
to be given in respect of such adjourned meeting. At the adjourned meeting the
Holders of Securities present in person or by proxy shall form a quorum and may
transact the business for which the meeting was originally convened
notwithstanding that they may not represent 25% of the principal amount of the
Outstanding Securities.
SECTION 1506. VOTING.
The vote upon any resolutions submitted to any meeting of Holders
shall be by written ballots on which shall be subscribed the signatures of the
Holders of Securities or of their representatives by proxy. The permanent
chairman (or the temporary chairman, if no permanent chairman shall have been
elected pursuant to Section 1505) of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the permanent secretary (or the
temporary secretary, if no permanent secretary shall have been elected pursuant
to Section 1505) of the meeting their verified written reports in duplicate of
all votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the permanent secretary (or the
temporary secretary, if no permanent secretary shall have been elected pursuant
to Section 1505) of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
mailed as provided in Section 1502. The record shall be signed and verified by
the affidavits of the permanent chairman and the permanent secretary of the
meeting (or if no permanent chairman and/or permanent secretary shall have been
elected pursuant to Section 1505, then the temporary chairman and/or the
temporary secretary, as the case may be, shall take such action) and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 1507. NO DELAY OF RIGHTS BY MEETING.
Nothing in this Article Fifteen contained shall be deemed or construed
to authorize or permit, by reason of any call of a meeting of Holders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Holders under any of the provisions of this
Indenture or of the Securities.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
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SECTION 1601. INDENTURE, SECURITIES AND SUBSIDIARY GUARANTEES SOLELY CORPORATE
OBLIGATIONS.
No recourse under or upon any obligation, covenant or agreement of
this Indenture, any supplemental indenture, or of any Security or any Subsidiary
Guarantee, or for any claim based thereon or otherwise in respect thereof, shall
be had against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or any Subsidiary Guarantor or of any
successor corporation or Person of the Company or a Subsidiary Guarantor, either
directly or through the Company or such Subsidiary Guarantor, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued or Incurred hereunder are solely corporate
obligations, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, the incorporators, shareholders, officers or directors,
as such, of the Company or the Subsidiary Guarantors or of any successor
corporation or Person of the Company or a Subsidiary Guarantor, or any of them,
because of the creation of the Indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or any of the Securities or Subsidiary Guarantees or implied therefrom; and that
any and all such personal liability, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, shareholder, officer or director, as such, because of
the creation of the Indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities or Subsidiary Guarantees or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of such Securities and Subsidiary
Guarantees.
SECTION 1602. EXECUTION IN COUNTERPARTS.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and have caused their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
GREENWICH AIR SERVICES
By................................
By................................
[Seal]
Attest:
..........................
GAS TURBINE CORPORATION
GREENWICH TURBINE, INC.
GASI ENGINE SERVICES CORPORATION
GAS TURBINE TEST CORPORATION
GREENWICH FOREIGN SALES
CORPORATION
GREENWICH AIR SERVICES-TEXAS, L.P.,
McALLEN COMPONENTS, L.P.
Each as Subsidiary Guarantor
By.................................
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Trustee
By.................................
[Seal]
Attest:
..............................................
<PAGE>
[Notarial Seal]
STATE OF NEW YORK, )
) SS.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in and for the said
county and state, on this ____ day of [____________________] 1996, within my
jurisdiction, the within named who acknowledged that he is a
of Greenwich Air Services, Inc. and that for and on
behalf of the said corporation, and as its act and deed he executed the above
and foregoing instrument, after first having been duly authorized by said
corporation so to do.
___________________
NOTARY PUBLIC
<PAGE>
[Notarial Seal]
STATE OF NEW YORK, )
) SS.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in and for the said
county and state, on this ____ day of [____________________] 1996, within my
jurisdiction, the within named who acknowledged that he is a
of American Stock Trust & Transfer Company and that
for and on behalf of the said corporation, and as its act and deed he executed
the above and foregoing instrument, after first having been duly authorized by
said corporation so to do.
_____________________
NOTARY PUBLIC
[Notarial Seal]
STATE OF NEW YORK, )
) SS.:
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned authority in and for the said
county and state, on this ____ day of [____________________] 1996, within my
jurisdiction, the within named who acknowledged that he is a
of each of Gas Turbine Corporation, Greenwich Turbine,
Inc., GASI Engine Services Corporation, Gas Turbine Test Corporation, Greenwich
Foreign Sales Corporation, Greenwich Air Services-Texas, L.P. and McAllen
Components, L.P. and that for and on behalf of each of the said corporations,
and as each of their act and deed he executed the above and foregoing
instrument, after first having been duly authorized by each of said corporations
so to do.
__________________
NOTARY PUBLIC
<PAGE>
Schedule 1008
[SPECIFIED INDEBTEDNESS PURSUANT TO CLAUSE (F) OF DEFINITION OF PERMITTED
COMPANY INDEBTEDNESS]
<PAGE>
Schedule 1009
[SPECIFIED INDEBTEDNESS PURSUANT TO CLAUSE (E) OF THE DEFINITION OF PERMITTED
RESTRICTED SUBSIDIARY INDEBTEDNESS OR PREFERRED STOCK]
<PAGE>
Schedule 1016
[SPECIFIED AGREEMENTS CONCERNING ENCUMBRANCES OR RESTRICTIONS ON DISTRIBUTIONS
FROM RESTRICTED SUBSIDIARIES -- SEE (I) OF Section 1016]
<PAGE>
TABLE OF CONTENTS
________
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions................................................... 1
Act........................................................... 1
Aerospace Industry and Gas Turbine Engine Business............ 1
Affiliate..................................................... 1
Asset Sale.................................................... 2
Attributable Indebtedness..................................... 2
Authenticating Agent.......................................... 2
Average Life.................................................. 2
Bankruptcy Code............................................... 2
Board of Directors............................................ 2
Board Resolution.............................................. 2
Business Day.................................................. 2
Capital Lease Obligation...................................... 2
Capital Stock................................................. 3
Change of Control............................................. 3
Change of Control Offer....................................... 3
Change of Control Payment Date................................ 3
Commission.................................................... 3
Company....................................................... 3
Company Request or Company Order.............................. 3
Conese Family................................................. 3
Consolidated Interest Coverage Ratio.......................... 3
Consolidated Interest Expense................................. 4
Consolidated Net Income....................................... 4
Consolidated Net Worth........................................ 5
Consolidated Net Tangible Assets.............................. 5
Corporate Trust Office........................................ 5
Corporation................................................... 5
Covenant Defeasance........................................... 5
Currency Agreement............................................ 5
CUSIP Number.................................................. 5
Default....................................................... 5
Defaulted Interest............................................ 6
Defeasance.................................................... 6
Depositary.................................................... 6
EBITDA........................................................ 6
Event of Default.............................................. 6
Excess Proceeds............................................... 6
Exchange Act.................................................. 6
Expiration Date............................................... 6
Expiry Date................................................... 6
Fair Market Value............................................. 6
GAAP.......................................................... 6
Global Security............................................... 6
Guarantee..................................................... 6
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Holder........................................................ 7
Incur......................................................... 7
Indebtedness.................................................. 7
Indenture..................................................... 7
Interest Payment Date......................................... 7
Interest Rate Protection Agreement............................ 7
Investment.................................................... 8
Issue Date.................................................... 8
Investment Company Act........................................ 8
Legal Holiday................................................. 8
Lien.......................................................... 8
Maturity...................................................... 8
Moody's....................................................... 8
Net Cash Proceeds............................................. 8
New Credit Facility........................................... 8
Notice of Default............................................. 9
Officers' Certificate......................................... 9
Opinion of Counsel............................................ 9
Outstanding................................................... 9
Participants.................................................. 10
Paying Agent.................................................. 10
pari passu.................................................... 10
Permitted Company Indebtedness................................ 10
Permitted Investments......................................... 11
Permitted Liens............................................... 11
Permitted Restricted Subsidiary Indebtedness
or Preferred Stock........................................... 12
Permitted Short-Term Investments.............................. 12
Person........................................................ 13
Predecessor Security.......................................... 13
Preferred Stock............................................... 13
Prepayment Offer.............................................. 13
Prepayment Offer Notice....................................... 13
primary obligor............................................... 14
Property...................................................... 14
Purchase Amount............................................... 14
Purchase Date................................................. 14
Purchase Price................................................ 14
Redeemable Stock.............................................. 15
Redemption Date............................................... 15
Redemption Price.............................................. 15
Registrar..................................................... 15
Regular Record Date........................................... 15
Replacement Assets............................................ 15
Restricted Payment............................................ 15
Restricted Subsidiary......................................... 15
Sale and Leaseback Transaction................................ 15
Securities.................................................... 15
Securities Act................................................ 15
Security Register............................................. 16
Special Record Date........................................... 16
Specified Holders............................................. 16
S&P........................................................... 16
Stated Maturity............................................... 16
Subsidiary.................................................... 16
Subsidiary Guarantors......................................... 16
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Surviving Entity.............................................. 16
Transaction Date.............................................. 16
Trust Indenture Act........................................... 16
Trust Officer................................................. 16
Trustee....................................................... 16
Unrestricted Subsidiary....................................... 16
U.S. Government Obligation.................................... 17
Vice President................................................ 17
Voting Stock.................................................. 17
Wholly Owned Subsidiary....................................... 17
SECTION 102. Compliance Certificates and Opinions.......................... 17
SECTION 103. Form of Documents Delivered to Trustee........................ 18
SECTION 104. Acts of Holders; Record Dates................................. 18
SECTION 105. Notices, Etc., to Trustee, Company
and the Subsidiary Guarantors................................ 20
SECTION 106. Notice to Holders; Waiver..................................... 20
SECTION 107. Conflict with Trust Indenture Act............................. 21
SECTION 108. Effect of Headings, Table of Contents
and Cross-Reference Sheet.................................... 21
SECTION 109. Successors and Assigns........................................ 21
SECTION 110. Separability Clause........................................... 21
SECTION 111. Benefits of Indenture......................................... 21
SECTION 112. Governing Law................................................. 21
SECTION 113. Legal Holidays................................................ 21
ARTICLE TWO
SECURITY FORMS
SECTION 201. Form of Securities............................................ 22
SECTION 202. Form of Face of Global Security............................... 22
SECTION 203. Form of Reverse of Global Security............................ 24
SECTION 204. Form of Trustee's Certificate of Authentication............... 26
SECTION 205. Form of Guarantee............................................. 26
ARTICLE THREE
THE SECURITIES
SECTION 301. Denominations................................................. 29
SECTION 302. Execution, Authentication, Delivery and Dating................ 29
SECTION 303. Temporary Securities.......................................... 29
SECTION 304. Registration, Registration of Transfer and Exchange........... 30
SECTION 305. Mutilated, Destroyed, Lost and Stolen Securities.............. 32
SECTION 306. Payment of Interest; Interest Rights Preserved................ 32
SECTION 307. Persons Deemed Owners......................................... 33
SECTION 308. Cancellation.................................................. 33
SECTION 309. Computation of Interest....................................... 34
SECTION 310. CUSIP Numbers................................................. 34
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture....................... 34
SECTION 402. Application of Trust Money.................................... 35
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default............................................. 35
SECTION 502. Acceleration of Maturity; Rescission and Annulment............ 37
SECTION 503. Collection of Indebtedness
and Suits for Enforcement by Trustee......................... 37
SECTION 504. Trustee May File Proofs of Claim.............................. 38
SECTION 505. Trustee May Enforce Claims Without Possession of Securities... 38
SECTION 506. Application of Money Collected................................ 38
SECTION 507. Limitation on Suits........................................... 39
SECTION 508. Unconditional Right of Holders To Receive Principal, Premium
and Interest................................................. 39
SECTION 509. Restoration of Rights and Remedies............................ 39
SECTION 510. Rights and Remedies Cumulative................................ 40
SECTION 511. Delay or Omission Not Waiver.................................. 40
SECTION 512. Control by Holders............................................ 40
SECTION 513. Waiver of Past Defaults....................................... 40
SECTION 514. Undertaking for Costs......................................... 41
SECTION 515. Waiver of Usury, Stay or Extension Laws....................... 41
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities........................... 41
SECTION 602. Notice of Defaults............................................ 41
SECTION 603. Certain Rights of Trustee..................................... 41
SECTION 604. Trustee's Disclaimer.......................................... 42
SECTION 605. May Hold Securities........................................... 42
SECTION 606. Money Held in Trust........................................... 43
SECTION 607. Compensation and Reimbursement................................ 43
SECTION 608. Conflicting Interests......................................... 43
SECTION 609. Corporate Trustee Required; Eligibility....................... 44
SECTION 610. Resignation and Removal; Appointment of Successor............. 44
SECTION 611. Acceptance of Appointment by Successor........................ 45
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business....................................... 45
SECTION 613. Preferential Collection of Claims Against Company............. 45
SECTION 614. Appointment of Authenticating Agent........................... 46
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Company To Furnish Trustee Names
and Addresses of Holders..................................... 47
SECTION 702. Preservation of Information; Communications to Holders........ 47
SECTION 703. Reports by Trustee............................................ 48
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.......... 48
SECTION 802. Successor Substituted......................................... 49
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders............ 49
SECTION 902. Supplemental Indentures with Consent of Holders............... 50
SECTION 903. Execution of Supplemental Indentures.......................... 51
SECTION 904. Effect of Supplemental Indentures............................. 51
SECTION 905. Conformity with Trust Indenture Act........................... 51
SECTION 906. Reference in Securities to Supplemental Indentures............ 51
SECTION 907. Payment for Consent........................................... 52
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.................... 52
SECTION 1002. Registrar and Paying Agent.................................... 52
SECTION 1003. Money for Securities Payments To Be Held in Trust............. 53
SECTION 1004. Statement by Officers as to Default........................... 53
SECTION 1005. Existence..................................................... 54
SECTION 1006. Maintenance of Properties..................................... 54
SECTION 1007. Payment of Taxes and Other Claims............................. 54
SECTION 1008. Limitation on Company Indebtedness............................ 54
SECTION 1009. Limitation on Restricted Subsidiary Indebtedness and
Preferred Stock.............................................. 54
SECTION 1010. Limitation on Liens........................................... 55
SECTION 1011. Limitation on Sale and Leaseback Transactions................. 55
SECTION 1012. Limitation on Restricted Payments............................. 55
SECTION 1013. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries............................................ 56
SECTION 1014. Limitation on Asset Sales..................................... 56
SECTION 1015. Transactions with Affiliates.................................. 57
SECTION 1016. Limitation on Restrictions on Distributions
from Restricted Subsidiaries....................................... 58
SECTION 1017. Restricted and Unrestricted Subsidiaries...................... 58
SECTION 1018. Guarantees of Certain Indebtedness............................ 59
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SECTION 1019. Commission Reports............................................ 59
SECTION 1020. Waiver of Certain Covenants................................... 59
SECTION 1021. Mandatory Repurchase Upon a Change of Control................. 60
SECTION 1022. Further Instruments and Acts.................................. 61
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Election To Redeem; Notice to Trustee......................... 61
SECTION 1102. Selection by Trustee of Securities To Be Redeemed............. 61
SECTION 1103. Notice of Redemption.......................................... 62
SECTION 1104. Deposit of Redemption Price................................... 62
SECTION 1105. Securities Payable on Redemption Date......................... 63
SECTION 1106. Securities Redeemed in Part................................... 63
SECTION 1107. Purchase of Securities........................................ 63
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Defeasance and Discharge...................................... 63
SECTION 1202. Covenant Defeasance........................................... 64
SECTION 1203. Conditions to Defeasance or Covenant Defeasance............... 64
SECTION 1204. Deposited Money and U.S. Government Obligations To Be
Held in Trust; Miscellaneous Provisions...................... 65
SECTION 1205. Reinstatement................................................. 66
ARTICLE THIRTEEN
SUBSIDIARY GUARANTEES
SECTION 1301. Subsidiary Guarantees......................................... 66
SECTION 1302. Execution and Delivery of Subsidiary Guarantees............... 67
SECTION 1303. Subsidiary Guarantors May Consolidate, Etc.,
on Certain Terms............................................. 68
SECTION 1304. Release of Subsidiary Guarantors.............................. 68
SECTION 1305. Additional Subsidiary Guarantors.............................. 69
SECTION 1306. Limitation of Subsidiary Guarantor's Liability................ 69
SECTION 1307. Contribution.................................................. 69
ARTICLE FOURTEEN
CONCERNING THE HOLDERS
SECTION 1401. Identification of Company-Owned Securities.................... 70
SECTION 1402. Revocation of Consents; Future Holders Bound.................. 70
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ARTICLE FIFTEEN
HOLDERS' MEETINGS
SECTION 1501. Purposes of Meetings.......................................... 70
SECTION 1502. Call of Meetings by Trustee................................... 71
SECTION 1503. Call of Meetings by Company or Holders........................ 71
SECTION 1504. Qualifications for Voting..................................... 71
SECTION 1505. Regulations................................................... 71
SECTION 1506. Voting........................................................ 72
SECTION 1507. No Delay of Rights by Meeting................................. 73
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 1601. Indenture, Securities and Subsidiary Guarantees Solely
Corporate Obligations........................................ 73
SECTION 1602. Execution in Counterparts..................................... 73
TESTIMONIUM...................................................................74
SIGNATURE AND SEALS...........................................................74
ACKNOWLEDGMENTS...........................................................75, 76
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<PAGE>
COLLATERAL SHARING AGREEMENT
Agreement dated June __, 1996 between The Bank of New York Commercial
Corporation ("BNYCC"), as agent for the Lenders under and as defined in the Loan
Agreement (as defined below) (BNYCC, in such capacity, the "Agent"), American
Stock Transfer & Trust Company ("ASTC") as Trustee for the Holders of Securities
under and as defined in the Indenture (as defined below) (ASTC, in such
capacity, the "Trustee"), and BNYCC as collateral agent for Agent and Trustee.
BACKGROUND
Greenwich Air Services, Inc. ("Greenwich"), Gas Turbine Corporation
("GTC"), Greenwich Turbine, Inc. ("GTI"), GASI Engine Services Corporation
("Engine"), Greenwich Air Services - Texas, L.P. ("Texas") and McAllen
Components, L.P. ("Components") (Greenwich, GTC, GTI, Engine, Texas and
Components, each a "Borrower" and collectively, "Borrowers") are parties to a
Fourth Amended and Restated Revolving Credit and Security Agreement dated as of
this date (as amended, modified, restated or supplemented from time to time, the
"Loan Agreement") among Borrowers, The Bank of New York Commercial Corporation
("BNYCC"), the other financial institutions named therein or which hereafter
become a party thereto (BNYCC and such other financial institutions,
collectively, "Lenders") and BNYCC, as agent thereunder.
Greenwich Caledonian Limited ("Caledonian") is a party to a Revolving
Credit Agreement dated as of this date (as amended, modified, restated or
supplemented from time to time, the "Caledonian Agreement") between Caledonian,
BNYCC, the other financial institutions named therein or which hereafter become
a party thereto (BNYCC and such other financial institutions, collectively,
"Caledonian Lenders") and BNYCC as agent for Lenders (in such capacity,
"Caledonian Agent"). In connection with the execution of the Caledonian
Agreement, each of the Borrowers executed and delivered a guaranty to Lenders of
the obligations of Caledonian to Lenders under the Caledonian Agreement (each, a
"Guaranty" and collectively, the "Guaranties").
Concurrently with entering into the Loan Agreement, Greenwich is offering
$150,000,000 aggregate principal amount of Senior Notes due 2006 pursuant to an
Indenture dated June ____, 1996 (the "Indenture") between Greenwich and Trustee.
In connection therewith each of the Subsidiary Guarantors (as defined in the
Indenture) executed and delivered a guaranty of the obligations of Greenwich to
the Holders (each, a "Holder Guaranty" and collectively, the "Holder
Guaranties").
<PAGE>
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the undersigned hereby agree as follows:
1. DEFINITIONS.
1.1 GENERAL TERMS. For purposes of this Agreement, the
following terms shall have the following meanings:
"AGREEMENTS" shall mean, collectively, the Credit Agreements, the
Pledge Agreement and the Indenture.
"COLLATERAL" shall mean 65% of the issued and outstanding capital
stock of Caledonian pledged by Engine to Agent and Trustee pursuant to the
Pledge Agreement.
"COLLATERAL AGENT" shall mean The Bank of New York Commercial
Corporation acting in its capacity for the Creditors hereunder.
"COLLATERAL AGENT AGREEMENTS" shall mean, collectively, this
Agreement, together with such other written agreements among the Creditors and
Collateral Agent, or written instructions from any Creditor to Collateral Agent,
as now or at any time hereafter may be executed and/or delivered in connection
herewith, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
"COLLECTIONS" shall mean any payments or amounts realized or
recovered or otherwise received in respect of the Obligations from the recovery
or realization on any Collateral.
"CREDIT AGREEMENTS" shall mean, collectively, the Loan Agreement,
Guaranties, Indenture, Holder Guaranties and all agreements, documents and
instruments now or at any time hereafter executed and/or delivered by the
Borrowers and/or the Subsidiary Guarantors in connection therewith or related
thereto, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
"CREDITORS" shall mean, collectively, Agent, Lenders, Trustee and
Holders of Securities and their respective successors and assigns.
"HOLDERS" shall have the meaning given to it in the Indenture.
"INDENTURE OBLIGATIONS" shall mean all obligations of Greenwich
and the Subsidiary Guarantors to the Trustee and the Holders of Securities under
the Indenture.
<PAGE>
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights of way and the like), lien
(statutory or other), security agreement or transfer intended as security,
including without limitation, any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease or any financing lease
having substantially the same economic effect as any of the foregoing.
"LOAN OBLIGATIONS" shall have the meaning given to the term
"Obligations" in the Loan Agreement and the Guaranties.
"OBLIGATIONS" all Loan Obligations and Indenture Obligations.
"PERSON" shall mean an individual, a partnership, a corporation
(including a business trust), a joint stock company, a trust, an unincorporated
association, a joint venture, or other entity or a government or any agency,
instrumentality or political subdivision thereof.
"PLEDGE AGREEMENT" means that certain Shares Pledge dated this
date pursuant to which Engine pledges 65% of the issued and outstanding capital
stock of Caledonian to Agent, as collateral agent for itself, the Lenders, the
Trustee and the Holders of Securities.
"SECURED PARTY REMEDIES" means any action which results in the
sale, foreclosure, realization upon, or a liquidation of any of the Collateral.
"SECURITIES" shall have the meaning given to it in the Indenture.
"SUBSIDIARY GUARANTORS" shall have the meaning given to it in the
Indenture.
"TRUSTEE" shall have the meaning given to it in the preamble to
this Agreement.
1.2 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and VICE VERSA. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements, including, without limitation,
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references to any of the Lending Agreements shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
2. COLLATERAL AGENCY.
2.1 APPOINTMENT OF COLLATERAL AGENT.
(a) For purposes of this Agreement, Agent (on behalf of itself
and Lenders) and Trustee (on behalf of itself and Holders of Securities) hereby
irrevocably designate and appoint BNYCC to act as Collateral Agent and attorney-
in-fact for and on behalf of each of the Creditors to take such action on behalf
of the Creditors under the provisions of this Agreement, and to exercise such
powers and to perform such duties, with respect to the management, supervision,
servicing, administration and disbursement of the Collateral (including, without
limitation, perfecting its security interest in the Collateral by filing
financing statements, holding physical possession of instruments or otherwise)
and the Collections of the Collateral as are specifically delegated to or
required of Collateral Agent by the terms of this Agreement or the other
Collateral Agent Agreements, together with such other powers as are incidental
thereto, with, (1) full power of substitution and (2) the power to select one or
more sub-agents or designees to carry out certain specific powers and
obligations of Collateral Agent pursuant hereto. This power of attorney being
coupled with an interest is irrevocable while this Agreement remains in effect.
(b) The Collateral Agent agrees to act as such on the express
conditions contained herein. The provisions of this Agreement and any other
Collateral Agent Agreements are solely for the benefit of Collateral Agent and
Creditors and neither Borrowers nor any other person shall have any right to
rely on, inquire into or enforce any of the provisions hereof. In performing
its functions and duties under this Agreement, the other Collateral Agent
Agreements and the Pledge Agreement, Collateral Agent shall act solely as
Collateral Agent of Creditors and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust with or
for Borrowers, or any of their Affiliates (as defined in the Loan Agreement).
Collateral Agent shall have no duties or responsibilities except as expressly
set forth in this Agreement or the other Collateral Agent Agreements.
Collateral Agent shall not have, by reason of this Agreement or the other
Collateral Agent Agreements, a fiduciary relationship in respect of the
Creditors. In no event shall Collateral Agent be required to take any action
which, in Collateral Agent's opinion, exposes Collateral Agent to liability or
which is contrary to any of the Credit Agreements or applicable law. Collateral
Agent shall not be removed as collateral agent for the term of this Agreement,
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<PAGE>
without the prior written consent of Agent and Trustee. Collateral Agent shall
at all times have the right to resign as collateral agent without the consent of
the Creditors upon thirty (30) days prior written notice to Agent and Trustee
provided that such resignation shall not be effective until the appointment of a
successor collateral agent by Agent and Trustee.
2.2 GENERAL POWERS OF COLLATERAL AGENT. Subject to the terms of this
Agreement, Creditors agree that Collateral Agent shall have the right to and
shall exercise the following powers as long as this Agreement remains in effect:
(a) maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Collateral and/or
Collections, as the case may be;
(b) execute and/or file in its name as Collateral Agent for the
benefit of the Creditors any and all financing or similar statements or notices,
amendments, renewals, supplements, documents, instruments, proofs of claim,
notices and other written agreements with respect to the Pledge Agreement and
hold and maintain physical possession of the instruments constituting the
Collateral;
(c) exclusively receive, apply and distribute the Collections as
provided in this Agreement and the other Collateral Agent Agreements;
(d) open and maintain such bank accounts as Collateral Agent
deems necessary and appropriate, in its discretion, for the foregoing purposes
with respect to the Collections;
(e) perform, exercise and enforce any and all other rights and
remedies of Creditors with respect to the Collateral or otherwise related to any
of same as provided in the Pledge Agreement, this Agreement and the other
Collateral Agent Agreements;
(f) incur and pay such reasonable expenses as Collateral Agent
may deem necessary or appropriate for the performance and fulfillment of its
functions and powers pursuant to the Pledge Agreement, this Agreement and the
other Collateral Agent Agreements.
3. MANAGEMENT OF COLLATERAL. Collateral Agent, on behalf of
Creditors, shall have the exclusive right to manage, perform and enforce the
terms of this Agreement, the other Collateral Agent Agreements and the Pledge
Agreement with respect to the Collateral and to exercise and enforce all
privileges and rights thereunder according to its discretion and the exercise of
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its business judgment, including, without limitation, the exclusive right to
take or retake control or possession of such Collateral and to hold, prepare for
sale, process, sell, lease, dispose of, or liquidate such Collateral. In
connection therewith, Trustee waives any and all rights to affect the method or
challenge the appropriateness of any action by Collateral Agent provided that
(i) Collateral Agent shall always proceed in a commercially reasonable manner
and in compliance with the terms of this Agreement, and (ii) Collateral Agent
shall consult with and keep Trustee advised on a current basis with respect to
the exercise of its Secured Party Remedies.
4. SALES OF COLLATERAL.
4.1 PROCEDURES.
(A) Notwithstanding anything to the contrary contained in
any of the Agreements:
(1) If a "default", "incipient event of default" or "event
of default" shall occur under any Agreement, (an "Event") the Agent and/or the
Trustee, as applicable, shall notify the other of the occurrence of such Event
within two (2) business days of obtaining actual knowledge of such occurrence.
(2) Agent and Trustee thereupon shall meet, to the extent
either deems it reasonably necessary, to discuss any action that may be required
or advisable as a result of such Event.
(3) At any time following the occurrence of an Event that
is not cured or waived within any applicable grace period, the Agent and/or the
Trustee shall have the right (but not the obligation) to require at Borrower's
sole cost and expense (a) that an appraiser be engaged to conduct (i) an
appraisal of the orderly liquidation value of the (x) Receivables and Inventory
of Caledonian (as such terms are defined in the Caledonian Agreement) and (y)
the equipment, real property and other [unencumbered] assets of Caledonian
including, without limitation, assignable contracts (the "Appraisal") and (b)
that an investment banker be engaged to issue an opinion as to the value likely
to be received on the sale of all of the issued and outstanding capital stock of
Caledonian ("Confidence Letter"). The Appraisal shall be conducted by an
appraiser mutually satisfactory to the Agent and the Trustee. The Confidence
Letter shall be issued by Salomon Brothers Inc., Oppenheimer & Co., Inc., Dillon
Read & Co. Inc., Alex Brown & Sons Inc. or such other investment banking firm as
shall be mutually satisfactory to the Agent and the Trustee.
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<PAGE>
(4) If either Agent or Trustee accelerates the Obligations
under the respective Agreements, the applicable Creditor shall provide the other
with written notice of such acceleration within two (2) business days thereof
("Acceleration").
(5) In the event that an Acceleration has occurred within
(90) days of the receipt of an Appraisal and Confidence Letter, and the
Collections to be received for the Collateral as described in the Confidence
Letter would exceed the amount of the Appraisal applicable to the Receivables
and Inventory, then the Agent and Trustee shall engage the aforementioned
investment bank to solicit and obtain, within 60 days of the Acceleration, a
signed letter of intent for the sale of the Collateral and the other issued and
outstanding capital stock of Caledonian ("Letter of Intent"). The Letter of
Intent shall be from a reputable purchaser, require a closing of the sale within
90 days of its execution, be subject to no contingencies other than customary
conditions precedent such as satisfactory due diligence results and the
execution of acquisition agreements acceptable to all parties and shall not
provide for a financing contingency.
(6) (A) In the event that an Acceleration has occurred
more than 90 days after the receipt of an Appraisal and Confidence Letter, the
Agent and the Trustee shall engage the aforementioned appraiser and investment
bank to update the Appraisal and the Confidence Letter with respect to the asset
valuations and financial statements of Engine (the "Updates"). The Updates shall
be received within 30 days of the Acceleration and, if the Collections to be
received for the Collateral as described therein would exceed the amount of the
Appraisal applicable to the Receivables and the Inventory, a Letter of Intent as
described in clause (5) above shall be obtained within 60 days of the
Acceleration.
(B) In the event that no Appraisal and/or Confidence
Letter has been received prior to the occurrence of an Acceleration, the Agent
and the Trustee shall then engage (a) an appraiser to conduct an Appraisal and
(b) an investment banker to issue a Confidence Letter in accordance with
provisions of subclause (3). Each of the foregoing must be delivered within
thirty (30) days of the Acceleration.
(7) In the event that (a) the Appraisal, the Confidence
Letter and/or any Updates thereof are not received within the respective
required time periods or (b) if the proceeds applicable to the Receivables and
Inventory as set forth in the Appraisal or any Update thereof exceed the
proceeds to be received for the Collateral as described in the Confidence
Letter, any Update thereof or any Letter of Intent, as the case
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<PAGE>
may be, Agent shall be entitled to commence Secured Party Remedies and remedies
under the Loan Agreement with respect to the Inventory and the Collateral. At
no time however, shall Agent be prohibited from exercising its remedies as a
secured party with respect to the Receivables. Thereafter, Agent shall use its
best efforts to liquidate the Collateral, PROVIDED, it shall have no liability
to the Creditors for any failure to do so.
(8) All proceeds received from the sale of the Collateral
shall be distributed to the Creditors as follows: (i) first, all costs and
expenses incurred by Collateral Agent under this Agreement, (ii) second, to
Agent to the extent of the book value of the Receivables and Inventory of
Caledonian up to an amount equal to the Loan Obligations, and (iii) third, to
Agent and the Trustee on a pro rata basis based upon the remaining outstanding
obligations of Borrowers' to Agent, Lenders and the Holders under the
Agreements.
(B) In the event of a sale or other disposition of the Collateral and
the other issued and outstanding shares of capital stock of Caledonian by
Engine, the proceeds of such sale shall be distributed to the Creditors in the
same manner as set forth in Section 4.1(8) above. This Section shall not,
however, be deemed to be a consent by either Creditor to the sale or other
disposition of the Collateral by Engine.
4.2 SALE OF COLLATERAL. In the event that Collateral Agent
shall enforce its lien in the Collateral pursuant to Section 4.1 hereof,
notwithstanding anything to the contrary contained in any of the Agreements,
only Collateral Agent shall have the right to restrict or permit, or approve or
disapprove, the sale, transfer or other disposition of Collateral. Trustee and
Agent will, immediately upon the request of Collateral Agent, release or
otherwise terminate their respective Liens upon the Collateral, to the extent
such Collateral is sold or otherwise disposed of either by Collateral Agent or
any Borrower with the consent of Collateral Agent, and Trustee and Agent will
immediately deliver such release documents as Collateral Agent may require in
connection therewith.
4.3 LIABILITY OF INVESTMENT BANK. No investment bank issuing a
Confidence Letter shall have any liability to Agent or Trustee for the opinions
rendered in the Confidence Letter so long as they have been issued in good faith
notwithstanding a failure to obtain a Letter of Intent for an amount at least
equal to that set forth in the Confidence Letter.
4.4 SECTION 9-504 NOTICE AND WAIVER OF MARSHALING. The Trustee
and Agent acknowledge that this Agreement shall constitute notice of their
respective interests
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<PAGE>
in the Collateral as provided by Section 9-504 of the Uniform Commercial Code
and each hereby waive any right to compel any marshaling of any of the
Collateral.
5. MISCELLANEOUS.
5.1 SURVIVAL OF RIGHTS. The right of Collateral Agent to
enforce the provisions of this Agreement shall not be prejudiced or impaired by
any act or omitted act of Caledonian, Borrowers, Agent or Trustee, including
forbearance, waiver, consent, compromise, amendment, extension, renewal, or
taking or release of security in respect of any Obligations or noncompliance by
Caledonian, Borrowers or Subsidiary Guarantors with such provisions, regardless
of the actual or imputed knowledge of such holder of the Obligations.
5.2 BANKRUPTCY ISSUES. This Agreement shall continue in full
force and effect after the filing of any petition ("Petition") by or against the
Borrowers under the United States Bankruptcy Code (the "Code") and all converted
or succeeding cases in respect thereof. All references herein to the Borrowers
shall be deemed to apply to the Borrowers as debtors-in-possession and to a
trustee for the Borrowers.
5.3 NOTICES. Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or three days following posting thereof by
certified or registered mail, postage prepaid, or (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon actual
receipt thereof when sent by telecopier to the number set forth below with
telephone communication confirming receipt and subsequently confirmed by
registered, certified or overnight mail to the address set forth below, in each
case addressed to each party at its address set forth below or at such other
address as has been furnished in writing by a party to the other by like notice:
If to Agent, at: The Bank of New York Commercial
Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Anthony Viola
Telephone: (212) 408-4097
Telecopier: (212) 408-4313
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
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<PAGE>
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
If to the Trustee: American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: __________________
Telephone: __________________
Telecopier: _________________
with copies to:
Attention: __________________
Telephone: __________________
Telecopier: _________________
5.4 BINDING EFFECT; OTHER. This Agreement shall be a
continuing agreement, shall be binding upon and shall inure to the benefit of
the parties hereto from time to time and their respective successors and
assigns, shall be irrevocable and shall remain in full force and effect until
the Loan Obligations shall have been satisfied or paid in full in cash and the
Agreements shall have been irrevocably terminated, but shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any amount paid by or on behalf of Borrowers with regard to the
Loan Obligations is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrowers,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee, custodian, or similar officer, for any Borrower or
any substantial part of its property, or otherwise, all as though such payments
had not been made. Any waiver or amendment hereunder must be evidenced by a
signed writing of the party to be bound thereby, and shall only be effective in
the specific instance. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. The headings in this
Agreement are for convenience of reference only, and shall not alter or
otherwise affect the meaning hereof.
5.5 RESPONSIBILITY OF COLLATERAL AGENT.
(a) Neither Collateral Agent nor any of its officers,
directors, employees or agents shall be liable to any Creditor or any Borrower
for any action taken or omitted to be taken under or in connection with this
Agreement, the other Collateral Agent Agreements, the Agreements or otherwise
(whether or not such action taken or omitted is within or without
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Collateral Agent's responsibilities and duties expressly set forth in this
Agreement, the other Collateral Agent Agreements or the Agreement or otherwise)
except as a result of willful misconduct, or, solely with respect to Section
4.1(8) hereof, gross negligence on the part of Collateral Agent or such other
Persons. Collateral Agent does not assume any responsibility for any failure or
delay in performance or breach by any Borrower or any Creditor of its
obligations in this Agreement, the other Collateral Agent Agreements or an other
Agreement.
(b) Collateral Agent does not make to Creditors, and no
Creditor makes to Collateral Agent, any express or implied warranty,
representation or guarantee with respect to the Obligations, Collateral, the
Collections or the Agreements. Collateral Agent shall not be responsible to
Lenders, and no Creditor shall be responsible to the other Creditors or the
Collateral Agent, for: (i) any recitals, statements, information,
representations or warranties in connection with any Agreement, or (ii) the
execution, effectiveness, genuineness, validity, enforceability, collectability,
value or sufficiency of the Obligations, the Collateral, the Collections, the
Agreements, or be required to make any inquiry concerning either the performance
or observance of any other terms, provisions or conditions of any Agreement, or
(iii) the assets, liabilities, financial condition, results of operations,
business or creditworthiness of Borrowers.
(c) Collateral Agent shall be entitled to act, and shall be
fully protected in acting upon, any communication in whatever form believed by
Collateral Agent, in good faith, to be genuine and correct and to have been
signed or sent or made by a proper person or persons or entity. Collateral
Agent may consult counsel and shall be entitled to act, and shall be fully
protected in any action taken in good faith in accordance with advice given by
counsel. Collateral Agent may employ agents and attorneys-in-fact reasonably
satisfactory to Creditors and shall not be liable for the default or misconduct
of any such agents or attorneys-in-fact selected by Collateral Agent with
reasonable care.
5.6 CERTAIN RIGHTS OF COLLATERAL AGENT. If Collateral Agent shall
request instructions from Creditors with respect to any act or action (including
failure to act) in connection with the Agreements, Collateral Agent shall be
entitled to refrain from such act or taking such action unless and until
Collateral Agent shall have received instructions from the Creditors and
Collateral Agent shall not incur liability to any person by reason of so
refraining. Collateral Agent shall be entitled to act or refrain from acting,
and in all cases shall be fully protected in acting or refraining from acting
under this
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Agreement, the other Collateral Agent Agreements or any Agreement in accordance
with any instructions from Creditors.
5.7 INDEMNIFICATION.
(a) To the extent Collateral Agent is not reimbursed and
indemnified by Borrowers out of Collateral (or otherwise), Creditors will
reimburse and indemnify Collateral Agent in proportion to the Obligations owing
to them by Borrowers for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Collateral Agent in performing its duties hereunder or in
any way relating to or arising out of this Agreement or any Agreement, other
than as a consequence of bad faith or willful misconduct on the part of
Collateral Agent.
(b) Without limiting the generality of the foregoing, in the
event that, at any time, whether during or after the term of this Agreement, any
action or proceeding shall be brought against Collateral Agent by any Borrower
or by any other person claiming by, through or under any Borrower or otherwise,
which action shall be to recover damages for any act taken or omitted by
Collateral Agent under any Agreement or in the performance of any rights, powers
or remedies of Collateral Agent against any Borrower, the Collateral or with
respect to the Obligations, or which action or proceeding shall be for any other
relief of any kind, arising directly or indirectly out of any transaction
between Collateral Agent and Borrowers under or in relation to any Agreement,
each of the Creditors agrees to indemnify and hold harmless with respect thereto
and to pay to Collateral Agent its pro rata share of such amount as Collateral
Agent shall be required to pay by reason of a judgment, decree, or other order
entered in such action or proceeding or by reason of any compromise or
settlement agreed to by Collateral Agent, including, without limitation, all
interest and costs assessed against Collateral Agent in defending or
compromising such action, together with attorneys' fees and other legal expenses
paid or incurred by Collateral Agent in connection therewith other than in
connection with any action or proceeding arising as a consequence of actual bad
faith, willful misconduct or gross negligence on the part of Collateral Agent.
In Collateral Agent's reasonable discretion, Collateral Agent may also, to the
extent Collateral Agent is entitled to indemnification hereunder, reserve for
and/or satisfy any such judgment, decree or order from Collections prior to any
distributions therefrom to or for the account of the Creditors.
6. REPRESENTATIONS AND WARRANTIES. (a) The Trustee further
warrants to Agent that it has full right, power and
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authority to enter into this Agreement and, to the extent the Trustee is an
agent or trustee for other parties, that this Agreement shall fully bind all
such other parties.
(b) Agent represents and warrants to the Trustee that Agent is
the holder of such Liens on the Collateral which secure or will secure the
Obligations. Agent agrees that it shall not assign or transfer any of such
Liens without (i) prior notice being given to the Trustee and (ii) such
assignment or transfer being made expressly subject to the terms and provisions
of this Agreement. Agent further warrants to the Trustee that it has full
right, power and authority to enter into this Agreement and, to the extent Agent
is an agent or trustee for other parties, that this Agreement shall fully bind
all such other parties.
7. PROCEEDINGS. ANY JUDICIAL PROCEEDING BROUGHT BY OR AGAINST ANY
CREDITOR WITH RESPECT TO THIS OR ANY RELATED AGREEMENT MAY BE BROUGHT IN ANY
COURT OF COMPETENT JURISDICTION IN THE CITY OF NEW YORK, STATE OF NEW YORK AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE TRUSTEE, AGENT AND COLLATERAL
AGENT ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT TO
BRING PROCEEDINGS AGAINST THE TRUSTEE IN ANY COURTS OF ANY OTHER JURISDICTION.
ANY JUDICIAL PROCEEDING BY THE TRUSTEE AGAINST THE AGENT OR COLLATERAL AGENT
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY ARISING OUT
OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, SHALL
BE BROUGHT ONLY IN A COURT LOCATED IN THE CITY OF NEW YORK, STATE OF NEW YORK;
PROVIDED THAT NOTWITHSTANDING THE FOREGOING, IF IN ANY JUDICIAL PROCEEDING BY OR
AGAINST THE TRUSTEE THAT IS BROUGHT IN ANY OTHER COURT SUCH COURT DETERMINES
THAT AGENT IS AN INDISPENSABLE PARTY, THE TRUSTEE SHALL BE ENTITLED TO JOIN OR
INCLUDE AGENT IN SUCH PROCEEDINGS IN SUCH OTHER COURT. THE TRUSTEE WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND SHALL
NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON
FORUM NON CONVENIENS.
8. WAIVER OF JURY TRIAL. THE TRUSTEE AND AGENT HEREBY EXPRESSLY
WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE TRUSTEE AND AGENT OR ANY ONE OF
THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENTS OR
AGREEMENT EXECUTED OR DELIVERED BY
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<PAGE>
THEM IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND THE TRUSTEE AND AGENT HEREBY AGREE AND CONSENT
THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT JURY, AND THAT ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THEIR CONSENT TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
this ___ day of June, 1996.
THE BANK OF NEW YORK COMMERCIAL CORPORATION, as Agent
By:_________________________________
Name:_______________________________
Title:______________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY, as Trustee
By:_________________________________
Name:_______________________________
Title:______________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Collateral Agent
By:_________________________________
Name:_______________________________
Title:______________________________
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<PAGE>
ACKNOWLEDGMENT
Each of the undersigned hereby acknowledges and agrees to the
foregoing Agreement. Each of the undersigned agrees to be bound by the terms
and provisions thereof as they relate to the relative rights of the Creditors
with respect to each other. However, nothing therein shall be deemed to amend,
modify, supersede or otherwise alter the terms of the respective agreements
between the undersigned and each Creditor. Each of the undersigned further
agrees that the Agreement is solely for the benefit of the Creditors and shall
not give the undersigned, its successors and assigns, or any other person, any
rights vis-a-vis any Creditor.
GREENWICH AIR SERVICES, INC.
By:________________________________
Its:_______________________________
GAS TURBINE CORPORATION
By:________________________________
Its:_______________________________
GREENWICH TURBINE, INC.
By:________________________________
Its:_______________________________
GASI ENGINE SERVICES CORPORATION
By:________________________________
Its:_______________________________
MCALLEN COMPONENTS, L.P.
By:________________________________
Its:_______________________________
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<PAGE>
GREENWICH AIR SERVICES-TEXAS, L.P.
By:________________________________
Its:_______________________________
GREENWICH CALEDONIAN, LTD.
By:________________________________
Its:_______________________________
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SHARES PLEDGE
between
GASI ENGINE SERVICES CORPORATION, a corporation organized under the laws of
the state of Delaware and having its principal office at 4590 N.W. 36th St.,
Bldg 23 Miami, Florida 33122 (hereinafter referred to as THE PLEDGOR);
and
THE BANK OF NEW YORK COMMERCIAL CORPORATION, having an office at 1290 Avenue
of the Americas, New York, New York 10104 as agent under the Sharing Agreement
(as hereafter defined) for the Lenders, Trustee and the Holders of Securities
(as each is defined therein) (in such capacity, THE AGENT).
________________
CONSIDERING THAT the Agent has required the transfer to it or its nominees of
the Pledged Securities (as hereinafter defined) and the execution by the Company
and Pledgor of this Deed, in security of the obligations of the Company and
Pledgor to (INTER ALIA) the Banks under the Agreement and the Note Holders
under the Indenture (all as defined below).
NOW IT IS HEREBY PROVIDED AND DECLARED THAT:
1. INTERPRETATION
(1) In this Deed:
AGREEMENTS means the Fourth Amended and Restated Revolving Credit
and Security Agreement dated as of this date between INTER ALIA
the Company and Pledgor, Greenwich Air Services, Inc., Gas Turbine
Corporation, Greenwich Turbine, Inc., GASI Engine Services
Corporation, McAllen Components, L.P. and Greenwich Air Services -
Texas, L.P. the Lenders (as defined therein), and the Agent (the
Loan Agreement; and (b) the Indenture, dated as of this date between
Greenwich Air Services, Inc., the Subsidiary guarantors (as defined
therein) and the Note Trustee (the INDENTURE);
<PAGE>
LENDERS shall mean: (a) the Lenders as defined in the Agreement
and (b) the holders of the Securities as defined in the Indenture;
DEFAULT RATE is as defined in Section 3.1 of the Agreement;
GUARANTY is the guaranty dated as of this date issued by Pledgor
to Agent of the obligations of Greenwich Caledonian Limited
(Caledonian) to the Lenders under the Receivable Credit Agreement
dated as of this date among Caledonian, Agent and Lenders.
INDEBTEDNESS is as defined in each Agreement and shall include,
without limitation, the Securities held by the Note Holders (as
herein defined);
NOTE HOLDERS are the holders of ____% senior notes of Greenwich
Air Services, Inc. due 2006 (the Notes) issued pursuant to the
Indenture referred to in the definition of the Agreement;
NOTE TRUSTEE is American Stock Transfer & Trust Company;
PLEDGED SECURITIES means the securities described in paragraph (a)
of the SCHEDULE hereto which are to be transferred, or which have
been transferred, to the Agent or its nominees, and the securities,
monies, assets, rights and powers described in paragraphs (b) and
(c) of the SCHEDULE hereto and all other securities (if any) which
are hereafter transferred or delivered to the Agent to be held
subject to the terms and conditions of this Deed; and
SECURED OBLIGATIONS shall mean and include:
(i) any and all of Pledgor's indebtedness and/or liabilities to the
Agent or the Lenders of every kind, nature and description, direct
or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing
or hereafter arising, contractual or tortious, liquidated or
unliquidated, under the Loan Agreement and the Guaranty and all
obligations of the Company and Pledgor to the Agent or Lenders to
perform acts or refrain from taking any action under the Loan
Agreement; and
(ii) any and all of the Company's and Pledgor's Indebtedness and/or
liabilities to the Agent, the Note Trustee or the Note Holders of
every kind, nature and description, direct or indirect, secured or
unsecured,
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<PAGE>
joint, several, joint and several, absolute and contingent, due or
to become due, now existing or hereafter arising, contractual or
tortious, liquidated or unliquidated, under the Indenture, the
Subsidiary Guarantees and the Notes;
SHARING AGREEMENT means the Collateral Sharing Agreement dated as
of this date among Agent, Note Trustee and Agent, as collateral
agent.
(2) Unless otherwise stated, terms and expressions defined in the
Agreement shall have the same meaning herein.
(3) The expressions THE COMPANY AND PLEDGOR, THE AGENT, THE LENDERS,
the Note Trustee and the Note Holders shall include the successors,
assignees and transferees of the Company and Pledgor, the Agent, the
Lenders; the Note Trustee and the Note Holders and, in the case of
the Agent shall include any person for the time being the Agent
under the Sharing Agreement.
(4) Unless any provision of this Deed or the context otherwise requires,
any reference herein to any statute or any section of any statute
shall be deemed to include a reference to any statutory modification
or re-enactment thereof for the time being in force.
(5) In this Deed the singular includes the plural and vice versa.
Clause headings are for convenience of reference only.
(6) Any reference in this Deed to a document of any kind whatsoever
(including this Deed) is to that document as amended or varied or
supplemented or novated or substituted from time to time.
(7) Except as otherwise expressly provided for above, the provisions of
the Agreement shall apply hereto, MUTATIS MUTANDIS, as if the same
had been set out in full herein.
2. OBLIGATION TO PAY
The Company and Pledgor undertakes to the Agent that it will pay or
discharge the Secured Obligations to the Agent and/or the Note
Holders; as the case may be direct on the due date therefore in
accordance with the terms of the Agreement, the Indenture or any
other document evidencing the Indebtedness of the Company and
Pledgor.
3. SECURITY
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(1) In security of the Secured Obligations the Company and Pledgor
hereby assigns to the Agent as for the Lenders, the Note Trustee and
the Note Holders its whole right, title, interest and benefit in and
to the Pledged Securities.
(2) The Agent hereby acknowledges that, notwithstanding any transfer or
delivery to EX FACIE absolutely of Pledged Securities and any
registration of Pledged Securities in the name of the Agent or any
person holding to the order of the Agent, or the custody thereof by
the Agent of any such person, Pledged Securities are and shall truly
be held by it as security for the payment of the Secured Obligations
on the terms and conditions of this Deed.
4. UNDERTAKINGS
(1) The Company and Pledgor undertakes forthwith to transfer to the
Agent or its nominees, by duly stamped transfer, such of the Pledged
Securities as at the date hereof have not been so transferred and to
issue certificates representing the Pledged Securities in the name
of the Agent or such nominee as appropriate.
(2) The Company and Pledgor shall for so long as this security is in
force pay duly and promptly all calls which may from time to time be
made in respect of any unpaid monies under any Pledged Securities
and/or any other monies which it may lawfully be required to pay in
respect of any Pledged Securities, and in case of default the Agent
may, if it thinks fit, make such payments on behalf of the Company
and Pledgor.
(3) Any monies expended by the Agent under these provisions shall be
deemed to be properly paid by the Agent, and the Company and Pledgor
shall reimburse the Agent on demand, and such monies shall pending
reimbursement constitute a part of the Secured Obligations.
5. WARRANTIES
The Company and Pledgor hereby warrants, represents and undertakes
that subject to this Deed (a) it is and will remain the sole owner
of the Pledged Securities, (b) it has not transferred, assigned,
pledged or in any way encumbered and hereby covenants that it will
not transfer, assign, pledge or otherwise encumber hereafter the
whole or any part of the Pledged Securities or any interest therein
to anyone other than the Agent and (c) the Pledged Securities
represent and will continue to
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represent no less than 65% of the share capital of Greenwich
Caledonian Limited.
6. VOTING RIGHTS, DIVIDENDS, ETC.
(1) If the Pledged Securities shall entitle the holder thereof to rights
to subscribe for any other securities, then the Company and Pledgor
shall do all acts and things and execute such documents (including
such deed or deeds supplemental hereto) as the Agent may require so
as to effect a fixed security in favor of the Agent (as trustee
aforesaid) over such Pledged Securities when issued.
(2) Subject to Clauses 6(3) and 8(2) the Company and Pledgor shall be
entitled to exercise any and all voting rights pertaining to the
Pledged Securities or any part thereof and to receive and retain any
and all cash dividends paid in respect of the Pledged Securities in
accordance with the provisions of the Agreement. If the Agent
receives due notice not less than 7 days before the proposed
exercise of any such voting rights by the Company and Pledgor (or
such lesser period as the Agent may agree), and if the Company and
Pledgor is entitled hereunder to exercise such rights, the Agent
shall procure its nominee to execute and deliver such documents as
the Company and Pledgor may reasonably require in order to enable
such rights to be so exercised.
(3) This Deed shall take effect so that:
(a) prior to any enforcement of this security all rights attached
to the Pledged Securities shall be exercisable only in the
interests of the Company and Pledgor in accordance with the
Company's and Pledgor's instructions, apart from the exercise
of any such right for the purpose of preserving this security
in accordance with the provisions hereof; and
(b) upon any enforcement of this security all rights attached to
the Pledged Securities shall be exercisable by the Agent for
the purpose of enforcing this security and otherwise in
accordance with Clause 6(3)(a), to the intent that nothing
contained herein or in any other Agreements shall give or is
intended to have the effect of giving control of Greenwich
Caledonian Limited to the Agent or the Lenders, otherwise than
on enforcement of this security.
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<PAGE>
(4) The Agent may after notifying the Company and Pledgor of its
intention to do so, but shall not be obliged to, pay any calls or
other sums that may be or become due in respect of any of the
securities for the time being the subject of this Deed (including,
without limitation, the Pledged Securities) and the Company and
Pledgor undertakes to pay to the Agent on written demand to the
Company and Pledgor such sums so paid by the Agent together with
interest thereon at the Default Rate from the date of demand by the
Agent to the date of payment by the Company and Pledgor. Such sums
and interest shall be secured by this Deed.
7. LIABILITY TO PERFORM
It is expressly agreed that, notwithstanding anything to the
contrary herein contained, the Company and Pledgor shall remain
liable to observe and perform all of the conditions and obligations
assumed by it in respect of the Pledged Securities and due Agent
shall be under no obligation or liability by reason of or arising
out of this Deed. The Agent shall not be required in any manner to
perform or fulfill any obligations of the Company and Pledgor in
respect of the Pledged Securities.
8. ENFORCEMENT
(1) At any time after the occurrence and during the continuance of an
Event of Default then, if and for so long as the Agent is, or is
entitled to be registered as the holder of the Pledged Securities in
the register of members of Greenwich Caledonian Limited this
security may be enforced, subject to the provisions of the Sharing
Agreement in the following manner [STANDSTILL?]:
(a) the Agent shall become entitled to sell, call in, collect or
convert into money any Pledged Securities with full power on
giving notice to the Company and Pledgor to such effect to
sell any of the same either together or in parcels and either
by public auction or private contract and for such
consideration (whether in cash, securities or other assets and
whether deferred or not) as the Agent may think fit and with
full power to buy in or rescind or vary any contract of sale
of Pledged Securities or any part thereof and to resell the
same without being responsible for any loss which may be
occasioned thereby and with full power to compromise and
effect compositions and for the purposes aforesaid or any of
them to execute and do all such assurances and things as it
shall think fit;
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(b) the Agent shall become entitled to apply all or any monies
received or held by it in respect of the Pledged Securities in
respect of the exercise of any of its rights in relation
thereto in accordance with Clause 9; and
(c) the Company and Pledgor shall on demand execute and do all
such transfers, assurances and things which the Agent may
require for perfecting its title to any Pledged Securities or
for vesting the same in the Agent or its nominees or any
purchaser.
(2) After this security has become enforceable:
(a) all rights of the Company and Pledgor to exercise the voting
rights which it would otherwise be entitled to exercise and to
receive the dividends and other payments which it would
otherwise be authorized to receive and retain pursuant to
Clause 6(b) shall cease, and, if and so long as the Agent is,
or is entitled to be, registered as the holder of the Pledged
Securities in the register of members of Greenwich Caledonian
Limited all such rights shall thereupon become vested in the
Agent which shall have the sole right to exercise such voting
rights and to receive and hold as Pledged Securities such
dividends and interest payments; and
(b) all dividends and other payments which are received by the
Company and Pledgor contrary to the provisions of Clause
8(2)(a) shall, if and for so long as the Agent is entitled to
be registered as the holder of the Pledged Securities in the
register of members of Greenwich Caledonian Limited, be
received in, and be declared by the Company and Pledgor to be
subject to a trust for the benefit of the Agent, and shall be
segregated from other funds of the Company and Pledgor and
forthwith be paid over to the Agent,
to the intent that the Agent shall be entitled to exercise such rights and
receive such payments only for the purpose of protecting or enforcing the
security constituted hereby.
(3) The Agent shall incur no liability to the Company and Pledgor in the
event of an overrealization of Pledged Securities or any of them or
from any error or omission in the administration thereof.
9. APPLICATION OF ENFORCEMENT MONIES
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(1) All monies received by the Agent under or by virtue of this Deed
following enforcement of the security hereby granted shall be
applied, subject to the claim of any creditors ranking in priority
to or PAR PASSU with the claims of the Agent hereunder, in manner
set out in the Sharing Agreement.
(2) Nothing contained in this Deed shall limit the right of the Agent
(and the Company and Pledgor acknowledges that the Agent is so
entitled) if and for so long as the Agent, in its discretion shall
consider it appropriate, to place all or any monies arising from the
enforcement of the security hereby granted into a suspense account,
without any obligation to apply the same or any part thereof in or
towards the discharge of any Secured Obligation.
10. RECONVEYANCE
Upon payment in full of all Secured Obligations, the Agent shall
transfer to the Company and Pledgor at the Company's and Pledgor's
expense, and the Company and Pledgor shall accept the transfer of,
all Pledged Securities then held by or to the order of the Agent and
the Agent shall co-operate in procuring the registration of such
Pledged Securities in the name of the Company and Pledgor or as it
shall direct.
11. PROTECTION OF SECURITY
(1) The security created by this Deed shall be a continuing security
notwithstanding any settlement of account or other matter or thing
whatsoever, and in particular (but without prejudice to the
generality of the foregoing) shall not be considered satisfied by an
intermediate repayment or satisfaction of part only of the Secured
Obligations and shall continue in full force and effect until total
and irrevocable satisfaction of all the Secured Obligation.
(2) The security created by this Deed shall be in addition to and shall
not in any way prejudice or be prejudiced by any collateral or other
security, right or remedy which the Agent may now or at any time
hereafter hold for all or any part of the Secured Obligations.
(3) No failure on the part of the Agent or any Lender to exercise and no
delay on its part in exercising any right, remedy, power or
privilege under or pursuant to this Deed or any other document
relating to or securing all or any part of the Secured Obligations
will operate
-8-
<PAGE>
as a waiver thereof, nor will any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or
the exercise of any other right or remedy. The rights and remedies
provided in this Deed and any such other document are cumulative and
not exclusive of any right or remedies provided by law.
(4) Each of the provisions in this Deed shall be severable and distinct
from one another and if at any time any one or more of such
provisions is or becomes or is declared null and void, invalid,
illegal or unenforceable in any respect under any law or otherwise
howsoever the validity, legality and unenforceability of the
remaining provisions hereof shall not in any way be affected or
impaired thereby.
(5) If any of the Agent, the Lender, the Note Trustee or the Note
Holders receives or is deemed to be affected by notice whether
actual or constructive of any subsequent security or other interest
affecting any part of the Pledged Securities and/or the proceeds or
sale thereof, any of the Agent, the Lender, the Note Trustee or the
Note Holders may open a new account or accounts with the Company and
Pledgor. If the Agent or such Lenders does not open a new account
it shall nevertheless be treated as if it had done so at the time
when it received or was deemed to have received notice and as from
that time all payments made to the Agent or such Lender, the Note
Trustee or the Note Holder shall be credited or be treated as having
been credited to the new account and shall not operate to reduce the
amount for which this Deed is security.
(6) Neither the security created by this Deed nor the rights, powers,
discretions and remedies conferred upon the Agent by this Deed or by
law shall be discharged, impaired or otherwise affected by reason
of:
(a) any present or future security, guarantee, indemnity or other
right or remedy held by or available to any of Agent, the
Lenders, the Note Trustee or the Note Holders being or
becoming wholly or in part void, voidable or unenforceable on
any ground whatsoever or by any of Agent, the Lenders, the
Note Trustee or the Note Holders from time to time exchanging,
varying, realizing, releasing or failing to perfect or enforce
any of the same; or
(b) the Agent or any Lender or the Note Trustee or any Note Holder
compounding with, discharging or releasing or varying the
liability of, or granting
-9-
<PAGE>
any time, indulgence or concession to, the Company and Pledgor
or any other person or renewing, determining, varying or
increasing any accommodation or transaction in any manner
whatsoever or concurring in accepting or varying any
compromise, arrangement or settlement or omitting to claim or
enforce payment from the Company and Pledgor or any other
person; or
(c) any act or omission which would not have discharged or
affected the liability of the Company and Pledgor had it been
a principal debtor instead of cautioner or by anything done or
omitted which but for this provision might operate to
exonerate the Company and Pledgor from the Secured
Obligations; or
(d) any legal limitation, disability, incapacity or other similar
circumstance relating to the Company and Pledgor.
(7) The Agent shall not be obliged, before exercising any of the rights,
powers or remedies conferred upon it by or pursuant to this Deed or
by law, to:
(a) take any action or obtain judgment or decree in any Court
against the Company and Pledgor;
(b) make or file any claims to rank in a winding-up or liquidation
of the Company and Pledgor; or
(c) enforce or seek to enforce any other security taken, or
exercise any right or plea available to the Agent, in respect
of any of the Company's and Pledgor's obligations under any
document other than this Deed.
12. FURTHER ASSURANCE
The Company and Pledgor shall execute and do all such assurances,
acts and things as the Agent may require for perfecting or
protecting the security created by or pursuant to this Deed over the
Pledged Securities or for facilitating the realization of such
rights and the exercise of all powers, authorities and discretions
vested in the Agent, and shall, in particular, on demand forthwith
sign, seal, execute, deliver and complete all transfers,
assignments, renunciations, mandates, instructions, deeds and
documents of every kind and do or cause to be done, all acts and
things of every kind which the Agent may specify by written notice
to the Company and Pledgor to perfect the interest of the Agent or
to
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<PAGE>
enable the Agent or the nominees of the Agent to exercise any rights
or powers attaching to the Pledged Securities or to vest the Pledged
Securities in the Agent or the nominees of the Agent, or to enable
the Agent to sell or dispose of the Pledged Securities or otherwise
to enforce or exercise any rights or powers under or in connection
with its security.
13. MANDATE AND ATTORNEY
(1) The Company and Pledgor hereby irrevocably appoints the Agent to be
its mandatory and attorney for it and on its behalf and in its name
or otherwise and as its act or deed to create or constitute, or to
make any alteration or addition or deletion in or to, any documents
which the Agent may require for perfecting or protecting the title
of the Agent to the Pledged Securities or for vesting any of the
Pledged Securities in the Agent or its nominees or any purchaser and
to redeliver the same thereafter and otherwise generally to sign,
seal and deliver and otherwise perfect any fixed security, floating
charge, transfer, disposition, assignation, security and/or
assurance or any writing, assurance, document or act which may be
required or may be deemed proper by the Agent on or in connection
with any sale, lease, disposition, realization, getting in or other
enforcement by the Agent of all or any of the Pledged Securities.
(2) The Company and Pledgor hereby ratifies and confirms and agrees to
ratify and confirm whatever any such mandatory or attorney shall do
in the exercise or purported exercise of all or any of the powers,
authorities and discretions referred to in this Clause 13.
14. EXPENSES
(1) The Company and Pledgor binds and obliges itself for the whole
expenses of completing and enforcing the security hereby granted and
the expenses of any retrocession or discharge hereof.
(2) All costs, charges and expenses incurred and all payments made by
the Agent hereunder in the lawful exercise of the powers hereby
conferred whether or not occasioned by any act, neglect or default
of the Company and Pledgor shall carry interest from the date of the
same being incurred or becoming payable at the Default Rate. The
amount of all such costs, charges, expenses and payments and all
interest thereon and all remuneration payable hereunder shall be
payable by the Company and Pledgor on demand and shall be a Secured
Obligation. All such costs, charges,
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<PAGE>
expenses and payments shall be paid and charged as between the Agent
and the Company and Pledgor on the basis of a full and unqualified
indemnity.
15. INDEMNITY
The Agent and every attorney, manager, agent or other person
appointed by the Agent in connection herewith shall be entitled to
be indemnified out of the Pledged Securities in respect of all
liabilities and expenses properly incurred by them or him in the
execution or purported execution of any of the powers, authorities
or discretions vested in them or him pursuant hereto and against all
actions, proceedings, costs, claims and demands in respect of any
matter or thing done or omitted in anywise relating to the Pledged
Securities, and the Agent may retain and pay all sums in respect of
the same out of any monies received under the powers hereby
conferred.
16. AVOIDANCE OF PAYMENTS
Any amount which has been paid by a Borrower to the Agent or any
other Lender or the Note Trustee or any Note Holder and which is, in
the opinion of the Agent, capable of being reduced or restored or
otherwise avoided in whole or in part in the liquidation or
administration of that Borrower, shall not be regarded as having
been irrevocably paid for the purposes of this Deed.
17. NOTICES
All notices, requests, demands and other communications to be given
under this Deed shall be given and/or deemed to be given in the same
manner as notices to be given under the Agreement, and the terms of
Section 14.6 of the Agreement shall apply MUTATIS MUTANDIS to this
Deed as though that Clause were set out in full herein.
18. GOVERNING LAW
This Deed shall be construed and governed in all respects in
accordance with the law of Scotland.
19. CONSENT TO REGISTRATION
A Certificate signed by an authorized officer of the Agent shall, in
the absence of manifest error, conclusively determine the Secured
Obligations at any relevant time and shall constitute a balance and
charge against the Company and Pledgor, and no suspension of a
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<PAGE>
charge or of a threatened charge for payment of the balance so
constituted shall pass nor any sist of execution thereon be granted
except on consignation. The Company and Pledgor consents to the
registration of this Deed and of any such certificate for
preservation and execution.
IN WITNESS WHEREOF, this Shares Pledge has been executed as of the
___ day of June, 1996.
GASI ENGINE SERVICES CORPORATION
By:_____________________________
Title:_______________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Agent
By:_____________________________
Title:_______________________
GREENWICH TURBINE TEST CORPORATION
By:_____________________________
Title:_______________________
GREENWICH FOREIGN SALES CORPORATION
By:_____________________________
Title:
-13-
<PAGE>
THE SCHEDULE
PLEDGED SECURITIES
(a) 650,000 fully paid Ordinary "A" Shares of L1 each and 14,345,026
Ordinary "B" Shares of US $1 each in the capital of Greenwich
Caledonian Limited (formerly Aviall Limited).
(b) all other securities of every kind which may at any time, whether
directly or indirectly, be derived from any kind of the said shares,
whether by way of bonus, rights, exchange, option, preference,
capital re-organization or otherwise howsoever; and
(c) where the context so admits, all monies and assets whatsoever at any
time accruing on, or payable or receivable in respect of, any of the
said shares or securities and all voting and other rights and powers
of any kind at any time attaching to, or exercisable in respect of,
any of the said shares or securities.
- 14 -
<PAGE>
June 3, 1996
Greenwich Air Services, Inc.
P.O. Box 522187
Miami, Florida 33152
Gentlemen:
On April 26, 1996, Greenwich Air Services, Inc., a Delaware corporation
(the "Company"), and its subsidiaries (together with the Company, the
"Companies"), filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 (Registration No. 333-4164) (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Act"). The Registration
Statement relates to the sale by the Company of $150,000,000 principal amount of
Senior Notes of the Company due 2006 (the "Notes"). We have acted as counsel to
the Companies in connection with preparation and filing of the Registration
Statement.
In connection with the Registration Statement, we have examined, considered
and relied upon copies of the following documents (collectively, the
"Documents"): (i) the Company's Amended and Restated Certificate of
Incorporation and Bylaws, and similar organizational and charter documents of
each of the other Companies; (ii) resolutions of each of the Companies' (or
their corporate general partners, as the case may be) Board of Directors
authorizing the offering and the issuance of the Notes to be sold by the Company
and related matters; (iii) the Registration Statement and exhibits thereto; and
(iv) such other documents and instruments that we have deemed necessary for the
expression of the opinions herein contained. In making the foregoing
examinations, we have assumed without investigation the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
the conformity to authentic original documents of all documents submitted to us
as copies, and the veracity of the Documents. As to various questions of fact
material to the opinion
<PAGE>
Greenwich Air Services, Inc.
June 3, 1996
Page 2
expressed below, we have relied, to the extent we deemed reasonably appropriate,
upon the representations or certificates of officers and/or directors of the
Companies (or their corporate general partners, as appropriate) and upon
documents, records and instruments furnished to us by the Companies, without
independently verifying the accuracy of such certificates, documents, records or
instruments.
Based upon the foregoing examination, and subject to the qualifications set
forth below, we are of the opinion that the Notes have been duly and validly
authorized, and when issued and delivered in accordance with the terms of the
Underwriting Agreement filed as Exhibit 1.1 to the Registration Statement, will
be validly issued, fully paid and non-assessable, and binding obligations of the
Companies.
Although we have acted as counsel to the Company in connection the
preparation and filing of the Registration Statement, our engagement has been
limited to certain matters about which we have been consulted. Consequently,
there exist matters of a legal nature involving the Company in which we have not
been consulted and have not represented the Company. This opinion letter is
limited to the matters stated herein and no opinions may be implied or inferred
beyond the matters expressly stated herein. The opinions expressed herein are
given as of this date, and we assume no obligation to update or supplement our
opinions to reflect any facts or circumstances that may come to our attention or
any change in law that may occur or become effective at a later date.
<PAGE>
Greenwich Air Services, Inc.
June 3, 1996
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus comprising a part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations promulgated thereunder.
Sincerely,
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
<PAGE>
- --------------------------------------------------------------------------------
GREENWICH AIR SERVICES, INC.
GAS TURBINE CORPORATION
GREENWICH TURBINE, INC.
GASI ENGINE SERVICES CORPORATION
MCALLEN COMPONENTS, L.P.
GREENWICH AIR SERVICES - TEXAS, L.P.
-----------------------------
FOURTH AMENDED AND RESTATED REVOLVING CREDIT
AND
SECURITY AGREEMENT
-----------------------------
DATED AS OF JUNE ___, 1996
THE BANK OF NEW YORK COMMERCIAL CORPORATION
(AS A LENDER AND AS AGENT)
AND
THE VARIOUS FINANCIAL INSTITUTIONS THAT BECOME LENDERS HEREUNDER
(LENDERS)
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . 1
1.2 General Terms . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Uniform Commercial Code Terms . . . . . . . . . . . . . . . 21
1.4 Certain Matters of Construction . . . . . . . . . . . . . . 22
II. ADVANCES AND PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1 (a) Greenwich Borrowing Base . . . . . . . . . . . . . . 22
(b) Turbine Borrowing Base . . . . . . . . . . . . . . . 23
(c) GTI Borrowing Base . . . . . . . . . . . . . . . . . 23
(d) Components Borrowing Base. . . . . . . . . . . . . . 24
(e) GASI Borrowing Base. . . . . . . . . . . . . . . . . 25
(f) Engine Services Borrowing Base . . . . . . . . . . . 26
(g) Discretionary Rights . . . . . . . . . . . . . . . . 26
(h) Inventory Advances . . . . . . . . . . . . . . . . . 27
(i) Receivables Advances . . . . . . . . . . . . . . . . 27
(j) Unbilled Receivables . . . . . . . . . . . . . . . . 27
(k) Individual Revolving Advances. . . . . . . . . . . . 27
(l) . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3 Procedure for Borrowing . . . . . . . . . . . . . . . . . . 28
2.4 Disbursement of Advance Proceeds. . . . . . . . . . . . . . 31
2.5 Repayment of Advances . . . . . . . . . . . . . . . . . . . 31
2.6 Repayment of Excess Advances. . . . . . . . . . . . . . . . 31
2.7 Manner of Borrowing and Payment . . . . . . . . . . . . . . 32
2.8 Statement of Account. . . . . . . . . . . . . . . . . . . . 33
2.9 No Deductions . . . . . . . . . . . . . . . . . . . . . . . 34
2.10 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . 34
2.11 Additional Payments . . . . . . . . . . . . . . . . . . . . 34
2.12 Increased Costs . . . . . . . . . . . . . . . . . . . . . . 35
2.13 Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . 36
2.14 Basis For Determining Interest Rate Inadequate or Unfair. . 36
2.15 Letters of Credit . . . . . . . . . . . . . . . . . . . . . 37
2.16 Issuance of Letters of Credit . . . . . . . . . . . . . . . 38
2.17 Requirements For Issuance of Letters of Credit. . . . . . . 39
2.18 Defaulting Lender . . . . . . . . . . . . . . . . . . . . . 40
III. INTEREST AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.1 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.2 Intentionally Omitted . . . . . . . . . . . . . . . . . . . 42
3.3 Unused Facility Fee . . . . . . . . . . . . . . . . . . . . 42
3.4 Letter of Credit. . . . . . . . . . . . . . . . . . . . . . 42
3.5 Computation of Interest and Fees. . . . . . . . . . . . . . 43
3.6 Maximum Charges . . . . . . . . . . . . . . . . . . . . . . 43
IV. COLLATERAL: GENERAL TERMS. . . . . . . . . . . . . . . . . . . . . . . 43
4.1 Acknowledgement and Grant of Security Interests . . . . . . 43
4.2 Perfection of Security Interest . . . . . . . . . . . . . . 44
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<PAGE>
4.3 Disposition of Collateral . . . . . . . . . . . . . . . . . 44
4.4 Preservation of Collateral. . . . . . . . . . . . . . . . . 44
4.5 Ownership of Collateral . . . . . . . . . . . . . . . . . . 45
4.6 Defense of Agent's Interests. . . . . . . . . . . . . . . . 45
4.7 Books and Records . . . . . . . . . . . . . . . . . . . . . 46
4.8 Financial Disclosure. . . . . . . . . . . . . . . . . . . . 46
4.9 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 47
4.10 Inspection of Premises. . . . . . . . . . . . . . . . . . . 47
4.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.12 Failure to Maintain Insurance . . . . . . . . . . . . . . . 49
4.13 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . 49
4.14 Payment of Leasehold Obligations. . . . . . . . . . . . . . 50
4.15 Receivables . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) Nature of Receivables. . . . . . . . . . . . . . . . 50
(b) Solvency of Customers. . . . . . . . . . . . . . . . 50
(c) Locations of Borrower. . . . . . . . . . . . . . . . 50
(d) Collection of Receivables. . . . . . . . . . . . . . 50
(e) Notification of Assignment of Receivables. . . . . . 51
(f) Power of Agent to Act on Each Borrower's Behalf. . . 51
(g) No Liability . . . . . . . . . . . . . . . . . . . . 52
(h) Establishment of an Agency Account . . . . . . . . . 52
4.16 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.17 Exculpation of Liability. . . . . . . . . . . . . . . . . . 53
4.18 Environmental Matters . . . . . . . . . . . . . . . . . . . 53
V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 56
5.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.2 Formation and Qualification . . . . . . . . . . . . . . . . 56
5.3 Survival of Representations and Warranties. . . . . . . . . 56
5.4 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . 57
5.5 Financial Statements. . . . . . . . . . . . . . . . . . . . 57
5.6 Corporate Name. . . . . . . . . . . . . . . . . . . . . . . 58
5.7 O.S.H.A. and Environmental Compliance . . . . . . . . . . . 59
5.8 Solvency; No Litigation, Violation, Indebtedness or
Default . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.9 Patents, Trademarks, Copyrights and Licenses. . . . . . . . 60
5.10 Licenses and Permits. . . . . . . . . . . . . . . . . . . . 60
5.11 Default of Indebtedness . . . . . . . . . . . . . . . . . . 61
5.12 No Default. . . . . . . . . . . . . . . . . . . . . . . . . 61
5.13 No Burdensome Restrictions. . . . . . . . . . . . . . . . . 61
5.14 No Labor Disputes . . . . . . . . . . . . . . . . . . . . . 61
5.15 Margin Regulations. . . . . . . . . . . . . . . . . . . . . 61
5.16 Investment Company Act. . . . . . . . . . . . . . . . . . . 61
5.17 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 61
5.18 Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.19 Other Loan Documents. . . . . . . . . . . . . . . . . . . . 62
5.20 Delivery of Purchase Agreement. . . . . . . . . . . . . . . 62
VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 62
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<PAGE>
6.1 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . 62
6.2 Conduct of Business and Maintenance of Existence and
Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.3 Violations. . . . . . . . . . . . . . . . . . . . . . . . . 63
6.4 Government Receivables. . . . . . . . . . . . . . . . . . . 63
6.5 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . 63
6.6 Funded Debt to EBITDA . . . . . . . . . . . . . . . . . . . 63
6.7 Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . 64
6.8 Hedging Agreements; Interest Rate Protection. . . . . . . . 64
6.9 Execution of Supplemental Instruments . . . . . . . . . . . 64
6.10 Payment of Indebtedness . . . . . . . . . . . . . . . . . . 64
6.11 Standards of Financial Statements . . . . . . . . . . . . . 65
6.12 Exercise of Rights. . . . . . . . . . . . . . . . . . . . . 65
6.13 Inventory Composition . . . . . . . . . . . . . . . . . . . 65
6.14 Interim Balance Sheet . . . . . . . . . . . . . . . . . . . 65
VII. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.1 Merger, Consolidation, Acquisition and Sale of Assets . . . 66
7.2 Creation of Liens . . . . . . . . . . . . . . . . . . . . . 66
7.3 Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . 66
7.4 Investments . . . . . . . . . . . . . . . . . . . . . . . . 66
7.5 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.6 Capital Expenditures. . . . . . . . . . . . . . . . . . . . 67
7.7 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.8 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 68
7.9 Nature of Business. . . . . . . . . . . . . . . . . . . . . 68
7.10 Transactions with Affiliates. . . . . . . . . . . . . . . . 68
7.11 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.12 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 69
7.13 Fiscal Year and Accounting Changes. . . . . . . . . . . . . 69
7.14 Prepayment of Indebtedness. . . . . . . . . . . . . . . . . 69
7.15 Pledge of Credit. . . . . . . . . . . . . . . . . . . . . . 69
VIII. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . 69
8.1 Conditions to Effectiveness . . . . . . . . . . . . . . . . 69
(a) Notes. . . . . . . . . . . . . . . . . . . . . . . . 69
(b) Filings, Registrations and Recordings. . . . . . . . 69
(c) Proceedings of the Borrowers . . . . . . . . . . . . 70
(d) Legal Opinions . . . . . . . . . . . . . . . . . . . 70
(e) No Litigation. . . . . . . . . . . . . . . . . . . . 70
(f) Senior Notes . . . . . . . . . . . . . . . . . . . . 70
(g) Pledge Agreements and Other Documents. . . . . . . . 70
(h) Fees . . . . . . . . . . . . . . . . . . . . . . . . 71
(i) Material Adverse Change. . . . . . . . . . . . . . . 71
(j) Representations and Warranties; Covenants; Events. . 71
(k) Incumbency Certificates of the Borrowers . . . . . . 71
(l) Certificates . . . . . . . . . . . . . . . . . . . . 71
(m) Good Standing Certificates . . . . . . . . . . . . . 71
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<PAGE>
(n) Financial Condition Certificates . . . . . . . . . . 72
(o) Collateral Examination . . . . . . . . . . . . . . . 72
(p) Pro Forma Financial Statements . . . . . . . . . . . 72
(q) Undrawn Availability . . . . . . . . . . . . . . . . 72
(r) Insurance. . . . . . . . . . . . . . . . . . . . . . 72
(s) Payment Instructions . . . . . . . . . . . . . . . . 72
(t) Blocked Accounts . . . . . . . . . . . . . . . . . . 72
(u) Consents . . . . . . . . . . . . . . . . . . . . . . 72
(v) Leasehold Agreements . . . . . . . . . . . . . . . . 72
(w) Senior Notes . . . . . . . . . . . . . . . . . . . . 72
(x) Contract Review. . . . . . . . . . . . . . . . . . . 73
(y) Closing Certificate. . . . . . . . . . . . . . . . . 73
(z) Borrowing Base . . . . . . . . . . . . . . . . . . . 73
(aa) Other Agreements . . . . . . . . . . . . . . . . . . 73
(ab) Equity Offering. . . . . . . . . . . . . . . . . . . 73
(ac) Environmental Reports. . . . . . . . . . . . . . . . 73
(ad) Payment Instructions . . . . . . . . . . . . . . . . 73
(ae) Other. . . . . . . . . . . . . . . . . . . . . . . . 73
(af) Purchase Agreement . . . . . . . . . . . . . . . . . 73
8.2 Conditions to Each Advance. . . . . . . . . . . . . . . . . 74
(a) Representations and Warranties . . . . . . . . . . . 74
(b) No Default . . . . . . . . . . . . . . . . . . . . . 74
(c) Maximum Advances . . . . . . . . . . . . . . . . . . 74
IX. INFORMATION AS TO BORROWERS . . . . . . . . . . . . . . . . . . . . . . 74
9.1 Disclosure of Material Matters. . . . . . . . . . . . . . . 74
9.2 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.3 Environmental Reports . . . . . . . . . . . . . . . . . . . 75
9.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 75
9.5 Occurrence of Defaults, etc . . . . . . . . . . . . . . . . 76
9.6 Government Receivables. . . . . . . . . . . . . . . . . . . 76
9.7 Annual Financial Statements . . . . . . . . . . . . . . . . 76
9.8 Monthly Financial Statements. . . . . . . . . . . . . . . . 77
9.9 Other Reports . . . . . . . . . . . . . . . . . . . . . . . 77
9.10 Additional Information. . . . . . . . . . . . . . . . . . . 77
9.11 Business Plan . . . . . . . . . . . . . . . . . . . . . . . 78
9.12 Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . 78
9.13 Power by the Hour Agreement . . . . . . . . . . . . . . . . 78
9.14 Additional Documents. . . . . . . . . . . . . . . . . . . . 78
X. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
XI. AGENT'S AND LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT. . . . . . . . . 80
11.1 Rights and Remedies . . . . . . . . . . . . . . . . . . . . 80
11.2 Agent's Discretion. . . . . . . . . . . . . . . . . . . . . 82
11.3 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . 82
11.4 Rights and Remedies not Exclusive . . . . . . . . . . . . . 82
XII. WAIVERS AND JUDICIAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . 82
12.1 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . 82
12.2 Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.3 Jury Waiver . . . . . . . . . . . . . . . . . . . . . . . . 82
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<PAGE>
XIII. EFFECTIVE DATE AND TERMINATION. . . . . . . . . . . . . . . . . . . . 83
13.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
13.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . 83
XIV. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
14.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 84
14.2 Entire Understanding and Amendments and Modifications . . . 84
14.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 85
14.4 Successors and Assigns; Participations; New Lenders . . . . 86
14.5 Application of Payments . . . . . . . . . . . . . . . . . . 87
14.6 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 88
14.7 Survivability . . . . . . . . . . . . . . . . . . . . . . . 89
14.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 89
14.9 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . 89
14.10 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . 90
14.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 90
14.12 Recordation . . . . . . . . . . . . . . . . . . . . . . . . 90
14.13 Consequential Damages . . . . . . . . . . . . . . . . . . . 90
14.14 Construction. . . . . . . . . . . . . . . . . . . . . . . . 90
XV. BORROWING AGENCY. . . . . . . . . . . . . . . . . . . . . . . . . . 90
15.1. Borrowing Agency Provisions . . . . . . . . . . . . . . . . 90
15.2. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . 91
XVI. REGARDING AGENT.. . . . . . . . . . . . . . . . . . . . . . . . . . 91
16.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . 91
16.2. Nature of Duties. . . . . . . . . . . . . . . . . . . . . . 92
16.3. Lack of Reliance on Agent and Resignation . . . . . . . . . 92
16.4. Certain Rights of Agent . . . . . . . . . . . . . . . . . . 93
16.5. Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . 93
16.6. Notice of Default . . . . . . . . . . . . . . . . . . . . . 93
16.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . 94
16.8. Agent in its Individual Capacity. . . . . . . . . . . . . . 94
16.9. Delivery of Documents . . . . . . . . . . . . . . . . . . . 94
16.10. Borrowers' Undertaking to Agent . . . . . . . . . . . . . . 94
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<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
1.2(a) CIT Loan Documents
1.2(b) Permitted Liens
1.2(c) World Loan Documents
2.2 Notes
2.15 Letter of Credit Agreement
4.5 Inventory Locations
5.2 States of Incorporation and Qualification To Do Business
5.5(c) Cash Flow Projections and Balance Sheets
5.7 Environmental Compliance
5.8(b) Pending Litigation
5.9 Patents, Tradenames, Copyrights and Licenses
5.10 Licenses and Permits
5.12 Defaults
5.14 Labor Disputes and Contracts
7.3 Guarantees
8.1(r) Financial Condition Opinion
9.2 Borrowing Base Certificate
SCHEDULES
1.2 Real Property
<PAGE>
FOURTH AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT
Fourth Amended and Restated Revolving Credit and Security Agreement dated
as of June ___, 1996 among GREENWICH AIR SERVICES, INC., a corporation organized
under the laws of the State of Delaware ("Greenwich"), GAS TURBINE CORPORATION,
a corporation organized under the laws of the State of Delaware, and a wholly-
owned subsidiary of Greenwich ("Turbine"), GREENWICH TURBINE, INC., a
corporation organized under the laws of the State of Delaware ("GTI") GASI
ENGINE SERVICES CORPORATION, a corporation organized under the laws of the state
of Delaware ("GASI"), MCALLEN COMPONENTS, L.P., a limited partnership organized
under the laws of the State of Delaware ("Components"), GREENWICH AIR SERVICES -
TEXAS, L.P., a limited partnership organized under the laws of the state of
Delaware ("Engine Services") (each, a "Borrower" and jointly and severally,
"Borrowers"), the undersigned financial institutions and the various financial
institutions that become Lenders hereunder (each a "Lender" and collectively,
"Lenders") and THE BANK OF NEW YORK COMMERCIAL CORPORATION ("BNYCC"), a
corporation organized under the laws of the State of New York as agent for
Lenders (BNYCC in such capacity, "Agent").
B A C K G R O U N D
Greenwich, Turbine, GTI and BNYCC entered into a Third Amended and
Restated Revolving Credit, Term Loan and Security Agreement dated as of March
14, 1995 (as same may have been amended, modified or supplemented, the "Existing
Loan Agreement"). BNYCC, pursuant to an Assignment dated as of June ___, 1996,
has assigned all of its rights and obligations under the Existing Loan Agreement
to Agent and Lenders. By execution of this Agreement, Borrowers, Agent and
Lenders wish to add certain entities as Borrowers and to amend and restate the
Existing Loan Agreement on the terms and conditions hereinafter set forth.
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, the parties hereto hereby agree as follows:
I. DEFINITIONS.
1.1 ACCOUNTING TERMS. As used in this Agreement, the Notes, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP.
1.2 GENERAL TERMS. For purposes of this Agreement the following terms
shall have the following meanings:
"ACQUISITION AGREEMENT" shall mean the Agreement of Purchase and Sale by
and among Greenwich, Turbine (formerly known
<PAGE>
as GTC East Granby Corporation) and Chromalloy dated March 21, 1994.
"ADVANCE RATES" shall mean the Greenwich Advance Rates, Turbine Advance
Rates, GTI Advance Rates, GASI Advance Rates and the Engine Services Advance
Rates.
"ADVANCE REQUEST" shall mean the meaning set forth in Section 2.3.
"ADVANCES" shall mean all Revolving Advances, and other financial
accommodations provided by Lenders to Borrowers under or in connection with this
Agreement including, without limitation, Letters of Credit to the extent of the
undrawn amount outstanding of such Letters of Credit.
"AFFILIATE" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 10% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"AGENCY ACCOUNT" shall have the meaning set forth in Section 4.15(h).
"AGENT" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum equal to
the higher of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2 of 1%.
"APPLICABLE MARGIN" shall mean initially (a) with respect to Domestic
Loans, 7/8% and (b) with respect to Eurodollar Rate Loans, 2 3/8%, PROVIDED,
HOWEVER, the Applicable Margin shall be amended as provided below, commencing on
the later to occur of (i) the last day of the third fiscal quarter after the
Effective Date and (ii) March 31, 1997 and at the end of each fiscal quarter
thereafter based upon the ratio of Funded Debt to EBITDA as reflected in the
financial statements (x) delivered to Agent pursuant to Section 9.7 of this
Agreement with respect to the first three (3) fiscal quarters of any fiscal year
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<PAGE>
and (b) delivered to Agent pursuant to Section 9.8 of this Agreement with
respect to the last fiscal quarter of any fiscal year:
Applicable Margin
Ratio of Funded Debt Alternate
to EBITDA LIBOR Base Rate
- --------------------------------------------------------------------------------
less than 3.0 to 1.0 2.00% 0.50%
less than 3.50 and equal to or greater than 3.0 to 1.0 2.125% 0.625%
less than 4.50 and equal to or greater than 3.50 to 1.0 2.375% 0.875%
equal to or greater than 4.50 to 1.0 2.625% 1.125%
Notwithstanding the foregoing, the Applicable Margin shall not be reduced at
such time as an Event of Default or Incipient Event of Default has occurred and
is continuing but shall be reduced (if applicable) when such Event of Default or
Incipient Event of Default has been waived or cured. The foregoing ratio shall
be determined for Borrowers on a consolidated basis.
"AUTHORITY" shall have the meaning set forth in Section 4.18(d).
"AVIALL" shall mean collectively, Aviall Services, Inc. and Aviall, Inc.
"AVIALL POWER BY THE HOUR AGREEMENTS" shall mean
________________________.
"BANK" shall mean The Bank of New York.
"BNYCC" shall have the meaning set forth in the introductory paragraph
hereof.
"BORROWERS" shall mean, jointly and severally, Greenwich, Turbine, GTI,
GASI, Components, Engine Services and all permitted successors and assigns.
"BUSINESS DAY" shall mean with respect to Eurodollar Rate Loans, any day
on which commercial banks are open for domestic and international business,
including dealings in dollar deposits in London, England and New York, New York
and with respect to Domestic Rate Loans, any day other than a day on which
commercial banks in New York are authorized or required by law to close.
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<PAGE>
"BUSINESS PLAN" shall mean the long range business and strategic plan of
Borrowers which shall include monthly forecasts for (a) the fiscal year ending
September 30, 1997 and (b) each fiscal year thereafter, each of which shall be
in form and substance consistent with past practices.
"CALEDONIAN" shall mean Greenwich Caledonian, Limited, a company
organized and existing under the laws of [Scotland].
"CALEDONIAN CREDIT AGREEMENT" shall mean __________________________.
"CAPITAL STOCK" shall have the meaning given to it in the Indenture.
"CAPITALIZED LEASE" means as to any Person, any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 ET
SEQ.
"CHANGE OF CONTROL" shall mean (a) with respect to Turbine, GTI, GASI,
Components and/or Engine Services, the occurrence of any event (whether in one
or more transactions) that results in a transfer of control of such Borrower to
a Person other than its respective Parent and (b) with respect to Greenwich, if
(i) (a) the Specified Holders cease in the aggregate to "beneficially own" (as
such term is used in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, at least 50% of the total voting power of the Voting Stock of
Greenwich, whether as a result of any issuance of securities of Greenwich, any
merger, consolidation, liquidation or dissolution of Greenwich or otherwise, and
(b) any "person" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the
Exchange Act or any successor provision to either of the foregoing, including
any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than an underwriter engaged in a firm commitment underwriting on behalf of
Greenwich and other than the Specified Holders, becomes the "beneficial owner"
(as defined in clause (a) above, except that for the purposes of this clause (b)
a person other than a Specified Holder shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of either (x) 35% or more of the total voting power of the Voting
Stock of Greenwich or (y) a greater percentage of the total voting power of the
Voting Stock of Greenwich than the Specified Holders in the aggregate
"beneficially owned" (as defined in clause (a) above) directly or indirectly;,
(ii) the stockholders of Greenwich shall have approved any plan of liquidation
or dissolution of Greenwich; or (iii) during any period of two consecutive
years, individuals who at the beginning of such
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<PAGE>
period constituted Greenwich's board of directors (together with any new
directors whose election or appointment by such board or whose nomination for
election by the stockholders of Greenwich was approved by a vote of at least 66-
2/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
Greenwich's board of directors then in office.
"CHARGES" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, Liens, Claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other governmental authority,
domestic or foreign (including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral, any
Borrower or any of their Affiliates.
"CIT" shall mean The CIT Group/Equipment Financing, Inc., a New York
corporation.
"CIT LOAN DOCUMENTS" shall mean the Loan and Security Agreement and other
documents, dated as of November 5, 1992, as amended through the Effective Date,
between or among CIT, Greenwich, GCL, World and certain Affiliates of Borrowers,
all of which are listed on EXHIBIT 1.2(a) hereto; true and complete copies of
which have been furnished to Agent.
"CLAIMS" shall mean all security interests, Liens, claims or encumbrances
held or asserted by any Person against any or all of the Collateral, other than
(A) Charges and (B) Permitted Encumbrances.
"COLLATERAL" shall mean and include
(a) all Receivables;
(b) all Inventory;
(c) all of each Borrower's right, title and interest in and to
(i) its respective goods and other property including, but not limited to all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of such Borrower's rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, set off, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to any Borrower from
-5-
<PAGE>
any Customer relating to the Receivables; (iv) other property, including
warranty claims, relating to any goods securing this Agreement; (v) if and when
obtained by any Borrower, all real and personal property of third parties in
which such Borrower has been granted a lien or security interest as security for
the payment or enforcement of receivables; and (vi) any other goods, personal
property or real property now owned or hereafter acquired in which any Borrower
has expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto, or under
any other agreement between Agent and each Borrower;
(d) all of each Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computer software
(owned by any Borrower or in which it has an interest to the extent of such
interest), computer programs, tapes, disks and documents relating to (a), (b) or
(c) of this Paragraph; and
(e) all proceeds and products of (a), (b), (c) and (d) in
whatever form, including, but not limited to cash, deposit accounts (whether
or not comprised solely of proceeds), certificates of deposit, insurance
proceeds (including hazard, flood and credit insurance), negotiable instruments
and other instruments for the payment of money, chattel paper, security
agreements or documents.
"COMMITMENT PERCENTAGE" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 14.4(c) hereof.
"COMPONENTS" shall have the meaning set forth in the introductory
paragraph hereof.
"COMPONENTS ADVANCE RATES" shall have the meaning set forth in Section
2.1(d)(ii) hereof.
"COMPONENTS FORMULA AMOUNT" shall have the meaning set forth in Section
2.1(d) hereof.
"COMPONENTS INVENTORY ADVANCE RATE" shall have the meaning set forth in
Section 2.1(d)(ii) hereof.
"COMPONENTS RECEIVABLES ADVANCE RATE" shall have the meaning set forth in
Section 2.1(d)(i) hereof.
"CONESE FAMILY" shall have the meaning given to it in the Indenture.
"CONTINENTAL" shall have the meaning set forth in the definition of
Eligible Receivables.
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<PAGE>
"CONTINENTAL INTERCREDITOR AGREEMENT" shall mean the Intercreditor and
Subordination Agreement between BNYCC and Continental dated as of May 1, 1995.
"CURRENT ASSETS" at a particular date, shall mean all cash, cash
equivalents, accounts and inventory of Borrowers on a consolidated basis and all
other items which would, in conformity with GAAP, be included under current
assets on a balance sheet of Borrowers on a consolidated basis as at such date;
PROVIDED, HOWEVER, that such amounts shall not include (a) any amounts for any
Indebtedness owing by an Affiliate to any Borrower, unless such Indebtedness
arose in connection with the sale of goods or rendition of services in the
ordinary course of business and would otherwise constitute current assets in
conformity with GAAP, (b) any shares of stock issued by an Affiliate of either
Borrower, or (c) the cash surrender value of any life insurance policy. In
addition, Current Assets shall include (i) gas turbine engines and rotable parts
even if recorded as property, plant and equipment by any Borrower in its
respective books and records for accounting purposes and (ii) Customer Deposits
as a contra-asset.
"CURRENT LIABILITIES" at a particular date, shall mean all amounts which
would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrowers on a consolidated basis, as at such date, but in any
event including, without limitation, the amounts of (a) all Indebtedness of
Borrowers on a consolidated basis payable on demand, or, at the option of the
Person to whom such Indebtedness is owed, not more than twelve (12) months after
such date, (b) any payments in respect of any Indebtedness of any Borrower
(whether installment, serial maturity, sinking fund payment or otherwise)
required to be made not more than twelve (12) months after such date, (c) all
reserves in respect of liabilities or Indebtedness payable on demand or, at the
option of the Person to whom such Indebtedness is owed, not more than twelve
(12) months after such date and (d) all accruals for federal or other taxes
measured by income payable within a twelve (12) month period. Current
Liabilities shall exclude Customer Deposits.
"CUSTOMER" shall mean and include the account debtor with respect to any
of the Receivables.
"CUSTOMER DEPOSITS" shall mean cash deposits or advance payments and
progress payments received from Customers of the Borrower.
"DEFAULTING LENDER" shall have the meaning set forth in Section 2.18(a)
hereof.
"DEFAULT RATE" shall have the meaning set forth in Section 3.1 hereof.
"DOCUMENT" shall have the meaning set forth in Section 8.1(c) hereof.
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<PAGE>
"DOLLAR" and the sign "$" shall mean lawful money of the United States of
America.
"DOMESTIC RATE LOAN" shall mean any Advance that bears interest based
upon the Alternate Base Rate.
"EBITDA" for any period, shall mean for Borrowers on a consolidated basis
(a) Net Income for such period, PLUS (b) interest and taxes for such period,
PLUS (c) the sum of depreciation and amortization for such period.
"EFFECTIVE DATE" shall mean June __, 1996 or such other later date as the
conditions precedent set forth in Article VIII shall have been satisfied.
"EFFECTIVE HOURS ADJUSTMENT" shall have the meaning set forth in the
definition of Eligible Receivables.
"ELIGIBLE INVENTORY" shall mean and include with respect to all Borrowers
Inventory valued at book value, determined by a moving average method consistent
with the method in effect on the Initial Closing Date, which is consistent with
Greenwich's past practices for write-offs, write downs or reserves for old,
non-serviceable, non-repairable, obsolete, slow moving or unmerchantable
Inventory and which Agent, in its reasonable discretion, shall not deem
ineligible Inventory, based on such considerations as Agent may from time to
time deem appropriate including, without limitation, whether the Inventory is
subject to a perfected, first priority security interest in favor of Agent and
whether the Inventory conforms to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority over such
goods or the use or sale thereof. Notwithstanding anything to the contrary
contained herein, in the event that the aggregate amount of "repairable"
Inventory (as defined in Section 6.13 hereof) ("Total Repairable Inventory")
exceeds 20% of total Inventory, repairable Inventory in an amount equal to the
difference between (a) Total Repairable Inventory MINUS (b) 20% of total
Inventory shall be excluded from Eligible Inventory. The preceding sentence
shall not constitute a waiver of any breach of Section 6.13(c) hereof.
"ELIGIBLE RECEIVABLES" shall mean and include with respect to any
Borrower each Receivable of such Borrower arising in the ordinary course of such
Borrower's business and which Agent, in its reasonable credit judgment (but
subject to the limitations set forth below), shall deem to be an Eligible
Receivable, based on such considerations as Agent may from time to time deem
appropriate. Specifically, a Receivable shall not be deemed eligible unless
such Receivable is subject to Agent's perfected security interest and no other
Lien other than Permitted Encumbrances, and is evidenced by an invoice or other
documentary
-8-
<PAGE>
evidence satisfactory to Agent. In addition, a Receivable shall not be an
Eligible Receivable if:
(a) it arises out of a sale made by such Borrower to an
Affiliate of such Borrower or to a Person controlled by an Affiliate of such
Borrower and such Receivable when added to the existing Receivables from
Affiliates causes the aggregate amount of outstanding Receivables from
Affiliates of such Borrower to be greater than $250,000; PROVIDED, HOWEVER, in
no event shall a Receivable due from one Borrower to another Borrower constitute
an Eligible Receivable;
(b) it is due or unpaid more than one hundred twenty (120) days
after the original invoice date except Receivables from (i) Affiliates which
shall be due or unpaid more than thirty (30) days after the original invoice
date and (ii) Continental ("Continental Receivables") which shall be due or
unpaid more than ninety (90) days after the original invoice date;
(c) thirty-five percent (35%) or more of the Receivables from
the subject Customer are due or unpaid more than one hundred twenty (120) days
after the original invoice date;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached in any material
respect;
(e) the Customer is also such Borrower's creditor or supplier
for an amount in excess of $100,000, or the Customer has disputed liability, or
the Customer has made any claim with respect to any other Receivable due from
such Customer to such Borrower, or the Receivable otherwise is or may become
subject to any right of set off by the Customer; PROVIDED, HOWEVER, the portion
of such Receivable that would otherwise be deemed an Eligible Receivable and
which is not subject to dispute or set-off shall be an Eligible Receivable;
(f) the Customer has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or if a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
Customer in an involuntary case under any state or federal bankruptcy laws, as
now constituted or hereafter amended, or if any other petition or other
application for relief under any state or federal bankruptcy law has been filed
against the Customer, or if the Customer has discontinued its business, ceased
to be solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs;
(g) the sale is to a Customer outside the United States or
Canada, unless the sale is on letter of credit, guaranty or acceptance terms
(and all proceeds thereunder have been
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assigned to Agent for benefit of Lenders) or Borrowers' maintain credit
insurance with respect thereto with type of coverage and limit levels acceptable
to Agent, or unless such Borrower shall have retained in its possession the
goods giving rise to such Receivable as collateral for such Receivable and such
goods shall have a market value in excess of the face amount of the Receivable,
in any such case acceptable to Agent in its reasonable discretion;
(h) the sale to the Customer is on a bill-and-hold basis
(except where (i) the Customer has manifested its approval, in writing, to the
acceptable quality of the services rendered, goods to be delivered and its
approval of such sale or (ii) the goods to be delivered have passed all tests
required pursuant to the contract therefor), guaranteed sale, sale-and-return,
sale on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper;
(i) Agent believes, in its reasonable judgment, that collection
of such Receivable is insecure or that such Receivable may not be paid by reason
of the Customer's financial inability to pay unless, in either case, such
Borrower shall have retained in its possession the goods giving rise to such
Receivable as collateral for such Receivable and such goods shall have a market
value in excess of the face amount of the Receivable, in any such case
acceptable to Agent in its reasonable discretion;
(j) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless such Borrower
assigns its right to payment of such Receivable to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 ET SEQ.
and 41 U.S.C., Sub-Section 15) or has otherwise complied with other applicable
statutes or ordinances;
[(k) the services giving rise to such Receivable have not been
performed by such Borrower or the Receivable is an advance or progress billing
or otherwise does not represent a final sale or performance;]
(l) the aggregate Receivables owed by the subject Customer
exceed a credit limit for such Customer as same may be determined in good faith
by Agent, in the exercise of its discretion in a reasonable manner, but only to
the extent that the aggregate Receivables owed by such Customer exceeds such
limit;
(m) the Receivable is subject to any pending or asserted
offset, deduction, defense, dispute, or counterclaim (excluding claims by
Customers with respect to their respective Customer Deposits for services not
yet performed in an amount less than $150,000) or if the Receivable is
contingent in any respect or for any reason; PROVIDED, HOWEVER, the portion of
each Receivable that would otherwise be deemed an Eligible Receivable and which
is not subject to offset, deduction, defense, dispute, counterclaim or
contingency shall be an Eligible Receivable;
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(n) Such Borrower has made any agreement with the subject
Customer for any deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which discounts or
allowances are reflected on the face of each respective invoice related thereto;
PROVIDED, HOWEVER, the portion of such Receivable that would otherwise be deemed
an Eligible Receivable and which is not subject to deduction, discount or
allowance shall be an Eligible Receivable;
(o) the rendition of services has not been completed or all
supporting documentation has not been placed in the Customer file;
(p) any return, rejection or repossession of any underlying
merchandise has occurred;
(q) such Receivable is not payable to such Borrower; or
(r) such Receivable is not otherwise satisfactory to the Agent
as determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
Notwithstanding anything to the contrary, Receivables arising under the
Greenwich Power by the Hour Agreement for any two consecutive months consisting
of the then current month and one additional month, shall be deemed Eligible
Receivables only if (i) no Event of Default shall have occurred and be
continuing, (ii) Greenwich shall have an "accrued receivable" on its books with
respect to the Greenwich Power by the Hour Agreement, (iii) the amount of such
Receivables shall not exceed the adjustment with respect to "Effective Hours"
("Effective Hours Adjustment") as of the end of the immediately preceding month
calculated pursuant to Section 10 of the Greenwich Power by the Hour Agreement
and (iv) Agent believes, in the good faith exercise of its reasonable judgment,
that the collection of such Receivable is secure and that the aggregate
Receivables owed by the Customer do not exceed a credit limit determined in good
faith by Agent.
[INSERT PROVISIONS RE AVIALL POWER BY HOUR AGREEMENTS]
"ELIGIBLE UNBILLED RECEIVABLES" shall mean Receivables of Engine
Services, Components and/or GASI which, but for the fact invoices for payment
have not yet been sent to Customers, would constitute Eligible Receivables
hereunder.
"ENGINE SERVICES" shall have the meaning set forth in the introductory
paragraph hereof.
"ENGINE SERVICES ADVANCE RATES" shall have the meaning set forth in
Section 2.1(f)(ii)
"ENGINE SERVICES FORMULA AMOUNT" shall have the meaning set forth in
Section 2.1(f) hereof.
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"ENGINE SERVICES INVENTORY ADVANCE RATE" shall have the meaning set forth
in Section 2.1(f)(ii) hereof.
"ENGINE SERVICES RECEIVABLES ADVANCE RATE" shall have the meaning set
forth in Section 2.1(f)(i) hereof.
"ENVIRONMENTAL COMPLAINT" shall have the meaning set forth in Section
4.18(d) hereof.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"EQUIPMENT" shall have the meaning set forth in the CIT Loan Documents.
"EURODOLLAR RATE" shall mean for any Eurodollar Rate Loan, for the then
current Interest Period relating thereto, the rate per annum (such Eurodollar
Rate to be adjusted to the next higher 1/100 of one (1%) percent) equal to the
quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate
of the rates (expressed as a decimal) of reserve requirements current on the day
that is three Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having jurisdiction
of the Bank) as in effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve requirements with
respect to "Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System.
"EURODOLLAR RATE LOAN" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"EVENT OF DEFAULT" shall mean the occurrence and continuance of any of
the events set forth in Article X hereof.
"EXCHANGE ACT" shall have the meaning given to it in the Indenture.
"FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so
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published for any day which is a Business Day, the average of quotations for
such day on such transactions received by the Bank from three Federal funds
brokers of recognized standing selected by the Bank.
"FEE LETTER" shall mean _________________________.
"FIXED CHARGE COVERAGE RATIO", with respect to any fiscal period, shall
mean the ratio of (a) EBITDA for such period MINUS capital expenditures for
Borrowers on a consolidated basis for such period PLUS purchase money
indebtedness related to capital expenditures for such period to (b) the sum of
(i) all cash expended by Borrowers on a consolidated basis to make interest and
scheduled principal payments on Indebtedness (including, without limitation,
Capitalized Leases) PLUS (ii) income taxes PLUS (iii) cash dividends paid.
"FORMULA AMOUNT" shall mean the sum of the Greenwich Formula Amount, the
Turbine Formula Amount, the GTI Formula Amount, the GASI Formula Amount, the
Components Formula Amount and the Engine Services Formula Amount.
"FUNDING DATE" shall have the meaning set forth in Section 2.7(f) hereof.
"FUNDED DEBT" shall mean, with respect to Borrowers on a consolidated
basis, (i) liabilities for borrowed money and (ii) obligations under leases
which are or are required to be shown in accordance with GAAP as a liability on
a balance sheet of the lessee thereunder.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time consistently applied.
"GASI" shall have the meaning set forth in the introductory paragraph
hereof.
"GASI ADVANCE RATES" shall have the meaning set forth in Section
2.1(e)(ii)
"GASI FORMULA AMOUNT" shall have the meaning set forth in Section 2.1(e)
hereof.
"GASI INVENTORY ADVANCE RATE" shall have the meaning set forth in Section
2.1(e)(ii) hereof.
"GASI RECEIVABLE ADVANCE RATE" shall have the meaning set forth in
Section 2.1(e)(i) hereof.
"GREENWICH" shall have the meaning set forth in the introductory
paragraph hereof.
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"GREENWICH ADVANCE RATES" shall have the meaning set forth in Section
2.1(a)(ii) hereof.
"GREENWICH FORMULA AMOUNT" shall have the meaning set forth in Section
2.1(a) hereof.
"GREENWICH INVENTORY ADVANCE RATE" shall have the meaning set forth in
Section 2.1(a)(ii) hereof.
"GREENWICH POWER BY THE HOUR AGREEMENT" shall mean the Block Hour GASI
Maintenance Agreement between Greenwich and Burlington Air Express U.S.A., Inc.
dated September 8, 1989, for the repair and overhaul of Pratt & Whitney JT3 gas
turbine aircraft engines.
"GREENWICH RECEIVABLES ADVANCE RATE" shall have the meaning set forth in
Section 2.1(a)(i) hereof.
"GTI" shall have the meaning set forth in the introductory paragraph
hereof.
"GTI ADVANCE RATES" shall have the meaning set forth in Section
2.1(c)(ii) hereof.
"GTI FORMULA AMOUNT" shall have the meaning set forth in Section 2.1(c)
hereof.
"GTI INVENTORY ADVANCE RATE" shall have the meaning set forth in Section
2.1(c) hereof.
"GTI RECEIVABLES ADVANCE RATE" shall have the meaning set forth in
Section 2.1(c)(i) hereof.
"HAZARDOUS DISCHARGE" shall have the meaning set forth in Section 4.18(d)
hereof.
"HAZARDOUS SUBSTANCE" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, ET SEQ.), or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"HAZARDOUS WASTES" includes all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
"HEDGING AGREEMENTS" any agreement entered into, from time to time, by
Borrowers and any one of the Lenders or a bank or
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financial institution reasonably acceptable to Agent to protect Borrower against
fluctuations in foreign currency exchange rates.
"INCIPIENT EVENT OF DEFAULT" shall mean an event which, with the giving
of notice or passage of time or both, would constitute an Event of Default.
"INDEBTEDNESS" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except Customer Deposits, Subordinated
Debt, capital stock and surplus earned or otherwise).
"INDENTURE" shall mean that certain Indenture, dated as of June __, 1996
from Greenwich and the Subsidiary Guarantors to American Stock Transfer & Trust
Company (as trustee) ("Trustee").
"INITIAL CLOSING DATE" shall mean July 6, 1990.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement, dated
November 5, 1992 among CIT, BNYCC, World and Greenwich, as same has been
amended, modified and supplemented from time to time.
"INTEREST PERIOD" shall mean the period provided for any Eurodollar Rate
Loan pursuant to Section 2.3(b) hereof.
"INTEREST RESERVE" shall mean at any time following an Event of Default
and for so long as such Event of Default shall be continuing without waiver or
cure an amount equal to the regularly scheduled interest payments under the CIT
Loan Documents and the Turbine Term Loan Documents for the next succeeding five
(5) month period.
"INVENTORY" shall mean and include, as to each Borrower, all of such
Borrower's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of service or
held for sale or lease, all raw materials, work in process, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in such Borrower's business or used in selling or furnishing
such goods, merchandise and other personal property, and all documents of title
or other documents representing them. In addition, Inventory shall include gas
turbine engines and rotable parts even if recorded as property, plant and
equipment by Borrowers for accounting purposes.
"INVENTORY ADVANCE RATE" shall singularly or collectively, the Greenwich
Inventory Advance Rate, Turbine Inventory Advance Rate, GTI Inventory Advance
Rate, Components Inventory Advance Rate, GASI Inventory Advance Rate and Engine
Services Inventory Advance Rate.
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"INVENTORY PURCHASE AGREEMENT" shall mean the Inventory Purchase
Agreement dated as of May 1, 1995 between Greenwich and Continental.
"LENDER" or "LENDERS" shall have the meaning set forth in the
introductory paragraph hereof.
"LENDER DEFAULT" shall have the meaning set forth in Section 2.18(a)
hereof.
"LETTER OF CREDIT FEES" shall have the meaning set forth in Section 3.4.
"LETTERS OF CREDIT" shall have the meaning set forth in Section 2.15.
"LIBOR" shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto, the rate per annum quoted by the Bank in 1/16
increments, if available, two (2) Business Days prior to the first day of such
Interest Period for the offering by the Bank to prime commercial banks in the
London interbank Eurodollar market of dollar deposits in immediately available
funds for a period equal to such Interest Period and in an amount equal to the
amount of such Eurodollar Rate Loan.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien, Charge, Claim or encumbrance, or
preference, priority or other security agreement or preferential arrangement in
respect of any asset of any Borrower of any kind or nature whatsoever including,
without limitation, any conditional sale or other title retention agreement, any
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction.
"MAXIMUM LOAN AMOUNT" at any date shall mean $175,000,000 less such
amounts as shall be due and owing by Caledonian to Agent [and the Lenders] under
the Caledonian Credit Agreement.
"MONTHLY ADVANCES" shall have the meaning set forth in Section 3.1
hereof.
"NET INCOME" for any period shall mean the net income of Borrowers on a
consolidated basis for such period as determined in accordance with GAAP.
"NET WORTH" at a particular date, shall mean all amounts which would be
included under shareholders' equity on a balance sheet of the Borrowers on a
consolidated basis determined in accordance with GAAP.
"NON-DEFAULTING LENDERS" shall have the meaning set forth in Section
2.18(b) hereof.
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"NOTES" shall mean the promissory notes referred to in Section 2.2
hereof.
"OBLIGATIONS" shall mean and include any and all of each Borrower's
Indebtedness and/or liabilities to Agent or Lenders of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, under this
Agreement and the U.K. Guaranties and all obligations of any Borrower to Agent
or Lenders to perform acts or refrain from taking any action under this
Agreement.
"OTHER DOCUMENTS" shall mean any and all agreements, instruments and
documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, and all other writings heretofore, now or hereafter executed
by any Borrower and/or delivered to Agent or any Lender in respect of the
transactions contemplated by this Agreement.
"PARENT" (a) of Turbine, GTI and Engine shall mean Greenwich, (b) of
GASI, Components and Engine Services shall mean Engine (as general partner in
the case of Components and Engine Services) and (c) of any other Person shall
mean a corporation or other entity owning, directly or indirectly, at least 50%
of the shares of stock or other ownership interests having ordinary voting power
to elect a majority of the directors of the Person, or other Persons performing
similar functions for any such Person.
"PARTICIPANT" shall mean each Person who shall be granted the right by
any Lender to participate in any of the Advances and who shall have entered into
a participation agreement in respect thereof in form and substance satisfactory
to such Lender.
"PAYMENT OFFICE" shall mean initially 1290 Avenue of the Americas, New
York, New York 10104; thereafter, such other office of Agent, if any, which it
may designate by notice to Greenwich on behalf of Borrowers to be the Payment
Office.
"PERMITTED ENCUMBRANCES" shall mean (a) Liens in favor of Agent for the
benefit of Lenders; (b) Liens for taxes, assessments or other governmental
charges not delinquent, or, being contested in good faith and by appropriate
proceedings and with respect to which proper reserves have been taken by
Borrowers; PROVIDED, THAT the Lien shall have no effect on the priority of the
Liens in favor of Agent or the value of the assets in which Agent has such a
Lien and a stay of enforcement of any such Lien shall be in effect; (c) Liens
disclosed in the financial statements referred to in Section 5.5; (d) deposits
or pledges to secure obligations under workmen's compensation, social security
or similar laws, or under unemployment insurance; (e) deposits or pledges to
secure bids, tenders, contracts (other than contracts for the payment of money),
Leases,
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statutory obligations, surety, performance and appeal bonds and other
obligations of like nature arising in the ordinary course of Borrowers'
business; (f) judgment Liens that have been stayed or bonded and mechanics',
worker's, materialmen's or other like Liens arising in the ordinary course of
Borrowers' business with respect to obligations which are not past due or which
are being contested in good faith by Borrowers; (g) Liens placed upon fixed
assets hereafter acquired to secure a portion of the purchase price thereof,
provided that (x) any such Lien shall not encumber any other property of any
Borrower and (y) the aggregate amount of Indebtedness secured by such Liens
incurred as a result of such purchases during any fiscal year shall not exceed
the amount provided for in Section 7.6; (h) Liens on Equipment in favor of CIT
and World as in existence on Closing Date; and (i) other Liens disclosed on
EXHIBIT 1.2(b).
"PERSON" shall mean an individual, a partnership, a corporation, a
business trust, a joint stock company, a trust, an unincorporated association, a
joint venture, a governmental authority or any other entity of whatever nature.
"PLEDGE AGREEMENT" shall mean that certain Pledge and Security Agreement
dated as of the Effective Date pursuant to which Greenwich pledges 65% of the
issued and outstanding stock of Caledonian to Agent and Trustee.
"PREPAYMENT DATE" shall have the meaning set forth in Section 13.1
hereof.
"PRIME RATE" for the purpose of this Agreement means the rate of interest
publicly announced from time to time by the Bank at its principal office in New
York as its prime rate or prime lending rate. This rate of interest is
determined from time to time by the Bank as a means of pricing some loans to its
customers and is neither tied to any external rate of interest or index nor does
it necessarily reflect the lowest rate of interest actually charged by the Bank
to any particular class or category of customers of the Bank.
"PRO FORMA BALANCE SHEET" shall have the meaning set forth in Section
5.5(a) hereof.
"PROJECTIONS" shall have the meaning set forth in Section 5.5(d) hereof.
"PROPERTY" shall have the meaning given to it in the Indenture.
"PURCHASE AGREEMENT" shall mean the Agreement of Purchase and Sale
between GASI, Greenwich, Aviall Services, Inc. and Aviall, Inc. dated April 19,
1996.
"RATE SWAP AGREEMENT" any interest rate swap, cap, interest rate collar
agreement or similar arrangement entered into,
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from time to time, by Borrowers and any one of the Lenders or a bank or
financial institution reasonably acceptable to Agent to protect the Borrowers
and any Lender against fluctuations in interest rates on the Obligations
incurred by the Borrowers under this Agreement.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 ET SEQ., as same may be amended from time to time.
"REAL PROPERTY" shall mean all of each Borrower's right, title and
interest by ownership or lease in and to the owned property located at 51
Bradley Park Road, East Granby, Connecticut 06026, the leased premises (and any
Improvements thereon) located at Buildings 21, 21A, 21B, and 23, 4590 N.W. 36th
Street, Miami, Florida 33122 and those leased premises set forth on SCHEDULE
1.2.
"RECEIVABLES" shall mean and include as to each Borrower all of such
Borrower's accounts, contract rights, instruments, documents, chattel paper,
general intangibles relating to accounts, drafts and acceptances, and all other
forms of obligations owing to such Borrower arising out of or in connection with
the sale or lease of Inventory or the rendition of services, all guarantees and
other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically assigned or pledged to Agent hereunder.
"RECEIVABLES ADVANCE RATE" shall mean singularly or collectively, the
Greenwich Receivables Advance Rate, Turbine Receivables Advance Rate, GTI
Receivables Advance Rate, Components Receivables Advance Rate, GASI Receivables
Advance Rate and Engine Services Receivables Advance Rate.
"REDEEMABLE STOCK" shall have the meaning given to it in the Indenture.
"RELEASE" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"REQUIRED LENDERS" shall mean Lenders holding, in the aggregate, at least
fifty-one percent (51%) of the Advances or, if no Advances are outstanding, at
least fifty-one percent (51%) of the Commitment Percentages.
"REVOLVING ADVANCES" shall mean Advances made other than Letters of
Credit.
"REVOLVING INTEREST RATE" shall mean an interest rate per annum equal to
(a) with respect to Domestic Rate Loans, the sum of the Alternate Base Rate plus
the Applicable Margin and (b) with respect to Eurodollar Rate Loans, the sum of
the Eurodollar Rate plus the Applicable Margin.
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"SENIOR NOTES" shall mean the ___% Senior Notes due 2006 issued by
Greenwich pursuant to the Indenture in conjunction with the Transactions.
"SETTLEMENT DATE" shall mean the Effective Date and thereafter Wednesday
of each week unless such day is not a Business Day in which case it shall be the
next succeeding Business Day.
"SPECIFIED HOLDERS" shall have the meaning given to it in the Indenture.
"STATED MATURITY" shall have the meaning given to it in the Indenture.
"SUBORDINATED DEBENTURES" shall mean the $16,999,000, 8% convertible
subordinated debentures of Greenwich issued on November 12, 1993 (with respect
to debentures with an original face amount of $15,000,000) and December 10, 1993
(with respect to debentures with an original face amount of $1,999,000).
"SUBSIDIARY" of any Person shall mean a corporation or other entity of
whose shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"SUBSIDIARY GUARANTORS" shall have the meaning given to it in the
Indenture.
"TANGIBLE NET WORTH" shall mean, as of any date, the difference between
(a) Net Worth, as of such date, and (b) the aggregate amount, if any, included
in such Net Worth for goodwill, capitalized financial costs, customer lists,
intercompany Receivables, non-compete agreements, security deposits and deferred
taxes of Borrowers on a consolidated basis and all assets properly classified as
intangible assets in accordance with GAAP.
"TERM" shall mean the Effective Date through _________ ___, 2001.
"TEXAS BORROWERS" shall mean collectively, GASI, Engine Services and
Components.
"TOTAL REPAIRABLE INVENTORY" shall have the meaning set forth in the
definition of Eligible Inventory.
"TOXIC SUBSTANCE" shall mean and include any material present on the Real
Property which is subject to regulation under the Toxic Substances Control Act
(TSCA), 15 U.S. C. Section 2601 ET seq., applicable state law, or any other
applicable Federal or state laws
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now in force or hereafter enacted relating to toxic substances. "Toxic
Substance" includes but is not limited to asbestos, polychlorinated biphenyls
(PCBs) and lead-based paints.
"TRANSACTIONS" shall have the meaning given to it in Section 5.5 hereof.
"TRUSTEE" shall mean American Stock Transfer & Trust Company.
"TURBINE" shall have the meaning set forth in the introductory paragraph
hereof.
"TURBINE ADVANCE RATES" shall have the meaning set forth in Section
2.1(b)(ii)
"TURBINE FORMULA AMOUNT" shall have the meaning set forth in Section
2.1(b) hereof.
"TURBINE INVENTORY ADVANCE RATE" shall have the meaning set forth in
Section 2.1(b)(ii) hereof.
"TURBINE RECEIVABLES ADVANCE RATE" shall have the meaning set forth in
Section 2.1(b)(i) hereof.
"TURBINE TERM LOAN" shall mean a loan made to Turbine by the Turbine Term
Loan Lender in the original principal amount of $__________.
"TURBINE TERM LOAN DOCUMENTS" shall mean the loan agreement and related
documents entered into by Turbine with the Turbine Term Loan Lender.
"TURBINE TERM LOAN LENDER" shall mean CIT.
"U.K. GUARANTIES" shall mean each guaranty issued by a Borrower to Agent
of the obligations of Caledonian to ______________ under the Caledonian Credit
Agreement.
"UNDRAWN AVAILABILITY" shall at any given date mean the amount equal to
the difference between (a) the lesser of (i) Maximum Loan Amount, and (ii)
Formula Amount as of such date, MINUS (b) the aggregate outstanding Advances on
such date after giving effect to any outstanding requests by Borrowers for
Advances as of that date.
"VOTING STOCK" shall have the meaning given to it in the Indenture.
"WEEK" shall mean the time period commencing with a Wednesday and ending
on the following Tuesday.
"WORLD" shall mean World Air Lease, Inc., a Florida corporation.
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"WORLD LOAN DOCUMENTS" shall mean the $3,000,000 promissory note from
Greenwich to World dated November 5, 1992 and all other agreements and documents
executed in connection therewith which are listed on EXHIBIT 1.2(c); true and
complete copies of which have been furnished to BNYCC.
1.3 UNIFORM COMMERCIAL CODE TERMS. All terms used herein and defined
in the Uniform Commercial Code as adopted in the State of New York shall have
the meaning given therein unless otherwise defined herein.
1.4 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and VICE versa. The
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation". In computing periods of time from a specified
date to a later specified date, the word "from" means "from and including" and
the words "to" and "until" each means "to but excluding". All references to
statutes and regulations shall include any amendments of same and any successor
statutes and regulations. All references to any instrument or agreements to
which any Borrower and any Lender or Agent are parties including, without
limitation, references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES AND PAYMENTS
2.1 (a) GREENWICH BORROWING BASE. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and not jointly,
agrees to make Revolving Advances to Greenwich in accordance with the procedures
provided for herein in an aggregate amount outstanding at any time not greater
than such Lender's Commitment Percentage of the lesser of (x) the Maximum Loan
Amount MINUS the sum of (1) outstanding Advances made to or for the benefit of
Turbine, GTI, Components, GASI and Engine Services and (2) the undrawn amount of
outstanding Letters of Credit issued on behalf of Greenwich, or (y) the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(g) and Section 2.1(h) hereof ("Greenwich Receivables Advance Rate"), of
Eligible Receivables of Greenwich, PLUS
(ii) up to 55%, subject to the provisions of Section
2.1(g) and Section 2.1(h) hereof ("Greenwich Inventory Advance Rate"), of
Eligible Inventory of Greenwich (the Greenwich Receivables Advance Rate and the
Greenwich Inventory
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Advance Rate shall be referred to, collectively, as the "Greenwich Advance
Rates"), MINUS
(iii) such reserves as Agent may, in a commercially
reasonable manner, reasonably deem proper and necessary, including, without
limitation, the Interest Reserve; PROVIDED, that the Interest Reserve shall only
apply if and for so long as an Event of Default shall exist, MINUS
(iv) the undrawn amount of outstanding Letters of Credit
issued on behalf of Greenwich.
The amounts derived from (x) the sum of Sections 2.1(a)(y)(i) PLUS
2.1(a)(y)(ii) MINUS (y) the sum of Sections 2.1(a)(y)(iii) and 2.1(a)(y)(iv) at
any time and from time to time shall be referred to as the "Greenwich Formula
Amount".
(b) TURBINE BORROWING BASE. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and not jointly,
agrees to make Revolving Advances to Turbine in accordance with the procedures
provided for herein in an aggregate amount outstanding at any time not greater
than such Lender's Commitment Percentage of the lesser of (x) the Maximum Loan
Amount MINUS the sum of (1) outstanding Advances made to or for the benefit of
Greenwich, GTI, Components, GASI and Engine Services and (2) the undrawn amount
of outstanding Letters of Credit issued on behalf of Turbine or (y) the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(g) and Section 2.1(i) hereof ("Turbine Receivables Advance Rate"), of
Eligible Receivables of Turbine, PLUS
(ii) up to 55%, subject to the provisions of Section
2.1(g) and Section 2.1(h) hereof ("Turbine Inventory Advance Rate"), of Eligible
Inventory of Turbine (the Turbine Receivables Advance Rate and the Turbine
Inventory Advance Rate shall be referred to, collectively, as the "Turbine
Advance Rates"), MINUS
(iii) such reserves as Agent may, in a commercially
reasonable manner, reasonably deem proper and necessary, including, without
limitation, the Interest Reserve; PROVIDED, that the Interest Reserve shall only
apply if and for so long as an Event of Default shall exist, MINUS
(iv) the undrawn amount of outstanding Letters of Credit
issued on behalf of Turbine.
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The sum of the amounts derived from (x) the sum of Sections
2.1(b)(y)(i) PLUS 2.1(b)(y)(ii) MINUS (y) the sum of Sections 2.1(b)(y)(iii) and
2.1(b)(y)(iv) at any time and from time to time shall be referred to as the
"Turbine Formula Amount".
(c) GTI BORROWING BASE. Subject to the terms and conditions
set forth in this Agreement, each Lender, jointly and not severally, agrees to
make Revolving Advances to GTI in accordance with the procedures provided for
herein in an aggregate amount outstanding at any time not greater than such
Lender's Commitment Percentage of the lesser of (x) the Maximum Loan Amount
MINUS the sum of (1) outstanding Advances made to or for the benefit of
Greenwich, Turbine, Components, GASI and Engine Services and (2) the undrawn
amount of outstanding Letters of Credit issued on behalf of GTI or (y) the sum
of:
(i) up to 85%, subject to the provisions of Section
2.1(g) and Section 2.1(i) hereof ("GTI Receivables Advance Rate"), of Eligible
Receivables of GTI, PLUS
(ii) up to 55%, subject to the provisions of Section
2.1(g) and Section 2.1(h) hereof ("GTI Inventory Advance Rate"), of Eligible
Inventory of GTI (the GTI Receivables Advance Rate and the GTI Inventory Advance
Rate shall be referred to, collectively, as the "GTI Advance Rates"), MINUS
(iii) such reserves as Agent may, in a commercially
reasonable manner, reasonably deem proper and necessary including, without
limitation, the Interest Reserve; PROVIDED, that the Interest Reserve shall only
apply if and for so long as an Event of Default shall exist, MINUS
(iv) the undrawn amount of outstanding Letters of Credit
issued on behalf of GTI.
The sum of the amounts derived from (x) the sum of (i) Sections
2.1(c)(y)(i) PLUS 2.1(c)(y)(ii) MINUS (y) the sum of Sections 2.1(c)(y)(iii) and
2.1(c)(y)(iv) at any time and from time to time shall be referred to as the "GTI
Formula Amount".
(d) COMPONENTS BORROWING BASE. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and not jointly,
agrees to make Revolving Advances to Components in accordance with the
procedures provided for herein in an aggregate amount outstanding at any time
not greater than such Lender's Commitment Percentage of the lesser of (x) the
Maximum Loan Amount MINUS the sum of (1) outstanding Advances made to or for the
benefit of Greenwich, Turbine, GASI, GTI and Engine Services and (2) the undrawn
amount of outstanding Letters of Credit issued on behalf of Components or (y)
the sum of:
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(i) up to 85%, subject to the provisions of Section
2.1(h) and Section 2.1(j) hereof ("Components Receivables Advance Rate"), of
Eligible Receivables of Components, PLUS
(ii) up to 55%, subject to the provisions of Section
2.1(g) and Section 2.1(h) hereof ("Components Inventory Advance Rate"), of
Eligible Inventory of Components, PLUS
(iii) up to 55%, subject to the provisions of Section
2.1(g), Section 2.1(i) and Section 2.1(j) (the Components Receivables Advance
Rate and the Components Inventory Advance Rate and the Components Unbilled
Receivables Advance Rate shall be referred to, collectively, as the "Components
Advance Rates") of the Eligible Unbilled Receivables of Components, MINUS
(iv) such reserves as Agent may, in a commercially
reasonable manner, reasonably deem proper and necessary, including, without
limitation, the Interest Reserve; PROVIDED, that the Interest Reserve shall only
apply if and for so long as an Event of Default shall exist, MINUS
(v) the undrawn amount of outstanding Letters of Credit
issued on behalf of Components.
The sum of the amounts derived from (x) the sum of (i) Sections
2.1(d)(y)(i) PLUS 2.1(d)(y)(ii) PLUS 2.1(d)(y)(iii) MINUS (y) the sum of
Sections 2.1(d)(y)(iv) and 2.1(d)(y)(v) at any time and from time to time shall
be referred to as the "Components Formula Amount".
(e) GASI BORROWING BASE. Subject to the terms and conditions
set forth in this Agreement, each Lender, jointly and not severally, agrees to
make Revolving Advances to GASI in accordance with the procedures provided for
herein in an aggregate amount outstanding at any time not greater than such
Lender's Commitment Percentage of the lesser of (x) the Maximum Loan Amount
MINUS the sum of (1) outstanding Advances made to or for the benefit of
Greenwich, Turbine, GTI, Components and Engine Services and (2) the undrawn
amount of outstanding Letters of Credit issued on behalf of GASI, or (y) the sum
of:
(i) up to 85%, subject to the provisions of Section
2.1(g) and Section 2.1(i) hereof ("GASI Receivables Advance Rate"), of Eligible
Receivables of GASI, PLUS
(ii) up to 55%, subject to the provisions of Section
2.1(g) and Section 2.1(h) hereof ("GASI Inventory Advance Rate"), of Eligible
Inventory of GASI (the GASI Receivables Advance Rate and the GASI Inventory
Advance Rate shall be referred to, collectively, as the "GASI Advance Rates"),
PLUS
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(iii) up to 55%, subject to the provisions of Section
2.1(g), Section 2.1(i) and Section 2.1(j) (the GASI Receivables Advance Rate and
the GASI Inventory Advance Rate and the GASI Unbilled Receivables Advance Rate
shall be referred to, collectively, as the "GASI Advance Rates") of the Eligible
Unbilled Receivables of GASI, MINUS
(iv) such reserves as Agent may, in a commercially
reasonable manner, reasonably deem proper and necessary including, without
limitation, the Interest Reserve; PROVIDED, that the Interest Reserve shall only
apply if and for so long as an Event of Default shall exist, MINUS
(v) the undrawn amount of outstanding Letters of Credit
issued on behalf of GASI.
The sum of the amounts derived from (x) the sum of (i) Sections
2.1(e)(y)(i) PLUS 2.1(e)(y)(ii) PLUS 2.1(e)(y)(iii) MINUS (y) the sum of
Sections 2.1(e)(y)(iv) and 2.1(e)(y)(v) at any time and from time to time shall
be referred to as the "GASI Formula Amount".
(f) ENGINE SERVICES BORROWING BASE. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and not jointly,
agrees to make Revolving Advances to Engine Services in accordance with the
procedures provided for herein in an aggregate amount outstanding at any time
not greater than such Lender's Commitment Percentage of the lesser of (x) the
Maximum Loan Amount MINUS the sum of (1) outstanding Advances made to or for the
benefit of Greenwich, Turbine, GASI, GTI and Components and (2) the undrawn
amount of outstanding Letters of Credit issued on behalf of Engine Services or
(y) the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(g) and Section 2.1(i) hereof ("Engine Services Receivables Advance Rate"),
of Eligible Receivables of Engine Services, PLUS
(ii) up to 55%, subject to the provisions of Section
2.1(g) and Section 2.1(h) hereof ("Engine Services Inventory Advance Rate"), of
Eligible Inventory of Engine Services (the Engine Services Receivables Advance
Rate and the Engine Services Inventory Advance Rate shall be referred to,
collectively, as the "Engine Services Advance Rates"), PLUS
(iii) up to 55%, subject to the provisions of Section
2.1(g), Section 2.1(i) and Section 2.1(j) (the Engine Services Receivables
Advance Rate and the Engine Services Inventory Advance Rate and the Engine
Services Unbilled Receivables Advance Rate shall be referred to, collectively,
as the "Engine Services Advance Rates") of the Eligible Unbilled Receivables of
Engine Services, MINUS
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(iv) such reserves as Agent may, in a commercially
reasonable manner, reasonably deem proper and necessary, including, without
limitation, the Interest Reserve; PROVIDED, that the Interest Reserve shall only
apply if and for so long as an Event of Default shall exist, MINUS
(v) the undrawn amount of outstanding Letters of Credit
issued on behalf of Engine Services, MINUS
The sum of the amounts derived from (x) the sum of (i) Sections
2.1(f)(y)(i) PLUS 2.1(f)(y)(ii) PLUS 2.1(f)(y)(iii) MINUS the sum of Sections
2.1(f)(y)(iv) and 2.1(f)(y)(v) at any time and from time to time shall be
referred to as the "Engine Services Formula Amount".
(g) DISCRETIONARY RIGHTS. The Advance Rates may be increased
by Agent with the consent of the Lenders or decreased by Agent at any time and
from time to time in the good faith exercise of its reasonable discretion;
PROVIDED, HOWEVER, that Agent shall not: (i) decrease any Advance Rate by more
than five (5%) percent during any forty-five (45) day period (for example, from
85% to 80% with respect to any Receivables Advance Rate); or (ii) decrease any
Inventory Advance Rate below 45%. Borrowers consent to any such increases or
decreases and acknowledge that decreasing the Advance Rates may limit or
restrict Advances requested by Borrowers. Agent shall in each instance give
Borrowers not less than five (5) Business Days' prior written notice of its
intention to decrease any of the Advance Rates.
(h) INVENTORY ADVANCES. In no event shall the aggregate
Advances with respect to Inventory of Borrowers outstanding at any time pursuant
to Section 2.1(a)(ii), Section 2.1(b)(ii), Section 2.1(c)(ii), Section
2.1(d)(ii) and Section 2.1(e)(ii) and Section 2.1(f)(ii) exceed $130,000,000 in
the aggregate.
(i) RECEIVABLES ADVANCES. In no event shall the aggregate
Advances with respect to Continental Receivables outstanding at any time
pursuant to Sections 2.1(a)(i), 2.1(b)(i), 2.1(c)(i), 2.1(d)(i), 2.1(e)(i),
2.1(f)(i), 2.1(d)(iii), 2.1(e)(iii) and 2.1(f)(iii) exceed [$15,000,000] in the
aggregate.
(j) UNBILLED RECEIVABLES. In no event shall the aggregate
Advances with respect to Eligible Unbilled Receivables of Borrowers outstanding
at any time pursuant to Sections 2.1(d)(iii), 2.1(e)(iii) and 2.1(f)(iii) exceed
$12,000,000 in the aggregate.
(k) INDIVIDUAL REVOLVING ADVANCES. Each Lender, severally and
not jointly, will make Revolving Advances to each Borrower in aggregate amounts
outstanding at any time not greater
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than such Lender's Commitment Percentage of the applicable Formula Amount.
Notwithstanding the foregoing, for the first ninety (90) days after Effective
Date, Lenders will make Advances to GASI, Components and Engine Services up to
an amount equal to the lesser of (x) the Maximum Loan Amount MINUS the sum of
(1) outstanding Advances made to or for the benefit of Greenwich, Turbine and
GTI and (2) the undrawn amount of outstanding Letters of Credit issued on behalf
of GASI, Components and Engine Services or (y) the sum of the GASI Formula
Amount, Components Formula Amount and Engine Services Formula Amount. In the
event that GASI, Components and Engine Services shall not have merged and/or
consolidated with and into each other such that one of them shall remain as the
surviving entity by the ninetieth (90th) day following the Effective Date, (i)
all new Advances made to each of GASI, Components and Engine Services will be
made, from and after the ninety first (91st) day following the Effective Date
shall be made to each individually in accordance with the provisions of Sections
2.1(d), (e) and (f) and (ii) all then outstanding Advances will be apportioned
among such Borrowers' loan accounts in accordance with the Advance Requests
received by Agent which preceded the making of such Advances and the proceeds of
Collateral received by Agent with respect to such Borrower such determination by
Agent with respect to the foregoing shall be conclusive absent manifest error.
2.2 NOTES. The Advances shall be evidenced by amended and restated
promissory notes of the Borrowers, substantially in the form of EXHIBIT 2.2 (the
"Notes") with appropriate insertion as to date and principal amount, payable to
the order of each Lender in an amount equal to its respective Commitment
Percentage of Receivable Advances.
C\7 PROCEDURE FOR BORROWING.
(a) In the event any Borrower desires to obtain a Domestic Rate
Loan Greenwich on behalf of Borrowers shall give Agent at least one (1) Business
Days prior telephonic notice ("Advance Request") on or before 11:00 A.M., New
York time (except as may be set forth below) specifying (i) the date of the
proposed borrowing (which shall be a Business Day) and (ii) the type of
borrowing and the amount to be borrowed, which amount on the date of such
Advance shall be in a minimum amount of $250,000 and in integral multiples of
$100,000 for borrowings in excess thereof. In addition, as a convenient means
of effecting Advances, Borrowers will each maintain a controlled disbursement
account (business checking) with the Bank at its branch located at 1290 6th
Avenue, New York, New York 10104 (collectively, "Checking Accounts"). Each
Checking Account will act as a corporate payable account for such Borrower.
Once each Business Day following receipt by the Bank of its Federal Reserve
system clearing (which may be later than 11:00 a.m. New York time but must be
earlier than 1:00 p.m. New York time), Bank will notify Agent of the total
dollar amount of checks presented to Bank for payment for each Checking Account
since the previous Business Day's notification (the "Payable Amount"). Such
notification shall be
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deemed to be an Advance Request for an Advance to be made on such Business Day
to the respective Borrower's Checking Account in an amount equal to the Payable
Amount, but Agent and Lenders shall not be obligated to honor such Advance
Request except as herein specifically required. Any request for an Advance
shall be deemed reduced automatically and without notice so as not to be in
excess of, after giving effect to the requested Advance, an amount which would
cause the aggregate amount of all Advances to be greater than the lesser of (a)
for Greenwich, (i) the Maximum Loan Amount MINUS outstanding Advances made to
Turbine, GTI, Components, GASI and Engine Services or (ii) the Greenwich Formula
Amount, (b) for Turbine, (i) the Maximum Loan Amount MINUS outstanding Advances
made to Greenwich, GTI, Components, GASI and Engine Services or (ii) the Turbine
Formula Amount (c) for GTI, (i) the Maximum Loan Amount MINUS outstanding
Advances made to Greenwich, Turbine, Components, GASI and Engine Services or
(ii) the GTI Formula Amount, (d) for Components, (i) the Maximum Loan Amount
MINUS outstanding Advances made to Greenwich, GTI, Turbine, GASI and Engine
Services or (ii) the Components Formula Amount, (e) for GASI, (i) the Maximum
Loan Amount MINUS outstanding Advances made to Greenwich, GTI, Turbine,
Components and Engine Services or (ii) the GASI Formula Amount, and (f) for
Engine Services, (i) the Maximum Loan Amount MINUS outstanding Advances made to
Greenwich, GTI, Turbine, GASI and Components or (ii) the Engine Services Formula
Amount. Subject to the provisions of Section 2.7 hereof, the proceeds of each
Advance shall be made available by Agent to Borrowers on or before 1:45 p.m.,
New York time (except with respect to Advances to the Checking Accounts which
shall be made available on or before 1:45 p.m. New York time), on the Business
Day specified in the Advance Request by wire transferring immediately available
funds in such amount or causing immediately available funds in such amount to be
wire transferred to the account of the applicable Borrower, as shall be
designated to Agent in the Advance Request therefor.
(b) Notwithstanding the provisions of 2.3(a) above, in the
event any Borrower desires to obtain a Eurodollar Rate Loan, Greenwich on behalf
of such Borrower shall give Agent at least three (3) Business Days' prior
written notice specifying (i) the date of the proposed borrowing (which shall be
a Business Day), (ii) the type of borrowing and the amount to be borrowed, which
amount on the date of such Advance shall be in a minimum amount of $1,000,000
and in integral multiples of $100,000 for borrowings in excess thereof and (iii)
the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for 30, 60 or 90 days. Notwithstanding anything
contained herein, no Eurodollar Rate Loan shall be made (i) until the later to
occur of (x) ninety (90) days following the Effective Date or (y) the date on
which the Commitment Percentages of all Lenders (other than BNYCC) shall
aggregate _____%, (ii) upon the occurrence and during the continuation of an
Event of Default and (iii) if after giving effect to such Eurodollar Rate Loan
more than six (6) shall be outstanding at such time.
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(c) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on such
date as Borrowers may elect as set forth in (b)(iii) above provided that:
(i) any Interest Period which would otherwise end on a
day which is not a Business Day shall end on the next preceding or succeeding
Business Day as is the Bank's custom in the market to which such Eurodollar Rate
Loan relates;
(ii) no Interest Period shall end after the last day of
the Term;
(iii) any Interest Period which begins on a day for which
there is no numerically corresponding day in the calendar month during which
such Interest Period is to end, shall (subject to clause (i) above) end on the
last day of such calendar month.
The Borrowers shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by Greenwich's notice of borrowing (on behalf of the
Borrowers) given to Agent pursuant to Section 2.3(b) or by its notice of
conversion given to Agent pursuant to Section 2.3(d), as the case may be.
Greenwich on behalf of Borrowers shall elect the duration of each succeeding
Interest Period by giving irrevocable written notice to Agent of such duration
not less than three (3) Business Days prior to the last day of the then current
Interest Period applicable to such Eurodollar Rate Loan. If Agent does not
receive timely notice of the Interest Period elected by Greenwich on behalf of
Borrowers, Borrowers shall be deemed to have elected to convert to a Domestic
Rate Loan subject to Section 2.3(d) hereinbelow.
(d) Provided that no Event of Default shall have occurred and
be continuing, the Borrowers may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, continue any
such loan in the same aggregate principal amount. If a Borrower desires to
convert a loan, Greenwich on behalf of such Borrower shall give Agent not less
than three (3) Business Days' prior written notice, specifying the date of such
conversion, the loans to be converted and if the conversion is from a Domestic
Rate Loan to a Eurodollar Loan, the duration of the first Interest Period
therefor. After giving effect to each such conversion, there shall not be
outstanding more than six (6) Eurodollar Rate Loans, in the aggregate.
(e) At their option and upon three (3) Business Days' prior
written notice, Borrowers may prepay the Advances in whole at any time, with
accrued interest on the principal being prepaid to the date of such prepayment.
In the event that any prepayment of a Eurodollar Rate Loan is required or
permitted on a date other than the last Business Day of the then current
Interest Period with respect thereto, the Borrowers shall indemnify Agent and
Lenders therefor in accordance with Section 2.3(f) hereof.
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(f) Each Borrower shall indemnify Agent and Lenders and hold
Agent and Lenders harmless from and against any and all losses or expenses that
Agent or any Lender may sustain or incur as a consequence of any prepayment or
any default by the Borrowers in the payment of the principal of or interest on
any Eurodollar Rate Loan or failure by the Borrowers to complete a borrowing of,
a prepayment of or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given, including (but not limited to) any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Rate Loans hereunder.
(g) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), Section 2.12 and Section 2.13, the term
"Lender" shall include any Lender and the office or branch where any Lender or
any corporation or bank controlling such Lender makes or maintains any
Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the
obligation of any Lender to make Eurodollar Rate Loans hereunder shall forthwith
be cancelled and the Borrowers shall, if any affected Eurodollar Rate Loans are
then outstanding, promptly upon request from Agent, either pay all such affected
Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into
Domestic Loans. If any such payment or conversion of any Eurodollar Rate Loan
is made on a day that is not applicable to such Eurodollar Rate Loan, the
Borrowers shall pay Lenders, upon Agent's request, such amount or amounts as may
be necessary to compensate Lenders for any loss or expense sustained or incurred
by Lenders in respect of such Eurodollar Rate Loan as a result of such payment
or conversion, including (but not limited to) any interest or other amounts
payable by the Agent or Lenders to lenders of funds obtained by Agent or Lenders
in order to make or maintain such Eurodollar Rate Loan. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
to the Borrowers shall be conclusive absent manifest error.
(h) Should any amount required to be paid by Borrowers as
principal or interest hereunder, or as fees or other charges under this
Agreement or any Other Documents, or with respect to any other Obligation,
become due and payable, same shall be deemed a request for an Advance as of the
date such payment is due, in the amount required to pay in full such interest,
principal, fee, charge or other Obligation under this Agreement and/or any Other
Documents, and such request shall be irrevocable.
2.4 DISBURSEMENT OF ADVANCE PROCEEDS. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or any Lender,
shall be charged to Borrowers' accounts on the Agent's books. During the Term,
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Borrowers may use the Advances (subject to the limitations set forth in Section
2.1 hereof) by borrowing, prepaying and reborrowing, all in accordance with the
terms and conditions hereof.
2.5 REPAYMENT OF ADVANCES. The Advances shall be due and payable in
full on the last day of the Term subject to earlier prepayment as herein
provided.
2.6 REPAYMENT OF EXCESS ADVANCES.
The aggregate balance of Advances outstanding at any time either
(a) to Greenwich in excess of the lesser of the (i) Greenwich Formula Amount as
at such time, or (ii) Maximum Loan Amount MINUS the outstanding Advances made to
or for the benefit of Turbine, GTI, Components, GASI and Engine Services or (b)
to or for the benefit of Turbine in excess of the lesser of (i) Turbine Formula
Amount as at such time, or (ii) Maximum Loan Amount MINUS the outstanding
Advances made to or for the benefit of Greenwich, GTI, Components, GASI and
Engine Services or (c) to GTI in excess of the lesser of the (i) GTI Formula
Amount as at such time, or (ii) Maximum Loan Amount MINUS the outstanding
Advances made to or for the benefit of Greenwich, Turbine, Components, GASI and
Engine Services or (d) to GASI in excess of the lesser of the (i) GASI Formula
Amount as at such time, or (ii) Maximum Loan Amount MINUS the outstanding
Advances made to or for the benefit of Greenwich, Turbine, Components, GTI and
Engine Services or (e) to Components in excess of the lesser of the (i)
Components Formula Amount as at such time, or (ii) Maximum Loan Amount MINUS the
outstanding Advances made to or for the benefit of Greenwich, Turbine, GTI, GASI
and Engine Services, or (f) to Engine Services in excess of the lesser of the
(i) Engine Services Formula Amount as at such time, or (ii) Maximum Loan Amount
MINUS the outstanding Advances made to or for the benefit of Greenwich, Turbine,
GTI, GASI and Engine Services shall be immediately due and payable without the
necessity of any demand, at the place designated by Agent, whether or not an
Incipient Event of Default or Event of Default has occurred hereunder. In no
event shall the aggregate balance of Advances outstanding at any time to
Borrowers exceed the Maximum Loan Amount.
2.7 MANNER OF BORROWING AND PAYMENT. (a) Except as expressly provided
herein, all payments (including prepayments) to be made by Borrowers on account
of principal, interest and fees shall be made without set-off or counterclaim
and shall be made to the Agent to the Payment Office, in each case on or prior
to 1:00 p.m., New York time, in Dollars and in immediately available funds.
(b) Each borrowing of Revolving Advances shall be advanced
according to the Commitment Percentages of the Lenders.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.7(a) and (b) hereof, commencing with the first Business Day following
the Effective Date, each borrowing of
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Revolving Advances shall be advanced by Agent and each payment by Borrower on
account of Revolving Advances shall be applied first to those Revolving Advances
made by Agent. On or before [1:00 P.M.], New York time, on each Settlement Date
commencing with the first Settlement Date following the Effective Date, Agent
and the Lenders shall make certain payments as follows: (I) if the aggregate
amount of new Revolving Advances made by Agent during the preceding Week exceeds
the aggregate amount of repayments applied to outstanding Revolving Advances
during such preceding Week, then each Lender shall provide Agent with funds in
an amount equal to its Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with its Commitment Percentage of the difference
between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at
the applicable Contract Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefitted
Lender shall purchase for cash from the other Lenders such portion of each such
other Lender's Advances, or shall provide such other Lender with the benefits of
any such Collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. Each Lender so purchasing a portion of another Lender's Advances may
exercise all rights of payment (including, without limitation, rights of set-
off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender
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will not make the amount which would constitute its Commitment Percentage of the
Advances available to Agent, Agent may (but shall not be obligated to) assume
that such Lender shall make such amount available to Agent and, in reliance upon
such assumption, make available to Borrowers a corresponding amount. Agent will
promptly notify Borrowers of its receipt of any such notice from a Lender. If
such amount is made available to Agent on a date after a Settlement Date, such
Lender shall pay to Agent on demand an amount equal to the product of (i) the
daily average Federal Funds Rate (computed on the basis of a year of 360 days)
during such period as quoted by Agent, times (ii) such amount, times (iii) the
number of days from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent. A certificate of Agent submitted
to any Lender with respect to any amounts owing under this paragraph (e) shall
be conclusive, in the absence of manifest error. If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to Revolving Advances
hereunder, on demand from Borrowers; PROVIDED, HOWEVER, that Agent's right to
such recovery shall not prejudice or otherwise adversely affect Borrowers'
rights (if any) against such Lender.
2.8 STATEMENT OF ACCOUNT. Agent shall maintain, in accordance with
its customary procedures, a loan account in the name of each Borrower in which
shall be recorded the date and amount of each Advance to such Borrower made by
Agent and the date and amount of each repayment, prepayment or other payment in
respect thereof; PROVIDED, HOWEVER, the failure by Agent to record the date and
amount of any Advance shall not adversely affect Agent and the failure of the
Agent to record the date and amount of any repayment or prepayment of any
Advance shall not adversely affect such Borrower nor give it any rights vis a
vis Agent. For each month, Agent shall send to Greenwich on behalf of Borrowers
a statement showing the accounting for the Advances made, payments made or
credited in respect thereof, and other transactions between the Agent, Lenders
and each Borrower, during such month. The monthly statements shall be deemed
correct and binding upon the Borrowers in the absence of manifest error, and
shall constitute an account stated between Lenders and each Borrower unless
Agent receives a written statement of specific exceptions within thirty (30)
days after such statement is received by Borrowers. The records of Agent with
respect to the loan accounts shall be prima facie evidence of the amounts of
Advances and other changes thereto and of payments applicable thereto.
2.9 NO DEDUCTIONS. Each Borrower shall pay principal, interest, and
all other amounts payable hereunder, or under any Other Documents, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
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2.10 MANDATORY PREPAYMENTS.
(a) When any Borrower sells or otherwise disposes of any
Collateral (other than Inventory in the ordinary course of business) such
Borrower shall repay the Advances in an amount equal to the difference between
(i) the cash proceeds of such sale or other disposition (except as otherwise
provided by Section 4.3) and (ii) the reasonable costs of such sale or other
disposition (in the case of subclauses (i) and (ii) above after giving effect to
all tax benefits or obligations in accordance with GAAP), such repayment to be
made promptly but in no event more than five (5) Business Days following receipt
of the net cash proceeds thereof, and until the date of payment, such proceeds
shall be held in trust for Lenders. The foregoing shall not be deemed to be
implied consent to any such sale otherwise prohibited by the terms and
conditions hereof.
2.11 ADDITIONAL PAYMENTS. To the extent that Agent may, in the
exercise of its rights under this Agreement, make an expenditure due to any
Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document, any reasonable amounts so expended by Agent may
be charged to such Borrower's account as a Revolving Advance and added to the
Obligations. Agent shall provide such Borrower, if requested, with
documentation to evidence such expenditure and shall provide such Borrower with
notice immediately prior to the making of such payment; PROVIDED, that the
failure of Agent to give such notice shall not adversely affect Agent's rights
hereunder. In the event that at the time such sum is expended the unpaid
balance of Advances to any Borrower exceeds or would exceed, with the making of
such expenditure, the lesser of the Maximum Loan Amount MINUS the outstanding
Advances made to the other Borrowers or the Greenwich Formula Amount with
respect to Greenwich or the Turbine Formula Amount with respect to Turbine or
the GTI Formula Amount with respect to GTI or the GASI Formula Amount with
respect to GASI, or the Components Formula Amount with respect to Components, or
the Engine Services Formula Amount with respect to Engine Services such Borrower
shall on demand repay the Advances in the amount by which such expenditure
causes such excess.
2.12 INCREASED COSTS. In the event a change in any applicable law,
treaty or governmental regulation, in the interpretation or application thereof,
or compliance by Agent or any Lender with any new request or directive (whether
or not having the force of law) from any central bank or other financial,
monetary or other authority which is generally applicable to lenders similarly
situated to Agent or any Lender shall
(a) subject the Agent or any Lender to any tax of any kind
whatsoever (excluding taxes based on the income of Agent or any Lender) with
respect to this Agreement or change the basis of taxation of payments to Agent
or any Lender of principal, fees, interest or any other amount payable hereunder
or under any Other Documents;
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(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender any other condition with
respect to this Agreement or any Other Documents;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or any Lender deems to be material or to reduce the amount of any
payment by or for the account of any Borrower (whether of principal, interest or
otherwise) in respect of any of the Advances by an amount that Agent or any
Lender deems to be material; then, in any case, such Borrower shall promptly pay
Agent or such Lender, upon demand, such additional amount as will compensate
Agent or such Lender for such additional cost or such reduction, as the case may
be, provided that the foregoing shall not apply to increased costs which are
reflected in the Alternate Base Rate. Agent shall certify the amount of such
additional cost or reduced amount to such Borrower, and such certification shall
be prima facie evidence of such additional cost or reduced amount absent
manifest error.
2.13 CAPITAL ADEQUACY.
(a) In the event that, on or after the date of this Agreement,
any adoption of or any change in any applicable law, rule, regulation or
guideline regarding capital adequacy of Agent or any Lender or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Agent or any Lender, or any corporation or bank
controlling Agent or any Lender and the office or branch where Agent or any
Lender makes or maintains any Eurodollar Rate Loan with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on Agent's or any Lender's capital as a consequence
of its obligations hereunder to a level below that which Agent or any Lender
would have achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, the Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender may use
any reasonable averaging or attribution methods. The protection of this Section
2.13 shall be available to Agent and Lenders regardless of any possible
contention of invalidity or
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inapplicability with respect to the applicable law, regulation or condition.
(b) A certificate of Agent setting forth such amount or amounts
as shall be necessary to compensate Agent or any Lender with respect to Section
2.13(a) when delivered to the Borrowers shall be conclusive absent manifest
error.
(c) The obligations of Borrowers under this Section 2.13 shall
survive for a period of one (1) year following the termination of this Agreement
and the Other Documents and payment of the Notes and the Advances.
2.14 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan;
THEN
Agent shall give the Borrowers prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless the Borrowers
shall notify the Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that their request
for such borrowing shall be cancelled or made as an unaffected type of
Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which
was to have been converted to an affected type of Eurodollar Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if the Borrowers shall
notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business
Days prior to the proposed conversion, shall be maintained as an unaffected type
of Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loan
shall be converted into a Domestic Rate Loan, or, if Borrowers shall notify
Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior
to the last Business Day of the then current Interest Period applicable to such
affected Eurodollar Rate Loan, shall be converted into an unaffected type of
Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
Borrowers shall not have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
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2.15 LETTERS OF CREDIT. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of Standby Letters of Credit ("Letters
of Credit") PROVIDED, HOWEVER, that Agent will not be required to issue or cause
to be issued Letters of Credit (i) for Turbine to the extent that the face
amount of such Letters of Credit would then cause the outstanding Advances to
Turbine (with the requested Letter of Credit being deemed to be outstanding for
purposes of this calculation) to exceed the lesser of (A) the Maximum Loan
Amount MINUS outstanding Advances to or for the benefit of Greenwich and GTI,
Components, GASI and Engine Services or (B) the Turbine Formula Amount or (ii)
for Greenwich to the extent that the face amount of such Letters of Credit would
then cause the outstanding Advances to Greenwich (with the requested Letter of
Credit being deemed to be outstanding for purposes of this calculation) to
exceed the lesser of (A) the Maximum Loan Amount MINUS outstanding Advances to
or for the benefit of Turbine, GTI, Components, GASI and Engine Services or (B)
the Greenwich Formula Amount or (iii) for GTI to the extent the face amount of
such Letters of Credit would then cause the outstanding Advances to GTI (with
the requested Letter of Credit being deemed to be outstanding for purposes of
this calculation) to exceed the lesser of (A) the Maximum Loan Amount MINUS
outstanding Advances to or for the benefit of Greenwich, Turbine, Components,
GASI and Engine Services or (B) the GTI Formula Amount, (iv) for Components to
the extent the face amount of such Letters of Credit would then cause the
outstanding Advances to Components (with the requested Letter of Credit being
deemed to be outstanding for purposes of this calculation) to exceed the lesser
of (A) the Maximum Loan Amount MINUS outstanding Advances to or for the benefit
of Greenwich, Turbine, GTI, GASI and Engine Services or (B) the Components
Formula Amount, (v) for GASI to the extent the face amount of such Letters of
Credit would then cause the outstanding Advances to GASI (with the requested
Letter of Credit being deemed to be outstanding for purposes of this
calculation) to exceed the lesser of (A) the Maximum Loan Amount MINUS
outstanding Advances to or for the benefit of Greenwich, Turbine, GTI,
Components and Engine Services or (B) the GASI Formula Amount, (vi) for Engine
Services to the extent the face amount of such Letters of Credit would then
cause the outstanding Advances to Engine Services (with the requested Letter of
Credit being deemed to be outstanding for purposes of this calculation) to
exceed the lesser of (A) the Maximum Loan Amount MINUS outstanding Advances to
or for the benefit of Greenwich, Turbine, GTI, Components and GASI or (B) the
Engine Services Formula Amount. The maximum amount of outstanding Letters of
Credit shall not exceed $10,000,000 in the aggregate at any time. All
disbursements or payments related to Letters of Credit shall be deemed to be
Revolving Advances and shall bear interest at the Revolving Interest Rate for
Domestic Rate Loans (unless and until converted to a Eurodollar Rate Loan); and
to the extent not drawn upon, Letters of Credit that have not been drawn upon
shall not bear interest. Letters of Credit shall be subject to the terms and
conditions set forth in the Application and Agreement for Standby Letter of
Credit attached hereto as EXHIBIT 2.15.
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Upon the declaration by Agent of an Event of Default, Borrowers
will cause cash to be deposited and maintained in an account with Agent, as cash
collateral, in an amount equal to the undrawn amount of outstanding Letters of
Credit, and each Borrower hereby irrevocably authorizes Agent, in its
discretion, on such Borrower's behalf and in such Borrower's name, to open such
an account and to make and maintain deposits therein, or in an account opened by
such Borrower, in the amounts required to be made by such Borrower, out of the
proceeds of Receivables or other Collateral or out of any other funds of such
Borrower coming into Agent's possession at any time. Agent will invest such
cash collateral (less applicable reserves) in such short-term money-market items
as to which Agent and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. No Borrower may withdraw amounts credited to any such account
except upon (a) waiver or cure of the subject Event of Default, or (b) payment
and performance in full of all Obligations and termination of this Agreement.
2.16 ISSUANCE OF LETTERS OF CREDIT.
(a) Greenwich on behalf of itself or any other Borrower may
request Agent to issue or cause the issuance of a Letter of Credit by delivering
to Agent at the Payment Office, Bank's standard form of Application and
Agreement for Standby Letter of Credit (the "Letter of Credit Application")
completed to the satisfaction of Agent; and such other related certificates,
documents and other papers and information as Agent may reasonably request.
(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than twelve months
after such Letter of Credit's date of issuance and in no event later than five
(5) days prior to the last day of the Term. Each Letter of Credit Application
and each Letter of Credit shall be subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any amendments or revisions thereof and, to the extent
not inconsistent therewith, the laws of the State of New York.
2.17 REQUIREMENTS FOR ISSUANCE OF LETTERS OF CREDIT.
(a) In connection with the issuance of any Letter of Credit,
Borrowers shall indemnify, save and hold Agent and each Lender harmless from any
loss, cost, expense or liability, including, without limitation, payments made
by Agent or any Lender, and expenses and reasonable attorneys' fees incurred by
Agent or any Lender arising out of, or in connection with, any Letter of Credit
to be issued or created. Borrowers shall be bound by Agent's, any Lender's or
any issuing bank's regulations and good faith interpretations of any Letter of
Credit issued or created for
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any Borrower's account, although this interpretation may be different from
Borrowers' own; and neither Agent, any Lender, the bank which opened the Letter
of Credit, nor any of its correspondents shall be liable for any error,
negligence, or mistakes, whether of omission or commission, in following any
Borrower's instructions or those contained in any Letter of Credit or of any
modifications, amendments or supplements thereto or in issuing or paying any
Letter of Credit, except for its own gross negligence or willful misconduct.
(b) Greenwich on behalf of itself or any other Borrower shall
authorize and direct any bank which issues a Letter of Credit to name such
Borrower as the "Account Party" therein and to deliver to Agent all instruments,
documents, and other writings and property received by the bank pursuant to the
Letter of Credit and to accept and rely upon Agent's instructions and agreements
with respect to all matters arising in connection with the Letter of Credit or
the application therefor.
(c) Each Lender shall be deemed to have irrevocably purchased
an undivided participation in Agent's credit support enhancement provided to the
issuing bank of any Letter of Credit and each Revolving Advance made as a
consequence of the issuance of a Letter of Credit and all disbursements
thereunder in an amount equal to such Lender's applicable Commitment Percentage
times the outstanding amount of the Letters of Credit and disbursements
thereunder. In the event that at the time a disbursement is made the unpaid
balance of Revolving Advances exceeds or would exceed, with the making of such
disbursement, the lesser of the Maximum Loan Amount or the Formula Amount, and
such disbursement is not reimbursed by Borrowers within two (2) Business Days,
Agent shall promptly notify each Lender and upon Agent's demand each Lender
shall pay to Agent such Lender's proportionate share of such unreimbursed
disbursement together with such Lender's proportionate share of Agent's
unreimbursed costs and expenses relating to such unreimbursed disbursement.
Upon receipt by Agent of a repayment from any Borrower of any amount disbursed
by Agent for which Agent had already been reimbursed by any of Lenders, Agent
shall deliver to each of the subject Lenders that Lender's pro rata share of
such repayment. Each Lender's participation commitment shall continue until the
last to occur of any of the following events: (A) Agent ceases to be obligated
to issue Letters of Credit hereunder; (B) no Letter of Credit issued hereunder
remains outstanding and uncancelled or (C) all Persons (other than the
applicable Borrower) have been fully reimbursed for all payments made under or
relating to Letters of Credit.
2.18 DEFAULTING LENDER.
(a) Notwithstanding anything to the contrary contained herein,
in the event any Lender (x) has refused (which refusal constitutes a breach by
such Lender of its obligations
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under this Agreement) to make available its portion of any Advance or (y)
notifies either Agent or any Borrower that it does not intend to make available
its portion of any Advance (if the actual refusal would constitute a breach by
such Lender of its obligations under this Agreement) (each, a "Lender Default"),
all rights and obligations hereunder of such Lender (a "Defaulting Lender") as
to which a Lender Default is in effect and of the other parties hereto shall be
modified to the extent of the express provisions of this Section 2.18 while such
Lender Default remains in effect.
(b) Advances shall be incurred PRO RATA from Lenders (the "Non-
Defaulting Lenders") which are not Defaulting Lenders based on their respective
Commitment Percentages, and no Commitment Percentage of any Lender or any PRO
RATA share of any Advances required to be advanced by any Lender shall be
increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender PRO RATA based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled, during the
continuance of such Lender Default, to give instructions to Agent or to approve,
disapprove, consent to or vote on any matters relating to this Agreement and the
Other Documents. All amendments, waivers and other modifications of this
Agreement and the Other Documents may be made without regard to a Defaulting
Lender and, solely for purposes of the definition of "Required Lenders" and
Section 14.2(b) hereof, a Defaulting Lender shall be deemed not to be a Lender
and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.18, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing
in this Section 2.18 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
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(f) If a Lender Default shall occur, any Lender or Lenders may
commit to make Advances in an amount necessary to meet Borrowers' request. In
such event, the Defaulting Lender's Commitment Percentage of the Advances shall
be terminated and its Commitment Percentage of the Advances outstanding (prior
to such additional Advances being made by the other Lender or Lenders) shall be
repaid by the Borrowers provided Borrowers shall not be obligated to pay an
early termination fee to such Defaulting Lender.
III. INTEREST AND FEES.
3.1 INTEREST. Interest on Revolving Advances shall be payable in
arrears on the last day of each month with respect to Domestic Rate Loans and,
with respect to any Eurodollar Rate Loan, at the end of the Interest Period
relating to such Eurodollar Rate Loan. Interest charges for Domestic Rate Loans
shall be computed on the actual average of daily Revolving Advances outstanding
during the month (the "Monthly Advances") at a rate per annum equal to the
applicable Revolving Interest Rate. Whenever, subsequent to the date of this
Agreement, the Alternate Base Rate is increased or decreased, the Revolving
Interest Rate applicable to Domestic Rate Loans shall be similarly changed
without notice or demand of any kind by an amount equal to the amount of such
change in the Alternate Base Rate during the time such change or changes remain
in effect. Upon and after the declaration by Agent of an Event of Default, and
during the continuation thereof, the Revolving Advances shall bear interest at
the Revolving Interest Rate plus two (2%) percent per annum and fees on
outstanding Letters of Credit shall be calculated at three and one-half (3.50%)
percent (the "Default Rate").
3.2 INTENTIONALLY OMITTED.
3.3 UNUSED FACILITY FEE. On the first day of each calendar month
commencing on the first day of the first month following the Effective Date,
Borrowers shall pay to Agent an unused facility fee initially, a rate per annum
equal to .3% of the average daily unused portion of the Maximum Loan Amount;
PROVIDED, however, the unused facility fee shall be amended as provided below,
commencing on the later to occur of (i) the last day of the third fiscal quarter
after the Effective Date and (ii) March 31, 1997 and at the end of each fiscal
quarter thereafter based upon the ratio of Funded Debt to EBITDA as reflected in
the financial statements (x) delivered to Agent pursuant to Section 9.7 of this
Agreement with respect to the first three (3) fiscal quarters of any fiscal year
and (y) delivered to Agent pursuant to Section 9.8 of this Agreement with
respect to the last fiscal quarter of any fiscal year:
Ratio of Indebtedness to EBITDA Unused Facility Fee
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less than 3.0 to 1.0 0.200%
less than 3.50 and equal to or greater than 3.0 to 1.0 0.200%
less than 4.50 and equal to or greater than 3.50 to 1.0 0.300%
equal to or greater than 4.50 to 1.0 0.375%
The foregoing ratio shall be determined for Borrowers on a consolidated
basis. Notwithstanding the foregoing, the unused facility fee shall not be
reduced at such time as an Event of Default or Incipient Event of Default has
occurred and is continuing but shall be reduced (if applicable) when such Event
of Default or Incipient Event of Default has been cured or waived.
3.4 LETTER OF CREDIT.
Borrowers shall pay Agent (i) for the pro-rata benefit of Lenders for
issuing or causing the issuance of a Letter of Credit, a fee computed at a rate
per annum of one and one-half percent (1-1/2%) on the original face amount
thereof ("Letter of Credit Fees"), (ii) Bank's other customary charges payable
in connection with Letters of Credit, as in effect from time to time (which
charges shall be furnished to Borrowers by Agent upon request). Such fees and
charges shall be payable on the opening of each Letter of Credit, and thereafter
on the last day of each month. Any such charge in effect at the time of a
particular transaction shall be the charge for that transaction, notwithstanding
any subsequent change in Bank's prevailing charges for that type of transaction.
All Letter of Credit Fees payable hereunder shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not be subject to
rebate or proration upon the termination of this Agreement for any reason.
3.5 COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed; PROVIDED, HOWEVER, Advances bearing interest based on the Prime
Rate shall be computed on the basis of a year of 365(6) days and for the actual
number of days elapsed. If any payment to be made hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall then be
payable in respect of the period of such extension. The fees set forth in
Sections 3.2, 3.3 and 3.4 shall, unless contrary instructions are received in
writing by Agent from Greenwich, be charged to the respective loan accounts of
each Borrower as follows: [25% to Greenwich's account, 10% to Turbine's
account, __% to Engine Services, __% to GASI and __% to Components.
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3.6 MAXIMUM CHARGES. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that a court determines that Agent or any Lender has
received interest and other charges hereunder in excess of the highest lawful
rate applicable hereto, such excess interest shall be first applied to any
unpaid principal balance owed by Borrowers, and if the then remaining excess
interest is greater than the previously unpaid principal balance, Lenders shall
promptly refund such excess amount to the Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
IV. COLLATERAL: GENERAL TERMS
4.1 ACKNOWLEDGEMENT AND GRANT OF SECURITY INTERESTS.
(a) Each Borrower hereby acknowledges, confirms and agrees that
Agent for the ratable benefit of Lenders has and shall continue to have a lien
upon and security interest in all Collateral heretofore granted to BNYCC
pursuant to the Existing Loan Agreement to secure the Obligations, and, to the
extent not otherwise granted thereunder or under the Other Documents or
otherwise granted to or held by BNYCC, Borrowers hereby pledge and assign to
Agent for the ratable benefit of Lenders and grant to Agent for the ratable
benefit of Lenders a continuing security interest in, all of the Collateral,
wherever located, whether in any Borrower's possession or in the possession and
control of a third party for any Borrower's or Agent's or any Lender's account.
All of each Borrower's ledger sheets, files, records, books of account, business
papers and documents relating to the Collateral shall, until delivered to or
removed by Agent, be kept by such Borrower in trust for Agent for the ratable
benefit of Lenders.
(b) The liens and security interests of Agent for the ratable
benefit of Lenders in the Collateral shall be deemed to be continuously
perfected from the earliest date of the granting of such liens and security
interests, whether hereunder, under the Other Documents, or under the Existing
Loan Agreement.
4.2 PERFECTION OF SECURITY INTEREST. Each Borrower shall take all
action that may be necessary or desirable, or that Agent may reasonably request,
so as at all times to maintain the validity, perfection, enforceability and
first priority of Agent's security interest in the Collateral or to enable Agent
to protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to (i) immediately discharging all Liens on
Collateral other than Permitted Encumbrances, (ii) obtaining landlords' or
mortgagees' lien waivers with respect to any premises leased or purchased by any
Borrower after the Initial Closing Date, (iii) delivering to Agent, endorsed or
accompanied by such instruments of assignment as Agent may reasonably specify,
and stamping or marking, in such manner as Agent may reasonably specify, any and
all chattel paper, instruments, letters of credits
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and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into custodial arrangements satisfactory to Agent, and
(v) executing and delivering financing statements, instruments of pledge,
mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest in the Collateral under
the Uniform Commercial Code or other applicable law. All reasonable and
necessary charges, expenses and fees that Agent may incur in doing any of the
foregoing in the good faith exercise of its discretion, and any local taxes
relating thereto, shall be charged to the applicable Borrower's account and
added to the Obligations, or, at Agent's option, shall be paid to Agent
immediately upon demand.
4.3 DISPOSITION OF COLLATERAL. Each Borrower will safeguard and
protect all Collateral for Agent's general account and make no disposition
thereof whether by sale, lease or otherwise without Agent's prior written
consent which shall not be unreasonably withheld or delayed, except that any
Borrower may, without Agent's consent, sell Inventory in the ordinary course of
business.
4.4 PRESERVATION OF COLLATERAL. Agent shall have, and is hereby
granted, a right of ingress and egress to the places where the Collateral is
located, and may proceed over and through any of Borrowers' owned or leased
property In addition to the rights and remedies set forth in Section 11.1
hereof, Agent may at any time following the occurrence and during the
continuance of an Event of Default take such steps as Agent deems necessary to
protect its security interest in and to preserve the Collateral including (a)
the hiring of such security guards or the placing of other security protection
measures as Agent may deem appropriate; (b) employing and maintaining at any of
Borrowers' premises a custodian who shall have full authority to do all acts
necessary to protect Agent's security interest in the Collateral; (c) leasing
warehouse facilities to which Agent may move all or part of the Collateral; and
(d) subject to the provisions of the Intercreditor Agreement, using any of
Borrowers' owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral. Each Borrower shall cooperate
fully with all of Agent's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may direct. All of Agent's
reasonable and necessary expenses of preserving the Collateral, including any
expenses relating to the bonding of a custodian, shall be charged to the
applicable Borrower's account as an Advance and added to the Obligations.
4.5 OWNERSHIP OF COLLATERAL. With respect to the Collateral, at the
time the Collateral became or becomes subject to the security interest granted
pursuant to the Existing Loan Agreement or Section 4.1 hereof, as the case may
be: (a) each Borrower shall be the sole owner of and fully authorized and able
to transfer, pledge and/or grant a first security interest in each
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and every item of its respective Collateral to Agent; and, except for Permitted
Encumbrances, the Collateral shall be free and clear of all Liens, Claims,
Charges and encumbrances whatsoever; (b) each document and agreement executed by
each Borrower or delivered to Agent or any Lender on behalf of each Borrower in
connection with this Agreement shall be true and correct in all material
respects as of the date thereof; (c) all signatures and endorsements of each
Borrower that appear on such documents and agreements shall be genuine and each
Borrower shall have full capacity to execute same; and (d) Borrowers' Inventory
shall be located as set forth on EXHIBIT 4.5 and shall not be removed from such
location(s) (except with respect to the sale of Inventory in the ordinary course
of business) unless Agent shall have received thirty (30) days' prior written
notice of such removal.
4.6 DEFENSE OF AGENT'S INTERESTS. Until (a) payment and performance
in full of all of the Obligations and (b) termination of this Agreement, Agent's
interests in the Collateral shall continue in full force and effect. During
such period none of the Borrowers shall, without Agent's prior written consent,
pledge, sell (except Inventory in the ordinary course of business), assign,
transfer, create or suffer to exist a security interest in, Lien, Claim or
Charge upon or encumber or allow or suffer to be encumbered in any way except
for Permitted Encumbrances, any part of the Collateral. Except as respects
Permitted Encumbrances, each Borrower shall defend Agent's interests in the
Collateral against any and all Persons whatsoever. At any time following the
declaration and during the continuance of an Event of Default hereunder, Agent
shall have the right to take possession of the indicia of the Collateral and the
Collateral using all legally permitted methods in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this right to take
possession of the Collateral, each Borrower shall, upon demand, assemble it in
the best manner possible and make it available to Agent at a place reasonably
convenient to Agent; PROVIDED, that any request by Agent shall be made in a
commercially reasonable manner. In addition, with respect to all Collateral,
Agent and Lenders shall be entitled to all of the rights and remedies set forth
herein and further provided by the Uniform Commercial Code or other applicable
law. Following the occurrence and during the continuation of an Event of
Default, each Borrower shall, and Agent may, at its option, instruct all
suppliers, carriers, forwarders, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which Agent holds a security
interest to deliver same to Agent and/or subject to Agent's order. If any of
the foregoing shall, at any time, come into any Borrower's possession, they, and
each of them, shall be held by such Borrower in trust as Agent's trustee, and
such Borrower will immediately deliver them to Agent in their original form
together with any necessary endorsement.
4.7 BOOKS AND RECORDS. Each Borrower (a) shall keep proper books of
record and account in which full, true and correct
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entries will be made of all dealings or transactions of or in relation to its
business and affairs; (b) set up on its books accruals with respect to all
taxes, assessments, charges, levies and claims; and (c) on a reasonably current
basis set up on its books, from its earnings, allowances against doubtful
Receivables, advances and investments and all other proper accruals (including
without limitation by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or
amortization of properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to this subsection
shall be made in accordance with, or as required by, GAAP consistently applied.
4.8 FINANCIAL DISCLOSURE. Each Borrower hereby irrevocably authorizes
and directs all accountants and auditors employed by such Borrower at any time
during the term of this Agreement to exhibit and deliver to Agent and each
Lender copies of any of the Borrowers' financial statements, trial balances or
other accounting records including work papers of any sort in the accountant's
or auditor's possession, and to disclose to Agent and each Lender any
information such accountants may have concerning the Borrowers' financial status
and business operations. Each Borrower hereby authorizes all federal, state and
municipal authorities to furnish to Agent and each Lender copies of reports or
examinations relating to the Borrowers, whether made by the Borrowers or
otherwise; PROVIDED, HOWEVER, that Agent and each Lender will attempt to obtain
such information or materials directly from the Borrowers prior to obtaining
such information or materials from such accountants or governmental authorities.
Any failure by the accountants or governmental authorities to comply with
information requests of Agent or any Lender shall not be deemed an Event of
Default hereunder unless such failure to comply is a result of instructions by
any Borrower which are contrary to the provisions of this Section 4.8. Agent
and each Lender shall exercise its rights hereunder in a commercially reasonable
manner.
4.9 COMPLIANCE WITH LAWS. Each Borrower shall in all material
respects comply with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the Collateral or any
part thereof or to the operation of such Borrower's business the non-compliance
with which would have a material adverse effect on the Collateral, or the
operations, business or condition (financial or otherwise) of such Borrower.
Any Borrower may, however, contest or dispute any acts, rules, regulations,
orders and directions of those bodies or officials in any reasonable manner,
provided that any related Lien or Charge which is or might be asserted with
respect thereto (if applicable to the Collateral) is inchoate or stayed and
sufficient reserves are established to the reasonable satisfaction of Agent so
as not to derogate from or against and so as to protect, Agent's lien on or
security interest in the Collateral.
4.10 INSPECTION OF PREMISES. At all reasonable times Agent or any
Lender shall have full access to and the right to
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audit, check, inspect and make abstracts and copies from the Borrowers' books,
records, audits, correspondence and all other papers relating to the Collateral
and the operation of Borrowers' business. Agent or any Lender may enter upon
any of the Borrowers' premises at any time during business hours and at any
other reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of
Borrowers' business.
4.11 INSURANCE. Borrowers shall bear the full risk from any loss of
any nature whatsoever with respect to the Collateral. At its own cost and
expense in amounts and with carriers acceptable to Agent (which acceptance shall
not be unreasonably withheld), each Borrower shall (a) keep all its insurable
properties and properties in which such Borrower has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, including, without limitation,
business interruption insurance and for such amounts, as is customary in the
case of companies engaged in a business similar to such Borrower provided that
such insurance shall be for at least [$____________] in the aggregate for all of
the Borrowers; (b) maintain a bond in such amounts as is customary in the case
of companies engaged in a business similar to such Borrower insuring against
larceny, embezzlement or other criminal misappropriation of insured's officers
and employees who may either singly or jointly with others at any time have
access to the assets or funds of any Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain product liability insurance against claims for personal
injury, death or property damage suffered by others in an amount not less than
the maximum amount which Borrowers are able to obtain; PROVIDED, that such
insurance shall not be for an amount less than [$100,000,000?] in the aggregate
for all of the Borrowers or more than [$250,000,000?] in the aggregate for all
of the Borrowers; and PROVIDED, FURTHER, that Borrowers' inability to obtain
insurance in an amount equal to [$250,000,000] in the aggregate for all
Borrowers is due to market conditions and is not a result of Borrowers' actions
or omissions; (d) maintain all such worker's compensation or similar insurance
as may be required under the laws of each state or jurisdiction in which any
Borrower is engaged in business; (e) furnish Agent with (i) copies of all
policies and evidence of the maintenance of such policies by the renewal thereof
at least thirty (30) days before any expiration date, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to Agent, naming Agent
as loss payee as its interests may appear with respect to all insurance coverage
referred to in clauses (a) and (b) above and as an additional insured with
respect to the insurance coverage referred to in clauses (c) and (d) above, and
in either case providing (A) that all proceeds thereunder in respect of the
Collateral shall be payable to Agent, (B) that no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (C) that such policy and loss payable clauses may not be
cancelled,
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amended or terminated unless at least thirty (30) days' prior written notice is
given to Agent. In the event of any loss thereunder, the carriers named therein
hereby are directed by Agent and Borrowers to make payment for such loss to
Agent and not to the Borrowers and Agent jointly. If any insurance losses are
paid by check, draft or other instrument payable to the Borrowers and Agent
jointly, Agent may endorse any Borrower's name thereon and do such other things
as Agent may deem advisable to reduce the same to cash. All loss recoveries
received by Agent upon any such insurance may be applied to the Obligations, in
such order as Agent in its sole discretion shall determine; PROVIDED, HOWEVER,
Agent shall remit to Borrowers any loss recoveries received by Agent with
respect to Borrowers' insurance coverage referred to in clauses (c) and (d)
above which are paid to Agent other than in its capacity as an additional
insured under said policies. Any surplus shall be paid by Agent to Borrowers or
applied as may be otherwise required by law. Any deficiency in the amount of
insurance proceeds received when compared to the value of the Collateral the
loss of which gave rise to such insurance proceeds shall be paid by the
Borrowers to Agent, on demand. Anything hereinabove to the contrary
notwithstanding (i) Agent shall permit each Borrower to adjust and compromise
claims under insurance coverage provided that no Event of Default shall have
been declared and be continuing and (ii) Agent shall promptly remit to Borrowers
insurance proceeds received by Agent during any calendar year under insurance
policies procured and maintained by Borrowers which insure Borrowers' insurable
Collateral to the extent such insurance proceeds do not exceed $2,000,000 per
occurrence provided, (x) no Event of Default shall have been declared and be
continuing, (y) Borrowers shall use such insurance proceeds to repair, replace
or restore the insurable Collateral which was the subject of the insurable loss
and for no other purpose and (z) Agent shall have obtained a perfected security
interest in such repaired, replaced or restored Collateral. In the event the
amount of insurance proceeds received by Agent for any occurrence as aforesaid
exceeds [$750,000] and no Event of Default shall have been declared and be
continuing, Agent shall place such proceeds in an interest-bearing account and
such proceeds shall be remitted to Borrowers from time to time to the extent (a)
Borrowers shall submit invoices to Agent with respect to the repair, replacement
or restoration of the insurable Collateral which was the subject of the
insurable loss, (b) Borrowers shall use such insurance proceeds to repair,
replace or restore the insurable Collateral which was the subject of the
insurable loss and for no other purpose, (c) the repair, replacement or
restoration of the subject Collateral must be capable of being accomplished
during the period of time in which any Borrower's business interruption
insurance is in effect and (d) each Borrower shall have delivered to Agent a
revised Business Plan in form and substance satisfactory to Agent evidencing
such Borrower's ability to continue to operate its business in compliance with
the provisions of Sections 6.5, 6.6 and 6.7 hereof and without the occurrence of
any other Event of Default hereunder. Following the declaration and during the
continuance of an Event of Default
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hereunder, Agent shall not be obligated to remit the insurance proceeds to
Borrowers.
4.12 FAILURE TO MAINTAIN INSURANCE. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent may
obtain such insurance and pay the premium therefor for such Borrower's account,
and charge such Borrower's account therefor and such expenses so paid shall be
charged to such Borrower's account as an Advance and added to the Obligations.
4.13 PAYMENT OF TAXES. Each Borrower will pay, before becoming
delinquent, all taxes, assessments and other Charges or Claims lawfully levied
or assessed upon such Borrower or any of the Collateral including, without
limitation, real and personal property taxes, assessments and charges and all
franchise, income, employment, social security benefits, withholding, and sales
taxes. If any tax by any governmental authority is or may be imposed on Agent or
any Lender or, as a result of any transaction between Borrowers, any Agent and
Lender, Agent or any Lender may be required to withhold or pay such a tax or, if
any taxes, assessments, or other Charges remain unpaid after the delinquency
date or if any Claim shall be made which, in Agent's opinion, may possibly
create a valid Lien, Charge or Claim on the Collateral, Agent may, concurrently
with giving notice to Borrowers, pay the taxes, assessments, Liens, Charges or
Claims and each Borrower hereby indemnifies and holds Agent harmless in respect
thereof except for gross (not mere) negligence or willful misconduct. The
amount of any payment by Agent or any Lender under this Section 4.13 shall be
charged to the applicable Borrower's account as an Advance and added to the
Obligations and, until the applicable Borrower shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision for the payment thereof has been made), Agent may hold without
interest any balance standing to any Borrower's credit and Agent shall retain
its security interest in any and all Collateral held by Agent.
4.14 PAYMENT OF LEASEHOLD OBLIGATIONS. Each Borrower shall at all
times pay, before becoming delinquent, its rental obligations under all leases
under which it is a tenant, and shall otherwise comply, in all material
respects, with all other terms of such leases and keep them in full force and
effect and, at Agent's request, will provide evidence of having done so.
4.15 RECEIVABLES.
(a) NATURE OF RECEIVABLES. Each of the Receivables shall be a
bona fide and valid account representing a bona fide obligation of the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach hereof and Eligible Unbilled Receivables do not have any invoices
relating thereto) with respect to an absolute sale or lease and delivery of
goods upon stated terms of the applicable Borrower, or
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work, labor or services theretofore rendered by such Borrower and as of the date
each Receivable is created. Same shall be due and owing in accordance with each
Borrower's standard terms of sale without dispute, setoff or counterclaim
except, as may be stated on the accounts receivable schedules delivered by the
Borrower to Agent.
(b) SOLVENCY OF CUSTOMERS. To the best of each Borrower's
knowledge, each Customer, as of the date each Receivable is created, is and will
be solvent and able to pay all Receivables on which the Customer is obligated in
full when due or with respect to such Customers of Borrowers who are not solvent
such Borrower has set up on its books and in its financial records bad debt
reserves adequate to cover such Receivables or has collateral from such Customer
sufficient to cover such Receivables.
(c) LOCATIONS OF BORROWER. Each Borrower's chief executive
office is located at 4590 N.W. 36th Street, Building 23, Miami, Florida 33122.
Until written notice is given to Agent by any Borrower of any other office at
which it keeps its records pertaining to Receivables, all such records shall be
kept at such executive office.
(d) COLLECTION OF RECEIVABLES. Until the Borrowers' authority
to do so is terminated by Agent (which notice Agent may give at any time
following the occurrence and during the continuance of an Event of Default),
each Borrower will, at such Borrower's sole cost and expense, but on Agent's
behalf and for the account of Agent, collect as Agent's property and in trust
for Agent all amounts received on Receivables, and shall not commingle such
collections with such Borrower's funds or use the same except to pay
Obligations. Each Borrower shall, upon request, deliver to Agent in original
form and on the date of receipt thereof, all checks, drafts, notes, money
orders, acceptances, cash and other evidences of Indebtedness.
(e) NOTIFICATION OF ASSIGNMENT OF RECEIVABLES. At any time
following the occurrence and during the continuance of an Event of Default,
Agent shall have the right to send notice of the assignment of, and Agent's
security interest in, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Agent shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to each Borrower's account and added to the
Obligations.
(f) POWER OF AGENT TO ACT ON EACH BORROWER'S BEHALF. Agent
shall have the right to receive, endorse, assign and/or deliver in the name of
Agent or the applicable Borrower any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and each
Borrower hereby waives
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notice of presentment, protest and non-payment of any instrument so endorsed.
Each Borrower hereby constitutes Agent or its designee as the Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or bill of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; (iv) to sign such Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's interest in the Collateral and to file
same; (v) following the occurrence and during the continuance of an Event of
Default, to demand payment of the Receivables; (vi) following the occurrence and
during the continuance of an Event of Default, to enforce payment of the
Receivables by legal proceedings or otherwise: (vii) following the occurrence
and during the continuance of an Event of Default, to exercise all of each
Borrower's rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) following the occurrence and during the
continuance of an Event of Default, to settle, adjust, compromise, extend or
renew the Receivables; (ix) following the occurrence and during the continuance
of an Event of Default, to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign each Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer
if such Borrower has failed to do so no later than thirty (30) days prior to any
bar date; (xi) to prepare, file and sign each Borrower's name on any notice of
Lien, assignment or satisfaction of Lien or similar document in connection with
the Receivables if such Borrower has failed to do so no later than thirty (30)
days prior to the expiration of any applicable time period; and (xii) to do all
other acts and things necessary to carry out this Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or of law, unless done willfully and
maliciously or by gross (not mere) negligence; this power being coupled with an
interest is irrevocable while any of the Obligations remain unpaid. Agent shall
have the right at any time following the declaration and during the continuance
of an Event of Default to change the address for delivery of mail addressed to
any Borrower to such address as Agent may designate.
(g) NO LIABILITY. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom except for its own willful misconduct or
gross (not mere) negligence. Following the occurrence and during the
continuance of an Event of Default, Agent may, without notice or consent from
any Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or
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upon any terms any of the Receivables or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof. Agent is
authorized and empowered to accept, following the occurrence and during the
continuance of an Event of Default, the return of the goods represented by any
of the Receivables, without notice to or consent by any Borrower, all without
discharging or in any way affecting any Borrower's liability hereunder.
(h) ESTABLISHMENT OF AN AGENCY ACCOUNT. All proceeds of
Collateral shall, at the direction of Agent, be deposited by each Borrower into
a separate agency account (collectively, "Agency Accounts") as Agent may require
pursuant to an arrangement with such bank(s) (the "Depository Banks") as may be
selected by each Borrower and be acceptable to Agent. The Depository Bank shall
receive, in writing, irrevocable instructions directing the Depository Bank to
transfer such funds so deposited to Agent by wire transfer to specified
account(s) of Agent. All funds deposited in the Agency Accounts shall
immediately become the property of Agent and each Borrower shall obtain the
agreement by the Depository Bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for such
Agency Account arrangements, including without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder. Each Borrower will maintain an operating account with a Depository
Bank. In the event that any check(s) deposited in the Agency Accounts is
returned unpaid, the amount thereof shall be charged by such Depository Bank to
such operating account and, to the extent that funds are not available in the
operating account, such Borrower shall be solely responsible for reimbursing the
Depository Bank. Each Borrower shall issue, to the respective Depository Bank,
an irrevocable letter of instruction directing such Depository Bank that, to the
extent that such Borrower shall receive wire transfers representing proceeds of
Collateral in such operating account, such funds shall be automatically and
immediately transferred to the applicable Agency Account.
4.16 INVENTORY. All Inventory produced by each Borrower has been, and
will be produced, in accordance with the Federal Fair Labor Standards Act of
1938, as amended, and all rules, regulations and orders thereunder.
4.17 EXCULPATION OF LIABILITY. Except as set forth in Section 4.15(f)
hereof, nothing herein contained shall be construed to constitute Agent or any
Lender as any Borrower's agent for any purpose whatsoever, nor shall Agent or
any Lender be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located
and regardless of the cause thereof except for its own gross (not mere)
negligence or willful misconduct. Neither Agent nor any Lender does by anything
herein or in any Other Document or in any assignment or otherwise, assume any of
the Borrowers' obligations under any contract or agreement assigned to Agent or
such Lender,
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and neither Agent nor any Lender shall be responsible in any way for the
performance by any Borrower of any of the terms and conditions thereof except
for its own willful misconduct or gross (not mere) negligence.
4.18 ENVIRONMENTAL MATTERS.
(a) Each Borrower will maintain the Real Property in
substantial compliance with all Environmental Laws and it will not place or
suffer or permit to be placed any Hazardous Substances on the Real Property
except as not prohibited by applicable law or appropriate governmental
authorities and which are necessary for the operation of the commercial business
of such Borrower or of its tenants.
(b) Each Borrower will maintain its current system to assure
and monitor continued compliance with all applicable Environmental Laws which
system includes periodic reviews of such compliance.
(c) Each Borrower will dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under any applicable Environmental Laws. Each Borrower
shall use its best efforts to obtain certificates of disposal, such as hazardous
waste manifest receipts, from all treatment, transport, storage or disposal
facilities or operators employed by such Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower comes into possession of, gives
or receives notice of any Release or threat of Release of a reportable quantity
of any Hazardous Substances at the Real Property or any other site used by such
Borrower to dispose of Hazardous Substances (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property (or
any other site used by such Borrower to dispose of Hazardous Substances), demand
letter or complaint, order, citation, or other written notice with regard to any
Hazardous Discharge or violation of Environmental Laws affecting the Real
Property (or any other site used by such Borrower to dispose of Hazardous
Substances) or such Borrower's interest therein (any of the foregoing is
referred to herein as an "Environmental Complaint") from any local, state or
federal authority or agency with enforcement rights, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then such
Borrower shall, within five (5) Business Days, give written notice of same to
Agent detailing non-privileged and non-confidential facts and circumstances of
which such Borrower is aware giving rise to the
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Hazardous Discharge or Environmental Complaint and shall forward copies of
correspondence between the Borrower and the Authority regarding such claims to
Agent until the claim is settled. Each Borrower shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that such Borrower is required to file under any Environmental Laws.
Such information is to be provided to allow Agent to protect its security
interest in the collateral assignment of Borrowers' lease interest in the Real
Property and is not intended to create nor shall it create any obligation upon
Agent or any Lender with respect thereto.
(e) Each Borrower shall respond promptly to any Hazardous
Discharge and within thirty (30) days of receipt of any Environmental Complaint
and take all necessary action in order to comply with all applicable
Environmental Laws and to avoid subjecting the Collateral or Real Property to
any Lien relating to a failure to comply with Environmental Laws; PROVIDED,
HOWEVER, if such compliance cannot reasonably be completed within such thirty
(30) day period, such Borrower shall commence such necessary action within such
thirty (30) day period and shall thereafter diligently and expeditiously proceed
to fully comply in all respects and in a timely fashion with all Environmental
Laws. If any Borrower shall fail to respond promptly to any Hazardous Discharge
or shall fail to respond within a reasonable period of time to any Environmental
Complaint or any Borrower shall fail to diligently and expeditiously proceed to
comply in a timely fashion with any of the requirements of any Environmental
Laws, Agent, on behalf of Lenders, may, in its sole and absolute discretion, but
without the obligation to do so, for the sole purpose of protecting Agent's
interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint in a
commercially reasonable manner. All reasonable costs and expenses incurred by
Agent or any Lender (or such third parties) in the exercise of any such rights,
including any sums paid in connection with any judicial or administrative
investigation or proceedings, reasonable counsel and consultant fees and
expenses, investigation and laboratory fees and expenses, and fines and
penalties, together with interest thereon from the date expended at the Default
Rate shall be paid upon demand by the applicable Borrower, and until paid shall
be charged to the applicable Borrower's account as an Advance and added to the
Obligations secured by the Liens created by the terms of this Agreement. Each
Borrower shall execute and deliver, promptly upon request, such instruments as
Agent may reasonably deem useful or necessary to permit Agent to take any such
action, and such additional notes and mortgages, as Agent may require to secure
all sums so advanced or paid by Agent or Lenders.
(f) Each Borrower shall defend and indemnify Agent and Lenders
and hold Agent and Lenders harmless from and
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against all loss, liability, damage and expense, claims, costs, fines and
penalties, including reasonable attorney's fees, suffered or incurred by Agent
or Lenders under or on account of any Environmental Laws in relation to such
Borrower or its Collateral or Real Property, including, without limitation, the
assertion of any lien thereunder, with respect to any Hazardous Discharge, the
presence of any Hazardous Substances affecting the Real Property, whether or not
the same originates or emanates from the Real Property or any contiguous real
estate, except to the extent such loss, liability or damage is directly related
to Agent or Lenders (i) placing any Hazardous Substance on the Real Property,
(ii) failing to properly dispose of Hazardous Waste, (iii) causing a Hazardous
Discharge on the Real Property or (iv) failing to act in a commercially
reasonable manner. Agent may, in the event it is dissatisfied, in the exercise
of its reasonable judgment, with counsel employed by any Borrower, employ
counsel separate from counsel employed by such Borrower in any such action and
participate in the defense thereof, at the expense of such Borrower. The
Borrowers' obligations and the indemnifications hereunder shall survive the
termination of this Agreement.
(g) If a Lien is filed against any Real Property by any
governmental authority resulting from the need to expend or the actual expending
of monies arising from an action or omission, whether intentional or
unintentional, of any Borrower for which such Borrower is responsible, resulting
in the releasing, spilling, leaking, leaching, pumping, emitting, pouring,
emptying or dumping of any Hazardous Substance into the waters or onto land
located within or without the state where the Real Property is located, then
within thirty (30) days from the date such Borrower is first given notice that
such Lien has been filed against the Real Property (or within such shorter
period of time as may be specified by Agent if such governmental authority has
commenced steps to cause the Real Property to be sold pursuant to such Lien)
either (i) pay the claim and remove the Lien, or (ii) furnish a cash deposit,
bond, or such other security with respect thereto as is satisfactory in all
respects to Agent and is sufficient to effect a complete discharge of such Lien
on the Real Property. If any Borrower fails to do either (i) or (ii) above in a
timely manner, Agent and Lenders shall have the right, but not the obligation,
to do so and all such costs or expenses incurred by Agent and Lenders in
connection therewith, together with interest thereon from the date expended at
the Default Rate shall be paid upon demand by such Borrower and until paid shall
be added to the Obligations secured by the Liens created by the terms of this
Agreement.
V. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants as follows:
5.1 AUTHORITY. Each Borrower has full power, authority and legal
right to enter into this Agreement and the Other Documents and perform all
Obligations hereunder and thereunder. The execution, delivery and performance
hereof and of
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the Other Documents are within each Borrower's corporate powers, have been duly
authorized, are not in contravention of law or the terms of each Borrower's
by-laws, certificate of incorporation or other applicable documents relating to
each Borrower's formation or to the conduct of each Borrower's business or of
any material agreement or undertaking to which any Borrower is a party or by
which any Borrower is bound, and will not conflict with or result in any breach
of any of the provisions of or constitute a default under or result in the
creation of any Lien except Permitted Encumbrances upon any asset of any
Borrower under the provisions of any agreement, charter, instrument, by-law, or
other instrument to which any Borrower is a party or by which it may be bound.
5.2 FORMATION AND QUALIFICATION. Each Borrower is duly incorporated
and in good standing under the laws of the State of Delaware and is qualified to
do business and is in good standing in the states listed on EXHIBIT 5.2 which
constitute all states in which qualification and good standing are necessary to
conduct its business and own its property and where the failure to so qualify
would have a material adverse effect on its business. Each Borrower has
delivered to Agent true and complete copies of its certificate of incorporation
and by-laws and will promptly notify Agent of any amendment or changes thereto.
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of each Borrower contained in this Agreement and the Other
Documents shall be true at the time of such Borrower's execution of this
Agreement and the Other Documents, and shall survive the execution, delivery and
acceptance thereof by Agent and the parties thereto and the closing of the
transactions described therein or related thereto. Any misrepresentation or
breach of any representation or warranty whatsoever contained in this Agreement
or the Other Documents shall be deemed material.
5.4 TAX RETURNS. Greenwich's federal tax identification number is
58-1758941, Turbine's federal tax identification number is 06-1391887, GTI's
federal tax identification number is 06-1419037, Service's federal tax
identification number is 65-0666006, Components' federal tax identification
number is 65-0666009, and GASI's federal tax identification number is 65-
0666004. Each Borrower has filed or has caused to be filed all federal, state
and local tax returns and other reports it is required by law to file and has
paid all taxes, assessments, fees and other governmental charges that are due
and payable. Except for the consolidated tax return of GCL for the fiscal years
ended ____________ ___, 199___ and __________ ____, 199__, which Greenwich
believes will be audited, the Borrowers have been examined and reported upon by
the appropriate taxing authority and have been closed by applicable statute and
satisfied for each fiscal year prior to and including the fiscal year ending
_____________ ___, 199___. To the best of each Borrower's knowledge, the
provision for taxes on the books of Borrowers are adequate for all years not
closed by applicable statutes, and for its current fiscal year, and none of the
Borrowers has any
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knowledge of any deficiency or additional assessment in connection therewith not
provided for on its books.
5.5 FINANCIAL STATEMENTS.
(a) The pro forma balance sheet of Borrowers on a combined
basis (the "Pro Forma Balance Sheet") furnished to Agent on the Effective Date
reflects the consummation of the transactions contemplated by the Purchase
Agreement, the Indenture and under this Agreement (the "Transactions") and is
accurate, complete and correct and fairly reflects the financial condition of
Borrowers as of the Effective Date after giving effect to the Transactions, and
has been prepared in accordance with GAAP, consistently applied. The Pro Forma
Balance Sheet of Borrowers on a combined basis has been certified as accurate,
complete and correct in all material respects by the President and Chief
Financial Officer of Greenwich. All financial statements referred to in this
subsection 5.5(a), including the related schedules and notes thereto, have been
prepared, in accordance with GAAP, except as may be disclosed in such financial
statements.
(b) The combined audited balance sheet of Greenwich and its
Subsidiaries as of March 31, 1996, and the related statements of income, changes
in stockholders' equity, and changes in financial position for the period ended
on such date, all accompanied by reports thereon containing opinions without
qualification by independent certified public accountants, copies of which have
been delivered to Lender, have been prepared in accordance with GAAP
consistently applied (except for changes in application in which such
accountants concur) and present fairly the financial position of Greenwich and
its Subsidiaries at such date and the results of their operations for such
period. Since March 31, 1996, there has been no change in the consolidated
condition, financial or otherwise, of Greenwich as shown on the balance sheet as
of such date except changes in the ordinary course of business, which changes
have not (in the aggregate) been materially adverse.
(c) The twelve-month cash flow projections of the Borrowers on
a consolidated and consolidating basis and their projected balance sheets as of
the Effective Date, copies of which are annexed hereto as EXHIBIT 5.5(c) (the
"Projections"), were prepared by the Chief Financial Officer of Greenwich, are
based on underlying assumptions which provide a reasonable basis for the
projections contained therein and reflect Borrowers' judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period. The cash flow projections together with the Pro Forma Balance
Sheet, are collectively referred to as the "Pro Forma Financial Statements".
(d) The combined audited balance sheet of Aviall and its
Subsidiaries as of December 31, 1995, and the related statements of income,
changes in stockholders' equity, and changes in financial position for the
period ended on such date, all
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accompanied by reports thereon containing opinions without qualification by
independent certified public accountants, copies of which have been delivered to
Lender, have been prepared in accordance with GAAP consistently applied (except
for changes in application in which such accountants concur) and presents fairly
the financial position of Aviall and its Subsidiaries at such date and the
results of their operations for such period. The combined financial statements
of Aviall or its Subsidiaries for the fiscal period ending March 31, 1996,
previously delivered to Agent, were prepared in accordance with GAAP,
consistently applied and present fairly the financial position of Aviall and its
Subsidiaries subject to normal year-end adjustments at such date and the results
of its operations for such period. Since March 31, 1996, there has been no
change in the consolidated condition, financial or otherwise, of Aviall and its
Subsidiaries as shown on the balance sheet as of such date except changes in the
ordinary course of business, which changes have not (in the aggregate) been
materially adverse.
5.6 CORPORATE NAME. Except for Batch-Air, Inc , a Delaware
corporation and Batch-Air Universal, Inc., a Florida corporation, Greenwich has
not been known by any other corporate name in the past five years and does not
sell Inventory under any other name. Except for Gas Turbine Corporation, a
division of Chromalloy Gas Turbine Corporation and GTC East Granby Corp.,
Turbine has not been known by any other corporate name in the past five years
and does not sell Inventory under any other name. GTI, Components, Engine
Services and GASI have not been known by any other corporate name in the past
five years and except for the "CEF Division" do not sell Inventory under any
other names.
5.7 O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.
(a) Each Borrower has substantially complied with, and its
facilities, business assets, property, leaseholds and equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; and there are no outstanding citations, notices or
orders of substantial non-compliance issued to any Borrower or relating to its
business, assets, property, leaseholds or equipment under any such laws, rules
or regulations.
(b) Each Borrower has been issued all required material
federal, state and local licenses, certificates or permits relating to, and each
Borrower and its facilities, businesses, assets, property, leaseholds and
equipment are in compliance in all material respects with, all applicable
Environmental Laws.
ABL (i) There are no material releases, spills, discharges,
leaks or disposal (collectively referred to as "Releases") of Hazardous
Substances at, upon, under or within any Real Property or any premises leased by
any Borrower; (ii) except as set forth on EXHIBIT 5.7, there are no underground
storage tanks
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or known polychlorinated biphenyls on the Real Property or any premises leased
by any Borrower; (iii) to the best knowledge of Borrowers, neither the Real
Property nor any premises leased by any Borrower has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) to the best
knowledge of Borrowers, no Hazardous Substances are present on the Real Property
or any premises leased by any Borrower, excepting such quantities as are handled
in accordance with all applicable manufacturer's instructions and governmental
regulations and in proper storage containers and as are necessary for the
operation of the commercial business of any Borrower or of its tenants.
5.8 SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.
(a) After giving effect to the Transactions, each Borrower will
be solvent, able to pay its debts as they mature, have capital sufficient to
carry on its business and all businesses in which it is about to engage, and (i)
as of the Effective Date, the fair present saleable value of its assets,
calculated on a going concern basis, was in excess of the amount of its
liabilities and (ii) subsequent to the Effective Date, the fair saleable value
of its assets (calculated on a going concern basis) will be in excess of the
amount of its liabilities.
(b) Except as disclosed in EXHIBIT 5.8(b), no Borrower has (i)
pending or threatened litigation, actions or proceedings which involve the
possibility of materially and adversely affecting Borrowers' business, assets,
operations, condition or prospects, financial or otherwise, taken as a whole, or
the Collateral, or the ability of any Borrower to perform its obligations under
this Agreement, and (ii) any liabilities or Indebtedness for borrowed money
other than the Obligations.
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect materially and adversely affecting the
Collateral or Borrowers' business, assets, operations or condition or prospects,
financial or otherwise, taken as a whole, nor is any Borrower in violation of
any order of any court, governmental authority or arbitration board or tribunal.
(d) Borrowers have received no notice that they are not in full
compliance in all material respects with any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or its regulations
and, (i) they have not engaged in any Prohibited Transactions as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code as amended,
(ii) they have met all applicable minimum funding requirements under Section 302
of ERISA in respect of its plans and no funding requirements have been postponed
or delayed, (iii) they have no knowledge of any event or occurrence which would
cause the Pension Benefit Guaranty Corporation to institute proceedings under
Title IV of ERISA to terminate any employee benefit plan, (iv)
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there exists no event described in Section 4043 of ERISA, excluding subsections
4043(b)(2) and 4043(b)(3) thereof, for which the thirty (30) days notice period
contained in 12 CFR Section 26153 has not been waived, (v) they do not have any
fiduciary responsibility for investments with respect to any plan existing for
the benefit of persons other than its employees or former employees, and (vi)
they have not withdrawn, completely or partially, from any multi-employer
pension plan so as to incur liability under the Multi-Employer Pension Plan
Amendments Act of 1980. As of the Initial Closing Date and the Effective Date,
Borrowers do not maintain any benefit plans or welfare plans subject to ERISA.
5.9 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. All patents, patent
applications, trademarks, trademark applications, copyrights, copyright
applications, trade names, trade secrets and licenses owned or utilized by any
Borrower are set forth on EXHIBIT 5.9, are valid, and have been duly registered
or filed with all appropriate governmental authorities; there is no objection to
or pending challenge to the validity of any such material patent, trademark,
copyright, trade name, trade secret or license and Borrowers are not aware of
any grounds for any challenge, except as set forth in EXHIBIT 5.9 hereto.
5.10 LICENSES AND PERMITS. Except as set forth in EXHIBIT 5.10, each
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits would have a material
adverse effect on Borrowers' business, properties, condition (financial or
otherwise) or operations, present or prospective, taken as a whole.
5.11 DEFAULT OF INDEBTEDNESS. No Borrower is in default in the payment
of the principal of or interest on any Indebtedness (excluding trade payables
not subject to written settlements) or under any instrument or agreement under
or subject to which any Indebtedness has been issued and no event has occurred
under the provisions of any such instrument or agreement which with or without
the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
5.12 NO DEFAULT. To the best of each Borrower's knowledge and except
as set forth on EXHIBIT 5.12 hereof, no Borrower is in default in the payment or
performance of any of its contractual obligations and no Incipient Event of
Default has occurred.
5.13 NO BURDENSOME RESTRICTIONS. No Borrower is party to any contract
or agreement the performance of which would materially and adversely restrict
Borrowers' business, assets, operations, condition or prospects (financial or
otherwise) and no Borrower has agreed or consented to cause or permit in the
future
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(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.14 NO LABOR DISPUTES. No Borrower is involved in any material labor
dispute; there are no strikes or walkouts or union organization of any of
Borrowers' employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on EXHIBIT 5.14
hereto.
5.15 MARGIN REGULATIONS. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16 INVESTMENT COMPANY ACT. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17 DISCLOSURE. No representation or warranty made by any Borrower in
this Agreement, in the Acquisition Agreement or in the Purchase Agreement or in
any financial statement, report, certificate or any other document furnished in
connection herewith contains any untrue statement of fact or omits to state any
fact necessary to make the statements herein or therein not misleading in any
material respect. There is no fact known to any Borrower or which reasonably
should be known to any Borrower which it has not disclosed to Agent in writing
with respect to the Transactions which materially and adversely affects the
condition (financial or otherwise), results of operations, business, or assets
of the Borrowers in any material respect.
5.18 SWAPS. No Borrower is a party to, nor will it be a party to, any
swap agreement whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.19 OTHER LOAN DOCUMENTS. None of the CIT Loan Documents, Turbine
Term Loan Documents or World Loan Documents have been amended or supplemented,
nor have any of the provisions thereof been waived, except pursuant to a written
agreement or instrument which has heretofore been delivered to Agent.
5.20 DELIVERY OF PURCHASE AGREEMENT. Agent has received complete
copies of the Purchase Agreement (including all exhibits, schedules and
disclosure letters referred to therein or
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delivered pursuant thereto, if any) and all amendments thereto, waivers relating
thereto and other side letters or agreements affecting the terms thereof. None
of such documents and agreements has been amended or supplemented, nor have any
of the provisions thereof been waived, except pursuant to a written agreement or
instrument which has heretofore been delivered to Agent.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1 PAYMENT OF FEES. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Agency Account
as provided for in Section 4.15(h). Agent may, without making demand, charge
the account of the applicable Borrower for all such fees and expenses as an
Advance and such amount shall be added to the Obligations.
6.2 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of without violation of the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
trade names, trade secrets and trademarks; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States of America or any
political subdivision thereof.
6.3 VIOLATIONS. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any governmental entity, or of any
agency thereof, applicable to any Borrower which may materially adversely affect
the Collateral or the Borrowers' business, assets, operations, condition or
prospects (financial or otherwise).
6.4 GOVERNMENT RECEIVABLES. Take all steps necessary to protect
Agent's interest in the Collateral under the Federal Assignment of Claims Act or
other applicable state or local statutes or ordinances and deliver to Agent,
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them and notify
Agent of the existence of such Receivables to the extent required pursuant to
Section 9.6 hereof.
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6.5 FIXED CHARGE COVERAGE RATIO. Cause to be maintained as of the end
of each fiscal quarter with respect to the four (4) fiscal quarters then ended a
Fixed Charge Coverage Ratio equal to or greater than 1.2 to 1.0:
6.6 FUNDED DEBT TO EBITDA. Cause the ratio of Funded Debt to EBITDA
at the end of each fiscal quarter with respect to the four (4) fiscal quarters
then ended to be not greater than the ratio shown below opposite the date
corresponding thereto:
Quarter Ended Ratio
------------- -----
September 30, 1996(1) 5.0 to 1.0
December 31, 19961(1) 5.0 to 1.0
March 31, 1997 5.0 to 1.0
June 30, 1997 5.0 to 1.0
September 30, 1997 4.75 to 1.0
December 31, 1997 4.75 to 1.0
March 31, 1998 4.75 to 1.0
June 30, 1998 4.75 to 1.0
September 30, 1998 4.75 to 1.0
December 31, 1998 4.75 to 1.0
March 31, 1999 4.75 to 1.0
June 30, 1999 4.75 to 1.0
September 30, 1999 4.5 to 1.0
December 31, 1999 4.5 to 1.0
March 31, 2000 4.5 to 1.0
June 30, 2000 4.5 to 1.0
September 30, 2000 4.0 to 1.0
December 31, 2000 4.0 to 1.0
March 31, 2001 4.0 to 1.0
6.7 TANGIBLE NET WORTH. Cause to be maintained, Tangible Net Worth
[plus the aggregate outstanding principal amount of Subordinated Debentures] in
an aggregate amount not less than the amount shown below opposite the date
corresponding thereto:
Quarter Ended Amount
------------- ------
September 30, 1996 $ 80,000,000
December 31, 1996 $ 80,000,000
March 31, 1997 $ 80,000,000
June 30, 1997 $ 80,000,000
September 30, 1997 $ 95,000,000
December 31, 1997 $ 95,000,000
March 31, 1998 $ 95,000,000
June 30, 1998 $ 95,000,000
September 30, 1998 $110,000,000
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(1) For September 30, 1996 such calculation is with respect to the two
(2) fiscal quarters then ended and for December 31, 1996 such calculation is
with respect to the three (3) fiscal quarters then ended.
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December 31, 1998 $110,000,000
March 31, 1999 $110,000,000
June 30, 1999 $110,000,000
September 30, 1999 $125,000,000
December 31, 1999 $125,000,000
March 31, 2000 $125,000,000
June 30, 2000 $125,000,000
September 30, 2000 $140,000,000
December 31, 2000 $140,000,000
March 31, 2001 $140,000,000
6.8 HEDGING AGREEMENTS; INTEREST RATE PROTECTION. Within ninety (90)
days of the Effective Date, enter into Rate Swap Agreements with respect to at
least ___% of the outstanding Advances [and Hedging Agreements with respect to
at least __% of the outstanding Advances], each on terms and conditions
satisfactory to Agent.
6.9 EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
6.10 PAYMENT OF INDEBTEDNESS. Pay, discharge or otherwise satisfy at
or before maturity (subject, where applicable, to specified grace periods and,
in the case of trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the amount or validity thereof
is currently being contested in good faith by appropriate proceedings and
Borrowers shall have provided for such reserves as Agent may reasonably deem
proper and necessary, subject at all times to any applicable subordination
arrangement in favor of Lenders.
6.11 STANDARDS OF FINANCIAL STATEMENTS. Cause all statements referred
to in Sections 9.7, 9.8, 9.11 and 9.12 to be complete and correct in all
material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments) and to be prepared in reasonable detail and
as to those to which GAAP is applicable in accordance with GAAP applied
consistently throughout the periods reflected therein (except as concurred in by
such reporting accountants or officer, as the case may be, and disclosed
therein).
6.12 EXERCISE OF RIGHTS. Enforce all of its rights and pursue all
remedies available to it with diligence and in good faith, consistent with
reasonable business judgment, or at the reasonable request of Agent in
connection with the enforcement of (x) any rights it may have against any of its
Customers as a processor's, repairman's or mechanic's lienor, and (y) all of its
rights under the Acquisition Agreement and the Purchase Agreement. Agent shall
not exercise its rights under the Collateral Assignment
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made as of April 21, 1994 by Greenwich and Turbine in favor of Agent unless an
Event of Default has occurred and is continuing.
6.13 INVENTORY COMPOSITION. Maintain, at all times, a composition of
its Inventory (valued on a book value basis) in the following proportions:
(a) "new" Inventory shall be at least twenty-five percent (25%)
of total Inventory;
(b) "new", "serviceable" and "overhauled" Inventory shall be at
least forty-five percent (45%) of total Inventory; and
(c) "repairable" Inventory shall not exceed twenty percent
(20%) of total Inventory.
For the purposes hereof and in accordance with FAA regulations, "new" Inventory
shall mean Inventory which has never been used and is immediately usable,
"serviceable" or "overhauled" Inventory shall mean Inventory which is in a
condition which allows it to be returned immediately to operational status and
"repairable" Inventory shall mean Inventory which is in a condition which
requires repair prior to being returned to operational status and is usable if
repaired.
6.14 INTERIM BALANCE SHEET. Furnish Agent, within thirty (30) days of
the Effective Date, an unaudited balance sheet of Borrowers on a consolidated
and consolidating basis as at ______________ ___, 199___. Such balance sheet
shall be accurate, complete and correct and fairly reflect the financial
condition of Borrowers as of such date and shall have been prepared in
accordance with GAAP, subject to non-material audit adjustments and the absence
of the full footnote disclosures.
VII. NEGATIVE COVENANTS.
No Borrower shall, without Agent's and Required Lenders' prior written
approval (which approval will not be unreasonably withheld), until satisfaction
in full of the Obligations and termination of this Agreement:
7.1 MERGER, CONSOLIDATION, ACQUISITION AND SALE OF Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it; PROVIDED, THAT any Subsidiary of Greenwich
(other than Caledonian) may merge with and into Greenwich at any time without
Agent's consent.
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(b) Sell, lease, transfer or otherwise dispose of any of the
Collateral, except in the ordinary course of its business or as permitted by
Section 4.3 hereof.
7.2 CREATION OF LIENS. Create or suffer to exist any Lien, Charge,
Claim or transfer upon or against any of their respective assets and properties
Collateral now owned or hereafter acquired, except Permitted Encumbrances.
7.3 GUARANTEES. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on EXHIBIT 7.3, (b) other guarantees made in the
ordinary course of business up to an aggregate amount of $500,000 at any one
time outstanding, (c) the endorsement of checks in the ordinary course of
business, (d) guaranties by ____________ of the Senior Notes and (e) the
guaranty by Greenwich of Caledonian's obligations to the Royal Bank of Scotland
pursuant to [described Overdraft Agreement] as in effective on Effective Date.
7.4 INVESTMENTS. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-l
or P-l (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof, and (e) as permitted by Section 7.12(a) hereof.
7.5 LOANS. Make advances, loans or extensions of credit to any
Person, including without limitation, any Parent, Subsidiary or Affiliate except
(a) loans to employees in an amount not to exceed $150,000 individually and
$600,000 in the aggregate outstanding at any one time, (b) loans to other
Borrowers in an aggregate amount not to exceed [$10,000,000] outstanding at any
time so long as after giving effect to such loan, no Event of Default has
occurred and is continuing and aggregate Undrawn Availability is at least
$______________, and (c) with respect to the extension of commercial trade
credit in connection with the sale of Inventory or rendition of services in the
ordinary course of its business.
7.6 CAPITAL EXPENDITURES. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including Capitalized
Leases) in any fiscal year in an amount in
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excess of the amounts shown below opposite the fiscal years corresponding
thereto:
Fiscal Year Ended Amount
----------------- ------
March 31, 1997 $ 7,500,000
March 31, 1998 $ 7,500,000
March 31, 1999 $ 7,500,000
March 31, 2000 $10,000,000
March 31, 2001 $10,000,000
7.7 DIVIDENDS. Declare, pay or make any dividend or distribution on
any shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower except that so long as (a) a notice of termination with
regard to this Agreement shall not be outstanding, (b) no Event of Default or
Incipient Event of Default shall have occurred prior to and after giving effect
to such payment, (c) solely with respect to (ii) below, Borrowers shall be in
compliance with Section 6.5 hereof (computed as if the dividend has been paid as
of the end of the immediately preceding fiscal quarter), (d) after giving effect
to such dividend, aggregate Undrawn Availability is at least $___________ and
(e) the purpose for such dividend shall be set forth in writing to Agent at
least five (5) days prior to such dividend and such dividend shall in fact be
used for such purpose (i) any Borrower other than Greenwich shall be permitted
to pay dividends and distributions to Greenwich and (ii) Greenwich shall be
permitted to pay dividends on its shares of common stock to common stock
shareholders in the aggregate amount of dividends paid during any fiscal year
does not exceed $2,000,000.
7.8 INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) of Borrower except in respect of (i)
Indebtedness to Lenders, (ii) Indebtedness incurred for capital expenditures
permitted under Section 7.6 hereof, (iii) Indebtedness to CIT and World pursuant
to the CIT Loan Documents and World Loan Documents, as the case may be, as in
effect on the Effective Date, (iv) the Subordinated Debentures and the Senior
Notes, (v) Indebtedness secured by Turbine's Real Property located in East
Granby, CT, in an amount not greater than $____________ subject to receipt by
Agent of a Mortgagee Waiver in form and substance satisfactory to Agent in its
reasonable discretion, (vi) the Turbine Term Loan, and (vii) other Indebtedness
in an amount not greater than $__________, in the aggregate, which is unsecured
and subordinated on terms and provisions satisfactory to Required Lenders
(including, without limitation, no amortization of principal at any time, no
payment of interest following the occurrence and during the continuance of an
Event of Default and no right to accelerate such Indebtedness in
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the absence of acceleration by Agent); provided, that, with respect to
Indebtedness contemplated by subclause (vii) hereof (x) prior to and after
giving effect to the incurrence of such Indebtedness no Event of Default or
Incipient Event of Default shall have occurred, (y) Borrowers shall be in
compliance with Sections 6.5, 6.6 and 6.7 and (z) Borrowers shall have provided
Lender with a revised Business Plan allowing a continued ability by Borrowers to
be in compliance with all financial covenants for the balance of the Term.
7.9 NATURE OF BUSINESS. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business in the ordinary
course as presently conducted.
7.10 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions under the World Loan
Documents, transactions between the Borrowers as expressly permitted elsewhere
in this Agreement and other transactions in the ordinary course of business, on
an arm's-length basis on terms no less favorable than terms which would have
been obtainable from a Person other than an Affiliate, each of which
transactions are disclosed to Agent on a certificate delivered with each monthly
financial statement delivered pursuant to Section 9.8 hereof.
7.11 LEASES. Enter as lessee into any new lease arrangement for real
or personal property (unless capitalized and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for all newly
leased property would exceed [$5,000,000] in any one fiscal year.
7.12 SUBSIDIARIES.
(a) Form any Subsidiary on or after the date hereof unless (i)
such Subsidiary expressly joins in this Agreement as a borrower and becomes
jointly and severally liable for the obligations of Borrowers hereunder and
under any other agreement between Borrowers and Lenders and (ii) Agent shall
have received all documents, including legal opinions, it may reasonably require
to establish compliance with each of the foregoing conditions.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13 FISCAL YEAR AND ACCOUNTING CHANGES. Change its fiscal year from
September 30 or make any change in accounting practices which is not disclosed
to Agent prior to the inception thereof except (i) in accounting treatment and
reporting practices
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as required by GAAP or (ii) in tax reporting treatment as required by law.
7.14 PREPAYMENT OF INDEBTEDNESS. Except as expressly contemplated by
the CIT Loan Documents as in effect on the Effective Date, at any time, directly
or indirectly, prepay any Indebtedness (other than to Lenders), or repurchase,
redeem, retire or otherwise acquire any Indebtedness of any Borrower.
7.15 PLEDGE OF CREDIT. Not now or hereafter pledge Agent's or any
Lender's credit on any purchases or for any purpose whatsoever or use any
portion of any Advance in or for any business other than each Borrower's
business substantially as conducted on the date of this Agreement.
VIII. CONDITIONS PRECEDENT
8.1 CONDITIONS TO EFFECTIVENESS. Neither Agent nor any Lender will be
obligated to modify as set forth herein the terms of the Existing Loan Agreement
or make any Advances hereunder unless the following conditions precedent have
been satisfied:
(a) NOTES. Agent shall have received the Notes duly executed
and delivered by an authorized officer of each Borrower;
(b) FILINGS, REGISTRATIONS AND RECORDINGS. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by Agent to be filed, registered or recorded in order to create, in
favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence reasonably satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(c) PROCEEDINGS OF THE BORROWERS. Agent shall have received a
copy of the resolutions in form and substance reasonably satisfactory to Agent,
of the Board of Directors or the General Partner of each Borrower, as
applicable, authorizing (i) the execution, delivery and performance of this
Agreement, the Notes and any related agreements (collectively the "Documents")
and (ii) the granting by each Borrower of the security interests in and liens
upon its respective portion of the Collateral in each case certified by the
Secretary, an Assistant Secretary or the general partners, as applicable, of
such Borrower as of the Effective Date; and, such certificate shall state that
the resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
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(d) LEGAL OPINIONS. Agent shall have received the executed
legal opinions of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, and
[Borrowers' UK counsel] in form and substance satisfactory to Agent which shall
cover such matters incident to the transactions contemplated by this Agreement
as may be reasonably requested by Agent;
(e) NO LITIGATION. (i) No litigation, investigation or
proceeding before or by any arbitrator or governmental authority shall be
continuing or threatened against any Borrower or against the officers or
directors of any Borrower other than as set forth on EXHIBIT 5.8(b) hereto (A)
in connection with the Documents or any of the transactions contemplated thereby
and which, in the reasonable opinion of Agent, is deemed material or (B) which
if adversely determined, would, in the reasonable opinion of Agent, have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Borrowers; and (ii) no injunction, writ,
restraining order or other order of any nature materially adverse to the
Borrowers or the conduct of their business or inconsistent with the due
consummation of the Transactions shall have been issued by any governmental
authority;
(f) SENIOR NOTES. Agent shall have received final executed
copies of the Senior Notes which shall contain such terms and provisions
satisfactory to Agent;
(g) PLEDGE AGREEMENTS AND OTHER DOCUMENTS. Agent shall have
received (i) the executed Pledge Agreement and (ii) the executed Other
Documents, all in form and substance satisfactory to Agent;
(h) FEES. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Effective Date pursuant to Article III hereof;
(i) MATERIAL ADVERSE CHANGE. There shall have been (i) no
material adverse change in, and there shall have occurred no development
(including, without limitation, damage, destruction or depreciation of the
Collateral) substantially likely to have a material adverse effect on, the
business, operations, prospects, properties (including, without limitation,
intangible properties), assets or financial or other conditions of the Borrowers
taken as a whole, and (ii) no occurrence or event subsequent to _____________
___, 199___ which shall have a material adverse effect on the rights and
remedies of Agent or any Lender or on the ability of any Borrower to perform the
Obligations;
(j) REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS. The
Borrowers' representations and warranties contained in this Agreement and the
Other Documents shall be true and correct as of the Effective Date; Greenwich,
Turbine and GTI shall have performed and complied with all covenants, agreements
and conditions contained in the Existing Loan Agreement, herein and in
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the Other Documents which are required to have been performed or complied with
by Greenwich, Turbine and GTI on or before the Effective Date; and there shall
exist no Incipient Event of Default or Event of Default in existence on the
Effective Date.
(k) INCUMBENCY CERTIFICATES OF THE BORROWERS. Agent shall have
received a certificate of the Secretary, Assistant Secretary or general partners
of each Borrower, dated the Effective Date, as to the incumbency and signature
of the officers of each Borrower executing this Agreement, any certificate or
other documents to be delivered by it pursuant hereto, together with evidence of
the incumbency of such Secretary, Assistant Secretary or general partners;
(l) CERTIFICATES. Agent shall have received a copy of the
Articles or Certificate of Incorporation of each Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of each
Borrower and all agreements among shareholders of each Borrower's shareholders
certified as accurate and complete by the Secretary of each Borrower or
certified copy of each Borrower's Partnership Agreement, as applicable;
(m) GOOD STANDING CERTIFICATES. Agent shall have received good
standing certificates for each Borrower dated not more than thirty (30) days
prior to the Effective Date, issued by the Secretary of State or other
appropriate official of each Borrower's jurisdiction of incorporation or
formation and each jurisdiction where the conduct of each Borrower's business
activities or the ownership of its properties necessitates qualification;
(n) FINANCIAL CONDITION CERTIFICATES. Agent shall have
received executed Officer's Certificates substantially in the form of EXHIBIT
8.1(n);
(o) COLLATERAL EXAMINATION. Agent shall have completed
Collateral examinations and its closing audit and received appraisals, the
results of which shall be satisfactory in form and substance to Agent, of the
Receivables and Inventory of each Borrower and all books and records in
connection therewith;
(p) PRO FORMA FINANCIAL STATEMENTS. Agent shall have received
a copy of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Agent;
(q) UNDRAWN AVAILABILITY. After giving effect to the initial
Advances hereunder, Borrowers on a consolidated basis shall have Undrawn
Availability of at least $25,000,000;
(r) INSURANCE. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers' casualty insurance
policies, together with loss payable
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endorsements on Agent's standard form of loss payee endorsement naming Agent as
loss payee, and certified copies of Borrowers' liability insurance policies,
together with endorsements naming Agent as a co-insured or additional insured;
(s) PAYMENT INSTRUCTIONS. Agent shall have received written
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(t) BLOCKED ACCOUNTS. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
(u) CONSENTS. Agent shall have received any and all consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary including, without
limitation, CIT and Continental;
(v) LEASEHOLD AGREEMENTS. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory is located;
(w) SENIOR NOTES. Borrowers shall have received at least
$___________ from the sale of the Senior Notes;
(x) CONTRACT REVIEW. Agent shall have reviewed all material
contracts of the Borrowers including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Agent;
(y) CLOSING CERTIFICATE. Agent shall have received a closing
certificate signed on behalf of Borrowers by the Chief Financial Officer of each
Borrower dated as of the Effective Date, stating that (i) all representations
and warranties set forth in this Agreement and the other Documents are true and
correct on and as of such date, (ii) Borrowers are on such date in compliance
with all the terms and provisions set forth in this Agreement and the Other
Documents and (iii) on such date no Incipient Event of Default or Event of
Default has occurred or is continuing;
(z) BORROWING BASE. Agent shall have received evidence from
Borrowers that the aggregate amount of Eligible Receivables and Eligible
Inventory is sufficient in value and amount to support Advances in the amount
requested by Borrowers on the Effective Date;
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(aa) OTHER AGREEMENTS. Agent shall have received final executed
copies of the Purchase Agreement and all related agreements, documents and
instruments as in effect on the Effective Date and the transactions contemplated
by such documentation shall be consummated concurrently with the making of the
initial Advances;
(ab) EQUITY OFFERING. Borrowers shall have received at least
$50,000,000 from a public equity offering and/or shall deliver common stock [of
_______] to the Seller under the Purchase Agreement with an aggregate [market
value] of at least $50,000,000;
(ac) ENVIRONMENTAL REPORTS. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms with respect to all real property owned or leased by Borrower;
(ad) PAYMENT INSTRUCTIONS. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(ae) OTHER. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance Agent and its counsel; and
(af) PURCHASE AGREEMENT. Agent shall have received final
executed copies of the Purchase Agreement and all related agreements, documents
and instruments as in effect on the Effective Date which shall be in form and
substance satisfactory to Agent and Lenders and Borrowers' rights thereunder,
but not its obligations, shall have been collaterally assigned to Agent for the
benefit of Lenders. The transactions contemplated by such documentation shall
be consummated prior to the Effective Date.
8.2 CONDITIONS TO EACH ADVANCE. The agreement of Lenders to make any
Advance requested to be made on any date is subject to the satisfaction of the
following conditions precedent as of the date such Advance is made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by each Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;
(b) NO DEFAULT. No Event of Default or Incipient Event of
Default shall have occurred and be continuing on such
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date, or would exist after giving effect to the Advances requested to be made on
such date; PROVIDED, HOWEVER, that Agent, in its sole discretion, unless
otherwise directed by Required Lenders, may continue to make Advances
notwithstanding the existence of an Event of Default or Incipient Event of
Default; and
(c) MAXIMUM ADVANCES. In the case of any Advances requested to
be made, after giving effect thereto, the aggregate outstanding Advances shall
not exceed the maximum Advances permitted under Article II hereof.
Each request for an Advance by Greenwich on behalf of Borrowers hereunder shall
constitute a representation and warranty by Borrowers as of the date of such
Advance that the conditions contained in this Section 8.2 shall have been
satisfied.
IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations and
the termination of this Agreement:
9.1 DISCLOSURE OF MATERIAL MATTERS. Promptly upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
the reclamation or repossession of, or the return of, a material amount of goods
or material claims or disputes asserted by any Customer or other obligor. No
Borrower will, without Agent's consent, compromise or adjust any Receivables (or
extend the time for payment thereof) or accept any returns of merchandise or
grant any additional discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and allowances as have
been heretofore customary in the business of such Borrower.
9.2 SCHEDULES. Deliver to Agent, daily, its daily sales register.
Also, each Borrower shall deliver to Agent on or before the fifteenth (15th) day
of each month as and for the prior month (a) monthly accounts receivable agings
and (b) accounts payable schedules. Each Borrower will also deliver to Agent on
or before the twenty-fifth (25th) day of each month as and for the prior month a
report of Inventory. ___________ will deliver to Agent on or before the twenty-
fifth (25th) day of each month a reconciliation of Eligible Unbilled Receivables
as of the beginning and the end of the prior month. Further, each Borrower
shall deliver to Agent on or before the twenty-fifth (25th) day of each month a
Borrowing Base Certificate in the form annexed hereto as EXHIBIT 9.2. In
addition, each Borrower will deliver to Agent at such intervals as Agent may
reasonably require: (i) confirmatory assignment schedules, (ii) copies of
Customers' invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may reasonably require including, without limitation, trial balances and
test verifications. Agent shall have the right to confirm and
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verify all Receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its
interests hereunder. The items to be provided under this Section are to be in
form satisfactory to Agent and executed by the Borrowers and delivered to Agent
from time to time solely for Agent's convenience in maintaining records of the
Collateral, and the Borrowers' failure to deliver any of such items to Agent
shall not affect, terminate, modify, derogate from or otherwise limit Agent's
lien on or security interest in the Collateral.
9.3 ENVIRONMENTAL REPORTS. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7, a certificate
of each Borrower signed on its behalf by its President stating, to the best of
his knowledge, that such Borrower is in compliance in all material respects with
all federal, state and local laws relating to environmental protection and
control and occupational safety and health. To the extent any Borrower is not
in compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4 LITIGATION. Promptly notify Agent in writing of any litigation
affecting the Borrowers, whether or not the claim is covered by insurance, and
of any suit or administrative proceeding, which may materially and adversely
affect the Collateral or Borrowers' business, assets, operations, condition or
prospects (financial or otherwise) taken as a whole.
9.5 OCCURRENCE OF DEFAULTS, ETC. Promptly notify Agent in writing
upon the occurrence of (a) any Event of Default or Incipient Event of Default;
(b) any default or event of default under the CIT Loan Documents; (c) any
default or event of default under the Subordinated Debentures or Senior Notes;
(d) any event, development or circumstance whereby any financial statements or
other reports furnished by such Borrower to Agent fail in any material respect
to present fairly, in accordance, where applicable, with GAAP consistently
applied, the financial condition or operating results of the Borrowers on a
consolidated and consolidating basis as of the date of such statements; (e) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Internal Revenue Code, could subject any Borrower to a tax imposed by
Section 4971 of the Internal Revenue Code; (f) each and every default by any
Borrower which might result in the acceleration of the maturity of any
Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (g) any other development in the business or affairs of any
Borrower which might reasonably be expected to be materially adverse to such
Borrower; in each case describing the
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nature thereof and the action such Borrower proposes to take with respect
thereto.
9.6 GOVERNMENT RECEIVABLES. Notify Agent promptly if any of its
Receivables in excess of $50,000 arise out of contracts between any Borrower and
the United States, any State, or any department, agency or instrumentality of
any of them.
9.7 ANNUAL FINANCIAL STATEMENTS. Furnish Agent within one hundred
five (105) days after the end of each fiscal year of Borrowers, financial
statements of Borrowers on a consolidated and consolidating basis including, but
not limited to, statements of income and stockholders' equity and changes in
financial position from the beginning of the current fiscal year to the end of
such fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and reported upon (as respects the
consolidated statements) without qualification by an independent certified
public accounting firm selected by Borrowers and reasonably satisfactory to
Agent (the "Accountants"). The report of such accounting firm shall be
accompanied by a statement of such accounting firm certifying that in making the
examination upon which such report was based either no information came to their
attention which to their knowledge constituted an Event of Default under this
Agreement or any related agreement or, if such information came to their
attention, specifying any such default, and such report shall contain or have
appended thereto calculations which set forth the Borrowers' compliance with the
requirements or restrictions imposed by Sections 6.5, 6.6, 6.7, 7.6 and 7.11.
In addition, if there has been a change in GAAP during such fiscal year which
affects the calculations referred to in Sections 6.5, 6.6, 6.7, 7.6 and/or 7.11,
the Accountants shall prepare two (2) sets of calculations referred to in
Sections 6.5, 6.6, 6.7, 7.6 and/or 7.11, one (1) set prepared in accordance with
GAAP as in effect on the Effective Date and one (1) set prepared in accordance
with GAAP as in effect as of the date of preparation.
9.8 MONTHLY FINANCIAL STATEMENTS. Furnish Agent within twenty-five
(25) days after the end of each month, an unaudited balance sheet of Borrowers
on a consolidated and consolidating basis and an unaudited statement of income
and stockholders' equity on a consolidated and consolidating basis and changes
in financial position of Borrowers reflecting results of operations from the
beginning of the fiscal year to the end of such month and for such month and
comparing Borrowers' performance during such month with the Business Plan for
such month, prepared on a basis consistent with prior practices and complete and
correct in all material respects, subject to normal year-end adjustments. In
addition, if there has been a change in GAAP during any fiscal quarter which
affects the calculations referred to in Sections 6.5, 6.6, 6.7, 7.6 and/or 7.11,
Borrowers shall prepare two (2) sets of calculations referred to in Sections
6.5, 6.6, 6.7, 7.6 and/or 7.11, one (1) set prepared in accordance with GAAP as
in effect on
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the Effective Date and one (1) set prepared in accordance with GAAP as in effect
as of the date of preparation. At the end of each calendar quarter, the reports
shall be accompanied by a certificate of each Borrower, signed on its behalf by
its President and/or Chief Financial Officer, which shall state whether an Event
of Default as specified in Article X hereof or an Incipient Event of Default has
occurred.
9.9 OTHER REPORTS. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of (a) such
financial statements, reports and returns as any Borrower shall send to its
stockholders in their capacity as stockholders and (b) any management letter
received by any Borrower from its independent certified public accountants.
9.10 ADDITIONAL INFORMATION. Furnish Agent with additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement have been complied with by Borrowers including, without limitation and
without the necessity of any request by Agent, (a) copies of all environmental
audits and reviews that have been previously obtained by Borrowers or obtained
pursuant to Section 4.18 hereof, (b) at least thirty (30) days prior thereto, of
any Borrower's opening of any new office or place of business or any Borrower's
closing of any existing office or place of business, (c) promptly upon any
Borrower's learning thereof, notice of any labor dispute to which such Borrower
may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which any Borrower
is a party or by which any Borrower is bound and (d) evidence of the payment of
its rental obligations with respect to the Real Property.
9.11 BUSINESS PLAN. Furnish Agent, on or before the beginning of each
of the Borrowers' fiscal years, their Business Plan including, without
limitation, a month by month projected operating budget and cash flow of each
Borrower for such fiscal year (including an income statement for each month and
a balance sheet as at the end of the last month in each fiscal quarter) such
projections to be accompanied by a certificate signed on its behalf by its Chief
Financial Officer setting forth the assumptions on which such report has been
based and including a statement to the effect that to the best of his knowledge
such projections have been prepared on the basis of sound financial planning
practice consistent with past budgets and financial statements and that such
officer has no reason to question the reasonableness of any material assumptions
on which such projections were prepared.
9.12 APPRAISALS. Furnish Agent, when reasonably requested by Agent
(but no more than once each year), with updates of the appraisals delivered
prior to the Initial Closing Date prepared by AVMARK, Inc. or any other
appraiser satisfactory to Agent indicating any material changes from the
appraisals delivered prior to the Initial Closing Date.
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9.13 POWER BY THE HOUR AGREEMENT. Furnish Agent, no later than twenty-
five (25) days following the end of each month, with a calculation of (i)
"accrued receivables" carried on Borrower's books with respect to the Power by
the Hour Agreement or any similar "block hour" agreements executed subsequent to
the Effective Date as of the end of the immediately preceding month and (ii) the
Effective Hours Adjustment under the Power by the Hour Agreement or any similar
"block hour" agreements executed subsequent to the Effective Date as of the end
of the immediately preceding month.
9.14 ADDITIONAL DOCUMENTS. Execute and deliver to Agent, upon
request, such documents and agreements as Agent may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1 failure by Borrowers to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to make any other payment, fee or charge to Agent
provided for herein when due;
10.2 any representation or warranty made or deemed made by any Borrower
in this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made and within ten (10) days of such
occurrence such Borrower shall not have proven that such representation or
warranty was true when made;
10.3 failure by any Borrower to (i) furnish financial information (x)
when due which is not cured within five (5) Business Days after receipt of
notice from Agent of such failure (y) when requested which is unremedied for a
period of fifteen (15) days, or (ii) permit the inspection of its books or
records;
10.4 issuance of a notice of Lien, Charge, Claim, levy, assessment,
injunction or attachment (other than a Permitted Encumbrance) against a material
portion of any Borrower's property which is not stayed or lifted within thirty
(30) days;
10.5 failure or neglect of any Borrower to perform, keep or observe any
term, provision, condition or covenant herein contained, or contained in any
other agreement or arrangement, now or hereafter entered into between any
Borrower, Agent and any Lender other than a failure or neglect of any Borrower
to perform, keep or observe any term, provision, condition or covenant,
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contained in Sections 4.6, 4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 6.14, 9.4 and 9.6
hereof which is cured within the earlier of (i) twenty (20) days after receipt
of notice of such breach from Agent of the occurrence of such failure or neglect
or (ii) twenty (20) days following the date on which such failure or neglect
becomes known to any officer of any Borrower;
10.6 any final judgment is rendered or judgment lien filed against any
Borrower for an amount in excess of $1,500,000 which within thirty (30) days of
such rendering or filing is not either satisfied, stayed or discharged of
record;
10.7 any Borrower, its respective Parent or any Subsidiary shall (i)
apply for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, within forty-five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (xiii) take any action for the purpose of effecting any of
the foregoing;
10.8 any change in any Borrower's condition or affairs (financial or
otherwise) which in Agent's reasonable opinion materially and adversely impairs
the Collateral or the ability of Borrower to perform its Obligations under this
Agreement or under the U.K. Guaranties;
10.9 any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to or is not a valid and perfected Lien
having a first priority interest (subject to Permitted Encumbrances);
10.10 an "event of default" has been declared with respect to the
obligations of Borrowers under the CIT Loan Documents, the Subordinated
Debentures, the Senior Notes, the Indenture, the World Loan Documents, or the
Turbine Term Loan Documents, or the Service Agreement dated as of January 17,
1995 between Greenwich and Continental Airlines, Inc. ("Continental") (as may be
amended from time to time, "Service Agreement") shall be terminated due to a
breach by Greenwich of its obligations thereunder and as a result of such
termination Continental shall accelerate Greenwich's obligation to pay the then
outstanding balance of the Inventory Purchase Price as such term is defined in
the Inventory Purchase Agreement and require that such Inventory Purchase Price
be paid in cash;
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10.11 a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which materially and adversely
affects the condition, affairs or prospects (financial or otherwise) of the
Borrowers' taken as a whole which default is not cured within any applicable
grace period;
10.12 any Change of Control;
10.13 any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent or any Lender;
10.14 a default by GCL of its obligations under the Inducement
Agreement;
10.15 Eugene Conese, Sr., shall cease to serve as Chairman and Chief
Executive Officer of Greenwich (whether by death or otherwise); or
10.16 termination or breach of the Pledge Agreement or if
Greenwich]attempts to terminate or challenge the validity of or its liability
under the Pledge Agreement.
XI. AGENT'S AND LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 RIGHTS AND REMEDIES. Upon (i) an Event of Default pursuant to
Section 10.7 all Obligations shall be automatically and immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured or waived), at the
option of Required Lenders, all Obligations shall be immediately due and payable
and Required Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances and (iii) filing of a
petition against any Borrower in any involuntary case under any state or federal
bankruptcy laws, the obligations of the Lenders to make Advances to such
Borrower hereunder shall be terminated other than as may be permitted by an
appropriate order of the bankruptcy court having jurisdiction over such
Borrower. In any event, Agent shall have the right to exercise any and all
other rights and remedies provided for herein, under the Uniform Commercial Code
and at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with judicial process. Agent may enter any of
the Borrowers' premises or other premises with required and necessary legal
process and without incurring liability to any Borrower therefor, and Agent may
thereupon, or at any time thereafter in accordance with the provisions of this
Agreement, in its discretion without notice or demand, take the Collateral and
remove the same to such place as Agent may deem
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advisable and Agent may require the Borrowers to make the Collateral available
to Agent at a convenient place. With or without having the Collateral at the
time or place of sale, Agent may sell the Collateral, or any part thereof, at
public or private sale, at any time or place, in one or more sales, at such
price or prices, and upon such terms, either for cash, credit or future
delivery, as Agent may elect. Except as to that part of the Collateral which is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Agent shall give the Borrowers reasonable
notification of such sale or sales, it being agreed that in all events written
notice mailed to the Borrowers via overnight mail at least five (5) Business
Days prior to such sale or sales is reasonable notification. At any public sale
Agent may bid for and become the purchaser, and Agent or any other purchaser at
any such sale thereafter shall hold the Collateral sold absolutely free from any
claim or right of whatsoever kind, including any equity of redemption and such
right and equity are hereby expressly waived and released by the Borrowers to
the fullest extent permitted by law. In connection with the exercise of the
foregoing remedies, Agent is granted permission to use all of the Borrowers'
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with
Inventory for the purpose of disposing of such Inventory. The proceeds realized
from the sale of any Collateral shall be applied first to the reasonable costs,
reasonable expenses and reasonable attorneys' fees and reasonable expenses
incurred by Agent for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; secondly to interest due
upon any of the Obligations; and thirdly to the principal of the Obligations.
If any deficiency shall arise, Borrowers shall remain liable to Agent and
Lenders therefor.
11.2 AGENT'S DISCRETION. Agent shall have the right in its reasonable
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3 SETOFF. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence and during the continuance of
an Event of Default hereunder, Agent and such Lender shall have a right to apply
any of the Borrowers' property held by Agent or any Lender to reduce the
Obligations.
11.4 RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedy, all of which shall be cumulative and not alternative.
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XII. WAIVERS AND JUDICIAL PROCEEDINGS
12.1 WAIVER OF NOTICE. Each Borrower hereby waives demand,
presentment, protest and notice of demand, presentment, protest, default,
non-payment, maturity, release, compromise, settlement, extensions or renewals
with respect to any and all instruments, commercial paper, accounts, contract
rights, documents, chattel paper and guaranties at any time held by Agent or any
Lender on which any Borrower may in any way be liable, and each Borrower further
waives notice of acceptance hereof, notice of loans or advances made, credit
extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.
12.2 DELAY. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3 JURY WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE: AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1 TERM. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
the Borrowers, Agent and Lenders, shall become effective on the date hereof and
shall continue in full force and effect until the last day of the Term, unless
sooner terminated as herein provided. In the event the Obligations are prepaid
in full prior to the last day of the Term and this Agreement is thereby
terminated by Borrowers (the date of such prepayment hereinafter referred to as
the "Prepayment Date"), Borrower shall pay an early termination fee in an amount
equal to (x) $1,925,000 if the Prepayment Date occurs from the Effective Date to
and including the date immediately preceding the first anniversary of the
Effective Date, (y) $1,225,000 if the Prepayment Date occurs from the first
anniversary of the Effective Date to and including the date immediately
preceding the second anniversary of
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the Effective Date, and (z) $525,000 if the Prepayment Date occurs on or after
the second anniversary of the Effective Date to and including the date
immediately preceding the fifth anniversary of the Effective Date.
13.2 TERMINATION. The termination of this Agreement shall not affect
any of the Borrowers', Agent's or any Lender's rights, or any of the Obligations
having their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent hereunder and the financing statements filed hereunder shall
continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that the Borrowers' accounts may from time to time be
temporarily in a zero or credit position, until Borrowers' rights to borrow
under this Agreement have been terminated all of the Obligations of the
Borrowers have been paid or performed in full or the Borrowers have furnished
Agent and Lenders with an indemnification reasonably satisfactory to Agent with
respect to any existing, pending or threatened claims or an existing state of
facts which might, in Agent's reasonable judgment which is exercised in good
faith and not in an arbitrary or capricious manner, give rise to an Obligation
hereunder. Accordingly, each Borrower waives any rights which it may have under
Section 9-404(1) of the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent and Lenders
shall not be required to send such termination statements to Borrowers, or to
file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations paid in full in
immediately available funds or satisfied as set forth in the preceding sentence.
If there are no existing, pending or threatened claims or existing state of
facts which might, in Agent's reasonable judgment which is exercised in good
faith and not in an arbitrary or capricious manner, give rise to an Obligation
hereunder and the Obligations of the Borrowers shall have been paid in full and
this Agreement terminated, Agent shall deliver termination statements with
respect to the Collateral to Borrowers. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination
hereof until all Obligations are paid or performed in full unless otherwise
provided.
XIV. MISCELLANEOUS
14.1 GOVERNING LAW. This Agreement has been negotiated, executed and
delivered at and shall be deemed to have been made in New York and is to be
performed at New York and interpreted and the rights and liabilities of the
parties hereto determined, in accordance with the laws of the State of New York.
Any judicial proceeding by any Borrower against Agent or any Lender involving,
directly or indirectly, any matter or claim in any way arising out of, related
to or connected with this or any related agreement,
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shall be brought only in a state or federal court located in the City of New
York, State of New York. Any judicial proceeding brought against any Borrower
with respect to any of the Obligations, or this Agreement or any Other Documents
may be brought in any court of competent jurisdiction in the City of New York,
State of New York, United States of America, and, by execution and delivery of
this Agreement, each Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Nothing herein shall affect the
right to serve process in any manner permitted by law or shall limit the right
of Agent or any Lender to bring proceedings against any Borrower in the courts
of any other competent jurisdiction. Each Borrower waives any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based on FORUM NON
CONVENIENS.
14.2 ENTIRE UNDERSTANDING AND AMENDMENTS AND MODIFICATIONS.
(a) This Agreement and the Documents executed concurrently
herewith contain the entire understanding between Borrowers, Agent and Lenders
and supersede all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein or therein contained shall have no force and effect unless in
writing, signed by each Borrower's, Agent's and each Lender's respective
officers.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrowers may, subject to the provisions of this
Section 14.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrowers, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof or waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
PROVIDED, HOWEVER, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage of any Lender;
(ii) increase the Maximum Loan Amount;
(iii) extend the Term, the maturity of any of the Notes or
the due date for any amount payable hereunder, or decrease the rate of interest
or reduce any fee payable by Borrowers to Lenders pursuant to this Agreement;
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(iv) alter the several nature of the funding obligations
of Lenders or the definition of the term Required Lenders or alter, amend or
modify this Section 14.2(b);
(v) alter, amend or modify Sections 2.12, 2.13 or 2.14
hereof;
(vi) except as otherwise permitted hereunder, release any
Collateral during any calendar year having an aggregate value in excess of
$__________; or
(vii) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
14.3 INDEMNITY. Each Borrower shall indemnify Agent and Lenders from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent or any Lender as a result of any violation of any law or in any
litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement, any Other Documents (whether or not Agent or any
Lender is a party thereto), except to the extent that any of the foregoing
arises out of the gross negligence (but not mere negligence) or willful
misconduct of the party being indemnified.
14.4 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrowers, Agent, each Lender, all future holders of the Obligations
and their respective successors and assigns, except that no Borrower may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or
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purchaser of a participating interest, a "Transferee"). Each Transferee may
exercise all rights of payment (including without limitation rights of set-off)
with respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Transferee were the direct holder thereof
provided that Borrowers shall not be required to pay to any Transferee more than
the amount which it would have been required to pay to the Lender which granted
an interest in its Advances or other Obligations payable hereunder to such
Transferee had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder and in no event shall Borrowers be required
to pay any such amount arising from the same circumstances and with respect to
the same Advances or other Obligations payable hereunder to both such Lender and
such Transferee. Each Borrower hereby grants to any Transferee a continuing
security interest in any deposits, moneys or other property actually or
constructively held by such Transferee as security for the Transferee's interest
in the Advances.
(c) Any Lender may (i) pledge and assign as collateral to any
Federal Reserve Bank all or a portion of its interest in the Advances hereunder
and (ii) upon the prior written consent of Borrowers and Agent, which consents
shall not be unreasonably withheld, sell, assign or transfer all or any part of
its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a "Purchasing
Lender"), in minimum amounts of not less than $5,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the Transferor
Lender, and Agent and delivered to Agent for recording. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. By consenting to the foregoing, Borrowers hereby agree to the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Borrowers shall execute and deliver
such further documents and do such further acts and things in order to
effectuate the foregoing.
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(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrowers, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advances
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowers or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in
the amount of $3,500 payable by the applicable Purchasing Lender upon the
effective date of each transfer or assignment to such Purchasing Lender.
(e) Borrowers authorize each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
Borrowers which has been delivered to such Lender by or on behalf of Borrowers
pursuant to this Agreement or in connection with such Lender's credit evaluation
of Borrowers.
14.5 APPLICATION OF PAYMENTS. Following the occurrence and during the
continuation of an Event of Default, Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any and all proceeds of
Collateral to any portion of the Obligations. To the extent that any Borrower
makes a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for Borrowers' benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
14.6 NOTICE. Any notice or request hereunder may be given to
Borrowers, Agent or to any Lender at the respective addresses set forth below or
at such other address as may hereafter be specified in a notice designated as a
notice of change of address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery or overnight courier, (b) registered or
certified mail, return receipt requested, (c) telex or telegram, subsequently
confirmed by registered or certified mail, or (d) telefax to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with telephone communication to the recipient
or to a duly authorized officer of the recipient in the event the recipient is
not available by telephone, confirming its receipt or as subsequently confirmed
by electronic confirmation mail. Notices and requests shall, in the case of
those by mail or telegram, be deemed to have been given three (3) days after
deposit in the mail, or delivered to the telegraph office, in the case of
overnight
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courier, one (1) day after deposit in the mail addressed as provided in this
Section, or in the case of telefax, upon receipt of electronic confirmation.
(A) If to Agent, at: The Bank of New York Commercial
Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Anthony Viola
Telephone: (212) 408-4097
Telecopier: (212) 408-4313
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to a Lender
other than Agent,
as specified on the
signature pages
hereof
(C) If to Borrowers, at: Greenwich Air Services, Inc.
4590 N.W. 36th Street, Bldg. 23
Miami, Florida 33122
Attention: Eugene Conese, Jr.,
President
Telephone: (305) 526-7032
Telecopier: (305) 526-7005
or (if by mail) at: Greenwich Air Services, Inc.
P.O. Box 522187
Miami, Florida 33152-2187
Attention: Eugene Conese, Jr.
with a copy to: Greenberg Traurig Hoffman Lipoff Rosen &
Quentel
153 East 53rd Street
New York, New York 10022
Attention: Stephen A. Weiss, Esq.
Telephone: (212) 801-9200
Telecopier: (212) 223-7161
14.7 SURVIVABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
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14.8 EXPENSES. All reasonable costs and expenses including, without
limitation, reasonable attorneys' fees incurred by (a) Agent in its efforts to
enforce payment of any Obligation or effect collection of any Collateral, or (b)
Agent in connection with the entering into, modification, amendment and
enforcement of this Agreement or any consents or waivers hereunder and all
related agreements, documents and instruments, or (c) Agent or any Lender in
instituting, maintaining, preserving, enforcing and foreclosing of or on Agent's
security interest or Lien in any of the Collateral, whether through judicial
proceedings or otherwise, or (d) Agent or any Lender in defending or prosecuting
any actions or proceedings arising out of or relating to Agent's or any Lender's
transactions with the Borrowers, or (e) Agent in connection with any legal
advice given to Agent or any Lender with respect to its rights and obligations
under this Agreement and all related agreements other than with respect to
disputes between Agent, any Lender or any Transferee(s), may be charged to the
Borrowers' accounts and shall be part of the Obligations.
14.9 INJUNCTIVE RELIEF. Each Borrower recognizes that, in the event
such Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Agent and Lenders; therefore, each Lender, if such Lender so requests,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages to the extent permitted by law.
14.10 CAPTIONS. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
14.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
14.12 RECORDATION. Agent shall not record this document unless required
to do so in order to protect its rights hereunder and upon concurrent notice to
Borrowers.
14.13 CONSEQUENTIAL DAMAGES. Neither Agent, any Lender nor any agent or
attorney for Lender shall be liable to Borrowers for consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
14.14 CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
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XV. BORROWING AGENCY.
15.1. BORROWING AGENCY PROVISIONS.
(a) Borrowers hereby irrevocably designate Greenwich to be
their attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of Borrowers, and
hereby authorize Agent and Lenders to pay over or credit all loan proceeds
hereunder in accordance with the request of Greenwich.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to the Borrowers and at their request. Neither Agent
nor any Lender shall incur liability to the Borrowers as a result thereof. To
induce Agent and each Lender to do so and in consideration thereof, each
Borrower hereby indemnifies Agent and Lenders and holds Agent and Lenders
harmless from and against any and all liabilities, expenses, losses, damages and
claims of damage or injury asserted against Agent or any Lender by any Person
arising from or incurred by reason of the handling of the financing arrangements
of the Borrowers as provided herein, reliance by Agent or any Lender on any
request or instruction from Greenwich or any other action taken by Agent or any
Lender with respect to this Section 15.1 except due to gross negligence (but not
mere negligence) or willful misconduct by the indemnified party.
(c) Except as set forth in Section 15.1(d) below, all
Obligations shall be joint and several, and each Borrower shall make payment
upon the maturity of the Obligations by acceleration or otherwise, and such
obligation and liability on the part of each Borrower shall in no way be
affected by any extensions, renewals and forbearance granted by Agent or any
Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Borrower, the release by Agent of any
Collateral now or hereafter acquired from any Borrower, and such agreement by
each Borrower to pay upon any notice issued pursuant thereto is unconditional
and unaffected by prior recourse by Agent or any Lender to the other Borrower or
any Collateral for such Borrowers' Obligations or the lack thereof.
15.2. WAIVER OF SUBROGATION. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution or
any other claim which such Borrower may now or hereafter have against any other
Borrower or any other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to any other Borrower's property
(including, without limitation, any property which is
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Collateral for the Obligations), arising from the existence or performance of
this Agreement.
XVI. REGARDING AGENT.
16.1. APPOINTMENT. Each Lender hereby designates BNYCC to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
3.2 and the Fee Letter), and collections received pursuant to this Agreement,
for the ratable benefit of Lenders. Agent may perform any of its duties
hereunder by or through its agents or employees. As to any matters not
expressly provided for by this Agreement (including without limitation,
collection of the Notes), Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
PROVIDED, HOWEVER, that Agent shall not be required to take any action which
exposes Agent to liability or which is contrary to this Agreement or the Other
Documents or applicable law unless Agent is furnished with an indemnification
reasonably satisfactory to Agent with respect thereto.
16.2. NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their willful misconduct or gross (not
mere) negligence, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of any Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of any Borrower. The duties of Agent as respects
the Advances to Borrowers shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
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intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement except as expressly set forth herein.
16.3. LACK OF RELIANCE ON AGENT AND RESIGNATION. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each Borrower. Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before
making of the Advances or at any time or times thereafter except as shall be
provided by any Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Other Document, or of the financial condition of any Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Other Documents or the financial condition of any Borrower, or the existence of
any Event of Default or any Incipient Event of Default.
Agent may resign on sixty (60) days' written notice to each of Lenders
and Borrowers and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and duties
of Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent. After any Agent's resignation as Agent, the provisions of this
Article XVI shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
16.4. CERTAIN RIGHTS OF AGENT. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining
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from acting hereunder in accordance with the instructions of the Required
Lenders.
16.5. RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
16.6. NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Incipient Event of Default or Event of Default
hereunder or under the Other Documents, unless Agent has received notice from a
Lender or a Borrower referring to this Agreement or the Other Documents,
describing such Incipient Event of Default or Event of Default and stating that
such notice is a "notice of default". In the event that Agent receives such a
notice, Agent shall give notice thereof to Lenders. Agent shall take such
action with respect to such Incipient Event of Default or Event of Default as
shall be reasonably directed by the Required Lenders; PROVIDED, THAT, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Incipient Event of Default or Event of Default as it shall deem
advisable in the best interests of Lenders.
16.7. INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; PROVIDED THAT, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence (but not mere negligence) or willful misconduct.
16.8. AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in
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its individual capacity as a Lender. Agent may engage in business with any
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
16.9. DELIVERY OF DOCUMENTS. To the extent Agent receives documents and
information from any Borrower pursuant to the terms of this Agreement, Agent
will promptly furnish such documents and information to Lenders.
16.10. BORROWERS' UNDERTAKING TO AGENT. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall PRO TANTO
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
Each of the parties has signed this Agreement as of the _____ day of
___________, 1996.
GREENWICH AIR SERVICES, INC.
By:________________________________
Its:_______________________________
GAS TURBINE CORPORATION
By:________________________________
Its:_______________________________
GREENWICH TURBINE, INC.
By:________________________________
Its:_______________________________
GASI ENGINE SERVICES CORPORATION
By:________________________________
Its:_______________________________
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MCALLEN COMPONENTS, L.P.
By:________________________________
Its:_______________________________
GREENWICH AIR SERVICES-TEXAS, L.P.
By:________________________________
Its:_______________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, AS AGENT
By:________________________________
Its:_______________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, AS LENDER
By:________________________________
Its:_______________________________
Commitment Percentage _______%
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GREENWICH CALEDONIAN, LIMITED
----------------------------
REVOLVING CREDIT AGREEMENT
----------------------------
Dated as of June ___, 1996
THE BANK OF NEW YORK COMMERCIAL CORPORATION
(AS A LENDER AND AS AGENT)
AND
THE VARIOUS FINANCIAL INSTITUTIONS THAT BECOME LENDERS HEREUNDER
(LENDERS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounting Terms . . . . . . . . . . . . . . . . . . . . . 1
1.2 General Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Uniform Commercial Code Terms. . . . . . . . . . . . . . . 15
1.4 Certain Matters of Construction. . . . . . . . . . . . . . 15
1.5 Other Defined Terms. . . . . . . . . . . . . . . . . . . . 15
II. ADVANCES AND PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1 (a) Borrowing Base. . . . . . . . . . . . . . . . . . . 15
(b) Discretionary Rights. . . . . . . . . . . . . . . . 16
(c) Inventory Advances. . . . . . . . . . . . . . . . . 16
(d) Receivables Advances. . . . . . . . . . . . . . . . 16
(e) Unbilled Receivables. . . . . . . . . . . . . . . . 16
2.2 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . 17
2.4 Disbursement of Advance Proceeds . . . . . . . . . . . . . 20
2.5 Repayment of Advances. . . . . . . . . . . . . . . . . . . 20
2.6 Repayment of Excess Advances . . . . . . . . . . . . . . . 20
2.7 Manner of Borrowing and Payment. . . . . . . . . . . . . . 20
2.8 Statement of Account . . . . . . . . . . . . . . . . . . . 22
2.9 No Deductions. . . . . . . . . . . . . . . . . . . . . . . 22
2.10 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . 22
2.11 Additional Payments. . . . . . . . . . . . . . . . . . . . 23
2.12 Increased Costs. . . . . . . . . . . . . . . . . . . . . . 23
2.13 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . 24
2.14 Basis For Determining Interest Rate Inadequate or Unfair . 24
2.15 Letters of Credit. . . . . . . . . . . . . . . . . . . . . 25
2.16 Issuance of Letters of Credit. . . . . . . . . . . . . . . 26
2.17 Requirements For Issuance of Letters of Credit.. . . . . . 26
2.18 Defaulting Lender. . . . . . . . . . . . . . . . . . . . . 27
III. INTEREST AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.2 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 30
3.3 Unused Facility Fee. . . . . . . . . . . . . . . . . . . . 30
3.4 Letter of Credit . . . . . . . . . . . . . . . . . . . . . 30
3.5 Computation of Interest and Fees . . . . . . . . . . . . . 31
3.6 Maximum Charges. . . . . . . . . . . . . . . . . . . . . . 31
IV. COLLATERAL: GENERAL TERMS. . . . . . . . . . . . . . . . . . . . . . . 31
4.1 Acknowledgement and Grant of Security Interests. . . . . . 31
4.2 Perfection of Security Interest. . . . . . . . . . . . . . 32
4.3 Disposition of Collateral. . . . . . . . . . . . . . . . . 32
4.4 Preservation of Collateral . . . . . . . . . . . . . . . . 32
4.5 Ownership of Collateral. . . . . . . . . . . . . . . . . . 33
4.6 Defense of Agent's Interests . . . . . . . . . . . . . . . 33
4.7 Books and Records. . . . . . . . . . . . . . . . . . . . . 34
4.8 Financial Disclosure . . . . . . . . . . . . . . . . . . . 34
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4.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . 34
4.10 Inspection of Premises . . . . . . . . . . . . . . . . . . 35
4.11 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 35
4.12 Failure to Maintain Insurance. . . . . . . . . . . . . . . 37
4.13 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . 37
4.14 Payment of Leasehold Obligations . . . . . . . . . . . . . 37
4.15 Receivables. . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Nature of Receivables . . . . . . . . . . . . . . . 38
(b) Solvency of Customers . . . . . . . . . . . . . . . 38
(c) Locations of Borrower . . . . . . . . . . . . . . . 38
(d) Collection of Receivables . . . . . . . . . . . . . 38
(e) Notification of Assignment of Receivables . . . . . 38
(f) Power of Agent to Act on Borrower's Behalf. . . . . 39
(g) No Liability. . . . . . . . . . . . . . . . . . . . 39
(h) Establishment of an Agency Account. . . . . . . . . 40
4.16 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . 40
4.17 Exculpation of Liability . . . . . . . . . . . . . . . . . 40
4.18 Environmental Matters. . . . . . . . . . . . . . . . . . . 41
4.19 Greenwich. . . . . . . . . . . . . . . . . . . . . . . . . 43
4.20 Inconsistent Provisions. . . . . . . . . . . . . . . . . . 44
V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 44
5.1 Authority. . . . . . . . . . . . . . . . . . . . . . . . . 44
5.2 Formation and Qualification. . . . . . . . . . . . . . . . 44
5.3 Survival of Representations and Warranties . . . . . . . . 44
5.4 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . 44
5.5 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 45
5.6 Corporate Name . . . . . . . . . . . . . . . . . . . . . . 45
5.7 O.S.H.A. and Environmental Compliance. . . . . . . . . . . 45
5.8 Solvency; No Litigation, Violation, Indebtedness or
Default . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.9 Patents, Trademarks, Copyrights and Licenses . . . . . . . 46
5.10 Licenses and Permits . . . . . . . . . . . . . . . . . . . 47
5.11 Default of Indebtedness. . . . . . . . . . . . . . . . . . 47
5.12 No Default . . . . . . . . . . . . . . . . . . . . . . . . 47
5.13 No Burdensome Restrictions . . . . . . . . . . . . . . . . 47
5.14 No Labor Disputes. . . . . . . . . . . . . . . . . . . . . 47
5.15 Margin Regulations . . . . . . . . . . . . . . . . . . . . 47
5.16 Investment Company Act . . . . . . . . . . . . . . . . . . 48
5.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 48
5.18 Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.1 Payment of Fees. . . . . . . . . . . . . . . . . . . . . . 48
6.2 Conduct of Business and Maintenance of Existence and
Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.3 Violations . . . . . . . . . . . . . . . . . . . . . . . . 49
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6.4 Government Receivables . . . . . . . . . . . . . . . . . . 49
6.5 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 49
6.6 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 49
6.7 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 49
6.8 Hedging Agreements; Interest Rate Protection . . . . . . . 49
6.9 Execution of Supplemental Instruments. . . . . . . . . . . 49
6.10 Payment of Indebtedness. . . . . . . . . . . . . . . . . . 49
6.11 Standards of Financial Statements. . . . . . . . . . . . . 49
6.12 Exercise of Rights . . . . . . . . . . . . . . . . . . . . 50
6.13 Inventory Composition. . . . . . . . . . . . . . . . . . . 50
6.14 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 50
VII. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Merger, Consolidation, Acquisition and Sale of Assets. . . 50
7.2 Creation of Liens. . . . . . . . . . . . . . . . . . . . . 51
7.3 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . 51
7.4 Investments. . . . . . . . . . . . . . . . . . . . . . . . 51
7.5 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.6 Capital Expenditures . . . . . . . . . . . . . . . . . . . 51
7.7 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . 52
7.8 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 52
7.9 Nature of Business . . . . . . . . . . . . . . . . . . . . 52
7.10 Transactions with Affiliates . . . . . . . . . . . . . . . 52
7.11 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.12 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 53
7.13 Fiscal Year and Accounting Changes . . . . . . . . . . . . 53
7.14 Prepayment of Indebtedness . . . . . . . . . . . . . . . . 53
7.15 Pledge of Credit . . . . . . . . . . . . . . . . . . . . . 53
VIII. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . 53
8.1 Conditions to Effectiveness. . . . . . . . . . . . . . . . 53
(a) Notes . . . . . . . . . . . . . . . . . . . . . . . 53
(b) Filings, Registrations and Recordings . . . . . . . 54
(c) Proceedings of Borrower . . . . . . . . . . . . . . 54
(d) Legal Opinions. . . . . . . . . . . . . . . . . . . 54
(e) No Litigation . . . . . . . . . . . . . . . . . . . 54
(f) Intentionally Omitted . . . . . . . . . . . . . . . 54
(g) Pledge Agreements and Other Documents . . . . . . . 54
(h) Fees. . . . . . . . . . . . . . . . . . . . . . . . 55
(i) Material Adverse Change . . . . . . . . . . . . . . 55
(j) Representations and Warranties; Covenants; Events . 55
(k) Incumbency Certificates of Borrower . . . . . . . . 55
(l) Certificates. . . . . . . . . . . . . . . . . . . . 55
(m) Good Standing Certificates. . . . . . . . . . . . . 55
(n) Financial Condition Certificates. . . . . . . . . . 55
(o) Collateral Examination. . . . . . . . . . . . . . . 56
(p) Undrawn Availability. . . . . . . . . . . . . . . . 56
(q) Insurance . . . . . . . . . . . . . . . . . . . . . 56
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(r) Payment Instructions. . . . . . . . . . . . . . . . 56
(s) Blocked Accounts. . . . . . . . . . . . . . . . . . 56
(t) Consents. . . . . . . . . . . . . . . . . . . . . . 56
(u) Leasehold Agreements. . . . . . . . . . . . . . . . 56
(v) U.K. Security Document. . . . . . . . . . . . . . . 56
(w) Contract Review . . . . . . . . . . . . . . . . . . 56
(x) Closing Certificate . . . . . . . . . . . . . . . . 57
(y) Borrowing Base. . . . . . . . . . . . . . . . . . . 57
(z) Other Agreements. . . . . . . . . . . . . . . . . . 57
(aa) Intentionally Omitted . . . . . . . . . . . . . . . 57
(ab) Environmental Reports . . . . . . . . . . . . . . . 57
(ac) Payment Instructions. . . . . . . . . . . . . . . . 57
(ad) Other . . . . . . . . . . . . . . . . . . . . . . . 57
8.2 Conditions to Each Advance . . . . . . . . . . . . . . . . 57
(a) Representations and Warranties. . . . . . . . . . . 57
(b) No Default. . . . . . . . . . . . . . . . . . . . . 58
(c) Maximum Advances. . . . . . . . . . . . . . . . . . 58
IX. INFORMATION AS TO Borrower. . . . . . . . . . . . . . . . . . . . . . . 58
9.1 Disclosure of Material Matters . . . . . . . . . . . . . . 58
9.2 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . 58
9.3 Environmental Reports. . . . . . . . . . . . . . . . . . . 59
9.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 59
9.5 Occurrence of Defaults, etc. . . . . . . . . . . . . . . . 59
9.6 Government Receivables . . . . . . . . . . . . . . . . . . 60
9.7 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 60
9.8 Intentionally Omitted. . . . . . . . . . . . . . . . . . . 60
9.9 Other Reports. . . . . . . . . . . . . . . . . . . . . . . 60
9.10 Additional Information . . . . . . . . . . . . . . . . . . 60
9.11 Business Plan. . . . . . . . . . . . . . . . . . . . . . . 60
9.12 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . 60
9.13 Aviall Power by the Hour Agreements. . . . . . . . . . . . 61
9.14 Additional Documents . . . . . . . . . . . . . . . . . . . 61
X. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
XI. AGENT'S AND LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT. . . . . . . . . 63
11.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . 63
11.2 Agent's Discretion . . . . . . . . . . . . . . . . . . . . 64
11.3 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.4 Rights and Remedies not Exclusive. . . . . . . . . . . . . 64
XII. WAIVERS AND JUDICIAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . 65
12.1 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . 65
12.2 Delay. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.3 Jury Waiver. . . . . . . . . . . . . . . . . . . . . . . . 65
XIII. EFFECTIVE DATE AND TERMINATION. . . . . . . . . . . . . . . . . . . . 65
13.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . 66
XIV. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
14.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 66
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14.2 Entire Understanding and Amendments and Modifications. . . 67
14.3 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 68
14.4 Successors and Assigns; Participations; New Lenders. . . . 68
14.5 Application of Payments. . . . . . . . . . . . . . . . . . 70
14.6 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 70
14.7 Survivability. . . . . . . . . . . . . . . . . . . . . . . 71
14.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 72
14.9 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . 72
14.10 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 72
14.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 72
14.12 Recordation. . . . . . . . . . . . . . . . . . . . . . . . 72
14.13 Consequential Damages. . . . . . . . . . . . . . . . . . . 72
14.14 Construction . . . . . . . . . . . . . . . . . . . . . . . 72
XV. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . . . 73
XVI. REGARDING AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
16.1. Appointment. . . . . . . . . . . . . . . . . . . . . . . . 73
16.2. Nature of Duties . . . . . . . . . . . . . . . . . . . . . 73
16.3. Lack of Reliance on Agent and Resignation. . . . . . . . . 74
16.4. Certain Rights of Agent. . . . . . . . . . . . . . . . . . 74
16.5. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . 75
16.6. Notice of Default. . . . . . . . . . . . . . . . . . . . . 75
16.7. Indemnification. . . . . . . . . . . . . . . . . . . . . . 75
16.8. Agent in its Individual Capacity . . . . . . . . . . . . . 75
16.9. Delivery of Documents. . . . . . . . . . . . . . . . . . . 76
16.10. Borrower's Undertaking to Agent. . . . . . . . . . . . . . 76
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EXHIBITS AND SCHEDULES
EXHIBITS
1.2(a) CIT Loan Documents
1.2(b) Permitted Liens
1.2(c) World Loan Documents
2.2 Notes
2.15 Letter of Credit Agreement
4.5 Inventory Locations
5.2 States of Incorporation and Qualification To Do Business
5.5(c) Cash Flow Projections and Balance Sheets
5.7 Environmental Compliance
5.8(b) Pending Litigation
5.9 Patents, Tradenames, Copyrights and Licenses
5.10 Licenses and Permits
5.12 Defaults
5.14 Labor Disputes and Contracts
7.3 Guarantees
8.1(r) Financial Condition Opinion
9.2 Borrowing Base Certificate
SCHEDULES
1.2 Real Property
<PAGE>
REVOLVING CREDIT AGREEMENT
Revolving Credit Agreement dated as of June ___, 1996 among GREENWICH
CALEDONIAN, LIMITED, a corporation organized under the laws of [Scotland]
("Borrower"), the undersigned financial institutions and the various financial
institutions that become Lenders hereunder (each a "Lender" and collectively,
"Lenders") and THE BANK OF NEW YORK COMMERCIAL CORPORATION ("BNYCC"), a
corporation organized under the laws of the State of New York as agent for
Lenders (BNYCC in such capacity, "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, the parties hereto hereby agree as follows:
I. DEFINITIONS.
1.1 ACCOUNTING TERMS. As used in this Agreement, the Notes, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP.
1.2 GENERAL TERMS. For purposes of this Agreement the following terms
shall have the following meanings:
"ADVANCE RATES" shall have the meaning set forth in Section 2.1(a)
hereof.
"ADVANCE REQUEST" shall mean the meaning set forth in Section 2.3.
"ADVANCES" shall mean all Revolving Advances, and other financial
accommodations provided by Lenders to Borrower under or in connection with this
Agreement including, without limitation, Letters of Credit to the extent of the
undrawn amount outstanding of such Letters of Credit.
"AFFILIATE" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 10% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (y)
<PAGE>
to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"AFFILIATE LOAN AGREEMENT" shall mean the Fourth Amended and Restated
Revolving Credit and Security Agreement dated as of this date among Agent,
Lenders, Greenwich, Turbine, GTI, Components and Engine Services, as same may be
amended, modified or supplemented from time to time.
"AGENCY ACCOUNT" shall have the meaning set forth in Section 4.15(h).
"AGENT" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum equal to
the higher of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2 of 1%.
"APPLICABLE MARGIN" shall have the meaning given to such term in the
Affiliate Loan Agreement.
"AUTHORITY" shall have the meaning set forth in Section 4.18(d).
"AVIALL" shall mean collectively, Aviall Services, Inc. and Aviall, Inc.
"AVIALL POWER BY THE HOUR AGREEMENTS" shall mean ___________________.
"BANK" shall mean The Bank of New York.
"BNYCC" shall have the meaning set forth in the introductory paragraph
hereof.
"BORROWER" shall mean Greenwich Caledonian, Limited, and all permitted
successors and assigns.
"BUSINESS DAY" shall mean with respect to Eurodollar Rate Loans, any day
on which commercial banks are open for domestic and international business,
including dealings in dollar deposits in London, England and New York, New York
and with respect to Domestic Rate Loans, any day other than a day on which
commercial banks in New York are authorized or required by law to close.
"BUSINESS PLAN" shall mean the long range business and strategic plan of
Borrower which shall include monthly forecasts for (a) the fiscal year ending
September 30, 1997 and (b) each
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fiscal year thereafter, each of which shall be in form and substance consistent
with past practices.
"CALEDONIAN" shall have the meaning set forth in the introductory
paragraph hereof.
"CALEDONIAN ADVANCE RATES" shall have the meaning set forth in Section
2.1(a)(iii) hereof.
"CALEDONIAN FORMULA AMOUNT" shall have the meaning set forth in Section
2.1(a) hereof.
"CALEDONIAN INVENTORY ADVANCE RATE" shall have the meaning set forth in
Section 2.1(a)(ii) hereof.
"CALEDONIAN RECEIVABLES ADVANCE RATE" shall have the meaning set forth in
Section 2.1(a)(i) hereof.
"CALEDONIAN SUBLIMIT" shall mean $50,000,000.
"CAPITALIZED LEASE" means as to any Person, any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"CHANGE OF CONTROL" shall mean the occurrence of any event (whether in
one or more transactions) that results in a transfer of control of Borrower to a
Person other than its Parent. For purposes of this definition, "control of
Borrower" shall mean the power, direct or indirect, (x) to vote 51% or more of
the securities having ordinary voting power for the election of directors of
Borrower or (y) to direct or cause the direction of the management and policies
of Borrower by contract.
"CHARGES" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, Liens, Claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other governmental authority,
domestic or foreign (including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral,
Borrower or any of their Affiliates.
"CLAIMS" shall mean all security interests, Liens, claims or encumbrances
held or asserted by any Person against any or all
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of the Collateral, other than (A) Charges and (B) Permitted Encumbrances.
"COLLATERAL" shall mean the Charged Assets as defined in the U.K.
Security Document.
"COMMITMENT PERCENTAGE" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 14.4(c) hereof.
"COMPONENTS" shall mean McAllen Components, L.P., a Delaware limited
partnership.
"CONTINENTAL" shall have the meaning set forth in the definition of
Eligible Receivables.
"CUSTOMER" shall mean and include the account debtor with respect to any
of the Receivables.
"CUSTOMER DEPOSITS" shall mean cash deposits or advance payments and
progress payments received from Customers of Borrower.
"DEFAULTING LENDER" shall have the meaning set forth in Section 2.18(a)
hereof.
"DEFAULT RATE" shall have the meaning set forth in Section 3.1 hereof.
"DOCUMENT" shall have the meaning set forth in Section 8.1(c) hereof.
"DOLLAR" and the sign "$" shall mean lawful money of the United States of
America.
"DOMESTIC RATE LOAN" shall mean any Advance that bears interest based
upon the Alternate Base Rate.
"EFFECTIVE DATE" shall mean June __, 1996 or such other later date as the
conditions precedent set forth in Article VIII shall have been satisfied.
"EFFECTIVE HOURS ADJUSTMENT" shall have the meaning set forth in the
definition of Eligible Receivables.
"ELIGIBLE INVENTORY" shall mean and include all Inventory valued at book
value, determined by a moving average method consistent with the method, and
which Agent, in its reasonable discretion, shall not deem ineligible Inventory,
based
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<PAGE>
on such considerations as Agent may from time to time deem appropriate
including, without limitation, whether the Inventory is subject to a perfected,
first priority security interest in favor of Agent under the U.K. Security
Document and whether the Inventory conforms to all standards imposed by any
governmental agency, division or department thereof which has regulatory
authority over such goods or the use or sale thereof. Notwithstanding anything
to the contrary contained herein, in the event that the aggregate amount of
"repairable" Inventory (as defined in Section 6.13 hereof) ("Total Repairable
Inventory") exceeds 20% of total Inventory, repairable Inventory in an amount
equal to the difference between (a) Total Repairable Inventory MINUS (b) 20% of
total Inventory shall be excluded from Eligible Inventory. The preceding
sentence shall not constitute a waiver of any breach of Section 6.13(c) hereof.
"ELIGIBLE RECEIVABLES" shall mean and include with respect to Borrower
each Receivable of Borrower arising in the ordinary course of Borrower's
business and which Agent, in its reasonable credit judgment (but subject to the
limitations set forth below), shall deem to be an Eligible Receivable, based on
such considerations as Agent may from time to time deem appropriate.
Specifically, a Receivable shall not be deemed eligible unless such Receivable
is subject to Agent's perfected security interest and no other Lien other than
Permitted Encumbrances, and is evidenced by an invoice or other documentary
evidence satisfactory to Agent. In addition, a Receivable shall not be an
Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower and such
Receivable when added to the existing Receivables from Affiliates causes the
aggregate amount of outstanding Receivables from Affiliates of Borrower to be
greater than $250,000; PROVIDED, HOWEVER, in no event shall a Receivable due
from one Borrower to another Borrower constitute an Eligible Receivable;
(b) it is due or unpaid more than one hundred twenty (120) days
after the original invoice date except Receivables from (i) Affiliates which
shall be due or unpaid more than thirty (30) days after the original invoice
date and (ii) Continental ("Continental Receivables") which shall be due or
unpaid more than ninety (90) days after the original invoice date;
(c) thirty-five percent (35%) or more of the Receivables from the
subject Customer are due or unpaid more than one hundred twenty (120) days after
the original invoice date;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached in any material
respect;
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<PAGE>
(e) the Customer is also Borrower's creditor or supplier for an
amount in excess of $100,000, or the Customer has disputed liability, or the
Customer has made any claim with respect to any other Receivable due from such
Customer to Borrower, or the Receivable otherwise is or may become subject to
any right of set off by the Customer; PROVIDED, HOWEVER, the portion of such
Receivable that would otherwise be deemed an Eligible Receivable and which is
not subject to dispute or set-off shall be an Eligible Receivable;
(f) (i) the Customer has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or if a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
Customer in an involuntary case under any state or federal bankruptcy laws, as
now constituted or hereafter amended, or if any other petition or other
application for relief under any state or federal bankruptcy law has been filed
against the Customer, or if the Customer has discontinued its business, ceased
to be solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs; or
(ii) a petition is presented by any Person or an order is
made or an effective resolution is passed for the dissolution, termination,
winding up or liquidation of the Customer or for the appointment of a receiver,
administrative receiver, administrator, trustee or similar officer of the
Customer, (ii) the Customer is unable or admits in writing its inability to pay
its debts generally as they fall due or commences negotiations with a view to,
or takes any proceedings under any law for, a readjustment, rescheduling or
deferment of its obligations generally or proposes, makes or enters into an
assignment, arrangement (including a voluntary arrangement under section 1 of
the Insolvency Act) or composition with or for the benefit of its customers
generally, (iii) the Customer ceases or threatens to cease its business, or (iv)
any execution or distress is levied against, or an encumbrancer takes possession
of the whole or any substantial part of the property, undertaking or assets of
the Customer;
(g) the sale is to a Customer outside the United States or United
Kingdom, unless the sale is on letter of credit, guaranty or acceptance terms
(and all proceeds thereunder have been assigned to Agent for benefit of Lenders)
or Borrower's maintain credit insurance with respect thereto with type of
coverage and limit levels acceptable to Agent, or unless Borrower shall have
retained in its possession the goods giving rise to such Receivable as
collateral for such Receivable and such goods shall have a market value in
excess of the face amount of the Receivable, in any such case acceptable to
Agent in its reasonable discretion;
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(h) the sale to the Customer is on a bill-and-hold basis (except
where (i) the Customer has manifested its approval, in writing, to the
acceptable quality of the services rendered, goods to be delivered and its
approval of such sale or (ii) the goods to be delivered have passed all tests
required pursuant to the contract therefor), guaranteed sale, sale-and-return,
sale on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper;
(i) Agent believes, in its reasonable judgment, that collection
of such Receivable is insecure or that such Receivable may not be paid by reason
of the Customer's financial inability to pay unless, in either case, Borrower
shall have retained in its possession the goods giving rise to such Receivable
as collateral for such Receivable and such goods shall have a market value in
excess of the face amount of the Receivable, in any such case acceptable to
Agent in its reasonable discretion;
(j) the Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless Borrower
assigns its right to payment of such Receivable to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 ET SEQ.
and 41 U.S.C., Sub-Section 15) or has otherwise complied with other applicable
statutes or ordinances;
[(k) the services giving rise to such Receivable have not been
performed by Borrower or the Receivable is an advance or progress billing or
otherwise does not represent a final sale or performance;]
(l) the aggregate Receivables owed by the subject Customer exceed
a credit limit for such Customer as same may be determined in good faith by
Agent, in the exercise of its discretion in a reasonable manner, but only to the
extent that the aggregate Receivables owed by such Customer exceeds such limit;
(m) the Receivable is subject to any pending or asserted offset,
deduction, defense, dispute, or counterclaim (excluding claims by Customers with
respect to their respective Customer Deposits for services not yet performed in
an amount less than $150,000) or if the Receivable is contingent in any respect
or for any reason; PROVIDED, HOWEVER, the portion of each Receivable that would
otherwise be deemed an Eligible Receivable and which is not subject to offset,
deduction, defense, dispute, counterclaim or contingency shall be an Eligible
Receivable;
(n) Borrower has made any agreement with the subject Customer for
any deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected on the face of each respective invoice related thereto; PROVIDED,
HOWEVER, the portion of such Receivable that would otherwise be deemed an
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Eligible Receivable and which is not subject to deduction, discount or allowance
shall be an Eligible Receivable;
(o) the rendition of services has not been completed or all
supporting documentation has not been placed in the Customer file;
(p) any return, rejection or repossession of any underlying
merchandise has occurred;
(q) such Receivable is not payable to Borrower;
(r) such Receivable is not payable in Dollars or Sterling; or
(s) such Receivable is not otherwise satisfactory to the Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
[INSERT PROVISIONS RE AVIALL POWER BY HOUR AGREEMENTS]
"ELIGIBLE UNBILLED RECEIVABLES" shall mean Receivables which, but for the
fact invoices for payment have not yet been sent to Customers, would constitute
Eligible Receivables hereunder.
"ENGINE SERVICES" shall mean Greenwich Air Services - Texas, L.P., a
Delaware limited partnership.
"ENVIRONMENTAL COMPLAINT" shall have the meaning set forth in Section
4.18(d) hereof.
"ENVIRONMENTAL LAWS" shall mean all environmental, land use, zoning,
health, chemical use, safety and sanitation laws, statutes, ordinances and codes
in the United Kingdom relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of all governmental agencies and authorities with respect thereto.
"EURODOLLAR RATE" shall mean for any Eurodollar Rate Loan, for the then
current Interest Period relating thereto, the rate per annum (such Eurodollar
Rate to be adjusted to the next higher 1/100 of one (1%) percent) equal to the
quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate
of the rates (expressed as a decimal) of reserve requirements current on the day
that is three Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation
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promulgated by the Board of Governors of the Federal Reserve System (or any
other governmental authority having jurisdiction of the Bank) as in effect from
time to time, dealing with reserve requirements prescribed for Eurocurrency
funding including any reserve requirements with respect to "Eurocurrency
liabilities" under Regulation D of the Board of Governors of the Federal Reserve
System.
"EURODOLLAR RATE LOAN" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"EVENT OF DEFAULT" shall mean the occurrence and continuance of any of
the events set forth in Article X hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by the Bank.
"FEE LETTER" shall mean _________________________.
"FORMULA AMOUNT" shall have the meaning given to it in Section 2.1(a)
hereof.
"FUNDING DATE" shall have the meaning set forth in Section 2.7(f) hereof.
"FUNDED DEBT" shall have the meaning given to it in the Affiliate Loan
Agreement.
"GAAP" shall mean generally accepted accounting principles in the United
Kingdom in effect from time to time consistently applied.
"GASI" shall mean GASI Engine Services Corporation, a Delaware
corporation.
"GREENWICH" shall mean Greenwich Air Services, Inc., a Delaware
corporation.
"GREENWICH ON A COMBINED BASIS" shall mean _____________________.
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"GTI" shall mean Greenwich Turbine, Inc., a Delaware corporation.
"HAZARDOUS DISCHARGE" shall have the meaning set forth in Section 4.18(d)
hereof.
"HAZARDOUS SUBSTANCE" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in any applicable Environmental Law and in the
regulations adopted pursuant thereto.
"HAZARDOUS WASTES" includes all waste materials subject to regulation
under applicable laws now in force or hereafter enacted relating to hazardous
waste disposal.
"HEDGING AGREEMENTS" any agreement entered into, from time to time, by
Borrower and any one of the Lenders or a bank or financial institution
reasonably acceptable to Agent to protect Borrower against fluctuations in
foreign currency exchange rates.
"INCIPIENT EVENT OF DEFAULT" shall mean an event which, with the giving
of notice or passage of time or both, would constitute an Event of Default.
"INDEBTEDNESS" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except Customer Deposits, capital stock and
surplus earned or otherwise).
"INTEREST PERIOD" shall mean the period provided for any Eurodollar Rate
Loan pursuant to Section 2.3(b) hereof.
"INVENTORY" shall mean and include all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them. In addition, Inventory shall include gas turbine
engines and rotable parts even if recorded as property, plant and equipment by
Borrower for accounting purposes.
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"INVENTORY ADVANCE RATE" shall have the meaning given to it in Section
2.1(a) hereof.
"LENDER" or "LENDERS" shall have the meaning set forth in the
introductory paragraph hereof.
"LENDER DEFAULT" shall have the meaning set forth in Section 2.18(a)
hereof.
"LETTER OF CREDIT FEES" shall have the meaning set forth in Section 3.4.
"LETTERS OF CREDIT" shall have the meaning set forth in Section 2.15.
"LIBOR" shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto, the rate per annum quoted by the Bank in 1/16
increments, if available, two (2) Business Days prior to the first day of such
Interest Period for the offering by the Bank to prime commercial banks in the
London interbank Eurodollar market of dollar deposits in immediately available
funds for a period equal to such Interest Period and in an amount equal to the
amount of such Eurodollar Rate Loan.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien, Charge, Claim or encumbrance, or
preference, priority or other security agreement or preferential arrangement in
respect of any asset of Borrower of any kind or nature whatsoever including,
without limitation, any conditional sale or other title retention agreement, any
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction.
"MAXIMUM LOAN AMOUNT" at any date shall mean $50,000,000.
"MONTHLY ADVANCES" shall have the meaning set forth in Section 3.1
hereof.
"NON-DEFAULTING LENDERS" shall have the meaning set forth in Section
2.18(b) hereof.
"NOTES" shall mean the promissory notes referred to in Section 2.2
hereof.
"OBLIGATIONS" shall mean and include any and all of Borrower's
Indebtedness and/or liabilities to Agent or Lenders of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing or hereafter
arising,
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contractual or tortious, liquidated or unliquidated, under this Agreement and
all obligations of Borrower to Agent or Lenders to perform acts or refrain from
taking any action under this Agreement.
"OTHER DOCUMENTS" shall mean any and all agreements, instruments and
documents, including, without limitation, the U.K. Security Document,
guaranties, pledges, powers of attorney, consents, and all other writings
heretofore, now or hereafter executed by Borrower and/or delivered to Agent or
any Lender in respect of the transactions contemplated by this Agreement.
"PARENT" (a) of Borrower shall mean Greenwich and (b) of any other Person
shall mean a corporation or other entity owning, directly or indirectly, at
least 50% of the shares of stock or other ownership interests having ordinary
voting power to elect a majority of the directors of the Person, or other
Persons performing similar functions for any such Person.
"PARTICIPANT" shall mean each Person who shall be granted the right by
any Lender to participate in any of the Advances and who shall have entered into
a participation agreement in respect thereof in form and substance satisfactory
to such Lender.
"PAYMENT OFFICE" shall mean initially 1290 Avenue of the Americas, New
York, New York 10104; thereafter, such other office of Agent, if any, which it
may designate by notice to Greenwich on behalf of Borrower to be the Payment
Office.
"PERMITTED ENCUMBRANCES" shall mean (a) Liens in favor of Agent for the
benefit of Lenders; (b) Liens for taxes, assessments or other governmental
charges not delinquent, or, being contested in good faith and by appropriate
proceedings and with respect to which proper reserves have been taken by
Borrower; PROVIDED, THAT the Lien shall have no effect on the priority of the
Liens in favor of Agent or the value of the assets in which Agent has such a
Lien and a stay of enforcement of any such Lien shall be in effect; (c) Liens
disclosed in the financial statements referred to in Section 5.5; (d) deposits
or pledges to secure obligations under workmen's compensation, social security
or similar laws, or under unemployment insurance; (e) deposits or pledges to
secure bids, tenders, contracts (other than contracts for the payment of money),
Leases, statutory obligations, surety, performance and appeal bonds and other
obligations of like nature arising in the ordinary course of Borrower's
business; (f) judgment Liens that have been stayed or bonded and mechanics',
worker's, materialmen's or other like Liens arising in the ordinary course of
Borrower's business with respect to obligations which are not past due or which
are being contested in good faith by Borrower; (g) Liens placed upon fixed
assets hereafter acquired to secure a portion of the purchase price thereof,
provided that (x) any such Lien shall not encumber any other property of
Borrower and (y) the aggregate amount of Indebtedness secured by such Liens
incurred as a result of such purchases during any fiscal year shall not exceed
the amount
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provided for in Section 7.6; (h) Liens on Equipment in favor of CIT and World as
in existence on Closing Date; and (i) other Liens disclosed on EXHIBIT 1.2(b)
and the permissions contained in the U.K. Security Document.
"PERSON" shall mean an individual, a partnership, a corporation, a
business trust, a joint stock company, a trust, an unincorporated association, a
joint venture, a governmental authority or any other entity of whatever nature.
"PLEDGE AGREEMENT" shall mean that certain Pledge and Security Agreement
dated as of the Effective Date pursuant to which Greenwich pledges 65% of the
issued and outstanding stock of Caledonian to Agent and Trustee.
"PREPAYMENT DATE" shall have the meaning set forth in Section 13.1
hereof.
"PRIME RATE" for the purpose of this Agreement means the rate of interest
publicly announced from time to time by the Bank at its principal office in New
York as its prime rate or prime lending rate. This rate of interest is
determined from time to time by the Bank as a means of pricing some loans to its
customers and is neither tied to any external rate of interest or index nor does
it necessarily reflect the lowest rate of interest actually charged by the Bank
to any particular class or category of customers of the Bank.
"PRO FORMA BALANCE SHEET" shall have the meaning set forth in Section
5.5(a) hereof.
"PROJECTIONS" shall have the meaning set forth in Section 5.5(d) hereof.
"PROPERTY" shall have the meaning given to it in the Indenture.
"PURCHASE AGREEMENT" shall mean the Agreement of Purchase and Sale
between GASI, Greenwich, Aviall Services, Inc. and Aviall, Inc. dated April 19,
1996.
"RATE SWAP AGREEMENT" any interest rate swap, cap, interest rate collar
agreement or similar arrangement entered into, from time to time, by Borrower
and any one of the Lenders or a bank or financial institution reasonably
acceptable to Agent to protect Borrower and any Lender against fluctuations in
interest rates on the Obligations incurred by Borrower under this Agreement.
"RECEIVABLES" shall mean and include as to Borrower all of Borrower's
accounts, contract rights, instruments, documents, chattel paper, general
intangibles relating to accounts, drafts and
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acceptances, and all other forms of obligations owing to Borrower arising out of
or in connection with the sale or lease of Inventory or the rendition of
services, all guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
assigned or pledged to Agent hereunder.
"RECEIVABLES ADVANCE RATE" shall have the meaning set forth in Section
2.1(a) hereof.
"RELEASE" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"REQUIRED LENDERS" shall mean Lenders and Specified Participants holding,
in the aggregate, at least fifty-one percent (51%) of the Advances or, if no
Advances are outstanding, at least fifty-one percent (51%) of the Commitment
Percentages.
"REVOLVING ADVANCES" shall mean Advances made other than Letters of
Credit.
"REVOLVING INTEREST RATE" shall mean an interest rate per annum equal to
(a) with respect to Domestic Rate Loans, the sum of the Alternate Base Rate plus
the Applicable Margin and (b) with respect to Eurodollar Rate Loans, the sum of
the Eurodollar Rate plus the Applicable Margin.
"SETTLEMENT DATE" shall mean the Effective Date and thereafter Wednesday
of each week unless such day is not a Business Day in which case it shall be the
next succeeding Business Day.
"SPECIFIED PARTICIPANTS" shall mean _________________.
"SUBSIDIARY" of any Person shall mean a corporation or other entity of
whose shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"TERM" shall mean the Effective Date through _________ ___, 2001.
"TOTAL REPAIRABLE INVENTORY" shall have the meaning set forth in the
definition of Eligible Inventory.
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"TOXIC SUBSTANCE" shall mean and include any material present on
Borrower's premises which is subject to regulation under applicable United
Kingdom laws now in force or hereafter enacted relating to toxic substances.
"Toxic Substance" includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.
"TRANSACTIONS" shall have the meaning given to it in Section 5.5 hereof.
"TURBINE" shall have the meaning set forth in the Affiliate Loan
Agreement.
"UNDRAWN AVAILABILITY" shall at any given date mean the amount equal to
the difference between (a) the lesser of (i) Maximum Loan Amount, and (ii)
Formula Amount as of such date, MINUS (b) the aggregate outstanding Advances on
such date after giving effect to any outstanding requests by Borrower for
Advances as of that date.
"U.K. SECURITY DOCUMENT" shall mean the debenture dated this date between
Borrower and Agent (as agent and trustee for Lenders).
"WEEK" shall mean the time period commencing with a Wednesday and ending
on the following Tuesday.
1.3 UNIFORM COMMERCIAL CODE TERMS. All terms used herein and defined
in the Uniform Commercial Code as adopted in the State of New York shall have
the meaning given therein unless otherwise defined herein.
1.4 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and VICE VERSA. The
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation". In computing periods of time from a specified
date to a later specified date, the word "from" means "from and including" and
the words "to" and "until" each means "to but excluding". All references to
statutes and regulations shall include any amendments of same and any successor
statutes and regulations. All references to any instrument or agreements to
which Borrower and any Lender or Agent are parties including, without
limitation, references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
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1.5 OTHER DEFINED TERMS. All capitalized terms used herein and not
otherwise defined herein shall have the meaning given to them in the Affiliate
Loan Agreement.
II. ADVANCES AND PAYMENTS
2.1 (a) BORROWING BASE. Subject to the terms and conditions set
forth in this Agreement, each Lender, severally and not jointly, agrees to make
Revolving Advances to Borrower in accordance with the procedures provided for
herein in an aggregate amount outstanding at any time not greater than such
Lender's Commitment Percentage of the lesser of (x) the Maximum Loan Amount
MINUS the undrawn amount of outstanding Letters of Credit or (y) the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(b) and Section 2.1(d) hereof ("Receivables Advance Rate"), of Eligible
Receivables, PLUS
(ii) up to 55%, subject to the provisions of Section
2.1(b) and Section 2.1(c) hereof ("Inventory Advance Rate"), of Eligible
Inventory, PLUS
(iii) up to 55%, subject to the provisions of Section
2.1(b) and Section 2.1(d) (the Receivables Advance Rate and the Inventory
Advance Rate and the Unbilled Receivables Advance Rate shall be referred to,
collectively, as the "Advance Rates") of the Eligible Unbilled Receivables,
MINUS
(iv) such reserves as Agent may, in a commercially
reasonable manner, reasonably deem proper and necessary, MINUS
(v) the undrawn amount of outstanding Letters of Credit.
The amounts derived from (x) the sum of Sections 2.1(a)(y)(i) PLUS
2.1(a)(y)(ii) MINUS (y) the sum of Sections 2.1(a)(y)(iii) and 2.1(a)(y)(iv) at
any time and from time to time shall be referred to as the "Formula Amount".
(b) DISCRETIONARY RIGHTS. The Advance Rates may be increased
by Agent with the consent of the Lenders or decreased by Agent at any time and
from time to time in the good faith exercise of its reasonable discretion;
PROVIDED, HOWEVER, that Agent shall not: (i) decrease any Advance Rate by more
than five (5%) percent during any forty-five (45) day period (for example, from
85% to 80% with respect to any Receivables Advance Rate); or (ii) decrease any
Inventory Advance Rate below 45%. Borrower consent to any such increases or
decreases and acknowledge that decreasing the Advance Rates may limit or
restrict Advances
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requested by Borrower. Agent shall in each instance give Borrower not less than
five (5) Business Days' prior written notice of its intention to decrease any of
the Advance Rates.
(c) INVENTORY ADVANCES.In no event shall the aggregate Advances
with respect to Inventory of Borrower plus the aggregate Inventory Advances
outstanding at any time pursuant to Section 2.1(a)(ii), Section 2.1(b)(ii),
Section 2.1(c)(ii), Section 2.1(d)(ii), Section 2.1(e)(ii) and Section
2.1(f)(ii) of the Affiliate Loan Agreement exceed $130,000,000 in the aggregate.
(d) RECEIVABLES ADVANCES. In no event shall the aggregate
Advances with respect to Continental Receivables outstanding at any time plus
the aggregate Advances with respect to Contract Receivables pursuant to Sections
2.1(a)(i), 2.1(b)(i), 2.1(c)(i), 2.1(d)(i), 2.1(e)(i), 2.1(f)(i), 2.1(d)(iii),
2.1(e)(iii) and 2.1(f)(iii) of the Affiliate Loan Agreement exceed [$15,000,000]
in the aggregate.
(e) UNBILLED RECEIVABLES. In no event shall the aggregate
Advances with respect to Eligible Unbilled Receivables plus the aggregate
Advances with respect to Eligible Unbilled Receivables outstanding at any time
pursuant to Sections 2.1(d)(iii), 2.1(e)(iii) and 2.1(f)(iii) of the Affiliate
Loan Agreement exceed $12,000,000 in the aggregate.
2.2 NOTES. The Advances shall be evidenced by amended and restated
promissory notes of Borrower, substantially in the form of EXHIBIT 2.2 (the
"Notes") with appropriate insertion as to date and principal amount, payable to
the order of each Lender in an amount equal to its respective Commitment
Percentage of Advances.
2.3 PROCEDURE FOR BORROWING.
(a) In the event Borrower desires to obtain a Domestic Rate
Loan Borrower shall give Agent at least one (1) Business Days prior telephonic
notice ("Advance Request") on or before 11:00 A.M., New York time (except as may
be set forth below) specifying (i) the date of the proposed borrowing (which
shall be a Business Day) and (ii) the type of borrowing and the amount to be
borrowed, which amount on the date of such Advance shall be in a minimum amount
of $250,000 and in integral multiples of $100,000 for borrowings in excess
thereof. In addition, as a convenient means of effecting Advances, Borrower
will maintain a controlled disbursement account (business checking) with the
Bank at its branch located at 1290 6th Avenue, New York, New York 10104
(collectively, "Checking Accounts"). Each Checking Account will act as a
corporate payable account for Borrower. Once each Business Day following
receipt by the Bank of its Federal Reserve system clearing (which may be later
than 11:00 a.m. New York time but must be earlier than 1:00 p.m. New York time),
Bank will notify
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Agent of the total dollar amount of checks presented to Bank for payment for
each Checking Account since the previous Business Day's notification (the
"Payable Amount"). Such notification shall be deemed to be an Advance Request
for an Advance to be made on such Business Day to the respective Borrower's
Checking Account in an amount equal to the Payable Amount, but Agent and Lenders
shall not be obligated to honor such Advance Request except as herein
specifically required. Any request for an Advance shall be deemed reduced
automatically and without notice so as not to be in excess of, after giving
effect to the requested Advance, an amount which would cause the aggregate
amount of all Advances to be greater than the lesser of (a) for Greenwich, (i)
the Maximum Loan Amount or (ii) the Formula Amount. Subject to the provisions
of Section 2.7 hereof, the proceeds of each Advance shall be made available by
Agent to Borrower on or before 1:45 p.m., New York time (except with respect to
Advances to the Checking Accounts which shall be made available on or before
1:45 p.m. New York time), on the Business Day specified in the Advance Request
by wire transferring immediately available funds in such amount or causing
immediately available funds in such amount to be wire transferred to the account
of Borrower, as shall be designated to Agent in the Advance Request therefor.
(b) Notwithstanding the provisions of 2.3(a) above, in the
event Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give
Agent at least three (3) Business Days' prior written notice specifying (i) the
date of the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount to be borrowed, which amount on the date of such
Advance shall be in a minimum amount of $1,000,000 and in integral multiples of
$100,000 for borrowings in excess thereof and (iii) the duration of the first
Interest Period therefor. Interest Periods for Eurodollar Rate Loans shall be
for 30, 60 or 90 days. Notwithstanding anything contained herein, no Eurodollar
Rate Loan shall be made (i) until the later to occur of (x) ninety (90) days
following the Effective Date or (y) the date on which the Commitment Percentages
of all Lenders (other than BNYCC) shall aggregate _____%, (ii) upon the
occurrence and during the continuation of an Event of Default and (iii) if after
giving effect to such Eurodollar Rate Loan more than six (6) shall be
outstanding at such time.
(c) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on such
date as Borrower may elect as set forth in (b)(iii) above provided that:
(i) any Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next preceding or succeeding
Business Day as is the Bank's custom in the market to which such Eurodollar Rate
Loan relates;
(ii) no Interest Period shall end after the last day of
the Term;
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(iii) any Interest Period which begins on a day for which
there is no numerically corresponding day in the calendar month during which
such Interest Period is to end, shall (subject to clause (i) above) end on the
last day of such calendar month.
Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by Borrower's notice of borrowing given to Agent pursuant
to Section 2.3(b) or by its notice of conversion given to Agent pursuant to
Section 2.3(d), as the case may be. Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrower, Borrower
shall be deemed to have elected to convert to a Domestic Rate Loan subject to
Section 2.3(d) hereinbelow.
(d) Provided that no Event of Default shall have occurred and
be continuing, Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, continue any
such loan in the same aggregate principal amount. If a Borrower desires to
convert a loan, Borrower shall give Agent not less than three (3) Business Days'
prior written notice, specifying the date of such conversion, the loans to be
converted and if the conversion is from a Domestic Rate Loan to a Eurodollar
Loan, the duration of the first Interest Period therefor. After giving effect
to each such conversion, there shall not be outstanding more than six (6)
Eurodollar Rate Loans, in the aggregate.
(e) At their option and upon three (3) Business Days' prior
written notice, Borrower may prepay the Advances in whole at any time, with
accrued interest on the principal being prepaid to the date of such prepayment.
In the event that any prepayment of a Eurodollar Rate Loan is required or
permitted on a date other than the last Business Day of the then current
Interest Period with respect thereto, Borrower shall indemnify Agent and Lenders
therefor in accordance with Section 2.3(f) hereof.
(f) Borrower shall indemnify Agent and Lenders and hold Agent
and Lenders harmless from and against any and all losses or expenses that Agent
or any Lender may sustain or incur as a consequence of any prepayment or any
default by Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including (but not limited to) any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder.
(g) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, or any
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change therein or in the interpretation or application thereof, shall make it
unlawful for any Lender (for purposes of this subsection (g), Section 2.12 and
Section 2.13, the term "Lender" shall include any Lender and the office or
branch where any Lender or any corporation or bank controlling such Lender makes
or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate
Loans, the obligation of any Lender to make Eurodollar Rate Loans hereunder
shall forthwith be cancelled and Borrower shall, if any affected Eurodollar Rate
Loans are then outstanding, promptly upon request from Agent, either pay all
such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate
Loans into Domestic Rate Loans. If any such payment or conversion of any
Eurodollar Rate Loan is made on a day that is not applicable to such Eurodollar
Rate Loan, Borrower shall pay Lenders, upon Agent's request, such amount or
amounts as may be necessary to compensate Lenders for any loss or expense
sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a
result of such payment or conversion, including (but not limited to) any
interest or other amounts payable by the Agent or Lenders to lenders of funds
obtained by Agent or Lenders in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Agent to Borrower shall be conclusive absent
manifest error.
(h) Should any amount required to be paid by Borrower as
principal or interest hereunder, or as fees or other charges under this
Agreement or any Other Documents, or with respect to any other Obligation,
become due and payable, same shall be deemed a request for an Advance as of the
date such payment is due, in the amount required to pay in full such interest,
principal, fee, charge or other Obligation under this Agreement and/or any Other
Documents, and such request shall be irrevocable.
2.4 DISBURSEMENT OF ADVANCE PROCEEDS. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or any Lender,
shall be charged to Borrower's account on the Agent's books. During the Term,
Borrower may use the Advances (subject to the limitations set forth in Section
2.1 hereof) by borrowing, prepaying and reborrowing, all in accordance with the
terms and conditions hereof.
2.5 REPAYMENT OF ADVANCES.The Advances shall be due and payable in
full on the last day of the Term subject to earlier prepayment as herein
provided.
2.6 REPAYMENT OF EXCESS ADVANCES.
The aggregate balance of Advances outstanding at any time in
excess of the lesser of (i) Formula Amount as at such time, or (ii) Maximum Loan
Amount shall be immediately due and payable without the necessity of any demand,
at the place designated by Agent, whether or not an Incipient Event of Default
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or Event of Default has occurred hereunder. In no event shall the aggregate
balance of Advances outstanding at any time to Borrower exceed the Maximum Loan
Amount.
2.7 MANNER OF BORROWING AND PAYMENT. (a) Except as expressly provided
herein, all payments (including prepayments) to be made by Borrower on account
of principal, interest and fees shall be made without set-off or counterclaim
and shall be made to the Agent to the Payment Office, in each case on or prior
to 1:00 p.m., New York time, in Dollars and in immediately available funds.
(b) Each borrowing of Revolving Advances shall be advanced
according to the Commitment Percentages of the Lenders.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.7(a) and (b) hereof, commencing with the first Business Day following
the Effective Date, each borrowing of Revolving Advances shall be advanced by
Agent and each payment by Borrower on account of Revolving Advances shall be
applied first to those Revolving Advances made by Agent. On or before [1:00
P.M.], New York time, on each Settlement Date commencing with the first
Settlement Date following the Effective Date, Agent and the Lenders shall make
certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week exceeds the aggregate amount of
repayments applied to outstanding Revolving Advances during such preceding Week,
then each Lender shall provide Agent with funds in an amount equal to its
Commitment Percentage of the difference between (w) such Revolving Advances and
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with its Commitment Percentage of the difference between (y) such
repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at
the applicable Contract Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefitted
Lender shall purchase for cash
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from the other Lenders such portion of each such other Lender's Advances, or
shall provide such other Lender with the benefits of any such Collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to share
the excess payment or benefits of such Collateral or proceeds ratably with each
of the Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. Each Lender so purchasing a
portion of another Lender's Advances may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Borrower a corresponding amount. Agent will promptly notify
Borrower of its receipt of any such notice from a Lender. If such amount is
made available to Agent on a date after a Settlement Date, such Lender shall pay
to Agent on demand an amount equal to the product of (i) the daily average
Federal Funds Rate (computed on the basis of a year of 360 days) during such
period as quoted by Agent, times (ii) such amount, times (iii) the number of
days from and including such Settlement Date to the date on which such amount
becomes immediately available to Agent. A certificate of Agent submitted to any
Lender with respect to any amounts owing under this paragraph (e) shall be
conclusive, in the absence of manifest error. If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to Revolving Advances
hereunder, on demand from Borrower; PROVIDED, HOWEVER, that Agent's right to
such recovery shall not prejudice or otherwise adversely affect Borrower's
rights (if any) against such Lender.
2.8 STATEMENT OF ACCOUNT. Agent shall maintain, in accordance with
its customary procedures, a loan account in the name of Borrower in which shall
be recorded the date and amount of each Advance to Borrower made by Agent and
the date and amount of each repayment, prepayment or other payment in respect
thereof; PROVIDED, HOWEVER, the failure by Agent to record the date and amount
of any Advance shall not adversely affect Agent and the failure of the Agent to
record the date and amount of any repayment or prepayment of any Advance shall
not adversely affect Borrower nor give it any rights vis a vis Agent. For each
month, Agent shall send to Borrower a statement showing the accounting for the
Advances made, payments made or credited in respect thereof, and other
transactions between the Agent, Lenders and Borrower,
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during such month. The monthly statements shall be deemed correct and binding
upon Borrower in the absence of manifest error, and shall constitute an account
stated between Lenders and Borrower unless Agent receives a written statement of
specific exceptions within thirty (30) days after such statement is received by
Borrower. The records of Agent with respect to the loan accounts shall be prima
facie evidence of the amounts of Advances and other changes thereto and of
payments applicable thereto.
2.9 NO DEDUCTIONS. Borrower shall pay principal, interest, and all
other amounts payable hereunder, or under any Other Documents, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
2.10 MANDATORY PREPAYMENTS.
(a) When Borrower sells or otherwise disposes of any Collateral
(other than Inventory in the ordinary course of business) Borrower shall repay
the Advances in an amount equal to the difference between (i) the cash proceeds
of such sale or other disposition (except as otherwise provided by Section 4.3)
and (ii) the reasonable costs of such sale or other disposition (in the case of
subclauses (i) and (ii) above after giving effect to all tax benefits or
obligations in accordance with GAAP), such repayment to be made promptly but in
no event more than five (5) Business Days following receipt of the net cash
proceeds thereof, and until the date of payment, such proceeds shall be held in
trust for Lenders. The foregoing shall not be deemed to be implied consent to
any such sale otherwise prohibited by the terms and conditions hereof.
2.11 ADDITIONAL PAYMENTS. To the extent that Agent may, in the
exercise of its rights under this Agreement, make an expenditure due to
Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document, any reasonable amounts so expended by Agent may
be charged to Borrower's account as a Revolving Advance and added to the
Obligations. Agent shall provide Borrower, if requested, with documentation to
evidence such expenditure and shall provide Borrower with notice immediately
prior to the making of such payment; PROVIDED, that the failure of Agent to give
such notice shall not adversely affect Agent's rights hereunder. In the event
that at the time such sum is expended the unpaid balance of Advances to Borrower
exceeds or would exceed, with the making of such expenditure, the lesser of the
Maximum Loan Amount or Borrower shall on demand repay the Advances in the amount
by which such expenditure causes such excess.
2.12 INCREASED COSTS. In the event a change in any applicable law,
treaty or governmental regulation, in the interpretation or application thereof,
or compliance by Agent or any Lender with any new request or directive (whether
or not having the force of law) from any central bank or other financial,
monetary or other authority which is generally applicable to lenders similarly
situated to Agent or any Lender shall
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(a) subject the Agent or any Lender to any tax of any kind
whatsoever (excluding taxes based on the income of Agent or any Lender) with
respect to this Agreement or change the basis of taxation of payments to Agent
or any Lender of principal, fees, interest or any other amount payable hereunder
or under any Other Documents;
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender any other condition with
respect to this Agreement or any Other Documents;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or any Lender deems to be material or to reduce the amount of any
payment by or for the account of Borrower (whether of principal, interest or
otherwise) in respect of any of the Advances by an amount that Agent or any
Lender deems to be material; then, in any case, Borrower shall promptly pay
Agent or such Lender, upon demand, such additional amount as will compensate
Agent or such Lender for such additional cost or such reduction, as the case may
be, provided that the foregoing shall not apply to increased costs which are
reflected in the Alternate Base Rate. Agent shall certify the amount of such
additional cost or reduced amount to Borrower, and such certification shall be
prima facie evidence of such additional cost or reduced amount absent manifest
error.
2.13 CAPITAL ADEQUACY.
(a) In the event that, on or after the date of this Agreement,
any adoption of or any change in any applicable law, rule, regulation or
guideline regarding capital adequacy of Agent or any Lender or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Agent or any Lender, or any corporation or bank
controlling Agent or any Lender and the office or branch where Agent or any
Lender makes or maintains any Eurodollar Rate Loan with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on Agent's or any Lender's capital as a consequence
of its obligations hereunder to a level below that which Agent or any Lender
would have achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Borrower shall pay upon demand
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to Agent or such Lender such additional amount or amounts as will compensate
Agent or such Lender for such reduction. In determining such amount or amounts,
Agent or such Lender may use any reasonable averaging or attribution methods.
The protection of this Section 2.13 shall be available to Agent and Lenders
regardless of any possible contention of invalidity or inapplicability with
respect to the applicable law, regulation or condition.
(b) A certificate of Agent setting forth such amount or amounts
as shall be necessary to compensate Agent or any Lender with respect to Section
2.13(a) when delivered to Borrower shall be conclusive absent manifest error.
(c) The obligations of Borrower under this Section 2.13 shall
survive for a period of one (1) year following the termination of this Agreement
and the Other Documents and payment of the Notes and the Advances.
2.14 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan;
THEN
Agent shall give Borrower prompt written, telephonic or telegraphic notice of
such determination. If such notice is given, (i) any such requested Eurodollar
Rate Loan shall be made as a Domestic Rate Loan, unless Borrower shall notify
the Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days
prior to the date of such proposed borrowing, that their request for such
borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate
Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been
converted to an affected type of Eurodollar Rate Loan shall be continued as or
converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loan shall be
converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
last Business Day of the then current Interest Period applicable to such
affected Eurodollar Rate Loan, shall be converted into an unaffected type of
Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain
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outstanding affected Eurodollar Rate Loans and Borrower shall not have the right
to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.
2.15 LETTERS OF CREDIT. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of Standby Letters of Credit ("Letters
of Credit") PROVIDED, HOWEVER, that Agent will not be required to issue or cause
to be issued Letters of Credit to the extent that the face amount of such
Letters of Credit would then cause the outstanding Advances (with the requested
Letter of Credit being deemed to be outstanding for purposes of this
calculation) to exceed the lesser of (A) the Maximum Loan Amount or (B) the
Formula Amount The maximum amount of outstanding Letters of Credit hereunder and
under the Affiliate Loan Agreement shall not exceed $10,000,000 in the aggregate
at any time. All disbursements or payments related to Letters of Credit shall
be deemed to be Revolving Advances and shall bear interest at the Revolving
Interest Rate for Domestic Rate Loans (unless and until converted to a
Eurodollar Rate Loan); and to the extent not drawn upon, Letters of Credit that
have not been drawn upon shall not bear interest. Letters of Credit shall be
subject to the terms and conditions set forth in the Application and Agreement
for Standby Letter of Credit attached hereto as EXHIBIT 2.15.
Upon the declaration by Agent of an Event of Default, Borrower
will cause cash to be deposited and maintained in an account with Agent, as cash
collateral, in an amount equal to the undrawn amount of outstanding Letters of
Credit, and Borrower hereby irrevocably authorizes Agent, in its discretion, on
Borrower's behalf and in Borrower's name, to open such an account and to make
and maintain deposits therein, or in an account opened by Borrower, in the
amounts required to be made by Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of Borrower coming into Agent's
possession at any time. Agent will invest such cash collateral (less applicable
reserves) in such short-term money-market items as to which Agent and Borrower
mutually agree and the net return on such investments shall be credited to such
account and constitute additional cash collateral. Borrower may not withdraw
amounts credited to any such account except upon (a) waiver or cure of the
subject Event of Default, or (b) payment and performance in full of all
Obligations and termination of this Agreement.
2.16 ISSUANCE OF LETTERS OF CREDIT.
(a) Borrower may request Agent to issue or cause the issuance
of a Letter of Credit by delivering to Agent at the Payment Office, Bank's
standard form of Application and Agreement for Standby Letter of Credit (the
"Letter of Credit Application") completed to the satisfaction of Agent; and such
other related certificates, documents and other papers and information as Agent
may reasonably request.
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(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than twelve months
after such Letter of Credit's date of issuance and in no event later than five
(5) days prior to the last day of the Term. Each Letter of Credit Application
and each Letter of Credit shall be subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any amendments or revisions thereof and, to the extent
not inconsistent therewith, the laws of the State of New York.
2.17 REQUIREMENTS FOR ISSUANCE OF LETTERS OF CREDIT.
(a) In connection with the issuance of any Letter of Credit,
Borrower shall indemnify, save and hold Agent and each Lender harmless from any
loss, cost, expense or liability, including, without limitation, payments made
by Agent or any Lender, and expenses and reasonable attorneys' fees incurred by
Agent or any Lender arising out of, or in connection with, any Letter of Credit
to be issued or created. Borrower shall be bound by Agent's, any Lender's or any
issuing bank's regulations and good faith interpretations of any Letter of
Credit issued or created for Borrower's account, although this interpretation
may be different from Borrower's own; and neither Agent, any Lender, the bank
which opened the Letter of Credit, nor any of its correspondents shall be liable
for any error, negligence, or mistakes, whether of omission or commission, in
following Borrower's instructions or those contained in any Letter of Credit or
of any modifications, amendments or supplements thereto or in issuing or paying
any Letter of Credit, except for its own gross negligence or willful misconduct.
(b) Borrower shall authorize and direct any bank which issues a
Letter of Credit to name Borrower as the "Account Party" therein and to deliver
to Agent all instruments, documents, and other writings and property received by
the bank pursuant to the Letter of Credit and to accept and rely upon Agent's
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit or the application therefor.
(c) Each Lender shall be deemed to have irrevocably purchased
an undivided participation in Agent's credit support enhancement provided to the
issuing bank of any Letter of Credit and each Revolving Advance made as a
consequence of the issuance of a Letter of Credit and all disbursements
thereunder in an amount equal to such Lender's applicable Commitment Percentage
times the outstanding amount of the Letters of Credit and disbursements
thereunder. In the event that at the time a disbursement is made the unpaid
balance of Revolving Advances exceeds or would exceed, with the making of such
disbursement, the lesser of the Maximum Loan Amount or the Formula Amount, and
such
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disbursement is not reimbursed by Borrower within two (2) Business Days, Agent
shall promptly notify each Lender and upon Agent's demand each Lender shall pay
to Agent such Lender's proportionate share of such unreimbursed disbursement
together with such Lender's proportionate share of Agent's unreimbursed costs
and expenses relating to such unreimbursed disbursement. Upon receipt by Agent
of a repayment from Borrower of any amount disbursed by Agent for which Agent
had already been reimbursed by any of Lenders, Agent shall deliver to each of
the subject Lenders that Lender's pro rata share of such repayment. Each
Lender's participation commitment shall continue until the last to occur of any
of the following events: (A) Agent ceases to be obligated to issue Letters of
Credit hereunder; (B) no Letter of Credit issued hereunder remains outstanding
and uncancelled or (C) all Persons (other than Borrower) have been fully
reimbursed for all payments made under or relating to Letters of Credit.
2.18 DEFAULTING LENDER.
(a) Notwithstanding anything to the contrary contained herein,
in the event any Lender (x) has refused (which refusal constitutes a breach by
such Lender of its obligations under this Agreement) to make available its
portion of any Advance or (y) notifies either Agent or Borrower that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.18 while such Lender Default remains in effect.
(b) Advances shall be incurred PRO RATA from Lenders (the "Non-
Defaulting Lenders") which are not Defaulting Lenders based on their respective
Commitment Percentages, and no Commitment Percentage of any Lender or any PRO
rata share of any Advances required to be advanced by any Lender shall be
increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender PRO RATA based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled, during the
continuance of such Lender Default, to give instructions to Agent or to approve,
disapprove, consent to or vote on any matters relating to this Agreement and the
Other Documents. All amendments, waivers and other modifications of this
Agreement and the Other Documents may be made without regard to a Defaulting
Lender and, solely for purposes of the definition of "Required
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Lenders" and Section 14.2(b) hereof, a Defaulting Lender shall be deemed not to
be a Lender and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.18, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing
in this Section 2.18 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
(f) If a Lender Default shall occur, any Lender or Lenders may
commit to make Advances in an amount necessary to meet Borrower's request. In
such event, the Defaulting Lender's Commitment Percentage of the Advances shall
be terminated and its Commitment Percentage of the Advances outstanding (prior
to such additional Advances being made by the other Lender or Lenders) shall be
repaid by Borrower provided Borrower shall not be obligated to pay an early
termination fee to such Defaulting Lender.
2.19 WITHHOLDING TAXES.
(a) All sums payable by Borrower under this Agreement shall be
paid in full without set off or counterclaim and free and clear of and without
any deduction or withholding for or on account of any present or future
withholding taxes.
(b) If Borrower shall be required by law to make any such
deduction or withholding from any payment for the account of Agent, the Lenders
or any of them, then Borrower will ensure that such deduction or withholding
does not exceed the minimum legal liability therefor and will forthwith pay to
Agent for the account of Agent, the Lenders or any of them such additional
amount as will result in the receipt by Agent, the Lenders or any of them of the
full amount which would otherwise have been receivable hereunder had no such
deduction or withholding been made.
(c) If Borrower pays any additional amount referred to in sub-
clause (b) above ("tax payment") to Agent or any Lender pursuant to the clause
and Agent or such Lender, in its absolute discretion, effectively obtains a
refund of that tax payment ("tax credit") which it is able to identify as being
attributable to that tax payment, then if it can, in its absolute
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discretion, do so without prejudicing the retention of that tax credit, Agent or
such Lender may reimburse Borrower such proportion of that tax credit as it
determines will leave it (after such reimbursement) in no better or worse
position than if that tax payment had not been required. Agent or such Lender
shall have complete discretion as to (a) whether to claim any tax credit (and,
if so, the extent, order and manner of such claim) and (b) whether any amount is
due from it hereunder (and, if so, the amount and time of payment). Neither
Agent nor any Lender shall be obliged to disclose any information regarding its
tax affairs and computations.
III. INTEREST AND FEES.
3.1 INTEREST. Interest on Revolving Advances shall be payable in
arrears on the last day of each month with respect to Domestic Rate Loans and,
with respect to any Eurodollar Rate Loan, at the end of the Interest Period
relating to such Eurodollar Rate Loan. Interest charges for Domestic Rate Loans
shall be computed on the actual average of daily Revolving Advances outstanding
during the month (the "Monthly Advances") at a rate per annum equal to the
applicable Revolving Interest Rate. Whenever, subsequent to the date of this
Agreement, the Alternate Base Rate is increased or decreased, the Revolving
Interest Rate applicable to Domestic Rate Loans shall be similarly changed
without notice or demand of any kind by an amount equal to the amount of such
change in the Alternate Base Rate during the time such change or changes remain
in effect. Upon and after the declaration by Agent of an Event of Default, and
during the continuation thereof, the Revolving Advances shall bear interest at
the Revolving Interest Rate plus two (2%) percent per annum and fees on
outstanding Letters of Credit shall be calculated at three and one-half (3.50%)
percent (the "Default Rate").
3.2 INTENTIONALLY OMITTED.
3.3 UNUSED FACILITY FEE. On the first day of each calendar month
commencing on the first day of the first month following the Effective Date,
Borrower shall pay to Agent an unused facility fee initially, a rate per annum
equal to .3% of the average daily unused portion of the Maximum Loan Amount;
PROVIDED, however, the unused facility fee shall be amended as provided below,
commencing on the later to occur of (i) the last day of the third fiscal quarter
after the Effective Date and (ii) March 31, 1997 and at the end of each fiscal
quarter thereafter based upon the ratio of Funded Debt to EBITDA as reflected in
the financial statements (x) delivered to Agent pursuant to Section 9.7 of the
Affiliate Loan Agreement with respect to the first three (3) fiscal quarters of
any fiscal year and (y) delivered to Agent pursuant to Section 9.8 of the
Affiliate Loan Agreement with respect to the last fiscal quarter of any fiscal
year:
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Ratio of Indebtedness to EBITDA Unused Facility Fee
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less than 3.0 to 1.0 0.200%
less than 3.50 and equal to or greater than 3.0 to 1.0 0.200%
less than 4.50 and equal to or greater than 3.50 to 1.0 0.300%
equal to or greater than 4.50 to 1.0 0.375%
The foregoing ratio shall be determined for Borrowers on a consolidated
basis. Notwithstanding the foregoing, the unused facility fee shall not be
reduced at such time as an Event of Default or Incipient Event of Default has
occurred and is continuing but shall be reduced (if applicable) when such Event
of Default or Incipient Event of Default has been cured or waived.
3.4 LETTER OF CREDIT.
Borrower shall pay Agent (i) for the pro-rata benefit of Lenders for
issuing or causing the issuance of a Letter of Credit, a fee computed at a rate
per annum of one and one-half percent (1-1/2%) on the original face amount
thereof ("Letter of Credit Fees"), (ii) Bank's other customary charges payable
in connection with Letters of Credit, as in effect from time to time (which
charges shall be furnished to Borrower by Agent upon request). Such fees and
charges shall be payable on the opening of each Letter of Credit, and thereafter
on the last day of each month. Any such charge in effect at the time of a
particular transaction shall be the charge for that transaction, notwithstanding
any subsequent change in Bank's prevailing charges for that type of transaction.
All Letter of Credit Fees payable hereunder shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not be subject to
rebate or proration upon the termination of this Agreement for any reason.
3.5 COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed; PROVIDED, HOWEVER, Advances bearing interest based on the Prime
Rate shall be computed on the basis of a year of 365(6) days and for the actual
number of days elapsed. If any payment to be made hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall then be
payable in respect of the period of such extension.
3.6 MAXIMUM CHARGES. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest
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rate permissible under law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that a court
determines that Agent or any Lender has received interest and other charges
hereunder in excess of the highest lawful rate applicable hereto, such excess
interest shall be first applied to any unpaid principal balance owed by
Borrower, and if the then remaining excess interest is greater than the
previously unpaid principal balance, Lenders shall promptly refund such excess
amount to Borrower and the provisions hereof shall be deemed amended to provide
for such permissible rate.
IV. COLLATERAL: GENERAL TERMS
4.1 ACKNOWLEDGEMENT AND GRANT OF SECURITY INTERESTS.
(a) Borrower hereby pledges and assigns to Agent for the ratable
benefit of the Lenders and grants to Agent for the ratable benefit of the
Lenders a continuing security interest in all of the Collateral and
acknowledges, confirms and agrees that Agent has and shall continue to have for
the ratable benefit of the Lenders a continuing security interest and fixed and
floating charges in, on or to, all the Collateral now or heretofore granted,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Borrower shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
(b) The liens and security interests of Agent for the ratable
benefit of Lenders in the Collateral shall be deemed to be continuously
perfected from the earliest date of the granting of such liens and security
interests, whether hereunder, under the Other Documents, or under the Existing
Loan Agreement.
4.2 PERFECTION OF SECURITY INTEREST. Borrower shall take all action
that may be necessary or desirable, or that Agent may reasonably request, so as
at all times to maintain the validity, perfection, enforceability and first
priority of Agent's security interest in the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to (i) immediately discharging all Liens on
Collateral other than Permitted Encumbrances, (ii) obtaining landlords' or
mortgagees' lien waivers with respect to any premises leased or purchased by
Borrower after the Initial Closing Date, (iii) delivering to Agent, endorsed or
accompanied by such instruments of assignment as Agent may reasonably specify,
and stamping or marking, in such manner as Agent may reasonably specify, any and
all chattel paper, instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv) entering into
custodial arrangements satisfactory to Agent, and (v) executing and delivering
financing statements, instruments of pledge, mortgages, notices and assignments,
in each case in form and substance satisfactory to Agent, relating to the
creation, validity, perfection, maintenance
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or continuation of Agent's security interest in the Collateral under the Uniform
Commercial Code or other applicable or comparable law. All reasonable and
necessary charges, expenses and fees that Agent may incur in doing any of the
foregoing in the good faith exercise of its discretion, and any local taxes
relating thereto, shall be charged to Borrower's account and added to the
Obligations, or, at Agent's option, shall be paid to Agent immediately upon
demand.
4.3 DISPOSITION OF COLLATERAL. Borrower will safeguard and protect
all Collateral for Agent's general account and make no disposition thereof
whether by sale, lease or otherwise without Agent's prior written consent which
shall not be unreasonably withheld or delayed, except that Borrower may, without
Agent's consent, sell Inventory in the ordinary course of business.
4.4 PRESERVATION OF COLLATERAL. Agent shall have, and is hereby
granted, a right of ingress and egress to the places where the Collateral is
located, and may proceed over and through any of Borrower's owned or leased
property In addition to the rights and remedies set forth in Section 11.1
hereof, Agent may at any time following the occurrence and during the
continuance of an Event of Default take such steps as Agent deems necessary to
protect its security interest in and to preserve the Collateral including (a)
the hiring of such security guards or the placing of other security protection
measures as Agent may deem appropriate; (b) employing and maintaining at any of
Borrower's premises a custodian who shall have full authority to do all acts
necessary to protect Agent's security interest in the Collateral; (c) leasing
warehouse facilities to which Agent may move all or part of the Collateral; and
(d) subject to the provisions of the Intercreditor Agreement, using any of
Borrower's owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral. Borrower shall cooperate
fully with all of Agent's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may direct. All of Agent's
reasonable and necessary expenses of preserving the Collateral, including any
expenses relating to the bonding of a custodian, shall be charged to Borrower's
account as an Advance and added to the Obligations.
4.5 OWNERSHIP OF COLLATERAL. With respect to the Collateral, at the
time the Collateral becomes subject to the security interest granted pursuant to
or Section 4.1 hereof, as the case may be: (a) Borrower shall be the sole owner
of and fully authorized and able to transfer, pledge and/or grant a first
security interest in each and every item of its respective Collateral to Agent;
and, except for Permitted Encumbrances, the Collateral shall be free and clear
of all Liens, Claims, Charges and encumbrances whatsoever; (b) each document and
agreement executed by Borrower or delivered to Agent or any Lender on behalf of
Borrower in connection with this Agreement shall be true and correct in all
material respects as of the date thereof;
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(c) all signatures and endorsements of Borrower that appear on such documents
and agreements shall be genuine and Borrower shall have full capacity to execute
same; and (d) Borrower's Inventory shall be located as set forth on EXHIBIT 4.5
and shall not be removed from such location(s) (except with respect to the sale
of Inventory in the ordinary course of business) unless Agent shall have
received thirty (30) days' prior written notice of such removal.
4.6 DEFENSE OF AGENT'S INTERESTS. Until (a) payment and performance
in full of all of the Obligations and (b) termination of this Agreement, Agent's
interests in the Collateral shall continue in full force and effect. During
such period none of Borrower shall, without Agent's prior written consent,
pledge, sell (except Inventory in the ordinary course of business), assign,
transfer, create or suffer to exist a security interest in, Lien, Claim or
Charge upon or encumber or allow or suffer to be encumbered in any way except
for Permitted Encumbrances, any part of the Collateral. Except as respects
Permitted Encumbrances, Borrower shall defend Agent's interests in the
Collateral against any and all Persons whatsoever. At any time following the
declaration and during the continuance of an Event of Default hereunder, Agent
shall have the right to take possession of the indicia of the Collateral and the
Collateral using all legally permitted methods in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this right to take
possession of the Collateral, Borrower shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent; PROVIDED, that any request by Agent shall be made in a
commercially reasonable manner. In addition, with respect to all Collateral,
Agent and Lenders shall be entitled to all of the rights and remedies set forth
herein and further provided by the Uniform Commercial Code or other applicable
law. Following the occurrence and during the continuation of an Event of
Default, Borrower shall, and Agent may, at its option, instruct all suppliers,
carriers, forwarders, warehouses or others receiving or holding cash, checks,
Inventory, documents or instruments in which Agent holds a security interest to
deliver same to Agent and/or subject to Agent's order. If any of the foregoing
shall, at any time, come into Borrower's possession, they, and each of them,
shall be held by Borrower in trust as Agent's trustee, and Borrower will
immediately deliver them to Agent in their original form together with any
necessary endorsement.
4.7 BOOKS AND RECORDS. Borrower (a) shall keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including
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without limitation by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or
amortization of properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to this subsection
shall be made in accordance with, or as required by, GAAP consistently applied.
4.8 FINANCIAL DISCLOSURE. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
term of this Agreement to exhibit and deliver to Agent and each Lender copies of
any of Borrower's financial statements, trial balances or other accounting
records including work papers of any sort in the accountant's or auditor's
possession, and to disclose to Agent and each Lender any information such
accountants may have concerning Borrower's financial status and business
operations. Borrower hereby authorizes all federal, state and municipal
authorities to furnish to Agent and each Lender copies of reports or
examinations relating to Borrower, whether made by Borrower or otherwise;
PROVIDED, HOWEVER, that Agent and each Lender will attempt to obtain such
information or materials directly from Borrower prior to obtaining such
information or materials from such accountants or governmental authorities. Any
failure by the accountants or governmental authorities to comply with
information requests of Agent or any Lender shall not be deemed an Event of
Default hereunder unless such failure to comply is a result of instructions by
Borrower which are contrary to the provisions of this Section 4.8. Agent and
each Lender shall exercise its rights hereunder in a commercially reasonable
manner.
4.9 COMPLIANCE WITH LAWS. Borrower shall in all material respects
comply with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the Collateral or any
part thereof or to the operation of Borrower's business the non-compliance with
which would have a material adverse effect on the Collateral, or the operations,
business or condition (financial or otherwise) of Borrower. Borrower may,
however, contest or dispute any acts, rules, regulations, orders and directions
of those bodies or officials in any reasonable manner, provided that any related
Lien or Charge which is or might be asserted with respect thereto (if applicable
to the Collateral) is inchoate or stayed and sufficient reserves are established
to the reasonable satisfaction of Agent so as not to derogate from or against
and so as to protect, Agent's lien on or security interest in the Collateral.
4.10 INSPECTION OF PREMISES. At all reasonable times Agent or any
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from Borrower's books, records, audits, correspondence and
all other papers relating to the Collateral and the operation of Borrower's
business. Agent or any Lender may enter upon any of Borrower's premises at any
time during business hours and at any other reasonable time, and from time to
time, for the purpose of
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inspecting the Collateral and any and all records pertaining thereto and the
operation of Borrower's business.
4.11 INSURANCE. Borrower shall bear the full risk from any loss of any
nature whatsoever with respect to the Collateral. At its own cost and expense
in amounts and with carriers acceptable to Agent (which acceptance shall not be
unreasonably withheld), Borrower shall (a) keep all its insurable properties and
properties in which Borrower has an interest insured against the hazards of
fire, flood, sprinkler leakage, those hazards covered by extended coverage
insurance and such other hazards, including, without limitation, business
interruption insurance and for such amounts, as is customary in the case of
companies engaged in a business similar to Borrower provided that such insurance
shall be for at least [$____________]; (b) maintain a bond in such amounts as is
customary in the case of companies engaged in a business similar to Borrower
insuring against larceny, embezzlement or other criminal misappropriation of
insured's officers and employees who may either singly or jointly with others at
any time have access to the assets or funds of Borrower either directly or
through authority to draw upon such funds or to direct generally the disposition
of such assets; (c) maintain product liability insurance against claims for
personal injury, death or property damage suffered by others in an amount not
less than the maximum amount which Borrower is able to obtain; PROVIDED, that
such insurance shall not be for an amount less than $______________ or more than
$____________; and PROVIDED, FURTHER, that Borrower's inability to obtain
insurance in an amount equal to $____________ for Borrower is due to market
conditions and is not a result of Borrower's actions or omissions; (d) maintain
all such worker's compensation or similar insurance as may be required under the
laws of each state or jurisdiction in which Borrower is engaged in business; (e)
furnish Agent with (i) copies of all policies and evidence of the maintenance of
such policies by the renewal thereof at least thirty (30) days before any
expiration date, and (ii) appropriate loss payable endorsements in form and
substance satisfactory to Agent, naming Agent as loss payee as its interests may
appear with respect to all insurance coverage referred to in clauses (a) and (b)
above and as an additional insured with respect to the insurance coverage
referred to in clauses (c) and (d) above, and in either case providing (A) that
all proceeds thereunder in respect of the Collateral shall be payable to Agent,
(B) that no such insurance shall be affected by any act or neglect of the
insured or owner of the property described in such policy, and (C) that such
policy and loss payable clauses may not be cancelled, amended or terminated
unless at least thirty (30) days' prior written notice is given to Agent. In
the event of any loss thereunder, the carriers named therein hereby are directed
by Agent and Borrower to make payment for such loss to Agent and not to Borrower
and Agent jointly. If any insurance losses are paid by check, draft or other
instrument payable to Borrower and Agent jointly, Agent may endorse Borrower's
name thereon and do such other things as Agent may deem advisable to reduce the
same to cash. All loss recoveries received
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by Agent upon any such insurance may be applied to the Obligations, in such
order as Agent in its sole discretion shall determine; PROVIDED, HOWEVER, Agent
shall remit to Borrower any loss recoveries received by Agent with respect to
Borrower's insurance coverage referred to in clauses (c) and (d) above which are
paid to Agent other than in its capacity as an additional insured under said
policies. Any surplus shall be paid by Agent to Borrower or applied as may be
otherwise required by law. Any deficiency in the amount of insurance proceeds
received when compared to the value of the Collateral the loss of which gave
rise to such insurance proceeds shall be paid by Borrower to Agent, on demand.
Anything hereinabove to the contrary notwithstanding (i) Agent shall permit
Borrower to adjust and compromise claims under insurance coverage provided that
no Event of Default shall have been declared and be continuing and (ii) Agent
shall promptly remit to Borrower insurance proceeds received by Agent during any
calendar year under insurance policies procured and maintained by Borrower which
insure Borrower's insurable Collateral to the extent such insurance proceeds do
not exceed $__________ per occurrence provided, (x) no Event of Default shall
have been declared and be continuing, (y) Borrower shall use such insurance
proceeds to repair, replace or restore the insurable Collateral which was the
subject of the insurable loss and for no other purpose and (z) Agent shall have
obtained a perfected security interest in such repaired, replaced or restored
Collateral. In the event the amount of insurance proceeds received by Agent for
any occurrence as aforesaid exceeds $_________ and no Event of Default shall
have been declared and be continuing, Agent shall place such proceeds in an
interest-bearing account and such proceeds shall be remitted to Borrower from
time to time to the extent (a) Borrower shall submit invoices to Agent with
respect to the repair, replacement or restoration of the insurable Collateral
which was the subject of the insurable loss, (b) Borrower shall use such
insurance proceeds to repair, replace or restore the insurable Collateral which
was the subject of the insurable loss and for no other purpose, (c) the repair,
replacement or restoration of the subject Collateral must be capable of being
accomplished during the period of time in which Borrower's business interruption
insurance is in effect and (d) Borrower shall have delivered to Agent a revised
Business Plan in form and substance satisfactory to Agent evidencing Borrower's
ability to continue to operate its business without the occurrence of any other
Event of Default hereunder. Following the declaration and during the
continuance of an Event of Default hereunder, Agent shall not be obligated to
remit the insurance proceeds to Borrower.
4.12 FAILURE TO MAINTAIN INSURANCE. If Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent may
obtain such insurance and pay the premium therefor for Borrower's account, and
charge Borrower's account therefor and such expenses so paid shall be charged to
Borrower's account as an Advance and added to the Obligations.
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4.13 PAYMENT OF TAXES. Borrower will pay, before becoming delinquent,
all taxes, assessments and other Charges or Claims lawfully levied or assessed
upon Borrower or any of the Collateral including, without limitation, real and
personal property taxes, assessments and charges and all franchise, income,
employment, social security benefits, withholding, and sales taxes. If any tax
by any governmental authority is or may be imposed on Agent or any Lender or, as
a result of any transaction between Borrower, any Agent and Lender, Agent or any
Lender may be required to withhold or pay such a tax or, if any taxes,
assessments, or other Charges remain unpaid after the delinquency date or if any
Claim shall be made which, in Agent's opinion, may possibly create a valid Lien,
Charge or Claim on the Collateral, Agent may, concurrently with giving notice to
Borrower, pay the taxes, assessments, Liens, Charges or Claims and Borrower
hereby indemnifies and holds Agent harmless in respect thereof except for gross
(not mere) negligence or willful misconduct. The amount of any payment by Agent
or any Lender under this Section 4.13 shall be charged to Borrower's account as
an Advance and added to the Obligations and, until Borrower shall furnish Agent
with an indemnity therefor (or supply Agent with evidence satisfactory to Agent
that due provision for the payment thereof has been made), Agent may hold
without interest any balance standing to Borrower's credit and Agent shall
retain its security interest in any and all Collateral held by Agent.
4.14 PAYMENT OF LEASEHOLD OBLIGATIONS. Borrower shall at all times
pay, before becoming delinquent, its rental obligations under all leases under
which it is a tenant, and shall otherwise comply, in all material respects, with
all other terms of such leases and keep them in full force and effect and, at
Agent's request, will provide evidence of having done so.
4.15 RECEIVABLES.
(a) NATURE OF RECEIVABLES. Each of the Receivables shall be a
bona fide and valid account representing a bona fide obligation of the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach hereof and Eligible Unbilled Receivables do not have any invoices
relating thereto) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Borrower, or work, labor or services theretofore
rendered by Borrower and as of the date each Receivable is created. Same shall
be due and owing in accordance with Borrower's standard terms of sale without
dispute, setoff or counterclaim except, as may be stated on the accounts
receivable schedules delivered by Borrower to Agent.
(b) SOLVENCY OF CUSTOMERS. To the best of Borrower's
knowledge, each Customer, as of the date each Receivable is created, is and will
be solvent and able to pay all Receivables on which the Customer is obligated in
full when due or with respect to such Customers of Borrower who are not solvent
Borrower has
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set up on its books and in its financial records bad debt reserves adequate to
cover such Receivables or has collateral from such Customer sufficient to cover
such Receivables.
(c) LOCATIONS OF BORROWER. Borrower's chief executive office
is located at ________________________________. Until written notice is given
to Agent by Borrower of any other office at which it keeps its records
pertaining to Receivables, all such records shall be kept at such executive
office.
(d) COLLECTION OF RECEIVABLES. Until Borrower's authority to
do so is terminated by Agent (which notice Agent may give at any time following
the occurrence and during the continuance of an Event of Default), Borrower
will, at Borrower's sole cost and expense, but on Agent's behalf and for the
account of Agent, collect as Agent's property and in trust for Agent all amounts
received on Receivables, and shall not commingle such collections with
Borrower's funds or use the same except to pay Obligations. Borrower shall,
upon request, deliver to Agent in original form and on the date of receipt
thereof, all checks, drafts, notes, money orders, acceptances, cash and other
evidences of Indebtedness.
(e) NOTIFICATION OF ASSIGNMENT OF RECEIVABLES. At any time
following the occurrence and during the continuance of an Event of Default,
Agent shall have the right to send notice of the assignment of, and Agent's
security interest in, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Agent shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrower's account and added to the Obligations.
(f) POWER OF AGENT TO ACT ON BORROWER'S BEHALF. Agent shall
have the right to receive, endorse, assign and/or deliver in the name of Agent
or Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Borrower
hereby constitutes Agent or its designee as Borrower's attorney with power (i)
to endorse Borrower's name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment or Collateral; (ii) to sign Borrower's name
on any invoice or bill of lading relating to any of the Receivables, drafts
against Customers, assignments and verifications of Receivables; (iii) to send
verifications of Receivables to any Customer; (iv) to sign Borrower's name on
all financing statements or any other documents or instruments deemed necessary
or appropriate by Agent to preserve, protect, or perfect Agent's interest in the
Collateral and to file same; (v) following the occurrence and during the
continuance of an Event of Default, to
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demand payment of the Receivables; (vi) following the occurrence and during the
continuance of an Event of Default, to enforce payment of the Receivables by
legal proceedings or otherwise: (vii) following the occurrence and during the
continuance of an Event of Default, to exercise all of Borrower's rights and
remedies with respect to the collection of the Receivables and any other
Collateral; (viii) following the occurrence and during the continuance of an
Event of Default, to settle, adjust, compromise, extend or renew the
Receivables; (ix) following the occurrence and during the continuance of an
Event of Default, to settle, adjust or compromise any legal proceedings brought
to collect Receivables; (x) to prepare, file and sign Borrower's name on a proof
of claim in bankruptcy or similar document against any Customer if Borrower has
failed to do so no later than thirty (30) days prior to any bar date; (xi) to
prepare, file and sign Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables if
Borrower has failed to do so no later than thirty (30) days prior to the
expiration of any applicable time period; and (xii) to do all other acts and
things necessary to carry out this Agreement. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee shall
not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done willfully and maliciously or
by gross (not mere) negligence; this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Agent shall have the
right at any time following the declaration and during the continuance of an
Event of Default to change the address for delivery of mail addressed to
Borrower to such address as Agent may designate.
(g) NO LIABILITY. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom except for its own willful misconduct or
gross (not mere) negligence. Following the occurrence and during the
continuance of an Event of Default, Agent may, without notice or consent from
Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept,
following the occurrence and during the continuance of an Event of Default, the
return of the goods represented by any of the Receivables, without notice to or
consent by Borrower, all without discharging or in any way affecting Borrower's
liability hereunder.
(h) ESTABLISHMENT OF AN AGENCY ACCOUNT. All proceeds of
Collateral shall, at the direction of Agent, be deposited by Borrower into a
separate agency account (collectively, "Agency Accounts") as Agent may require
pursuant to
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an arrangement with such bank(s) (the "Depository Banks") as may be selected by
Borrower and be acceptable to Agent. The Depository Bank shall receive, in
writing, irrevocable instructions directing the Depository Bank to transfer such
funds so deposited to Agent by wire transfer to specified account(s) of Agent.
All funds deposited in the Agency Accounts shall immediately become the property
of Agent and Borrower shall obtain the agreement by the Depository Bank to waive
any offset rights against the funds so deposited. Neither Agent nor any Lender
assumes any responsibility for such Agency Account arrangements, including
without limitation, any claim of accord and satisfaction or release with respect
to deposits accepted by any bank thereunder. Borrower will maintain an
operating account with a Depository Bank. In the event that any check(s)
deposited in the Agency Accounts is returned unpaid, the amount thereof shall be
charged by such Depository Bank to such operating account and, to the extent
that funds are not available in the operating account, Borrower shall be solely
responsible for reimbursing the Depository Bank. Borrower shall issue, to the
respective Depository Bank, an irrevocable letter of instruction directing such
Depository Bank that, to the extent that Borrower shall receive wire transfers
representing proceeds of Collateral in such operating account, such funds shall
be automatically and immediately transferred to the applicable Agency Account.
4.16 INVENTORY. All Inventory produced by Borrower in the United
States has been, and will be produced, in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder.
4.17 EXCULPATION OF LIABILITY. Except as set forth in Section 4.15(f)
hereof, nothing herein contained shall be construed to constitute Agent or any
Lender as Borrower's agent for any purpose whatsoever, nor shall Agent or any
Lender be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof except for its own gross (not mere) negligence
or willful misconduct. Neither Agent nor any Lender does by anything herein or
in any Other Document or in any assignment or otherwise, assume any of
Borrower's obligations under any contract or agreement assigned to Agent or such
Lender, and neither Agent nor any Lender shall be responsible in any way for the
performance by Borrower of any of the terms and conditions thereof except for
its own willful misconduct or gross (not mere) negligence.
4.18 ENVIRONMENTAL MATTERS.
(a) Borrower will maintain its real property in substantial
compliance with all Environmental Laws and it will not place or suffer or permit
to be placed any Hazardous Substances on the real property except as not
prohibited by applicable law or appropriate governmental authorities and which
are necessary for
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the operation of the commercial business of Borrower or of its tenants.
(b) Borrower will maintain its current system to assure and
monitor continued compliance with all applicable Environmental Laws which system
includes periodic reviews of such compliance.
(c) Borrower will dispose of any and all Hazardous Waste
generated at the real property only at facilities and with carriers that
maintain valid permits under any applicable Environmental Laws. Borrower shall
use its best efforts to obtain certificates of disposal, such as hazardous waste
manifest receipts, from all treatment, transport, storage or disposal facilities
or operators employed by Borrower in connection with the transport or disposal
of any Hazardous Waste generated at the real property.
(d) In the event Borrower comes into possession of, gives or
receives notice of any Release or threat of Release of a reportable quantity of
any Hazardous Substances at the real property or any other site used by Borrower
to dispose of Hazardous Substances (any such event being hereinafter referred to
as a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the real property (or any other site
used by Borrower to dispose of Hazardous Substances), demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the real property (or any
other site used by Borrower to dispose of Hazardous Substances) or Borrower's
interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any local, state or federal authority or agency
with enforcement rights, including any state agency responsible in whole or in
part for environmental matters in the state in which the real property is
located or the United States Environmental Protection Agency (any such person or
entity hereinafter the "Authority"), then such Borrower shall, within five (5)
Business Days, give written notice of same to Agent detailing non-privileged and
non-confidential facts and circumstances of which Borrower is aware giving rise
to the Hazardous Discharge or Environmental Complaint and shall forward copies
of correspondence between Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrower shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the real
property that Borrower is required to file under any Environmental Laws. Such
information is to be provided to allow Agent to protect its security interest in
the collateral assignment of Borrower's lease interest in the real property and
is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.
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(e) Borrower shall respond promptly to any Hazardous Discharge
and within thirty (30) days of receipt of any Environmental Complaint and take
all necessary action in order to comply with all applicable Environmental Laws
and to avoid subjecting the Collateral or real property to any Lien relating to
a failure to comply with Environmental Laws; PROVIDED, HOWEVER, if such
compliance cannot reasonably be completed within such thirty (30) day period,
Borrower shall commence such necessary action within such thirty (30) day period
and shall thereafter diligently and expeditiously proceed to fully comply in all
respects and in a timely fashion with all Environmental Laws. If Borrower shall
fail to respond promptly to any Hazardous Discharge or shall fail to respond
within a reasonable period of time to any Environmental Complaint or Borrower
shall fail to diligently and expeditiously proceed to comply in a timely fashion
with any of the requirements of any Environmental Laws, Agent, on behalf of
Lenders, may, in its sole and absolute discretion, but without the obligation to
do so, for the sole purpose of protecting Agent's interest in Collateral: (A)
give such notices or (B) enter onto the real property (or authorize third
parties to enter onto the real property) and take such actions as Agent (or such
third parties as directed by Agent) deem reasonably necessary or advisable, to
clean up, remove, mitigate or otherwise deal with any such Hazardous Discharge
or Environmental Complaint in a commercially reasonable manner. All reasonable
costs and expenses incurred by Agent or any Lender (or such third parties) in
the exercise of any such rights, including any sums paid in connection with any
judicial or administrative investigation or proceedings, reasonable counsel and
consultant fees and expenses, investigation and laboratory fees and expenses,
and fines and penalties, together with interest thereon from the date expended
at the Default Rate shall be paid upon demand by Borrower, and until paid shall
be charged to Borrower's account as an Advance and added to the Obligations
secured by the Liens created by the terms of this Agreement. Borrower shall
execute and deliver, promptly upon request, such instruments as Agent may
reasonably deem useful or necessary to permit Agent to take any such action, and
such additional notes and mortgages, as Agent may require to secure all sums so
advanced or paid by Agent or Lenders.
(f) Borrower shall defend and indemnify Agent and Lenders and
hold Agent and Lenders harmless from and against all loss, liability, damage and
expense, claims, costs, fines and penalties, including reasonable attorney's
fees, suffered or incurred by Agent or Lenders under or on account of any
Environmental Laws in relation to Borrower or its Collateral or real property,
including, without limitation, the assertion of any lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the real property, whether or not the same originates or emanates from
the real property or any contiguous real estate, except to the extent such loss,
liability or damage is directly related to Agent or Lenders (i) placing any
Hazardous Substance on the real property, (ii) failing to properly dispose of
Hazardous Waste, (iii) causing a
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Hazardous Discharge on the real property or (iv) failing to act in a
commercially reasonable manner. Agent may, in the event it is dissatisfied, in
the exercise of its reasonable judgment, with counsel employed by Borrower,
employ counsel separate from counsel employed by Borrower in any such action and
participate in the defense thereof, at the expense of Borrower. Borrower's
obligations and the indemnifications hereunder shall survive the termination of
this Agreement.
(g) If a Lien is filed against any real property by any
governmental authority resulting from the need to expend or the actual expending
of monies arising from an action or omission, whether intentional or
unintentional, of Borrower for which Borrower is responsible, resulting in the
releasing, spilling, leaking, leaching, pumping, emitting, pouring, emptying or
dumping of any Hazardous Substance into the waters or onto land located within
or without the state where the real property is located, then within thirty (30)
days from the date Borrower is first given notice that such Lien has been filed
against the real property (or within such shorter period of time as may be
specified by Agent if such governmental authority has commenced steps to cause
the real property to be sold pursuant to such Lien) either (i) pay the claim and
remove the Lien, or (ii) furnish a cash deposit, bond, or such other security
with respect thereto as is satisfactory in all respects to Agent and is
sufficient to effect a complete discharge of such Lien on the real property. If
Borrower fails to do either (i) or (ii) above in a timely manner, Agent and
Lenders shall have the right, but not the obligation, to do so and all such
costs or expenses incurred by Agent and Lenders in connection therewith,
together with interest thereon from the date expended at the Default Rate shall
be paid upon demand by Borrower and until paid shall be added to the Obligations
secured by the Liens created by the terms of this Agreement.
4.19 GREENWICH. All expenses of Agent, the Lenders or any Receiver (as
defined in the U.K. Security Document) under the U.K. Security Document shall be
charged to Borrower's account as Revolving Advance and added to the Obligations
of, at Agent's option, paid by Borrower upon written demand therefor.
4.20 INCONSISTENT PROVISIONS. If and to the extent that any
provisions of this Agreement with respect to Collateral or certain obligations
of Borrower conflict or are otherwise inconsistent with any provisions of the
U.K. Security Document, the provisions of the U.K. Security Document shall
control.
V. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 AUTHORITY. Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and perform all Obligations
hereunder and thereunder. The execution, delivery and performance hereof and of
the Other
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Documents are within Borrower's corporate powers, have been duly authorized, are
not in contravention of law or the terms of Borrower's by-laws, certificate of
incorporation or other applicable documents relating to Borrower's formation or
to the conduct of Borrower's business or of any material agreement or
undertaking to which Borrower is a party or by which Borrower is bound, and will
not conflict with or result in any breach of any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of Borrower under the provisions of any
agreement, charter, instrument, by-law, or other instrument to which Borrower is
a party or by which it may be bound.
5.2 FORMATION AND QUALIFICATION. Borrower is duly incorporated and in
good standing under the laws of the United Kingdom and is qualified to do
business and is in good standing in the states listed on EXHIBIT 5.2 which
constitute all states in which qualification and good standing are necessary to
conduct its business and own its property and where the failure to so qualify
would have a material adverse effect on its business. Borrower has delivered to
Agent true and complete copies of its certificate of incorporation and by-laws
and will promptly notify Agent of any amendment or changes thereto.
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Borrower contained in this Agreement and the Other Documents
shall be true at the time of Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by Agent and the parties thereto and the closing of the transactions
described therein or related thereto. Any misrepresentation or breach of any
representation or warranty whatsoever contained in this Agreement or the Other
Documents shall be deemed material.
5.4 TAX RETURNS. Borrower has filed or has caused to be filed all
Inland Revenue tax returns and other reports it is required by law to file and
has paid all taxes, assessments, fees and other governmental charges that are
due and payable. Borrower has been examined and reported upon by the
appropriate taxing authority and have been closed by applicable statute and
satisfied for each fiscal year prior to and including the fiscal year ending
_____________ ___, 199___. To the best of Borrower's knowledge, the provision
for taxes on the books of Borrower is adequate for all years not closed by
applicable statutes, and for its current fiscal year, and none of Borrower has
any knowledge of any deficiency or additional assessment in connection therewith
not provided for on its books.
5.5 INTENTIONALLY OMITTED.
5.6 CORPORATE NAME. Except for Aviall, Borrower has not been known by
any other corporate name in the past five years and does not sell Inventory
under any other name.
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5.7 O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.
(a) Borrower has substantially complied with, and its
facilities, business assets, property, leaseholds and equipment are in
compliance in all material respects with, the provisions of all Environmental
Laws; and there are no outstanding citations, notices or orders of substantial
non-compliance issued to Borrower or relating to its business, assets, property,
leaseholds or equipment under any such laws, rules or regulations.
(b) Borrower has been issued all required material federal,
state and local licenses, certificates or permits relating to, and Borrower and
its facilities, businesses, assets, property, leaseholds and equipment are in
compliance in all material respects with, all applicable Environmental Laws.
(c) (i) There are no material releases, spills, discharges,
leaks or disposal (collectively referred to as "Releases") of Hazardous
Substances at, upon, under or within any real property or any premises leased by
Borrower; (ii) except as set forth on EXHIBIT 5.7, there are no underground
storage tanks or known polychlorinated biphenyls on the real property or any
premises leased by Borrower; (iii) to the best knowledge of Borrower, neither
the real property nor any premises leased by Borrower has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) to the best
knowledge of Borrower, no Hazardous Substances are present on the real property
or any premises leased by Borrower, excepting such quantities as are handled in
accordance with all applicable manufacturer's instructions and governmental
regulations and in proper storage containers and as are necessary for the
operation of the commercial business of Borrower or of its tenants.
5.8 SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.
(a) After giving effect to the Transactions, Borrower will be
solvent, able to pay its debts as they mature, have capital sufficient to carry
on its business and all businesses in which it is about to engage, and (i) as of
the Effective Date, the fair present saleable value of its assets, calculated on
a going concern basis, was in excess of the amount of its liabilities and (ii)
subsequent to the Effective Date, the fair saleable value of its assets
(calculated on a going concern basis) will be in excess of the amount of its
liabilities.
(b) Except as disclosed in EXHIBIT 5.8(b), Borrower has no (i)
pending or threatened litigation, actions or proceedings which involve the
possibility of materially and adversely affecting Borrower's business, assets,
operations, condition or prospects, financial or otherwise, or the Collateral,
or the ability of Borrower to perform its obligations under this
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Agreement, and (ii) any liabilities or Indebtedness for borrowed money other
than the Obligations.
(c) Borrower is not in violation of any applicable statute,
regulation or ordinance in any respect materially and adversely affecting the
Collateral or Borrower's business, assets, operations or condition or prospects,
financial or otherwise, taken as a whole, nor is Borrower in violation of any
order of any court, governmental authority or arbitration board or tribunal.
(d) Borrower has received no notice that it is not in full
compliance in all material respects with any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or its regulations
and, (i) it has not engaged in any Prohibited Transactions as defined in Section
406 of ERISA or Section 4975 of the Internal Revenue Code as amended, (ii) it
has met all applicable minimum funding requirements under Section 302 of ERISA
in respect of its plans and no funding requirements have been postponed or
delayed, (iii) it has no knowledge of any event or occurrence which would cause
the Pension Benefit Guaranty Corporation to institute proceedings under Title IV
of ERISA to terminate any employee benefit plan, (iv) there exists no event
described in Section 4043 of ERISA, excluding subsections 4043(b)(2) and
4043(b)(3) thereof, for which the thirty (30) days notice period contained in 12
CFR Section 26153 has not been waived, (v) they do not have any fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons other than its employees or former employees, and (vi) it has not
withdrawn, completely or partially, from any multi-employer pension plan so as
to incur liability under the Multi-Employer Pension Plan Amendments Act of 1980.
As of the Initial Closing Date and the Effective Date, Borrower does not
maintain any benefit plans or welfare plans subject to ERISA.
5.9 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. All patents, patent
applications, trademarks, trademark applications, copyrights, copyright
applications, trade names, trade secrets and licenses owned or utilized by
Borrower is set forth on EXHIBIT 5.9, are valid, and have been duly registered
or filed with all appropriate governmental authorities; there is no objection to
or pending challenge to the validity of any such material patent, trademark,
copyright, trade name, trade secret or license and Borrower is not aware of any
grounds for any challenge, except as set forth in EXHIBIT 5.9 hereto.
5.10 LICENSES AND PERMITS. Except as set forth in EXHIBIT 5.10,
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits would have a material
adverse effect on Borrower's business, properties,
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condition (financial or otherwise) or operations, present or prospective, taken
as a whole.
5.11 DEFAULT OF INDEBTEDNESS. Borrower is not in default in the
payment of the principal of or interest on any Indebtedness (excluding trade
payables not subject to written settlements) or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.
5.12 NO DEFAULT. To the best of Borrower's knowledge and except as set
forth on EXHIBIT 5.12 hereof, Borrower is not in default in the payment or
performance of any of its contractual obligations and no Incipient Event of
Default has occurred.
5.13 NO BURDENSOME RESTRICTIONS. Borrower is not a party to any
contract or agreement the performance of which would materially and adversely
restrict Borrower's business, assets, operations, condition or prospects
(financial or otherwise) and Borrower has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
its property, whether now owned or hereafter acquired, to be subject to a Lien
which is not a Permitted Encumbrance.
5.14 NO LABOR DISPUTES. Borrower is not involved in any material labor
dispute; there are no strikes or walkouts or union organization of any of
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on EXHIBIT 5.14
hereto.
5.15 MARGIN REGULATIONS. Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16 INVESTMENT COMPANY ACT. Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17 DISCLOSURE. No representation or warranty made by Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of fact
or omits to state any fact necessary to make the statements herein or therein
not misleading in any material respect. There is no fact known to
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Borrower or which reasonably should be known to Borrower which it has not
disclosed to Agent in writing with respect to the Transactions which materially
and adversely affects the condition (financial or otherwise), results of
operations, business, or assets of Borrower in any material respect.
5.18 SWAPS. Borrower is not a party to, nor will it be a party to, any
swap agreement whereby Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
VI. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and termination
of this Agreement:
6.1 PAYMENT OF FEES. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Agency Account
as provided for in Section 4.15(h). Agent may, without making demand, charge
the account of Borrower for all such fees and expenses as an Advance and such
amount shall be added to the Obligations.
6.2 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of without violation of the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
trade names, trade secrets and trademarks; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States of America or any
political subdivision thereof.
6.3 VIOLATIONS. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any governmental entity, or of any
agency thereof, applicable to Borrower which may materially adversely affect the
Collateral or Borrower's business, assets, operations, condition or prospects
(financial or otherwise).
6.4 GOVERNMENT RECEIVABLES. Take all steps necessary to protect
Agent's interest in the Collateral under the Federal
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Assignment of Claims Act or other applicable state or local statutes or
ordinances and deliver to Agent, appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of contracts between
Borrower and the United States, any state or any department, agency or
instrumentality of any of them and notify Agent of the existence of such
Receivables to the extent required pursuant to Section 9.6 hereof.
6.5 INTENTIONALLY OMITTED.
6.6 INTENTIONALLY OMITTED.
6.7 INTENTIONALLY OMITTED.
6.8 HEDGING AGREEMENTS; INTEREST RATE PROTECTION. Within ninety (90)
days of the Effective Date, enter into Rate Swap Agreements with respect to at
least ___% of the outstanding Advances [and Hedging Agreements with respect to
at least __% of the outstanding Advances], each on terms and conditions
satisfactory to Agent.
6.9 EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
6.10 PAYMENT OF INDEBTEDNESS. Pay, discharge or otherwise satisfy at
or before maturity (subject, where applicable, to specified grace periods and,
in the case of trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the amount or validity thereof
is currently being contested in good faith by appropriate proceedings and
Borrower shall have provided for such reserves as Agent may reasonably deem
proper and necessary, subject at all times to any applicable subordination
arrangement in favor of Lenders.
6.11 STANDARDS OF FINANCIAL STATEMENTS. Cause all statements referred
to in Sections 9.7, 9.8, 9.11 and 9.12 to be complete and correct in all
material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments) and to be prepared in reasonable detail and
as to those to which GAAP is applicable in accordance with GAAP applied
consistently throughout the periods reflected therein (except as concurred in by
such reporting accountants or officer, as the case may be, and disclosed
therein).
6.12 EXERCISE OF RIGHTS. Enforce all of its rights and pursue all
remedies available to it with diligence and in good faith, consistent with
reasonable business judgment, or at the reasonable request of Agent in
connection with the enforcement of
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any rights it may have against any of its Customers as a processor's,
repairman's or mechanic's lienor.
6.13 INVENTORY COMPOSITION. Maintain, at all times, a composition of
its Inventory (valued on a book value basis) in the following proportions:
(a) "new" Inventory shall be at least twenty-five percent (25%)
of total Inventory;
(b) "new", "serviceable" and "overhauled" Inventory shall be at
least forty-five percent (45%) of total Inventory; and
(c) "repairable" Inventory shall not exceed twenty percent
(20%) of total Inventory.
For the purposes hereof and in accordance with FAA regulations, "new" Inventory
shall mean Inventory which has never been used and is immediately usable,
"serviceable" or "overhauled" Inventory shall mean Inventory which is in a
condition which allows it to be returned immediately to operational status and
"repairable" Inventory shall mean Inventory which is in a condition which
requires repair prior to being returned to operational status and is usable if
repaired.
6.14 INTENTIONALLY OMITTED.
VII. NEGATIVE COVENANTS.
Borrower shall not, without Agent's and Required Lenders' prior written
approval (which approval will not be unreasonably withheld), until satisfaction
in full of the Obligations and termination of this Agreement:
7.1 MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of the
Collateral, except in the ordinary course of its business or as permitted by
Section 4.3 hereof.
7.2 CREATION OF LIENS. Create or suffer to exist any Lien, Charge,
Claim or transfer upon or against any of their respective assets and properties
Collateral now owned or hereafter acquired, except Permitted Encumbrances.
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7.3 GUARANTEES. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on EXHIBIT 7.3, (b) other guarantees made in the
ordinary course of business up to an aggregate amount of $_________ at any one
time outstanding and (c) the endorsement of checks in the ordinary course of
business.
7.4 INVESTMENTS. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-l
or P-l (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof, and (e) as permitted by Section 7.12(a) hereof.
7.5 LOANS. Make advances, loans or extensions of credit to any
Person, including without limitation, any Parent, Subsidiary or Affiliate except
(a) loans to employees in an amount not to exceed $150,000 individually and
$600,000 in the aggregate outstanding at any one time, (b) loans to
___________________ in an aggregate amount not to exceed [$10,000,000]
outstanding at any time so long as after giving effect to such loan, no Event of
Default has occurred and is continuing and aggregate Undrawn Availability is at
least $______________, and (c) with respect to the extension of commercial trade
credit in connection with the sale of Inventory or rendition of services in the
ordinary course of its business.
7.6 CAPITAL EXPENDITURES. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including Capitalized
Leases) in any fiscal year in an amount which, when added to the capital
expenditures made by ____________ in such fiscal year would exceed the amounts
shown below opposite the fiscal years corresponding thereto:
Fiscal Year Ended Amount
----------------- ------
March 31, 1997 $
March 31, 1998 $
March 31, 1999 $
March 31, 2000 $
March 31, 2001 $
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7.7 DIVIDENDS. Declare, pay or make any dividend or distribution on
any shares of the common stock or preferred stock of Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of Borrower except that so long as (a) a notice of termination with regard
to this Agreement shall not be outstanding, (b) no Event of Default or Incipient
Event of Default shall have occurred prior to and after giving effect to such
payment, (c) solely with respect to (ii) below, Borrower shall be in compliance
with Section 6.5 hereof (computed as if the dividend has been paid as of the end
of the immediately preceding fiscal quarter), (d) after giving effect to such
dividend, aggregate Undrawn Availability is at least $___________ and (e) the
purpose for such dividend shall be set forth in writing to Agent at least five
(5) days prior to such dividend and such dividend shall in fact be used for such
purpose Borrower shall be permitted to pay dividends and distributions to
Greenwich.
7.8 INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders, (ii) Indebtedness incurred for capital expenditures permitted under
Section 7.6 hereof, and (iii) other Indebtedness in an amount not greater than
$__________, in the aggregate, which is unsecured and subordinated on terms and
provisions satisfactory to Required Lenders (including, without limitation, no
amortization of principal at any time, no payment of interest following the
occurrence and during the continuance of an Event of Default and no right to
accelerate such Indebtedness in the absence of acceleration by Agent); provided,
that, with respect to Indebtedness contemplated by subclause (iv) hereof prior
to and after giving effect to the incurrence of such Indebtedness no Event of
Default or Incipient Event of Default shall have occurred, Borrower shall have
provided Lender with a revised Business Plan allowing a continued ability by
Borrower to be in compliance with all covenants for the balance of the Term.
7.9 NATURE OF BUSINESS. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business in the ordinary
course as presently conducted.
7.10 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, transactions between Borrower as
expressly permitted elsewhere in this Agreement and other transactions in the
ordinary course of business, on an arm's-length basis on terms no less
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favorable than terms which would have been obtainable from a Person other than
an Affiliate, each of which transactions are disclosed to Agent on a certificate
delivered with each monthly financial statement delivered pursuant to Section
9.8 hereof.
7.11 LEASES. Enter as lessee into any new lease arrangement for real
or personal property (unless capitalized and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for all newly
leased property together with all lease arrangements entered into by
_____________ during such fiscal year would exceed [$5,000,000] in such fiscal
year.
7.12 SUBSIDIARIES.
(a) Form any Subsidiary on or after the date hereof unless (i)
such Subsidiary expressly joins in this Agreement as a borrower and becomes
jointly and severally liable for the obligations of Borrower hereunder and under
any other agreement between Borrower and Lenders and (ii) Agent shall have
received all documents, including legal opinions, it may reasonably require to
establish compliance with each of the foregoing conditions.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13 FISCAL YEAR AND ACCOUNTING CHANGES. Change its fiscal year from
September 30 or make any change in accounting practices which is not disclosed
to Agent prior to the inception thereof except (i) in accounting treatment and
reporting practices as required by GAAP or (ii) in tax reporting treatment as
required by law.
7.14 PREPAYMENT OF INDEBTEDNESS. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of Borrower.
7.15 PLEDGE OF CREDIT. Not now or hereafter pledge Agent's or any
Lender's credit on any purchases or for any purpose whatsoever or use any
portion of any Advance in or for any business other than Borrower's business
substantially as conducted on the date of this Agreement.
VIII. CONDITIONS PRECEDENT
8.1 CONDITIONS TO EFFECTIVENESS. Neither Agent nor any Lender will be
obligated to make any Advances hereunder unless the following conditions
precedent have been satisfied:
(a) NOTES. Agent shall have received the Notes duly executed
and delivered by an authorized officer of Borrower;
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(b) FILINGS, REGISTRATIONS AND RECORDINGS. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by Agent to be filed, registered or recorded in order to create, in
favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence reasonably satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(c) PROCEEDINGS OF BORROWER. Agent shall have received a copy
of the resolutions in form and substance reasonably satisfactory to Agent, of
the Board of Directors or the General Partner of Borrower, as applicable,
authorizing (i) the execution, delivery and performance of this Agreement, the
Notes and any related agreements (collectively the "Documents") and (ii) the
granting by Borrower of the security interests in and liens upon its respective
portion of the Collateral in each case certified by the Secretary, an Assistant
Secretary or the general partners, as applicable, of Borrower as of the
Effective Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate;
(d) LEGAL OPINIONS. Agent shall have received the executed
legal opinions of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, and
[Borrower's UK counsel] in form and substance satisfactory to Agent which shall
cover such matters incident to the transactions contemplated by this Agreement
as may be reasonably requested by Agent;
(e) NO LITIGATION. (i) No litigation, investigation or
proceeding before or by any arbitrator or governmental authority shall be
continuing or threatened against Borrower or against the officers or directors
of Borrower other than as set forth on EXHIBIT 5.8(b) hereto (A) in connection
with the Documents or any of the transactions contemplated thereby and which, in
the reasonable opinion of Agent, is deemed material or (B) which if adversely
determined, would, in the reasonable opinion of Agent, have a material adverse
effect on the business, assets, operations or condition (financial or otherwise)
of Borrower; and (ii) no injunction, writ, restraining order or other order of
any nature materially adverse to Borrower or the conduct of their business or
inconsistent with the due consummation of the Transactions shall have been
issued by any governmental authority;
(f) INTENTIONALLY OMITTED.
(g) PLEDGE AGREEMENTS AND OTHER DOCUMENTS. Agent shall have
received (i) the executed Pledge Agreement and (ii) the
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executed Other Documents, all in form and substance satisfactory to Agent;
(h) FEES. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Effective Date pursuant to Article III hereof;
(i) MATERIAL ADVERSE CHANGE. There shall have been (i) no
material adverse change in, and there shall have occurred no development
(including, without limitation, damage, destruction or depreciation of the
Collateral) substantially likely to have a material adverse effect on, the
business, operations, prospects, properties (including, without limitation,
intangible properties), assets or financial or other conditions of Borrower
taken as a whole, and (ii) no occurrence or event subsequent to _____________
___, 199___ which shall have a material adverse effect on the rights and
remedies of Agent or any Lender or on the ability of Borrower to perform the
Obligations;
(j) REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS.
Borrower's representations and warranties contained in this Agreement and the
Other Documents shall be true and correct as of the Effective Date;
(k) INCUMBENCY CERTIFICATES OF BORROWER. Agent shall have
received a certificate of the Secretary, Assistant Secretary or general partners
of Borrower, dated the Effective Date, as to the incumbency and signature of the
officers of Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary, Assistant Secretary or general partners;
(l) CERTIFICATES. Agent shall have received a copy of the
Articles or Certificate of Incorporation of Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of
Borrower and all agreements among shareholders of Borrower's shareholders
certified as accurate and complete by the Secretary of Borrower or certified
copy of Borrower's Partnership Agreement, as applicable;
(m) GOOD STANDING CERTIFICATES. Agent shall have received good
standing certificates for Borrower dated not more than thirty (30) days prior to
the Effective Date, issued by the Secretary of State or other appropriate
official of Borrower's jurisdiction of incorporation or formation and each
jurisdiction where the conduct of Borrower's business activities or the
ownership of its properties necessitates qualification;
(n) FINANCIAL CONDITION CERTIFICATES. Agent shall have
received executed Officer's Certificates substantially in the form of EXHIBIT
8.1(n);
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(o) COLLATERAL EXAMINATION. Agent shall have completed
Collateral examinations and its closing audit and received appraisals, the
results of which shall be satisfactory in form and substance to Agent, of the
Receivables and Inventory of Borrower and all books and records in connection
therewith;
(p) UNDRAWN AVAILABILITY. After giving effect to the initial
Advances hereunder, Borrower shall have Undrawn Availability of at least
$______________;
(q) INSURANCE. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrower's liability insurance policies, together with endorsements naming Agent
as a co-insured or additional insured;
(r) PAYMENT INSTRUCTIONS. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(s) BLOCKED ACCOUNTS. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
(t) CONSENTS. Agent shall have received any and all consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary including, without
limitation, CIT and Continental;
(u) LEASEHOLD AGREEMENTS. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrower at which Inventory is located;
(v) U.K. SECURITY DOCUMENT. Agent shall have received final
executed copies of the U.K. Security Document and all related agreements,
documents and instruments;
(w) CONTRACT REVIEW. Agent shall have reviewed all material
contracts of Borrower including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
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(x) CLOSING CERTIFICATE. Agent shall have received a closing
certificate signed on behalf of Borrower by the Chief Financial Officer of
Borrower dated as of the Effective Date, stating that (i) all representations
and warranties set forth in this Agreement and the other Documents are true and
correct on and as of such date, (ii) Borrower is on such date in compliance with
all the terms and provisions set forth in this Agreement and the Other Documents
and (iii) on such date no Incipient Event of Default or Event of Default has
occurred or is continuing;
(y) BORROWING BASE. Agent shall have received evidence from
Borrower that the aggregate amount of Eligible Receivables and Eligible
Inventory is sufficient in value and amount to support Advances in the amount
requested by Borrower on the Effective Date;
(z) OTHER AGREEMENTS. Agent shall have received final executed
copies of the Purchase Agreement and all related agreements, documents and
instruments as in effect on the Effective Date and the transactions contemplated
by such documentation shall be consummated concurrently with the making of the
initial Advances;
(aa) INTENTIONALLY OMITTED.
(ab) ENVIRONMENTAL REPORTS. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms with respect to all real property owned or leased by Borrower;
(ac) PAYMENT INSTRUCTIONS. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(ad) OTHER. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance Agent and its counsel; and
8.2 CONDITIONS TO EACH ADVANCE. The agreement of Lenders to make any
Advance requested to be made on any date is subject to the satisfaction of the
following conditions precedent as of the date such Advance is made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Borrower in or pursuant to this Agreement
and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related
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agreement shall be true and correct in all material respects on and as of such
date as if made on and as of such date;
(b) NO DEFAULT. No Event of Default or Incipient Event of
Default shall have occurred and be continuing on such date, or would exist after
giving effect to the Advances requested to be made on such date; PROVIDED,
HOWEVER, that Agent, in its sole discretion, unless otherwise directed by
Required Lenders, may continue to make Advances notwithstanding the existence of
an Event of Default or Incipient Event of Default; and
(c) MAXIMUM ADVANCES. In the case of any Advances requested to
be made, after giving effect thereto, the aggregate outstanding Advances shall
not exceed the maximum Advances permitted under Article II hereof.
Each request for an Advance by Greenwich on behalf of Borrower hereunder shall
constitute a representation and warranty by Borrower as of the date of such
Advance that the conditions contained in this Section 8.2 shall have been
satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1 DISCLOSURE OF MATERIAL MATTERS. Promptly upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
the reclamation or repossession of, or the return of, a material amount of goods
or material claims or disputes asserted by any Customer or other obligor. No
Borrower will, without Agent's consent, compromise or adjust any Receivables (or
extend the time for payment thereof) or accept any returns of merchandise or
grant any additional discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and allowances as have
been heretofore customary in the business of Borrower.
9.2 SCHEDULES. Deliver to Agent, daily, its daily sales register.
Also, Borrower shall deliver to Agent on or before the fifteenth (15th) day of
each month as and for the prior month (a) monthly accounts receivable agings and
(b) accounts payable schedules. Borrower will also deliver to Agent on or
before the twenty-fifth (25th) day of each month as and for the prior month a
report of Inventory. ___________ will deliver to Agent on or before the twenty-
fifth (25th) day of each month a reconciliation of Eligible Unbilled Receivables
as of the beginning and the end of the prior month. Further, Borrower shall
deliver to Agent on or before the twenty-fifth (25th) day of each month a
Borrowing Base Certificate in the form annexed hereto as EXHIBIT 9.2. In
addition, Borrower will deliver to Agent at such intervals as Agent may
reasonably require: (i) confirmatory
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assignment schedules, (ii) copies of Customers' invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents and/or
information regarding the Collateral as Agent may reasonably require including,
without limitation, trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section
are to be in form satisfactory to Agent and executed by Borrower and delivered
to Agent from time to time solely for Agent's convenience in maintaining records
of the Collateral, and Borrower's failure to deliver any of such items to Agent
shall not affect, terminate, modify, derogate from or otherwise limit Agent's
lien on or security interest in the Collateral.
9.3 ENVIRONMENTAL REPORTS. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 of the Affiliate
Loan Agreement, a certificate of Borrower signed on its behalf by its President
stating, to the best of his knowledge, that Borrower is in compliance in all
material respects with all federal, state and local laws relating to
environmental protection and control and occupational safety and health. To the
extent Borrower is not in compliance with the foregoing laws, the certificate
shall set forth with specificity all areas of non-compliance and the proposed
action Borrower will implement in order to achieve full compliance.
9.4 LITIGATION. Promptly notify Agent in writing of any litigation
affecting Borrower, whether or not the claim is covered by insurance, and of any
suit or administrative proceeding, which may materially and adversely affect the
Collateral or Borrower's business, assets, operations, condition or prospects
(financial or otherwise) taken as a whole.
9.5 OCCURRENCE OF DEFAULTS, ETC. Promptly notify Agent in writing
upon the occurrence of (a) any Event of Default or Incipient Event of Default;
(b) any event, development or circumstance whereby any financial statements or
other reports furnished by Borrower to Agent fail in any material respect to
present fairly, in accordance, where applicable, with GAAP consistently applied,
the financial condition or operating results of Borrower on a consolidated and
consolidating basis as of the date of such statements; (c) any accumulated
retirement plan funding deficiency which, if such deficiency continued for two
plan years and was not corrected as provided in Section 4971 of the Internal
Revenue Code, could subject Borrower to a tax imposed by Section 4971 of the
Internal Revenue Code; (d) each and every default by Borrower which might result
in the acceleration of the maturity of any Indebtedness, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (e) any other development
in the business or affairs of Borrower
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which might reasonably be expected to be materially adverse to Borrower; in each
case describing the nature thereof and the action Borrower proposes to take with
respect thereto.
9.6 GOVERNMENT RECEIVABLES. Notify Agent promptly if any of its
Receivables in excess of $50,000 arise out of contracts between Borrower and the
United States, any State, or any department, agency or instrumentality of any of
them.
9.7 INTENTIONALLY OMITTED.
9.8 INTENTIONALLY OMITTED.
9.9 OTHER REPORTS. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of (a) such
financial statements, reports and returns as Borrower shall send to its
stockholders in their capacity as stockholders and (b) any management letter
received by Borrower from its independent certified public accountants.
9.10 ADDITIONAL INFORMATION. Furnish Agent with additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement have been complied with by Borrower including, without limitation and
without the necessity of any request by Agent, (a) copies of all environmental
audits and reviews that have been previously obtained by Borrower or obtained
pursuant to Section 4.18 hereof, (b) at least thirty (30) days prior thereto, of
Borrower's opening of any new office or place of business or Borrower's closing
of any existing office or place of business, (c) promptly upon Borrower's
learning thereof, notice of any labor dispute to which Borrower may become a
party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which Borrower is a
party or by which Borrower is bound and (d) evidence of the payment of its
rental obligations with respect to the real property.
9.11 BUSINESS PLAN. Furnish Agent, on or before the beginning of each
of Borrower's fiscal years, its Business Plan including, without limitation, a
month by month projected operating budget and cash flow of Borrower for such
fiscal year (including an income statement for each month and a balance sheet as
at the end of the last month in each fiscal quarter) such projections to be
accompanied by a certificate signed on its behalf by its Chief Financial Officer
setting forth the assumptions on which such report has been based and including
a statement to the effect that to the best of his knowledge such projections
have been prepared on the basis of sound financial planning practice consistent
with past budgets and financial statements and that such officer has no reason
to question the reasonableness of any material assumptions on which such
projections were prepared.
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9.12 APPRAISALS. Furnish Agent, when reasonably requested by Agent
(but no more than once each year), with updates of the appraisals delivered
prior to the Effective Date prepared by _______________ or any other appraiser
satisfactory to Agent indicating any material changes from the appraisals
delivered prior to the Effective Date.
9.13 AVIALL POWER BY THE HOUR AGREEMENTS. Furnish Agent, no later than
twenty-five (25) days following the end of each month, with a calculation of
[(i) "accrued receivables" carried on Borrower's books with respect to the Power
by the Hour Agreement or any similar "block hour" agreements executed subsequent
to the Effective Date as of the end of the immediately preceding month and (ii)
the Effective Hours Adjustment under the Power by the Hour Agreement or any
similar "block hour" agreements executed subsequent to the Effective Date as of
the end of the immediately preceding month].
9.14 ADDITIONAL DOCUMENTS. Execute and deliver to
Agent, upon request, such documents and agreements as Agent may, from time to
time, reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1 failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to make any other payment, fee or charge to Agent
provided for herein when due;
10.2 any representation or warranty made or deemed made by Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made and within ten (10) days of such
occurrence Borrower shall not have proven that such representation or warranty
was true when made;
10.3 failure by Borrower to (i) furnish financial information (x) when
due which is not cured within five (5) Business Days after receipt of notice
from Agent of such failure (y) when requested which is unremedied for a period
of fifteen (15) days, or (ii) permit the inspection of its books or records;
10.4 issuance of a notice of Lien, Charge, Claim, levy, assessment,
injunction or attachment (other than a Permitted Encumbrance) against a
material portion of Borrower's property which is not stayed or lifted within
thirty (30) days;
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10.5 failure or neglect of Borrower to perform, keep or observe any
term, provision, condition or covenant herein contained, or contained in any
other agreement or arrangement, including, without limitation, the U.K. Security
Agreement Document, now or hereafter entered into between Borrower, Agent and
any Lender other than a failure or neglect of Borrower to perform, keep or
observe any term, provision, condition or covenant, contained in Sections 4.6,
4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 6.14, 9.4 and 9.6 hereof which is cured within
the earlier of (i) twenty (20) days after receipt of notice of such breach from
Agent of the occurrence of such failure or neglect or (ii) twenty (20) days
following the date on which such failure or neglect becomes known to any officer
of Borrower;
10.6 any final judgment is rendered or judgment lien filed against
Borrower for an amount in excess of $1,500,000 which within thirty (30) days of
such rendering or filing is not either satisfied, stayed or discharged of
record;
10.7 If (i) a petition is presented by any person or an order is made
or an effective resolution is passed for the dissolution, termination, winding
up or liquidation of Borrower or for the appointment of a receiver,
administrative receiver, administrator, trustee or similar officer of Borrower,
(ii) Borrower is unable or admits in writing its inability to pay its debts
generally as they fall due or commences negotiations with a view to, or takes
any proceedings under any law for, a readjustment, rescheduling or deferment of
its obligations generally or proposes, makes or enters into an assignment,
arrangement (including a voluntary arrangement under section 1 of the Insolvency
Act 1986) or composition with or for the benefit of its customers generally,
(iii) BML ceases or threatens to cease its business or (iv) any execution or
distress is levied against, or an encumbrancer takes possession of the whole or
any substantial part of the property, undertaking or assets of Borrower;
10.8 any change in Borrower's condition or affairs (financial or
otherwise) which in Agent's reasonable opinion materially and adversely impairs
the Collateral or the ability of Borrower to perform its Obligations under this
Agreement or under the U.K. Security Document;
10.9 any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to or is not a valid and perfected Lien
having a first priority interest (subject to Permitted Encumbrances);
10.10 an "event of default" has been declared with respect to the
obligations of _____________ under the CIT Loan Documents, the Subordinated
Debentures, the Senior Notes, the Indenture, the World Loan Documents, or the
Turbine Term Loan Documents, or the Service Agreement dated as of January 17,
1995 between Greenwich and Continental (as may be amended from time to time,
"Service Agreement") shall be terminated due to a breach by
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Greenwich of its obligations thereunder and as a result of such termination
Continental shall accelerate Greenwich's obligation to pay the then outstanding
balance of the Inventory Purchase Price as such term is defined in the Inventory
Purchase Agreement and require that such Inventory Purchase Price be paid in
cash;
10.11 a default of the obligations of Borrower under any other agreement
to which it is a party shall occur which materially and adversely affects the
condition, affairs or prospects (financial or otherwise) of Borrower's taken as
a whole which default is not cured within any applicable grace period;
10.12 any "Event of Default" shall occur under the Affiliate Loan
Agreement;
10.13 any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in writing
to Agent or any Lender;
10.14 a default by GCL of its obligations under the Inducement
Agreement;
10.15 Eugene Conese, Sr., shall cease to serve as Chairman and Chief
Executive Officer of Greenwich (whether by death or otherwise); or
10.16 termination or breach of the Pledge Agreement or if Greenwich
attempts to terminate or challenge the validity of or its liability under the
Pledge Agreement.
XI. AGENT'S AND LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 RIGHTS AND REMEDIES. Upon (i) an Event of Default pursuant to
Section 10.7 all Obligations shall be automatically and immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured or waived), at the
option of Required Lenders, all Obligations shall be immediately due and payable
and Required Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances and (iii) filing of a
petition against Borrower in any involuntary case under any state or federal
bankruptcy laws, the obligations of the Lenders to make Advances to Borrower
hereunder shall be terminated other than as may be permitted by an appropriate
order of the bankruptcy court having jurisdiction over Borrower. In any event,
Agent shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with judicial process and, to appoint
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a Receiver (as defined in the U.K. Security Document) to take possession of and
sell any or all of the Collateral with judicial process. Agent may enter any of
Borrower's premises or other premises with required and necessary legal process
and without incurring liability to Borrower therefor, and Agent may thereupon,
or at any time thereafter in accordance with the provisions of this Agreement,
in its discretion without notice or demand, take the Collateral and remove the
same to such place as Agent may deem advisable and Agent may require Borrower to
make the Collateral available to Agent at a convenient place. With or without
having the Collateral at the time or place of sale, Agent may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Borrower reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrower via overnight mail at least
five (5) Business Days prior to such sale or sales is reasonable notification.
At any public sale Agent may bid for and become the purchaser, and Agent or any
other purchaser at any such sale thereafter shall hold the Collateral sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and such right and equity are hereby expressly waived and released
by Borrower to the fullest extent permitted by law. In connection with the
exercise of the foregoing remedies, Agent is granted permission to use all of
Borrower's trademarks, trade styles, trade names, patents, patent applications,
licenses, franchises and other proprietary rights which are used in connection
with Inventory for the purpose of disposing of such Inventory. The proceeds
realized from the sale of any Collateral shall be applied first to the
reasonable costs, reasonable expenses and reasonable attorneys' fees and
reasonable expenses incurred by Agent for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of the Collateral;
secondly to interest due upon any of the Obligations; and thirdly to the
principal of the Obligations. If any deficiency shall arise, Borrower shall
remain liable to Agent and Lenders therefor. Nothing herein contained shall
limit the rights of Agent, the Lenders or any other Person under the Other
Documents (including, without limitation, the U.K. Security Document).
11.2 AGENT'S DISCRETION. Agent shall have the right in its reasonable
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3 SETOFF. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence and during the continuance of
an Event of Default
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hereunder, Agent and such Lender shall have a right to apply any of Borrower's
property held by Agent or any Lender to reduce the Obligations.
11.4 RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedy, all of which shall be cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS
12.1 WAIVER OF NOTICE. Borrower hereby waives demand, presentment,
protest and notice of demand, presentment, protest, default, non-payment,
maturity, release, compromise, settlement, extensions or renewals with respect
to any and all instruments, commercial paper, accounts, contract rights,
documents, chattel paper and guaranties at any time held by Agent or any Lender
on which Borrower may in any way be liable, and Borrower further waives notice
of acceptance hereof, notice of loans or advances made, credit extended,
Collateral received or delivered, or any other action taken in reliance hereon,
and all other demands and notices of any description, except such as are
expressly provided for herein.
12.2 DELAY. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3 JURY WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE: AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1 TERM. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
Borrower, Agent and Lenders, shall become effective on the date hereof and shall
continue in full force and effect until the last day of the Term, unless sooner
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terminated as herein provided. In the event the Obligations are prepaid in full
prior to the last day of the Term and this Agreement is thereby terminated by
Borrower (the date of such prepayment hereinafter referred to as the "Prepayment
Date"), Borrower shall pay an early termination fee in an amount equal to (x)
$1,925,000 if the Prepayment Date occurs from the Effective Date to and
including the date immediately preceding the first anniversary of the Effective
Date, (y) $1,225,000 if the Prepayment Date occurs from the first anniversary of
the Effective Date to and including the date immediately preceding the second
anniversary of the Effective Date, and (z) $525,000 if the Prepayment Date
occurs on or after the second anniversary of the Effective Date to and including
the date immediately preceding the fifth anniversary of the Effective Date.
Notwithstanding the foregoing, in no event shall the aggregate early termination
fees paid hereunder and under the Affiliate Loan Agreement exceed the foregoing
amounts.
13.2 TERMINATION. The termination of this Agreement shall not affect
any of Borrower', Agent's or any Lender's rights, or any of the Obligations
having their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent hereunder and the financing statements filed hereunder shall
continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that Borrower's accounts may from time to time be
temporarily in a zero or credit position, until Borrower's rights to borrow
under this Agreement have been terminated all of the Obligations of Borrower has
been paid or performed in full or Borrower has furnished Agent and Lenders with
an indemnification reasonably satisfactory to Agent with respect to any
existing, pending or threatened claims or an existing state of facts which
might, in Agent's reasonable judgment which is exercised in good faith and not
in an arbitrary or capricious manner, give rise to an Obligation hereunder.
Accordingly, Borrower waives any rights which it may have under Section 9-404(1)
of the Uniform Commercial Code to demand the filing of termination statements
with respect to the Collateral, and Agent and Lenders shall not be required to
send such termination statements to Borrower, or to file them with any filing
office, unless and until this Agreement shall have been terminated in accordance
with its terms and all Obligations paid in full in immediately available funds
or satisfied as set forth in the preceding sentence. If there are no existing,
pending or threatened claims or existing state of facts which might, in Agent's
reasonable judgment which is exercised in good faith and not in an arbitrary or
capricious manner, give rise to an Obligation hereunder and the Obligations of
Borrower shall have been paid in full and this Agreement terminated, Agent shall
deliver termination statements with respect to the Collateral to Borrower. All
representations, warranties, covenants, waivers and agreements contained herein
shall survive termination hereof until
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all Obligations are paid or performed in full unless otherwise provided.
XIV. MISCELLANEOUS
14.1 GOVERNING LAW. This Agreement has been negotiated, executed and
delivered at and shall be deemed to have been made in New York and is to be
performed at New York and interpreted and the rights and liabilities of the
parties hereto determined, in accordance with the laws of the State of New York.
Any judicial proceeding by Borrower against Agent or any Lender involving,
directly or indirectly, any matter or claim in any way arising out of, related
to or connected with this or any related agreement, shall be brought only in a
state or federal court located in the City of New York, State of New York. Any
judicial proceeding brought against Borrower with respect to any of the
Obligations, or this Agreement or any Other Documents may be brought in any
court of competent jurisdiction in the City of New York, State of New York,
United States of America, and, by execution and delivery of this Agreement,
Borrower accepts for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Nothing herein shall affect the right to serve process in
any manner permitted by law or shall limit the right of Agent or any Lender to
bring proceedings against Borrower in the courts of any other competent
jurisdiction. Borrower waives any objection to jurisdiction and venue of any
action instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based on FORUM NON CONVENIENS.
14.2 ENTIRE UNDERSTANDING AND AMENDMENTS AND MODIFICATIONS.
(a) This Agreement and the Documents executed concurrently
herewith contain the entire understanding between Borrower, Agent and Lenders
and supersede all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein or therein contained shall have no force and effect unless in
writing, signed by Borrower's, Agent's and each Lender's respective officers.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrower may, subject to the provisions of this
Section 14.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrower, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrower thereunder or the
conditions, provisions or terms thereof or waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
PROVIDED, HOWEVER, that no such supplemental agreement shall, without the
consent of all Lenders:
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(i) increase the Commitment Percentage of any Lender;
(ii) increase the Maximum Loan Amount;
(iii) extend the Term, the maturity of any of the Notes or
the due date for any amount payable hereunder, or decrease the rate of interest
or reduce any fee payable by Borrower to Lenders pursuant to this Agreement;
(iv) alter the several nature of the funding obligations of
Lenders or the definition of the term Required Lenders or alter, amend or modify
this Section 14.2(b);
(v) alter, amend or modify Sections 2.12, 2.13 or 2.14
hereof;
(vi) except as otherwise permitted hereunder, release any
Collateral during any calendar year having an aggregate value in excess of
$__________; or
(vii) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
14.3 INDEMNITY. Borrower shall indemnify Agent and Lenders from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent or any Lender as a result of any violation of any law or in any
litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement, any Other Documents (whether or not Agent or any
Lender is a party thereto), except to the extent that any of the foregoing
arises out of the gross negligence (but not mere negligence) or willful
misconduct of the party being indemnified.
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14.4 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrower, Agent, each Lender, all future holders of the Obligations
and their respective successors and assigns, except that no Borrower may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it or other Obligations payable hereunder as fully as if such
Transferee were the direct holder thereof provided that Borrower shall not be
required to pay to any Transferee more than the amount which it would have been
required to pay to the Lender which granted an interest in its Advances or other
Obligations payable hereunder to such Transferee had such Lender retained such
interest in the Advances hereunder or other Obligations payable hereunder and in
no event shall Borrower be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Transferee. Borrower hereby grants to
any Transferee a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Transferee as security for the
Transferee's interest in the Advances.
(c) Any Lender may (i) pledge and assign as collateral to any
Federal Reserve Bank all or a portion of its interest in the Advances hereunder
and (ii) upon the prior written consent of Borrower and Agent, which consents
shall not be unreasonably withheld, sell, assign or transfer all or any part of
its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a "Purchasing
Lender"), in minimum amounts of not less than $5,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the Transferor
Lender, and Agent and delivered to Agent for recording. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer
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Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. By consenting
to the foregoing, Borrower hereby agree to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrower shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrower, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advances
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in
the amount of $3,500 payable by the applicable Purchasing Lender upon the
effective date of each transfer or assignment to such Purchasing Lender.
(e) Borrower authorize each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
Borrower which has been delivered to such Lender by or on behalf of Borrower
pursuant to this Agreement or in connection with such Lender's credit evaluation
of Borrower.
14.5 APPLICATION OF PAYMENTS. Following the occurrence and during the
continuation of an Event of Default, Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any and all proceeds of
Collateral to any portion of the Obligations. To the extent that Borrower makes
a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for Borrower's benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
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14.6 NOTICE. Any notice or request hereunder may be given to Borrower,
Agent or to any Lender at the respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery or overnight courier, (b) registered or certified
mail, return receipt requested, (c) telex or telegram, subsequently confirmed by
registered or certified mail, or (d) telefax to the number set out below (or
such other number as may hereafter be specified in a notice designated as a
notice of change of address) with telephone communication to the recipient or to
a duly authorized officer of the recipient in the event the recipient is not
available by telephone, confirming its receipt or as subsequently confirmed by
electronic confirmation mail. Notices and requests shall, in the case of those
by mail or telegram, be deemed to have been given three (3) days after deposit
in the mail, or delivered to the telegraph office, in the case of overnight
courier, one (1) day after deposit in the mail addressed as provided in this
Section, or in the case of telefax, upon receipt of electronic confirmation.
(A) If to Agent, at: The Bank of New York Commercial
Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Anthony Viola
Telephone: (212) 408-4097
Telecopier: (212) 408-4313
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to a Lender
other than Agent,
as specified on the
signature pages
hereof
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(C) If to Borrower, at: c/o Greenwich Air Services, Inc.
4590 N.W. 36th Street, Bldg. 23
Miami, Florida 33122
Attention: Eugene Conese, Jr.,
President
Telephone: (305) 526-7032
Telecopier: (305) 526-7005
or (if by mail) at: Greenwich Air Services, Inc.
P.O. Box 522187
Miami, Florida 33152-2187
Attention: Eugene Conese, Jr.
with a copy to: Greenberg Traurig Hoffman Lipoff Rosen &
Quentel
153 East 53rd Street
New York, New York 10022
Attention: Stephen A. Weiss, Esq.
Telephone: (212) 801-9200
Telecopier: (212) 223-7161
14.7 SURVIVABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
14.8 EXPENSES. All reasonable costs and expenses including, without
limitation, reasonable attorneys' fees incurred by (a) Agent in its efforts to
enforce payment of any Obligation or effect collection of any Collateral, or (b)
Agent in connection with the entering into, modification, amendment and
enforcement of this Agreement or any consents or waivers hereunder and all
related agreements, documents and instruments, or (c) Agent or any Lender in
instituting, maintaining, preserving, enforcing and foreclosing of or on Agent's
security interest or Lien in any of the Collateral, whether through judicial
proceedings or otherwise, or (d) Agent or any Lender in defending or prosecuting
any actions or proceedings arising out of or relating to Agent's or any Lender's
transactions with Borrower, or (e) Agent in connection with any legal advice
given to Agent or any Lender with respect to its rights and obligations under
this Agreement and all related agreements other than with respect to disputes
between Agent, any Lender or any Transferee(s), may be charged to Borrower's
accounts and shall be part of the Obligations.
14.9 INJUNCTIVE RELIEF. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Agent and Lenders; therefore, each Lender, if such Lender so requests,
shall be entitled to temporary and permanent injunctive relief in any such
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case without the necessity of proving actual damages to the extent permitted by
law.
14.10 CAPTIONS. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
14.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
14.12 RECORDATION. Agent shall not record this document unless required
to do so in order to protect its rights hereunder and upon concurrent notice to
Borrower.
14.13 CONSEQUENTIAL DAMAGES. Neither Agent, any Lender nor any agent or
attorney for Lender shall be liable to Borrower for consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
14.14 CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
XV. INTENTIONALLY OMITTED.
XVI. REGARDING AGENT.
16.1. APPOINTMENT. Each Lender hereby designates BNYCC to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
3.2 and the Fee Letter), and collections received pursuant to this Agreement,
for the ratable benefit of Lenders. Agent may perform any of its duties
hereunder by or through its agents or employees. As to any matters not
expressly provided for by this Agreement (including without limitation,
collection of the Notes), Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
PROVIDED, HOWEVER, that Agent shall not be required to take any action which
exposes Agent to liability or which is
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contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
16.2. NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their willful misconduct or gross (not
mere) negligence, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of Borrower. The duties of Agent as respects the
Advances to Borrower shall be mechanical and administrative in nature; Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon Agent any obligations in respect
of this Agreement except as expressly set forth herein.
16.3. LACK OF RELIANCE ON AGENT AND RESIGNATION. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
Borrower. Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before making of the
Advances or at any time or times thereafter except as shall be provided by
Borrower pursuant to the terms hereof. Agent shall not be responsible to any
Lender for any recitals, statements, information, representations or warranties
herein or in any agreement, document, certificate or statement delivered in
connection with or for the execution, effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any Other
Document, or of the financial condition of Borrower, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Other Documents or the financial
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condition of Borrower, or the existence of any Event of Default or any Incipient
Event of Default.
Agent may resign on sixty (60) days' written notice to each of Lenders
and Borrower and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrower.
Any such successor Agent shall succeed to the rights, powers and duties
of Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent. After any Agent's resignation as Agent, the provisions of this
Article XVI shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
16.4. CERTAIN RIGHTS OF AGENT. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
16.5. RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
16.6. NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Incipient Event of Default or Event of Default
hereunder or under the Other Documents, unless Agent has received notice from a
Lender or a Borrower referring to this Agreement or the Other Documents,
describing such Incipient Event of Default or Event of Default and stating that
such notice is a "notice of default". In the event that Agent receives such a
notice, Agent shall give notice thereof to Lenders. Agent shall take such
action with respect to such Incipient Event of Default or Event of Default as
shall be reasonably directed by the Required Lenders; PROVIDED, THAT, unless and
until Agent shall have received such directions, Agent may (but
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shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Incipient Event of Default or Event of Default as it shall
deem advisable in the best interests of Lenders.
16.7. INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; PROVIDED THAT, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence (but not mere negligence) or willful misconduct.
16.8. AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
16.9 DELIVERY OF DOCUMENTS. To the extent Agent receives documents and
information from Borrower pursuant to the terms of this Agreement, Agent will
promptly furnish such documents and information to Lenders.
16.10. BORROWER'S UNDERTAKING TO AGENT. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall PRO TANTO
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
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Each of the parties has signed this Agreement as of the _____ day of
___________, 1996.
GREENWICH CALEDONIAN, LIMITED
By:________________________________
Its:_______________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, AS AGENT
By:________________________________
Its:_______________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, AS LENDER
By:________________________________
Its:_______________________________
Commitment Percentage _______%
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EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-4164 on Form S-1 of Greenwich Air Services, Inc. of our report dated
December 18, 1995, except for Note 16 as to which the date is April 24, 1996,
appearing in the Prospectus, which is part of this Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Miami, Florida
May 31, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 10, 1996
relating to the combined financial statements of Engine Services Division
of Aviall, Inc., which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Dallas, Texas
May 31, 1996
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
Aviall, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus. Our report refers to
changes in the method of accounting for income taxes and postretirement
benefits other than pensions.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Dallas, Texas
May 31, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated May 14, 1996 relating
to the consolidated financial statements of Aviall Limited, which appears in
such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Price Waterhouse
PRICE WATERHOUSE
Chartered Accountants
Glasgow, Scotland
May 31, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------------------------------
AMERICAN STOCK TRANSFER & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-3439945
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
40 Wall Street 10005
New York, New York (Zip Code)
(Address of trustee's
principal executive offices)
----------------------------------
GREENWICH AIR SERVICES, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 58-1758941
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
P. O. BOX 522187
MIAMI, FLORIDA 33152
(Address of principal executive (Zip Code)
offices)
----------------------------------
% SENIOR NOTES DUE 2006
(Title of the Indenture Securities)
<PAGE>
-2-
GENERAL
1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
None.
3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of
the trustee:
AS OF MAY 20, 1996
---------------------------------------------------------------------------
COL. A COL. B
---------------------------------------------------------------------------
Title of Class Amount Outstanding
---------------------------------------------------------------------------
Common Shares - par value $600 per share. 1,000 shares
4. TRUSTEESHIPS UNDER OTHER INDENTURES.
8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2000 ISSUED IN TERMS OF
INDENTURE DATED AS OF NOVEMBER 15, 1993.
5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE
OBLIGOR OR UNDERWRITERS.
None.
<PAGE>
-3-
6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
None.
7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS.
None.
8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
None.
9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
None.
10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
None.
11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING
50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
None.
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
None.
13. DEFAULTS BY THE OBLIGOR.
None.
14. AFFILIATIONS WITH THE UNDERWRITERS.
None.
15. FOREIGN TRUSTEE.
Not applicable.
<PAGE>
-4-
16. LIST OF EXHIBITS.
T-1.1 - A copy of the Organization Certificate of American Stock Transfer
& Trust Company, as amended to date including authority to
commence business and exercise trust powers was filed in
connection with the Registration Statement of Live Entertainment,
Inc., File No. 33-54654, and is incorporated herein by reference.
T-1.4 - A copy of the By-Laws of American Stock Transfer & Trust Company,
as amended to date was filed in connection with the Registration
Statement of Live Entertainment, Inc., File No. 33-54654, and is
incorporated herein by reference.
T-1.6 - The consent of the Trustee required by Section 312(b) of the
Trust Indenture Act of 1939. - Exhibit A.
T-1.7 - A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority. - Exhibit B.
---------------------------------------
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
American Stock Transfer and Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 21st day of May 1996 .
AMERICAN STOCK TRANSFER
AND TRUST COMPANY
Trustee
By:
---------------------------
Vice President
<PAGE>
EXHIBIT A
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321 (b) of the Trust Indenture Act of
1939, and subject to the limitations therein contained, American Stock Transfer
& Trust Company hereby consents that reports of examinations of said corporation
by Federal, State, Territorial or District authorities may be furnished by such
authorities to you upon request therefor.
Very truly yours,
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By
---------------------------
Vice President
<PAGE>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1996
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
- --------------------------------------------------------------------------------
/1/
[Logo] Please refer to page i, Table of Contents,
for the required disclosure of estimated
burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC OFFICES
ONLY AND TOTAL ASSETS OF LESS THAN $100 MILLION--FFIEC 034
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1995 (951231)
------
This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).
This report form is to be filed by banks with domestic offices only. Banks with
branches and consolidated subsidiaries in U.S. territories and possessions, Edge
or Agreement subsidiaries, foreign branches, consolidated foreign subsidiaries,
or International Banking Facilities must file FFIEC 031.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Michael Karfunkel
---------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
/s/ Michael Karfunkel
- ------------------------------------------------------
Signature of Officer Authorized to Sign Report
January 29, 1996
- ------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
NOTE: These instructions may in some cases differ from generally accepted
accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulation authority and is true and correct.
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the SPECIAL RETURN
ADDRESS ENVELOPE PROVIDED. If express mail is used in lieu of the special
return address envelope, return the original only to the FDIC, c/o Quality
Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the SPECIAL RETURN ADDRESS
ENVELOPE PROVIDED. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
STATE OF NY BANKING DEPT.
2 RECTOR STREET, 22ND FLOOR
NEW YORK NY 10006 0006
32
Banks should affix the address label in this space.
American Stock Transfer & Trust Co.
- ------------------------------------------------------
Legal Title of Bank (TEXT 8010)
New York
- ------------------------------------------------------
City (TEXT 8130)
New York 10005
- ------------------------------------------------------
State Abbrev. (TEXT 8300) ZIP Code (TEXT 8220)
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
<PAGE>
Page i
/2/
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100 MILLION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement. . . . . . . . . . . . . . . . . . . . .RI-1, 2, 3
Schedule RI-A--Changes in Equity Capital . . . . . . . . . . . . . . . . . .RI-3
Schedule RI-B--Charge-offs and Recoveries and Changes in Allowance
for Loan and Lease Losses. . . . . . . . . . . . . . . . . . . . . . . RI-4, 5
Schedule RI-C--Applicable Income Taxes by Taxing Authority . . . . . . . . .RI-5
Schedule RI-E--Explanations. . . . . . . . . . . . . . . . . . . . . . . RI-5, 6
REPORT OF CONDITION
Schedule RC--Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . RC-1, 2
Schedule RC-B--Securities. . . . . . . . . . . . . . . . . . . . . . . . RC-3, 4
Schedule RC-C--Loans and Lease Financing Receivables:
Part I. Loans and Leases. . . . . . . . . . . . . . . . . . . . . . RC-5, 6
Part II. Loans to Small Businesses and Small Farms (included
in the forms for June 30 only) . . . . . . . . . . . . . . . . . RC-6a, 6b
Schedule RC-E--Deposit Liabilities . . . . . . . . . . . . . . . . . . . RC-7, 8
Schedule RC-F--Other Assets. . . . . . . . . . . . . . . . . . . . . . . . .RC-9
Schedule RC-G--Other Liabilities . . . . . . . . . . . . . . . . . . . . . .RC-9
Schedule RC-K--Quarterly Averages. . . . . . . . . . . . . . . . . . . . . RC-10
Schedule RC-L--Off-Balance Sheet Items . . . . . . . . . . . . . . . . RC-11, 12
Schedule RC-M--Memoranda . . . . . . . . . . . . . . . . . . . . . RC-12, 13, 14
Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets . . RC-15
Schedule RC-O--Other Data for Deposit Insurance Assessments. . . . . . RC-16, 17
Schedule RC-R--Risk-Based Capital. . . . . . . . . . . . . . . . . . . RC-18, 19
Optional Narrative Statement Concerning the Amounts Reported in the
Reports of Condition and Income. . . . . . . . . . . . . . . . . . . . . RC-20
Special Report (to be completed by all banks)
Schedule RC-J-- Repricing Opportunities (sent only to and to be completed only
by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is 31.8
hours per respondent and is estimated to vary from 15 to 225 hours per response,
depending on individual circumstances. Burden estimates include the time for
reviewing instructions, gathering and maintaining data in the required form, and
completing the information collection, but exclude the time for compiling and
maintaining business records in the normal course of a respondent's activities.
Comments concerning the accuracy of this burden estimate and suggestions for
reducing this burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Washington, D.C. 20503 and
to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, national and state nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00
a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
Affix the address label in this space. FFIEC 034
Page RC-I
American Stock Transfer & Trust Co. /9/
- ------------------------------------------------------
Legal Title of Bank
New York
- ------------------------------------------------------
City
New York 10005
- ------------------------------------------------------
State ZIP Code
FDIC Certificate Number | | | | | |
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR DECEMBER 31, 1995
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C100
--------
DOLLAR AMOUNTS IN THOUSANDS MIL THOU
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions:
a. Noninterest-bearing balances and currency and coin(1)(2). . . . . . . . . . . . . . . . . RCON 0061 1,464 1.a.
b. Interest-bearing balances(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 0071 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A). . . . . . . . . . . . . . . . RCON 1754 2.a.
b Available-for-sale securities (from Schedule RC-B, column D). . . . . . . . . . . . . . . RCON 1773 8,042 2.b.
3. Federal funds sold and securities purchased under agreements to resell:
a. Federal funds sold(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 0276 3.a.
b. Securities purchased under agreements to resell(5). . . . . . . . . . . . . . . . . . . . RCON 0277 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) . . . . . RCON 2122 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . . . RCON 3123 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . . . RCON 2120 4.c.
d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a
minus 4.b and 4.c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 2125 4.d.
5. Trading assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3645 5.
6. Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . . . . . . RCON 2145 2,716 6.
7. Other real estate owned (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . . . RCON 2150 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M). . . RCON 2130 8.
9. Customer's liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . . . RCON 2185 9.
10. Intangible assets (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 2143 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 2160 5,185 11.
12. a. Total assets (sum of items 1 through 11). . . . . . . . . . . . . . . . . . . . . . . . . RCON 2170 12.a.
b. Losses deferred pursuant to 12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . . . . . RCON 0505 12.b.
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(j) (sum of items 12.a
and 12.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 0307 17,407 12.c.
- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) The amount reported in this item must be greater than or equal to the sum of Schedule RC-M, items 3.a and 3.b.
(3) Includes time certificates of deposit not held for trading.
(4) Report "term federal funds sold" in Schedule RC, item 4.a, "Loans and leases, net of unearned income," and in Schedule RC-C,
part I.
(5) Report securities purchased under agreements to resell that involve the receipt of immediately available funds and mature in
one business day or roll over under a continuing contract in Schedule RC, item 3.a, "Federal funds sold."
<PAGE>
FFIEC 034
Page RC-12
/10/
SCHEDULE RC--CONTINUED
<CAPTION>
DOLLAR AMOUNTS IN THOUSANDS MIL THOU
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals in columns A and C from Schedule RC-E) . . . . . . . . RCON 2200 13.a.
(1) Noninterest-bearing(1). . . . . . . . . . . . . . . . . . . . . . . RCON 6631 13.a.(1)
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . . RCON 6634 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBF's. . . . . . . . . . . . . .
(1) Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. Federal funds purchased and securities sold under agreements to repurchase:
a. Federal funds purchased(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 0275 14.a.
b. Securities sold under agreements to repurchase(3) . . . . . . . . . . . . . . . . . . . . RCON 0279 14.b.
15. a. Demand notes issued to the U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . RCON 2840 15.a.
b. Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3148 15.b.
16. Other borrowed money:
a. With original maturity of one year or less. . . . . . . . . . . . . . . . . . . . . . . . RCON 2332 16.a.
b. With original maturity of more than one year. . . . . . . . . . . . . . . . . . . . . . . RCON 2333 16.b.
17. Mortgage indebtedness and obligations under capitalized leases. . . . . . . . . . . . . . . . RCON 2910 17.
18. Bank's liability on acceptances executed and outstanding. . . . . . . . . . . . . . . . . . . RCON 2920 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3200 19.
20. Other liabilities (from Schedule RC-G). . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 2830 6,350 20.
21. Total liabilities (sum of items 13 through 20). . . . . . . . . . . . . . . . . . . . . . . . RCON 2648 6,350 21.
22. Limited-life preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . . . RCON 3282 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . RCON 3428 23.
24. Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3230 600 24.
25. Surplus (exclude all surplus related to preferred stock). . . . . . . . . . . . . . . . . . . RCON 3836 7,478 25.
26. a. Undivided profits and capital reserves. . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3832 2,844 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities. . . . . . . . . . RCON 3834 135 26.b.
27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . .
28. a. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . . . RCON 3210 11,057 28.a.
b. Losses deferred pursuant to 12 U.S.C. 1823(j) . . . . . . . . . . . . . . . . . . . . . . RCON 0308 28.b.
c. Total equity capital and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 28.a and 28.b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3659 11,057 28.c.
29. Total liabilities, limited-life preferred stock, equity capital, and losses deferred
pursuant to 12 U.S.C. 1823(j) (sum of items 21, 22, and 28.c) . . . . . . . . . . . . . . . . RCON 2257 17,407 29.
Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION
1. Indicate in the box at the right the number of the statement below that best describes Number
the most comprehensive level of auditing work performed for the bank by independent ------
external auditors as of any date during 1994. . . . . . . . . . . . . . . . . . . . . . . . . RCON 6724 M.1.
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ---------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, "Other borrowed money."
(3) Report securities sold under agreements to repurchase that involve the receipt of immediately available funds and mature in one
business day or roll over under a continuing contract in Schedule RC, item 14.a, "Federal funds purchased."
</TABLE>
