<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------------------------
FORM 8-K
----------------------------------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 10, 1997
KELLSTROM INDUSTRIES, INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-23764 13-3753725
- ---------------------------- -------------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
14000 N.W. 4th Street, Sunrise, Florida 33325
- ----------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 845-0427
Not Applicable
------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On September 10, 1997, Kellstrom Industries, Inc. (the "Company"),
through Aero Support Holdings, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Kellstrom Subsidiary"), completed the acquisition
(the "Acquisition") of substantially all of the assets of Aero Support USA Inc.,
a privately held New York Corporation ("Aero Support"). The consideration paid
by the Company consisted of $13,767,867 in cash (the "Cash Purchase Price") and
three warrants dated September 10, 1997. One warrant is for the purchase of
75,000 shares of common stock, par value $0.001 per share of the Company (the
"Common Stock"), at an exercise price of $22.00 per share, expiring in three
years. The other warrants are for the purchase of an aggregate of 175,000 shares
of Common Stock, at an exercise price of $19.00 per share, expiring in five
years. Up to an additional $5,000,000 cash consideration may be paid in the
form of an earn-out payable over three years based upon Aero Support's future
operating performance. On September 10, 1997, the last sale price of the Common
Stock, as reported on the Nasdaq National Market, was $16.75 per share. The
Acquisition was consummated pursuant to the terms of an Asset Purchase
Agreement, dated as of September 10, 1997, by and among the Company and
Kellstrom Subsidiary, on the one hand, and Aero Support and its shareholders
(the "Principals"), on the other hand.
A portion of the Cash Purchase Price consisted of the issuance of (i) a
promissory note in the aggregate principal amount of $8,999,457 maturing
September 17, 1997 and bearing interest at the so called "prime" rate of
interest charged from time to time by Barnett Bank, N.A. (Kellstrom's senior
lender) on short term loans and (ii) two promissory notes in the aggregate
principal amount of $2,688,410 maturing January 15, 1998 and bearing interest at
the same rate. The financing needed for payment of the Cash Purchase Price was
funded through the Company's revolving credit facility with Barnett Bank, N.A.
(the "Barnett Facility"). Borrowings under the Barnett Facility bear interest at
1/4% below the prime rate or at LIBOR plus 275 basis points and are secured by
substantially all the assets of the Company.
In addition, the Company is obligated to pay a fee to Helix Capital
Services, L.L.C. ("Helix") for financial services provided in connection with
the Acquisition under a pre-existing merchant banking agreement with Helix in
an amount equal to three percent (3%) of the consideration paid by the Company
in the Acquisition.
Aero Support is an international after market reseller of turbo jet
engines and engine parts for helicopters and large transport aircraft. Aero
Support has a customer base that includes domestic and foreign operators,
commercial and industrial enterprises, engine overhaul facilities and individual
operators. Its main product lines are distinct from those of Kellstrom. Aero
Support's primary focus is on the Allison (Rolls Royce) T56/501 engine, which
powers the military's Hercules C-130 aircraft and the Allison 250, with 16,000
units actively in use by helicopters. During 1996, Aero Support served 495
customers worldwide from its headquarters in New York and its additional
facilities in Louisiana. The Company intends to continue the business conducted
by Aero Support. The press release issued by the Company, dated September 10,
1997, is attached hereto as Exhibit 99.1.
<PAGE>
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. Financial Statements of Business Acquired.
It is impracticable for the Company to provide the required Consolidated
Financial Statements of Aero Support on the date this report is being filed. The
Company intends to file the required Interim Consolidated Financial Statements
under cover of Form 8-K/A as soon as practicable; but not later than 60 days
after the date this report must have been filed.
b. Pro Forma Financial Information.
It is impracticable for the Company to provide the required pro
forma financial information on the date this report is being filed. The Company
intends to file the required Financial Statements under cover of Form 8-K/A as
soon as practicable; but not later than 60 days after the date this report must
have been filed.
c. Exhibits.
2. The Asset Purchase Agreement by and among the Company, Kellstrom
Subsidiary, Aero Support and the Principals.
10.1 Warrant dated September 10, 1997, issued by the Company to Zvi
Bar-On.
10.2 Warrant dated September 10, 1997, issued by the Company to
Mordechai Markowicz.
10.3 Warrant dated September 10, 1997, issued by the Company to
Michael Navon.
99.1 Press Release issued by the Company, dated September 10, 1997,
regarding the Company's acquisition of Aero Support.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KELLSTROM INDUSTRIES, INC.
Date: September 24, 1997 By /s/ Zivi R. Nedivi
-------------------------------
Zivi R. Nedivi
President and Chief Executive
Officer
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as .........'SS'
<PAGE>
<PAGE>
EXHIBIT INDEX
No. Description
- -- -----------
2. The Asset Purchase Agreement by and among the Company,
Kellstrom Subsidiary, Aero Support and the Principals.
10.1 Warrant dated September 10, 1997, issued by the Company
to Zvi Bar-On.
10.2 Warrant dated September 10, 1997, issued by the Company
to Mordechai Markowicz.
10.3 Warrant dated September 10, 1997, issued by the Company
to Michael Navon.
99.1 Press Release, dated September 10, 1997, regarding the
Company's acquisition of Aero Support.
<PAGE>
<PAGE>
EXHIBIT 2
ASSET PURCHASE AGREEMENT
dated as of
September 10, 1997
by and among
KELLSTROM INDUSTRIES, INC.
and
AERO SUPPORT HOLDINGS, INC.
and
AERO SUPPORT USA INC.
and
ZVI BAR-ON
and
MORDECHAI MARKOWICZ
and
MICHAEL NAVON
<PAGE>
<PAGE>
<TABLE>
TABLE OF CONTENTS
ARTICLE I
<S> <C>
DEFINITIONS................................................................................. 1
ARTICLE II
PURCHASE AND SALE.......................................................................... 6
Section 2.01. Assets Conveyed................................................... 6
Section 2.02. Excluded Assets................................................... 8
Section 2.03. Purchase Price.................................................... 8
Section 2.04. Liabilities Assumed by Kellstrom Subsidiary....................... 10
Section 2.05. Instruments of Conveyance and Transfer of Books and
Records......................................................... 10
Section 2.06. The Closing....................................................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND THE PRINCIPALS................... 11
Section 3.01. Organization, Etc................................................. 11
Section 3.02. Subsidiaries...................................................... 11
Section 3.03. Capitalization.................................................... 11
Section 3.04. Ownership of Assets............................................... 11
Section 3.05. Authority and No Conflict; Consents............................... 11
Section 3.06. Financial Statements; Books and Records........................... 12
Section 3.07. No Undisclosed Liabilities........................................ 13
Section 3.08. Corporate Action.................................................. 13
Section 3.09. Absence of Changes................................................ 13
Section 3.10. Taxes............................................................. 14
Section 3.11. Leased Property................................................... 16
Section 3.12. Environmental Protection.......................................... 17
Section 3.13. Intellectual Property............................................. 17
Section 3.14. Assets............................................................ 17
Section 3.15. Inventories....................................................... 17
Section 3.16. Product Warranty.................................................. 18
Section 3.17. Personnel and Plans............................................... 18
Section 3.18. Insurance......................................................... 19
Section 3.19. Litigation........................................................ 19
Section 3.20. Compliance with Law............................................... 20
Section 3.21. Contracts, Obligations and Commitments............................ 20
Section 3.22. Licenses.......................................................... 20
Section 3.23. No Broker......................................................... 21
Section 3.24. No Illegal or Improper Transactions............................... 21
Section 3.25. Related Party Transactions........................................ 21
Section 3.26. Suppliers and Customers........................................... 21
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 3.27. Accounts Receivable............................................... 22
Section 3.28. Amounts Due From Principals and Affiliates........................ 22
Section 3.29. No Misleading Statements.......................................... 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS........................................... 23
Section 4.01. Due Authorization................................................. 23
Section 4.02. No Conflict....................................................... 23
Section 4.03. Brokers........................................................... 23
Section 4.04. Securities Representation......................................... 24
Section 4.05. HSR Matters....................................................... 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF KELLSTROM AND KELLSTROM SUBSIDIARY....................... 24
Section 5.01. Organization...................................................... 24
Section 5.02. Authority and No Conflict......................................... 24
Section 5.03. Consents.......................................................... 25
Section 5.04. Issuance of Warrants.............................................. 25
Section 5.05. Reports of Kellstrom.............................................. 25
Section 5.06. No Material Adverse Effect........................................ 26
Section 5.07. Brokers........................................................... 26
Section 5.08. HSR Matters....................................................... 26
ARTICLE VI
PRE-CLOSING COVENANT OF THE COMPANY AND THE PRINCIPALS..................................... 26
Section 6.01 Name Change.............................................................. 26
ARTICLE VII
POST-CLOSING COVENANTS..................................................................... 26
Post-Closing Covenants of all Parties Hereto............................................... 26
Section 7.01. General.................................................................. 26
Section 7.02. Tax Matters.............................................................. 27
Section 7.03. Kellstrom Subsidiary to Act as Agent for the Company..................... 28
Section 7.04. Delivery of Property Received by the Company or Kellstrom Subsidiary
After Closing.......................................................... 28
Section 7.05. Kellstrom Subsidiary Appointed Attorney for the Company.................. 28
Section 7.06. Payment of Liabilities................................................... 29
Section 7.07. Subsequent Liability..................................................... 29
Section 7.08. Consents................................................................. 29
Section 7.09. Non-Competition.......................................................... 29
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.10. Consulting Services.
Section 7.11. Employee Matters.................................................. 30
Section 7.12. Relocation........................................................ 31
Section 7.13. Monthly DAGM Reports.............................................. 31
ARTICLE VIII
CONDITIONS PRECEDENT TO KELLSTROM'S AND KELLSTROM SUBSIDIARY'S PERFORMANCE................. 31
Section 8.01. Accuracy of Representations and Warranties........................ 32
Section 8.02. Performance....................................................... 32
Section 8.03. No Material Adverse Effect........................................ 32
Section 8.04. Certification by the Company...................................... 32
Section 8.05. Certification by the Principals................................... 32
Section 8.06. Absence of Litigation............................................. 32
Section 8.07. Government Authorization.......................................... 32
Section 8.08. Opinion of the Company's Counsel.................................. 32
Section 8.09. Termination of Credit Facilities.................................. 33
Section 8.10. Name Change....................................................... 33
Section 8.11. Agreements........................................................ 33
ARTICLE IX
CONDITIONS PRECEDENT TO THE COMPANY'S AND THE PRINCIPALS' PERFORMANCE...................... 33
Section 9.01. Accuracy of Kellstrom's and Kellstrom Subsidiary's
Representations and Warranties.................................. 33
Section 9.02. Performance....................................................... 33
Section 9.03. No Material Adverse Effect........................................ 34
Section 9.04. Certificates...................................................... 34
Section 9.05. Absence of Litigation............................................. 34
Section 9.06. Government Authorization.......................................... 34
Section 9.07. Consents.......................................................... 34
Section 9.08. Payment........................................................... 34
Section 9.09. Opinion of Kellstrom's Counsel.................................... 34
ARTICLE X
INDEMNIFICATION............................................................................ 34
Section 10.01. Survival of Representations and Warranties........................ 34
Section 10.02. Indemnification Provisions for Benefit of Kellstrom............... 35
Section 10.03. Indemnification Provisions for Benefit of the Company and
the Principals.................................................. 35
Section 10.04. Matters Involving Third Parties................................... 36
Section 10.05. Other Indemnification Provisions.................................. 37
Section 10.06. Limitations on Indemnity and Liability............................ 38
</TABLE>
<PAGE>
<PAGE>
ARTICLE XI
<TABLE>
<S> <C> <C>
TERMINATION................................................................................ 38
Section 11.01. Termination of Agreement.......................................... 38
Section 11.02. Effect of Termination............................................. 38
ARTICLE XII
MISCELLANEOUS.............................................................................. 39
Section 12.01. Effect of Due Diligence........................................... 39
Section 12.02. Press Releases and Public Announcements........................... 39
Section 12.03. No Third Party Beneficiaries...................................... 39
Section 12.04. Bulk Sales Law.................................................... 39
Section 12.05. Entire Agreement.................................................. 39
Section 12.06. Succession and Assignment......................................... 39
Section 12.07. Counterparts...................................................... 39
Section 12.08. Headings.......................................................... 39
Section 12.09. Notices........................................................... 40
Section 12.10. Governing Law..................................................... 40
Section 12.11. Amendments and Waivers............................................ 40
Section 12.12. Severability...................................................... 41
Section 12.13. Expenses.......................................................... 41
Section 12.14. Construction...................................................... 41
Section 12.15. Incorporation of Exhibits, Annexes, and Schedules................. 42
Section 12.16. Specific Performance.............................................. 42
</TABLE>
<PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of September 10, 1997 (this
"Agreement"), by and among (i) Kellstrom Industries, Inc., a Delaware
corporation ("Kellstrom"), (ii) Aero Support Holdings, Inc., a Delaware
corporation and a wholly-owned subsidiary of Kellstrom ("Kellstrom Subsidiary"),
(iii) Aero Support USA Inc., a New York corporation (the "Company"), and (iv)
Zvi Bar-On, Mordechai Markowicz and Michael Navon (together, the "Principals"
and each individually, a "Principal").
RECITALS:
WHEREAS, Kellstrom, through Kellstrom Subsidiary, desires to
purchase and the Company desires to sell substantially all of the assets used by
the Company in the operation of its business (the "Business"), upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the Principals have determined that it is in the best
interest of the Company, and in furtherance of its purposes, to sell
substantially all assets, real and personal and mixed, tangible and intangible,
owned or leased by the Company and associated with or employed in the operations
of the Business, and substantially all other related operations owned or leased
by the Company (pursuant to a plan to liquidate the Company) to Kellstrom
Subsidiary, subject to the assumption by Kellstrom Subsidiary of those
liabilities of the Company as are more fully described herein.
NOW, THEREFORE, in consideration of the mutual promises and
agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following respective meanings for all
purposes of this Agreement:
"Acquisition" shall mean the purchase and sale of the Assets pursuant to
the terms of this Agreement.
"Affiliate" or "affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls or is controlled by or is
under common control with such Person. As used in this definition of "Affiliate"
the term "control" and any derivatives thereof mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract, or otherwise.
"Affiliated Obligations" means the amounts owed to the Company by the
Principals and their respective Affiliates, in the aggregate amount of
$29,382.66 excluding reimbursement of expenses to Affiliates in accordance with
prior practices of the Company disclosed to Kellstrom prior to the date hereof.
<PAGE>
<PAGE>
"Additional Payments" has the meaning set forth in Section 2.03.
"Additional Payments Schedules" has the meaning set forth in Section
2.03.
"Agreement" shall mean this Asset Purchase Agreement, as it may be from
time to time amended.
"Assets" has the meaning set forth in Section 2.01.
"Assigned Contracts" has the meaning set forth in Section 2.01.
"Audited Balance Sheet" has the meaning set forth in Section 3.06.
"Balance Sheet Date" has the meaning set forth in Section 3.07.
"Business Day" shall mean any day, other than a Saturday, Sunday or a
legal holiday under the Federal laws of the United States.
"Closing" shall mean the consummation of the Acquisition pursuant to
this Agreement.
"Closing Date" shall mean the date the Closing takes place.
"Closing Date Balance Sheet" has the meaning set forth in Section 2.03.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential Information" shall mean all trade secrets and other
confidential information concerning the Company including, without limitation,
information regarding the operations, future plans, projected and historical
sales, marketing, costs, production, growth and distribution, any customer
lists, customer information, information relating to governmental relations, and
information relating to the products or services, whether patentable or not.
"Consulting Agreement" shall mean the Consulting Agreement by and
between Kellstrom Subsidiary and Zvi Bar-On, dated as of the date of this
Agreement, in substantially the form of Exhibit A hereto.
"Employee Plan" has the meaning set forth in Section 3.17.
"Employment Agreements" shall mean the Employment Agreement by and
between Kellstrom Subsidiary and Mordechai Markowicz, the Employment Agreement
by and between Kellstrom Subsidiary and Michael Navon and the Employment
Agreement by and between Kellstrom Subsidiary and Jack Portlock each dated as of
the date of this Agreement, in substantially the forms of Exhibits B, C and C-1
hereto, respectively.
"Environmental Laws" shall mean all laws, rules, regulations, statutes,
ordinances, decrees or orders of any governmental entity relating to (a) the
control of any potential pollutant or protection of the air, water or land, (b)
solid, gaseous or
<PAGE>
<PAGE>
liquid waste generation, handling, treatment, storage, disposal or
transportation, and (c) exposure to hazardous, toxic or other substances alleged
to be harmful, and includes without limitation final and binding requirements
related to the foregoing imposed by (i) the terms and conditions of any license,
permit, approval or other authorization by any governmental entity, and (ii)
applicable judicial, administrative or other regulatory decrees, judgments and
orders of any governmental entity. The term "Environmental Laws" shall include,
but not be limited to the following statutes and the regulations promulgated
thereunder as currently in effect: the Clean Air Act, 42 U.S.C. 'SS' 7401 et
seq., the Clean Water Act, 33 U.S.C. 'SS' 1251 et seq., the Resource
Conservation Recovery Act ("RCRA"), 42 U.S.C. 'SS' 6901 et seq., the Superfund
Amendments and Reauthorization Act, 42 U.S.C. 'SS' 11011 et seq., the Toxic
Substances Control Act, 15 U.S.C. 'SS' 2601 et seq., the Water Pollution Control
Act, 33 U.S.C. 'SS' 1251, et seq., the Safe Drinking Water Act, 42 U.S.C.
'SS' 300f et seq., the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"), 42 U.S.C. 'SS' 9601 et seq., and any similar state,
federal or local statute or ordinance.
"Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative and/or monitoring costs and any
other related costs and expenses, including without limitation Environmental
Remediation Costs), other causes of action recognized now or at any later time,
damages, settlements, expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, attorney fees and other legal fees (a)
pursuant to any agreement, order, notice, directive (including directives
embodied in Environmental Laws), injunction, judgment or similar documents
(including settlements), or (b) pursuant to any claim by a governmental entity
or other person for personal injury, property damage, damage to natural
resources, remediation or similar costs or expenses incurred or asserted by such
governmental entity or person pursuant to common law or statute.
"Environmental Remediation Costs" shall mean all costs and expenses of
actions or activities to (a) clean-up or remove Hazardous Materials from the
environment, (b) prevent or minimize the movement, leaching or migration of
Hazardous Materials into the environment, (c) prevent, minimize or mitigate the
Release or threatened Release of Hazardous Materials into the environment, or
injury or damage from such Release, and (d) comply with the requirements of any
Environmental Laws. Environmental Remediation Costs include, without limitation,
costs and expenses payable in connection with the foregoing for legal,
engineering or other consultant services, for investigation, testing, sampling
and monitoring, for boring, excavation and construction, for removal,
modification or replacement of equipment or facilities, for labor and material,
and for proper storage, treatment and disposal of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any person, firm or entity (whether or not
incorporated) which, by reason of its relationship with the Company, is required
to be aggregated with the Company under Section 414(b), 414(c) or 414(m) of the
Code, or which together with the Company is a member of a controlled group
within the meaning of Section 4001(a) of ERISA.
<PAGE>
<PAGE>
"Excluded Assets" has the meaning set forth in Section 2.02.
"Hazardous Materials" shall mean any (a) toxic or hazardous materials or
substances; (b) solid wastes, including asbestos, buried contaminants,
chemicals, flammable or explosive materials; (c) radioactive materials; (d)
petroleum wastes and spills or releases of petroleum products; and (e) any other
chemical, pollutant, contaminant, substance or waste that is regulated by any
governmental entity under any Environmental Law.
"HSR" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"Fixed Payments" has the meaning set forth in Section 2.03.
"Intellectual Property" has the meaning set forth in Section 2.01
"Interim Balance Sheet" has the meaning set forth in Section 3.07.
"Inventories" has the meaning set forth in Section 2.01.
"IRS" shall mean the Internal Revenue Service.
"Leased Personal Property" has the meaning set forth in Section 2.01.
"Leasehold Improvements" means any and all leasehold improvements other
than those which can be removed from the Leased Property without material damage
to the walls or the floor.
"Leasehold Related Indebtedness" shall mean the indebtedness to The
Chase Manhattan Bank, N.A., in aggregate amount of $202,485.88, inclusive of
principal and accrued interest, relating to the Leasehold Improvements evidenced
by a term note, dated November 29, 1994, in the original principal amount of
$150,000 and a term note, dated June 30, 1997, in the original principal amount
of $200,000.
"Liability" shall mean any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"License" has the meaning set forth in Section 2.01.
"Liens" means liens, charges, claims, pledges, security interests and
encumbrances of any nature whatsoever.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on the business, prospects, results of operations,
financial condition or assets of such Person and its subsidiaries taken as a
whole. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.
<PAGE>
<PAGE>
"Material Adverse Event" shall mean an occurrence, event or development
which has had or is reasonably likely to have a Material Adverse Effect.
"Notes" has the meaning set forth in Section 2.03.
"Permitted Liens" has the meaning set forth in Section 3.04.
"Person" shall mean an individual, partnership, corporation, limited
liability company, joint venture, unincorporated organization, cooperative or a
governmental entity or agency thereof.
"Regulatory Authority" shall mean any foreign, United States Federal or
state government or governmental authority.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Tax" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Treasury Regulations" means the regulations promulgated under the Code.
"Warrants" shall mean the warrants to purchase shares of common stock
(the "Common Stock"), par value $.001 per share, of Kellstrom to be issued to
the Principals on the Closing Date in accordance with the terms of this
Agreement, in substantially the form of Exhibits D-1 through D-3 hereto.
"Yearly Unaudited Financial Statements" has the meaning set forth in
Section 3.05.
ARTICLE II
PURCHASE AND SALE
Section 2.01. Assets Conveyed. At the Closing, and upon the basis of the
representations, warranties, covenants and agreements contained herein, the
Company shall sell, transfer, assign, convey and deliver to Kellstrom
Subsidiary, all of the Company's right, title and interest in and to the Assets
(as defined below) free and clear of all Liens except for the Permitted Liens.
The "Assets" shall mean all those
<PAGE>
<PAGE>
personal, tangible and intangible properties, and the real property and
improvements of the Company used in connection with the operation of the
Business as set forth below other than Excluded Assets including without
limitation, those more particularly described in the Schedules to this Section
2.01, including the going concern value of the Business:
(a) all the rights and benefits accruing to the Company under all
agreements, contracts, arrangements, leases with respect to personal property,
guarantees, commitments and orders, whether written or oral, between the Company
and any third party, including without limitation, the contracts listed in
Schedule 2.01(a) hereto (the "Assigned Contracts");
(b) all of the Company's inventories of raw materials, engines
(including engines held for lease), parts, work-in-process, intermediates and
finished goods, if any ("Inventories");
(c) all manufacturing, production, maintenance and testing machinery
and equipment, computers, computer hardware and software, tools, supplies,
furniture, vehicles, and other tangible personal property and assets of the
Company related to the Business, including, without limitation, the items listed
on Schedule 2.01(c) hereto;
(d) all the interest of and the rights and benefits accruing to the
Company as lessee under the leases or rental agreements covering machinery,
equipment, computers, computer hardware and software, vehicles and other
tangible personal property as described in Schedule 2.01(d) hereto (the "Leased
Personal Property");
(e) all accounts and notes receivable (including without limitation,
any claims, remedies and other rights related thereto) evidencing rights to
payment for services rendered through the Closing Date, except for the
Affiliated Obligations (it being understood and agreed that such Affiliated
Obligations shall be repaid prior to the Closing Date);
(f) all operating data and records of the Company relating to the
Business, including, without limitation, client lists and records, referral
sources, production reports and records, equipment logs, operating guides and
manuals, projections, copies of financial, accounting and personnel records,
correspondence and other similar documents and records;
(g) all claims, warranty rights, causes of action and other similar
rights granted or owing to the Company arising out of the Business to the extent
the same are assignable;
(h) all of the Company's rights, to the extent of such rights, to use
the names set forth on Schedule 2.01(h) and all variations on any thereof for
any and all purposes;
(i) all the intellectual property of the Company, including, without
limitation, all software and software libraries, processes, formulae, methods,
plans, research data, marketing plans and strategies, forecasts, patents and
patent
<PAGE>
<PAGE>
applications, inventions, discoveries, know-how, trade secrets and ideas
(including those in the possession of third parties, but which are the property
of the Company), Confidential Information, and all drawings, records, books or
other indicia of the foregoing, trademarks, servicemarks, tradenames, licenses,
copyrights, operating rights, permits and other similar intangible property and
rights (the "Intellectual Property");
(j) all licenses, permits, approvals, qualifications, consents and
other authorizations (the "Licenses") necessary for the lawful conduct,
ownership and operation of the Business, including those described on Schedule
2.01(j), to the extent the same are transferrable;
(k) all prepaid expenses and cash and cash equivalents of the Company;
(l) all goodwill and going-concern value of the Company and the
Business; and
(m) all other assets and properties of any nature whatsoever held by
the Company, either directly or indirectly, and used in, allocated to, or
required for the conduct of the Business, but excluding the Excluded Assets (as
defined in Section 2.02 below).
Section 2.02. Excluded Assets. Anything to the contrary in Section 2.01
notwithstanding, the Assets shall exclude and Kellstrom Subsidiary shall not
purchase (i) all tax books of the Company other than those relating to sales,
use and other state and local taxes, books and ledgers relating to the ownership
interests in the Company, and minutes of meetings of, and actions taken by, the
Company's shareholders, (ii) the rights which accrue or will accrue to the
Company under this Agreement, (iii) any Employee Plan, other than the Oxford
Health Insurance Policy, Group No. AS067*01,01SC (the "Oxford Plan"), (iv) the
Affiliated Obligations, (v) the Leasehold Improvements, (vi) the construction
contract, dated February 6, 1997, between Paul Bavosa Construction Management
Inc. and the Company with respect to the renovation of the lobby at 44 Hudson
Street, New York, New York, (vii) all rights, under (a) the automobile lease,
dated May 9, 1995, with Zumbach Sports Cars Ltd. and World Omni Financial Corp.
for the Land Rover operated by Zvi Bar-On, to the extent, if any, that the
Company is a party thereto, and (b) the automobile lease, dated August 1997,
with Rallye Lexus and Lexus Credit for the 1997 Lexus SC300 operated by
Mordechai Markowicz, to the extent, if any, that the Company is a party thereto,
(viii) the life insurance policy, in the amount of $1,000,000, on the life of
Zvi Bar-On and (ix) the assets set forth on Schedule 2.02 hereto (collectively,
the "Excluded Assets").
Section 2.03. Purchase Price.
(a) The aggregate purchase price (the "Purchase Price") to be paid by
Kellstrom Subsidiary for (i) the Inventory shall consist of $1 million payable
by wire transfer of immediately available funds plus the assumption of an amount
of the Assumed Liabilities equal to the difference between $1 million and the
portion of the Purchase Price allocated to the Inventory pursuant to Schedule
7.02 and (ii) the Assets other than the Inventory shall consist of (A)
$1,080,000 in cash, payable by wire transfer of immediately available funds, (B)
the promissory notes of Kellstrom Subsidiary to be delivered at Closing in the
forms of Exhibits E-1, E-2, and E-3 (the
<PAGE>
<PAGE>
"Notes") which Notes shall provide for fixed payments (the "Fixed Payments") of
an aggregate principal amount of $11,687,867 (subject to adjustment as set forth
in paragraph (b) of this Section 2.03), (C) such additional payments (the
"Additional Payments"), if any, which may be made as described in Schedules
2.03(a)(1), 2.03(a)(2) and 2.03(a)(3) hereto (collectively, the "Additional
Payments Schedules"), (D) warrants to purchase up to an aggregate of 250,000
shares of common stock, par value $.001 per share, of Kellstrom (the "Common
Stock"), in the form attached hereto as Exhibits D-1 through D-3 (the
"Warrants") and (E) the assumption of the balance of the Assumed Liabilities not
assumed in consideration of the purchase of the Inventory pursuant to clause (i)
hereof. The Notes shall be secured by letters of credit in an aggregate amount
of $11.5 million from Barnett Bank, N.A.
(b) Adjustments to Purchase Price. (i) As soon as practicable and in
any event no later than ninety (90) days after the Closing Date, Kellstrom shall
deliver to the Principals a consolidated balance sheet of the Company as of the
Closing Date, prepared by Kellstrom's independent auditors in accordance with
generally accepted accounting principles and on a basis consistent with the
Yearly Unaudited Financial Statements (the "Closing Date Balance Sheet").
Kellstrom shall bear the costs of preparing the Closing Date Balance Sheet.
(ii) If the Closing Date Balance Sheet as determined pursuant to this
Section 2.03 reflects that the amounts owed to the Company by the Principals and
their respective Affiliates is more than or less than $29,382.66, then the
purchase price owed to the Company shall be reduced by the return to Kellstrom
Subsidiary of cash in the amount of such excess or increased by the payment to
the Company in the amount of such shortfall, it being agreed that, in preparing
the Closing Date Balance Sheet, no changes shall be made to entries for the
reimbursement of expenses of Affiliates if they were made in accordance with
prior practice of the Company disclosed to Kellstrom prior to the date hereof.
(iii) Any amounts owed by any party hereto pursuant to this Section
2.03 shall be paid by wire transfer of immediately available funds no later than
ten (10) days following receipt by the Principals of the Closing Date Balance
Sheet.
(c) Right to Contest Closing Date Balance Sheet and Calculation
of the Additional Payments. In connection with the adjustment to the Purchase
Price which may be made pursuant to clause (b)(ii) above based on the Closing
Date Balance Sheet and the calculation of the Additional Payments, the
Principals shall be entitled to:
(i) at their own expense, have their certified public accountants
review (i) Kellstrom Subsidiary's calculation of DAGM (as defined in the
Additional Payments Schedules) and determination of any Additional Payment (the
"Kellstrom Determination") in order to confirm the calculation thereof and (ii)
the Closing Date Balance Sheet to confirm the amount of the Affiliated
Obligations as of the Closing Date. The Principals shall complete their review
as promptly as possible but in no event later than thirty (30) days following
receipt of Kellstrom Determination and payment, if any, of the Additional
Payment due therewith, or the Closing Date Balance Sheet, as applicable.
<PAGE>
<PAGE>
(ii) If, within thirty (30) days (or such shorter period) following
receipt by the Principals of the Kellstrom Determination or the Closing Date
Balance Sheet, as applicable, the Principals object to any part thereof, the
Principals shall notify in writing (each, an "Objection Notice") Kellstrom,
specifying in reasonable detail the nature of the objections. If the Principals
do not deliver an Objection Notice within such 30-day period, the calculation of
the applicable DAGM and Additional Payment or the Affiliated Obligations as of
the Closing Date as applicable, shall be deemed final and binding. If the
Principals do timely deliver an Objection Notice, the Principals and Kellstrom
shall promptly seek to agree upon any disputed matters. If full agreement is not
reached within ten (10) business days following the date of the Objection
Notice, the parties shall jointly designate a firm of independent certified
public accountants having no past or current affiliation with Kellstrom, the
Principals or any of their respective affiliates to resolve any disputed matters
in accordance with this paragraph and, if the parties cannot jointly agree on
the designation of such a firm within twenty (20) business days following the
date of the Objection Notice, the parties shall jointly request the American
Institute of Certified Public Accountants promptly to designate a firm of
independent certified public accountants having no past or current affiliation
with Kellstrom, the Principals or any of their respective affiliates. The firm
so designated shall, within thirty (30) days thereafter, determine all
unresolved issues between Kellstrom Subsidiary and the Principals in accordance
with generally accepted accounting principles in the United States consistently
applied and certify in writing the resolution thereof to the Principals and
Kellstrom Subsidiary. The costs and expenses of such firm shall be borne by the
Principals unless the firm designated in the preceding sentence determines that
the Additional Payments due amount to 105% or more, or the Affiliated
Obligations set forth on the Closing Date Balance Sheet amount to 95% or less,
in each case of the amount objected to by the Principals, in which cases such
costs shall be borne by Kellstrom or Kellstrom Subsidiary. The applicable DAGM
and Additional Payment or the Affiliated Obligations as of the Closing Date, as
applicable, with such changes as are agreed upon between the Principals and
Kellstrom Subsidiary or their respective accountants or as so determined by the
independent accounting firm appointed pursuant to the terms hereof, shall be
deemed final and binding.
Section 2.04. Liabilities Assumed by Kellstrom Subsidiary. In further
consideration for the sale of the Assets, on the Closing Date, Kellstrom
Subsidiary shall assume and agree to pay, perform and discharge the Assumed
Liabilities. For purposes of this Agreement, the term "Assumed Liabilities"
shall mean all the Liabilities of the Company, excluding (i) any liabilities for
transactional and advisory costs, including, without limitation, attorneys' and
accountants' fees and expenses, incurred in connection with the transactions
contemplated hereby or the proposed sale of the Company or any equity interest
therein (collectively, "Transaction Costs"), (ii) Taxes measured by income owing
by the Company to any governmental agency or other taxing authority, (iii) any
Employee Plan, other than the Oxford Plan (iv) any Liabilities arising out or
relating to the Excluded Assets other than the Leasehold Related Indebtedness,
and (v) any guarantees whatsoever by the Company of the Small Business
Administration loan approved on June 28, 1994 to Zvi Bar-On in the original
principal amount of $800,000. Nothing in this Section 2.04 shall in any way
limit the right of Kellstrom or Kellstrom Subsidiary to indemnification under
this Agreement.
Section 2.05. Instruments of Conveyance and Transfer of Books and
Records. At the Closing, the Company shall deliver to Kellstrom Subsidiary, such
<PAGE>
<PAGE>
deeds, bills of sale, endorsements, assignments and other instruments of sale,
conveyance, transfer and assignment, satisfactory in form and substance to
Kellstrom Subsidiary and its counsel, as may be reasonably requested by
Kellstrom Subsidiary, in order to convey to Kellstrom Subsidiary good and
marketable title to the Assets, free and clear of all Liens other than Permitted
Liens. Kellstrom Subsidiary shall pay all sales, use, transfer or stamp taxes,
or similar charges, payable by reason of the sale hereunder.
Section 2.06. The Closing.
Assuming the satisfaction or the waiver of satisfaction of the
conditions contained herein, the Closing will take place at the offices of
Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103 as soon
as possible but in no event later than 9:00 a.m. on September 10, 1997. This
date is the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY AND THE PRINCIPALS
Each of the Company and Principals, jointly and severally, represent and
warrant to Kellstrom and Kellstrom Subsidiary that the statements contained in
this Article III are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the schedules delivered by
the Principals to Kellstrom and Kellstrom Subsidiary on the date hereof (the
"Schedules").
Section 3.01. Organization, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has full corporate power and authority to conduct its Business as
it is now being conducted and to own, operate or lease the properties and assets
it currently owns, operates or holds under lease. The Company is duly qualified
or licensed to do Business and is in good standing as a foreign corporation in
each jurisdiction where the character of its Business or the nature of its
properties makes such qualification or licensing necessary, except where the
failure to so qualify or be licensed would not have a Material Adverse Effect,
all of which jurisdictions are set forth on Schedule 3.01. The Company has
heretofore delivered to Kellstrom true and correct copies of its Certificate of
Incorporation and By-laws as in effect on the date hereof.
Section 3.02. Subsidiaries. The Company has no equity interest in any
corporation, partnership, joint venture or other legal entity.
Section 3.03. Capitalization. The Principals are the sole stockholders
of the Company. No contract, commitment or undertaking of any kind has been made
for the issuance of any additional capital stock or other interests in the
Company; nor is there in effect or outstanding any subscription, option, warrant
or preemptive or other right to acquire any of such capital stock or other
instruments convertible into or exchangeable for any of such capital stock.
<PAGE>
<PAGE>
Section 3.04. Ownership of Assets. The Company is the legal and
beneficial owner of the Assets, free and clear of any Liens other than the Liens
described on Schedule 3.04 hereto (the "Permitted Liens") and the Company has
full right, power and authority to sell, transfer, assign, convey and deliver
all of the Assets to be sold by it hereunder and delivery thereof will convey to
Kellstrom Subsidiary good, absolute and marketable title to said Assets, free
and clear of any Liens except for Permitted Liens and except to the extent that
consents have not been obtained.
Section 3.05. Authority and No Conflict; Consents. (a) The Company has
the full right, power and authority to execute, deliver and carry out the terms
of this Agreement and all other documents and agreements to be entered into in
connection herewith or necessary to give effect to the provisions of this
Agreement, and this Agreement and such other documents and agreements have been
duly authorized, executed and delivered by the Company. Except to the extent
that consents are required as set forth on Schedule 3.05(a), the execution and
delivery of this Agreement by the Company does not, and the consummation of the
transactions contemplated hereby will not (a) conflict with, or result in any
violation of or default or loss of any benefit under, any provision of the
Company's governing instruments; (b) conflict with, or result in any violation
of or default or loss of any material benefit under, any permit, concession,
grant, franchise, law, rule or regulation, or any judgment, decree or order of
any court or other Regulatory Authority to which the Company or its assets or
Business is a party or to which the Company is subject; (c) conflict with, or
result in a breach or violation of or default or loss of any material benefit
under, or accelerate the performance required by, the terms of any material
agreement, contract, indenture or other instrument to which the Company is a
party or to which the Company's assets or Business is subject, or constitute a
default or loss of any material right thereunder or the creation of any material
Liens upon the Company's assets; or (d) result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any material License. All action and
other authorizations prerequisite to the execution of this Agreement and the
consummation of the transactions contemplated hereby have been taken or obtained
by the Company and the Principals. This Agreement is the valid and binding
agreement of the Company enforceable in accordance with its terms (except as
such enforceability may be limited by any applicable bankruptcy, insolvency or
other laws affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity or at
law).
(b) Other than as set forth on Schedule 3.05(a) hereto, the execution,
delivery and performance by the Company of this Agreement, and the performance
of the transactions contemplated by this Agreement, do not require the
authorization, consent, approval, certification, license or order of, or any
filing with, any Regulatory Authority or any other third party except for such
authorizations, consents, approvals, certifications, licenses and orders that
have been obtained.
Section 3.06. Financial Statements; Books and Records.
(a) Financial Statements Provided. A copy of the balance sheet of the
Company for the fiscal year ended December 31, 1996 has been attached as
Schedule 3.06(a) hereto (the "Audited Balance Sheet"). Also attached hereto as
Schedule 3.06(a) are the related statements of operations, stockholders' equity
and cash flows of the Company for the fiscal year ended December 31, 1996 (the
"Yearly Unaudited Financial Statements"). Also attached hereto as Schedule
3.06(a) are unaudited financial
<PAGE>
<PAGE>
statements of the Company for the six months ended June 30, 1997 (the "Interim
Financial Statements"), which financial statements have been prepared on the
same basis as the Audited Balance Sheet and the Yearly Unaudited Financial
Statements, subject to normal year-end adjustments and accruals (none of which
is expected to be material). (The Audited Balance Sheet, the Yearly Unaudited
Financial Statements and the Interim Financial Statements are collectively
referred to as the "Financial Statements.") The Financial Statements are true
and correct in all material respects, are consistent with the books and records
of the Company, fairly represent in all material respects the financial
condition and results of operations of the Company as at and for the periods
reflected therein, have been prepared in accordance with generally accepted
accounting principles in the United States (and more particularly in accordance
with the cost accounting methods described on Schedule 3.06(a)) except, in the
case of unaudited financial statements, for the lack of footnotes, and the
Audited Balance Sheet has been audited by Anchin, Block & Anchin L.L.P.,
certified public accountants.
Section 3.07. No Undisclosed Liabilities. Except as set forth in the
notes to the Financial Statements or on Schedule 3.07 hereto, the Liabilities on
the balance sheet included in the Interim Financial Statements (the "Interim
Balance Sheet") consist solely of accrued obligations and Liabilities incurred
by the Company in the ordinary course of business to Persons which are not
Affiliates of the Company. There are no Liabilities of the Company of any kind
whatsoever, whether or not accrued and whether or not contingent or absolute,
determined or determinable or otherwise, including without limitation
documentary or standby letters of credit, bid or performance bonds, or customer
or third party guarantees, and no existing condition, situation or set of
circumstances that could reasonably result in such a Liability, other than (i)
Liabilities disclosed on Schedule 3.07, in the notes to the Financial Statements
or in the Interim Financial Statements, and (ii) Liabilities which have arisen
after June 30, 1997 (the "Balance Sheet Date") in the ordinary course of
business and consistent with past practice (none of which is a Liability for
breach of contract, breach of warranty, tort, infringement claim or lawsuit)
which, whether individually or in the aggregate, could or could reasonably be
expected to have a Material Adverse Effect. There are no asserted claims for
indemnification by any Person against the Company under any law or agreement or
pursuant to the Company's Certificate of Incorporation or By-laws and neither
the Company nor any of the Principals is aware of any facts or circumstances
that might reasonably give rise to the assertion of such a claim against the
Company thereunder.
Section 3.08. Corporate Action. All corporate action of the Board of
Directors and of the stockholders of the Company taken on or prior to the date
hereof has been duly authorized, adopted or ratified in accordance with
applicable law and the Certificate of Incorporation and By-laws of the Company,
and has been duly recorded in its corporate minute books (which have been made
available for inspection by Kellstrom).
Section 3.09. Absence of Changes. Except as disclosed on Schedule 3.09
hereto or otherwise approved in writing by Kellstrom, since the Balance Sheet
Date, there has not been, with respect to the Company, any (a) transaction by
the Company except in the ordinary course of business as conducted during the
12-month period ending on that date; (b) capital expenditures exceeding $100,000
or Inventories expenditures exceeding $500,000, in each case in the aggregate;
(c) Material Adverse
<PAGE>
<PAGE>
Event or Material Adverse Effect; (d) destruction, damage to, or loss of any
asset (whether or not covered by insurance) that, individually or in the
aggregate has a Material Adverse Effect; (e) labor trouble or other event or
condition relating to employment or labor matters of any character that,
individually or in the aggregate, could have a Material Adverse Effect; (f) any
increase in compensation payable to, or any employment, bonus or compensation
agreement entered into with, any employees or consultants of the Company (other;
than those made after consultation with Kellstrom); (g) change in accounting
methods or practices (including, without limitation, changes in depreciation or
amortization policies or rates) by the Company; (h) revaluation of the Company's
assets; (i) sale or transfer of any asset of the Company except in the ordinary
course of business; (j) amendment or termination of any material contract,
agreement, or license to which the Company is a party; (k) loan or other
investment by the Company to or in any person or entity, or guaranty of any loan
other than travel or other job-related expenses advanced to employees in the
ordinary course of business not exceeding $30,000 in the aggregate; (l)
commitment to borrow money or any mortgage, pledge, or other encumbrance of any
asset of the Company or grant or commitment to grant a mortgage, pledge, or
other encumbrance of any asset of the Company; (m) waiver or release of any
right or claim of the Company except in the ordinary course of business; (n)
material obligation or liability (absolute or contingent) incurred by the
Company or to which it has become subject except current liabilities incurred in
the ordinary course of business and obligations under contracts entered into in
the ordinary course of business; (o) write-off in excess of reserves as
uncollectible of any accounts or notes receivable; (p) issue or split-up of, or
grant of any option or other right to acquire, any security of the Company; (q)
amendment of the Company's Certificate of Incorporation or By-laws; (r) dividend
or distribution on or with respect to shares of capital stock or other equity
securities of the Company, or any other distribution to the Principals or their
affiliates other than (i) payments for salaries, bonuses and regular Business
expenses listed on Schedule 3.09(r) hereto and (ii) the distribution to the
Principals of $300,000; (s) issuance, grant, sale or pledge of any shares of, or
rights of any kind to acquire any shares of, capital stock, or purchase,
redemption or other acquisition of any shares of such capital stock or other
equity securities; (t) cancellation of current insurance (or reinsurance)
policies or termination of any of the coverage thereunder; (u) any payment or
provision with respect to any employee benefit plan, except in the ordinary
course of the administration of such plans; (v) grants of any stock options,
restricted stock grants, stock appreciation rights or similar instruments or
rights; (w) new employment agreement or other contract or arrangement with
respect to the performance of personal services which is not terminable without
liability by the Company on not more than 30 days' notice; or (x) oral or
written agreement, contract, arrangement or understanding with respect to any of
the foregoing.
Section 3.10. Taxes. Except as specifically set forth in Schedule 3.10:
(a) All Tax Returns required to be filed by or on behalf of the Company
have been properly prepared and duly and timely filed with the appropriate
taxing authorities in all jurisdictions in which such Tax Returns are required
to be filed (after giving effect to any valid extensions of time in which to
make such filings), and all such Tax Returns were true, complete and correct in
all material respects.
(b) All Taxes for all periods up to the Closing Date that are due and
payable by the Company on or before the Closing Date have been or, on or before
the Closing
<PAGE>
<PAGE>
Date, will be, fully and timely paid, and adequate reserves or accruals for any
and all Taxes for which the Company is liable with respect to any period ending
on or before the Closing Date for which Tax Returns have not yet been filed or
for which Taxes are not yet due and owing have been made in the Financial
Statements or are disclosed on Schedule 3.07 hereto.
(c) The Company has timely withheld from employee salaries, wages and
other compensation and paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws ending on or before the Closing Date.
(d) Kellstrom has received complete copies of any audit report issued
within the last 3 years relating to Taxes due from the Company.
(e) The Company has not executed or filed with the IRS or any other
taxing authority any agreement, waiver or other document or arrangement
extending or having the effect of extending the period for assessment or
collection of Taxes (including, but not limited to, any applicable statute of
limitation, except as set forth on Schedule 3.10).
(f) No written claim has been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction.
(g) All deficiencies asserted or assessments made as a result of any
examinations by the IRS or any other taxing authority of the Tax Returns of or
covering or including the Company have been fully paid, and there are no other
audits or investigations by any taxing authority in progress, nor have the
Principals nor the Company received any written notice from any taxing authority
that it intends to conduct such an audit or investigation.
(h) Neither the Company nor any other person (including any of the
Principals on behalf of the Company) has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company.
(i) None of the Assets is (i) property required to be treated as being
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (iii) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code.
(j) There are no Liens as a result of any unpaid Taxes upon any of the
Assets.
(k) The Company has properly and timely elected under Section 1362 of
the Code, and under each analogous or similar provision of state or local law in
each jurisdiction where such an election is available and in which the Company
is required to file a Tax Return, to be treated as an "S" corporation for all
taxable periods since its
<PAGE>
<PAGE>
inception. There has not been any voluntary or involuntary termination or
revocation of any such election.
(l) No tax is required to be withheld by Kellstrom or Kellstrom
Subsidiary under Section 1445 of the Code as a result of the sale of the Assets.
Section 3.11. Leased Property.
(a) Schedule 3.11 hereto identifies all leasehold interests in real
property including land and improvements held by the Company which is used or
useful in the conduct of the Business of the Company (the "Leased Property").
The Company does not own of record or beneficially any real property. Except as
set forth in Schedule 3.11, (i) the Company has assignable leaseholds in all
real estate leased by it, in each case under leases which are binding and
enforceable against the Company and, to the knowledge of the Company, the other
parties thereto and (ii) none of the leasehold interests are subject to any
Liens (other than Liens for current property taxes and assessments or mechanics
liens, in each case with respect to amounts not in default).
(b) Except as set forth on Schedule 3.11 hereto, there are no
outstanding contracts made by the Company for any improvements to the Leased
Property which have not been fully paid for. At the Closing, the Company shall
cause to be discharged all mechanics' or materialmen's liens arising from any
labor or materials furnished to the Leased Property on behalf of the Company
prior to the time of Closing.
(c) To the Company's or the Principals' knowledge, all buildings,
structures, improvements, fixtures, facilities, equipment, all components of all
buildings, structures and other improvements included within the Leased
Property, including but not limited to the roofs and structural elements thereof
and the heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, paving and parking equipment,
systems and facilities included therein, and other material items of tangible
property and assets are in good operating condition and repair, subject to
normal wear and maintenance and are usable in the regular and ordinary course of
business. No person other than the Company owns any equipment or other tangible
assets or properties situated on the Leased Property or necessary to the
operation of Company's Business, except for leased items disclosed on Schedule
3.11 hereto.
(d) The use and operation of the Leased Property is in full compliance
with all applicable statutes, rules, regulations, ordinances, orders, writs,
injunctions, judgments, decrees, awards and restrictions of every Regulatory
Authority having jurisdiction over any of the Leased Property, the Company or
its Business, and every instrumentality or agency thereof (including, without
limitation, applicable statutes, rules, regulations, orders and restrictions
relating to zoning, land use, safety, health, environment, hazardous substances,
pollution controls, employment and employment practices and access by the
handicapped) (collectively, "Laws"), and with all covenants, conditions,
restrictions, easements, disposition agreements and similar matters affecting
the Leased Property, except where such non-compliance would not have a Material
Adverse Effect. Effective as of the Closing, the Company shall have the right to
continue the use and operation of the Leased Property for its current uses in
the operation of the Company's Business. The Company has not received any notice
of any violation of or investigation regarding any Laws.
<PAGE>
<PAGE>
Section 3.12. Environmental Protection. Except as set forth on Schedule
3.12, (i) no Hazardous Substances are present on or below the surface of the
Leased Property and such real estate has not previously been used by the Company
or the Principals for the manufacture, refining, treatment, storage, or disposal
of any Hazardous Substance; (ii) none of the soil, ground water, or surface
water of the Leased Property is contaminated by any Hazardous Substance and the
Company is not aware of any such contamination from neighboring real estate; and
(iii) except as consistent with applicable Environmental Laws, no Hazardous
Substances are being emitted, discharged or released from the Leased Property
into the environment, except for such occurrences or circumstances described in
clauses (i) through (iii) which would not have a Material Adverse Effect. Except
as set forth on Schedule 3.12, the Company is not liable for cleanup or response
costs with respect to the emission, discharge, or release of any Hazardous
Substance or for any other matter arising under the Environmental Laws due to
its operation of the Leased Property.
Section 3.13. Intellectual Property. Schedule 3.13 contains a schedule
of all the Intellectual Property of the Company. The Company has not infringed,
and is not now infringing, any trade name, trademark, service mark, copyright,
patent, trade secret or other Intellectual Property right belonging to a third
party, and it has not received any notice of infringement upon or conflict with
the asserted rights of others. Except as set forth on Section 3.13 hereto, none
of such Intellectual Property rights are registered with the United States
Patent and Trademark Office or the United States Copyright Office. Except as
disclosed in Schedule 3.13, the Company is not a party to any license,
agreement, or arrangement, whether as licensor, licensee, or otherwise, with
respect to any Intellectual Property right. There are no trade names,
trademarks, service marks, copyrights, patents or applications for patents and
trade secrets other than those listed on Section 3.13 which are necessary for
the conduct of the Company's Business. The Company is not a party to any
outstanding options, licenses or agreements of any kind relating to the
foregoing. No partner, officer or employee of the Company or any predecessor has
any interest in any of the foregoing rights.
Section 3.14. Assets. The Assets constitute in the aggregate, all of the
assets and tangible personal property owned by, in the possession of, or used by
the Company in connection with the Business, and are owned by the Company free
and clear of any Liens other than Permitted Liens. Except as disclosed in
Schedule 3.14, no personal property used in connection with the Company's
Business is held under any lease, security agreement, conditional sales
contract, or other title retention or security arrangement, or is other than in
its possession and control. All tangible personal property is in good operating
condition and repair, subject to normal wear and maintenance, and is suitable
for the conduct of the Business.
Section 3.15. Inventories. All Inventories of the Company set forth on
the Interim Balance Sheet, and all Inventories acquired subsequent to the
Balance Sheet Date are valued in accordance with generally accepted accounting
principles in the United States, and more particularly in accordance with the
cost accounting methods described on Schedule 3.06(a). All such Inventories
consist, and at the Closing Date will consist, of a quality and quantity usable
and saleable in the ordinary course of business, except for items of obsolete
materials, which have been written down on the Interim Balance Sheet to
realizable market value in accordance with the cost accounting methods described
on Schedule 3.06(a). In the Company's experience, the present
<PAGE>
<PAGE>
quantities of Inventories are, and at the Closing Date will be, reasonable and
warranted in the present and then circumstances of the Business.
Section 3.16. Product Warranty. Each product manufactured, sold, leased,
or delivered by the Company has been in conformity with all applicable
contractual commitments and all express and implied warranties, if any, and the
Company does not have any material Liability (and there is no reasonable basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against it giving rise to any material
Liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth in
the Interim Balance Sheet as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company. No
product sold, leased, or delivered by the Company is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard terms and conditions
of sale or lease of such product.
Section 3.17. Personnel and Plans. Schedule 3.17 comprises a complete
and correct list of (a) the names, titles, length of employment or service and
current annual salary rates and all other compensation and fringe benefits of
each of the employees, officers or consultants of the Company who is engaged in
the conduct of the Business; and (b) the amount of accrued bonuses, vacation,
sick leave, maternity leave and other leave for such personnel. The Company is
not in default with respect to any withholding or other employment taxes or
payments with respect to accrued vacation or severance pay on behalf of any
employee for which it is obligated on the date hereof, and the Company will
maintain and continue to make all such necessary payments or adjustments arising
through the Closing Date. There are not in existence or, to the Company's or the
Principals' knowledge, threatened any (a) work stoppages respecting employees of
the Company; or (b) unfair labor or practice complaints against the Company. No
representation question exists respecting the employees of the Company and no
collective bargaining agreement is currently being negotiated by the Company
covering employees of the Company, nor is any grievance procedure or arbitration
proceeding pending under any collective bargaining agreement and no claim
therefor has been asserted. The Company has not received notice from any union
or employees setting forth demands for representation, elections or for present
or future changes in wages, terms of employment or working conditions. There
have been no audits of the equal employment opportunity practices of the
Company, and, to the best knowledge of the Company, no basis for such audit
exists. The Company does not have any severance agreement or other arrangement
with respect to severance with any employee of the Company. True and complete
copies of the current written personnel policies, manuals and/or handbooks of
the Company have previously been delivered to Kellstrom.
Schedule 3.17 lists each of the following plans, contracts, policies and
arrangements which is or, was sponsored, maintained or contributed to by, or
otherwise binding upon the Company or, in the case of an "employee pension plan"
(as defined in Section 3(2) of ERISA), an ERISA Affiliate for the benefit of any
current or former employee, director or other personnel (including any such
plan, contract, policy or arrangement approved or adopted before, but effective
on or after, the date of this Agreement): (a) any "employee benefit plan," as
such term is defined in Section 3(3) of ERISA, whether or not subject to the
provisions of ERISA, (b) any personnel policy, and (c) any other employment,
consulting, stock option, stock bonus, stock purchase,
<PAGE>
<PAGE>
phantom stock, incentive, bonus, deferred compensation, retirement, severance,
vacation, dependent care, employee assistance, fringe benefit, medical, dental,
sick leave, death benefit, golden parachute or other compensatory plan,
contract, policy or arrangement that is not an employee benefit plan as defined
in Section 3(3) of ERISA (each such plan, contract, policy and arrangement being
herein referred to as an "Employee Plan"). With respect to each Employee Plan,
the Company has delivered to Kellstrom true and complete copies of each
contract, plan document, policy statement, summary plan description and other
written material governing or describing the Employee Plan and/or any related
funding arrangements (including, without limitation, any related trust agreement
or insurance company contract) or, if there are no such written materials, a
summary description of the Employee Plan.
There are no Liens against the Assets under Section 412(n) of the Code
or Sections 302(f) or 4068 of ERISA. As of the Closing, neither Kellstrom nor
Kellstrom Subsidiary will have any obligation to contribute to, or any liability
in respect of, any Employee Plan. Each "employee benefit plan" of the Company
that has been required to comply with the provisions of Section 4980B of the
Code has substantially complied in all material respects.
Section 3.18. Insurance. Attached hereto as Schedule 3.18 are
certificates of insurance setting forth all insurance agreements and policies
maintained by the Company, including any and all insurance agreements and
policies covering the Business and any life insurance policies maintained by the
Company on the lives of its employees, officers or directors, and the type and
amounts of coverage thereunder, which Schedule 3.18 reflects all such insurance
which is required by law to be maintained by the Company. During the past three
years, the Company has not been refused insurance in connection with the
Company's Business, nor has any claim in excess of $10,000 been made in respect
of any such agreements or policies, except as set forth in Schedule 3.18 hereto.
Such policies are in full force and effect, and the Company is not delinquent
with respect to any premium payments thereon. The Company maintains the type and
amount of insurance which is adequate to protect its financial condition against
the risks involved in the conduct of the Business.
Section 3.19. Litigation. Except as disclosed in Schedule 3.19, there is
no suit, action, arbitration, or legal, administrative, or other proceeding, or
governmental investigation pending against or affecting the Company relating to
any of the transactions contemplated by this Agreement or which could have a
Material Adverse Effect. The Company is not in default of any order, writ,
injunction or decree of any Federal, state, local, or foreign court, department,
agency or instrumentality which would have a Material Adverse Effect.
Section 3.20. Compliance with Law. Except as set forth on Schedule 3.20
hereto, the Company has complied with all existing laws, rules, regulations,
orders, judgments and decrees applicable to it and its properties, including,
without limitation, all laws, regulations, orders and requirements relating to
consumer protection, currency exchange, equal opportunity, health, environmental
protection, fire, zoning and building, occupation safety and pension matters
except where such non-compliance would not have a Material Adverse Effect.
Section 3.21. Contracts, Obligations and Commitments. Except as set forth
on Schedule 3.21 hereto, the Company has no existing contract, obligation or
<PAGE>
<PAGE>
commitment (written or oral) of any nature, including, without limitation, the
following: (a) loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money or mortgaging,
pledging or granting or creating a Lien on any of its assets or any agreement or
instrument evidencing any guaranty by the Company of payment or performance by
any other person; (b) any contract or series of contracts with the same person
for the furnishing or purchase of equipment, goods or services for an excess of
$25,000; (c) any material joint venture contract or arrangement or other
material agreement involving a sharing of profits or expenses to which it is a
party or by which it is bound; (d) agreements which will materially limit the
freedom of the Company to compete in any line of business or in any geographic
area or with any person; (e) agreements providing for disposition of the assets
of the Company other than in the ordinary course of business or agreements of
merger or consolidation to which it is a party or by which it is bound; (f) any
lease under which the Company is either lessor or lessee relating to any asset
of its Business or any property at which its Business or such assets are located
if such lease involves lease payments in excess of $25,000 per year; (g) any
contract, commitment or agreement with the federal government or any state or
local government or any agency thereof.
Except as set forth on Schedule 3.21, each contract, agreement,
arrangement, plan, lease, license or similar instrument listed on Schedule 3.21
is a valid and binding obligation of the Company and, to the best of the
Company's knowledge, the other parties thereto, enforceable in accordance with
its terms (except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law), and is in full force and effect, and neither
the Company, nor, to the best of such Company's knowledge, any other party
thereto has breached any material provisions of, nor is in default in any
material respect under the terms of (and, to the best of the Company's
knowledge, no condition exists which, with the passage of time, the giving of
notice, or both, would result in a default under the terms of), any of such
contracts.
Section 3.22. Licenses. The Company has all Licenses necessary from all
applicable Regulatory Authorities for the lawful conduct of its Business, all of
which are listed on Schedule 2.01(j) hereto, and it is not in default in any
material respect under such Licenses.
Section 3.23. No Broker. The Company has not dealt with any broker or
finder in connection with any of the transactions contemplated by this Agreement
and no broker or other person is entitled to any commission or finder's fee in
connection with any of such transactions.
Section 3.24. No Illegal or Improper Transactions. Neither the Company
nor any stockholder, officer or employee of the Company, has directly or
indirectly, used funds or other assets of the Company, or made any promise or
undertaking in such regards, for (a) illegal contributions, gifts, entertainment
or other expenses relating to political activity; (b) illegal payments to or for
the benefit of governmental officials or employees, whether domestic or foreign;
(c) illegal payments to or for the benefit of any person, firm, corporation or
other entity, or any director, officer, employee, agent or representative
thereof; (d) gifts, entertainment or other expenses that jeopardize the normal
business relations between the Company and any of its
<PAGE>
<PAGE>
customers; or (e) the establishment or maintenance of a secret or unrecorded
fund. There have been no false or fictitious entries made in the books or
records of the Company, and the Company has records that accurately and validly
reflect transactions and accounting controls sufficient to insure that such
transactions are (i) in all material respects executed in accordance with
management's general or specific authorization and (ii) recorded in conformity
with generally accepted accounting principles in the United States and more
particularly in accordance with the cost accounting methods described on
Schedule 3.06(a).
Section 3.25. Related Party Transactions. Except as set forth in
Schedule 3.25, no current or former stockholder, officer or employee or any
associate (as defined in the rules promulgated under the Securities Exchange Act
of 1934, as amended) or any Affiliate of any of the foregoing of the Company, is
presently, or during the last three fiscal years has been, (a) a party to any
transaction with the Company with respect to the business of the Company
(including, but not limited to, any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer,
employee or stockholder or such associate), or (b) the direct of indirect owner
of an interest in any corporation, firm, association or business organization
which is a present (or potential) competitor, supplier or customer of the
Company with respect to the business of the Company, nor does any such person
receive income from any source other than the Company which relates to the
business of, or should properly accrue to, the Company with respect to the
business of the Company.
Section 3.26. Suppliers and Customers. (a) Schedule 3.26(a) lists (i)
all suppliers of the Company to which the Company made payments during the year
ended December 31, 1996, or expects to make payments during the year ending
December 31, 1997, in excess of five percent of the combined cost of sales of
the Company for such year and (ii) all customers that paid the Company during
the year ended December 31, 1996 or that the Company expects will pay to the
Company during the year ending December 31, 1997, more than five percent of the
combined revenues of the Company.
(b) The Company has no information which might reasonably indicate that
any of the customers or suppliers listed on the Schedule 3.26(a) intend to cease
purchasing from, selling to or dealing with the Company, nor has any information
been brought to its attention which might reasonably lead it to believe any such
customer or supplier intends to alter in any material respect the amount of such
purchases, sales or the extent of dealings with the Company or would alter in
any material respect such purchases, sales or dealings in the event of the
consummation of the Acquisition. The Company has no information which might
reasonably indicate, or information which has been brought to its attention
which might reasonably lead it to believe that, (i) any supplier will not be
able to fulfill outstanding or currently anticipated purchase orders placed by
the Company which, individually or in the aggregate, exceed $100,000, or (ii)
any customer will cancel outstanding or currently anticipated purchase orders
placed with the Company which, individually or in the aggregate, exceed
$100,000.
Section 3.27. Accounts Receivable. Except as set forth in Schedule 3.27,
each of the accounts receivable of the Company set forth on the Interim Balance
Sheet (a) arose from bona fide sales in the ordinary course of business, (b) was
entered into under circumstances and by methods usual and customary in the
Company's Business, as the case may be, in the applicable state and the
collection practices used with respect
<PAGE>
<PAGE>
thereto have been in all respects legal and proper, (c) was entered into, and
credit granted pursuant hereto, consistent with the Company's historical credit
policies and practices and (d) shall be collected, net of the allowance for bad
debt of $50,000 shown on the Interim Balance Sheet, within two hundred seventy
(270) days of the Closing Date or, with respect to the accounts receivable
described in Schedule 3.27, items 2 and 3, within the longer of (i) eighteen
(18) months from the Closing Date and (ii) 120 days from the date the liens on
such accounts receivable described on Schedule 3.04, item 2 are removed. The
books of the Company correctly record the principal balance of all accounts
receivable and each of the security instruments securing any account receivable,
if any, constitutes a valid lien in favor of the Company upon the property which
it describes, and is enforceable by the Company and its transferees. The
reserves for doubtful accounts shown or reflected in the Interim Financial
Statements are adequate and were calculated consistent with past practice.
Payments received subsequent to the Closing Date from an account debtor with one
or more accounts receivable guaranteed pursuant to Section 3.27(d) (the "Closing
Date Receivables") and one or more accounts receivable created following the
Closing Date shall be deemed received in respect of, and shall be applied
against, the oldest outstanding Closing Date Receivable, unless otherwise
specified by the account debtor.
Section 3.28. Amounts Due From Principals and Affiliates. It is the good
faith estimate of the Company and the Principals that, as of the Closing Date,
the amount due to the Company from the Principals and their respective
Affiliates is $29,382.66.
Section 3.29. No Misleading Statements. This Agreement, the information
and schedules referred to herein and the information that has been furnished to
Kellstrom or Kellstrom Subsidiary in connection with the transactions
contemplated hereby do not include any untrue statement of a material fact and
do not omit to state any material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading. There is no fact known to the Company which materially
adversely affects or in the future may (so far as the Company can now reasonably
foresee) materially adversely affect the Business, condition (financial or
otherwise), property or assets of the Company which has not been set forth
herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS
The Principals, severally and not jointly, represent and warrant to
Kellstrom and Kellstrom Subsidiary that the statements contained in this Article
IV are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Article IV), except as set forth in the Schedules attached hereto.
Section 4.01. Due Authorization. Each Principal has full power and
authority to execute and deliver this Agreement, the Employment Agreements and
the Consulting Agreement and all other documents and agreements to be entered
into in connection herewith or necessary to give effect to the provisions of
this Agreement (the "Other Agreements") to which such Principal is a party and
to perform his obligations
<PAGE>
<PAGE>
hereunder and thereunder. Each Principal has duly executed this Agreement and
the Other Agreements to which such Principal is a party, and this Agreement and
the Other Agreements to which such Principal is a party is, upon execution and
delivery thereof by him, his legal, valid and binding obligation, enforceable
against him in accordance with its terms (except as the enforceability thereof
may be limited by any applicable bankruptcy, insolvency or other laws affecting
creditors' rights generally or by general principles of equity, regardless of
whether such enforceability is considered in equity or at law).
Section 4.02. No Conflict. Except as set forth on Schedule 4.02, neither
each Principal's execution and delivery of this Agreement and the Other
Agreements to which such Principal is a party nor the consummation of the
transactions contemplated hereby or thereby by him will (i) conflict with, or
result in any violation of or default or loss of any material benefit under, any
permit, concession, grant, franchise, law, rule or regulation, or any judgment,
decree or order of any court or Regulatory Authority to which such Principal is
a party; or (ii) conflict with, or result in a breach or violation of or default
or loss of any material benefit under, or accelerate the performance required
by, the terms of any material agreement, contract, indenture or other instrument
to which the such Principal is a party, or constitute a default or loss of any
right thereunder or an event which, with the lapse of time or notice or both,
might result in a default or loss of any right thereunder or the creation of any
material Lien upon the assets of such Principal.
Section 4.03. Brokers. None of the Principals has paid or become
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with the transactions contemplated by this
Agreement or the Other Agreements.
Section 4.04. Securities Representation. Each Principal severally agrees
that, prior to the delivery of any Warrants issued to each Principal pursuant to
the provisions hereof, each Principal will execute and deliver to Kellstrom and
Kellstrom Subsidiary an investment letter in the form of Exhibit F hereto. Each
certificate representing the Warrants, issued to each Principal, shall bear the
following legend:
"This Warrant and the shares underlying this Warrant shall not be
transferable at any time unless (i) a registration statement under the
Securities Act of 1933 shall be in effect with respect to such transfer at such
time or (ii) counsel for Kellstrom Industries Inc. shall give it an opinion to
the effect that such registration under said Act of such transfer at such time
is not required."
Each Principal severally represents and warrants to Kellstrom and Kellstrom
Subsidiary that no transaction in the Warrants will be effected other than
transactions which will be exempt from registration under the Securities Act of
1933, as amended.
Section 4.05. HSR Matters. None of the Principals may be deemed to be
"an ultimate parent entity" (as that term is defined in HSR) with total assets
of $100,000,000 or more within the meaning of HSR.
<PAGE>
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
KELLSTROM AND KELLSTROM SUBSIDIARY
Kellstrom and Kellstrom Subsidiary, jointly and severally, represent and
warrant to the Company and each Principal that the statements contained in this
Article V are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Article V).
Section 5.01. Organization. Each of Kellstrom and Kellstrom Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite power and
authority to execute, deliver and perform this Agreement and the Other
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby.
Section 5.02. Authority and No Conflict. Each of Kellstrom and Kellstrom
Subsidiary has the full right, power and authority to execute, deliver and carry
out the terms of this Agreement and the Other Agreements to which it is party,
and all documents and agreements necessary to give effect to the provisions of
this Agreement and the Other Agreements, and this Agreement and the Other
Agreements to which it is a party have been duly authorized, executed and
delivered by each of Kellstrom and Kellstrom Subsidiary. The execution and
delivery of this Agreement and the Other Agreements to which it is a party by
each of Kellstrom and Kellstrom Subsidiary does not, and consummation of the
transactions contemplated hereby and thereby will not (a) conflict with, or
result in any violation of or default or loss of any benefit under, any
provision of Kellstrom's or Kellstrom Subsidiary's governing instruments; (b)
conflict with, or result in any violation of or default or loss of any material
benefit under, any permit, concession, grant, franchise, law, rule or
regulation, or any judgment, decree or order of any court or Regulatory
Authority to which Kellstrom or Kellstrom Subsidiary is a party; or (c) conflict
with, or result in a breach or violation of or default or loss of any material
benefit under, or accelerate the performance required by, the terms of any
material agreement, contract, indenture or other instrument to which Kellstrom
or Kellstrom Subsidiary is a party, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or notice or both, might
result in a default or loss of any right thereunder or the creation of any
material Lien upon the assets of Kellstrom or Kellstrom Subsidiary. All action
and other authorizations prerequisite to the execution of this Agreement and the
Other Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been taken or obtained by Kellstrom and
Kellstrom Subsidiary. This Agreement and the Other Agreements to which it is a
party are valid and binding agreements of Kellstrom and Kellstrom Subsidiary
enforceable against Kellstrom and Kellstrom Subsidiary in accordance with their
terms (except as such enforceability may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditor's rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law).
Section 5.03. Consents. The execution, delivery and performance by
Kellstrom and Kellstrom Subsidiary of this Agreement and the Other Agreements to
which it is a party, and the performance of the transactions contemplated hereby
and
<PAGE>
<PAGE>
thereby, do not require the authorization, consent, approval, certification,
license or order of, or any filing with, any Regulatory Authority or any other
third party except for such governmental authorizations, consents, approvals,
certifications, licenses and orders that have been obtained.
Section 5.04. Issuance of Warrants. Kellstrom has the full right, power
and authority to issue, execute and deliver the Warrants and the Warrants have
been duly authorized, and at the Closing shall be duly executed by Kellstrom and
delivered by Kellstrom Subsidiary. The Common Stock issuable upon the exercise
of the Warrants has been duly and validly authorized and reserved and, upon
issuance thereof upon exercise of the Warrants, will be duly and validly issued,
fully paid and non-assessable.
Section 5.05. Reports of Kellstrom. Kellstrom has delivered to the
Company and the Principals (i) Kellstrom's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996, (ii) Kellstrom's Quarterly Reports for the
fiscal quarters ended March 31, 1997 and June 30, 1997 and (iv) Kellstrom's
Definitive Proxy Statement for the Annual Meeting held on August 28, 1997
(collectively, the "SEC Reports"). The SEC Reports, when filed with the
Securities and Exchange Commission (the "SEC"), complied as to form in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended. As of their respective dates, the SEC Reports did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein. There have been no Forms 8-K filed by Kellstrom with the SEC
since the filing of Kellstrom's Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1997.
Section 5.06. No Material Adverse Effect. Since the filing of
Kellstrom's Form 10-QSB for the fiscal quarter ended June 30, 1997, there has
been no material adverse change in results of operations, financial condition or
Business of Kellstrom.
Section 5.07. Brokers. Except as set forth on Schedule 5.07, neither
Kellstrom, Kellstrom Subsidiary nor any of their Affiliates has paid or become
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with the transactions contemplated by this
Agreement.
Section 5.08. HSR Matters. Neither Kellstrom nor any person who may be
deemed to be "an ultimate parent entity" (as that term is defined in HSR) of
Kellstrom has total assets or annual net sales of $100,000,000 or more within
the meaning of HSR.
ARTICLE VI
PRE-CLOSING COVENANT OF THE COMPANY
AND THE PRINCIPALS
Section 6.01 Name Change. At the Closing, the Company will change its
name to a name that is not confusingly similar to its current name.
<PAGE>
<PAGE>
ARTICLE VII
POST-CLOSING COVENANTS
Post-Closing Covenants of all Parties Hereto
Section 7.01. General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement and
the Other Agreements, each of the parties hereto will take such further action
(including the execution and delivery of such further instruments and documents)
as any other party hereto reasonably may request. The Principals acknowledge and
agree that from and after the Closing Kellstrom Subsidiary will be entitled to
possession of all documents, books, records, agreements, and financial data of
any sort relating to the Company.
Section 7.02. Tax Matters.
(a) Cooperation on Tax Matters.
(i) Kellstrom, Kellstrom Subsidiary, the Company and the
Principals shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder.
(ii) Kellstrom, Kellstrom Subsidiary and the Principals further
agree, upon request, to use their reasonable best efforts to obtain any
certificate or other document from any Regulatory Authority or any other Person
as may be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(b) Allocation of Purchase Price. Following the completion of the
Closing Date Balance Sheet, the Company and Kellstrom shall agree upon an
allocation of the Purchase Price in its entirety among the Assets and the
non-competition provisions of Section 7.09 hereof which is satisfactory to the
Company, the Principals, Kellstrom and Kellstrom Subsidiary and as required by
Section 1060 of the Code and Treasury Regulations promulgated thereunder, and
consistent with the guidelines set forth on Schedule 7.02. The Company and
Kellstrom or Kellstrom Subsidiary shall file all required information and tax
returns (and any amendments thereto) in a manner consistent with such allocation
and comply with the applicable information reporting requirements of Section
1060 of the Code and Treasury Regulations promulgated thereunder. If, contrary
to the intent of the parties hereto as expressed in this Section 7.02, any
taxing authority makes or proposes an allocation different from that agreed upon
pursuant to this Section 7.02, the Company and Kellstrom or Kellstrom Subsidiary
shall cooperate with each other in good faith to contest such taxing authority's
allocation (or proposed allocation), provided, however, that, after consultation
with the party adversely affected by such allocation (or proposed
<PAGE>
<PAGE>
allocation), another party hereto may file such protective claims or returns as
may reasonably be acquired to protect its interests.
(c) Certain Taxes. All transfer (including, without limitation, any real
estate transfer taxes), documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the transactions contemplated hereby, shall
be paid by Kellstrom or Kellstrom Subsidiary when due, and Kellstrom Subsidiary
will, at its expense, file all necessary Tax Returns and other documentation
with respect to all such transfer, documentary, sales, use, stamp, registration
and other Taxes and fees, and, if required by applicable law, and Kellstrom
Subsidiary will, and will cause its Affiliates to, join in the execution of any
such Tax Returns and other documentation.
Section 7.03 Kellstrom Subsidiary to Act as Agent for the Company. This
Agreement shall not constitute an agreement to assign any contract right
included among the Assets if any attempted assignment of the same without the
consent of the other party thereto would constitute a breach thereof or in any
way adversely affect the rights of the Company thereunder. If such consent is
not obtained or if any attempted assignment would be ineffective or would
adversely affect the Company's rights thereunder so that Kellstrom Subsidiary
would not in fact receive all such rights, then Kellstrom Subsidiary shall act
as the agent for the Company in order to obtain for Kellstrom Subsidiary the
benefits thereunder and to assume the liabilities thereunder. Nothing herein
shall be deemed to make Kellstrom Subsidiary the Company's agent in respect of
the Excluded Assets.
Section 7.04 Delivery of Property Received by the Company or Kellstrom
Subsidiary After Closing. From and after the Closing, Kellstrom Subsidiary shall
have the right and authority to collect, for the account of Kellstrom
Subsidiary, all assets which shall be transferred or are intended to be
transferred to Kellstrom Subsidiary as part of the Assets as provided in this
Agreement, and to endorse with the name of the Company (without recourse or
warranty except to the extent set forth herein) any checks or drafts received on
account of any such assets. The Company agrees that it will transfer or deliver
to Kellstrom Subsidiary promptly after the receipt thereof, any cash or other
property which the Company receives after the Closing Date in respect of any
assets transferred or intended to be transferred to Kellstrom Subsidiary as part
of the Assets under this Agreement. In addition, Kellstrom Subsidiary agrees
that it will transfer or deliver to the Company, promptly after receipt thereof,
any cash or other property which Kellstrom Subsidiary receives after the Closing
Date in respect of any assets not transferred or intended to be transferred to
Kellstrom Subsidiary as part of the Assets under this Agreement.
Section 7.05 Kellstrom Subsidiary Appointed Attorney for the Company.
The Company, effective at the Closing Date, hereby constitutes and appoints
Kellstrom Subsidiary, and its successors and assigns, the true and lawful
attorney of the Company, in the name of Kellstrom Subsidiary or the Company (as
Kellstrom Subsidiary shall determine in its sole discretion) but for the benefit
of Kellstrom Subsidiary: (i) to institute and prosecute all proceedings which
Kellstrom Subsidiary may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Assets as provided for in this
Agreement; (ii) to defend or compromise any and all actions, suits or
proceedings in respect of any of the Assets, and to do all such acts and things
in relation thereto as Kellstrom Subsidiary shall deem advisable;
<PAGE>
<PAGE>
and (iii) to take all action which Kellstrom Subsidiary, its successors or
assigns may reasonably deem proper in order to provide for Kellstrom Subsidiary,
its successors or assigns, the benefits under any of the Assets where any
required consent of another party to the sale or assignment thereof to Kellstrom
Subsidiary pursuant to this Agreement shall not have been obtained. The Company
acknowledges that the foregoing powers are coupled with an interest and shall be
irrevocable. Kellstrom Subsidiary shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing powers, including any
amounts payable as interest in respect thereof. Kellstrom Subsidiary agrees to
act in good faith in seeking to collect, assert or enforce any claim against any
third party in accordance with this Section 7.05. Notwithstanding the foregoing,
the power of attorney set forth in this Section 7.05 shall not apply in the
event that the Company or any Principal has an indemnification obligation under
Article X and is complying with such obligation.
Section 7.06 Payment of Liabilities. Following the Closing Date each of
Kellstrom Subsidiary and the Company agrees to discharge in accordance with
their terms the Assumed Liabilities and the Excluded Liabilities, respectively.
Section 7.07 Subsequent Liability. If, subsequent to the Closing Date,
any liability for Taxes measured by the income of the Company relating to the
Assets or the conduct of the Business is imposed on Kellstrom or Kellstrom
Subsidiary with respect to any period prior to and through the Closing Date
which has not otherwise been assumed by Kellstrom or Kellstrom Subsidiary
pursuant to this Agreement, then the Company and the Principals, jointly and
severally, shall indemnify and hold Kellstrom and Kellstrom Subsidiary harmless,
from and against, and shall pay, the full amount of such Tax liability,
including any interest, additions to tax and penalties thereon, together with
interest on such additions to tax or penalties (as well as reasonable attorneys'
or other fees and disbursements of Kellstrom and Kellstrom Subsidiary incurred
in determination thereof or in connection therewith), or the Company and the
Principals shall, at their sole expense and in their reasonable discretion,
either settle any Tax claim that may be the subject of indemnification under
this Section 7.07 at such time and on such terms as they shall deem appropriate
or assume the entire defense thereof, provided, however, that the Company and
the Principals shall not in any event take any position in such settlement or
defense that subjects Kellstrom or Kellstrom Subsidiary to any civil fraud or
any civil or criminal penalty. Notwithstanding the foregoing, neither the
Company nor the Principals shall consent, without the prior written consent of
Kellstrom Subsidiary, which prior written consent shall not be unreasonably
withheld, delayed or conditioned, to any change in the treatment of any item
which would adversely affect the tax liability of Kellstrom or Kellstrom
Subsidiary for a period subsequent to the Closing Date.
Section 7.08. Consents. The Company and the Principals shall use their
best efforts to promptly obtain the consents listed on Schedule 3.05(a) hereto,
to the extent requested by Kellstrom or Kellstrom Subsidiary. In addition, to
the extent that the consent of the New York Business Development Corp. and U.S.
Small Business Administration is not received within 60 days of the Closing
Date, the Company and/or the Principals shall cause the indebtedness or other
obligations to such entities to be repaid such that their consent is not
required for the consummation of the transactions contemplated by this
Agreement.
<PAGE>
<PAGE>
Section 7.09. Non-Competition. Each of the Company and the Principals
agrees that none of them nor any of their affiliates will, for a period of five
(5) years from the Closing Date, in the United States or elsewhere in the world
directly or indirectly (i) own, invest in, assist in the development of, or have
any management role in, any firm, corporation, business or other organization or
enterprise engaged, directly or indirectly, in the purchasing, refurbishing,
manufacturing, marketing or distribution of jet, turbo prop or other aircraft
engines or jet, turbo prop or other aircraft engine parts, or any other aircraft
part, without prior written consent of Kellstrom; provided, however, that
nothing herein shall in any way restrict Zvi Bar-On from, directly or
indirectly, owning, investing in, assisting in the development of, or having any
management role in, any computer software company servicing the "after-market"
jet engine business, (ii) solicit for employment any employee of Kellstrom or
Kellstrom Subsidiary or any of their affiliates, or (iii) interfere with,
disrupt or attempt to disrupt the relationship between Kellstrom or Kellstrom
Subsidiary or any of their affiliates, on the one hand, and any of their
respective employees, customers or suppliers, on the other hand. Nothing herein
contained, however, shall restrict the Company or the Principals from making any
investments in any company (but without otherwise participating in the
activities of such company) whose stock is listed on a national securities
exchange or actively traded in the over-the-counter market, as long as such
investment does not give him the right to control or influence the policy
decisions of any such business or enterprise which is or might be directly or
indirectly in competition with any of such business operations or activities of
Kellstrom or Kellstrom Subsidiary. If any court determines that any of the
restrictive covenants set forth in this Section 7.09, or any part of such
covenants, is unenforceable because of the duration of such provision or the
area covered thereby, such court shall have the power to reduce the duration or
area of such provision and, in its reduced form, such provision shall then be
enforceable and shall be enforced.
Termination of the Employment Agreements or the Consulting Agreement, or
the non-competition provisions contained therein, shall in no way affect or
diminish the obligations of the Principals pursuant to this Section 7.09.
Section 7.10. Consulting Services.
Zvi Bar-On shall provide Kellstrom Subsidiary with the consulting
services described in the Consulting Agreement during the Consulting Period (as
defined in the Consulting Agreement), in accordance with the terms of the
Consulting Agreement.
Post-Closing Covenants of Kellstrom
Section 7.11. Employee Matters.
(a) The Company acknowledges that it has no information that Kellstrom
Subsidiary would not qualify for successor status under Rev. Proc. 84-77.
Pursuant to that pronouncement, the parties agree Kellstrom Subsidiary will file
(with the federal government and the state, where appropriate) a single W-2 for
each employee, reporting the wages paid by both Kellstrom Subsidiary and the
Company. In addition, both parties will file 941's for the quarter during which
the sale takes place, reflecting the wages and deposits made during its period
of ownership.
<PAGE>
<PAGE>
(b) Except as set forth on Schedule 7.11 hereto, Kellstrom Subsidiary
shall offer employment to all current employees of the Company at substantially
similar terms to those currently offered by the Company. Notwithstanding the
foregoing or any other provision herein, no term of this Agreement shall be
deemed to create any contract between Kellstrom or Kellstrom Subsidiary and any
such employee which gives the employee the right to be retained in the
employment of Kellstrom Subsidiary or any related employer, or to interfere with
Kellstrom Subsidiary's right to terminate employment of any employee at any time
or to change its policies regarding salaries, benefits and other employment
matters at any time or from time to time. The representations, warranties,
covenants and agreements contained herein are for the sole benefit of the
parties hereto, and employees are not intended to be and shall not be construed
as beneficiaries hereof.
(c) Neither Kellstrom nor Kellstrom Subsidiary shall assume the
sponsorship of, or the responsibility for contributions to, or any liability in
connection with, any Employee Plan. Without limiting the foregoing, the Company
shall be liable for any continuation coverage (including any penalties, excise
taxes or interest resulting from the failure to provide continuation coverage)
required by Section 4980B of the Code due to qualifying events that occur on or
before the Closing Date, and the Company shall otherwise retain all obligations
and liabilities under the Employee Plans.
(d) No provision of this Agreement shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of the Company in respect of employment with
Kellstrom or Kellstrom Subsidiary or in respect of any benefits that may be
provided, directly or indirectly, under any employee benefit plan, contract,
policy or arrangement which may be established by Kellstrom or Kellstrom
Subsidiary. No provision of this Agreement shall constitute a limitation on
rights to amend, modify or terminate after the Closing Date any such plans,
contracts, policies or arrangements of Kellstrom or Kellstrom Subsidiary.
Section 7.12. Relocation. Kellstrom and Kellstrom Subsidiary agree that
the Company's operations at 44 Hudson Street, New York, New York shall not be
relocated prior to June 30, 1998 without the Principals' consent.
Section 7.13. Monthly DAGM Reports. Within forty five (45) days of the
end of each calendar month (other than December) through November 30, 2000,
Kellstrom shall furnish a report to the Principals setting forth the calculation
of the DAGM for the month then ended. It is agreed and understood that such
reports are delivered for informational purposes only and any right to contest
the Kellstrom Determination shall be solely as set forth in Section 2.03(c)
above.
ARTICLE VIII
CONDITIONS PRECEDENT TO KELLSTROM'S AND KELLSTROM
SUBSIDIARY'S PERFORMANCE.
The obligations of Kellstrom and Kellstrom Subsidiary under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set out below. Kellstrom and Kellstrom Subsidiary may waive any or
all of these conditions in whole or in part without prior notice; provided,
however, that no such waiver of a condition
<PAGE>
<PAGE>
shall constitute a waiver by Kellstrom or Kellstrom Subsidiary of any of their
other rights or remedies, at law or in equity, if the Company or the Principals
is in default of any of the representations, warranties or covenants contained
in this Agreement, except to the extent that such defaults are expressly waived.
Section 8.01. Accuracy of Representations and Warranties. All
representations and warranties by the Company and each Principal in this
Agreement or in the Other Agreements or in any written statement that is
delivered to Kellstrom pursuant to this Agreement will be true and accurate on
and as of the Closing Date as though made on that date.
Section 8.02. Performance. The Company and the Principals will have
performed, satisfied and complied in all material respects with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by them on or before the Closing Date.
Section 8.03. No Material Adverse Effect. There shall have been no
Material Adverse Event or Material Adverse Effect with respect to the Company.
Section 8.04. Certification by the Company. Kellstrom will have a
received certificate, dated the Closing Date, signed by the president or vice
president and secretary or assistant secretary of the Company, certifying, in
such detail as Kellstrom and its counsel may reasonably request, that the
conditions specified in Sections 8.01 through 8.03 and 8.06 and 8.07 hereof have
been fulfilled, including, but not limited to, certified copies of all
resolutions of the Company pertaining to the authorization of the execution,
delivery and performance of this Agreement.
Section 8.05. Certification by the Principals. Kellstrom will have
received certificates, dated the Closing Date, signed by the Principals
certifying, in such detail as Kellstrom and its counsel may reasonably request,
that the conditions specified in Sections 8.01 through 8.03 and 8.06 and 8.07
hereof have been fulfilled.
Section 8.06. Absence of Litigation. No action, suit, or proceeding
before any court or any governmental body or authority, pertaining to the
transactions contemplated by this Agreement or to their consummation, will have
been instituted and served or threatened against the Company, the Principals,
any Affiliate of any of the foregoing or the Assets on or before the Closing
Date.
Section 8.07. Government Authorization. All agreements and consents
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained by the Company and the Principals, and no
Federal, state or other authority having jurisdiction over the transactions
contemplated hereby shall have taken any action to enjoin or prevent the
consummation of such transactions.
Section 8.08. Opinion of the Company's Counsel. Kellstrom shall have
received from counsel to the Company and the Principals its favorable opinion
dated the Closing Date in the form of Exhibit G hereto.
Section 8.09. Termination of Credit Facilities. Subject to the
satisfaction of Kellstrom Subsidiary of the provisions of Section 9.08 below,
the Revolving Credit
<PAGE>
<PAGE>
Agreement (the "Revolving Credit Agreement"), dated as of October 4, 1996, with
The Chase Manhattan Bank ("Chase"), as amended, and all obligations under the
term notes evidencing the Leasehold Related Indebtedness and all security
agreements, guaranties and other agreements relating to each of the foregoing
shall have been terminated and the Company shall deliver UCC-3 termination
statements executed by Chase releasing all Liens of Chase with respect to the
Assets.
Section 8.10. Name Change. The Company shall have changed its name
to a name that is not confusingly similar to its current name.
Section 8.11. Agreements. At the Closing Date:
(a) the Employment Agreements shall be executed and delivered by the
parties thereto; and
(b) the Consulting Agreement shall be executed and delivered by the
parties thereto;
(c) The Company shall have entered into a lease agreement, in the form
of Exhibit H hereto, with Zvi Bar-On covering the Leased Property.
ARTICLE IX
CONDITIONS PRECEDENT TO THE COMPANY'S
AND THE PRINCIPALS' PERFORMANCE.
The obligations of the Company and the Principals under this Agreement
are subject to the satisfaction, at or before the Closing, of all the following
conditions. The Company and the Principals may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that no
such waiver of a condition shall constitute a waiver of any of the Company's
other rights or remedies, at law or in equity, if Kellstrom or Kellstrom
Subsidiary is in default of any of the representations, warranties or covenants
contained in this Agreement, except to the extent that such defaults are
expressly waived.
Section 9.01. Accuracy of Kellstrom's and Kellstrom Subsidiary's
Representations and Warranties. All representations and warranties by Kellstrom
and Kellstrom Subsidiary contained in this Agreement or in any written statement
delivered by Kellstrom under this Agreement will be true and accurate on and as
of the Closing Date as though such representations and warranties were made on
and as of that date.
Section 9.02. Performance. Kellstrom and Kellstrom Subsidiary will have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by them on or before the Closing Date.
Section 9.03. No Material Adverse Effect. There shall have been no
Material Adverse Event or Material Adverse Effect with respect to Kellstrom.
<PAGE>
<PAGE>
Section 9.04. Certificates. The Company and each Principal will have
received certificates, dated the Closing Date, signed by the president or vice
president and secretary or assistant secretary of Kellstrom certifying, in such
detail as the Company and its counsel may reasonably request, that the
conditions specified in Sections 9.01 through 9.03 and 9.05 through 9.07 hereof
have been fulfilled, including, but not limited to, certified copies of all
resolutions of Kellstrom and Kellstrom Subsidiary pertaining to corporate
authorization of the execution, delivery and performance of this Agreement.
Section 9.05. Absence of Litigation. No action, suit, or proceeding
before any court or any governmental body or authority pertaining to the
transactions contemplated by this Agreement or to their consummation, will have
been instituted and served or threatened in writing on or before the Closing
Date.
Section 9.06. Government Authorization. All agreements and consents
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained by Kellstrom and Kellstrom Subsidiary and
delivered to the Company, and no Federal, state or other authority having
jurisdiction over the transactions contemplated hereby shall have taken any
action to enjoin or prevent the consummation of such transactions.
Section 9.07. Consents. Consents (if any) in form and substance
reasonably satisfactory to the Company, the Principals and their counsel, to the
consummation by Kellstrom and Kellstrom Subsidiary of the transactions
contemplated hereby shall have been obtained.
Section 9.08. Payment. Kellstrom Subsidiary shall have delivered the
consideration required to be delivered at the Closing as set forth in Section
2.03, and shall have paid $3,710,798.37 to Chase in full payment of all
obligations under the Revolving Credit Agreement, and the term notes evidencing
the Leasehold Related Indebtedness.
Section 9.09. Opinion of Kellstrom's Counsel. The Company and the
Principals shall have received from counsel to Kellstrom its favorable opinion
dated as of the Closing Date in the form of Exhibit I hereto.
ARTICLE X
INDEMNIFICATION
Section 10.01. Survival of Representations and Warranties. All of the
representations and warranties contained in this Agreement shall survive the
Closing hereunder and continue in full force and effect for a period of twelve
(12) months, regardless of any investigation made by Kellstrom, Kellstrom
Subsidiary, the Company or the Principals or on their behalf; provided, however,
that the representations and warranties contained in Sections 3.10, 3.12 and
3.17, relating to Taxes, environmental matters and ERISA, respectively, shall
survive and remain in full force and effect for the periods equal to the
applicable statutes of limitation relating thereto.
Section 10.02. Indemnification Provisions for Benefit of Kellstrom and
Kellstrom Subsidiary. In the event the Company or any of the Principals breaches
(or
<PAGE>
<PAGE>
in the event any third party alleges facts that, if true, would mean the
Company, or any of the Principals has breached) any of their representations,
warranties and covenants contained herein, then the Company and the Principals,
jointly and severally (and severally as to Article IV) agree to indemnify
Kellstrom and Kellstrom Subsidiary from and against all damages, costs,
liabilities, losses and expenses, including reasonable attorneys' fees and
expenses, which Kellstrom or Kellstrom Subsidiary may suffer through and after
the date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of or caused by the breach (or the alleged breach).
In addition, the Company and the Principals, jointly and severally, shall
indemnify Kellstrom and Kellstrom Subsidiary from and against the entirety of
all damages, costs, liabilities, losses and expenses, including reasonable
attorneys' fees and expenses, which Kellstrom or Kellstrom Subsidiary may suffer
at any time resulting from, arising out of, relating to, in the nature of or
caused by the items described on Schedule 3.04 item 2, Schedule 3.19 and
Schedule 3.27. Notwithstanding anything contained herein to the contrary: (i)
Kellstrom and Kellstrom Subsidiary shall not seek indemnification from the
Company or the Principals relating to a Product Liability Claim to the extent
(and only to the extent) that Kellstrom and Kellstrom Subsidiary are entitled to
coverage (following any deductible) under a product liability insurance policy,
if any, maintained by either of them, it being understood and agreed that
neither Kellstrom nor Kellstrom Subsidiary shall be under any obligation
whatsoever to maintain any such product liability insurance policy; (iii)
Kellstrom and Kellstrom Subsidiary shall not be entitled to indemnification
relating to a breach of the representation and warranty contained in Section
3.27(d) to the extent that (A) the damages, costs, liabilities, losses and
expenses, including reasonable attorneys' fees and expenses suffered by
Kellstrom or Kellstrom Subsidiary would have been covered by the CNA Credit
Insurance currently carried by the Company, and Kellstrom or Kellstrom
Subsidiary failed to maintain such insurance notwithstanding that such insurance
policy was made available to Kellstrom or Kellstrom Subsidiary or (B) Kellstrom
and Kellstrom Subsidiary fail to act in a commercially reasonable manner to
collect amounts due under the accounts receivable which is the subject of the
claim for indemnification; and (iv) to the extent that the Company or the
Principals have paid Kellstrom or Kellstrom Subsidiary the amount of an account
receivable as a result of an indemnification obligation relating to a breach of
the representation and warranty contained in Section 3.27(d), Kellstrom
Subsidiary shall assign such account receivable, to the extent paid, to the
Company or the Principals as designated by them, and Kellstrom or Kellstrom
Subsidiary shall reimburse the Company or the Principals as designated by them
if and to the extent that Kellstrom or Kellstrom Subsidiary is subsequently paid
amounts on such assigned account receivable.
Section 10.03. Indemnification Provisions for Benefit of the Company and
the Principals. In the event Kellstrom breaches (or in the event any third party
alleges facts that, if true, would mean Kellstrom has breached) any of its
representations, warranties and covenants contained herein, then Kellstrom and
Kellstrom Subsidiary, jointly and severally, agree to indemnify the Company and
the Principals from and against the entirety of all damages, costs, liabilities,
losses and expenses, including reasonable attorneys' fees and expenses, which
the Company or the Principals may suffer through and after the date of the claim
for indemnification resulting from, arising out of, relating to, in the nature
of or caused by the breach (or the alleged breach).
<PAGE>
<PAGE>
Section 10.04. Matters Involving Third Parties. (a) If any third party
shall notify any party (the "Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a claim for indemnification against
any other party hereto (the "Indemnifying Party") under this Article X, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified party in writing within fifteen (15) days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of all damages, costs, liabilities, losses and expenses, including
reasonable attorneys' fees and expenses, which the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim, (ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (iii) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice adverse to the
continuing Business interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
Notwithstanding the foregoing or anything else in this Agreement to the
contrary, (i) in the event of a claim by Kellstrom Subsidiary or Kellstrom for
indemnification based on a Third Party Claim as a result of a breach of the
representation and warranty contained in Section 3.16 (a "Product Liability
Claim"), it is understood and agreed that Kellstrom and Kellstrom Subsidiary
shall pay the reasonable legal fees and expenses incurred from and after the
Closing Date in defending the Product Liability Claim and Kellstrom and
Kellstrom Subsidiary shall conduct the defense of such Product Liability Claim;
provided, however that if the Company or the Principals determine to retain
independent counsel, the Company and the Principals shall bear the costs of such
counsel and (ii) Kellstrom or Kellstrom Subsidiary shall pay the reasonable
legal fees and expenses incurred in defending the lawsuit in the District Court
of Tel Aviv, Complaint No. 990/97, entitled Kamtech Systems Ltd. v. Aero Support
USA Inc. and the related arbitration and Kellstrom or Kellstrom Subsidiary shall
conduct the defense of such lawsuit; provided, however, that if the Company or
the Principals determine to retain independent counsel, the Company and the
Principals shall bear the costs of such counsel.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 10.04(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld, delayed or conditioned unreasonably),
and (iii) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party
<PAGE>
<PAGE>
Claim without the prior written consent of the Indemnified Party (not to be
withheld, delayed or conditioned unreasonably); provided, however that the
Indemnified Party shall have the right to employ its counsel in any action and
the fees and expenses of such counsel shall be at the expense of the
Indemnifying Party (subject to clause (i) of the second sentence of Section
10.02) in the event that the Indemnified Party shall have reasonably concluded
that there may be a conflict of interest between the Indemnified Party and the
Indemnifying Party in the conduct of such defense of such action (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action on behalf of the Indemnified Party).
(d) In the event any of the conditions in Section 10.04(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party will remain responsible for all
damages, costs, liabilities, losses and expenses, including reasonable
attorneys' fees and expenses, which the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Article X.
Section 10.05. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable or common law remedy any party hereto may have for breach
of representation, warranty or covenant. Each Principal hereby agrees that he
will not make any claim for indemnification against the Company by reason of the
fact that he was a stockholder, director, officer, employee or agent of any such
entity or was serving at the request of any such entity as a partner, trustee,
director, officer, employee or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement or otherwise) with respect to any action,
suit, proceeding, complaint, claim or demand brought by Kellstrom or Kellstrom
Subsidiary against such Principal (whether such action, suit, proceeding,
complaint, claim or demand is pursuant to this Agreement, applicable law or
otherwise).
Section 10.06. Limitations on Indemnity and Liability. Neither Kellstrom
nor Kellstrom Subsidiary shall be entitled to (i) make any claim for indemnity
under this Article X for the Company's or the Principals' breaches of
representations and warranties or (ii) make any claim against any of the Company
or the Principals under this Agreement for any reason, until such time as all
damages on account thereof total $250,000, at which time and thereafter
Kellstrom and Kellstrom Subsidiary shall be entitled to recover amounts in
excess of $150,000. The maximum amount that may be claimed against: (w) the
Company and the Principals shall be $10 million in the aggregate (regardless of
whether or not the Company is dissolved following the Closing); (x) Zvi Bar-On
shall be $6 million; (y) Michael Navon shall be $2 million; and (z) Mordechai
Markowicz shall be $2 million.
<PAGE>
<PAGE>
ARTICLE XI
TERMINATION
Section 11.01. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(i) Kellstrom and the Principals may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Kellstrom may terminate this Agreement by giving written
notice to the Principals at any time prior to the Closing (A) in the
event the Company or any of the Principals has breached any
representation, warranty or covenant contained in this Agreement and
such breach has not been cured or (B) if the Closing shall not have
occurred on or before September 10, 1997, by reason of the failure of
any condition precedent under Article VIII hereof (unless the failure
results primarily from Kellstrom itself breaching any representation,
warranty or covenant contained in this Agreement); and
(iii) the Company and the Principals may terminate this Agreement
by giving written notice to Kellstrom at any time prior to the Closing
(A) in the event Kellstrom has breached any representation, warranty or
covenant contained in this Agreement and such breach has not been cured
or (B) if the Closing shall not have occurred on or before September 10,
1997, by reason of the failure of any condition precedent under Article
IX hereof (unless the failure results primarily from any of the Company
or the Principals themselves breaching any representation, warranty or
covenant contained in this Agreement).
Section 11.02. Effect of Termination. If any party terminates this
Agreement pursuant to Section 11.01 above, all rights and obligations of the
parties hereunder shall terminate without any Liability of any party hereto to
any other party hereto (except for any Liability of any party then in breach).
ARTICLE XII
MISCELLANEOUS
Section 12.01. Effect of Due Diligence. No investigation by or on behalf
of Kellstrom or Kellstrom Subsidiary into the Business, operations, prospects,
assets or condition (financial or otherwise) of the Company shall diminish in
any way the effect of any representations or warranties made by Principals or
the Company in this Agreement or shall relieve Principals or the Company of any
of their obligations under this Agreement except to the extent set forth in
Section 12.10.
Section 12.02. Press Releases and Public Announcements. Neither the
Company nor the Principals shall issue any press release or make any public
announcement relating to the subject matter of this Agreement. Kellstrom may
make any public disclosure it believes in good faith is required by applicable
law.
<PAGE>
<PAGE>
Section 12.03. No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and permitted assigns.
Section 12.04. Bulk Sales Law. Kellstrom and Kellstrom Subsidiary hereby
waives compliance by the Company with all applicable bulk sales laws.
Section 12.05. Entire Agreement. This Agreement and the Other Agreements
constitute the entire agreement among the parties hereto and supersedes any
prior understandings, agreements or representations by or among the parties
hereto, written or oral, to the extent they related in any way to the subject
matter hereof and thereof.
Section 12.06. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and their
respective successors and permitted assigns. No party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of Kellstrom and the Principals; provided,
however, that (a) Kellstrom may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases Kellstrom nonetheless shall remain responsible for the performance
of all of its obligations hereunder) and (b) the Company may assign its right to
receive any or all of the purchase price to the parties set forth in the Notes
and the Additional Payments Schedules.
Section 12.07. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 12.08. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 12.09. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given (a) on the
date of delivery, if delivered to the persons identified below, (b) two Business
Days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Principals: Zvi Bar-On
377 Rector Place, Apt. 23F
New York, New York 10280
Copy to: Gratch Jacobs & Brozman, P.C.
950 Third Avenue
New York, New York 10022
Attn: Andrew Reinhard, Esq.
<PAGE>
<PAGE>
If to Kellstrom
or Kellstrom Subsidiary: Kellstrom Industries, Inc.
14000 N.W. 4th Street
Sunrise, Fl 33325
Attn: Zivi R. Nedivi
Copy to: Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attn: Richard H. Gilden, Esq.
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
Section 12.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 12.11. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Kellstrom, the Company and Principals. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence. Anything contained in this Agreement to the contrary
notwithstanding, in the event that Kellstrom has been advised in writing by the
Principals of a misrepresentation or breach of warranty prior to the Closing,
the Principals shall be permitted to amend the appropriate Schedule(s) to cure
such misrepresentation or breach prior to the Closing; provided, however, that
if any changes reflected on such Schedules have, or could be reasonably expected
to have, a Material Adverse Effect on the Company or a material adverse effect
on the value of the transaction as a whole, Kellstrom shall not be obligated to
consummate the transactions contemplated hereby. If Kellstrom elects not to
consummate the transactions contemplated hereby in accordance with provisions of
the preceding sentence, such election will be treated as a termination of this
Agreement pursuant to Article XI hereof. If Kellstrom elects to consummate the
transactions contemplated hereby notwithstanding a revision to the Schedules
hereto, the Schedules, as so revised, will be deemed to have been reinstated as
of the date hereof as if they had been originally attached to this Agreement.
Section 12.12. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity
<PAGE>
<PAGE>
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
Section 12.13. Expenses. Each of Kellstrom and Kellstrom Subsidiary and
Principals will bear his or its own costs and expenses (including legal fees and
expenses), and the Principals shall bear the costs and expenses (including legal
fees and expenses) of the Company, in each case incurred in connection with this
Agreement and the transactions contemplated hereby. The Principals agree that
the Company has not borne and will not bear any of the Principal's costs and
expenses (including any of its legal fees and expenses) in connection with this
Agreement or the Other Agreements or any of the transactions contemplated hereby
or thereby.
Section 12.14. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
Section 12.15. Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
Section 12.16. Specific Performance. Each of the parties acknowledges
and agrees that the other parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date set forth above.
KELLSTROM INDUSTRIES,INC.
By:
--------------------------
Zivi R. Nedivi
President and
Chief Executive Officer
AERO SUPPORT HOLDINGS, INC.
By:
--------------------------
Zivi R. Nedivi
President
AERO SUPPORT USA INC.
By:
--------------------------
Title:
------------------------
------------------------------
Zvi Bar-On
------------------------------
Mordechai Markowicz
------------------------------
Michael Navon
<PAGE>
<PAGE>
SCHEDULE 2.03(a)(1)
12.17 The Company shall be entitled to certain additional
payments (the "Additional Payments"), if any, calculated in accordance with this
Section 1, subject to adjustment as set forth in Section 2 below. The term
"Payment Years" shall mean each of (a) the period commencing on the date of
execution of this Agreement and ending on December 31, 1998 and (b) the two
twelve-month periods ending December 31, 1999 and 2000. The term "Division
Adjusted Gross Margin" ("DAGM") shall be as described in Appendix X to this
Schedule 2.03(a)(1).
If DAGM is equal to or less than the "GMT1" listed in the table below,
no Additional Payment shall be made for the applicable Payment Year. The actual
amount of the Additional Payment payable by Buyer will be computed in accordance
with the formula below to the extent that the DAGM exceeds the GMT1 for the
applicable period as listed below:
<TABLE>
<CAPTION>
Payment Year Gross Margin Target 1 ("GMT1") Gross Margin Target 2 ("GMT2")
- ------------ ----------------------------- -----------------------------
<S> <C> <C>
1998 $8,900,000 $13,000,000
1999 $7,450,000 $10,750,000
2000 $8,150,000 $11,750,000
</TABLE>
To the extent the DAGM is greater than the GMT1 but less than GMT2, the
Additional Payment would be:
Additional Payment = (DAGM - GMT1) x $333,333
-------------
(GMT2 - GMT1)
To the extent the DAGM is equal to or more than GMT2, the Additional Payment
would be $333,333.
On or before March 31, 1999, 2000 and 2001, Maker shall deliver to the
Holder the determination of DAGM and the Additional Payment, if any, for the
applicable Payment Year together with payment of the Additional Payment.
12.18 The Company may assign the right to receive Additional
Payments under this Schedule 2.03(a)(1) to Zvi Bar-On.
<PAGE>
<PAGE>
APPENDIX X
Method for calculating
Division Adjusted Gross Margin
For the purpose of this Schedule 2.03(a)(1), "Aero Inventory" will mean
any jet or turbo prop engine and/or jet or turbo prop engine parts and aircraft
parts purchased for resale, NOT INCLUDING the following models:
JT-9 all models
JT-8 all models
PW-4000 all models
PW-2000 all models
CFM 56 all models
All models of GE and Rolls Royce jet engines, as well as all other
aircraft parts, which fly on commercial aircraft including the following:
All models of Boeing 727, 737, 747, 757, 767, 777, Airbus all models,
L-1011, DC-8, DC-9, DC-10, MD-80 Series, MD-11
; provided, however, that any of such engines, engine parts and aircraft
parts purchased for resale which are included as part of the Inventory as of the
Closing Date shall not be so excluded from the definition of "Aero Inventory."
"Division Adjusted Gross Margin" shall equal (i) the consolidated "net
revenues" (defined as gross sales less sales discounts, allowances and returns)
of Aero Support Holdings, Inc. relating to the sale of the Aero Inventory for
each Payment Year less (ii) the book value of such Aero Inventory (which shall
include the purchase price of the Aero Inventory, plus all direct charges
related to the refurbishment of such Aero Inventory) and less (iii) interest on
any amounts of Aero Inventory appearing on Aero Support Holdings, Inc.'s balance
sheet as calculated on a monthly basis based on the average Aero Inventory
balance for each month (calculated as follows: beginning Aero Inventory balance
for the month, plus ending Aero Inventory balance for the month, divided by two)
at the end of each calendar month at the so called "prime" rate of interest (the
"Prime Rate") charged from time to time by Barnett Bank N.A. (or such other
banking institution as shall then be Kellstrom's senior lender) to its
commercial customers for loans having a maturity of 90 days or less, such rate
to take into account any compensating balances which may be required by said
bank in connection with such loans and to change as and when a change occurs in
the Prime Rate.
All of the above shall be determined by Buyer's internal auditors, in
conformity with generally accepted accounting principles and practices in the
United States applied on a consistent basis with prior periods of Kellstrom
Industries, Inc., provided, that for purposes of this Appendix X, no change
shall be made to the book value of the Aero Inventory appearing on the books of
Aero Support USA Inc. as of the Closing Date.
<PAGE>
<PAGE>
Right to Contest Maker's Calculation of DAGM
The Principals shall be entitled to contest the calculation of DAGM and
the Additional Payments, at their own expense, to the extent set forth in
Section 2.03 of this Agreement.
<PAGE>
<PAGE>
SCHEDULE 2.03(a)(3)
12.19 The Company shall be entitled to certain additional payments (the
"Additional Payments"), if any, calculated in accordance with this Section 1,
subject to adjustment and the conditions set forth in Sections 2 and 3 below.
The term "Payment Years" shall mean each of (a) the period commencing on the
date of execution of this Agreement and ending on December 31, 1998 and (b) the
two twelve-month periods ending December 31, 1999 and 2000. The term "Division
Adjusted Gross Margin" ("DAGM") shall be as described in Appendix X to this
Schedule 2.03(a)(2).
The actual amount of the Additional Payment payable by Buyer will be
computed in accordance with the formula below:
Payment Year Gross Margin Target0 ("GMT0") GMT1 GMT2
- ----------- ---------------------------- ---- ----
1998 $6,850,000 $8,900,000 $13,000,000
1999 $5,800,000 $7,450,000 $10,750,000
2000 $6,350,000 $8,150,000 $11,750,000
To the extent the DAGM is equal to or more than GMT2, the Additional Payment
would be $666,666.
To the extent the DAGM is greater than the GMT1 but less than GMT2, the
Additional Payment would be:
Additional Payment = $333,333 + [(DAGM - GMT1) x $333,333]
--------------
(GMT2 - GMT1)
To the extent that the DAGM equals the GMT1, the Additional Payment would be
$333,333.
To the extent that DAGM is greater than GMT0, but less than the GMT1, the
Additional Payment would be:
Additional Payment = $333,333 - [$333,333 x (GMT1 - DAGM)]
---------------
(GMT1 - GMT0)
To the extent that the DAGM is equal to or less than GMT0, there will be
no Additional Payment.
On or before March 31, 1999, 2000 and 2001, Maker shall deliver to the
Holder the determination of DAGM and the Additional Payment, if any, for the
applicable Payment Year together with payment of the Additional Payment.
12.20 Notwithstanding anything to the contrary contained in this
Agreement or the Employment Agreement (the "Employment Agreement"), dated the
date hereof, between Mordechai Markowicz and Aero Support Holdings, Inc., the
following terms and conditions shall apply to the payment of Additional Payments
due under this Schedule 2.03(a)(2):
<PAGE>
<PAGE>
(a) In the event that Mordechai Markowicz's employment under the
Employment Agreement is terminated under Section 5(d) or 5(e) thereof (i) prior
to December 31, 1998 or (ii) following the end of a Payment Year for which the
DAGM was greater than GMT0 for such Payment Year, the Company shall be entitled
to receive a lump sum payment equal to the Additional Payments which would have
been due hereunder assuming that the DAGM for all remaining Payment Years were
equal to GMT2, it being understood that the Additional Payment with respect to
the Payment year ended immediately preceding such termination (in the case of
clause (ii) hereof) shall be based upon the actual DAGM for such Payment Year.
The lump sum payment shall be paid upon the termination of the employment of
Mordechai Markowicz; provided that, in the case of a termination described under
clause (ii) hereof, if at the time of such termination the calculation of DAGM
for the Payment Year just ended has not yet been delivered under Section 1
above, then the lump sum payment shall be made on the date such determination is
so delivered.
(b) In the event that Mordechai Markowicz's employment under the
Employment Agreement is terminated (i) under Section 5(d) or (e) thereof
following the end of any Payment Year in which the DAGM was less than the GMT0
for such Payment Year or (ii) at any time under Section 5(a) or 5(b) of the
Employment Agreement, the Company shall be entitled to continue to receive all
Additional Payments, if any, which become due hereunder, without any
adjustments. Such Additional Payments shall be paid on the dates set forth in
Section 1 above.
(c) In the event that Mordechai Markowicz's employment under the
Employment Agreement is terminated under Section 5(c) of the Employment
Agreement or Mordechai Markowicz terminates the Employment Agreement other than
under Section 5(e) thereof, all rights to receive Additional Payments not yet
received shall be null and void and of no force or effect.
12.21 The Company may assign the right to receive Additional Payments
under this Schedule 2.03(a)(2) to Mordechai Markowicz.
<PAGE>
<PAGE>
APPENDIX X
Method for calculating
Division Adjusted Gross Margin
For the purpose of this Schedule 2.03(a)(1), "Aero Inventory" will mean
any jet or turbo prop engine and/or jet or turbo prop engine parts and aircraft
parts purchased for resale, NOT INCLUDING the following models:
JT-9 all models
JT-8 all models
PW-4000 all models
PW-2000 all models
CFM 56 all models
All models of GE and Rolls Royce jet engines, as well as all other
aircraft parts, which fly on commercial aircraft including the following:
All models of Boeing 727, 737, 747, 757, 767, 777, Airbus all models,
L-1011, DC-8, DC-9, DC-10, MD-80 Series, MD-11
; provided, however, that any of such engines, engine parts and aircraft
parts purchased for resale which are included as part of the Inventory as of the
Closing Date shall not be so excluded from the definition of "Aero Inventory."
"Division Adjusted Gross Margin" shall equal (i) the consolidated "net
revenues" (defined as gross sales less sales discounts, allowances and returns)
of Aero Support Holdings, Inc. relating to the sale of the Aero Inventory for
each Payment Year less (ii) the book value of such Aero Inventory (which shall
include the purchase price of the Aero Inventory, plus all direct charges
related to the refurbishment of such Aero Inventory) and less (iii) interest on
any amounts of Aero Inventory appearing on Aero Support Holdings, Inc.'s balance
sheet as calculated on a monthly basis based on the average Aero Inventory
balance for each month (calculated as follows: beginning Aero Inventory balance
for the month, plus ending Aero Inventory balance for the month divided by two)
at the end of each calendar month at the so called "prime" rate of interest (the
"Prime Rate") charged from time to time by Barnett Bank N.A. (or such other
banking institution as shall then be Kellstrom's senior lender) to its
commercial customers for loans having a maturity of 90 days or less, such rate
to take into account any compensating balances which may be required by said
bank in connection with such loans and to change as and when a change occurs in
the Prime Rate.
All of the above shall be determined by Buyer's internal auditors, in
conformity with generally accepted accounting principles and practices in the
United States applied on a consistent basis with prior periods of Kellstrom
Industries, Inc., provided, that for purposes of this Appendix X, no change
shall be made to the book value of the Aero Inventory appearing on the books of
Aero Support USA Inc. as of the Closing Date.
<PAGE>
<PAGE>
Right to Contest Maker's Calculation of DAGM
The Principals shall be entitled to contest the calculation of DAGM and
the Additional Payments, at their own expense, to the extent set forth in
Section 2.03 of this Agreement.
<PAGE>
<PAGE>
SCHEDULE 2.03(a)(2)
12.22 The Company shall be entitled to certain additional payments (the
"Additional Payments"), if any, calculated in accordance with this Section 1,
subject to adjustment and the conditions set forth in Sections 2 and 3 below.
The term "Payment Years" shall mean each of (a) the period commencing on the
date of execution of this Agreement and ending on December 31, 1998 and (b) the
two twelve-month periods ending December 31, 1999 and 2000. The term "Division
Adjusted Gross Margin" ("DAGM") shall be as described in Appendix X to this
Schedule 2.03(a)(2).
The actual amount of the Additional Payment payable by Buyer will be
computed in accordance with the formula below:
Payment Year Gross Margin Target 0 ("GMT0") GMT1 GMT2
- ------------ ----------------------------- ---- ----
1998 $6,850,000 $8,900,000 $13,000,000
1999 $5,800,000 $7,450,000 $10,750,000
2000 $6,350,000 $8,150,000 $11,750,000
To the extent the DAGM is equal to or more than GMT2, the Additional Payment
would be $666,666.
To the extent the DAGM is greater than the GMT1 but less than GMT2, the
Additional Payment would be:
Additional Payment = $333,333 + [(DAGM - GMT1) x $333,333]
--------------
(GMT2 - GMT1)
To the extent that the DAGM equals the GMT1, the Additional Payment would be
$333,333.
To the extent that DAGM is greater than GMT0, but less than the GMT1, the
Additional Payment would be:
Additional Payment = $333,333 - [$333,333 x (GMT1 - DAGM)]
--------------
(GMT1 - GMT0)
To the extent that the DAGM is equal to or less than GMT0, there will be
no Additional Payment.
On or before March 31, 1999, 2000 and 2001, Maker shall deliver to the
Holder the determination of DAGM and the Additional Payment, if any, for the
applicable Payment Year together with payment of the Additional Payment.
<PAGE>
<PAGE>
12.23 Notwithstanding anything to the contrary contained in this
Agreement or the Employment Agreement (the "Employment Agreement"), dated the
date hereof, between Michael Navon and Aero Support Holdings, Inc., the
following terms and conditions shall apply to the payment of Additional Payments
due under this Schedule 2.03(a)(2):
(a) In the event that Michael Navon's employment under the Employment
Agreement is terminated under Section 5(d) or 5(e) thereof (i) prior to December
31, 1998 or (ii) following the end of a Payment Year for which the DAGM was
greater than GMT0 for such Payment Year, the Company shall be entitled to
receive a lump sum payment equal to the Additional Payments which would have
been due hereunder assuming that the DAGM for all remaining Payment Years were
equal to GMT2, it being understood that the Additional Payment with respect to
the Payment year ended immediately preceding such termination (in the case of
clause (ii) hereof) shall be based upon the actual DAGM for such Payment Year.
The lump sum payment shall be paid upon the termination of the employment of
Michael Navon; provided that, in the case of a termination described under
clause (ii) hereof, if at the time of such termination the calculation of DAGM
for the Payment Year just ended has not yet been delivered under Section 1
above, then the lump sum payment shall be made on the date such determination is
so delivered.
(b) In the event that Michael Navon's employment under the Employment
Agreement is terminated (i) under Section 5(d) or (e) thereof following the end
of any Payment Year in which the DAGM was less than the GMT0 for such Payment
Year or (ii) at any time under Section 5(a) or 5(b) of the Employment Agreement,
the Company shall be entitled to continue to receive all Additional Payments, if
any, which become due hereunder, without any adjustments. Such Additional
Payments shall be paid on the dates set forth in Section 1 above.
(c) In the event that Michael Navon's employment under the Employment
Agreement is terminated under Section 5(c) of the Employment Agreement or
Michael Navon terminates the Employment Agreement other than under Section 5(e)
thereof, all rights to receive Additional Payments not yet received shall be
null and void and of no force or effect.
12.24 The Company may assign the right to receive Additional Payments
under this Schedule 2.03(a)(2) to Michael Navon.
<PAGE>
<PAGE>
APPENDIX X
Method for calculating
Division Adjusted Gross Margin
For the purpose of this Schedule 2.03(a)(1), "Aero Inventory" will mean
any jet or turbo prop engine and/or jet or turbo prop engine parts and aircraft
parts purchased for resale, NOT INCLUDING the following models:
JT-9 all models
JT-8 all models
PW-4000 all models
PW-2000 all models
CFM 56 all models
All models of GE and Rolls Royce jet engines, as well as all other
aircraft parts, which fly on commercial aircraft including the following:
All models of Boeing 727, 737, 747, 757, 767, 777, Airbus all models,
L-1011, DC-8, DC-9, DC-10, MD-80 Series, MD-11
; provided, however, that any of such engines, engine parts and aircraft
parts purchased for resale which are included as part of the Inventory as of the
Closing Date shall not be so excluded from the definition of "Aero Inventory."
"Division Adjusted Gross Margin" shall equal (i) the consolidated "net
revenues" (defined as gross sales less sales discounts, allowances and returns)
of Aero Support Holdings, Inc. relating to the sale of the Aero Inventory for
each Payment Year less (ii) the book value of such Aero Inventory (which shall
include the purchase price of the Aero Inventory, plus all direct charges
related to the refurbishment of such Aero Inventory) and less (iii) interest on
any amounts of Aero Inventory appearing on Aero Support Holdings, Inc.'s balance
sheet as calculated on a monthly basis based on the average Aero Inventory
balance for each month (calculated as follows: beginning Aero Inventory balance
for the month, plus ending Aero Inventory balance for the month divided by two)
at the end of each calendar month at the so called "prime" rate of interest (the
"Prime Rate") charged from time to time by Barnett Bank N.A. (or such other
banking institution as shall then be Kellstrom's senior lender) to its
commercial customers for loans having a maturity of 90 days or less, such rate
to take into account any compensating balances which may be required by said
bank in connection with such loans and to change as and when a change occurs in
the Prime Rate.
All of the above shall be determined by Buyer's internal auditors, in
conformity with generally accepted accounting principles and practices in the
United States applied on a consistent basis with prior periods of Kellstrom
Industries, Inc., provided, that for purposes of this Appendix X, no change
shall be made to the book value of the Aero Inventory appearing on the books of
Aero Support USA Inc. as of the Closing Date.
<PAGE>
<PAGE>
Right to Contest Maker's Calculation of DAGM
The Principals shall be entitled to contest the calculation of DAGM and
the Additional Payments, at their own expense, to the extent set forth in
Section 2.03 of this Agreement.
<PAGE>
<PAGE>
EXHIBIT 10.1
Kellstrom Industries, Inc.
Warrant for the Purchase of Shares of Common Stock
No. 75,000 Shares
FOR VALUE RECEIVED, Kellstrom Industries, Inc., a Delaware
corporation (the "Company"), hereby certifies that Aero Support USA Inc. ("Aero
Support") or its permitted assigns, is entitled to purchase from the Company, at
any time or from time to time commencing on September 10, 1997 (the
"Commencement Date") and prior to 5:00 P.M., New York City time, on September 9,
2000 (the "Exercise Period"), seventy-five thousand (75,000), subject to
adjustment as hereinafter provided, fully paid and non-assessable shares of the
common stock, $.001 par value per share, of the Company for an aggregate
purchase price of $1,650,000 (computed on the basis of $22.00 per share).
(Hereinafter, (i) said common stock, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock," (ii) the shares of the Common
Stock purchasable hereunder or under any other Warrant (as hereinafter defined)
are referred to individually as a "Warrant Share" and collectively as the
"Warrant Shares," (iii) the aggregate purchase price payable for the Warrant
Shares hereunder is referred to as the "Aggregate Warrant Price," (iv) the price
payable for each of the Warrant Shares hereunder is referred to as the "Per
Share Warrant Price," (v) this Warrant, all similar Warrants issued on the date
hereof to Aero Support in connection with the Purchase Agreement, dated
September 10, 1997, by and among the Company, Aero Support Holdings, Inc., Aero
Support USA Inc, Zvi Bar-On, Mordechai Markowicz and Michael Navon, and all
Warrants hereafter issued in exchange or substitution for this Warrant or such
similar Warrants are referred to as the "Warrants" and (vi) the holder of this
Warrant is referred to as the "Holder" and the holder of this Warrant and all
other Warrants or Warrant Shares issued upon the exercise of any Warrant are
referred to as the "Holders.") The Aggregate Warrant Price is not subject to
adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter
provided; in the event of any such adjustment, the number of Warrant Shares
shall be adjusted by dividing the Aggregate Warrant Price by the Per Share
Warrant Price in effect immediately after such adjustment.
1.Exercise of Warrant. (a) This Warrant may be exercised in whole at
any time or in part from time to time, beginning on the Commencement Date and
prior to 5:00 P.M., New York City time, on September 9, 2000, by the Holder by
the surrender of this Warrant (with the subscription form or the cashless
exercise notice, as applicable, at the end hereof, or a reasonable facsimile
thereof, duly executed) at the address set forth in Subsection 10(a) hereof,
together with proper payment of the Aggregate Warrant Price, or the
proportionate part hereof if this Warrant is exercised in part. Payment for
Warrant Shares shall be made at the election of the Holder, either (i) by
certified or official bank check payable to the order of the Company or (ii)
with a Cashless Exercise Form annexed hereto (or a reasonable facsimile thereof)
duly executed (a "Cashless Exercise"). Presentation of the Cashless Exercise
Form and surrender of this Warrant shall be deemed a waiver of the Holder's
obligation to pay all of the Aggregate Warrant Price, or the applicable portion
thereof with respect to a partial exercise. In the event of a Cashless Exercise,
the Holder shall exchange its Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares being exercised by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current market price per
share of Common Stock. For purposes of any computation under this Section
1(a)(ii), the then current market price per share of Common Stock at any date
shall be deemed to be the average for the five consecutive business days
immediately prior to the Cashless Exercise of the daily closing prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the closing prices as reported by the Nasdaq National
Market, or if not then listed on the Nasdaq National Market, the average of the
highest reported bid and lowest reported asked prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ")
<PAGE>
<PAGE>
or if not then publicly traded, the fair market price of the Common Stock as
determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock, and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this Warrant,
the Company will, as promptly as practicable, (a) issue a certificate or
certificates in the name of the Holder (or any designee of the Holder to whom
the Warrant is transferred in accordance with Section 6 hereof) for the largest
number of whole shares of the Common Stock to which the Holder shall be entitled
and, if this Warrant is exercised in whole, in lieu of any fractional share of
the Common Stock to which the Holder shall be entitled, pay to the Holder cash
in an amount equal to the fair value of such fractional share (determined in
such reasonable manner as the Board of Directors of the Company shall
determine), and (b) deliver the other securities and properties receivable upon
the exercise of this Warrant, or the proportionate part thereof if this Warrant
is exercised in part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees
that, prior to the expiration of this Warrant, the Company will at all times (a)
have authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first refusal
and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, keep the shares of the Common Stock receivable upon the
exercise of this Warrant authorized for listing on such exchange upon notice of
issuance.
3. Protection Against Dilution. (a) In case the Company shall
hereafter (i) pay a dividend or make a distribution on its capital stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Company, the Per Share Warrant
Price shall be adjusted so that the Holder upon the exercise hereof shall be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Subsection 3(a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
(b) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Common Stock
evidences of its indebtedness, any other securities of the Company or any cash,
property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(a), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor if the full
amount thereof, together with the value of other dividends and distributions
made substantially concurrently therewith or pursuant to a plan which includes
payment thereof, is equivalent to not more than a cumulative amount equal to 15%
of the Company's net worth) (any such nonexcluded event being herein called a
"Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current market price (as defined above) of
the Common Stock less the fair market value (as determined in good faith by the
Company's Board of Directors) of the evidences of indebtedness, cash, securities
or property, or other assets issued or distributed in such Special Dividend
applicable to one share of Common Stock and the denominator of which shall be
such then current market price per share of Common Stock. An adjustment made
pursuant to this Subsection 3(b) shall become effective immediately after the
record date of any such Special Dividend.
(c) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case
<PAGE>
<PAGE>
of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Company), the Holder of this Warrant shall have the right thereafter to receive
on the exercise of this Warrant the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(c) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 15 days prior to such event.
(d) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(d)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(e) If the Board of Directors of the Company shall (i) declare any
dividend or other distribution with respect to the Common Stock, other than a
cash dividend subject to the first parenthetical in Subsection 3(b), (ii) offer
to the holders of shares of Common Stock any additional shares of Common Stock,
any securities convertible into or exercisable for shares of Common Stock or any
rights to subscribe thereto, or (iii) propose a dissolution, liquidation or
winding up of the Company, the Company shall mail notice thereof to the Holders
of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend, distribution,
offer or subscription right or to vote on such dissolution, liquidation or
winding up.
(f) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall in
good faith determine the allocation of the adjusted Per Share Warrant Price
between or among shares or such classes of capital stock or shares of Common
Stock and other capital stock.
(g) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of the Holder of Warrants in
accordance with this Section 3, the Company shall promptly cause its Chief
Financial Officer to provide a notice to the Holder setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or the
effect of such modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same.
<PAGE>
<PAGE>
4. Fully Paid Stock; Taxes. The Company agrees that the shares
of the Common Stock, or any other capital stock, represented by each and every
certificate for Warrant Shares delivered on the exercise of this Warrant shall,
at the time of such delivery, be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive rights or rights of first refusal,
and the Company will take all such actions as may be necessary to assure that
the par value or stated value, if any, per share of the Common Stock is at all
times equal to or less than the then Per Share Warrant Price. The Company
further covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933. (a) The Company
agrees that if, at any time during the period beginning on the Commencement Date
and ending on the third anniversary of the date the Warrants are exercised in
full, the Holder and/or the Holders of any other Warrants and/or Warrant Shares
who or which shall hold not less than 50% of the Warrants and/or Warrant Shares
outstanding at such time and not previously sold pursuant to this Section 5
shall request that the Company file, under the Securities Act of 1933 (the
"Act"), a registration statement under the Act covering not less than 50% of the
Warrant Shares issued or issuable upon the exercise of all of the Warrants and
not so previously sold, the Company will (i) promptly notify each Holder of the
Warrants and each holder of Warrant Shares not so previously sold that such
registration statement will be filed and that the Warrant Shares which are then
held, and/or may be acquired upon exercise of the Warrants by the Holder and
such Holders, will be included in such registration statement at the Holder's
and such Holders' request, (ii) cause such registration statement to be filed
with the Securities and Exchange Commission (the "Commission") as soon as
possible following such request and to cover all Warrant Shares which it has
been so requested to include, (iii) use its best efforts to cause such
registration statement to become effective as soon as practicable and (iv) take
all other action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation of any governmental authority for the period necessary for
such Holder to effect the proposed sale or other disposition. The Company shall
be required to effect a registration or qualification pursuant to this
Subsection 5(a) on one occasion only, it being agreed that a registration
pursuant to this Subsection 5(a) shall not be deemed to have been effected
unless a registration statement with respect thereto has become effective;
provided that if such registration statement failed to become effective as a
result of the decision of the Holder not to consummate, or the failure of the
Holder to satisfy the conditions to, the sale of the Warrant Shares pursuant to
such registration statement, the Company shall have no further obligation to
effect a registration pursuant to this Subsection 5(a). Notwithstanding the
foregoing, if the Holder exercises its right to request that a registration
statement be filed pursuant to this Subsection 5(a) at a time when the Company
in good faith as evidenced by a Board resolution believes that a public offering
of Common Stock would materially impair a pending financing or other material
transaction of the Company, the Company shall have the right to defer filing a
Registration Statement hereunder for a period not to exceed 90 days.
(b) The Company agrees that if (without any obligation to do so), at any
time and from time to time during the period beginning on the Commencement Date
and ending on the third anniversary of the date the Warrants are exercised in
full, the Board of Directors of the Company shall authorize the filing of a
registration statement (any such registration statement being hereinafter called
a "Subsequent Registration Statement") under the Act (otherwise than pursuant to
Subsection 5(a) hereof, or other than a registration statement on Form S-4 or
Form S-8 or other form which does not include substantially the same information
as would be required in a form for the general registration of securities) in
connection with the proposed offer of any of its securities by it or any of its
stockholders, the Company will (i) promptly notify the Holder and each of the
Holders, if any, of other Warrants and/or Warrant Shares not previously sold
pursuant to this Section 5 that such Subsequent Registration Statement will be
filed and that the Warrant Shares which are then held, and/or which may be
acquired upon the exercise of the Warrants, by the Holder and such Holders,
will, at the Holder's and such Holders' request, be included in such Subsequent
Registration Statement, (ii) upon the written request of a Holder made within 15
days after the giving of such notice by the Company, include in
<PAGE>
<PAGE>
the securities covered by such Subsequent Registration Statement all Warrant
Shares which it has been so requested to include, and (iii) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such Subsequent Registration Statement to be sold or
otherwise disposed of, and will maintain such compliance with each such Federal
and state law and regulation of any governmental authority for the period
necessary for the Holder and such Holders to effect the proposed sale or other
disposition. Notwithstanding the foregoing, the Company shall be under no
obligation to cause such Subsequent Registration Statement to become effective.
(c) Whenever the Company is required pursuant to the provisions of
this Section 5 to include Warrant Shares in a registration statement, the
Company shall (i) furnish each Holder of any such Warrant Shares and each
underwriter of such Warrant Shares with such copies of the prospectus, including
the preliminary prospectus, conforming to the Act (and such other documents as
each such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
(d) The Company shall pay all expenses incurred in connection with
any registration statement or other action pursuant to the provisions of this
Section 5, other than underwriting discounts, applicable transfer taxes relating
to the Warrant Shares and the fees and expenses of counsel for the Holders of
the Warrant Shares.
(e) In connection with any public offering by the Company involving
an underwriting of its securities effected pursuant to Section 5(b) hereof, the
Company shall not be required to include in such registration any Warrant Shares
held by the Holder unless the Holder agrees to the terms of the underwriting
agreement between the Company and the managing underwriter of such offering,
which agreement may require that the Warrant Shares be withheld from the market
by the Holders for a certain period after the effective date of the registration
statement by which such public offering is being effected. Furthermore, the
Company shall be obligated to include in such registration only the quantity of
Warrant Shares, if any, as will not, in the opinion of the managing underwriter,
jeopardize the success of the offering by the Company. If the managing
underwriter for the offering advises the Company in writing that the total
amount of securities sought to be registered by the Holders and other
shareholders or warrantholders of the Company having similar registration rights
(collectively, the "Kellstrom Shareholders") exceeds the amount of securities
that can be offered without adversely affecting the offering by the Company or
the Company's stockholders which had initially been included in such Subsequent
Registration Statement, then the Company may reduce the number of shares to be
registered by the Company for the Kellstrom Shareholders, including Warrant
Shares, to a number satisfactory to such managing underwriter. Any such
reduction shall be pro rata, based upon the total number of shares held by each
Kellstrom Shareholder.
(f) The Company will indemnify and hold harmless the Holder and any
person or entity engaged by the Holder to sell the Holder's Warrant Shares, and
each person, if any, who controls such persons or entities within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act")
(collectively, a "Holder Indemnitee"), against any losses, claims, damages,
liabilities or expenses (or actions, proceedings, or settlements in respect
thereof) (joint or several) to which a Holder Indemnitee may become subject
under the Act, the 1934 Act, or other federal or state law, insofar as such
losses, claims, damages, liabilities or expenses (or actions, proceedings or
settlements in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; or (iii) the employment by the Company of
any device, scheme or artifice to defraud or the engagement by the Company in
any act, practice
<PAGE>
<PAGE>
or course of business which operates or would operate as a fraud or deceit upon
the purchasers of its securities pursuant to such registration statement. The
Company will also reimburse each Holder Indemnitee in connection with
investigating, defending, and settling any such loss, claim, damage, liability,
or action.
The indemnity agreement contained in this Subsection 5(h) shall not
apply to amounts paid in settlement of any loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, delayed or conditioned, nor shall
the Company be liable to any Holder Indemnitee for any loss, claim, damage,
liability or action (i) to the extent that it arises solely out of or is based
solely upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by or on behalf of the Holder or any agent of the Holder, which
consent shall not be unreasonably withheld, or controlling person of either; or
(ii) in the case of a sale directly by the Holder (including a sale of such
Warrant Shares through any underwriter retained by such Holder to engage in a
distribution solely on behalf of such Holder), such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Holder failed
to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Warrant Shares to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the Act.
(g) The Holder will indemnify and hold harmless the Company, each of
its employees, officers, directors or persons who control the Company within the
meaning of the Act or the 1934 Act, and each agent or underwriter for the
Company or any other person or entity engaged by the Company to sell the
Company's securities offered in the registration statement, or any of their
respective directors, officers, partners, agents, employees or control persons
(collectively, a "Company Indemnitee") against any losses, claims, damages,
liabilities or expenses (joint or several) to which the Company or any such
Company Indemnitee may become subject under the Act, the 1934 Act, or other
federal or state law, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereto) arise solely out of or are based solely
up;on any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by or on behalf of the Holder expressly for use in
connection with such registration; and each Holder will reimburse any legal or
other expenses reasonably incurred by a Company Indemnitee in connection with
investigating or defending any such loss, claim, damage, liability, or action.
Notwithstanding the above, the amount of any losses, claims, damages,
liabilities,legal fees and expenses to be paid by any Holder shall not exceed
the amount of the proceeds received by the Holder from the sale of its Warrant
Shares.
The indemnity agreement contained in this Subsection 5(i) shall not
apply to amounts paid in settlement of any loss,claim damage, liability, or
action if such settlement is effected without the consent of the indemnifying
Holder, which consent shall not be unreasonably withheld, delayed or conditioned
nor, in the case of a sale directly by the Company of its securities (including
a sale of such securities through any underwriter retained by the Company to
engage in a distribution solely on behalf of the Company), shall the Holder be
liable to the Company in any case in which such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Company
failed to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the Act.
(h) (i) Promptly after receipt by an indemnified party under
Subsections 5(h) and (i) of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume and control the defense thereof with counsel
mutually satisfactory to the indemnified and indemnifying parties, provided that
an indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests (as reasonably
determined by either party) between such indemnified party and any other party
represented by
<PAGE>
<PAGE>
such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if actually prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
Subsection 5(h) or (i), respectively, to the extent of such actual prejudice,
but the failure to so deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under Subsection 5(h) or (i), respectively.
(ii) The obligations of the Company and the Holders under
Subsections 5(f) and (g), respectively, shall survive the completion of any
offering of Warrant Shares made pursuant to a registration under this Agreement.
(iii) The amount paid or payable by a party as a result of the
losses, claims, damages, or liabilities (or actions or proceedings in respect
thereof) referred to in Subsections 5(f) and (g) shall include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
(i) If the indemnification provided for in the preceding subsections
5(f) or (g) is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall be
entitled to contribution, except to the extent that contribution is not
permitted under Section 11(f) of the Act. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Notwithstanding the
provisions of this paragraph, the Holder shall not be required to contribute any
amount in excess of the net proceeds received by the Holder from the sale of
Warrant Shares. 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.
(j) The Holder, in addition to being entitled to exercise all rights
provided in this Section 5, including recovery of damages, will be entitled to
specific performance of its rights hereunder. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Section 5 and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(k) The Company shall not be obligated to register any Warrant
Shares pursuant to this Section 5 at any time when the resale provisions of Rule
144 promulgated under the Act are available to the Holder with respect to the
Warrant Shares without limitation as to volume; provided, however, that the
Company shall file all reports required to be filed under the Act and the 1934
Act as set forth in paragraph (c) of Rule 144.
6. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act, and is so transferable only upon the books of the
Company which it shall cause to be maintained for the purpose; provided, that
the Company will cooperate with the Holder in the event that the Holder desires
to effect a private placement of the Warrant. The Company may treat the
registered Holder of this Warrant as he or it appears on the Company's books at
any time as the Holder for all purposes. The Company shall permit any Holder of
a Warrant or his duly authorized attorney, upon written request during ordinary
business hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and all
rights of the Holder thereof shall be identical to those of the Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant,
and of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
<PAGE>
<PAGE>
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Information to Holder. The Company agrees that it shall from time to
time deliver to the Holder promptly after their becoming available copies of all
financial statements, reports and proxy statements which the Company shall have
sent to its stockholders generally.
10. Notices. All notices and other communications required or permitted
to be given under this Warrant shall be in writing and shall be deemed to have
been duly given if delivered personally or by facsimile transmission, or sent by
recognized overnight courier or by certified mail, return receipt requested,
postage paid, to the parties hereto as follows:
(a) if to the Company at 14000 NW 4th Street,
Sunrise, Florida 33325, Attn.: Chief Executive
Officer, facsimile no. 954-845-0428, or such other
address as the Company has designated in writing to
the Holder, or
(b) if to the Holder at 44 Hudson Street, New
York, New York 10013 Attn.: Zvi Bar-On, or such other
address or facsimile number as the Holder has
designated in writing to the Company.
11. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Kellstrom
Industries, Inc. has caused this Warrant to be signed by its President and its
corporate seal to be hereunto affixed and attested by its Secretary this 10th
day of September, 1997.
KELLSTROM INDUSTRIES, INC.
By: ________________________
ATTEST:
- -----------------------------------
Secretary
<PAGE>
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED ________________________ hereby sells, assigns
and transfers unto ___________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
__________________, attorney, to transfer said Warrant on the books of Kellstrom
Industries, Inc.
Dated: ________________________ Signature: ____________________________
Address: ______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ________________________ hereby assigns and
transfers unto ___________________________ the right to purchase ________ shares
of the Common Stock of _____________________ covered by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced thereby, and
does irrevocably constitute and appoint __________________, attorney, to
transfer that part of said Warrant on the books of Kellstrom Industries, Inc.
Dated: ________________________ Signature: ____________________________
Address: ______________________________
<PAGE>
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 1(a)(i))
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_________ shares of Common Stock, as provided for in Section 1(a)(i), and
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $_________________.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name _____________________________________
(Please Print Name, Address and
Social Security No.)
Address __________________________________
__________________________________
__________________________________
Social Security Number
Signature
-----------------------------------
NOTE: The above signature should correspond
exactly with the name on the first
page of this Warrant or with the name
of the assignee appearing in the
assignment form previously delivered
to the Company.
Date ______________________________________
And if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder.
<PAGE>
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 1(a)(ii))
The undersigned hereby irrevocably elects to surrender _______ shares
purchasable under this Warrant for such shares of Common Stock issuable in
exchange therefor pursuant to the Cashless Exercise provisions of the within
Warrant, as provided for in Section 1(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay cash for fractional shares to:
Name ___________________________________________________
(Please Print Name, Address and Social Security No.)
Address ________________________________________________
________________________________________________
________________________________________________
Social Security Number
Signature ______________________________________________
NOTE: The above signature should correspond exactly with
the name on the first page of this Warrant or with
the name of the assignee appearing in the assignment
form previously delivered to the Company.
Date_______________________________________________
And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.
<PAGE>
<PAGE>
EXHIBIT 10.2
Kellstrom Industries, Inc.
Warrant for the Purchase of Shares of Common Stock
No. 87,500 Shares
FOR VALUE RECEIVED, Kellstrom Industries, Inc., a Delaware
corporation (the "Company"), hereby certifies that Aero Support USA Inc. ("Aero
Support") or its permitted assigns, is entitled to purchase from the Company, at
any time or from time to time commencing on September 10, 1997 (the
"Commencement Date") and prior to 5:00 P.M., New York City time, on September 9,
2002 (the "Exercise Period"), eighty-seven thousand five hundred (87,500),
subject to adjustment as hereinafter provided, fully paid and non-assessable
shares of the common stock, $.001 par value per share, of the Company for an
aggregate purchase price of $1,662,500 (computed on the basis of $19.00 per
share). (Hereinafter, (i) said common stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to individually as a "Warrant Share" and
collectively as the "Warrant Shares," (iii) the aggregate purchase price payable
for the Warrant Shares hereunder is referred to as the "Aggregate Warrant
Price," (iv) the price payable for each of the Warrant Shares hereunder is
referred to as the "Per Share Warrant Price," (v) this Warrant, all similar
Warrants issued on the date hereof to Aero Support in connection with the
Purchase Agreement, dated September 10, 1997, by and among the Company, Aero
Support Holdings, Inc., Aero Support USA Inc, Zvi Bar-On, Mordechai Markowicz
and Michael Navon, and all Warrants hereafter issued in exchange or substitution
for this Warrant or such similar Warrants are referred to as the "Warrants" and
(vi) the holder of this Warrant is referred to as the "Holder" and the holder of
this Warrant and all other Warrants or Warrant Shares issued upon the exercise
of any Warrant are referred to as the "Holders.") The Aggregate Warrant Price is
not subject to adjustment. The Per Share Warrant Price is subject to adjustment
as hereinafter provided; in the event of any such adjustment, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the
Per Share Warrant Price in effect immediately after such adjustment.
1. Exercise of Warrant. (a) This Warrant may be exercised in
whole at any time or in part from time to time, beginning on the Commencement
Date and prior to 5:00 P.M., New York City time, on September 9, 2002, by the
Holder by the surrender of this Warrant (with the subscription form or the
cashless exercise notice, as applicable, at the end hereof, or a reasonable
facsimile thereof, duly executed) at the address set forth in Subsection 10(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part hereof if this Warrant is exercised in part. Payment for
Warrant Shares shall be made at the election of the Holder, either (i) by
certified or official bank check payable to the order of the Company or (ii)
with a Cashless Exercise Form annexed hereto (or a reasonable facsimile thereof)
duly executed (a "Cashless Exercise"). Presentation of the Cashless Exercise
Form and surrender of this Warrant shall be deemed a waiver of the Holder's
obligation to pay all of the Aggregate Warrant Price, or the applicable portion
thereof with respect to a partial exercise. In the event of a Cashless Exercise,
the Holder shall exchange its Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares being exercised by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current market price per
share of Common Stock. For purposes of any computation under this Section
1(a)(ii), the then current market price per share of Common Stock at any date
shall be deemed to be the average for the five consecutive business days
immediately prior to the Cashless Exercise of the daily closing prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the closing prices as reported by the Nasdaq National
Market, or if not then listed on the Nasdaq National Market, the average of the
highest reported bid and lowest reported asked prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ")
<PAGE>
<PAGE>
or if not then publicly traded, the fair market price of the Common Stock as
determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon such surrender of this Warrant, the
Company will, as promptly as practicable, (a) issue a certificate or
certificates in the name of the Holder (or any designee of the Holder to whom
the Warrant is transferred in accordance with Section 6 hereof) for the largest
number of whole shares of the Common Stock to which the Holder shall be entitled
and, if this Warrant is exercised in whole, in lieu of any fractional share of
the Common Stock to which the Holder shall be entitled, pay to the Holder cash
in an amount equal to the fair value of such fractional share (determined in
such reasonable manner as the Board of Directors of the Company shall
determine), and (b) deliver the other securities and properties receivable upon
the exercise of this Warrant, or the proportionate part thereof if this Warrant
is exercised in part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees
that, prior to the expiration of this Warrant, the Company will at all times (a)
have authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first refusal
and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, keep the shares of the Common Stock receivable upon the
exercise of this Warrant authorized for listing on such exchange upon notice of
issuance.
3. Protection Against Dilution. (a) In case the Company shall
hereafter (i) pay a dividend or make a distribution on its capital stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Company, the Per Share Warrant
Price shall be adjusted so that the Holder upon the exercise hereof shall be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Subsection 3(a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
(b) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Common Stock
evidences of its indebtedness, any other securities of the Company or any cash,
property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(a), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor if the full
amount thereof, together with the value of other dividends and distributions
made substantially concurrently therewith or pursuant to a plan which includes
payment thereof, is equivalent to not more than a cumulative amount equal to 15%
of the Company's net worth) (any such nonexcluded event being herein called a
"Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current market price (as defined above) of
the Common Stock less the fair market value (as determined in good faith by the
Company's Board of Directors) of the evidences of indebtedness, cash, securities
or property, or other assets issued or distributed in such Special Dividend
applicable to one share of Common Stock and the denominator of which shall be
such then current market price per share of Common Stock. An adjustment made
pursuant to this Subsection 3(b) shall become effective immediately after the
record date of any such Special Dividend.
(c) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company
<PAGE>
<PAGE>
as an entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 15 days prior to such event.
(d) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(d)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(e) If the Board of Directors of the Company shall (i) declare any
dividend or other distribution with respect to the Common Stock, other than a
cash dividend subject to the first parenthetical in Subsection 3(b), (ii) offer
to the holders of shares of Common Stock any additional shares of Common Stock,
any securities convertible into or exercisable for shares of Common Stock or any
rights to subscribe thereto, or (iii) propose a dissolution, liquidation or
winding up of the Company, the Company shall mail notice thereof to the Holders
of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend, distribution,
offer or subscription right or to vote on such dissolution, liquidation or
winding up.
(f) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall in
good faith determine the allocation of the adjusted Per Share Warrant Price
between or among shares or such classes of capital stock or shares of Common
Stock and other capital stock.
(g) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of the Holder of Warrants in
accordance with this Section 3, the Company shall promptly cause its Chief
Financial Officer to provide a notice to the Holder setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or the
effect of such
<PAGE>
<PAGE>
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of
the Common Stock, or any other capital stock, represented by each and every
certificate for Warrant Shares delivered on the exercise of this Warrant shall,
at the time of such delivery, be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive rights or rights of first refusal,
and the Company will take all such actions as may be necessary to assure that
the par value or stated value, if any, per share of the Common Stock is at all
times equal to or less than the then Per Share Warrant Price. The Company
further covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933.
(a) The Company agrees that if, at any time during the period beginning
on the Commencement Date and ending on the third anniversary of the date the
Warrants are exercised in full, the Holder and/or the Holders of any other
Warrants and/or Warrant Shares who or which shall hold not less than 50% of the
Warrants and/or Warrant Shares outstanding at such time and not previously sold
pursuant to this Section 5 shall request that the Company file, under the
Securities Act of 1933 (the "Act"), a registration statement under the Act
covering not less than 50% of the Warrant Shares issued or issuable upon the
exercise of all of the Warrants and not so previously sold, the Company will (i)
promptly notify each Holder of the Warrants and each holder of Warrant Shares
not so previously sold that such registration statement will be filed and that
the Warrant Shares which are then held, and/or may be acquired upon exercise of
the Warrants by the Holder and such Holders, will be included in such
registration statement at the Holder's and such Holders' request, (ii) cause
such registration statement to be filed with the Securities and Exchange
Commission (the "Commission") as soon as possible following such request and to
cover all Warrant Shares which it has been so requested to include, (iii) use
its best efforts to cause such registration statement to become effective as
soon as practicable and (iv) take all other action necessary under any Federal
or state law or regulation of any governmental authority to permit all Warrant
Shares which it has been so requested to include in such registration statement
to be sold or otherwise disposed of, and will maintain such compliance with each
such Federal and state law and regulation of any governmental authority for the
period necessary for such Holder to effect the proposed sale or other
disposition. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only, it being
agreed that a registration pursuant to this Subsection 5(a) shall not be deemed
to have been effected unless a registration statement with respect thereto has
become effective; provided that if such registration statement failed to become
effective as a result of the decision of the Holder not to consummate, or the
failure of the Holder to satisfy the conditions to, the sale of the Warrant
Shares pursuant to such registration statement, the Company shall have no
further obligation to effect a registration pursuant to this Subsection 5(a).
Notwithstanding the foregoing, if the Holder exercises its right to request that
a registration statement be filed pursuant to this Subsection 5(a) at a time
when the Company in good faith as evidenced by a Board resolution believes that
a public offering of Common Stock would materially impair a pending financing or
other material transaction of the Company, the Company shall have the right to
defer filing a Registration Statement hereunder for a period not to exceed 90
days.
(b) The Company agrees that if (without any obligation to do so), at any
time and from time to time during the period beginning on the Commencement Date
and ending on the third anniversary of the date the Warrants are exercised in
full, the Board of Directors of the Company shall authorize the filing of a
registration statement (any such registration statement being hereinafter called
a "Subsequent Registration Statement") under the Act (otherwise than pursuant to
Subsection 5(a) hereof, or other than a registration statement on Form S-4 or
Form S-8 or other form which does not include substantially the same information
as would be required in a form for the general registration of securities) in
connection with the proposed offer of any of its securities by it or any of its
stockholders, the Company will (i) promptly notify the Holder and each of the
Holders, if any, of other Warrants and/or Warrant Shares not previously sold
pursuant to this Section 5 that such Subsequent Registration Statement will be
filed and that
<PAGE>
<PAGE>
the Warrant Shares which are then held, and/or which may be acquired upon the
exercise of the Warrants, by the Holder and such Holders, will, at the Holder's
and such Holders' request, be included in such Subsequent Registration
Statement, (ii) upon the written request of a Holder made within 15 days after
the giving of such notice by the Company, include in the securities covered by
such Subsequent Registration Statement all Warrant Shares which it has been so
requested to include, and (iii) take all other action necessary under any
Federal or state law or regulation of any governmental authority to permit all
Warrant Shares which it has been so requested to include in such Subsequent
Registration Statement to be sold or otherwise disposed of, and will maintain
such compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder and such Holders
to effect the proposed sale or other disposition. Notwithstanding the foregoing,
the Company shall be under no obligation to cause such Subsequent Registration
Statement to become effective.
(c) Whenever the Company is required pursuant to the provisions
of this Section 5 to include Warrant Shares in a registration statement, the
Company shall (i) furnish each Holder of any such Warrant Shares and each
underwriter of such Warrant Shares with such copies of the prospectus, including
the preliminary prospectus, conforming to the Act (and such other documents as
each such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
(d) The Company shall pay all expenses incurred in connection
with any registration statement or other action pursuant to the provisions of
this Section 5, other than underwriting discounts, applicable transfer taxes
relating to the Warrant Shares and the fees and expenses of counsel for the
Holders of the Warrant Shares.
(e) In connection with any public offering by the Company
involving an underwriting of its securities effected pursuant to Section 5(b)
hereof, the Company shall not be required to include in such registration any
Warrant Shares held by the Holder unless the Holder agrees to the terms of the
underwriting agreement between the Company and the managing underwriter of such
offering, which agreement may require that the Warrant Shares be withheld from
the market by the Holders for a certain period after the effective date of the
registration statement by which such public offering is being effected.
Furthermore, the Company shall be obligated to include in such registration only
the quantity of Warrant Shares, if any, as will not, in the opinion of the
managing underwriter, jeopardize the success of the offering by the Company. If
the managing underwriter for the offering advises the Company in writing that
the total amount of securities sought to be registered by the Holders and other
shareholders or warrantholders of the Company having similar registration rights
(collectively, the "Kellstrom Shareholders") exceeds the amount of securities
that can be offered without adversely affecting the offering by the Company or
the Company's stockholders which had initially been included in such Subsequent
Registration Statement, then the Company may reduce the number of shares to be
registered by the Company for the Kellstrom Shareholders, including Warrant
Shares, to a number satisfactory to such managing underwriter. Any such
reduction shall be pro rata, based upon the total number of shares held by each
Kellstrom Shareholder.
(f) The Company will indemnify and hold harmless the Holder and
any person or entity engaged by the Holder to sell the Holder's Warrant Shares,
and each person, if any, who controls such persons or entities within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934
Act") (collectively, a "Holder Indemnitee"), against any losses, claims,
damages, liabilities or expenses (or actions, proceedings, or settlements in
respect thereof) (joint or several) to which a Holder Indemnitee may become
subject under the Act, the 1934 Act, or other federal or state law, insofar as
such losses, claims, damages, liabilities or expenses (or actions, proceedings
or settlements in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any
<PAGE>
<PAGE>
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto; (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
or (iii) the employment by the Company of any device, scheme or artifice to
defraud or the engagement by the Company in any act, practice or course of
business which operates or would operate as a fraud or deceit upon the
purchasers of its securities pursuant to such registration statement. The
Company will also reimburse each Holder Indemnitee in connection with
investigating, defending, and settling any such loss, claim, damage, liability,
or action.
The indemnity agreement contained in this Subsection 5(h) shall
not apply to amounts paid in settlement of any loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, delayed or conditioned, nor
shall the Company be liable to any Holder Indemnitee for any loss, claim,
damage, liability or action (i) to the extent that it arises solely out of or is
based solely upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by or on behalf of the Holder or any agent of the Holder, which
consent shall not be unreasonably withheld, or controlling person of either; or
(ii) in the case of a sale directly by the Holder (including a sale of such
Warrant Shares through any underwriter retained by such Holder to engage in a
distribution solely on behalf of such Holder), such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Holder failed
to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Warrant Shares to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the Act.
(g) The Holder will indemnify and hold harmless the Company, each
of its employees, officers, directors or persons who control the Company within
the meaning of the Act or the 1934 Act, and each agent or underwriter for the
Company or any other person or entity engaged by the Company to sell the
Company's securities offered in the registration statement, or any of their
respective directors, officers, partners, agents, employees or control persons
(collectively, a "Company Indemnitee") against any losses, claims, damages,
liabilities or expenses (joint or several) to which the Company or any such
Company Indemnitee may become subject under the Act, the 1934 Act, or other
federal or state law, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereto) arise solely out of or are based solely
up;on any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by or on behalf of the Holder expressly for use in
connection with such registration; and each Holder will reimburse any legal or
other expenses reasonably incurred by a Company Indemnitee in connection with
investigating or defending any such loss, claim, damage, liability, or action.
Notwithstanding the above, the amount of any losses, claims, damages,
liabilities,legal fees and expenses to be paid by any Holder shall not exceed
the amount of the proceeds received by the Holder from the sale of its Warrant
Shares.
The indemnity agreement contained in this Subsection 5(i) shall
not apply to amounts paid in settlement of any loss, claim damage, liability, or
action if such settlement is effected without the consent of the indemnifying
Holder, which consent shall not be unreasonably withheld, delayed or conditioned
nor, in the case of a sale directly by the Company of its securities (including
a sale of such securities through any underwriter retained by the Company to
engage in a distribution solely on behalf of the Company), shall the Holder be
liable to the Company in any case in which such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Company
failed to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the Act.
(h) (i) Promptly after receipt by an indemnified party under
Subsections 5(h) and (i) of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in,
<PAGE>
<PAGE>
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume and control the defense thereof
with counsel mutually satisfactory to the indemnified and indemnifying parties,
provided that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests (as reasonably determined by either party) between such indemnified
party and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if actually prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under Subsection 5(h) or (i), respectively,
to the extent of such actual prejudice, but the failure to so deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under Subsection 5(h) or (i),
respectively.
(ii) The obligations of the Company and the Holders under Subsections
5(f) and (g), respectively, shall survive the completion of any offering of
Warrant Shares made pursuant to a registration under this Agreement.
(iii) The amount paid or payable by a party as a result of the losses,
claims, damages, or liabilities (or actions or proceedings in respect thereof)
referred to in Subsections 5(f) and (g) shall include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
(i) If the indemnification provided for in the preceding
subsections 5(f) or (g) is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall be
entitled to contribution, except to the extent that contribution is not
permitted under Section 11(f) of the Act. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Notwithstanding the
provisions of this paragraph, the Holder shall not be required to contribute any
amount in excess of the net proceeds received by the Holder from the sale of
Warrant Shares. 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.
(j) The Holder, in addition to being entitled to exercise all rights
provided in this Section 5, including recovery of damages, will be entitled to
specific performance of its rights hereunder. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Section 5 and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(k) The Company shall not be obligated to register any Warrant Shares
pursuant to this Section 5 at any time when the resale provisions of Rule 144
promulgated under the Act are available to the Holder with respect to the
Warrant Shares without limitation as to volume; provided, however, that the
Company shall file all reports required to be filed under the Act and the 1934
Act as set forth in paragraph (c) of Rule 144.
6. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act, and is so transferable only upon the books of the
Company which it shall cause to be maintained for the purpose; provided, that
the Company will cooperate with the Holder in the event that the Holder desires
to effect a private placement of the Warrant. The Company may treat the
registered Holder of this Warrant as he or it appears on the Company's books at
any time as the Holder for all purposes. The Company shall permit any Holder of
a Warrant or his duly authorized attorney, upon written request during ordinary
business hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon
<PAGE>
<PAGE>
the transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the Holder thereof shall be identical to those of the
Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant,
and of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
9. Information to Holder. The Company agrees that it shall from
time to time deliver to the Holder promptly after their becoming available
copies of all financial statements, reports and proxy statements which the
Company shall have sent to its stockholders generally.
10. Notices. All notices and other communications required or
permitted to be given under this Warrant shall be in writing and shall be deemed
to have been duly given if delivered personally or by facsimile transmission, or
sent by recognized overnight courier or by certified mail, return receipt
requested, postage paid, to the parties hereto as follows:
(a) if to the Company at 14000 NW 4th Street, Sunrise,
Florida 33325, Attn.: Chief Executive Officer, facsimile no.
954-845-0428, or such other address as the Company has designated
in writing to the Holder, or
(b) if to the Holder at 44 Hudson Street, New York, New
York 10013 Attn.: Mordechai Markowicz, or such other address or
facsimile number as the Holder has designated in writing to the
Company.
11. Headings. The headings of this Warrant have been inserted as
a matter of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Kellstrom
Industries, Inc. has caused this Warrant to be signed by its President and its
corporate seal to be hereunto affixed and attested by its Secretary this 10th
day of September, 1997.
KELLSTROM INDUSTRIES, INC.
By: ________________________
<PAGE>
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED ________________________ hereby sells, assigns
and transfers unto ___________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
__________________, attorney, to transfer said Warrant on the books of Kellstrom
Industries, Inc.
Dated: ________________________ Signature: ____________________________
Address: ______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ________________________ hereby assigns and
transfers unto ___________________________ the right to purchase ________ shares
of the Common Stock of _____________________ covered by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced thereby, and
does irrevocably constitute and appoint __________________, attorney, to
transfer that part of said Warrant on the books of Kellstrom Industries, Inc.
Dated: ________________________ Signature: ____________________________
Address: ______________________________
<PAGE>
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 1(a)(i))
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant for, and to purchase thereunder,
_________ shares of Common Stock, as provided for in Section 1(a)(i), and
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $_________________.
Please issue a certificate or certificates for such Common Stock
in the name of, and pay any cash for any fractional share to:
Name ______________________________
(Please Print Name, Address and
Social Security No.)
Address ___________________________
___________________________
___________________________
Social Security Number
Signature _________________________
NOTE: The above signature should
correspond exactly with the
name on the first page of
this Warrant or with the name
of the assignee appearing in
the assignment form
previously delivered to the
Company.
Date ______________________________
And if said number of shares shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned for the balance remaining of the shares purchasable
thereunder.
<PAGE>
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 1(a)(ii))
The undersigned hereby irrevocably elects to surrender _______
shares purchasable under this Warrant for such shares of Common Stock issuable
in exchange therefor pursuant to the Cashless Exercise provisions of the within
Warrant, as provided for in Section 1(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Common Stock
in the name of, and pay cash for fractional shares to:
Name ________________________
(Please Print Name, Address
and Social Security No.)
Address _____________________
Social ______________________
Security Number
Signature ___________________
NOTE: The above signature
should correspond
exactly with the name
on the first page of
this Warrant or with
the name of the
assignee appearing in
the assignment form
previously delivered
to the Company.
Date_________________________
And if said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of the shares
purchasable thereunder.
<PAGE>
<PAGE>
EXHIBIT 10.3
Kellstrom Industries, Inc.
Warrant for the Purchase of Shares of Common Stock
No. 87,500 Shares
FOR VALUE RECEIVED, Kellstrom Industries, Inc., a Delaware
corporation (the "Company"), hereby certifies that Aero Support USA Inc. ("Aero
Support") or its permitted assigns, is entitled to purchase from the Company, at
any time or from time to time commencing on September 10, 1997 (the
"Commencement Date") and prior to 5:00 P.M., New York City time, on September 9,
2002 (the "Exercise Period"), eighty-seven thousand five hundred (87,500),
subject to adjustment as hereinafter provided, fully paid and non-assessable
shares of the common stock, $.001 par value per share, of the Company for an
aggregate purchase price of $1,662,500 (computed on the basis of $19.00 per
share). (Hereinafter, (i) said common stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to individually as a "Warrant Share" and
collectively as the "Warrant Shares," (iii) the aggregate purchase price payable
for the Warrant Shares hereunder is referred to as the "Aggregate Warrant
Price," (iv) the price payable for each of the Warrant Shares hereunder is
referred to as the "Per Share Warrant Price," (v) this Warrant, all similar
Warrants issued on the date hereof to Aero Support in connection with the
Purchase Agreement, dated September 10, 1997, by and among the Company, Aero
Support Holdings, Inc., Aero Support USA Inc, Zvi Bar-On, Mordechai Markowicz
and Michael Navon, and all Warrants hereafter issued in exchange or substitution
for this Warrant or such similar Warrants are referred to as the "Warrants" and
(vi) the holder of this Warrant is referred to as the "Holder" and the holder of
this Warrant and all other Warrants or Warrant Shares issued upon the exercise
of any Warrant are referred to as the "Holders.") The Aggregate Warrant Price is
not subject to adjustment. The Per Share Warrant Price is subject to adjustment
as hereinafter provided; in the event of any such adjustment, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant Price by the
Per Share Warrant Price in effect immediately after such adjustment.
1. Exercise of Warrant. (a) This Warrant may be exercised in
whole at any time or in part from time to time, beginning on the Commencement
Date and prior to 5:00 P.M., New York City time, on September 9, 2002, by the
Holder by the surrender of this Warrant (with the subscription form or the
cashless exercise notice, as applicable, at the end hereof, or a reasonable
facsimile thereof, duly executed) at the address set forth in Subsection 10(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part hereof if this Warrant is exercised in part. Payment for
Warrant Shares shall be made at the election of the Holder, either (i) by
certified or official bank check payable to the order of the Company or (ii)
with a Cashless Exercise Form annexed hereto (or a reasonable facsimile thereof)
duly executed (a "Cashless Exercise"). Presentation of the Cashless Exercise
Form and surrender of this Warrant shall be deemed a waiver of the Holder's
obligation to pay all of the Aggregate Warrant Price, or the applicable portion
thereof with respect to a partial exercise. In the event of a Cashless Exercise,
the Holder shall exchange its Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares being exercised by a
fraction, the numerator of which shall be the difference between the then
current market price per share of the Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current market price per
share of Common Stock. For purposes of any computation under this Section
1(a)(ii), the then current market price per share of Common Stock at any date
shall be deemed to be the average for the five consecutive business days
immediately prior to the Cashless Exercise of the daily closing prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the closing prices as reported by the Nasdaq National
Market, or if not then listed on the Nasdaq National Market, the average of the
highest reported bid and lowest reported asked prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ")
<PAGE>
<PAGE>
or if not then publicly traded, the fair market price of the Common Stock as
determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock, and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon such surrender of this Warrant, the
Company will, as promptly as practicable, (a) issue a certificate or
certificates in the name of the Holder (or any designee of the Holder to whom
the Warrant is transferred in accordance with Section 6 hereof) for the largest
number of whole shares of the Common Stock to which the Holder shall be entitled
and, if this Warrant is exercised in whole, in lieu of any fractional share of
the Common Stock to which the Holder shall be entitled, pay to the Holder cash
in an amount equal to the fair value of such fractional share (determined in
such reasonable manner as the Board of Directors of the Company shall
determine), and (b) deliver the other securities and properties receivable upon
the exercise of this Warrant, or the proportionate part thereof if this Warrant
is exercised in part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees
that, prior to the expiration of this Warrant, the Company will at all times (a)
have authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first refusal
and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, keep the shares of the Common Stock receivable upon the
exercise of this Warrant authorized for listing on such exchange upon notice of
issuance.
3. Protection Against Dilution. (a) In case the Company shall
hereafter (i) pay a dividend or make a distribution on its capital stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Company, the Per Share Warrant
Price shall be adjusted so that the Holder upon the exercise hereof shall be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Subsection 3(a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
(b) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Common Stock
evidences of its indebtedness, any other securities of the Company or any cash,
property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(a), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor if the full
amount thereof, together with the value of other dividends and distributions
made substantially concurrently therewith or pursuant to a plan which includes
payment thereof, is equivalent to not more than a cumulative amount equal to 15%
of the Company's net worth) (any such nonexcluded event being herein called a
"Special Dividend"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current market price (as defined above) of
the Common Stock less the fair market value (as determined in good faith by the
Company's Board of Directors) of the evidences of indebtedness, cash, securities
or property, or other assets issued or distributed in such Special Dividend
applicable to one share of Common Stock and the denominator of which shall be
such then current market price per share of Common Stock. An adjustment made
pursuant to this Subsection 3(b) shall become effective immediately after the
record date of any such Special Dividend.
(c) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company
<PAGE>
<PAGE>
as an entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(c) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 15 days prior to such event.
(d) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(d)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(e) If the Board of Directors of the Company shall (i) declare any
dividend or other distribution with respect to the Common Stock, other than a
cash dividend subject to the first parenthetical in Subsection 3(b), (ii) offer
to the holders of shares of Common Stock any additional shares of Common Stock,
any securities convertible into or exercisable for shares of Common Stock or any
rights to subscribe thereto, or (iii) propose a dissolution, liquidation or
winding up of the Company, the Company shall mail notice thereof to the Holders
of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend, distribution,
offer or subscription right or to vote on such dissolution, liquidation or
winding up.
(f) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall in
good faith determine the allocation of the adjusted Per Share Warrant Price
between or among shares or such classes of capital stock or shares of Common
Stock and other capital stock.
(g) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of the Holder of Warrants in
accordance with this Section 3, the Company shall promptly cause its Chief
Financial Officer to provide a notice to the Holder setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or the
effect of such
<PAGE>
<PAGE>
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of
the Common Stock, or any other capital stock, represented by each and every
certificate for Warrant Shares delivered on the exercise of this Warrant shall,
at the time of such delivery, be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive rights or rights of first refusal,
and the Company will take all such actions as may be necessary to assure that
the par value or stated value, if any, per share of the Common Stock is at all
times equal to or less than the then Per Share Warrant Price. The Company
further covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933.
(a) The Company agrees that if, at any time during the period beginning
on the Commencement Date and ending on the third anniversary of the date the
Warrants are exercised in full, the Holder and/or the Holders of any other
Warrants and/or Warrant Shares who or which shall hold not less than 50% of the
Warrants and/or Warrant Shares outstanding at such time and not previously sold
pursuant to this Section 5 shall request that the Company file, under the
Securities Act of 1933 (the "Act"), a registration statement under the Act
covering not less than 50% of the Warrant Shares issued or issuable upon the
exercise of all of the Warrants and not so previously sold, the Company will (i)
promptly notify each Holder of the Warrants and each holder of Warrant Shares
not so previously sold that such registration statement will be filed and that
the Warrant Shares which are then held, and/or may be acquired upon exercise of
the Warrants by the Holder and such Holders, will be included in such
registration statement at the Holder's and such Holders' request, (ii) cause
such registration statement to be filed with the Securities and Exchange
Commission (the "Commission") as soon as possible following such request and to
cover all Warrant Shares which it has been so requested to include, (iii) use
its best efforts to cause such registration statement to become effective as
soon as practicable and (iv) take all other action necessary under any Federal
or state law or regulation of any governmental authority to permit all Warrant
Shares which it has been so requested to include in such registration statement
to be sold or otherwise disposed of, and will maintain such compliance with each
such Federal and state law and regulation of any governmental authority for the
period necessary for such Holder to effect the proposed sale or other
disposition. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only, it being
agreed that a registration pursuant to this Subsection 5(a) shall not be deemed
to have been effected unless a registration statement with respect thereto has
become effective; provided that if such registration statement failed to become
effective as a result of the decision of the Holder not to consummate, or the
failure of the Holder to satisfy the conditions to, the sale of the Warrant
Shares pursuant to such registration statement, the Company shall have no
further obligation to effect a registration pursuant to this Subsection 5(a).
Notwithstanding the foregoing, if the Holder exercises its right to request that
a registration statement be filed pursuant to this Subsection 5(a) at a time
when the Company in good faith as evidenced by a Board resolution believes that
a public offering of Common Stock would materially impair a pending financing or
other material transaction of the Company, the Company shall have the right to
defer filing a Registration Statement hereunder for a period not to exceed 90
days.
(b) The Company agrees that if (without any obligation to do so), at any
time and from time to time during the period beginning on the Commencement Date
and ending on the third anniversary of the date the Warrants are exercised in
full, the Board of Directors of the Company shall authorize the filing of a
registration statement (any such registration statement being hereinafter called
a "Subsequent Registration Statement") under the Act (otherwise than pursuant to
Subsection 5(a) hereof, or other than a registration statement on Form S-4 or
Form S-8 or other form which does not include substantially the same information
as would be required in a form for the general registration of securities) in
connection with the proposed offer of any of its securities by it or any of its
stockholders, the Company will (i) promptly notify the Holder and each of the
Holders, if any, of other Warrants and/or Warrant Shares not previously sold
pursuant to this Section 5 that such Subsequent Registration Statement will be
filed and that
<PAGE>
<PAGE>
the Warrant Shares which are then held, and/or which may be acquired upon the
exercise of the Warrants, by the Holder and such Holders, will, at the Holder's
and such Holders' request, be included in such Subsequent Registration
Statement, (ii) upon the written request of a Holder made within 15 days after
the giving of such notice by the Company, include in the securities covered by
such Subsequent Registration Statement all Warrant Shares which it has been so
requested to include, and (iii) take all other action necessary under any
Federal or state law or regulation of any governmental authority to permit all
Warrant Shares which it has been so requested to include in such Subsequent
Registration Statement to be sold or otherwise disposed of, and will maintain
such compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder and such Holders
to effect the proposed sale or other disposition. Notwithstanding the foregoing,
the Company shall be under no obligation to cause such Subsequent Registration
Statement to become effective.
(c) Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each underwriter of
such Warrant Shares with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold.
(d) The Company shall pay all expenses incurred in connection with any
registration statement or other action pursuant to the provisions of this
Section 5, other than underwriting discounts, applicable transfer taxes relating
to the Warrant Shares and the fees and expenses of counsel for the Holders of
the Warrant Shares.
(e) In connection with any public offering by the Company involving an
underwriting of its securities effected pursuant to Section 5(b) hereof, the
Company shall not be required to include in such registration any Warrant Shares
held by the Holder unless the Holder agrees to the terms of the underwriting
agreement between the Company and the managing underwriter of such offering,
which agreement may require that the Warrant Shares be withheld from the market
by the Holders for a certain period after the effective date of the registration
statement by which such public offering is being effected. Furthermore, the
Company shall be obligated to include in such registration only the quantity of
Warrant Shares, if any, as will not, in the opinion of the managing underwriter,
jeopardize the success of the offering by the Company. If the managing
underwriter for the offering advises the Company in writing that the total
amount of securities sought to be registered by the Holders and other
shareholders or warrantholders of the Company having similar registration rights
(collectively, the "Kellstrom Shareholders") exceeds the amount of securities
that can be offered without adversely affecting the offering by the Company or
the Company's stockholders which had initially been included in such Subsequent
Registration Statement, then the Company may reduce the number of shares to be
registered by the Company for the Kellstrom Shareholders, including Warrant
Shares, to a number satisfactory to such managing underwriter. Any such
reduction shall be pro rata, based upon the total number of shares held by each
Kellstrom Shareholder.
(f) The Company will indemnify and hold harmless the Holder and any
person or entity engaged by the Holder to sell the Holder's Warrant Shares, and
each person, if any, who controls such persons or entities within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act")
(collectively, a "Holder Indemnitee"), against any losses, claims, damages,
liabilities or expenses (or actions, proceedings, or settlements in respect
thereof) (joint or several) to which a Holder Indemnitee may become subject
under the Act, the 1934 Act, or other federal or state law, insofar as such
losses, claims, damages, liabilities or expenses (or actions, proceedings or
settlements in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any
<PAGE>
<PAGE>
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto; (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
or (iii) the employment by the Company of any device, scheme or artifice to
defraud or the engagement by the Company in any act, practice or course of
business which operates or would operate as a fraud or deceit upon the
purchasers of its securities pursuant to such registration statement. The
Company will also reimburse each Holder Indemnitee in connection with
investigating, defending, and settling any such loss, claim, damage, liability,
or action.
The indemnity agreement contained in this Subsection 5(h) shall not
apply to amounts paid in settlement of any loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, delayed or conditioned, nor shall
the Company be liable to any Holder Indemnitee for any loss, claim, damage,
liability or action (i) to the extent that it arises solely out of or is based
solely upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by or on behalf of the Holder or any agent of the Holder, which
consent shall not be unreasonably withheld, or controlling person of either; or
(ii) in the case of a sale directly by the Holder (including a sale of such
Warrant Shares through any underwriter retained by such Holder to engage in a
distribution solely on behalf of such Holder), such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Holder failed
to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Warrant Shares to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the Act.
(g) The Holder will indemnify and hold harmless the Company, each of its
employees, officers, directors or persons who control the Company within the
meaning of the Act or the 1934 Act, and each agent or underwriter for the
Company or any other person or entity engaged by the Company to sell the
Company's securities offered in the registration statement, or any of their
respective directors, officers, partners, agents, employees or control persons
(collectively, a "Company Indemnitee") against any losses, claims, damages,
liabilities or expenses (joint or several) to which the Company or any such
Company Indemnitee may become subject under the Act, the 1934 Act, or other
federal or state law, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereto) arise solely out of or are based solely
up;on any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by or on behalf of the Holder expressly for use in
connection with such registration; and each Holder will reimburse any legal or
other expenses reasonably incurred by a Company Indemnitee in connection with
investigating or defending any such loss, claim, damage, liability, or action.
Notwithstanding the above, the amount of any losses, claims, damages,
liabilities,legal fees and expenses to be paid by any Holder shall not exceed
the amount of the proceeds received by the Holder from the sale of its Warrant
Shares.
The indemnity agreement contained in this Subsection 5(i) shall not
apply to amounts paid in settlement of any loss, claim damage, liability, or
action if such settlement is effected without the consent of the indemnifying
Holder, which consent shall not be unreasonably withheld, delayed or conditioned
nor, in the case of a sale directly by the Company of its securities (including
a sale of such securities through any underwriter retained by the Company to
engage in a distribution solely on behalf of the Company), shall the Holder be
liable to the Company in any case in which such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Company
failed to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the Act.
(h) (i) Promptly after receipt by an indemnified party under Subsections
5(h) and (i) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to
<PAGE>
<PAGE>
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume and control the
defense thereof with counsel mutually satisfactory to the indemnified and
indemnifying parties, provided that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests (as reasonably determined by either party) between
such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if actually
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under Subsection
5(h) or (i), respectively, to the extent of such actual prejudice, but the
failure to so deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under Subsection 5(h) or (i), respectively.
(ii) The obligations of the Company and the Holders under Subsections
5(f) and (g), respectively, shall survive the completion of any offering of
Warrant Shares made pursuant to a registration under this Agreement.
(iii) The amount paid or payable by a party as a result of the losses,
claims, damages, or liabilities (or actions or proceedings in respect thereof)
referred to in Subsections 5(f) and (g) shall include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
(i) If the indemnification provided for in the preceding subsections
5(f) or (g) is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall be
entitled to contribution, except to the extent that contribution is not
permitted under Section 11(f) of the Act. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Notwithstanding the
provisions of this paragraph, the Holder shall not be required to contribute any
amount in excess of the net proceeds received by the Holder from the sale of
Warrant Shares. 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.
(j) The Holder, in addition to being entitled to exercise all rights
provided in this Section 5, including recovery of damages, will be entitled to
specific performance of its rights hereunder. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Section 5 and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(k) The Company shall not be obligated to register any Warrant Shares
pursuant to this Section 5 at any time when the resale provisions of Rule 144
promulgated under the Act are available to the Holder with respect to the
Warrant Shares without limitation as to volume; provided, however, that the
Company shall file all reports required to be filed under the Act and the 1934
Act as set forth in paragraph (c) of Rule 144.
6. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act, and is so transferable only upon the books of the
Company which it shall cause to be maintained for the purpose; provided, that
the Company will cooperate with the Holder in the event that the Holder desires
to effect a private placement of the Warrant. The Company may treat the
registered Holder of this Warrant as he or it appears on the Company's books at
any time as the Holder for all purposes. The Company shall permit any Holder of
a Warrant or his duly authorized attorney, upon written request during ordinary
business hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon
<PAGE>
<PAGE>
the transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the Holder thereof shall be identical to those of the
Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant,
and of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
9. Information to Holder. The Company agrees that it shall from
time to time deliver to the Holder promptly after their becoming available
copies of all financial statements, reports and proxy statements which the
Company shall have sent to its stockholders generally.
10. Notices. All notices and other communications required or
permitted to be given under this Warrant shall be in writing and shall be deemed
to have been duly given if delivered personally or by facsimile transmission, or
sent by recognized overnight courier or by certified mail, return receipt
requested, postage paid, to the parties hereto as follows:
(a) if to the Company at 14000 NW 4th Street, Sunrise,
Florida 33325, Attn.: Chief Executive Officer, facsimile no.
954-845-0428, or such other address as the Company has designated
in writing to the Holder, or
(b) if to the Holder at 44 Hudson Street, New York, New
York 10013 Attn.: Michael Navon, or such other address or
facsimile number as the Holder has designated in writing to the
Company.
11. Headings. The headings of this Warrant have been inserted as
a matter of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Kellstrom Industries, Inc. has caused this
Warrant to be signed by its President and its corporate seal to be hereunto
affixed and attested by its Secretary this 10th day of September, 1997.
KELLSTROM INDUSTRIES, INC.
By: ________________________
ATTEST:
- -----------------------------------
Secretary
<PAGE>
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED ________________________ hereby sells, assigns
and transfers unto ___________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
__________________, attorney, to transfer said Warrant on the books of Kellstrom
Industries, Inc.
Dated: ________________________ Signature: ____________________________
Address: ______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ________________________ hereby assigns and
transfers unto ___________________________ the right to purchase ________ shares
of the Common Stock of _____________________ covered by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced thereby, and
does irrevocably constitute and appoint __________________, attorney, to
transfer that part of said Warrant on the books of Kellstrom Industries, Inc.
Dated: ________________________ Signature: ____________________________
Address: ______________________________
<PAGE>
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 1(a)(i))
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant for, and to purchase thereunder,
_________ shares of Common Stock, as provided for in Section 1(a)(i), and
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $_________________.
Please issue a certificate or certificates for such Common Stock
in the name of, and pay any cash for any fractional share to:
Name ______________________________
(Please Print Name, Address and
Social Security No.)
Address ___________________________
___________________________
___________________________
Social Security Number
Signature _________________________
NOTE: The above signature should
correspond exactly with the
name on the first page of
this Warrant or with the name
of the assignee appearing in
the assignment form
previously delivered to the
Company.
Date ______________________________
And if said number of shares shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned for the balance remaining of the shares purchasable
thereunder.
<PAGE>
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 1(a)(ii))
The undersigned hereby irrevocably elects to surrender _______
shares purchasable under this Warrant for such shares of Common Stock issuable
in exchange therefor pursuant to the Cashless Exercise provisions of the within
Warrant, as provided for in Section 1(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Common Stock
in the name of, and pay cash for fractional shares to:
Name _______________________
(Please Print Name, Address
and Social Security No.)
Address_____________________
_____________________
Social _____________________
Security Number
Signature __________________
NOTE: The above signature
should correspond
exactly with the name
on the first page of
this Warrant or with
the name of the
assignee appearing in
the assignment form
previously delivered
to the Company.
Date_________________________
And if said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of the shares
purchasable thereunder.
<PAGE>
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
KELLSTROM INDUSTRIES, INC. ACQUIRES AERO SUPPORT U.S.A. INC.
Sunrise, FL - September 10, 1997 -- Kellstrom Industries, Inc. [NASDAQ NMS:
KELL] today announced that it completed the acquisition of privately held Aero
Support U.S.A. Inc. ("Aero Support") for approximately $13.7 million in cash
plus 3-5 year warrants to purchase up to 250,000 shares of Kellstrom Common
Stock at $19.00-22.00 per share. Some additional cash consideration may be paid
to the sellers (all of whom will continue with Aero Support) in the form of an
earn-out payable over three years based upon Aero Support's future profits.
Kellstrom funded the cash portion of the purchase price from its current banking
facility.
Aero Support's revenue for the six months ended June 30, 1997 was $10.1 million
with pre-tax income of $1.35 million, while 1996 annual revenue was $17.3
million with pre-tax income of $1.4 million. It is anticipated that this latest
Kellstrom acquisition, net of one-time acquisition expense, will be immediately
accretive to Kellstrom's earnings.
Aero Support is a leading international after market reseller of para-military
and helicopter jet engines and jet engine parts. Its technical and commercial
teams have substantial expertise in large and medium size turbo-prop engines.
Founded in 1983, Aero Support has a broad customer base that includes domestic
and foreign military agencies, commercial and industrial enterprises, engine
overhaul facilities and individual operators. Its main product lines are
distinct from those of Kellstrom. Aero Support's primary focus is on the Allison
(Rolls Royce) T56/501 engine, which powers the military's Hercules C-130
aircraft with over 17,000 engines built, and the Allison 250, with 16,000 units
actively in use by 2,700 helicopter operators. During 1996 Aero Support served
495 customers worldwide from its headquarters in New York and its additional
facilities in Louisiana.
Aero Support's management team is staying with the combined companies. Its
founder and CEO, Zvi Bar-On is a 20 year veteran of the aerospace industry. He
earned a Masters of Business Administration from NY University and Bachelor of
Science in Engineering from Polytechnic University. He will become an advisor to
Kellstrom, and continue to devote time and attention to the business of the
combined companies. Bringing 17 years of aviation industry background is Moti
Markowicz, an Aero Support shareholder and Executive Vice President. He earned a
Masters of Business Administration from NY Institute of Technology. Michael
Navon, Aero Support's third shareholder, has a Masters of Business
Administration graduate from Baruch College. He will continue in his previous
post as Vice President of Aero Support's Sales. Also joining Kellstrom are the
rest of Aero Support's highly experienced sales and service personnel.
<PAGE>
<PAGE>
Aero Support's Recent Financial Performance (unaudited):
<TABLE>
<CAPTION>
6 months 12 months 12 months
6/30/97 12/31/96 12/31/95
($millions) ($millions) ($millions)
<S> <C> <C> <C> <C> <C> <C>
Revenue 10.1 17.3 12.8
Cost of Goods Sold 6.4 63% 12.1 70% 9.5 74%
----------------- ---------------- ---------------
Gross Profit 3.7 37% 5.2 30% 3.3 26%
SG&A 2.2 22% 3.6 21% 2.5 20%
----------------- ---------------- ---------------
EBIT 1.5 15% 1.6 9% 0.8 6%
Interest 0.15 1% 0.2 1% 0.1 1%
================= ================ ===============
Pre-tax Income 1.35 13% 1.4 8% 0.7 5%
</TABLE>
Kellstrom President & CEO, Zivi R. Nedivi stated, "We welcome the Aero Support
team led by Zvi Bar-On. They are re-enforcing our commitment to quality in
management. This is our second acquisition thus far this year and it adds much
more than revenues and earnings. Until this addition, Kellstrom's business was
focused exclusively on the large commercial jet engine industry. Kellstrom will
now participate not only in the commercial helicopter engine segment, but also
in the para-military aviation industry. We now address the most widely used
para-military transport aircraft in the world, the Hercules C-130."
Yoav Stern, Chairman of the Board of Kellstrom added, "We are opening up
completely untouched market segments and therefore expanding the growth
potential of the Company. In analyzing different targets, we seldom face a
situation where all variables are accretive in a very synergetic acquisition.
Product lines have practically no overlaps, distribution channels are
complementary, customer bases are not duplicated, and additional technical
know-how is added by the new team. We believe that Aero Support's future
operating results will match Kellstrom's financial formula and ratios. We hope
to realize the synergistic benefits resulting from marrying the opportunities in
the new markets with the quality assurance and financial capabilities of
Kellstrom, as well as the obvious intrinsic overhead savings that stem from the
merger."
<PAGE>
<PAGE>
Kellstrom is engaged in the purchasing, refurbishing (through subcontractors),
leasing, marketing and reselling of commercial jet engines and jet engine parts.
A leader in the industry, Kellstrom is the first to be awarded the ISO 9000
quality assurance certification. The Company has received approved supplier
status by a broad customer base including major domestic and international
airlines, engine parts distributors and dealers, and overhaul service facilities
throughout the world.
The Company, from time to time, may discuss forward-looking information. Except
for the historical information contained in this release, all forward-looking
information are estimates by the Company's management and are subject to various
risks and uncertainties that may be beyond the Company's control and may cause
results to differ from management's current expectations.
#### #### ####
CONTACT: or KELL'S INVESTOR RELATIONS COUNSEL:
Kellstrom Industries, Inc. The Equity Group, Inc.
Zivi R. Nedivi, Pres. & CEO Linda Latman (212) 836-9609
John S. Gleason, Exec. VP & CFO Bob Goldstein (212) 371-8660
(954) 845-0427
