<PAGE>
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-23764
KELLSTROM INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3753725
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14000 N.W. 4TH ST., SUNRISE, FLORIDA 33325
(Address of principal executive offices) Zip Code
(954) 845-0427
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO ____
State the number of shares of common stock outstanding as of November
7, 1997: 7,878,774 shares. Transitional Small Business Disclosure Format (check
one):
YES ___ NO X
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
QUARTERLY REPORT FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
PART I
<S> <C>
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Earnings 4
Consolidated Condensed Statements of Cash Flows 6
Notes to Consolidated Condensed Financial Statements 9
Pro Forma Consolidated Condensed Statements of Earnings 12
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
PART II
Item 6 - Exhibits and Reports on Form 8-K 22
Signatures 23
</TABLE>
2
<PAGE>
<PAGE>
ITEM I FINANCIAL STATEMENTS
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, 1997 December 31, 1996
------------------ -----------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 702,907 $ 154,254
Trade receivables, net of allowances for returns and
doubtful accounts of $187,021 and $150,000 in 1997
and 1996 respectively 6,884,086 4,023,298
Inventory 52,274,559 15,723,370
Prepaid expenses and other current assets 3,176,858 588,286
Deferred tax asset 315,608 57,176
Investment in securities 906,518 1,829,532
------------- -------------
Total current assets $ 64,260,536 $ 22,375,916
Property, plant and equipment, net 3,224,870 2,943,077
Intangible assets, net 31,181,734 3,618,862
Deferred tax asset 202,409 306,079
Other assets 2,774,817 376,791
------------- -------------
Total Assets $ 101,644,366 $ 29,620,725
============= =============
LIABILLTIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable $ 28,970,063 $ 5,157,302
Current maturities of long-term debt 3,883,652 211,068
Accounts payable 6,791,309 1,651,405
Accrued expenses 1,756,970 1,290,393
Income taxes payable 369,526 157,212
Deferred tax liability 70,175 173,379
------------- -------------
Total current liabilities $ 41,841,695 $ 8,640,759
Long-term debt, less current maturities 12,225,958 2,819,225
------------- -------------
Total Liabilities $ 54,067,653 $ 11,459,984
Stockholders' Equity:
Preferred stock, $.001 par value; 1,000,000 shares authorized;
none issued --- ---
Common stock, $.001 par value; 20,000,000 shares authorized
7,878,774 shares and 3,315,308 shares issued
and outstanding in 1997 and 1996 respectively 7,879 3,315
Additional paid-in capital 38,682,589 14,871,559
Retained earnings 8,939,876 3,012,642
Net unrealized gain (loss) on investment securities, net (53,631) 273,225
------------- -------------
Total Stockholders' Equity $ 47,576,713 $ 18,160,741
------------- -------------
Total Liabilities and Stockholders' Equity $ 101,644,366 $ 29,620,725
============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
1997 1996
------------ ------------
<S> <C> <C>
Net revenues $ 20,352,441 $ 6,462,088
Cost of goods sold (13,121,265) (4,011,950)
Selling, general and administrative expenses (2,310,679) (915,790)
Depreciation and amortization (345,382) (322,608)
------------ ------------
Operating income $ 4,575,115 $ 1,211,740
Interest expense, net of interest income (834,516) (160,734)
------------ ------------
Income before income taxes $ 3,740,599 $ 1,051,006
Income taxes (1,413,947) (388,873)
------------ ------------
Net income $ 2,326,652 $ 662,133
============ ============
Net income per share $ 0.25 $ 0.11
============ ============
Weighted average number of common shares outstanding 9,300,180 8,050,454
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
4
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1997 1996
------------ ------------
<S> <C> <C>
Net revenues $ 54,768,424 $ 17,650,915
Cost of goods sold (35,655,889) (11,124,932)
Selling, general and administrative expenses (5,995,448) (2,393,222)
Depreciation and amortization (985,540) (526,231)
------------ ------------
Operating income $ 12,131,547 $ 3,606,530
Interest expense, net of interest income (2,662,138) (424,613)
------------ ------------
Income before income taxes $ 9,469,409 $ 3,181,917
Income taxes (3,542,175) (1,174,667)
------------ ------------
Net income $ 5,927,234 $ 2,007,250
============ ============
Net income per share $ 0.67 $ 0.34
============ ============
Weighted average number of common shares outstanding 9,238,851 8,050,454
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
5
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,927,234 $ 2,007,250
------------- ------------
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization $ 985,540 $ 526,231
Amortization of deferred financing costs 537,347 16,226
Deferred income taxes (68,158) 93,968
Changes in operating assets and liabilities:
Decrease in trade receivables, net 912,940 819,354
(Increase) in inventory (4,161,389) (3,080,314)
(Increase) in prepaid expenses and other current assets (1,096,919) (94,622)
(Increase) decrease in other assets (67,702) 23,771
Increase in accounts payable 447,798 255,028
(Decrease) in accrued expenses (2,122,506) (288,232)
Increase (decrease) in income taxes payable 212,314 (442,601)
------------- ------------
Net cash provided by/(used in) operating activities $ 1,506,499 $ (163,941)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of IASI assets $ (25,053,141) $ ---
Purchase of Aero Support assets (2,656,289) ---
Sale of investment securities 406,350 ---
Purchase of engines held under operating leases --- (3,250,000)
Purchases of property, plant and equipment (404,314) (1,070,468)
------------- ------------
Net cash (used in) investing activities $ (27,707,394) $ (4,320,468)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit agreements $ 3,547,019 $ ---
Debt proceeds 21,000,000 15,982,662
Debt repayment, including capital lease obligations (16,920,143) (11,264,354)
Common stock issued 20,794,371 ---
Loans to corporate directors (362,415) ---
Deferred financing costs (1,309,284) ---
Other --- (24,375)
------------- ------------
Net cash provided by financing activities $ 26,749,548 $ 4,693,933
------------- ------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS $ 548,653 $ 209,524
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 154,254 210,871
------------- ------------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 702,907 $ 420,395
============= ============
</TABLE>
(continued)
See accompanying notes to consolidated condensed financial statements
6
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(continued)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Supplemental disclosures of non-cash investing and financing activities:
IASI assets acquired for warrants $ 1,173,134 $ ---
============= ============
Deferred financing costs paid through the issuance of warrants $ 1,530,446 $ ---
============= ============
Aero Support assets acquired for warrants $ 680,058 $ ---
============= ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,166,546 $ 325,831
============= ============
Income taxes $ 3,394,999 $ 1,529,935
============= ============
Supplemental disclosures of purchase of IASI assets, net of liabilities:
Cash $ 36,709
Receivables 1,621,664
Inventory 27,275,861
Prepaid expenses and other current assets 1,132,400
Property, plant and equipment 74,865
Goodwill 14,055,172
Other assets 26,177
-------------
Total assets $ 44,222,848
=============
Accrued expenses $ 2,350,280
Accounts payable 1,530,786
Notes payable 14,078,798
-------------
Total liabilities $ 17,959,864
=============
Net acquisition cost $ 26,262,984
Less warrants issued to seller 1,173,134
-------------
Cash paid to seller at closing $ 25,089,850
Less cash acquired 36,709
-------------
Net cash used in acquisition $ 25,053,141
=============
</TABLE>
(continued)
See accompanying notes to consolidated condensed financial statements
7
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(continued)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Supplemental disclosures of purchase of Aero Support assets, net of liabilities:
Cash $ 426,929
Receivables 2,152,064
Inventory 5,091,063
Prepaid expenses and other current assets 359,253
Property, plant and equipment 37,926
Goodwill 13,198,554
Intangible - non compete 1,080,000
Other assets 4,014
------------
Total assets $ 22,349,803
============
Accrued expenses $ 238,803
Accounts payable 3,161,320
Notes payable - Bank 3,498,537
------------
Total liabilities $ 6,898,660
============
Net acquisition cost $ 15,451,143
Less warrants issued to sellers 680,058
Less notes payable to sellers 11,687,867
------------
Cash paid to sellers at closing $ 3,083,218
Less cash acquired 426,929
------------
Net cash used in acquisition $ 2,656,289
============
See accompanying notes to consolidated condensed financial statements
8
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements have been
prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
condensed balance sheet as of December 31, 1996 has been derived from
audited financial statements. Certain information and footnote
disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations of the SEC.
These consolidated condensed financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Company's latest annual report on Form 10-KSB.
In the opinion of management of the Company, the consolidated condensed
financial statements reflect all adjustments (which consist only of
normal recurring adjustments) necessary to present fairly the
consolidated condensed financial position of Kellstrom Industries, Inc.
as of September 30, 1997, and the consolidated condensed results of
earnings for the three and nine month periods ended September 30, 1997
and 1996 and the consolidated condensed statements of cash flows for the
nine month periods ended September 30, 1997 and 1996. The results of
operations for such interim periods are not necessarily indicative of
the results for the full year.
NOTE 2 - ACQUISITIONS
On January 15, 1997, the Company through its 100% subsidiary, IASI,
Inc., completed the acquisition of substantially all of the assets and
assumed certain of the liabilities of International Aircraft Support,
L.P. ("IASI"), a California limited partnership, for a cash purchase
consideration of $25.1 million and issued warrants, with an expiration
date of two years from January 15, 1997, to purchase 500,000 shares of
the Company's Common Stock, par value $.001 per share (the "Common
Stock") at $9.25 per share. The acquisition was financed through the
issuance of $15 million in senior subordinated debt and warrants, along
with the proceeds of a $6 million subordinated bridge loan and warrants
("Bridge Loan") with the balance from the Company's working capital. The
acquisition was accounted for using the purchase method of accounting
for business combinations. The Company also assumed IASI's existing debt
including IASI's various credit facilities, which provided for credit up
to a maximum of approximately $20 million as of the date of the
acquisition. The Bridge Loan matured on April 15, 1997 and was paid in
full by the Company. The interest rate on the Bridge Loan was 10% and,
additionally, 85,625 warrants that are exercisable at $10 and expire on
April 15, 2000 were issued to the Bridge Loan lenders. The interest rate
on the $15 million senior subordinated debt is 11.75%, payable
semi-annually. Additionally, 305,660 warrants were issued to this
lender, such warrants are exercisable at $10 and expire on January 15,
2004. Principal on this debt is payable in two equal annual installments
beginning January 15, 2002 and a final payment in the amount of
$1,250,000 payable on January 15, 2004.
On September 10, 1997, the Company through its 100% subsidiary, Aero
Support Holdings, Inc., completed the acquisition of substantially all
of the assets and assumed certain of the liabilities of Aero Support
U.S.A. Inc. ("Aero Support") for $2.1 million in cash and $11.7 million
in short-term notes payable, plus 3-5 year warrants to purchase up to
250,000 shares of the Company's Common Stock, par value $.001 per share,
at an exercise price of $19.00-$22.00 per share. Some additional cash
consideration may be paid to the sellers (all of whom will continue with
Aero Support Holdings, Inc.) in the form of an earn-out payable over
three years based upon the future profits of the subsidiary. The Company
funded the cash portion of the purchase price from its current banking
facility. The acquisition was accounted for using the purchase method of
accounting for business combinations.
NOTE 3 - SUBSEQUENT EVENT
On October 10, 1997, the Company issued $50 million of 5.75%
Convertible Subordinated Notes (the "144A Notes") due October 15, 2002,
under Rule 144A of the Securities Act of 1933, as amended, with
interest payable semiannually commencing April 15, 1998. The 144A
Notes are convertible into 1,818,181 shares of Common Stock at
$27.50 at any time prior to maturity. The 144A Notes are not redeemable
by the Company prior to October 15, 2000. These 144A Notes were issued
in an offering not registered or required to be registered under
the U.S. Securities Act of 1933, and therefore were offered only
to "qualified institutional buyers" and "accredited investors" as
defined by the applicable SEC regulations.
NOTE 4 - EARNINGS PER SHARE
Net earnings per common and common equivalent share are computed by
dividing net earnings by the weighted average number of common and
common equivalent shares outstanding during the period. Common
equivalent shares assume the exercise of all dilutive stock options and
warrants. Primary and fully diluted earnings per common and common
equivalent share are essentially the same. Quarterly and year-to-date
computations of per share amounts are made independently; therefore, the
sum of per share amounts for the quarters may not equal per share
amounts for the year.
9
<PAGE>
<PAGE>
NOTE 5 - ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standard (SFAS) No.
128, "Earnings per Share" was released and is effective for financial
statements for both interim and annual periods ending after December 15,
1997. Early application of this Statement is not permitted. Subsequent
to the effective date, all prior-period earnings per share data
presented will be restated to conform with the provisions of this
Statement. The following presents the pro forma earnings per share
amounts computed using this Statement.
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
---------- ---------
<S> <C> <C>
Basic EPS $ .30 $ .23
Diluted EPS $ .25 $ .14
For the Three Month Period Ended September 30,
1997
----
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
Net Income $ 2,326,652
Basic EPS
Income available to
common stockholders $ 2,326,652 7,850,976 $ .30
Effect of Dilutive Securities
Warrants 681,687
Options 767,517
Diluted EPS
Income available to common
stockholders + assumed conversions $ 2,326,652 9,300,180 $ .25
For the Three Month Period Ended September 30,
1996
----
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
Net Income $ 662,133
Basic EPS
Income available to
common stockholders $ 662,133 2,881,818 $ .23
Effect of Dilutive Securities
Warrants 1,737,674
Options 83,801
Unit Purchase Options 144,635
Diluted EPS
Income available to common
stockholders + assumed conversions $ 662,133 4,847,928 $ .14
</TABLE>
10
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------------- --------------
<S> <C> <C>
$ .83 $ .70
Basic EPS
$ .67 $ .44
Diluted EPS
For the Nine Month Period Ended September 30,
1997
----
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net Income $ 5,927,234
Basic EPS
Income available to
common stockholders $ 5,927,234 7,122,903 $ .83
Effect of Dilutive Securities
Warrants 787,595
Options 797,103
Unit Purchase Options 93,712
Diluted EPS
Income available to common
stockholders + assumed conversions $ 5,927,234 8,801,313 $ .67
For the Nine Month Period Ended September 30,
1996
-----
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ----------
Net Income $ 2,007,250
Basic EPS
Income available to
common stockholders $ 2,007,250 2,881,818 $ .70
Effect of Dilutive Securities
Warrants 1,480,477
Options 71,137
Unit Purchase Options 122,187
Diluted EPS
Income available to common
stockholders + assumed conversions $ 2,007,250 4,555,619 $ .44
</TABLE>
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information" were
issued and are effective for fiscal periods beginning after December 15, 1997
with early adoption permitted. Currently, the Company is evaluating the effects
these Statements will have on its financial reporting and disclosures.
11
<PAGE>
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS - UNAUDITED
Set forth herein is the unaudited consolidated condensed statement of earnings,
for the nine month period ended September 30, 1997, and the unaudited pro forma
consolidated condensed statement of earnings, for the nine month period ended
September 30, 1996, assuming that the acquisition of substantially all of the
assets and certain liabilities of IASI had been consummated on January 1, 1996.
An unaudited pro forma consolidated condensed statement of earnings for the nine
month period ended September 30, 1997 was not deemed necessary as the actual
results for the nine month period adequately reflect the operations of the
combined entity for the entire period, since the acquisition was completed on
January 15, 1997.
12
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
ACTUAL and PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------
September 30, 1997 September 30, 1996
------------------ ------------------
Pro Forma
Actual Combined
------------------- ------------------
<S> <C> <C>
Net revenues $54,768,424 $ 35,607,171
Cost of goods sold (35,655,889) (22,161,301)
Selling, general and administrative expenses (5,995,448) (3,871,571)
Depreciation and amortization (985,540) (1,097,465)
------------- ---------------
Operating income $12,131,547 $ 8,476,834
Interest expense, net of interest income (2,662,138) (2,378,997)
------------- ---------------
Income before income taxes $ 9,469,409 $ 6,097,837
Income tax expense (3,542,175) (2,256,200)
------------- ---------------
Net income $ 5,927,234 $ 3,841,637
============= ===============
Net income per share $ 0.67 $ 0.46
============= ===============
Weighted average number of common shares outstanding 9,238,851 8,295,725
============= ===============
</TABLE>
See accompanying notes to consolidated condensed and pro forma
consolidated condensed statements of earnings
13
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
----------------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA
KELLSTROM IASI ADJUSTMENTS COMBINED
---------------------------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues $ 17,650,915 $ 18,279,161 $ (322,905) $ 35,607,171
Cost of goods sold (11,124,932) (10,636,027) 248,588 (22,161,301)
(648,930)
Selling, general and administrative expenses (2,393,222) (1,998,456) 520,107 (3,871,571)
Depreciation and amortization (526,231) (686,930) (533,234) (1,097,465)
648,930
------------- ---------- ---------- ------------
Operating income $ 3,606,530 $ 4,957,748 $ (87,444) $ 8,476,834
Interest expense, net of interest income (424,613) (795,219) (1,946,431) (2,378,997)
787,266
------------- ---------- ---------- ------------
Income before income taxes $ 3,181,917 $ 4,162,529 $(1,246,609) $ 6,097,837
Income tax expense (1,174,667) 0 (1,081,533) (2,256,200)
------------- ---------- ---------- ------------
Net income $ 2,007,250 $ 4,162,529 $(2,328,142) $ 3,841,637
============= ========== ========== ============
Net income per share $ 0.34 $ 0.46
============= ============
Weighted average number of common shares outstanding 8,050,454 8,295,725
============= ============
</TABLE>
See accompanying notes to pro forma consolidated condensed statement of earnings
14
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(A) For purposes of presenting the pro forma consolidated condensed statement of
earnings, the following adjustments have been made:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1996
--------------------
<S> <C>
Increase (decrease) to income:
Decrease in net revenues due to intercompany sales $ (322,905)
Decrease in cost of goods sold due to intercompany sales 248,588
Reclassification entry to conform with current Kellstrom presentation (648,930)
Decrease in IASI selling, general and administrative expenses
due to the elimination of pension plan, bonus program and
overall consolidation of functions 520,107
Amortization of goodwill related to IASI acquisition (533,234)
Reclassification entry to conform with current Kellstrom presentation 648,930
Interest expense on acquisition debt (1,946,431)
Reduction of bank interest expense - exercise of warrants 787,266
-----------
$(1,246,609)
To adjust pro forma tax provision to 37% of income before taxes (1,081,533)
-----------
Net Adjustment $(2,328,142)
============
</TABLE>
15
<PAGE>
<PAGE>
KELLSTROM INDUSTRIES, INC.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(B) The following table reconciles net income to the amount used for purposes of
determining net income per share under the modified treasury stock method:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
--------------
Actual Pro Forma
1997 1996
----------- ------------
<S> <C> <C>
Net income $ 5,927,234 $ 3,841,637
Adjustments to pro forma net income for proceeds from exercise of
common stock equivalents:
Elimination of interest expense (net of tax) 259,319 0
----------- -----------
Adjusted net income $ 6,186,553 $ 3,841,637
Weighted average actual common shares outstanding 7,122,903 6,689,710
Weighted average common stock equivalents outstanding 2,115,948 1,606,015
----------- ------------
Weighted average shares outstanding 9,238,851 8,295,725
----------- ------------
Earnings per share $ .67 $ .46
=========== ============
</TABLE>
16
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following should be read in conjunction with the Company's
financial statements and the related notes thereto included elsewhere herein.
This Report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the Company's business, financial condition and results of operations. The words
"estimate," "project," "intend," "expect," and similar expressions are intended
to identify forward-looking statements. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated in such forward-looking statements, including
those described below. Investors are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
On January 15, 1997, the Company, through its wholly-owned subsidiary,
IASI, Inc., completed the acquisition of substantially all of the assets and
certain liabilities of IASI for $25.1 million in cash and warrants to purchase
500,000 shares of Common Stock at $9.25 per share. The warrants expire in
January 1999.
On February 4, 1997, the Company called its publicly traded warrants
(the "Public Warrants") pursuant to their terms. There were 4,166,510 Public
Warrants outstanding at December 31, 1996. The Company received proceeds of
$22,961,950 from the exercise of Public Warrants during the period from October
1, 1996 to March 21, 1997.
On September 10, 1997, the Company, through its wholly-owned
subsidiary, Aero Support Holdings, Inc., completed the acquisition of
substantially all of the assets and certain liabilities of Aero Support for $2.1
million in cash and $11.7 million in short-term notes payable, plus 3-5 year
warrants to purchase up to 250,000 shares of the Company's Common Stock at
$19.00-22.00 per share.
On October 10, 1997, the Company completed a private placement, under
Rule 144A of the Securities Act of 1933, as amended, of $50 million aggregate
principal amount of 5.75% Convertible Subordinated Notes (the "144A Notes") due
2002, plus an additional $4 million to cover overallotments. Proceeds of the
offering will be used for repayment of indebtedness, the
purchase of inventory, potential acquisitions of complementary businesses
and general corporate purposes.
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. Although the Company
has historically experienced increasing net sales and operating results, the
Company may experience significant fluctuations in its gross margins and
operating results in the future, both on an annual and a quarterly basis, caused
by various factors, including general economic conditions, specific economic
conditions in the commercial aviation industry, the availability and price of
surplus aviation material, the size and timing of customer orders, returns by
and allowances to customers and the cost of capital to the Company. In a
strategic response to a changing, competitive environment, the Company may elect
from time to time to make certain pricing, product or marketing decisions, and
any such decisions could have a material adverse effect on the Company's
periodic results of operations, including net sales and net income from quarter
to quarter. Therefore, comparisons of recent net sales and operating results of
the Company should not be taken as indicative of the results of operations that
can be expected in the future. There can be no assurance that the net sales and
operating results of the Company will continue at their current levels or will
grow, or that the Company will be able to achieve sustained profitability on a
quarterly or annual basis.
17
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Results of Operations.
The Company's revenues increased by 215% to $20,352,441 in the third
quarter of 1997, compared with $6,462,088 in last year's third quarter. Revenues
increased by 210% to $54,768,424 in the first nine months of 1997, compared with
$17,650,915 in the first nine months of 1996. The increase in net revenues is
due primarily to revenues from the IASI operation coupled with internal growth
due to additional inventory availability as a result of the Company's increased
capital resources. The principal reasons for the Company's increased capital
were the proceeds received from the exercise of the Public Warrants which were
called during the first quarter and increases in working capital made available
from the Company's additional bank credit facilities. Also contributing to the
increase in net revenues were the revenues from Aero Support, which was acquired
by the Company on September 10, 1997.
Gross margins increased by 195% to $7,231,176 in the third quarter of
1997, compared with $2,450,138 in last year's third quarter. Gross margins
increased by 193% to $19,112,535 in the first nine months of 1997, compared with
$6,525,983 in the first nine months of 1996. Gross margins, as a percentage of
net revenue, were slightly lower in 1997 due to unusually high gross margins
during the second and third quarters of 1996, resulting in margins of 34.9% for
the first nine months of 1997 compared with 37.0% for the corresponding period
in 1996.
Total selling, general and administrative expenses increased to
$2,310,679 and $5,995,448 for the three and nine month periods ended September
30, 1997 respectively, from $915,790 and $2,393,222 for the year ago periods,
but decreased as a percentage of net revenues for both periods. The increase in
these expenses was primarily the result of 1) expenses related to the continuing
operations of IASI and to a lesser extent Aero Support, 2) continued expansion
of the Company's sales and warehouse operations in order to support a higher
level of revenue and a corresponding greater number of whole engine and engine
component transactions and 3) the continued addition of marketing and management
personnel necessary to achieve and administer the revenue growth opportunities
that are available due to the Company's expanded level of inventory investment.
Depreciation and amortization expense increased to $345,382 and
$985,540 for the three and nine month periods ended September 30, 1997
respectively, from $322,608 and $526,231 for the year ago periods, but decreased
as a percentage of net revenues for both periods. The increase in depreciation
and amortization expense is primarily the result of amortization of goodwill
related to the IASI acquisition, and to a lesser extent the Aero Support
acquisition, as well as purchases of property, plant and equipment since
September 30, 1996.
Operating income increased by 278% to $4,575,115 in the third quarter
of 1997, compared with $1,211,740 in last year's third quarter. Operating income
increased by 236% to $12,131,547 in the first nine months of 1997, compared with
$3,606,530 in the first nine months of 1996.
Interest expense (net of interest income) increased to $834,516 and
$2,662,138 for the three and nine month periods ended September 30, 1997
respectively, from $160,734 and $424,613 for the year ago periods due to
interest expense and related costs from the $21 million and $13.8 million of
debt related to the acquisition of IASI and Aero Support, respectively, as well
as interest expense related to the overall increases in the Company's debt
levels due to inventory growth. Further increases in interest expense can be
anticipated during the remainder of 1997 as the Company expects to continue to
expand its inventory levels and facilities to support future growth in
operations and to the extent the Company completes acquisitions funded by debt.
There can be no assurance, however, that the Company's operations will expand or
that it will complete any material acquisitions.
18
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Net income in the third quarter of 1997 increased by 251% to
$2,326,652, or $0.25 per common share, compared with $662,133, or $0.11 per
common share, in the third quarter of 1996. In the first nine months of 1997,
net income increased by 195% to $5,927,234, or $0.67 per common share, compared
with $2,007,250, or $0.34 per common share, in the first nine months of 1996.
Net income per share is reported based upon the weighted average of the
common shares outstanding along with the inclusion of the effect of the dilutive
securities outstanding during the periods using the treasury stock method in
accordance with generally accepted accounting principles. The effect of this was
to increase the weighted average number of common shares outstanding from
7,850,976 to 9,300,180 for the three months ended September 30, 1997, from
7,122,903 to 9,238,851 for the nine months ended September 30, 1997, and from
2,881,818 to 8,050,454 shares for the three and nine months ended September 30,
1996. This increase in the number of common shares deemed outstanding was due to
the Company's outstanding options and warrants to purchase shares of common
stock having an exercise price of less than the market price of the common
stock.
Liquidity and Capital Resources.
The Company's working capital was $22,418,841 as of September 30, 1997,
an increase of $8,683,684 since December 31, 1996. The principal reasons for the
increase in working capital were the increase in inventories stemming from both
internal growth and the acquisitions of IASI and Aero Support, coupled with the
increase in cash resulting from the exercise of the Company's Public Warrants.
Total debt at September 30, 1997 was $45,079,673, compared with
$8,187,595 at December 31, 1996. The Company had contractual lines of credit
totaling $55,000,000 at September 30, 1997, of which $3,534,686 million was
unused and available.
Cash flow provided by operating activities in the first nine months of
1997 was $1,506,499, compared with cash flow used in operating activities of
$163,941 in the same period last year. The decrease resulted primarily from
higher net income for the period, offset in part by an increase in cash required
for working capital due mainly to an increase in inventory. The primary sources
of funds utilized by the Company were from certain debt proceeds and the
exercise of the Company's Public Warrants. The primary uses of funds were for
the purchase of all assets and certain liabilities of IASI ($25,053,141) and
Aero Support ($2,656,289).
The Company's acquisition of IASI was primarily financed through the
issuance of $15,000,000 in senior subordinated debt (the "Senior Debt") and
warrants, as well as the proceeds of a $6,000,000 subordinated bridge loan
("Bridge Loan") and warrants with the balance from the Company's working
capital. The Company also assumed IASI's existing debt, including various credit
facilities with Union Bank of California ("Union Bank") secured by IASI's
assets, which facilities provided for credit of up to a maximum of approximately
$20,000,000 as of the date of the acquisition. The amount of credit outstanding,
as of the date of acquisition and September 30, 1997 was $14,078,798 and $0
respectively. Interest on the credit facilities accrued daily and ranged from
.50% to 1.00% above Union Bank's prime rate, and was payable monthly.
The Senior Debt is held by The Equitable Life Assurance Society of the
United States ("Equitable"). The interest rate on the Senior Debt is 11.75% per
annum, payable semi-annually. Additionally, warrants to purchase 305,660 shares
of Common Stock were issued to Equitable. The warrants are exercisable at $10
per share and expire on January 15, 2004. Principal on this debt is payable in
two equal annual installments beginning January 15, 2002 and a final payment in
the amount of $1,250,000 payable on January 15, 2004. The balance due at
September 30, 1997 on the Senior Debt was $15,000,000. An advance principal
payment of $3,750,000, along with a prepayment penalty of 1%, was made by the
Company on October 10, 1997 with the proceeds received
19
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from the 144A Notes offering. Moreover, the Company may, at its option, redeem
up to an additional $750,000 (along with a prepayment penalty of 1%) of
principal amount of Senior Debt concurrently or within five days after the
occurrence of any public offering of the Company's Common Stock as long as the
principal balance of the debt is not reduced below $10,500,000.
The Bridge Loan was due April 15, 1997 and was paid in full on that
date. In connection with the Bridge Loan, the Company issued warrants to
purchase 85,625 shares of Common Stock at an exercise price of $10 per share,
exercisable until three years from the repayment of the Bridge Loan.
On April 24, 1997, in order to modify and consolidate its current
credit facilities, the Company entered into a $55 million revolving loan
agreement with Barnett Bank, N.A. The loan, which bears interest at .25% below
the bank's prime rate (which was 8.25% at April 24, 1997), is due on April 24,
1998. On April 28, 1997, utilizing funds from the new facility, the Company paid
$13,640,774 to fully satisfy the existing credit lines outstanding with Union
Bank. The new loan agreement is secured by substantially all of the Company's
assets.
The Company's acquisition of Aero Support was financed primarily
through the issuance of short-term notes payable which are due from September
1997 to January 1998, the Company's working capital and warrants. The Company
also assumed Aero Support's existing debt of $3,498,537 which was immediately
paid by the Company upon consummation of the acquisition. The amount of
short-term notes payable as of the date of acquisition and September 30, 1997
was $11,687,867 and $2,688,410, respectively. Interest on the remaining
short-term notes payable accrues at an annual rate equal to the prime rate and
is payable, with principal, on January 15, 1998. The remaining short-term notes
payable will be paid with the Company's existing credit facility.
The $975,958 first mortgage (including a $750,000 construction/mortgage
loan) held by BankAtlantic and secured by the Company's office and warehouse
facilities remains in place. The interest on the mortgage is 10.49% per annum.
Principal and interest are payable in monthly installments of $20,238. Principal
is amortized over a ten-year period with a final payment of $20,238 due May
2005.
The Company has entered into certain short-term engine leases during
1996 and 1997, and acquired certain other engines under lease as part of the
IASI acquisition. The Company continues to believe this activity should allow it
to liquidate the remaining maintenance value of jet engines on a profitable
basis by realizing both rental income as well as maintenance reserve fees
charged to the Company's engine lease customers for their utilization of such
engines. Upon the full consumption of the remaining maintenance value in each
engine, the Company will evaluate the engine's condition in order to determine
if such engine should be refurbished or should be disassembled into piece parts
in support of the Company's parts supply business. These leases are accounted
for as operating leases.
On September 24, 1997, the Company signed a definitive agreement with
Aerocar Aviation Corp. to purchase commercial aircraft and jet engines, all of
which are under operating leases, for $20.3 million in cash. The portfolio
consists of aircraft and engines on leases expiring from early 1998 through
2002. The purchase is intended to enable the Company to enter the short-term
aircraft leasing business and to increase its whole engine leasing business. The
agreement with Aerocar Aviation Corp. closed on October 14, 1997, and was
financed with the net proceeds from the sale of the 144A Notes.
The Company's management believes that cash flow from operations, and
cash that became available as a result of the exercise of the publicly traded
warrants and recent completion of a $50 million 144A Note offering, combined
with the Company's borrowing facilities should be sufficient for the Company's
current level of operations.
20
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The Company plans to take advantage of growth opportunities that are
consistent with the Company's expansion and profit objectives. These growth
opportunities will require the investment of cash into inventories of jet
engines and jet engine parts. Greater availability of such inventories will
better enable the Company to continue to increase its revenues as well as to
encourage the development of strategic relationships with new customers. The
Company intends to finance its inventory expansion program through its current
credit facilities and through the employment of its cash flows along with the
management of trade credits. In the future, the Company may require additional
sources of capital to continue to fund its expansion.
21
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of the stockholders of the Company was held on
August 28, 1997 pursuant to a proxy statement dated July 28, 1997. The
various matters voted upon as well as the results of such voting, are
as follows:
(a) Election of two Class I Directors to serve for a term of two years.
Director's Name: David J. Mitchell Thomas McMillen
----------------- ---------------
Votes in favor: 6,759,614 6,759,314
Votes against: 0 0
Abstentions: 251,550 251,850
--------- ----------
Total 7,011,164 7,011,164
(b) Ratify and approve the selection of KPMG Peat Marwick LLP
independent auditors of the Company
Votes in favor: 7,003,064
Votes against: 3,950
Abstentions: 4,150
---------
Total 7,011,164
A total of 7,011,164 shares were represented at the meeting, constituting a
quorum in accordance with the applicable provisions of the By-laws of the
Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
4.1 Indenture dated as of October 10, 1997, between the Company
and First Union National Bank
4.2 Registration Rights Agreement dated as of October 10, 1997,
by and between the Company and BT Alex. Brown
10.1 Material Contracts. Asset Purchase Agreement dated September
10, 1997 by and among Kellstrom Industries, Inc. and Aero Support
Holdings, Inc., on the one hand and Aero Support, U.S.A. Inc. Zvi
Bar-On, Mordechai Markowicz and Michael Navon, on the other hand.
10.2 Form of Warrant between the Company and Aero Support, U.S.A.
Inc.
27 - Financial Data Schedule
(b) Reports on Form 8-K. The Company filed a Report on Form 8-K dated
September 24, 1997, which included a copy of a press release
regarding the purchase of substantially all the assets of Aero
Support, U.S.A. Inc.
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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.
November 12, 1997 KELLSTROM INDUSTRIES, INC.
(Registrant)
/s/ Michael W. Wallace
------------------------------
Michael W. Wallace
Chief Financial Officer
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as .......... 'SS'
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================================================================================
KELLSTROM INDUSTRIES, INC.
$50,000,000
5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
----------------
INDENTURE
DATED AS OF OCTOBER 10, 1997
----------------
FIRST UNION NATIONAL BANK
TRUSTEE
================================================================================
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
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Section 1.1. Definitions..........................................1
Section 1.2. Other Definitions....................................6
Section 1.3. Rules of Construction................................7
ARTICLE II THE NOTES
Section 2.1. Designation, Amount and Issue of Notes...............7
Section 2.2. Form of Notes........................................8
Section 2.3. Date and Denomination of Notes; Payments of
Interest.............................................8
Section 2.4. Execution of Notes..................................10
Section 2.5. Registrar, Paying Agent and Conversion Agent........11
Section 2.6. Paying Agent to Hold Money in Trust.................11
Section 2.7. Noteholder Lists....................................11
Section 2.8. Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary................12
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes..........20
Section 2.10. Treasury Notes.....................................21
Section 2.11. Temporary Notes....................................22
Section 2.12. Cancellation.......................................22
Section 2.13. Deposit of Funds...................................22
ARTICLE III REDEMPTION OF NOTES
Section 3.1. Right to Redeem; Notice to Trustee..................23
Section 3.2. Selection of Notes to Be Redeemed...................23
Section 3.3. Notice of Redemption................................23
Section 3.4. Effect of Notice of Redemption......................24
Section 3.5. Deposit of Redemption Price.........................24
Section 3.6. Notes Redeemed in Part..............................25
Section 3.7. Conversion Arrangement on Call for Redemption.......25
ARTICLE IV SUBORDINATION OF NOTES
Section 4.1. Notes Subordinated to Senior Indebtedness...........26
Section 4.2. Payments to Holders.................................26
Section 4.3. Notes to Be Subrogated to Rights of Holders of
Senior Indebtedness.................................29
Section 4.4. Obligations of the Company Unconditional............29
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Section 4.5. Notice to Trustee...................................29
Section 4.6. Application by Trustee of Monies Deposited With It..30
Section 4.7 Reinstatement.......................................30
Section 4.8 Rights of Holders of Senior Indebtedness............31
Section 4.9 No Modification, etc................................31
Section 4.10 Specific Performance................................31
Section 4.11. Subordination Rights Not Impaired by Acts or
Omissions of Company or holders of Senior
Indebtedness........................................31
Section 4.12. Trustee to Effectuate Subordination................32
Section 4.13 Proofs of Claim.....................................32
Section 4.14. Right of Trustee to Hold Senior Indebtedness.......32
Section 4.15. Article IV Not to Prevent Events of Default........32
Section 4.16. No Fiduciary Duty Created to Holders of Senior
Indebtedness........................................32
Section 4.17. Article Applicable to Paying Agent.................33
ARTICLE V COVENANTS
Section 5.1. Payment of Notes....................................33
Section 5.2. SEC Reports.........................................33
section 5.3. Maintenance of Office or Agency.....................34
Section 5.4. Stay, Extension and Usury Laws......................34
Section 5.5. Liquidation.........................................35
Section 5.6. Compliance Certificates.............................35
Section 5.7. Notice of Defaults..................................36
Section 5.8. Payment of Taxes and Other Claims...................36
Section 5.9. Corporate Existence.................................36
Section 5.10. Maintenance of Properties..........................36
Section 5.11. Further Instruments and Acts.......................37
ARTICLE VI NOTEHOLDERS' LISTS AND REPORTS BY THE TRUSTEE
Section 6.1. Holders' Lists......................................37
Section 6.2. Preservation and Disclosure of Lists................37
Section 6.3. Reports by Trustee..................................38
ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT
Section 7.1. Events of Default...................................38
Section 7.2. Payment of Notes on Default; Suit Therefor..........40
Section 7.3. Application of Monies Collected by Trustee..........42
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Section 7.4. Proceedings by Holders..............................42
Section 7.5. Proceedings by Trustee..............................43
Section 7.6. Remedies Cumulative and Continuing..................43
Section 7.7. Direction of Proceedings and Waiver of Defaults
by Majority of Holders..............................44
Section 7.8. Notice of Defaults..................................44
Section 7.9. Undertaking to Pay Costs............................45
ARTICLE VIII CONCERNING THE TRUSTEE
Section 8.1. Duties and Responsibilities of Trustee..............45
Section 8.2. Reliance on Documents, Opinions, Etc................46
Section 8.3. No Responsibility for Recitals, Etc.................47
Section 8.4. Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes.............................48
Section 8.5. Monies to Be Held in Trust..........................48
Section 8.6. Compensation and Expenses of Trustee................48
Section 8.7. Officers' Certificate as Evidence...................49
Section 8.8. Conflicting Interests of Trustee....................49
Section 8.9. Eligibility of Trustee..............................49
Section 8.10. Resignation or Removal of Trustee..................49
Section 8.11. Acceptance by Successor Trustee....................51
Section 8.12. Succession by Merger, Etc..........................51
Section 8.13. Limitation on Rights of Trustee as Creditor........52
ARTICLE IX CONCERNING THE NOTEHOLDERS
Section 9.1. Action by Holders...................................52
Section 9.2. Proof of Execution by Holders.......................52
Section 9.3. Who are Deemed Absolute Owners......................53
Section 9.4. Company-Owned Notes Disregarded.....................53
Section 9.5. Revocation of Consents; Future Holders Bound.......53
ARTICLE X NOTEHOLDERS' MEETINGS
Section 10.1. Purpose of Meetings................................54
Section 10.2. Call of Meetings by Trustee........................54
Section 10.3. Call of Meetings by Company or Holders.............55
Section 10.4. Qualifications for Voting..........................55
Section 10.5. Regulations........................................55
Section 10.6. Voting.............................................56
Section 10.7. No Delay of Rights by Meeting......................56
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ARTICLE XI SUPPLEMENTAL INDENTURES
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Section 11.1. Supplemental Indentures Without Consent of
Holders.............................................57
Section 11.2. Supplemental Indentures with Consent of Holders....58
Section 11.3. Effect of Supplemental Indenture...................59
Section 11.4. Notation on Notes..................................59
Section 11.5. Evidence of Compliance of Supplemental Indenture
to Be Furnished Trustee.............................59
ARTICLE XII CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1. Company May Consolidate Etc. on Certain Terms......60
Section 12.2. Successor Corporation to Be Substituted............60
Section 12.3. Opinion of Counsel to Be Given Trustee.............61
ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1. Discharge of Indenture.............................61
Section 13.2. Deposited Monies to Be Held in Trust by Trustee....62
Section 13.3. Paying Agent to Repay Monies Held..................62
Section 13.4. Return of Unclaimed Monies.........................62
Section 13.5. Reinstatement......................................62
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.1. Indenture and Notes Solely Corporate Obligations...63
ARTICLE XV CONVERSION OF NOTES
Section 15.1. Right to Convert...................................63
Section 15.2. Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for
Interest or Dividends...............................64
Section 15.3. Cash Payments in Lieu of Fractional Shares.........65
Section 15.4. Conversion Price...................................65
Section 15.5. Adjustment of Conversion Price.....................66
Section 15.6. Effect of Reclassification, Consolidation,
Merger or Sale......................................74
Section 15.7. Taxes on Shares Issued.............................75
Section 15.8. Reservation of Shares to Be Fully Paid;
Compliance with Governmental Requirements;
Listing of Common Stock.............................75
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Section 15.9 Responsibility of Trustee...........................76
Section 15.10. Notice to Holders Prior to Certain Actions......77
ARTICLE XVI
REPURCHASE OF NOTES AT OPTION OF THE HOLDER UPON CHANGE IN
CONTROL
Section 16.1. Right to Require Repurchase........................78
Section 16.2. Notices; Method of Exercising Purchase Right, Etc..78
Section 16.3. Certain Definitions................................80
Section 16.4. Change in Control..................................80
Section 16.5. Consolidation, Merger, Etc.........................81
ARTICLE XVII MISCELLANEOUS PROVISIONS
Section 17.1. Provisions Binding on Company's Successors.........82
Section 17.2. Official Acts by Successor Corporation.............82
Section 17.3. Addresses for Notices, Etc.........................82
Section 17.4. Governing Law......................................83
Section 17.5. Evidence of Compliance with Conditions Precedent
Certificates to Trustee.............................83
Section 17.6. Legal Holidays.....................................83
Section 17.7. Trust Indenture Act................................84
Section 17.8. No Security Interest Created.......................84
Section 17.9. Benefits of Indenture..............................84
Section 17.10. Table of Contents, Headings, Etc................84
Section 17.11. Authenticating Agent............................84
Section 17.12. Execution in Counterparts.......................85
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INDENTURE dated as of October 10, 1997, between Kellstrom Industries, Inc.,
a Delaware corporation (hereinafter sometimes called the "Company," as more
fully set forth in Section 1.1), and First Union National Bank, a national
banking association, as trustee hereunder (hereinafter sometimes called the
"Trustee," as more fully set forth in Section 1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its 5 3/4% Convertible Subordinated Notes due 2002 (hereinafter
sometimes called the "Notes"), in an aggregate principal amount not to exceed
$50,000,000 ($57,500,000 if the overallotment option is exercised in full) and,
to provide the terms and conditions upon which the Notes are to be
authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture;
WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repurchase upon a Change
in Control and a form of conversion notice to be borne by the Notes are to be
substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee or a duly authorized
authenticating agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are,
and are to be, authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Notes by the Holders thereof,
the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective Holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
The terms defined in this Section 1.1 (except as herein otherwise expressly
provided or unless the context otherwise requires) for all purposes of this
Indenture and of any indenture supplemental hereto shall have the respective
meanings specified in this Section 1.1. All other terms used in this Indenture
that are defined in the Trust Indenture Act or which are by reference
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therein defined in the Securities Act (except as herein otherwise expressly
provided or unless the context otherwise requires) shall have the meanings
assigned to such terms in said Trust Indenture Act and in said Securities Act as
in force at the date of the execution of this Indenture. The words "herein,"
"hereof," "hereunder," and words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other Subdivision. The terms
defined in this Article include the plural as well as the singular.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent or Conversion Agent or any
successor thereto.
"Board of Directors" means either the Board of Directors of the Company or
any committee of such Board duly authorized to act for it hereunder.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions in the City of New York, Richmond, Virginia or
Charlotte, North Carolina are authorized or required by law or executive order
to remain closed.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles;
the amount of such indebtedness shall be the capitalized amount of such
obligations determined in accordance with such principles.
"Cash" or "cash" means such coin or currency of the United States as at any
time of payment is legal tender for the payment of public and private debts.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
"Company" means Kellstrom Industries, Inc. until a successor corporation
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Company" shall mean such successor corporation.
"Corporate Trust Office" means the principal offices of the Trustee at
which at any particular time its corporate trust business shall be administered,
which offices as of the date of
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this Indenture are located at 901 East Cary Street, 2nd Floor, Richmond,
Virginia 23261-3279 and 1525 West W. T. Harris Boulevard, Charlotte, North
Carolina 28262.
"Custodian" means First Union National Bank, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Default" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"Depositary" means, with respect to the Notes issued or issuable in whole
or in part in global form, the Person designated as Depositary by the Company
pursuant to Section 2.8 with respect to such Notes (or any successor thereto).
"Designated Senior Indebtedness" means the Company's Indebtedness
outstanding from time to time under its revolving credit facility with Barnett
Bank, N.A., indebtedness incurred in connection with the Senior Subordinated
Notes Purchase Agreement and the Senior Subordinated Notes issued thereunder and
any particular Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes
of the Indenture (provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Indebtedness to
exercise the rights of Designated Senior Indebtedness).
"Event of Default" means any event specified in Section 7.1(a), (b), (c),
(d), (e), (f) or (g).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Holder" or "Noteholder" means a Person in whose name a Note is registered
on the Note Register.
"Indebtedness" means, with respect to any Person, and without duplication,
(a) the principal of and premium, if any, and interest on, and fees, costs,
enforcement expenses, collateral protection expenses and other reimbursement or
indemnity obligations in respect to all indebtedness or obligations of the
Company to any Person, including but not limited to banks and other lending
institutions, for money borrowed that is evidenced by a note, bond, loan
agreement, or similar instrument or agreement (including purchase money
obligations with original maturities in excess of one year and noncontingent
reimbursement obligations in respect of amounts paid under letters of credit),
(b) all reimbursement obligations and other liabilities (contingent or
otherwise) of such Person with respect to letters of credit, bank guarantees or
bankers' acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of Capitalized Lease Obligations on the balance sheet of
such Person, (d) all obligations of such Person (contingent or otherwise) with
respect to an interest rate or other swap, cap or collar agreement or other
similar instrument or agreement or foreign currency hedge, exchange,
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purchase or similar instrument or agreement, (e) all direct or indirect
guaranties or similar agreements by such Person in respect of, and obligations
or liabilities (contingent or otherwise) of such Person to purchase or otherwise
acquire or otherwise assure a creditor against loss in respect of indebtedness,
obligations or liabilities of another Person of the kind described in clauses
(a) through (d), (f) any indebtedness or other obligations, excluding any
operating leases the Company is currently (or may become) a party to, described
in clauses (a) through (d) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
regardless of whether the indebtedness or other obligation secured thereby shall
have been assumed by such Person and (g) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness, obligation or liability of the kind described in clauses (a)
through (f).
"Indenture" means this instrument as originally executed or, if
supplemented or amended as herein provided, as so supplemented or amended.
"Initial Purchaser" means BT Alex. Brown Incorporated.
"Institutional Accredited Investor" means an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, the Controller, the Secretary, any Assistant Secretary or any
Vice President of the Company.
"Officer's Certificate" means a certificate signed by two Officers, one of
whom must be the Chairman of the Board, the President, the Chief Financial
Officer or a Vice President of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"Person" means any individual, corporation, partnership, joint venture,
trust, association, joint stock company, unincorporated organization or
government or any agency or political subdivision thereof.
"PORTAL Market" means the Private Offerings, Resales and Trading through
Automated Linkages Market operated by the National Association of Securities
Dealers, Inc. or any successor thereto.
"Principal" or "principal" of a debt security, including the Notes, means
the principal of the security plus, when appropriate, the premium, if any, on
the security.
"QIB" shall mean a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
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"Redemption Date," when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of October 10, 1997, between the Company and the Initial
Purchaser.
"Regulation D" means Regulation D promulgated under the Securities Act (or
any successor provision), as it may be amended from time to time.
"Representative" means the indenture trustee or other trustee, agent or
representative for the holders of any Senior Indebtedness.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Indebtedness" means the principal of, premium, if any, interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (including but not limited to all
Designated Senior Indebtedness) of the Company or any Subsidiary, other than
trade debt, whether outstanding on the date of this Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the Company or
any Subsidiary (including all deferrals, renewals, extensions or refundings of,
or amendments, modifications or supplements to, the foregoing), unless in the
case of any particular Indebtedness the instrument creating or evidencing the
same or the assumption or guarantee thereof expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes or expressly
provides that such Indebtedness is "pari passu" with or "junior" to the Notes.
Notwithstanding the foregoing, the term Senior Indebtedness shall not include
any Indebtedness of the Company to any Subsidiary of the Company.
"Senior Subordinated Notes" means the 11 3/4% Senior Subordinated Notes due
2004 issued pursuant to the Senior Subordinated Notes Purchase Agreement.
"Senior Subordinated Notes Purchase Agreement" means the Securities
Purchase Agreement, dated as of January 15, 1997, as amended, between the
Company and The Equitable Life Assurance Society of the United States, pursuant
to which the Company issued its Senior Subordinated Notes and Warrants to
purchase Common Stock.
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"Subsidiary" means with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
person or one or more Subsidiaries of such person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or managing general partner of
which is such person or a Subsidiary of such person or (b) the only general
partners of which are such person or one or more Subsidiaries of such Person (or
any combination thereof).
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. 'SS' 'SS'77aaa-77666), as amended by the Trust Indenture Reform Act of
1990, and as in effect on the date of this Indenture, except as provided in
Sections 11.3, 15.6 and 16.5, and except to the extent any amendment to the
Trust Indenture Act expressly provides for application of the Trust Indenture
Act as in effect on another date.
"Trading Day" or "trading day" means, with respect to any security, each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on the exchange or market in which such security is
traded.
"Trustee" means the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture, and thereafter
means the successor.
"Trust Officer" means any officer of the Trustee with direct responsibility
for the administration of this Indenture or who is otherwise exercising judgment
with respect to this Indenture.
"U.S. Government Obligations" means direct noncallable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States is pledged.
"Vice President" when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 1.2. Other Definitions.
TERM DEFINED IN SECTION
"Change in Control" Section 16.4
"Closing Price" Section 15.5
"Conversion Agent" Section 2.5
"Conversion Price" Section 15.4
"Current Market Price" Section 15.5
"Defaulted Interest" Section 2.3
"Expiration Time" Section 15.5
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TERM DEFINED IN SECTION
"Note Registrar" Section 2.8
"Paying Agent" Section 2.5
"Payment Blockage Notice" Section 4.2
"Purchased Shares" Section 15.5
"Record Date" Section 15.5
"Registrar" Section 2.5
"Securities" Section 15.5
"Trigger Event" Section 15.5
SECTION 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with generally accepted accounting principles in effect on the
date hereof, and any other reference in this Indenture to "generally accepted
accounting principles" refers to generally accepted accounting principles in
effect on the date hereof;
(3) words in the singular include the plural, and words in the plural
include the singular;
(4) provisions apply to successive events and transactions; and
(5) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE II
THE NOTES
SECTION 2.1. Designation, Amount and Issue of Notes.
The Notes shall be designated as "5 3/4% Convertible
Subordinated Notes due 2002." Notes not to exceed the aggregate principal amount
of $50,000,000 (or $57,500,000 if the over-allotment option set forth in Section
2(b) of the Purchase Agreement, dated October 7, 1997, by and between the
Company and the Initial Purchaser is exercised in full) upon the execution of
this Indenture, or (except pursuant to Sections 2.8, 2.9, 15.2 and 16.1 hereof)
from time to time thereafter, may be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Notes to or upon the written order of the Company, signed by its
(a) President, Senior Vice President or any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title "Vice
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President") and (b) Treasurer or Assistant Treasurer or its Secretary or
Assistant Secretary, without any further action by the Company hereunder.
SECTION 2.2. Form of Notes.
The Notes and the Trustee's certificate of authentication to be borne by
such Notes shall be substantially in the form set forth in Exhibit A, which is
incorporated in and part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the Officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.
Any Note in global form shall represent such of the outstanding Notes as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the Holder of such Notes in
accordance with this Indenture. Payment of principal of and interest and
premium, if any, on any Note in global form shall be made to the Holder of such
Note.
The terms and provisions contained in the form of Note attached as Exhibit
A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Neither the Company nor the Trustee shall have any responsibility for any
defect in the CUSIP number that appears on any Note, check, advice of payment or
redemption notice, and any such document may contain a statement to the effect
that CUSIP numbers have been assigned by an independent service for convenience
of reference and that neither the Company nor the Trustee shall be liable for
any inaccuracy in such numbers.
SECTION 2.3. Date and Denomination of Notes; Payments of
Interest.
The Notes shall be issuable in registered form without coupons in
denominations of $1,000 principal amount ($100,000 and integral multiples of
$1,000 in excess thereof, in the case of Notes issued pursuant to Regulation D).
Every Note shall be dated October 10, 1997 and shall bear interest from the
applicable date in each case as specified on the face of the form of Note
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attached as Exhibit A hereto. Interest on the Notes shall be paid in arrears on
each April 15 and October 15 commencing April 15, 1998. Interest on the Notes
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.
The Person in whose name any Note is registered at the close of business on
any record date with respect to any interest payment date (including any Note
that is converted after the record date and on or before the interest payment
date) shall be entitled to receive the interest payable on such interest payment
date notwithstanding the cancellation of such Note upon any transfer, exchange
or conversion subsequent to the record date and on or prior to such interest
payment date, provided, that in the case of any Note, or portion thereof, called
for redemption on a Redemption Date or repurchased in connection with a Change
in Control on a repurchase date that is after a record date and prior to (but
excluding) the next succeeding interest payment date, interest shall not be paid
to the Person in whose name the Note, or portion thereof, is registered on the
close of business on such record date and the Company shall have no obligation
to pay interest on such Note or such portion except to the extent required to be
paid upon redemption or repurchase of such Note or portion thereof pursuant to
Section 3.1 or 16.1 hereof. Interest may, at the option of the Company, be paid
by check mailed to the address of such Person on the Note register provided
that, with respect to any Holder of Notes with an aggregate principal amount
equal to or in excess of $5,000,000 at the request of such Holder in writing to
the Company at least five (5) days prior to the date set for payment of interest
(who shall then furnish written notice to such effect to the Trustee), interest
on such Holder's Notes shall be paid by wire transfer in immediately available
funds in accordance with the wire transfer instructions supplied by such Holder
to the Trustee and Paying Agent (if different from the Trustee). The term
"Interest Payment Date" shall mean April 15 and October 15 of each year
commencing on April 15, 1998. The term "record date" with respect to any
interest payment date shall mean the April 1 or October 1 preceding said April
15 or October 15, respectively.
Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any said April 15 or October 15 (herein called "Defaulted
Interest") shall be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below.
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names are registered at the close of business
on a special record date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and the date
of payment (which shall not be less than 25 days after the receipt by the
Trustee of such notice, unless the Trustee shall consent to an earlier date),
and at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest which shall be not more than 15 days
and not less than ten (10) days prior to the date of the proposed payment and
not less than ten (10) days after the receipt by the Trustee
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of the notice of the proposed payment. The Trustee shall promptly notify the
Company of such special record date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the special record date therefor to be mailed, first-class postage prepaid,
to each Noteholder at his address as it appears in the Note register, not less
than ten (10) days prior to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special record date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Notes were registered at the close of business on such special record
date and shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange or automated quotation system on which the Notes may be listed or
designated for listing, and upon such notice as may be required by such exchange
or automated quotation system, if, after written notice is given by the Company
to the Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
SECTION 2.4. Execution of Notes.
The Notes shall be signed in the name and on behalf of the Company by the
manual or facsimile signature of its President, any Senior Vice President or any
Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and attested by the
manual or facsimile signature of its Secretary or any of its Assistant
Secretaries (which may be printed, engraved or otherwise reproduced thereon, by
facsimile or otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture.
In case any Officer who shall have signed any of the Notes shall cease to
be such Officer before the Notes so signed shall have been authenticated and
delivered by the Trustee, or disposed of by the Company, such Notes nevertheless
may be authenticated and delivered or disposed of as though the Person who
signed such Notes had ceased to be such Officer and any Note may be signed on
behalf of the Company by such Persons as, at the actual date of the execution of
such Note, shall be the proper Officers, although at the date of the execution
of this Indenture any such Person was not such an Officer.
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SECTION 2.5. Registrar, Paying Agent and Conversion Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange (the "Registrar"), an office or
agency where Notes may be presented for payment (the "Paying Agent"), an office
or agency where Notes may be presented for conversion (the "Conversion Agent")
and an office or agency where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
in writing of the name and address of any Agent not a party to this Indenture.
If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or
agent for service of notices and demands, or fails to give the foregoing notice,
the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands in connection with
the Notes.
SECTION 2.6. Paying Agent to Hold Money in Trust.
On or prior to each due date of the principal of or interest on any
Securities, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal or interest so becoming due. Subject to Sections 4.1, 4.2 and
4.3, the Paying Agent shall hold in trust for the benefit of Holders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Notes, and shall notify the Trustee of any default by the
Company (or any other obligor on the Notes) in making any such payment. If the
Company or an Affiliate of the Company acts as Paying Agent, it shall, on or
before each due date of the principal of or interest on any Notes, segregate the
money and hold it as a separate trust fund. The Company at any time may require
a Paying Agent to pay all money held by it to the Trustee and the Trustee may at
any time during the continuance of any default, upon written request to a Paying
Agent, require such Paying Agent to forthwith pay to the Trustee all sums so
held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than
the Company) shall have no further liability for the money.
SECTION 2.7. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, and the
Company shall otherwise comply with TIA Section 312(a).
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SECTION 2.8. Exchange and Registration of Transfer of
Notes; Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.3 being herein sometimes
collectively referred to as the "Note register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes. The Note register shall be in
written form or in any form capable of being converted into written form within
a reasonably prompt period of time. The Trustee is hereby appointed "Note
Registrar" for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-Registrars in accordance with
Section 5.3.
Upon surrender for registration of transfer of any Note to the
Note Registrar or any co-Registrar, and satisfaction of the requirements for
such transfer set forth in this Section 2.8, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Notes to be exchanged at any such office or agency maintained by the Company
pursuant to Section 5.3. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the Notes
which the Noteholder making the exchange is entitled to receive bearing
registration numbers not contemporaneously outstanding.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
All Notes presented or surrendered for registration of transfer
or for exchange, redemption, repurchase or conversion shall (if so required by
the Company or the Note Registrar) be duly endorsed, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company and the Trustee, and the Notes shall be duly executed by the Noteholder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
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Neither the Company nor the Trustee nor any Note Registrar nor
any co-registrar shall be required to exchange or register a transfer of (a) any
Notes for a period of 15 days next preceding any selection of Notes to be
redeemed or (b) any Notes or portions thereof called for redemption pursuant to
Article III or (c) any Notes or portions thereof surrendered for conversion
pursuant to Article XV.
(b) So long as the Notes are eligible for book-entry settlement
with the Depositary, unless otherwise required by law, all Notes to be traded
(i) on the PORTAL Market shall be represented by a Note in global form (the
"Rule 144A Global Note") or (ii) to a Person who is not a U.S. Person (as
defined in Regulation S) who is acquiring the Note in an offshore transaction (a
"Foreign Person") in accordance with Regulation S shall be represented by a Note
in global form (the "Regulation S Global Note") (the Rule 144 A Global Note and
the Regulation S Global Note collectively referred to in this Indenture as the
"Global Note"), the Rule 144A Global Note and the Regulation S Global Note being
registered in the name of the Depositary or the nominee of the Depositary. The
transfer and exchange of beneficial interests in the Global Note, which does not
involve the issuance of a Note in certificated form, shall be effected through
the Depositary, in accordance with this Indenture (including restrictions on
transfer set forth herein) and the procedures of the Depositary therefor.
At any time at the request of the beneficial Holder of an
interest in the Global Note to obtain a Note in certificated form, such
beneficial Holder shall be entitled to obtain a Note in certificated form upon
written request to the Trustee and the Custodian in accordance with the standing
instructions and procedures existing between the Custodian and Depositary for
the issuance thereof. Upon receipt of any such request, the Trustee, or the
Custodian at the direction of the Trustee, will cause, in accordance with the
standing, instructions and procedures existing between the Depositary and the
Custodian, the aggregate principal amount of the Rule 144A Global Note or
Regulation S Global Note, as appropriate, to be reduced by the principal amount
of the Note in certified form issued upon such request to such beneficial Holder
and, following such reduction, the Company will execute and the Trustee will
authenticate and deliver to such beneficial Holder (or its nominee) a Note or
Notes in certificated form in the appropriate aggregate principal amount in the
name of such beneficial Holder (or its nominee) and bearing such restrictive
legends as may be required by this Indenture.
Any transfer of a beneficial interest in the Global Note which
cannot be effected through book-entry settlement must be effected by the
delivery to the transferee (or its nominee) of a Note or Notes in certificated
form registered in the name of the transferee (or its nominee) on the books
maintained by the Note Registrar in accordance with the transfer restrictions
set forth herein. With respect to any such transfer, the Trustee, or the
Custodian at the direction of the Trustee, will cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Custodian, the aggregate principal amount of the Rule 144A Global Note or
Regulation S Global Note to be reduced by the principal amount of the respective
beneficial interest in the Rule 144A Global Note or Regulation S Global Note
being transferred and, following such reduction, the Company will execute and
the Trustee will authenticate and deliver to the transferee (or such
transferee's nominee, as the case may be), a
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Note or Notes in certificated form in the appropriate aggregate principal amount
in the name of such transferee (or its nominee) bearing such restrictive legends
as may be registered by this Indenture.
(c) So long as the Notes are eligible for book-entry settlement,
or unless otherwise required by law, upon any transfer of a Note in certificated
form to a QIB in accordance with Rule 144A or a Foreign Person in accordance
with the Regulation S, and upon receipt of the Note or Notes in certificated
form being so transferred, together with a certification from the transferor
that the transferee is a QIB or a Foreign Person (or other evidence satisfactory
to the Trustee), the Trustee shall make, or direct the Custodian to make, an
endorsement on the Rule 144A Global Note or Regulation S Global Note to reflect
an increase in the aggregate principal amount of the Notes represented by the
Rule 144A Global Note or Regulation S Global Note, and the Trustee shall cancel
such Note or Notes in certificated form and cause, or direct the Custodian to
cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal amount of
Notes represented by the Rule 144A Global Note or Regulation S Global Note to be
increased accordingly provided that no Note in certificated form, or portion
thereof, in respect of which the Company or an Affiliate of the Company held any
beneficial interest shall be included in the Global Note until such Note in
certificated form is freely tradable in accordance with Rule 144(k) provided
further that the Trustee shall issue Notes in certificated form upon any
transfer of a beneficial interest in the Global Note to the Company or an
Affiliate of the Company.
Any Global Note may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Indenture as may be required by the Custodian, the Depositary
or by the National Association of Securities Dealers, Inc. in order for the
Notes to be tradable on the PORTAL Market or tradable on Euroclear or Cedel or
as may be required for the Notes to be tradable on any other market developed
for trading of securities pursuant to Rule 144A or Regulation S under the
Securities Act or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange or
automated quotation system upon which the Notes may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this Section
2.8(d) to bear the legend set forth in this Section 2.8(d) (together with any
Common Stock issued upon conversion of the Notes and required to bear the legend
set forth in Section 2.8(e), collectively, the "Restricted Notes") shall be
subject to the restrictions on transfer set forth in this Section 2.8(d)
(including those set forth in the legend set forth below) unless such
restrictions on transfer shall be waived by written consent of the Company (with
written notice to the Trustee), and the Holder of each such Restricted Note, by
such Noteholder's acceptance thereof, agrees to be bound by all such
restrictions on transfer. As used in Section 2.8(d) and 2.8(e), the term
"transfer" encompasses any sale, pledge, transfer or other disposition
whatsoever of any Restricted Note.
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Until two (2) years after the original issuance date of any Note,
any certificate evidencing such Note (and all Notes issued in exchange therefor
or substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.8(e), if applicable)
shall bear a legend in substantially the following form, unless otherwise agreed
by the Company in writing, with written notice thereof to the Trustee:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW.
BY ITS ACQUISITION HEREOF, THE HOLDER: (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR
TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE
NOTE EVIDENCED HEREBY AND THE LAST DATE ON WHICH KELLSTROM INDUSTRIES, INC. (THE
"COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT)
OF THE COMPANY WAS THE OWNER OF THE NOTE (THE "RESTRICTION TERMINATION DATE")
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO FIRST UNION NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE
AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON
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TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY
BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS NOTE TO FIRST UNION NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D)
OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO FIRST UNION
NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF TWO YEARS
FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms or as to which the conditions for removal of the
foregoing legend set forth therein have been satisfied may, upon surrender of
such Note for exchange to the Note Registrar in accordance with the provisions
of this Section 2.8, be exchanged for a new Note or Notes, of like tenor and
aggregate principal amount, which shall not bear the restrictive legend required
by this Section 2.8(d).
Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in the second paragraph of Section 2.8(b) and in
this Section 2.8(d), a Global Note may not be transferred as a whole or in part
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to act
as Depositary with respect to the Global Notes. Initially, the Rule 144A Global
Note and the Regulation S Global Note shall be issued to the Depositary,
registered in the name of Cede & Co., as the nominee of the Depositary, and
deposited with the Custodian for Cede & Co.
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The Trustee is hereby authorized and requested to execute and
deliver a Letter of Representation to the Depositary and, in connection with any
successor nominee for the Depositary or any successor Depositary, enter into
comparable arrangements, and shall have the same rights with respect to its
actions thereunder as it has with respect to its action under this Indenture.
If at any time the Depositary for the Global Note notifies the
Company that it is unwilling or unable to continue as Depositary for the Note,
the Company may appoint a successor Depositary with respect to such Note. If a
successor Depositary is not appointed by the Company within 90 days after the
Company receives such notice, the Company will execute, and the Trustee, upon
receipt of an Officers' Certificate for the authentication and delivery of
Notes, will authenticate and deliver, Notes in certificated form, in an
aggregate principal amount equal to the principal amount of the Global Note, in
exchange for the Global Note.
If a Note in certificated form is issued in exchange for any
portion of a Global Note after the close of business at the office or agency
where such exchange occurs on any record date and before the opening of business
at such office or agency on the next succeeding interest payment date, interest
will not be payable on such interest payment date in respect of such Note, but
will be payable on such interest payment date only to the Person to whom
interest in respect of such portion of such Global Note is payable in accordance
with the provisions of this Indenture.
Notes in certificated form issued in exchange for all or a part
of a Global Note pursuant to this Section 2.8 shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to instruction
from its direct or indirect participants or otherwise, shall instruct the
Trustee in writing. Upon execution and authentication, the Trustee shall deliver
such Notes in certificated form to the Persons in whose names such Notes in
certificated form are so registered.
At such time as all interests in a Global Note have been
redeemed, repurchased, converted, canceled, exchanged for Notes in certificated
form, or transferred to a transferee who receives Notes in certificated form,
such Global Note shall, upon receipt thereof, be canceled by the Trustee in
accordance with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such cancellation, if any
interest in a Global Note is exchanged for Notes in certificated form, redeemed,
converted, repurchased or canceled, or transferred to a transferee who receives
Notes in certificated form therefor or any Note in certificated form is
exchanged or transferred for part of a Global Note, the principal amount of such
Global Note shall, in accordance with the standing procedures and instructions
existing between the Depositary and the Custodian, be appropriately reduced or
increased, as the case may be, and an endorsement shall be made on such Global
Note, by the Trustee or the Custodian, at the direction of the Trustee, to
reflect such reduction or increase. In the event of any transfer of any
beneficial interest between the Rule 144A Global Note and the Regulation S
Global Note in accordance with the standing procedures and instructions between
the Depositary and the Custodian and the transfer restrictions set forth herein,
the aggregate principal amount of
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each of the Rule 144A Global Note and the Regulation S Global Note shall be
appropriately increased or decreased, as the case may be, and an endorsement
shall be made on each of the Rule 144A Global Note and the Regulation S Global
Note by the Trustee or the Custodian, at the direction of the Trustee, to
reflect such reduction or increase.
(e) Until two (2) years after the original issuance date of any
Note, any stock certificate representing Common Stock issued upon conversion of
such Note shall bear a legend in substantially the following form, unless such
Common Stock has been transferred pursuant to a registration statement that has
been declared effective under the Securities Act (and which continues to be
effective at the time of such transfer) or such Common Stock has been issued
upon conversion of Notes that have been transferred pursuant to a registration
statement that has been declared effective under the Securities Act, or unless
otherwise agreed by the Company in writing with written notice thereof to the
transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
BELOW.
THE HOLDER HEREOF AGREES THAT PRIOR TO THE DATE THAT IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE NOTE UPON THE CONVERSION OF
WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED AND THE LAST DATE ON WHICH
KELLSTROM INDUSTRIES, INC. (THE "COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE OR
THE COMMON STOCK EVIDENCED HEREBY (THE "RESTRICTION TERMINATION DATE"); (1) IT
WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT
(A) TO THE COMPANY, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN COMPLIANCE WITH RULE 144A, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER FURNISHES TO
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
COMMON STOCK EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
SUCH TRANSFER AGENT OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO A
REGISTRATION
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STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH
TRANSFER BEFORE THE RESTRICTION TERMINATION DATE (OTHER THAN A TRANSFER PURSUANT
TO CLAUSE 1(F) ABOVE), IT WILL FURNISH CONTINENTAL STOCK TRANSFER AND TRUST
COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE) A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF
THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(F) ABOVE OR UPON THE
RESTRICTION TERMINATION DATE OR UPON THE EARLIER SATISFACTION OF CONTINENTAL
STOCK TRANSFER AND TRUST COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER
AGENT, AS APPLICABLE), THAT THE COMMON STOCK HAS BEEN OR IS BEING OFFERED AND
SOLD IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer
shall have expired in accordance with their terms or as to which the conditions
for removal of the foregoing legend set forth therein have been satisfied may,
upon surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.8(e).
(f) Any certificate evidencing a Note that has been transferred
to an Affiliate of the Company within two (2) years after the original issuance
date of the Note, as evidenced by a notation on the Assignment Form for such
transfer or in the representation letter delivered in respect thereof
(substantially in the form attached as an exhibit to the Offering Memorandum),
shall, until two (2) years after the last day on which the Company or any
Affiliate of the Company was an owner of such Note, bear a legend in
substantially the following form, unless otherwise agreed by the Company (with
written notice thereof to the Trustee):
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THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE.
BY ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO KELLSTROM INDUSTRIES, INC.
OR ANY SUBSIDIARY THEREOF, (B) IN A TRANSACTION REGISTERED UNDER THE SECURITIES
ACT OR (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) AND (2) THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. THIS LEGEND SHALL BE REMOVED UPON THE TRANSFER OF
THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
NOTE PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCE.
IF THE PROPOSED TRANSFER IS PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH FIRST UNION NATIONAL BANK, AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any stock certificate representing Common Stock issued upon
conversion of such Note shall also bear a legend in substantially the form
indicated above, unless otherwise agreed by the Company (with written notice
thereof to the Trustee).
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Notes.
In case any Note shall become mutilated or be destroyed, lost or stolen,
the Company in its discretion may execute and the Trustee or an authenticating
agent appointed by the Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of Notes, shall authenticate and deliver, a new
Note, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Note, or in lieu of and in substitution for the
Note so
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destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company or the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Note which has matured or is about to
mature or has been called for redemption or is about to be converted into Common
Stock shall become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Note, pay or authorize the payment of or convert
or authorize the conversion of the same (without surrender thereof except in the
case of a mutilated Note), as the case may be, if the applicant for such payment
or conversion shall furnish to the Company, to the Trustee and, if applicable,
to such authenticating agent such security or indemnity as may be required by
them to save each of them harmless for any loss, liability, cost or expense
caused by or connected with such substitution, and, in case of destruction, loss
or theft, evidence satisfactory to the Company, the Trustee and, if applicable,
any Paying Agent or Conversion Agent of the destruction, loss or theft of such
Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section 2.9
by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionally with any and all other Notes
duly issued hereunder. To the extent permitted by law, all Notes shall be held
and owned upon the express condition that the foregoing provisions are exclusive
with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
SECTION 2.10. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any notice, direction, waiver or consent, Notes owned by
the Company or any other obligor on the Notes or by any Affiliate of the Company
or of such other obligor on the Notes shall be disregarded, except that, for
purposes of determining whether the Trustee shall be protected in relying on any
such notice, direction, waiver or consent, only Notes which the
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Trustee knows are so owned shall be so disregarded. Notes so owned which have
been pledged in good faith shall not be disregarded if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
the Notes and that the pledgee is not the Company or any other obligor on the
Notes or any Affiliate of the Company or of such other obligor.
SECTION 2.11. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
execute, and, upon the order of the Company, the Trustee shall authenticate and
deliver temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have variation that the Company with the consent of the
Trustee considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate and deliver
definitive Notes in exchange for temporary Notes.
SECTION 2.12. Cancellation.
All Notes surrendered for the purpose of payment, redemption, repurchase,
conversion, exchange or registration of transfer, shall, if surrendered to the
Company or any paying agent or any Note registrar or any conversion agent, be
surrendered to the Trustee and promptly canceled by it, or, if surrendered to
the Trustee, shall be promptly canceled by it, and no Notes shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture provided that any Note or portion thereof surrendered for repurchase
shall only be canceled at such time as such Note or portion thereof has been
repurchased pursuant to Article XVI hereof. The Trustee shall destroy canceled
Notes (unless the Company directs it to do otherwise) and, after such
destruction, shall, if requested by the Company, deliver a certificate of such
destruction to the Company. If the Company shall acquire any of the Notes, such
acquisitions shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are delivered
to the Trustee for cancellation.
SECTION 2.13. Deposit of Funds.
Prior to 10:00 a.m. New York City time on each Interest Payment Date and
the maturity date, the Company shall deposit with the Paying Agent in
immediately available funds sufficient to make cash payments, if any, due on
such Interest Payment Date or maturity date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or maturity date, as the case may be.
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ARTICLE III
REDEMPTION OF NOTES
SECTION 3.1. Right to Redeem; Notice to Trustee.
The Notes may not be redeemed otherwise than at the option
of the Holder as provided in Section 16.1 or at the election of the Company, as
a whole or from time to time in part, at any time after October 15, 2000, at the
Redemption Prices specified in paragraph nine of the form of Note (reverse side)
attached hereto as Exhibit A, together with accrued interest up to but not
including the Redemption Date, provided, however, that prior to the payment in
full of the principal of, premium, if any, and interest and all other amounts
payable in respect of the Senior Subordinated Notes, the Company shall have no
right to elect to redeem the Notes pursuant to this Section 3.1 (and shall have
no right to make any payment on the Notes in respect thereof) unless the Company
can incur one dollar of additional Debt (as such term is defined in the Senior
Subordinated Notes Purchase Agreement) pursuant to Section 11.1(i) of the Senior
Subordinated Notes Purchase Agreement at the time of and after giving effect to
such redemption and the payment of the Notes in respect thereof.
If the Company elects to redeem Notes pursuant to this Section 3.1 and
paragraph eight of the Notes, it shall notify the Trustee in writing at least 45
days prior to the Redemption Date as fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee) of the Redemption Date and the
principal amount of Notes to be redeemed and shall deliver to the Trustee such
documentation and records as shall enable the Trustee to select the Notes to be
redeemed pursuant to Section 3.2. If fewer than all of the Notes are to be
redeemed, the record date relating to such redemption shall be selected by the
Company and given to the Trustee, which record date shall not be less than ten
days after the date of notice to the Trustee.
SECTION 3.2. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the Trustee shall, not
more than 60 days prior to the Redemption Date, select the Notes to be redeemed
by lot or by a method the Trustee considers fair and appropriate; provided,
however, that such method is not prohibited by any stock exchange or automated
quotations system on which the Notes are then listed or traded. The Trustee
shall make the selection from the Notes outstanding and not previously called
for redemption. The Trustee shall select for redemption portions of the
principal of Notes that have denominations larger than $1,000. Provisions of
this Indenture that apply to Notes called for redemption also apply to portions
of Notes called for redemption.
SECTION 3.3. Notice of Redemption.
At least 15 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first-class
mail to the Trustee and to each Holder of Notes to be redeemed at such Holder's
address as it appears on the Note register.
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The notice shall identify the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the then current Conversion Price;
(4) the name and address of the Paying Agent and the Conversion Agent;
(5) that Notes called for redemption must be presented and surrendered to
the Paying Agent to collect the Redemption Price;
(6) that the Notes called for redemption may be converted at any time
before the close of business on the fifth Business Day immediately preceding the
Redemption Date;
(7) that Holders who wish to convert Notes must satisfy the requirements in
paragraph 11 of the Notes;
(8) that, unless the Company defaults in making the redemption payment, the
only remaining right of the Holder shall be to receive payment of the Redemption
Price upon presentation and surrender to the Paying Agent of the Notes;
(9) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the Redemption Date, upon
presentation and surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion thereof will be issued; and
(10) that interest on Notes called for redemption ceases to accrue on and
after the Redemption Date.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become due
and payable on the Redemption Date and at the Redemption Price stated in the
notice, except for Notes that are converted in accordance with the provisions of
Section 15.1. Upon presentation and surrender to the Paying Agent, Notes called
for redemption shall be paid at the Redemption Price, plus accrued interest up
to but not including the Redemption Date.
SECTION 3.5. Deposit of Redemption Price.
On or before 10:00 a.m. New York City time on any Redemption Date, the
Company shall deposit with the Paying Agent money sufficient to pay the
Redemption Price of and accrued
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interest on all Notes to be redeemed on that date, other than Notes or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation or have been converted. The Paying Agent
shall promptly return to the Company any money not required for that purpose
because of the conversion of Notes pursuant to Article XV or otherwise. If such
money is instead held by the Company or an Affiliate of the Company in trust and
is not required for such purpose, it shall be discharged from the trust.
SECTION 3.6. Notes Redeemed in Part.
Upon presentation and surrender of a Note that is redeemed in part, the
Company shall execute and the Trustee shall authenticate for and deliver to the
Holder a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Notwithstanding the foregoing, the Trustee shall not pay the Redemption
Price of any Notes or mail any notice of redemption during the continuance of a
default in payment of interest on the Notes or of any Event of Default of which
a Trust Officer has knowledge. If any Note called for redemption shall not be so
paid upon surrender thereof for redemption, the principal and premium, if any,
shall, until paid or duly provided for, bear interest from the date fixed for
redemption at the rate borne by the Note and such Note shall remain convertible
into Common Stock until the principal and premium, if any, shall have been paid
or duly provided for.
SECTION 3.7. Conversion Arrangement on Call for Redemption.
In connection with any redemption of Notes, the Company may
arrange for the purchase and conversion of any Notes by an agreement with one or
more investment bankers or other purchasers to purchase such Notes by paying to
the Trustee in trust for the Holders, on or before the date fixed for
redemption, an amount not less than the applicable Redemption Price, together
with interest accrued to (but excluding) that date fixed for redemption, of such
Notes. Notwithstanding anything to the contrary contained in this Article III,
the obligation of the Company to pay the Redemption Price of such Notes,
together with interest accrued to (but excluding) the date fixed for redemption,
shall be deemed to be satisfied and discharged to the extent such amount is so
paid by such purchasers. If such an agreement is entered into (a copy of which
shall be filed with the Trustee prior to the date fixed for redemption), any
Notes not duly surrendered for conversion by the Holders thereof may, at the
option of the Company, be deemed, to the fullest extent permitted by law,
acquired by such purchasers from such Holders and surrendered by such purchasers
for conversions, all as of immediately prior to the close of business on the
date fixed for redemption (and the right to convert any such Notes shall be
extended through such time), subject to payment of the above amount as
aforesaid. At the written direction of the Company, the Trustee shall hold and
dispose of any such amount paid to it in the same manner as it would monies
deposited with it by the Company for the redemption of Notes. Without the
Trustee's prior written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Notes shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Trustee as set forth in this Indenture, and the Company agrees to indemnify
the Trustee from, and hold it harmless against,
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any loss, liability or expense arising out of or in connection with any such
arrangement for the purchase and conversion of any Notes between the Company and
such purchasers to which the Trustee has not consented in writing, including the
costs and expenses, including reasonable legal fees, incurred by the Trustee in
the defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF NOTES
SECTION 4.1. Notes Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each Holder of Notes
issued hereunder by his or her acceptance thereof likewise covenants and agrees,
that all Notes shall be issued subject to the provisions of this Article IV; and
each Person holding any Note, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions.
The payment of the principal of, or premium, if any, and interest on all
Notes issued hereunder (including, without limitation, in connection with any
redemption of Notes) shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness, whether outstanding at the date of this
Indenture or thereafter created, incurred, assumed or guaranteed.
SECTION 4.2. Payments to Holders.
No payment shall be made with respect to the principal of, or premium, if
any, or interest on the Notes (including, but not limited to, the Redemption
Price with respect to the Notes to be called for redemption in accordance with
Section 3.2 or submitted for repurchase in accordance with Section 16.2, as the
case, may be, as provided in the Indenture), if:
(a) a default in the payment of principal, premium, interest, rent or other
obligations due on any Senior Indebtedness occurs and is continuing (or, in the
case of Senior Indebtedness for which there is a period of grace, in the event
of such a default that continues beyond the period of grace, if any, specified
in the instrument or lease evidencing such Senior Indebtedness), unless and
until such default shall have been cured or waived or shall have ceased to
exist, or
(b) a default, other than a payment default, on any Designated Senior
Indebtedness occurs and is continuing that then permits any holders of such
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a written notice of the default (a "Payment Blockage Notice") from a
Representative or the Company.
If the Trustee receives any Payment Blockage Notice pursuant to clause (b)
above, no subsequent Payment Blockage Notice shall be effective for purposes of
this Section unless and
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until (A) at least 365 days shall have elapsed since the initial effectiveness
of the immediately prior Payment Blockage Notice, and (B) all scheduled payments
of principal, premium, if any, and interest on the Notes that have come due have
been paid in full in cash. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee shall be,
or be made, the basis for a subsequent Payment Blockage Notice.
The Company, after providing written notice to the Trustee, shall resume
payments on and distributions in respect of the Notes upon the earlier of:
(a) the date upon which the default is cured or waived or
ceases to exist, or
(b) in the case of a default referred to in clause (b) above, 179 days pass
after notice is received if the maturity of such Designated Senior Indebtedness
has not been accelerated;
unless this Article IV otherwise prohibits the payment or distribution at
the time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment in form
and substance satisfactory to the holders of such Senior Indebtedness, or
payment thereof in accordance with its terms provided for in cash or other
payment in form and substance satisfactory to the holders of such Senior
Indebtedness, before any payment is made on account of the principal of,
premium, if any, or interest on the Notes (except payments made pursuant to
Article XIII from monies deposited with the Trustee pursuant thereto prior to
commencement of proceedings for such dissolution, winding up, liquidation or
reorganization) and upon any such dissolution or winding up or liquidation or
reorganization of the Company or bankruptcy, insolvency, receivership or other
proceeding, any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to which the
holders of the Notes or the Trustee would be entitled, except for the provision
of this Article IV, shall (except as aforesaid) be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the holders of the Notes or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or as otherwise required by
law or a court order) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full, in cash or other payment in form and substance satisfactory to the holders
of such Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any payment or
distribution or provision therefor is made to the holders of the Notes or to the
Trustee.
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For purposes of this Article IV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article IV with respect to
the Notes to the payment of all Senior Indebtedness which may at the time be
outstanding provided that (i) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from any reorganization or readjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than leases which are
not assumed by the Company or the new corporation, as the case may be) are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a dissolution,
winding up, liquidation or reorganization for the purposes of this Section 4.2
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article XII.
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest on the
Notes (including, but not limited to, the Redemption Price with respect to the
Notes, called for redemption in accordance with Section 3.2 or submitted for
repurchase in accordance with Section 16.2, as the case may be, as provided in
the Indenture), except payments and distributions made by the Trustee as
permitted by the first or second paragraph of Section 4.5, until all Senior
Indebtedness has been paid in full in cash or other payment in form and
substance satisfactory to the holders of Senior Indebtedness or such
acceleration is rescinded in accordance with the terms of this Indenture. If
payment of the Notes is accelerated because of an Event of Default, the Company
shall promptly notify holders of Senior Indebtedness of the acceleration.
In the event that, notwithstanding the foregoing provisions, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing, shall be received by the Trustee or the
Holders before all Senior Indebtedness is paid in full in cash or other payment
in form and substance satisfactory to the holders of such Senior Indebtedness,
or provision is made for such payment thereof in accordance with its terms in
cash or other payment in form and substance satisfactory to the holders of such
Senior Indebtedness, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holders of Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may
appear, as calculated by the Company, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in cash or other payment in form and
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substance satisfactory to the holders of such Senior Indebtedness, after giving
effect to any concurrent payment or distribution to or for the holders of such
Senior Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject to
the right to rescind and annul acceleration of the notice pursuant to Section
7.1
SECTION 4.3. Notes to Be Subrogated to Rights of Holders of
Senior Indebtedness.
Subject to the prior payment in full of all Senior Indebtedness then due,
the Holders shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until the principal of and interest on the
Notes shall be paid in full, and, for purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness of assets, whether in
cash, property or securities, distributable to the holders of Senior
Indebtedness under the provisions hereof to which the Holders would be entitled
except for the provisions of this Article IV, and no payment pursuant to the
provisions of this Article IV to the holders of Senior Indebtedness by the
Holders shall, as among the Company, its creditors other than the holders of
Senior Indebtedness, and the Holders, be deemed to be a payment by the Company
to or on account of the Notes, it being understood that the provisions of this
Article IV are, and are intended, solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of Senior
Indebtedness, on the other hand.
SECTION 4.4. Obligations of the Company Unconditional.
Nothing contained in this Article IV or elsewhere in this Indenture or in
any Note is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and interest on the Notes, as the same shall become due and payable
in accordance with the terms of the Notes, or to affect the relative rights of
the Holders and other creditors of the Company other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
the happening of an Event of Default under this Indenture, subject to the
provisions of Article VIII and this Article IV.
SECTION 4.5. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Notes. Notwithstanding the provisions of this Article
IV or any other provision of this Indenture, the Trustee shall not at any time
be charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee, unless and until a Trust Officer of
the Trustee shall have received written notice thereof from the Company or from
the holder or holders of Senior Indebtedness or from their Representative or
Representatives; and, prior to the
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receipt of any such written notice, the Trustee, subject to the provisions of
Sections 8.1 and 8.2, shall be entitled to assume conclusively that such facts
do not exist.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself or herself to be a holder of Senior
Indebtedness (or a Representative of such holder) to establish that such notice
has been given by a holder of Senior Indebtedness or a Representative of any
such holder. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article IV, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent of which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
each Person under this Article IV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of Person to receive such payment.
SECTION 4.6. Application by Trustee of Monies Deposited With It.
Money or U.S. Government Obligations deposited with the Trustee or any
Paying Agent (whether or not in trust) for the payment of the principal of or
interest on any Notes shall be subject to the provisions of Sections 4.1, 4.2,
4.3 and 4.4; except that, if two (2) Business Days prior to the date on which by
the terms of this Indenture any such monies or U.S. Government Obligations may
become payable for any purpose (including, without limitation, the payment of
either the principal of or interest on any Note) the Trustee shall not have
received with respect to such monies or U.S. Government Obligations the notice
provided for in Section 4.5, then the Trustee or any Paying Agent shall have
full power and authority to receive such monies and to apply such monies to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such date. This Section 4.6
shall be construed solely for the benefit of the Trustee and the Paying Agent
and shall not otherwise affect the rights that holders of Senior Indebtedness
may have to recover any such payments from the Holders in accordance with the
provisions of this Article IV.
SECTION 4.7 Reinstatement.
If, at any time, all or part of any payment with respect to Senior
Indebtedness theretofore made by the Company is rescinded for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of the Company), the subordination provisions set forth in this
Article IV shall continue to be effective or be reinstated, as the case may be,
all as though such payment had not been made.
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SECTION 4.8 Rights of Holders of Senior Indebtedness.
Each Holder agrees and consents that without notice to or assent by
Holders, and without affecting the liabilities and obligations of the Company
and the rights and benefits of the holders of Senior Indebtedness set forth in
this Article IV:
(a) the obligations and liabilities of the Company with respect to the
Senior Indebtedness may, from time to time, be increased, renewed, refinanced,
extended, modified, amended, restated, compromised, supplemented, terminated,
waived or released;
(b) the holders of Senior Indebtedness, and any Representative or
Representatives acting on behalf thereof, may exercise or refrain from
exercising any right, remedy or power granted by or in connection with any
agreements relating to the Senior Indebtedness; and
(c) any balance or balances of funds with any holder of Senior Indebtedness
at any time outstanding to the credit of the Company may, from time to time, in
whole or in part, be surrendered or released, all as the holders of any Senior
Indebtedness, or any Representative or Representatives acting on behalf thereof,
may deem advisable, and all without impairing, abridging, diminishing, releasing
or affecting the subordination of the Notes to Senior Indebtedness.
SECTION 4.9 No Modification, etc.
The provisions of this Article IV are for the benefit of the holders of
Senior Indebtedness, and, so long as any Senior Indebtedness remains
outstanding, may not be modified, rescinded or canceled in whole or in part
without the prior written consent thereto of all holders of Senior Indebtedness.
SECTION 4.10 Specific Performance.
The Company and the Holders hereby expressly agree that the holders of
Senior Indebtedness may enforce any and all rights derived herein by suit,
either in equity or at law, for specific performance of any agreement contained
in this Article IV or for judgment at law and any other relief whatsoever
appropriate to such action or procedure.
SECTION 4.11. Subordination Rights Not Impaired by Acts or Omissions of
Company or holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with. The holders of any Senior Indebtedness may extend,
renew, modify or amend the terms of such Senior Indebtedness or any security
therefor and release, sell
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or exchange such security and otherwise deal freely with the Company, all
without affecting the liabilities and obligations of the parties to this
Indenture or the Holders. No provision in any supplement to, modification of or
replacement of this Indenture which affects the rights or obligations of the
holders of the Senior Indebtedness shall be effective against the holders of the
Senior Indebtedness unless the holders of such Senior Indebtedness (required
pursuant to the terms of such Senior Indebtedness to give such consent) have
consented thereto.
SECTION 4.12. Trustee to Effectuate Subordination.
Each Holder of a Note by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article IV and
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 4.13 Proofs of Claim.
So long as any Senior Indebtedness is outstanding, if any Event of Default
under Section 7.1(f) or (g) occurs, and if any Holder of Notes fails to file any
claim or proof of claim necessary to enforce the obligations of the Company in
respect of such Notes at least ten days before the time to file such claim or
proof of claim has expired, any holder of Senior Indebtedness may (but shall
have no obligation to) file any such claim or proof of claim, and each Holder of
Notes hereby acknowledges that any holder of Senior Indebtedness may so file any
such claims and proofs of claim.
SECTION 4.14. Right of Trustee to Hold Senior Indebtedness.
The Trustee, in its individual capacity, shall be entitled to all of the
rights set forth in this Article IV in respect of any Senior Indebtedness at any
time held by it to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee of any
of its rights as such holder. Nothing in this Article IV shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 8.6.
SECTION 4.15. Article IV Not to Prevent Events of Default.
The failure to make a payment on account of the principal of or interest on
the Notes by reason of any provision in this Article IV shall not be construed
as preventing the occurrence of an Event of Default under Section 7.1.
SECTION 4.16. No Fiduciary Duty Created to Holders of Senior Indebtedness.
Notwithstanding any other provision in this Article IV, the Trustee shall
not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness by
virtue of the provisions of this Article IV and shall not be liable to any such
holders if it shall in good faith mistakenly pay over or distribute to Holders
of Notes or to the Company or to any other Person cash, property or securities
to which holders of Senior Indebtedness shall be entitled by virtue of this
Article IV or
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otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Article IV against the Trustee.
SECTION 4.17. Article Applicable to Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article IV shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article IV in addition to or in place of the Trustee. Notwithstanding
the foregoing, neither the Company nor any Affiliate shall be eligible to (i)
serve as Paying Agent or (ii) assume responsibilities similar to those typically
performed by a paying agent.
ARTICLE V
COVENANTS
SECTION 5.1. Payment of Notes.
The Company shall promptly make all payments in respect of the Notes on the
dates and in the manner provided in the Notes and this Indenture. An installment
of principal or interest shall be considered paid on the date it is due if the
Trustee or Paying Agent (other than the Company or an Affiliate of the Company)
holds on that date money deposited by the Company or an Affiliate thereof and
sufficient to pay the installment. The Company shall pay interest on overdue
principal at the rate borne by the Notes per annum; it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
SECTION 5.2. SEC Reports.
The Company shall file all reports and other information and documents
which it is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, and within 15 days after it files them with the SEC, the Company
shall file copies of all such reports, information and other documents with the
Trustee. The Company will cause any quarterly and annual reports which it mails
to its shareholders to be mailed to the Holders.
During the period beginning on the latest date of the original issuance of
the Notes and ending on the date that is two (2) years from such date, the
Company covenants and agrees that it shall, during any period in which it is not
subject to Section 13 or 15(d) under the Exchange Act, make available to any
Holder or beneficial Holder of Notes or any Common Stock issued upon conversion
thereof which continue to be Restricted Securities in connection with any sale
thereof and any prospective purchaser of Notes or such Common Stock from such
Holder or beneficial Holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the
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request of any Holder or beneficial Holder of such Notes or such Common Stock
and it will take such further action as any Holder or beneficial Holder of such
Notes or such Common Stock may reasonably request, all to the extent required
from time to time to enable such Holder or beneficial Holder to sell its Notes
or Common Stock without registration under the Securities Act within the
limitation of the exemption provided by Rule 144A, as such Rule may be amended
from time to time. Upon the request of any Holder or any beneficial Holder of
the Notes or such Common Stock, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
SECTION 5.3. Maintenance of Office or Agency.
The Company will maintain in Richmond, Virginia, an office or agency (which
may be the Corporate Trust Office) where the Notes may be surrendered for
registration of transfer or exchange or for presentation for payment or for
conversion or redemption and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency not designated or appointed by the Trustee.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office or the office or agency of the Trustee in Charlotte,
North Carolina.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in Richmond, Virginia, for such
purposes. The Company will give prompt written notice to the holders of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates each of the Corporate Trust Office
of the Trustee and the office or agency of the Trustee in Charlotte, North
Carolina, as one such office or agency of the Company for each of the aforesaid
purposes.
SECTION 5.4. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claims or
take the benefit or advantage of, any stay, extension or usury law or other law
which would prohibit or forgive the Company from paying all or any portion of
the principal of, premium, if any, or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture, and the Company (to
the extent it may lawfully do so) hereby expressly waives all benefits or
advantage of any such law, and covenants that it will not, by resort to any such
law, hinder, delay or impede the execution of any power
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herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law has been enacted.
SECTION 5.5. Liquidation.
Subject to the provisions of Article IV, so far as they may be applicable
hereto, the Board of Directors or the shareholders of the Company may not adopt
a plan of liquidation, which plan provides for, contemplates or the effectuation
of which is preceded by (a) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company otherwise than
substantially as an entirety (any such sale, lease, conveyance or other
disposition substantially as an entirety being governed by Article VII) and (b)
the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and of the remaining assets of the
Company to the holders of the capital stock of the Company, unless the Company
shall in connection with the adoption of such plan make provision for, or agree
that prior to making any liquidating distributions it will make provision for,
the satisfaction of the Company's obligations hereunder and under the Notes as
to the payment of the principal and interest thereof. The Company shall be
deemed to make provision for such payments only if (1) the Company irrevocably
deposits in trust with the Trustee money or U.S. Government Obligations maturing
as to principal and interest in such amounts and at such times as are
sufficient, without consideration of any reinvestment of such interest, to pay
the principal of and interest on the Notes then outstanding to maturity and to
pay all other sums payable by it hereunder or (2) there is an express assumption
of the due and punctual payment of the Company's obligations hereunder and under
the Notes and the performance and observance of all covenants and conditions to
be performed by the Company hereunder, by the execution and delivery of a
supplemental indenture in form satisfactory to the Trustee by a Person who
acquires, or will acquire (otherwise than pursuant to a lease), all or
substantially all of the assets of the Company, and which Person will have
assets (immediately after the acquisition) and aggregate earnings (for such
Person's four full fiscal quarters immediately preceding such acquisition) at
least equal to the assets of the Company (immediately preceding such
acquisition) and the aggregate earnings of the Company (for its four (4) full
fiscal quarters immediately preceding the acquisition), respectively, and which
is a corporation organized under the laws of the United States, any State
thereof or the District of Columbia; provided, however, that the Company shall
not make any liquidating distribution until after the Company (x) has certified
to the Trustee with an Officers' Certificate at least five (5) days prior to the
making of any liquidating distribution that it has complied with the provisions
of this Section 5.5 and (y) delivered to the Trustee an Opinion of Counsel that
all conditions precedent to such liquidation have been complied with.
SECTION 5.6. Compliance Certificates.
The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company, an Officers' Certificate as to the signer's
knowledge of the Company's compliance with all conditions and covenants on its
part contained in this Indenture and stating whether or not the signer knows of
any default or Event of Default. If such signer knows of such
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a default or Event of Default, the Officers' Certificate shall describe the
default or Event of Default and the efforts to remedy the same. For the purposes
of this Section 5.6, compliance shall be determined without regard to any grace
period or requirement of notice provided pursuant to the terms of this
Indenture. The Officers' Certificate need not comply with Section 17.5 hereof.
SECTION 5.7. Notice of Defaults.
In the event (a) that Indebtedness of the Company in an aggregate amount in
excess of $10,000,000 is declared due and payable before its maturity because of
the occurrence of any default under such Indebtedness, or (b) of the occurrence
of any event which, with the giving of notice or the passage of time, or both,
would entitle the holder or holders of such Indebtedness to declare such
Indebtedness due and payable before its maturity, the Company will promptly give
written notice to the Trustee of such declaration.
SECTION 5.8. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company, directly or by reason
of its ownership of any Subsidiary or upon the income, profits or property of
the Company and (b) all material lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a lien upon the property of the
Company; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which adequate provision has been made.
SECTION 5.9. Corporate Existence.
Subject to Article XII, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and rights (charter and statutory); provided, however, that the Company shall
not be required to preserve any right if the Board of Directors shall determine
in good faith that the preservation is no longer desirable in the conduct of the
Company's business and that the loss thereof is not, and will not be, adverse in
any material respect to the Holders.
SECTION 5.10. Maintenance of Properties.
Subject to Section 5.5, the Company and its Subsidiaries
will cause all material properties (real and personal) owned, leased or licensed
in the conduct of their business to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof and thereto, all as in the reasonable judgment of the Board
of Directors may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times while any
Notes are outstanding, provided, however, that
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nothing in this Section 5.10 shall prevent the Company and its Subsidiaries from
discontinuing the maintenance of any such properties if, in the reasonable
judgment of the Board of Directors, such discontinuance is desirable in the
conduct of the Company's business and is not, and will not be, adverse in any
material respect to the Holders.
SECTION 5.11. Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS
BY THE TRUSTEE
SECTION 6.1. Holders' Lists.
The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee, semiannually, not more than 15 days after each April 1
and October 1 in each year beginning with 1998, and at such other times as the
Trustee may request in writing, within 30 days after receipt by the Company of
any such request (or such lesser time as the Trustee may reasonably request in
order to enable it to timely provide any notice to be provided by it hereunder),
a list in such form as the Trustee may reasonably require of the names and
addresses of the Holders of Notes as of a date not more than 15 days (or such
other date as the Trustee may reasonably request in order to so provide any such
notices) prior to the time such information is furnished, except that no such
list need be furnished so long as the Trustee is acting as Note Registrar.
SECTION 6.2. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of
Notes contained in the most recent list furnished to it as provided in Section
6.1 or maintained by the Trustee in its capacity as Note Registrar, if so
acting. The Trustee may destroy any list furnished to it as provided in Section
6.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders of Notes with
respect to their rights under this Indenture or under the Notes, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any Agent
of either of them shall
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be held accountable by reason of any disclosure of information as to names and
addresses of Holders of Notes made pursuant to the Trust Indenture Act.
SECTION 6.3. Reports by Trustee.
(a) Within 60 days after December 31 of each year commencing with the year
1997, the Trustee shall transmit to Holders of Notes such reports dated as of
December 31 of the year in which such reports are made concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
Holders of Notes, be filed by the Trustee with each stock exchange or automated
quotation system upon which the Notes may be listed or traded with the Company.
The Company will notify the Trustee in writing within a reasonable time if the
Notes are listed on any stock exchange or automated quotation system.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON AN EVENT OF DEFAULT
SECTION 7.1. Events of Default.
In case one or more of the following Events of Default (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest upon any of the
Notes as and when the same shall become due and payable, and continuance of such
default for a period of 30 days, whether or not such payment is permitted under
Article IV hereof; or
(b) default in the payment of the principal of or premium, if any, on any
of the Notes as and when the same shall become due and payable either at
maturity or in connection with any redemption pursuant to Article III or
repurchase pursuant to Article XVI, by acceleration or otherwise, whether or not
such payment is permitted under Article IV hereof; or
(c) failure on the part of the Company duly to observe or perform any other
of the covenants or agreements on the part of the Company in the Notes or in
this Indenture (other than a covenant or agreement a default in whose
performance or whose breach is elsewhere in this Section 7.1 specifically dealt
with) continued for a period of 60 days after the date on which written notice
of such failure, requiring the Company to remedy the same, shall have been given
to the Company by theTrustee, or to the Company and a Trust Officer of the
Trustee by the
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Holders of at least 25% in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4; or
(d) failure on the part of the Company or any Subsidiary with respect to
its obligation to pay principal of or interest on Indebtedness for borrowed
money which default shall have resulted in Indebtedness in an amount in excess
of $10,000,000; or
(e) default by the Company with respect to any Indebtedness for borrowed
money of the Company, which default results in acceleration of any such
Indebtedness which is in an amount of in excess of $10,000,000 without such
Indebtedness having been discharged, or such acceleration having been rescinded
or annulled within the applicable grace period; or
(f) the Company shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(g) an involuntary case or other proceeding shall be commenced against the
Company seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 consecutive days; or
(h) the entry by a court having jurisdiction in the premises of a final
judgment, decree or order against the Company or any Subsidiary which shall
require the payment by the Company or any Subsidiary of an amount (to the extent
not covered by insurance) in excess of $10,000,000 and the continuance of any
such judgment, decree or order unstayed or unsatisfied and in effect for a
period of 60 consecutive days which is not being contested in good faith by
appropriate judicial proceedings;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(f) or (g)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 9.4, by notice in writing to the Company
(and to the Trustee if given by Holders), may declare the principal of all the
Notes and the interest accrued thereon to be due and payable immediately, and
upon any such declaration the same shall become and shall be immediately due and
payable, anything in this Indenture or in the Notes contained to the contrary
notwithstanding. If an Event of Default specified in Section 7.1(f) or (g)
occurs, the principal of all the Notes and the interest accrued thereon shall be
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immediately and automatically due and payable without necessity of further
action. This provision, however, is subject to the condition that if, at any
time after the decree for the payment of the monies due shall have been obtained
or entered as hereinafter provided, the Company shall pay or shall deposit with
the Trustee a sum sufficient to pay all matured installments of interest upon
all Notes and the principal of and premium, if any, on any and all Notes which
shall have become due otherwise than by acceleration (with interest on overdue
installments of interest (to the extent that payment of such interest is
enforceable under applicable law) and on such principal and premium, if any, at
the rate borne by the Notes, to the date of such payment or deposit) and amounts
due to the Trustee pursuant to Section 8.6, and if any and all defaults under
this Indenture, other than the nonpayment of principal of and premium, if any,
and accrued interest on Notes which shall have become due by acceleration, shall
have been cured or waived pursuant to Section 7.7, then and in every such case
the Holders of a majority in aggregate principal amount of the Notes then
outstanding determined in accordance with Section 9.4, by written notice to the
Company and to the Trustee, may waive all defaults or Events of Default and
rescind and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or Event of Default, or shall impair any right consequent thereon. The Company
shall notify a Trust Officer of the Trustee, promptly upon becoming aware
thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Holders of Notes, and the Trustee shall be restored respectively to
their several positions and rights hereunder and all rights, remedies and powers
of the Company, the Holders of Notes, and the Trustee shall continue as though
no such proceeding had been taken.
SECTION 7.2. Payment of Notes on Default; Suit Therefor.
The Company covenants that (a) in case default shall be made in the payment
of any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of 30
days, or (b) in case default shall be made in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall have become due
and payable, whether at maturity of the Notes or in connection with any
redemption or repurchase, under this Indenture, by declaration or otherwise,
then, upon demand of the Trustee, the Company will pay to the Trustee, for the
benefit of the Holders, the whole amount that then shall have become due and
payable on all such Notes for principal and premium, if any, or interest, or
both, as the case may be, with interest upon the overdue principal and premium,
if any, and (to the extent that payment of such interest is enforceable under
applicable law) upon the overdue installments of interest at the rate borne by
the Notes and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including reasonable compensation
to the Trustee, its agents, attorneys and counsel, and any expenses or
liabilities incurred by the Trustee hereunder. Until such demand by the
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Trustee, the Company may pay the principal of and premium, if any, and interest
on the Notes to the Holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as Trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
of the Holders allowed in such judicial proceedings relative to the Company or
any other obligor on the Notes, its or their creditors, or its or their
property, and to collect and receive any monies or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of any amounts due the Trustee under Section 8.6, and any receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, custodian or similar
official is hereby authorized by each of the Holders to make such payments to
the Trustee, and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due it
for reasonable compensation, expenses, advances and disbursements, including
counsel fees incurred by it up to the date of such distribution. To the extent
that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the Holders may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or under
any of the Notes, may be enforced by the Trustee without the possession of any
of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express
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trust, and any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders.
In any proceedings brought by the Trustee (and in any proceedings involving
the interpretation of any provision of this Indenture to which the Trustee shall
be a party), the Trustee shall be held to represent all the Holders, and it
shall not be necessary to make any Holders parties to any such proceedings.
SECTION 7.3. Application of Monies Collected by Trustee.
Any monies collected by the Trustee pursuant to this Article VII shall be
applied in the order following, at the date or dates fixed by the Trustee for
the distribution of such monies, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:
First: to the payment of all amounts due the Trustee under
Section 8.6;
Second: subject to the provisions of Article IV, in case the principal of
the outstanding Notes shall not have become due and be unpaid, to the payment of
interest on the Notes in default in the order of the maturity of the
installments of such interest, with interest (to the extent that such interest
has been collected by the Trustee) upon the overdue installments of interest at
the rate borne by the Notes, such payments to be made ratably to the Persons
entitled thereto;
Third: subject to the provisions of Article IV, in case the principal of
the outstanding Notes shall have become due, by declaration or otherwise, and be
unpaid, to the payment of the whole amount then owing and unpaid upon the Notes
for principal and premium, if any, and interest, with interest on the overdue
principal and premium, if any, and (to the extent that such interest has been
collected by the Trustee) upon overdue payments of interest at the rate borne by
the Notes, and in case such monies shall be insufficient to pay in full the
whole amounts so due and unpaid upon the Notes, then to the payment of such
principal and premium, if any, and interest without preference or priority of
principal and premium, if any, over interest, or of interest over principal and
premium, if any, or of any installment of interest over any other installment of
interest, or of any Note over any other Note, ratably to the aggregate of such
principal and premium, if any, and accrued and unpaid interest; and
Fourth: subject to the provisions of Article IV, to the payment of the
remainder, if any, to the Company or any other Person lawfully entitled thereto.
SECTION 7.4. Proceedings by Holders.
No Holder shall have any right by virtue of or by availing of any provision
of this Indenture to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such Holder previously shall
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have given to the Trustee written notice of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
not less than 25% in aggregate principal amount of the Notes then outstanding
determined in accordance with Section 9.4 shall have made written request upon
the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and no direction inconsistent with
such written request shall have been given to the Trustee pursuant to Section
7.7, it being understood and intended, and being expressly covenanted by the
taker and Holder of every Note with every other taker and Holder and the
Trustee, that no one or more Holders shall have any right in any manner whatever
by virtue of or by availing of any provision of this Indenture to affect,
disturb or prejudice the rights of any other Holder of Notes, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all Holders (except as otherwise
provided herein). For the protection and enforcement of this Section 7.4, each
and every Noteholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Note, the right of any Holder of any Note to receive payment of the
principal of and premium, if any, and interest on such Note, on or after the
respective due dates therefor, or to institute suit for the enforcement of any
such payment on or after such respective dates against the Company shall not be
impaired or affected without the consent of such Holder.
Anything in this Indenture or the Notes to the contrary notwithstanding,
the Holder of any Note, without the consent of either the Trustee or the Holder
of any other Note, in his own behalf and for his own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
SECTION 7.5. Proceedings by Trustee.
In case of an Event of Default, the Trustee may in its discretion proceed
to protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either by suit in equity or by action at
law or by proceeding in bankruptcy or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture, or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by law.
SECTION 7.6. Remedies Cumulative and Continuing.
Except as provided in the last paragraph of Section 2.9, all powers and
remedies given by this Article VII to the Trustee or to the Holders shall, to
the extent permitted by law, be deemed
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cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the Holders, by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained in this Indenture, and no delay or omission of the Trustee or of any
Holder of any of the Notes to exercise any right or power accruing upon any
default or Event of Default occurring and continuing as aforesaid shall impair
any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Holders.
SECTION 7.7. Direction of Proceedings and Waiver of Defaults by Majority
of Holders.
The Holders of a majority in aggregate principal amount of the Notes at the
time outstanding determined in accordance with Section 9.4 shall have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee, provided, however, that (a) such direction shall not be in conflict
with any rule of law or with this Indenture, and (b) the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction. The Holders of a majority in aggregate principal amount of the Notes
at the time outstanding determined in accordance with Section 9.4 may on behalf
of the Holders of all of the Notes waive any past default or Event of Default
hereunder and its consequences except (i) a default in the payment of interest
or premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock, (iii) a default in the payment
of the Redemption Price pursuant to Article III or repurchase price pursuant to
Article XVI or (iv) a default in respect of a covenant or provisions hereof
which under Article XI cannot be modified or amended without the consent of the
Holders of all Notes then outstanding. Upon any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder, but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by this Section
7.7, said default or Event of Default shall for all purposes of the Notes and
this Indenture be deemed to have been cured and to be not continuing, but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
SECTION 7.8. Notice of Defaults.
The Trustee shall, within 90 days after a Trust Officer has actual
knowledge of the occurrence of a default, mail to all Holders, as the names and
addresses of such Holders appear upon the Note register, notice of all defaults
known to a Trust Officer, unless such defaults shall have been cured or waived
before the giving of such notice and provided that, except in the case of
default in the payment of the principal of, or premium, if any, or interest on
any of the Notes, the Trustee shall be protected in withholding such notice if
and so long as a trust committee of
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directors and/or officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.
SECTION 7.9. Undertaking to Pay Costs.
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may, in its
discretion, require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant, provided that
the provisions of this Section 7.9 (to the extent permitted by law) shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Noteholder, or group of Holders, holding in the aggregate more than ten percent
in principal amount of the Notes at the time outstanding determined in
accordance with Section 9.4, or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of or premium, if any, or interest
on any Note on or after the due date therefor or to any suit for the enforcement
of the right to convert any Note in accordance with the provisions of Article XV
or to require the Company to repurchase any Note in accordance with Article XVI.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1. Duties and Responsibilities of Trustee.
The Trustee, prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trust Indenture Act, and the
Trustee shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this
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Indenture and no implied covenants or obligations shall be read into this
Indenture or the Trust Indenture Act against the Trustee; and
(2) in the absence of bad faith and willful misconduct on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of this
Indenture but, in the case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a Trust Officer or Officers, unless the Trustee was negligent in
ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of not less than a majority in principal amount of the Notes at the time
outstanding determined as provided in Section 9.4 relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture; and
(d) whether or not therein provided, every provision of this Indenture
relating to the conduct or affecting the liability of, or affording protection
to, the Trustee as Trustee, Paying Agent, Note Registrar, Custodian or
Conversion Agent shall be subject to the provisions of this Section.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers.
SECTION 8.2. Reliance on Documents, Opinions, Etc.
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, coupon or other paper or document believed
by it in good faith to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed) and any
resolution of the Board of Directors shall be sufficiently evidenced by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel, and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or omitted by it thereunder in good faith and in accordance
with such advice or Opinion of Counsel;
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(d) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby;
(e) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, Note or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by Agent or attorney, provided, however, that if the payments
within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liability as a condition to so
proceeding and the reasonable expenses of every such examination shall be paid
by the Company or, if paid by the Trustee or any predecessor Trustee, shall be
repaid by the Company upon demand;
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any Agent or attorney appointed by it with due care
hereunder; and
(g) the Trustee shall not be deemed to have notice of an Event of Default
or of any event or conditions which, with the giving of notice, the passage of
time, or both, might constitute an Event of Default unless (i) a Trust Officer
has received written notice thereof from the Company or any Noteholder or (ii) a
Trust Officer shall have actual knowledge thereof.
SECTION 8.3. No Responsibility for Recitals, Etc.
The recitals contained herein and in the Notes (except in the Trustee's
certificate of authentication) shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes. The Trustee shall not be accountable for the use or
application by the Company of any Notes or the proceeds of any Notes
authenticated and delivered by the Trustee in conformity with the provisions of
this Indenture.
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SECTION 8.4. Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes.
The Trustee, any Paying Agent, any Conversion Agent or Note Registrar, in
its individual or any other capacity, may become the owner or pledgee of Notes
with the same rights it would have if it were not Trustee, Paying Agent,
Conversion Agent or Note Registrar.
SECTION 8.5. Monies to Be Held in Trust.
Subject to the provisions of Section 13.4, all monies received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received. Money held by the Trustee in trust
thereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as may be agreed from time to time by the
Company and the Trustee.
SECTION 8.6. Compensation and Expenses of Trustee.
The Company covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, reasonable compensation for all services
rendered by it hereunder in any capacity (which shall not be limited by any
provision of law in regard to the compensation of a Trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances reasonably incurred or made
by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all Persons not regularly in its employ), except any such
expense, disbursement or advance as may arise from the Trustee's negligence,
willful misconduct, recklessness or bad faith. The Company also covenants to
indemnify the Trustee in any capacity under this Indenture and its agents and
any authenticating agent for, and to hold them harmless against, any loss,
liability or expense incurred without negligence, willful misconduct,
recklessness, or bad faith on the part of the Trustee or such Agent or
authenticating agent, as the case may be, and arising out of or in connection
with the offer and sale of the Notes or the acceptance or administration of this
trust or in any other capacity hereunder, including the costs and expenses of
defending themselves against any claim of liability in the premises. All
indemnifications and releases from liability granted hereunder to the Trustee
shall extend to its officers, directors, employees, agents, successors and
assigns. The obligations of the Company under this Section 8.6 to compensate or
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to that of the Notes
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of the Holders of particular Notes. The
obligation of the Company under this Section 8.6 shall survive the resignation
or removal of the Trustee and the satisfaction and discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur expenses
or render services after an Event of Default specified in Section 7.1(f) or (g)
occurs, the expenses and the
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compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.
SECTION 8.7. Officers' Certificate as Evidence.
Except as otherwise provided in Section 8.1, wherever in
the administration of the provisions of this Indenture, the Trustee shall deem
it necessary or desirable that a matter be proved or established prior to taking
or omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence,
willful misconduct, recklessness, or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officers' Certificate
delivered to the Trustee.
SECTION 8.8. Conflicting Interests of Trustee.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 8.9. Eligibility of Trustee.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and which
shall have (or, in the case of a corporation included in a bank holding company
system, the related bank holding company shall have) a combined capital and
surplus of at least $50,000,000. If such Person publishes reports of condition
at least annually, pursuant to law or to the requirements of any supervising or
examining authority, then for the purposes of this Section 8.9, the combined
capital and surplus of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 8.9, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article VIII.
SECTION 8.10. Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written notice of such
resignation to the Company and to the Holders of Notes. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor Trustee by
written instrument, in duplicate, executed by order of the Board of Directors,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and have accepted appointment within 60 days after the mailing of such
notice of resignation to the Holders, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee, or
any Noteholder who has been a bona fide Holder of a Note or Notes for at least
six months may, subject to the provisions of Section 7.9, on behalf of himself
and all others similarly situated, petition any such court for
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the appointment of a successor Trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
Trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has been a bona
fide Holder of a Note or Notes for at least six (6) months; or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written request
therefor by the Company or by any such Noteholder; or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint
a successor Trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee, or, subject to the
provisions of Section 7.9, any Noteholder who has been a bona fide Holder of a
Note or Notes for at least six (6) months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor Trustee.
(c) The Holders of a majority in aggregate principal amount of the
Notes at the time outstanding may at any time remove the Trustee and nominate a
successor Trustee which shall be deemed appointed as successor Trustee unless
within ten (10) days after notice to the Company of such nomination, the Company
objects thereto, in which case the Trustee so removed or any Noteholder, upon
the terms and conditions and otherwise as in Section 8.10(a) provided, may
petition any court of competent jurisdiction for an appointment of a successor
Trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor Trustee as
provided in Section 8.11 and payment of all fees and expenses owed to the
resigning or removed Trustee in accordance with Section 8.6.
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SECTION 8.11. Acceptance by Successor Trustee.
Any successor Trustee appointed as provided in Section 8.10 shall execute,
acknowledge and deliver to the Company and to its predecessor Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with like effect as if originally named as Trustee herein but, nevertheless, on
the written request of the Company or of its successor Trustee, the Trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of Section 8.6, execute and deliver an instrument transferring to
such successor Trustee all the rights and powers of the Trustee so ceasing to
act. Upon request of any such successor Trustee, the Company shall execute any
and all instruments in writing for more fully and certainly vesting in and
confirming to such successor Trustee all such rights and powers. Any Trustee
ceasing to act shall, nevertheless, retain a lien upon all property and funds
held or collected by such Trustee as such, except for funds held in trust for
the benefit of Holders of particular Notes, to secure any amounts then due it
pursuant to the provisions of Section 8.6.
No successor Trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance, such successor Trustee shall be
qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 8.11, the Company (or the former Trustee, at the written direction of
the Company) shall mail or cause to be mailed notice of the succession of such
Trustee hereunder the Holders of Notes at their addresses as they shall appear
on the Note register. If the Company fails to mail such notice within ten (10)
days after acceptance of appointment by the successor Trustee, the successor
Trustee shall cause such notice to be mailed at the expense of the Company.
SECTION 8.12. Succession by Merger, Etc.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee (including any trust created by this Indenture), shall
be the successor to the Trustee hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
in the case of any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, such corporation shall be qualified
under the provisions of Section 8.8 and eligible under the provisions of Section
8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor Trustee or
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authenticating agent appointed by such predecessor Trustee, and deliver such
Notes so authenticated and in case at that time any of the Notes shall not have
been authenticated, any successor to the Trustee or an authenticating agent
appointed by such successor Trustee may authenticate such Notes either in the
name of any predecessor Trustee hereunder or in the name of the successor
Trustee and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
SECTION 8.13. Limitation on Rights of Trustee as Creditor.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Notes), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of the claims
against the Company (or any such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
SECTION 9.1. Action by Holders.
When in this Indenture it is provided that the Holders of a specified
percentage in aggregate principal amount of the Notes may take any action
(including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time
of taking any such action, the Holders of such specified percentage have joined
therein may be evidenced (a) by any instrument or any number of instruments of
similar tenor executed by Holders in Person or by Agent or proxy appointed in
writing, or (b) by the record of the Holders of Notes voting in favor thereof at
any meeting of Holders duly called and held in accordance with the provisions of
Article X, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Holders. Whenever the Company or the Trustee
solicits the taking of any action by the Holders, the Company or the Trustee may
fix in advance of such solicitation, a date as the record date for determining
Holders entitled to take such action. The record date shall be not more than 15
days prior to the date of commencement of solicitation of such action.
SECTION 9.2. Proof of Execution by Holders.
Subject to the provisions of Sections 8.1, 8.2 and 10.5, proof of the
execution of any instrument by a Noteholder or his Agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The holding of Notes shall be provided by the registry of such
Notes or by a certificate of the Note Registrar.
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The record of any Holders' meeting shall be proved in the manner provided
in Section 10.6.
SECTION 9.3. Who are Deemed Absolute Owners.
The Company, any other obligor on the Notes, the Trustee,
any authenticating agent, any Paying Agent, any Conversion Agent and any Note
Registrar may deem the Person in whose name such Note shall be registered upon
the Note register to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest on such Note, for
conversion of such Note and for all other purposes and neither the Company nor
any authenticating agent nor any Note Registrar shall be affected by any notice
to the contrary. All such payments so made to any Holder for the time being, or
upon his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon such
Note.
SECTION 9.4. Company-Owned Notes Disregarded.
In determining whether the Holders of the requisite
aggregate principal amount of Notes have concurred in any direction, consent,
waiver or other action under this Indenture, Notes which are owned by the
Company or any other obligor on the Notes or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any other obligor on the Notes shall be disregarded
and deemed not to be outstanding for the purpose of any such determination,
provided that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent, waiver or other action,
only Notes which a Trust Officer knows are so owned shall be so disregarded.
Notes so owned which have been pledged in good faith may be regarded as
outstanding for the purpose of this Section 9.4 if the pledgee shall establish
to the satisfaction of the Trustee the pledgee's right to vote such Notes and
that the pledgee is not the Company, any other obligor on the Notes or a Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company of any such other obligor. In the case of a
dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee. Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above-described Persons and, subject to
Section 8.1, the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the fact that all
Notes not listed therein are outstanding for the purpose of any such
determination.
SECTION 9.5. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 9.1, of the taking of any action by the Holders
of the percentage in aggregate principal amount of the Notes specified in this
Indenture in connection with such action, any Holder of a
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Note which is shown by the evidence to be included in the Notes the Holders of
which have consented to such action may, by filing written notice with the
Trustee at its Corporate Trust Office and upon proof of holding as provided in
Section 9.2, revoke such action so far as it concerns such Note. Except as
aforesaid, any such action taken by the Holder of any Note shall be conclusive
and binding upon such Holder and upon all future Holders and owners of such Note
and of any Notes issued in exchange or substitution therefor, irrespective of
whether any notation in regard thereto is made upon such Note or any Note issued
in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
SECTION 10.1. Purpose of Meetings.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article X for any of the following purposes:
(a) to give any notice to the Company or to the Trustee or to give any
directions to the Trustee permitted under this Indenture, or to consent to the
waiving of any default or Event of Default hereunder and its consequences, or to
take any other action authorized to be taken by Holders pursuant to any of the
provisions of Article VII;
(b) to remove the Trustee and nominate a successor Trustee pursuant to the
provisions of Article VIII;
(c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 11.2; or
(d) to take any other action authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of the Notes under any
other provision of this Indenture or under applicable law.
SECTION 10.2. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Holders to take any action
specified in Section 10.1, to be held at such time and at such place at a
location within ten (10) miles of the Corporate Trust Office or in New York, New
York, as the Trustee shall determine. Notice of every meeting of the Holders,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting and the establishment of any record
date pursuant to Section 9.1, shall be mailed to Holders of Notes at their
addresses as they shall appear on the Note register. Such notice shall also be
mailed to the Company. Such notices shall be mailed not less than 20 nor more
than 90 days prior to the date fixed for the meeting.
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Any meeting of Holders shall be valid without notice if the Holders of all
Notes then outstanding are present in Person or by proxy or if notice is waived
before or after the meeting by the Holders of all Notes outstanding, and if the
Company and the Trustee are either present by duly authorized representatives or
have, before or after the meeting, waived notice.
SECTION 10.3. Call of Meetings by Company or Holders.
In case at any time the Company, pursuant to a resolution
of its Board of Directors, or the Holders of at least ten percent in aggregate
principal amount of the Notes then outstanding, shall have requested the Trustee
to call a meeting of Holders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Holders may determine the time and the place
at any location within 10 miles of the Corporate Trust Office or New York, New
York for such meeting and may call such meeting to take any action authorized in
Section 10.1, by mailing notice thereof as provided in Section 10.2.
SECTION 10.4. Qualifications for Voting.
To be entitled to vote at any meeting of Holders a Person
shall (a) be a Holder of one or more Notes on the record date pertaining to such
meeting or (b) be a Person appointed by an instrument in writing as proxy by a
Holder of one or more Notes. The only Persons who shall be entitled to be
present or to speak at any meeting of Holders shall be the Persons entitled to
vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
SECTION 10.5. Regulations.
Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders, in regard to proof of the holding of Notes and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the conduct of the meeting as
it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 10.3, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the Holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each Noteholder or
proxy Holder shall be entitled to one vote for each $1,000 principal amount of
Notes then outstanding and held or represented by him, provided, however, that
no vote shall be cast or counted at any meeting in
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respect of any Note challenged as not outstanding and ruled by the chairman of
the meeting to be not outstanding. The chairman of the meeting shall have no
right to vote other than by virtue of Notes held by him or instruments in
writing as aforesaid duly designating him as the proxy vote on behalf of other
Holders. Any meeting of Holders duly called pursuant to the provisions of
Section 10.2 or 10.3 may be adjourned from time to time by the Holders of a
majority of the aggregate principal amount of Notes represented at the meeting,
whether or not constituting a quorum, and the meeting may be held as so
adjourned without further notice.
SECTION 10.6. Voting.
The vote upon any resolution submitted to any meeting of Holders shall be
by written ballot on which shall be subscribed the signatures of the Holders of
Notes or of their representative by proxy and the principal amount of the Notes
held or represented by them. The permanent chairman of the meeting shall appoint
two inspectors of votes who shall count all votes cast at the meting for or
against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Holders
shall be prepared by the secretary of the meeting and there shall be attached to
said record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more Persons having knowledge of
the facts setting forth a copy of the notice of the meeting and showing that
said notice was mailed as provided in Section 10.2. The record shall show the
principal amount of the Notes voting in favor of or against any resolution. The
record shall be signed and verified by the affidavits of the permanent chairman
and secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 10.7. No Delay of Rights by Meeting.
Nothing in this Article X shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Holders under any of the provisions of this Indenture or of
the Notes.
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ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1. Supplemental Indentures Without Consent
of Holders.
The Company, when authorized by resolutions of the Board of Directors, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provisions with respect to the conversion rights of the
Holders of Notes pursuant to the requirements of Section 15.6 or the repurchase
obligations of the Company pursuant to the requirements of Section 16.5;
(b) subject to Article IV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company pursuant to Article
XII;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the Holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth provided, however, that in
respect of any such additional covenant, restriction or conditions such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrable as to principal only) and to provide
for exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provisions contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture which shall not materially adversely affect the
interests of the Holders;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
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(h) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualification of this Indenture
under the Trust Indenture Act, or under any similar federal statue hereafter
enacted.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
Holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
SECTION 11.2. Supplemental Indentures with Consent of Holders.
With the consent (evidenced as provided in Article IX) of the Holders of
not less than a majority in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4, the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the Holders,
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable on redemption thereof, or impair the right
of any Noteholder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable in any coin or
currency other than that provided in the Notes, or modify the provisions of this
Indenture with respect to the subordination of the Notes in a manner adverse to
the Holders in any material respect, or change the obligation of the Company to
repurchase any Note upon the occurrence of a Change in Control in a manner
adverse to the Holder of Notes, or impair the right to convert the Notes into
Common Stock in any material respect, without the consent of the Holder of each
Note so affected, or (ii) reduce the aforesaid percentage of Notes, the Holders
of which are required to consent to any such supplemental indentures, without
the consent of the Holders of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or an Assistant Secretary
authorizing the execution of any such supplemental indentures, and upon the
filing with the Trustee of evidence of the consent of Holders as aforesaid the
Trustee shall join with the Company in the execution of such supplemental
indentures unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
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It shall not be necessary for the consent of the Holders under this Section
11.2 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such consent shall approve the substance thereof.
SECTION 11.3. Effect of Supplemental Indenture.
Any supplemental indenture executed pursuant to the
provisions of this Article XI shall comply with the Trust Indenture Act, as then
in effect, provided that this Section 11.3 shall not require such supplemental
indenture or the Trustee to be qualified under the Trust Indenture Act prior to
the time such qualification is in fact required under the terms of the Trust
Indenture Act or the Indenture has been qualified under the Trust Indenture Act,
nor shall it constitute any admission or acknowledgment by any party to such
supplemental indenture that any such qualification is required prior to the time
such qualification is in fact required under the terms of the Trust Indenture
Act or the Indenture has been qualified under the Trust Indenture Act. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article XI, this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the Holders of Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 11.4. Notation on Notes.
Notes authenticated and delivered after the execution of
any supplemental indenture pursuant to the provisions of this Article XI may
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company or the Trustee shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Board
of Directors, to any modification of this Indenture contained in any such
supplemental indenture may, at the Company's expense, be prepared and executed
by the Company, authenticated by the Trustee (or an authenticating agent duly
appointed by the Trustee pursuant to Section 17.11) and delivered in exchange
for the Notes then outstanding, upon surrender of such Notes then outstanding.
SECTION 11.5. Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee.
The Trustee, subject to the provisions of Sections 8.1 and
8.2, may require an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
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ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 12.1. Company May Consolidate Etc. on Certain Terms.
Subject to the provisions of Sections 12.2 and 16.1, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of the Company with or into any other corporation or corporations (whether or
not affiliated with the Company), or successive consolidations or mergers in
which the Company or its successor or successors shall be a party or parties, or
shall prevent any sale, conveyance or lease (or successive sales, conveyances or
leases) of the property of the Company, substantially as an entirety, to any
other corporation (whether or not affiliated with the Company), authorized to
acquire and operate the same and which, in each case, shall be organized under
the laws of the United States of America, any state thereof or the District of
Columbia, provided, that upon any such consolidation, merger, sale, conveyance
or lease, if the Company is not the surviving entity, the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Notes, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by the Company, shall be expressly assumed, by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the corporation (if other than the Company) formed by such consolidation, or
into which the Company shall have been merged, or by the corporation which shall
have acquired or leased such property, and such supplemental indenture shall
provide for the applicable conversion rights set forth in Section 15.6.
SECTION 12.2. Successor Corporation to Be Substituted.
In case of any such consolidation, merger, sale, conveyance
or lease referenced in Section 12.1 and upon the assumption by any successor
corporation, by supplemental indenture required by Section 12.1, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as such. Such successor corporation
thereupon may cause to be signed and may issue either in its own name or in the
name of Kellstrom Industries, Inc. any or all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company and delivered to the
Trustee and, upon the order of such successor corporation instead of the Company
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or cause to be
authenticated and delivered, any Notes which previously shall have been signed
and delivered by the Officers of the Company to the Trustee for authentication,
and any Notes which such successor corporation thereafter shall cause to be
signed and delivered to the Trustee for that purpose. All the Notes so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Notes theretofore or thereafter issued in accordance with
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the terms of this Indenture as though all of such Notes had been issued at the
date of the execution hereof. In the event of any such consolidation, merger,
sale or conveyance (but not in the event of any such lease), the Person named as
the "Company" in the first paragraph of this Indenture or any successor which
shall thereafter have become such in the manner prescribed in this Article XII
shall be released from its liabilities as obligor and maker of the Notes and
from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
SECTION 12.3. Opinion of Counsel to Be Given Trustee.
The Trustee, subject to Sections 8.1 and 8.2, shall receive
an Officers' Certificate and an Opinion of Counsel as conclusive evidence that
any such consolidation, merger, sale, conveyance or lease and any such
assumption complies with the provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.1. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for cancellation all
Notes theretofore authenticated (other than any Notes which have been destroyed,
lost or stolen and in lieu of or in substitution for which other Notes shall
have been authenticated and delivered) and not theretofore canceled, or (b) all
the Notes not theretofore canceled or delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be canceled for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, monies
sufficient to pay at maturity or upon redemption of all of the Notes (other than
any Notes which shall have been mutilated, destroyed, lost or stolen and in lieu
of or in substitution for which other Notes shall have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and premium, if any, and interest due or to
become due to such date of maturity or Redemption Date, as the case may be, and
if in either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect (except as to (i) remaining rights of registration of transfer,
substitution and exchange and conversion of Notes, (ii) rights hereunder of
Holders to receive payments of principal of and premium, if any, and interest
on, the Notes and the other rights, duties and obligations of Holders, as
beneficiaries hereof with respect to the amounts, if any, so deposited with the
Trustee and (iii) the rights, obligations and immunities of the Trustee
hereunder), and the Trustee, on demand of the Company accompanied by an
Officers' Certificate and an Opinion of Counsel as
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required by Section 17.5 and at the cost of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Notes.
SECTION 13.2. Deposited Monies to Be Held in Trust by Trustee.
Subject to Section 13.4, all monies deposited with the Trustee pursuant to
Section 13.1 and not in violation of Article IV shall be held in trust for the
sole benefit of the Holders and not to be subject to the subordination
provisions of Article IV, and such monies hall be applied by the Trustee to the
payment, either directly or through any Paying Agent (including the Company if
acting as its own Paying Agent), to the Holders of the particular Notes for the
payment or redemption of which such monies have been deposited with the Trustee,
of all sums due and to become due thereon for principal and interest and
premium, if any.
SECTION 13.3. Paying Agent to Repay Monies Held.
Upon the satisfaction and discharge of this Indenture, all monies then held
by any Paying Agent for the Notes (other than the Trustee) shall, upon written
request of the Company, be repaid to the Company or paid to the Trustee, and
thereupon such Paying Agent shall be released from all further liability with
respect to such monies.
SECTION 13.4. Return of Unclaimed Monies.
Subject to the requirement of applicable law, any monies deposited with or
paid to the Trustee for payment of the principal of, premium, if any, or
interest on Notes and not applied but remaining unclaimed by the Holders of
Notes for two years after the date upon which the principal of, premium, if any,
or interest on such Notes, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee on demand and all
liability of the Trustee shall thereupon cease with respect to such monies, and
the Holder of any of the Notes shall thereafter look only to the Company for any
payment which such Holder may be entitled to collect except if an applicable
abandoned property law does not so permit.
SECTION 13.5. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 13.2 by reason of any order or judgment of any court of
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
13.1 until such time as the Trustee or the Paying Agent is permitted to apply
all such money in accordance with Section 13.2, provided, however, that if the
Company makes any payment of interest or premium, if any, on or principal of any
Note following the
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reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 14.1. Indenture and Notes Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or
interest on any Note, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any Note,
or because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, Officer, or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
SECTION 15.1. Right to Convert.
Subject to and upon compliance with the provisions of this Indenture, the
Holder of any Note shall have the right, at his option, at any time on or after
60 days following the latest date of original issuance of the Notes and prior to
the close of business on October 15, 2002 (except that, with respect to any Note
or portion of a Note which shall be called for redemption, such right shall
terminate, except as provided in Section 15.2 or Section 3.4, at the close of
business on the fifth Business Day preceding the date fixed for redemption of
such Note or portion of a Note, unless the Company shall default in payment due
upon redemption thereof) to convert the principal amount of any such Note, or
any portion of such principal amount which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares of Common
Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of the Note or portion thereof surrendered for conversion by
the Conversion Price in effect at such time, by surrender of the Note so to be
converted in whole or in part in the manner provided, together with any required
funds, in Section 15.2. A Holder of Notes is not entitled to any rights of a
Holder of Common Stock until such Holder has converted his Notes to Common
Stock, and only
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to the extent such Notes are deemed to have been converted to Common Stock under
this Article XV.
SECTION 15.2. Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends.
In order to exercise the conversion privilege with respect to any Note in
certificated form, the Holder of any such Note to be converted in whole or in
part shall surrender such Note, duly endorsed, at an office or agency maintained
by the Company pursuant to Section 5.2, accompanied by the funds, if any,
required by the penultimate paragraph of this Section 15.2, and shall give
written notice of conversion in the form provided on the Notes (or such other
notice which is acceptable to the Company) to such office or agency that the
Holder elects to convert such Note or the portion thereof specified in said
notice. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
which shall be issuable on such conversion shall be issued, and shall be
accompanied by transfer taxes, if required pursuant to Section 15.7. Each such
Note surrendered for conversion shall, unless the shares issuable on conversion
are to be issued in the same name as the registration of such Note, be duly
endorsed by, or be accompanied by instruments of transfer in form satisfactory
to the Company duly executed by, the Holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Note in global form, the beneficial Holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program, deliver by book-entry delivery an interest in such Note in
global form, furnish appropriate endorsements and transfer documents if required
by the Company or the Trustee or Conversion Agent, and pay the funds, if any,
required by this Section 15.2 and any transfer taxes if required pursuant to
Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such Holder at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 15.3. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.3, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of the Note so surrendered, without
charge to him, a new Note or Notes in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above in
this Section 15.2 have been
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satisfied as to such Note (or portion thereof), and the Person in whose name any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on said date the Holder of record
of the shares represented thereby, provided, however, that any such surrender on
any date when the stock transfer books of the Company shall be closed shall
constitute the Person in whose name the certificates are to be issued as the
record Holder thereof for all purposes on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date to
the close of business on the Business Day next preceding the following interest
payment date shall (unless such Note or portion thereof being converted shall
have been called for redemption during the period from the close of business on
such record date to the close of business on the Business Day next preceding the
following interest payment date) be accompanied by payment, in New York Clearing
House funds or other funds acceptable to the Company, of an amount equal to the
interest payable on such interest payment date on the principal amount being
converted provided, however, that no such payment need be made if there shall
exist at the time of conversion a default in the payment of interest on the
Notes. No adjustment shall be made for interest accrued on any Note converted or
for dividends on any shares issued upon the conversion of such Note as provided
in this Article.
Upon the conversion of an interest in a Note in global form, the Trustee,
or the Custodian at the direction of the Trustee, shall make a notation on such
Note in global form as to the reduction in the principal amount represented
thereby as a result of such conversion.
SECTION 15.3. Cash Payments in Lieu of Fractional Shares.
No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of Notes. If more than one Note shall be
surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issuable upon conversion shall be computed on the basis of
the aggregate principal amount of the Notes (or specified portions thereof to
the extent permitted hereby) so surrendered. If any fractional share of stock
would be issuable upon the conversion of any Note or Notes, the Company shall
make an adjustment and payment therefor in cash at the current market value
thereof to the Holder of Notes. The current market value of a share of Common
Stock shall be the Closing Price on the first Trading Day immediately preceding
the day on which the Notes (or specified portions thereof) are deemed to have
been converted.
SECTION 15.4. Conversion Price.
The conversion price shall be as specified in the form of Note (herein
called the "Conversion Price") attached as Exhibit A hereto, subject to
adjustment as provided in this Article XV.
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SECTION 15.5. Adjustment of Conversion Price.
The Conversion Price shall be adjusted from time to time by
the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all Holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. The
Company will not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company. If any dividend or distribution of
the type described in this Section 15.5(a) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all Holders of
its outstanding shares of Common Stock entitling them (for a period expiring
within 45 days after the date fixed for determination of stockholders entitled
to receive such rights or warrants) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market Price (as defined
below) on the date fixed for determination of stockholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date fixed for determination of stockholders entitled
to receive such rights or warrants by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for determination of stockholders entitled to receive such rights and
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price,
and of which the denominator shall be the number of shares of Common Stock
outstanding on the date fixed for determination of stockholders entitled to
receive such rights and warrants plus the total number of additional shares of
Common Stock offered for subscription or purchase. Such adjustment shall be
successively made whenever any such rights and warrants are issued, and shall
become effective immediately after the opening of business on the day following
the date fixed for determination of stockholders entitled to receive such rights
or warrants. To the extent that shares of Common Stock are not delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle
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the Holders to subscribe for or purchase shares of Common Stock at less than
such Current Market Price, and in determining the aggregate offering price of
such shares of Common Stock, there shall be taken into account any consideration
received by the Company for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
(c) In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the Company
(other than any dividends or distributions to which Section 15.5(a) applies) or
evidences of its Indebtedness or assets (including securities, but excluding any
rights or warrants referred to in Section 15.5(b), and excluding any dividend or
distribution paid exclusively in cash (any of the foregoing hereinafter in this
Section 15.5(d) called the "Securities")), then, in each such case (unless the
Company elects to reserve such Securities for distribution to the Holders upon
the conversion of the Notes so that any such Holder converting Notes will
receive upon such conversion, in addition to the shares of Common Stock to which
such Holder is entitled, the amount and kind of such Securities which such
Holder would have received if such Holder had converted its Notes into Common
Stock immediately prior to the Record Date (as defined in Section 15.5(h) for
such distribution of the Securities)), the Conversion Price shall be reduced so
that the same shall be equal to the price determined by multiplying the
Conversion Price in effect on the Record Date (as defined below) with respect to
such distribution by a fraction of which the numerator shall be the Current
Market Price per share of the Common Stock on such Record Date less the fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive, and described in a resolution of the Board of Directors) on the
Record Date of the portion of the Securities so distributed applicable to one
share of Common Stock and the denominator shall be the Current Market Price per
share of the Common Stock, such reduction to become effective immediately prior
to the opening of business on the day following such Record Date provided,
however, that in the event the then fair market value (as so determined) of the
portion of the Securities so distributed applicable to one share of Common Stock
is equal to or greater than the Current Market Price of the Common Stock on the
Record Date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Noteholder shall have the right to receive upon conversion the
amount of Securities such Holder would have received had such Holder converted
each Note on the Record Date. In the event that such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price
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which would then be in effect if such dividend or distribution had not been
declared. If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 15.5(d) by reference to the actual or
when issued trading market for any securities, it must in doing so consider the
prices in such market over the same period used in computing the Current Market
Price of the Common Stock.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5 (and no adjustment to the Conversion Price under
this Section 15.5 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Price shall be made under this Section 15.5(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
Indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
Holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 15.5 was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any Holders thereof, the Conversion Price shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights or
warrants which shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of Indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any further Conversion Price reduction required by this Section 15.5(d) with
respect to such dividend or distribution shall then be made) immediately
followed by (2) a dividend or distribution of such
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shares of Common Stock or such rights or warrants (and any further Conversion
Price reduction required by Sections 15.5(a) and (b) with respect to such
dividend or distribution shall then be made), except (A) the Record Date of such
dividend or distribution shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution" and "the date fixed for such determination" within the meaning of
Sections 15.5(a) and (b), and (B) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of Section
15.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed upon a
merger or consolidation to which Section 15.6 applies or as part of a
distribution referred to in Section 15.5(d)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such distributions
to all holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to this Section 15.5(e) has been made, and (2) the aggregate
of any cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer by
the Company for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 15.5(f) has been made, exceeds 10% of
the product of the Current Market Price (determined as provided in Section
15.5(h)) on the Record Date with respect to such distribution times the number
of shares of Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on such
Record Date by a fraction (i) the numerator of which shall be equal to the
Current Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10% and (y) the number of
shares of Common Stock outstanding on the Record Date and (ii) the denominator
of which shall be equal to the Current Market Price on such Record Date
provided, however, that, if the portion of the cash so distributed applicable to
one share of Common Stock is equal to or greater than the Current Market Price
of the Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder shall have the right to
receive upon conversion the amount of cash such Holder would have received had
such Holder converted such Note immediately prior to such Record Date. If such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any of its subsidiaries
for all or any portion of the Common Stock expires and such tender offer (as
amended upon the expiration thereof) requires the payment to stockholders (based
on the acceptance (up to any maximum specified in the terms of the tender offer)
of Purchased Shares (as defined below)) of an
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aggregate consideration having a fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) that, combined together with (1) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offers, by the Company or
any of its subsidiaries for all or any portion of the Common Stock expiring
within the 12 months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to this Section 15.5(f) has been made
and (2) the aggregate amount of any distributions to all Holders of the Common
Stock made exclusively in cash within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to Section 15.5(e)
has been made, exceeds 10% of the product of the Current Market Price
(determined as provided in Section 15.5(h)) as of the last time (the "Expiration
Time") tenders could have been made pursuant to such tender offer (as it may be
amended) times the number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date of the Expiration Time by
a fraction of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time multiplied by
the Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the Expiration
Time. If the Company is obligated to purchase shares pursuant to any such tender
offer, but the Company is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in effect
if such tender offer had not been made. If the application of this Section
15.5(f) to any tender offer would result in an increase in the Conversion Price,
no adjustment shall be made for such tender offer under this Section 15.5(f).
(g) In case of a tender or exchange offer made by a Person other than the
Company or any subsidiary of the Company for an amount which increases the
offeror's ownership of Common Stock to more than 25% of the Common Stock
outstanding and shall involve the payment by such Person of consideration per
share of Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) at the Expiration Time that exceeds the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration
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Time, and in which, as of the Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the Expiration Time by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration Time multiplied
by the current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the sum of (X) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
and (y) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) on the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction to become effective as of immediately prior to the opening of business
on the day following the Expiration Time. In the event that such Person is
obligated to purchase shares pursuant to any such tender or exchange offer, but
such Person is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if such
tender or exchange offer had not been made. Notwithstanding the foregoing, the
adjustment described in this Section 15.5(g) shall not be made if, as of the
Expiration Time, the offering documents with respect to such offer disclose a
plan or intention to cause the Company to engage in any transaction described in
Article XII.
(h) For purposes of this Section 15.5, the following terms shall have the
meaning indicated:
(1) "Closing Price" with respect to any securities on any day shall mean
the closing sale price regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices,
regular way, in each case on the New York Stock Exchange, or, if such security
is not listed or admitted to trading on such Exchange, on the principal national
security exchange or quotation system on which such security is quoted or listed
or admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the average of the closing
bid and asked prices of such security on the over-the-counter market on the day
in question as reported by the National Quotation Bureau Incorporated, or a
similar generally accepted reporting service, or if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors for that purpose, or a price determined
in good faith by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof, whose determination shall
be conclusive.
(2) "Current Market Price" shall mean the average of the daily Closing
Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the date in question provided, however, that (1) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
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Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or (g)
occurs during such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, (2) if the
"ex" date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the "ex" date
for the issuance or distribution requiring such computation and prior to the day
in question, the Closing Price for each Trading Day on and after the "ex" date
for such other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, and (3) if the "ex" date for the
issuance or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to clause
(1) or (2) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any cash and
the fair market value (as determined by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof in a manner
consistent with any determination of such value for purposes of Section 15.5(d),
(f) or (g), whose determination shall be conclusive and described in a
resolution of the Board of Directors or such duly authorized committee thereof,
as the case may be) of the evidences of Indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For purposes of any computation
under Section 15.5(f) or (g), the Current Market Price of the Common Stock on
any date shall be deemed to be the average of the daily Closing Prices per share
of Common Stock for such day and the next two succeeding Trading Days provided,
however, that if the "ex" date for any event (other than the tender or exchange
offer requiring such computation) that requires an adjustment to the Conversion
Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or
after the Expiration Time for the tender or exchange offer requiring such
computation and prior to the day in question, the Closing Price for each Trading
Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such other event.
For purposes of this paragraph, the term "ex" date, (1) when used with respect
to any issuance or distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant market from which
the Closing Price was obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or combination of
shares of Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (3) when used with respect to
any tender or exchange offer means the first date on which the Common Stock
trades regular way on such exchange or in such market after the Expiration Time
of such offer.
(3) "fair market value" shall mean the amount which a willing buyer would
pay a willing seller in an arm's length transaction.
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(4) "Record Date" shall mean, with respect to any dividend, distribution or
other transaction or event in which the Holders of Common Stock have the right
to receive any cash, securities or other property or in which the Common Stock
(or other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange, the Nasdaq Stock Market
(National Market) or another national security exchange, a day on which the New
York Stock Exchange, the Nasdaq Stock Market (National Market) or another
national security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may be
made thereon or (z) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f) and (g),
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to Holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to time
may reduce the Conversion Price by any amount for any period of time if the
period is at least 20 days, the reduction is irrevocable during the period and
the Board of Directors shall have made a determination that such reduction would
be in the best interests of the Company, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to Holders of record of the Notes a notice of
the reduction at least 15 days prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced Conversion Price and the
period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1.00% in such price
provided, however, that any adjustments which by reason of this Section 15.5(j)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article XV shall be made
by the Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be.
(k) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any Conversion Agent other than
the Trustee an Officers' Certificate setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall
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mail notice of such adjustment of the Conversion Price to the Holder of each
Note at his last address appearing on the Note register provided for in Section
2.5 of this Indenture, within 20 days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.
(l) In any case in which this Section 15.5 provides that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the Holder of any
Note converted after such record date and before the occurrence of such event
the additional shares of Common Stock issuable upon such conversion by reason of
the adjustment required by such event over and above such conversion by reason
of the adjustment required by such event and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such Holder any amount in cash in lieu of any fraction pursuant to Section 15.5.
(m) For purposes of this Section 15.5, the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
SECTION 15.6. Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which Holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
Holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Notes shall be convertible
into the kind and amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a Holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock
available to convert all such Notes) immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming such
Holder of Common Stock did not exercise his rights of election, if any, as to
the kind or amount of shares of stock and other securities or property or assets
(including cash) receivable
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upon such reclassification, change, consolidation, merger, combination, sale or
conveyance (provided that, if the kind or amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
is not the same for each share of Common Stock in respect of which such rights
of election shall not have been exercised ("nonelecting share"), then for the
purposes of this Section 15.6 the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares. Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within 20 days
after execution thereof. Failure to deliver such notice shall not affect the
legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5 shall
not apply.
SECTION 15.7. Taxes on Shares Issued.
The issue of stock certificates on conversions of Notes shall be made
without charge to the converting Noteholder for any tax in respect of the issue
thereof. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the Holder of any Note converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the Person or Persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 15.8. Reservation of Shares to Be Fully Paid; Compliance with
Governmental Requirements; Listing of Common Stock.
The Company shall reserve, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares of
Common Stock to provide for the conversion of the Notes from time to time as
such Notes are presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
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The Company covenants that all shares of Common Stock which may be issued
upon conversion of Notes will upon issue be fully paid and non-assessable by the
Company and free from all taxes, liens and charges with respect to the issue
thereof.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that so long as the Common Stock shall be
listed or quoted on the New York Stock Exchange, the Nasdaq Stock Market
(National Market), or any other national securities exchange the Company will,
if permitted by the rules of such exchange, list and keep listed so long as the
Common Stock shall be so listed on such market or exchange, all Common Stock
issuable upon conversion of the Notes.
SECTION 15.9. Responsibility of Trustee.
The Trustee and any other Conversion Agent shall not at any time be under
any duty or responsibility to any Holder of Notes to either calculate the
Conversion Price or determine whether any facts exist which may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other Conversion Agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Note and the Trustee and any
other Conversion Agent make no representations with respect thereto. Subject to
the provisions of Section 8.1, neither the Trustee nor any Conversion Agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article. Without limiting the generality of the foregoing,
neither the Trustee nor any Conversion Agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Holders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
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SECTION 15.10. Notice to Holders Prior to Certain Actions.
In case:
(a) the Company shall declare a dividend (or any other distribution) on its
Common Stock that would require an adjustment in the Conversion Price pursuant
to Section 15.5; or
(b) the Company shall authorize the granting to all or substantially all
the Holders of its Common Stock of rights or warrants to subscribe for or
purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common Stock of the
Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
the Company shall cause to be filed with the Trustee and to be mailed to each
Holder of Notes at his address appearing on the Note register provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
15 days prior to the applicable date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, or rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that Holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliver-able upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
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ARTICLE XVI
REPURCHASE OF NOTES AT OPTION OF THE HOLDER
UPON CHANGE IN CONTROL
SECTION 16.1. Right to Require Repurchase.
In the event that a Change in Control (as hereinafter defined) shall occur,
then each Holder shall have the right, at the Holder's option, to require the
Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Notes, or any portion of the principal amount
thereof that is an integral multiple of $1,000 (provided that no single Note may
be repurchased in part unless the portion of the principal amount of such Note
to be outstanding after such repurchase is equal to $1,000 or an integral
multiple of $1,000), on the date (the "Repurchase Date") that is 30 days after
the date of the Company Notice (as defined in Section 16.2) for cash at a
purchase price equal to 100% of the principal amount (the "Repurchase Price")
plus interest accrued and unpaid to, but excluding, the Repurchase Date. If the
Repurchase Date is between a record date for an interest payment date and such
interest payment date, then the interest payable on such interest payment date
shall be paid to the Holder of Record on the Note on such interest payment date.
Whenever in this Indenture there is a reference, in any context, to the
principal of any Note as of any time, such reference shall be deemed to include
reference to the Repurchase Price payable in respect of such Note to the extent
that such Repurchase Price is, was or would be so payable at such time, and
express mention of the Repurchase Price in any provision of this Indenture shall
not be construed as excluding the Repurchase Price in those provisions of this
Indenture when such express mention is not made.
SECTION 16.2. Notices; Method of Exercising Purchase Right, Etc.
(a) Unless the Company shall have theretofore called for redemption all of
the outstanding Notes pursuant to Article III, on or before the 15th day after
the occurrence of a Change in Control, the Company or, at the written request of
the Company on or before the tenth (10th) day after receipt of such request, the
Trustee, shall give to all Holders of Notes notice (the "Company Notice") of the
occurrence of the Change in Control and of the repurchase right set forth herein
arising as a result thereof. The Company shall also deliver a copy of such
notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder must follow to exercise a
repurchase right,
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(5) that on the Repurchase Date the Repurchase Price will become due and
payable upon each such Note designated by the Holder to be repurchased, and that
interest thereon shall cease to accrue on and after said date,
(6) the Conversion Price, the date on which the right to convert the Notes
to be repurchased will terminate and the places where such Notes may be
surrendered for conversion, and
(7) the place or places where such Notes are to be surrendered for payment
of the Repurchase Price and accrued interest, if any.
No failure of the Company to give the foregoing notices or defect therein
shall limit any Holder's right to exercise a repurchase right or affect the
validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions or other provisions of this Article are
inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the Trustee
or any Paying Agent on or before the 30th day after the date of the Company
Notice (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Notes to be
repurchased (and, if any Note is to be repurchased in part, the serial number
thereof, the portion of the principal amount thereof to be repurchased and the
name of the Person in which the portion thereof to remain outstanding after such
repurchase is to be registered) and a statement that an election to exercise the
repurchase right is being made thereby, and (ii) the Notes with respect to which
the repurchase right is being exercised.
(c) In the event a repurchase right shall be exercised in accordance with
the terms hereof, the Company shall pay or cause to be paid to the Trustee or
the Paying Agent the Repurchase Price in cash, for payment to the Holder on the
Repurchase Date, together with accrued and unpaid interest to, but excluding,
the Repurchase Date payable with respect to the Notes as to which the repurchase
right has been exercised.
(d) If any Note (or portion thereof) surrendered for repurchase shall not
be so paid on the Repurchase Date, the principal amount of such Note (or portion
thereof, as the case may be) shall, until paid, bear interest from the
Repurchase Date at the rate of 5 3/4% per annum, and each Note shall remain
convertible into Common Stock until the principal of such Note (or portion
thereof, as the case may be) shall have been paid or duly provided for.
(e) Any Note which is to be repurchased only in part shall be surrendered
to the Trustee (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Note without service charge, a
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new Note or Notes, containing identical terms and conditions, each in an
authorized denomination in aggregate principal amount equal to and in exchange
for the portion of the principal of the Note so surrendered that was not
repurchased.
(f) Any Holder that has delivered to the Trustee its written notice
exercising its right to require the Company to repurchase its Notes upon a
Change in Control shall have the right to withdraw such notice at any time prior
to the close of business on the Repurchase Date by delivery of a written notice
of withdrawal to the Trustee prior to the close of business on such date. A Note
in respect of which a Holder is exercising its option to require repurchase upon
a Change in Control may be converted into Common Stock in accordance with
Article XV only if such Holder withdraws its notice in accordance with the
preceding sentence.
SECTION 16.3. Certain Definitions.
For purposes of this Article XVI,
(a) the term "beneficial owner" shall be determined in accordance with Rule
13d-3 promulgated by the Commission pursuant to the Exchange Act; and
(b) the term "Person" shall include any syndicate or group which would be
deemed to be a "Person" under Section 13(d)(3) of the Exchange Act.
SECTION 16.4. Change in Control.
A "Change in Control" shall be deemed to have occurred at such time after
the original issuance of the Notes as:
(a) any Person, other than the Company, any subsidiary of the Company or
any entity Controlled (as defined below) by the foregoing, or any employee
benefit plan of the Company or any such subsidiary, is or becomes the beneficial
owner, directly or indirectly, through a purchase or other acquisition
transaction or series of transactions (other than a merger or consolidation
involving the Company), of shares of capital stock of the Company entitling such
Person to exercise in excess of 50% of the total voting power of all shares of
capital stock of the Company entitled to vote generally in the election of
directors;
(b) there occurs any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company,
or any sale or transfer of the assets of the Company as, or substantially as, an
entirety to another Person (other than (i) any such transaction pursuant to
which the Holders of the Common Stock immediately prior to such transaction
have, directly or indirectly, shares of capital stock of the continuing or
surviving corporation immediately after such transaction which entitle such
Holders to exercise in excess of 50% of the total voting power of all shares of
capital stock of the continuing or surviving corporation entitled to vote
generally in the election of directors and (ii) any merger (1) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock or (2) which is effected solely to change the
jurisdiction of incorporation of
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the Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of Common Stock and
separate series of Common Stock carrying substantially the same relative rights
as the Common Stock); or
(c) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the one-year period immediately preceding such change (together
with any other director whose election by the Board of Directors of the Company
or whose nomination for election by the stockholders of the Company was approved
by a vote of at least a majority of the directors then in office either who were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors then in office;
provided, however, that a Change in Control shall not be deemed to have occurred
if either (a) the Closing Price per share of the Common Stock for any ten (10)
Trading Days within the period of 20 consecutive Trading Days ending immediately
before the Change in Control shall equal or exceed 105% of the Conversion Price
in effect on each such Trading Day, or (b) (i) at least 90% of the consideration
(excluding cash payments for fractional shares) in the transaction or
transactions constituting the Change in Control consists of shares of Common
Stock with full voting rights traded on a national securities exchange or quoted
on the Nasdaq National Market (or which will be so traded or quoted when issued
or exchanged in connection with such Change in Control) (such securities being
referred to as "Publicly Traded Securities") and as a result of such transaction
or transactions such Notes become convertible solely into such Publicly Traded
Securities and (ii) the consideration in the transaction or transactions
constituting the Change of Control consists of cash, Publicly Traded Securities
or a combination of cash and Publicly Traded Securities with an aggregate fair
market value (which, in the case of Publicly Traded Securities, shall be equal
to the average Closing Price of such Publicly Traded Securities during the ten
(10) consecutive Trading Days, commencing with the sixth Trading Day, following
consummation of the transaction or transactions constituting the Change in
Control) is at least 105% of the Conversion Price in effect on the date
immediately preceding the date of consummation of such Change in Control. The
term "Controlled" shall mean ownership or control of more than 50% of the voting
power of such entity.
SECTION 16.5. Consolidation, Merger, Etc.
In the case of any reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 15.6 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive shares of stock and other securities or property or assets (including
cash) which includes shares of Common Stock of the Company or Common Stock of
another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such shares of stock and other securities,
property and assets (including cash) (as determined by the Company,
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which determination shall be conclusive and binding), then the Person formed by
such consolidation or resulting from such merger or combination or which
acquires the properties or assets (including cash) of the Company, as the case
may be, shall execute and deliver to the Trustee a supplemental indenture (which
shall comply with the trust Indenture Act as in force at the date of execution
of such supplemental indenture) modifying the provisions of this Indenture
relating to the right of Holders to cause the Company to repurchase the Notes
following a Change in Control, including without limitation the applicable
provisions of this Article XVI and the definitions of the Common Stock and
Change in Control, as appropriate, and such other related definitions set forth
herein as determined in good faith by the Company (which determination shall be
conclusive and binding), to make such provisions apply to the Common Stock and
the issuer thereof if different from the Company and Common Stock of the Company
(in lieu of the Company and the Common Stock of the Company).
ARTICLE XVII
MISCELLANEOUS PROVISIONS
SECTION 17.1. Provisions Binding on Company's Successors.
All the covenants, stipulations, promises and agreements by the Company
contained in this Indenture shall bind its successors and assigns whether so
expressed or not.
SECTION 17.2. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or Officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or Officer of any corporation that shall at the time be
the lawful sole successor of the Company.
SECTION 17.3. Addresses for Notices, Etc.
Any notice or demand which by any provision of this Indenture is required
or permitted to be given or served by the Trustee or by the Holders of Notes on
the Company shall be deemed to have been sufficiently given or made, for all
purposes, if given or served by being deposited postage prepaid by registered or
certified mail in a post office letter box addressed (until another address is
filed by the Company with the Trustee) to Kellstrom Industries, Inc., 14000 N.W.
4 Street, Sunrise, Florida 33325. Any notice, direction, request or demand
hereunder to or upon the Trustee shall be deemed to have been sufficiently given
or made, for all purposes, if given or served by being deposited postage prepaid
by registered or certified mail in a post office letter box addressed to the
Corporate Trust Office, which office is, at the date as of which this Indenture
is dated, located at 901 East Cary Street, 2nd Floor, Richmond, Virginia
23261-3279, Attention: Corporate Trust Department.
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The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail, postage prepaid, at his address as it appears on the Note
register and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 17.4. Governing Law.
This Indenture and each Note shall be deemed to be a contract made under
the laws of the Commonwealth of Virginia, and for all purposes shall be
construed in accordance with the laws of the Commonwealth of Virginia.
SECTION 17.5. Evidence of Compliance with Conditions Precedent Certificates
to Trustee.
Upon any application or demand by the Company to the Trustee to take any
action under any of the provisions of this Indenture, the Company shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with, and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition (2) a brief statement
as to the nature and scope of the examination or investigation upon which the
statement or opinion contained in such certificate or opinion is based (3) a
statement that, in the opinion of such Person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with and (4) a
statement as to whether or not, in the opinion of such Person, such condition or
covenant has been complied with.
SECTION 17.6. Legal Holidays.
In any case where the date of maturity of interest on or principal of the
Notes or the date fixed for redemption or repurchase of any Note will not be a
Business Day, then payment of such interest on or principal of the Notes need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity or the date
fixed for redemption or repurchase, and no interest shall accrue for the period
from and after such date.
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SECTION 17.7. Trust Indenture Act.
This Indenture is hereby made subject to, and shall be governed by, the
provisions of the Trust Indenture Act required to be part of and to govern
indentures qualified under the Trust Indenture Act provided, however, that,
unless otherwise required by law, notwithstanding the foregoing, this Indenture
and the Notes issued hereunder shall not be subject to the provisions of
subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the Trust Indenture Act
as now in effect or as hereafter amended or modified provided, further, that
this Section 17.7 shall not require this Indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act, nor shall it
constitute any admission or acknowledgment by any party to such supplemental
indenture that any such qualification is required prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act. If
any provision hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in an indenture qualified under the
Trust Indenture Act, such required provision shall control.
SECTION 17.8. No Security Interest Created.
Nothing in this Indenture or in the Notes, expressed or implied, shall be
construed to constitute a security interest under the Uniform Commercial Code or
similar legislation, as now or hereafter enacted and in effect, in any
jurisdiction where property of the Company or its subsidiaries is located.
SECTION 17.9. Benefits of Indenture.
Nothing in this Indenture or in the Notes, expressed or implied, shall give
to any Person, other than the parties hereto, any Paying Agent, any
authenticating agent, any Custodian, any Conversion Agent, any Note Registrar
and their successors hereunder, the Holders of Notes and the Holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 17.10. Table of Contents, Headings, Etc.
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
SECTION 17.11. Authenticating Agent.
The Trustee may appoint an authenticating agent which shall be authorized
to act on its behalf and subject to its direction in the authentication and
delivery of Notes in connection with the original issuance thereof and transfers
and exchanges of Notes hereunder, including under Sections 2.4, 2.5, 2.6, 2.7,
3.3, 15.2 and 16.2, as fully to all intents and purposes as though the
authenticating agent had been expressly authorized by this Indenture and those
Sections to authenticate and deliver Notes. For all purposes of this Indenture,
the authentication and delivery
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of Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a Person
eligible to serve as Trustee hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 17.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall either promptly appoint a successor authenticating agent or itself assume
the duties and obligations of the former authenticating agent under this
Indenture, and upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all Holders of Notes as the names and
addresses of such Holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11 shall
be applicable to any authenticating agent.
SECTION 17.12. Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of which
shall be an original, but such countervails shall together constitute but one
and the same instrument.
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First Union National Bank hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, all as of the date first written above.
ATTEST: KELLSTROM INDUSTRIES, INC.
_______________________________ By:________________________________
Title: Zivi R. Nedivi
President and Chief Executive Officer
ATTEST: FIRST UNION NATIONAL BANK,
as Trustee
_______________________________ By:________________________________
Title: Name:
Title:
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EXHIBIT A
[For Global Note only:]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY," WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES)
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND
ANY PAYMENT HEREIN IS MADE TO CEDE & CO. (OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[For all Notes:]
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH BELOW.
BY ITS ACQUISITION HEREOF, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED
HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE
THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED
HEREBY AND THE LAST DATE ON WHICH KELLSTROM INDUSTRIES, INC. (THE "COMPANY") OR
ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY
WAS THE OWNER OF THE NOTE (THE "RESTRICTION TERMINATION DATE") RESELL OR
OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON
CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
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FURNISHES TO FIRST UNION NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY BEFORE THE
RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS NOTE TO FIRST UNION NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E)
ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO FIRST UNION NATIONAL
BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF TWO YEARS FROM THE
ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
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KELLSTROM INDUSTRIES, INC.
5 3/4% CONVERTIBLE SUBORDINATED NOTE DUE 2002
No. _______ CUSIP [_____]
Kellstrom Industries, Inc., a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "Company"),
which term includes any successor corporation under the indenture referred to on
the reverse hereof, for value received hereby promises to pay to _____________
[for global Note, insert: CEDE & CO.] or registered assigns, the principal sum
of [___________ ($____________)] [for Global Note only (as increased or
decreased from time to time in accordance with the procedures of DTC)] on
October 15, 2002, at the office or agency of the Company maintained for that
purpose in Richmond, Virginia, or, at the option of the Holder of this Note, at
the Corporate Trust Office, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, and to pay interest, semi-annually on April 15 and
October 15 of each year, commencing April 15, 1998, on said principal sum at
said office or agency, in like coin or currency, at the rate per annum of 5
3/4%, from the date of this Note. The interest payable on this Note pursuant to
the Indenture on any April 15 or October 15 will be paid to the person in whose
name this Note (or one or more predecessor Notes is registered at the close of
business on the record date, which shall be the April 1 or October 1 (whether or
not a Business Day) next preceding such April 15 or October 15, as provided in
the Indenture provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Interest may, at the
option of the Company, be paid by check mailed to the registered address of such
person provided that with respect to any Holder with an aggregate principal
amount equal to or in excess of $5,000,000 interest may be paid by wire transfer
as more fully specified in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the Holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the Indenture.
Such further provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
Commonwealth of Virginia, and for all purposes shall be construed in accordance
with and governed by the laws of said Commonwealth.
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This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
DATED:
ATTEST: KELLSTROM INDUSTRIES, INC.
__________________________________ By: __________________________________
Title: Zivi R. Nedivi
President and Chief Executive Officer
[SEAL]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
FIRST UNION NATIONAL BANK, as Trustee
By:_______________________________
Name:
Title:
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[FORM OF REVERSE OF NOTE]
KELLSTROM INDUSTRIES, INC.
5 3/4% CONVERTIBLE SUBORDINATED NOTE DUE 2002
1. This Note is one of a duly authorized issue of Notes of the Company,
designated as its 5 3/4% Convertible Subordinated Notes due 2002 (herein called
the "Notes"), limited to aggregate principal amount of $50,000,000 ($57,500,000
if the over-allotment option is exercised in full) issued or to be issued under
and pursuant to an indenture dated as of October 10, 1997 (herein called the
"Indenture"), between the Company and First Union National Bank, as trustee
(herein called the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the Holders.
2. In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all Notes
may be declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
3. The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes as the time outstanding, evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the Holders provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption thereof, or impair
the right of any Noteholder to institute suit for the payment thereof, or make
the principal thereof or interest or premium, if any, thereon payable in any
coin or currency other than that provided in the Note, or modify the provisions
of the Indenture with respect to the subordination of the Notes in a manner
adverse to the Holders in any material respect, or change the obligation of the
Company to repurchase any Note upon the occurrence of a Change in Control in a
manner adverse to the Holder of the Notes, or impair the right to convert the
Notes into Common Stock in any material respect, without the consent of the
Holder of each Note so affected or (ii) reduce the aforesaid percentage of
Notes, the Holders of which are required to consent to any such supplemental
indenture, without the consent of the Holders of all Notes then outstanding. It
is also provided in the Indenture that the Holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
Holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except (i) a default in the payment of interest
or any premium, if any, on, or the
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principal of, the Notes, (ii) a failure by the Company to convert any Notes into
Common Stock, (iii) a default in the payment of the Redemption Price pursuant to
Article III or repurchase price pursuant to Article XVI or (iv) a default in
respect of a covenant or provisions which under Article XI cannot be modified or
amended without the consent of the Holders of all Notes then outstanding. Any
such consent or waiver by the Holder of this Note (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Note and any Notes which may be issued in
exchange or substitution hereof, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
4. The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each Holder of this Note by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney-in-fact for such purpose.
5. No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
6. Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
7. The Notes are issuable in registered form without coupons in minimum
denominations of $1,000 ($100,000 in the case of Notes issued pursuant to
Regulation D) and any integral multiple of $1,000. At the office or agency of
the Company referred to on the face hereof, and in the manner and subject to the
limitations provided in the Indenture, without payment of any service charge but
with payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration or exchange of Notes,
Notes may be exchanged for a like aggregate principal amount of Notes of other
authorized denominations.
8. The Notes will not be redeemable at the option of the Company prior to
October 15, 2000. At any time after October 15, 2000, and prior to maturity, the
Notes may be redeemed at the option of the Company from time to time, as a whole
or in part, upon mailing a notice of such redemption not less than 15 nor more
than 60 days before the date fixed for redemption to the Holders of Notes at
their registered addresses, all as provided in the Indenture, at the following
optional Redemption Prices (expressed as percentages of the principal amount),
together in each case with accrued interest to, but excluding, the date fixed
for redemption.
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9. If redeemed during the 12-month period beginning October 15:
YEAR PERCENTAGE
---- -----------
2000....................102.30%
2001....................101.15%
and 100% at October 15, 2002 provided that if the date fixed for redemption is
on April 15 or October 15, then the interest payable on such date shall be paid
to the Holder of record of the Note on the next preceding April 1 or October 1,
respectively.
10. The Notes are not subject to redemption through the operation of any
sinking fund.
11. Subject to the provisions of the Indenture, the Holder hereof has the
right, at its option, at any time after 60 days following the latest date of
original issuance of the Notes and prior to the close of business on the
maturity date, subject to prior redemption or repurchase, or, as to all or any
portion hereof called for redemption, prior to the close of business on the
fifth Business Day preceding the date fixed for redemption (unless the Company
shall default in payment due upon redemption thereof), to convert the principal
hereof or any portion of such principal which is $1,000 or an integral multiple
thereof, into that number of shares of the Company's Common Stock, said shares
shall be constituted at the date of conversion, obtained by dividing the
principal amount of this Note or portion thereof to be converted by the
Conversion Price of $27.50 or such Conversion Price as adjusted from time to
time as provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture, to the Company at the office or
agency of the Company maintained for that purpose in Richmond, Virginia, or at
the option of such Holder, the Corporate Trust Office, and, unless the shares
issuable on conversion are to be issued in the same name as this Note, duly
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the Holder or by his duly authorized attorney. No
adjustment in respect of interest or dividends will be made upon any conversion
provided, however, that if this Note shall be surrendered for conversion during
the period from the close of business on any record date for the payment of
interest to the close of business on the Business Day preceding the interest
payment date, this Note (unless it or the portion being converted shall have
been called for redemption during the period from the close of business on any
record date for the payment of interest to the close of business on the Business
Day preceding the interest payment date) must be accompanied by an amount, in
New York Clearing House funds or other funds acceptable to the Company, equal to
the interest payable on such interest payment date on the principal amount being
converted (provided however, that no such payment need be made if there shall
exist at the time of conversion a default in the payment of interest on the
Notes.) No fractional shares will be issued upon any conversion, but an
adjustment in cash will be made, as provided in the Indenture, in respect of any
fraction of a share which would otherwise be issuable upon the surrender of any
Note or Notes for conversion.
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12. Any Notes called for redemption, unless surrendered for conversion on
or before the close of business on the date fixed for redemption, may be deemed
to be purchased from the Holder of such Notes at an amount equal to the
applicable Redemption Price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the Holders thereof and
convert them into Common Stock of the Company and to make payment for such Notes
as aforesaid to the Trustee in trust for such Holders.
13. Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in Richmond, Virginia, or at the option of the
Holder of this Note, at the Corporate Trust Office, a new Note or Notes of
authorized denominations for an equal aggregate principal amount will be issued
to the transferee in exchange thereof, subject to the limitations provided in
the Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.
14. The Company, the Trustee, any authenticating agency, any paying agent,
any conversion agent and any Note Registrar may deem and treat the registered
Holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment hereof, or on account hereof, for
the conversion hereof and for all other purposes, and neither the Company nor
the Trustee nor any other authenticating agent nor any paying agent nor any
other conversion agent nor any Note Registrar shall be affected by any notice to
the contrary. All payments made to or upon the order of such registered Holder
shall, to the extent of the sum or sums paid, satisfy and discharge liability
for monies payable on this Note.
15. No recourse for the payment of the principal or any premium or interest
on this Note, or for any claim based hereon or otherwise in respect hereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in the Indenture or any indenture supplemental thereto or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration of the issue
hereof, expressly waived and released.
16. Terms used in this Note and defined in the Indenture are used herein as
therein defined.
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ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM- as tenants in common UNIF GIFT MIN ACT _____Custodian_______
(Cust) (Minor)
ENT TEN- as tenants by the
entireties
JT TEN- as joint tenants with under Uniform Gifts to Minors Act
right to survivorship
and not as tenants in
common _________________________________
(State)
Additional abbreviations may also be used
though not in the above list.
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CONVERSION NOTICE
To: KELLSTROM INDUSTRIES, INC.
The undersigned registered owner of this Note hereby irrevocably exercises
the option to convert this Note, or the portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock of
Kellstrom Industries, Inc. in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Notes representing any unconverted principal amount hereof, be issued
and delivered to the registered Holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a Person other than the undersigned, the undersigned will
check the appropriate box below and pay all transfer taxes payable with respect
thereto. Any amount required to be paid to the undersigned on account of
interest accompanies this Note.
Dated: ______________________
___________________________________
___________________________________
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit
unions) with membership in an
approved signature guarantee
medallion program pursuant to
Securities and Exchange Commission
Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes to
be delivered, other than to and in
the name of the registered Holder.
___________________________________
Signature Guarantee
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Fill in for registration of shares of
Common Stock if to be issued, and
Notes it to be delivered, other than to
and in the name of the registered
Holder:
- ---------------------------
(Name)
- ---------------------------
(Street Address)
- ---------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than
all):
$-----------
-------------------------------------------------
Social Security or Other Taxpayer Identification
Number
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ASSIGNMENT
For value received ___________________ hereby sell(s), assign(s) and transfer(s)
unto
- ------------------------------------------------------------------------------
(Please insert name, social security or other Taxpayer Identification
Number of assignee)
the within Note, and hereby irrevocably constitutes and appoints
- ------------------------------------------------------------------------------
attorney to transfer the said Note on the Books of the Company, with power of
substitution in the premises.
In connection with any transfer of the within Note within two years of the
date of original issuance of such Note, the undersigned confirms that such Note
is being transferred:
[ ] To Kellstrom Industries, Inc. or a subsidiary thereof; or
[ ] Pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
[ ] To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Regulation S under the Securities
Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
[ ] The transferee is an Affiliate of the Company.
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Dated: ______________________
____________________________________
____________________________________
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit unions)
with membership in an approved
signature guarantee medallion
program pursuant to Securities and
Exchange Commission Rule 17Ad-15 if
shares of Common Stock are to be
issued, or Notes to be delivered,
other than to and in the name of the
registered Holder.
____________________________________
Signature Guarantee
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OPTION TO ELECT REPURCHASE
UPON A CHANGE IN CONTROL
To: KELLSTROM INDUSTRIES, INC.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Kellstrom Industries, Inc. (the Company")
as to the occurrence of a Change in Control with respect to the Company and
requests and instructs the Company to repay the entire principal amount of this
Note, or the portion thereof (which is $1,000 or an integral multiple thereof)
below designated, in accordance with the terms of the Indenture referred to in
this Note at the repurchase price, together with accrued interest to, but
excluding, such date, to the registered Holder hereof.
Dated: ______________________
___________________________________
___________________________________
Signature(s)
NOTICE: The above signatures of the
Holder(s) hereof must correspond
with the name as written upon the
face of the Note in every
particular without alteration,
enlargement or any change whatever.
Principal amount to be repurchased
(if less than all):
$_____________
___________________________________
Social Security or Other Taxpayer
Identification Number
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REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of October 10, 1997, by and between Kellstrom Industries, Inc., a
Delaware corporation (the "Company"), and BT Alex. Brown Incorporated (the
"Initial Purchaser") pursuant to the Purchase Agreement dated as of October 7,
1997 (the "Purchase Agreement"), between the Company and the Initial Purchaser.
In order to induce the Initial Purchaser to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Purchase Agreement.
The Company agrees with the Initial Purchaser, (i) for its benefit as
Initial Purchaser and (ii) for the benefit of the holders from time to time of
the Notes (including the Initial Purchaser) and the holders from time to time of
the Common Stock issued upon conversion of the Notes (each of the foregoing a
"Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition shall have
their respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Affiliate: "Affiliate" means, with respect to any specified person, (i) any
other person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such specified person or (ii) any
officer or director of such other person. For purposes of this definition, the
term "control" (including the terms "controlling," "controlled by" and "under
common control with") of a person means the possession direct or indirect, of
the power (whether or not exercised) to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
not a day on which banking institutions in the City of New York are authorized
or obligated by law or executive order to close.
Common Stock: The shares of common stock, $.001 par value, of the Company
and any other shares of common stock as may constitute "Common Stock" for
purposes of the Indenture, in each case, as issuable or issued upon conversion
of the Notes.
Damages Accrual Period: See Section 2(d) hereof.
Damages Payment Date: Each of the semi-annual interest payment dates
provided in the Indenture, whether or not Liquidated Damages are payable on such
date.
Effectiveness Period: The period commencing with the date hereof and ending
on the earlier of the date that is two years after the latest date of original
issuance of the Notes and the date that all Registrable Securities have ceased
to be Registrable Securities.
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Effectiveness Target Date: See Section 2(a) hereof.
Event. See Section 2(d) hereof.
Event Date: See Section 2(d) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Filing Date: See Section 2(a) hereof.
Holder: See the second paragraph of this Agreement.
Indenture: The Indenture, dated as of October 10, 1997, between the Company
and First Union National Bank, as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
Initial Purchaser: See the first paragraph of this Agreement.
Initial Shelf Registration: See Section 2(a) hereof.
Liquidated Damages: See Section 2(d) hereof.
Losses: See Section 5 hereof.
Majority of Registrable Securities: A majority of the then outstanding
aggregate principal amount of Registrable Securities. For purposes of this
calculation, Registrable Securities which have been converted into shares of
Common Stock shall be deemed to bear the principal amount at which such
Registrable Securities were converted.
Managing Underwriters: The investment banking firm or firms that shall
manage or co-manage an Underwritten Offering.
Notes: The 5 3/4% Convertible Subordinated Notes due 2002 of the Company
being issued and sold pursuant to the Purchase Agreement and the Indenture.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Purchase Agreement: See the first paragraph of this Agreement.
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Record Holder: (i) with respect to any Damages Payment Date relating to the
Notes, each Person who is a registered holder of such Notes on the record date
with respect to the interest payment date under the Indenture on which such
Damages Payment Date shall occur and (ii) with respect to any Damages Payment
Date relating to the Common Stock, each Person who is a registered holder of
such Common Stock 15 days prior to such Damages Payment Date.
Registrable Securities: Each Note and each share of Common Stock into which
the Notes are convertible or converted upon original issuance thereof, and at
all times subsequent thereto, and any Common Stock issued with respect thereto
upon any stock dividend, split or similar event, until, in the case of any such
Note or share of Common Stock, (i) it is effectively registered under the
Securities Act and disposed of in accordance with the Registration Statement
covering it, (ii) it is salable by the holder thereof pursuant to Rule 144(k) or
(iii) it is sold to the public pursuant to Rule 144, and, as a result of the
event or circumstance described in any of the foregoing clauses (i) through
(iii), the legends with respect to transfer restrictions required under the
Indenture (other than any such legends required solely as the consequences or
the fact that the Registrable Securities are owned by, or were previously owned
by, the Company or an Affiliate of the Company) are removed or removable in
accordance with the terms of the Indenture.
Registration Expenses: See Section 4 hereof.
Registration Statement: Any registration statement of the Company which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulations hereafter adopted by the
SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.
Selling Holder: A Holder offering to sell Registrable Securities.
Shelf Registration: See Section 2(a) hereof.
Special Counsel: Piper & Marbury L.L.P., or such other successor counsel as
shall be specified by the Holders of a majority of the Registrable Securities,
the fees and expenses of which will be paid by the Company pursuant to Section 4
hereof.
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Subsequent Shelf Registration: See Section 2(b) hereof.
Suspension Period: See Section 2(c).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The Trustee under the Indenture.
Underwritten Registration or Underwritten Offering: A registration in which
the Registrable Securities are sold by Holders thereof to an underwriter for
reoffering to the public.
2. Shelf Registration.
(a) The Company shall prepare and file with the SEC, as soon as
practicable but in any event on or prior to the date 90 days following the
latest date of original issuance of the Notes (the "Filing Date"), a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 of the Securities Act (a "Shelf Registration") registering the
resale from time to time by Holders thereof of all of the Registrable Securities
(the "Initial Shelf Registration"). The Initial Shelf Registration shall be on
an appropriate SEC Registration Statement form permitting registration of such
Registrable Securities for resale by such Holders in the manner or manners
designated by them (including, without limitation, one or more Underwritten
Offerings). The Company shall use its best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act as soon as
practicable but in any event on or prior to the date 120 days following the
Filing Date (the "Effectiveness Target Date"), and shall use its best efforts to
keep the Initial Shelf Registration continuously effective under the Securities
Act, subject to the provisions of Section 2(c), until the earlier of the
expiration of the Effectiveness Period or the date a Subsequent Shelf
Registration (as defined below) covering all of the Registrable Securities has
been declared effective under the Securities Act. Subject to the right of the
Company to have the Initial Shelf Registration not be effective, or not to be
updated, amended or supplemented, for periods of time set forth in Section 2(c),
the Company further agrees to use its best efforts to prevent the happening of
any event that would cause the Initial Shelf Registration to contain a material
misstatement or omission or to be not effective and usable for resale of the
Registrable Securities during the Effective Period.
(b) If the Initial Shelf Registration or any subsequent Shelf
Registration ceases to be effective for any reason as a result of the issuance
of a stop order by the SEC at any time during the Effectiveness Period, the
Company shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 30 days of
such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration covering all of
the Registrable Securities (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after
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such filing and to keep such Registration Statement continuously effective until
the end of the Effectiveness Period.
(c) In the event (A) of the happening of any event of the kind described
in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) hereof or (B)
that, in the good faith judgment of the Company, it is advisable to suspend the
use of the Prospectus for a discrete period of time due to pending material
corporate developments or similar material events that have not yet been
publicly disclosed and as to which the Company believes public disclosure will
be prejudicial to the Company, the Company shall deliver a certificate in
writing, signed by an authorized executive officer of the Company, to the
Special Counsel, the Initial Purchaser and the Managing Underwriters, if any, to
the effect of the foregoing and thereafter the use of the Prospectus shall be
suspended, and the Company, subject to the terms of this Section 2(c), shall
thereafter not be required to maintain the effectiveness or update the Shelf
Registration. The Company will use its best efforts to ensure that the use of
the Prospectus may be resumed as soon as practicable, in the case of suspension
under Section 2(c)(A), and, in the case of a pending development or event
referred to in Section 2(c)(B) hereof, as soon as, in the good faith-judgment of
the Company, public disclosure of such material corporate development or similar
material event would not have a material adverse effect on the Company.
Notwithstanding the foregoing, the Company shall not under any circumstances be
entitled to exercise its right under this Section 2(c) to suspend the use of the
Prospectus (whether as a result of events referred to in Section 2(c)(A) hereof
or as a result of the pending development or event referred to in Section
2(c)(B) hereof) more than one (1) time in any three (3) month period, and the
periods in which the use of the Prospectus is suspended shall not exceed 30 days
in any three-month period (a "Suspension Period").
(d) The parties hereto agree that the Holders of Registrable Securities
will suffer damages, and that it would not be feasible to ascertain the extent
of such damages with precision, if (i) the Initial Shelf Registration has not
been filed on or prior to the Filing Date, (ii) the Initial Shelf Registration
has not been declared effective by the Effectiveness Target Date, (iii) prior to
the end of the Effectiveness Period, the SEC shall have issued a stop order
suspending the effectiveness of the Shelf Registration or proceedings have been
initiated with respect to the Shelf Registration under Section 8(d) or 8(e) of
the Securities Act, (iv) the aggregate number of days in any one Suspension
Period exceeds the period permitted pursuant to Section 2(c) hereof or (v) the
number of Suspension Periods exceeds the number permitted pursuant to Section
2(c) hereof (each of the events of a type described in any of the foregoing
clauses (i) through (v) are individually referred to herein as an "Event," and
the Filing Date in the case of clause (i), the Effectiveness Target Date in the
case of clause (ii), the date on which the effectiveness of the Shelf
Registration has been suspended or proceedings with respect to the Shelf
Registration under Section 8(d) or 8(e) of the Securities Act have been
commenced in the case of clause (iii), the date on which the duration of a
Suspension Period exceeds the period permitted by Section 2(c) hereof in the
case of clause (iv), and the date of the commencement of a Suspension Period
that causes the limit on the number of Suspension Periods under Section 2(c)
hereof to be exceeded in the case of clause (v), being referred to herein as an
"Event Date").
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Notwithstanding the foregoing, the parties hereto agree that an Event shall be
deemed not to have occurred to the extent the parties mutually agree that the
direct, proximate cause of said Event was the act or failure to act of one or
more Holders, the Initial Purchaser or the Managing Underwriters. Events shall
be deemed to continue until the date of the termination of such Event, which
shall be the following dates with respect to the respective types of Events: the
date the Initial Registration Statement is filed in the case of an Event of the
type described in clause (i), the date the Initial Shelf Registration is
declared effective in the case of clause (ii), the date that all stop orders
suspending effectiveness of the Shelf Registration have been removed and the
proceedings initiated with respect to the Shelf Registration under Section 8(d)
or 8(e) of the Securities Act have terminated, as the case may be, in the case
of Events of the types described in clause (iii), termination of the Suspension
Period which caused the aggregate number of days in any one Suspension Period to
exceed the number permitted by Section 2(c) to be exceeded in the case of Events
of the types described in clause (iv), and termination of the Suspension
Periods, the commencement of which caused the number of Suspension Periods
permitted by Section 2(d) to be exceeded in the case of Events of the type
described in clause (v).
Accordingly, upon the occurrence of any Event and until such time as there
are no Events which have occurred and are continuing (a "'Damages Accrual
Period"), commencing on the Event Date on which such Damages Accrual Period
began, the Company agrees to pay, as liquidated damages, and not as a penalty,
an additional amount (the "Liquidated Damages"): (i) to each holder of Notes
that are Registrable Securities, accruing at a rate equal to one-half of one
percent per annum (50 basis points) on the aggregate principal amount of Notes
that are Registrable Securities held by such Holder and (ii) to each holder of
shares of Common Stock that are Registrable Securities, accruing at a rate equal
to one-half of one percent per annum (50 basis points) calculated on an amount
equal to the product of (x) the then-applicable Conversion Price (as defined in
the Indenture), times (y) the number of shares of Common Stock that are
Registrable Securities held by such holder. Notwithstanding the foregoing, no
Liquidated Damages shall accrue as to any Registrable Securities from and after
the earlier of (x) the date such securities are no longer Registrable
Securities, and (y) the expiration of the Effectiveness Period. The rate of
accrual of the Liquidated Damages with respect to any period shall not exceed
the rate provided for in this paragraph notwithstanding the occurrence of
multiple concurrent Events.
The Company shall pay the Liquidated Damages due on any Notes or Common
Stock by depositing with the Trustee under the Indenture, in trust, for the
benefit of the holders of Notes or Common Stock, as the case may be, entitled
thereto, at least one Business Day prior to the applicable Damages Payment Date,
sums sufficient to pay the Liquidated Damages accrued or accruing since the last
preceding Damages Payment Date through such Damages Payment Date. The Liquidated
Damages shall be paid by the Company to the Record Holders on each Damages
Payment Date by wire transfer of immediately available funds to the account
specified by them or by mailing checks to their registered addresses as they
appear in the Note register (as defined in the Indenture), in the case of the
Notes, and in the register of the Company for the Common Stock, in the case of
the Common Stock, if no such accounts have been specified on or before the
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Damage Payment Date; provided, however, that any Liquidated Damages accrued with
respect to any Note or portion thereof called for redemption on a redemption
date, or repurchased in connection with a Change in Control (as defined in the
Indenture) on a repurchase date, or converted into Common Stock on a conversion
date prior to the Damages Payment Date, shall, in any such event, be paid
instead to the holder who submitted such Note or portion thereof for redemption,
repurchase or conversion on the applicable redemption date, repurchase date or
conversion date, as the case may be, on such date (or promptly following the
conversion date, in the case of conversion of a Note). If a holder of a Note
submits a Note for conversion during the period between a record date for the
payment of Liquidated Damages and the related Damages Payment Date, Liquidated
Damages for the period from the conversion date through the next succeeding
Damages Payment Date shall accrue and be payable to the holder of Common Stock
received on conversion on the next succeeding Damages Payment Date,
notwithstanding that such holder was not a Record Holder with respect to such
Damages Payment Date. The Trustee shall be entitled, on behalf of the Holders of
Notes and Common Stock to seek any available remedy for the enforcement of this
Agreement, including for the payment of such Liquidated Damages. Nothing shall
preclude a Holder of Registrable Securities from pursuing or obtaining specific
performance or other equitable relief with respect to this Agreement.
All of the Company's obligations set forth in this Section 2(d) which are
outstanding with respect to any Registrable Securities at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of the Agreement pursuant to Section 7(o)).
The parties hereto agree that the Liquidated Damages provided for in this
Section 2(d) constitute a reasonable estimate of the damages that may be
incurred by holders of Registrable Securities (other than the Initial Purchaser)
by reason of the failure of the Shelf Registration to be filed or declared
effective or unavailable (absolutely or as a practical matter) for effecting
resales of Registrable Securities, as the case may be, in accordance with the
provisions hereof.
3. Registration Procedures. In connection with the Company's registration
obligations under Section 2 hereof, the Company shall effect such registrations
to permit the sale of the Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the intended method or methods of distribution thereof and shall
include all required financial statements, and use its best efforts to cause
each such Registration Statement to become effective and remain effective as
provided herein; provided, that before filing, any such Registration Statement
or Prospectus or any amendments or supplements thereto the Company shall furnish
within a reasonable time period to each Selling Holder (if requested by such
Selling Holder), the Initial Purchaser, the Special Counsel and the Managing
Underwriters of such offering, if any, copies of all such documents proposed to
be filed, which documents will be subject to the review of each Selling Holder
(if
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requested by such Selling Holder), the Initial Purchaser, the Special Counsel
and such Managing Underwriters, and the Company shall not file any such
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto to which the Holders of a majority of the Registrable Securities covered
by such Registration Statement, the Initial Purchaser or the Special Counsel
shall reasonably object in writing within three Business Days after the receipt
thereof. In addition, the Company shall use its best efforts to reflect in each
such document referenced in this paragraph so filed with the SEC such comments
as the Initial Purchaser, Special Counsel and the Managing Underwriters, if any,
may reasonably propose.
(b) Subject to Section 2(c), prepare and file with the SEC such
amendments and post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously effective for the
applicable period specified in Section 2; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended methods or
disposition by the sellers thereof set forth in such Registration Statement as
so amended or such Prospectus as so supplemented. The Company shall ensure that
(i) any Shelf Registration and any amendment thereto and any Prospectus forming
a part thereof and any amendment or supplement thereto complies in all material
respects with the Act and the rules and regulations thereunder, (ii) any Shelf
Registration and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and (iii)
any Prospectus forming part of any Shelf Registration, and any amendment or
supplement to such Prospectus, does not include an untrue statement or a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(c) Notify the Holders, the Initial Purchaser, the Special Counsel and
the Managing Underwriters, if any, promptly, and (if requested by any such
person) confirm such notice in writing, (i) when a Prospectus, any Prospectus
supplement, a Registration Statement or a post-effective amendment to a
Registration Statement has been filed with the SEC, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other federal or state
governmental authority for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (iii) of the issuance by
the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceedings for such
purpose, (v) of the existence of any fact or happening of any event which makes
any statement of a material fact in such Registration Statement or related
Prospectus or
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any document incorporated or deemed to be incorporated therein by reference
untrue or which would require the making of any changes in the Registration
Statement or Prospectus in order that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (vi) of the Company's determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest possible
moment.
(e) If requested by the Initial Purchaser or the Managing Underwriters,
if any, or the Holders of a Majority of the Registrable Securities being sold,
(i) promptly incorporate in a Prospectus supplement or post-effective amendment
to Registration Statement such information as the Initial Purchaser, the Special
Counsel, the Managing Underwriters, if any, or such Holders and the Company
agree should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters proposed to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Selling Holder (if requested by such Selling
Holder), the Special Counsel, the Initial Purchaser, and each Managing
Underwriter, if any, without charge, at least one conformed copy of the
Registration Statement or Statements and any amendment thereto, including
financial statements but excluding schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) Deliver to each Selling Holder, the Special Counsel, the Initial
Purchaser and each Managing Underwriter, if any, in connection with any offering
of Registrable Securities, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as such persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus or each amendment or supplement thereto by each of the Selling
Holders of Registrable Securities and the Underwriters, if any, in connection
with any offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register
or qualify or cooperate with the Selling Holders, the Managing Underwriters, if
any, and the Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky
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laws of such jurisdictions within the United States as any Selling Holder or
Managing Underwriter reasonably requests in writing, keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement, provided, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action that would subject it to general service of
process in suits or to taxation in any such jurisdiction where it is not then so
subject.
(i) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies in addition to the SEC or authorities within the United
States as may be necessary to enable the Selling Holder or Holders thereof or
the Managing Underwriters, if any, to consummate the disposition of such
Registrable Securities.
(j) During the Effectiveness Period (subject to the provisions of
Section 2(c)), immediately upon the existence of any fact or the occurrence of
any event as a result of which a Registration Statement shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or a Prospectus shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
promptly prepare and file a post-effective amendment to each Registration
Statement or a supplement to the related Prospectus or any document incorporated
therein by reference or file any other required document (such as a Current
Report on Form 8-K) that would be incorporated by reference into the
Registration Statement so that the Registration Statement shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
in light of the circumstances under which they were made, and so that the
Prospectus will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and in the case of a
post-effective amendment to a Registration Statement use its best efforts to
cause it to become effective as soon as practicable.
(k) Enter into such agreements (including, in the event of an
Underwritten Offering, an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including, in the event of an the Underwritten Offering,
those reasonably requested by the Managing Underwriters, if any, or the Holders
of a Majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into, and if the
registration is an underwritten registration, (i) make such representations and
warranties to the underwriters with
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respect to the business of the Company and its subsidiaries, the Registration
Statement, Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (ii) use its reasonable efforts to
obtain opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any, and Special Counsel, addressed to each of the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings; (iii) use its reasonable efforts to obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other certified public
accountants of any subsidiary of the Company or any business acquired or to be
acquired by the Company for which financial statements and financial data are,
or are required to be, included in the Registration Statement), addressed to
each of the Managing Underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by Special Counsel and the Managing
Underwriters, if any, to evidence the continued validity of the representations
and warranties of the Company and its subsidiaries made pursuant to clause (i)
above and to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company. The above
shall be done at each closing under such underwriting or similar agreement as
and to the extent required thereunder.
(1) Make available for inspection by a representative of the Holders of
Registrable Securities being sold, any Managing Underwriter participating in any
disposition of Registrable Securities, if any, and any attorney or accountant
retained by such Selling Holders or underwriter, financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the executive officers, directors and employees of the
Company and its subsidiaries to supply all information reasonably requested by
any such representative, Managing Underwriter, attorney or accountant in
connection with such disposition; provided, however, that any information that
is reasonable and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by such persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to federal
securities laws in connection with the filing of any Registration Statement or
the use of any prospectus referred to in this Agreement provided, however, that
the Company shall have the right to make application to the SEC requesting
confidential treatment of such information), (iii) such information becomes
generally available to the public other than as a result of disclosure or
failure to safeguard by any such person or (iv) such information becomes
available to any such person from a source other than the Company and such
source is not bound by a confidentiality agreement.
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(m) Comply with all applicable rules and regulations of the SEC in all
material respects and make generally available to its securityholders earnings
statements (which need not be audited) satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
commencing after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(n) Cooperate with the Selling Holders of Registrable Securities, the
Initial Purchaser, the Special Counsel and the Managing Underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations and registered in
such names as the Holders may request.
(o) Not later than the effectiveness date of any Registration Statement
hereunder, provide a CUSIP number for the Registrable Securities registered
under such Registration Statement, and provide the Trustee under the Indenture
and the transfer agent for the Common Stock with printed certificates for the
Registrable Securities which are in a form eligible for deposit with The
Depository Trust Company.
(p) Cause all shares of Common Stock covered by the Registration
Statement to be listed on, each securities exchange or quotation system on which
the Company's Common Stock is then listed or quoted no later than the date the
Registration Statement is declared effective, and, in connection therewith, to
the extent applicable, to make such findings under the Exchange Act (e.g., the
filing of a Registration Statement on Form 8-A) and to have such filings
declared effective thereunder.
(q) Cooperate and assist in any filing required to be made with the
National Association of Securities Dealers, Inc.
(r) Cause the Indenture to be qualified under the TIA, and, in
connection therewith, cooperate with the Trustee and the Holders, the Initial
Purchaser, the Special Counsel and the Managing Underwriters, if any, to effect
such changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute all documents as may be required to
effect such changes and all other forms and documents required to be filed with
the SEC to enable such Indenture to be so qualified in a timely manner.
The Company may require each Holder of securities to be sold pursuant to
any Registration Statement to furnish to the Company such information regarding
the Holder and the distribution of such securities as the Company may from time
to time reasonably require for
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inclusion in such Registration Statement. Any Holder who fails to provide such
information shall not be entitled to use the Prospectus.
4. Registration Expenses. All fees and expenses incident to the Company's
obligations under this Agreement shall be borne by the Company whether or not
any of the Registration Statements become effective. Such fees and expenses
shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses with respect to filings
required to be made with the National Association of Securities Dealers, Inc.),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is requested by the Special Counsel, the Initial Purchaser, the
Managing Underwriters or the holders of a Majority of the Registrable Securities
included in any Registration Statement), (iii) reasonable fees and disbursements
of counsel for the Company and the Special Counsel in connection with the Shelf
Registration (provided that the Company shall not be liable for the fees and
expenses of more than one separate firm for all parties (other than the Company)
participating in any transaction hereunder), and (iv) fees and disbursements of
all independent certified public accountants referred to in Section 3(k)(iii)
hereof (including the expenses of any special audit and "cold comfort" letters
required by or incident to such performance). In addition, the Company shall pay
the fees and expenses incurred in connection with the listing or quotation of
the securities to be registered on any securities exchange or quotations system
on which similar securities issued by the Company are then listed and the fees
and expenses of any person, including special experts, retained by the Company.
5. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each Holder, the directors, officers, employees and agents of each such
Holder and each person, if any, who controls any such Holder (within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act)
from and against all losses, liabilities, damages and expenses (including
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim)
(collectively, "Losses"), arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or in any amendment or supplement thereto, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances under which they were
made, except insofar as such Losses arise out of or are based upon the
information relating to any Holder furnished to the Company in writing by any
Holder expressly for use therein. The Company shall also indemnify each
underwriter, their officers and directors, and each person who controls such
person (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent and with the same limitations as provided
above with respect to the indemnification of the Holders or Registrable
Securities.
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(b) Indemnification by Holder of Registrable Securities. Each
Holder, agrees severally and not jointly to indemnify and hold harmless the
Company, its directors, its officers who sign a Registration Statement and each
person, if any, who controls the Company (within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act), from and against
all losses arising out of or based upon any untrue statement of a material fact
contained in any Registration Statement, Prospectus or arising out of or based
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, in light of the circumstances
under which they were made, to the extent, but only to the extent, that such
untrue statement or omission is contained in any information relating to such
Holder so furnished in writing by such Holder to the Company expressly for use
in such Registration Statement or Prospectus. In no event shall the liability of
any Selling Holder of Registrable Securities hereunder be greater in amount than
the dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing, but failure so to notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof. The indemnifying party, upon
request of the indemnified party, shall retain counsel satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, or (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of commencement of
the action. It is understood that the indemnifying party shall not, in respect
of the legal expenses or any indemnified party in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all indemnified parties under Section 5(a) or 5(b) hereof who are parties to
such proceeding or proceedings, and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying
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party to reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, such
indemnifying party agrees that it shall be liable for any settlements of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) Contribution. If the indemnification provided for in this Section 5
is unavailable to an indemnified party under Section 5(a) or 5(b) hereof in
respect of any Losses or is insufficient to hold such indemnified party
harmless, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses, (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party or parties an the other
hand or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such Losses, as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the initial placement of the Notes pursuant to the Purchase
Agreement. Benefits received by the Initial Purchaser shall be deemed to be
equal to the total purchase discounts and commissions received by it pursuant to
the Purchase Agreement and benefits received by any other Holders shall be
deemed to be equal to the value of receiving Notes registered under the
Securities Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on the cover
page of the Prospectus forming a part of the Registration Statement which
resulted in such Losses. The relative fault of the Holders on the one hand and
the Company on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Holders or by the Company and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this paragraph are several in proportion to the respective number of
Registrable Securities they have sold pursuant to a Registration Statement, and
not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding
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paragraph. The amount paid or payable by an indemnified party as a result of the
Losses referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding this Section 5(d), an
indemnifying party that is a Selling Holder of Registrable Securities shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount of any
damages which such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations of the
Company hereunder shall be in addition to any liability the Company may
otherwise have hereunder, under the Purchase Agreement or otherwise.
The indemnity and contribution provisions contained in this Section 5 shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of any Holder or
any person controlling any Holder, or the Company, its officers or directors or
any person controlling the Company and (iii) the sale of any Registrable
Securities by any Holder.
6. Information Requirements.
(a) The Company shall file the reports required to be filed by it under
the Securities Act and the Exchange Act, and if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. The Company further covenants that it will cooperate with any
Holder of Registrable Securities and take such further reasonable action as any
Holder of Registrable Securities may reasonably request (including, without
limitation, making such reasonable representations as any such Holder may
reasonably request), all to the extent required from time to enable such Holder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 and Rule 144A under
the Securities Act. Notwithstanding the foregoing, nothing in this Section 6
shall be deemed to require the Company to register any of its securities under
any section of the Exchange Act.
(b) The Company shall file the reports required to be filed by it under
the Exchange Act and shall comply with all other requirements set forth in the
instructions to the appropriate SEC Registration Statement form permitting
registration of the Registrable Securities for resale by the Holders thereof in
the manner or manners designated by them.
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7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its obligations
under this Agreement, each Holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason or a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Conflicting Agreements. The Company has not entered, as of the
date hereof and shall not, on or after the date of this Agreement, enter into
any agreement with respect to its securities which conflicts with the rights
granted to the Holders of Registrable Securities in this Agreement. The Company
represents and warrants that the rights granted to the Holders of Registrable
Securities hereunder do not in any way conflict with the rights granted to the
holders of the Company's securities under any other agreements.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of Holders of a
Majority of the then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders of
Registrable Securities may be given by Holders of at least a majority of the
Registrable Securities being sold by such Holders; provided, that the provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and shall be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by telecopier or
(iii) one business day after being deposited with a reputable next-day courier,
postage prepaid, to the parties as follows:
(x) if to a holder of Registrable Securities, at the most current
address given by such holder to the Company in accordance with the provisions of
Section 7(e):
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(y) if to the Company, to:
Kellstrom Industries, Inc.
14000 N.W. 4th Street
Sunrise, Florida 33325
Attention: Zivi R. Nedivi
Telecopy No.: (954) 845-0428
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, New York 10103-3198
Attention: Richard Gilden, Esq.
Telecopy No.: (212) 752-5958
and
(z) if to the Special Counsel, to:
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Attention: Stephen A. Riddick, Esq.
Telecopy No.: (410) 576-1763
or to such other address as such person may have furnished to the other persons
identified in this Section 7(d) in writing in accordance herewith.
Copies of all notices, demands or other communications shall be
concurrently delivered by the Person given the same to the Trustee under the
Indenture at the address specified in the Indenture.
(e) Owner of Registrable Securities. The Company will maintain, or will
cause its registrar and transfer agent to maintain, a register with respect to
the Registrable Securities in which all transfers of Registrable Securities of
which the Company has received notice will be recorded. The Company may deem and
treat the person in whose name Registrable Securities are registered in such
register of the Company as the owner thereof for all purposes, including,
without limitation, the giving of notices under this Agreement.
(f) Approval of Holders. Whenever the consent or approval of Holders of
a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial Purchaser
or subsequent holders of Registrable Securities if such
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subsequent holders are deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(g) Successors and Assigns. Any person who purchases any Registrable
Securities from the Initial Purchaser shall be deemed, for purposes of this
Agreement to be an assignee of the Initial Purchaser. The Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties and shall inure to the benefit of and be binding upon each holder of any
Registrable Securities.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter declared
invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. Except as provided in the
Purchase Agreement and the Indenture, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement and the Indenture. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter.
(m) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the
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prevailing party, as determined by the court, shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
(n) Further Assurances. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate the make effective the transactions
contemplated hereby.
(o) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Sections 2(d), 4 or 5 hereof, each of which
shall remain in effect in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
KELLSTROM INDUSTRIES, INC.
By: ________________________________
Zivi R. Nedivi
President and Chief Executive Officer
Accepted as of the date first above written:
BT ALEX. BROWN INCORPORATED
By: _____________________________
Authorized Signatory
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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
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I
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
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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
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
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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
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
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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
ARTICLE XI
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
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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.
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"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.
"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.
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"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 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
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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.
"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.
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"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.
"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.
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"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 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
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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 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).
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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 "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.
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(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.
(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.
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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
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."
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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.
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,
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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 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
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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 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
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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 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
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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
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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
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operation of the Company's Business. The Company has not received any notice of
any violation of or investigation regarding any Laws.
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
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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 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.
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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, 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
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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 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
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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 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.
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(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 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
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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 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
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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.
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
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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 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
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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.
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.
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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 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.
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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; 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.
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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.
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,
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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.
(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
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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 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
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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.
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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 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.
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Section 9.03. No Material Adverse Effect. There shall have been no
Material Adverse Event or Material Adverse Effect with respect to Kellstrom.
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
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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 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,
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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).
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
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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 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).
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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.
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).
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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.
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.
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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.
If to Kellstrom Kellstrom Industries, Inc.
or Kellstrom Subsidiary: 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
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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 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.
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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.
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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
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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
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(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") 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
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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 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
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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.
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(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.
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
-5-
<PAGE>
<PAGE>
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 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
-6-
<PAGE>
<PAGE>
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.
-7-
<PAGE>
<PAGE>
(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 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
-8-
<PAGE>
<PAGE>
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 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
-9-
<PAGE>
<PAGE>
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
-10-
<PAGE>
<PAGE>
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.
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.
-11-
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<PAGE>
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.
-12-
<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
-13-
<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: ____________________
-14-
<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.
-15-
<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.
-16-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
KELLSTROM INDUSTRIES, INC. BALANCE SHEET AND STATEMENT OF EARNINGS FOR THE
PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 9-MOS
<CASH> 703
<SECURITIES> 907
<RECEIVABLES> 7,071
<ALLOWANCES> 187
<INVENTORY> 52,275
<CURRENT-ASSETS> 64,261
<PP&E> 4,281
<DEPRECIATION> 1,056
<TOTAL-ASSETS> 101,644
<CURRENT-LIABILITIES> 41,842
<BONDS> 0
<COMMON> 8
0
0
<OTHER-SE> 47,569
<TOTAL-LIABILITY-AND-EQUITY> 101,644
<SALES> 54,768
<TOTAL-REVENUES> 54,768
<CGS> 35,656
<TOTAL-COSTS> 42,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,662
<INCOME-PRETAX> 9,469
<INCOME-TAX> 3,542
<INCOME-CONTINUING> 5,927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,927
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.67
</TABLE>
