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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-23764
KELLSTROM INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3753725
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1100 INTERNATIONAL PARKWAY
SUNRISE, FLORIDA 33323
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(Address of Principal Executive Offices) (Zip Code)
(954) 845-0427
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(Registrant telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value per share (Nasdaq National Market)
Preferred Stock Purchase Rights (Nasdaq National Market)
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(Title of Each Class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of February 26, 1999, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $182,729,907 based on
the closing price on that date of $16 3/16 per share. As of that date, there
were 11,784,515 shares of the registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Items 10, 11, 12 and 13 of Part III of this
Form 10-K is incorporated by reference to the Definitive Proxy Statement of the
Company relating to the 1999 Annual Meeting of Stockholders.
Certain exhibits listed in Part IV of this Annual Report on Form 10-K
are incorporated by reference from prior filings made by the registrant under
the Securities Act of 1934, as amended.
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Kellstrom Industries, Inc.
Annual Report on Form 10-K
Index
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PAGE NUMBER
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PART I
Item 1. Business............................................................................ 4
Item 2. Properties.......................................................................... 20
Item 3. Legal Proceedings................................................................... 21
Item 4. Submission of Matters to a Vote of Security Holders................................. 21
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters............................................................................. 22
Item 6. Selected Financial Data............................................................. 24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................... 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......................... 33
Item 8. Financial Statements and Supplementary Data......................................... 33
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................................ 33
PART III
Item 10. Directors and Executive Officers of the Registrant.................................. 34
Item 11. Executive Compensation.............................................................. 34
Item 12. Security Ownership of Certain Beneficial Owners and Management...................... 34
Item 13. Certain Relationships and Related Transactions...................................... 34
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K..................... 34
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PART I
This report contains or incorporates by reference forward-looking
statements that are subject to risks and uncertainties. Forward-looking
statements include information concerning the financial condition, results of
operations, plans, objectives, future performance and business of Kellstrom
Industries, Inc. (the "Company"). The Company includes forward-looking
statements in descriptions of future earnings and cash flows, anticipated
capital expenditures and management's strategies, plans and objectives.
Statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates" or similar expressions are generally considered to be
forward-looking statements.
Forward-looking statements involve both known and unknown risks and
uncertainties and actual results or performance may therefore differ materially
from the expected results or performance expressed or implied by the
forward-looking statements. The following important factors, in addition to
factors the Company discusses elsewhere in this report and in the documents
that are incorporated into this report by reference, could affect the Company's
actual results or performance:
o the Company's continuing ability to effectively integrate
acquired companies and the effects of increased indebtedness
as a result of the Company's business acquisitions;
o the Company's continuing ability to acquire adequate inventory
and to obtain favorable pricing for such inventory;
o the Company's ability to arrange for the repair of aircraft
engines and engine parts by third-party contractors prior to
resale or lease;
o the Company's ability to control costs;
o competitive pricing for the Company's products;
o customer concentration;
o fluctuations in demand for the Company's products which are
dependent upon the condition of the airline industry and the
Company's ability to collect receivables;
o changes in government regulation;
o the availability to the Company of acquisition and expansion
opportunities on attractive terms;
o the Company's ability to develop and implement systems to
manage rapidly growing operations;
o the availability of capital to fund growth and acquisition
opportunities;
o the effect and costs of Year 2000 issues; and
o adverse conditions in the capital markets or in the general
economy.
In light of these risks and uncertainties the forward-looking events
discussed in this report might not occur. The Company undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
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ITEM 1. BUSINESS.
GENERAL
The Company is a leader in the airborne equipment segments of the
international aviation services after-market. The Company's principal business
is the purchasing, overhauling (through subcontractors), reselling and leasing
of aircraft, avionics and aircraft rotables, and engines and engine parts. The
Company specializes in providing engines and after-market engine parts for large
turbo-fan engines manufactured by CFM International, General Electric, Pratt &
Whitney and Rolls Royce. The Company believes that the engine types which it
sells and leases and for which it supplies parts comprise in excess of 85% of
the total world jet engine supply. The Company is a supplier to a broad base of
approximately 1,000 domestic and international customers representing nearly all
segments of the worldwide aviation industry, including commercial airlines such
as American, Delta, Lufthansa, Swiss Air and Singapore Airlines, and original
equipment manufacturers ("OEMs") and engine overhaul facilities such as
Daimler-Benz, GE Aircraft Engine Services and Pratt & Whitney. The Company
enables customers to reduce their inventory, inventory carrying costs and
airborne equipment maintenance costs by offering a broad inventory of engines
and engine parts on a timely basis and at competitive prices. For the year ended
December 31, 1998, the Company generated revenues of $180.0 million, earnings
before interest, taxes, depreciation and amortization ("EBITDA") of $60.8
million and net earnings of $19.6 million (or $1.53 per diluted share).
The Company's business strategy is focused on strong and controlled
internal growth, supplemented by strategic inventory purchases and acquisitions
of competing and complementary businesses meeting pre-defined criteria. In
evaluating acquisition opportunities, the Company's management considers the
following criteria in addition to customary business and operational due
diligence: the effects on earnings per share, the expected stability and
inherent strength of gross margins and a comparative analysis of returns on
invested capital and assets. The Company pursues acquisitions to strengthen
current product lines, increase access to customers in its existing markets and
expand into new product lines and markets.
The Company's operating approach enables it to pursue its growth plans
while maintaining and improving operating efficiencies and results. As the
Company's operations team strives to enhance internal procedures and controls,
streamline distribution channels and maintain and expand customer relationships
and account management, the Company's acquisition team works continuously with
outside advisors to identify, structure and consummate acquisitions. This
operating approach enables the Company to manage the internal growth of its
business and to integrate acquired businesses while continuing to evaluate
acquisition opportunities.
The Company's principal executive office is located at Sawgrass
International Corporate Park, 1100 International Parkway, Sunrise, Florida
33323. Its telephone number is (954) 845-0427.
THE INDUSTRY
The airline industry has experienced rapid growth in the level of air
travel and the volume of air cargo in recent years and is expected by industry
analysts to continue to experience such growth in the future. According to the
Boeing 1998 Current Market Outlook (the "Boeing Report"), air travel is expected
to rise over 1997 levels by over 60% by 2007 and by over 160% by 2017. While
this growth to date has been accommodated largely by increasing load factors,
airlines are responding by expanding fleet size. The Boeing Report projects that
the worldwide fleet of commercial passenger aircraft is expected to more than
double from approximately 10,845 at the end of 1997 to over 23,000 by 2017, and
the worldwide fleet of cargo jet aircraft is expected to increase from
approximately 1,430 in 1997 to approximately 2,700 by 2017.
This increase in worldwide air travel has resulted in a corresponding
increase in demand for aircraft, avionics and aircraft rotables, and engines and
engine parts. In light of the requirements of the Federal Aviation
Administration (the "FAA") that aircraft engines and engine parts be serviced at
scheduled intervals of flying hours, the increase in worldwide air travel has
resulted in the need for more frequent servicing cycles and a corresponding
increase in demand for engines and engine parts. The Company believes that, due
to cost constraints, many airlines and repair and maintenance facilities that
historically purchased parts from new parts manufacturers are increasingly
utilizing after-market parts sold by resellers such as the Company.
At the same time that demand for aircraft, avionics and aircraft
rotables, and aircraft engines and engine parts has been increasing, the
competitive environment of the commercial airline industry has led many airlines
to "outsource" a larger percentage of non-core functions, including ownership of
such inventory, in order to focus resources on improving passenger and freight
services. As a result, airlines are increasingly turning to operating leases and
inventory management providers to maximize operational and financial flexibility
while minimizing upfront capital requirements.
The aircraft engine and engine parts market is estimated by the United
States Department of Commerce to exceed $18 billion annually. The resale segment
of this market is highly fragmented, characterized by a limited number of large
suppliers with broad product offerings and numerous smaller competitors serving
niche markets. Several notable trends in the industry have recently emerged to
improve safety, reduce costs and increase efficiency, including increasing
emphasis on documentation and traceability of parts, outsourcing of inventory
management functions, implementing "just-in-time" inventory management systems
and reducing the number of approved suppliers. The Company believes that only
those companies with superior quality assurance programs, sophisticated
information systems and adequate capital will succeed in this changing
environment. The Company is an active participant in the consolidation of the
industry, having completed five acquisitions with combined annual revenues in
the years preceding the respective acquisitions of approximately $187 million.
The airborne equipment segment of the worldwide aviation services
industry is being affected by the following trends:
INCREASING EMPHASIS ON DOCUMENTATION AND TRACEABILITY. As safety
requirements have become more stringent, regulatory authorities have increased
the level of documentation required of aircraft operators. Operators have, in
turn, extended this requirement to the independent dealers from which they
purchase after-market parts. The expense and sophistication required to track
the history of inventory consisting of thousands of components is considerable
and provides a barrier to entry into the engine parts after-market. In addition
to the barriers created by documentation requirements, management believes that
the potential adoption of tighter regulations by government and industry
regulators regarding the operating procedures of resellers may eliminate smaller
participants and create additional barriers to entry.
OUTSOURCING OF INVENTORY MANAGEMENT FUNCTION. Some airlines have
streamlined their operations by outsourcing the entire inventory management
function to independent third parties. This improves the airline's
profitability, as measured by return on assets, by removing parts inventory from
the balance sheet. Outsourcing allows airlines to secure parts on an "as-needed"
basis without incurring the costs associated with carrying their own expensive
inventory. This enables a company such as the Company to acquire directly or
through consignment arrangements a large inventory and to make such inventory
attractive to a broad customer base. Under consignment agreements, the supplier
is granted the right to sell spare parts from the airlines' inventory, with the
proceeds divided between the supplier and the airline itself.
LEASING. Similar to outsourcing, leasing engines or engine parts
enables airlines to meet short-term operating needs while lowering their
overhead and/or working capital requirements. Short-term leases, often 30-90
days in duration, are used by some carriers that do not wish to maintain a pool
of spare engines or engine parts. Intermediate and long-term leases (up to 10
years) are used by many larger carriers as they upgrade their fleets. A
significant portion of the new aircraft flown by the major carriers are leased
and such carriers typically prefer to lease rather than purchase spare engines
for their fleet. In addition, many of the new entrant jet carriers are
capital-constrained and thereby prefer to lease rather than own aircraft and
engines in order to minimize upfront capital outlays.
REDUCTION IN NUMBER OF SUPPLIERS AND CONSOLIDATION OF THE ENGINE PARTS
AFTER-MARKET. In order to ensure better control of their safety standards and
reduce their administrative costs, airlines are limiting the number of suppliers
with which they do business. To remain a supplier to the airlines, dealers must
maintain high standards of quality control, enabling customers to trace the
complete history of any part. This move to limit the number of suppliers is
causing a realignment among independent dealers. A small number of dealers
continue to do business directly with airlines, and a new tier of dealers sell
to these approved suppliers. The Company believes that this reduction in
supplier base will continue to lead to consolidation in the market for aircraft
spare parts.
INCREASED IMPORTANCE OF CAPITAL. Suppliers need ready access to capital
in order to take advantage of various profitable opportunities, including
purchasing large portfolios of assets to be made available for outsourcing and
leasing. Larger inventories, sophisticated information technology systems and
more expensive jet engines require increased access to capital.
BUSINESS STRATEGY
The Company has experienced significant growth over the past few years.
The Company believes that the following strategies should provide opportunities
for continued growth:
STRONG AND CONTROLLED INTERNAL GROWTH. The Company has achieved strong
and controlled internal growth by increasing business with its existing
customers, expanding its customer base and constantly improving the efficiency
of its operations. On a pro forma basis (assuming the acquisitions of Aero
Support USA, Inc. ("Aero Support"), Integrated Technology Corporation ("ITC")
and Aerocar Aviation Corp. ("Aerocar Aviation") and Aerocar Parts, Inc.
("Aerocar Parts", and together with Aerocar Aviation, "Aerocar") had been made
on January 1, 1997) the total revenue of the Company increased by 36% from 1997
to 1998. During this time period, the Company has increased the size of its
marketing department to support its customer base. The Company believes that the
focus of its core business on purchasing, overhauling (through subcontractors),
reselling and leasing of aircraft, avionics and aircraft rotables, and engines
and engine parts results in cost-efficient operations which maximize its profit
margins and minimize its dependence on expensive machinery, equipment and labor.
The Company believes that its efficiency is exemplified by its decreased
selling, general and administrative expenses as a percent of total revenues.
From 1996 to 1998 this ratio has decreased from 14.0% in 1996 to 11.2% in 1997
and 10.6% in 1998. The Company intends to further improve efficiency by
continuing to centralize its management and consolidate its operations.
STRATEGIC INVENTORY PURCHASES. The Company believes that its potential
to increase revenues from its existing business is largely dependent on its
ability to deliver aircraft, avionics and aircraft rotables, and engines and
engine parts on a "just-in-time" basis. The lead time between purchasing
aircraft, avionics and aircraft rotables, and engines and engine parts and
having a ready-for-sale product is generally 60 to 90 days. The Company focuses
on developing new sources of supply, such as OEMs and overhaul facilities, as
well as airlines which are replacing portions of their fleets or disposing of
excess inventory. By broadening its sources of supply, the Company is better
able to maintain a strategic stock of inventory in order to remain responsive to
customer delivery requirements. The Company relies on its market expertise and
industry network to analyze both short and long-term trends in supply and demand
in the aviation industry.
AIRBORNE EQUIPMENT LEASING. In 1997, the Company established Kellstrom
Commercial Aircraft, Inc. ("KELLCAD"), a wholly-owned subsidiary, which manages
a portfolio of aircraft and aircraft engines that are available to the Company's
customers on short to medium term (approximately 3 to 60 month) operating
leases. KELLCAD supports and complements the Company's core after-market sales
business by providing assured access to a future supply of aircraft, avionics
and aircraft rotables, and aircraft engines and engine parts while providing the
Company with an attractive current return on capital invested in such inventory.
As the operating leases expire and the equipment is returned, the Company can
re-lease, resell or disassemble the equipment depending upon then existing
market supply and demand. As of December 31, 1998, the Company, leased 8
aircraft and 68 engines to third parties.
ACQUISITIONS IN EXISTING COMMERCIAL AVIATION MARKETS. As a result of
its concentration in certain niche markets, the Company's management develops
in-depth knowledge of other resellers serving similar product lines that may be
potential acquisition candidates. The acquisitions of ITC and Aerocar expanded
the Company's customer base within its existing commercial aviation product
lines, enhanced its product offering and strengthened its distribution network.
ACQUISITIONS IN ADJACENT MARKETS. As a result of its position in the
industry, the Company's management also becomes familiar with companies serving
complementary markets that may be attractive acquisition candidates. The Company
continually works with outside advisors to evaluate and pursue companies that
will enable it to expand into product lines and markets in which the Company
does not have a significant presence. As a result of the acquisition of Aero
Support in September 1997, the Company is able to offer engines and engine parts
to customers in the large cargo transport aircraft and commercial helicopter
markets, which were not previously served by the Company. In addition, as a
result of the acquisition of Solair, Inc. ("Solair") in December 1998, the
Company is able to offer avionics equipment, a complimentary product line, which
was not previously sold by the Company. The Company believes that the continued
expansion may be achieved through the acquisition of companies offering
different product lines than those of the Company.
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PRODUCTS
The Company's principal business is the purchasing, overhauling
(through subcontractors) and reselling of airborne equipment, principally
airframe components, engines and engine parts. The Company also maintains a
portfolio of aircraft and engines that it leases to its customers on a short to
medium term basis. This leasing activity complements the Company's core business
by providing access to a predictable source of airframe components, engines and
engine parts as lessees return the leased aircraft and engines to the Company at
the end of the lease term.
AFTER-MARKET SALES BUSINESS. Customers in both the commercial and
military sectors purchase spare and replacement parts and other airborne
equipment. The Company is active in both the commercial aircraft sector, which
is divided into large jet transports, smaller commercial aircraft (known as
general aviation aircraft) and helicopters, and the military sector. General
aviation includes both jet and propeller-driven planes for business and personal
use. The Company specializes in engine parts for the large jet segment of the
commercial aircraft sector. Through its small engine and military group, the
Company also services certain military customers for turbojet engines, and
engine parts for large transport aircraft and commercial customers for
helicopters. The Company does not participate in the turboprop market, which is
typically low margin in terms of cost per unit.
Boeing (which acquired McDonnell Douglas) and Airbus Industries
dominate the market for the production of large commercial aircraft. A small
number of suppliers provide the bulk of engines used to power these large
commercial jet aircraft. The suppliers include the Pratt & Whitney division of
United Technologies, General Electric, Rolls Royce and CFM International. The
following is a brief description of the engines models for which the Company
supplies engine parts:
THE JT9D ENGINE. JT9D engines, introduced by Pratt & Whitney in the
late 1960's, are used in Boeing 747 and 767 aircraft, the McDonnell Douglas
DC-10 and Airbus A300/310's. The JT9D was the first commercial turbo fan with a
high bypass ratio, enabling the engine to provide unprecedented thrust with
outstanding fuel efficiency and relatively low noise. The JT9D engine has flown
more than 135 million hours. Approximately 3,000 of these engines were built
until production ceased in 1990; approximately 2,800 are still flying on wide
body aircraft operated by over 50 airlines. The Company estimates that JT9D
engines will be widely used for the next 10-15 years. Pratt & Whitney continues
to upgrade and improve in-service engines to meet current noise and emissions
requirements, thus increasing the life span of these engines.
THE JT8D ENGINE. JT8D engines, a derivative military J-52 Turbojet,
were originally developed by Pratt & Whitney for the Boeing 727 airliner in
1963. The engine is the most widely used engine in commercial aviation history.
More than 13,000 of the JT8D family of engines have been produced and the engine
is still in production today. A variant of the basic JT8D, called the 200
Series, was introduced in 1977. The older, less fuel efficient JT8D engines are
used in the Boeing 727 and 737, the McDonnell Douglas DC-9, the Aerospatiale
Carvelle, Dassualt Mercure and the C-9 and C-22, U.S. military versions of the
DC-9 and 727 aircraft. The newer 200 Series JT8D engines are used throughout the
McDonnell Douglas MD-80 range of aircraft models. The Company estimates that the
older JT8D engines will be in service for at least ten more years, and the 200
Series JT8D engines will be in service for at least 20 more years.
THE PWA 2000 ENGINE. Pratt & Whitney began development in 1974 of a
series of advanced technology aircraft engines to power the commercial
transports of the mid-1980s and beyond. The PWA 2037 engine model the first in
the series of such models, was awarded FAA certification in December 1983. These
highly fuel efficient engines feature high thrust, low noise and reduced
emissions. The PWA 2000 series engines are used to power the Boeing 757 and are
considered to be current technology engines that are likely to continue in
service for at least 25 more years.
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THE PWA 4000 ENGINE. In 1982, Pratt & Whitney launched development of
the PWA 4000 Series turbo fan - an all new commercial jet engine series with
improved fuel efficiency and higher takeoff thrust rating. The PWA 4000 entered
commercial service in mid 1987. The PWA 4000 is designed for use on current and
advanced versions of such wide-body aircraft as the Airbus A300, A310, A330, the
Boeing 747, 767, 777 and the McDonnell Douglas MD-11. These engines are
considered to be current technology engines and are likely to continue in
service for at least 25 more years.
THE ROLLS ROYCE RB-211 ENGINE. The RB-211 was built by Rolls Royce
beginning in 1970 for the Lockhead L-1011, the majority of which were purchased
by Delta and Eastern. Approximately 230 aircraft are still in use which use the
RB-211.
THE CFM-56 ENGINE. The CFM-56 is manufactured by CFM International, a
joint venture between General Electric and SNECMA, and is the second most
popular engine as measured by number of aircraft in the worldwide fleet powered
by this engine type. The CFM-56 is used to power the Boeing 737 and the Airbus
A320, A321, A340 and the McDonnell Douglas DC-8. These engines are considered to
be current technology engines and are likely to continue in service for at least
25 more years.
THE T56/501 ENGINE. The T56/501 engine is used to power the widely used
military transport aircraft, the Hercules C-130, manufactured by Lockheed. Over
17,000 engines have been produced.
THE A250 ENGINE. The A250 engine is used to power a wide range of
helicopters manufactured by Bell, McDonnell Douglas and Eurocopter. There are
approximately 16,000 engines currently in use by approximately 2,700 helicopter
operators.
AIRCRAFT ROTABLES AND EXPENDABLE COMPONENTS. Aircraft rotables are
major aircraft components which are regularly removed, replaced and overhauled
in the course of aircraft operation and maintenance. Aircraft rotables supplied
by the Company include flight data recorders, electrical and mechanical
equipment and radar and navigation systems. The Company stocks a wide variety of
rotable and expendables for all commercial jet aircraft types manufactured by
Boeing, McDonnell-Douglas, Airbus, British Aerospace and Fokker Aircraft.
QUALITY CONTROL
Airborne equipment is typically highly engineered as to dimension,
composition and performance characteristics. In addition, engine parts are
generally more expensive, flight critical, technically complex and utilize more
specialized heat tolerant metals than other aircraft parts. A high standard for
quality control and documentation is an absolute necessity. The history of a
given part from the date of original manufacture must be documented and
available to regulators and maintenance personnel. The Company works closely
with third-party FAA certified repair facilities to perform repair services to
bring surplus aircraft engines held for resale and certain engine components
into a condition of airworthiness so that the Company can sell such equipment.
The Company's management believes that its ability to continue to act
as an approved supplier for the major airlines, OEMs and overhaul facilities is
heavily dependent on quality assurance, and that the Company's comprehensive
quality assurance program is among the best in its industry. The Company is (i)
a member of the Coordinating Agency for Supplier Evaluation ("CASE"), a
self-governing organization formed by the airlines that evaluates and audits
parts suppliers and repair stations (ii) a member of the Airline Suppliers
Association for which the Company is an accredited reseller under the provisions
of FAA AC 00-56, and (iii) listed in the European Aerospace Suppliers Register.
In addition, in August 1998, the Company received its recertification under ISO
9002 which was originally received in 1996. The ISO 9002 designation indicates a
quality assurance standard recognized by leading companies throughout the world.
The Company believes it was the first after-market supplier of commercial jet
engines and engine parts in the world to receive such a certification. In
addition, the Company is one of the few vendors in the industry to have invested
in a sophisticated optical imaging system for document storage and retrieval.
This system provides a high degree of traceability by serial number for engine
parts sold by the Company.
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CUSTOMERS
The Company's customers include airlines, OEMs, lessors, operators of
overhaul facilities and other independent dealers. These customers include
American, Daimler-Benz, Delta, Lufthansa, GE Aircraft Engine Services, Pratt &
Whitney, SwissAir and Singapore Airlines. For the years ended December 31, 1998,
1997 and 1996, the five largest customers collectively accounted for
approximately 42%, 38% and 55% of the Company's consolidated revenues. Certain
significant customers vary from period to period as a result of the large unit
prices associated with whole aircraft engine sales.
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OPERATING APPROACH
The principal elements of the Company's operating approach are as
follows:
CONTINUE STRONG QUALITY ORIENTATION. The Company's management believes
that its comprehensive quality program is among the best in the industry. The
Company is a member of CASE, a self-governing organization formed by the
airlines that evaluates and audits parts suppliers and repair stations. The
Company believes it is one of the few resellers of commercial jet engines and
engine parts in the world to receive ISO 9002 certification which the Company
believes provides it with a distinctive competitive advantage. ISO's
comprehensive evaluation system seeks to ensure satisfaction of customer
requirements, documentation of quality management systems and verification that
a product or service is designed, delivered and maintained in accordance with
specific requirements. The ISO 9002 designation indicates a quality assurance
standard recognized by leading businesses throughout the world. In response to
recent airline tragedies and resultant increased scrutiny of airline safety,
airlines and maintenance repair facilities are demanding internationally
recognized quality assurance certification as a condition of doing business.
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The Company is one of the few vendors in the industry to have invested
in a sophisticated optical imaging system for documentation storage and
retrieval. This system, which includes a WORM (write once, read many) drive,
provides a high degree of traceability by serial number for engine parts sold by
the Company. The FAA and customers accept this form of electronic documentation
as the equivalent of original documents. In addition, the Company is working to
make such documentation available online to customers worldwide.
ADDITIONAL KNOWLEDGEABLE PERSONNEL. The market for engine parts is
highly specialized and technically complex. The Company believes that its
success depends heavily on the high level of technical and engineering knowledge
and experience possessed by its personnel. The Company continues to add to its
technically proficient personnel as its business expands both internally and
through the acquisition of competing and complementary businesses.
OPTIMIZE INVENTORY. The Company manages its inventory carefully by
purchasing both whole engines and individual engine parts through
well-structured transactions, disassembling engines for parts when market
conditions are favorable, and closely monitoring the overhauling of selected
parts by high quality subcontractors, while maintaining a high level of
documentation at all stages of the process and storing the engine parts in a
carefully controlled environment. In addition to management's expertise of
market forces and conditions, the Company has developed a series of management
procedures to assess demand for engines and engine parts. In such assessments,
the Company compiles a periodic analysis of the industry's supply and demand on
a product-by-product basis, reevaluates its available supply of inventory and
interfaces with customers and suppliers to forecast supply and demand. The
Company believes that its ability to structure and finance inventory purchase
transactions is critical to success.
EXPAND MARKETING RELATIONSHIPS. The Company maintains and strives to
expand its close relationships with a variety of key customers, including OEMs,
repair facilities, domestic and international airlines and other distributors.
The Company continually seeks to expand its customer base, by among other
things, regularly attending industry trade conferences.
INCREASE CAPITAL RESOURCES. It is critical for the Company to have the
capital to act quickly when purchasing opportunities present themselves. In
addition, increasing the Company's access to capital markets to finance working
capital requirements will allow the Company to take advantage of opportunities
such as leasing, inventory outsourcing and long-term inventory management
contracts.
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COMPETITION
The aviation after-market is highly competitive. Competition is based
on product quality, price, and the ability to provide needed parts quickly. The
largest segment of the after-market is served by OEMs. However, the relatively
high overhead and slow response times which characterize these large
organizations can present a handicap in a fast-moving, price-sensitive
marketplace. OEMs generally concentrate on selling new parts, leaving the market
in serviceable and overhauled parts to other suppliers. OEM-manufactured new
parts generally do not compete with overhauled parts.
The largest resellers include companies such as AAR Corp. and The AGES
Group. There are approximately 10 to 15 midsize competitors, including the
Company. Over 50 small after-market suppliers and brokers generate a large
portion of the market revenue. As a result of industry consolidation, management
expects that a number of these smaller operators will either be acquired or will
have difficulty competing in this changing market. The Company competes based on
its ability to deliver parts on a "just-in-time" basis, the breadth of its
product offering, quality assurance and part traceability, proven technical
capabilities and price.
In addition, the engine parts supply business has been reshaped by the
widespread adoption of ILS - the Inventory Locator Service. The ILS lists the
availability of thousands of types of engine parts from brokers, resellers,
repair facilities and airlines. The listing includes the quantity of parts
available, the condition of the parts, when the parts are available and a
contact for more information. The ILS has created a much freer flow of
information concerning the supply and demand for particular parts. Dealers now
must compete not only on the basis of their relationships with customers and
knowledge regarding a potential source for products, but also on the quality of
the parts available, the documentation tracing the history of the parts and the
price.
GOVERNMENT REGULATION
The aviation industry is highly regulated by the FAA in the United
States and the equivalent regulatory agencies in other countries. While the
business of selling after-market engines and engine parts is not regulated by
the FAA, the aircraft engines, engine components and airframe materials supplied
by after-market suppliers must be accompanied by documentation which enables the
customers to comply with applicable regulatory requirements. Aircraft operators
must maintain logs concerning the utilization and condition of aircraft engines,
life-limited engine components and airframes.
Before engine components may be installed in an aircraft engine, they
must meet certain standards of airworthiness established by the FAA or the
equivalent regulatory agencies in other countries. Specific regulations vary
from country to country, although regulatory requirements in other countries are
generally satisfied by compliance with FAA requirements. Engine components must
also be traceable to sources deemed acceptable by such agencies. Although the
Company believes it complies with the highest level of such regulatory
standards, standards may change in the future, requiring engine components
already contained in the Company's inventory to be scrapped or modified.
Aircraft engine manufacturers may also develop new engine components to be used
in lieu of engine components already contained in the Company's inventory. In
all such cases, to the extent that the Company has such engine components in its
inventory, their value may be reduced.
Management believes that the industry will be subject to continued
regulatory activity. Increased oversight has and will continue to originate with
quality assurance departments at airline operators. The Company has been able to
meet all such requirements to date, and believes that it will meet any
additional requirements that may be imposed.
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STRATEGIC ACQUISITIONS
KST ACQUISITION. The Company, formerly Israel Tech Acquisition Corp.,
was formed in December 1993 as a specified purpose acquisition company, the
objective of which was to consummate an initial public offering and enter into a
business combination with an operating business. In April 1994, the Company
consummated the initial public offering, from which it derived net proceeds of
$11.3 million after expenses. On June 22, 1995, the Company completed the
acquisition of substantially all of the assets and liabilities of the commercial
jet aircraft engine part distribution business of Kellstrom Industries, Inc., an
indirect wholly-owned subsidiary of Rada Electronic Industries, Inc. ("Rada").
In connection with the closing on June 22, 1995, the Company changed its name
from Israel Tech Acquisition Corp. to Kellstrom Industries, Inc.
IASI ACQUISITION. On January 15, 1997, the Company completed the
acquisition of substantially all of the assets and certain liabilities of
International Aircraft Support, L.P. ("IASI") for $25.1 million in cash and
warrants to acquire 500,000 shares of the Company's common stock, par value
$.001 per share ("Common Stock"), at $9.25 per share, expiring January 15, 1999.
IASI was a worldwide seller of new and used aircraft engine parts to maintenance
and overhaul facilities, major commercial airlines and other redistributors.
Along with the engine parts sales, IASI was a lessor of jet engines and offered
engine repair management programs through its technical services business.
IASI's mix of business and its purchasing activities ultimately contributed to
its position as a "market-maker" in redistributed engines and various engine
parts.
The IASI acquisition enabled the Company to enter into markets for
additional engine types, including the JT8D, PWA 2000 and CFM-56 markets.
According to industry analysts, these engine types power aircraft which as of
the date of the IASI Acquisition constitute a majority of the world aircraft
fleet. In addition, the IASI acquisition accelerated the Company's entry into
the engine leasing business, an area in which IASI had been an active
participant. The IASI acquisition also expanded and diversified the Company's
customer base, particularly in European markets. IASI's customers included major
airlines, engine overhaul facilities including those operated by airlines,
independent overhaul and maintenance organizations and aircraft engine
manufacturers. Following the acquisition, IASI's senior management joined the
Company, further broadening the Company's management team.
AERO SUPPORT ACQUISITION. On September 10, 1997, the Company completed
the acquisition of substantially all of the assets and liabilities of Aero
Support for approximately $2.7 million in cash, three promissory notes in the
aggregate principal amount of $11.7 million, and three warrants. One warrant
provides for the purchase of 75,000 shares of Common Stock at an exercise price
of $22.00 per share, expiring on September 9, 2000. The other two warrants
provide for the purchase of an aggregate of 175,000 shares of Common Stock at an
exercise price of $19.00 per share, expiring on September 9, 2002. Up to an
additional $5.0 million cash consideration may be paid by the Company in the
form of an earn-out payable over three years based upon certain specified
criteria of which $1.6 million was earned during 1998.
Aero Support was an international after-market reseller of turbojet
engines and engine parts for helicopters and large transport aircraft. Aero
Support had a customer base that included domestic and foreign operators,
commercial and industrial enterprises and engine overhaul facilities. Aero
Support's primary focus was on the Allison (Rolls Royce) T56/501 engine, which
powers the military's Hercules C-130 aircraft, a widely used military transport
aircraft, and the Allison 250, with approximately 16,000 units actively in use
by helicopters. Prior to its acquisition, Aero Support served 495 customers
worldwide from its headquarters in New York and its additional facility in
Louisiana. With the addition of Aero Support's business, the Company entered the
large transport aircraft and commercial helicopter engine and engine parts
market.
ITC ACQUISITION. On April 1, 1998, the Company completed the
acquisition of substantially all of the assets and liabilities of ITC for $20.5
million in cash plus up to $10.0 million cash consideration which may be paid in
the form of an earn-out payable over three years based on certain specified
criteria, of which $3.3 million was earned during 1998. In addition, the Company
received a three-year option to purchase a 49% interest in a related
FAA-approved overhaul facility.
ITC was an after-market supplier of jet engines and jet engine parts
for the airline industry. It also provided related services such as engine
leasing. ITC's principal product line featured the Rolls Royce RB-211, Pratt &
Whitney JT8D and Rolls Royce Allison models, and, to a lesser extent, it
supplied Pratt & Whitney JT9D engines and engine parts. ITC had some 75
customers worldwide, including major commercial airlines and jet engine repair
facilities.
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AEROCAR ACQUISITION. On June 17, 1998, the Company acquired all of the
outstanding capital stock of Aerocar for $42.3 million in cash, warrants to
purchase an aggregate of 250,000 shares of the Company's Common Stock at an
exercise price of $26.00 per share, expiring on June 17, 2001, plus an
additional $5.0 million payable within a two-year period after closing, either
in cash, or at the option of the Company, in shares of Common Stock having an
equivalent value as of the date of the acquisition. Aerocar was engaged in the
sale and leasing of aircraft engines and aircraft engine parts to major airlines
and regional carriers. Aerocar's primary focus was on the Pratt & Whitney JT8D
engine.
SOLAIR ACQUISITION. On December 31, 1998, the Company acquired all of
the outstanding capital stock of Solair, a wholly-owned subsidiary of Banner
Aerospace, Inc., for approximately $57.4 million in cash and a warrant to
purchase 300,000 shares of Common Stock at an exercise price of $27.50 per
share, expiring on December 31, 2002. Solair is engaged in the sale of a wide
variety of aircraft rotables and expendable components including flight data
recorders, electrical and mechanical equipment and radar and navigation systems.
Through the acquisition of Solair, the Company expanded into the adjacent
avinonics and aircraft rotables business.
TRADEMARKS AND DESIGN PATENTS
The Company either owns or has applied for various trade names and trademarks in
the United States (and abroad), for use with its products. The Company believes
that its trade names and trademarks are well recognized within the aviation
industry. The Company believes that its tradename and trademarks are not
critical to its continued business success and that the loss of any trade name
and/or trademark would not have a material adverse effect on its business
operations.
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ENVIRONMENTAL MATTERS
The Company believes that it is in compliance in all material respects
with applicable environmental laws and regulations and due to the current nature
of the Company's business there is little or no direct cost associated with such
compliance.
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PRODUCT LIABILITY
The Company's business exposes it to possible claims for personal
injury or death that may result from the failure of an aircraft or engine owned
and leased by it or an engine part sold by it. The Company currently maintains
product liability insurance coverage in the amount of $750 million on an
aggregate and per claim basis.
CERTAIN FACTORS WHICH MAY AFFECT FUTURE RESULTS
The Company does not provide financial performance forecasts. The
Company's operating results and financial condition have varied in the past and
may in the future vary significantly depending on a number of factors. Except
for the historical information in this report, the matters contained in this
report include forward-looking statements that involve risks and uncertainties.
The following factors, among others, could cause actual results to differ
materially from those contained in forward-looking statements made in this
report and presented elsewhere by management from time to time. Such factors,
among others, may have a material adverse effect upon the Company's business,
results of operation and financial condition.
LIMITED OPERATING HISTORY; POTENTIAL FLUCTUATIONS IN OPERATING RESULTS.
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 revenues, the Company may experience significant
fluctuations in its net revenues, 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
aviation industry, the availability and price of surplus aviation equipment, the
size and timing of customer orders 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 revenues and net income from
quarter to quarter. A large portion of the Company's operating expenses is
relatively fixed. Since the Company typically does not obtain long-term purchase
orders or commitments from its customers with respect to the sale of aircraft,
avionics and aircraft rotables, and engines and engine parts, it must anticipate
the future volume of orders based upon the historic purchasing patterns of its
customers and upon its discussions with its customers as to their future
requirements. Cancellations, reductions or delays in orders by a customer or
group of customers could have a material adverse effect on the Company's
business, financial condition and results of operations. Therefore, recent net
revenues 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 revenues 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.
MANAGEMENT OF GROWTH. The Company has recently experienced significant
expansion that has placed substantial demands upon its management, systems and
resources. The Company's ability to manage its future growth, if any, will
require the Company continually to improve its financial controls, management
controls, reporting systems and procedures on a timely basis, implement new
systems as necessary and expand, train and manage its workforce. There can be no
assurance that the Company's controls, systems or procedures will continue to be
adequate to support the Company's operations. The failure of the Company's
management to respond effectively to changing business conditions would have a
material adverse effect upon the Company's business, financial condition and
results of operations.
GROWTH STRATEGY AND RISKS RELATING TO ACQUISITIONS. A key element of
the Company's strategy involves growth through the acquisition of additional
inventories of aircraft, avionics and aircraft rotables, and engines and engine
parts and the acquisition of other companies, assets or product lines that would
complement or expand the Company's existing business. The Company's ability to
grow by acquisition is dependent upon, and may be limited by, the availability
of suitable aircraft, avionics and aircraft rotables, and engines and engine
parts inventories, acquisition candidates and capital, and by restrictions
contained in the Company's credit agreements. The company completed the IASI
acquisition in January 1997, the Aero Support acquisition in September 1997, the
ITC acquisition in April 1998, the Aerocar acquisition in June 1998 and the
Solair acquisition in December 1998. The process of seeking to integrate an
acquired company's business into the Company's operations may result in ongoing
and extraordinary operating difficulties and expenditures, may absorb
significant management attention that would otherwise be available for the
ongoing
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development of the Company's business and may result in charges against income.
In addition, future acquisitions by the Company could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, any of which could materially adversely affect the Company's operating
results and financial condition. There can be no assurance that the Company will
be able to consummate any future acquisitions on satisfactory terms or that it
will be able to successfully integrate newly acquired businesses into its
existing operations.
UNCERTAIN SUPPLY OF INVENTORY. The Company obtains its inventories of
aircraft, avionics and aircraft rotables, and engines and engine parts by
purchasing surplus inventory from airlines, overhaul facilities and other
suppliers. There is not an organized market for surplus aircraft, avionics and
aircraft rotables, and engines and engine parts, and the Company must rely on
field representatives and personnel, advertisements and its reputation as a
buyer of surplus inventory in order to generate opportunities to purchase such
equipment. The market for bulk sales of surplus aircraft, avionics and aircraft
rotables, and engines and engine parts is highly competitive, in some instances
involving a bidding process. While the Company has been able to purchase surplus
inventory in this manner successfully in the past, there can be no assurance
that surplus aircraft, avionics and aircraft rotables, and engines and engine
parts of the type required by the Company's customers will be available on
acceptable terms when needed in the future or that the Company will continue to
compete effectively in the purchase of such surplus equipment.
DEPENDENCE ON THIRD-PARTY AIRCRAFT ENGINE REPAIR FACILITIES. The
Company is dependent on third-party FAA-approved repair facilities to perform
repair services to bring surplus aircraft, avionics and aircraft rotables, and
engines and engine parts into a condition of airworthiness so that the Company
can then sell or lease such equipment to its customers. Third-party repair
facilities may experience heavy workloads or may allocate their resources to
customers with which they have entered into long-term, regularly scheduled
aircraft engine and airframe maintenance agreements and thereby delay the
services to be provided to the Company. The repair facilities utilized by the
Company are responsible for inspecting and certifying engines and engine parts
to be of serviceable quality. The Company does not have direct control over the
quality of repairs performed by such repair facilities or the accuracy of the
airworthiness condition designated by such facility. It is possible that engines
and engine parts could pass inspection by the Company, be sold by the Company
and be incorporated into an aircraft, and subsequently be determined to be
unsafe or in need of further repair. In such event, the FAA has the authority to
take actions which may include the grounding of an aircraft which contains such
parts. Additionally, the customer who purchased such engines or engine parts
could demand a replacement from the Company. While the Company has insurance
coverage to cover related losses, the effect of such a development on passenger
confidence and customer relations could have a material adverse effect upon the
Company.
CUSTOMER CONCENTRATION. The Company's five largest customers accounted
for approximately 42% of total revenue for the year ended December 31, 1998.
While the relative significance of customers varies from period to period as a
result of the large unit prices associated with whole aircraft engine sales, the
loss of, or significant curtailments of purchases by, one or more of the
Company's significant customers at any time could have a material adverse effect
on the Company's business, financial condition and results of operations.
CUSTOMER CREDIT RISKS. The Company's inability to collect receivables
from a substantial sale could adversely affect the Company's financial position
and results of operations for a particular period, although Company policy is
generally to sell whole engines for cash at closing. The Company's bad debt
expense was less than 0.5% of revenues for the years ended December 31, 1996,
1997 and 1998. The Company anticipates that it may incur greater bad debt losses
in the future as its customer base grows and the Company experiences greater
exposure to its customers as a result, in part, of the implementation of a
program for the leasing of aircraft engines and airframes. There can be no
assurance that the Company will not incur significant bad debt losses in the
future which individually, or in the aggregate, could have a material adverse
effect on the Company's business, financial condition and results of operations.
ADVERSE CONSEQUENCES OF DEBT AND LEVERAGE. As a result of incurring
debt, the Company is subject to the risks normally associated with debt
financing, including, without limitation, the following: (i) a substantial
portion of the Company's net cash provided by operations may be committed to the
payment of the Company's interest expense and principal repayment obligations
and will not be available to the Company for other purposes; (ii) the Company's
ability to
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obtain additional financing in the future for working capital, capital
expenditures or acquisitions may be limited; and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in its industry
and general economic conditions. The Company's ability to pay interest on its
debt and to satisfy its other debt obligations will depend upon its future
operating performance, including its ability to implement its business strategy,
which will be affected by prevailing economic conditions and financial, business
and other factors, many of which are beyond the Company's control. If the
Company is unable to service its indebtedness, it will be forced to adopt an
alternative strategy that may include actions such as reducing or delaying
planned acquisition activity, selling assets, restructuring or refinancing its
indebtedness or seeking additional capital. There can be no assurance that any
of these strategies could be effected on satisfactory terms, if at all, or that
the Company's failure to service any of its indebtedness will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS. The Company has debt
obligations which restrict, among other things, the ability of the Company
and/or its subsidiaries to: (i) incur additional indebtedness; (ii) incur liens;
(iii) pay dividends or make certain other restricted payments; (iv) consummate
certain asset sales; (v) enter into certain transactions with affiliates; (vi)
merge or consolidate with any other person; or (vii) sell, assign, transfer,
lease, convey or otherwise dispose of its assets. In addition, the Company's
senior credit facility requires the Company to maintain specified financial
ratios and satisfy certain financial tests. The Company's ability to maintain
those financial ratios and to satisfy those tests will be affected by events
beyond its control, and there can be no assurance that the Company will be able
to do so. A breach of any of the financial covenants in the senior credit
facility, or certain other debt obligations could result in a default under each
of the governing agreements. Upon the occurrence of an event of default under
the senior credit facility, the respective lenders could elect to declare all
amounts outstanding, together with accrued interest, to be immediately due and
payable. Substantially all of the assets of the Company and each of its U.S.
subsidiaries are pledged as collateral security for the senior credit facility.
If the Company were unable to repay all such outstanding amounts, the lenders
could proceed against the collateral granted to them to secure that
indebtedness, and any proceeds realized upon the sale of such collateral would
be used first to satisfy all amounts outstanding under the senior credit
facility, and thereafter, any other liabilities of the Company. If the
indebtedness under the senior credit facility were to be accelerated, there can
be no assurance that the assets of the Company would be sufficient to repay in
full that indebtedness and any other indebtedness of the Company, which could
have a material adverse effect upon the Company's business, financial condition
and results of operations.
DEPENDENCE UPON KEY PERSONNEL. The Company depends upon the efforts of
its officers and directors. The loss of the services of such key personnel could
have a material adverse effect on the Company's ability to successfully achieve
its business objectives. Although each of the key employees has executed an
employment agreement that prohibits the employee from competing against the
Company for a specified period of time, there can be no assurance that such
remedy will be available to the Company or that such protection will mitigate
any losses incurred as a result of termination of employment.
PRODUCT LIABILITY. The Company's business exposes it to possible claims
for personal injury or death that may result from the failure of an aircraft or
engine owned and leased by it or an engine part sold by it. The Company
currently maintains product liability insurance coverage in the amount of $750
million on an aggregate and per claim basis. There can be no assurance that
claims will not arise in the future, that such insurance coverage can be
maintained in the future at an acceptable cost or that such coverage will be
adequate to cover any future liability of the Company. Any such liability not
covered by insurance could have a material adverse effect on the financial
condition of the Company.
YEAR 2000. The Year 2000 problem is the result of computer programs
being written using two digits rather than four to define the applicable year.
The Company has engaged a software consulting firm to replace its accounting and
inventory management software programs with programs that are Year 2000
compliant. There can be no assurance, however, that replacing such software
programs will result in Year 2000 compliant software systems. The Company
expects the conversion efforts to be completed by the end of 1999. Management
does not expect the financial impact of making the required system changes to be
material to the Company's consolidated financial position, results of operations
or cash flows which are being funded through operating cash flows. Even if the
Company becomes Year 2000 compliant, there can be no assurance that all of the
Company's customers and suppliers will be Year 2000 compliant by the end of
1999. The failure of the Company or any of its customers or suppliers to become
Year 2000 compliant by the end of 1999 could have a material adverse effect on
the Company's business, financial condition and results of operations. See Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Issue.
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DEPENDENCE ON THE CONDITION OF THE AIRLINE INDUSTRY. Aircraft engine
and engine parts pricing is affected to a degree by the overall economic
condition of the airline industry, which has historically been volatile. The
demand for after-market engines and engine parts is driven primarily by flying
hours or cycles. Regardless of the profitability of the airline industry, parts
must be serviced or replaced at scheduled intervals. As such, the demand for
after-market parts is a function of the level of worldwide air traffic.
Additionally, factors such as the price of fuel affect the aircraft parts
market, since older aircraft (into which aircraft parts are most often placed)
become less economically viable as the price of fuel increases. During a
downturn in the aviation industry, there may be reduced overall demand for
aircraft, avionics and aircraft rotables, and engines and engine parts, lower
selling prices for the Company's products and increased credit risk associated
with doing business with industry participants. There can be no assurance that
economic and other factors that might affect the airline industry will not have
an adverse impact on the Company's business, financial condition and results of
operations.
COMPETITION. The aviation parts after-market is highly competitive.
Competition is based on product quality, price and the ability to provide needed
parts quickly. The largest segment of the after-market is served by OEMs.
However, the relatively high overhead and slow response times often associated
with such large organizations can present a handicap in a fast-moving, price-
sensitive marketplace. OEMs generally concentrate on selling new parts, leaving
the market in serviceable and overhauled parts to other suppliers.
OEM-manufactured new parts generally do not compete with overhauled parts. The
largest resellers include companies such as AAR Corp. and The AGES Group. There
are approximately 10 to 15 midsize resellers, including the Company. A large
portion of the market revenue is generated by over 50 small after-market
suppliers and brokers. As a result of industry consolidation, management expects
that a number of these smaller operators will either be acquired or will have
difficulty competing in this changing market. In addition, the engine parts
supply business has been reshaped by the widespread adoption of ILS -- the
Inventory Locator Service. The ILS lists the availability of thousands of types
of parts from brokers, distributors, repair facilities and airlines. The listing
includes the quantity of parts available, the condition of the parts, when the
parts are available and a contact for more information. The ILS has created a
much freer flow of information concerning the supply and demand for particular
parts. Dealers now must compete not only on the basis of their relationships
with customers and knowledge regarding a potential source for products, but also
on the quality of the parts available, the documentation tracing the history of
the parts and the price. There can be no assurance that the Company will
continue to compete effectively against present and future competitors or that
competitive pressures will not have a material adverse effect on the Company's
business, financial condition and results of operations.
GOVERNMENT REGULATION. The aviation industry is highly regulated by the
FAA in the United States and the equivalent regulatory agencies in other
countries. While the Company's reselling business is not regulated, the
aircraft, avionics and aircraft rotables, and engines and engine parts that the
Company sells to its customers must be accompanied by documentation that enables
the customer to comply with applicable regulatory requirements. There can be no
assurance that new and more stringent government regulations will not be adopted
in the future or that any such new regulations, if enacted, would not have an
adverse impact on the Company. Before engine parts may be installed in an
aircraft engine, they must meet certain standards of airworthiness established
by the FAA or the equivalent regulatory agencies in other countries. Specific
regulations vary from country to country, although regulatory requirements in
other countries are generally satisfied by compliance with FAA requirements.
Engine components must also be traceable to sources deemed acceptable by such
agencies. Although the Company believes it complies with the highest level of
such regulatory standards, standards may change in the future, requiring engine
components already contained in the Company's inventory to be scrapped or
modified. Aircraft engine manufacturers may also develop new engine components
to be used in lieu of engine components already contained in the Company's
inventory. In all such cases, to the extent that the Company has such engine
components in its inventory, their value may be reduced and the Company's
business, financial condition and results of operations could be adversely
affected.
NO DIVIDENDS. The Company intends to retain all earnings for the
foreseeable future for use in the operations and expansion of its business.
Consequently, the Company does not anticipate paying any cash dividends on its
Common Stock to its stockholders for the foreseeable future. In addition, the
debt financing agreements to which the Company is a party contain restrictions
on the Company's ability to declare dividends.
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EMPLOYEES
As of December 31, 1998, the Company had approximately 124 full-time
employees. None of the Company's employees are members of a labor union. The
Company believes that its relations with its employees are good.
STOCK OPTION PLANS
CORPORATE POLICY. The Company is operating in a unique environment
where its relatively small number of employees (consisting of 17 executives and
107 employees) make the daily decisions that directly effect the Company's
operational and financial results. The Company continually strives to build and
maintain a team comprised of the best executives and employees in their field by
offering the most attractive work environment and performance based compensation
packages available. The Board believes that the Company's stock option plans are
an essential component of the Company's compensation package which promote the
interests of the Company and its stockholders by strengthening the Company's
ability to attract, retain and incentivize competent employees and executives
and making service on the Company's Board of Directors more attractive to
present and prospective non-employee directors. Such stock option plans
encourage stock ownership and proprietary interest in the Company by the
individuals upon whose judgment, initiative and efforts the financial success
and growth of the Company largely depend.
STOCK OPTION REPRICING AND EXTENSION OF VESTING SCHEDULES. In early
October 1998, the Company faced a significant decline in the market price of its
Common Stock, while financial and operating performance remained strong. Thus, a
significant portion of the stock options previously issued to employees and
non-employee directors which were to vest that month, had exercise prices which
exceeded the then-current market value of the underlying shares. In a special
effort to fend off competitive pressures and reincentivize employees while
securing their long-term commitment to the Company, the Board approved the
extension of the vesting schedule and the repricing of certain previously
granted options in lieu of granting additional options to existing executives
and employees. The Company offered all employees and directors of the Company
who held options which had been granted under the Company's stock option plans
the opportunity to exchange outstanding options having an exercise price above
$10.125, the closing price of a share of Common Stock on October 8, 1998, for a
corresponding number of options having an exercise price of $10.125. The Company
also offered this opportunity to certain individuals who held options granted
outside of the plans. The Company secured the long term commitment of employees
and executives electing to exchange such options by requiring that the vesting
schedules on the unvested portions of the new options would be extended by, in
general, 50%. As a result of this program, options to purchase approximately
1,170,998 shares, representing approximately 45% of the outstanding common stock
options were exchanged and vesting schedules extended.
In light of the repricing of stock options and extension of vesting
schedules, the Company believes its existing officers and employees are properly
incentivized with long term commitments to the Company. Therefore, it is the
Company's intent not to grant options to its current officers or employees until
at least 2000, and to thereby avoid any dilutive effect resulting from a full
scale grant of options during 1999.
STOCK OPTION PLAN FOR NEW EXECUTIVES AND EMPLOYEES AND OUTSIDE
DIRECTORS. Consistent with the corporate policy placing importance on stock
options as part of compensation packages, the Company intends to continue to use
stock options as part of the performance based compensation packages used to
attract and incentivize new executives and employees. The Company also intends
to use stock options in lieu of cash compensation to continue to make service by
present and prospective outside directors attractive. For these reasons, the
Board adopted, subject to shareholder approval, a 1998 Stock Option Plan (the
"Plan") effective as of November 15, 1998 and intends to only grant options
under this Plan to newly hired executives and employees as an inducement to
enter into employment arrangements with the Company, and to outside members of
the Board, in lieu of cash compensation, as an incentive for their service on
the Board. The Plan authorizes the issuance of stock options to purchase an
aggregate of 250,000 shares of the Company's Common Stock and contains
substantially the same terms as the Company's 1997 Stock Option Plan. The
Company intends to seek shareholder approval of the Plan at the 1999 Annual
Meeting of Shareholders.
18
<PAGE> 19
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC REVENUES
Total revenues derived from domestic and international customers
accounted for 67% and 33%, respectively, for the year ended December 31, 1998,
79% and 21%, respectively, for the year ended December 31, 1997, and 77% and
23%, respectively, for the year ended December 31, 1996. See Footnote 15 to
the Consolidated Financial Statements.
SUBSEQUENT EVENTS
TERMINATION OF HELIX ENGAGEMENT AGREEMENT. On March 30, 1999, the
Company entered into a Termination Agreement (the "Helix Termination Agreement")
with Helix Management Company II, LLC. ("Helix"), a company owned by Yoav Stern,
Chairman of Company's Board of Directors, and Zivi Nedivi, President, Chief
Executive Officer and a Director of the Company, pursuant to which the Company
agreed to terminate the Engagement Agreement dated as of March 28, 1997 between
the Company and Helix (the "Helix Engagement Agreement"). Under the terms of the
Helix Engagement Agreement, Helix has served as the Company's exclusive mergers
and acquisitions and principal financial advisor and advised the Company in all
of its significant acquisitions since March 1997. Under the terms of the Helix
Termination Agreement, the Company will only be required to pay Helix success
fees on those transactions procured by Helix which have either been consummated
or signed prior to the date of termination. Helix has waived all other fees
which it is entitled to under the terms of the Helix Engagement Agreement,
including monthly retainer fees on account of the ninety day period following
termination and success fees on account of transactions procured by Helix which
are undertaken by the Company within one year of termination. Helix has also
agreed that it will, for no additional consideration, provide the Company such
assistance (including access to its members and employees and copies of its
records and files) as is necessary to assure an orderly transition in the
services provided by Helix.
TERMINATION OF EAST SHORE MANAGEMENT AGREEMENT. On March 30, 1999, the
Company entered into a Termination Agreement (the "East Shore Termination
Agreement") with East Shore Ventures, Inc. ("East Shore"), a company owned by
Mr. Nedivi, pursuant to which the Company agreed to terminate the Management
Agreement dated of January 1, 1997 between the Company and East Shore (the
"Management Agreement"). Under the terms of the Management Agreement, East Shore
provided the Company through the services of Mr. Nedivi with the management
services required of the chief executive officer responsible for the overall
direction and administration of the business of the Company. The Company
concluded that it is in its best interests to employ Mr. Nedivi directly to
provide such services on substantially the same terms on which such services
were provided to the Company under the Management Agreement. Under the terms of
the East Shore Termination Agreement, East Shore will only be paid management
fees and related benefits prorated through the date of termination.
EMPLOYMENT AGREEMENTS. In connection with the execution of the East
Shore Termination Agreement, the Company entered into an Employment Agreement
with Mr. Nedivi (the "Nedivi Employment Agreement") with substantially the same
terms as those included in the Management Agreement. Under the terms of the
Nedivi Employment Agreement, Mr. Nedivi will be employed as President and Chief
Executive Officer of the Company through December 31, 2004 and will be
responsible for the overall direction of the operations and administration of
the business of the Company. In connection with the execution of the Helix
Termination Agreement, the Company entered into an Employment Agreement with
Yoav Stern (the "Stern Employment Agreement") providing for substantially the
same terms as those included in the Nedivi Employment Agreement. Under the terms
of the Stern Employment Agreement, Mr. Stern is employed as Chairman of the
Company through December 31, 2004 and will be responsible for the development
and implementation of the strategic plans for the growth and development of the
Company's business and operations, including overseeing all aspects of the
Company's mergers and acquisitions activities (including, without limitation,
analyzing, structuring, negotiating and effecting acquisitions and integrating
newly acquired businesses with the business and operations of the Company).
ACQUISITION OF CERTIFIED AIRCRAFT PARTS, INC. On March 27, 1999, the
Company entered into a definitive agreement to acquire Certified Aircraft Parts,
Inc. ("Certified") for approximately $16 million in cash. Certified is a leader
in the parts, aftermarket support and logistics segment for Lockheed Martin
C-130/L100 Hercules aircraft. The acquisition of Certified will significantly
expand the Company's military transport business. The transaction is subject to
customary closing conditions and is expected to close by the end of April 1999.
19
<PAGE> 20
ITEM 2. DESCRIPTION OF PROPERTIES.
The Company owns its newly built 193,000 square foot headquarters and
warehouse facility located on 11.5 acres in the Sawgrass International Corporate
Park, Sunrise, Florida which is near Ft. Lauderdale, Florida. The Company's
address is 1100 International Parkway, Sunrise, Florida 33323. The Company is in
the process of consolidating most of it geographically separate locations into
its new headquarters. The property is subject to a mortgage held by Bank of
America, N.A. to secure the Company's obligations under its bank credit
facility.
The Company owns its previous 45,000 square foot office and warehouse
facility located on 2.5 acres in the Sawgrass International Corporate Park,
Sunrise, Florida which is near Ft. Lauderdale, Florida at 14000 N.W. 4th Street,
Sunrise, Florida 33325. The property is subject to a mortgage held by Bank of
America, N.A.
The Company leases a 4,000 square foot facility of office and warehouse
space, assumed in connection with the acquisition of Aero Support, located at
112 Turn Row, Lafayette, Louisiana 70502. The lease provides for a term ending
September 30, 2001 at a base rent of approximately $14,000 per year plus certain
operating expenses.
The Company leases a 9,360 square foot facility of office and warehouse
space, assumed in connection with the acquisition of ITC, located at 776 Grand
Avenue, Ridgefield, New Jersey 07657. The lease provides for a term ending March
31, 1999 at a base rent of approximately $5,000 per month.
The Company leases a 7,000 square foot facility of office and warehouse
space, assumed in connection with the acquisition of ITC, located at 500
Nordhoff Place, Englewood, New Jersey 07657. The lease provides for a term
ending March 31, 1999 at a base rent of approximately $2,000 per month.
The Company leases a 2,775 square foot facility of office and warehouse
space, assumed in connection with the acquisition of ITC, located at 13818 and
13992 S.W. 139th Court, Miami, Florida 33186. The lease provides for a term
ending October 31, 1999 at a base rent of approximately $1,300 per month.
The Company leases a 20,000 square foot facility of office and
warehouse space, assumed in connection with the acquisition of Aerocar, located
at 1495 N. Park Drive, Weston, Florida 33326. The lease provides for a term
ending December 31, 1999 at a base rent of approximately $21,000 per month.
The Company leases a 44,000 square foot facility of office and
warehouse space, assumed in connection with the acquisition of Solair, located
at 3380 S.W. 11th Avenue, Ft. Lauderdale, Florida 33315. The lease provides for
a term ending August 31, 2007 at a base rent of $20,000 per month through August
31, 2002 and $23,000 per month through August 31, 2007.
The Company leases a 2,000 square foot facility of office and warehouse
space, assumed in connection with the acquisition of Solair, located at 4694
Aviation Parkway, Suite K, Atlanta, Georgia 30349. The month to month lease
provides for a base rent of approximately $1,300 per month.
The Company leases a 70,000 square foot facility of office and
warehouse space, assumed in connection with the acquisition of Solair, located
at 4900 Lakeland Commerce Parkway, Lakeland, Florida 33805. The lease provides
for a term ending June 30, 2002 at a base rent of $227,500 per year.
The Company leases a 600 square foot facility of office space, assumed
in connection with the acquisition of Solair, located at 121 Fairfield Way,
Suite 305, Bloomingdale, Illinois 60108. The lease provides for a term ending
March 1, 2000 at a base rent of $6,600 per year.
20
<PAGE> 21
The Company leases a 2,000 square foot facility of office and warehouse
space, assumed in connection with the acquisition of Solair, located at Unit 15
Farnborough Business Centre, Pelmoor Road, Farnborough England. The lease
provides for a term ending April 7, 2003 at a base rent of approximately $19,000
plus value added taxes per year.
The Company leases a 1,300 square foot facility for office space,
assumed in connection with the acquisition of Solair, located at 360 Orchard
Road, International Building, Singapore 238869. The lease provides for a term
ending July 31, 1999 at a base rent of approximately $5,000 per month.
The Company leases a 4,000 square foot facility for office space,
assumed in connection with the acquisition of Solair, located at 47A Gentle
Road, Singapore 309999. The lease provides for a term ending April 30, 2000 at a
base rent of approximately $5,000 per month.
ITEM 3. LEGAL PROCEEDINGS.
The Company was named as a defendant in an action in the Supreme Court
of the State of New York, County of New York, brought by an alleged beneficiary
of the Estate of the late Mr. Joram Rosenfeld (a former Co-Chairman of the
Company) and the Executor of the Estate of Mr. Rosenfeld. The Complaint alleged,
INTER ALIA, that the Company breached a purported agreement to provide Rosenfeld
with options to purchase 345,000 shares of the Company's common stock under the
Company's 1996 Stock Option Plan, several months before his death. The Complaint
further alleged that the Company aided and abetted and/or participated in
breaches of fiduciary duty that Yoav Stern, the Company's Chairman of the Board,
and Zivi Nedivi, the Company's President and Chief Executive Officer, owed to
Rosenfeld as co-members of two private Delaware limited liability companies. The
plantiffs are seeking compensatory and punitive damages. The Company believes
that the claims asserted against it are totally without merit and has moved for
summary judgement dismissing the claims against it on the grounds that the
uncontradicted evidence shows that the claims have no basis.
There are no other material legal proceedings pending against the
Company or any of its property. However, the Company may become party to various
claims, legal actions and complaints arising in the ordinary course of business
or otherwise. The Company cannot determine whether such actions would have a
material impact on the financial condition, results of operations or cash flows
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of stockholders of the Company
during the fourth quarter of the fiscal year ended December 31, 1998.
21
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since June 1997, the Company's Common Stock has been listed on The
Nasdaq Stock Market ("NASDAQ")-National Market under the symbol "KELL." Prior to
that date, the Company's Common Stock was listed on the NASDAQ-SmallCap Market
under the same symbol.
The following table sets forth the range of high and low bid prices for
the Common Stock for the period from January 1997 to December 1998, as reported
by NASDAQ. The quotes represent "Inter-dealer" prices without retail markups,
markdowns or commissions and may not necessarily represent actual transactions.
COMMON STOCK
------------------------
HIGH LOW
---- ---
Year Ended December 31, 1997:
First Quarter $14 7/8 $8 1/4
Second Quarter $17 1/8 $11 7/8
Third Quarter $21 7/8 $15
Fourth Quarter $27 1/2 $17 1/8
Year Ended December 31, 1998:
First Quarter $27 3/4 $20
Second Quarter $29 3/8 $23
Third Quarter $27 1/8 $12 7/8
Fourth Quarter $28 3/4 $9 1/8
As of February 26, 1999, there were 11,784,515 shares of Common Stock
outstanding, held by 62 stockholders of record. The Company believes that
certain holders of record hold a substantial number of shares of Common Stock as
nominees for a significant number of beneficial owners. The closing price for
the Company's Common Stock on February 26, 1999 was $16 3/16 per share.
The Company has not paid any cash dividends on its Common Stock to
date. The payment of dividends is within the discretion of the Board of
Directors. The debt financing arrangements to which the Company is a party
contain restrictions on the Company's ability to pay dividends. It is the
present intention of the Board of Directors to retain all earnings for use in
the Company's business operations and, accordingly, the Board does not
anticipate declaring any dividends in the foreseeable future.
ISSUANCE OF UNREGISTERED SECURITIES DURING 1998
All of the transactions listed below involve the issuance of securities
of the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended.
On June 17, 1998, in connection with the acquisition of the outstanding
capital stock of Aerocar, the Company issued to Rosa Shashua and Carmel Shashua,
the shareholders of Aerocar, warrants to acquire in the aggregate 250,000 shares
of Common Stock at an exercise price of $26.00 per share, expiring on June 17,
2001.
22
<PAGE> 23
On December 18, 1998, in connection with the acquisition of Aerocar,
the Company issued to Helix a warrant to acquire 5,000 shares of Common Stock at
an exercise price of $26.00 per share, expiring on June 17, 2001, in partial
consideration for the services performed by Helix in connection with the
transaction.
On December 31, 1998, in connection with the acquisition of the
outstanding capital stock of Solair, the Company issued to Banner Aerospace,
Inc., the sole shareholder of Solair, a warrant to acquire 300,000 shares of
Common Stock at an exercise price of $27.50 per share, expiring on December 31,
2002.
On March 23, 1999, in connection with the acquisition of Solair, the
Company issued to Helix a warrant to acquire 2,250 shares of Common Stock at
an exercise price of $27.50 per share, expiring on December 31, 2002, in partial
consideration for the services performed by Helix in connection with the
transaction.
23
<PAGE> 24
ITEM 6. SELECTED FINANCIAL DATA
The financial data set forth below should be read in conjunction with
the Company's consolidated financial statements and notes thereto included
elsewhere herein. See also "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
INCEPTION
DECEMBER 28,
1993 THROUGH
DECEMBER 31,
1998 1997 1996 1995 1994
-------- ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues $180,049 $79,439 $24,922 $ 8,579 $ --
Total operating expenses 139,019 61,828 20,169 7,062 --
Net operating income 41,030 17,611 4,753 1,517 --
Interest expense, net of interest income 9,773 3,991 645 (225) (309)
Non-operating expenses -- -- -- 1,110 317
Income taxes 11,679 5,077 1,462 258 --
------- ------- ------- ------- --------
Net income $19,578 $ 8,543 $ 2,646 $ 374 $ (8)
======= ======= ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets $272,530 $74,215 $19,655 $15,689 $ 685
Total current liabilities 42,147 19,020 8,565 6,019 100
Total assets 434,050 134,361 29,545 21,918 11,483
Non-current obligations 242,144 65,430 2,819 2,760 --
Stockholders' equity 149,759 49,912 18,161 13,139 9,227
</TABLE>
24
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED
ELSEWHERE HEREIN.
GENERAL
The Company is a leader in the airborne equipment segments of the
international aviation services after-market. The Company's net revenues have
increased from $24.9 million for the year ended December 31, 1996 to $180.0
million for the year ended December 31, 1998. During the same time period, the
Company's net income increased from $2.6 million to $19.6 million. The increase
in revenues and net income is the result of a number of factors, including the
expansion of the Company's product lines, customer base and market share,
increases in the Company's internal growth, cost controls and overall operating
efficiencies, acquisitions in existing and adjacent markets and significant
capital investments.
On January 15, 1997, September 10, 1997, April 1, 1998, June 17, 1998
and December 31, 1998 the Company acquired IASI, Aero Support, ITC, Aerocar and
Solair, respectively. These acquisitions were accounted for using the purchase
method of accounting for business combinations and accordingly, those companies'
operating results have been included in the Company's results of operations
since the date of acquisition.
25
<PAGE> 26
RESULTS OF OPERATIONS
For the periods indicated, the following table sets forth the
percentage of certain income statement items to total revenues derived from the
Company's consolidated statements of earnings.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1997 1998
------------ ----------------------
<S> <C> <C> <C>
Revenues:
Sales of aircraft and engine parts, net 96.4% 90.1% 82.7%
Rental Revenues 3.6 9.9 17.3
Total Revenues 100.0 100.0 100.0
Operating Expenses:
Cost of Goods Sold 62.8 58.9 55.7
Depreciation of Equipment Under Operating Leases 2.3 5.7 9.3
Selling, General and Administrative Expenses 14.0 11.2 10.6
Depreciation and Amortization Expense 1.8 2.0 1.7
Total Operating Expenses 80.9 77.8 77.3
Interest Expense (net of Interest Income) 2.6 5.0 5.4
Income before income taxes 16.5 17.2 17.3
Income Taxes 5.9 6.4 6.4
Net Income 10.6 10.8 10.9
</TABLE>
26
<PAGE> 27
YEARS ENDED DECEMBER 31, 1998 AND 1997
Net sales of aircraft and engine parts increased by 108% to $148.9
million for the year ended December 31, 1998 as compared to $71.5 million for
the year ended December 31, 1997. The increase in net sales of aircraft and
engine parts was primarily due to (i) growth of sales of approximately $38.4
million due to additional inventory availability as a result of the Company's
increased capital resources as well as the acquisition of Aerocar being combined
into Kellstrom, and (ii) incremental sales of approximately $39.0 million
related to the acquisition of Aero Support and ITC.
Rental revenues increased by 294% to $31.1 million for the year ended
December 31, 1998 as compared to $7.9 million for the year ended December 31,
1997. The increase in rental revenues was primarily due to (i) the Company's
continued expansion into the leasing business through purchases of individual
assets as well as the acquisition of Aerocar being combined into Kellstrom
resulting in increased rental revenues of approximately $20.0 million, and (ii)
incremental rental revenues of approximately $3.2 million related to the
acquisition of the ITC operations.
Cost of goods sold increased by 114% to $100.2 million for the year
ended December 31, 1998 as compared to $46.8 million for the year ended December
31, 1997; the gross profit margin decreased to 32.7% in 1998 from 34.6% in 1997.
The increase in cost of goods sold was primarily due to increased sales volume
across all product lines. The decrease in the gross profit margin was primarily
due to the mix of product sales during 1998, resulting in lower gross profit
margin. However, despite the decrease in the gross profit margin during 1998,
the gross profit margin remains in the range of the Company's historical gross
profit margin.
Depreciation of equipment under operating leases increased by 263% to
$16.7 million for the year ended December 31, 1998 as compared to $4.6 million
for the year ended December 31, 1997. The increase in depreciation of equipment
under operating leases was primarily due to (i) the Company's continued
expansion into the short-term leasing business through purchases of individual
assets as well as the acquisition of Aerocar being combined into Kellstrom,
resulting in increased depreciation of approximately $10.2 million, and (ii)
incremental depreciation of approximately $1.9 million related to the
acquisition of ITC.
Selling, general and administrative expenses increased by 115% to $19.1
million for the year ended December 31, 1998 as compared to $8.9 million for the
year ended December 31, 1997; however, as a percentage of total revenues,
selling, general and administrative expenses decreased to 10.6% in 1998 from
11.2% in 1997. The increase in selling, general and administrative expenses was
primarily due to (i) expenses of approximately $5.2 million related to the
continuing operations of Aero Support and ITC, and (ii) expenses of
approximately $5.0 million related to the continued expansion of the Company's
sales and warehouse operations. This expansion consisted of greater resources to
support a higher level of revenue and a corresponding greater number of whole
engine and engine component transactions, and 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 as well as the acquisition of Aerocar being
combined into Kellstrom. Selling, general and administrative expenses as a
percentage of total revenues decreased during 1998 primarily due to economies of
scale and operating efficiencies derived from the consolidation of operations
related to completed acquisitions. The Company expects selling, general and
administrative expenses to continue to increase due to the Company's growth
plans and need for additional personnel and facilities to support the Company's
operations.
27
<PAGE> 28
Depreciation and amortization expense increased by 97% to $3.1 million
for the year ended December 31, 1998 as compared to $1.6 million for the year
ended December 31, 1997; however, as a percentage of total revenues,
depreciation and amortization expense decreased to 1.7% in 1998 from 2.0% in
1997. The increase in depreciation and amortization expense was primarily due to
amortization of goodwill related to the Aero Support, ITC and Aerocar
acquisitions.
Interest expense (net of interest income) increased by 145% to $9.8
million for the year ended December 31, 1998 as compared to $4.0 million for the
year ended December 31, 1997. The increase in interest expense was primarily
driven by an increase in the Company's average debt levels during 1998,
resulting from the acquisition of ITC and growth in inventories and equipment
under operating leases. The Company expects interest expense to continue to
increase as the Company continues to expand its inventory levels and facilities
to support future growth in operations and 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.
Net income increased by 129% to $19.6 million for the year ended
December 31, 1998 as compared to $8.5 million for the year ended December 31,
1997. Basic earnings per common share increased by 64% to $1.94 for the year
ended December 31, 1998 as compared to $1.18 for the year ended December 31,
1997. Diluted earnings per common share increased by 61% to $1.53 for the year
ended December 31, 1998 as compared to $0.95 for the year ended December 31,
1997.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Net sales of aircraft and engine parts increased by 198% to $71.5
million for the year ended December 31, 1997 as compared to $24.0 million for
the year ended December 31, 1996. The increase in net sales of aircraft and
engine parts was primarily due to (i) incremental sales of $23.8 million related
to the acquisition of IASI, (ii) internal growth of sales of $16.9 million
primarily due to additional inventory availability as a result of the Company's
increased capital resources, and (iii) incremental sales of $6.8 million related
to the acquisition of Aero Support.
Rental revenues increased by 777% to $7.9 million for the year ended
December 31, 1997 as compared to $902,000 for the year ended December 31, 1996.
The increase in rental revenues was primarily due to (i) the Company's continued
expansion into the short-term leasing business through purchases of individual
assets resulting in incremental rental revenues of $5.5 million and (ii) the
purchase of a portfolio of commercial aircraft and jet engines during the fourth
quarter of 1997 resulting in additional rental revenues of $1.5 million.
Cost of goods sold increased by 199% to $46.8 million for the year
ended December 31, 1997 as compared to $15.6 million for the year ended December
31, 1996; the gross profit margin decreased to 34.6% in 1997 from 34.9% in 1996.
The increase in cost of goods sold was primarily due to the increased sales
volume associated with the IASI and Aero Support operations as well as continued
internal sales growth within the Company.
Depreciation of equipment under operating leases increased by 684% to
$4.6 million for the year ended December 31, 1997 as compared to $586,000 for
the year ended December 31, 1996. The increase in depreciation of equipment
under operating leases was primarily due to (i) the Company's expansion into the
short-term leasing business through purchases of individual assets resulting in
incremental depreciation expense of $3.3 million and (ii) the purchase of a
portfolio of commercial aircraft and jet engines during the fourth quarter of
1997, resulting in additional depreciation expense of $700,000.
28
<PAGE> 29
Selling, general and administrative expenses increased by 154% to $8.9
million for the year ended December 31, 1997 as compared to $3.5 million for the
year ended December 31, 1996; however, as a percentage of total revenues,
selling, general and administrative expenses decreased to 11.2% in 1997 from
14.0% in 1996. The increase in selling, general and administrative expenses was
primarily due to expenses of $2.9 million related to the continuing operations
of IASI and Aero Support. In addition, $2.5 million related to the 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 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. Selling, general and administrative expenses as a
percentage of total revenues decreased primarily due to economies of scale and
operating efficiencies. The Company expects selling, general and administrative
expenses to continue to increase due to the Company's growth plans and need for
additional personnel and facilities to support the Company's operations.
Depreciation and amortization expense increased by 252% to $1.6 million
for the year ended December 31, 1997 as compared to $442,000 for the year ended
December 31, 1996; however, as a percentage of total revenues, depreciation and
amortization expense increased to 2.0% in 1997 from 1.8% in 1996. The increase
in depreciation and amortization expense was primarily due to amortization of
goodwill related to the IASI and Aero Support acquisitions.
Interest expense (net of interest income) increased by 519% to $4.0
million the year ended December 31, 1997 as compared to $645,000 for the year
ended December 31, 1996. The increase in interest expense was primarily due to
interest expense and related costs of $3.0 million for the $35.6 million and
$17.3 million of debt assumed and incurred related to the acquisitions of IASI
and Aero Support, respectively, as well as interest expense of $400,000 related
to the overall increases in the Company's debt levels due to the investment in
equipment under operating leases. The Company expects interest expense to
continue to increase as the Company continues to expand its inventory levels and
facilities to support future growth in operations and 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.
Net income increased by 223% to $8.5 million for the year ended
December 31, 1997 as compared to $2.6 million for the year ended December 31,
1996. Basic earnings per common share increased by 31% to $1.18 for the year
ended December 31, 1997 as compared to $0.90 for the year ended December 31,
1996. Diluted earnings per common share increased by 70% to $0.95 for the year
ended December 31, 1997 as compared to $0.56 for the year ended December 31,
1996.
LIQUIDITY AND CAPITAL RESOURCES.
As of December 31, 1998, the Company's liquidity and capital resources
included cash and cash equivalents of $1.1 million and working capital of $230.4
million. At December 31, 1998, total outstanding debt was $239.9 million as
compared to $73.1 million as of December 31, 1997. As of December 31, 1998, the
outstanding principal balance on the Company's convertible subordinated notes
was $140.3 million and the Company had contractual lines of credit totaling
$256.7 million of which $83.9 million was outstanding and $22.9 million was
available.
Cash flows used in operating activities for the year ended December 31,
1998 was $89.0 million compared with $22.4 million for the year ended December
31, 1997. The primary uses of cash for operating activities during the year
ended December 31, 1998 was due to increases in inventories and equipment under
operating leases of $46.1 million and $91.9 million, respectively, and a
decrease in accounts payable of $5.1 million. The primary sources of cash for
operating activities for the year ended December 31, 1998 was due to net income
of $19.6 million, coupled with total depreciation and amortization of $19.7
million and an increase in accrued expenses of $11.2 million.
Cash flows used in investing activities for the year ended December 31,
1998 was $130.1 million compared with $29.0 million for the year ended December
31, 1997. The primary uses of cash for investing activities for the year ended
December 31, 1998 was related to the acquisitions of ITC, Aerocar, and Solair,
for $120.3 million in the aggregate and purchases of property, plant and
equipment for $10.7 million.
On April 1, 1998, the Company through a wholly-owned subsidiary
completed the acquisition of substantially all of the assets and assumed certain
liabilities of Integrated Technology Corp. ("ITC") for $20.5 million in cash
plus up to $10.0 million cash consideration may be paid in the form of an
earn-out payable over three years based on certain specified criteria of which
$3.3 million was earned during 1998. In addition, the Company received a
three-year option to purchase a 49% interest in a related FAA-approved overhaul
facility.
On June 17, 1998, the Company completed the acquisition of the
outstanding capital stock of Aerocar Aviation Corp. ("Aerocar Aviation") and
Aerocar Parts, Inc. ("Aerocar Parts,") and together with Aerocar Aviation,
"Aerocar") for $42.3 million in cash, warrants to purchase an aggregate of
250,000 shares of the Company's common stock, exercisable at $26.00 per share,
expiring on June 17, 2001 plus an additional $5.0 million payable within a
two-year period after closing, either in cash, or at the option of the Company,
in shares of common stock having an equivalent value as of the date of
acquisition.
On December 31, 1998, the Company acquired all of the outstanding
capital stock of Solair, Inc. ("Solair"), a wholly-owned subsidiary of Banner
Aerospace, Inc. for $57.4 million in cash and a warrant to purchase 300,000
shares of common stock at an exercise price of $27.50 per share, expiring on
December 31, 2002.
29
<PAGE> 30
Cash flows provided by financing activities for the year ended December
31, 1998 was $219.7 million compared with $51.6 million for the year ended
December 31, 1997. The primary sources of cash for financing activities for the
year ended December 31, 1998 related to proceeds from the issuance of the 5 1/2%
ConvertibLE Subordinated Notes (the "5 1/2% Notes") of $86.3 million, an
increase in borrowings under line of credit agreements of $79.9 million and
issuance of Common Stock of $78.4 million, offset by repayments of debt incurred
and assumed of $18.7 million and payment of deferred financing costs of $5.1
million.
The Company's Senior Subordinated Debt is held by The Equitable Life
Assurance Society of the United States ("Equitable"). The interest rate on the
Senior Subordinated Debt is 11 3/4% per annum, payable quarterly. Additionally,
warrants to purchase 305,660 shares of Common Stock were issued to Equitable.
The warrants are exercisable at $10.00 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 $1.25 million payable on
January 15, 2004. The outstanding balance at December 31, 1998 on the Senior
Subordinated Debt was $11.25 million. An advance principal payment of $3.75
million, along with a prepayment penalty of 1%, was made by the Company on
October 10, 1997 with the proceeds received from the 5 3/4% Convertible
Subordinated Notes (the "5 3/4% 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 $10.5 million.
On June 17, 1998, the Company completed a secondary public offering of
2,750,000 shares of Common Stock at $26.00 per share, resulting in net proceeds
of $67.4 million. On July 2, 1998, the Company's underwriters exercised their
overallotment option to purchase an additional 412,500 shares of Common Stock at
$26.00, resulting in additional net proceeds of $10.2 million. Proceeds of the
offering were used to repay the outstanding borrowings under its then current
revolving credit facility, to finance the Aerocar acquisition and for general
corporate purposes.
On June 17, 1998, the Company completed a public offering of $75.0
million aggregate principal amount of the 5 1/2% Notes due 2003, resulting in
net proceeds of $72.8 million. On July 2, 1998, the Company's underwriters
exercised their overallotment option to purchase an additional $11.3 million
aggregate principal amount of the 5 1/2% Notes, resulting in additional net
proceeds of $10.9 million. Proceeds of the offering were used to repAY
outstanding borrowings under its then current revolving credit facility and for
general corporate purposes.
On December 14, 1998, in order to expand its current credit facility,
the Company entered into a five-year, $256.7 million syndicated credit facility
with Bank of America, N.A. (formerly NationsBank, N.A.) ("Bank of America") as
the agent bank, consisting of a $250.0 million revolving credit facility and a
letter of credit in the amount of up to $6.7 million, with an option by the
Company to increase the revolving credit facility by an additional $50.0 million
for a total of $306.7 million throughout the term, subject to the approval of
Bank of America and the satisfaction of certain conditions. The new credit
facility bears interest ranging from prime rate plus 0 to 50 basis points, or at
the Company's option, LIBOR plus 150 to 250 basis points. The letter of credit
component of the $256.7 million syndicated credit facility was specifically
committed to the permanent financing of the Company's new world headquarters.
The $6.7 million financing was completed by the Company on February 22, 1999.
During the year ended December 31, 1998, the Company's highest
utilization of its NationsBank $256.7 million syndicated credit facility was
$83.9 million. The outstanding balance at December 31, 1998 on the NationsBank
syndicated credit facility was $83.9 million.
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, jet engine parts and avionics and rotables. 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 syndicated credit facility, which was expanded in December 1998, and
through the employment of its cash. In the future, the Company may require
additional sources of capital to continue to fund its expansion.
30
<PAGE> 31
The Company's management believes that free cash flow (net income plus
depreciation of property, plant and equipment and amortization of goodwill),
combined with the Company's syndicated credit facility should be sufficient for
the Company's current level of operations. However, the Company may elect to
seek equity capital or other debt financing in the future depending upon market
conditions and the capital needs of the Company.
YEAR 2000 ISSUE
The Year 2000 problem is primarily the result of computer programs
being written using two digits rather than four to define the applicable year.
Such programs will be unable to interpret dates beyond the year 1999, which
could cause a system failure or other computer errors, including possible
miscalculations, and a disruption in the operation of such systems. This is
commonly referred to as the Year 2000 issue.
The Company and each of its operating subsidiaries are executing a plan
to identify and address any possible business issues related to the impact of
the Year 2000 problem on both its information technology ("IT") and non-IT
systems (e.g., embedded technology). This plan addresses the Year 2000 issue in
multiple phases, including (i) determining an initial inventory of the Company's
systems, equipment (including embedded technology in the Company's aircraft,
engine and parts inventory as well as leased equipment), vendors, customers and
third party administrators that may be vulnerable to system failures or
processing errors as a result of Year 2000 issues, (ii) assessment and
prioritization of inventoried items to determine risks associated with their
failure to be Year 2000 compliant, (iii) testing of systems and equipment to
determine Year 2000 compliance, (iv) remediation and implementation of systems
and equipment, and (v) contingency planning to assess reasonably likely worst
case scenarios. As part of the Company's plan, the Company has retained a third
party Year 2000 solution provider to assist with a risk analysis of the
Company's Year 2000 issue and assist with project office management. For those
systems which the Company determines are not currently Year 2000 compliant,
implementation of the required changes is expected to be completed by September
1999.
Incremental costs, which include consulting costs and costs associated
with internal resources to modify existing systems in order to achieve Year 2000
compliance are charged to expense as incurred. The Company does not expect the
cost of making the required system changes to exceed $500,000. The anticipated
costs of the project and the dates on which the Company believes it will
complete the Year 2000 modifications and assessments are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources. There can be
no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area and the ability to locate and correct all
relevant systems.
With respect to the Company's customers, suppliers and vendors, the
Company is in the process of contacting customers, suppliers and vendors to
assess the potential impact on operations if such third parties are not
successful in ensuring that their systems and operations are Year 2000 compliant
in a timely manner. The Company's Year 2000 issues and any potential business
interruptions, costs, damages or losses related thereto, are also dependent upon
the Year 2000 compliance of other third parties such as governmental agencies
(e.g., Federal Aviation Administration and foreign equivalents). To date, the
Company is unable to determine whether it will be materially affected by the
failure of any of its customers, suppliers, vendors or other third parties to be
Year 2000 compliant. The Company believes that its compliance efforts have and
will reduce the impact on the Company of any such failures. Failure of any third
parties with which the Company interacts to achieve Year 2000 compliance could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Risk assessment, readiness evaluation, action plans and contingency
plans related to the Company's suppliers, vendors and other third parties are
expected to be completed by September 1999. The Company's risk management
program includes emergency backup and recovery procedures to be followed in the
event of failure of a business critical system. These procedures will be
expanded to include specific procedures for the potential Year 2000 issue.
Contingency plans to protect the Company from Year 2000 related interruptions
are also being developed and are expected to be completed by September 1999.
These plans will include development of backup procedures, identification of
alternate suppliers, possible increases in inventory levels and other
appropriate measures.
31
<PAGE> 32
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is effective
for fiscal years beginning after December 15, 1998. SOP 98-1 outlines the
accounting treatment for certain costs related to the development or purchase of
software to be used internally and requires that costs incurred during the
preliminary project and post-implementation/operation stages be expensed, and
costs incurred during the application development stage be capitalized and
amortized over the estimated useful life of the software. Adoption of this
statement is not expected to have a material impact on the Company's results of
operations or financial position.
In April 1998, the AICPA also issued SOP 98-5, "Reporting on the Costs
of Start-up Activities." SOP 98-5, which is effective for fiscal years beginning
after December 15, 1998, requires that all costs of start-up activities,
including organization costs, be expensed as incurred. Adoption of this
statement is not expected to have material impact on the Company's results of
operations or financial position.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires companies to
recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999. Management does not anticipate a
significant impact of the adoption of SFAS No. 133 on the Company's consolidated
financial position, results of operations or cash flows.
32
<PAGE> 33
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's exposure to market risk is limited primarily to the
fluctuating interest rates associated with variable rate indebtedness
outstanding under the Company's $256.7 million bank credit facility. The bank
credit facility, which expires in 2003, bears interest at the bank's prime rate
plus 0-50 basis points or, at the Company's option, LIBOR plus 150-250 basis
points. These variable interest rates are subject to interest rate changes in
the United States and Eurodollar markets. The Company does not currently use,
and has not historically used, derivative financial instruments to hedge against
such market interest rate risk. At December 31, 1998, the Company had
approximately $83.9 million in variable rate indebtedness outstanding under the
credit facility, representing approximately, 84% of the Company's total debt
outstanding, at an average interest rate of 7.5%. An increase in interest rates
by 1% would not have a material impact on the financial condition, results of
operations or cash flows of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated financial statements for the years ended
December 31, 1998, 1997 and 1996, and the respective notes thereto, are set
forth elsewhere in this report. An index of these financial statements appears
in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
33
<PAGE> 34
PART III
The information required by Items 10, 11, 12 and 13 of Part III of Form
10-K will be set forth in the definitive Proxy Statement of the Company relating
to the 1999 Annual Meeting of Stockholders and is incorporated herein by
reference. The Proxy Statement will be filed within 120 days of the end of the
fiscal year ended December 31, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) The following consolidated financial statements are filed as part of this
Form 10-K:
Kellstrom Industries, Inc. Consolidated Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Earnings for the years ended December 31,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity and Comprehensive
Income for the years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
(2) The following financial statement schedule is filed as part of this
Form 10-K:
Schedule II - Valuation and Qualifying Accounts
(3) See Index of Exhibits included elsewhere herein.
(b) Reports on Form 8-K:
None
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 31, 1999 KELLSTROM INDUSTRIES, INC.
(Registrant)
By: /s/ Zivi R. Nedivi
------------------------------
Title: Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf by the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Zivi R. Nedivi President and Chief Executive March 31, 1999
- ------------------------------------ Officer and Director
Zivi R. Nedivi (principal executive officer)
/s/ Yoav Stern Chairman of the Board of Directors March 31, 1999
- ------------------------------------
Yoav Stern
/s/ Michael W. Wallace Chief Financial Officer March 31, 1999
- ------------------------------------ (principal financial and
Michael W. Wallace accounting officer)
/s/ David Jan Mitchell Director March 31, 1999
- ------------------------------------
David Jan Mitchell
/s/ Niv Harizman Director March 31, 1999
- ------------------------------------
Niv Harizman
/s/ General William Lyon Director March 31, 1999
- ------------------------------------
General William Lyon
/s/ Admiral William J. Crowe, Jr. Director March 31, 1999
- ------------------------------------
Admiral William J. Crowe, Jr.
</TABLE>
35
<PAGE> 36
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 The Company's Restated Certificate of Incorporation, as amended
(incorporated by reference to the Current Report on Form 8-K filed
with the Commission on June 22, 1995).
3.2 The Company's By-laws, as amended (incorporated by reference to the
Current Report on Form 8-K filed with the Commission on June 22, 1995).
3.3 Form of Certificate of Designations setting forth the terms of the
Series A Junior Participating Cumulative Preferred Stock, par value
$.001 per share (incorporated by reference to Exhibit 1 to the
Registration Statement on Form 8-A filed with the Commission on
January 16, 1997).
4.1 Indenture dated as of October 10, 1997 by and between the Company and
First Union National Bank (incorporated by reference to the Quarterly
Report on Form 10-QSB filed with the Commission on November 12, 1997).
4.2 Form of Note (included in Exhibit 4.1).
4.3 Registration Rights Agreement dated as of October 10, 1997 by and
between the Company and BT Alex. Brown Incorporated (incorporated by
reference to the Quarterly Report on Form 10-QSB filed with the
Commission on November 11, 1997).
4.4 Indenture dated June 17, 1998 by and between the Company and First
Union National Bank (incorporated by reference to Amendment No. 2 to
Registration Statement on Form S-3, Number 333-52917 filed with the
Commission on June 11, 1998).
4.5 Form of Note (included in Exhibit 4.4)
4.6 Indenture of Trust dated as of February 1, 1999 between the Company
and Norwest Bank Minnesota, N.A., as Trustee (filed herewith).
4.7 Form of Note (included in Exhibit 4.6).
10.1 Letter Agreement among each of the Stockholders of the Company, the
Company, and GKN Securities Corp. (without schedules) (incorporated by
reference to Registration Statement on Form S-1, Number 33- 75750,
filed with the Commission on February 25, 1994).
10.2 Asset Purchase Agreement dated February 15, 1995 among ITAC, Rada
Electronic Industries Limited, Tasco Electronics Inc. and the Company
(incorporated by reference to the Current Report on Form 8-K/A filed
with the Commission on March 14, 1994).
10.3* Management Agreement dated January 1, 1997 between East Shore
Ventures, Inc. and the Company (incorporated by reference to the Annual
Report on Form 10-KSB filed with the Commission on March 31, 1997).
10.4* Employment Agreement dated January 30, 1996 between Anthony Motisi
and the Company (incorporated by reference to the Annual Report on Form
10-KSB filed with the Commission on March 31, 1997).
10.5* Employment Agreement dated January 1, 1996 between Paul F. Steele and
the Company (incorporated by reference to the Annual Report on Form
10-KSB filed with the Commission on March 31, 1997).
10.6* Employment Agreement dated May 18, 1995 between John Gleason and the
Company (incorporated by reference to the Annual Report on Form 10-KSB
filed with the Commission on March 30, 1996).
10.7* Employment Agreement dated October 25, 1996 between Fred von Husen
and the Company (incorporated by reference to the Annual Report on Form
10-KSB filed with the Commission on March 31, 1997).
10.8* Amendment No. 1 to Employment Agreement dated February 14, 1997
between John Gleason and the Company (incorporated by reference to the
Annual Report on Form 10-KSB filed with the Commission on March 31,
1997).
10.9* Employment Agreement dated April 1, 1997 between Michael Wallace and
the Company (incorporated by reference to the Annual Report on Form
10-K filed with the Commission on March 23, 1998).
10.10* Employment Agreement dated March 30, 1999 between Zivi R. Nedivi and
the Company (filed herewith).
10.11* Employment Agreement dated March 30, 1999 between Yoav Stern and the
Company (filed herewith).
36
<PAGE> 37
10.12 Stockholders Agreement dated August 24, 1995 between Zivi R. Nedivi
and Yoav Stern (incorporated by reference to the Annual Report on Form
10-KSB filed with the Commission on March 30, 1996).
10.13 Amendment, dated January 15, 1996, to Stockholders Agreement dated
August 24, 1995 between Zivi R. Nedivi and Yoav Stern (incorporated by
reference to the Annual Report on Form 10-KSB filed with the Commission
on March 31, 1997).
10.14 Asset Purchase Agreement dated October 28, 1996 by and among the
Company, a wholly owned subsidiary of the Company and IASI
(incorporated by reference to the Quarterly Report on Form 10-QSB filed
with the Commission on November 14, 1996).
10.15 Securities Purchase Agreement dated as of January 15, 1997 between the
Company and The Equitable Life Assurance Society of the United States
(incorporated by reference to the Annual Report on Form 10-KSB filed
with the Commission on March 31, 1997).
10.16 Amendment No. 1 to Securities Purchase Agreement dated February 14,
1997 between the Company and The Equitable Life Assurance Society of
the United States (incorporated by reference to the Annual Report on
Form 10-KSB filed with the Commission on March 31, 1997).
10.17 Warrant dated January 15, 1997 between the Company and The Equitable
Life Assurance Society of the United States (incorporated by reference
to the Annual Report on Form 10-KSB filed with the Commission on March
31, 1997).
10.18 Note Purchase Agreement dated as of January 9, 1997 by and among the
Company and the Purchasers listed on Schedule I thereto (incorporated
by reference to the Annual Report on Form 10-KSB filed with the
Commission on March 31, 1997).
10.19 Amendment No. 1 to the Note Purchase Agreement dated January 15, 1997
by and among the Company and the Purchasers listed on Schedule I
thereto (incorporated by reference to the Annual Report on Form 10-KSB
filed with the Commission on March 31, 1997).
10.20 Form of Warrant between the Company and the Purchasers listed on
Schedule I to the Note Purchase Agreement (incorporated by reference to
the Annual Report on Form 10-KSB filed with the Commission on March 31,
1997).
10.21 Amended and Restated Loan and Security Agreement dated as of December
14, 1998 among the Company, certain of its subsidiaries, the lenders
party thereto, from time to time, Bank of America, N.A. (as successor
to NationsBank, N.A.), as agent for the lenders, and NationsBanc
Montgomery Securities, LLC, as syndication agent (filed herewith).
10.22 Form of Revolving Credit Note (filed herewith).
10.23 Engagement Agreement dated March 28, 1997 between Helix Management
Company II, LLC and the Company (incorporated by reference to the
Annual Report on Form 10-K filed with the Commission on March 23,
1998).
10.24 Amendment No. 1, dated August 25, 1998, to the Engagement Agreement
dated March 28, 1997 between Helix Management Company II, LLC and the
Company (incorporated by reference to the Quarterly Report on Form 10-Q
filed with the Commission on November 12, 1998).
10.25 Rights Agreement, dated January 14, 1997, by and between the Company
and Continental Stock Transfer and Trust Company (incorporated by
reference to the Registration Statement on Form 8-A filed with the
Commission on January 16, 1997).
10.26 Amendment No. 1, dated February 27, 1997, to Rights Agreement dated
January 14, 1997 by and between the Company and Continental Stock
Transfer and Trust Company (incorporated by reference to the Current
Report on Form 8-K/A filed with the Commission on March 7, 1997).
10.27* 1995 Stock Option Plan of the Company (incorporated by reference to the
Proxy Statement of the Company filed with the Commission on May 15,
1995).
10.28* 1996 Stock Option Plan of the Company, as amended (filed herewith).
37
<PAGE> 38
10.29* 1997 Stock Option Plan of the Company, as amended (filed herewith).
10.30* 1998 Stock Option Plan of the Company (filed herewith).
10.31 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. (incorporated by reference to the
Current Report on Form 8-K filed with the Commission on September 24,
1997).
10.32 Form of Warrant between the Company and Aero Support, USA, Inc.
(incorporated by reference to the Quarterly Report on Form 10-QSB filed
with the Commission on November 11, 1997).
10.33 Form of Warrant dated September 10, 1997 between the Company and Helix
(incorporated by reference to the Annual Report on Form 10-K filed with
the Commission on March 23, 1998).
10.34 Form of Warrant dated September 10, 1997 between the Company and Helix
(incorporated by reference to the Annual Report on Form 10-K filed with
the Commission on March 23, 1998).
10.35 Asset Purchase Agreement dated as of February 27, 1998 among the
Company, Integrated Technology Holdings Corp., Integrated Technology
Corp. and Gideon Vaisman (incorporated by reference to the Current
Report on Form 8-K filed with the Commission on April 14, 1998).
10.36 Amendment No. 1, dated as of March 13, 1998, to the Asset Purchase
Agreement dated as of February 27, 1998 among the Company, Integrated
Technology Holdings Corp., Integrated Technology Corp. and Gideon
Vaisman (incorporated by reference to the Quarterly Report on Form 10-Q
filed with the Commission on November 12, 1998).
10.37 Amendment No. 2, dated as of September 15, 1998, to the Asset Purchase
Agreement dated as of February 27, 1998 among the Company, Integrated
Technology Holdings Corp., Integrated Technology Corp. and Gideon
Vaisman (incorporated by reference to the Quarterly Report on Form 10-Q
filed with the Commission on November 12, 1998).
10.38* Employment Agreement dated February 27, 1998 between Gideon Vaisman and
the company (filed herewith).
10.39* Amendment No. 1, dated as of September 15, 1998, to the Employment
Agreement dated February 27, 1998 between Gideon Vaisman and the
Company (incorporated by reference to the Quarterly Report on Form 10-Q
filed with the Commission on November 12, 1998).
10.40 Stock Purchase Agreement dated as of May 6, 1998 among the Company,
Aerocar Parts, Inc., Aeorcar Aviation Corp., Rosa Shashua and Carmel
Shashua (incorporated by reference to the Current Report on Form 8-K
filed with the Commission on May 18, 1998).
10.41 Warrant dated June 17, 1998 between the Company and Carmel
Shashua (incorporated by reference to the Current Report on Form 8-K
filed with the Commission on August 11, 1998).
10.42 Warrant dated June 17, 1998 between the Company and Rosa
Shashua (incorporated by reference to the Current Report on Form 8-K
filed with the Commission on August 11, 1998).
10.43 Warrant dated December 18, 1998 between the Company and Helix
Management Company II, LLC (filed herewith).
10.44 Stock Purchase Agreement dated as of December 5, 1998, by and between
the Company, Solair, Inc. and Banner Aerospace, Inc. (incorporated by
reference to the Current Report on Form 8-K filed with the Commission
on January 14, 1999).
10.45 Warrant dated December 31, 1998 between the Company and Banner
Aerospace, Inc. (incorporated by reference to the Current Report on
Form 8-K/A filed with the Commission on March 16, 1999).
10.46 Warrant dated March 23, 1999 between the Company and Helix
Management Company II, LLC (filed herewith).
10.47 Termination Agreement dated as of March 30, 1999 between the Company
and East Shore Ventures, Inc. (filed herewith).
10.48 Termination Agreement dated as of March 30, 1999 between the Company
and Helix Management Company II, LLC (filed herewith).
10.49 Stock Purchase Agreement dated March 27, 1999 among the Company,
Certified Aircraft Parts, Inc., R. Dean Stickler and Donald E. Marshall
(filed herewith).
10.50 Joinder Agreement dated January 15, 1999 between Solair, Inc., the
Company and NationsBank, N.A., as agent for the lenders party thereto
(filed herewith).
10.51 Letter of Credit Reimbursement Agreement dated as of February 1, 1999
between the Company and NationsBank, N.A. (filed herewith).
21 Subsidiaries of the Registrant (filed herewith).
23 Consent of KPMG LLP (filed herewith).
27 Financial Data Schedule (filed herewith).
- --------------
* Compensatory plan or agreement.
38
<PAGE> 39
Kellstrom Industries, Inc.
Schedule II - Valuation and Qualifying Accounts
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Additions - Deductions -
Balance at Charged to Additions - Uncollectible Balance at
Beginning Costs and Due to Accounts End
Description of Period Expenses Acquisitions Written Off of Period
- ----------- --------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
1998
Allowance for returns and
doubtful accounts $ 335,786 $ 830,914 $4,296,755 $ 45,459 $5,417,996
Accumulated amortization - goodwill 1,555,526 2,226,999 -- -- 3,782,525
1997
Allowance for returns and
doubtful accounts $ 150,000 $ 35,592 $ 167,990 $17,796 $ 335,786
Accumulated amortization - goodwill 409,863 1,145,663 -- -- 1,555,526
1996
Allowance for returns and
doubtful accounts $ 125,531 $ 24,469 $ -- $ -- $ 150,000
Accumulated amortization - goodwill 138,853 271,010 -- -- 409,863
</TABLE>
39
<PAGE> 40
The following Consolidated Financial Statements are attached hereto:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Kellstrom Industries, Inc. Consolidated Financial Statements:
Independent Auditors' Report F-1
Consolidated Balance Sheets at December 31, 1998 and 1997 F-2
Consolidated Statements of Earnings for the years ended December 31, 1998,
1997 and 1996 F-3
Consolidated Statements of Stockholders' Equity and Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996 F-5
Notes to Consolidated Financial Statements F-9
</TABLE>
<PAGE> 41
Independent Auditors' Report
The Board of Directors and Stockholders
Kellstrom Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Kellstrom
Industries, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of earnings, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three year
period ended December 31, 1998. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule of valuation and qualifying accounts for the years ended December 31,
1998, 1997 and 1996. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kellstrom
Industries, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG LLP
Ft. Lauderdale, Florida
February 17, 1999, except as to note 18,
which is as of March 30, 1999
F-1
<PAGE> 42
ITEM I. FINANCIAL STATEMENTS
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,107,102 $ 462,676
Trade receivables, net of allowances for returns and
doubtful accounts of $5,417,996 and $335,786
for 1998 and 1997, respectively 31,367,337 10,189,082
Notes receivable -- 2,475,856
Inventories (Note 3) 149,957,320 35,965,376
Equipment under short-term operating leases (Note 4) 77,201,289 20,881,713
Prepaid expenses 3,166,158 2,646,629
Income tax receivable -- 531,762
Deferred tax assets (Note 11) 9,730,577 636,115
Investment in securities (Note 6) -- 425,759
--------------- ----------------
Total current assets 272,529,783 74,214,968
Equipment under long-term operating leases, net (Note 4) 63,323,008 19,050,675
Property, plant and equipment, net (Note 5) 16,755,185 5,027,096
Goodwill, net 71,501,153 29,775,709
Other asset 9,941,367 6,293,050
--------------- ----------------
Total Assets $434,050,496 $134,361,498
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable (Note 8) $ 2,317,982 $ 6,759,013
Current maturities of long-term debt (Note 8) -- 1,079,787
Accounts payable 13,333,709 6,183,762
Accrued expenses (Note 7) 25,715,518 4,996,963
Income taxes payable 779,972 --
--------------- ----------------
Total current liabilities 42,147,181 19,019,525
Long-term debt, less current maturities (Note 8) 97,336,821 11,250,000
Convertible subordinated notes (Note 9) 140,250,000 54,000,000
Deferred tax liabilities (Note 11) 4,557,256 180,053
--------------- ----------------
Total Liabilities 284,291,258 84,449,578
Stockholders' Equity: (Note 12)
Common stock, $ .001 par value; 20,000,000 shares authorized;
11,762,015 shares and 7,879,356 shares issued and outstanding
in 1998 and 1997, respectively 11,762 7,879
Additional paid-in capital 120,007,268 39,027,053
Retained earnings 31,133,280 11,555,161
Accumulated other comprehensive income -- (315,758)
Loans receivable from directors and officers (1,393,072) (362,415)
--------------- ----------------
Total Stockholders' Equity 149,759,238 49,911,920
--------------- ----------------
Total Liabilities and Stockholders' Equity $ 434,050,496 $134,361,498
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE> 43
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1998 1997 1996
----------------- ---------------- -----------------
<S> <C> <C> <C>
Sales of aircraft and engine parts, net $ 148,901,686 $ 71,534,539 $ 24,019,999
Rental revenues 31,147,123 7,904,610 901,588
----------------- -------------- -----------------
Total revenues 180,048,809 79,439,149 24,921,587
Cost of goods sold (100,221,300) (46,800,589) (15,649,127)
Depreciation of equipment under operating leases (16,688,141) (4,594,399) (586,032)
Selling, general and administrative expenses (19,051,869) (8,877,598) (3,491,457)
Depreciation and amortization (3,057,847) (1,555,673) (441,854)
----------------- -------------- -----------------
Total operating expenses (139,019,157) (61,828,259) (20,168,470)
Operating income 41,029,652 17,610,890 4,753,117
Interest expense (10,259,749) (4,390,384) (662,528)
Interest income 486,857 399,172 18,001
----------------- -------------- -----------------
Income before income taxes 31,256,760 13,619,678 4,108,590
Income taxes (Note 11) (11,678,641) (5,077,159) (1,462,247)
----------------- -------------- -----------------
Net income $ 19,578,119 $ 8,542,519 $ 2,646,343
================= ============== =================
Earnings per common share - basic $ 1.94 $ 1.18 $ 0.90
================= ============== =================
Earnings per common share - diluted $ 1.53 $ 0.95 $ 0.56
================= ============== =================
Weighted average number of common shares outstanding - basic 10,086,875 7,266,534 2,943,902
================= ============== =================
Weighted average number of common shares outstanding - diluted 15,060,512 9,394,439 4,759,890
================= ============== =================
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 44
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
LOANS
RETAINED RECEIVABLE ACCUMULATED
COMMON STOCK EARNINGS/ FROM OTHER TOTAL
COMPRE- ------------------- ADDITIONAL (ACCUMU- DIRECTORS COMPRE- STOCK-
HENSIVE NUMBER PAID-IN LUMATED) AND HENSIVE HOLDER
INCOME OF SHARES AMOUNT CAPITAL DEFICIT) OFICERS INCOME EQUITY
------- --------- ------ ------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 2,881,818 2,882 12,769,565 366,299 -- -- 13,138,746
Exercise of warrants 433,490 433 2,101,994 -- -- -- 2,102,427
Net income 2,646,343 -- -- -- 2,646,343 -- -- 2,646,343
Unrealized gain on investment
Securities (net of taxes
of $156,308) 273,225 -- -- -- -- -- 273,225 273,225
----------
Comprehensive income 2,919,568
==========
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31,1996 3,315,308 3,315 14,871,559 3,012,642 -- 273,225 18,160,741
Exercise of warrants 4,564,048 4,564 20,771,856 -- -- -- 20,776,420
Issuance of warrants related to
the IASI and Aero Support
acquisitions -- -- 1,853,192 -- -- -- 1,853,192
Issuance of warrants in lieu of
financing fees provided
with respect to IASI
acquisition -- -- 1,530,446 -- -- -- 1,530,446
Net income 8,542,519 -- -- -- 8,542,519 -- -- 8,542,519
Unrealized loss on investment
Securities, net of reclassifi-
cation adjustments (net of
taxes of $346,817) (588,983) -- -- -- -- -- (588,983) (588,983)
----------
Comprehensive income 7,953,536
==========
Borrowings on loans receivable -- -- -- -- (362,415) -- (362,415)
- -----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1997 7,879,356 7,879 39,027,053 11,555,161 (362,415) (315,758) 49,911,920
Issuance of common stock 3,882,659 3,883 78,423,642 -- -- -- 78,427,525
Issuance of warrants related
to the Aerocar and Solair
acquisition -- -- 2,556,573 -- -- -- 2,556,573
Net income 19,578,119 -- -- -- 19,578,119 -- -- 19,578,119
Unrealized gain on investment
Securities, net of reclassifi-
cation adjustments (net
of taxes of $190,506) 315,758 -- -- -- -- -- 315,758 315,758
----------
Comprehensive income 19,893,877
==========
Borrowings on loans receivable -- -- -- -- (1,030,657) -- (1,030,657)
===================================================================================================================================
Balances, December 31, 1998 11,762,015 11,762 120,007,268 31,133,280 (1,393,072) -- 149,759,238
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 45
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1996
----------------- --------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,578,119 $ 8,542,519 $ 2,646,343
Adjustments to reconcile net income to net cash
Used in operating activities:
Depreciation and amortization 3,057,847 1,555,673 441,854
Depreciation of equipment under operating leases 16,688,141 4,594,399 586,032
Amortization of deferred financing costs 1,376,807 760,019 30,172
Deferred income taxes 1,722,246 80,631 12,285
Loss on sales of investment securities 119,472 38,051 --
Gain on sales of property, plant and equipment (102,145) -- --
Changes in operating assets and liabilities:
Increase in trade receivables, net (2,922,492) (2,392,056) (704,273)
(Increase) decrease in inventories (46,121,637) 8,768,582 (1,207,383)
Increase in equipment under operating leases (91,947,589) (41,862,819) (3,250,000)
Increase in prepaid expenses (308,659) (3,042,546) (351,704)
Decrease (increase) in other assets 2,492,539 330,878 (255,655)
Decrease in accounts payable (5,114,524) (2,748,832) (515,809)
Increase in accrued expenses 11,175,219 3,706,570 431,661
Increase (decrease) in income taxes payable 1,311,734 (687,551) (486,519)
----------------- --------------- ----------------
Net cash used in operating activities (88,994,922) (22,356,482) (2,622,996)
----------------- --------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities -- -- (1,200,000)
Proceeds from sales of investment securities 812,553 428,499 --
Purchase of property, plant and equipment (10,729,964) (2,418,677) (1,372,244)
Proceeds from sales of property, plant and equipment 104,607 744,744 --
Purchase of ITC assets, net of cash acquired (20,519,903) -- --
Purchase of Aerocar assets, net of cash acquired (42,341,684) -- --
Purchase of Solair assets (57,390,887) -- --
Purchase of IASI assets, net of cash acquired -- (25,053,141) --
Purchase of Aero Support assets, net of cash acquired -- (2,656,289) --
Other (24,321) 2,115 31,753
----------------- --------------- ----------------
Net cash used in investing activities (130,089,599) (28,952,749) (2,540,491)
----------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit agreement 79,878,811 1,086,699 --
Proceeds from the issuance of debt -- 21,000,000 27,577,960
Proceeds from the issuance of subordinated debentures 86,250,000 54,000,000 --
Debt repayment, including capital lease obligation (18,679,625) (40,450,696) (24,499,503)
Proceeds from the issuance of common stock 78,427,525 20,776,420 2,102,427
Borrowings for loans receivable from directors and officers (1,030,657) (362,415) --
Payment of deferred financing costs (5,117,107) (4,432,355) --
Other -- -- (74,014)
----------------- --------------- ----------------
Net cash provided by financing activities 219,728,947 51,617,653 5,106,870
----------------- --------------- ----------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 644,426 308,422 (56,617)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 462,676 154,254 210,871
----------------- --------------- ----------------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 1,107,102 $ 462,676 $ 154,254
================= =============== ================
</TABLE>
(continued)
See accompanying notes to consolidated financial statements
F-5
<PAGE> 46
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Supplemental disclosures of non-cash investing and financing activities:
Aerocar assets acquired for warrants $ 1,405,000 $ -- $ --
=============== =============== ==============
Solair assets acquired for warrants $ 1,151,573 $ -- $ --
=============== =============== ==============
IASI assets acquired for warrants $ -- $ 1,173,134 $ --
=============== =============== ==============
Aero Support assets acquired for warrants $ -- $ 680,058 $ --
=============== =============== ==============
Deferred financing costs paid through the issuance of warrants $ -- $ 1,530,446 $ --
=============== =============== ==============
Unrealized gain/(loss) on investment securities, net $ 315,758 $ (588,983) $ 273,225
=============== =============== ==============
Supplementaldisclosures of cash flow information:
Cash paid during the period for:
Interest $ 8,481,524 $ 2,436,209 $ 558,083
=============== =============== ==============
Income taxes $ 8,644,661 $ 5,685,502 $ 1,936,481
=============== =============== ==============
Supplemental disclosures of purchase of ITC assets, net of liabilities:
Cash $ 841,012
Receivables 6,095,225
Inventory 16,965,831
Prepaid expenses and other assets 29,553
Equipment under operating leases 4,594,456
Property, plant and equipment 33,121
Goodwill 5,289,587
Other assets 119,171
---------------
Total assets $ 33,967,956
===============
Accrued expenses $ 3,147,436
Account payable 3,109,605
Notes payable 6,350,000
---------------
Total liabilities $ 12,607,041
===============
Net acquisition cost 21,360,915
Less cash acquired 841,012
---------------
Net cash used in acquisition $ 20,519,903
===============
</TABLE>
(continued)
See accompanying notes to consolidated financial statements
F-6
<PAGE> 47
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Supplemental disclosures of purchase of Aerocar assets, net of liabilities:
Cash $ 227,855
Receivables 473,118
Inventory 9,683,625
Equipment under operating leases 20,738,005
Property, plant and equipment 151,103
Goodwill 28,073,728
Other assets 39,532
---------------
Total assets $59,386,966
===============
Account payable $ 2,395,610
Notes payable 13,016,817
---------------
Total liabilities $15,412,427
===============
Net acquisition cost 43,974,539
Less warrants issued to seller 1,405,000
---------------
Cash paid to seller at closing 42,569,539
Less cash acquired 227,855
---------------
Net cash used in acquisition $42,341,684
===============
Supplemental disclosures of purchase of Solair assets, net of liabilities:
Receivables $11,687,420
Inventory 41,371,604
Prepaid expenses and other assets 181,317
Property, plant and equipment 1,413,210
Deferred tax asset 6,630,011
Goodwill 5,414,056
---------------
Total assets $66,697,618
===============
Accrued expenses $ 1,395,902
Account payable 6,759,256
---------------
Total liabilities $8,155,158
===============
Net acquisition cost 58,542,460
Less warrants issued to seller 1,151,573
---------------
Net cash used in acquisition $57,390,887
===============
</TABLE>
(continued)
See accompanying notes to consolidated financial statements
F-7
<PAGE> 48
KELLSTROM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
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 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
Account 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
===============
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 assets 359,253
Property, plant and equipment 37,926
Goodwill 13,198,554
Other assets 1,084,014
---------------
Total assets $ 22,349,803
===============
Accrued expenses $ 238,803
Accounts payable 3,161,320
Notes payable 3,498,537
---------------
Total liabilities 6,898,660
===============
Net acquisition cost 15,451,143
Less warrants issued to seller 680,058
Less notes payable to sellers 11,687,867
---------------
Cash paid to seller at closing 3,083,218
Less cash acquired 426,929
---------------
Net cash used in acquisition $ 2,656,289
===============
</TABLE>
See accompanying notes to consolidated financial statements
F-8
<PAGE> 49
KELLSTROM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Kellstrom Industries, Inc.'s (the "Company") principal business is the
purchasing, overhauling (through subcontractors), reselling and leasing of
aircraft, avionics and aircraft rotables, and engines and engine parts. The
Company is also an international after-market reseller of turbo-jet engines and
turbo-jet engine parts for helicopters and large cargo transport aircraft. The
Company's customers include major domestic and international airlines, engine
manufacturers, engine part distributors and dealers and overhaul service
suppliers throughout the world. The Company's business enables customers to
reduce their engine maintenance costs by providing Federal Aviation
Administration approved engine parts on a timely basis and at competitive
prices.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions have
been eliminated.
REVENUE RECOGNITION
Revenue is recognized upon shipment of the product to the customer net of an
estimated allowance for sales returns. Revenue from equipment under operating
leases is recognized as rental revenue on a straight-line basis over the lease
term.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is primarily
determined using the specific identification method for individual part
purchases and whole engines and on an allocated cost basis for dismantled
engines and aircraft and bulk inventory purchases. Inventories are made up
primarily of new, refurbished and as removed engines, engine parts, rotables and
expendables.
INVESTMENT IN SECURITIES
Investment in securities at December 31, 1997 consists of equity securities. All
equity securities are classified as available for sale. Available for sale
securities are recorded at fair value. Unrealized holding gains and losses, net
of the related tax effect, on available for sale securities are excluded from
earnings and are reported as a separate component of stockholders' equity until
realized. Realized gains and losses from the sale of available for sale
securities are determined on a specific identification basis.
F-9
<PAGE> 50
A decline in the market value of any available for sale security below cost that
is deemed to be other than temporary results in a reduction in carrying amount
to fair value. The impairment is charged to earnings and a new cost basis for
the security is established. Dividend and interest income are recognized when
earned.
EQUIPMENT UNDER OPERATING LEASES
The cost of equipment under operating leases is the original purchase price plus
overhaul costs. Depreciation of the cost is computed based on a usage-variable
method, which adjusts straight-line depreciation to reflect the usage levels of
the equipment.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation on property,
plant and equipment is calculated on the straight-line method over the following
estimated useful lives: building and improvements - 25 years, machinery and
equipment - 3 to 10 years and furniture and fixtures - 7 years.
GOODWILL
Goodwill represents the excess of purchase price over fair value of net assets
acquired, which is amortized on a straight-line basis over the expected periods
to be benefited, generally 15 to 35 years. Amortization expense of goodwill was
$2.2 million, $1.1 million and $0.3 million for the years ended December 31,
1998, 1997 and 1996, respectively. The Company assesses the recoverability of
the carrying value of goodwill by determining whether the carrying value can be
recovered through undiscounted future operating cash flows. The amount of
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved. Accumulated amortization of
goodwill was $3.8 million and $1.6 million at December 31, 1998 and 1997,
respectively.
DEFERRED FINANCING COSTS
Deferred financing costs are capitalized and amortized on a straight-line basis
over the life of the related debt, which currently approximates one to seven
years. Amortization expense was $1.4 million, $0.8 million, and $30,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments, consisting of cash and cash
equivalents, trade accounts receivables, other current assets, equipment under
operating leases, trade accounts payables, accrued expenses, and notes payable
to banks, is based on the short maturity of these instruments which approximates
fair value at December 31, 1998 and 1997. The fair value of the senior
subordinated debt and convertible subordinated debt is estimated by discounting
the future cash flows of each instrument at rates currently offered to the
Company for similar debt instruments of comparable maturities by the Company's
bankers which approximate fair value at December 31, 1998. Investment securities
available for sale are recorded at fair value based on quoted market prices.
F-10
<PAGE> 51
COMMITMENTS AND CONTINGENCIES
During 1998, the Company entered into agreements to purchase two aircraft
engines at a total purchase price of $9.8 million. The Company is committed to
purchasing the engines upon successful completion of certain inspections. At
December 31, 1998, the purchases had not yet been consummated.
The Company records liabilities for loss contingencies, including those arising
from claims, assessments, litigation, fines and penalties, and other sources
when it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No.
128 establishes standards for computing and presenting basic and diluted
earnings per share and applies to entities with publicly held common stock or
potential common stock. Basic earnings per share ("EPS") is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Common equivalent shares
assume the exercise of all dilutive stock options and warrants. The weighted
average number of common shares outstanding used to compute basic and diluted
EPS was 10,086,875 and 15,060,512 for the year ended December 31, 1998,
7,266,534 and 9,394,439 for the year ended December 31, 1997, and 2,943,902 and
4,759,890 for the year ended December 31, 1996. 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.
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
Long-lived assets, including intangible assets, used in the Company's operations
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
STOCK-BASED COMPENSATION
Stock-based compensation is recognized in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. As such, compensation expense is
recorded on the date of grant only if the current market price of the underlying
stock exceeds the exercise price. For disclosure purposes, pro forma net income
and pro forma earnings per share are provided as if the fair value based method
defined in SFAS No. 123, "Accounting for Stock-Based Compensation" had been
applied.
ACCOUNTING CHANGES
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards (FAS) No. 130, "Reporting Comprehensive Income." Comprehensive income
presents a measure of all changes in shareholders' equity except for changes
resulting from transactions with shareholders in their capacity as shareholders.
The Company's total comprehensive income presently consists of net income and
unrealized gain/(loss) on investment securities. The statement also requires the
separate presentation of the accumulated balance of comprehensive income other
than net earnings in the Consolidated Balance Sheets.
F-11
<PAGE> 52
Effective December 31, 1998, the Company adopted FAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This statement
establishes standards for reporting information about a company's operating
segments and related disclosures about its products, services, geographic areas
of operations and major customers. Adoption of this statement did not impact the
Company's results of operations or financial position. The "Segment Reporting"
note provides further information.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which is effective for fiscal
years beginning after December 15, 1998. SOP 98-1 outlines the accounting
treatment for certain costs related to the development or purchase of software
to be used internally and requires that costs incurred during the preliminary
project and post-implementation/operation stages be expensed, and costs incurred
during the application development stage be capitalized and amortized over the
estimated useful life of the software. Adoption of this statement is not
expected to have a material impact on the Company's results of operations or
financial position.
In April 1998, the AICPA also issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5, which is effective for fiscal years beginning
after December 15, 1998, requires that all costs of start-up activities,
including organization costs, be expensed as incurred. Adoption of this
statement is not expected to have material impact on the Company's results of
operations or financial position.
In June 1998, the Financial Accounting Standards Board issued FAS No.133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
all derivatives to be recognized at fair value as either assets or liabilities
on the balance sheet. Any gain or loss resulting from changes in such fair value
is required to be recognized in earnings to the extent the derivatives are not
effective as hedges. This statement is effective for fiscal years beginning
after June 15, 1999, and is effective for interim periods in the initial year of
adoption. Adoption of this statement is not expected to have material impact on
the Company's results of operations or financial position.
RECLASSIFICATIONS
Certain 1997 financial statement amounts have been reclassified to conform with
the 1998 presentation.
2. ACQUISITIONS
On January 15, 1997, the Company through a wholly-owned subsidiary completed the
acquisition of substantially all of the assets and assumed certain of the
liabilities of International Aircraft Support, L.P. ("IASI") for $25.1 million
in cash and warrants to purchase an aggregate of 500,000 shares of the Company's
common stock, exercisable at $9.25 per share, expiring on January 15, 1999.
On September 10, 1997, the Company through a wholly-owned subsidiary completed
the acquisition of substantially all of the assets and liabilities of Aero
Support USA, Inc. ("Aero Support") for approximately $2.7 million in cash, a
promissory note in the aggregate principal amount of $9.0 million, which matured
and was fully repaid on September 17, 1997, two promissory notes in the
aggregate principal amount of $2.7 million, which matured and were fully repaid
on January 15, 1998, and three warrants. One warrant is for the purchase of
75,000 shares of common stock at an exercise price of $22.00 per share, expiring
in three years. The other two warrants are for the purchase of an aggregate
175,000 shares of common stock at an exercise price of $19.00 per share,
expiring in five years. Up to an additional $5,000,000 cash consideration may be
paid in the form of an earn-out payable over three years based on certain
specified criteria of which $1.7 million was earned during 1998.
F-12
<PAGE> 53
On April 1, 1998, the Company through a wholly-owned subsidiary completed the
acquisition of substantially all of the assets and assumed certain liabilities
of Integrated Technology Corp. ("ITC") for $20.5 million in cash plus up to $10
million cash consideration which may be paid in the form of an earn-out payable
over three years based on certain specified criteria, of which $3.3 million was
earned during 1998. In addition, the Company received a three-year option to
purchase a 49% interest in a related FAA-approved overhaul facility.
On June 17, 1998, the Company completed the acquisition of the outstanding
capital stock of Aerocar Aviation Corp. ("Aerocar Aviation") and Aerocar Parts,
Inc. ("Aerocar Parts," and together with Aerocar Aviation, "Aerocar") for $42.3
million in cash, warrants to purchase an aggregate of 250,000 shares of the
Company's common stock, exercisable at $26.00 per share, expiring on June 17,
2001 plus an additional $5.0 million payable within a two-year period after
closing, either in cash, or at the option of the Company, in shares of common
stock having an equivalent value as of the date of acquisition.
On December 31, 1998, the Company acquired all of the outstanding capital stock
of Solair, Inc. ("Solair"), a wholly-owned subsidiary of Banner Aerospace, Inc.
for $57.4 million in cash and a warrant to purchase 300,000 shares of common
stock at an exercise price of $27.50 per share, expiring on December 31, 2002.
Each of the companies acquired are in the business of purchasing, overhauling
(through subcontractors), reselling or leasing of aircraft, avionics and
aircraft rotables, or engines and engine parts. Each of these acquisitions were
accounted for using the purchase method of accounting for business combinations
and accordingly, the consolidated financial statements reflect the results of
operations of the acquired businesses from the dates of acquisition. Unaudited
pro forma consolidated statements of earnings have been provided in Note 19(b)
to report the results of operations for the years ended December 31, 1998 and
1997 as though the acquisitions had occurred at the beginning of the period
being reported.
3. INVENTORIES
At December 31, 1998 and 1997, inventories consists of the following:
1998 1997
---- ----
Engine parts $ 99,325,400 $ 32,475,972
Whole engines 9,260,316 3,489,404
Avionics and aircraft
rotables 41,371,604 --
------------------ ------------------
$ 149,957,320 $ 35,965,376
================== ==================
4. EQUIPMENT UNDER OPERATING LEASES, NET
At December 31, 1998 and 1997, equipment under operating leases, primarily
aircraft and engines, consists of the following:
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
Equipment under operating leases $ 153,365,577 $ 42,766,620
Accumulated depreciation (12,841,280) (2,834,232)
------------------ ------------------
140,524,297 $ 39,932,388
Equipment under short-term operating leases 77,201,289 20,881,713
------------------ ------------------
Equipment under long-term operating leases $ 63,323,008 $ 19,050,675
================== ==================
</TABLE>
Equipment under long-term operating leases represents equipment under lease
agreements with an original term greater than one year.
F-13
<PAGE> 54
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment at December 31, 1998 and 1997 consists of the
following:
1998 1997
---- ----
Land $ 2,140,140 $ 2,133,642
Building and Improvements 11,316,046 1,824,552
Machinery and Equipment 3,089,800 1,496,438
Furniture and Fixtures 3,213,401 545,486
------------------ ------------------
19,759,387 6,000,118
Accumulated Depreciation (3,004,202) (1,157,450)
------------------ ------------------
16,755,185 4,842,668
Construction in Progress -- 184,428
------------------ ------------------
$ 16,755,185 $ 5,027,096
================== ==================
6. INVESTMENT IN SECURITIES
Upon consummation of the acquisition of the assets of KST, the Company received
warrants to purchase 400,000 shares of common stock of Rada (the "Rada
Warrants") at $3.00 per share, commencing on July 1, 1995 and expiring on or
before July 1, 2000. The Rada Warrants were originally recorded at their fair
value on the date of the acquisition. The Company classifies these warrants as
"available for sale." In December 1996, the Company exercised the Rada Warrants
upon payment of $1,200,000. As a result of certain antidilution provisions
contained in the Rada Warrant, the Company received 464,643 shares of Rada,
representing 5.6% of the outstanding shares of Rada at the time of exercise. The
Company classifies the shares of Rada as "available for sale." As of December
31, 1997, the Company's ownership of Rada common stock was 309,643 shares,
representing approximately 3.7% of the then current outstanding shares. During
the year ended December 31, 1998, the Company sold all the remaining shares of
its investment in Rada for $812,553 and recorded a realized loss of $119,472.
At December 31, 1997, the cost, gross unrealized holding losses and fair value
for investment in securities available for sale are as follows:
Gross Unrealized
Cost Holding Losses Fair Value
------------------ ------------------- ------------------
Rada common stock $932,025 $506,266 $425,759
================== =================== ==================
Reclassification adjustments related to the investment in Rada included in
comprehensive income for the years ended December 31, 1998, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the year $ 386,795 $ (973,851) $ 429,533
Plus: reclassification adjustment for losses included in
net income 119,472 38,051 --
================== ================== ==================
Net unrealized gains (losses) on securities $ 506,267 $ (935,800) $ 429,533
================== ================== ==================
</TABLE>
F-14
<PAGE> 55
7. ACCRUED EXPENSES
Accrued expenses at December 31, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Employee bonuses $ 2,140,914 $ 1,033,580
Acquisition costs and earn-out payments 6,978,417 --
Accrued interest 1,760,926 1,359,508
Customer deposits 6,659,814 870,300
Commissions 1,103,562 --
Deferred income 1,598,721 821,062
Other 5,473,164 912,513
------------------ ------------------
$ 25,715,518 $ 4,996,963
================== ==================
</TABLE>
8. LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Senior subordinated debt due 2002 - 2004 at 11.75% $ 11,250,000 $ 11,250,000
Mortgage note payable monthly due 2005 at 10.49% -- 1,079,787
senior secured revolving credit facility expiring 2003 at 7.75% in
1998 and 8.25% in 1997 83,949,415 4,070,603
Notes payable due 1999 - 2000 at 8.25% 4,455,388 2,688,410
------------------ ------------------
Total long-term debt obligations 99,654,803 19,088,800
Less short-term notes payable (2,317,982) (6,759,013)
Less current installments on long-term debt -- (1,079,787)
================== ==================
Long-term debt less current installments $97,336,821 $11,250,000
================== ==================
</TABLE>
During 1997, the Company made an advance principal payment of $3.8 million on
the senior subordinated debt, along with a prepayment penalty of 1%. The Company
may, at its option, redeem up to an additional $750,000 (along with a prepayment
penalty of 1%) of principal amount concurrently or within five days after the
occurrence of any public offering of the Company's common stock as long as the
principal balance is not reduced below $10.5 million.
In December 1998, the Company entered into a five-year, $256.7 million
syndicated credit facility consisting of a $250.0 million revolving credit
facility and a letter of credit in the amount of up to $6.7 million, with an
option by the Company to increase the revolving credit facility by an
additional $50.0 million, subject to approval from the agent bank and the
satisfaction of certain conditions, for a total of $306.7 million. The new
credit facility replaced the Company's existing credit facilities. The prior
credit facility consisted of a $100 million revolving loan agreement which
expired in 2001 and which bore interest at 0.25% below the bank's prime rate,
or at the Company's option, LIBOR plus 175-275 basis points. The new credit
facility bears interest ranging from prime rate plus 0 to 50 basis points, or
at the Company's option, LIBOR plus 150 to 250 basis points and is secured by
substantially all of the Company's assets. The total amount available to the
Company under the revolving credit facility is determined by applying certain
advance rate factors to eligible receivables, inventories and equipment under
operating leases. The letter of credit component of the $256.7 million
syndicated credit facility was specifically committed to the permanent
financing of the Company's new headquarters. The $6.7 million financing was
completed by the Company in February 1999. No compensating balances are
required under the revolving credit facility but the agreement contains
restrictions on the Company's ability to pay dividends. At December 31, 1998,
borrowings of $83.9 million were outstanding under the revolving credit
facility and the Company had $22.9 million available under the agreement.
Debt maturities for each of the five years subsequent to December 31, 1998 are
as follows: 1999, $2,317,982; 2000, $2,137,406; 2001, $0; 2002, $5,000,000;
2003, $88,949,415; and thereafter $1,250,000.
F-15
<PAGE> 56
9. CONVERTIBLE SUBORDINATED NOTES
During October 1997, the Company completed the offering and sale in a private
placement transaction of $50.0 million of 5 3/4% Convertible Subordinated Notes
(the "5 3/4% Notes") maturing in October 2002. In November 1997, the
underwriters of the 5 3/4% Notes exercised their overallotment option for $4.0
million. The principal amount is convertible into shares of common stock at the
option of the holders at a conversion price equal to $27.50, subject to
adjustment in certain events. In addition, the Company may at any time on or
after October 2000, 2001, and 2002 redeem all or any part of the 5 3/4% Notes at
prices (expressed in percentages of the principal amount) of 102.30%, 101.15%,
and 100%, respectively. Interest on the 5 3/4% Notes is payable semi-annually.
During June 1998, the Company completed a public offering of $75.0 million of 5
1/2% Convertible Subordinated Notes (the "5 1/2% Notes") maturing in June 2003.
In July 1998, the underwriters of the 5 1/2% Notes exercised their overallotment
option for $11.3 million. The principal amount is convertible into shares of
common stock at the option of the holders at a conversion price equal to $32.50,
subject to adjustment in certain events. In addition, the Company may at any
time on or after June 2000, 2001, and 2002 redeem all or any part of the 5 1/2%
Notes at prices (expressed in percentages of the principal amount) of 102.30%,
101.15%, and 100%, respectively. Interest on the 5 1/2% Notes is payable
semi-annually.
10. LEASES
OPERATING LEASES AS LESSOR. One of the Company's product offerings is the
leasing of aircraft and engines. These lease agreements have typical lease terms
of 3 to 60 months and provide for a fixed time charge plus a usage charge based
on flight hours and cycles. Contingent rentals included in income during 1998,
1997 and 1996 were $8.3 million, $2.5 million and $0.4 million, respectively.
OPERATING LEASES AS LESSEE. The Company has several operating leases, primarily
for transportation equipment and facilities that expire over the next five
years. These leases generally require the Company to pay all executory costs
such as maintenance and insurance and provide for early termination at
stipulated values. Total rent expense for all operating leases for the years
ended December 31, 1998, 1997 and 1996 amounted to $0.6 million, $0.3 million
and $70,000, respectively.
LEASE PAYMENTS. At December 31, 1998, future minimum lease payments are as
follows:
Operating Leases
--------------------------------------------
As Lessor As Lessee
------------------ ------------------
1999 $ 25,262,641 $ 1,473,808
2000 12,890,650 655,640
2001 6,131,000 581,820
2002 1,111,000 439,987
2003 75,000 285,848
Thereafter -- 1,012,000
================== ==================
$ 45,470,291 $ 4,449,103
================== ==================
The amounts in the previous table are based upon the assumption that equipment
under operating leases will remain on lease for the length of time specified by
the respective lease agreements. This is not a projection of future lease
revenue; no effect has been given to renewals, new business, cancellations,
contingent rentals, sales of equipment under lease or future rate changes.
F-16
<PAGE> 57
11. INCOME TAXES
Income tax expense for the years ended December 31, 1998, 1997 and 1996 is
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 8,795,142 $ 4,393,569 $ 1,299,550
State and local 1,161,253 602,959 150,412
----------------- ----------------- -----------------
9,956,395 4,996,528 1,449,962
Deferred 1,722,246 80,631 12,285
----------------- ----------------- -----------------
Provision for income taxes $ 11,678,641 $5,077,159 $ 1,462,247
================= ================= =================
</TABLE>
The actual tax expense differs from the "expected" tax expense for the years
ended December 31, 1998, 1997 and 1996 (computed by applying the U.S. federal
corporate tax rate of 35% for the year ended December 31, 1998 and 34% for the
years ended December 31, 1997 and 1996, to income before income taxes), as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense $ 10,939,866 $ 4,630,691 $ 1,396,921
State income tax, net of federal benefit 845,960 573,245 98,411
Foreign sales corporation benefit (155,255) (123,771) --
Other 48,070 (3,006) (33,085)
----------------- ----------------- -----------------
Actual tax expense $ 11,678,641 $ 5,077,159 $ 1,462,247
================= ================= =================
</TABLE>
Total income tax expense for the years ended December 31, 1998, 1997 and 1996
was allocated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations $11,678,641 $ 5,077,159 $ 1,462,247
Stockholders' equity, for unrealized
gain/(loss) on investment securities 190,506 (346,817) 156,308
----------------- ----------------- -----------------
$11,869,147 $4,730,342 $ 1,618,555
================= ================= =================
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1998 and
1997 are presented below:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Intangible assets $ -- $ 70,194
Accounts receivable, principally due to allowance for
doubtful accounts 3,841,131 70,688
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the Tax
Reform Act of 1986 4,381,547 278,403
Unrealized losses on investment securities -- 190,508
Accrued liabilities, principally for financial reporting
Purposes 602,990 95,039
Deferred rental and leasing revenue 599,520 --
State net operating losses 561,979
Other 13,810 1,477
------------------ ------------------
Total gross deferred tax assets 10,000,977 706,309
Less valuation allowance -- --
------------------ ------------------
Deferred tax assets 10,000,977 706,309
</TABLE>
F-17
<PAGE> 58
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment (2,465) (23,575)
Equipment under operating leases (4,550,455) (226,672)
Intangible assets (274,736) --
Other -- --
------------------ ------------------
Deferred tax liabilities (4,827,656) (250,247)
------------------ ------------------
Net deferred tax assets $ 5,173,321 $ 456,062
================== ==================
</TABLE>
The Company's management believes that it is more likely than not that the
results of future operations will generate sufficient taxable income to realize
the deferred tax asset. On December 31, 1998, the Company acquired all of the
outstanding stock of Solair, Inc. The Company files a consolidated income tax
return which will include Solair. Thus deferred taxes were calculated on a
consolidated basis as of the acquisition date. Based on the potential of the
combined enterprises' future taxable income and the applicable provisions of the
tax law, the future tax benefits of Solair are expected to be realized within
the consolidated group. Therefore, the Company, as a result of the acquisition,
has recognized net deferred tax assets of $6,630,011 from Solair which are
included in the consolidated net deferred tax assets position of $5,173,321.
12. STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.
The Company is authorized to issue 20,000,000 shares of common stock, $.001 par
value. In June 1998, the Company completed a secondary public offering of
2,750,000 shares of common stock at $26.00 per share, resulting in net proceeds
of $67.4 million. In July 1998, the Company's underwriters exercised their
overallotment option to purchase an additional 412,500 shares of common stock at
$26.00, resulting in additional net proceeds of $10.2 million. The Company had
11,762,015 and 7,879,356 shares of common stock outstanding at December 31, 1998
and 1997, respectively.
In January 1997, the Company's Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of common
stock. Each right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Cumulative
Preferred Stock ("Series Preferred Stock") at an exercise price of $80.00.
The Rights are not exercisable, or transferable apart from the common stock,
until the earlier to occur of (i) ten days following a public announcement that
a person or group of affiliated or associated persons have acquired beneficial
ownership of 20% or more of the outstanding common stock of the Company or (ii)
ten business days (or such later date, as defined) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer,
the consummation of which would result in the beneficial ownership by a person
or group of 19% or more of the outstanding common stock of the Company.
Furthermore, if the Company enters into a consolidation, merger, or other
business combination, as defined, each Right would entitle the holder upon
exercise to receive, in lieu of shares of Series A Preferred Stock, that number
of shares of common stock of the acquiring company having a value of two times
the exercise price of the Right, as defined. The Rights contain antidilutive
provisions, are redeemable at the Company's option, subject to certain defined
restrictions, for $.01 per Right, and expire in January 2007.
As a result of the Rights dividend, the Board designated 200,000 shares of
preferred stock as Series A Preferred Stock. Series A Preferred Stockholders
will be entitled to a preferential cumulative quarterly dividend of the greater
of $1.00 per share or 100 times the per share dividend declared on the Company's
common stock. The Series A Preferred Stock has a liquidation preference, as
defined. In addition, each share will have 100 votes and will vote together with
the shares of common stock.
F-18
<PAGE> 59
During 1998 and 1997, the Board of Directors of the Company approved loans in
the aggregate amount of $1.1 million and $0.5 million, respectively, to certain
officers and directors of the Company for the purposes of purchasing shares of
common stock. The loans will be full recourse, unsecured and payable over four
years for employees or five years for directors at an interest rate based on the
applicable federal rate, as defined by the agreement, at the time of the loan.
The average interest rate for these loans at December 31, 1998 and 1997 was 5.8%
and 6.1%, respectively. Interest will be paid annually by officers and will
accrue and be paid at maturity by directors. As of December 31, 1998 and 1997,
the outstanding balance on the loans receivable was $1.4 million and $0.4
million, respectively.
Upon consummation of the acquisitions of IASI, Aero Support, Aerocar and Solair,
the Company issued warrants to purchase an aggregate of 1,300,000 shares of the
Company's common stock at stated prices of $9.25-$27.50, expiring two to five
years from the dates of issuance. The amounts recorded by the Company as a
result of the issuance of the warrants was determined based on the fair value of
the warrants on the closing date of the acquisitions.
In February 1997 the Company called its publicly traded warrants pursuant to
their terms. The Company received proceeds of $22,961,950 from the exercise of
these warrants during the period from October 1996 to March 1997.
The Company had 1,147,030 and 1,593,155 warrants outstanding at December 31,
1998 and 1997, respectively. Each warrant entitles the holder to the purchase of
one share of the Company's common stock at an average stated price of $19.15 and
$10.14 respectively. These warrants are exercisable at various times principally
commencing in June 1995 and expiring on or before December 2001. The Company has
reserved 5.0 million common shares for the exercise of these warrants.
13. EMPLOYEE STOCK OPTION PLANS
The 1995 Stock Option Plan provides for the granting of stock options to
purchase up to 250,000 shares of common stock to key employees, with no
individual granted options to purchase more than 100,000 shares of common stock
during the ten-year period commencing on June 22, 1995, at a price which will
not be less than the fair market value of common stock on the date of grant.
These options will be exercisable at such times, in such amounts and during such
intervals as determined on the date of grant. However, no option will be
exercisable during the first six months after the date of grant or more than 10
years after the date of grant. In 1995 the Company granted 235,000 stock options
at an exercise price of $5.00; all of which provide that such options fully vest
over a period of three years from the date of grant.
The 1996 Stock Option Plan (the "1996 Plan") provides for the granting of
incentive stock options to purchase shares of common stock at not less than the
fair market value on the date of the option grant or the granting of
nonqualified options and stock appreciation rights ("SARs") with any exercise
price. SARs granted in tandem with an option have the same exercise price as the
related option. The total number of shares with respect to which options and
SARs may be granted under the 1996 Plan is currently 1,100,000. No option or SAR
may be granted under the 1996 Plan after July 9, 2006, and no option or SAR may
be outstanding for more than ten years after its grant.
The 1997 Stock Option Plan (the "1997 Plan") provides for the granting of
incentive stock options to purchase shares of common stock at not less than the
fair market value on the date of the option grant and the granting of
nonqualified options. The total number of shares with respect to which options
may be granted under the 1997 Plan is currently 1,000,000. No option may be
granted under the 1997 Plan after October 27, 2007, and no option may be
outstanding for more than ten years after its grant.
The 1998 Stock Option Plan (the "1998 Plan") which is subject to shareholder
approval, provides for the granting of stock options to purchase shares of
common stock at not less than the fair market value on the date of the option
grant. The total number of shares with respect to which options may be granted
under the 1998 Plan is 250,000. No option may be granted under the 1998 Plan
after November 15, 2008, and no option may be outstanding for more than ten
years after its grant. The Company intends to only grant options under the 1998
Plan to newly hired executives and employees as an inducement to enter into
employment arrangements with the Company, and to outside members of the Board,
in lieu of cash compensation, as an incentive for their service on the Board.
F-19
<PAGE> 60
In October 1998, the Company's Board of Directors approved the extention of the
vesting schedule and repricing of all outstanding employee stock options with
an exercise price above $10.125. Employees who accepted the Company's repricing
offer were subject to, in general, a 50% extension to the vesting term for that
option. All other terms of the existing options remained unchanged. As a result,
1,170,998 employee stock options were cancelled and reissued by the Company at
the new exercise price of $10.125. The new exercise price was determined based
on the closing market price of the Company's common stock on October 8, 1998.
The following table summarizes the status of the Company's stock option plans:
<TABLE>
<CAPTION>
Weighted
Average Option
Shares Exercise Price
------- --------------
<S> <C> <C>
Outstanding at January 1, 1996 235,000 $ 5.00
Granted 373,000 7.63
Exercised -- --
Expired or Canceled -- --
----------------- ----------------------
Outstanding at December 31, 1996 608,000 6.61
Granted 1,542,000 12.66
Exercised (5,499) 5.00
Expired or Canceled (81,000) 6.94
----------------- ----------------------
Outstanding at December 31, 1997 2,063,501 11.12
Granted 1,819,412 15.33
Exercised (80,147) 7.46
Expired or Canceled (1,180,998) 21.47
----------------- ----------------------
Outstanding at December 31, 1998 2,621,768 9.51
================= ======================
At December 31, 1998:
Exercisable options 749,241 7.32
Shares Available for Future Grant 250,000 --
</TABLE>
The following table summarizes the status of stock options outstanding and
exercisable as of December 31, 1998, by range of exercise price:
<TABLE>
<CAPTION>
Remaining Weighted
Contractual Average Weighted
Range of Options Term Exercise Options Average
Exercise Prices Outstanding (in years) Price Exercisable Exercise Price
- --------------------- --------------- -------------- -------------- ------------------ -----------------
<C> <C> <C> <C> <C> <C>
$5.00 - $8.00 550,935 7.4 $ 6.75 422,011 $6.48
$8.01 - $12.00 1,937,499 8.6 $ 9.43 327,230 $8.40
$12.01 - $20.00 33,334 9.3 $16.45 -- --
$20.01 - $25.75 100,000 9.5 $24.00 -- --
--------------- ------------------
2,621,768 749,241
=============== ==================
</TABLE>
F-20
<PAGE> 61
The weighted average per share fair values of options granted under the
Company's stock option plans during 1998, 1997 and 1996 were $18.13, $12.66 and
$4.02, respectively. Had the fair value of the grants under these plans been
recognized as compensation expense over the vesting period of the awards, the
Company's net earnings and earnings per share would have reflected the pro forma
amounts shown below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ---------------- ----------------
<S> <C> <C> <C>
Net earnings:
As reported $ 19,578,119 $ 8,542,519 $ 2,646,343
Pro forma 15,052,692 7,193,698 2,260,098
Earnings per share - basic:
As reported 1.94 1.18 0.90
Pro forma 1.49 0.99 0.77
Earnings per share - diluted:
As reported 1.53 0.95 0.56
Pro forma 1.02 0.77 0.47
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0% in 1998, 1997 and 1996; expected volatility of
59% in 1998 and 20% in 1997 and 1996; a risk-free interest rate of 5.35% in 1998
and 6.59% in 1997 and 1996; and an expected holding period of 10 years.
Increased pro forma compensation expense in 1998 is the result of the additional
options granted and further vesting of 1995, 1996 and 1997 grants during 1998.
Pro forma expense for 1999 is expected to increase over 1998 for the same
reasons.
14. EARNINGS PER SHARE
Diluted earnings per share for the years ended December 31, 1998, 1997 and 1996
was calculated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ---------------- ----------------
<S> <C> <C> <C>
Net income $ 19,578,119 $ 8,542,519 $ 2,646,343
Income adjustment relating to reduction of debt based
on the if converted method 3,423,047 405,921 --
================== ================ ================
Net income available to common and common
equivalent shares 23,001,166 8,948,440 2,646,343
================== ================ ================
Weighted average number of common shares
outstanding - basic 10,086,875 7,266,534 2,943,902
Dilutive common stock equivalents from stock options
and warrants based on the treasury stock method 3,542,904 1,712,196 1,815,988
Dilutive convertible subordinated notes based
on the if converted method 1,430,733 415,709 --
================== ================ ================
Weighted average number of common shares
outstanding - diluted 15,060,512 9,394,439 4,759,890
================== ================ ================
</TABLE>
At December 31, 1997, options and warrants to purchase 726,000 shares of common
stock were outstanding but were not included in the computation of diluted EPS
because their exercise price was greater than the average market price of the
common shares during the period.
F-21
<PAGE> 62
15. SEGMENT REPORTING
The Company is organized based on the products that it offers. Under this
organizational structure, the Company has three reportable segments: commercial
engine, small engine and avionics and rotables. The commercial engine segment is
involved in the business of purchasing, overhauling (through subcontractors),
reselling and leasing of aircraft, and engines and engine parts for large
turbo-fan engines manufactured by CFM International, General Electric, Pratt &
Whitney and Rolls Royce. The small engine segment is an after-market reseller of
turbojet engines and engine parts for helicopters and large transport aircraft.
The segment's primary focus is on the Allison (Rolls Royce) T56/501 engine,
which powers the military's Hercules C-130 aircraft, a widely used military
transport aircraft, and the Allison 250, with approximately 16,000 units
actively in use by helicopters. The Company entered the small engine segment in
1997 with the acquisition of Aero Support. The avionics and rotables segment is
engaged in the sale of a wide variety of aircraft rotables and expendable
components including flight data recorders, electrical and mechanical equipment
and radar and navigation systems. The Company entered the avionics and rotables
segment in 1998 with the acquisition of Solair.
The Company's reportable segments are managed separately because each business
requires different technology and marketing strategies. The Company does not
allocate selling, general and administrative expenses, depreciation and
amortization, interest expense or income taxes to its business segments. Rather,
the Company evaluates performance of the business segments based on revenue and
gross margins. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ---------------- ----------------
<S> <C> <C> <C>
REVENUES
Commercial engine $155,863,349 $ 72,621,217 $24,921,587
Small engine 24,185,460 6,817,932 --
Avionics and rotables -- -- --
------------------ ---------------- ----------------
Total revenue $180,048,809 $79,439,149 $24,921,587
================== ================ ================
GROSS MARGIN
Commercial engine $54,750,720 $ 25,003,200 $8,686,428
Small engine 8,388,648 3,040,961 --
Avionics and rotables -- -- --
------------------ ---------------- ----------------
Total gross margin $63,139,368 $28,044,161 $8,686,428
================== ================ ================
INVENTORIES AND EQUIPMENT UNDER LEASE
Commercial engine $229,239,876 $67,428,059 $35,974,507
Small engine 19,870,137 8,469,705 --
Avionics and rotables 41,371,604 -- --
------------------ ---------------- ----------------
Total inventories $290,481,617 $75,897,764 $35,974,507
================== ================ ================
GEOGRAPHIC REVENUE INFORMATION
Revenue from domestic customers 120,632,702 62,756,928 19,189,622
Revenue from international customers 59,416,107 16,682,221 5,731,965
------------------ ---------------- ----------------
Total revenue $180,048,809 $79,439,149 $24,921,587
================== ================ ================
</TABLE>
F-22
<PAGE> 63
For the years ended December 31, 1998, 1997 and 1996, the Company's five largest
customers collectively accounted for approximately 42%, 38% and 55%,
respectively, of the Company's consolidated revenues.
The Company's business is impacted by the general economic conditions of the
commercial aviation industry. Airlines and other operators recognize the need to
cut costs, shift inventory requirements, and conserve capital to sustain
profitability. The Company's industry is also subject to regulation by various
governmental agencies with responsibilities over civil aviation. Increased
regulations imposed by organizations such as the Federal Aviation Administration
may significantly affect industry operations. Accordingly economic and
regulatory changes in the marketplace may significantly affect management's
estimates and future performance.
The Company estimates an allowance for doubtful accounts based on the credit
worthiness of its customers as well as general economic conditions. Consequently
an adverse change in those factors could affect the Company's estimate of its
bad debts.
16. OTHER MATTERS
The Company was named as a defendant in an action in the Supreme Court of the
State of New York, County of New York, brought by an alleged beneficiary of the
Estate of the late Mr. Joram Rosenfeld (a former Co-Chairman of the Company) and
the Executor of the Estate of Mr. Rosenfeld. The Complaint alleged, INTER ALIA,
that the Company breached a purported agreement to provide Rosenfeld with
options to purchase 345,000 shares of the Company's common stock under the
Company's 1996 Stock Option Plan, several months before his death. The complaint
further alleged that the Company aided and abetted and/or participated in
breaches of fiduciary duty that Yoav Stern, the Company's Chairman of the Board,
and Zivi Nedivi, the Company's President and Chief Executive Officer, owed to
Rosenfeld as co-members of two private Delaware limited liability companies. The
Company believes that the claims asserted against it are totally without merit
and has moved for summary judgement dismissing the claims against it on the
grounds that the uncontradicted evidence shows that the claims have no basis.
At December 31, 1998 there were no other material legal proceedings pending
against the Company or any of its property. However, the Company may become
party to various claims, legal actions and complaints arising in the ordinary
course of business. While any proceeding or litigation has an element of
uncertainty, management believes that the disposition of any matter that may
arise will not have a material impact on the financial condition, results of
operations or cash flows of the Company.
The Company has certain employment agreements with officers with terms of up to
five years. The employment agreement provides that such officers may earn
bonuses, based on the Company achieving certain target net income levels.
Further, each of the employment agreements provide that in the event of
termination without cause, the employment agreement shall be terminable by the
mutual agreement between the Company and the officers, or by either party upon
sixty days notice and provides for certain levels of severance compensation.
In February 1998, the Company established a defined contribution savings plan
that covers substantially all eligible employees. Company contributions to the
plan are based on employee contributions and the level of company match. Company
contributions to the plan totaled approximately $32,000 in 1998.
17. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1996, the Company paid Yoav Stern and Joram
D. Rosenfeld, and in each case entities controlled by them, an aggregate of
$90,000, each for services rendered by Yoav Stern and Joram D. Rosenfeld as
Co-Chairmen of the Company's Board of Directors. These payments were terminated
for Yoav Stern in December 1996 and for Joram D. Rosenfeld in March 1997.
Payments to Joram D. Rosenfeld during 1997 amounted to $16,200.
In March 1997, the Company engaged Helix Management Company II, LLC ("Helix"), a
company owned by Yoav Stern, Chairman of the Company's Board of Directors, and
Zivi Nedivi, President, Chief Executive Officer and a Director of the Company,
to act as the Company's exclusive financial advisor with respect to merger and
acquisition transactions and as principal financial advisor with respect to
other transactions for an initial term of eighteen months beginning January 1,
1997, renewable for additional 12 month terms (as amended, the "Helix Engagement
Agreement"). On March 24, 1999, the Company entered into a termination agreement
with Helix, pursuant to which the Company agreed to terminate the Helix
Engagement Agreement. The "Subsequent Events" note provides further information.
Under the terms of the agreement, Helix received a monthly retainer of $25,000.
In addition, under the terms of the agreement, a success fee was to be paid by
the Company on a per transaction basis, based upon the aggregate consideration
in connection with the applicable transaction. Originally, the agreement
provided for such fee to be determined on a per transaction basis, not to fall
below 2% of the aggregate consideration. In August 1998, the agreement was
amended to provide for such fee to be determined as follows: for transactions
with aggregate consideration of less than $50 million, 5.0% of the first $5
million, 2.5% of the next $10 million, plus 0.75% of any consideration in excess
of $15 million; and for transactions with aggregate consideration of $50 million
or more (up to $1,000 million), 1.5% of the first $50 million, 0.75% of the next
$200 million, plus 0.5% of any consideration in excess of $250 million. During
the years ended December 31, 1998 and 1997, the Company paid $2.0 million and
$0.5 million, respectively, and issued warrants for the purchase of an aggregate
14,750 shares of the Company's common stock at exercise prices between $19.00
and $27.50 per share, expiring in three to five years, to Helix relating to such
agreement. In addition, at December 31, 1998, the Company has accrued $0.8
million payable to Helix relating to such agreement.
F-23
<PAGE> 64
18. SUBSEQUENT EVENTS
On March 30, 1999, the Company entered into a Termination Agreement (the "Helix
Termination Agreement") with Helix, pursuant to which the Company agreed to
terminate the Helix Engagement Agreement dated as of March 28, 1997. Under the
terms of the Helix Termination Agreement, the Company will only be required to
pay Helix success fees on those transactions procured by Helix which have either
been consummated or signed prior to the date of termination. Helix has waived
all other fees which it is entitled to under the terms of the Helix Engagement
Agreement, including monthly retainer fees on account of the ninety day period
following termination and success fees on account of transactions procured by
Helix which are undertaken by the Company within one year of termination. Helix
has also agreed that it will, for no additional consideration, provide the
Company such assistance (including access to its members and employees and
copies of its records and files) as is necessary to assure an orderly
transition in the services provided by Helix.
On March 27, 1999, the Company entered into a definitive agreement to acquire
privately held Certified Aircraft Parts, Inc. ("Certified") for approximately
$16 million in cash. Certified is a provider of parts, after-market support and
logistics for the Lockheed Martin C-130/L100 Hercules aircraft and will
complement the activities of the Company's small engine segment, which is
involved in supplying inventory management for C-130 engines. The transaction is
expected to close by the end of April 1999 and is subject to certain customary
closing conditions.
19. SUPPLEMENTAL FINANCIAL DATA
(A) QUARTERLY DATA - UNAUDITED
<TABLE>
<CAPTION>
Quarters
-------------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Total revenues:
1998 $29,090,571 $38,063,117 $52,806,517 $60,088,604
1997 16,466,073 17,949,910 20,352,441 24,670,725
Earnings from continuing operations:
1998 $2,941,610 $3,681,064 $6,203,317 $6,752,128
1997 1,659,368 1,941,214 2,326,652 2,615,285
Net earnings:
1998 $2,941,610 $3,681,064 $6,203,317 $6,752,128
1997 1,659,368 1,941,214 2,326,652 2,615,285
Earnings from continuing operations per
common share - diluted:
1998 $0.29 $0.34 $0.42 $0.45
1997 0.21 0.22 0.25 0.27
Net earnings per common share - diluted:
1998 $0.29 $0.34 $0.42 $0.45
1997 0.21 0.22 0.25 0.27
</TABLE>
(B) PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
F-24
<PAGE> 65
The following unaudited pro forma consolidated statements of earnings for the
years ended December 31, 1998 and 1997 are based on historical financial
statements of the Company and have been adjusted to reflect the acquisitions of
Aero Support, ITC, Aerocar, and Solair as though the companies had combined at
the beginning of the periods being reported.
The pro forma consolidated financial information does not purport to be
indicative of results that would have occurred had the acquisitions been in
effect for the period presented, nor does it purport to be indicative of the
results that will be obtained in the future. The pro forma consolidated
financial information is based on certain assumptions and adjustments described
in the notes hereto and should be read in conjunction therewith.
The pro forma consolidated statements of earnings for the years ended December
31, 1998 and 1997 reflect the effect of the Company's secondary public offering
of common stock and convertible subordinated notes as though they had occurred
at the beginning of the periods being reported.
F-25
<PAGE> 66
KELLSTROM INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Sales of aircraft and engine parts, net $ 230,047,078 $ 199,661,381
Rental revenues 35,139,470 19,427,808
------------- -------------
Total revenues 265,186,548 219,089,189
Cost of goods sold (161,522,112) (139,958,940)
Inventory write-down (see below) (5,628,643) (14,027,176)
Depreciation of equipment under operating leases (17,735,353) (7,511,290)
Selling, general and administrative expenses (37,208,774) (35,077,609)
Depreciation and amortization (4,137,877) (2,842,637)
------------- -------------
Total operating expenses (226,232,759) (199,417,652)
Operating income 38,953,789 19,671,537
Interest expense, net of interest income (16,032,522) (15,365,956)
Expenses related to sale of business -- 321,461
------------- -------------
Income before income taxes 22,921,267 4,627,042
Income taxes (8,571,665) (1,721,228)
------------- -------------
Net income $ 14,349,602 $ 2,905,814
============= =============
Earnings per common share - basic $ 1.24 $ 0.28
============= =============
Earnings per common share - diluted $ 0.87 $ 0.23
============= =============
Weighted average number of common shares
outstanding - basic 11,550,779 10,429,034
============= =============
Weighted average number of common shares
outstanding - diluted 16,524,416 12,556,939
============= =============
</TABLE>
Solair's historical results for the years ended December 31, 1998 and March 31,
1998 reflect charges to income of $5.6 million and $14.0 million, respectively,
for the write-down of inventory. If these charges were excluded from the pro
forma statements of earnings, net income and earnings per share on a basic and
diluted basis would be $17.9 million, $1.55 and $1.08, respectively and $11.7
million, $1.12 and $0.93, respectively for the years ended December 31, 1998 and
1997, respectively.
Unaudited - See accompanying notes to pro forma consolidated statements of
earnings.
F-26
<PAGE> 67
KELLSTROM INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
Year Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------
KELLSTROM ITC AEROCAR SOLAIR
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales of aircraft and engine parts,
net $ 148,901,686 $ 8,036,576 $ 3,458,512 $ 69,650,304
Rental revenues 31,147,123 538,306 3,454,041 --
------------- ------------- ------------- -------------
Total revenues 180,048,809 8,574,882 6,912,553 69,650,304
Cost of goods sold (100,221,300) (4,997,742) (1,724,577) (54,578,493)
Inventory write-down -- -- -- (5,628,643)
Depreciation of equipment under
operating leases (16,688,141) (289,317) (757,895) --
Selling, general and administrative
expenses (19,051,869) (640,591) (1,443,646) (16,787,829)
Depreciation and amortization (3,057,847) (3,498) -- (480,545)
------------- ------------- ------------- -------------
Total operating expenses (139,019,157) (5,931,148) (3,926,118) (77,475,510)
Operating income 41,029,652 2,643,734 2,986,435 (7,825,206)
Interest expense, net of interest
income (9,772,892) (160,492) (87,257) (5,289,158)
------------- ------------- ------------- -------------
Income before income taxes 31,256,760 2,483,242 2,899,178 (13,114,364)
Income taxes (11,678,641) -- --
------------- ------------- ------------- -------------
Net income $ 19,578,119 $ 2,483,242 $ 2,899,178 $ (13,114,364)
============= ============= ============= =============
Earnings per common share - basic $ 1.94
=============
Earnings per common share - diluted $ 1.53
=============
Weighted average number of common
shares outstanding - basic 10,086,875
=============
Weighted average number of common
shares outstanding - diluted 15,060,512
=============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS(A) ADJUSTMENTS(B) ADJUSTMENTS(C) COMBINED
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales of aircraft and engine parts,
net $ -- $ 230,047,078
Rental revenues -- 35,139,470
--------------- --------------- --------------- ---------------
Total revenues -- -- -- 265,186,548
Cost of goods sold -- (161,522,112)
Inventory write-down (5,628,643)
Depreciation of equipment under
operating leases (17,735,353)
Selling, general and administrative
expenses 43,161 132,000 540,000 (37,208,774)
Depreciation and amortization (52,963) (431,194) (111,830) (4,137,877)
--------------- --------------- --------------- ---------------
Total operating expenses (9,802) (299,194) 428,170 (226,232,759)
Operating income (9,802) (299,194) 428,170 38,953,789
Interest expense, net of interest
income 160,492 219,633 5,479,680 (16,032,522)
(532,331) (2,061,530) (3,988,667)
--------------- --------------- --------------- ---------------
Income before income taxes (381,642) (2,141,091) 1,919,183 22,921,267
Income taxes (785,233) (283,248) 4,175,458 (8,571,664)
--------------- --------------- --------------- ---------------
Net income $ (1,166,874) $ (2,424,339) $ 6,094,641 $ 14,349,603
=============== =============== =============== ===============
Earnings per common share - basic $ 1.24
===============
Earnings per common share - diluted $ 0.87
===============
Weighted average number of common
shares outstanding - basic 11,550,779
===============
Weighted average number of common
shares outstanding - diluted 16,524,416
===============
</TABLE>
Unaudited - See accompanying notes to pro forma consolidated statement of
earnings.
F-27
<PAGE> 68
KELLSTROM INDUSTRIES, INC.
Notes to Pro Forma Consolidated Statement of Earnings
(Unaudited)
(A) For the purpose of presenting the pro forma consolidated statement of
earnings, the following adjustments have been made for the ITC acquisition:
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
<S> <C>
Increase (decrease) in income:
Reduction in selling, general and administrative expense due to elimination of pension expense 43,161
Amortization of goodwill and non-compete agreement related to ITC acquisition (52,963)
Reduction in interest expense due to pay-off of debt on ITC line of credit 160,492
Interest expense on acquisition debt and debt incurred to repay existing ITC line of credit (532,331)
------------
(381,642)
Tax effect of pro forma adjustments and impact of acquisition on the provision for income taxes (785,233)
------------
Net adjustment $ (1,166,874)
============
</TABLE>
(B) For the purpose of presenting the pro forma consolidated statement of
earnings, the following adjustments have been made for the Aerocar Aviation and
Aerocar Parts acquisitions:
<TABLE>
<CAPTION>
Year ended
December 31, 1998
-----------------
<S> <C>
Increase (decrease) in income:
Elimination of Aerocar Aviation and Aerocar Parts officer's salary and bonus $ 132,000
Amortization of goodwill related to Aerocar Aviation and Aerocar Parts acquisitions (431,194)
Reduction in interest expense due to pay-off of debt on Aerocar Aviation and Aerocar Parts line of credit 219,633
Interest expense on acquisition debt and debt incurred to repay existing Aerocar
Aviation and Aerocar Parts line of credit (2,061,530)
------------
Tax effect of pro forma adjustments and impact of acquisition on the provision for income taxes (2,141,091)
(283,248)
Net adjustments ------------
$ (2,424,339)
============
</TABLE>
(C) For the purpose of presenting the pro forma consolidated statement of
earnings, the statement of operations of Solair for the twelve months ended
December 31, 1998 has been used and the following adjustments have been made for
the Solair acquisition:
<TABLE>
<CAPTION>
Year ended
December 31, 1998
-----------------
<S> <C>
Increase (decrease) in income:
Reduction in selling, general and administrative expenses for elimination of Banner management fees 540,000
Amortization of goodwill related to Solair acquisition (111,830)
Reduction in interest expense due to pay-off of Solair debt 5,479,680
Increase in interest expense from acquisition debt (3,988,667)
------------
1,919,183
Tax effect of pro forma adjustments and impact of acquisition on the provision for income taxes 4,175,458
------------
Net adjustment $ 6,094,641
============
</TABLE>
F-28
<PAGE> 69
KELLSTROM INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
Year Ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------------------
KELLSTROM AERO SUPPORT ITC AEROCAR SOLAIR
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Sales of aircraft and engine parts,
net $ 71,534,539 $ 20,041,644 $ 28,214,141 $ 31,693,131 $ 75,295,858
Rental revenues
7,904,610 -- 738,636 10,784,562 --
------------- ------------ ------------ ------------- -------------
Total revenues 79,439,149 20,041,644 28,952,777 42,477,693 75,295,858
Cost of goods sold (46,800,589) (13,162,382) (17,034,996) (11,957,687) (61,052,592)
Inventory write-down -- -- -- -- (14,027,176)
Depreciation of equipment under
operating leases (4,594,399) -- (449,673) (3,025,095) --
Selling, general and administrative
expenses (8,877,598) (3,690,856) (5,615,848) (4,600,069) (15,707,692)
Depreciation and amortization (1,555,673) (68,583) (12,758) (31,592) (365,767)
------------- ------------ ------------ ------------- -------------
Total operating expenses (61,828,259) (16,921,821) (23,113,275) (19,614,443) (91,153,227)
Operating income 17,610,890 3,119,823 5,839,502 22,863,250 (15,857,369)
Interest expense, net of interest
income (3,991,212) (197,011) (481,812) (92,108) (3,697,510)
Expenses related to sale of business -- --
------------- ------------ ------------ ------------- -------------
Income before income taxes 13,619,678 2,922,812 5,357,690 22,771,142 (19,554,879)
Income taxes (5,077,159) (196,401) -- -- --
============= ============ ============ ============= =============
Net income $ 8,542,519 $ 2,726,411 $ 5,357,690 $ 22,771,142 $ (19,554,879)
============= ============ ============ ============= =============
Earnings per common share - basic $ 1.18
=============
Earnings per common share - diluted $ 0.95
=============
Weighted average number of common
shares outstanding - basic 7,266,534
=============
Weighted average number of common
shares outstanding - diluted 9,394,439
=============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS(A) ADJUSTMENTS(B) ADJUSTMENTS(C) ADJUSTMENTS(D) COMBINED
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales of aircraft and engine parts,
net $ (6,817,932) $ -- $ (20,300,000) -- $ 199,661,381
Rental revenues -- -- -- -- 19,427,808
-------------- -------------- -------------- ----------- --------------
Total revenues (6,817,932) -- (20,300,000) -- 219,089,189
Cost of goods sold 4,161,267 -- 4,286,710 -- (139,958,940)
1,601,329
Inventory write-down -- -- -- -- (14,027,176)
Depreciation of equipment under
operating leases -- -- 557,877 -- (7,511,290)
Selling, general and administrative
expenses 856,045 152,272 (938,259) 540,000 (35,077,609)
2,804,396
Depreciation and amortization 16,500 (111,830) (2,842,637)
(659,517) (211,853)
158,436
-------------- -------------- -------------- ----------- --------------
Total operating expenses $ 4,532,731 $ (59,581) $ 8,312,053 $ 428,170 $ (199,417,652)
Operating income (2,285,201) (59,581) (11,987,947) 428,170 19,671,537
Interest expense, net of interest
income 197,011 (2,129,325) (4,123,059) 3,726,362 (15,365,956)
(1,070,437) 481,812 (3,988,667)
Expenses related to sale of business 321,461 321,461
-------------- -------------- -------------- ----------- --------------
Income before income taxes (3,158,627) (1,707,094) (15,789,545) 165,865 4,627,042
Income taxes 284,308 (1,360,873) (2,602,608) 7,231,505 (1,721,228)
-------------- -------------- -------------- ----------- --------------
Net income $ (2,874,319) $ (3,067,967) $ (18,392,153) 7,397,370 2,905,814
============== ============== ============== =========== ==============
Earnings per common share - basic $ 0.28
==============
Earnings per common share - diluted $ 0.23
==============
Weighted average number of common
shares outstanding - basic 10,429,034
==============
Weighted average number of common
shares outstanding - diluted 12,556,939
==============
</TABLE>
Unaudited - See accompanying notes to pro forma consolidated statement of
earnings.
F-29
<PAGE> 70
KELLSTROM INDUSTRIES, INC.
Notes to Pro Forma Consolidated Statement of Earnings
(Unaudited)
(A) For the purpose of presenting the pro forma consolidated statement of
earnings, the following adjustments have been made for the Aero support
acquisition:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Increase (decrease) in income:
Reversal of Aero Support revenues for the period September 10, 1997 to December 31, 1997 $ (6,817,932)
Reversal Of Aero Support cost of goods sold for the period September 10, 1997 to
December 31, 1997 4,161,267
Reversal of Aero Support selling, general and administrative expenses September
10, 1997 to December 31, 1997 856,045
Reversal of Aero Support depreciation and amortization for the period September 10, 1997
to December 31, 1997 16,500
Amortization of goodwill and non-complete agreement related to Aero Support acquisition (659,517)
Elimination of leasehold amortization expense for assets not acquired 158,436
Reduction in interest expense due to pay-off of debt on Aero Support line of credit 197,011
Interest expense on acquisition debt and debt incurred to repay existing Aero
Support line of credit (1,070,437)
-------------
(3,158,627)
Tax effect of pro forma adjustments and impact of acquisition on the provision for income taxes 284,308
-------------
Net adjustment $ (2,874,319)
=============
</TABLE>
(B) For the purpose of presenting the pro forma consolidated statement
of earnings, the following adjustments have been made for the ITC acquisition:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Increase (decrease) in income:
Amortization of goodwill and non-compete agreement related to ITC acquisition $ (211,853)
Reduction in selling, general and administrative expense due to elimination of pension expense 152,272
Reduction in interest expense due to pay-off of debt on ITC line of credit 481,812
Interest expense on acquisition debt and debt incurred on ITC's line of credit (2,129,325)
------------
(1,707,094)
Tax effect of pro forma adjustments and impact of acquisition on the provision for income taxes (1,360,873)
------------
Net adjustment $ (3,067,967)
============
</TABLE>
(C) For the purpose of presenting the pro forma consolidated statement of
earnings, the following adjustments have been made for the Aerocar Aviation and
Aerocar Parts acquisitions:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Increase (decrease) in income:
Reversal of Aerocar Aviation revenues for sales to Kellstrom Industries, Inc. $ (20,300,000)
Reversal in cost of goods sold for sales to Kellstrom Industries, Inc. 4,286,710
Reduction in cost of goods sold for sale of equipment previously owned by Aerocar Aviation 1,601,329
Reduction in depreciation expense from sales to Kellstrom Industries, Inc. 557,877
Amortization of goodwill and non-compete related to Aerocar Aviation and Aerocar Parts acquisition (938,259)
Elimination of Aerocar Aviation and Aerocar Parts officer's salary and bonus 2,804,396
Increase in interest expense from acquisition debt (4,123,059)
Reduction in interest expense due to pay-off of debt on Aerocar Aviation and Aerocar Parts
line of credit 321,461
-------------
(15,789,545)
Tax effect of pro forma adjustments and impact of acquisition on the provision for income taxes (2,602,608)
-------------
Net adjustments $ (18,392,153)
=============
</TABLE>
(D) For the purpose of presenting the pro forma consolidated statement of
earnings, the statement of operations of Solair for the year ended March 31,
1998 has been used and the following adjustments have been made for the Solair
acquisition:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Increase (decrease) in income:
Reduction in selling, general and administrative expenses for elimination of Banner
management fees 540,000
Amortization of goodwill related to Solair acquisition (111,830)
Reduction in interest expense due to pay-off of Solair debt 3,726,362
Increase in interest expense from acquisition debt (3,988,667)
-----------
165,865
Tax effect of pro forma adjustments and impact of acquisition on the provision for income taxes 7,231,505
-----------
Net adjustment $ 7,397,370
===========
</TABLE>
F-30
<PAGE> 1
EXHIBIT 4.6
INDENTURE OF TRUST
DATED AS OF FEBRUARY 1, 1999
BETWEEN
KELLSTROM INDUSTRIES, INC.
AND
NORWEST BANK MINNESOTA, N.A.
AS TRUSTEE
$6,670,000
KELLSTROM INDUSTRIES, INC.
TAXABLE VARIABLE RATE DEMAND NOTES,
SERIES 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION............................................................. 3
Section 1.01. Definitions........................................................................ 3
Section 1.02. Rules of Construction.............................................................. 9
ARTICLE II THE NOTES........................................................................................ 10
Section 2.01. Issuance of Notes; Form; Dating.................................................... 10
Section 2.02. Interest on the Notes.............................................................. 12
Section 2.03. Execution and Authentication....................................................... 13
Section 2.04. Note Register...................................................................... 14
Section 2.05. Registration and Exchange of Notes; Persons Treated as Owners; Book-Entry
System............................................................................. 14
Section 2.06. Mutilated, Lost, Stolen, Destroyed or Undelivered Notes............................ 17
Section 2.07. Cancellation of Notes.............................................................. 18
Section 2.08. Temporary Notes.................................................................... 18
ARTICLE III REDEMPTION, PURCHASE AND REMARKETING OF NOTES................................................... 19
Section 3.01. Redemption of Notes................................................................ 19
Section 3.02. Redemption Date.................................................................... 20
Section 3.03. Selection of Notes To Be Redeemed.................................................. 20
Section 3.04. Notice to Trustee; Notice of Redemption............................................ 21
Section 3.05. Payment of Notes Called for Redemption............................................. 22
Section 3.06. Notes Redeemed in Part............................................................. 22
Section 3.07. Purchase of Notes.................................................................. 22
Section 3.08. Remarketing of Purchased Notes..................................................... 24
ARTICLE IV PAYMENT OF NOTES AND CREATION OF FUNDS........................................................... 28
Section 4.01. Payment of Notes................................................................... 28
Section 4.02. Creation of Note Fund.............................................................. 28
Section 4.03. Payments Into Note Fund............................................................ 28
Section 4.04. Use of Moneys in Note Fund......................................................... 29
Section 4.05. Custody of Note Fund............................................................... 29
Section 4.06. Creation of Construction Fund...................................................... 29
Section 4.07. Deposits into Construction Fund; Cost of the Project............................... 29
Section 4.08. Payments from Construction Fund.................................................... 30
Section 4.09. Disposition of Balance in Construction Fund........................................ 32
Section 4.10. Trustee's Reliance on Bank......................................................... 32
Section 4.11. Moneys To Be Held in Trust......................................................... 32
Section 4.12. Payment to Borrower From Note Fund or Construction Fund............................ 33
Section 4.13. Investment of Moneys............................................................... 33
ARTICLE V LETTER OF CREDIT.................................................................................. 36
Section 5.01. Requirements for Letter of Credit.................................................. 36
Section 5.02. Draws on Letter of Credit; Extensions.............................................. 36
Section 5.03. Substitute Letter of Credit........................................................ 37
Section 5.04. Enforcement of the Letter of Credit................................................ 38
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI GENERAL COVENANTS, REPRESENTATIONS AND WARRANTIES................................................ 39
Section 6.01. Payment of Notes................................................................... 39
Section 6.02. Covenants, Representations and Warranties of Borrower.............................. 39
Section 6.03. Notice of Litigation............................................................... 40
Section 6.04. Financing and Continuation Statements.............................................. 40
Section 6.05. Further Assurances................................................................. 40
ARTICLE VII DISCHARGE OF INDENTURE.......................................................................... 41
Section 7.01. Notes Deemed Paid; Discharge of Indenture.......................................... 41
Section 7.02. Application of Trust Money......................................................... 42
ARTICLE VIII DEFAULTS AND REMEDIES.......................................................................... 43
Section 8.01. Events of Default.................................................................. 43
Section 8.02. Acceleration and Duty to Draw on Letter of Credit.................................. 43
Section 8.03. Disposition of Amounts Drawn on Letter of Credit;
Assignment of Rights to Contest.................................................... 44
Section 8.04. Other Remedies; Rights of Noteholders.............................................. 44
Section 8.05. Right of Noteholders to Direct Proceedings......................................... 45
Section 8.06. Application of Moneys.............................................................. 45
Section 8.07. Remedies Vested in Trustee......................................................... 47
Section 8.08. Limitations on Suits............................................................... 47
Section 8.09. Termination of Proceedings......................................................... 48
Section 8.10. Waivers of Events of Default....................................................... 48
Section 8.11. Notice of Defaults; Opportunity of Borrower to Cure Defaults....................... 48
Section 8.12. Unconditional Right to Receive Principal and Interest.............................. 49
Section 8.13. Notes Outstanding.................................................................. 49
Section 8.14. Letter of Credit Bank Deemed Owner................................................. 49
Section 8.15. Subrogation Rights of the Bank..................................................... 50
ARTICLE IX TRUSTEE, FISCAL AGENT, PLACEMENT AGENT AND REMARKETING AGENT .................................... 51
Section 9.01. Duties of Trustee.................................................................. 51
Section 9.02. Rights of Trustee.................................................................. 52
Section 9.03. Individual Rights of Trustee, Etc................................................. 53
Section 9.04. Trustee's Disclaimer............................................................... 53
Section 9.05. Notice of Defaults................................................................. 53
Section 9.06. Compensation and Indemnification of Trustee........................................ 54
Section 9.07. Eligibility of Trustee............................................................. 54
Section 9.08. Replacement of Trustee............................................................. 55
Section 9.09. Fiscal Agent....................................................................... 55
Section 9.10. Qualifications of Fiscal Agent; Resignation; Removal............................... 56
Section 9.11. Duties of Placement Agent.......................................................... 57
Section 9.12. [Reserved]......................................................................... 57
Section 9.13. Duties of Remarketing Agent........................................................ 57
Section 9.14. Eligibility of Remarketing Agent; Replacement...................................... 57
Section 9.15. Successor Trustee, Remarketing Agent or Fiscal Agent by Merger..................... 58
Section 9.16. Appointment of Co-Trustee.......................................................... 59
Section 9.17. Several Capacities................................................................. 59
ARTICLE X AMENDMENTS OF AND SUPPLEMENTS TO INDENTURE........................................................ 60
Section 10.01. Without Consent of Noteholders..................................................... 60
Section 10.02. With Consent of Noteholders........................................................ 61
Section 10.03. Effect of Consents................................................................. 61
Section 10.04. Notation on or Exchange of Notes................................................... 61
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Section 10.05. Signing by Trustee of Amendments and Supplements................................... 61
Section 10.06. Bank, Fiscal Agent and Remarketing Agent Consents Required......................... 62
Section 10.07. Notice to Noteholders.............................................................. 62
Section 10.08. Opinion of Counsel Required........................................................ 62
ARTICLE XI MISCELLANEOUS ................................................................................... 63
Section 11.01. Notices............................................................................ 63
Section 11.02. Noteholders' Consents.............................................................. 65
Section 11.03. Notices to Rating Agency........................................................... 65
Section 11.04. Limitation of Rights............................................................... 66
Section 11.05. Severability....................................................................... 66
Section 11.06. Payments Due on Non-Business Days.................................................. 66
Section 11.07. Governing Law...................................................................... 66
Section 11.08. Counterparts....................................................................... 66
Section 11.09. References to the Bank............................................................. 66
EXHIBIT A FORM OF NOTE
EXHIBIT B NOTICE OF MANDATORY PURCHASE
EXHIBIT C REQUEST FOR DISBURSEMENT AND CERTIFICATION
</TABLE>
-iii-
<PAGE> 5
INDENTURE OF TRUST
THIS INDENTURE OF TRUST dated as of February 1, 1999 between KELLSTROM
INDUSTRIES, INC., a Delaware corporation (the "Borrower"), and NORWEST BANK
MINNESOTA, N.A., a national banking association organized and existing under the
laws of the United States of America and having its principal office in
Minneapolis, Minnesota (the "Trustee"), as trustee and as Fiscal Agent
(hereinafter defined) for the Notes (hereinafter defined);
W I T N E S S E T H:
WHEREAS, the Borrower has determined to issue and sell its interest
bearing taxable variable rate demand notes in substantially the form of EXHIBIT
A attached hereto (individually, the "Note" and collectively, the "Notes") in
the aggregate principal amount of Six Million Six Hundred Seventy Thousand
Dollars ($6,670,000) and to use the proceeds from such issuance and sale (i) to
finance, in whole or in part, the cost of acquiring, constructing and equipping
a headquarters facility for the Borrower in Sunrise, Florida (the "Project"),
including reimbursing the Borrower for any of such costs paid by it prior to the
issuance of the Notes, and (ii) to pay the costs of issuance of the Notes and
other related costs;
WHEREAS, the payment when due of the principal of, interest on and
Purchase Price (hereinafter defined) of the Notes will be supported, to the
extent provided therein, by the Letter of Credit (hereinafter defined) issued in
favor of the Trustee by the Bank (hereinafter defined) in an initial stated
amount equal to the principal amount of Notes issued hereunder plus 35 days'
interest on such amount computed at the Maximum Rate (hereinafter defined), on
the basis of actual number of days elapsed in a year of 365 days, all pursuant
to and as more fully set forth in the Reimbursement Agreement (hereinafter
defined); and
WHEREAS, the Borrower has requested that the Trustee act (i) hereunder
for the benefit of the Noteholders (hereinafter defined) to perform certain
services in connection with the issuance, authentication and delivery of, the
registration, transfer and exchange of, and the payment of principal, interest
and purchase price with respect to the Notes issued hereunder and (ii) as the
beneficiary of the Letter of Credit for the benefit of the Noteholders, and the
Trustee is willing to accept such appointments and perform such services on the
terms and subject to the conditions set forth herein; and
WHEREAS, the Borrower has requested that NationsBank, N.A. act as its
agent hereunder to perform certain services in connection with the placement of
the Notes upon issuance thereof, and NationsBank, N.A. is willing to accept such
appointment and perform such services on the terms and subject to the conditions
set forth herein and in the Placement Agreement (hereinafter defined); and
WHEREAS, the Borrower has requested that NationsBank, N.A. act as its
agent hereunder to perform certain services in connection with the remarketing
of Notes tendered for purchase and the determination of the interest rates with
respect to the Notes, and NationsBank,
<PAGE> 6
N.A. is willing to accept such appointment and perform such services on the
terms and subject to the conditions set forth herein and in the Remarketing
Agreement (hereinafter defined); and
WHEREAS, the Borrower and the Trustee desire to set forth certain of
the terms and conditions with respect to the issuance of the Notes;
NOW, THEREFORE, KNOW ALL BY THESE PRESENTS, THIS INDENTURE WITNESSETH:
That the Borrower, in consideration of the premises and of the
acceptance by the Trustee of the trusts hereby created, and of the purchase and
acceptance of the Notes by the holders thereof, and of the sum of TEN DOLLARS
($10.00), lawful money of the United States of America, to it paid by the
Trustee, at or before the execution and delivery of these presents, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, in order to secure (i) the payment of the principal and
purchase price of, and the interest on, the Notes and all other amounts payable
by the Borrower pursuant to the terms of the Notes and/or this Indenture
according to their tenor and effect and to ensure the performance and observance
by the Borrower of all the agreements expressed or implied herein and in the
Notes, and (ii) the payment of all amounts due and owing the Bank under and
pursuant to the Reimbursement Agreement, has given, granted, assigned and
pledged and does by these presents give, grant, assign and pledge to the Trustee
and to its successors in the trusts hereby created, and to them and their
assigns forever:
GRANTING CLAUSE
To secure first, the payment of the Notes, and second, the payment and
performance of the Borrower's obligations to the Bank under the Reimbursement
Agreement, the Borrower (i) assigns and pledges to the Trustee and the Bank and
(ii) grants to the Trustee a first priority security interest in, and to the
Bank a second priority security interest in, all right, title and interest of
the Borrower in and to:
I.
This Indenture, including any right to delivery of the Letter of
Credit, any right to bring actions and proceedings under this Indenture or for
the enforcement of this Indenture and to do all things that the Borrower is
entitled to do under this Indenture; and
II.
All moneys and securities held from time to time by the Trustee under
this Indenture, first, for the equal and proportionate benefit of all holders of
the Notes without priority or distinction as to lien or otherwise of any Notes
over any other Notes, and second, for the benefit of the Bank to secure the
payment and performance of the Borrower's obligations to the Bank under the
Reimbursement Agreement, except as otherwise provided in this Indenture; and
-2-
<PAGE> 7
III.
Any and all real or personal property of every nature now and from time
to time hereafter by delivery or by writing of any kind conveyed, mortgaged,
pledged, assigned or transferred, as and for additional security hereunder by
the Borrower or by anyone on its behalf or with its written consent to the
Trustee which is hereby authorized to receive any and all such property at any
and all times and to hold and apply the same subject to the terms hereof (items
I, II and III being referred to collectively herein as the "Trust Estate").
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01. DEFINITIONS. For all purposes of this Indenture, unless
the context or use clearly indicates another or different meaning or intent, the
following terms shall have the following meanings:
"AUTHORIZED DENOMINATIONS" means, with respect to all Notes, $100,000
and any integral multiple of $5,000 in excess thereof.
"AVAILABLE MONEYS" means moneys which are (a) continuously on deposit
with the Trustee in trust for the benefit of the Noteholders in a separate and
segregated account in which only Available Moneys are held and which are (b)
proceeds of (i) the Notes received contemporaneously with and directly from the
issuance and sale of the Notes, (ii) payments made by the Borrower or any
Guarantor if at the time of the deposit of such payments and for a period of at
least 366 days thereafter no Bankruptcy Filing has occurred, (iii) a draw by the
Trustee on the Letter of Credit, or (iv) income derived from the investment of
the foregoing.
"BANK" means the issuer of the Letter of Credit, initially NationsBank,
N.A., and upon the issuance and delivery of a Substitute Letter of Credit, shall
mean the issuer of such Substitute Letter of Credit.
"BANK NOTES" means any Notes purchased with proceeds from a draw under
the Letter of Credit and held pursuant to the terms of the Reimbursement
Agreement and this Indenture. In addition, Notes that are registered in the name
of the Borrower and pledged to the Bank shall constitute Bank Notes.
"BANKRUPTCY COUNSEL" means any counsel nationally recognized in
bankruptcy matters which is independent of the Borrower and is reasonably
acceptable to the Bank and the Remarketing Agent.
"BANKRUPTCY FILING" means the filing of a petition by or against the
Borrower or any Guarantor as a debtor under the United States Bankruptcy Code or
similar bankruptcy or insolvency act. If the petition has been dismissed and the
dismissal is final and not subject to appeal at the relevant time, the filing
shall not be considered to have occurred.
-3-
<PAGE> 8
"BENEFICIAL OWNER" is defined in Section 2.05(c).
"BORROWER" means Kellstrom Industries, Inc., a Delaware corporation, or
any successor or successors to the Borrower's obligations under this Indenture.
"BORROWER NOTES" means any Notes (other than Bank Notes) of which the
Borrower, or any affiliate or subsidiary thereof, is the registered holder or
Beneficial Owner.
"BORROWER REPRESENTATIVE" means a person at the time designated to act
on behalf of the Borrower by a written instrument furnished to the Trustee and
the Fiscal Agent containing the specimen signature of such person and signed on
behalf of the Borrower by its President or any Vice President, or, in the case
of a Person other than a corporation, the person or persons having comparable
positions or roles. The certificate may designate an alternate or alternates.
"BUSINESS DAY" means any day other than (a) a Saturday or Sunday, (b) a
day on which commercial banks in New York, New York or the city or cities in
which the corporate trust office of the Trustee or the Fiscal Agent, the primary
office of the Remarketing Agent or the paying office of the Bank are located are
authorized or required by law or executive order to close, or (c) a day on which
the New York Stock Exchange or DTC is closed. For purposes of this definition,
"paying office of the Bank" means the Bank office responsible for making
payments under any Letter of Credit.
"CEDE & CO." means Cede & Co., the nominee of DTC or any successor
nominee of DTC with respect to the Notes.
"CONSTRUCTION FUND" means the fund by that name created by Section
4.06.
"COST OF THE PROJECT" means the costs of the Project, as described in
Section 4.07.
"DTC" means The Depository Trust Company, a limited purpose company
organized under the laws of the State of New York, and its successors and
assigns.
"DTC PARTICIPANT" or "DTC PARTICIPANTS" means securities brokers and
dealers, banks, trust companies and clearing corporations which have access, as
participants or otherwise (directly or indirectly) to the DTC system.
"EVENT OF DEFAULT" is defined in Section 8.01.
"FISCAL AGENT" means the agent appointed from time to time pursuant to
Section 9.09.
"GUARANTOR" means any guarantor of any of the payment obligations of
the Borrower under any of the Transaction Documents.
"INDENTURE" means this Indenture of Trust between the Borrower and the
Trustee, as amended or supplemented from time to time in accordance with its
terms.
-4-
<PAGE> 9
"INTEREST PAYMENT DATE" means the first day of each month.
"INVESTMENT SECURITIES" means those securities enumerated in Section
4.13 as permitted investments for the proceeds of the Notes.
"LAND" means the 11.75 acre parcel of real estate in Sunrise, Florida
on which the Project is located.
"LETTER OF CREDIT" means an irrevocable direct-pay letter of credit
having the characteristics of a "credit" or "letter of credit" set forth in
Section 5-103 of the Uniform Commercial Code of the State of Florida (or in the
case of a Substitute Letter of Credit, Section 5-103 of the Uniform Commercial
Code of the state under whose laws such Substitute Letter of Credit is governed)
except that a letter of credit (a) may not be revocable and (b) may only be
issued by (i) a national bank, (ii) any banking institution organized under the
laws of any state, territory or the District of Columbia, the business of which
is substantially confined to banking and is supervised by the state or
territorial banking commission or similar officials or (iii) a branch or agency
of a foreign bank, provided that the nature and extent of federal and/or state
regulation and the supervision of the particular branch or agency is
substantially equivalent to that applicable to federal or state chartered
domestic banks doing business in the same jurisdiction and which meets the
requirements of Section 5.01. Initially, the term "Letter of Credit" shall mean
the irrevocable, direct-pay letter of credit issued by the Bank to the Trustee
in accordance with Section 5.01, including any permitted supplements or
amendments thereto and any renewals or extensions thereof, and, upon the
expiration or termination of the Letter of Credit and the issuance and delivery
of a Substitute Letter of Credit meeting the requirements set forth in this
paragraph and in Section 5.01 hereof, "Letter of Credit" shall mean such
Substitute Letter of Credit.
"LETTER OF CREDIT DOCUMENTS" means the Reimbursement Agreement, the
Letter of Credit and all other documents evidencing, securing or otherwise
relating to the Obligations (including the mortgage evidencing the Bank's lien
on the Project and the guaranty of the Guarantors) collectively or individually,
as appropriate, each as amended, substituted, replaced, modified and extended
from time to time.
"MANDATORY REPURCHASE DATE" means, with respect to any Notes, the date
on which such Notes are required to be purchased pursuant to Section 3.07(a).
"MAXIMUM RATE" means the lesser of (a) the highest interest rate which
may be borne by the Notes under State law or (b) twelve percent (12%) per year.
"NOTE" or "NOTES" means the notes issued pursuant to this Indenture in
substantially the form of EXHIBIT A attached hereto.
"NOTE DOCUMENTS" means this Indenture, the Notes, the Placement
Agreement and the Remarketing Agreement, collectively or individually, as
appropriate, each as amended, modified and extended from time to time.
-5-
<PAGE> 10
"NOTE FUND" means the fund by that name created by Section 4.02.
"NOTICE OF MANDATORY REPURCHASE" means that notice required to be
prepared by the Trustee and given by the Fiscal Agent pursuant to Section 3.07,
the form of which is attached hereto as EXHIBIT B.
"OBLIGATIONS" means, at any time, the sum of (i) the maximum amount
which is, or at any time thereafter may become, available to be drawn under the
Letter of Credit, assuming compliance with all requirements for drawings
thereunder, PLUS (ii) the aggregate amount of all drawings under the Letter of
Credit honored by the Bank but not theretofore reimbursed, PLUS (iii) any
interest, fees or other obligations or amounts owing by the Borrower to the Bank
under the Reimbursement Agreement, the other Letter of Credit Documents, or the
other Transaction Documents.
"OPINION OF COUNSEL" means a written opinion of counsel who is
reasonably acceptable to the Trustee, the Remarketing Agent and the Bank. The
counsel may be an employee of or counsel to the Trustee, the Remarketing Agent
or the Borrower.
"OPTIONAL TENDER DATE" is defined in Section 3.07(b)(i).
"OUTSTANDING" when used with reference to Notes, or "Notes Outstanding"
means all Notes which have been authenticated and delivered by the Fiscal Agent
under this Indenture, except the following:
(a) Notes canceled or purchased by or delivered to the Fiscal
Agent for cancellation pursuant to the provisions of this Indenture.
Except as otherwise provided in Section 3.08, Notes purchased by the
Borrower pursuant to optional tender or mandatory repurchase under
Section 3.07 (including Bank Notes) shall continue to be Outstanding
until the holder of such Notes directs the Fiscal Agent to cancel them;
(b) Notes that have become due (at maturity or on redemption,
acceleration or otherwise) and for the payment, including interest
accrued to the due date, of which sufficient moneys are held by the
Fiscal Agent; and
(c) Notes in lieu of which others have been authenticated
under Section 2.05 (relating to registration and exchange of Notes) or
Section 2.06 (relating to mutilated, lost, stolen, destroyed or
undelivered Notes).
"OWNER", "OWNER", "NOTEHOLDER", "NOTEHOLDER", "HOLDER", "HOLDER" or
words of similar import mean: (a) in the event that the book-entry system of
evidence and transfer of ownership in the Notes is employed pursuant to Section
2.05(c), Cede & Co., as nominee for DTC, or its nominee, and (b) in all other
cases, the registered owner or owners of any Note fully registered as shown on
the register maintained by the Fiscal Agent.
"PERSON" means (a) any individual, (b) any corporation, partnership,
joint venture, association, joint-stock company, business trust or
unincorporated organization, limited liability
-6-
<PAGE> 11
company, or grouping of any such entities, in each case formed or organized
under the laws of the United States of America, any state thereof or the
District of Columbia or (c) the United States of America or any state thereof,
or any political subdivision of either thereof, or any agency, authority or
other instrumentality of any of the foregoing.
"PLACEMENT AGENT" means NationsBank, N.A., the placement agent under
the Placement Agreement with respect to the initial placement of the Notes.
"PLACEMENT AGREEMENT" means the Placement Agreement, dated as of
February 1, 1999, by and between the Borrower and the Placement Agent.
"PRIVATE PLACEMENT MEMORANDUM" means the Private Placement Memorandum
dated February 16, 1999 relating to the sale of the Notes by the Placement Agent
and the Remarketing Agent.
"PROJECT" means a headquarters facility for the Borrower located on the
Land.
"RATING AGENCY" means, if the Notes are rated, Moody's Investors
Service, Inc., if such agency's ratings are in effect with respect to the Notes,
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., if such
agency's ratings are in effect with respect to the Notes, and Fitch IBCA, Inc.
if such agency's ratings are in effect with respect to the Notes, and their
respective successors and assigns. If any such entity ceases to act as a
securities rating agency, the Borrower may, with the approval of the Remarketing
Agent and the Bank, appoint any nationally recognized securities rating agency
as a replacement.
"RECORD DATE" means the Fiscal Agent's close of business on the
Business Day next preceding each Interest Payment Date.
"REIMBURSEMENT AGREEMENT" means the agreement between the Borrower and
the Bank pursuant to which the Letter of Credit is issued by the Bank for the
account of the Borrower and delivered to the Trustee, and the Borrower
acknowledges its obligation to reimburse the Bank for payments made under the
Letter of Credit, and includes any and all modifications, alterations,
amendments and supplements thereto. Initially, the Reimbursement Agreement means
the Letter of Credit Reimbursement Agreement, dated as of February 1, 1999,
between the Borrower and the Bank.
"REMARKETING AGENT" means initially NationsBank, N.A., and any
successor agent or agents appointed from time to time pursuant to Section 9.14.
"REMARKETING AGREEMENT" means (a) initially the Remarketing and
Interest Services Agreement between the Remarketing Agent and the Borrower,
dated as of February 1, 1999, and any and all modifications, alterations,
amendments and supplements thereto and (b) any agreement between the Borrower
and any successor remarketing agent appointed pursuant to Section 9.14.
"REMARKETING PROCEEDS" is defined in Section 3.08(b).
-7-
<PAGE> 12
"REQUEST FOR DISBURSEMENT" means any requisition submitted in
accordance with Section 4.08 and substantially in the form of EXHIBIT C attached
hereto.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee, any
agent or officer within the Corporate Trust Department (or any successor group
of the Trustee) including any vice president, assistant vice president,
assistant secretary or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such agents or officers, respectively, or to whom any
corporate trust matter is referred at the Trustee's address set forth in Section
11.01 because of his knowledge of and familiarity with the particular subject.
"STATE" means the State of Florida.
"SUBSTITUTE LETTER OF CREDIT" is defined in Section 5.03.
"TRANSACTION DOCUMENTS" means, collectively, the Note Documents and the
Letter of Credit Documents.
"TRUSTEE" means the entity identified as such in the heading of this
Indenture and such entity's successors under this Indenture, and any separate or
co-trustee at the time serving as such under this Indenture.
"U.S. GOVERNMENT OBLIGATIONS" means (a) direct obligations of the
United States for which its full faith and credit are pledged for the full and
timely payment thereof, (b) obligations of a person controlled or supervised by
and acting as an agency or instrumentality of the United States, the payment of
which is unconditionally guaranteed as a full faith and credit obligation of the
United States for the full and timely payment thereof or (c) securities or
receipts evidencing ownership interests in obligations or specified portions
(such as principal or interest) of obligations described in (a) or (b).
"WEEKLY RATE" means with respect to the Notes the variable interest
rate on the Notes established weekly in accordance with Section 2.02.
"WEEKLY RATE PERIOD" means each period during which a Weekly Rate is in
effect.
Section 1.02. RULES OF CONSTRUCTION. Unless the context otherwise
requires,
(a) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles applied on a
consistent basis;
(b) references to Articles and Sections are to the Articles and
Sections of this Indenture;
(c) terms defined elsewhere in this Indenture shall have the meanings
ascribed to them therein;
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<PAGE> 13
(d) words of the masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders;
(e) headings used in this Indenture are for convenience of reference
only and shall not define or limit the provisions hereof;
(f) each reference herein or in the Notes to a percentage of Notes
required for notices, consents or for any other reason shall be deemed to refer
to Notes then Outstanding; and
(g) all references herein to time shall be Eastern Time unless
otherwise expressly stated.
[End of Article I]
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<PAGE> 14
ARTICLE II
THE NOTES
Section 2.01. ISSUANCE OF NOTES; FORM; DATING.
(a) AUTHORIZATION. The Borrower hereby authorizes and creates under
this Indenture an issue of Notes, to be designated "Kellstrom Industries, Inc.
Taxable Variable Rate Demand Notes, Series 1999." The total principal amount of
Notes that may be issued and outstanding hereunder shall be $6,670,000, except
as provided in Section 2.06 with respect to replacement of mutilated, lost,
stolen, destroyed or undelivered Notes. The Notes shall be issuable only as
fully registered notes without coupons in Authorized Denominations only, and in
substantially the form of EXHIBIT A to this Indenture, with appropriate
variations, omissions, insertions, notations, legends or endorsements required
by law or usage or permitted or required by this Indenture. The Notes may be in
printed or typewritten form. No Notes may be issued under the provisions of this
Indenture except in accordance with this Article.
(b) DETAILS OF NOTES. Each Note shall be dated the date of its original
authentication and delivery hereunder and all Notes shall mature, subject to
prior redemption, on February 1, 2029. Interest on the Notes shall be computed
from the Interest Payment Date next preceding the date of authentication
thereof, unless such authentication date (i) is prior to the first Interest
Payment Date following the initial delivery of the Notes, in which case interest
shall be computed from such initial delivery date, (ii) is after a Record Date
and before the subsequent Interest Payment Date, in which case interest shall be
computed from the subsequent Interest Payment Date, or (iii) is an Interest
Payment Date, in which case interest shall be computed from such authentication
date; provided, that if interest on the Notes is in default, Notes shall bear
interest from the last date to which interest has been paid. The principal of
and redemption or purchase price of the Notes shall be payable in lawful
currency of the United States of America at the principal corporate trust office
of the Fiscal Agent (except as otherwise provided in Section 2.05) upon
presentation and surrender of the Notes. Payments of interest on the Notes will
be mailed to the persons in whose names the Notes are registered on the register
of the Fiscal Agent at the close of business on the Record Date next preceding
each Interest Payment Date; provided that, any Holder of a Note or Notes in an
aggregate principal amount of not less than $500,000 may, by prior written
instructions filed with the Fiscal Agent not later than three (3) Business Days
prior to the Interest Payment Date (which instructions shall remain in effect
until revoked by subsequent written instructions), instruct that interest
payments for any period be made by wire transfer to an account in the
continental United States or other means acceptable to the Fiscal Agent. Notes
will be numbered from 1 upward as determined by the Fiscal Agent and will
contain the designation "R."
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<PAGE> 15
(c) ISSUANCE AND DELIVERY. Upon the execution and delivery of this
Indenture and receipt by the Trustee of the following items, the Fiscal Agent
shall authenticate and deliver Notes in an aggregate principal amount of
$6,670,000 in accordance with the authorization described in (iv) below:
(i) a copy, certified by the Secretary or the Assistant
Secretary of the Borrower, of the resolution of the Borrower
authorizing (a) the execution and delivery of the Transaction Documents
to which the Borrower is a party; (b) the execution, delivery and
issuance of the Notes in the aggregate principal amount of $6,670,000;
and (c) the use by the Placement Agent and the Remarketing Agent of the
Private Placement Memorandum in connection with the initial placement
and remarketing, respectively, of the Notes;
(ii) original executed counterparts of this Indenture, the
Reimbursement Agreement, the Placement Agreement and the Remarketing
Agreement;
(iii) the original, executed Letter of Credit from the Bank;
(iv) an authorization and request from the Borrower to the
Fiscal Agent to authenticate and deliver $6,670,000 in aggregate
principal amount of the Notes in specified Authorized Denominations to
the initial purchaser(s) or DTC or its nominee on behalf of such
purchaser(s) upon receipt by the Trustee on behalf of the Borrower of
the sum specified therein;
(v) one or more Opinions of Counsel to the Borrower, addressed
to the Trustee, the Fiscal Agent, the Bank, the Placement Agent and the
Remarketing Agent, stating among other things, that (A) the Borrower is
duly organized, validly existing and in good standing under the laws of
the state of its creation and is authorized to transact business in the
State, (B) the issuance of the Notes and the execution and delivery of
the other Transaction Documents to which the Borrower is a party have
been duly authorized by the Borrower, (C) the Notes and the other
Transaction Documents to which the Borrower is a party have been duly
executed and delivered by the Borrower, and (D) the Notes and the other
Transaction Documents to which the Borrower is a party are the valid,
legal and binding obligations of the Borrower enforceable in accordance
with their terms subject to customary equity and bankruptcy exceptions,
and otherwise in form and substance satisfactory to the Trustee, the
Fiscal Agent, the Bank, the Placement Agent and the Remarketing Agent;
(vi) an Opinion of Counsel to the Bank addressed to the
Trustee, the Fiscal Agent, the Borrower, the Placement Agent and the
Remarketing Agent, or upon which the Trustee, the Fiscal Agent, the
Borrower, the Placement Agent and the Remarketing Agent may rely,
stating, among other things, that the Letter of Credit has been duly
authorized, executed and delivered by the Bank, constitutes the valid
and binding obligation of the Bank and is enforceable in accordance
with its terms subject to customary equity and bankruptcy exceptions
and otherwise in form and substance satisfactory to the Trustee, the
Fiscal Agent, the Placement Agent and the Remarketing Agent;
(vii) an Opinion of Counsel to the Placement Agent and the
Remarketing Agent addressed to the Placement Agent, the Remarketing
Agent, the Bank, the Trustee, the Fiscal Agent and the Borrower,
stating, among other things, that (A) no registration of the
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<PAGE> 16
Notes is required under the Securities Act of 1933, as amended, and no
qualification of this Indenture is required under the Trust Indenture
Act of 1939, as amended, and (B) the Note Documents have been duly
authorized, executed and delivered by, and are the valid legal and
binding obligations of, the Placement Agent and the Remarketing Agent,
to the extent parties thereto, enforceable in accordance with their
terms subject to customary equity and bankruptcy exceptions and
otherwise in form and substance satisfactory to the Placement Agent,
the Remarketing Agent, the Bank, the Trustee, the Fiscal Agent and the
Borrower; and
(viii) such other documentation, certificates and assurances
as may be reasonably required by the Bank, the Trustee, the Fiscal
Agent, the Placement Agent or the Remarketing Agent or their respective
counsel.
(d) NOTE PROCEEDS. All proceeds from the sale of the Notes issued
hereunder (net of the placement fee and other costs of issuance payable by the
Borrower in connection therewith that may be retained by the Placement Agent
from the purchase price otherwise paid to the Trustee on behalf of the Borrower
to purchase the Notes on their date of issuance) shall be deposited in the
Construction Fund on their date of issuance.
Section 2.02. INTEREST ON THE NOTES. The Notes shall bear interest as
provided in Section 2.01(b) until paid in full. Interest accrued on the Notes
shall be paid on each Interest Payment Date, commencing on March 1, 1999. The
Notes shall bear interest at the rate determined by the Placement Agent on or
before their date of issuance as necessary to sell all of the Notes at par and
to apply from their date of issuance until and including the next succeeding
Wednesday and thereafter at the Weekly Rate determined by the Remarketing Agent
in the manner set forth below; provided that no Weekly Rate shall exceed the
Maximum Rate. The amount of interest payable on any Interest Payment Date (a)
shall be computed on the basis of the actual number of days elapsed over a year
of 365 or 366 days, whichever may be applicable, and (b) shall be the amount of
interest accrued thereon from the preceding Interest Payment Date (or such other
date as described in Section 2.01(b)) to, but excluding, the Interest Payment
Date on which interest is being paid.
During each Weekly Rate Period, the Notes shall bear interest at the
Weekly Rate, determined by the Remarketing Agent initially no later than the
first day of each Weekly Rate Period and thereafter no later than Wednesday (or
the next succeeding Business Day, if such Wednesday is not a Business Day) of
each week during such Weekly Rate Period. The Weekly Rate shall be the minimum
rate of interest which the Remarketing Agent determines, in its sole discretion
based upon market conditions, would be necessary to sell the Notes on such date
of determination in a secondary market sale at the principal amount thereof,
plus, if such sale would not be on an Interest Payment Date, accrued interest.
If the Remarketing Agent has not determined a Weekly Rate for any week,
the Weekly Rate shall be the same as the Weekly Rate for the immediately
preceding week. If for any reason, the Weekly Rate cannot otherwise be
determined for any week as hereinbefore provided, the Weekly Rate for such week
shall be a rate per annum equal to 100% of the rate published in the then most
recent edition of THE BOND BUYER for 30 day prime taxable commercial paper or,
if
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<PAGE> 17
THE BOND BUYER no longer publishes such information, such other publication or
provider of such information as the Remarketing Agent may select.
The first Weekly Rate determined for each Weekly Rate Period shall
apply to the period commencing on the first day of such Weekly Rate Period and
ending on the next succeeding Wednesday (or the next succeeding Business Day, if
such Wednesday is not a Business Day). Thereafter, each Weekly Rate shall apply
to the period commencing on Thursday (or if the date of determination is not a
Wednesday, on the next following Business Day) and ending on the next succeeding
date of determination.
Promptly following the determination of each Weekly Rate, the
Remarketing Agent shall give written notice, which may be delivered by telecopy,
to the Borrower, the Trustee and the Fiscal Agent. Upon the request of any
Noteholder, the Remarketing Agent shall notify any such Noteholder of each
change in the Weekly Rate by first class mail. The failure to give any such
notice shall not affect the change in the Weekly Rate.
The Remarketing Agent shall also notify the Trustee (who shall notify
the Fiscal Agent) and, upon request, the Borrower, in each case in writing
(which may be in telecopy form) or by telephone, promptly confirmed in writing,
by 4:00 p.m. on the last Wednesday of each month (or if such Wednesday is not a
Business Day, on the next succeeding Business Day) of the Weekly Rate set for
each week in such month, and principal amount of Notes bearing interest at the
Weekly Rate during each week.
Using the Weekly Rates supplied by the Remarketing Agent, the Fiscal
Agent shall calculate the amount of interest payable on the Notes and notify the
Trustee, the Borrower and the Bank of such amount and the Trustee will verify
such calculation.
The establishment of the Weekly Rates as provided in this Indenture
shall be conclusive and binding on the Borrower, the Bank, the Trustee, the
Fiscal Agent, the Remarketing Agent and the Noteholders, absent manifest error.
The calculation and verification of interest payable on the Notes as provided in
this Indenture shall be conclusive and binding on the Borrower, the Bank, the
Trustee, the Remarketing Agent, the Fiscal Agent and the Noteholders.
Section 2.03. EXECUTION AND AUTHENTICATION. The Notes shall be signed
on behalf of the Borrower with the manual or facsimile signature of the
President or any Vice President and attested by the manual or facsimile
signature of the Borrower's Secretary or Assistant Secretary, and the corporate
seal of the Borrower shall be impressed or imprinted on the Notes by facsimile
or otherwise. If any officer of the Borrower whose signature is on a Note no
longer holds that office at the time the Fiscal Agent authenticates the Note,
the Note shall nevertheless be valid. Also, if a person signing a Note is the
proper officer on the actual date of execution, the Note shall be valid even if
that person is not the proper officer on the nominal date of action.
A Note shall not be valid for any purpose under this Indenture unless
and until the Fiscal Agent manually signs the certificate of authentication on
the Note, and such signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
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<PAGE> 18
Section 2.04. NOTE REGISTER. The Fiscal Agent shall keep a register of
Notes and of their transfer and exchange. Notes not held under a book-entry
system must be presented at the principal corporate trust office of the Fiscal
Agent for registration, transfer and exchange, and Notes may be presented at
that office for payment. Notes not held under a book-entry system and optionally
tendered by their holders must be delivered as specified in Section 3.07(b).
Section 2.05. REGISTRATION AND EXCHANGE OF NOTES; PERSONS TREATED AS
OWNERS; BOOK-ENTRY SYSTEM.
(a) Notes may be transferred only on the register maintained by the
Fiscal Agent. Upon surrender for transfer of any Note to the Fiscal Agent, duly
endorsed for transfer or accompanied by an assignment duly executed by the
holder or the holder's attorney duly authorized in writing and in either case,
with an appropriate guarantee of signature conforming to the requirements of
EXHIBIT A hereto, the Fiscal Agent shall authenticate a new Note or Notes in an
equal aggregate principal amount and registered in the name of the transferee.
Notes may be exchanged for an equal aggregate principal amount of Notes
of different Authorized Denominations. The Fiscal Agent shall authenticate and
deliver Notes that the Noteholder making the exchange is entitled to receive,
bearing numbers not then Outstanding.
Except in connection with the optional tender of Notes pursuant to
Section 3.07(b) and the delivery thereof pursuant to Section 3.08, the Fiscal
Agent shall not be required to transfer or exchange any Note during the period
beginning 15 days before the mailing of notice calling the Note or any portion
of the Note for redemption and ending on the redemption date. Notes subject to
redemption or mandatory repurchase may be transferred or exchanged only if the
Fiscal Agent provides the new holder thereof with a copy of the notice of
redemption or mandatory repurchase, as the case may be.
The holder of a Note as shown on the register of the Fiscal Agent shall
be the absolute owner of the Note for all purposes, and payment of principal,
interest or purchase price shall be made only to or upon the written order of
such holder or the holder's legal representative; provided that interest shall
be paid to the Person shown on the register as a holder of a Note on the
applicable Record Date.
(b) The Fiscal Agent may require the payment by a Noteholder requesting
exchange or registration of transfer of any tax or other governmental charge
required to be paid in respect of the exchange or registration of transfer but
shall not impose any other charge.
(c) The Fiscal Agent or the Remarketing Agent may make appropriate
arrangements for the Notes to be issued or held by means of a book-entry system
administered by DTC with no physical distribution of Notes made to the public.
The Notes will initially be issued by means of a book-entry system administered
by DTC with no physical distribution of Notes made to the public. References in
this Section 2.05(c) to a Note or the Notes shall be construed to mean the Note
or the Notes which are held under the book-entry system. In such event, one Note
of each maturity shall be issued to DTC and immobilized in its custody. A
book-entry system shall be employed, evidencing ownership of the Notes in
Authorized Denominations, with transfers of
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<PAGE> 19
beneficial ownership effected on the records of DTC and the DTC Participants
pursuant to rules and procedures established by DTC.
Each DTC Participant shall be credited in the records of DTC with the
amount of such DTC Participant's interest in the Notes. Beneficial ownership
interests in the Notes may be purchased by or through DTC Participants. The
holders of these beneficial ownership interests are hereinafter referred to as
the "Beneficial Owners". The Beneficial Owners shall not receive Notes
representing their beneficial ownership interests. The ownership interests of
each Beneficial Owner shall be recorded through the records of the DTC
Participant from which such Beneficial Owner purchased its Notes. Transfers of
ownership interests in the Notes shall be accomplished by book entries made by
DTC and, in turn, by DTC Participants acting on behalf of Beneficial Owners.
SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE REGISTERED OWNER OF
THE NOTES, THE TRUSTEE AND THE FISCAL AGENT SHALL TREAT CEDE & CO. AS THE ONLY
HOLDER OF THE NOTES FOR ALL PURPOSES UNDER THIS INDENTURE, INCLUDING RECEIPT OF
ALL PRINCIPAL AND PURCHASE PRICE OF AND INTEREST ON THE NOTES, RECEIPT OF
NOTICES (EXCEPT AS SET FORTH IN SECTION 3.04), VOTING AND REQUESTING OR
DIRECTING THE TRUSTEE OR FISCAL AGENT TO TAKE OR NOT TO TAKE, OR CONSENTING TO,
CERTAIN ACTIONS UNDER THIS INDENTURE.
Payments of principal, interest and purchase price with respect to the
Notes, so long as DTC or its nominee, Cede & Co., is the only owner of the
Notes, shall be paid by the Fiscal Agent directly to DTC or its nominee, Cede &
Co. by wire transfer as provided in the Letter of Representations dated February
1, 1999, from the Borrower to DTC (the "Letter of Representations"). DTC shall
remit such payments to DTC Participants, and such payments thereafter shall be
paid by DTC Participants to the Beneficial Owners. The Borrower, the Fiscal
Agent, the Remarketing Agent and the Trustee shall not be responsible or liable
for payment by DTC or DTC Participants, for sending transaction statements or
for maintaining, supervising or reviewing records maintained by DTC or DTC
Participants.
In the event that (i) DTC determines not to continue to act as
securities depository for the Notes or (ii) the Borrower or the Remarketing
Agent determines that the continuation of the book-entry system of evidence and
transfer of ownership of the Notes would adversely affect their interests or the
interests of the Beneficial Owners of the Notes, the Borrower shall, at its own
discretion or at the request of the Remarketing Agent, discontinue the
book-entry system with DTC. If the Remarketing Agent fails to identify another
qualified securities depository to replace DTC, the Remarketing Agent shall
cause the Fiscal Agent to authenticate and deliver replacement Notes in the form
of fully registered Notes to each Beneficial Owner.
THE BORROWER, THE BANK, THE REMARKETING AGENT, THE FISCAL AGENT AND THE
TRUSTEE SHALL NOT HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO ANY DTC PARTICIPANT
OR ANY BENEFICIAL OWNER WITH RESPECT TO (I) THE NOTES; (II) THE ACCURACY OF ANY
RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (III) THE PAYMENT BY DTC OR
ANY DTC
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<PAGE> 20
PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE
PRINCIPAL OF AND INTEREST ON THE NOTES; (IV) THE DELIVERY OR TIMELINESS OF
DELIVERY BY DTC OR ANY DTC PARTICIPANT OF ANY NOTICE DUE TO ANY BENEFICIAL OWNER
WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THIS INDENTURE TO BE GIVEN TO
BENEFICIAL OWNERS; (V) THE SELECTION OF BENEFICIAL OWNERS TO RECEIVE PAYMENTS IN
THE EVENT OF ANY PARTIAL REDEMPTION OF THE NOTES; OR (VI) ANY CONSENT GIVEN OR
OTHER ACTION TAKEN BY DTC, OR ITS NOMINEE, CEDE & CO., AS OWNER.
(d) The Fiscal Agent or the Remarketing Agent shall not be limited to
utilizing a book-entry system maintained by DTC but may enter into a custody
agreement with any bank or trust company serving as custodian (which may be the
Fiscal Agent serving in the capacity of custodian) to provide for a book-entry
or similar method for the registration and registration of transfer of all or a
portion of the Notes.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE OF TRANSFER OF OWNERSHIP OF
ALL THE NOTES IS MAINTAINED IN ACCORDANCE HEREWITH, THE PROVISIONS OF THIS
INDENTURE RELATING TO THE DELIVERY OF PHYSICAL NOTE CERTIFICATES SHALL BE DEEMED
TO GIVE FULL EFFECT TO SUCH BOOK-ENTRY SYSTEM.
In the event the Notes are held under a book-entry system, the
securities depository shall provide the Trustee, upon request of the Trustee,
the names, addresses and principal amount of the holders of beneficial interests
in the Notes. In the event DTC only provides the Trustee with the names of the
DTC Participants, the Trustee shall use all reasonable efforts to obtain the
names, addresses and principal amount of the holders of beneficial interests in
the Notes from DTC or the DTC Participants. Subject to the provisions of Section
8.14 of this Indenture, such beneficial holders shall be treated in all respects
as the holders of the Notes for purposes of Article VIII of this Indenture, and
the Trustee shall send notices to such beneficial owners as required in Article
VIII of this Indenture.
Section 2.06. MUTILATED, LOST, STOLEN, DESTROYED OR UNDELIVERED NOTES.
(a) If any Note is mutilated, lost, stolen or destroyed, the Fiscal
Agent shall authenticate a new Note of the same denomination for any mutilated,
lost, stolen or destroyed Note if there shall first be delivered by the
Noteholder to the Fiscal Agent at its principal corporate trust office (i) in
the case of any mutilated Note, such mutilated Note, and (ii) in the case of any
lost, stolen or destroyed Note, evidence of such loss, theft or destruction
reasonably satisfactory to the Fiscal Agent, the Bank, the Trustee and the
Borrower, together with an indemnity from the Noteholder, reasonably
satisfactory to the Fiscal Agent. If the Note has matured and if the evidence
and indemnity described above have been provided by the Noteholder, instead of
issuing a duplicate Note, the Fiscal Agent, with the consent of the Borrower,
shall pay the Note without requiring surrender of the Note and make such
requirements as the Fiscal Agent deems fit for its protection, including a lost
instrument Note. The Fiscal Agent may charge the Noteholder its reasonable fees
and expenses in this connection.
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<PAGE> 21
(b) In the event that any Note purchased pursuant to an optional tender
or mandatory repurchase is not delivered by the holder thereof on the date such
Note is purchased, the Borrower shall execute (if necessary) and the Fiscal
Agent shall authenticate and deliver a new Note of like aggregate principal
amount as the Note purchased, which Note shall, for all purposes of this
Indenture, be deemed to evidence the same debt as the Note purchased and shall
be remarketed, delivered and registered in accordance with Section 3.08(d)
hereof.
If any Note is purchased by the Fiscal Agent with Available Moneys
provided by the Borrower and sufficient for such purchase, the Fiscal Agent,
upon request of the Borrower, shall authenticate a new Note in any Authorized
Denomination specified by the Borrower, registered as the Borrower may direct
and deliver it to the Borrower, or to its order, whether or not such Note is
ever delivered. If any Note is purchased with funds obtained by a drawing on the
Letter of Credit, the Fiscal Agent shall comply with the provisions of Section
3.08(d)(ii).
(c) Every new Note issued pursuant to this Section 2.06 shall (i)
constitute an additional contractual obligation of the Borrower regardless of
whether, in the case of (a) above, the mutilated, lost, stolen or destroyed
Note and, in the case of (b) above, the Note purchased shall be enforceable at
any time by anyone, and (ii) be entitled to all of the benefits of this
Indenture equally and proportionately with any and all other Notes issued and
Outstanding hereunder.
(d) All Notes shall be held and owned on the express condition that the
foregoing provisions of this Section 2.06 are exclusive with respect to the
replacement or payment of mutilated, lost, stolen or destroyed Notes and the
replacement of any Note purchased pursuant to an optional tender or mandatory
repurchase and, to the extent permitted by law, and shall preclude any and all
other rights and remedies with respect to the replacement or payment of
negotiable instruments or other investment securities without their surrender,
notwithstanding any law or statute to the contrary now existing or enacted
hereafter.
Section 2.07. CANCELLATION OF NOTES. All Notes paid, redeemed or
purchased, either at or before maturity, shall be delivered to the Fiscal Agent
when such payment, redemption or purchase is made, and except as otherwise
provided herein shall be canceled. Whenever a Note is delivered to the Fiscal
Agent for cancellation (upon payment, redemption, defeasance or otherwise), or
for transfer, exchange or replacement pursuant to Section 2.05 or 2.06, the
Fiscal Agent shall safeguard such Note for such period of time as may be
required by applicable governmental regulations and shall thereafter promptly
cancel the Note and supply evidence of such cancellation to any party so
requesting.
Section 2.08. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Borrower may execute and the Fiscal Agent shall authenticate
temporary Notes substantially in the form of the definitive Notes, with
appropriate variations. The Borrower shall, without unreasonable delay, prepare
and the Fiscal Agent shall authenticate definitive Notes in exchange for the
temporary Notes. Such exchange shall be made by the Fiscal Agent without charge
to the Noteholders. Temporary Notes shall not otherwise be eligible for transfer
or exchange under Section 2.05.
[End of Article II]
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<PAGE> 22
ARTICLE III
REDEMPTION, PURCHASE AND REMARKETING OF NOTES
Section 3.01. REDEMPTION OF NOTES.
(a) OPTIONAL REDEMPTION. The Notes may be redeemed by the Borrower in
whole on any Business Day, or in part on any Interest Payment Date, or if such
Interest Payment Date is not a Business Day, on the next succeeding Business
Day, at a redemption price equal to the principal thereof, plus accrued interest
to, but not including, the redemption date; provided that any such redemption in
part shall be in a minimum principal amount of $100,000 or a whole multiple of
$5,000 in excess thereof.
(b) MANDATORY SINKING FUND REDEMPTION. The Notes are not subject to
mandatory sinking fund redemption prior to maturity; provided, however, that
pursuant to the terms of the Reimbursement Agreement, the Bank may direct the
Borrower to exercise its right of optional redemption of the Notes in part from
time to time on the dates specified in the Reimbursement Agreement.
(c) MANDATORY REDEMPTION UPON DEMAND BY BANK. The Notes are subject to
mandatory redemption at a redemption price equal to the principal amount thereof
plus accrued interest to, but not including, the redemption date in whole or in
part, without premium, at the earliest date for which notice of redemption can
be given upon receipt by the Trustee of written notice from the Bank requesting
such redemption, specifying the principal amount of the Notes to be redeemed (if
less than all of the Notes Outstanding are to be redeemed) and stating that (i)
an "event of default" under and as defined in the Reimbursement Agreement has
occurred and is continuing, or (ii) it holds as the registered or beneficial
owner Notes purchased by the Bank in accordance with Section 3.07, 3.01(e) or
8.03(a) and not remarketed; provided, however, only Notes so held by the Bank
shall be subject to mandatory redemption pursuant to this subsection (ii).
(d) MANDATORY REDEMPTION ON EXPIRATION OR TERMINATION OF LETTER OF
CREDIT WITHOUT EXTENSION OR PROVIDING A SUBSTITUTE LETTER OF CREDIT. The Notes
are subject to mandatory redemption at a redemption price equal to the principal
amount thereof plus accrued interest to, but not including, the redemption date,
in whole, without premium, on the Interest Payment Date which next precedes by
at least fourteen (14) days the stated expiration or termination date of the
Letter of Credit or, if such Interest Payment Date is not a Business Day, on the
next succeeding Business Day, unless by the 20th day prior to such Interest
Payment Date the Borrower provides to the Trustee, and the Trustee has accepted,
(i) evidence that such Letter of Credit has been extended or (ii) a Substitute
Letter of Credit to be effective on or prior to such Interest Payment Date, in
which event a mandatory repurchase shall occur in accordance with the terms of
subsection 3.07(a)(i) hereof.
(e) PURCHASE IN LIEU OF REDEMPTION. When Notes are subject to
redemption pursuant to subsections (c) or (d) in this Section 3.01, Notes paid
by the Borrower or paid from a draw or claim under the Letter of Credit or
otherwise paid by or on behalf of the Bank shall be deemed to
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<PAGE> 23
have been purchased in lieu of redemption on the applicable redemption date at a
purchase price equal to the principal amount thereof, plus accrued interest
thereon to, but not including, the date of such purchase, if the Trustee has
received a written request on or before said purchase date from the Borrower or
the Bank, as the case may be, specifying that the moneys provided or to be
provided by such party shall be used to purchase Notes in lieu of redemption. No
purchase of Notes by the Borrower or the Bank pursuant to this Indenture or
advance or use of any moneys to effectuate any such purchase shall be deemed to
be a payment or redemption of the Notes or any portion thereof, and such
purchase shall not operate to extinguish or discharge the indebtedness evidenced
by such Notes. No Notes purchased pursuant to this subsection (e) shall be
required to be remarketed by the Remarketing Agent pursuant to Section 3.08,
unless the Remarketing Agent specifically agrees to undertake such remarketing.
Any purchase by the Borrower pursuant to this Section 3.01(e) must be made with
Available Moneys.
Section 3.02. REDEMPTION DATE. The redemption date of Notes to be
redeemed pursuant to any optional redemption provisions in Section 3.01(a) shall
be a date permitted by such clause and specified by the Borrower in the notice
delivered pursuant to Section 3.04. The redemption date for mandatory
redemptions shall be as specified in Section 3.01(c) or (d), as the case may be,
or determined by the Trustee consistently with the provisions thereof.
Section 3.03. SELECTION OF NOTES TO BE REDEEMED. If fewer than all the
Notes are to be redeemed, the Fiscal Agent shall select the Notes to be redeemed
from among the Outstanding Notes, as set forth below, by lot or such other
method as it deems in its sole discretion to be fair and appropriate, except
that Bank Notes will be selected for redemption prior to any other Notes. The
Fiscal Agent shall make the selection from Notes not previously called for
redemption. The Fiscal Agent shall treat each holder of Notes as the owner of
one Note for purposes of selection for redemption, and shall select Notes for
redemption by lot (a) from among the holders of less than $1,000,000 in
aggregate principal amount, provided that if there are no such holders, or if,
after selection from among such holders such selection has not resulted in
redemption of a sufficient amount of Notes, then (b) from among the holders of
$1,000,000 or more in aggregate principal amount of Notes. The Fiscal Agent
shall, on or before the day on which notice of redemption is mailed to the
holders, give telephonic notice to the Remarketing Agent of the Notes selected
for redemption and the name of the holder or holders thereof. No portion of a
Note may be redeemed that would result in a Note which is smaller than the
minimum Authorized Denomination. For this purpose, the Fiscal Agent shall
consider each Note in a denomination larger than the minimum Authorized
Denomination to be separate Notes each in the minimum Authorized Denomination.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. Notwithstanding the foregoing,
for so long as a book-entry system of evidence of transfer of ownership is in
effect with respect to all the Notes, any selection of Notes to be redeemed
shall be made in accordance with the securities depository's rules and
procedures as then in effect.
Notwithstanding anything to the contrary in this Indenture, there shall
be no redemption of less than all of the Notes if there has occurred and be
continuing an Event of Default.
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Section 3.04. NOTICE TO TRUSTEE; NOTICE OF REDEMPTION.
(a) If the Borrower wishes that any Notes be redeemed pursuant to any
optional redemption provisions in Sections 3.01(a) hereof, the Borrower shall
notify the Trustee, the Fiscal Agent, the Bank and the Remarketing Agent in
writing of the applicable provision, the redemption date, the principal amount
of Notes to be redeemed and other necessary particulars. The Borrower shall give
such notices at least 45 days before the redemption date.
(b) The Trustee shall prepare and the Fiscal Agent shall send notice of
each redemption to each Noteholder whose Notes are being redeemed, the Borrower,
the Remarketing Agent and the Bank by first-class mail at least 30 days but not
more than 60 days before each redemption, except for any mandatory redemption
pursuant to Section 3.01(d) in which case such notice shall be given at least 15
but not more than 19 days before such redemption and except as otherwise
provided in Section 3.08(a)(i). The notice shall identify the Notes or portions
thereof to be redeemed and shall state (i) the type of redemption and the
redemption date, (ii) the redemption price, (iii) that the Notes called for
redemption must be surrendered to collect the redemption price, (iv) the address
at which the Notes must be surrendered, (v) that if on the redemption date the
Note Fund contains moneys sufficient to pay the redemption price, interest on
the Notes called for redemption will cease to accrue on the redemption date,
(vi) the CUSIP number of the Notes and (vii) any condition to the redemption.
A copy of each notice of redemption shall also be sent by the Fiscal
Agent by certified or registered mail to each securities depository (each, a
"Depository") registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, two Business Days prior to mailing
notice to Noteholders and to two national information services which disseminate
redemption notices and to each registered owner of $1,000,000 or more of Notes
on the same date notices are mailed to other Noteholders, provided that the
Fiscal Agent may, in its discretion, provide for overnight, telecopied or other
form of notice to a Depository acceptable to or requested by such Depository.
Notwithstanding the foregoing, in the event that the Depository for the Notes is
DTC, the Trustee shall follow the procedure for redemption and notice as set
forth in DTC's operational arrangements, as in effect at the time.
With respect to any Notes to be redeemed which have not been presented
for redemption within 60 days after the redemption date, the Trustee, at the
expense of the Borrower, shall prepare and the Fiscal Agent shall give a second
notice of redemption to the holder of any such Notes which have not been
presented for redemption, by first-class mail, within 30 days after the end of
such 60 day period.
Failure by the Fiscal Agent to give any notice of redemption or any
defect in such notice as to any particular Notes shall not affect the validity
of the call for redemption of any Notes in respect of which no such failure or
defect has occurred. Any notice mailed as provided in this Indenture shall be
conclusively presumed to have been given whether or not actually received by any
holder.
Section 3.05. PAYMENT OF NOTES CALLED FOR REDEMPTION. On or before the
date fixed for redemption, the Trustee shall cause to be transferred from the
Note Fund to the Fiscal Agent
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pursuant to Section 4.01 moneys sufficient to pay the redemption price, together
with accrued interest to the redemption date of the Notes called for redemption.
Upon surrender to the Fiscal Agent, Notes called for redemption shall be paid as
provided in this Article at the redemption price provided for in this Article.
On the date fixed for redemption, notice having been given in the manner and
under the conditions hereinabove provided, the Notes or portions thereof called
for redemption shall be due and payable at the redemption price provided
therefor, plus accrued interest to, but not including, such date. On such
redemption date, if moneys sufficient to pay the redemption price of the Notes
to be redeemed, plus accrued interest thereon to, but not including, the date
fixed for redemption, are held by the Fiscal Agent, interest on the Notes called
for redemption shall cease to accrue; such Notes shall cease to be entitled to
any benefits or security under this Indenture or to be deemed Outstanding; and
the holders of such Notes shall have no rights in respect thereof except to
receive payment of the redemption price thereof, plus accrued interest to, but
not including, the date of redemption.
Section 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note redeemed
in part, the Fiscal Agent shall authenticate for the holder a new Note or Notes
in Authorized Denominations equal in aggregate principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. PURCHASE OF NOTES.
(a) MANDATORY REPURCHASE OF NOTES; NOTICE. Except as provided in
Section 3.07(e), Notes are subject to mandatory repurchase as follows:
(i) on the effective date of any Substitute Letter of Credit
delivered pursuant to Section 5.03, at a purchase price equal to 100%
of the principal amount thereof plus accrued and unpaid interest
thereon to but not including the date of purchase; and
(ii) on any Interest Payment Date selected by the Borrower in
a written notice to the Trustee delivered at least 30 days prior to
such date, or if such Interest Payment Date is not a Business Day, on
the next succeeding Business Day, at a purchase price equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon
to but not including the date of purchase; provided that any such
mandatory repurchase, except as provided in Section 9.14 hereof, shall
be subject to the prior written consent of the Bank.
The Trustee will prepare and the Fiscal Agent will send to the holders
of Notes subject to mandatory repurchase and to the Remarketing Agent, the Bank
and the Borrower a Notice of Mandatory Repurchase at least 15 days but not more
than 60 days before the Mandatory Repurchase Date. Any Notice of Mandatory
Repurchase will be given by first-class mail and will be substantially in the
form attached hereto as EXHIBIT B.
With respect to any Notes to be purchased which have not been presented
for purchase within 60 days after the Mandatory Repurchase Date, the Trustee, at
the expense of the Borrower, shall cause the Fiscal Agent to prepare and send a
second notice of purchase to the holder of any such Notes which have not been
presented for purchase, by first-class mail, within 30 days of the end of such
60 day period.
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(b) OPTIONAL TENDER OF NOTES.
(i) Except as provided in Section 3.07(e), the holder (or
while the Notes are held pursuant to a book-entry system, the
Beneficial Owner) of any Note (other than a Bank Note or Borrower Note)
may elect to tender such Note (or portion thereof, provided that each
of the portion to be purchased and the portion to be retained is in an
Authorized Denomination) for purchase at a purchase price equal to 100%
of the principal amount of such Note (or portion thereof), plus accrued
and unpaid interest thereon to but not including the date of purchase,
on any Business Day (the "Optional Tender Date"), but only upon (A)
receipt by the Remarketing Agent by not later than 11:00 a.m. at least
seven calendar days or five Business Days, whichever may be earlier,
but not more than 30 days, prior to such Optional Tender Date of
telephonic (followed, if requested by the Remarketing Agent, by written
or facsimile confirmation delivered to the Remarketing Agent no later
than the close of business on the next succeeding Business Day) or
other written notice from the holder (or while the Notes are held
pursuant to a book-entry system, the DTC Participant through whom such
Beneficial Owner holds such Note) stating (1) the principal amount of
the Note (or portion thereof) to be tendered, (2) the Note number or
other identification satisfactory to the Remarketing Agent, and (3) the
Optional Tender Date on which such Note will be tendered; and (B) if
the Notes are not being held under a book-entry system, delivery of
such Note (with an appropriate instrument of transfer duly executed in
blank) to the Fiscal Agent by 10:00 a.m. on such Optional Tender Date.
(ii) Any notice of optional tender for purchase delivered
pursuant to subpart (i) above shall be irrevocable and shall be binding
on the holder or Beneficial Owner giving or delivering such notice and
on any transferee of such holder or Beneficial Owner.
(iii) Upon receipt by the Remarketing Agent of a notice of
optional tender for purchase pursuant to subpart (i) above, the
Remarketing Agent shall give prompt telephonic notice thereof
including, in particular, notice of the information described in
subsections 3.07(b)(i) (1) and (3) above, to the Trustee and the Fiscal
Agent.
(c) PAYMENT FOR PURCHASED NOTES. To the extent that sufficient moneys
are available therefor by 1:45 p.m. on the Optional Tender Date or the Mandatory
Repurchase Date or other day on which Notes have been successfully remarketed,
as applicable (the "Purchase Date") pursuant to Sections 3.08 and 5.02, upon
surrender to the Fiscal Agent of Notes optionally tendered or called for
mandatory repurchase as provided herein, the purchase price therefor (as
provided in this Section) shall be paid in immediately available funds by the
Fiscal Agent or the Remarketing Agent not later than the close of business on
the Purchase Date. From and after the Purchase Date or, if later, the date on
which such moneys are made available to the Remarketing Agent or the Fiscal
Agent, as applicable, interest accruing on such Notes shall cease to be payable
to the prior holder thereof, such Notes shall cease to be entitled to the
benefits or security of this Indenture and to such extent the prior holder shall
have recourse solely to the funds held
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by the Trustee, the Fiscal Agent or the Remarketing Agent for the purchase of
such Notes as provided in Section 4.11.
(d) NOTES PURCHASED IN PART. Upon surrender of a Note purchased in part
and receipt by the Fiscal Agent thereof, the Fiscal Agent shall authenticate and
deliver to the surrendering holder a new Note or Notes in Authorized
Denominations equal in aggregate principal amount to the unpurchased portion of
the Note surrendered.
(e) LIMITATIONS ON TENDERS.
(i) The holders or Beneficial Owners shall not have the right
or be required, as the case may be, to tender any Note for purchase on
an Optional Tender Date or a Mandatory Repurchase Date (other than a
mandatory tender in lieu of redemption at the direction of the Bank
pursuant to Section 3.01(e) or a mandatory tender for purchase at the
direction of the Bank after acceleration of the Notes pursuant to
Section 8.03(a)) if on such date, following the occurrence of an Event
of Default, the Trustee has declared the principal of and interest on
the Notes to be immediately due and payable pursuant to Section 8.02.
(ii) Holders or Beneficial Owners of Notes called for
redemption or mandatory repurchase shall not have the right (without
the prior consent of the Remarketing Agent) to tender such Notes for
purchase on an Optional Tender Date if such Optional Tender Date will
occur on or after the 10th day prior to the date fixed for redemption
or mandatory repurchase. Notwithstanding the foregoing, holders or
Beneficial Owners of Notes called for redemption shall not have the
right in any event to tender such Notes for purchase on an Optional
Tender Date if such Optional Tender Date will occur on or after the
second day prior to the date fixed for redemption.
Section 3.08. REMARKETING OF PURCHASED NOTES.
(a) NOTES TO BE REMARKETED. Notes purchased pursuant to optional tender
or mandatory repurchase shall be remarketed by the Remarketing Agent as provided
in this Section except as follows:
(i) Notes purchased pursuant to an optional tender or a
mandatory repurchase and as to which the Remarketing Agent has received
a notice of redemption may be remarketed before the date fixed for
redemption only if the purchaser receives prior to purchasing such Note
a notice that such Note is subject to redemption on the date fixed for
redemption, notwithstanding the fact that such notice of redemption may
be sent to such purchaser after the time period mentioned in Section
3.04(b).
(ii) Borrower Notes shall only be remarketed at the direction
of the Borrower.
(iii) The Remarketing Agent shall not be required to offer
Notes for sale under this Section (A) during the continuance of an
Event of Default, or (B) as otherwise provided in the Remarketing
Agreement.
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(iv) Notes purchased pursuant to an optional tender and as to
which the Remarketing Agent has received a Notice of Mandatory
Repurchase may be remarketed before the Mandatory Repurchase Date only
if the purchaser receives a copy of the Notice of Mandatory Repurchase
prior to purchasing such Note.
(v) The Remarketing Agent shall not knowingly remarket any
Notes to the Borrower or any subsidiary or affiliate of the Borrower
pursuant to this Section 3.08 unless either (A) the entire purchase
price is paid from Available Moneys or (B) prior to such sale, the
Trustee and the Fiscal Agent receive a written opinion of Bankruptcy
Counsel to the effect that such purchase would not result in a
preferential payment pursuant to the provisions of Section 547 of the
Bankruptcy Code, 11 U.S.C. Section 101, ET SEQ.
(b) REMARKETING EFFORT. Except as provided in subsection (a) above or
except to the extent the Borrower directs the Remarketing Agent not to do so,
the Remarketing Agent shall (i) use reasonable best efforts to remarket on or
prior to any scheduled purchase date all Notes tendered or to be purchased
pursuant to Section 3.07 (a "Scheduled Purchase Date"), and (ii) to the extent
such Notes are not remarketed on the Scheduled Purchase Date, continue to use
reasonable best efforts to remarket such Notes, upon the terms and subject to
the conditions of the Remarketing Agreement, for purchase on a Business Day
after such Scheduled Purchase Date (an "Unscheduled Purchase Date").
As early as practicable but not later than 9:00 a.m. on each Scheduled
Purchase Date and each Unscheduled Purchase Date, the Remarketing Agent shall
notify the Fiscal Agent by telephone of (A) the amount of funds it has received
from the remarketing of such Notes (the "Remarketing Proceeds"), and (B) if the
Notes are not held pursuant to a book-entry system, the information to enable
the Fiscal Agent to prepare new Note certificates with respect to Notes which
were remarketed. If the Remarketing Agent has received Remarketing Proceeds with
respect to all of the Notes to be remarketed on a Scheduled Purchase Date, it
shall transfer such Remarketing Proceeds to the owners tendering such Notes for
purchase as provided in subsection (c) below. If the Remarketing Agent has not
received Remarketing Proceeds with respect to all of such Notes to be remarketed
on a Scheduled Purchase Date or has received Remarketing Proceeds with respect
to all or a portion of Notes remarketed on an Unscheduled Purchase Date, it
shall transfer to the Trustee for redelivery to the Fiscal Agent the Remarketing
Proceeds which the Remarketing Agent has received as provided in subsection (c)
below. The Fiscal Agent shall immediately notify the Trustee and promptly
thereafter notify the Borrower by telephone of the amount of such Remarketing
Proceeds and the Trustee shall, if required, take action as set forth in Section
5.02(a). If the Fiscal Agent fails to receive the notice described in the first
sentence of this paragraph from the Remarketing Agent by 9:00 a.m. on any
Scheduled Purchase Date, the Fiscal Agent shall contact the Remarketing Agent by
telephone to confirm the information required to be provided in such notice.
Upon such confirmation by the Fiscal Agent, the Fiscal Agent shall notify the
Trustee in the manner set forth above, and the Trustee shall, if required, take
action as set forth in Section 5.02(a).
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(c) REMARKETING PROCEEDS. If the Remarketing Agent has received from
the purchasers thereof Remarketing Proceeds for the remarketing of all Notes to
be remarketed on a Scheduled Purchase Date, the Remarketing Agent shall promptly
forward such Remarketing Proceeds by wire transfer (or in such other manner as
is acceptable to the Remarketing Agent) to the owners tendering such Notes for
purchase. Except as otherwise provided below with respect to Bank Notes, until
such transfer, all such Remarketing Proceeds shall be deposited in a separate,
segregated account of the Remarketing Agent for application in accordance with
the provisions of this Section 3.08, and until so applied shall be held
uninvested in trust for the benefit of the holders tendering such Notes for
purchase.
If the Remarketing Agent has not received Remarketing Proceeds with
respect to all of the Notes to be remarketed on a Scheduled Purchase Date or has
received Remarketing Proceeds from the remarketing of all or a portion of the
Notes to be remarketed on an Unscheduled Purchase Date, the Remarketing Agent
will promptly forward all of the Remarketing Proceeds which it has received, if
any, by wire transfer (or in such other manner as is acceptable to the
Remarketing Agent and the Trustee) to the Trustee for delivery to the Fiscal
Agent for payment to the owners tendering such Notes for purchase or for payment
to the Bank in the case of Bank Notes. Except as otherwise provided below with
respect to Bank Notes, upon receipt by the Trustee and the Fiscal Agent, all
such Remarketing Proceeds shall be deposited in a separate, segregated account
of the Note Fund for application in accordance with the provisions of this
Section 3.08 and Article IV hereof and, until so applied, shall be held in trust
for the benefit of the owners tendering such Notes for purchase.
(d) DELIVERY OF PURCHASED NOTES. Notes purchased pursuant to Section
3.07 shall be delivered as follows:
(i) Notes (other than Bank Notes) purchased with Remarketing
Proceeds shall be delivered to the purchasers thereof upon receipt of
payment therefor. Prior to such delivery, the Fiscal Agent shall
provide for registration of transfer to the Holders, as provided in a
written notice from the Remarketing Agent; and
(ii) All Bank Notes shall be registered in the name of the
Borrower, subject to a pledge to the Bank and shall be held by the
Fiscal Agent pursuant to the Reimbursement Agreement. Upon receipt of
Remarketing Proceeds in respect of the sale of Bank Notes, the Fiscal
Agent shall notify the Bank and the Borrower of such receipt. Upon
receipt of notice by the Fiscal Agent from the Bank by telephone,
telecopy or telex, promptly confirmed in writing, that the Notes have
ceased to be Bank Notes and that the amount of the Letter of Credit has
been reinstated as provided therein, the Fiscal Agent shall remit the
Remarketing Proceeds as directed by the Bank and release the Bank Notes
and deliver them to the purchasers thereof in accordance with Section
(d)(i) above. The Fiscal Agent shall hold such Remarketing Proceeds in
a segregated account in trust for the benefit of the Bank except that
if the Letter of Credit is not reinstated as provided in the Letter of
Credit, then the Fiscal Agent shall hold such funds for the benefit of,
and return them as soon as possible to, the Persons who provided such
Remarketing Proceeds as specified in a notice from the Remarketing
Agent to the Fiscal Agent.
[End of Article III]
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ARTICLE IV
PAYMENT OF NOTES AND CREATION OF FUNDS
Section 4.01. PAYMENT OF NOTES. The Trustee shall direct the Fiscal
Agent to make payments when due of principal of and interest on the Notes, and
the Fiscal Agent or the Remarketing Agent, as applicable, shall make payments of
the purchase price of Notes purchased pursuant to an optional tender or a
mandatory repurchase:
(a) FIRST, (but only with respect to payments of purchase price) from
Remarketing Proceeds under Section 3.08, excluding any remarketing to the
Borrower, any subsidiary or affiliate thereof or any Guarantor;
(b) SECOND, from moneys drawn by the Trustee under the Letter of Credit
and deposited in the Note Fund;
(c) THIRD, from any moneys which constitute Available Moneys in the
Construction Fund directed to be paid into the Note Fund in accordance with the
provisions of Section 4.09;
(d) FOURTH, from any other Available Moneys held by the Trustee in the
Note Fund; and
(e) LAST, from any other moneys available to the Fiscal Agent or the
Trustee.
Notwithstanding the foregoing, however, payments of purchase price of,
principal of, and interest on Borrower Notes and Bank Notes shall be paid only
from the first and last categories of moneys. The proceeds of investments of any
moneys in any of these categories may be used to the same extent as the moneys
invested could be used.
Section 4.02. CREATION OF NOTE FUND. There is hereby created by the
Borrower and ordered established with the Trustee a trust fund to be designated
"Kellstrom Industries, Inc. Taxable Variable Rate Demand Notes, Series 1999 Note
Fund". The money and securities in the Note Fund shall be held in trust by the
Trustee and applied as herein provided and, until such application, the money
and securities in such fund shall be subject to a first priority lien and charge
in favor of the Noteholders, and a second priority lien and charge in favor of
the Bank, each as described in the Granting Clauses hereto.
Section 4.03. PAYMENTS INTO NOTE FUND. Subject to the provisions of
Section 5.02(b), there shall be deposited into the Note Fund, as and when
received, (a) all proceeds of drawings under the Letter of Credit received by
the Trustee and (b) all other moneys received by the Trustee from the Borrower
hereunder which are required, or which are accompanied by directions that such
moneys are, to be paid into the Note Fund, including, without limitation, moneys
transferred to the Note Fund pursuant to Sections 3.08(c), 4.08 and 4.09. No
other funds (other than investment proceeds from moneys deposited therein) shall
be deposited or commingled with the Note Fund. To the extent that moneys
described above would not constitute Available Moneys at the time of such
deposit, the Trustee shall create
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separate subaccounts in the Note Fund in which moneys described above shall be
held until such moneys constitute Available Moneys. The Trustee shall create a
separate subaccount in the Note Fund for and shall not commingle moneys
described in Section 4.01(b) with any other moneys hereunder. The Trustee shall
create a separate subaccount in the Note Fund for and shall not commingle moneys
described in Section 4.01(c) with any other moneys hereunder.
Section 4.04. USE OF MONEYS IN NOTE FUND. Moneys in the Note Fund shall
be used solely for the payment of the principal of and interest on the Notes as
the same become due and payable whether at maturity, upon redemption or
otherwise and for the purchase price of the Notes as the same shall become due,
and the Trustee shall transfer to the Fiscal Agent sufficient funds therefrom to
accomplish such payment in accordance with the provisions of the Notes and this
Indenture; provided, however, that to the extent such principal, interest or
purchase price is paid with proceeds of a drawing under the Letter of Credit and
the Borrower does not reimburse the Bank directly, the Trustee shall promptly
reimburse the Bank from funds on deposit in the Note Fund (other than
Remarketing Proceeds derived from the sale of any Notes that are not Bank Notes
or proceeds from a drawing on the Letter of Credit required to pay principal,
interest or purchase price of the Notes) in accordance with written instructions
given from time to time to the Trustee by the Bank.
Section 4.05. CUSTODY OF NOTE FUND. The Note Fund shall be held in the
custody of the Trustee but in the name of the Borrower. The Borrower hereby
authorizes and directs (a) the Trustee to withdraw sufficient funds from the
Note Fund to pay the principal of, interest on and the purchase price of the
Notes as the same become due and payable, and to withdraw from the Note Fund
funds sufficient to pay any other amounts payable therefrom as the same become
due and payable, and (b) the Fiscal Agent to use such funds transferred to it to
make such payments, which authorization and direction the Trustee and the Fiscal
Agent hereby accept; provided, however, that to the extent such principal,
interest or purchase price is paid with proceeds of a drawing under the Letter
of Credit and the Borrower does not reimburse the Bank directly, the Trustee
shall promptly reimburse the Bank from funds on deposit in the Note Fund other
than (i) Remarketing Proceeds to be paid to former holders derived from the sale
of any Notes that are not Bank Notes, or (ii) proceeds from a drawing on the
Letter of Credit required to pay principal, interest or purchase price of the
Notes, in accordance with written instructions given from time to time to the
Trustee by the Bank.
Section 4.06. CREATION OF CONSTRUCTION FUND. There is hereby created by
the Borrower and ordered established with the Trustee a trust fund to be
designated "Kellstrom Industries, Inc. Taxable Variable Rate Demand Revenue
Notes, Series 1999 Construction Fund". The money and securities in the
Construction Fund shall be held in trust by the Trustee and applied as provided
herein and, until such application, the money and securities in such fund shall
be subject to a first priority lien and charge in favor of the Noteholders and a
second priority lien and charge in favor of the Bank, each as described in the
Granting Clauses hereto.
Section 4.07. DEPOSITS INTO CONSTRUCTION FUND; COST OF THE PROJECT. All
proceeds from the sale of the Notes (net of any placement fee and other costs of
issuance specified by the Borrower in the authorization and request delivered to
the Fiscal Agent pursuant to Section 2.01(c)(iv)) shall be deposited into the
Construction Fund to be applied by the Trustee
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and the Borrower in the manner hereinafter provided for payment of the Cost of
the Project. The Cost of the Project shall include the following:
(a) The cost of the Land and the sitework related to the Land;
(b) The cost of labor, materials, machinery and equipment as payable to
contractors, builders and materialmen in connection with the construction and
equipping of the Project;
(c) Governmental charges levied or assessed during construction on the
Project, or on any property acquired therefor, and premiums on insurance in
connection with the Project during construction;
(d) Expenses necessary or incident to determining the feasibility or
practicability of completing the Project, the fees and expenses of appraisers,
architects, engineers and management consultants for making studies, surveys and
estimates of costs and of revenues and other estimates, and fees and expenses of
architects and engineers for preparation of plans, drawings and specifications
and supervision of construction, as well as for the performance of all other
duties of architects and engineers in relation to the construction of the
Project or the issuance of the Notes;
(e) Expenses of administration, management, supervision, operation and
inspection properly chargeable to the Project, legal expenses and fees of the
Borrower in connection with the Project and the issuance and sale of the Notes,
legal expenses and fees, fees and expenses of the Trustee and the Fiscal Agent,
Letter of Credit fees, fees and expenses of the Placement Agent and the
Remarketing Agent in arranging for the placement and remarketing of the Notes,
management fees, interest expense and financing charges, cost of audits, cost of
preparing, issuing and selling the Notes, abstracts and reports on titles to
real estate, title insurance premiums, recording fees and taxes, and all other
items of expense, including those of the Borrower, not elsewhere specified in
this section incident to the acquisition, construction and equipping of the
Project;
(f) Any other cost relating to the acquisition, construction and
equipping of the Project approved by the Bank;
(g) Reimbursement to the Borrower for any costs described above paid by
it, whether before or after the execution of this Indenture; and
(h) Reimbursement to the Bank for amounts drawn on the Letter of Credit
to pay interest on the Notes during construction of the Project.
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Section 4.08. PAYMENTS FROM CONSTRUCTION FUND. Except as provided in
Section 4.09, the Trustee shall use moneys in the Construction Fund solely to
pay the Cost of the Project. Disbursements from the Construction Fund shall be
made not more frequently than once each calendar month. Before each payment
shall be made from the Construction Fund, there shall be filed with the Trustee:
(a) A Request for Disbursement, signed by a Borrower Representative and
approved by the Bank, stating:
(i) the name of the Person to whom the payment is due;
(ii) the amount to be paid;
(iii) the purpose in reasonable detail for which the
obligation to be paid was incurred; and
(iv) the proposed date upon which such disbursement is to be
made.
(b) A certificate attached to the Request for Disbursement, signed by a
Borrower Representative, stating that:
(i) there has been received no notice (A) of any lien, right
to lien or attachment upon, or claim affecting the right to receive
payment of, any of the moneys payable under such Request for
Disbursement to any of the persons, firms or corporations named
therein, and (B) that any materials, supplies or equipment covered by
such Request for Disbursement are subject to any lien, attachment,
claim or security interest, or if any notice of any such lien,
attachment, claim or security interest has been received, such lien,
attachment, claim or security interest has been released or discharged
or will be released or discharged upon payment of the Request for
Disbursement;
(ii) such Request for Disbursement contains no items
representing payment on account of any percentage entitled to be
retained at the date of the certificate;
(iii) the obligation stated on the Request for Disbursement
has been incurred in or about the issuance of the Notes or the
acquisition, construction or equipping of the Project, each item is a
proper charge against the Construction Fund and the obligation has not
been the basis for a prior Request for Disbursement that has been paid;
and
(iv) as of the date of such certificate no event or condition
has happened or existed or is happening or exists that constitutes, or
that with notice or lapse of time or both, would constitute, an Event
of Default, or if such an event or condition has happened or existed,
or is happening or exists, specifying the nature and period of such
event or condition and what action the Borrower has taken, is taking or
proposes to take with respect thereto.
(c) An invoice, bill or other appropriate evidence of the obligation
described in the Request for Disbursement.
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The Trustee may transfer moneys from the Construction Fund to the Note
Fund or to the Bank and apply such moneys to pay Letter of Credit fees or to
reimburse the Bank for amounts drawn under the Letter of Credit to pay interest
on the Notes during construction of the Project, when due, without the need for
submission of a Request for Disbursement or other documents.
Upon receipt of the above, the Trustee shall within three Business Days
make payment from the Construction Fund in accordance with such Request for
Disbursement; provided, however, that if such certificate states that any Event
of Default exists, the Borrower shall not be entitled to request or receive any
further disbursements until such time as the deficiency has been cured to the
satisfaction of the Bank. All such payments shall be made by check or draft
payable either (i) directly to the Person to be paid, (ii) to both the Borrower
and such Person or (iii) upon receipt of evidence that the Borrower has
previously paid such amount, to the Borrower.
Anything to the contrary herein notwithstanding, the Trustee may pay
Requests for Disbursements executed only by the Bank (so long as it has not
failed to honor a validly drawn draft under the Letter of Credit) if the Bank
certifies to the Trustee that the Bank alone is entitled to direct the
disbursement of moneys in the Construction Fund due to a default by the Borrower
under, or the occurrence of other circumstances provided for in, the Letter of
Credit Documents.
Section 4.09. DISPOSITION OF BALANCE IN CONSTRUCTION FUND. When the
Project is completed and all Costs of the Project have been paid, a certificate
of the Borrower to that effect signed by a Borrower Representative shall be
delivered to the Trustee. Any amounts thereafter remaining in the Construction
Fund shall be held in the Construction Fund as collateral for the payment of the
Notes. Such remaining amounts may be transferred from the Construction Fund (i)
to the Note Fund at the direction of the Borrower to be used to effect the
optional redemption of Notes to the maximum extent possible or (ii) to or
otherwise on behalf of the Borrower upon the instructions of the Bank to be used
by the Borrower only for such purposes as permitted by the Bank.
Section 4.10. TRUSTEE'S RELIANCE ON BANK. So long as no Event of
Default under Section 8.01(a) or (b) has occurred and is continuing, the Trustee
may conclusively rely on directions from the Bank in approving or disapproving
any Request for Disbursement submitted hereunder, and may waive any requirement
of this Article pertaining to the Construction Fund and moneys therein at the
direction of the Bank. Any approval, disapproval or waiver by the Trustee, based
upon such directions, shall be no basis for and shall give no rise to any
liability to the Borrower, the Noteholders or any other Person on the part of
the Trustee.
Section 4.11. MONEYS TO BE HELD IN TRUST. All money that the Trustee
has withdrawn from the Note Fund or has received from any other source and set
aside or transferred to the Fiscal Agent for the purpose of paying any of the
Notes, either at the maturity thereof or by purchase (other than as provided in
Section 3.08) or call for redemption or for the purpose of paying any interest
on the Notes, shall be held in trust for the respective Holders. Moneys received
by the Remarketing Agent, the Fiscal Agent or the Trustee from the sale of a
Note under Section 3.08 or from the purchase of any Note shall be held
segregated from other funds held by the Remarketing Agent, the Fiscal Agent or
the Trustee in trust for the benefit of the Person from
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whom such Note was purchased and shall not be invested while so held. Any moneys
deposited with the Trustee, the Fiscal Agent or the Remarketing Agent pursuant
to the terms of this Indenture for the payment of principal or purchase price of
Notes, or the payment of interest on Notes, that remains unclaimed by the
Holders of the Notes on the date fixed for the payment, redemption or purchase
of such Notes, shall be transferred to the appropriate governmental authorities
of the states upon the expiration of the escheat period in accordance with the
escheat laws applicable to each of the Holders of the Notes, and upon such
transfer, the Trustee, the Fiscal Agent and the Remarketing Agent shall have no
responsibility with respect to such money.
Section 4.12. PAYMENT TO BORROWER FROM NOTE FUND OR CONSTRUCTION FUND.
Any amounts remaining in the Note Fund or Construction Fund after payment in
full of the principal of and interest on the Outstanding Notes, the fees,
charges and expenses of the Trustee, the Fiscal Agent, the Remarketing Agent and
the Bank (including without limitation the fees and expenses of their respective
counsel) and all other amounts required to be paid hereunder and under the
Letter of Credit Documents shall be paid promptly to the Borrower; provided the
Trustee has received written confirmation from each of the Remarketing Agent and
the Bank that all of their fees, charges and expenses have been paid in full.
Section 4.13. INVESTMENT OF MONEYS. To the extent permitted by law and
except as otherwise provided herein, the Trustee or the Fiscal Agent, as the
case may be, shall invest and reinvest moneys held by it representing proceeds
of drawings under the Letter of Credit and moneys on deposit in the Note Fund as
directed in writing by a Borrower Representative containing the written consent
of the Bank only in U. S. Government Obligations (or in a mutual fund composed
solely of U. S. Government Obligations which at the time of any such investment
has a securities rating from each Rating Agency equal to or higher than the then
current rating on the Notes), maturing at such times as such amounts shall be
needed for the purposes thereof. Unclaimed moneys held by the Trustee, the
Fiscal Agent or the Remarketing Agent under Section 4.11 shall be held
uninvested by the Trustee, the Fiscal Agent or the Remarketing Agent, as the
case may be.
Moneys held by the Trustee in the Construction Fund shall be invested
and reinvested by the Trustee in any of the following on which neither the
Borrower nor any of its subsidiaries or affiliates nor any Guarantor is the
obligor, as directed in writing by a Borrower Representative containing the
written consent of the Bank:
(i) U. S. Government Obligations;
(ii) obligations of the Federal Intermediate Credit Banks,
Federal Home Loan Banks, National Bank for Cooperatives, Federal Land
Banks, The Governmental National Mortgage Association or The Federal
National Mortgage Association;
(iii) certificates of deposit of banks or trust companies
(including the Trustee and the Bank) organized under the laws of the
United States or any state thereof, but only if such bank or trust
company has a minimum combined capital and surplus not less than
$20,000,000;
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(iv) commercial paper or finance company paper which is rated
not less than P-1, A-1 or F-1, or their equivalent, by a Rating Agency;
(v) any repurchase agreement secured by any one or more of the
securities described in (i) through (iv), inclusive, above;
(vi) obligations issued by any state of the United States, any
territory of the United States or any political subdivision of either,
the interest on which is excludable from the gross income of the owner
thereof for federal income tax purposes, and which obligations are
rated by a Rating Agency (A) in either of its two highest long-term
debt categories, or (B) not less than either P-1, A-1, or F-1 or their
equivalent;
(vii) banker's acceptances, Eurodollar deposits, certificates
of deposit or interest accruing demand deposits of banks or trust
companies (including the Trustee and the Bank) organized under the laws
of the United States or Canada or any state or province thereof, or
domestic branches of foreign banks, having a capital and surplus of
$25,000,000 or more;
(viii) any money market fund or mutual fund (including any
such fund for which the Trustee in its individual capacity, the Bank or
any of their affiliates is investment manager or advisor) investing in
obligations described in clauses (i) through (vii), inclusive, above;
(ix) an investment agreement with a financial institution
which has a bond rating of not less than "A" or its equivalent, by a
Rating Agency, with the proceeds of the Notes invested therein
collateralized by securities of such type and maturities acceptable to
the Bank; and
(x) any other investment permitted by the Bank.
To the extent that the Trustee or the Fiscal Agent, as the case may be,
has not received written directions from the Borrower regarding investment of
moneys, the Trustee or the Fiscal Agent, as the case may be, shall, until such
directions are received, invest such moneys pursuant to standing written
instructions of the Borrower that have been approved by the Bank and are
delivered to the Trustee or the Fiscal Agent, as the case may be, by the
Borrower upon the original issuance of the Notes, as such instructions may be
amended from time to time by the Borrower with the consent of the Bank.
The Trustee or the Fiscal Agent, as applicable, may purchase or sell
investments permitted by this Article through itself or any subsidiary or
affiliate as principal or agent. Investments will be made so as to mature or be
subject to redemption at the option of the holder on or before the date or dates
that the Trustee or the Fiscal Agent, as applicable, or the Borrower, as
appropriate, anticipates that moneys from the investments will be required.
Investments shall be registered in the name of the Trustee or the Fiscal Agent,
as applicable, or its nominee and held by or under the control of the Trustee or
the Fiscal Agent, as applicable. The Trustee or the Fiscal Agent, as applicable,
shall sell and reduce to cash a sufficient amount of investments whenever the
cash held by the Trustee or the Fiscal Agent, as applicable, is insufficient for
its purposes, regardless of the loss on liquidation.
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<PAGE> 37
All such investments shall be held by or under the control of the
Trustee or the Fiscal Agent, as applicable, and while so held shall be deemed a
part of the particular fund in which held. The interest accruing thereon and any
profit realized from such investments shall be credited to such fund, and any
loss resulting from such investments shall be charged to such fund. The Trustee
and the Fiscal Agent shall not be responsible for any losses on investments made
in accordance with this section or the tax consequences thereof.
[End of Article IV]
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ARTICLE V
LETTER OF CREDIT
Section 5.01. REQUIREMENTS FOR LETTER OF CREDIT. In order to support
its obligations to make payments under the Notes, the Borrower hereby agrees (a)
upon the initial authentication and delivery of the Notes, to deliver to the
Trustee the Letter of Credit, issued by the Bank in favor of the Trustee and for
the benefit of the holders of the Notes (other than Bank Notes and Borrower
Notes), and (b) to ensure that so long as any Notes remain Outstanding, a Letter
of Credit shall be in effect with respect to such Notes with terms substantially
conforming to those of the original Letter of Credit.
Section 5.02. DRAWS ON LETTER OF CREDIT; EXTENSIONS.
(a) The Trustee shall make timely draws in accordance with the Letter
of Credit such that timely payment under Section 4.01 is made without resort to
the sources of payment described in Section 4.01(c) or (d). Such draws shall be
in amounts equal to (i) the purchase price payable with respect to the Notes
(excluding Bank Notes and Borrower Notes which are not entitled to any benefit
of the Letter of Credit), less the amounts, if any, available under Section
4.01(a), or (ii) the total principal and interest due on the Notes (excluding
Bank Notes and Borrower Notes which are not entitled to any benefit of the
Letter of Credit). If any such draws are made on a Mandatory Repurchase Date in
connection with the delivery of a Substitute Letter of Credit such draws shall
be made under the existing Letter of Credit and not on the Substitute Letter of
Credit. In the event the Trustee uses Available Moneys (other than Available
Moneys arising from a draw under the Letter of Credit) for the payment of
principal of or interest on the Notes as the same become due and payable whether
at maturity, upon redemption or otherwise or for purchase price of the Notes
when due, the Trustee shall, within 10 days after such payment, give notice
thereof to the Bank in accordance with the terms of the Letter of Credit. The
notice from the Trustee to the Bank shall be in the form attached to the Letter
of Credit. The Trustee agrees to make such draws so as to be able to obtain and
to transfer to the Fiscal Agent by 1:45 p.m. to the extent funds have been
received from the Bank on the payment or purchase date, as the case may be, such
funds to the extent necessary to permit the Fiscal Agent to make such payment
when due in accordance with this Indenture and the Notes.
(b) In drawing on the Letter of Credit, the Trustee shall be acting on
behalf of the Noteholders by facilitating payment of the Notes and not on behalf
of the Borrower and shall not be subject to the control of the Borrower.
Proceeds of draws on the Letter of Credit shall be segregated from, and not
commingled with, other moneys held by the Trustee and shall be paid to the
Fiscal Agent, who shall hold such moneys segregated from, and not commingled
with, other moneys held by the Fiscal Agent. If the Trustee is also acting as
Fiscal Agent, such moneys shall be held in the Note Fund.
(c) The Trustee shall advise the Borrower by telecopy or telex on the
date of each draw on the Letter of Credit of the amount and date of such draw
and of the reason for such draw.
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<PAGE> 39
(d) For extensions of the term of the Letter of Credit, the Trustee
shall, at the direction of a Borrower Representative, but only if required to
evidence an extension of the term of the Letter of Credit, surrender the Letter
of Credit to the Bank in exchange for a new letter of credit of the Bank or the
Letter of Credit with notations thereon, as the Bank may so elect, conforming in
all material respects to the Letter of Credit except that the expiration date
shall be extended. Any such extension shall be for a period of at least one year
or, if less, until the fifteenth day following the maturity date of the Notes.
(e) No draws shall be made by the Trustee under the Letter of Credit
for Bank Notes or Borrower Notes.
Section 5.03. SUBSTITUTE LETTER OF CREDIT.
(a) Upon at least 35 days' prior written notice to the Trustee, the
Fiscal Agent and the Remarketing Agent, the Borrower may provide for the
delivery to the Trustee of a substitute Letter of Credit complying with the
provisions of this Indenture (the "Substitute Letter of Credit"), which shall be
effective upon acceptance by the Trustee. Any Substitute Letter of Credit shall
have a stated expiration date of at least one year following the effective date
thereof and at least 15 days following an Interest Payment Date.
(b) On or before the date of delivery of any Substitute Letter of
Credit to the Trustee, as a condition to the acceptance by the Trustee of such
Substitute Letter of Credit, the Borrower shall furnish to the Trustee:
(i) An Opinion of Counsel addressed to the Trustee to the
effect that (A) the Substitute Letter of Credit is the valid and
binding obligation of the issuer thereof enforceable against such
issuer in accordance with its terms except insofar as its
enforceability may be limited by any insolvency or similar proceedings
applicable to the issuer or by proceedings affecting generally the
rights of the issuer's creditors or by general equitable principles;
(B) payments of principal, interest or purchase price on the Notes from
the proceeds of a draw on the Substitute Letter of Credit will not
constitute avoidable preferences under any applicable bankruptcy,
reorganization, insolvency or other similar laws; (C) the Substitute
Letter of Credit does not constitute a separate security requiring
registration under any applicable federal or state securities laws; and
(D) the delivery and acceptance of the Substitute Letter of Credit are
authorized under the Indenture. In the case of a Substitute Letter of
Credit, issued by a branch or agency of a foreign commercial bank,
there shall also be delivered an Opinion of Counsel from a firm
licensed to practice law in the jurisdiction in which the head office
of such bank is located, addressed to the Trustee to the effect that
the Substitute Letter of Credit is the valid and binding obligation of
such bank, enforceable against such bank in accordance with its terms,
subject to the limitations referred to in Section 5.03(b)(i)(A) above;
(ii) written evidence satisfactory to the Trustee that the
issuer of the Substitute Letter of Credit meets the requirements for an
issuer of a Letter of Credit in Article I hereof;
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<PAGE> 40
(iii) written confirmation from the Remarketing Agent (or any
successor Remarketing Agent which has been appointed to serve as the
Remarketing Agent on the effective date of the Substitute Letter of
Credit) that it has agreed to remarket the Notes on or after the date
of the delivery of the Substitute Letter of Credit; and
(iv) if the Notes will be rated following acceptance by the
Trustee of such Substitute Letter of Credit, a letter from each Rating
Agency setting forth such rating(s).
The Trustee shall accept any such Substitute Letter of Credit only in
accordance with the terms, and upon satisfaction of the conditions, contained in
this Section and any other applicable provisions of this Indenture.
Notwithstanding anything to the contrary herein, any Substitute Letter of Credit
shall become effective on a Business Day. Acceptance of the Substitute Letter of
Credit shall result in the occurrence of a Mandatory Repurchase Date, and the
Trustee shall not terminate or surrender the Letter of Credit until the Trustee
has made such drawings thereunder, if any, as shall be required under the
Indenture to provide for payment of the purchase price of the Notes, and has
received the proceeds of such drawing from the Bank.
(c) Not more than 60 days and not less than 15 days prior to the
effective date of the Substitute Letter of Credit, the Fiscal Agent shall, in
addition to the notice required by Section 11.01(b), send by registered or
certified mail to the Remarketing Agent and each holder of the Notes, notice of
the issuance of the Substitute Letter of Credit, which notice shall include (i)
the identity of the issuer thereof, (ii) the date the Substitute Letter of
Credit will be effective, and (iii) notice pursuant to Section 3.07 that the
Notes are subject to mandatory repurchase pursuant to Section 3.07.
Section 5.04. ENFORCEMENT OF THE LETTER OF CREDIT. The Trustee shall
hold and maintain the Letter of Credit for the benefit of the Owners of the
Notes until the Letter of Credit terminates or expires in accordance with its
terms. When the Letter of Credit terminates or expires in accordance with its
terms, the Trustee shall immediately surrender it to the Bank. The Trustee
hereby agrees that, except in the case of a redemption in part pursuant to
Article III hereof or any other reduction in the principal amount of Notes
Outstanding, it will not under any circumstances request that the Bank reduce
the amount of the Letter of Credit. If at any time, all Notes shall cease to be
Outstanding, the Trustee shall surrender the Letter of Credit to the Bank in
accordance with the terms thereof, together with written confirmation from the
Trustee to the Bank stating that the Letter of Credit is being delivered to the
Bank for cancellation and that the Trustee relinquishes its right to make any
further draws thereunder. If at any time, the Bank fails to honor a draft
presented under the Letter of Credit, in conformity with the terms thereof, the
Trustee shall give immediate telephonic notice thereof to the Remarketing Agent,
the Fiscal Agent and the Borrower.
[End of Article V]
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ARTICLE VI
GENERAL COVENANTS, REPRESENTATIONS AND WARRANTIES
Section 6.01. PAYMENT OF NOTES. The Borrower shall promptly pay, or
cause to be paid, the principal of (whether at maturity, by acceleration, call
for redemption or otherwise) and interest on and purchase price of every Note
issued under this Indenture to the Fiscal Agent for payment to the owners of the
Notes, on the dates and in the manner provided herein according to the true
intent and meaning thereof.
Section 6.02. COVENANTS. REPRESENTATIONS AND WARRANTIES OF BORROWER.
(a) COMPLIANCE WITH TERMS. The Borrower shall observe and perform all
covenants, conditions and agreements required on its part to be observed and
performed in this Indenture, the Reimbursement Agreement, the Placement
Agreement, the Remarketing Agreement and in each Note executed, authenticated
and delivered hereunder, in all other documents related hereto, and under any
laws or regulations related to the issuance of the Notes.
(b) INCORPORATION BY REFERENCE. The Borrower represents and warrants
that each of the Borrower's representations and warranties contained in the
Reimbursement Agreement, the Placement Agreement and the Remarketing Agreement
are true and correct in all material respects on and as of the date hereof and
are hereby made to the Trustee as if set forth herein.
(c) DUE AUTHORIZATION. The Borrower (i) has the requisite corporate
power and authority to execute, deliver and perform this Indenture and each of
the other Transaction Documents to which it is a party and to incur and perform
the obligations herein and therein provided for, and (ii) is duly authorized
under all applicable provisions of law, and has taken all necessary corporate
action on its part required, to execute, deliver and perform this Indenture and
each of the other Transaction Documents to which it is a party.
(d) NO CONFLICTS. Neither the execution and delivery of the Transaction
Documents to which the Borrower is a party, nor the consummation of the
transactions contemplated therein, nor performance of and compliance with the
terms and provision thereof will (i) violate or conflict with any provision of
the articles of incorporation or by laws of the Borrower, (ii) to the Borrower's
knowledge, violate, contravene or materially conflict with any law, regulation,
order, writ, judgment, injunction, decree or permit applicable to the Borrower,
(iii) violate, contravene or materially conflict with any contractual provisions
of, or cause an event of default under, any indenture, loan agreement, mortgage,
deed of trust, contract or other agreement or instrument to which the Borrower
is a party or by which the Borrower may be bound, or (iv) to the Borrower's
knowledge, result in or require the creation of any lien, security interest or
other charge or encumbrance (other than those contemplated in or in connection
with the Transaction Documents) upon or with respect to any material asset of
the Borrower.
(e) CONSENTS. No consent, approval, authorization or order of, or
filing, registration or qualification with, any court or governmental authority
or third party is required in connection
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with the execution, delivery or performance of this Indenture or any of the
other Transaction Documents.
(f) ENFORCEABLE OBLIGATIONS. This Indenture and the other Transaction
Documents to which the Borrower is a party have been duly executed and delivered
and constitute legal, valid and binding obligations of the Borrower enforceable
in accordance with their respective terms, except as may be limited by
bankruptcy or insolvency laws or similar laws affecting creditors' rights
generally.
Section 6.03. NOTICE OF LITIGATION. The Borrower shall promptly inform
the Trustee, the Bank, the Fiscal Agent, the Placement Agent and the Remarketing
Agent of (a) any litigation pending or to its knowledge threatened, to which the
Borrower is or may be a party and that has not been previously disclosed to the
Trustee, the Bank, the Fiscal Agent, the Placement Agent and the Remarketing
Agent, the adverse determination of which might materially prejudice the payment
of the Notes or the performance of its obligations hereunder, and (b) any
materially adverse developments in any such litigation previously disclosed to
the Trustee, the Bank, the Fiscal Agent, the Placement Agent and the Remarketing
Agent.
Section 6.04. FINANCING AND CONTINUATION STATEMENTS. Financing
statements with respect to the Trust Estate and meeting the requirements of the
Uniform Commercial Code of the State shall be filed by the Borrower in all
offices in the State where such filing is necessary to perfect the security
interest in the Trust Estate created by this Indenture. Whenever in the opinion
of the Trustee or the Bank (but without obligation on either or both of them to
make such a determination) such action is necessary to preserve such security
interest or the priority thereof and upon the written direction of either of
them to do so, the Borrower shall file additional financing or continuation
statements in all such offices. During the sixth month period immediately
preceding February 1, 2004 and February 1 of each fifth year thereafter, upon
the written direction of the Trustee or the Bank to do so, the Borrower shall
deliver or cause to be delivered to the Trustee and the Bank an opinion of
counsel, addressed to the Trustee and the Bank, or other evidence reasonably
satisfactory to each of them, stating that no further filing of any instrument
is necessary to preserve, perfect or protect the priority of the security
interest in the Trust Estate created hereby at such time or during the five year
period immediately succeeding such June 1, as the case may be, or, if any such
filing is necessary, setting forth the requirements with respect thereto, in
which case the Borrower shall cause such requirements to be met. The expenses,
including reasonable attorney's fees, of all such filings and opinions shall be
paid by the Borrower.
Section 6.05. FURTHER ASSURANCES. The Borrower shall execute and
deliver such supplemental agreements and such further instruments and do such
further acts, as the Trustee may reasonably require to carry out the purposes of
this Indenture.
[End of Article VI]
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ARTICLE VII
DISCHARGE OF INDENTURE
Section 7.01. NOTES DEEMED PAID; DISCHARGE OF INDENTURE. All Notes
shall be deemed paid for all purposes of this Indenture when (a) payment of the
greater of the principal of and the maximum amount of interest that may become
due on the Notes to the due date of such principal and interest (whether at
maturity, upon redemption, acceleration or otherwise) or the payment of the
purchase price of any Note that may be optionally tendered by the owner either
(i) has been made in accordance with the terms of Section 3.05 or Section
3.07(c) or (ii) has been provided for by depositing with the Trustee (A) moneys
sufficient to make such payment, which moneys must constitute Available Moneys
and/or (B) noncallable U.S. Government Obligations maturing as to principal and
interest in such amounts and at such times as will ensure the availability of
sufficient moneys to make such payment without regard to the reinvestment
thereof, provided that (i) such U.S. Government Obligations must be purchased
from Available Moneys and (ii) the Trustee has received written evidence from
each Rating Agency that as a result of such action, their rating on the Notes
will not be lowered or eliminated; and (b) all compensation and expenses of the
Trustee and the Fiscal Agent (as well as the fees and expenses of their counsel)
pertaining to each Note in respect of which such payment or deposit is made have
been paid or provided for to their respective satisfaction. When a Note is
deemed paid, it shall no longer be secured by or entitled to the benefits of
this Indenture, except for payment from moneys or U.S. Government Obligations
under subsection (a) above and except that it may be optionally tendered if and
as provided in Section 3.07(b) and it may be transferred, exchanged, registered,
discharged from registration or replaced as provided in Article II.
Notwithstanding the foregoing, no deposit under subsection (a) above
made for the purpose of paying the redemption price of a Note (as opposed to the
final payment thereof upon maturity) will be deemed a payment of a Note as
aforesaid until (x) notice of redemption of the Note is given in accordance with
Article III or, if the Note is not to be redeemed within the next 60 days, until
the Borrower has given the Trustee and the Fiscal Agent, in form satisfactory to
the Trustee, irrevocable instructions to notify, as soon as practicable, the
holder of the Note, in accordance with Article III, that the deposit required by
subsection (a) above has been made with the Trustee and that the Note is deemed
to be paid under this Article and stating the redemption date upon which moneys
are to be available for the payment of the principal of the Note or (y) the
maturity of the Note. Additionally, and while the deposit under subsection (a)
above made for the purpose of paying the final payment of a Note upon its
maturity shall be deemed a payment of such Note as aforesaid, the Trustee shall
mail notice to the Owner of such Note, as soon as practicable stating that the
deposit required by subsection (a) above has been made with the Trustee and that
the Note is deemed to be paid under this Article.
When all Outstanding Notes are deemed paid under the foregoing
provisions of this Section and other sums due under this Indenture and the
Reimbursement Agreement are paid in full, the Trustee shall, upon request,
acknowledge the discharge of the Borrower's obligations under this Indenture
except for obligations relating to optional tender as provided in Section
3.07(b), obligations under Article II in respect of the transfer, exchange,
registration, discharge from registration and replacement of Notes, and
obligations under Section 9.06 hereof with
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respect to the Trustee's compensation and indemnification, and the Trustee
without request or further direction shall surrender the Letter of Credit to the
Bank, in accordance with the terms of the Letter of Credit and the provisions of
Section 5.04 hereof. Notes delivered to the Fiscal Agent for payment shall be
canceled by the Fiscal Agent pursuant to Section 2.07.
The Trustee may request and shall be fully protected in relying upon a
certificate of an independent certified public accountant to the effect that a
deposit will be sufficient to defease the Notes as provided in this Section
7.01.
Upon receipt of any amount pursuant to this Article VII, the Trustee
shall give written notice thereof, which notice shall include, without
limitation, the amount of such deposit and any instructions given to the Trustee
pursuant thereto, to the Remarketing Agent by first-class mail, postage prepaid.
Section 7.02. APPLICATION OF TRUST MONEY. The Trustee and the Fiscal
Agent shall hold in trust money or U.S. Government Obligations deposited with
them pursuant to the preceding Section and shall apply the deposited money and
the money from the U.S. Government Obligations in accordance with this Indenture
only to the payment of principal of and interest on, or purchase price of, the
Notes.
[End of Article VII]
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ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. EVENTS OF DEFAULT. Each of the following events shall be
an Event of Default:
(a) Default in the due and punctual payment of any interest on any
Note;
(b) Default in the due and punctual payment of the principal or
purchase price of any Note (whether at maturity, by acceleration or redemption,
upon purchase or otherwise);
(c) Default in the observance or performance of any other of the
covenants, conditions or agreements on the part of the Borrower under this
Indenture with such default continuing for a period of thirty (30) consecutive
days (or such further time as may be granted in writing by the Trustee, with
notice to the Bank) after receipt by the Borrower Representative of a written
notice from the Trustee or the Bank specifying such default and requiring the
same to be remedied; or
(d) Receipt by the Trustee of written notice from the Bank that an
Event of Default has occurred under the Reimbursement Agreement accompanied by a
demand by the Bank that the Trustee declare the Notes to be immediately due and
payable.
For purposes of this Section 8.01, the Trustee shall not be deemed to
have knowledge of an Event of Default hereunder unless a Responsible Officer in
the corporate trust department of the Trustee has actual knowledge thereof or
unless written notice of any event which is an Event of Default is received by
the Trustee and such notice references this Indenture or the Notes.
Section 8.02. ACCELERATION AND DUTY TO DRAW ON LETTER OF CREDIT.
(a) Upon the occurrence of an Event of Default under Section 8.01(a),
(b) or (d) hereof, the Trustee shall, by notice to the holders, the Bank, the
Remarketing Agent and the Borrower, declare the entire unpaid principal of and
interest on the Notes immediately due and payable and, thereupon, the entire
unpaid principal of and interest on the Notes shall forthwith become immediately
due and payable. Upon the occurrence and continuance of any other Event of
Default, the Trustee may, and if requested by the holders of not less than a
majority in aggregate principal amount of Notes then Outstanding shall, by
notice to the holders, the Bank, the Remarketing Agent and the Borrower, declare
the entire unpaid principal of and interest on the Notes immediately due and
payable and, thereupon, the entire unpaid principal of and interest on the Notes
shall forthwith become due and payable. Upon any such declaration, the Borrower
shall forthwith cause the Trustee to pay to the holders of the Notes from the
Trust Estate the entire unpaid principal of and accrued interest on the Notes.
In the event the Trustee fails to accelerate as required by this Section
8.02(a), the owners of a majority in aggregate principal amount of Notes
Outstanding shall have the right to take such actions.
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(b) Upon the acceleration of the maturity of the Notes, by declaration
or otherwise, the Trustee shall immediately draw upon the Letter of Credit for
the aggregate unpaid principal amount of the Notes and interest accrued thereon
which shall be applied immediately as set forth in Section 8.03. Upon such
acceleration, interest on the Notes shall cease to accrue as of the date of
declaration of such acceleration.
Section 8.03. DISPOSITION OF AMOUNTS DRAWN ON LETTER OF CREDIT;
ASSIGNMENT OF RIGHTS TO CONTEST.
(a) All amounts drawn on the Letter of Credit by the Trustee in
accordance with Section 8.02(b) shall be held in the Note Fund (and invested in
accordance with Section 4.13), and shall be applied immediately to the payment
of principal of and interest accrued on the Notes unless, prior to or with the
proceeds of the draw on the Letter of Credit, the Trustee receives written
instructions from the Bank to use such proceeds to purchase all Notes. If such
instructions are received by the Trustee, such draw proceeds shall be
immediately applied to the purchase of the Notes, the acceleration of the Notes
shall be canceled, the Notes shall become Bank Notes, and the Notes shall be
registered in the name of the Borrower and pledged under the Reimbursement
Agreement as additional security for repayment of the Borrower's obligations
under the Reimbursement Agreement. Thereafter, such Notes shall not be
remarketed by the Remarketing Agent unless the Letter of Credit is reinstated or
a Substitute Letter of Credit is delivered pursuant to Section 5.03.
(b) The Trustee hereby assigns to the Bank all its rights to contest or
otherwise dispute in the Trustee's name, place and stead and at the Bank's sole
election and cost any claim of preferential transfer made by a bankruptcy
trustee, debtor-in-possession or other similar official with respect to any
amount paid to the Trustee by or on behalf of the Borrower to be applied to
principal of or interest on or purchase price of the Notes, to the extent of
payments made to the Trustee pursuant to a drawing under the Letter of Credit.
The Trustee shall cooperate with and assist the Bank in any such contest or
dispute as the Bank may reasonably request; provided, however, that the Bank
shall reimburse the Trustee for the reasonable costs incurred in connection with
providing such cooperation and assistance. The Trustee shall give the Bank
prompt notice of any claim of preferential transfer of which the Trustee has
knowledge. The foregoing assignment shall not be deemed to confer upon the Bank
any right to contest or otherwise dispute any claim of preferential transfer
with respect to any amount as to which there has been no drawing under the
Letter of Credit. The assignment set forth above shall in no event be effective
until the Bank has first furnished to the Trustee an agreement to indemnify the
Trustee and the holders of the Notes against any claim, liability or damage
which they might suffer by reason of any such contest or dispute.
Section 8.04. OTHER REMEDIES; RIGHTS OF NOTEHOLDERS. Upon the
occurrence of an Event of Default, the Trustee, subject to the terms of this
Indenture, may proceed to protect and enforce its rights and the rights of the
Noteholders by mandamus or other suit, action or proceeding, at law or in
equity, including but not limited to an action for specific performance of any
agreement herein contained or making a demand for payment from the Borrower and
taking action pursuant to any other document to which the Trustee is a party.
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Upon the occurrence of an Event of Default and subject to Section 8.14,
if requested to do so by the holders of not less than a majority in aggregate
principal amount of Notes Outstanding and if indemnified as provided in Section
9.01(d), the Trustee, subject to the terms of this Indenture, shall exercise
such one or more of the rights and powers conferred by this Article as the
Trustee, upon being advised by counsel, shall deem most expedient in the
interests of the Noteholders.
No remedy conferred by this Indenture upon or reserved to the Trustee
or to the Noteholders is intended to be exclusive of any other remedy, but each
such remedy shall be cumulative and shall be in addition to any other remedy
given to the Trustee or to the Noteholders hereunder or now or hereafter
existing at law or in equity. No delay or failure to exercise any right or power
accruing upon any default or Event of Default shall impair any such right or
power or shall be construed to be a waiver of any such default or Event of
Default or acquiescence therein, and every such right and power may be exercised
from time to time and as often as may be deemed necessary. No waiver of any
default or Event of Default hereunder, whether by the Trustee pursuant to
Section 8.10 or by the Noteholders, shall extend to or shall affect any
subsequent default or Event of Default or shall impair any rights or remedies
consequent thereon.
Section 8.05. RIGHT OF NOTEHOLDERS TO DIRECT PROCEEDINGS.
Notwithstanding anything in this Indenture to the contrary, but subject to
Section 8.14, the holders of a majority in aggregate principal amount of Notes
Outstanding shall have the right, at any time, by an instrument or instruments
in writing executed and delivered to the Trustee, to direct the method and place
of conducting all proceedings to be taken in connection with the enforcement of
the terms and conditions of this Indenture or for the appointment of a receiver
or any other proceedings hereunder; provided, however, that such direction shall
not be otherwise than in accordance with the provisions of law and of this
Indenture.
Section 8.06. APPLICATION OF MONEYS. All moneys received by the Trustee
pursuant to any right given or action taken under the provisions of this Article
shall, after payment of the costs and expenses of the proceedings resulting in
the collection of such moneys and of the expenses, liabilities and advances
incurred or made by the Trustee, be deposited in the Note Fund; provided,
however, that no proceeds from any draw on the Letter of Credit shall be used
for any purpose other than payment of the principal of and interest on the Notes
or the purchase price thereof. All moneys in the Note Fund shall be applied as
follows:
(a) Unless the principal of all Notes has become or has been declared
due and payable:
First, to the payment to the persons entitled thereto of all
installments of interest then due on the Notes, in the order of the
maturity of the installments of such interest and, if the amount
available shall not be sufficient to pay in full any particular
installment, then to the payment ratably, according to the amounts due
on such installment, to the persons entitled thereto, without any
discrimination or preference except as provided in Section 8.13, and as
to any difference in the respective rates of interest specified in the
Notes;
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Second, to the payment to the persons entitled thereto of the
unpaid principal of any of the Notes which has become due (other than
Notes called for redemption for the payment of which moneys are held
pursuant to the provisions of this Indenture), in the order of their
due dates, with interest on such Notes at the respective rates
specified therein from the respective dates upon which they become due
and, if the amount available shall not be sufficient to pay in full
Notes due on any particular date, together with such interest, then
first to the payment of such interest ratably, according to the amount
of such interest due on such date, and then to the amount of such
principal, ratably, according to the amount of such principal due on
such date, to the persons entitled thereto, without any discrimination
or preference, except as provided in Section 8.13, and as to any
difference in the respective rates of interest specified in the Notes;
and
Third, to the extent permitted by law, to the payment to the
persons entitled thereto of the unpaid interest on overdue installments
of interest ratably, according to the amounts of such interest due on
such date, without any discrimination or preference, except as provided
in Section 8.13, and as to any difference in the respective rates of
interest specified in the Notes.
(b) If the principal of all Notes have become due or have been declared
due and payable, all such moneys shall be applied to the payment of the
principal and interest then due and unpaid upon the Notes, including to the
extent permitted by law, interest on overdue installments of interest, without
preference or priority of principal over interest or of interest over principal,
or of any installment of interest over any other installment of interest, or of
any Note over any other Note, ratably according to the amounts due respectively
for principal and interest, to the persons entitled thereto, without any
discrimination or privilege, except as provided in Section 8.13.
(c) If the principal of all Notes have been declared due and payable,
and if such declaration is thereafter rescinded and annulled under the
provisions of this Article, then, subject to the provisions of Section 8.06(b)
in the event that the principal of all Notes later become due or be declared due
and payable, the moneys shall be applied in accordance with the provisions of
Section 8.06(a).
(d) All amounts received from a draw upon the Letter of Credit shall be
applied exclusively to the payment of the principal of and interest on the Notes
or the purchase price thereof.
Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times and from time to time as the
Trustee shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys becoming
available for such application in the future. Whenever the Trustee shall apply
such moneys, it shall fix the date (which shall be an Interest Payment Date
unless it shall deem another date more suitable or as required by Section
8.03(a)) upon which such application is to be made. The Trustee shall give such
notice as it may deem appropriate of the deposit with it of any such moneys and
of the fixing of any such date, and shall not be required to
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make payment to the holder of any Note until such Note is presented to the
Trustee for appropriate endorsement or for cancellation if fully paid.
Whenever all principal of and interest on all Notes have been paid
under the provisions of this Section and all expenses and charges of the Trustee
have been paid, and all obligations of the Borrower to the Bank pursuant to the
Reimbursement Agreement shall have been paid in full, the balance remaining in
the Note Fund shall be paid to the Borrower as provided in Section 4.12.
Section 8.07. REMEDIES VESTED IN TRUSTEE. All rights of action
(including the right to file proof of 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 in any trial or other proceeding relating
thereto and any such suit or proceeding instituted by the Trustee may be brought
in its name, as Trustee, without the necessity of joining as plaintiffs or
defendants any holders of the Notes, and any recovery of judgment shall be for
the equal benefit of the holders of the Outstanding Notes.
Section 8.08. LIMITATIONS ON SUITS. Except to enforce the rights given
under Sections 8.02(a), 8.05 and 8.12, no holder of any Note shall have any
right to institute any suit, action or proceeding in equity or at law for the
enforcement of this Indenture or for the execution of any trust thereof or any
other remedy hereunder, unless (a) a default has occurred of which the Trustee
has been notified as provided in Section 9.05, or of which by such Section it is
deemed to have notice, (b) such default has become an Event of Default and the
holders of at least a majority in aggregate principal amount of Notes
Outstanding have made written request to the Trustee and have offered it
reasonable opportunity either to proceed to exercise the powers hereinbefore
granted or to institute such action, suit or proceeding in its own name, (c)
such holders have offered to the Trustee indemnity as provided in Section
9.01(d), (d) the Trustee for 60 days after such notice fails or refuses to
exercise the powers hereinbefore granted, or to institute such action, suit or
proceeding in its own name or in the name of such holders, (e) no direction
inconsistent with such request has been given to the Trustee during such 60 day
period by the holders of a majority in aggregate principal amount of Notes
Outstanding, and (f) notice of such action, suit or proceeding is given to the
Trustee; it being understood and intended that no one or more holders of the
Notes shall have any right in any manner whatsoever to affect, disturb or
prejudice this Indenture by its, his or their action or to enforce any right
hereunder except in the manner herein provided, and that all proceedings at law
or in equity shall be instituted and maintained in the manner herein provided
and for the equal benefit of the holders of all Notes Outstanding.
The notification, request and offer of indemnity set forth in the
preceding paragraph, at the option of the Trustee, shall be conditions precedent
to the execution of the powers and trusts in this Indenture and to any action or
cause of action for the enforcement of this Indenture or for any other remedy
hereunder.
Section 8.09. TERMINATION OF PROCEEDINGS. In case the Trustee has
proceeded to enforce any right under this Indenture by the appointment of a
receiver, by entry or otherwise, and such proceedings have been discontinued or
abandoned for any reason, or have been determined adversely, then and in every
such case the Borrower, the Noteholders, the Bank and the Trustee
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shall be restored to their former positions and rights hereunder, and all
rights, remedies and powers of the Trustee shall continue as if no such
proceedings had been taken.
Section 8.10. WAIVERS OF EVENTS OF DEFAULT. The Trustee, with the
written consent of the Bank, may waive any Event of Default hereunder and its
consequences and rescind any declaration of maturity of principal of and
interest on the Notes, and shall do so, with the written consent of the Bank,
upon the written request of the holders of (a) a majority in aggregate principal
amount of Notes Outstanding in respect of which default in the payment of
principal and/or interest exists, or (b) a majority in aggregate principal
amount of Notes Outstanding in the case of any other default; provided, however,
that:
(i) there shall not be waived without the consent of the
holders of all Notes then Outstanding: (A) any default in the payment
of the principal of any Outstanding Notes when due (whether at maturity
or by mandatory or optional redemption); or (B) any default in the
payment when due of the interest on any such Notes unless, in either
case, prior to such waiver or rescission (1) there have been paid or
provided for all arrears of interest at the rate borne by the Notes on
overdue installments of principal, all arrears of payments of principal
and interest when due and all expenses of the Trustee and the Bank in
connection with such default, and (2) in case of any such waiver or
rescission, or in case of the discontinuance, abandonment or adverse
determination of any proceeding taken by the Trustee on account of any
such default, the Trustee, the Bank and the Noteholders shall be
restored to their respective former positions and rights hereunder;
(ii) no acceleration of maturity under Section 8.02 made at
the request of the holders of not less than a majority in aggregate
principal amount of Notes Outstanding shall be rescinded unless
requested by the holders of a majority in aggregate principal amount of
Notes Outstanding; and
(iii) unless the Trustee has been notified by the Bank in
writing that the Letter of Credit is reinstated in full as to principal
and interest and that the Bank has rescinded or withdrawn the written
notice referred to in Section 8.01(d), there shall be no waiver or
rescission so long as the Letter of Credit is in effect.
No such waiver or rescission shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 8.11. NOTICE OF DEFAULTS; OPPORTUNITY OF BORROWER TO CURE
DEFAULTS. Notwithstanding anything in this Indenture to the contrary, no default
specified in Section 8.01(c) on the part of the Borrower shall constitute an
Event of Default until (a) notice of such default shall be given (i) by the
Trustee to the Borrower and the Bank, or (ii) by the holders of not less than a
majority in aggregate principal amount of Notes Outstanding to the Trustee, the
Borrower and the Bank, and (b)the Borrower has had 30 days after such notice to
correct such default or cause such default to be corrected, and shall not have
corrected such default or caused such default to be corrected within such
period; provided, however, if any default specified in Section 8.01(c) shall be
such that it cannot be corrected within such period, it shall not constitute an
Event of Default if corrective action is instituted by the Borrower within such
period and
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diligently pursued until such default is corrected; provided, further, that the
period for corrective action shall not in any event extend more than 180 days
after such notice to correct such default.
With regard to any alleged default concerning which notice is given to
the Bank, the Bank may, but is under no obligation to, perform any covenant,
condition or agreement the nonperformance of which is alleged in such notice to
constitute a default, in the name and stead of the Borrower with full power to
do any and all things and acts to the same extent that the Borrower could do and
perform any such things and acts with power of substitution.
Section 8.12. UNCONDITIONAL RIGHT TO RECEIVE PRINCIPAL AND INTEREST.
Notwithstanding the terms of Section 8.08, any Noteholder may enforce, by action
at law, payment of the principal or purchase price of and interest on any Note
at and after the maturity thereof, or on the date fixed for redemption or
purchase or (subject to the provisions of Section 8.02) on the same being
declared due prior to maturity as herein provided, or the obligation of the
Borrower to pay the principal or purchase price of and interest on each of the
Notes issued hereunder to the respective holders thereof at the time, place,
from the source and in the manner herein and in the Notes expressed.
Section 8.13. NOTES OUTSTANDING. Notwithstanding anything else in this
Article to the contrary, but subject to Section 8.14, Borrower Notes shall not
be deemed to be Outstanding for purposes of this Article and the Borrower as
holder thereof shall not be entitled to any rights or payments therefor pursuant
to Sections 8.05, 8.06, 8.08, 8.10 and 8.12.
Section 8.14. LETTER OF CREDIT BANK DEEMED OWNER. For all purposes of
this Article VIII (other than receipt of payments), the Bank shall, so long as
the Bank shall not have dishonored any draw under the Letter of Credit strictly
complying with the terms thereof (other than for a reason permitted by the
Letter of Credit or pursuant to any administrative or judicial order, ruling,
finding or decision), be deemed the holder and registered owner of all Notes. As
such, the Bank may take all actions permitted by this Article VIII to be taken
by the Trustee or the holders or registered owners of the Notes, to the
exclusion of the Trustee or the actual holders and registered owners of the
Notes; the purpose of this Section 8.14 being to permit the Bank to direct the
taking of actions and enforcement of remedies permitted by this Article VIII so
long as the Bank shall not have dishonored any draw under the Letter of Credit
complying with the terms thereof (other than for a reason permitted by the
Letter of Credit or pursuant to any administrative or judicial order, ruling,
rule, finding or decision).
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Section 8.15. SUBROGATION RIGHTS OF THE BANK.
(a) Notwithstanding anything else contained herein, whenever the
Trustee shall make any payment to any Noteholder with funds drawn under Letter
of Credit pursuant hereto, the Trustee shall make such payments as agent for the
Bank and not as agent for the Borrower, and the Bank and its assigns shall
thereafter, to the extent of the amount so paid, be subrogated to the rights
thereon of the Noteholders to whom such payment was made, and the Trustee shall,
in the event of the payment of principal, keep a written record of such
payments. When a Noteholder has been paid the entire principal of and interest
on his Note with funds drawn under the Letter of Credit, such Note shall be
surrendered to the Trustee as agent for the Bank, in lieu of cancellation
thereof, and such Note shall be transferred and delivered to the Bank or as the
Bank shall direct.
(b) In the event the Bank makes any payment with respect to the payment
of the principal or purchase price of or interest on any Note to the Trustee
under the Letter of Credit, the Bank shall be subrogated to the rights possessed
under the Indenture by the Trustee, the Borrower and the owners of such Notes so
paid, and the Bank shall be subrogated to the rights of the Borrower and the
Trustee under any other document, instrument or agreement securing repayment of
the principal or purchase price of and interest on the Notes. For purposes of
the Bank's subrogation rights hereunder, (i) any reference in the Indenture to
the Noteholders shall include the Bank, which shall be entitled to be treated as
if the Bank were a registered owner of Notes in the principal amount of any
principal payment made by the Bank under the Letter of Credit, (ii) any portion
of any Note as to which the principal or purchase price is paid with money
collected pursuant to the Letter of Credit shall be deemed to be outstanding
under the Indenture and the principal amount of such Note, together with
interest due and unpaid thereon, which have been paid by the Bank pursuant to
the Letter of Credit shall be deemed to be held by and owing to the Bank, and
(iii) the Bank may exercise any and all rights and benefits it would have under
the Indenture as a Holder of Notes to the extent of the principal amount of
Notes owned or deemed to be owned by the Bank and any and all interest so due
and unpaid thereon; provided that such Bank Notes (A) shall not be taken into
account in determining any deficiency for which a claim or draw is to be made
under the Letter of Credit, and (B) shall be subordinated in right of payment as
of any Interest Payment Date or upon the redemption or acceleration of the
Notes. Subrogation rights granted to the Bank hereunder are not intended to be
exclusive of any other rights or remedies available to the Bank, and such
subrogation rights shall be cumulative and shall be in addition to every right
or remedy given hereunder or under any other instrument or agreement with
respect to reimbursement of money paid by the Bank pursuant to the Letter of
Credit, and every other right or remedy now or hereafter existing at law or in
equity or by statute.
[End of Article VIII]
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ARTICLE IX
TRUSTEE, FISCAL AGENT,
PLACEMENT AGENT AND REMARKETING AGENT
Section 9.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise its rights and powers and use the same degree of care and skill
in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee, and
(ii) in the absence of bad faith, negligence or willful
misconduct on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed,
upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether they conform
to the requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this subsection does not limit the effect of (b) above;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 8.05.
(d) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity reasonably satisfactory to it against any
loss, liability or expense, but (i) the Trustee may not require indemnity as a
condition to declaring the principal of and interest on the Notes to be due
immediately under Section 8.02 and (ii) the Trustee may not require indemnity as
a condition to drawing on the Letter of Credit or to taking any action under the
Letter of Credit. The Trustee shall not be required to give any bond or surety
in respect of the execution of the trust created hereby or the powers granted
hereunder. The permissive right of the Trustee to do things enumerated under
this Indenture shall not be construed as a duty of the Trustee.
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(e) The Trustee shall not be liable for interest on any cash held by it
except as the Trustee may agree with the Borrower in writing.
(f) The Trustee may conclusively rely on a Borrower Representative's
certificate as to whether a Bankruptcy Filing has occurred.
(g) The Trustee shall strictly comply with the terms of the Letter of
Credit.
(h) The Trustee shall maintain adequate records pertaining to the funds
held by the Trustee, the investment thereof and the disbursement therefrom;
notwithstanding anything to the contrary in this Indenture or the Notes, the
Trustee shall not be required to advance its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder.
(i) Every provision of this Indenture that in any way relates to the
Trustee is subject to all the foregoing paragraphs of this Section.
(j) The Trustee shall not in any event be responsible for ensuring that
the rate of interest due and payable on the Notes under this Indenture does not
exceed the highest legal rate of interest permissible under federal or state law
applicable thereto.
Section 9.02. RIGHTS OF TRUSTEE.
(a) Subject to the foregoing Section, including, but not limited to,
Sections 9.01(b)(ii) and 9.01(c), the Trustee may rely on any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document. Any
action taken by the Trustee pursuant to this Indenture upon the request or
authority or consent of any Person, who at the time of making such request or
authority or consent is the owner of any Note, shall be conclusive and binding
upon all future owners of any Note issued in replacement thereof.
(b) Before the Trustee acts or refrains from acting, it may require a
certificate of an appropriate officer or officers of the Borrower or an Opinion
of Counsel stating that (i) the person making such certificate or opinion has
read such covenant or condition, (ii) the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; (iii) 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 (iv) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with. The Trustee shall not
be liable for any loss or damage or action it takes or omits to take in good
faith in reliance on the certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder and
perform any of its duties through agents, attorneys or employees or co-trustees
and shall not be responsible for the misconduct or negligence of any agent,
attorney, employee or co-trustee appointed with due care.
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Section 9.03. INDIVIDUAL RIGHTS OF TRUSTEE, ETC. The Trustee in its
individual or any other capacity may become the owner, custodian or pledgee of
Notes and may otherwise deal with the Bank or with the Borrower or its
affiliates with the same rights it would have if it were not Trustee. The Fiscal
Agent may do the same with like rights.
Section 9.04. TRUSTEE'S DISCLAIMER. Subject to Sections 9.01(b) and
9.01(c):
(a) the Trustee (i) makes no representation as to the validity or
adequacy of this Indenture or the Notes, and (ii) shall not be responsible for
any statement in the Notes or for the perfection of any lien created by this
Indenture or otherwise as security for the Notes;
(b) the Trustee may construe any of the provisions of this Indenture
insofar as the same may appear to be ambiguous or inconsistent with any other
provision hereof, and any construction of any such provisions hereof by the
Trustee in good faith shall be binding upon the Noteholders, the Borrower and
the Remarketing Agent;
(c) the Trustee shall not be responsible for the application of any of
the proceeds of the Notes or any other moneys deposited with it and paid out,
withdrawn or transferred hereunder if such application, payment, withdrawal or
transfer shall be made in accordance with the provisions of this Indenture;
(d) except as to a determination whether the Borrower has delivered the
opinion of counsel or provided other satisfactory evidence to the Trustee that
the Borrower has satisfied the filing requirements set forth in the next to last
sentence of Section 6.04, the Trustee shall not be under any obligation to see
to the recording or filing of this Indenture, any financing statements or any
other instrument or otherwise to the giving to any person of notice of the
provisions hereof or thereof;
(e) the Trustee shall not be under any obligation to effect or maintain
insurance or to renew any policies of insurance or to inquire as to the
sufficiency of any policies of insurance carried by the Borrower, or to report,
or make or file claims or proof of loss for, any loss or damage insured against
or which may occur, or to keep itself informed or advised as to the payment of
any taxes or assessments, or to require any such payment to be made; and
(f) the Trustee shall not be personally liable for any claims by or on
behalf of any Person, arising from the conduct or management of, or from any
work or thing done on, the Project, and shall have no affirmative duty with
respect to compliance of the Project under state or federal laws pertaining to
the transport, storage, treatment or disposal of pollutants, contaminants, waste
or hazardous materials, or regulations, permits or licenses issued under such
laws or otherwise.
Section 9.05. NOTICE OF DEFAULTS. The Trustee shall not have notice, or
be deemed to have notice, of any default or Event of Default under this
Indenture, other than an Event of Default under Section 8.01(a), (b) or (d),
unless specifically notified in writing at such address as set forth in Section
11.01 hereof of such default or Event of Default by Noteholders having, in
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the aggregate, not less than 25% in principal amount of the Notes Outstanding,
by the Fiscal Agent, by the Bank, by the Remarketing Agent or by the Borrower.
If an event occurs which with the giving of notice or lapse of time or
both would be an Event of Default, and if the Event of Default is continuing and
if the Trustee has notice thereof as herein provided, the Trustee shall mail to
each Noteholder, the Remarketing Agent and the Bank notice of the Event of
Default upon its having notice of such occurrence. Except in the case of a
default in payment or purchase of any Notes, the Trustee may withhold the notice
if and so long as it determines that withholding the notice is in the interests
of Noteholders; provided, that in any event such notice shall not be withheld
from the Bank or the Remarketing Agent.
Section 9.06. COMPENSATION AND INDEMNIFICATION OF TRUSTEE. For acting
as trustee under this Indenture, the Trustee shall be entitled to compensation
by the Borrower (which shall not be limited by any statute regulating the
compensation of a trustee of an express trust) of reasonable fees for the
Trustee's services and reimbursement of advances, counsel fees and other
expenses reasonably and necessarily made or incurred by the Trustee in
connection with its services under this Indenture.
The Trustee shall be indemnified by the Borrower for, and shall be held
harmless against, any loss, liability or expense incurred without negligence,
willful misconduct or bad faith on the Trustee's part, arising directly or
indirectly out of or in connection with the acceptance or administration of the
trust created by this Indenture, including the costs and expenses (including
counsel fees) of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
Section 9.07. ELIGIBILITY OF TRUSTEE. This Indenture shall always have
a Trustee that meets the qualifications set forth in this Section 9.07. Each
Trustee shall: (i) be acceptable to the Bank and the Remarketing Agent, (ii) be
a corporation or national banking association duly organized under the laws of
the United States of America or any state or territory thereof, doing business
and having an office in such location as shall be approved by the Remarketing
Agent, (iii) have together with its affiliates (herein defined) a combined
capital and surplus of at least $100,000,000 as set forth in its most recent
published annual report of condition, (iv) have senior long-term debt securities
or outstanding bank deposit obligations, as appropriate, rated "Baa3/P3" or
better by Moody's Investors Service, Inc., "BBB-/A3" or better by Standard &
Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. or
"BBB-/F3" or better by Fitch IBCA, Inc., or be a direct or indirect subsidiary
of a bank or bank holding company which has senior long-term debt securities or
outstanding bank deposit obligations, as appropriate, rated "Baa3/P3" or better
by Moody's Investors Service, Inc., "BBB-/A3" or better by Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc. or "BBB-/F3" or
better by Fitch IBCA, Inc., or otherwise be acceptable to any Rating Agency then
rating the Notes, and (v) be authorized by law to perform all the duties imposed
upon it by this Indenture. For purposes of this Section, the term "affiliate" of
the Trustee shall mean any Person which, directly or indirectly, controls or is
controlled by or is under common control with the Trustee.
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Section 9.08. REPLACEMENT OF TRUSTEE. The Trustee may resign and be
discharged of the trust created by this Indenture by notifying the Bank, the
Fiscal Agent, the Remarketing Agent and the Borrower; provided, however, that no
such resignation shall become effective until the appointment of a successor
Trustee, as hereinafter provided. The holders of not less than a majority in
principal amount of the Notes Outstanding may remove the Trustee by notifying
the removed Trustee and may appoint a successor Trustee with the Bank's and, so
long as no Event of Default has occurred, the Borrower's prior written consent;
provided, however, that no such removal shall become effective until the
appointment of a successor Trustee, as hereinafter provided. The Borrower shall
remove the Trustee at the request of the Bank or if the Trustee is prohibited
from acting by law or by regulation, rule or order of any court or
administrative body having jurisdiction over the Trustee; provided, however,
that no such removal shall become effective until the appointment of a successor
Trustee, as hereinafter provided. Upon the removal or replacement of the Trustee
for any reason, the Borrower shall give written notice thereof to the
Remarketing Agent, the Fiscal Agent and the Bank by first-class mail, postage
prepaid.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Borrower, with the prior written consent
of the Bank, shall promptly appoint a successor Trustee. Notice of such
appointment shall be given by the Borrower to the Remarketing Agent and the
Fiscal Agent in writing by first-class mail.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Bank, the Borrower, the Fiscal
Agent and the Remarketing Agent. Immediately thereafter, the retiring Trustee
shall transfer all property held by it as Trustee hereunder to the successor
Trustee, the resignation or removal of the retiring Trustee shall then (but only
then) become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. The successor Trustee
shall notify the holders of the Notes of its acceptance of the trusts hereunder
by first-class mail promptly following such acceptance.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Bank, the
Borrower or the holders of a majority in principal amount of the Notes
Outstanding may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 9.07, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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Section 9.09. FISCAL AGENT. The Borrower shall, with the prior approval
of the Bank and the Remarketing Agent, appoint the Fiscal Agent for the Notes
subject to the conditions set forth in Section 9.10. Norwest Bank Minnesota,
N.A., Minneapolis, Minnesota shall be the initial Fiscal Agent and by executing
this Indenture as Trustee also signifies its acceptance of the duties and
obligations imposed upon it hereunder as Fiscal Agent. Any successor Fiscal
Agent shall signify its acceptance of the duties and obligations imposed upon it
hereunder by a written instrument of acceptance delivered to the Borrower, the
Bank and the Trustee under which such Fiscal Agent will agree, particularly:
(a) to carry out all of its duties set forth herein;
(b) to hold all sums held by it pursuant to the Indenture in a
segregated account for the payment of the principal of or interest on Notes in
trust for the benefit of the Noteholders until such sums shall be paid to such
Noteholders or otherwise disposed of as herein provided;
(c) to hold all Notes delivered to it pursuant to this Indenture, as
agent and bailee of, and in escrow for the benefit of, the respective holders
which have so delivered such Notes until moneys representing the purchase price
of such Notes have been delivered to or for the account of or to the order of
such holders; and
(d) to keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available for inspection by
the Trustee, the Remarketing Agent, the Bank and the Borrower at all reasonable
times.
Section 9.10. QUALIFICATIONS OF FISCAL AGENT; RESIGNATION; REMOVAL. The
Fiscal Agent shall meet the qualifications of the Trustee set forth in Section
9.07. For acting under this Indenture, the Fiscal Agent shall be entitled to
compensation by the Borrower of reasonable fees for the Fiscal Agent's services
and reimbursement of advances, counsel fees and other expenses reasonably and
necessarily made or incurred by the Fiscal Agent in connection with its services
under this Indenture.
The Fiscal Agent shall be indemnified by the Borrower for, and shall be
held harmless against, any loss, liability or expense directly or indirectly
incurred without negligence, willful misconduct or bad faith on the Fiscal
Agent's part, arising directly or indirectly out of or in connection with its
duties under this Indenture, including the costs and expenses (including counsel
fees) of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The Fiscal Agent may at any time resign and be discharged of the duties
and obligations created by this Indenture by giving at least 60 days' prior
written notice to the Bank, the Borrower, the Remarketing Agent and the Trustee.
The Fiscal Agent may be removed at any time at the written direction of the
Bank, and so long as no Event of Default has occurred and is continuing, the
Borrower, by an instrument filed with the Fiscal Agent, the Bank, the
Remarketing Agent and the Trustee. Except as provided below, no resignation or
removal will be effective until the successor has delivered an acceptance of its
appointment to the Trustee.
In the event of the resignation or removal of the Fiscal Agent, the
Fiscal Agent shall pay over, assign and deliver any property held by it in such
capacity hereunder to its successor or, if there be no successor, to the
Trustee.
In the event that the Borrower shall fail to appoint a Fiscal Agent
hereunder, or in the event that the Fiscal Agent shall resign or be removed, or
be dissolved, or if the property or affairs of the Fiscal Agent shall be taken
under the control of any state or federal court or administrative body because
of bankruptcy or insolvency, or for any other reason, and the
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Borrower shall not have appointed its successor as Fiscal Agent, the Trustee
shall IPSO FACTO be deemed to be the Fiscal Agent for all purposes of this
Indenture until the appointment by the Borrower of a successor Fiscal Agent.
Section 9.11. DUTIES OF PLACEMENT AGENT.
The Placement Agent shall, in accordance with the Placement Agreement,
use its reasonable best efforts to place the Notes with the initial purchasers
thereof on their date of issuance. The Placement Agent may for its own account
or as broker or agent for others deal in Notes and may do anything any other
Noteholder may do to the same extent as if the Placement Agent were not serving
as such.
Section 9.12. [Reserved]
Section 9.13. DUTIES OF REMARKETING AGENT.
(a) The Remarketing Agent shall, in accordance with the Remarketing
Agreement and as provided in this Indenture, establish the Weekly Rates on the
Notes, remarket the Notes and perform the other duties provided for it to be
done hereunder. The Remarketing Agent may for its own account or as broker or
agent for others deal in Notes and may do anything any other Noteholder may do
to the same extent as if the Remarketing Agent were not serving as such. The
Remarketing Agent has no duty to act hereunder to the extent the Remarketing
Agent is not required to perform its obligations under the Remarketing
Agreement.
(b) The Remarketing Agent may execute and perform any of its duties
hereunder through agents, attorneys or co-remarketing agents and shall not be
responsible for the misconduct or negligence of any agent, attorney or
co-remarketing agent appointed with due care.
Section 9.14. ELIGIBILITY OF REMARKETING AGENT; REPLACEMENT. The
Remarketing Agent shall be a member of the National Association of Securities
Dealers, Inc. having excess net capital (as defined in Rule l5c-3 of the
Securities Exchange Act of 1934, as amended) of at least $25,000,000 or, in the
alternative, a national banking association having a combined capital stock,
surplus and undivided profits of at least $100,000,000, and, if the Notes are
rated by a Rating Agency, the Remarketing Agent must be rated at least "Baa3/P3"
by Moody's Investors Service, Inc., "BBB-/A3" by Standard & Poor's Rating
Services, a Division of The McGraw-Hill Companies, Inc., or "BBB-/F3" by Fitch
IBCA, Inc. or otherwise be acceptable to the Rating Agency then rating the
Notes.
NationsBank, N.A. is hereby appointed as the initial Remarketing Agent
and is herein referred to as the "Remarketing Agent." Any Remarketing Agent
shall accept its appointment hereunder in writing. The Remarketing Agent may
resign by notifying the Borrower, the Trustee, the Fiscal Agent and the Bank at
least 45 days before the effective date of the resignation. The Bank or the
Borrower (but only with the Bank's prior written consent) may at any time remove
the Remarketing Agent and appoint a successor by notifying the Remarketing
Agent, the Fiscal Agent, the Bank and the Trustee at least 30 days prior to the
effective date of
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such removal. Notwithstanding anything herein to the contrary and subject to
satisfying the requirements of Section 5.03 with respect to the Substitute
Letter of Credit, the Borrower may simultaneously remove the Remarketing Agent
and the Bank by notifying the Remarketing Agent, the Bank, the Fiscal Agent and
the Trustee. Upon the receipt or giving, as the case may be, of notice of the
resignation or the removal of the Remarketing Agent, the Borrower, but only with
the prior written consent of the Bank, shall proceed to appoint a successor by
notifying the Remarketing Agent, the Bank, the Fiscal Agent and the Trustee. If
the Remarketing Agent resigns or is removed pursuant to the terms of this
Indenture and, after 45 days in the case of giving notice of resignation or 30
days in the case of receiving notice of removal, the Borrower has failed to
appoint a successor Remarketing Agent in accordance with the terms of this
Section 9.14, the Borrower shall immediately give notice thereof to the Trustee
and shall direct the Trustee to give notice to the holders of the Notes of a
mandatory repurchase of such Notes pursuant to Section 3.07(a)(ii) hereof. Such
mandatory repurchase shall take place on the first Interest Payment Date to
occur following such Notice of Mandatory Repurchase by the Trustee (or if such
date is not a Business Day, on the next succeeding Business Day), unless such
Mandatory Repurchase Date is a date less than 15 days after such Notice of
Mandatory Repurchase is given, in which case such mandatory repurchase shall
occur on the next succeeding Interest Payment Date (or, if such date is not a
Business Day, on the next succeeding Business Day). Notwithstanding the
foregoing, no such resignation or removal shall be effective until either (i)
the successor Remarketing Agent has delivered an acceptance of its appointment
to the Trustee, or (ii) the Mandatory Repurchase Date described above.
Notwithstanding the foregoing, with prior written notice to (but
without the consent of) the Borrower, the Trustee, the Fiscal Agent, the Bank
and the Noteholders, the Remarketing Agent may assign or transfer any or all of
its rights and obligations hereunder and under the Remarketing Agreement to any
wholly-owned subsidiary or affiliate of the Remarketing Agent so long as such
subsidiary or affiliate meets the qualifications for a Remarketing Agent set
forth herein and is otherwise permitted to perform such obligations under all
applicable federal and state banking and securities laws, rules and regulations.
Section 9.15. SUCCESSOR TRUSTEE, REMARKETING AGENT OR FISCAL AGENT BY
MERGER. If the Trustee, the Remarketing Agent or the Fiscal Agent consolidates
with, merges or converts into, or transfers all or substantially all its assets
(or, in the case of a bank or trust company, its corporate trust assets) to,
another corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee, Remarketing Agent or Fiscal Agent, provided that
such corporation or national banking association shall otherwise be eligible to
serve in such capacity under this Indenture.
Section 9.16. APPOINTMENT OF CO-TRUSTEE. It is the purpose of this
Indenture that there shall be no violation of any law of any jurisdiction
(including particularly the law of the State) denying or restricting the right
of banking corporations or associations to transact business as trustee in such
jurisdiction. It is recognized that in case of litigation under this Indenture,
and in particular in case of the enforcement thereof upon a default or an Event
of Default, or in case the Trustee deems that by reason of any present or future
law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein granted to the Trustee or hold title to the properties,
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in trust, as herein granted, or take any action which may be desirable or
necessary in connection therewith, it may be necessary that the Trustee appoint
an additional individual or institution as a separate or co-trustee. The
following provisions of this Section are adapted to these ends.
In the event that the Trustee appoints an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in
such separate or co-trustee but only to the extent necessary to enable such
separate or co-trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate or
co-trustee shall run to and be enforceable by either of them; provided, however,
that no co-trustee shall be liable by reason of any act or omission of any other
such co-trustee.
Should any instrument in writing from the Borrower be required by the
separate or co-trustee so appointed by the Trustee for more fully and certainly
vesting in and confirming to him or it such properties, rights, powers, trusts,
duties and obligations, any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the Borrower. In case any
separate or co-trustee or a successor to either shall die, become incapable of
acting, resign or be removed, all the estates, properties, rights, powers,
trusts, duties and obligations of such separate or co-trustee, so far as
permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a new co-trustee or successor to such separate or co-trustee.
Section 9.17 SEVERAL CAPACITIES. Anything in this Indenture to the
contrary notwithstanding, the same entity may serve hereunder as the Trustee,
the Bank, the Fiscal Agent and the Remarketing Agent and in any other
combination of such capacities, to the extent permitted by law; provided,
however, that in no event shall the same entity serve hereunder as the Trustee
and the Bank.
[End of Article IX]
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ARTICLE X
AMENDMENTS OF AND SUPPLEMENTS TO INDENTURE
Section 10.01. WITHOUT CONSENT OF NOTEHOLDERS. The Borrower and the
Trustee may amend or supplement this Indenture or the Notes without prior notice
to or consent of any Noteholder:
(a) to cure any ambiguity, inconsistency or formal defect or omission;
(b) to grant to the Trustee for the benefit of the Noteholders
additional rights, remedies, powers or authority;
(c) to subject to this Indenture additional collateral or to add other
agreements of the Borrower;
(d) to modify this Indenture or the Notes to permit qualification under
the Trust Indenture Act of 1939, as amended, or any similar federal statute at
the time in effect; to permit the qualification of the Notes for sale under the
securities laws of any state of the United States; or to prevent the application
of the Investment Company Act of 1940, as amended, to any of the transactions
contemplated by, or any of the parties to, this Indenture or the Notes;
(e) to provide for uncertificated Notes or to make any change necessary
to give effect to a custody agreement pursuant to Section 2.05(d);
(f) to evidence the succession of a new Trustee or the appointment by
the Trustee of a co-trustee;
(g) to make any change not materially adversely affecting any
Noteholder's rights requested by the Rating Agency in order (i) to obtain a
rating from the Rating Agency after the initial issuance of the Notes if the
Notes are initially issued without a rating equivalent to the rating assigned to
other securities supported by a Letter of Credit of the Bank, or (ii) to
maintain any rating on the Notes;
(h) to make any change not materially adversely affecting any
Noteholder's rights to provide for or to implement the provisions of a Letter of
Credit;
(i) to make any other change to provide for or to implement the
provisions of a Letter of Credit only if such Letter of Credit and the changes
to this Indenture become effective on a Mandatory Repurchase Date;
(j) to make any change to be effective on any Mandatory Repurchase Date
provided that such change has been disclosed to all owners of Notes who purchase
on such date;
(k) to make any change that does not materially adversely affect the
rights of any Noteholder; or
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(l) to add to this Indenture the obligation of the Trustee or the
Borrower to disclose such information regarding the Notes, the Project, the
Trustee, the Borrower or the Bank as shall be required or recommended to be
disclosed in accordance with applicable regulations or guidelines established
by, among others, the Securities and Exchange Commission.
Section 10.02. WITH CONSENT OF NOTEHOLDERS. If an amendment of or
supplement to this Indenture or the Notes without any consent of Noteholders is
not permitted by the preceding Section, the Borrower and the Trustee may enter
into such amendment or supplement without prior notice to any Noteholders but
with the consent of the holders of at least a majority in principal amount of
the Notes Outstanding. However, without the consent of all Noteholders affected,
no amendment or supplement may (a) extend the maturity of the principal of, or
interest on, any Note, (b) reduce the principal amount of, or rate of interest
on, any Note or change the terms of any redemption, (c) effect a privilege or
priority of any Note or Notes over any other Note or Notes (except as provided
herein), (d) reduce the percentage of the principal amount of the Notes required
for consent to such amendment or supplement, (e) eliminate the holders' rights
to optionally tender the Notes, (f) extend the due date for the purchase of
Notes optionally tendered by the holders thereof or reduce the purchase price of
such Notes, (g) create a lien ranking prior to or on a parity with the lien of
this Indenture on the property described in the Granting Clause of this
Indenture, or (h) deprive any Noteholder of the lien created by this Indenture
on such property. In addition, if moneys or U. S. Government Obligations have
been deposited or set aside with the Trustee pursuant to Article VII for the
payment of Notes and those Notes shall not have in fact been actually paid in
full, no amendment to the provisions of that Article shall be made without the
consent of the holder of each of those Notes affected.
Section 10.03. EFFECT OF CONSENTS. After an amendment or supplement
becomes effective, it shall bind every Noteholder unless it makes a change
described in any of the lettered clauses of the preceding Section. In such case,
the amendment or supplement shall bind each Noteholder who consented to it and
each subsequent holder of a Note or portion of a Note evidencing the same debt
as the consenting holder's Note.
Section 10.04. NOTATION ON OR EXCHANGE OF NOTES. If an amendment or
supplement changes the terms of a Note, the Trustee may require the holder to
deliver it to the Fiscal Agent. The Fiscal Agent may place an appropriate
notation on the Note regarding the changed terms and return it to the holder.
Alternatively, if the Trustee and the Borrower determine, the Borrower in
exchange for the Note shall issue and the Fiscal Agent or the Trustee shall
authenticate a new Note that reflects the changed terms. In either event, the
cost of placing such notation on the Note(s) shall be borne by the Borrower.
Section 10.05. SIGNING BY TRUSTEE OF AMENDMENTS AND SUPPLEMENTS. The
Trustee shall sign any amendment or supplement to this Indenture or the Notes
authorized by this Article if the amendment or supplement, in the judgment of
the Trustee, does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing an amendment or supplement, the Trustee shall be entitled to receive
and (subject to Section 9.01) shall be fully protected in relying on an Opinion
of Counsel stating that such
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amendment or supplement is authorized by this Indenture and is duly authorized,
executed and delivered and enforceable in accordance with its terms.
Section 10.06. BANK, FISCAL AGENT AND REMARKETING AGENT CONSENTS
REQUIRED. Notwithstanding the other provisions of this Article X, an amendment
or supplement to this Indenture or the Notes shall not become effective unless
the Remarketing Agent (but only to the extent that such amendment or supplement
affects the rights, duties or obligations of the Remarketing Agent hereunder),
the Fiscal Agent (but only to the extent that such amendment or supplement
affects the rights, duties or obligations of the Fiscal Agent hereunder) and the
Bank deliver to the Trustee their written consents to the amendment or
supplement. In any event, no amendment or supplement hereto shall become
effective until the Remarketing Agent and the Fiscal Agent acknowledge receipt
of a copy of such supplement or amendment.
Section 10.07. NOTICE TO NOTEHOLDERS. The Trustee shall cause notice of
the execution of a supplemental Indenture to be mailed promptly by first-class
mail to each Noteholder at the holder's registered address. The notice shall
state briefly the nature of the supplemental Indenture and that copies thereof
are on file with the Trustee for inspection by all Noteholders.
Section 10.08. OPINION OF COUNSEL REQUIRED. An amendment or supplement
to this Indenture shall not become effective unless the Trustee has received an
Opinion of Counsel to the Borrower addressed to the Trustee, the Fiscal Agent,
the Bank, the Borrower and the Remarketing Agent to the effect that such
amendment or supplement is authorized by this Indenture.
[End of Article X]
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ARTICLE XI
MISCELLANEOUS
Section 11.01 NOTICES.
(a) Any notice, request, direction, designation, consent,
acknowledgment, certification, appointment, waiver or other communication
required or permitted by this Indenture or the Notes must be in writing except
as expressly provided otherwise in this Indenture or the Notes.
(b) Except as otherwise provided herein, any notice or other
communication required or permitted by this Indenture shall be sufficiently
given and deemed given when (i) delivered by hand, (ii) sent by a nationally
recognized overnight courier, (iii) mailed by first-class mail, postage prepaid,
or, (iv) unless specifically prohibited under the terms of the Indenture, by
telecopy under the provisions of this Indenture, addressed as follows:
(1) If to the Borrower:
Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, Florida 33323
Attn: Michael W. Wallace, Chief Financial Officer
Facsimile Number: (954) 845-0428
with a copy to:
Akerman, Senterfitt & Eidson, P.A.
255 S. Orange Avenue
Orlando, Florida 32802
Attn: T. Dean Dickson, Esq.
Facsimile Number: (407) 843-6610
(2) If to the Trustee or the Fiscal Agent:
Norwest Bank Minnesota, N.A.
Norwest Center
6th Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attn: Corporate Trust Department
Facsimile Number: (612) 667-9825
(3) If to the Remarketing Agent:
NationsBank, N.A.
BankAmerica Corporate Center
100 North Tryon Street
NC1-007-06-06
Charlotte, North Carolina 28255
Attn: Credit Enhanced Product Trading
Facsimile: (704) 335-2291
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with copies to:
NationsBank, N.A.
Atlanta Plaza Building
GA1-006-09-13
600 Peachtree Street, N.E., 9th Floor
Atlanta, Georgia 30308
Attn: Corporate Taxable Finance
Facsimile Number: (404) 607-6484
and
Mays & Valentine, L.L.P.
NationsBank Center
1111 East Main Street
Richmond, Virginia 23219
Attn: William R. Derry, Jr., Esq.
Facsimile Number: (804) 697-1339
(4) If to the Bank:
NationsBank, N.A.
600 Peachtree Street,, 13th Floor
Atlanta, Georgia 30308
Attn: Robert Walker
Facsimile Number: (404) 607-6281
with a copy to:
English, McCaughan & O'Bryan, P.A.
100 N.E. 3rd Avenue
Fort Lauderdale, Florida 33301
Attn: Judith L. Keiser, Esquire
Facsimile Number: (954) 763-2439
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Notice to the Trustee and other information necessary to draw on the Letter of
Credit shall be sent by telephone (promptly confirmed by telecopy), telecopy or
as may be otherwise designated in writing by the Trustee. Any addressee may
designate additional or different addresses or telecopy numbers for purposes of
this Section.
A copy of any notice to any party given hereunder (with the exception
of notices required for drawings under any Letter of Credit) shall be provided
to the Remarketing Agent and the Bank in the manner such notice is otherwise
given.
The beneficial owner of $1,000,000 or more of Notes may, by written
notice to the Trustee and the Fiscal Agent, request that all notices given with
respect to such Notes be given to the registered owner thereof and to a second
address provided in such written notice to the Trustee and the Fiscal Agent.
Upon receipt of such notice described in the preceding sentence, the Trustee and
the Fiscal Agent, as applicable, shall send all notices relating to the relevant
Notes to the registered owner and the second address so designated.
Section 11.02. NOTEHOLDERS' CONSENTS. Any consent or other instrument
required by this Indenture to be signed by Noteholders may be in any number of
concurrent documents and may be signed by a Noteholder or by the holder's agent
appointed in writing. Proof of the execution of such instrument or of the
instrument appointing an agent and of the ownership of Notes, if made in the
following manner, shall be conclusive for any purposes of this Indenture with
regard to any action taken by the Trustee under the instrument:
(a) The fact and date of a person's signing an instrument may be proved
by the certificate of any officer in any jurisdiction who by law has power to
take acknowledgments within that jurisdiction that the person signing the
writing acknowledged before the officer the execution of the writing, or by an
affidavit of any witness to the signing.
(b) The fact of ownership of Notes, the amount or amounts, numbers and
other identification of such Notes and the date of holding shall be proved by
the registration books kept pursuant to this Indenture.
In determining whether the holders of the required principal amount of
Notes Outstanding have taken any action under this Indenture, Notes owned by the
Borrower or any subsidiary or affiliate of the Borrower shall be disregarded and
deemed not to be Outstanding; provided, however, that Bank Notes will not be
disregarded and shall be deemed to be Outstanding for such purpose. In
determining whether the Trustee shall be protected in relying on any such
action, only Notes which the Trustee knows to be so owned shall be disregarded.
Section 11.03. NOTICES TO RATING AGENCY. The Trustee shall notify each
Rating Agency in writing of the occurrence of any of the following events prior
(to the extent possible) to the occurrence thereof: (a) any change in the
identity of the Trustee, the Fiscal Agent or the Remarketing Agent; (b) any
amendment or modification of or change to this Indenture, the Reimbursement
Agreement (to the extent the Trustee has notice thereof) or the Letter of
Credit; (c) the expiration, substitution or termination of the Letter of Credit,
or any extension thereof;
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<PAGE> 68
(d) the payment in full of the principal of and interest on the Notes; and (e)
the delivery of any written opinion of Bankruptcy Counsel required to be
delivered under the terms of this Indenture.
Section 11.04. LIMITATION OF RIGHTS. Nothing expressed or implied in
this Indenture or the Notes shall give any person other than the Trustee, the
Bank, the Fiscal Agent, the Borrower, the Remarketing Agent and the Noteholders
any right, remedy or claim under or with respect to this Indenture.
Section 11.05. SEVERABILITY. If any provision of this Indenture shall
be determined to be unenforceable by a court of law, such holding shall not
affect any other provision of this Indenture; provided, no holding or invalidity
shall require the Trustee to make any payment from any source except those
pledged hereunder.
Section 11.06. PAYMENTS DUE ON NON-BUSINESS DAYS. If a payment date is
not a Business Day at the place of payment, then payment shall be made at that
place on the next succeeding Business Day, with the same force and effect as if
made on the payment date, and, in the case of any such payment, no interest
shall accrue for the intervening period.
Section 11.07. GOVERNING LAW. This Indenture and the authority of the
Borrower to issue the Notes shall be governed by and construed in accordance
with the laws of the State.
Section 11.08. COUNTERPARTS. This Indenture may be signed in several
counterparts, each of which shall be an original and all of which together shall
constitute the same instrument.
Section 11.09. REFERENCES TO THE BANK. The Bank has no rights to
enforce any provision of this Indenture during any period in which it has
dishonored a draw under any Letter of Credit presented in strict compliance with
the terms thereof (other than for a reason permitted by the Letter of Credit or
pursuant to any administrative or judicial order, ruling, rule, finding or
decision).
[End of Article XI]
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IN WITNESS WHEREOF, the Borrower and the Trustee have caused this Indenture to
be executed in their respective names by their respective duly authorized
officers, all as of the date first above written.
KELLSTROM INDUSTRIES, INC.
By:
-------------------------------------
Title:
[Signatures continue on next page.]
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<PAGE> 70
[Counterpart signature page to Indenture of Trust
dated as of February 1, 1999 between Kellstrom Industries, Inc.
and Norwest Bank Minnesota, N.A.]
NORWEST BANK MINNESOTA, N.A.
By:
-----------------------------------
Title:
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EXHIBIT A
FORM OF NOTE
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the issuer or its
agent for registration of transfer, exchange, or payment, and any certificate is
registered in the name of Cede & Co., or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
REGISTERED REGISTERED
- ---------- ----------
No. R-___ $
UNITED STATES OF AMERICA
STATE OF FLORIDA
KELLSTROM INDUSTRIES, INC.
TAXABLE VARIABLE RATE DEMAND NOTES
SERIES 1999
<TABLE>
<CAPTION>
INTEREST RATE MATURITY DATE ISSUE DATE CUSIP
------------- ------------- ---------- -----
<S> <C> <C> <C>
As Described February 1, 2029 February 22, 1999 [488035 AD8]
</TABLE>
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
Kellstrom Industries, Inc., a Delaware corporation (the "Borrower"),
for value received, hereby promises to pay, as hereinafter provided, to the
registered owner, or registered assigns or legal representative, upon
presentation and surrender hereof at the principal corporate trust office of
Norwest Bank Minnesota, N.A., or its successor in trust (the "Fiscal Agent"), or
by wire transfer, as provided in the Indenture, as hereinafter defined, the
principal sum set forth above on the Maturity Date set forth above, subject to
the prior mandatory or optional redemption of this Note as hereinafter
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provided, and to pay interest thereon at the Interest Rate, as hereinafter
described, payable in arrears on the Interest Payment Date, as hereinafter
defined, until payment in full and, to the extent permitted by law, interest on
overdue installments of such interest, from the Interest Payment Date next
preceding the date on which this Note is authenticated, unless this Note is (a)
authenticated before the first Interest Payment Date following the initial
delivery of the Notes, in which case it shall bear interest from the date of
such initial delivery, (b) authenticated after a Record Date and before the
subsequent Interest Payment Date, in which case interest shall be computed from
the subsequent Interest Payment Date, or (c) authenticated upon an Interest
Payment Date, in which case it shall bear interest from such Interest Payment
Date (unless interest on this Note is in default at the time of authentication,
in which case this Note shall bear interest from the date to which interest has
been paid). Except as otherwise provided in the Indenture, interest hereon shall
be paid to the person in whose name this Note is registered at the close of
business on the Record Date, as hereinafter defined, by check or draft mailed to
such person at his address as it appears on the register maintained by the
Fiscal Agent, or by wire transfer for holders of an aggregate principal amount
of at least $500,000, at the request of such holders, as provided in the
Indenture. Principal of and interest on or the purchase price of this Note are
payable in lawful money of the United States of America at the principal
corporate trust office of the Fiscal Agent upon presentation and surrender of
this Note. If any payment hereon is due on a day which is not a Business Day,
payment shall be made on the next succeeding Business Day with the same force
and effect as if made on the day such payment was due and, in the case of any
such payment, no interest shall accrue for the intervening period.
THE NOTE IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED BY,
BANKAMERICA CORPORATION OR ANY OF ITS AFFILIATED BANKS (INCLUDING THE BANK), IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND IS SUBJECT TO
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
ALTHOUGH NOT GUARANTEED BY THE BANK, PAYMENTS OF PRINCIPAL OF AND INTEREST ON
THE NOTE (AND IF REMARKETING PROCEEDS ARE NOT AVAILABLE, THE PURCHASE PRICE OF
THE NOTE) WILL BE MADE FROM DRAWINGS UNDER THE LETTER OF CREDIT ISSUED BY THE
BANK. THE FAILURE OF THE BANK TO HONOR ANY DRAWING UNDER THE LETTER OF CREDIT
WILL NOT GIVE RISE TO ANY CLAIMS OTHER THAN AGAINST THE BANK.
This Note is one of an issue of $6,670,000 in aggregate principal
amount of Kellstrom Industries, Inc. Taxable Variable Rate Demand Notes, Series
1999 (the "Notes"), of like date and tenor, except as to number and principal
amount, authorized and issued pursuant to the Indenture of Trust dated as of
February 1, 1999 (the "Indenture") between the Borrower and Norwest Bank
Minnesota, N.A., as trustee (the "Trustee"), to finance, in whole or in part,
the cost of the acquisition, construction and equipping of a headquarters
facility for the Borrower in Sunrise, Florida (the "Project"), including
reimbursing the Borrower for any of such costs paid by it prior to the issuance
of the Notes, and to pay certain costs of issuing the Notes and other related
costs. Pursuant to the Indenture, the Borrower has caused NationsBank, N.A. (the
"Bank") to issue its irrevocable Letter of Credit dated the date of the issuance
of the Notes (the "Letter of Credit") in favor of the Trustee, in an amount
sufficient to pay the outstanding principal amount of and unpaid interest on or
purchase price of the Notes, but not to exceed
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$6,746,751, pursuant to a Letter of Credit Reimbursement Agreement dated as of
February 1, 1999 (the "Reimbursement Agreement"), between the Bank and the
Borrower, which Letter of Credit has been issued in favor of the Trustee and
which initially expires (subject to early termination or extension as provided
in the Reimbursement Agreement and the Indenture) on February 22, 2002.
Substitute letters of credit may be delivered in accordance with the Indenture.
The Trustee will draw on the Letter of Credit from time to time to pay the
principal of, interest on and purchase price of the Notes. Reference is hereby
made to the Indenture, the Letter of Credit and the Reimbursement Agreement and
to all amendments thereof and supplements thereto for a description of the
provisions, among others, with respect to the nature and extent of the security,
the default provisions, the rights, duties and obligations of the Borrower and
the Trustee or the rights of the holders of the Notes and the terms upon which
the Notes are issued and secured.
The Notes are issuable as fully registered Notes in denominations of
$100,000 or any integral multiple of $5,000 in excess thereof (the "Authorized
Denominations"). This Note, upon surrender hereof at the principal office of the
Fiscal Agent with a written instrument of transfer satisfactory to the Fiscal
Agent executed by the holder hereof or his attorney duly authorized in writing,
may, at the option of the holder hereof, be exchanged for an equal aggregate
principal amount of Notes of the same aggregate principal amount and tenor as
the Notes being exchanged and of any Authorized Denomination. This Note is
transferable as provided in the Indenture, subject to certain limitations
therein contained, only upon the register of the Fiscal Agent, and only upon
surrender of this Note for transfer to the Fiscal Agent accompanied by a written
instrument of transfer (in substantially the form of the assignment attached
hereto) duly executed by the holder hereof or his duly authorized attorney.
Thereupon, one or more new Notes of any Authorized Denomination or Denominations
and in the same aggregate principal amount and tenor as the Note surrendered
will be issued to the designated transferee or transferees.
The person in whose name this Note is registered shall be deemed and
regarded as the absolute owner hereof for any purpose, as provided in the
Indenture.
The Fiscal Agent or NationsBank, N.A., as Remarketing Agent (together
with its successors, the "Remarketing Agent") may make appropriate arrangements
for the Notes (or any portion thereof) to be issued or held by means of a
book-entry system administered by The Depository Trust Company ("DTC") with no
physical distribution of Notes made to the public (other than those Notes, if
any, not held under such book-entry system). References in the remainder of this
paragraph and in the next five succeeding paragraphs to a Note or the Notes
shall be construed to mean the Note or Notes held under the book-entry system.
In such event, one Note for each maturity will be issued to DTC, and immobilized
in its custody. A book-entry system will be employed, evidencing ownership of
the Notes in Authorized Denominations, with transfers of beneficial ownership
effected on the records of DTC and the DTC Participants pursuant to rules and
procedures established by DTC.
Each DTC Participant will be credited in the records of DTC with the
amount of such DTC Participant's interest in the Notes. Beneficial ownership
interests in the Notes may be purchased by or through DTC Participants. The
holders of such beneficial ownership interests are hereinafter referred to as
the "Beneficial Owners." The Beneficial Owners will not receive
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Notes representing their beneficial ownership interests. The ownership interests
of each Beneficial Owner will be recorded through the records of the DTC
Participant from which such Beneficial Owner purchased its Notes. Transfers of
ownership interests in the Notes will be accomplished by book entries made by
DTC and, in turn, by DTC Participants acting on behalf of Beneficial Owners. SO
LONG AS CEDE CO., AS NOMINEE FOR DTC, IS THE REGISTERED OWNER OF THE NOTES, THE
TRUSTEE AND THE FISCAL AGENT SHALL TREAT CEDE & CO. AS THE ONLY HOLDER OF THE
NOTES FOR ALL PURPOSES UNDER THE INDENTURE, INCLUDING RECEIPT OF ALL PRINCIPAL
OF AND INTEREST ON THE NOTES, RECEIPT OF NOTICES, VOTING AND REQUESTING OR
DIRECTING THE TRUSTEE TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS
UNDER THE INDENTURE.
Payments of principal, interest and purchase price with respect to the
Notes, so long as DTC is the only owner of the Notes, will be paid by the Fiscal
Agent directly to DTC or its nominee, Cede & Co. as provided in the Blanket
Letter of Representation from the Borrower to DTC (the "Letter of
Representation"). DTC will remit such payments to DTC Participants, and such
payments thereafter will be paid by DTC Participants to the Beneficial Owners.
The Borrower, the Fiscal Agent and the Trustee shall not be responsible or
liable for payment by DTC or DTC Participants, for sending transaction
statements or for maintaining, supervising or reviewing records maintained by
DTC or DTC Participants.
In the event that (a) DTC determines not to continue to act as
securities depository for the Notes or (b) the Borrower or the Remarketing Agent
determines that the continuation of the book-entry system of evidence and
transfer of ownership of the Notes would adversely affect their interests or the
interests of the Beneficial Owners of the Notes, the Borrower shall discontinue
the book-entry system with DTC. If the Remarketing Agent fails to identify
another qualified securities depository to replace DTC, the Remarketing Agent
will cause the Fiscal Agent to authenticate and deliver replacement Notes in the
form of fully registered Notes to each Beneficial Owner.
THE BORROWER, THE BANK, THE FISCAL AGENT, THE REMARKETING AGENT AND THE
TRUSTEE SHALL NOT HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO ANY DTC PARTICIPANT
OR ANY BENEFICIAL OWNER WITH RESPECT TO (A) THE NOTES; (B) THE ACCURACY OF ANY
RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (C) THE PAYMENT BY DTC OR ANY
DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE
PRINCIPAL OF AND INTEREST ON THE NOTES; (D)THE DELIVERY OR TIMELINESS OF
DELIVERY BY DTC OR ANY DTC PARTICIPANT OF ANY NOTICE DUE TO ANY BENEFICIAL OWNER
WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO
BENEFICIAL OWNERS; (E) THE SELECTION OF BENEFICIAL OWNERS TO RECEIVE PAYMENTS IN
THE EVENT OF ANY PARTIAL REDEMPTION OF THE NOTES; OR (F) ANY CONSENT GIVEN OR
OTHER ACTION TAKEN BY DTC, OR ITS NOMINEE, CEDE & CO., AS OWNER.
In the event that a book-entry system of evidence and transfer of
ownership of the Notes is discontinued pursuant to the provisions of the
Indenture, the Notes shall be delivered solely as
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<PAGE> 75
fully registered Notes without coupons in the Authorized Denominations, shall be
lettered "R" and numbered separately from "1" upward, and shall be payable,
executed, authenticated, registered, exchanged and canceled pursuant to the
provisions hereof and of the Indenture.
All references herein to time shall be Eastern Time unless otherwise
expressly stated herein.
Except as otherwise specifically provided herein, all capitalized words
and terms shall have the same meaning when used herein as set forth in the
Indenture.
1. INTEREST RATE ON NOTES.
The Notes shall bear interest as provided herein from the Issue Date
referenced above until paid in full. Interest accrued on the Notes shall be paid
on each Interest Payment Date, commencing on March 1, 1999. The Notes shall bear
interest at the rate determined by NationsBank, N.A., as Placement Agent, on or
before the Issue Date as necessary to sell all of the Notes at par and to apply
until and including the next succeeding Wednesday and thereafter at the Weekly
Rate determined by the Remarketing Agent in the manner set forth below; provided
that no Weekly Rate shall exceed the Maximum Rate. The amount of interest
payable on any Interest Payment Date (a) shall be computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, whichever may be
applicable, and (b) shall be the amount of interest accrued thereon from the
preceding Interest Payment Date (or such other date as described above) to, but
excluding, the Interest Payment Date on which interest is being paid.
During each Weekly Rate Period, the Notes shall bear interest at the
Weekly Rate, determined by the Remarketing Agent initially no later than the
first day of each Weekly Rate Period and thereafter no later than Wednesday (or
the next succeeding Business Day, if such Wednesday is not a Business Day) of
each week during such Weekly Rate Period. The Weekly Rate shall be the minimum
rate of interest which the Remarketing Agent determines, in its sole discretion
based upon market conditions, would be necessary to sell the Notes on such date
of determination in a secondary market sale at the principal amount thereof,
plus, if such sale would not be on an Interest Payment Date, accrued interest.
If the Remarketing Agent has not determined a Weekly Rate for any week,
the Weekly Rate shall be the same as the Weekly Rate for the immediately
preceding week. If for any reason, the Weekly Rate cannot otherwise be
determined for any week as hereinbefore provided, the Weekly Rate for such week
shall be a rate per annum equal to 100% of the rate published in the then most
recent edition of THE BOND BUYER for 30 day prime taxable commercial paper or,
if THE BOND BUYER no longer publishes such information, such other publication
or provider of such information as the Remarketing Agent may select.
The first Weekly Rate determined for each Weekly Rate Period shall
apply to the period commencing on the first day of such Weekly Rate Period and
ending on the next succeeding Wednesday (or the next succeeding Business Day, if
such Wednesday is not a Business Day). Thereafter, each Weekly Rate shall apply
to the period commencing on Thursday (or if the date
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of determination is not a Wednesday, on the next following Business Day) and
ending on the next succeeding date of determination.
"Interest Payment Date" means the first day of each month commencing
March 1, 1999.
"Maximum Rate" means the lesser of (a) the highest interest rate which
may be borne by the Notes under Florida law or (b) twelve percent (12%) per
year.
"Record Date" means the Fiscal Agent's close of business on the
Business Day next preceding each Interest Payment Date.
The Remarketing Agent's determination of the Weekly Rates shall be
conclusive and binding on the Noteholders, the Remarketing Agent, the Trustee,
the Fiscal Agent, the Bank and the Borrower, absent manifest error.
2. REDEMPTION OF NOTES.
(a) OPTIONAL REDEMPTION. The Notes may be redeemed by the Borrower, in
whole on any Business Day, or in part on any Interest Payment Date, or if such
Interest Payment Date is not a Business Day, on the next succeeding Business
Day, at a redemption price equal to the principal thereof, plus accrued interest
to, but not including, the redemption date; provided that any such redemption in
part shall be in a minimum principal amount of $100,000 or a whole multiple of
$5,000 in excess thereof.
(b) MANDATORY REDEMPTION.
(i) The Notes are not subject to mandatory sinking fund redemption
prior to their scheduled maturity; provided, however, that pursuant to
the terms of the Reimbursement Agreement, the Bank may direct the
Borrower to exercise its right of optional redemption of the Notes in
part from time to time on the dates specified in the Reimbursement
Agreement.
(ii) The Notes are subject to mandatory redemption at a redemption
price equal to the principal amount thereof plus accrued interest to,
but not including, the redemption date in whole or in part, without
premium, at the earliest date for which notice of redemption can be
given upon receipt by the Trustee of written notice from the Bank
requesting such redemption, specifying the principal amount of the
Notes to be redeemed (if less than all of the Notes Outstanding are to
be redeemed) and stating that (A) an event of default under and as
defined in the Reimbursement Agreement has occurred and is continuing,
or (B) it holds as the registered or beneficial owner Notes purchased
by the Bank in accordance with Section 3.07 or 3.01(e) or 8.03(a) of
the Indenture and not remarketed; provided, however, only Notes so held
by the Bank shall be subject to mandatory redemption pursuant to this
subsection (B).
(iii) The Notes are subject to mandatory redemption at a redemption
price equal to the principal amount thereof plus accrued interest to,
but not including, the redemption date,
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in whole, without premium, on the Interest Payment Date which next
precedes by at least fourteen (14) days the stated expiration or
termination date of the Letter of Credit or, if such Interest Payment
Date is not a Business Day, on the next succeeding Business Day, unless
by the 20th day prior to such Interest Payment Date the Borrower
provides to the Trustee, and the Trustee has accepted, (A) evidence
that such Letter of Credit has been extended or (B) a Substitute Letter
of Credit to be effective on or prior to such Interest Payment Date, in
which event a mandatory repurchase shall occur in accordance with the
terms of subsection 3(b)(i) below.
(iv) When Notes are subject to mandatory redemption pursuant to
subsections (ii) or (iii) of 2(b), Notes paid by the Borrower or paid
from a draw or claim under the Letter of Credit or otherwise paid by or
on behalf of the Bank shall be deemed to have been purchased in lieu of
redemption on the applicable redemption date at a purchase price equal
to the principal amount thereof, plus interest accrued thereon to, but
not including, the date of such purchase, if the Trustee has received a
written request on or before said purchase date from the Borrower or
the Bank, as the case may be, specifying that the moneys provided or to
be provided by such party shall be used to purchase Notes in lieu of
redemption. No purchase of Notes by the Borrower or the Bank pursuant
to the Indenture or advance or use of any moneys to effectuate any such
purchase shall be deemed to be a payment or redemption of the Notes or
any portion thereof, and such purchase shall not operate to extinguish
or discharge the indebtedness evidence by such Notes. No Notes
purchased pursuant to this subsection (iv) shall be required to be
remarketed by the Remarketing Agent pursuant to the Indenture, unless
the Remarketing Agent specifically agrees to undertake such
remarketing.
(d) NOTICE OF REDEMPTION; EFFECT.
(i) The Trustee will prepare and the Fiscal Agent will send notice of
each redemption to each Noteholder whose Notes are being redeemed, the
Borrower, the Remarketing Agent and the Bank by first-class mail at
least 30 days but not more than 60 days before each redemption, except
for any mandatory redemption pursuant to subsection 2(b)(iii) in which
case such notice shall be given at least 15 but not more than 19 days
before such redemption.
Failure by the Fiscal Agent to give any notice of redemption
or any defect in such notice as to any particular Notes will not affect
the validity of the call for redemption of any Notes in respect of
which no such failure or defect has occurred. The notice shall identify
the Notes or portions thereof to be redeemed and set forth certain
other information relevant to such redemption, including the redemption
date and redemption price.
(ii) On the date fixed for redemption, notice having been given in the
manner and under the conditions provided in the Indenture, the Notes or
portions thereof called for redemption shall be due and payable at the
redemption price provided therefor, plus accrued interest to, but not
including, such date. On such redemption date, if moneys sufficient to
pay the redemption price of the Notes to be redeemed, plus accrued
interest
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thereon to, but not including, the date fixed for redemption, are held
by the Fiscal Agent, interest on the Notes called for redemption shall
cease to accrue; such Notes shall cease to be entitled to any benefits
or security under the Indenture or to be deemed Outstanding; and the
holders of such Notes shall have no rights in respect thereof except to
receive payment of the redemption price thereof, plus accrued interest
to, but not including, the date fixed for redemption.
(e) SELECTION OF NOTES TO BE REDEEMED. If fewer than all the Notes are
to be redeemed, the Fiscal Agent shall select the Notes to be redeemed from
among the Outstanding Notes, as set forth below, by lot or such other method as
it deems in its sole discretion to be fair and appropriate, except that Bank
Notes will be selected for redemption prior to any other Notes. The Fiscal Agent
shall make the selection from Notes not previously called for redemption. The
Fiscal Agent shall treat each holder of Notes as the owner of one Note for
purposes of selection for redemption, and shall select Notes for redemption by
lot (i) from among the holders of less than $1,000,000 in aggregate principal
amount, provided that if there are no such holders, or if, after selection from
among such holders such selection has not resulted in redemption of a sufficient
amount of Notes, then (ii) from among the holders of $1,000,000 or more in
aggregate principal amount of Notes. No portion of a Note may be redeemed that
would result in a Note which is smaller than the minimum Authorized
Denomination. For this purpose, the Fiscal Agent will consider each Note in a
denomination larger than the minimum Authorized Denomination to be separate
Notes each in the minimum Authorized Denomination.
Upon surrender of a Note redeemed in part, the Fiscal Agent will
authenticate for the surrendering holder a new Note or Notes equal in principal
amount to the unredeemed portion of the Note surrendered.
3. PURCHASE OF NOTES.
(a) OPTIONAL TENDER OF NOTES.
(i) Except as provided in Section 3(e) below, the holder (or while the
Notes are held pursuant to a book-entry system, the Beneficial Owner)
of any Note (other than a Bank Note or Borrower Note) may elect to
tender such Note (or portion thereof, provided that each of the portion
to be purchased and the portion to be retained is in an Authorized
Denomination) for purchase at a purchase price equal to 100% of the
principal amount of such Note (or portion thereof), plus accrued and
unpaid interest thereon to, but not including, the date of purchase, on
any Business Day (the "Optional Tender Date"), but only upon (A)
receipt by the Remarketing Agent by not later than 11:00 a.m. at least
seven calendar days or five Business Days, whichever may be earlier,
but not more than 30 days, prior to such Optional Tender Date of
telephonic (followed, if requested by the Remarketing Agent, by written
or facsimile confirmation delivered to the Remarketing Agent no later
than the close of business on the next succeeding Business Day) or
other written notice stating (x) the principal amount of the Note (or
portion thereof) to be tendered, (y) the Note number or other
identification satisfactory to the Remarketing Agent, and (z) the
Optional Tender Date on which such Note will be tendered; and (B) if
the Notes are not being held under a book-entry system, delivery of
such Note (with an
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appropriate instrument of transfer duly executed in blank) to the
Fiscal Agent by 10:00 a.m. on such Optional Tender Date.
(ii) Any notice of optional tender for purchase shall be irrevocable
and shall be binding on the holder giving or delivering such notice and
on any transferee of such holder.
(b) MANDATORY REPURCHASE OF NOTES; NOTICE. Except as provided in
Section 3(e) below, Notes are subject to mandatory repurchase as follows:
(i) on the effective date of any Substitute Letter of Credit delivered
pursuant to the Indenture, at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to
but not including the date of purchase; and
(ii) on any Interest Payment Date selected by the Borrower in a written
notice to the Trustee delivered at least 30 days prior to such date, or
if such Interest Payment Date is not a Business Day, on the next
succeeding Business Day, at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to
but not including the date of purchase; provided that, except as
otherwise provided in the Indenture, any such mandatory repurchase
shall be subject to the prior written consent of the Bank.
The Trustee will prepare and the Fiscal Agent will send to the holders
of Notes subject to mandatory repurchase and to the Remarketing Agent, the Bank
and the Borrower, a Notice of Mandatory Repurchase at least 15 days but not more
than 60 days before the Mandatory Repurchase Date.
(c) PAYMENT FOR PURCHASED NOTES. To the extent that sufficient moneys
are available therefor by 1:45 p.m. on the Optional Tender Date or the Mandatory
Repurchase Date or other day on which Notes have been successfully remarketed,
as applicable (the "Purchase Date"), upon surrender to the Fiscal Agent of Notes
optionally tendered or called for mandatory repurchase as provided herein, the
purchase price therefor (as provided in this Section) shall be paid in
immediately available funds by the Fiscal Agent or the Remarketing Agent not
later than the close of business on the Purchase Date. From and after the
Purchase Date or, if later, the date on which such moneys are made available to
the Remarketing Agent or the Fiscal Agent, as applicable, interest accruing on
such Notes shall cease to be payable to the prior holder thereof, such Notes
shall cease to be entitled to the benefits or security of this Indenture and to
such extent the prior holder has recourse solely to the funds held by the
Trustee, the Fiscal Agent or the Remarketing Agent for the purchase of such
Notes as provided in the Indenture.
(d) REMARKETING OF PURCHASED NOTES.
(i) Remarketing Effort. Except as provided in the Indenture, the
Remarketing Agent will (A) use reasonable best efforts to remarket on
or prior to any scheduled purchase date all Notes tendered or purchased
pursuant to the Indenture (a "Scheduled Purchase Date"), and (B) to the
extent such Notes are not remarketed on the Scheduled Purchase Date,
A-9
<PAGE> 80
continue to use reasonable best efforts to remarket such Notes, upon
the terms and subject to the conditions of the Indenture and the
Remarketing Agreement, for purchase on a Business Day after such
Scheduled Purchase Date (an "Unscheduled Purchase Date").
(ii) REMARKETING PROCEEDS. If the Remarketing Agent has received from
the purchasers thereof Remarketing Proceeds for the remarketing of all
Notes to be remarketed on a Scheduled Purchase Date, the Remarketing
Agent shall promptly forward such Remarketing Proceeds by wire transfer
(or in such other manner as is acceptable to the Remarketing Agent) to
the owners tendering such Notes for purchase. Except as otherwise
provided below with respect to Bank Notes, until such transfer, all
such Remarketing Proceeds shall be deposited in a separate, segregated
account and until applied toward payment of the purchase price of Notes
so remarketed, shall be held uninvested in trust for the benefit of the
holders tendering such Notes for purchase.
If the Remarketing Agent has not received Remarketing Proceeds
with respect to all of the Notes to be remarketed on a Scheduled
Purchase Date or has received Remarketing Proceeds from the remarketing
of all or a portion of the Notes to be remarketed on an Unscheduled
Purchased Date, the Remarketing Agent will promptly forward all of the
Remarketing Proceeds which it has received, if any, by wire transfer
(or in such other manner as is acceptable to the Remarketing Agent and
the Trustee) to the Trustee for delivery to the Fiscal Agent for
payment to the owners tendering such Notes for purchase or for payment
to the Bank in the case of Bank Notes. Except as otherwise provided
below with respect to Bank Notes, upon receipt by the Trustee and the
Fiscal Agent, all such Remarketing Proceeds shall be deposited in a
separate, segregated account and, until applied toward payment of the
purchase price of Notes so remarketed, shall be held in trust for the
benefit of the owners tendering such Notes for purchase.
(iii) Delivery of Purchased Notes. Notes purchased with Remarketing
Proceeds (other than Bank Notes) shall be delivered to the purchasers
thereof upon receipt of payment therefor. Prior to such delivery the
Fiscal Agent shall provide for registration of transfer to the Holders,
as provided in a written notice from the Remarketing Agent.
(e) LIMITATIONS ON TENDERS.
(i) The holders of the Notes shall not have the right or be required,
as the case may be, to tender any Note for purchase on an Optional
Tender Date or a Mandatory Repurchase Date (other than a mandatory
tender in lieu of redemption at the direction of the Bank pursuant to
subsection 2(b)(iv) above or a mandatory tender for purchase at the
direction of the Bank after acceleration of the Notes pursuant to the
terms of the Indenture) if on such date, following the occurrence of an
Event of Default, the Trustee has declared the principal of and
interest on the Notes to be immediately due and payable as provided in
the Indenture.
(ii) Holders of Notes called for redemption or mandatory repurchase
shall not have the right (without the prior consent of the Remarketing
Agent) to tender such Notes for purchase on an Optional Tender Date if
such Optional Tender Date will occur on or after
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<PAGE> 81
the tenth (10th) day prior to the date fixed for redemption or
mandatory repurchase. Notwithstanding the foregoing, holders of Notes
called for redemption shall not have the right in any event to tender
such Notes for purchase on an Optional Tender Date if such Optional
Tender Date will occur on or after the second (2nd) day prior to the
date fixed for redemption.
4. MISCELLANEOUS. Upon the occurrence of certain events, and on the
conditions, in the manner and with the effect set forth in the Indenture, the
principal of all Notes then Outstanding under the Indenture may become or may be
declared due and payable before the stated maturity thereof, together with
interest accrued thereon. The Indenture directs the Trustee to declare an
acceleration upon notice by the Bank of the occurrence and continuance of an
event of default under the Reimbursement Agreement, and upon the occurrence of
certain other Events of Default under the Indenture. The Trustee has the right
to accelerate the outstanding balance due under the Indenture and the principal
of the Notes in certain events only with the Bank's consent, all as provided in
more detail in the Indenture to which reference is hereby made.
The owner of this Note has no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any Event of Default under the Indenture, or to
institute, appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture and except that any registered
owner may institute action to enforce the payment of the principal of or
interest on his Note.
Modifications or alterations of the Indenture may be made only to the
extent and in the circumstances permitted by the Indenture.
Executed counterparts of the Indenture are on file at the principal
corporate trust office of the Trustee. The holder of this Note, by acceptance
hereof, consents to all of the terms and provisions of the Indenture.
It is hereby certified that all acts, conditions and things required to
happen, exist and be performed under the laws of the State of Florida, and under
the Indenture precedent to and in the issuance of this Note have happened, exist
and have been performed as so required, and that the issuance, authentication
and delivery of this Note have been duly authorized by the Borrower.
Unless the Certificate of Authentication hereon has been executed by
the Fiscal Agent by manual signature of one of its authorized signers, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
[Signatures on following page.]
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<PAGE> 82
IN WITNESS WHEREOF, Kellstrom Industries, Inc. has caused this Note to
be executed in its name and on its behalf by the manual or facsimile signature
of its President or Vice President or other authorized officer and its corporate
seal to be impressed or imprinted hereon and attested by the manual or facsimile
signature of its Secretary or Assistant Secretary, all as of the Issue Date set
forth above.
KELLSTROM INDUSTRIES, INC.
By:
--------------------------------------
Title:
--------------------------------
(CORPORATE SEAL)
ATTEST:
- -------------------------------
Secretary
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<PAGE> 83
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes issued under the provisions of the
within-mentioned Indenture.
NORWEST BANK MINNESOTA, N.A.
By:
--------------------------------------
Authorized Representative
Date of Authentication:
- ----------------------------
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<PAGE> 84
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________________________________________________
(Please print or type the name and address, including the zip code of the
transferee, and the Federal Taxpayer Identification or Social Security Number)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________________ Attorney to transfer the within Note on
the books kept for registration and transfer thereof, with full power of
substitution in the premises.
Dated:
------------------
By:
-------------------------------
NOTICE: The signature of the
Registered Owner above must
correspond with the name of the
Registered Owner as it appears on
the registration books maintained
by the Fiscal Agent.
Signature Guaranteed
By:
-----------------------------
NOTICE: Signature(s) must be guaranteed by a member firm of the STAMP,
SEMP or MSP signature guaranty medallion program.
A-14
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of March
30, 1999 (the "Effective Date") between Kellstrom Industries, Inc., a Delaware
corporation (the "Company"), and Zivi R. Nedivi, an individual resident of the
State of Florida (the "Employee").
RECITALS
The Employee has, as the President of East Shore Ventures, Inc. ("East
Shore"), served as the Chief Executive Officer of the Company and has been
responsible for the overall direction of the operations and administration of
the business of the Company. The Company and East Shore have agreed to terminate
the Management Agreement pursuant to which the Employee has provided such
services. The Company desires to employ the Employee to continue to provide such
services on substantially the same terms on which such services were provided to
the Company under the Management Agreement, and the Employee is willing to
accept such employment by the Company on such terms, subject to the terms and
conditions set forth in this Agreement.
TERMS OF AGREEMENT
In consideration of the above recitals and the mutual promises herein
contained, the Company and the Employee hereby agree as follows:
1. DEFINITIONS.
(a) The "Board" shall mean the Board of Directors of the
Company.
(b) The "Employment Period" shall mean the period commencing
on the Effective Date and ending on December 31, 2004, unless this Agreement
shall be terminated prior thereto by either party in accordance with the terms
of this Agreement.
(c) The "Executive Committee" shall mean the Executive
Committee of the Board of Directors of the Company.
(d) "GAAP" shall mean generally accepted accounting principles
as in effect in the United States from time to time.
(e) The "Restricted Period" shall mean (i) if the Employee
terminates this Agreement for "good reason" (as defined in Section 5(f)) or is
terminated "involuntarily" (as defined in Section 5(e)), then the Restricted
Period shall mean the Employment Period, and (ii) if the Employee shall
terminate this Agreement other than for good reason, or is terminated other than
involuntarily, then the Restricted Period shall mean the period including the
Employment Period and the three years following the Employment Period.
<PAGE> 2
2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the Employee,
and the Employee hereby agrees to be employed by the Company, during the
Employment Period, subject to the terms and conditions provided herein. This
Agreement shall terminate at the end of the Employment Period, unless the
Agreement shall be terminated by either party prior thereto in accordance with
the terms of this Agreement.
3. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES. During the Employment Period, the
Employee shall serve as President and Chief Executive Officer of the Company.
The Employee shall be responsible for the overall direction of the operations
and administration of the business of the Company and shall have such powers and
duties as provided for a president and chief executive officer of the Company
under the Company's Bylaws and under the General Corporation Law of the State of
Delaware, and such other incidental powers and duties as may be assigned to him
from time to time by the Board.
(b) LOCATION. The principal place of employment of the
Employee shall be the principal offices of the Company in Sunrise, Florida.
(c) COMPENSATION.
(i) BASE SALARY. The Employee's annual salary (the
"Salary") as of the Effective Date shall be $480,000 per annum and such Salary
shall apply for the duration of the Employee's employment hereunder unless and
until such Salary shall be increased by the Board. During the Employment Period,
the Salary may be reviewed and changed by the Board in its sole discretion;
PROVIDED, HOWEVER, that the Company shall in no event pay the Employee a Salary
of less than $480,000 per annum during the Employment Period. Any Salary payable
hereunder shall be paid in regular intervals in accordance with the Company's
payroll practices.
(ii) ANNUAL COMPANY BONUS. For each calendar year
commencing with the year ending December 31, 1999, at the end of which year the
Employee is employed by the Company:
(A) if the Company has Net Income (as
hereinafter defined) for such year in an amount equal to the Company's target
net income as determined in the sole discre tion of the Board (or the Executive
Committee) for such year (the "Target"), the Employee shall be entitled to a
bonus in an amount equal to the Salary of the Employee as of December 31 of such
year (the "Target Bonus");
(B) if the Company has Net Income for such
year in an amount which exceeds the Target but is less than 150% of the Target,
the Employee shall be entitled to a bonus calculated as follows:
B = Target Bonus + [Target Bonus x (NI - T)]
T
2
<PAGE> 3
where:
B = the bonus earned in such year
T = the Target for such year
NI = the actual Net Income of the Company for such year
as determined in accordance with GAAP;
(C) if the Company has Net Income for such
year in an amount which equals or exceeds 150% of the Target for such year, the
Employee shall be entitled to a bonus of 150% of the Target Bonus;
(D) if the Company has Net Income for such
year in an amount which is less than 50% of the Target for such year, the
Employee shall not be entitled to a bonus; or
(E) if the Company has Net Income for such
year in an amount which equals or exceeds 50% of the Target for such year but is
less than the Target for such year, the Employee shall be entitled to a bonus
calculated as follows:
B = Target Bonus - [Target Bonus x 2 X (T - NI)]
------------
T
where:
B = the bonus earned in such year
T = the Target for such year
NI = the actual Net Income of the Company for such year
as determined in accordance with GAAP
(iii) WITHHOLDING, ETC. The payment of any Salary
and bonus to the Employee shall be subject to all applicable withholding and
payroll taxes, and such other deductions as may be required under the Company's
employee benefit plans.
(d) BENEFITS. In addition to the compensation payable to the
Employee as set forth in Section 3(c) above, during the Employment Period, the
Employee shall be eligible to participate in all incentive, savings, pension,
welfare (including, without limitation, medical, dental, disability and salary
continuance insurance) plans, practices, policies and programs applicable on or
after the Effective Date to other executives of the Company. The Employee shall
be given credit for any period of time for which he has provided services to the
Company (including, without limitation, for the period of time for which he has
provided services to the Company as an employee of East Shore) toward all
employee benefit plans, practices, policies and programs maintained by the
Company. In addition, the Company shall, for the entire period commencing on the
Effective Date and ending
3
<PAGE> 4
on December 31, 2004 (the "Remaining Policy Period"), continue to pay the
premiums on the life insurance policy on the life of the Employee in the amount
of $4,000,000 previously obtained by the Company and transferred to the Employee
pursuant to the terms of the Management Agreement (the "Life Insurance Policy"),
and shall continue to reimburse the Employee for any Federal, state or local
income taxes payable by the Employee as a result of the payment by the Company
of such premiums on the Employee's behalf. In the event that this Agreement is
terminated (other than for cause (as hereinafter defined)) prior to December 31,
2004, the Company shall pay to the Employee a lump sum payment equal to the
aggregate unpaid premium payments payable under the Life Insurance Policy
through the end of the Remaining Policy Period, and any Federal, state or local
income taxes payable by the Employee as a result of the receipt of such payment.
(e) RELOCATION EXPENSES. If the Employee is relocated during
the Employment Period, the Employee shall be entitled to be reimbursed for
relocation expenses in an amount not greater than $10,000 in the case of any
move within the United States or $20,000 in the case of any move outside of the
United States.
(f) OTHER BUSINESS EXPENSES. During the Employment Period, the
Employee shall be entitled to receive prompt reimbursement from the Company for
all reasonable business expenses incurred by the Employee, itemized in
accordance with the Company's existing policies, practices and procedures.
(g) FRINGE BENEFITS. During the Employment Period, the
Employee shall be entitled in addition to any other benefits required to be
provided to him under the terms of this Agreement to all fringe benefits
applicable on or after the date hereof to other executives of the Company.
(h) VACATION. During the Employment Period, the Employee shall
be entitled to paid vacation in accordance with the policies and practices
applicable on or after the date hereof to executives of the Company, PROVIDED,
HOWEVER, that the Employee shall be entitled to a minimum of three weeks of paid
vacation per calendar year and all holidays that are prescribed by the Company's
policies and practices. If this Agreement is in effect for a portion of any
calendar year, the minimum three weeks shall be prorated for the period of such
year in which the Employee served pursuant to this Agreement (PROVIDED, HOWEVER,
that the Employee shall be given credit for the period of time for which he has
provided services to the Company (including, without limitation, for the period
of time for which he had provided services to the Company as an employee of East
Shore). Vacation accrued but unused at the end of a calendar year may be carried
over into the following calendar year or years; PROVIDED, HOWEVER, that such
accrued but unused vacation cannot be carried over for more than two years. All
earned, unused and accrued vacation shall be paid to the Employee upon the
expiration or termination of this Agreement.
(i) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Employee shall be entitled to an appropriate office or offices and with
furnishings and other appointments and with a secretary and other support staff
as are usual and customary for a president and chief executive officer of a
corporation of comparable size to the Company.
4
<PAGE> 5
(j) AUTOMOBILE. During the Employment Period, the Company
shall make available to the Employee an automobile and shall pay for all
expenses related thereto including, without limitation, gas, maintenance and
insurance.
4. EMPLOYEE'S OBLIGATIONS AND REPRESENTATIONS.
(a) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote substantially all of his time and attention during normal business
hours to the business and affairs of the Company and to perform faithfully and
efficiently the responsibilities assigned to the Employee from time to time by
the Board. During the Employment Period it shall not be a violation of this
Agreement for the Employee to serve on corporate, civic or charitable boards,
deliver lectures, fulfill speaking engagements or teach at educational
institutions or manage personal investments, so long as such activities do not
significantly interfere with the performance of his duties and responsibilities
hereunder on behalf of the Company.
(b) The Employee represents and warrants to the Company that
there are no agreements or arrangements, whether written or oral, in effect
which would prevent the Employee from rendering to the Company the services
required of him hereunder during the Employment Period. The Employee further
represents, warrants and agrees with the Company that as of the Effective Date
he has not made, and will not make during the Employment Period, any commitment
or do any act in conflict with this Agreement, or take any action that might
divert from the Company any opportunity which would be in the scope of any
present or future business of the Company or any subsidiary thereof.
5. TERMINATION.
(a) MUTUAL AGREEMENT. During the Employment Period, this
Agreement may be terminated at any time by mutual agreement between the Company
and the Employee on terms to be negotiated at the time of such termination. Any
such termination by mutual agreement shall be set forth in a written document
signed by the Company and the Employee. In the event of a termination by mutual
agreement, the Company's obligation to the Employee under this Agreement shall
be determined by such mutual agreement.
(b) DEATH. This Agreement shall terminate automatically upon
the Employee's death. If the Employee's employment is terminated by reason of
the Employee's death, the Company shall have no further obligations to the
Employee's legal representatives under this Agreement, other than (i) those
obligations accrued, earned or vested by the Employee as of the date of his
death, (ii) that portion of any bonus determined pursuant to Section 3(c)(ii) of
this Agreement in respect of a prior calendar year that had been deferred, which
amount shall be paid to the Employee as soon as practicable, and (iii) with
respect to the calendar year in which the Employee's death occurs, in the event
that a bonus would have been payable to the Employee pursuant to Section
3(b)(ii) of this Agreement in respect of such calendar year had the Employee not
died, the Employee shall be entitled to receive a prorated amount of such bonus
based on a fraction, the numerator of which is the number of days in the
calendar year in which the Employee died that the Employee provided
5
<PAGE> 6
services to the Company and the denominator of which is 365, with such bonus
payment to be paid in one cash lump sum paid as soon as practicable following
delivery of audited financial statements for the year in which the Employee
dies. In addition, the Employee's family shall be entitled to receive benefits
at least equal to the most favorable benefits provided by the Company to
surviving families of executives of the Company based on the terms of the
benefit plans referenced in Section 3(d) of this Agreement as in effect on the
date of the Employee's death.
(c) DISABILITY. If the Company determines in good faith that
the Employee has a "disability" (as defined below), it may give the Employee
written notice of its intention to terminate the Employee's employment. In such
event, the Employee's employment with the Company shall terminate effective on
the 60th day after receipt by the Employee of such notice. No such notice of
termination by reason of disability shall be given until the Employee has
experienced a period of three consecutive months of disability and the
disability is continuing. The notice of termination shall not be effective if
the Employee returns to full-time performance of his duties prior to the
expiration of the 60 day notice period. For purposes of this Agreement,
"disability" shall mean a physical or mental condition which, three months after
its commencement, is determined to be total and permanent by a physician
selected by the Company and which prevents the Employee from performing his
duties hereunder. The Employee shall be entitled to all compensation and
benefits provided for under this Agreement during the three month waiting period
for the disability determination and during the 60 day notice of termination
period. In the event that the Company provides long-term disability benefits for
the Employee, such benefits shall not commence until after the employment of the
Employee has been terminated and the Company has ceased paying the Employee
compensation pursuant to the foregoing sentence. If the Employee's employment is
terminated by reason of the Employee's disability, this Agreement shall
terminate without further obligations to the Employee or the Employee's legal
representatives under this Agreement, other than (i) those obligations accrued,
earned or vested by the Employee as of the date of the termination, (ii) that
portion of any bonus determined pursuant to Section 3(c)(ii) of this Agreement
in respect of a prior calendar year that had been deferred, which amount shall
be paid to the Employee as soon as practicable, and (iii) with respect to the
calendar year in which this Agreement is terminated, in the event that a bonus
would have been payable to the Employee pursuant to Section 3(c)(ii) of this
Agreement in respect of such calendar year had this Agreement not terminated,
the Employee shall be entitled to a pro-rated amount of such bonus based on a
fraction the numerator of which is the number of days in the calendar year in
which this Agreement was terminated that the Employee provided services to the
Company and which were prior to the period of the Employee's disability and the
denominator of which is 365, with such bonus payment to be paid in one cash lump
sum paid as soon as practicable following delivery of audited financial
statements for the year in which this Agreement is terminated. In the event the
Employee becomes disabled but returns to active service under this Agreement
prior to the expiration of the three-month waiting period, or prior to the
expiration of the 60-day notice of intent to terminate period, the Employee
shall be entitled to the full amount of any bonus payable pursuant to Section
3(c)(ii) of this Agreement in respect of the year in which he became disabled
without regard to the period of absence due to the disability. In addition, the
Employee and the Employee's family shall be entitled to receive benefits,
including without limitation disability benefits, at least equal to the most
favorable benefits provided by the Company to executives of the Company based on
the terms of
6
<PAGE> 7
the benefit plans referenced in Section 3(d) of this Agreement as in effect on
the date the Employee's disability commenced.
(d) CAUSE. During the Employment Period, the Company may
terminate the Employee's employment for "cause" (as defined below), as
determined by the Board (or the Executive Committee). For purposes of this
Agreement, "cause" shall mean:
(i) an act or acts of personal dishonesty undertaken
by the Employee at the expense of or against the interests of the Company;
(ii) repeated violations by the Employee of his
obligations under Section 4(a) of this Agreement which are not remedied within a
reasonable period of time after receipt of written notice from the Company of
such violations;
(iii) any direct or indirect disclosure of any
confidential information or other special knowledge of the finances, business or
other affairs of the Company;
(iv) the conviction of the Employee of a felony; or
(v) the conviction of the Employee of a serious
misdemeanor involving illegal use, possession or sale of drugs, larceny, crimes
of violence or sex offenses.
If the Employee's employment is terminated for cause, this Agreement shall
terminate without further obligations to the Employee under this Agreement,
other than those obligations accrued, earned or vested by the Employee as of the
date of termination of employment. The Employee shall not be entitled to any
bonus in respect of the year of termination in the event the Employee's
employment is terminated for cause pursuant to this Section 5(d).
(e) INVOLUNTARY TERMINATION. Notwithstanding anything herein
to the contrary, the Company shall have the right, at any time upon notice to
the Employee, to terminate the Employee's employment. If, during the Employment
Period, the Company terminates the Employee's employment other than for reasons
set forth in Sections 5(a) through 5(d) above, the Employee shall be deemed to
have been "terminated involuntarily" (such termination being referred to herein
as an ("involuntary termination") and the Company shall pay to the Employee the
following amounts:
(i) to the extent not theretofore paid, the Company
shall pay the Salary through the date of such involuntary termination as well as
that portion of any bonus determined pursuant to Section 3(c)(ii) of this
Agreement in respect of a prior calendar year which had been deferred;
(ii) the Company shall pay the Employee on the date
of such involuntary termination an amount equal to two years of the Salary, plus
the amount of the bonus paid to the Employee pursuant to Section 3(c)(ii) of
this Agreement on account of each of the two calendar years preceding the year
in which such involuntary termination occurs;
7
<PAGE> 8
(iii) with respect to the year in which such
involuntary termination occurs, in the event that a bonus would have been
payable to the Employee pursuant to Section 3(c)(ii) of this Agreement in
respect of such year had this Agreement not been terminated, the Employee shall
be entitled to receive a pro-rated amount of such bonus based on a fraction in
which the numerator is the number of days in the calendar year in which this
Agreement terminated that the Employee provided services to the Company and the
denominator is 365, with such bonus payment to be paid in one cash lump sum paid
as soon as practicable following delivery of audited financial statements for
the year in which this Agreement is involuntarily terminated; and
(iv) the Company shall pay in one cash lump sum any
vacation days accrued but unused as of the date of the Employee's involuntary
termination.
(f) GOOD REASON. During the Employment Period, the Employee
may terminate his employment for "good reason" as defined below. For purposes of
this Agreement, "good reason" shall mean:
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position as set forth in Section
3(a) of this Agreement or any action by the Company which results in a material
diminution in such position, or in the authority, duties or responsibilities of
the Employee, excluding for this purpose any isolated, insubstantial and
inadvertent action by the Company which is not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;
(ii) any failure by the Company to comply with any of
the provisions of Sections 3(a) through 3(j) of this Agreement regarding the
Employee's Salary, compensation, benefits, expenses, fringe benefits, vacation
or office staff other than an isolated, insubstantial and inadvertent action by
the Company which is not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be
based at any office or location other than the location set forth in Section
3(b) of this Agreement, except for travel reasonably required in the performance
of his responsibilities; or
(iv) any failure by the Company to comply with and
satisfy the terms of Section 10 of this Agreement with respect to successors.
In the event that the Employee terminates his employment for good reason as
defined in this Section 5(f), it shall be deemed an "involuntary termination" as
set forth in Section 5(e) above and the Employee shall be entitled to all
payments and obligations set forth in Sections 5(e)(i) through 5(e)(iv) of this
Agreement as if the Employee's employment had been involuntarily terminated.
(g) VOLUNTARY TERMINATION OR RETIREMENT. If the Employee shall
elect to voluntarily terminate his services under this Agreement (other than for
"good reason" as defined in Section 5(f) above) or to retire during the
Employment Period, this Agreement shall terminate
8
<PAGE> 9
automatically and the Company shall have no further obligations to the Employee
under this Agreement, other than those obligations accrued, earned or vested as
of the date of the termination or retirement. In the event of voluntary
termination or early retirement (prior to the Employee's 65 birthday), the
Employee shall be entitled to receive a pro-rated amount of any bonus payable in
respect of the year of voluntary termination or early retirement. If the
Employee retires upon the expiration of this Agreement at the end of the
Employment Period, and in the event that a bonus would have been payable to the
Employee pursuant to Section 3(c)(ii) of this Agreement in respect of such
calendar year had this Agreement not terminated, the Employee shall be entitled
to receive a pro-rated amount of such bonus based on a fraction in which the
numerator is the number of days in the calendar year in which the Employee was
terminated that he provided services to the Company and the denominator is 365,
with such bonus payment to be paid in one cash lump sum paid as soon as
practicable following delivery of audited financial statements for the year in
which this Agreement is terminated.
(h) NOTICE OF TERMINATION. Any termination by the Company for
any reason or by the Employee for any reason shall be communicated by such party
in a written notice to the other party which indicates (i) the specific
termination provision in this Agreement relied upon, (ii) the facts and
circumstances claimed to provide a basis for such termination, and (iii) the
date of termination.
(i) NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices
provided by the Company and for which the Employee may otherwise qualify.
Amounts which are vested benefits or which the Employee is otherwise entitled to
receive under any plan, policy, practice or program of the Company at or
subsequent to the termination of this Agreement shall be payable in accordance
with such plan, policy, practice or program.
(j) FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment or
other claim, right or action which the Company may have against the Employee or
others. In no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any of the provisions of this Agreement. In connection with any
contest by the Company or others of the validity or enforceability of, or
liability under, any provision of this Agreement in which the Employee is
ultimately successful, the Company agrees to pay, to the full extent permitted
by law, all reasonable legal fees and expenses, as incurred by the Employee and
others which the Employee may reasonably incur as a result of any such contest.
6. CONFIDENTIALITY.
(a) The Employee shall hold in a fiduciary capacity for the
benefit of the Company all secret, proprietary or confidential information,
knowledge or data relating to the Company and its business, including without
limitation, financial information and customer lists, which shall have been
obtained by the Employee during the Employment Period and which shall not
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<PAGE> 10
be or become public knowledge (other than by acts by the Employee in violation
of this Agreement). Notwithstanding the foregoing, the Employee may disclose any
such information if such information is compelled by legal process, provided
that if the Employee is so compelled, he shall provide the Company with prompt
notice so that it may seek a protective order or other remedy. In any event, the
Employee shall furnish only that portion of the confidential information that is
legally required to be disclosed.
(b) In the event that the Employee breaches any provision of
this Section 6, any payments or other benefits promised under this Agreement
shall be forfeited. In addition, the Company shall be entitled to apply to any
court of competent jurisdiction for an injunction restraining the Employee from
committing or continuing any violation of this Agreement.
7. NON-COMPETITION. The Employee agrees that during the Restricted
Period, he will not, without the prior consent of the Board, directly or
indirectly, alone or as a partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor or shareholder of, or lender to, any
company or business, anywhere within the continental United States, Israel,
Ireland or any other country in which the Company has operations, engage or
participate or make any financial investments in or become employed by or render
advisory of other services to or for any person, firm or corporation, or in
connection with any business activity, other than that of the Company and its
subsidiaries, directly or indirectly in competition with any of the business
operations or activities of the Company and its subsidiaries as of the date in
question or, if later, as of the date of termination of this Agreement, whether
such companies are presently existing or hereafter acquired. Nothing herein
contained, however, shall restrict the Employee from making any investments in
any company whose stock is listed on a national securities exchange or actively
traded in the over-the-counter market, so 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 the Company or any of its
subsidiaries.
8. RESTRICTION ON SOLICITATION. The Employee agrees that during the
Employment Period and for three (3) years thereafter he will not:
(a) directly or indirectly solicit, raid, entice or induce any
employee of the Company or any of its subsidiaries to become an employee of any
person, firm or corporation which is, directly or indirectly, in competition
with the business or activities of the Company or any of its subsidiaries or;
(b) directly or indirectly approach any such employee for
these purposes;
(c) authorize or knowingly approve the taking of such actions
by other persons on behalf of any such person, firm or corporation, or assist
any such person, firm or corporation in taking such action; or
(d) directly or indirectly solicit, raid, entice or induce any
person, firm or corporation who or which on the date hereof is, or at the time
during his employment with the Company or any of its subsidiaries shall be, a
customer of the Company or any of its subsidiaries,
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<PAGE> 11
to become a customer for the same or similar products which it purchased from
the Company or any of its subsidiaries, of any other person, firm or
corporation, and the Employee shall not approach any such customer for such
purpose or authorize or knowingly approve the taking of such actions by any
other person; provided that if the Employee terminates this Agreement for good
reason or in the event of an involuntary termination by the Company, then this
subsection (d) shall not apply.
9. REMEDIES. The Employee hereby acknowledges that in the event of a
breach or threatened breach by him of the provisions of Sections 6, 7 or 8 of
this Agreement, the Company would suffer irreparable harm for which there would
be no adequate remedy at law. Accordingly, the Employee agrees that in such
event, in addition to any other remedies which the Company may have in law or in
equity for money damages or other relief, the Company shall be entitled to
temporary and/or injunctive relief, without the necessity of proving damages, to
enforce the provisions hereof.
10. SUCCESSORS. This Agreement is personal to the Employee and may not,
without the prior written consent of the Company, be assigned by the Employee
other then by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the legal representatives of the
Employee. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
defined herein and any successor to its business and/or assets as aforesaid
which assumes this Agreement by operation of law or otherwise.
11. BINDING ARBITRATION. In the event that the Company and the Employee
cannot agree on an interpretation of any provision of this Agreement, or in the
event that either of the parties fails to make any payments or otherwise fulfill
any obligations required by the terms of this Agreement, the Company and the
Employee agree to resolve any such dispute through binding arbitration. Any
request for such arbitration shall be served on the other party by written
notice. The parties shall agree upon and select an arbitrator within 20 days
after written demand is made by either party for such arbitration. The
arbitrator shall set a time for hearing within 60 days of his/her selection.
Each party shall have an opportunity to present evidence on the issues in
dispute before the arbitrator and each party may be represented by legal counsel
if either so desires. The decision of the arbitrator shall be rendered in
writing to both parties within 30 days of the close of the hearing. The decision
of the arbitrator shall be final and binding upon both parties. Any legal fees,
expenses or other costs incurred by the Company and the Employee in connection
with such arbitration shall be borne by the Company. The parties agree that to
the extent not inconsistent with the foregoing provisions of this Section 11,
the then current rules of the American Arbitration Association shall apply.
12. INDEMNIFICATION.
(a) If the Employee acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and the Employee had no reasonable
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<PAGE> 12
cause to believe that his conduct was unlawful or detrimental to the Company,
the Company shall indemnify and hold harmless the Employee and his legal
representatives from and against any and all claims, losses, liabilities,
damages, costs, demands, causes of action (whether legal, equitable,
administrative, civil or criminal), judgments, settlements (subject to the last
sentence of paragraph (c) hereof), fines, court costs, and other expenses of any
kind or nature whatsoever, including, without limitation, attorneys' fees and
disbursements (collectively, "Losses"), which may be threatened against,
incurred or suffered by the Employee or his legal representatives in connection
with, relating to or arising out of, directly or indirectly, the Employee's
performance, duties and responsibilities to, for and on behalf of, the Company,
including, without limitation, (i) this Agreement and all actions or omissions
taken hereunder and (ii) any acts, omissions or alleged acts or omissions
arising out of the Employee's activities on behalf of the Company or in
furtherance of the interests of the Company.
(b) EXCEPTION. Notwithstanding anything contained herein or in
the By-Laws of the Company, the Company shall have no obligations to indemnify
the Employee if the Loss incurred by the Employee (i) arises out of an action
brought directly by the Company against the Employee or (ii) arises, directly or
indirectly, as a result of this Agreement being terminated for cause (as is
defined herein).
(c) NOTIFICATION OF CLAIM. Promptly after receipt by the
Company of notice of any claim against the Employee pursuant to which the
Employee is entitled to indemnification, the Company shall have the right to
assume the defense of such claim, including the employment of counsel of its
choice. Although the Employee shall have the right to employ his own counsel,
the fees and expenses of such counsel shall be at the expense of the Employee.
The Company shall not be liable for any settlement of any claim or action
effected without its written consent, PROVIDED, HOWEVER, that such consent was
not unreasonably withheld.
(d) PAYMENT OF INDEMNITY AMOUNTS. The Company agrees to pay
all amounts payable in respect of Losses immediately upon its receipt of a
statement with respect thereto rendered by the Employee, together with
appropriate supporting documentation thereof. It is the express intention of the
parties hereto that all such amounts shall be paid by the Company on or before
the date payment thereof is due, and that the Employee shall not be required at
any time to bear any costs or expenses on account of Losses.
13. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(b) The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
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<PAGE> 13
(c) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if sent by
facsimile transmission, delivered by overnight or other carrier service, or
mailed, certified first class mail, postage prepaid, return receipt requested,
to the parties hereto at the following addresses:
If to the Company, to:
Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, Florida 33323
Attn: Chairman
Telecopier: (954) 858-2449
If to the Employee, to:
Mr. Zivi R. Nedivi
c/o Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, Florida 33323
Telecopier: (954) 858-2449
or to such other address as either party shall have furnished to the other in
accordance herewith.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) A party's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement embodies the entire agreement between the
Company and the Employee and supersedes all prior agreements and understandings,
oral or written, with respect to the subject matter hereof including, without
limitation, the Management Agreement.
(g) This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which, together, shall constitute
one and the same instrument.
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<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
KELLSTROM INDUSTRIES, INC.
By:__________________________________________
Michael W. Wallace
Chief Financial Officer
EMPLOYEE
---------------------------------------------
Zivi R. Nedivi
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<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of March
30, 1999 (the "Effective Date"), between Kellstrom Industries, Inc., a Delaware
corporation (the "Company"), and Yoav Stern, an individual resident of the State
of California (the "Employee").
RECITALS
The Employee has, as the Managing Member of Helix Management Company
II, LLC ("Helix"), provided mergers and acquisitions and financial advisory
services to the Company and assisted the Company in analyzing, structuring,
negotiating and effecting a number of significant transactions. The Company and
Helix have agreed to terminate the agreement with Helix pursuant to which the
Employee has provided such services. The Company desires to employ the Employee
to continue to provide such services and to lead the Company's strategic
development efforts, and the Employee is willing to accept such employment and
to provide such services, on the terms and conditions set forth in this
Agreement.
TERMS OF AGREEMENT
In consideration of the above recitals and the mutual promises herein
contained, the Company and the Employee hereby agree as follows:
1. DEFINITIONS.
(a) The "Board" shall mean the Board of Directors of the
Company.
(b) The "Employment Period" shall mean the period commencing
on the Effective Date and ending on December 31, 2004, unless this Agreement
shall be terminated prior thereto by either party in accordance with the terms
of this Agreement.
(c) The "Executive Committee" shall mean the Executive
Committee of the Board of Directors of the Company.
(d) "GAAP" shall mean generally accepted accounting principles
as in effect in the United States from time to time.
(e) The "Restricted Period" shall mean (i) if the Employee
terminates this Agreement for "good reason" (as defined in Section 5(f)) or is
terminated "involuntarily" (as defined in Section 5(e)), then the Restricted
Period shall mean the Employment Period, and (ii) if the Employee shall
terminate this Agreement other than for good reason, or is terminated other than
involuntarily, then the Restricted Period shall mean the period including the
Employment Period and the three years following the Employment Period.
<PAGE> 2
2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the Employee,
and the Employee hereby agrees to be employed by the Company, during the
Employment Period, subject to the terms and conditions provided herein. This
Agreement shall terminate at the end of the Employment Period, unless the
Agreement shall be terminated by either party prior thereto in accordance with
the terms of this Agreement.
3. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES. During the Employment Period, the
Employee shall serve as Chairman of the Company. The Employee shall generally be
responsible for the development and implementation of the strategic plans for
the growth and development of the Company's business and operations, including
overseeing all aspects of the Company's mergers and acquisitions activities
(including, without limitation, analyzing, structuring, negotiating and
effecting acquisitions and integrating newly acquired businesses with the
business and operations of the Company), the evaluation and implementation of
strategic financing alternatives, the development and maintenance of the
Company's relationships with the investment banking and financial community, and
the coordination of investor relations, and such other areas as may otherwise be
assigned to him by the Board (or the Executive Committee) from time to time.
(b) LOCATION. The principal place of employment of the
Employee shall be in San Francisco, California, PROVIDED, HOWEVER, that the
Employee will be required to spend a substantial portion of his time in New
York, New York and Sunrise, Florida, when, as and to the extent necessary or
advisable to fulfill his obligations hereunder.
(c) COMPENSATION.
(i) BASE SALARY. The Employee's annual salary (the
"Salary") as of the Effective Date shall be $480,000 per annum and such Salary
shall apply for the duration of the Employee's employment hereunder unless and
until such Salary shall be increased by the Board. During the Employment Period,
the Salary may be reviewed and changed by the Board in its sole discretion;
PROVIDED, HOWEVER, that the Company shall in no event pay the Employee a Salary
of less than $480,000 per annum during the Employment Period. Any Salary payable
hereunder shall be paid in regular intervals in accordance with the Company's
payroll practices.
(ii) ANNUAL COMPANY BONUS. For each calendar year
commencing with the year ending December 31, 1999, at the end of which year the
Employee is employed by the Company:
(A) if the Company has Net Income (as
hereinafter defined) for such year in an amount equal to the Company's target
net income as determined in the sole discre tion of the Board (or the Executive
Committee) for such year (the "Target"), the Employee shall be entitled to a
bonus in an amount equal to the Salary of the Employee as of December 31 of such
year (the "Target Bonus");
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<PAGE> 3
(B) if the Company has Net Income (as
hereinafter defined) for such year in an amount which exceeds the Target but is
less than 150% of the Target for such year, the Employee shall be entitled to a
bonus calculated as follows:
B = Target Bonus + [Target Bonus x (NI - T)]
T
where:
B = the bonus earned in such year
T = the Target for such year
NI = the actual Net Income of the Company for such year
as determined in accordance with GAAP;
(C) if the Company has Net Income for such
year in an amount which equals or exceeds 150% of the Target for such year, the
Employee shall be entitled to a bonus of 150% of the Target Bonus;
(D) if the Company has Net Income for such
year in an amount which is less than 50% of the Target for such year, the
Employee shall not be entitled to a bonus;
(E) if the Company has Net Income for such
year in an amount which equals or exceeds 50% of the Target for such year but is
less than the Target for such year, the Employee shall be entitled to a bonus
calculated as follows:
B = Target Bonus - [Target Bonus x 2 X (T - NI)]
------------
T
where:
B = the bonus earned in such year
T = the Target for such year
NI = the actual Net Income of the Company for such year
as determined in accordance with GAAP;
(iii) WITHHOLDING, ETC. The payment of any Salary
and bonus to the Employee shall be subject to all applicable withholding and
payroll taxes, and such other deductions as may be required under the Company's
employee benefit plans.
(d) BENEFITS. In addition to the compensation payable to the
Employee as set forth in Section 3(c) above, during the Employment Period, the
Employee shall be eligible to participate in all incentive, savings, pension,
welfare (including, without limitation, medical, dental, disability and salary
continuance insurance) plans, practices, policies and programs applicable on or
after the
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<PAGE> 4
Effective Date to other executives of the Company. The Employee shall be given
credit for any period of time for which he has provided services to the Company
(including, without limitation, for the period of time for which he has provided
services to the Company as the managing member of Helix) toward all employee
benefit plans, practices, policies and programs maintained by the Company. In
addition, the Company shall, for the entire period commencing on the Effective
Date and ending on December 31, 2004 (the "Remaining Policy Period"), continue
to pay the premiums on the life insurance policy on the life of the Employee in
the amount of $4,000,000 previously obtained by the Company and transferred to
the Employee pursuant to the terms of the Helix Agreement (the "Life Insurance
Policy"), and shall continue to reimburse the Employee for any Federal, state or
local income taxes payable by the Employee as a result of the payment by the
Company of such premiums on the Employee's behalf. In the event that this
Agreement is terminated (other than for cause (as hereinafter defined)) prior to
December 31, 2004, the Company shall pay to the Employee a lump sum payment
equal to the aggregate unpaid premium payments payable under the Life Insurance
Policy through the end of the Remaining Policy Period, and any Federal, state or
local income taxes payable by the Employee as a result of the receipt of such
payment.
(e) RELOCATION EXPENSES. If the Employee is relocated during
the Employment Period, the Employee shall be entitled to be reimbursed for
relocation expenses in an amount not greater than $10,000 in the case of any
move within the United States or $20,000 in the case of any move outside of the
United States.
(f) OTHER BUSINESS EXPENSES. During the Employment Period, the
Employee shall be entitled to receive prompt reimbursement from the Company for
all reasonable business expenses incurred by the Employee, itemized in
accordance with the Company's existing policies, practices and procedures.
(g) FRINGE BENEFITS. During the Employment Period, the
Employee shall be entitled in addition to any other benefits required to be
provided to him under the terms of this Agreement to all fringe benefits
applicable on or after the date hereof to other executives of the Company.
(h) VACATION. During the Employment Period, the Employee shall
be entitled to paid vacation in accordance with the policies and practices
applicable on or after the date hereof to executives of the Company, PROVIDED,
HOWEVER, that the Employee shall be entitled to a minimum of three weeks of paid
vacation per calendar year and all holidays that are prescribed by the Company's
policies and practices. If this Agreement is in effect for a portion of any
calendar year, the minimum three weeks shall be prorated for the period of such
year in which the Employee served pursuant to this Agreement, PROVIDED, HOWEVER,
that the Employee shall be given credit for the period of time that he has
provided services to the Company (including, without limitation, for the period
of time for which he had provided services to the Company as the managing member
of Helix). Vacation accrued but unused at the end of a calendar year may be
carried over into the following calendar year or years; PROVIDED, HOWEVER, that
such accrued but unused vacation cannot be carried over for more than two years.
All earned, unused and accrued vacation shall be paid to the Employee upon the
expiration or termination of this Agreement.
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<PAGE> 5
(i) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Employee shall be entitled to an appropriate office or offices in San
Francisco, California and with furnishings and other appointments and with a
secretary and other support staff as are usual and customary for a president and
chief executive officer of a corporation of comparable size to the Company.
(j) AUTOMOBILE. During the Employment Period, the Company
shall make available to the Employee an automobile and shall pay for all
expenses related thereto including, without limitation, gas, maintenance and
insurance.
4. EMPLOYEE'S OBLIGATIONS AND REPRESENTATIONS.
(a) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote substantially all of his time and attention during normal business
hours to the business and affairs of the Company and to perform faithfully and
efficiently the responsibilities assigned to the Employee from time to time by
the Board. During the Employment Period it shall not be a violation of this
Agreement for the Employee to serve on corporate, civil or charitable boards,
deliver lectures, fulfill speaking engagements or teach at educational
institutions or manage personal investments, so long as such activities and
businesses do not significantly interfere with the performance of his duties and
responsibilities hereunder on behalf of the Company.
(b) The Employee represents and warrants to the Company that
there are no agreements or arrangements, whether written or oral, in effect
which would prevent the Employee from rendering to the Company the services
required of him hereunder during the Employment Period. The Employee further
represents, warrants and agrees with the Company that as of the Effective Date
he has not made, and will not make during the Employment Period, any commitment
or do any act in conflict with this Agreement, or take any action that might
divert from the Company any opportunity which would be in the scope of any
present or future business of the Company or any subsidiary thereof.
5. TERMINATION.
(a) MUTUAL AGREEMENT. During the Employment Period, this
Agreement may be terminated at any time by mutual agreement between the Company
and the Employee on terms to be negotiated at the time of such termination. Any
such termination by mutual agreement shall be set forth in a written document
signed by the Company and the Employee. In the event of a termination by mutual
agreement, the Company's obligation to the Employee under this Agreement shall
be determined by such mutual agreement.
(b) DEATH. This Agreement shall terminate automatically upon
the Employee's death. If the Employee's employment is terminated by reason of
the Employee's death, the Company shall have no further obligations to the
Employee's legal representatives under this Agreement, other than (i) those
obligations accrued, earned or vested by the Employee as of the date of his
death, (ii) that portion of any bonus determined pursuant to Section 3(c)(ii) of
this Agreement in respect of a
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<PAGE> 6
prior calendar year that had been deferred, which amount shall be paid to the
Employee as soon as practicable, and (iii) with respect to the calendar year in
which the Employee's death occurs, in the event that a bonus would have been
payable to the Employee pursuant to Section 3(b)(ii) of this Agreement in
respect of such calendar year had the Employee not died, the Employee shall be
entitled to receive a prorated amount of such bonus based on a fraction, the
numerator of which is the number of days in the calendar year in which the
Employee died that the Employee provided services to the Company and the
denominator of which is 365, with such bonus payment to be paid in one cash lump
sum paid as soon as practicable following delivery of audited financial
statements for the year in which the Employee dies. In addition, the Employee's
family shall be entitled to receive benefits at least equal to the most
favorable benefits provided by the Company to surviving families of executives
of the Company based on the terms of the benefit plans referenced in Section
3(d) of this Agreement as in effect on the date of the Employee's death.
(c) DISABILITY. If the Company determines in good faith that
the Employee has a "disability" (as defined below), it may give the Employee
written notice of its intention to terminate the Employee's employment. In such
event, the Employee's employment with the Company shall terminate effective on
the 60th day after receipt by the Employee of such notice. No such notice of
termination by reason of disability shall be given until the Employee has
experienced a period of three consecutive months of disability and the
disability is continuing. The notice of termination shall not be effective if
the Employee returns to full-time performance of his duties prior to the
expiration of the 60 day notice period. For purposes of this Agreement,
"disability" shall mean a physical or mental condition which, three months after
its commencement, is determined to be total and permanent by a physician
selected by the Company and which prevents the Employee from performing his
duties hereunder. The Employee shall be entitled to all compensation and
benefits provided for under this Agreement during the three month waiting period
for the disability determination and during the 60 day notice of termination
period. In the event that the Company provides long-term disability benefits for
the Employee, such benefits shall not commence until after the employment of the
Employee has been terminated and the Company has ceased paying the Employee
compensation pursuant to the foregoing sentence. If the Employee's employment is
terminated by reason of the Employee's disability, this Agreement shall
terminate without further obligations to the Employee or the Employee's legal
representatives under this Agreement, other than (i) those obligations accrued,
earned or vested by the Employee as of the date of the termination, (ii) that
portion of any bonus determined pursuant to Section 3(c)(ii) of this Agreement
in respect of a prior calendar year that had been deferred, which amount shall
be paid to the Employee as soon as practicable, and (iii) with respect to the
calendar year in which this Agreement is terminated, in the event that a bonus
would have been payable to the Employee pursuant to Section 3(c)(ii) of this
Agreement in respect of such calendar year had this Agreement not terminated,
the Employee shall be entitled to a pro-rated amount of such bonus based on a
fraction the numerator of which is the number of days in the calendar year in
which this Agreement was terminated that the Employee provided services to the
Company and which were prior to the period of the Employee's disability and the
denominator of which is 365, with such bonus payment to be paid in one cash lump
sum paid as soon as practicable following delivery of audited financial
statements for the year in which this Agreement is terminated. In the event the
Employee becomes disabled but returns to active service under this Agreement
prior to the expiration of the three-month waiting period, or prior to the
expiration of the 60-day notice of intent to terminate period, the
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<PAGE> 7
Employee shall be entitled to the full amount of any bonus payable pursuant to
Section 3(c)(ii) of this Agreement in respect of the year in which he became
disabled without regard to the period of absence due to the disability. In
addition, the Employee and the Employee's family shall be entitled to receive
benefits, including without limitation disability benefits, at least equal to
the most favorable benefits provided by the Company to executives of the Company
based on the terms of the benefit plans referenced in Section 3(d) of this
Agreement as in effect on the date the Employee's disability commenced.
(d) CAUSE. During the Employment Period, the Company may
terminate the Employee's employment for "cause" (as defined below), as
determined by the Board (or the Executive Committee). For purposes of this
Agreement, "cause" shall mean:
(i) an act or acts of personal dishonesty undertaken
by the Employee at the expense of or against the interests of the Company;
(ii) repeated violations by the Employee of his
obligations under Section 4(a) of this Agreement which are not remedied within a
reasonable period of time after receipt of written notice from the Company of
such violations;
(iii) any direct or indirect disclosure of any
confidential information or other special knowledge of the finances, business or
other affairs of the Company;
(iv) the conviction of the Employee of a felony; or
(v) the conviction of the Employee of a serious
misdemeanor involving illegal use, possession or sale of drugs, larceny, crimes
of violence or sex offenses.
If the Employee's employment is terminated for cause, this Agreement shall
terminate without further obligations to the Employee under this Agreement,
other than those obligations accrued, earned or vested by the Employee as of the
date of termination of employment. The Employee shall not be entitled to any
bonus in respect of the year of termination in the event the Employee's
employment is terminated for cause pursuant to this Section 5(d).
(e) INVOLUNTARY TERMINATION. Notwithstanding anything herein
to the contrary, the Company shall have the right, at any time upon notice to
the Employee, to terminate the Employee's employment. If, during the Employment
Period, the Company terminates the Employee's employment other than for reasons
set forth in Sections 5(a) through 5(d) above, the Employee shall be deemed to
have been "terminated involuntarily" (such termination being referred to herein
as an "involuntary termination") and the Company shall pay to the Employee the
following amounts:
(i) to the extent not theretofore paid, the Company
shall pay the Salary through the date of such involuntary termination as well as
that portion of any bonus determined pursuant to Section 3(c)(ii) of this
Agreement in respect of a prior calendar year which had been deferred;
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<PAGE> 8
(ii) the Company shall pay the Employee on the date
of such involuntary termination an amount equal to two years of the Salary, plus
the amount of the bonus paid to the Employee pursuant to Section 3(c)(ii) of
this Agreement on account of each of the two calendar years preceding the year
in which such involuntary termination occurs;
(iii) with respect to the year in which such
involuntary termination occurs, in the event that a bonus would have been
payable to the Employee pursuant to Section 3(c)(ii) of this Agreement in
respect of such year had this Agreement not been terminated, the Employee shall
be entitled to receive a pro-rated amount of such bonus based on a fraction in
which the numerator is the number of days in the calendar year in which this
Agreement terminated that the Employee provided services to the Company and the
denominator is 365, with such bonus payment to be paid in one cash lump sum paid
as soon as practicable following delivery of audited financial statements for
the year in which this Agreement is involuntarily terminated; and
(iv) the Company shall pay in one cash lump sum any
vacation days accrued but unused as of the date of the Employee's involuntary
termination.
(f) GOOD REASON. During the Employment Period, the Employee
may terminate his employment for "good reason" as defined below. For purposes of
this Agreement, "good reason" shall mean:
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position as set forth in Section
3(a) of this Agreement or any action by the Company which results in a material
diminution in such position, or in the authority, duties or responsibilities of
the Employee, excluding for this purpose any isolated, insubstantial and
inadvertent action by the Company which is not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;
(ii) any failure by the Company to comply with any of
the provisions of Sections 3(a) through 3(j) of this Agreement regarding the
Employee's Salary, compensation, benefits, expenses, fringe benefits, vacation
or office staff other than an isolated, insubstantial and inadvertent action by
the Company which is not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be
based at any office or location other than the location set forth as his
principal place of employment in Section 3(b) of this Agreement, except for
travel reasonably required in the performance of his responsibilities; or
(iv) any failure by the Company to comply with and
satisfy the terms of Section 10 of this Agreement with respect to successors.
In the event that the Employee terminates his employment for good reason as
defined in this Section 5(f), it shall be deemed an "involuntary termination" as
set forth in Section 5(e) above and the
8
<PAGE> 9
Employee shall be entitled to all payments and obligations set forth in Sections
5(e)(i) through 5(e)(iv) of this Agreement as if the Employee's employment had
been involuntarily terminated.
(g) VOLUNTARY TERMINATION OR RETIREMENT. If the Employee shall
elect to voluntarily terminate his services under this Agreement (other than for
"good reason" as defined in Section 5(f) above) or to retire during the
Employment Period, this Agreement shall terminate automatically and the Company
shall have no further obligations to the Employee under this Agreement, other
than those obligations accrued, earned or vested as of the date of the
termination or retirement. In the event of voluntary termination or early
retirement (prior to the Employee's 65 birthday), the Employee shall be entitled
to receive a pro-rated amount of any bonus payable in respect of the year of
voluntary termination or early retirement. If the Employee retires upon the
expiration of this Agreement at the end of the Employment Period, and in the
event that a bonus would have been payable to the Employee pursuant to Section
3(c)(ii) of this Agreement in respect of such calendar year had this Agreement
not terminated, the Employee shall be entitled to receive a pro-rated amount of
such bonus based on a fraction in which the numerator is the number of days in
the calendar year in which the Employee was terminated that he provided services
to the Company and the denominator is 365, with such bonus payment to be paid in
one cash lump sum paid as soon as practicable following delivery of audited
financial statements for the year in which this Agreement is terminated.
(h) NOTICE OF TERMINATION. Any termination by the Company for
any reason or by the Employee for any reason shall be communicated by such party
in a written notice to the other party which indicates (i) the specific
termination provision in this Agreement relied upon, (ii) the facts and
circumstances claimed to provide a basis for such termination, and (iii) the
date of termination.
(i) NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices
provided by the Company and for which the Employee may otherwise qualify.
Amounts which are vested benefits or which the Employee is otherwise entitled to
receive under any plan, policy, practice or program of the Company at or
subsequent to the termination of this Agreement shall be payable in accordance
with such plan, policy, practice or program.
(j) FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment or
other claim, right or action which the Company may have against the Employee or
others. In no event shall the Employee be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Employee under any of the provisions of this Agreement. In connection with any
contest by the Company or others of the validity or enforceability of, or
liability under, any provision of this Agreement in which the Employee is
ultimately successful, the Company agrees to pay, to the full extent permitted
by law, all reasonable legal fees and expenses, as incurred by the Employee and
others which the Employee may reasonably incur as a result of any such contest.
9
<PAGE> 10
6. CONFIDENTIALITY.
(a) The Employee shall hold in a fiduciary capacity for the
benefit of the Company all secret, proprietary or confidential information,
knowledge or data relating to the Company and its business, including without
limitation, financial information and customer lists, which shall have been
obtained by the Employee during the Employment Period and which shall not be or
become public knowledge (other than by acts by the Employee in violation of this
Agreement). Notwithstanding the foregoing, the Employee may disclose any such
information if such information is compelled by legal process, provided that if
the Employee is so compelled, he shall provide the Company with prompt notice so
that it may seek a protective order or other remedy. In any event, the Employee
shall furnish only that portion of the confidential information that is legally
required to be disclosed.
(b) In the event that the Employee breaches any provision of
this Section 6, any payments or other benefits promised under this Agreement
shall be forfeited. In addition, the Company shall be entitled to apply to any
court of competent jurisdiction for an injunction restraining the Employee from
committing or continuing any violation of this Agreement.
7. NON-COMPETITION. The Employee agrees that during the Restricted
Period, he will not, without the prior consent of the Board, directly or
indirectly, alone or as a partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor or shareholder of, or lender to, any
company or business, anywhere within the continental United States, Israel,
Ireland or any other country in which the Company has operations, engage or
participate or make any financial investments in or become employed by or render
advisory of other services to or for any person, firm or corporation, or in
connection with any business activity, other than that of the Company and its
subsidiaries, directly or indirectly in competition with any of the business
operations or activities of the Company and its subsidiaries as of the date in
question or, if later, as of the date of termination of this Agreement, whether
such companies are presently existing or hereafter acquired. Nothing herein
contained, however, shall restrict the Employee from making any investments in
any company whose stock is listed on a national securities exchange or actively
traded in the over-the-counter market, so 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 the Company or any of its
subsidiaries.
8. RESTRICTION ON SOLICITATION. The Employee agrees that during the
Employment Period and for three (3) years thereafter he will not:
(a) directly or indirectly solicit, raid, entice or induce any
employee of the Company or any of its subsidiaries to become an employee of any
person, firm or corporation which is, directly or indirectly, in competition
with the business or activities of the Company or any of its subsidiaries or;
(b) directly or indirectly approach any such employee for
these purposes;
10
<PAGE> 11
(c) authorize or knowingly approve the taking of such actions
by other persons on behalf of any such person, firm or corporation, or assist
any such person, firm or corporation in taking such action; or
(d) directly or indirectly solicit, raid, entice or induce any
person, firm or corporation who or which on the date hereof is, or at the time
during his employment with the Company or any of its subsidiaries shall be, a
customer of the Company or any of its subsidiaries, to become a customer for the
same or similar products which it purchased from the Company or any of its
subsidiaries, of any other person, firm or corporation, and the Employee shall
not approach any such customer for such purpose or authorize or knowingly
approve the taking of such actions by any other person; provided that if the
Employee terminates this Agreement for good reason or in the event of an
involuntary termination by the Company, then this subsection (d) shall not
apply.
9. REMEDIES. The Employee hereby acknowledges that in the event of a
breach or threatened breach by him of the provisions of Sections 6, 7 or 8 of
this Agreement, the Company would suffer irreparable harm for which there would
be no adequate remedy at law. Accordingly, the Employee agrees that in such
event, in addition to any other remedies which the Company may have in law or in
equity for money damages or other relief, the Company shall be entitled to
temporary and/or injunctive relief, without the necessity of proving damages, to
enforce the provisions hereof.
10. SUCCESSORS. This Agreement is personal to the Employee and may not,
without the prior written consent of the Company, be assigned by the Employee
other then by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the legal representatives of the
Employee. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
defined herein and any successor to its business and/or assets as aforesaid
which assumes this Agreement by operation of law or otherwise.
11. BINDING ARBITRATION. In the event that the Company and the Employee
cannot agree on an interpretation of any provision of this Agreement, or in the
event that either of the parties fails to make any payments or otherwise fulfill
any obligations required by the terms of this Agreement, the Company and the
Employee agree to resolve any such dispute through binding arbitration. Any
request for such arbitration shall be served on the other party by written
notice. The parties shall agree upon and select an arbitrator within 20 days
after written demand is made by either party for such arbitration. The
arbitrator shall set a time for hearing within 60 days of his/her selection.
Each party shall have an opportunity to present evidence on the issues in
dispute before the arbitrator and each party may be represented by legal counsel
if either so desires. The decision of the arbitrator shall be rendered in
writing to both parties within 30 days of the close of the hearing. The decision
of the arbitrator shall be final and binding upon both parties. Any legal fees,
expenses or other costs incurred by the Company and the Employee in connection
with such arbitration shall be borne by
11
<PAGE> 12
the Company. The parties agree that to the extent not inconsistent with the
foregoing provisions of this Section 11, the then current rules of the American
Arbitration Association shall apply.
12. INDEMNIFICATION.
(a) If the Employee acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and the Employee had no reasonable cause to believe that his conduct
was unlawful or detrimental to the Company, the Company shall indemnify and hold
harmless the Employee and his legal representatives from and against any and all
claims, losses, liabilities, damages, costs, demands, causes of action (whether
legal, equitable, administrative, civil or criminal), judgments, settlements
(subject to the last sentence of paragraph (c) hereof), fines, court costs, and
other expenses of any kind or nature whatsoever, including, without limitation,
attorneys' fees and disbursements (collectively, "Losses"), which may be
threatened against, incurred or suffered by the Employee or his legal
representatives in connection with, relating to or arising out of, directly or
indirectly, the Employee's performance, duties and responsibilities to, for and
on behalf of, the Company, including, without limitation, (i) this Agreement and
all actions or omissions taken hereunder and (ii) any acts, omissions or alleged
acts or omissions arising out of the Employee's activities on behalf of the
Company or in furtherance of the interests of the Company.
(b) EXCEPTION. Notwithstanding anything contained herein or in
the By-Laws of the Company, the Company shall have no obligations to indemnify
the Employee if the Loss incurred by the Employee (i) arises out of an action
brought directly by the Company against the Employee or (ii) arises, directly or
indirectly, as a result of this Agreement being terminated for cause (as defined
herein).
(c) NOTIFICATION OF CLAIM. Promptly after receipt by the
Company of notice of any claim against the Employee pursuant to which the
Employee is entitled to indemnification, the Company shall have the right to
assume the defense of such claim, including the employment of counsel of its
choice. Although the Employee shall have the right to employ his own counsel,
the fees and expenses of such counsel shall be at the expense of the Employee.
The Company shall not be liable for any settlement of any claim or action
effected without its written consent, PROVIDED, HOWEVER, that such consent was
not unreasonably withheld.
(d) PAYMENT OF INDEMNITY AMOUNTS. The Company agrees to pay
all amounts payable in respect of Losses immediately upon its receipt of a
statement with respect thereto rendered by the Employee, together with
appropriate supporting documentation thereof. It is the express intention of the
parties hereto that all such amounts shall be paid by the Company on or before
the date payment thereof is due, and that the Employee shall not be required at
any time to bear any costs or expenses on account of Losses.
12
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13. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(b) The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(c) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if sent by
facsimile transmission, delivered by overnight or other carrier service, or
mailed, certified first class mail, postage prepaid, return receipt requested,
to the parties hereto at the following addresses:
If to the Company, to:
Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, Florida 33323
Attn: President
Telecopier: (954) 858-2449
If to the Employee, to:
Mr. Yoav Stern
98 Battery Street, Suite 600
San Francisco, California 94111
Telecopier: (415) 956-9951
or to such other address as either party shall have furnished to the other in
accordance herewith.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) A party's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement embodies the entire agreement between the
Company and the Employee and supersedes all prior agreements and understandings,
oral or written, with respect to the subject matter hereof.
(g) This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which, together, shall constitute
one and the same instrument.
13
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
KELLSTROM INDUSTRIES, INC.
By:__________________________________________
Michael W. Wallace
Chief Financial Officer
EMPLOYEE
---------------------------------------------
Yoav Stern
14
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EXHIBIT 10.21
================================================================================
AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT
Dated as of December 14, 1998
Among
KELLSTROM INDUSTRIES, INC.
and
CERTAIN SUBSIDIARIES NAMED HEREIN
(collectively, the Borrowers)
and
THE FINANCIAL INSTITUTIONS PARTY
HERETO FROM TIME TO TIME
(the Lenders)
and
NATIONSBANK, N.A.
(the Agent)
and
NATIONSBANC MONTGOMERY SECURITIES LLC
(the Syndication Agent)
================================================================================
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TABLE OF CONTENTS(1)
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ARTICLE 1
DEFINITIONS 1
SECTION 1.1. DEFINITIONS................................................................................. 1
SECTION 1.2. GENERAL..................................................................................... 34
ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1. REVOLVING CREDIT LOANS...................................................................... 34
SECTION 2.2. MANNER OF BORROWING REVOLVING CREDIT LOANS.................................................. 34
SECTION 2.3. REPAYMENT OF REVOLVING CREDIT LOANS......................................................... 36
SECTION 2.4. REVOLVING CREDIT NOTES...................................................................... 37
SECTION 2.5. EXTENSION OF REVOLVING CREDIT FACILITY...................................................... 37
ARTICLE 3
LETTER OF CREDIT FACILITY
SECTION 3.1. AGREEMENT TO ISSUE.......................................................................... 37
SECTION 3.2. AMOUNTS..................................................................................... 38
SECTION 3.3. CONDITIONS................................................................................. 38
SECTION 3.4. ISSUANCE OF LETTERS OF CREDIT............................................................... 38
SECTION 3.5. DUTIES OF NATIONSBANK....................................................................... 39
SECTION 3.6. PAYMENT OF REIMBURSEMENT OBLIGATIONS........................................................ 39
SECTION 3.7. PARTICIPATIONS.............................................................................. 40
SECTION 3.8. INDEMNIFICATION, EXONERATION................................................................ 41
SECTION 3.9. SUPPORTING LETTER OF CREDIT; CASH COLLATERAL................................................ 43
</TABLE>
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1 This Table of Contents is included for reference purposes only and does not
constitute part of the Amended and Restated Loan and Security Agreement.
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ARTICLE 4
GENERAL LOAN PROVISIONS
SECTION 4.1. INTEREST.................................................................................... 44
SECTION 4.2. CERTAIN FEES................................................................................ 45
SECTION 4.3. MANNER OF PAYMENT........................................................................... 46
SECTION 4.4. GENERAL..................................................................................... 47
SECTION 4.5. LOAN ACCOUNTS; STATEMENTS OF ACCOUNT........................................................ 47
SECTION 4.6. TERMINATION OF AGREEMENT.................................................................... 48
SECTION 4.7. MAKING OF LOANS............................................................................. 48
SECTION 4.8. SETTLEMENT AMONG LENDERS.................................................................... 50
SECTION 4.9. MANDATORY PREPAYMENTS....................................................................... 54
SECTION 4.10. PAYMENTS NOT AT END OF INTEREST PERIOD; FAILURE TO BORROW.................................. 54
SECTION 4.11. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.................................... 55
SECTION 4.12. NOTICE OF CONVERSION OR CONTINUATION....................................................... 55
SECTION 4.13. CONVERSION OR CONTINUATION................................................................. 55
SECTION 4.14. DURATION OF INTEREST PERIODS; MAXIMUM NUMBER OF EURODOLLAR RATE LOANS; MINIMUM
INCREMENTS................................................................................. 55
SECTION 4.15. CHANGED CIRCUMSTANCES...................................................................... 56
SECTION 4.16. CASH COLLATERAL ACCOUNT.................................................................... 58
SECTION 4.17. BORROWERS' REPRESENTATIVE.................................................................. 58
SECTION 4.18. JOINT AND SEVERAL LIABILITY................................................................ 59
SECTION 4.19. OBLIGATIONS ABSOLUTE....................................................................... 59
SECTION 4.20. WAIVER OF SURETYSHIP DEFENSES.............................................................. 60
SECTION 4.21. WITHHOLDING TAXES.......................................................................... 60
SECTION 4.22. DESIGNATED SENIOR INDEBTEDNESS............................................................. 61
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1. CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT......................................... 61
SECTION 5.2. ALL LOANS; LETTERS OF CREDIT................................................................ 66
SECTION 5.3. CONDITIONS AS COVENANTS..................................................................... 66
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 6.1. REPRESENTATIONS AND WARRANTIES.............................................................. 66
SECTION 6.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC............................................. 77
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ARTICLE 7
SECURITY INTEREST
SECTION 7.1. SECURITY INTEREST........................................................................... 77
SECTION 7.2. CONTINUED PRIORITY OF SECURITY INTEREST..................................................... 78
ARTICLE 8
COLLATERAL COVENANTS
SECTION 8.1. COLLECTION OF RECEIVABLES................................................................... 79
SECTION 8.2. VERIFICATION AND NOTIFICATION............................................................... 80
SECTION 8.3. DISPUTES, RETURNS AND ADJUSTMENTS........................................................... 80
SECTION 8.4. INVOICES AND LEASE AGREEMENTS............................................................... 81
SECTION 8.5. DELIVERY OF INSTRUMENTS, CHATTEL PAPER AND MORTGAGE SUPPLEMENTS............................. 81
SECTION 8.6. SALES AND LEASES OF INVENTORY............................................................... 82
SECTION 8.7. OWNERSHIP AND DEFENSE OF TITLE.............................................................. 82
SECTION 8.8. INSURANCE................................................................................... 82
SECTION 8.9. LOCATION OF OFFICES AND COLLATERAL.......................................................... 83
SECTION 8.10. RECORDS RELATING TO COLLATERAL............................................................. 83
SECTION 8.11. INSPECTION................................................................................. 84
SECTION 8.12. INFORMATION AND REPORTS.................................................................... 84
SECTION 8.13. POWER OF ATTORNEY.......................................................................... 86
SECTION 8.14. ADDITIONAL REAL ESTATE AND LEASES.......................................................... 87
SECTION 8.15. ASSIGNMENT OF CLAIMS ACT................................................................... 87
SECTION 8.16. VRDN MORTGAGE.............................................................................. 87
ARTICLE 9
AFFIRMATIVE COVENANTS
SECTION 9.1. PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS..................................... 88
SECTION 9.2. COMPLIANCE WITH APPLICABLE LAW.............................................................. 88
SECTION 9.3. MAINTENANCE OF PROPERTY..................................................................... 88
SECTION 9.4. CONDUCT OF BUSINESS......................................................................... 88
SECTION 9.5. INSURANCE................................................................................... 88
SECTION 9.6. PAYMENT OF TAXES AND CLAIMS................................................................. 88
SECTION 9.7. ACCOUNTING METHODS AND FINANCIAL RECORDS.................................................... 89
SECTION 9.8. USE OF PROCEEDS............................................................................. 89
SECTION 9.9. HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL REQUIREMENTS.................................. 89
SECTION 9.10. YEAR 2000 COMPLIANCE....................................................................... 90
SECTION 9.11. ADDITIONAL BORROWERS....................................................................... 90
SECTION 9.12. SUBSIDIARY GUARANTORS...................................................................... 90
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ARTICLE 10
INFORMATION
SECTION 10.1. FINANCIAL STATEMENTS....................................................................... 92
SECTION 10.2. ACCOUNTANTS' CERTIFICATE................................................................... 93
SECTION 10.3. OFFICER'S CERTIFICATE...................................................................... 93
SECTION 10.4. COPIES OF OTHER REPORTS.................................................................... 93
SECTION 10.5. NOTICE OF LITIGATION AND OTHER MATTERS..................................................... 94
SECTION 10.6. ERISA...................................................................................... 94
SECTION 10.7. ACCURACY OF INFORMATION.................................................................... 95
SECTION 10.8. REVISIONS OR UPDATES TO SCHEDULES.......................................................... 95
SECTION 10.9. SUBORDINATED INDEBTEDNESS CERTIFICATE...................................................... 95
ARTICLE 11
NEGATIVE COVENANTS
SECTION 11.1. FINANCIAL RATIOS........................................................................... 95
SECTION 11.2. INDEBTEDNESS FOR MONEY BORROWED............................................................ 96
SECTION 11.3. GUARANTIES................................................................................. 96
SECTION 11.4. INVESTMENTS................................................................................ 96
SECTION 11.5. CAPITAL EXPENDITURES....................................................................... 97
SECTION 11.6. RESTRICTED DIVIDEND PAYMENTS AND PURCHASES, ETC............................................ 97
SECTION 11.7. MERGER, CONSOLIDATION AND SALE OF ASSETS................................................... 97
SECTION 11.8. TRANSACTIONS WITH AFFILIATES............................................................... 97
SECTION 11.9. LIENS...................................................................................... 97
SECTION 11.10. CAPITALIZED LEASE OBLIGATIONS.............................................................. 97
SECTION 11.11. OPERATING LEASES........................................................................... 97
SECTION 11.12. REAL ESTATE LEASES......................................................................... 97
SECTION 11.13. PLANS...................................................................................... 97
SECTION 11.14. SALES AND LEASEBACKS....................................................................... 97
SECTION 11.15. AMENDMENTS OF OTHER AGREEMENTS............................................................. 98
SECTION 11.16. MINIMUM AVAILABILITY....................................................................... 98
SECTION 11.17. FISCAL YEAR................................................................................ 98
SECTION 11.18. INSURANCE; PROHIBITED COUNTRIES............................................................ 98
SECTION 11.19. INTEREST RATE PROTECTION AGREEMENTS........................................................ 98
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ARTICLE 12
DEFAULT
SECTION 12.1. EVENTS OF DEFAULT.......................................................................... 98
SECTION 12.2. REMEDIES................................................................................... 101
SECTION 12.3. APPLICATION OF PROCEEDS.................................................................... 105
SECTION 12.4. POWER OF ATTORNEY.......................................................................... 105
SECTION 12.5. MISCELLANEOUS PROVISIONS CONCERNING REMEDIES............................................... 106
ARTICLE 13
ASSIGNMENTS
SECTION 13.1. SUCCESSORS AND ASSIGNS; PARTICIPATIONS..................................................... 107
SECTION 13.2. REPRESENTATION OF LENDERS.................................................................. 110
ARTICLE 14
AGENT
SECTION 14.1. APPOINTMENT OF AGENT....................................................................... 110
SECTION 14.2. DELEGATION OF DUTIES....................................................................... 110
SECTION 14.3. EXCULPATORY PROVISIONS..................................................................... 110
SECTION 14.4. RELIANCE BY AGENT.......................................................................... 111
SECTION 14.5. NOTICE OF DEFAULT.......................................................................... 111
SECTION 14.6. NON-RELIANCE ON AGENT AND OTHER LENDERS.................................................... 111
SECTION 14.7. INDEMNIFICATION............................................................................ 112
SECTION 14.8. AGENT IN ITS INDIVIDUAL CAPACITY........................................................... 112
SECTION 14.9. SUCCESSOR AGENT............................................................................ 112
SECTION 14.10. NOTICES FROM AGENT TO LENDERS............................................................. 112
SECTION 14.11. SYNDICATION AGENT......................................................................... 113
ARTICLE 15
MISCELLANEOUS
SECTION 15.1. NOTICES.................................................................................... 113
SECTION 15.2. EXPENSES................................................................................... 114
SECTION 15.3. STAMP AND OTHER TAXES...................................................................... 115
SECTION 15.4. SETOFF..................................................................................... 115
SECTION 15.5. LITIGATION................................................................................. 116
SECTION 15.6. WAIVER OF RIGHTS........................................................................... 116
SECTION 15.7. CONSENT TO ADVERTISING AND PUBLICITY....................................................... 117
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SECTION 15.8. REVERSAL OF PAYMENTS....................................................................... 117
SECTION 15.9. INJUNCTIVE RELIEF.......................................................................... 117
SECTION 15.10. ACCOUNTING MATTERS........................................................................ 117
SECTION 15.11. AMENDMENTS................................................................................ 117
SECTION 15.12. ASSIGNMENT................................................................................ 119
SECTION 15.13. PERFORMANCE OF BORROWERS' DUTIES.......................................................... 119
SECTION 15.14. INDEMNIFICATION........................................................................... 120
SECTION 15.15. ALL POWERS COUPLED WITH INTEREST.......................................................... 120
SECTION 15.16. SURVIVAL.................................................................................. 120
SECTION 15.17. TITLES AND CAPTIONS....................................................................... 121
SECTION 15.18. SEVERABILITY OF PROVISIONS................................................................ 121
SECTION 15.19. GOVERNING LAW............................................................................. 121
SECTION 15.20. COUNTERPARTS.............................................................................. 121
SECTION 15.21. REPRODUCTION OF DOCUMENTS................................................................. 121
SECTION 15.22. TERM OF AGREEMENT......................................................................... 121
SECTION 15.23. PRO-RATA PARTICIPATION.................................................................... 121
SECTION 15.24. FINAL AGREEMENT........................................................................... 122
SECTION 15.25. WAIVER OF CONSEQUENTIAL DAMAGES, ETC...................................................... 122
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ANNEXES, EXHIBITS AND SCHEDULES
ANNEX I PERFORMANCE PRICING MATRIX
ANNEX II COMMITMENTS
EXHIBIT A FORM OF REVOLVING CREDIT NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C FORM OF OPINION OF COUNSEL FOR BORROWERS
EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT E FORM OF SETTLEMENT REPORT
EXHIBIT F FORM OF JOINDER AGREEMENT
Schedule 1.1A Permitted Investments
Schedule 1.1B Permitted Liens
Schedule 6.1(a) Organization
Schedule 6.1(b) Capitalization
Schedule 6.1(d) Subsidiaries; Ownership of Stock
Schedule 6.1(f) Compliance with Laws
Schedule 6.1(g) Principal Business
Schedule 6.1(h) Governmental Approvals
Schedule 6.1(i) Title to Properties
Schedule 6.1(j) Liens
Schedule 6.1(k) Indebtedness and Guaranties
Schedule 6.1(l) Litigation
Schedule 6.1(m) Tax Matters
Schedule 6.1(q) ERISA
Schedule 6.1(u) Location of Offices and Receivables
Schedule 6.1(v) Location of Inventory
Schedule 6.1(w) Equipment
Schedule 6.1(x) Real Estate
Schedule 6.1(y) Corporate and Fictitious Names
Schedule 6.1(bb) Employee Relations
Schedule 6.1(cc) Proprietary Rights
Schedule 6.1(dd) Trade Names
Schedule 6.1(ee) Bank Accounts
Schedule 9.8 Use of Proceeds
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AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT
Dated as of December 14, 1998
KELLSTROM INDUSTRIES, INC., a Delaware corporation ("Kellstrom"),
KELLSTROM COMMERCIAL AIRCRAFT, INC., a Delaware corporation ("Kellcad"), AERO
SUPPORT HOLDINGS, INC., a Delaware corporation ("Aero Support"), INTEGRATED
TECHNOLOGY HOLDINGS CORP., a Delaware corporation ("ITC"), AEROCAR AVIATION
CORP., a Florida corporation ("Aerocar Aviation"), AEROCAR PARTS, INC., a
Florida corporation ("Aerocar Parts") (each a "Borrower" and collectively, the
"Borrowers"), the financial institutions party to this Agreement from time to
time (the "Lenders"), NATIONSBANK, N.A., a national banking association, as
agent for the Lenders (the "Agent"), and NationsBanc Montgomery Securities LLC,
as syndication agent (the "Syndication Agent"), agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.. DEFINITIONS. For the purposes of this Agreement:
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACQUIRE" or "ACQUISITION", as applied to any Business Unit or
Investment, means the acquiring or acquisition of such Business Unit or
Investment by purchase, exchange, issuance of stock or other securities, or by
merger, reorganization or any other method.
"ADJUSTED NET WORTH" means the Consolidated Net Worth of the Borrowers
and their Consolidated Subsidiaries less the amount included therein for any
amounts due from Affiliates.
"AFFILIATE" means, with respect to a Person, (a) any partner, officer,
shareholder (if holding more than 10% of the outstanding shares of capital stock
of such Person), director, employee or managing agent of such Person, (b) any
other Person (other than a Subsidiary) that, (i) directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such given Person, (ii) directly or indirectly beneficially owns
or holds 10% or more of any class of voting stock or partnership or other voting
interest of such Person or any Subsidiary of such Person, or (iii) 10% or more
of the voting stock or partnership or other voting interest of which is directly
or indirectly beneficially owned or held by such Person or a Subsidiary of such
Person. The term "control" means 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 or partnership or other
voting interest, by contract or otherwise.
<PAGE> 10
"AGENCY ACCOUNT" means an account of a Borrower maintained by it with a
Clearing Bank pursuant to an Agency Account Agreement.
"AGENCY ACCOUNT AGREEMENT" means an agreement among a Borrower, the
Agent and a Clearing Bank, in form and substance satisfactory to the Agent,
concerning the collection of payments which represent the proceeds of
Receivables or of any other Collateral.
"AGENT" means NationsBank, N.A., a national banking association, and
any successor agent appointed pursuant to SECTION 14.9 hereof.
"AGENT'S OFFICE" means the office of the Agent specified in or
determined in accordance with the provisions of SECTION 15.1.
"AGREEMENT" means and includes this Agreement, including all Schedules,
Exhibits and other attachments hereto, and all amendments, modifications and
supplements hereto and thereto.
"AGREEMENT DATE" means the date as of which this Agreement is dated.
"AIRFRAME AND ENGINE MORTGAGE" means, collectively, those certain
Airframe and Engine Mortgages and Security Agreements pursuant to which each
Borrower or Trust grant a Security Interest in all of its Airframe Inventory and
Engine Inventory to the Agent for the benefit of the Secured Parties.
"AIRFRAME INVENTORY" means Inventory owned directly or beneficially by
a Borrower or Trust consisting of an airframe (excluding all engines), but
including any and all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of with nature, so long as they are
incorporated or installed in or attached to the airframe.
"APPLICABLE LAW" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and of all
orders and decrees of all courts and arbitrators, including, without limitation,
Environmental Laws.
"APPLICABLE MARGIN" means, as to Prime Rate Revolving Credit Loans, 0%,
and as to Eurodollar Rate Revolving Credit Loans, 2.0%, in each case as adjusted
in accordance with the pricing matrix set forth on ANNEX I attached hereto based
upon the ratio of Consolidated Funded Indebtedness of the Borrowers and their
Consolidated Subsidiaries as of the date of determination to Consolidated EBITDA
of the Borrowers and their Consolidated Subsidiaries for the immediately
preceding four-quarter period. Adjustments to the Applicable Margin shall be
effective as of (i) the first day of the calendar month after the Agent's
receipt of the Borrowers' audited financial statements as of each fiscal year
end in conformance with SECTION 10.1(A), together with the accountant's
certificate described in SECTION 10.2 setting forth the calculations necessary
to determine the ratio referred to above, and (ii) the first day of the calendar
month after the Agent's receipt of the Borrowers' financial statements as of the
last day of each subsequent fiscal quarter in conformance with SECTION 10.1(B),
together with the officer's certificate described in SECTION 10.3 setting forth
the calculations necessary to determine the ratio referred to above, with the
first such adjustment taking place on the first day of the calendar month
following the Agent's receipt of the financial information required for the
quarter ending March 31, 1999. In the event Borrowers fail to timely provide the
financial statements and certificates referred to above, and without prejudice
to any additional rights under ARTICLE 12, the maximum Applicable Margin
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<PAGE> 11
shall apply to all Eurodollar Rate Loans and Prime Rate Loans until the first
day of the calendar month after the Agent's receipt of such financial statements
and certificates.
"ASSET DISPOSITION" means the disposition of any asset of any Borrower
or any of its Subsidiaries, other than sales and leases of Inventory in the
ordinary course of business.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance in the
form attached hereto as EXHIBIT D assigning all or a portion of a Lender's
interests, rights and obligations under this Agreement pursuant to SECTION 13.1.
"AVAILABILITY" means at any time (a) the Borrowing Base at such time
MINUS (b) the aggregate principal amount of Revolving Credit Loans outstanding
at such time.
"BANKING RELATIONSHIP" means obligations of any Borrower relating to or
arising out of (a) checking and operating account relationships between such
Borrower and any Lender (or any Affiliate of a Lender) and (b) Interest Rate
Protection Agreements with any Lender (or any Affiliate of a Lender).
"BASED" means, with respect to any Account Debtor, that such Account
Debtor's principal place of business, chief executive office, or principal
operations are located in such geographic location.
"BENEFIT PLAN" means an "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which a
Borrower or any Related Company is, or within the immediately preceding six
years was, an "employer" as defined in Section 3(5) of ERISA, including such
plans as may be established after the Agreement Date.
"BORROWING" means a borrowing of Revolving Credit Loans bearing
interest at the same rate, made by all Lenders on the same date and, in the case
of Eurodollar Rate Loans, having a single Interest Period, and the continuation
or conversion of an existing Loan or Loans in whole or in part.
"BORROWER" means any of Kellstrom, Kellcad, Aero Support, ITC, Aerocar
Aviation, Aerocar Parts, and each other Subsidiary of Kellstrom, Kellcad, Aero
Support, ITC or Aerocar Parts that becomes a Borrower pursuant to SECTION 9.11,
and "BORROWERS" means all of such entities collectively.
"BORROWING BASE" means at any time an amount equal to the lesser of:
(a) the Revolving Credit Facility MINUS the sum of
(i) the Letter of Credit Reserve, PLUS
(ii) the aggregate amount of the Environmental Compliance
Reserves, PLUS
(iii) such other reserves as the Agent in its reasonable
judgment may establish from time to time in accordance with customary
asset-based lending practices, and
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<PAGE> 12
(b) an amount equal to
(i) 85% of the face value of the Eligible Domestic Receivables
due and owing to the Borrowers at such time, PLUS
(ii) the lesser of
(A) 75% of the face value of the Eligible Foreign
Receivables due and owing to the Borrowers at such time, AND
(B) $4,000,000, PLUS
(iii) 65% of the Net Book Value of the Eligible Domestic
Leased Engine Inventory of the Borrowers at such time, PLUS
(iv) 65% of the Net Book Value of the Eligible Foreign Leased
Engine Inventory of the Borrowers at such time; provided, however, that
Loans and Letters of Credit outstanding against Eligible Foreign Leased
Airframe Inventory plus Loans and Letters of Credit outstanding against
Eligible Foreign Leased Engine Inventory shall at no time exceed
$50,000,000 in the aggregate, PLUS
(v) the lesser of
(A) 65% of the Net Book Value of the Eligible Leased
Airframe Inventory of the Borrowers at such time, AND
(B) $20,000,000, PLUS
(vi) 50% of the Net Book Value of the Eligible Inventoried
Engine and Parts Inventory of the Borrowers at such time, MINUS
(vii) the sum of
(A) the Letter of Credit Reserve, PLUS
(B) the aggregate amount of the Environmental
Compliance Reserves, PLUS
(C) such other reserves as the Agent in its
reasonable judgment may establish from time to time in
accordance with customary asset-based lending practices.
The advance rate against Eligible Domestic Leased Engine Inventory and Eligible
Foreign Leased Engine Inventory shall be adjusted by the Agent every year after
the Agent's receipt of appraisals showing the Fair Market Value of such
Inventory, which appraisals shall be conducted pursuant to and in accordance
with SECTION 8.12(F). Such adjustments, if necessary, shall take place on the
first day of the first month following the Agent's receipt of such appraisals.
The adjusted advance rate shall be the lesser of (a) 65%, or (b) the percentage
obtained by dividing (i) 65% of the Fair Market Value of such Inventory by (ii)
the Net Book Value of such Inventory.
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<PAGE> 13
The advance rate against all Inventory consisting of whole aircraft shall be
adjusted by the Agent every year after the Agent's receipt of appraisals showing
the Fair Market Value of each engine, the airframe, and the aircraft as a whole,
which appraisals shall be conducted pursuant to and in accordance with SECTION
8.12(F). Such adjustments, if necessary, shall take place within 10 days of the
Agent's receipt of such appraisals. The adjusted advance rate shall be the
lesser of (a) 65%, or (b) the percentage obtained by dividing (i) 65% of the
Fair Market Value of the whole aircraft (being the sum of the Fair Market Value
of the airframe and each engine) by (ii) the Net Book Value of the whole
aircraft, subject, however, to the following: (A) each time an appraisal is
conducted, whether it is the annual appraisal or an appraisal conducted in
accordance with SECTION 8.12(F) as a condition to any whole aircraft being
deemed Eligible Leased Airframe Inventory, the Agent shall calculate the sum of
65% of the most current Fair Market Value of each item of Eligible Leased
Airframe Inventory (the "Aggregate Margined Airframe FMV"), and (B) at any time
the Aggregate Margined Airframe FMV equals or exceeds $20,000,000, the adjusted
advance rate for each additional whole aircraft to be added to the Borrowing
Base shall be the lesser of (a) 65%, or (b) the percentage obtained by dividing
(i) 65% of the Fair Market Value of each engine appraised as part of such
aircraft by (ii) the Net Book Value of the whole aircraft.
The advance rate against Eligible Inventoried Engine and Parts Inventory shall
be adjusted by the Agent every year after the Agent's receipt of appraisals
showing the Orderly Liquidation Value of such Inventory, which appraisals shall
be conducted pursuant to and in accordance with SECTION 8.12(F). Such
adjustments, if necessary, shall take place within 10 days of the Agent's
receipt of such appraisals. The adjusted advance rate shall be the lesser of (a)
65%, or (b) the percentage obtained by dividing (i) 75% of the Orderly
Liquidation Value of such Inventory by (ii) the Net Book Value of such
Inventory.
"BORROWING BASE CERTIFICATE" means a certificate in the form attached
hereto as EXHIBIT B.
"BUSINESS DAY" means (a) any day other than a Saturday, Sunday or other
day on which banks in Atlanta, Georgia are authorized or required to close and
(b) in respect of any determination with respect to a Eurodollar Rate Loan, any
day referred to in clause (a) that is also a day on which tradings are conducted
in the London interbank eurodollar market.
"BUSINESS UNIT" means the assets constituting all or part of the
business, or a division or operating unit thereof, of any Person.
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than Permitted Acquisitions) which are not, in accordance with GAAP, treated as
expense items for such Person in the year made or incurred or as a prepaid
expense applicable to a future year or years, excluding, however, Airframe
Inventory or Engine Inventory.
"CAPITALIZED LEASE" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
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<PAGE> 14
"CASH COLLATERAL" means collateral consisting of cash or Cash
Equivalents on which the Agent, for the benefit of the Secured Parties, has a
first priority Lien.
"CASH COLLATERAL ACCOUNT" means a special interest-bearing deposit
account consisting of cash maintained at the principal office of the Agent and
under the sole dominion and control of the Agent, for the benefit of the
Lenders, established pursuant to the provisions of SECTION 4.16(A) for the
purposes set forth therein.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (b)
commercial paper maturing no more than one year from the date issued and, at the
time of acquisition thereof, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P1 from Moody's Investors Service, Inc.; (c)
certificates of deposit or bankers' acceptances issued in Dollar denominations
and maturing within one year from the date of issuance thereof issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia having combined capital and surplus of
not less than $100,000,000 and, unless issued by the Agent or a Lender, not
subject to set-off or offset rights in favor of such bank arising from any
banking relationship with such bank; and (d) repurchase agreements in form and
substance and for amounts satisfactory to the Agent.
"CHATTEL PAPER" means all chattel paper as such term is defined in the
Uniform Commercial Code, including, without limitation, the original of each
Lease Agreement.
"CLEARING BANK" means NationsBank and any other banking institution
with which an Agency Account has been established pursuant to an Agency Account
Agreement.
"COLLATERAL" means and includes, collectively, all of the collateral
referred to in each of the Security Documents and all of each Borrower's and
Trust's right, title and interest in and to each of the following, wherever
located and whether now or hereafter existing or now owned or hereafter acquired
or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Real Estate,
(g) all goods and other property, whether or not delivered,
(i) the sale or lease of which gives or purports to give rise
to any Receivable, including, but not limited to, all merchandise
returned or rejected by or repossessed from customers, or
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<PAGE> 15
(ii) securing any Receivable,
including, without limitation, all rights as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and
reclamation) with respect to such goods and other property,
(h) all mortgages, deeds to secure debt and deeds of trust on
real or personal property, guaranties, leases, security agreements, and
other agreements and property which secure or relate to any Receivable
or other Collateral, or are acquired for the purpose of securing and
enforcing any item thereof,
(i) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and
instruments evidencing or pertaining to any and all items of
Collateral,
(j) all files, correspondence, computer programs, tapes, discs
and related data processing software which contain information
identifying or pertaining to any of the Receivables or any Account
Debtor, or showing the amounts thereof or payments thereon or otherwise
necessary or helpful in the realization thereon or the collection
thereof,
(k) any demand, time, savings, passbook, money market or like
depository account, and all certificates of deposit, maintained with a
bank, savings and loan association, credit union or like organization,
other than an account evidenced by a certificate of deposit that is an
instrument under the UCC,
(l) all certificated and uncertificated securities, all
security entitlements, all securities accounts, all commodity contracts
and all commodity accounts,
(m)(i) any investment account maintained by or on behalf of a
Borrower or Trust with the Agent or any Lender or any Affiliate of the
Agent or any Lender, (ii) any agreement governing such account, (iii)
all cash, money, notes, securities, instruments, goods, accounts,
documents, chattel paper, general intangibles and other property now or
hereafter held by the Agent or any Lender or any Affiliate of the Agent
or any Lender on behalf of a Borrower or Trust in connection with such
investment account or deposited by a Borrower or Trust or on a
Borrower's or Trust's behalf to such investment account or otherwise
credited thereto for a Borrower's or Trust's benefit, or distributable
to a Borrower or Trust from such investment account, together with all
contracts for the sale or purchase of the foregoing, (iv) all of each
Borrower's or Trust's right, title and interest with respect to the
deposit, investment, allocation, disposition, distribution or
withdrawal of the foregoing, (v) all of each Borrower's or Trust's
right, title and interest with respect to the making of amendments,
modifications or additions of or to the terms and conditions under
which the investment account or investments maintained therein is to be
maintained by a Borrower, Trust, the Agent, any Lender or any Affiliate
of the Agent or any Lender on a Borrower's or Trust's behalf, and (vi)
all of each Borrower's or Trust's books, records and receipts
pertaining to or confirming any of the foregoing,
(n) all cash deposited with the Agent or any Lender or any
Affiliate of the Agent or any Lender or which the Agent, for the
benefit of the Secured Parties, or any Lender or such
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<PAGE> 16
Affiliate is entitled to retain or otherwise possess as collateral
pursuant to the provisions of this Agreement or any of the Security
Documents or any agreement relating to any Letters of Credit, and
(o) any and all products and proceeds of the foregoing
(including, but not limited to, any claim to any item referred to in
this definition, and any claim against any third party for loss of,
damage to or destruction of any or all of, the Collateral or for
proceeds payable under, or unearned premiums with respect to, policies
of insurance) in whatever form, including, but not limited to, cash,
negotiable instruments and other instruments for the payment of money,
chattel paper, security agreements and other documents.
"COMMITMENT" means, as to each Lender, the amount set forth opposite
such Lender's name on ANNEX II hereof, representing such Lender's obligation,
upon and subject to the terms and conditions of this Agreement (including the
applicable provisions of SECTION 13.1), to make Revolving Credit Loans and to
purchase participations in Letters of Credit or, from and after the date hereof,
in the Register (as defined in SECTION 13.1) representing such Lender's
obligation to make Revolving Credit Loans and to purchase participations in
Letters of Credit.
"COMMITMENT PERCENTAGE" means, as to any Lender, the percentage of the
Total Commitment obtained by dividing such Lender's Commitment by the Total
Commitment.
"CONSOLIDATED", when used with reference to EBITDA, Fixed Charges,
Funded Indebtedness, Indebtedness, Interest Expense, Liabilities, Net Income,
Net Worth, or any of the other financial terms used herein, shall mean the sum
of the EBITDA, Fixed Charges, Funded Indebtedness, Indebtedness, Interest
Expense, Liabilities, Net Incomes, Net Worths, and other financial terms used
herein, as the case may be, of the Borrowers and their Consolidated
Subsidiaries, as consolidated after the elimination of intercompany items and,
in the case of Net Income and Net Worth, after appropriate deductions for any
minority interests in any Subsidiaries, and, when used with reference to such
accounts of any other Person, shall mean the sum of such accounts of such Person
and its consolidated Subsidiaries as so modified.
"CONSOLIDATED SUBSIDIARIES" means, as to the Borrowers, the
Subsidiaries of the Borrowers whose accounts are at the time in question, in
accordance with GAAP and pursuant to the written consent of the Required
Lenders, which consent may be withheld in their absolute discretion conditioned
upon, INTER ALIA, the execution and delivery of guaranties, security agreements,
mortgages and other documents required by the Required Lenders in their absolute
discretion, consolidated with those of the Borrowers.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"CONTRACT RIGHTS" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper.
"CONVERTIBLE SUBORDINATED NOTES" means those certain $54,000,000 5.75%
Convertible Subordinated Notes due 2002, as more particularly described in that
certain Indenture dated as of October 10, 1997, by and between Kellstrom and
First Union National Bank, as trustee, and those certain $86,250,000 5.5%
Convertible Subordinated Notes due 2003, as more particularly described in that
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<PAGE> 17
certain Indenture dated as of June 17, 1998, by and between Kellstrom and First
Union National Bank, as trustee.
"COPYRIGHTS" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's right, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations and copyright applications; (b) all renewals
of any of the foregoing; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of the
foregoing; (d) the right to sue for past, present and future infringements of
any of the foregoing; and (e) all rights corresponding to any of the foregoing
throughout the world.
"DEFAULT" means any of the events specified in SECTION 12.1 which with
the passage of time or giving of notice or both would constitute an Event of
Default.
"DEFAULT MARGIN" means 2%.
"DISBURSEMENT ACCOUNT" means one or more accounts maintained by and in
the name of a Borrower with a Disbursing Bank for the purposes of disbursing
Revolving Credit Loan proceeds and amounts deposited thereto.
"DISBURSING BANK" means any commercial bank with which a Disbursement
Account is maintained after the Effective Date.
"DOLLAR" and "$" mean freely transferable United States dollars.
"EBITDA" means Net Income before provision for interest expense, income
tax expense, depreciation expense and amortization expense.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"EFFECTIVE DATE" means the later of: (a) the Agreement Date, and (b)
the first date on which all of the conditions set forth in ARTICLE 5 shall have
been fulfilled.
"EFFECTIVE INTEREST RATE" means the rate of interest per annum on the
Revolving Credit Loans in effect from time to time pursuant to the provisions of
SECTIONS 4.1(A) and (B).
"ELIGIBLE ASSIGNEE" means (i) a commercial bank, commercial finance
company or other asset-based lender, having total assets in excess of
$1,000,000,000; (ii) any Lender listed on the signature pages of this Agreement;
(iii) any Affiliate of a Lender; and (iv) if an Event of Default exists, any
Person reasonably acceptable to the Agent; PROVIDED in each case that the
representation contained in SECTION 13.2 hereof shall be applicable with respect
to such institution or Lender.
"ELIGIBLE DOMESTIC LEASED ENGINE INVENTORY" means Engine Inventory
which the Agent, in its absolute discretion, determines to meet all of the
following requirements: (a) such Inventory meets the definition of Eligible
Inventory, (b) such Inventory is subject to an Eligible Lease Agreement with an
Account Debtor Based in the United States, (c) the Agent has received
certificates executed by independent aircraft insurance brokers as to the
Borrower's compliance as to such Inventory with the
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<PAGE> 18
insurance provisions of SECTION 8.8 and with the insurance provisions of the
Airframe and Engine Mortgage, (d) the Agent has received evidence satisfactory
to the Agent in its absolute discretion that the Mortgage Supplement for such
Inventory has been duly filed with the FAA, together with such legal opinions
with respect to the FAA filing as the Agent desires in its reasonable
discretion, (e) such Inventory is airworthy in accordance with the FAA's
standards, (f) such Inventory is subject to the Security Interest, which is
perfected as to such Inventory, and is subject to no other Lien whatsoever other
than a Permitted Lien, and (g) if the Agent so elects in its absolute
discretion, the original term of the Lease Agreement to which such Inventory is
subject is not more than 36 months.
"ELIGIBLE DOMESTIC RECEIVABLE" means a Receivable that consists of the
unpaid portion of the obligation stated on an invoice issued to an Account
Debtor with respect to Inventory sold and shipped or services performed for such
Account Debtor, or the actual amount then due and payable under a Lease
Agreement for Airframe Inventory or Engine Inventory leased to such Account
Debtor in the ordinary course of business, in each case net of any security
deposits, maintenance reserves, credits, potential offsets or rebates owed by
any Borrower (or Trust) to the Account Debtor and net of any commissions payable
by any Borrower (or Trust) to third parties, and that the Agent, in its absolute
discretion, determines to meet all of the following requirements: (a) such
Receivable meets the definition of Eligible Receivable, (b) such Receivable is
owing by an Account Debtor Based in the United States, (c) if such Receivable is
a Lease Receivable, such Receivable shall comply with each of the following
criteria: (i) the Mortgage Supplement for the Airframe Inventory or Engine
Inventory subject to the Lease Agreement is in due form for filing with the FAA,
has been duly filed with the FAA, and the Agent has received such legal opinions
with respect to the FAA filing as the Agent desires in its reasonable
discretion, (ii) the Airframe Inventory or Engine Inventory subject to the Lease
Agreement giving rise to such Receivable is owned by a Borrower or Trust and is
subject to the Security Interest, which is perfected as to such Inventory, and
is subject to no other Lien whatsoever other than a Permitted Lien, and (iii)
such Receivable arises from an Eligible Lease Agreement.
"ELIGIBLE FOREIGN LEASED AIRFRAME INVENTORY" means Airframe Inventory
which the Agent, in its absolute discretion, determines to meet all of the
following requirements: (a) such Inventory meets the definition of Eligible
Leased Airframe Inventory, and (b) such Airframe Inventory is subject to a Lease
Agreement with an Account Debtor Based outside of the United States.
"ELIGIBLE FOREIGN LEASED ENGINE INVENTORY" means Engine Inventory which
the Agent, in its absolute discretion, determines to meet all of the following
requirements: (a) such Inventory meets the definition of Eligible Inventory, (b)
such Inventory is subject to an Eligible Lease Agreement with an Account Debtor
Based outside of the United States, (c) the Agent has received certificates
executed by independent aircraft insurance brokers as to the Borrower's
compliance as to such Inventory with the insurance provisions of SECTION 8.8 and
with the insurance provisions of the Airframe and Engine Mortgage, (d) the Agent
has received evidence satisfactory to the Agent in its absolute discretion that
the Mortgage Supplement for such Inventory has been duly filed with the FAA,
together with such legal opinions with respect to the FAA filing as the Agent
desires in its reasonable discretion, (e) such Inventory is airworthy in
accordance with the FAA's standards, (f) to the extent commercially reasonable
in the absolute discretion of the Agent, such Inventory is subject to the
Security Interest, which is perfected as to such Inventory, and is subject to no
other Lien whatsoever other than a Permitted Lien, (g) if such Inventory is
subject to a Lease Agreement with an Account Debtor Based in Mexico or in any
South American country other than Colombia, the Net Book Value of such
Inventory, when aggregated with the Net Book Value of all other Foreign Leased
Engine Inventory leased to that particular Account Debtor or leased to all
Account Debtors Based in that same country, does not exceed 20% of the Net Book
Value of all Foreign Leased Engine Inventory, (h) if such Inventory is subject
to a Lease
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<PAGE> 19
Agreement with an Account Debtor Based in Colombia, the Net Book Value of such
Inventory, when aggregated with the Net Book Value of all other Foreign Leased
Engine Inventory leased to that particular Account Debtor or leased to all
Account Debtors Based in Colombia, does not exceed 30% of the Net Book Value of
all Foreign Leased Engine Inventory, (i) if such Inventory is subject to a Lease
Agreement with an Account Debtor Based in Canada or in any European country, the
Net Book Value of such Inventory, when aggregated with the Net Book Value of all
other Foreign Leased Engine Inventory leased to that particular Account Debtor
or leased to all Account Debtors Based in that same country, does not exceed 30%
of the Net Book Value of all Foreign Leased Engine Inventory, (j) if such
Inventory is subject to a Lease Agreement with an Account Debtor Based outside
of North America, South America and Europe, the Net Book Value of such
Inventory, when aggregated with the Net Book Value of all other Foreign Leased
Engine Inventory leased to that particular Account Debtor or leased to all
Account Debtors Based in that same country, does not exceed 10% of the Net Book
Value of all Foreign Leased Engine Inventory, (k) if such Inventory is subject
to a Lease Agreement with an Account Debtor Based in Mexico or any South
American country, the Net Book Value of such Inventory, when aggregated with the
Net Book Value of all other Foreign Leased Engine Inventory leased to that
particular Account Debtor or leased to all Account Debtors Based in South
America and Mexico, does not exceed 50% of the Net Book Value of all Foreign
Leased Engine Inventory, (l) if such Inventory is subject to a Lease Agreement
with an Account Debtor Based in any continent other than Europe, South America
or North America, the Net Book Value of such Inventory, when aggregated with the
Net Book Value of all other Foreign Leased Engine Inventory leased to that
particular Account Debtor or leased to Account Debtors Based in any such
continent, does not exceed 20% of the Net Book Value of all Foreign Leased
Engine Inventory, and (m) if the Agent so elects in its absolute discretion, the
original term of the Lease Agreement to which such Inventory is subject is not
more than 36 months.
"ELIGIBLE FOREIGN RECEIVABLE" means a Receivable that consists of the
unpaid portion of the obligation stated on an invoice issued to an Account
Debtor with respect to Inventory sold and shipped or services performed for such
Account Debtor, or the actual amount then due and payable under a Lease
Agreement for Airframe Inventory or Engine Inventory leased to such Account
Debtor in the ordinary course of business, in each case net of any security
deposits, maintenance reserves, credits, potential offsets or rebates owed by
any Borrower (or Trust) to the Account Debtor and net of any commissions payable
by any Borrower (or Trust) to third parties, and that the Agent, in its absolute
discretion, determines to meet all of the following requirements: (a) such
Receivable meets the definition of Eligible Receivable, (b) such Receivable is
owing by an Account Debtor Based outside of the United States, and (c) if such
Receivable is a Lease Receivable, such Receivable shall comply with each of the
following criteria: (i) the Mortgage Supplement for the Airframe Inventory or
Engine Inventory subject to the Lease Agreement is in due form for recordation
by the FAA, has been duly filed for recordation by the FAA, and the Agent has
received such legal opinions with respect to the FAA filing as the Agent desires
in its reasonable discretion, (ii) the Airframe Inventory or Engine Inventory
subject to the Lease Agreement giving rise to such Receivable is owned by a
Borrower or Trust and to the extent commercially reasonable in the absolute
discretion of the Agent, such Inventory is subject to the Security Interest,
which is perfected as to such Inventory, and is subject to no other Lien
whatsoever other than a Permitted Lien, and (iii) such Receivable arises from an
Eligible Lease Agreement.
"ELIGIBLE INVENTORIED ENGINE AND PARTS INVENTORY" means Airframe
Inventory, Engine Inventory or Parts Inventory which the Agent, in its absolute
discretion, determines to meet all of the following requirements: (a) such
Inventory meets the definition of Eligible Inventory, (b) such Inventory is
located at one of the locations listed on SCHEDULE 6.1(v), or, if not located at
one of the locations listed on SCHEDULE 6.1(v), is in transit between such
locations, or is in transit to or from or is being serviced at an FAA-certified
repair station located in the United States, (c) such Inventory is not subject
to a Lease
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Agreement, (d) the Agent shall have received certificates executed by
independent aircraft insurance brokers as to the Borrower's compliance with the
insurance provisions of SECTION 8.8 as to such Inventory, (e) with respect to
Airframe Inventory and Engine Inventory, the Agent has received evidence
satisfactory to the Agent in its sole discretion that the Mortgage Supplement
for such Inventory has been duly filed with the FAA, together with such legal
opinions with respect to the FAA filing as the Agent desires in its reasonable
discretion, and (f) such Inventory is subject to the Security Interest, which is
perfected as to such Inventory, and is subject to no other Lien whatsoever other
than a Permitted Lien.
"ELIGIBLE INVENTORY" means Inventory which the Agent, in its absolute
discretion, determines to meet all of the following requirements:
(a) such Inventory consists of finished goods or raw materials
and not work-in-process,
(b) such Inventory is in good condition and meets in all
material respects all standards imposed by any governmental agency, or
department or division thereof, having regulatory authority over such
goods, their use, lease or sale,
(c) such Inventory is currently either usable, leaseable or
salable, at prices approximating at least cost, in the normal course of
the applicable Borrower's business,
(d) such Inventory is not obsolete,
(e) such Inventory is owned by a Borrower or by the Trust,
(f) no Borrower is in breach of any representation or
warranty, covenant or other agreement contained in the Loan Documents
with respect to such Inventory,
(g) if such Inventory is located in a warehouse or other
facility leased by a Borrower, the lessor has delivered to the Agent,
on behalf of the Lenders, a waiver and consent in form and substance
satisfactory to the Agent,
(h) the appraisal requirements set forth in SECTION 8.12(f)
have been complied with as to such Inventory,
(i) such Inventory is in compliance with all applicable FAA
standards, and Borrowers maintain all documentation necessary to
establish traceability of such Inventory, and
(j) such Inventory is not determined by the Agent, on behalf
of the Lenders, in its reasonable discretion to be ineligible for any
other reason.
"ELIGIBLE LEASE AGREEMENT" means a Lease Agreement with respect to
which each of the following is true, as determined by the Agent in its absolute
discretion: (a) if a chattel paper original of the Lease Agreement exists, the
Agent has received such chattel paper original, certified as such by the
Borrower, (b) the Borrower has received the funds required under the Lease
Agreement to be deposited as of such date by the Account Debtor for maintenance
reserves and security deposits, (c) no default or event of default exists under
the Lease Agreement, (d) the Lease Agreement is in the form required under
SECTION 8.4 hereof, (e) the Lease Agreement has been duly authorized, executed
and delivered by the Account Debtor and the Borrower and, if applicable, the
Trust, (f) the Airframe
<PAGE> 21
Inventory or Engine Inventory subject to the Lease Agreement is owned by a
Borrower or Trust, and the Borrower or Trust has taken all steps commercially
customary in the jurisdiction where the Inventory is being used to protect its
interest in such Airframe Inventory or Engine Inventory, (g) if the Account
Debtor obligated under the Lease Agreement has had a letter of credit issued for
the benefit of the Borrower (or Trust) securing any payments due under the Lease
Agreement, such letter of credit has been duly assigned to the Agent for the
benefit of the Secured Parties, (h) the Lease Agreement provides for return of
the Inventory (or a satisfactory substitute therefor) subject to the Lease
Agreement upon termination of the Lease Agreement, (i) the Lease Agreement
contains provisions permitting the Borrower or Trust to repossess the Inventory
upon the occurrence of a default or event of default, (j) the Lease Agreement
provides that it is assignable by the Borrower or Trust without the Account
Debtor's consent, and (k) the Agent has received a Notice of Assignment with
respect to such Lease Agreement, fully executed by the Borrower (or Trust) and
the Account Debtor.
"ELIGIBLE LEASED AIRFRAME INVENTORY" means Airframe Inventory which the
Agent, in its absolute discretion, determines to meet all of the following
requirements: (a) such Inventory meets the definition of Eligible Inventory, (b)
such Inventory is subject to an Eligible Lease Agreement, (c) such Inventory is
FAA-registered, (d) the Agent has received certificates executed by independent
aircraft insurance brokers as to the Borrower's compliance as to such Inventory
with the insurance provisions of SECTION 8.8 and the insurance provisions of the
Airframe and Engine Mortgage, (e) the Agent has received evidence satisfactory
to the Agent in its absolute discretion that the Mortgage Supplement for such
Inventory has been duly filed with the FAA, together with such legal opinions
with respect to the FAA filing as the Agent desires in its reasonable
discretion, (f) such Inventory is airworthy in accordance with FAA's standards,
(g) each engine in the Airframe Inventory is owned by a Borrower or by the
Trust, (h) the Agent has received an appraisal, in form and substance
satisfactory to the Agent, with respect to the Airframe Inventory from an
independent appraiser selected by the Agent, and (i) such Airframe Inventory is
subject to the Security Interest, which is perfected as to such Inventory, and
is subject to no other Lien whatsoever other than a Permitted Lien.
"ELIGIBLE RECEIVABLE" means a Receivable that consists of the unpaid
portion of the obligation stated on the invoice issued to an Account Debtor with
respect to Inventory sold and shipped to or services performed for such Account
Debtor, or the actual amount then due and payable under a Lease Agreement for
Airframe Inventory or Engine Inventory leased to such Account Debtor in the
ordinary course of business, net of any credits, potential offsets or rebates
owed by any Borrower (or Trust) to the Account Debtor and net of any commissions
payable by any Borrower (or Trust) to third parties, and that the Agent, in its
absolute discretion, determines to meet all of the following requirements:
(a) such Receivable is owned by a Borrower or by the Trust and
represents a complete bona fide transaction which requires no further
act under any circumstances on the part of such Borrower (or Trust) to
make such Receivable payable by the Account Debtor,
(b) for Receivables other than Lease Receivables, the due date
for such Receivable shall not be more than 60 days from the date of the
original invoice for the goods the sale of which gave rise to such
Receivable,
(c) for Lease Receivables, the due dates for each scheduled
payment under the Lease Agreement shall be every 30 days,
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<PAGE> 22
(d) for Receivables other than Lease Receivables, no more than
90 days have elapsed from the date of the original invoice,
(e) for Lease Receivables, such Receivable shall not be past
due, unless the applicable cure period for payment of such Receivable
shall not have expired,
(f) for Receivables other than Lease Receivables, the goods
the sale of which gave rise to such Receivable were shipped or
delivered to the Account Debtor on an absolute sale basis and not on a
bill and hold sale basis, a consignment sale basis, a guaranteed sale
basis, a sale or return basis, or on the basis of any other similar
understanding and no material part of such goods has been returned or
rejected,
(g) if such Receivable is evidenced by Chattel Paper or an
instrument, such Chattel Paper or instrument has been collaterally
assigned to the Agent, for the benefit of itself as agent and the
Secured Parties, pursuant to an assignment in form and substance
satisfactory to the Agent and the original of such Chattel Paper or
instrument has been delivered to the Agent,
(h) the Account Debtor with respect to such Receivable is not
insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, threatened (to any
Borrower's knowledge) or pending, which might, in the Agent's
reasonable judgment, have a materially adverse effect on such Account
Debtor, and is not, in the reasonable discretion of the Agent, deemed
ineligible for credit or other reasons,
(i) such Receivable is not owing by an Account Debtor having
50% or more in face value of its then-existing accounts owing to the
Borrowers (or Trust) which do not meet the requirements of CLAUSES (D)
and (E), above,
(j) such Receivable is not owing by an Account Debtor whose
then-existing Receivables owing to the Borrowers (and Trust) exceed in
face amount 20% of the sum of all Eligible Domestic Receivables plus
all Eligible Foreign Receivables,
(k) if such Receivable arises from the performance of
services, such services have been fully rendered and do not relate to
any warranty claim or obligation,
(l) such Receivable is a valid, legally enforceable obligation
of the Account Debtor with respect thereto and is not subject to any
present or contingent (and no facts exist which are the basis for any
future) offset, deduction or counterclaim, dispute or other defense on
the part of such Account Debtor,
(m) such Receivable is subject to the Security Interest, which
is perfected as to such Receivable, and is subject to no other Lien
whatsoever,
(n) such Receivable is evidenced by an invoice or other
documentation in form reasonably acceptable to the Agent,
(o) if such Receivable is subject to the Assignment of Claims
Act of 1940, as amended from time to time, or any Applicable Law now or
hereafter existing similar in effect thereto, if Agent so requires, all
procedures shall have been complied with such that such
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<PAGE> 23
Receivable shall have been duly and validly assigned to the Agent, for
the benefit of the Secured Parties,
(p) such Receivable is not subject to any prohibition against
its assignment or requiring notice of or consent to such assignment,
unless all such required notices have been given, all such required
consents have been received and all other procedures have been complied
with such that such Receivable shall have been duly and validly
assigned to the Agent, for the benefit of the Secured Parties,
(q) the goods giving rise to such Receivable were not, at the
time of the sale or lease thereof (and, in the case of Lease
Receivables, such goods are not), subject to any Lien, except the
Security Interest and Permitted Liens,
(r) no Borrower (or Trust) is in breach of any representation
or warranty with respect to the goods the sale or lease of which gave
rise to such Receivable nor in breach of any representation or
warranty, covenant or other agreement contained in the Loan Documents
with respect to such Receivable,
(s) such Receivable does not arise out of any transaction with
any Subsidiary or Affiliate of any Borrower,
(t) no bond or other undertaking by a guarantor or surety has
been obtained, supporting such Receivable and the Account Debtor's
obligations in respect thereof, other than any Guaranty given by a
parent company of such Account Debtor,
(u) such Receivable does not arise out of finance or similar
charges by any Borrower (or Trust) or other fees for the time value of
money, and
(v) the Account Debtor with respect to such Receivable is not
located in any state or jurisdiction denying creditors access to its
courts in the absence of qualification to transact business in such
state or jurisdiction or the filing of a Notice of Business Activities
Report or other similar filing, unless the applicable Borrower (or
Trust) has either qualified as a foreign corporation authorized to
transact business in such state or jurisdiction or has filed a Notice
of Business Activities Report or similar filing with the applicable
state or jurisdiction agency for the then current year.
"ENGINE INVENTORY" means Inventory owned by a Borrower or Trust
consisting of whole aircraft engines which have not been broken down into their
component parts.
"ENVIRONMENTAL COMPLIANCE RESERVES" means reserves for the cost of
Remedial Action by the Borrowers determined by the Agent from time to time in
its reasonable discretion based upon the reports delivered pursuant to SECTION
9.9(B) and such other advice, analysis and engineering studies as it deems
appropriate.
"ENVIRONMENTAL INDEMNITY AGREEMENT" means the Environmental Indemnity
Agreement, dated as of the Effective Date, among the Borrowers and the Agent,
for the ratable benefit of the Secured Parties, pursuant to which the Borrowers
jointly and severally agree to indemnify the Agent and the Secured Parties for
certain matters related to the Environmental Laws, as amended, modified or
supplemented from time to time.
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<PAGE> 24
"ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws
now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, Contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and any and
all regulations, notices or demand letters issued, entered, promulgated or
approved thereunder; such laws and regulations include but are not limited to
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ., as
amended; the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 6901 ET SEQ., as amended; the Toxic Substances Control
Act, 15 U.S.C. Section 2601 ET SEQ., as amended; the Clean Air Act, 46 U.S.C.
Section 7401 ET SEQ., as amended; and all federal, state, local and foreign lien
and environmental cleanup programs.
"ENVIRONMENTAL LIEN" means a Lien in favor of any governmental entity
for (a) any liability under Environmental Laws or (b) damages arising from, or
costs incurred by such governmental entity in response to, a Release or
threatened Release of Contaminant into the environment.
"EQUIPMENT" means and includes all machinery, apparatus, equipment,
motor vehicles, tractors, trailers, rolling stock, fittings, fixtures and other
tangible personal property (other than Inventory) of every kind and description
used in the Borrowers' business operations or owned by a Borrower or in which a
Borrower has an interest, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements therefor.
"EQUITABLE SUBORDINATED LOAN" means the subordinated loan in the
original principal amount of $15,000,000 (with an outstanding balance as of the
Effective Date of $11,250,000) extended by The Equitable Life Assurance Society
of the United States to Kellstrom, evidenced by the Securities Purchase
Agreement dated as of January 15, 1997 between Kellstrom and The Equitable Life
Assurance Society of the United States, as amended to the date hereof.
"EURODOLLAR RATE" means, with respect to any Eurodollar Rate Loan for
the Interest Period applicable thereto, a simple per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
----------------------------------
1 - Eurodollar Reserve Percentage
The Eurodollar Rate shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"EURODOLLAR RATE LOAN" or "EURODOLLAR RATE REVOLVING CREDIT LOAN" means
a Loan bearing interest at a simple per annum rate of interest equal to the
Eurodollar Rate plus the Applicable Margin.
"EURODOLLAR RESERVE PERCENTAGE" means that percentage (expressed as a
decimal) which is in effect from time to time under Regulation D of the Board of
Governors of the Federal Reserve System, as such regulation may be amended from
time to time, or any successor regulation, as the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as that
term is defined in
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<PAGE> 25
Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate of Eurodollar Rate Loans is
determined), whether or not any Lender has any Eurocurrency liabilities subject
to such reserve requirement at that time. Eurodollar Rate Loans shall be deemed
to constitute Eurocurrency liabilities and as such shall be deemed subject to
reserve requirements without benefits of credits for proration, exceptions or
offsets that may be available from time to time to any Lender.
"EVENT OF DEFAULT" means any of the events specified in SECTION 12.1,
PROVIDED that any requirement for notice or lapse of time or any other condition
has been satisfied, and any cure periods therefor have expired.
"FAA" means the United States Federal Aviation Administration, and any
instrumentality of the United States succeeding to this function.
"FAIR MARKET VALUE" means the fair market value of Inventory, as
reflected by appraisals conducted pursuant to SECTION 8.12(f).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve system arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of Atlanta, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by NationsBank from three federal funds brokers of
recognized standing selected by NationsBank.
"FEE LETTER" has the meaning given to such term in SECTION 4.2(a).
"FINANCIAL OFFICER" means the Chief Financial Officer, Treasurer or
Controller of Kellstrom.
"FINANCING STATEMENTS" means any and all Uniform Commercial Code
financing statements (or other similar documents), in form and substance
satisfactory to the Agent, executed and delivered by the Borrowers and the Trust
to the Agent, naming the Agent, for the benefit of the Secured Parties, as
secured party and the Borrowers and the Trust as debtor, in connection with this
Agreement.
"FIXED CHARGES" means, for any period, (a) Interest Expense, plus (b)
payments of principal actually made with respect to Indebtedness for Money
Borrowed (other than payments under the Loans), including payments with respect
to Capitalized Leases, plus (c) earn-out payments to the shareholders of
Business Units acquired by a Borrower.
"FOREIGN LEASED ENGINE INVENTORY" means Engine Inventory subject to a
Lease Agreement with an Account Debtor Based outside of the United States.
"FUNDED INDEBTEDNESS" means (a) all Indebtedness under this Agreement
and (b) all other Indebtedness for Money Borrowed, including all Subordinated
Indebtedness.
"GAAP" means generally accepted accounting principles as in effect in
the United States as consistently applied and maintained throughout the period
indicated and, when used with reference to the Borrowers or any Subsidiary of
the Borrowers, consistent with the prior financial
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practice of the Borrowers, as reflected on the financial statements referred to
in SECTION 6.1(O); PROVIDED, HOWEVER, that, in the event that changes shall be
mandated by the Financial Accounting Standards Board or any similar accounting
authority of comparable standing, or shall be recommended by the Borrowers'
independent public accountants, such changes shall be included in GAAP as
applicable to the Borrowers only from and after such date as the Borrowers, the
Required Lenders and the Agent shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants set forth in
ARTICLE 11.
"GENERAL INTANGIBLES" means all of the Borrowers' now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrowers of every kind and
nature (other than Receivables), including, without limitation, all Proprietary
Rights, corporate or other business records, inventions, designs, blueprints,
plans, specifications, goodwill, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, reversions or any rights
thereto and any other amounts payable to any Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, all assignable warranty claims under any purchase agreements
to which any Borrower or Trust is a party, business interruption insurance and
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key employees on
which any Borrower is beneficiary and any letter of credit, guarantee, claim,
security interest or other security held by or granted to any Borrower to secure
payment by an Account Debtor of any of the Receivables.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local or foreign national or
provincial and all agencies thereof.
"GUARANTY", "GUARANTEED" or to "GUARANTEE" as applied to any obligation
of another Person shall mean and include (a) a guaranty (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), directly or indirectly, in any manner, of any part or all of such
obligation of such other Person, and (b) an agreement, direct or indirect,
contingent or otherwise, and whether or not constituting a guaranty, the
practical effect of which is to assure the payment or performance (or payment of
damages in the event of nonperformance) of any part or all of such obligation of
such other Person whether by (i) the purchase of securities or obligations, (ii)
the purchase, sale or lease (as lessee or lessor) of property or the purchase or
sale of services primarily for the purpose of enabling the Guarantor with
respect to such obligation to make any payment or performance (or payment of
damages in the event of nonperformance) of or on account of any part or all of
such obligation, or to assure the owner of such obligation against loss, (iii)
the supplying of funds to or in any other manner investing in the Guarantor with
respect to such obligation, (iv) repayment of amounts drawn down by
beneficiaries of letters of credit, or (v) the supplying of funds to or
investing in a Person on account of all or any part of such Person's obligation
under a Guaranty of any obligation or indemnifying or holding harmless, in any
way, such Person against any part or all of such obligation.
"INDEBTEDNESS" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following: (a) all obligations for Money Borrowed or for the
deferred purchase price of property or services, (b) all obligations (including,
during the noncancellable term of any lease in the nature of a title retention
agreement, all future payment obligations under such lease discounted to their
present value in accordance with GAAP) secured by any Lien to which any property
or asset owned or held by such Person is subject, whether or not the obligation
secured thereby shall have been assumed by such Person, (c) all obligations of
other Persons which such Person has Guaranteed, including, but not limited to,
all obligations of such Person
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<PAGE> 27
consisting of recourse liability with respect to accounts receivable sold or
otherwise disposed of by such Person, (d) all obligations of such Person in
respect of Interest Rate Protection Agreements, and (e) in the case of the
Borrowers (without duplication) all obligations under the Revolving Credit
Loans.
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement, dated
as of the Effective Date, between the Borrowers and the Agent, for the ratable
benefit of the Secured Parties, pursuant to which the Borrowers jointly and
severally agree to indemnify the Agent and the Secured Parties for certain
matters related to Florida documentary stamp taxes, as amended, modified or
supplemented from time to time.
"INITIAL LOANS" means the Revolving Credit Loans made to the Borrowers
on the Effective Date pursuant to the Initial Notice of Borrowing.
"INITIAL NOTICE OF BORROWING" means the Notice of Borrowing given by
Kellstrom with respect to the Initial Loans which shall also specify the method
of disbursement.
"INTERBANK OFFERED RATE" means, with respect to any Eurodollar Rate
Loan for the Interest Period applicable thereto, the average (rounded upward to
the nearest one-sixteenth (1/16) of one percent) per annum rate of interest
determined by the Agent (each such determination to be conclusive and binding
absent manifest error) as of two Business Days prior to the first day of such
Interest Period as the effective rate at which deposits in immediately available
funds in Dollars are being offered or quoted to major banks in the interbank
market for Eurodollar deposits for a term comparable to such Interest Period and
in the amount of such Eurodollar Rate Loan. Such rate may be determined by the
Agent from any interest rate reporting service of recognized standing that the
Agent shall select.
"INTEREST EXPENSE" means interest on Indebtedness during the period for
which computation is being made, excluding (a) the amortization of fees and
costs incurred with respect to the closing of loans which have been capitalized
as transaction costs, and (b) interest paid in kind.
"INTEREST PAYMENT DATE" means the first day of each calendar month
commencing on January 1, 1999 and continuing thereafter until the Secured
Obligations have been irrevocably paid in full.
"INTEREST PERIOD" means with respect to each Eurodollar Rate Loan, the
period commencing on the date of the making or continuation of or conversion to
such Eurodollar Rate Loan and ending one, two, three, or six months thereafter,
as the Borrowers may elect in the applicable Notice of Borrowing or Notice of
Conversion or Continuation; PROVIDED, that:
(i) any Interest Period that would otherwise end on a day that
is not a Business Day shall, subject to the provisions of CLAUSE (iii)
below, be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to CLAUSE (iii) below, end on the last Business
Day of a calendar month;
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<PAGE> 28
(iii) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date; and
(iv) notwithstanding CLAUSE (III) above, no Interest Period
shall have a duration of less than one month and if any applicable
Interest Period would be for a shorter period, such Interest Period
shall not be available hereunder.
"INTEREST RATE PROTECTION AGREEMENT" shall mean an interest rate swap,
cap or collar agreement or similar arrangement between any Person and a
financial institution providing for the transfer or mitigation of interest risks
either generally or under specific contingencies.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
"INVENTORY" means all inventory as such term is defined in the Uniform
Commercial Code, regardless of whether such inventory is classified as inventory
or equipment on any Borrower's books, and shall include, without limitation, ()
all goods intended for sale or lease by the Borrowers, or for display or
demonstration, () all work in process, () all raw materials and other materials
and supplies of every nature and description used or which might be used in
connection with the manufacture, packing, shipping, advertising, selling,
leasing or furnishing of such goods or otherwise used or consumed in the
Borrowers' business, () all Airframe Inventory, Engine Inventory and Parts
Inventory, and () all documents evidencing and general intangibles relating to
any of the foregoing.
"INVESTMENT" means, with respect to any Person: () the acquisition or
ownership by such Person of any share of capital stock, evidence of Indebtedness
or other security issued by any other Person, () any loan, advance or extension
of credit to, or contribution to the capital of, any other Person, excluding
advances to employees in the ordinary course of business for business expenses,
() any Guaranty of the obligations of any other Person, () any other investment
(other than the Acquisition of a Business Unit) in any other Person, and () any
commitment or option to make any of the investments listed in CLAUSES (A)
through (D) above.
"IRS" means the Internal Revenue Service.
"KELLSTROM INTERNATIONAL" means Kellstrom International Sales
Corporation, a corporation incorporated under the laws of the United States
Virgin Islands.
"LEASE AGREEMENT" means a lease agreement between a Borrower or the
Trust, as owner and lessor of Airframe Inventory or Engine Inventory, and the
Account Debtor leasing such Airframe Inventory or Engine Inventory.
"LEASE RECEIVABLE" means a Receivable arising from a Lease Agreement
and consisting of the then-current lease payment due under the Lease Agreement.
"LENDER" means at any time any financial institution party to this
agreement at such time, including any such Person becoming a party hereto
pursuant to the provisions of ARTICLE 13, and its successors and assigns, and
"LENDERS" means at any time all of the financial institutions party to this
Agreement at such time, including any such Persons becoming parties hereto
pursuant to the provisions of ARTICLE 13, and their successors and assigns.
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"LETTER OF CREDIT" means any letter of credit issued by NationsBank for
the account of the Borrowers pursuant to ARTICLE 3, excluding, however, the VRDN
Letter of Credit.
"LETTER OF CREDIT AMOUNT" means, with respect to any Letter of Credit,
the aggregate maximum amount at any time available for drawing under such Letter
of Credit.
"LETTER OF CREDIT FACILITY" means the amount of $40,000,000.
"LETTER OF CREDIT OBLIGATIONS" means, at any time, the sum of (a) the
Reimbursement Obligations of the Borrowers at such time, PLUS (b) the aggregate
Letter of Credit Amount of Letters of Credit outstanding at such time, PLUS (c)
the aggregate Letter of Credit Amount of Letters of Credit the issuance of which
has been authorized by the Agent and NationsBank pursuant to SECTION 3.4(b) but
that have not yet been issued, in each case as determined by the Agent.
"LETTER OF CREDIT RESERVE" means, at any time, the aggregate Letter of
Credit Obligations at such time, other than Letter of Credit Obligations that
are fully secured by Cash Collateral.
"LIABILITIES" of any Person means all items (except for items of
capital stock, additional paid-in capital or retained earnings, or of general
contingency or deferred tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Liabilities are to be
determined.
"LIEN" as applied to the property of any Person means: () any mortgage,
deed to secure debt, deed of trust, lien, pledge, charge, lease constituting a
Capitalized Lease Obligation, conditional sale or other title retention
agreement, or other security interest, security title or encumbrance of any kind
in respect of any property of such Person, or upon the income or profits
therefrom, () any arrangement, express or implied, under which any property of
such Person is transferred, sequestered or otherwise identified for the purpose
of subjecting the same to the payment of Indebtedness or performance of any
other obligation in priority to the payment of the general, unsecured creditors
of such Person, () any Indebtedness which is unpaid more than 30 days after the
same shall have become due and payable (subject to applicable cure periods) and
which if unpaid might by law (including, but not limited to, bankruptcy and
insolvency laws), or otherwise, be given any priority whatsoever over the claims
of general unsecured creditors of such Person, and () the filing of, or any
agreement to give, any financing statement under the Uniform Commercial Code or
its equivalent in any jurisdiction, excluding informational financing statements
relating to property leased by the Borrower.
"LOAN" means any Revolving Credit Loan, as well as all such loans
collectively, as the context requires.
"LOAN ACCOUNT" and "LOAN ACCOUNTS" shall have the meanings ascribed
thereto in SECTION 4.5.
"LOAN DOCUMENTS" means collectively this Agreement, the Notes, the
Security Documents, the VRDN Documents, and each other instrument, agreement or
document executed by any Obligor in connection with this Agreement whether prior
to, on or after the Effective Date and each other instrument, agreement or
document referred to herein or contemplated hereby.
"LOCKBOX" means each post office box specified in a Lockbox Agreement.
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"LOCKBOX AGREEMENT" means each agreement between a Borrower and a
Clearing Bank concerning the establishment of a Lockbox for the collection of
Receivables.
"MARGIN STOCK" means margin stock as defined in Section 221.1(h) of
Regulation U, as the same may be amended or supplemented from time to time.
"MATERIALLY ADVERSE EFFECT" means any act, omission, situation,
circumstance, event or undertaking which would, singly or in any combination
with one or more other acts, omissions, situations, circumstances, events or
undertakings have, or reasonably be expected by the Agent to have, a materially
adverse effect upon (a) the business, assets, properties, liabilities, condition
(financial or otherwise), results of operations or business prospects of the
Borrowers and their Subsidiaries taken as a whole, (b) the value of the
Collateral or the Real Estate, (c) the Security Interest or the priority of the
Security Interest, (d) the respective ability of any Obligor or any of their
Subsidiaries to perform any obligations under this Agreement or any other Loan
Document to which it is a party, or (e) the legality, validity, binding effect,
enforceability or admissibility into evidence of any Loan Document or the
ability of the Agent or any Lender to enforce any rights or remedies under or in
connection with any Loan Document.
"MINIMUM COMMITMENT" means $10,000,000 with respect to each Lender
other than those Lenders with a Commitment on the Effective Date of less than
$10,000,000, in which case the Minimum Commitment for each such Lender shall be
all of such Lender's Commitment.
"MONEY BORROWED" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or not in any such case the same
was for money borrowed, (i) represented by notes payable, and drafts accepted,
that represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the ordinary
course of business), (c) Indebtedness that constitutes a Capitalized Lease
Obligation, and (d) Indebtedness that is such by virtue of CLAUSE (C) of the
definition thereof, but only to the extent that the obligations Guaranteed are
obligations that would constitute Indebtedness for Money Borrowed.
"MORTGAGE SUPPLEMENT" means a supplement to the Airframe and Engine
Mortgage pursuant to which each Borrower and the Trust grants the Security
Interest in Airframe Inventory, Engine Inventory and Lease Agreements acquired
by a Borrower or the Trust or entered into by a Borrower or the Trust on the
Effective Date and from time to time after the Effective Date.
"MORTGAGES" means and includes any and all of the mortgages, deeds of
trust, deeds to secure debt, assignments and other instruments executed and
delivered by the Borrowers to or for the benefit of the Agent by which the
Agent, on behalf of the Secured Parties, acquires a Lien on the Borrowers' Real
Estate, and all amendments, modifications and supplements thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which a Borrower or a Related Company is required to
contribute or has contributed within the immediately preceding six years.
"NATIONSBANK" means NationsBank, N.A., and its successors and assigns.
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<PAGE> 31
"NET AMOUNT" means, with respect to any Investments made by any Person,
the gross amount of all such Investments MINUS the aggregate amount of all cash
received and the fair value, at the time of receipt by such Person, of all
property received as payments of principal or premiums, returns of capital,
liquidating dividends or distributions, proceeds of sale or other dispositions
with respect to such Investments.
"NET BOOK VALUE" means, with respect to the Inventory or other assets
of any Person, the gross value of such Inventory or other assets less
accumulated depreciation determined in accordance with GAAP and as reflected on
the books and records of the Person owning such Inventory or other assets.
"NET INCOME" means, as applied to any Person, the net income (or net
loss) of such Person for the period in question after giving effect to deduction
of or provision for all operating expenses, all taxes and reserves (including
reserves for deferred taxes) and all other proper deductions, all determined in
accordance with GAAP, provided that there shall be excluded: (a) the net income
(or net loss) of any Person accrued prior to the date it becomes a Subsidiary
of, or is merged into or consolidated with, the Person whose Net Income is being
determined or a Subsidiary of such Person, (b) the net income (or net loss) of
any Person in which the Person whose Net Income is being determined or any
Subsidiary of such Person has an ownership interest, except, in the case of net
income, to the extent that any such income has actually been received by such
Person or such Subsidiary in the form of cash dividends or similar
distributions, (c) any restoration of any contingency reserve, except to the
extent that provision for such reserve was made out of income during such
period, (d) any net gains or losses on the sale or other disposition, not in the
ordinary course of business, of Investments, Business Units and other capital
assets, provided that there shall also be excluded any related charges for taxes
thereon, (e) any net gain arising from the collection of the proceeds of any
insurance policy, (f) any write-up of any asset, and (g) any other extraordinary
item.
"NET OUTSTANDINGS" of any Lender means, at any time, the sum of (a) all
amounts paid by such Lender (other than pursuant to SECTION 14.7) to the Agent
in respect of Revolving Credit Loans or otherwise under this Agreement, MINUS
(b) all amounts paid by the Agent to such Lender which are received by the Agent
and which, pursuant to this Agreement, are paid over to such Lender for
application in reduction of the outstanding principal balance of the Revolving
Credit Loans.
"NET PROCEEDS" means proceeds received by any Borrower or the Trust in
cash from any Asset Disposition (including, without limitation, payments under
notes or other debt securities received in connection with any Asset
Disposition), net of: (a) the transaction costs of such sale, lease, transfer or
other disposition; (b) any tax liability arising from such transaction; and (c)
amounts applied to repayment of Indebtedness (other than the Secured
Obligations) secured by a Lien on the asset or property disposed.
"NET WORTH" means, with respect to any Person, such Person's total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings, after deducting treasury stock) which would appear as such on
a balance sheet of such Person prepared in accordance with GAAP.
"NON-RATABLE LOAN" means a Revolving Credit Loan made by NationsBank in
accordance with the provisions of SECTION 4.8(B).
"NOTE" means any of the Revolving Credit Notes and "NOTES" means more
than one such Note.
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<PAGE> 32
"NOTICE OF ASSIGNMENT" means a notice of assignment and estoppel
certificate in form and substance satisfactory to the Agent in its absolute
discretion pursuant to which, among other things, the Borrowers (or Trust) and
the Agent provide notice to and seek acknowledgement from the Account Debtor
under a Lease Agreement that such Lease Agreement has been collaterally assigned
to the Agent for the benefit of the Secured Parties.
"NOTICE OF BORROWING" means a written notice, or telephonic notice
followed by a confirming same-day written notice, requesting a Borrowing of
either a Prime Rate Revolving Credit Loan or a Eurodollar Revolving Credit Loan,
which is given by telex or facsimile transmission in accordance with the
applicable provisions of SECTION 2.2 and which specifies (i) the amount of the
requested Borrowing, (ii) the date of the requested Borrowing, and (iii) if the
requested Borrowing is of a Eurodollar Rate Revolving Credit Loan, the duration
of the applicable Interest Period.
"NOTICE OF CONVERSION OR CONTINUATION" has the meaning specified in
SECTION 4.12.
"OBLIGOR" means any Borrower, any Subsidiary Guarantor, the Trust and
any other Person liable with respect to the Secured Obligations, whether as
maker, endorser, guarantor, pledgor or otherwise, and whether such liability is
direct, indirect, primary or secondary, and "OBLIGORS" means all of such Persons
collectively.
"OPERATING LEASE" means any lease (other than a lease constituting a
Capitalized Lease Obligation) of real or personal property.
"ORDERLY LIQUIDATION VALUE" means the orderly liquidation value of
Inventory, as reflected by appraisals conducted pursuant to SECTION 8.12(f).
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"PARTS INVENTORY" means airframe or engine parts or components held for
sale by a Borrower with respect to which each of the following is true, as
determined by the Agent in its absolute discretion: (a) such Inventory has been
labeled for sale and is segregated by Inventory type, and (b) such Inventory is
not rejected inventory, repairable Parts Inventory, or nonrepairable Parts
Inventory.
"PATENTS" means and includes, in each case whether now existing or
hereafter arising, all of the Borrowers' right, title and interest in and to ()
any and all patents and patent applications, () inventions and improvements
described and claimed therein, (c) reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, (d) income, royalties, damages,
claims and payments now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past and future
infringements thereof, (e) rights to sue for past, present and future
infringements thereof, and (f) all rights corresponding to any of the foregoing
throughout the world.
"PERMITTED ACQUISITIONS" means Acquisitions of Persons or Business
Units in the business related to the businesses of the Borrowers provided (a) no
Default or Event of Default exists before or after giving effect to such
Acquisition, (b) the Borrowers are in compliance with the covenants set forth in
SECTIONS 11.1, 11.2, 11.10 and 11.11 on a pro forma basis after giving effect to
such Acquisition, (c) simultaneously with the consummation of such Acquisition,
the Borrowers deliver to the Agent a certificate of the Financial Officer (i)
setting forth the calculations required to establish the
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<PAGE> 33
Borrowers' pro forma compliance with the requirements of SECTIONS 11.1, 11.2,
11.10 and 11.11 as of the date of the consummation of such Acquisition, and (ii)
stating that no Default or Event of Default exists before or after giving effect
to such Acquisition, (d) immediately after giving effect to the consummation of
such Acquisition (including any Loans made hereunder to finance any portion of
such Acquisition), Availability must be greater than $25,000,000, (e)
Availability must remain above $20,000,000 for each of the 90 days after the
date on which such Acquisition is consummated, (f) the purchase price for such
Acquisition must not exceed $30,000,000, (g) the purchase price for all such
Acquisitions consummated during any fiscal year must not exceed $40,000,000, and
(h) the Borrowers shall, in the case of all Inventory (including engines,
aircraft and airframes, and parts) that is purchased through a single
Acquisition and that has a book value of $20,000,000 or more, or that is
purchased through a series of Acquisitions and that has a book value of
$30,000,000 or more in the aggregate, deliver to the Agent an appraisal, in form
and substance satisfactory to the Agent and from an independent appraiser
acceptable to the Agent, within 90 days after the consummation of such
Acquisition.
"PERMITTED AIRCRAFT PURCHASE MONEY INDEBTEDNESS" means Purchase Money
Indebtedness of the Borrowers incurred after the Agreement Date for the purpose
of acquiring aircraft to be used in a Borrower's inventory (a) which is secured
by a Purchase Money Lien, (b) the aggregate principal amount of which does not
exceed an amount equal to the lesser of (i) the cost (including the principal
amount of such Indebtedness, whether or not assumed) of the aircraft subject to
such Lien, and (ii) the fair value of such aircraft at the time of its
acquisition, and (c) which, when aggregated with the principal amount of all
other such Permitted Aircraft Purchase Money Indebtedness of the Borrowers at
the time outstanding, does not exceed $50,000,000. For the purposes of this
definition, no Purchase Money Indebtedness shall be considered Permitted
Aircraft Purchase Money Indebtedness unless the Lenders have been provided with
the opportunity to finance the Borrower's acquisition of the aircraft and the
Required Lenders have declined to do so, and no additional Permitted Aircraft
Purchase Money Indebtedness shall be permitted to be incurred by any Borrower
during the occurrence or continuation of a Default or Event of Default. Also for
the purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of Capitalized Leases shall be computed as a Capitalized
Lease Obligation.
"PERMITTED INVESTMENTS" means Investments of the Borrowers in: (a)
negotiable certificates of deposit and time deposits issued by NationsBank or by
any United States bank or trust company having capital, surplus and undivided
profits in excess of $100,000,000, (b) any direct obligation of the United
States of America or any agency or instrumentality thereof which has a remaining
maturity at the time of purchase of not more than one year and repurchase
agreements relating to the same, (c) sales of inventory on credit in the
ordinary course of business, (d) shares of capital stock, evidence of
Indebtedness or other security acquired by the Borrowers in consideration for or
as evidence of past-due or restructured Receivables in an aggregate face amount
of such Receivables at any time not to exceed $1,000,000, (e) Guaranties
permitted pursuant to SECTION 11.3, (f) those items described on SCHEDULE 1.1A -
PERMITTED INVESTMENTS, (g) other Investments not in excess of $500,000
individually or $1,000,000 in the aggregate in any fiscal year of the Borrowers,
and (h) Investments by the Borrowers in Permitted Acquisitions; provided,
however, in no event shall the Borrowers' Investments in Kellstrom International
exceed $50,000 in the aggregate.
"PERMITTED LIENS" means: (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but (i) in all cases only if payment shall not
at the time be required to be made in accordance with SECTION 9.6, and (ii) in
the case of warehousemen or landlords, only if such liens are junior to the
Security Interest in any of the Collateral, (b) Liens consisting of deposits or
pledges made in the ordinary course of business in connection with, or to secure
payment of, obligations under workers' compensation, unemployment insurance or
similar legislation or under payment or performance bonds, (c) Liens
constituting Permitted Encumbrances, as defined in the Mortgages, as well as
other Liens on the Real Estate constituting encumbrances in the nature of zoning
restrictions, easements, and rights or restrictions of record on the use of real
property, which do not materially detract from the value of such property or
impair the use thereof in the business of the Borrowers or their Subsidiaries,
(d) Purchase Money Liens, (e) Liens shown on SCHEDULE 1.1B PERMITTED LIENS, and
(f) Liens of the Agent, for the benefit of the Secured Parties, arising under
this Agreement and the other Loan Documents.
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<PAGE> 34
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means Purchase Money
Indebtedness of the Borrowers incurred after the Agreement Date for the purpose
of acquiring an asset or assets other than Inventory (a) which is secured by a
Purchase Money Lien, (b) the aggregate principal amount of which does not exceed
an amount equal to the lesser of (i) the cost (including the principal amount of
such Indebtedness, whether or not assumed) of the property (other than
Inventory) subject to such Lien, and (ii) the fair value of such property (other
than Inventory) at the time of its acquisition, and (c) which, when aggregated
with the principal amount of all other such Indebtedness and Capitalized Lease
Obligations of the Borrowers at the time outstanding (excluding Permitted
Aircraft Purchase Money Indebtedness), does not exceed $5,000,000. For the
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of Capitalized Leases shall be computed as a Capitalized
Lease Obligation.
"PERSON" means an individual, limited liability company, corporation,
partnership, association, trust or unincorporated organization, joint venture or
other entity or a government or any agency or political subdivision thereof.
"PLAN" means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which a Borrower or any Related Company is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA.
"PLEDGE AGREEMENT" means the Stock Pledge Agreement, dated as of the
Effective Date, between Kellstrom and the Agent, for the ratable benefit of the
Secured Parties, pursuant to which Kellstrom pledges to the Agent, for the
benefit of the Secured Parties, all of the capital stock of each domestic
Subsidiary of Kellstrom and 65% of the voting stock and 100% of the non-voting
stock of each foreign Subsidiary of Kellstrom, as amended, modified or
supplemented from time to time.
"PRIME RATE" means on any day the interest rate per annum equal to the
rate of interest publicly announced by the Agent at its head office in Atlanta,
Georgia as its "prime" rate, as in effect on the last Business Day of the
calendar month immediately preceding the month in which such day falls. The
Agent lends at rates above and below the Prime Rate.
"PRIME RATE LOAN" or "PRIME RATE REVOLVING CREDIT LOAN" means a Loan
bearing interest at a simple per annum rate of interest equal to the Prime Rate
PLUS the Applicable Margin.
"PROHIBITED COUNTRY" means Afghanistan, Angola, Burundi, Cambodia,
Congo, Cuba, Ethiopia, Haiti, Iraq, Lebanon, Liberia, Libya, Mozambique, Rwanda,
Somalia, any part of the former Soviet Union other than Russia, Sudan, or any
part of the former republic of Yugoslavia, or any other
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<PAGE> 35
country with whom the United States does not then have full diplomatic relations
or with respect to which an FAA "no fly" ruling is in effect.
"PROJECTIONS" means the forecasted (a) balance sheets, (b) income
statements and (c) cash flow statements of the Borrowers and their Consolidated
Subsidiaries prepared in accordance with GAAP, together with appropriate
supporting details and a statement of underlying assumptions, which shall be
prepared for purposes of SECTIONS 5.1(a) and 6.1(o)(ii) for the Borrowers' 1999
through 2003 fiscal years on an annual basis, and which shall be prepared for
purposes of SECTION 10.1(d) for a one-year period on a quarterly basis.
"PROPORTIONATE SHARE" or "RATABLE", as applied to a Lender, means such
Lender's share of an amount in Dollars or other property at the time of
determination equal to (i) the Commitment Percentage of such Lender, or (ii) if
the Commitments are terminated, the percentage of the total principal amount of
Loans (plus Letter of Credit Obligations) outstanding at such time obtained by
dividing the principal amount of the Loans (plus Letter of Credit Obligations)
then owing to such Lender by the total principal amount of all Loans (plus
Letter of Credit Obligations) then owing to all Lenders.
"PROPRIETARY RIGHTS" means all of the Borrowers' now owned and
hereafter arising or acquired: Patents, Copyrights, Trademarks, including,
without limitation, those Proprietary Rights set forth on SCHEDULE 6.1(cc)
hereto, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of any
of the foregoing, and all rights to sue for past, present and future
infringement of any of the foregoing.
"PURCHASE MONEY INDEBTEDNESS" means (a) Indebtedness created to secure
the payment of all or any part of the purchase price of any property, (b) any
Indebtedness incurred at the time of the acquisition of any property for the
purpose of financing all or any part of the purchase price thereof, and (c) any
renewals, extensions or refinancings thereof, but not any increases in the
principal amounts thereof outstanding at the time of any such renewal, extension
or refinancing.
"PURCHASE MONEY LIEN" means any Lien securing Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
property the purchase price of which was financed through the incurrence of the
Permitted Purchase Money Indebtedness or Permitted Aircraft Purchase Money
Indebtedness secured by such Lien.
"REAL ESTATE" means all of the Borrowers' now or hereafter owned or
leased estates in real property, including, without limitation, all fees,
leaseholds and future interests, together with all of the Borrowers' now or
hereafter owned or leased interests in the improvements and emblements thereon,
the fixtures attached thereto and the easements appurtenant thereto, including,
without limitation the real property described on SCHEDULE 6.1(x).
"RECEIVABLES" means and includes, as to each Borrower, (a) any and all
rights to the payment of money or other forms of consideration of any kind
(whether classified under the Uniform Commercial Code as accounts, contract
rights, chattel paper, general intangibles, or otherwise) including, but not
limited to, accounts receivable, letters of credit and the right to receive
payment thereunder, chattel paper and the right to receive payment thereunder
(including the right to receive payment under any Lease Agreement), tax refunds,
insurance proceeds, Contract Rights, notes, drafts, instruments, documents,
acceptances, and all other debts, obligations and liabilities in whatever form
from any Person, (b) all guarantees, security and Liens for payment thereof, (c)
all goods, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be
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<PAGE> 36
represented by, or the sale or lease of which may have given rise to, any such
right to payment or other debt, obligation or liability, and (d) all proceeds of
any of the foregoing.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System (or any successor).
"REIMBURSEMENT AGREEMENT" means, with respect to a Letter of Credit,
such form of application therefor and form of reimbursement agreement therefor
(whether in a single document or several documents) as NationsBank may employ in
the ordinary course of business for its own account, with such modifications
thereto as may be agreed upon by NationsBank and the Borrowers, provided that
such application and agreement and any modifications thereto are not
inconsistent with the terms of this Agreement.
"REIMBURSEMENT OBLIGATIONS" means the reimbursement or repayment
obligations of the Borrowers to NationsBank with respect to Letters of Credit
pursuant to SECTION 3.6 or pursuant to a Reimbursement Agreement with respect to
amounts that have been drawn under Letters of Credit.
"RELATED COMPANY" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as any Borrower; (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with any Borrower; or (iii)
member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as any Borrower, any corporation described
in CLAUSE (i) above or any partnership, trade or business described in CLAUSE
(ii) above.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water or groundwater.
"REMEDIAL ACTION" means actions required to (i) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(ii) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (iii) perform
pre-remedial studies and investigations and post-remedial monitoring and care.
"REPORTABLE EVENT" has the meaning set forth in Section 4043(b) of
ERISA, but shall not include a Reportable Event as to which the provision for 30
days notice to the PBGC is waived under applicable regulations.
"REQUIRED LENDERS" means, at any time, any combination of Lenders whose
Commitment Percentages at such time aggregate in excess of 50%; provided,
however, that if any Lender shall have failed to fund its Proportionate Share of
any Loan in accordance with the terms of this Agreement, then, for so long as
such failure continues, the term "Required Lenders" shall mean Lenders
(excluding such Lender whose failure to fund its Proportionate Share of any Loan
has not been cured) whose Commitment Percentages (computed after excluding the
defaulting Lender's Commitment from the Total Commitment) at such time aggregate
in excess of 50%; provided further, however, that if the Commitments have been
terminated, the term "Required Lenders" shall mean Lenders (excluding each
Lender whose failure to fund its Proportionate Share of any Loan has not been
cured) holding Loans (plus
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Letter of Credit Obligations) representing in excess of 50% of the aggregate
principal amount of Loans and Letter of Credit Obligations (excluding the Loans
and Letter of Credit Obligations owing to the defaulting Lender) outstanding at
such time.
"RESTRICTED DIVIDEND PAYMENT" means any dividend, distribution or
payment on or with respect to (a) any shares of a Person's capital stock (other
than dividends payable solely in shares of its capital stock) or (b) any
partnership or other ownership interest in a Person, excluding, however, any
such dividend, distribution or payment to any Borrower by any Subsidiary of such
Borrower.
"RESTRICTED PAYMENT" means (a) any redemption or prepayment or other
retirement, prior to the stated maturity thereof or prior to the due date of any
regularly scheduled installment or amortization payment with respect thereto, of
any Indebtedness for Money Borrowed, (b) any redemption, retirement or payment
with respect to the Subordinated Indebtedness other than in accordance with any
subordination agreement or provisions applicable thereto, (c) the payment by any
Person of the principal amount of or interest on any Indebtedness (other than
trade debt) owing to a shareholder, partner or equity holder of such Person or
to any Affiliate of any such shareholder, partner or equity holder, and (d) the
payment of any management, consulting or similar fee by any Person to any
Affiliate of such Person; provided that the foregoing shall not prohibit any
redemption or retirement of the Convertible Subordinated Notes in connection
with the conversion of such Convertible Subordinated Notes to equity in
accordance with the terms thereof and any mandatory redemption of the Equitable
Subordinated Loan required by Section 4.1 or 4.5 of the Securities Purchase
Agreement relating to the Equitable Subordinated Loan.
"RESTRICTED PURCHASE" means any payment on account of the purchase,
redemption or other acquisition or retirement by a Person of any (a) shares of
such Person's capital stock (except shares acquired on the conversion thereof
into other shares of capital stock of such Person), (b) partnership interest in
such Person, if such Person is a partnership, or (c) membership interest in such
Person, if such Person is a limited liability company.
"REVOLVING CREDIT FACILITY" means the principal amount of $250,000,000
or such lesser or greater amount as shall be agreed upon from time to time in
writing by the Agent, the Lenders and the Borrowers; provided, however, at the
request of the Borrowers, but subject to the Agent's approval in its sole
discretion and further subject to the Agent's ability to obtain additional
commitments based on existing market conditions, including the payment by the
Borrowers of reasonable fees, the "Revolving Credit Facility" may be increased
to $300,000,000 as long as the average monthly outstanding principal balance
under the Revolving Credit Facility has equaled or exceeded $150,000,000 for the
immediately preceding three consecutive months and no Event of Default exists;
provided further, however, that the Borrowers shall execute and deliver such
promissory notes, agreements, certificates and legal opinions in connection with
such increase as may be requested by the Agent.
"REVOLVING CREDIT LOANS" means loans made to the Borrowers pursuant to
SECTION 2.1.
"REVOLVING CREDIT NOTE" means each Revolving Credit Note made by the
Borrowers payable to the order of a Lender evidencing the joint and several
obligation of the Borrowers to pay the aggregate unpaid principal amount of the
Revolving Credit Loans made to them by such Lender (and any promissory note or
notes that may be issued from time to time in substitution, renewal, extension,
replacement or exchange therefor whether payable to such Lender or to a
different Lender in connection with a Person becoming a Lender after the
Effective Date or otherwise) substantially in the form of
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EXHIBIT A hereto, with all blanks properly completed, either as originally
executed or as the same may from time to time be supplemented, modified,
amended, renewed, extended or refinanced.
"SCHEDULE OF EQUIPMENT" means a schedule delivered by the Borrowers to
the Agent pursuant to the provisions of SECTION 8.12(c).
"SCHEDULE OF INVENTORY" means a schedule delivered by the Borrowers to
the Agent pursuant to the provisions of SECTION 8.12(b).
"SCHEDULE OF RECEIVABLES" means a schedule delivered by the Borrowers
to the Agent pursuant to the provisions of SECTION 8.12(a).
"SECURED OBLIGATIONS" means, in each case whether now in existence or
hereafter arising,
(a) the principal of, and interest and premium, if any, on,
the Loans, and any fees payable in connection with the Loans,
(b) the Reimbursement Obligations and all other obligations of
the Borrowers to the Agent or any Lender arising in connection with the
issuance of Letters of Credit,
(c) all reimbursement and other obligations of any Borrower to
NationsBank, the Agent and the Lenders arising in connection with the
VRDN Documents, and
(d) all indebtedness, liabilities, obligations, covenants and
duties of the Borrowers to the Agent or to the Lenders (or any
Affiliate of any Lender) of every kind, nature and description arising
under or in respect of this Agreement, the Notes or any of the other
Loan Documents or the Banking Relationship, whether direct or indirect,
absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note,
and whether or not for the payment of money, including without
limitation, fees required to be paid pursuant to ARTICLE 4 and expenses
required to be paid or reimbursed pursuant to SECTION 15.2.
"SECURED PARTIES" means, collectively, the Agent, the Syndication
Agent, the Lenders, and each Affiliate of each of the foregoing.
"SEC" means the Securities and Exchange Commission or any successor
commission.
"SECURITY DOCUMENTS" means each of the following:
(a) the Mortgages,
(b) the Airframe and Engine Mortgage,
(c) the Mortgage Supplements,
(d) the Financing Statements,
(e) the Pledge Agreement,
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(f) the Trust Guaranty,
(g) the Trademark Assignment, and
(h) each other writing executed and delivered by any Obligor
securing any of the Secured Obligations.
"SECURITY INTEREST" means the Liens of the Agent, for the benefit of
the Secured Parties, on and in the Collateral effected hereby or by any of the
Security Documents or pursuant to the terms hereof or thereof.
"SETTLEMENT DATE" means each Business Day after the Effective Date
selected by the Agent in its sole discretion subject to and in accordance with
the provisions of SECTION 4.8(B) as of which a Settlement Report is delivered by
the Agent and on which settlement is to be made among the Lenders in accordance
with the provisions of SECTION 4.8.
"SETTLEMENT REPORT" means each report, substantially in the form
attached hereto as EXHIBIT E, prepared by the Agent and delivered to each Lender
and setting forth, among other things, as of the Settlement Date indicated
thereon and as of the next preceding Settlement Date, the aggregate principal
balance of all Revolving Credit Loans outstanding, each Lender's Commitment
Percentage thereof, each Lender's Net Outstandings and all Non-Ratable Loans
made, and all payments of principal, interest and fees received by the Agent
from the Borrowers during the period beginning on such next preceding Settlement
Date and ending on such Settlement Date.
"SUBORDINATED INDEBTEDNESS" means (a) the Indebtedness of the Borrowers
evidenced by the Convertible Subordinated Notes, including all principal,
interest and premium, if any, thereon, (b) the Equitable Subordinated Loan,
including all principal, interest and premium, if any, thereon, and (c) any
other Indebtedness for Money Borrowed of the Borrowers which is subordinated to
the Secured Obligations on terms and conditions acceptable to the Agent and the
Lenders in their sole discretion.
"SUBSIDIARY"
(a) when used to determine the relationship of a Person to
another Person, means a Person of which an aggregate of 50% or more of
the stock of any class or classes or 50% or more of other ownership
interests is owned of record or beneficially by such other Person, or
by one or more Subsidiaries of such other Person, or by such other
Person and one or more Subsidiaries of such Person,
(i) if the holders of such stock, or other ownership
interests, (A) are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority
of the directors (or other individuals performing similar
functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency, or
(B) are entitled, as such holders, to vote for the election of
a majority of the directors (or individuals performing similar
functions) of such Person, whether or not the right so to vote
exists by reason of the happening of a contingency, or
(ii) in the case of such other ownership interests,
if such ownership interests constitute a majority voting
interest, and
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(b) when used with respect to a Plan, ERISA or a provision of
the Internal Revenue Code pertaining to employee benefit plans, also
means any corporation, trade or business (whether or not incorporated)
which is under common control with any Borrower and is treated as a
single employer with such Borrower under Section 414(b) or (c) of the
Internal Revenue Code and the regulations thereunder.
"SUBSIDIARY GUARANTOR" has the meaning specified in SECTION 9.12.
"SUBSIDIARY GUARANTY" has the meaning specified in SECTION 9.12.
"SUPPORTING LETTER OF CREDIT" has the meaning specified in SECTION 3.9.
"TERMINATION DATE" means (a) December 14, 2003 or such later date as to
which the same may be extended pursuant to the provisions of SECTION 2.5, (b)
such earlier date as the Secured Obligations shall have been accelerated
pursuant to the provisions of SECTION 12.2, (c) such earlier date as all Secured
Obligations shall have been irrevocably paid in full and the Revolving Credit
Facility shall have been terminated, (d) such earlier date that is 180 days
prior to the stated maturity date of the next to mature of any of the
Convertible Subordinated Notes, unless prior to the date that is 180 days prior
to the stated maturity of the next to mature of any of Convertible Subordinated
Notes, either (i) such Convertible Subordinated Notes have been converted to
equity, or (ii) Kellstrom has secured a binding commitment letter satisfactory
to the Required Lenders in their absolute discretion pursuant to which a Person
satisfactory to the Required Lenders agrees to refinance the next to mature of
any of the Convertible Subordinated Notes on or prior to their stated maturity
date.
"TERMINATION EVENT" means (a) a Reportable Event, or (b) the filing of
a notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (c) the institution of proceedings
to terminate a Plan by the PBGC under Section 4042 of ERISA, or the appointment
of a trustee to administer any Plan.
"TOTAL COMMITMENT" means the sum of the Commitments.
"TRADEMARK ASSIGNMENT" means the Conditional Assignment and Trademark
Security Agreement, dated on or about the Effective Date, by the Borrowers to
the Agent for the benefit of the Secured Parties, as the same may be amended,
modified or supplemented from time to time.
"TRADEMARKS" means and includes in each case whether now existing or
hereafter arising, all of the Borrowers' right, title and interest in and to (a)
trademarks (including service marks), trade names and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the trademarks, (b) licenses of the foregoing, whether as
licensee or licensor, (c) renewals thereof, (d) income, royalties, damages and
payments now or hereafter due and/or payable with respect thereto, including,
without limitation, damages, claims and payments for past and future
infringements thereof, (e) rights to sue for past, present and future
infringements thereof, including the right to settle suits involving claims and
demands for royalties owing, and (f) all rights corresponding to any of the
foregoing throughout the world.
"TRUST" means that certain trust formed pursuant to that certain
Amended and Restated Trust Agreement 019, dated as of March 26, 1990, and any
other trust formed for the purpose of holding title to Aircraft Inventory or
Engine Inventory.
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"TRUST GUARANTY" has the meaning specified in SECTION 9.12.
"TYPE" when used in respect of any Loan or Borrowing, shall refer to
the rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined.
"UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures which are
paid for by a Person other than with the proceeds of Indebtedness for Money
Borrowed (other than the Loans) incurred to finance such Capital Expenditures
and other than those represented by Capitalized Lease Obligations.
"UNFUNDED VESTED ACCRUED BENEFITS" means with respect to any Plan at
any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code as
in effect from time to time in the State of Georgia.
"VRDN ASSIGNMENT" means the Collateral Assignment of Agreements
Affecting Real Estate, to be executed by Kellstrom in favor of NationsBank in
connection with the VRDN Letter of Credit.
"VRDN DOCUMENTS" means collectively the VRDN Assignment, the VRDN
Guaranty, the VRDN Letter of Credit, the VRDN Mortgage, the VRDN Reimbursement
Agreement, and each other instrument, agreement or document executed by the
Borrowers or any Subsidiary of the Borrowers in connection with the VRDN Letter
of Credit, whether on or after the Effective Date.
"VRDN GUARANTY" means the Corporate Guaranty Agreement to be executed
by Kellcad, Aero Support, ITC, Aerocar Aviation, and Aerocar Parts in favor of
NationsBank in connection with the VRDN Letter of Credit.
"VRDN LETTER OF CREDIT" means the Irrevocable Letter of Credit proposed
to be issued by NationsBank, for the account of Kellstrom, in favor of Norwest
Bank Minnesota, N.A., as Trustee, in the face amount of up to $6,750,000.
"VRDN MORTGAGE" means the Mortgage, Assignment of Rents and Security
Agreement to be executed by Kellstrom in favor of NationsBank in connection with
the VRDN Letter of Credit.
"VRDN REAL ESTATE" means Kellstrom's owned real property located at
14000 N.W. 4th Street, Sunrise, Florida.
"VRDN REIMBURSEMENT AGREEMENT" means the Letter of Credit Reimbursement
Agreement to be executed by Kellstrom and NationsBank in connection with the
VRDN Letter of Credit.
"WHOLLY-OWNED SUBSIDIARY", when used to determine the relationship of a
Subsidiary to a Person, means a Subsidiary all of the issued and outstanding
shares (other than directors' qualifying shares) of the capital stock of which
shall at the time be owned by such Person or one or more of such Person's
Wholly-Owned Subsidiaries or by such Person and one or more of such Person's
Wholly-Owned Subsidiaries.
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SECTION 1.2. GENERAL. All terms of an accounting nature not
specifically defined herein shall have the meaning ascribed thereto by GAAP. The
terms accounts, chattel paper, contract rights, documents, equipment,
instruments, general intangibles and inventory, as and when used in this
Agreement or the Security Documents, shall have the meanings given those terms
in the Uniform Commercial Code. Unless otherwise specified, a reference in this
Agreement to a particular section or subsection is a reference to that section
or subsection of this Agreement, and the words "hereof," "herein," "hereunder"
and words of similar import, when used in this Agreement, refer to this
Agreement as a whole and not to any particular provision, section or subsection
of this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and plural,
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, the feminine and the neuter. Words denoting individuals include
corporations and vice versa. References to any legislation or statute or code,
or to any provisions of any legislation or statute or code, shall include any
modification or reenactment of, or any legislative, statutory or code provision
substituted for, such legislation, statute or code or provision thereof.
References to any document or agreement (including this Agreement) shall include
references to such document or agreement as amended, novated, supplemented,
modified or replaced from time to time, so long as and to the extent that such
amendment, novation, supplement, modification or replacement is either not
prohibited by the terms of this Agreement or is consented to by the Required
Lenders and the Agent. References to any Person include its successor or
permitted substitutes and assigns.
ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1. REVOLVING CREDIT LOANS. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, each Lender agrees, severally, but not jointly, to make
Revolving Credit Loans to the Borrowers from time to time from the Effective
Date to but not including the Termination Date, as requested or deemed requested
by the Borrowers in accordance with the terms of SECTION 2.2, in amounts equal
to such Lender's Commitment Percentage of each such Loan requested or deemed
requested hereunder up to an aggregate amount at any one time outstanding equal
to such Lender's Commitment Percentage of the Borrowing Base; provided, however,
that the aggregate principal amount of all outstanding Revolving Credit Loans
(after giving effect to the Loans requested) shall not exceed the Borrowing
Base. It is expressly understood and agreed that the Lenders may and at present
intend to use the Borrowing Base as a maximum ceiling on Revolving Credit Loans
to the Borrowers; PROVIDED, HOWEVER, that it is agreed that should the Revolving
Credit Loans exceed the ceiling so determined or any other limitation set forth
in this Agreement, such Revolving Credit Loans shall nevertheless constitute
Secured Obligations and, as such, shall be entitled to all benefits thereof and
security therefor. The principal amount of any Revolving Credit Loan which is
repaid pursuant to SECTION 2.3(c) may be reborrowed by the Borrowers, subject to
the terms and conditions of this Agreement, in accordance with the terms of this
SECTION 2.1. The Agent's and each Lender's books and records reflecting the date
and the amount of each Revolving Credit Loan and each repayment of principal
thereof shall constitute PRIMA FACIE evidence of the accuracy of the information
contained therein, subject to the provisions of SECTION 4.8.
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SECTION 2.2. MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings
under the Revolving Credit Facility shall be made as follows:
(a) REQUESTS FOR BORROWING.
(i) PRIME RATE REVOLVING CREDIT LOANS. A request for
the Borrowing of a Prime Rate Revolving Credit Loan shall be
made, or shall be deemed to be made, in the following manner:
(A) with respect to the initial Borrowing to
be made on the Effective Date, the Borrowers shall
give the Agent an Initial Notice of Borrowing at
least two Business Days prior to the proposed date of
the Borrowing, and, as to subsequent Prime Rate
Revolving Credit Loans, the Borrowers shall give the
Agent a Notice of Borrowing before 11:00 a.m.
(Atlanta time) on the proposed Borrowing date, all of
which notices shall be irrevocable,
(B) whenever a check or other item is
presented to a Disbursing Bank for payment against a
Disbursement Account in an amount greater than the
then available balance in such account, such
Disbursing Bank shall, and is hereby irrevocably
authorized by the Borrowers to, give the Agent notice
thereof, which notice shall be deemed to be an
irrevocable request for a Prime Rate Revolving Credit
Loan on the date of such notice in an amount equal to
the excess of such check or other item over such
available balance,
(C) unless payment is otherwise made by the
Borrowers, the becoming due of any amount required to
be paid under this Agreement or any of the Notes as
interest shall be deemed to be an irrevocable request
for a Prime Rate Revolving Credit Loan on the due
date in the amount required to pay such interest,
(D) unless payment is otherwise made by the
Borrowers, the becoming due of any other Secured
Obligation shall be deemed to be an irrevocable
request for a Prime Rate Revolving Credit Loan on the
due date in the amount then so due, and such request
shall be irrevocable, and
(E) the receipt by the Agent of notification
from NationsBank to the effect that a drawing has
been made under a Letter of Credit and that the
Borrowers have failed to reimburse NationsBank
therefor in accordance with the terms of the Letter
of Credit, the Reimbursement Agreement and ARTICLE 3,
shall be deemed to be an irrevocable request for a
Prime Rate Revolving Credit Loan on the date such
notification is received in the amount of such
drawing which is so unreimbursed.
(ii) EURODOLLAR RATE REVOLVING CREDIT LOANS. The
Borrowers may request a Eurodollar Rate Loan under the
Revolving Credit Facility by giving the Agent a Notice of
Borrowing (which notice shall be irrevocable) not later than
11:00 a.m. (Atlanta time) on the date three Business Days
before the day on which the requested Eurodollar Rate
Revolving Credit Loan is to be made; provided the Borrowers
shall not be permitted to request, and the Lenders shall not
be required to make, Eurodollar Rate Revolving Credit Loans at
any time during the existence of an Event of Default.
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(iii) NOTIFICATION OF LENDERS. In the case of each
Eurodollar Rate Revolving Credit Loan and, unless the Agent
has elected periodic settlements pursuant to SECTION 4.8, in
the case of each Prime Rate Revolving Credit Loan, the Agent
shall promptly notify the Lenders of any Notice of Borrowing
given or deemed given pursuant to this SECTION 2.2(a) by 12:00
noon (Atlanta time) on the proposed Borrowing date (in the
case of Prime Rate Revolving Credit Loans) or by 3:00 p.m.
(Atlanta time) three Business Days before the proposed
Borrowing date (in the case of Eurodollar Rate Revolving
Credit Loans). Not later than 1:30 p.m. on the proposed
Borrowing date, each Lender will make available to the Agent,
for the account of the Borrowers, at the Agent's Office in
funds immediately available to the Agent, an amount equal to
such Lender's Commitment Percentage of such Prime Rate
Revolving Credit Loan or Eurodollar Rate Revolving Credit
Loan, as the case may be.
(b) DISBURSEMENT OF LOANS. Each Borrower hereby irrevocably
authorizes the Agent to disburse the proceeds of each Borrowing
requested, or deemed to be requested, pursuant to this SECTION 2.2 as
follows:
(i) the proceeds of each Borrowing requested under
SECTION 2.2(a)(i)(a) (other than the Borrowing of the Initial
Loans), 2.2(a)(i)(b) or 2.2(a)(ii) shall be disbursed by the
Agent in Dollars in immediately available funds by wire
transfer to a Disbursement Account or, in the absence of a
Disbursement Account, by wire transfer to such other account
as may be agreed upon by the Borrowers and the Agent from time
to time, and the proceeds of the Initial Loans under SECTION
2.2(a)(i)(a) shall be disbursed in accordance with the Initial
Notice of Borrowing;
(ii) the proceeds of each Borrowing deemed requested
under SECTION 2.2(a)(i)(c) or (d) shall be disbursed by the
Agent by way of direct payment of the relevant interest or
Secured Obligation; and
(iii) the proceeds of each Borrowing deemed requested
under SECTION 2.2(a)(i)(e) shall be disbursed by the Agent
directly to NationsBank on behalf of the Borrower.
SECTION 2.. REPAYMENT OF REVOLVING CREDIT LOANS. The Revolving Credit
Loans will be repaid as follows:
(a) Whether or not any Default or Event of Default has
occurred, the outstanding principal amount of all the Revolving Credit
Loans is due and payable, and shall be repaid by the Borrowers in full,
not later than the Termination Date;
(b) If at any time the aggregate outstanding unpaid principal
amount of the Revolving Credit Loans exceeds the Borrowing Base in
effect at such time, the Borrowers shall repay the Revolving Credit
Loans in an amount sufficient to reduce the aggregate unpaid principal
amount of such Revolving Credit Loans by an amount equal to such
excess, together with accrued and unpaid interest on the amount so
repaid to the date of repayment;
(c) Each Borrower hereby instructs the Agent to repay the
Revolving Credit Loans outstanding on any day in an amount equal to the
amount, if any, received by the Agent on such day pursuant to SECTION
8.1(b); PROVIDED that payments received in excess of outstanding
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Revolving Credit Loans or payments received on account of Eurodollar
Rate Loans which would otherwise result in prepayment of such Loans
prior to the end of the Interest Period applicable thereto may, upon
the instruction of the Borrowers to the Agent not later than 1:00 p.m.
(Atlanta time) on any Business Day, be applied to the Cash Collateral
Account; and
(d) Each Eurodollar Rate Loan is due and payable on the last
day of the Interest Period applicable thereto, except to the extent
converted or continued in accordance with SECTIONS 4.12 and 4.13.
Repayments pursuant to SECTION 2.3(b) or (c) shall be applied first to the Prime
Rate Revolving Credit Loans and then, subject to the provisions of SECTION
2.3(c), to Eurodollar Rate Revolving Credit Loans.
SECTION 2.4. REVOLVING CREDIT NOTES. Each Lender's Revolving
Credit Loans and the joint and several obligation of the Borrowers to repay such
Revolving Credit Loans shall also be evidenced by a Revolving Credit Note
payable to the order of such Lender. Each Revolving Credit Note shall be dated
the Effective Date (or the later "effective date" under any Assignment and
Acceptance) and be duly and validly executed and delivered by the Borrowers.
SECTION 2.5. EXTENSION OF REVOLVING CREDIT FACILITY. Upon the
request of the Borrowers, the Lenders may, in their sole discretion, effective
as of any anniversary of the Effective Date, agree to extend the Revolving
Credit Facility for a period of time beyond the then effective Termination Date.
Each such extension shall be effected by the Borrowers' and Lenders' execution
and delivery of a written agreement evidencing such extension.
ARTICLE 3
LETTER OF CREDIT FACILITY
SECTION 3.1. AGREEMENT TO ISSUE.
(a) Upon the terms and subject to the conditions of, and in
reliance upon the representations and warranties made under, this
Agreement, NationsBank agrees to issue for the account of the Borrowers
one or more Letters of Credit in accordance with this ARTICLE 3, from
time to time during the period commencing on the Effective Date and
ending on the Termination Date.
(b) Upon the terms and subject to the conditions of, and in
reliance upon the representations and warranties made under, the VRDN
Documents, NationsBank agrees to issue the VRDN Letter of Credit;
provided that, NationsBank shall have no obligation to issue the VRDN
Letter of Credit unless (i) the underlying bond to be secured by the
VRDN Letter of Credit is issued on terms acceptable to the Agent
contemporaneous with the issuance of the VRDN Letter of Credit on or
before March 5, 1999, (ii) all of the VRDN Documents are satisfactory
to NationsBank in its sole discretion, (iii) all conditions precedent
to the issuance of the VRDN Letter of Credit, whether set forth in this
Agreement or in the VRDN Documents, shall have been satisfied or
waived, and (iv) all other matters with respect to the VRDN Documents
and the VRDN Real Estate are satisfactory to NationsBank in its sole
discretion, including without limitation all matters relating to
Environmental Laws.
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SECTION 3.2. AMOUNTS. NationsBank shall not have any obligation to
issue any Letter of Credit at any time:
(a) if, after giving effect to the issuance of the requested
Letter of Credit, (i) the aggregate Letter of Credit Obligations of the
Borrowers would exceed the Letter of Credit Facility then in effect or
(ii) the aggregate principal amount of the Revolving Credit Loans
outstanding would exceed the Borrowing Base (after reduction for the
Letter of Credit Reserve in respect of such Letter of Credit); or
(b) which has a term longer than one calendar year or an
expiration date after the last Business Day that is more than 15 days
prior to the Termination Date.
SECTION 3.3. CONDITIONS. The obligation of NationsBank to issue the
VRDN Letter of Credit and any Letter of Credit is subject to the satisfaction of
the conditions precedent contained in ARTICLE 5. In addition, the obligation of
NationsBank to issue any Letter of Credit is subject to the satisfaction of the
following additional conditions precedent in a manner satisfactory to the Agent
and NationsBank:
(a) the Borrowers shall have delivered to NationsBank and the
Agent at such times and in such manner as NationsBank or the Agent may
prescribe an application in form and substance satisfactory to
NationsBank and the Agent for the issuance of the Letter of Credit, a
Reimbursement Agreement and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed
Letter of Credit shall be satisfactory to NationsBank and the Agent;
and
(b) as of the date of issuance, no order of any court,
arbitrator or governmental authority having jurisdiction or authority
over NationsBank shall purport by its terms to enjoin or restrain banks
generally from issuing letters of credit of the type and in the amount
of the proposed Letter of Credit, and no law, rule or regulation
applicable to banks generally and no request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over banks generally shall prohibit, or request that
NationsBank refrain from, the issuance of letters of credit generally
or the issuance of such Letter of Credit.
SECTION 3.4. ISSUANCE OF LETTERS OF CREDIT.
(a) REQUEST FOR ISSUANCE. The Borrowers shall give NationsBank
and the Agent written notice of the Borrowers' request for the issuance
of a Letter of Credit no later than six Business Days prior to the
proposed date of issuance of the Letter of Credit. Such notice shall be
irrevocable and shall specify the original face amount of the Letter of
Credit requested, the effective date (which date shall be a Business
Day) of issuance of such requested Letter of Credit, whether such
Letter of Credit may be drawn in a single or in multiple draws, the
date on which such requested Letter of Credit is to expire (which date
shall be a Business Day earlier than the Business Day 15 days prior to
the Termination Date), the purpose for which such Letter of Credit is
to be issued and the beneficiary of the requested Letter of Credit. The
Borrowers shall attach to such notice the form of the Letter of Credit
that the Borrowers request to be issued.
(b) RESPONSIBILITIES OF THE AGENT; ISSUANCE. The Agent shall
determine, as of the Business Day immediately preceding the requested
effective date of issuance of the Letter of Credit set forth in the
notice from the Borrowers pursuant to SECTION 3.4(a), the amount of the
unused Letter of Credit Facility and the Borrowing Base. If (i) the
form of the Letter of Credit delivered by the Borrowers to the Agent is
acceptable to NationsBank and the Agent in their sole discretion, (ii)
the Agent has not received notice of a Default or an Event of Default
from the Required Lenders specifically stating that the Required
Lenders do not intend to fund their ratable portion of the Loans, (iii)
the undrawn face amount of the requested Letter of Credit is less than
or equal to the lesser of (A) the unused Letter of Credit Facility and
(B) the unused Borrowing Base, and (iv) the Agent has received a
certificate from the Borrowers stating that the applicable conditions
set forth in ARTICLE 5 have been satisfied, then NationsBank will cause
the Letter of Credit to be issued.
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(c) NOTICE OF ISSUANCE. Promptly after the issuance of any
Letter of Credit, NationsBank shall give the Agent written or facsimile
notice, or telephonic notice confirmed promptly thereafter in writing,
of the issuance of such Letter of Credit, and the Agent shall give each
Lender written or facsimile notice, or telephonic notice confirmed
promptly thereafter in writing, of the issuance of such Letter of
Credit.
(d) NO EXTENSION OR AMENDMENT. No Letter of Credit shall be
extended or amended unless the requirements of this SECTION 3.4 are met
as though a new Letter of Credit were being requested and issued.
SECTION 3.5. DUTIES OF NATIONSBANK. Any action taken or omitted to be
taken by NationsBank under or in connection with any Letter of Credit or the
VRDN Letter of Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not result in any liability of NationsBank to any
Lender or relieve any Lender of its obligations hereunder to NationsBank. In
determining whether to pay under any Letter of Credit or the VRDN Letter of
Credit, NationsBank shall have no obligation to any Lender other than to confirm
that any documents required to be delivered under such Letter of Credit or the
VRDN Letter of Credit in connection with such drawing have been presented and
appear on their face to comply with the requirements of such Letter of Credit or
the VRDN Letter of Credit.
SECTION 3.6. PAYMENT OF REIMBURSEMENT OBLIGATIONS.
(a) PAYMENT TO ISSUER. Notwithstanding any provisions to the
contrary in any Reimbursement Agreement, the Borrowers jointly and
severally agree to reimburse NationsBank for any drawings (whether
partial or full) under each Letter of Credit issued by NationsBank and
agree to pay to NationsBank the amount of all other Reimbursement
Obligations and other amounts payable to NationsBank under or in
connection with such Letter of Credit immediately when due,
irrespective of any claim, set-off, defense or other right which any
Borrower may have at any time against NationsBank or any other Person.
Notwithstanding any provisions to the contrary in the VRDN
Reimbursement Agreement, Kellstrom agrees to reimburse NationsBank for
any drawings (whether partial or full) under the VRDN Letter of Credit
and agrees to pay to NationsBank the amount of all reimbursement
obligations and other amounts payable to NationsBank under or in
connection with the VRDN Letter of Credit immediately when due,
irrespective of any claim, set-off, defense or other right which
Kellstrom may have at any time against NationsBank or any other Person;
provided the foregoing shall not constitute a waiver of any rights of
the Borrowers for purposes other than this Agreement.
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(b) RECOVERY OR AVOIDANCE OF PAYMENTS. In the event any
payment by or on behalf of any Borrower with respect to any Letter of
Credit (or any Reimbursement Obligation relating thereto) or the VRDN
Letter of Credit (or any reimbursement or other obligation relating
thereto) received by NationsBank, or by the Agent and distributed by
the Agent to the Lenders on account of their respective participations
therein, is thereafter set aside, avoided or recovered from NationsBank
or the Agent in connection with any receivership, liquidation or
bankruptcy proceeding, the Lenders shall, upon demand by the Agent, pay
to the Agent, for the account of the Agent or NationsBank, their
respective Commitment Percentages of such amount set aside, avoided or
recovered together with interest at the rate required to be paid by the
Agent upon the amount required to be repaid by it.
SECTION 3.7. PARTICIPATIONS.
(a) PURCHASE OF PARTICIPATIONS. Immediately upon issuance by
NationsBank of the VRDN Letter of Credit or any Letter of Credit, each
Lender shall be deemed to have irrevocably and unconditionally
purchased and received without recourse or warranty an undivided
interest and participation (i) in such VRDN Letter of Credit or such
Letter of Credit, equal to such Lender's Commitment Percentage of the
face amount thereof (including, without limitation, all obligations of
the Borrowers with respect thereto, other than amounts owing to
NationsBank under SECTION 4.2(d), and any security therefor or guaranty
pertaining thereto), and (ii) in the case of the VRDN Letter of Credit,
in each of the VRDN Documents delivered to NationsBank in connection
with the issuance thereof.
(b) SHARING OF LETTER OF CREDIT PAYMENTS. In the event that
NationsBank makes a payment under the VRDN Letter of Credit or any
Letter of Credit and NationsBank shall not have been repaid such amount
pursuant to SECTION 3.6, then NationsBank shall be deemed to have made
a Non-Ratable Loan in the amount of such payment, and notwithstanding
the occurrence or continuance of a Default or Event of Default at the
time of such payment, such Non-Ratable Loan shall be subject to the
provisions of SECTION 4.8 and the absolute obligations of the Lenders
to pay for their respective participation interests therein.
(c) SHARING OF REIMBURSEMENT OBLIGATION PAYMENTS. Whenever
NationsBank receives a payment from or on behalf of the Borrowers on
account of a Reimbursement Obligation (or any reimbursement or other
obligation with respect to the VRDN Letter of Credit) as to which the
Agent has previously received for the account of NationsBank payment
from a Lender pursuant to this SECTION 3.7, NationsBank shall promptly
pay to the Agent, for the benefit of such Lender, such Lender's
Commitment Percentage of the amount of such payment from the Borrowers
in Dollars. Each such payment shall be made by NationsBank on the
Business Day on which NationsBank receives immediately available funds
pursuant to the immediately preceding sentence, if received prior to
11:00 a.m. (Atlanta time) on such Business Day and otherwise on the
next succeeding Business Day.
(d) DOCUMENTATION. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any VRDN Document, Letter of
Credit, Reimbursement Agreement or application for any Letter of Credit
and such other documentation as may reasonably be requested by such
Lender.
(e) OBLIGATIONS IRREVOCABLE. The obligations of each Lender to
make payments to the Agent with respect to the VRDN Letter of Credit
and any Letter of Credit and their
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participations therein pursuant to the provisions of SECTION 4.8 hereof
or otherwise and the obligations of the Borrowers to make payments to
NationsBank or to the Agent, for the account of Lenders, shall be
irrevocable, shall not be subject to any qualification or exception
whatsoever (except with respect to the Agent's gross negligence or
willful misconduct) and shall be made in accordance with the terms and
conditions of this Agreement (assuming, in the case of the obligations
of the Lenders to make such payments, that the Letter of Credit has
been issued in accordance with SECTION 3.4), including, without
limitation, any of the following circumstances:
(i) Any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense or
other right which any Borrower may have at any time against a
beneficiary named in the VRDN Letter of Credit or a Letter of
Credit or any transferee of the VRDN Letter of Credit or any
Letter of Credit (or any Person for whom any such transferee
may be acting), any Lender, NationsBank or any other Person,
whether in connection with this Agreement, the VRDN Letter of
Credit or any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying
transactions between any Borrower or any other Person and the
beneficiary named in the VRDN Letter of Credit or any Letter
of Credit);
(iii) Any draft, certificate or any other document
presented under the VRDN Letter of Credit or any Letter of
Credit upon which payment has been made in good faith and
according to its terms proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(iv) The surrender or impairment of any Collateral or
any other security for the Secured Obligations or the
performance or observance of any of the terms of any of the
Loan Documents;
(v) The occurrence of any Default or Event of
Default; or
(vi) The Agent's failure to deliver to any Lender the
notice provided for in SECTION 3.4(c).
SECTION 3.8. INDEMNIFICATION, EXONERATION.
(a) INDEMNIFICATION. In addition to amounts payable as
elsewhere provided in this ARTICLE 3, the Borrowers jointly and
severally agree to protect, indemnify, pay and save the Lenders and the
Agent harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) which any Lender or the Agent may incur or
be subject to as a consequence, directly or indirectly, of
(i) the issuance of the VRDN Letter of Credit or any
Letter of Credit, other than as a result of its gross
negligence or willful misconduct, as determined by a court of
competent jurisdiction, or
(ii) the failure of NationsBank to honor a drawing
under the VRDN Letter of Credit or any Letter of Credit as a
result of any act or omission, whether rightful or
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wrongful, of any present or future DE JURE or DE FACTO
governmental authority (all such acts or omissions being
hereinafter referred to collectively as "Government Acts").
(b) ASSUMPTION OF RISK BY THE BORROWERS. As among the
Borrowers, the Lenders and the Agent, the Borrowers assume all risks of
the acts and omissions of, or misuse of the VRDN Letter of Credit or
any of the Letters of Credit by, the respective beneficiaries thereof.
In furtherance and not in limitation of the foregoing, subject to the
provisions of the applications for the issuance of the VRDN Letter of
Credit and Letters of Credit, the Lenders and the Agent shall not be
responsible for:
(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any
Person in connection with the application for and issuance of
and presentation of drafts with respect to the VRDN Letter of
Credit or any of the Letters of Credit, even if it should
prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
the VRDN Letter of Credit or any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or
in part, which may prove to be invalid or ineffective for any
reason;
(iii) the failure of the beneficiary of the VRDN
Letter of Credit or any Letter of Credit to comply duly with
conditions required in order to draw upon the VRDN Letter of
Credit or such Letter of Credit (provided that the Borrowers
reserve all of their rights and remedies against NationsBank
as issuer of the VRDN Letter of Credit and the other Letters
of Credit for improper payment made by NationsBank);
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in
cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under the VRDN Letter of Credit or any Letter of Credit or of
the proceeds thereof;
(vii) the misapplication by the beneficiary of the
VRDN Letter of Credit or any Letter of Credit of the proceeds
of any drawing under the VRDN Letter of Credit or such Letter
of Credit; or
(viii) any consequences arising from causes beyond
the reasonable control of the Lenders or the Agent, including,
without limitation, any Government Acts.
None of the foregoing shall affect, impair or prevent the vesting of
any of the Agent's rights or powers under this SECTION 3.8.
(c) EXONERATION. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action
taken or omitted by the Agent, NationsBank or any Lender
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under or in connection with the VRDN Letter of Credit or any of the
Letters of Credit or any related certificates, if taken or omitted in
good faith, shall not result in any liability of any Lender or the
Agent to the Borrowers or relieve the Borrowers of any of their
obligations hereunder to any such Person.
SECTION 3.9. SUPPORTING LETTER OF CREDIT; CASH COLLATERAL. If,
notwithstanding the provisions of SECTION 3.2(b), the VRDN Letter of Credit or
any Letter of Credit is outstanding on the Termination Date, then on or prior to
such Termination Date, or in any case upon the occurrence of an Event of
Default, the Borrowers shall, promptly on demand by the Agent, deposit with the
Agent, for the ratable benefit of the Lenders, with respect to the VRDN Letter
of Credit and each Letter of Credit then outstanding, as the Agent shall
specify, either (a) a standby letter of credit (a "Supporting Letter of Credit")
in form and substance satisfactory to the Agent, issued by an issuer reasonably
satisfactory to the Agent in an amount equal to the greatest amount for which
each such letter of credit may be drawn, under which Supporting Letter of Credit
the Agent is entitled to draw amounts necessary to reimburse the Agent and the
Lenders for payments made by the Agent and the Lenders under each such letter of
credit or under any reimbursement or guaranty agreement with respect thereto, or
(b) Cash Collateral in an amount necessary to reimburse the Agent and the
Lenders for payments made by the Agent and the Lenders under each such letter of
credit or under any reimbursement or guaranty agreement with respect thereto.
Such Supporting Letter of Credit or Cash Collateral shall be held by the Agent
for the benefit of the Lenders, as security for, and to provide for the payment
of, the Reimbursement Obligations and all reimbursement and other obligations
with respect to the VRDN Letter of Credit. In addition, the Agent may at any
time after the Termination Date apply any or all of such Cash Collateral to the
payment of any or all of the Secured Obligations then due and payable. At the
Borrowers' request, but subject to the Agent's reasonable approval, the Agent
shall invest any Cash Collateral consisting of cash or any proceeds of Cash
Collateral consisting of cash in Cash Equivalents, and any commissions, expenses
and penalties incurred by the Agent in connection with any investment and
redemption of such Cash Collateral shall be Secured Obligations hereunder
secured by the Collateral, shall bear interest at the rates provided herein for
the Loans and shall be charged to the Borrowers' Loan Accounts, or, at the
Agent's option, shall be paid out of the proceeds of any earnings received by
the Agent from the investment of such Cash Collateral as provided herein or out
of such cash itself. The Agent makes no representation or warranty as to, and
shall not be responsible for, the rate of return, if any, earned on any Cash
Collateral. Any earnings on Cash Collateral shall be held as additional Cash
Collateral on the terms set forth in this SECTION 3.9.
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ARTICLE 4
GENERAL LOAN PROVISIONS
SECTION 4.1. INTEREST.
(a) PRIME RATE LOANS. Subject to the provisions of SECTION
4.1(d), the Borrowers will pay interest on the unpaid principal amount
of each Prime Rate Loan, for each day from the day such Loan is made
until such Loan is paid (whether at maturity, by reason of
acceleration, or otherwise) or is converted to a Loan of a different
Type, at a rate per annum equal to the sum of (i) the Applicable Margin
and (ii) the Prime Rate, payable monthly in arrears as it accrues on
each Interest Payment Date. As of the close of business on the last day
of the calendar month preceding the Effective Date the Prime Rate was
7.75%, and consequently the initial rate of interest for all Loans made
on the Effective Date shall be 7.75%, subject to adjustment after the
Effective Date as set forth herein.
(b) EURODOLLAR RATE LOANS. Subject to the provisions of
SECTION 4.1(d), the Borrowers will pay interest on the unpaid principal
amount of each Eurodollar Rate Loan for the applicable Interest Period
at a rate per annum equal to the sum of (i) the Applicable Margin and
(ii) the Eurodollar Rate, payable in arrears as it accrues on each
Interest Payment Date, and when such Eurodollar Rate Loan is due
(whether at maturity, by reason of acceleration or otherwise).
(c) OTHER SECURED OBLIGATIONS. The Borrowers will, to the
extent permitted by Applicable Law, pay interest on the unpaid
principal amount of any Secured Obligation that is due and payable,
other than the Loans, in accordance with SECTIONS 4.1(a) or (d), as
applicable, as if such Secured Obligation were a Prime Rate Revolving
Credit Loan.
(d) DEFAULT RATE. If there shall occur and be continuing an
Event of Default, at the election of the Required Lenders, the unpaid
principal amount of the Loans and other Secured Obligations shall no
longer bear interest in accordance with the terms of SECTION 4.1(a),
(b) or (c), but shall bear interest for each day from the date of such
Event of Default until such Event of Default shall have been cured or
waived at a rate per annum equal to the sum of (i) the Default Margin
and (ii) the rate otherwise applicable to such Loan or other Secured
Obligation, payable on demand. The interest rate provided for in the
preceding sentence shall, to the extent permitted by Applicable Law,
apply to and accrue on the amount of any judgment entered with respect
to any Secured Obligation and shall continue to accrue at such rate
during any proceeding described in SECTION 12.1(g) or (h).
(e) CALCULATION OF INTEREST. The interest rates provided for
in SECTIONS 4.1(a), (b), (c) and (d) shall be computed on the basis of
a year of 360 days and the actual number of days elapsed.
(f) MAXIMUM RATE. It is not intended by the Lenders, and
nothing contained in this Agreement or the Notes shall be deemed, to
establish or require the payment of a rate of interest in excess of the
maximum rate permitted by Applicable Law (the "Maximum Rate"). If, in
any month, the Effective Interest Rate, absent such limitation, would
have exceeded the Maximum Rate, then the Effective Interest Rate for
that month shall be the Maximum Rate, and, if in future months, the
Effective Interest Rate would otherwise be less than the Maximum Rate,
then the Effective Interest Rate shall remain at the Maximum Rate until
such time as the amount of
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interest paid hereunder equals the amount of interest which would have
been paid if the same had not been limited by the Maximum Rate. In the
event, upon payment in full of the Secured Obligations, the total
amount of interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would have been paid or
accrued if the Effective Interest Rate had at all times been in effect,
then the Borrowers shall, to the extent permitted by Applicable Law,
pay to the Agent for the account of the Lenders an amount equal to the
excess, if any, of (i) the lesser of (A) the amount of interest which
would have been charged if the Maximum Rate had, at all times, been in
effect and (B) the amount of interest which would have accrued had the
Effective Interest Rate, at all times, been in effect and (ii) the
amount of interest actually paid or accrued under this Agreement. In
the event the Lenders receive, collect or apply as interest any sum in
excess of the Maximum Rate, such excess amount shall be applied to the
reduction of the principal balance of the Secured Obligations, and if
no such principal is then outstanding, such excess or part thereof
remaining shall be paid to the Borrowers.
SECTION 4.2. CERTAIN FEES.
(a) CLOSING FEES. As additional consideration for the
extensions of credit provided for hereunder, in addition to any
interest due under this Agreement, on the Effective Date, the Borrowers
shall pay to the Agent (for its own account except as otherwise agreed
in writing between the Agent and the Lenders) a closing fee as set
forth in that certain letter agreement, dated as of October 26, 1998,
between the Borrowers and the Agent (the "Fee Letter"). The closing fee
provided for in the Fee Letter shall compensate the Agent for the
internal costs associated with the origination, structuring,
processing, approving and closing of the transactions contemplated by
this Agreement, but not including any out-of-pocket expenses for which
the Borrowers have agreed to reimburse the Agent and the other Lenders,
including, without limitation, the Agent's reasonable out-of-pocket
expenses incurred in connection with its due diligence examination of
the Borrowers and the closing of the transactions contemplated by this
Agreement. Such closing fee shall be fully earned on the Effective Date
and shall not be subject to refund or rebate.
(b) AGENT FEE. For administration and other services performed
by the Agent in connection with its continuing administration of this
Agreement, the Borrowers shall pay to the Agent, for its own account,
and not for the account of the Lenders, an annual fee as set forth in
the Fee Letter, payable on the Effective Date and each anniversary
thereof so long as any Loan or Letter of Credit that is not
collateralized by cash or by a Supporting Letter of Credit acceptable
to the Agent remains outstanding or the Revolving Credit Facility shall
not have been terminated. The fee payable pursuant to the Fee Letter
and this SECTION 4.2(b) shall be fully earned by the Agent on the date
payment thereof is due and shall not be subject to refund or rebate.
Payment of such fee shall not limit the Borrowers' obligations to
reimburse the Agent for its out-of-pocket expenses as set forth in
SECTION 15.2.
(c) UNUSED LINE FEE. In connection with and as consideration
for the holding available for the use of the Borrowers hereunder the
full amount of the Revolving Credit Facility, the Borrowers will pay a
fee to the Agent, for the ratable benefit of the Lenders, for each day
from the Effective Date until the Termination Date, in an amount equal
to 1/2% per annum of the unused portion of the Revolving Credit
Facility for such day, if the average outstandings for Revolving Credit
Loans for such month are less than $125,000,000, and in an amount equal
to 3/8% per annum of the unused portion of the Revolving Credit
Facility for such day, if the average outstandings for Revolving Credit
Loans for such month are greater than or
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equal to $125,000,000. Such fee shall be payable monthly in arrears on
each Interest Payment Date and shall be fully earned when due and
payable and shall not be subject to refund or rebate. Such fee is not,
and shall not be deemed to be, interest or a charge for the use of
money. Such fee shall be calculated based on a year of 360 days and the
actual number of days elapsed.
(d) LETTER OF CREDIT FEES.
(i) The Borrowers agree to pay to the Agent, for the
ratable benefit of the Lenders, Letter of Credit fees equal to
(a) 1.25% per annum, based on the average daily aggregate
Letter of Credit Amount of all documentary Letters of Credit
from time to time outstanding during the term of this
Agreement, and (b) the Eurodollar Rate Margin then applicable
to Revolving Credit Loans (as set forth in the definition of
"Applicable Margin"), based on the average daily aggregate
Letter of Credit Amount of all standby Letters of Credit from
time to time outstanding during the term of this Agreement.
Such fees shall be payable to the Agent for the ratable
benefit of the Lenders in accordance with their respective
Commitment Percentages monthly in arrears and shall be
calculated based on a year of 360 days and the actual number
of days elapsed.
(ii) The Borrowers agree to pay to the Agent, for the
account of the Agent, and not for the account of the Lenders,
(a) a facing fee of .25% of the face amount of each Letter of
Credit issued by the Agent, such fee being due and payable
upon issuance of each Letter of Credit, and (b) the standard
fees and charges of the Agent for issuing, administering,
amending, renewing, paying and canceling Letters of Credit, as
and when assessed.
(iii) In connection with the VRDN Letter of Credit,
the parties hereto agree that (a) an annual fee of 1% per
annum of the stated amount of the VRDN Letter of Credit shall
be shared by the Lenders on a ratable basis, and (b) all other
fees and charges payable under the VRDN Reimbursement
Agreement, including, without limitation, all administration
fees payable by Kellstrom, shall be for the account of
NationsBank and not for the account of the other Lenders.
(e) COLLECTION FEE. During the period from and including the
Effective Date to and including the Termination Date, the Borrowers
will pay to the Agent for its own account, and not for the account of
the Lenders, on the first day of each month, an amount of interest
computed at the Effective Interest Rate applicable to Prime Rate
Revolving Credit Loans on each remittance (other than a remittance
received via wire transfer, automated clearinghouse transfer or
otherwise in immediately available funds) received by the Agent against
Receivables during the preceding month, from the close of business on
the date of receipt of each such remittance until the close of business
on the first Business Day following the receipt of the remittance, as
compensation for delays in the collection and clearance of checks and
other remittances.
(f) GENERAL. All fees shall be fully earned by the identified
recipient thereof when due and payable and, except as otherwise set
forth herein or required by Applicable Law, shall not be subject to
refund or rebate. All fees provided for in this SECTION 4.2 are for
compensation for services and are not, and shall not be deemed to be,
interest or a charge for the use of money.
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SECTION 4.3. MANNER OF PAYMENT.
(a) Except as otherwise expressly provided in SECTION 8.1(b),
each payment (including prepayments) by the Borrowers on account of the
principal of or interest on the Loans or of any other amounts payable
to the Lenders under this Agreement or any Note shall be made not later
than 12:00 noon (Atlanta time) on the date specified for payment under
this Agreement to the Agent, for the account of the Lenders, at the
Agent's Office, in Dollars, in immediately available funds and shall be
made without any setoff, counterclaim or deduction whatsoever. Any
payment received after such time but before 1:00 p.m. (Atlanta time) on
such day shall be deemed a payment on such date for the purposes of
SECTION 12.1, but for all other purposes shall be deemed to have been
made on the next succeeding Business Day.
(b) The Borrowers hereby irrevocably authorize each Lender and
each Affiliate of such Lender and each participant herein to charge any
account of the Borrowers maintained with such Lender or such Affiliate
or participant with such amounts as may be necessary from time to time
to pay any Secured Obligations (whether or not owed to such Lender,
Affiliate or participant) which are not paid when due, subject to any
applicable cure period.
(c) Each Lender hereby severally (but not jointly) represents
that, under applicable law and treaties in effect on the date of this
Agreement, no United States federal taxes will be required to be
withheld by the Agent or the Borrowers with respect to any payments to
be made to such Lender in respect of this Agreement. Each Lender that
itself is not incorporated under the laws of the United States or a
state thereof agrees severally (but not jointly) that, prior to the
Effective Date and the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the
most recent form delivered by it to the Borrowers and the Agent, it
will deliver to the Borrowers and the Agent two duly completed copies
of either United States Internal Revenue Service Form W8, 1001 or 4224,
or successor applicable form, certifying in each case that such Lender
is entitled to receive all payments under this Agreement and the Notes
payable to it without deduction or withholding of any United States
federal income taxes
SECTION 4.4. GENERAL. If any payment under this Agreement or any Note
shall be specified to be made upon a day which is not a Business Day, it shall
be made on the next succeeding day which is a Business Day and such extension of
time shall in such case be included in computing interest, if any, in accordance
with such payment.
SECTION 4.5. LOAN ACCOUNTS; STATEMENTS OF ACCOUNT.
(a) Each Lender shall open and maintain on its books a loan
account in the Borrowers' name (each, a "Loan Account" and
collectively, the "Loan Accounts"). Each such Loan Account shall show
as debits thereto each Loan made under this Agreement by such Lender to
the Borrowers and as credits thereto all payments received by such
Lender and applied to principal of such Loan, so that the balance of
the loan account at all times reflects the principal amount due such
Lender from the Borrowers.
(b) The Agent shall maintain on its books a control account
for the Borrowers in which shall be recorded (i) the amount of each
disbursement made hereunder, (ii) the amount of any principal or
interest due or to become due from the Borrowers hereunder, and (iii)
the amount of any sum received by the Agent hereunder from the
Borrowers and each Lender's ratable share therein.
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(c) The entries made in the accounts pursuant to SUBSECTIONS
(a) and (b) shall be PRIMA FACIE evidence, in the absence of manifest
error, of the existence and amounts of the obligations of the Borrowers
therein recorded and in case of discrepancy between such accounts, in
the absence of manifest error, the accounts maintained pursuant to
SUBSECTION (b) shall be controlling.
(d) The Agent will account separately to Kellstrom monthly
with a statement of Loans, charges and payments made to and by the
Borrowers pursuant to this Agreement, and such accounts rendered by the
Agent shall be deemed final, binding and conclusive, save for manifest
error, unless the Agent is notified by the Borrowers in writing to the
contrary within 30 days of the date the account to Kellstrom was so
rendered. Such notice by the Borrowers shall be deemed an objection to
only those items specifically objected to therein. Failure of the Agent
to render such account shall in no way affect the rights of the Agent
or of the Lenders hereunder.
SECTION 4.6. TERMINATION OF AGREEMENT. The Borrowers shall have the
right, at any time, to terminate this Agreement upon not less than 60 days prior
written notice to the Agent of their intention to terminate this Agreement,
which notice shall specify the effective date of such termination. Upon receipt
of such notice, the Agent shall promptly notify each Lender thereof. On the date
specified in such notice, such termination shall be effected, PROVIDED, that the
Borrowers shall, on or prior to such date, pay to the Agent, for the account of
the Lenders, in same day funds, an amount equal to all Secured Obligations then
outstanding, including, without limitation, all (i) accrued interest thereon,
(ii) all accrued fees provided for hereunder, (iii) any amounts payable to the
Lenders pursuant to this ARTICLE 4 or SECTIONS 15.2, 15.3, 15.14 and 15.23, and
(iv) all amounts due and payable under the Fee Letter. In addition thereto, the
Borrowers shall deliver to the Agent (y) an indemnity or Cash Collateral in form
and substance acceptable to the Agent with respect to any checks or other
instruments received by the Agent and credited to the Borrowers in calculating
the payoff amount, and (z) in respect of the VRDN Letter of Credit and each
outstanding Letter of Credit, either the Supporting Letter of Credit or the Cash
Collateral as provided in SECTION 3.9. Following a notice of termination as
provided for in this SECTION 4.6 and upon payment in full of the amounts
specified in this SECTION 4.6, this Agreement shall be terminated and the Agent,
the Lenders and the Borrowers shall have no further obligations to any other
party hereto except for the indemnification obligations pursuant to SECTIONS
14.7 and 15.14 hereof.
SECTION 4.7. MAKING OF LOANS.
(a) NATURE OF OBLIGATIONS OF LENDERS TO MAKE LOANS. The
obligations of the Lenders under this Agreement to make the Loans are
several and are not joint or joint and several.
(b) ASSUMPTION BY AGENT. Subject to the provisions of SECTION
4.8 and notwithstanding the occurrence or continuance of a Default or
Event of Default or other failure of any condition to the making of
Loans hereunder subsequent to the Loans to be made on the Effective
Date, unless the Agent shall have received notice from the Required
Lenders in accordance with the provisions of SECTION 4.7(c) prior to a
proposed borrowing date that the Lenders will not make available to the
Agent such Lenders' ratable portion of the amount to be borrowed on
such date, the Agent may assume that the Lenders will make such portion
available to the Agent in accordance with SECTION 2.2(a), and the Agent
may, in reliance upon such assumption, make available to the Borrowers
on such date a corresponding amount. If and to the extent any Lender
shall not make such ratable portion available to the Agent, such Lender
and the Borrowers severally agree to repay to the Agent forthwith on
demand such corresponding
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amount, together with interest thereon for each day from the date such
amount is made available to the Borrowers until the date such amount is
repaid to the Agent at the Effective Interest Rate or, if lower,
subject to SECTION 4.1(e), the Maximum Rate. If such Lender shall repay
to the Agent such corresponding amount, the amount so repaid shall
constitute such Lender's Commitment Percentage of the Loan made on such
borrowing date for purposes of this Agreement. The failure of any
Lender to make its Commitment Percentage of any Loan available shall
not (without regard to whether the Borrowers shall have returned the
amount thereof to the Agent in accordance with this SECTION 4.7)
relieve it or any other Lender of its obligation, if any, hereunder to
make its Commitment Percentage of such Loan available on such borrowing
date, but no Lender shall be responsible for the failure of any other
Lender to make its Commitment Percentage of such Loan available on the
borrowing date.
(c) DELEGATION OF AUTHORITY TO AGENT. Without limiting the
generality of SECTION 14.1, each Lender expressly authorizes the Agent
to determine on behalf of such Lender (i) the creation or elimination
of any reserves (other than the Letter of Credit Reserve) against the
Revolving Credit Facility and the Borrowing Base and (ii) whether or
not Inventory or Receivables shall be deemed to constitute Eligible
Domestic Receivables, Eligible Foreign Receivables, Eligible Domestic
Leased Engine Inventory, Eligible Foreign Leased Engine Inventory,
Eligible Leased Airframe Inventory or Eligible Inventoried Engine and
Parts Inventory. Such authorization may be withdrawn by the Required
Lenders by giving the Agent written notice of such withdrawal signed by
the Required Lenders; PROVIDED, HOWEVER, that unless otherwise agreed
by the Agent such withdrawal of authorization shall not become
effective until the thirtieth Business Day after receipt of such notice
by the Agent. Thereafter, the Required Lenders shall jointly instruct
the Agent in writing regarding such matters with such frequency as the
Required Lenders shall jointly determine. Unless and until the Agent
shall have received written notice from the Required Lenders as to the
existence of a Default, an Event of Default or some other circumstance
which would relieve the Lenders of their respective obligations to make
Loans hereunder, which notice shall be in writing and shall be signed
by the Required Lenders and shall expressly state that the Required
Lenders do not intend to make available to the Agent such Lenders'
ratable share of Loans made after the effective date of such notice,
the Agent shall be entitled to continue to make the assumptions
described in SECTION 4.7(b). After receipt of the notice described in
the preceding sentence, which shall become effective on the third
Business Day after receipt of such notice by the Agent unless otherwise
agreed by the Agent, the Agent shall be entitled to make the
assumptions described in SECTION 4.7(b) as to any Loans as to which it
has not received a written notice to the contrary prior to 11:00 a.m.
(Atlanta time) on the Business Day next preceding the day on which the
Loan is to be made. The Agent shall not be required to make any Loan as
to which it shall have received notice by a Lender of such Lender's
intention not to make its ratable portion of such Loan available to the
Agent. Any withdrawal of authorization under this SECTION 4.7(c) shall
not affect the validity of any Loans made prior to the effectiveness
thereof.
(d) OVERADVANCES. Notwithstanding anything to the contrary
contained elsewhere in this SECTION 4.7 or this Agreement or the other
Loan Documents, and whether or not a Default or Event of Default exists
at the time, unless otherwise notified by the Required Lenders in
accordance with SECTION 4.7(c), the Agent may in its discretion require
all Lenders to honor requests or deemed requests by the Borrower for
Revolving Credit Loans at a time that an Overadvance exists or which
would result in an Overadvance and each Lender shall be obligated to
continue to make its Proportionate Share of Revolving Credit Loans, up
to a maximum amount outstanding equal to its Commitment to make
Revolving Credit Loans, so long as (i) such Overadvance is not known by
the
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Agent to exceed the amount of minimum Availability then required under
SECTION 11.16, (ii) such Overadvance is not outstanding for more than
30 consecutive days, and (iii) no more than 1 previous Overadvance has
been permitted hereunder during such fiscal year. "Overadvance" shall
mean, as of any date of determination, the amount, if any, by which (1)
the outstanding principal balance of Revolving Credit Loans exceeds (2)
the amount determined under CLAUSE (b) of the definition of "Borrowing
Base" minus the minimum Availability required at such time pursuant to
SECTION 11.16.
(e) REPLACEMENT OF CERTAIN LENDERS. If a Lender (the "Affected
Lender") shall have failed to fund its Proportionate Share of any Loan
requested (or deemed requested) by the Borrowers which such Lender is
obligated to fund under the terms of this Agreement and which failure
has not been cured, then, in any such case and in addition to any other
rights and remedies that the Agent, any other Lender or the Borrowers
may have against such Affected Lender, the Agent may make written
demand on such Affected Lender (with a copy to the Borrowers) for the
Affected Lender to assign, and such Affected Lender shall assign
pursuant to one or more duly executed Assignment and Acceptances within
5 Business Days after the date of such demand, to one or more Lenders
willing to accept such assignment or assignments, or to one or more
Eligible Assignees designated by the Agent, all of such Affected
Lender's rights and obligations under this Agreement (including its
Commitments and all Loans owing to it) in accordance with ARTICLE 13.
The Agent is hereby irrevocably authorized to execute one or more
Assignment and Acceptances as attorney-in-fact for any Affected Lender
which fails or refuses to execute and deliver the same within 5
Business Days after the date of such demand. The Affected Lender shall
be entitled to receive, in cash and concurrently with the execution and
delivery of each such Assignment and Acceptance, all amounts owed to
the Affected Lender hereunder or under any other Loan Document,
including the aggregate outstanding principal amount of the Loans owed
to such Lender, together with accrued interest thereon through the date
of such assignment. Upon the replacement of any Affected Lender
pursuant to this SECTION 4.7(e), such Affected Lender shall cease to
have any participation in, entitlement to, or other right to share in
the Security Interest or any other Lien of the Agent in any Collateral,
such Affected Lender shall have no further obligation to make Loans or
purchase participations in Letters of Credit, and such Affected Lender
shall have no further liability to the Agent, any Lender or any other
Person under any of the Loan Documents (except as provided in SECTION
14.7 and elsewhere in this Agreement as to events or transactions which
occur prior to the replacement of such Affected Lender).
SECTION 4.8. SETTLEMENT AMONG LENDERS.
(a) REVOLVING CREDIT LOANS. It is agreed that each Lender's
Net Outstandings are intended by the Lenders to be equal at all times
to such Lender's Commitment Percentage of the aggregate principal
amount of all Revolving Credit Loans outstanding. Notwithstanding such
agreement, the several and not joint obligation of each Lender to fund
Revolving Credit Loans made in accordance with the terms of this
Agreement ratably in accordance with such Lender's Commitment
Percentage and each Lender's right to receive its ratable share of
principal payments on Revolving Credit Loans in accordance with its
Commitment Percentage, the Lenders agree that in order to facilitate
the administration of this Agreement and the Loan Documents that
settlement among them may take place on a periodic basis in accordance
with the provisions of this SECTION 4.8.
(b) SETTLEMENT PROCEDURES AS TO REVOLVING CREDIT LOANS. To the
extent and in the manner hereinafter provided in this SECTION 4.8,
settlement among the Lenders as to Revolving
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Credit Loans may occur periodically on Settlement Dates determined from
time to time by the Agent, which may occur before or after the
occurrence or during the continuance of a Default or Event of Default
and whether or not all of the conditions set forth in SECTION 5.2 have
been met. On each Settlement Date payments shall be made by or to
NationsBank and the other Lenders in the manner provided in this
SECTION 4.8 in accordance with the Settlement Report delivered by the
Agent pursuant to the provisions of this SECTION 4.8 in respect of such
Settlement Date so that as of each Settlement Date, and after giving
effect to the transactions to take place on such Settlement Date, each
Lender's Net Outstandings shall equal such Lender's Commitment
Percentage of the Revolving Credit Loans outstanding.
(i) SELECTION OF SETTLEMENT DATES. If the Agent
elects, in its discretion, but subject to the consent of
NationsBank, to settle accounts among the Lenders with respect
to principal amounts of Revolving Credit Loans less frequently
than each Business Day, then the Agent shall designate
periodic Settlement Dates which may occur on any Business Day
after the Effective Date; PROVIDED, HOWEVER, that the Agent
shall designate as a Settlement Date any Business Day which is
an Interest Payment Date; and PROVIDED FURTHER, that a
Settlement Date shall occur at least once during each
seven-day period. The Agent shall designate a Settlement Date
by delivering to each Lender a Settlement Report not later
than 12:00 noon (Atlanta time) on the proposed Settlement
Date, which Settlement Report will be in the form of EXHIBIT E
hereto and shall be with respect to the period beginning on
the next preceding Settlement Date and ending on such
designated Settlement Date.
(ii) NON-RATABLE LOANS AND PAYMENTS. Between
Settlement Dates, the Agent shall request and NationsBank may
(but shall not be obligated to) advance to the Borrowers out
of NationsBank's own funds, the entire principal amount of any
Revolving Credit Loan requested or deemed requested pursuant
to SECTION 2.2(a) (any such Revolving Credit Loan being
referred to as a "Non-Ratable Loan"). The making of each
Non-Ratable Loan by NationsBank shall be deemed to be a
purchase by NationsBank of a 100% participation in each other
Lender's Commitment Percentage of the amount of such
Non-Ratable Loan. All payments of principal, interest and any
other amount with respect to such Non-Ratable Loan shall be
payable to and received by the Agent for the account of
NationsBank. Upon demand by NationsBank, with notice thereof
to the Agent, each other Lender shall pay to NationsBank, as
the repurchase of such participation, an amount equal to 100%
of such Lender's Commitment Percentage of the principal amount
of such Non-Ratable Loan. Any payments received by the Agent
between Settlement Dates which in accordance with the terms of
this Agreement are to be applied to the reduction of the
outstanding principal balance of Revolving Credit Loans shall
be paid over to and retained by NationsBank for such
application, and such payment to and retention by NationsBank
shall be deemed, to the extent of each other Lender's
Commitment Percentage of such payment, to be a purchase by
each such other Lender of a participation in the Revolving
Credit Loans (including the repurchase of participations in
Non-Ratable Loans) held by NationsBank. Upon demand by another
Lender, with notice thereof to the Agent, NationsBank shall
pay to the Agent, for the account of such other Lender, as a
repurchase of such participation, an amount equal to such
other Lender's Commitment Percentage of any such amounts
(after application thereof to the repurchase of any
participations of NationsBank in such other Lender's
Commitment Percentage of any Non-Ratable Loans) paid only to
NationsBank by the Agent.
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(iii) NET DECREASE IN OUTSTANDINGS. If on any
Settlement Date the increase, if any, in the dollar amount of
any Lender's Net Outstandings which is required to comply with
the first sentence of SECTION 4.8(a) is less than such
Lender's Commitment Percentage of amounts received by the
Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment
Percentage of such amounts to the increase in such Lender's
Net Outstandings, and NationsBank shall pay to the Agent, for
the account of such Lender, the excess allocable to such
Lender.
(iv) NET INCREASE IN OUTSTANDINGS. If on any
Settlement Date the increase, if any, in the dollar amount of
any Lender's Net Outstandings which is required to comply with
the first sentence of SECTION 4.8(a) exceeds such Lender's
Commitment Percentage of amounts received by the Agent but
paid only to NationsBank since the next preceding Settlement
Date, such Lender and the Agent, in their respective records,
shall apply such Lender's Commitment Percentage of such
amounts to the increase in such Lender's Net Outstandings, and
such Lender shall pay to the Agent, for the account of
NationsBank, any excess.
(v) NO CHANGE IN OUTSTANDINGS. If a Settlement Report
indicates that no Revolving Credit Loans have been made during
the period since the next preceding Settlement Date, then such
Lender's Commitment Percentage of any amounts received by the
Agent but paid only to NationsBank shall be paid by
NationsBank to the Agent, for the account of such Lender. If a
Settlement Report indicates that the increase in the dollar
amount of a Lender's Net Outstandings which is required to
comply with the first sentence of SECTION 4.8(a) is exactly
equal to such Lender's Commitment Percentage of amounts
received by the Agent but paid only to NationsBank since the
next preceding Settlement Date, such Lender and the Agent, in
their respective records, shall apply such Lender's Commitment
Percentage of such amounts to the increase in such Lender's
Net Outstandings.
(vi) RETURN OF PAYMENTS. If any amounts received by
NationsBank in respect of the Secured Obligations are later
required to be returned or repaid by NationsBank to the
Borrowers or their respective representatives or successors in
interest, whether by court order, settlement or otherwise, in
excess of the NationsBank's Commitment Percentage of all such
amounts required to be returned by all Lenders, each other
Lender shall, upon demand by NationsBank with notice to the
Agent, pay to the Agent for the account of NationsBank, an
amount equal to the excess of such Lender's Commitment
Percentage of all such amounts required to be returned by all
Lenders over the amount, if any, returned directly by such
Lender.
(vii) PAYMENTS TO AGENT, LENDERS.
(A) Payment by any Lender to the Agent shall
be made not later than 1:00 p.m. (Atlanta time) on
the Business Day such payment is due, PROVIDED that
if such payment is due on demand by another Lender,
such demand is made on the paying Lender not later
than 10:00 a.m. (Atlanta time) on such Business Day.
Payment by the Agent to any Lender shall be made by
wire transfer, promptly following the Agent's receipt
of funds for the account of such Lender
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and in the type of funds received by the Agent,
PROVIDED that if the Agent receives such funds at or
prior to 1:00 p.m. (Atlanta time), the Agent shall
pay such funds to such Lender by 2:00 p.m. (Atlanta
time) on such Business Day. If a demand for payment
is made after the applicable time set forth above,
the payment due shall be made by 2:00 p.m. (Atlanta
time) on the first Business Day following the date of
such demand.
(B) If a Lender shall, at any time, fail to
make any payment to the Agent required hereunder, the
Agent may, but shall not be required to, retain
payments that would otherwise be made to such Lender
hereunder and apply such payments to such Lender's
defaulted obligations hereunder, at such time, and in
such order, as the Agent may elect in its sole
discretion.
(C) With respect to the payment of any funds
under this SECTION 4.8(b), whether from the Agent to
a Lender or from a Lender to the Agent, the party
failing to make full payment when due pursuant to the
terms hereof shall, upon demand by the other party,
pay such amount together with interest on such amount
at the Federal Funds Effective Rate.
(c) SETTLEMENT OF OTHER SECURED OBLIGATIONS. All other amounts
received by the Agent on account of, or applied by the Agent to the
payment of, any Secured Obligation owed to the Lenders (including,
without limitation, fees payable to the Lenders pursuant to SECTIONS
4.2(C) and (D) and proceeds from the sale of, or other realization
upon, all or any part of the Collateral following an Event of Default)
that are received by the Agent on or prior to 1:00 p.m. (Atlanta time)
on a Business Day will be paid by the Agent to each Lender on the same
Business Day, and any such amounts that are received by the Agent after
1:00 p.m. (Atlanta time) will be paid by the Agent to each Lender on
the following Business Day. Unless otherwise stated herein, the Agent
shall distribute fees payable to the Lenders pursuant to SECTIONS
4.2(c) and (d) ratably to the Lenders based on each Lender's Commitment
Percentage and shall distribute proceeds from the sale of, or other
realization upon, all or any part of the Collateral following an Event
of Default ratably to the Lenders based on the amount of the Secured
Obligations then owing to each Lender.
(e) ALLOCATION OF PAYMENTS FROM BORROWERS. All monies to be
applied to the Secured Obligations, whether such monies represent
voluntary payments by the Borrowers or are received pursuant to demand
for payment or realized from any disposition of Collateral, shall be
allocated among the Agent and such of the Lenders and other holders of
the Secured Obligations as are entitled thereto (and, with respect to
monies allocated to the Lenders, on a Ratable basis unless otherwise
provided in this SECTION 4.8(e): (i) first, to NationsBank to pay
principal and accrued interest on any portion of any Non-Ratable Loan
which NationsBank may have advanced on behalf of any Lender (other than
itself) and for which NationsBank has not been reimbursed by such
Lender or the Borrowers; (ii) second, to the Agent to pay the amount of
expenses that have not been reimbursed to the Agent by the Borrowers or
the Lenders, together with interest accrued thereon; (iii) third, to
the Agent and the Syndication Agent to pay any indemnified amount that
has not been paid to the Agent by the Borrowers or the Lenders,
together with interest accrued thereon; (iv) fourth, to the Agent to
pay any fees due and payable to the Agent under this Agreement; (v)
fifth, to the Lenders for any indemnified amount that they have paid to
the Agent and for any expenses that they have reimbursed to the Agent;
(vi) sixth, to the Lenders in payment of the unpaid principal and
accrued interest in respect of the Loans and
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any other Secured Obligations arising under the Loan Documents then
outstanding and held by any Lender to be shared among Lenders on a
Ratable basis, or on such other basis as may be agreed upon in writing
by all of the Lenders (which agreement or agreements may be entered
into without notice to or the consent or approval of the Borrowers),
and (vii) seventh, to the Lenders and their Affiliates in payment of
the unpaid amount of all Secured Obligations arising under or in
respect of the Banking Relationship to be shared on a pro rata basis.
The allocations set forth in this SECTION 4.8(e) are solely to
determine the rights and priorities of the Agent and the Secured
Parties as among themselves and may be changed by the Agent and the
Secured Parties without notice or the consent of approval of the
Borrowers or any other Person. Whenever allocation is made pursuant to
this SECTION 4.8(e) to the holder of Secured Obligations in which
another Lender acquires a participation, the monies received by such
holder shall be shared as between such holder and such participants on
a Ratable basis.
SECTION 4.9. MANDATORY PREPAYMENTS.
(a) PREPAYMENTS FROM ASSET DISPOSITIONS. Within 3 Business
Days of receipt by any Borrower of the Net Proceeds of any Asset
Disposition, the Borrowers shall apply such Net Proceeds in prepayment
of the Loans as provided in SECTION 4.9(c). Concurrently with the
making of any such payment, the Borrowers shall deliver to the Agent a
certificate of the Financial Officer demonstrating the calculations of
the amount required to be paid.
(b) PREPAYMENTS FROM EQUITY OFFERINGS OR DEBT ISSUANCE. In the
event that, at any time after the Effective Date, any Borrower issues
capital stock or other securities or receives an additional capital
contribution in respect of existing capital stock or other securities
(excluding any such issuance to, or receipt from, another Borrower or a
Consolidated Subsidiary of a Borrower), or issues any Subordinated
Indebtedness, no later than the third Business Day following the date
of receipt of the proceeds from such issuance, the Borrowers shall
apply such proceeds, net of underwriting discounts and commissions and
other reasonable costs, fees and expenses associated therewith, in
prepayment of the Loans as provided in SECTION 4.9(c).
(c) APPLICATION OF PROCEEDS OF PREPAYMENTS. All prepayments
pursuant to this SECTION 4.9 shall be applied to the outstanding
Revolving Credit Loans to the extent thereof, PROVIDED that payments
shall be first applied to Prime Rate Loans to the extent thereof and
then to Eurodollar Rate Loans and any payments received which would
otherwise result in the prepayment of Eurodollar Rate Loans prior to
the end of the Interest Period applicable thereto may, upon the request
of the Borrowers, in the absence of an Event of Default, be applied to
the Cash Collateral Account, with any excess to be deposited with the
Agent to be held as Cash Collateral for the Secured Obligations and
applied by the Agent from time to time to outstanding Revolving Credit
Loans promptly upon the making of such Revolving Credit Loans or, after
the Termination Date, to any of the Secured Obligations in such manner
as the Agent shall determine in its sole discretion.
SECTION 4.10. PAYMENTS NOT AT END OF INTEREST PERIOD; FAILURE TO
BORROW. If for any reason any payment of principal with respect to any
Eurodollar Rate Loan is made on any day prior to the last day of the Interest
Period applicable to such Eurodollar Rate Loan or, after having given a Notice
of Borrowing with respect to any Eurodollar Rate Revolving Credit Loan or a
Notice of Conversion or Continuation with respect to any Loan to be continued as
or converted into a Eurodollar Rate Loan, such Loan is not made or is not
continued as or converted into a Eurodollar Rate Loan due to the Borrowers'
failure to borrow or to fulfill the applicable conditions set forth in ARTICLE
5, the Borrowers shall pay to each
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Lender upon the request of the Agent or such Lender, in addition to any amounts
that may be due under the Fee Letter, an amount sufficient to compensate the
Agent and each Lender for any and all losses or expenses which the Agent and
each Lender have sustained or incurred as a consequence thereof. The Borrowers
shall pay such amount upon presentation by the Agent (or as to any Lender, by
such Lender) of a statement setting forth the amount and the Agent's (or such
Lender's) calculation thereof, which statement shall be deemed true and correct
absent manifest error.
SECTION 4.11. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to the Lenders under this ARTICLE 4 shall be
made as though each Lender had actually funded or committed to fund its
Eurodollar Rate Loans through the purchase of an underlying deposit in an amount
equal to the amount of such ratable share and having a maturity comparable to
the relevant Interest Period for such Eurodollar Rate Loan; PROVIDED, HOWEVER,
each Lender may fund its Eurodollar Rate Loans in any manner it deems fit and
the foregoing assumption shall be utilized only for the calculation of amounts
payable under this ARTICLE 4.
SECTION 4.12. NOTICE OF CONVERSION OR CONTINUATION. Whenever the
Borrowers desire, subject to the provisions of SECTION 4.13, to convert an
outstanding Loan into a Loan or Loans of a different Type or to continue all or
a portion of an outstanding Eurodollar Rate Loan for a subsequent Interest
Period, the Borrowers shall notify the Agent by telephone or in writing by telex
or facsimile transmission (which notice shall be irrevocable) not later than
11:00 a.m. (Atlanta time) on the date three Business Days before the day on
which such proposed conversion or continuation is to be effective (and such
effective date of any continuation shall be the last day of the Interest Period
for the applicable Eurodollar Rate Loan), provided the Borrowers shall not be
permitted to convert Loans into (or continue Loans as) Eurodollar Rate Loans at
any time during the existence of an Event of Default. Each such notice (a
"Notice of Conversion or Continuation") shall (i) identify the Loan to be
converted or continued, the aggregate outstanding principal balance thereof and,
if a Eurodollar Rate Loan, the last day of the Interest Period applicable to
such Loan, (ii) specify the effective date of such conversion or continuation,
(iii) specify the principal amount of such Loan to be converted or continued
and, if converted, the Type or Types into which the same is to be converted, and
(iv) the Interest Period to be applicable to the Eurodollar Rate Loan as
converted or continued, and shall, if notice thereof was originally given by
telephone, be immediately followed by a signed, written confirmation thereof by
the Borrowers in a form acceptable to the Agent, PROVIDED that if such written
confirmation differs in any respect from the action taken by the Lenders, the
records of the Agent shall control absent manifest error.
SECTION 4.13. CONVERSION OR CONTINUATION. Provided that no Event of
Default shall have occurred and be continuing (but subject to the provisions of
SECTIONS 4.12 and 4.15), the Borrowers may request that all or any part of any
outstanding Loan be converted into a Loan or Loans of a different Type or be
continued as a Loan or Loans of the same Type, in the same aggregate principal
amount, on any Business Day (which, in the case of continuation of a Eurodollar
Rate Loan, shall be the last day of the Interest Period applicable to such
Loan), upon notice (which notice shall be irrevocable) given in accordance with
SECTION 4.12.
SECTION 4.14. DURATION OF INTEREST PERIODS; MAXIMUM NUMBER OF
EURODOLLAR RATE LOANS; MINIMUM INCREMENTS.
(a) Subject to the provision of the definition of "Interest
Period", the duration of each Interest Period applicable to a
Eurodollar Rate Loan shall be as specified in the applicable Notice of
Borrowing or Notice of Conversion or Continuation. The Borrowers may
elect a subsequent
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Interest Period to be applicable to any Eurodollar Rate Loan by giving
a Notice of Conversion or Continuation with respect to such Loan in
accordance with SECTION 4.12.
(b) If the Agent does not receive a notice of election in
accordance with SECTION 4.12 with respect to the continuation of a
Eurodollar Rate Loan within the applicable time limits specified in
said SECTION 4.12, or if, when such notice must be given, an Event of
Default exists or such Type of Loan is not available, the Borrowers
shall be deemed to have elected to convert such Eurodollar Rate Loan in
whole into a Prime Rate Loan on the last day of the Interest Period
therefor.
(c) Notwithstanding the foregoing, the Borrowers may not
select an Interest Period that would end, but for the provisions of the
definition "Interest Period," after the Termination Date.
(d) In no event shall there be more than 7 Eurodollar Rate
Loans outstanding hereunder at any time. For the purpose of this
SUBSECTION (d), each Eurodollar Rate Loan having a distinct Interest
Period shall be deemed to be a separate Loan hereunder.
(e) Each Eurodollar Rate Loan shall be in a minimum amount of
$1,000,000, with Eurodollar Rate Loans in excess of such amount in
integral multiples of $250,000.
SECTION 4.15. CHANGED CIRCUMSTANCES.
(a) If the introduction of or any change in or in the
interpretation of (in each case, after the date hereof) any law or
regulation makes it unlawful, or any Governmental Authority asserts,
after the date hereof, that it is unlawful, for any Lender to perform
its obligations hereunder to make Eurodollar Rate Loans or to fund or
maintain Eurodollar Rate Loans hereunder, such Lender shall notify the
Agent of such event and the Agent shall notify the Borrowers of such
event, and the right of the Borrowers to select Eurodollar Rate Loans
for any subsequent Interest Period or in connection with any subsequent
conversion of any Loan shall be suspended until the Agent shall notify
the Borrowers that the circumstances causing such suspension no longer
exist, and the Borrowers shall forthwith prepay in full all Eurodollar
Rate Loans then outstanding, and shall pay all interest accrued thereon
through the date of such prepayment or conversion, unless the
Borrowers, within three Business Days after such notice from the Agent,
request the conversion of all Eurodollar Rate Loans then outstanding
into Prime Rate Loans; PROVIDED, that if the date of such repayment or
proposed conversion is not the last day of the Interest Period
applicable to such Eurodollar Rate Loan, the Borrowers shall also pay
any amount due pursuant to SECTION 4.10.
(b) If the Agent shall, at least one Business Day before the
date of any requested Loan or the effective date of any conversion or
continuation of an existing Loan to be made or continued as or
converted into a Eurodollar Rate Loan (each such requested Loan made
and Loan to be converted or continued, a "Pending Loan"), notify the
Borrowers that the Eurodollar Rate will not adequately reflect the cost
to the Lenders of making or funding such Pending Loan as a Eurodollar
Rate Loan or that the Interbank Offered Rate is not reasonably
determinable, including from any interest rate reporting service of
recognized standing, then the right of the Borrowers to select
Eurodollar Rate Loans for such Pending Loan, any subsequent Loan or in
connection with any subsequent conversion or continuation of any Loan
shall be suspended until the Agent shall notify the Borrowers that the
circumstances causing such suspension no longer exist, and each Pending
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Loan and each such subsequent Loan requested to be made, continued or
converted shall be made or continued as or converted into a Prime Rate
Loan.
(c) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Reserve Percentage) in or in
the interpretation of, in each case after the date hereof, any law or
regulation (except to the extent such introduction, change or
interpretation affects taxes measured by net income), or (ii) the
compliance with a guideline or request (except to the extent such
guideline or request affects taxes measured by net income) from any
central bank or other governmental authority (whether nor not having
the force of law) made after the date hereof, there shall be any
increase in the cost to any Lender of agreeing to make or making,
funding or maintaining Eurodollar Rate Loans (other than as separately
provided for in SECTION 4.15(d)), then the Borrowers shall from time to
time, within 30 days after demand by such Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such
increased cost.
(d) If (i) the adoption of or change in, after the date
hereof, any law, rule, regulation or guideline regarding capital
requirements for banks or bank holding companies, or any change, after
the date hereof, in the interpretation or application thereof by any
governmental authority charged with the interpretation or
administration thereof, or (ii) compliance by such Lender with any
guideline, request or directive, made or promulgated after the date
hereof, of any such entity regarding capital adequacy (whether or not
having the force of law), has the effect of reducing the return on a
Lender's capital as a consequence of its maintaining its Loans or
commitment to make Loans hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's policies with respect to
capital adequacy immediately before such adoption, change or compliance
and assuming the full utilization of such Lender's capital immediately
before such adoption, change or compliance) or if any change in law,
regulation, treaty or official directive or the interpretation or
application thereof by any court or by any governmental authority
charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental
authority (whether or not having the force of law) subjects a Lender to
any tax with respect to payments of principal or interest or any other
amounts payable hereunder by the Borrowers or otherwise with respect to
the transactions contemplated hereby (except for taxes on the overall
net income of such Lender imposed by the United States of America or
any political subdivision thereof), in each case by any amount deemed
by such Lender to be material, then such Lender shall promptly after
its determination of such occurrence notify the Borrowers and the Agent
thereof. The Borrowers agree to pay to the Agent, for the account of
such Lender, as an additional fee from time to time, within 30 days
after demand by such Lender, such amount as such Lender certifies to be
the amount that will compensate it for such reduction.
(e) Before giving any notice pursuant to SECTION 4.15(a) or
making any demand pursuant to SECTION 4.15(c) or (d), each Lender
agrees to use its reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different
lending office if the making of such a designation would avoid the need
for such notice or demand, or reduce the amount of such increased cost
or reduction in return and would not, in the judgment of such Lender,
be otherwise disadvantageous to such Lender.
(f) A certificate of the Lender claiming compensation under
SECTION 4.15(c) or (d) shall be conclusive in the absence of manifest
error. Such certificate shall set forth the nature of the
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occurrence giving rise to such compensation, the additional amount or
amounts to be paid to it hereunder, and the method by which such
amounts were determined. In determining such amount, a Lender may use
any reasonable averaging and attribution methods.
SECTION 4.16. CASH COLLATERAL ACCOUNT. The Borrowers shall establish a
Cash Collateral Account in which to deposit Collateral consisting of cash or
Cash Equivalents from time to time: (a) representing payments received pursuant
to SECTIONS 2.3(c) and 4.9 in excess of then outstanding Revolving Credit Loans
or on account of Eurodollar Rate Loans which would otherwise result in repayment
of such Loans prior to the end of the Interest Period applicable thereto, (b)
with respect to Letter of Credit Obligations and Kellstrom's obligations with
respect to the VRDN Letter of Credit (i) at the request of the Agent upon the
occurrence of an Event of Default, or (ii) for the purposes set forth in SECTION
4.6 in the event of termination of this Agreement, or (c) for any other purpose
appropriate under this Agreement to provide security for the Secured
Obligations. On the last day of the applicable Interest Period as to any amounts
deposited to the Cash Collateral Account pursuant to CLAUSE (a) above or if a
drawing under the VRDN Letter of Credit or a Letter of Credit occurs with
respect to any amounts deposited to the Cash Collateral Account pursuant to
CLAUSE (b) above, each Borrower hereby authorizes the Agent to use the monies
deposited in the Cash Collateral Account to make payment to the payee with
respect to such Loan or drawing. The Cash Collateral Account shall be in the
name of the Agent and the Agent shall have sole dominion and control over, and
sole access to, the Cash Collateral Account. Neither any Borrower nor any Person
claiming on behalf of or through any Borrower shall have any right to withdraw
any of the funds held in the Cash Collateral Account. Each Borrower agrees that
it will not at any time (i) sell or otherwise dispose of any interest in the
Cash Collateral Account or any funds held therein or (ii) create or permit to
exist any Lien upon or with respect to the Cash Collateral Account or any funds
held therein, except as provided in or contemplated by this Agreement. The Agent
shall exercise reasonable care in the custody and preservation of any funds held
in the Cash Collateral Account and shall be deemed to have exercised such care
if such funds are accorded treatment substantially equivalent to that which the
Agent accords other funds deposited with the Agent, it being understood that the
Agent shall not have any responsibility for taking any necessary steps to
preserve rights against any parties with respect to any funds held in the Cash
Collateral Account. Subject to the right of the Agent to withdraw funds from the
Cash Collateral Account as provided herein, the Agent will, so long as no
Default or Event of Default shall have occurred and be continuing, from time to
time invest funds on deposit in the Cash Collateral Account, reinvest proceeds
of any such investments which may mature or be sold, and invest interest or
other income received from any such investments, in each case, in Cash
Equivalents, as the Borrowers may direct prior to the occurrence of a Default or
Event of Default and as the Agent may select after the occurrence and during the
continuance of a Default or Event of Default. Such proceeds, interest and income
which are not so invested or reinvested in Cash Equivalents shall be deposited
and held by the Agent in the Cash Collateral Account. The Agent makes no
representation or warranty as to, and shall not be responsible for, the rate of
return, if any, earned in any Cash Collateral. Any earnings on Cash Collateral
shall be held as additional Cash Collateral on the terms set forth in this
SECTION 4.16.
SECTION 4.17. BORROWERS' REPRESENTATIVE. Each of the Borrowers other
than Kellstrom hereby appoints Kellstrom as, and Kellstrom shall act under this
Agreement as, the representative of such other Borrowers for all purposes,
including, without being limited to, requesting Borrowings and receiving account
statements and other notices and communications to the Borrowers (or any of
them) from the Agent or any Lender. The Agent and the Lenders may rely, and
shall be fully protected in relying, on any Notice of Borrowing, Notice of
Conversion or Continuation, disbursement instruction, report, information or any
other notice or communication made or given by Kellstrom, whether in its own
name, on behalf of any other Borrower or on behalf of "the Borrowers," and
neither the Agent nor any Lender shall have any obligation to make any inquiry
or request any confirmation from or on behalf of any other Borrowers as to
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the binding effect on it of any such Notice, instruction, report, information,
other notice or communications, nor shall the joint and several character of the
Borrowers' liability for the Secured Obligations be affected, PROVIDED that the
provisions of this SECTION 4.17 shall not be construed so as to preclude any
Borrower from directly requesting Borrowings or taking other actions permitted
to be taken by "a Borrower" hereunder. The Agent and each Lender intend to
maintain a single Loan Account in the name of "Kellstrom Industries, Inc."
hereunder and each Borrower expressly agrees to such arrangement and confirms
that such arrangement shall have no effect on the joint and several character of
its liability for the Secured Obligations.
SECTION 4.18. JOINT AND SEVERAL LIABILITY.
(a) JOINT AND SEVERAL LIABILITY. The Secured Obligations shall
constitute one joint and several direct and general obligation of all
of the Borrowers. Notwithstanding anything to the contrary contained
herein, each of the Borrowers shall be jointly and severally, with each
other Borrower, directly and unconditionally liable to the Agent and
the Lenders for all Secured Obligations and shall have the obligations
of co-maker with respect to the Loans, the Notes and the Secured
Obligations, it being agreed that the advances to each Borrower inure
to the benefit of all Borrowers, and that the Agent and the Lenders are
relying on the joint and several liability of the Borrowers as
co-makers in extending the Loans hereunder. Each Borrower hereby
unconditionally and irrevocably agrees that upon default in the payment
when due (whether at stated maturity, by acceleration or otherwise) of
any principal of, or interest on, any Loan or other Secured Obligation
payable to the Agent or any Lender, it will forthwith pay the same,
without notice or demand.
(b) NO REDUCTION IN OBLIGATIONS. No payment or payments made
by any of the Borrowers or any other Person or received or collected by
the Agent or any Lender from any of the Borrowers or any other Person
by virtue of any action or proceeding or any set-off or appropriation
or application at any time or from time to time in reduction of or in
payment of the Secured Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of each Borrower under this
Agreement, which shall remain liable for the Secured Obligations until
the Secured Obligations are paid in full and the Revolving Credit
Facility is terminated.
SECTION 4.19. OBLIGATIONS ABSOLUTE. Each Borrower agrees that the
Secured Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or any Lender with respect thereto. All Secured Obligations shall be
conclusively presumed to have been created in reliance hereon. The liabilities
under this Agreement shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any Loan
Documents or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payments of, or
in any other term of, all or any part of the Secured Obligations, or
any other amendment or waiver thereof or any consent to departure
therefrom, including, but not limited to, any increase in the Secured
Obligations resulting from the extension of additional credit to any
Borrower or otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured Obligations;
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(d) any change, restructuring or termination of the corporate
structure or existence of any Borrower; or
(e) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Borrower.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by the Agent or any Lender upon the insolvency,
bankruptcy or reorganization of any Borrower or otherwise, all as though such
payment had not been made.
SECTION 4.20. WAIVER OF SURETYSHIP DEFENSES. Each Borrower agrees that
the joint and several liability of the Borrowers provided for in SECTION 4.18
shall not be impaired or affected by any modification, supplement, extension or
amendment or any contract or agreement to which the other Borrowers may
hereafter agree (other than an agreement signed by the Agent and the Lenders
specifically releasing such liability), nor by any delay, extension of time,
renewal, compromise or other indulgence granted by the Agent or any Lender with
respect to any of the Secured Obligations, nor by any other agreements or
arrangements whatever with the other Borrowers or with anyone else, each
Borrower hereby waiving all notice of such delay, extension, release,
substitution, renewal, compromise or other indulgence, and hereby consenting to
be bound thereby as fully and effectually as if it had expressly agreed thereto
in advance. The liability of each Borrower is direct and unconditional as to all
of the Secured Obligations, and may be enforced without requiring the Agent or
any Lender first to resort to any other right, remedy or security. Each Borrower
hereby expressly waives promptness, diligence, notice of acceptance and any
other notice (except to the extent expressly provided for herein or in another
Loan Document) with respect to any of the Secured Obligations, the Notes, this
Agreement or any other Loan Document and any requirement that the Agent or any
Lender protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against any Borrower or any
other Person or any collateral, including any rights any Borrower may otherwise
have under O.C.G.A. Section 10-7-24 or any successor statute or any analogous
statute in any jurisdiction under the laws of which any Borrower is incorporated
or in which any Borrower conducts business.
SECTION 4.21. WITHHOLDING TAXES. Except as otherwise required by
Applicable Law, each payment by the Borrowers under this Agreement or the Notes
or in respect of the VRDN Letter of Credit or the other Letters of Credit shall
be made without setoff or counterclaim and without withholding for or on account
of any present or future taxes imposed by or within the jurisdiction in which
any Borrower is domiciled, any jurisdiction from which the Borrowers make any
payment hereunder, or (in each case) any political subdivision or taxing
authority thereof or therein (excluding any such tax imposed on the overall net
income of the Agent or the Lenders). If any such withholding is so required, the
Borrowers shall make the withholding, pay the amount withheld to the appropriate
governmental authority before penalties attach thereto or interest accrues
thereon, and forthwith pay such additional amount as may be necessary to ensure
that the net amount actually received free and clear of such taxes (including
such taxes on such additional amount) is equal to the amount which Agent or the
Lenders would have received had such withholding not been made. If the Agent or
the Lenders pay any amount in respect of any such taxes, penalties or interest,
the Borrowers shall reimburse the Agent or the Lenders (as appropriate) for that
payment on demand in the currency in which such payment was made. If a Borrower
pays any such taxes, penalties or interest, it shall deliver official tax
receipts evidencing that payment or certified copies thereof to the Agent on or
before the thirtieth day after payment.
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SECTION 4.22. DESIGNATED SENIOR INDEBTEDNESS. The Borrowers
and the Secured Parties hereby agree that the Secured Obligations constitute
"Designated Senior Indebtedness" as defined in the Indentures relating to the
Convertible Subordinated Notes and that the Secured Obligations constitute
"Senior Debt" as defined in the Securities Purchase Agreement relating to the
Equitable Subordinated Loan.
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1. CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT.
Notwithstanding any other provision of this Agreement, the initial Loans will
not be made and no Letters of Credit will be issued, until the fulfillment of
each of the following conditions prior to or contemporaneously with the making
of the first to be made of such Loans or issuance of such Letters of Credit:
(a) FINANCIAL CONDITION. The Borrowers shall have delivered to
the Agent a fair saleable value balance sheet prepared and certified to
by the Financial Officer in form and substance satisfactory to the
Agent dated the Effective Date, and setting forth valuations of the
assets and the Projections together with a certificate executed by the
Financial Officer or the chief financial officer of each Borrower, in
form and substance satisfactory to the Agent, certifying that as of the
Effective Date, after giving effect to the extension of the initial
Loans, and the payment of all fees and expenses in connection with such
transactions, the fair saleable value of each Borrower's assets will
exceed the amount required to pay its debts as they become absolute and
matured (including contingent, subordinated, unmatured and unliquidated
liabilities), that each Borrower is able and anticipates that it will
be able to meet its debts as they mature and has adequate capital to
conduct the business in which it is or proposes to be engaged, together
with attachments demonstrating the basis of such conclusions.
(b) FEES. The Borrowers shall have paid all of the fees
payable on the Effective Date referred to herein.
(c) SECURITY INTERESTS. The Agent shall have received
satisfactory evidence that the Agent (for the benefit of the Secured
Parties) has a valid and perfected first priority security interest as
of such date in all of the Collateral, subject only to Permitted Liens.
(d) CLOSING DOCUMENTS. The Agent shall have received each of
the following documents, all of which shall be satisfactory in form and
substance to the Agent and its counsel and to the Lenders:
(i) certified copies of the articles or certificate
of incorporation and bylaws of each Borrower as in effect on
the Effective Date,
(ii) certified copies of all corporate action,
including shareholder approval, if necessary, taken by each
Borrower to authorize the execution, delivery and performance
of this Agreement, the Loan Documents, and the borrowings
under this Agreement,
(iii) certificates of incumbency and specimen
signatures with respect to each of the officers of each
Borrower authorized to execute and deliver this Agreement and
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the Loan Documents on behalf of each Borrower or other Person
executing any document, certificate or instrument to be
delivered in connection with this Agreement or the Loan
Documents and, in the case of each Borrower, to request
borrowings under this Agreement,
(iv) a certificate evidencing the good standing of
each Borrower in the jurisdiction of its incorporation and in
each other jurisdiction in which it is required to be
qualified as a foreign corporation to transact its business as
presently conducted,
(v) copies of all financial statements referred to in
SECTION 6.1(o) and meeting the requirements thereof,
(vi) a signed opinion of Akerman, Senterfitt &
Eidson, P.A., counsel for the Borrowers and the Trust,
substantially in the form of EXHIBIT C, and of such local
counsel for the Borrowers and the Trust as may be required,
opining as to such matters in connection with the transactions
contemplated by this Agreement as the Agent or its counsel may
reasonably request,
(vii) an opinion of Lytle Soule & Curlee and Crowe &
Dunlevy, each dated the Effective Date (which opinion may be
delivered orally on the Effective Date and followed by a
signed written opinion promptly thereafter) opining that (A)
the Airframe and Engine Mortgage and the Mortgage Supplement
are in due form for recordation by the FAA and have been duly
filed for recordation with the FAA, (B) the Collateral
described in the Airframe and Engine Mortgage and in the
Mortgage Supplement is free and clear of all Liens other than
the Security Interest, (C) the Security Interest in all
Collateral that consists of Airframe Inventory registered in
the United States is a perfected, first priority Security
Interest, (D) the Security Interest in all Engine Inventory is
a perfected, first priority Security Interest, (E) no filings
or recordings (other than the above described filings with the
FAA) are necessary to perfect the Security Interest in any
jurisdiction within the United States, and (F) no
authorization, approval, consent, license, or order of,
registration with, or giving of notice to, the FAA Engines
Registry is required for the valid authorization, delivery or
performance of the Airframe and Engine Mortgage and any
Mortgage Supplement except for such authorizations, approvals,
consents, licenses, orders, registrations and notices as have
been effected,
(viii) the Financing Statements duly executed and
delivered by the Borrowers and the Trust and acknowledgement
copies evidencing the filing of such Financing Statements in
each jurisdiction where such filing may be necessary or
appropriate to perfect the Security Interest,
(ix) the Airframe and Engine Mortgage and the
Mortgage Supplement duly executed by each Borrower and the
Trust,
(x) a certification from the principal officers of
the Borrowers as to such factual matters as shall be requested
by the Agent,
(xi) certificates or binders of insurance relating to
each of the policies of insurance covering any of the
Collateral, together with loss payable clauses which
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comply with the terms of SECTION 8.8, the Mortgages and the
Airframe and Engine Mortgage,
(xii) a certificate of the Financial Officer (or such
other officer of Kellstrom as may be acceptable to the Agent)
stating that, to the best of his knowledge and based on an
examination sufficient to enable him to make an informed
statement,
(A) all of the representations and
warranties made or deemed to be made under this
Agreement are true and correct as of the Effective
Date, after giving effect to the Loans to be made at
such time and the application of the proceeds
thereof, and
(B) no Default or Event of Default exists,
(xiii) a Borrowing Base Certificate, a Schedule of
Inventory and a Schedule of Receivables, prepared as of a date
not more than 5 days prior to the Effective Date,
(xiv) solvency certificates, certificates of
projection of income and cash flow, and such other
certificates as the Agent may require to evidence each
Borrower's solvency,
(xv) copies of the Mortgages duly executed and
delivered by the applicable Borrowers and evidencing the
recording of each such instrument in the appropriate
jurisdiction for the recording thereof on the Real Estate
subject thereto, in order to create in favor of the Agent (for
the benefit of the Secured Parties) a valid first Lien on and
security title to the Real Estate described therein, or, at
the option of the Agent, in proper form for recording in such
jurisdiction,
(xvi) one or more fully paid mortgagee title
insurance policies or, at the option of the Agent,
unconditional commitments for the issuance thereof with all
requirements and conditions to the issuance of the final
policy deleted or marked satisfied, issued by a title
insurance company satisfactory to the Agent, each in an amount
equal to not less than the fair market value of the Real
Estate subject to the Mortgage insured thereby, insuring that
such Mortgage creates a valid first Lien on, and security
title to, all Real Estate described therein, with no survey
exceptions and no other exceptions which the Agent shall not
have approved in writing,
(xvii) such materials and information concerning the
Real Estate as the Agent may require, including, without
limitation, (A) current and accurate surveys satisfactory to
the Agent of all of the owned Real Estate, certified to the
Agent and showing the location of the 100-year and 50-year
flood plains thereon, (B) zoning letters as to the zoning
status of all of the owned Real Estate, (C) certificates of
occupancy covering all of the Real Estate, and (D) owner's
affidavits as to such matters relating to the owned Real
Estate as the Agent may request,
(xviii) landlord's, warehouseman's or mortgagee's
waiver and consent agreements duly executed on behalf of each
landlord, warehouseman or mortgagee, as the case may be, of
Real Estate and any other real property on which any
Collateral is located,
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(xix) Agency Account Agreements, each duly executed
by the applicable Borrowers and the Clearing Bank party
thereto,
(xx) the Initial Notice of Borrowing, duly executed
by the chief financial officer of Kellstrom,
(xxi) a report from a qualified engineering firm or
other qualified consultant acceptable to the Agent with
respect to an investigation and audit of all Real Estate,
which shall be based on a thorough review of past and present
uses, occupants, ownership and tenancy of the property and/or
adjacent properties and/or upgradient properties regarding
(A) subsurface ground water hazards, soils
and/or test boring reports;
(B) contact with local, state or federal
agencies regarding known or suspected hazardous
material contamination of the property or other
properties in the area;
(C) review of aerial photographs;
(D) visual site inspection noting
unregulated fills, storage tanks or areas, ground
discoloration or soil odors; and
(E) other investigative methods deemed
necessary by the consultant or the Agent to enable
the consultant to report that there is no apparent or
likely contamination of the property or another
property in the area,
(xxii) if deemed reasonably necessary to further
investigate suspected or likely contamination, supplemental
environmental reports prepared by qualified consultants of the
analysis of core drilling or ground water samples from the
property, showing no contamination by hazardous materials,
(xxiii) an appraisal of all owned Real Estate
prepared by appraisers satisfactory to the Agent, establishing
values at levels satisfactory to the Agent,
(xxiv) a certified copy of the organizational trust
agreement governing the Trust, together with such
certifications from the trustee of the Trust with respect to
the Loan Documents to which the Trust is a party as the Agent
may request,
(xxv) copies of each of the other Loan Documents duly
executed by the parties thereto, together with evidence
satisfactory to the Agent of the due authorization and binding
effect of each such Loan Document on such party, and
(xxvi) such other documents and instruments as the
Agent or any Lender may reasonably request.
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(e) NOTES. Each Lender shall have received a Revolving Credit
Note duly executed and delivered by the Borrowers, complying with the
terms of SECTION 2.4.
(f) SUBORDINATED INDEBTEDNESS. The Agent shall have received a
certificate from the Financial Officer containing true and correct
copies of (i) the Convertible Subordinated Notes and each other
agreement executed in connection therewith and (ii) each agreement
executed in connection with the Equitable Subordinated Loan, including
the Securities Purchase Agreement described in the definition of
"Equitable Subordinated Loan". The Agent shall have received an
amendment executed and delivered by The Equitable Life Assurance
Society of the United States and Kellstrom, amending the Securities
Purchase Agreement described in the definition of "Equitable
Subordinated Loan" to permit the financing contemplated by this
Agreement, as well as any other consents required by the documents
relating to the Subordinated Indebtedness.
(g) PLEDGE AGREEMENT. The Agent shall have received the Pledge
Agreement, in form and substance satisfactory to the Agent and the
Lenders, duly executed and delivered by Kellstrom, together with stock
transfer powers duly executed in blank by Kellstrom and stock
certificates representing all of the stock subject to the Pledge
Agreement.
(h) OTHER SECURITY DOCUMENTS. The Agent shall have received
each other Security Document, in form and substance satisfactory to the
Agent and the Lenders, duly executed and delivered by the applicable
Borrowers, including without limitation the Trademark Assignment.
(i) INDEMNIFICATION AGREEMENTS. The Agent shall have received
the Environmental Indemnity Agreement and the Indemnification
Agreement, in form and substance satisfactory to the Agent and the
Lenders, duly executed and delivered by the Borrowers.
(j) AVAILABILITY. The Agent shall be provided with evidence
satisfactory to it that, as of the Effective Date, after giving effect
to the Initial Loans and the issuance of any Letters of Credit on the
Effective Date, Availability is not less than $75,000,000.
(k) NO INJUNCTIONS, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental agency or legislative body to
enjoin, restrain, or prohibit, or to obtain damages in respect of, or
which is related to or arises out of this Agreement or the consummation
of the transactions contemplated hereby, or which, in the Agent's or
the Lenders' discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement.
(l) MATERIAL ADVERSE CHANGE. As of the Effective Date, there
shall not have occurred any change which is materially adverse, in the
Agent's or the Lenders' discretion, to the assets, liabilities,
businesses, operations, condition (financial or otherwise) or prospects
of the Borrowers or their Subsidiaries from those presented by the
financial statements described in SECTION 6.1(o).
(m) RELEASE OF SECURITY INTERESTS. The Agent shall have
received evidence satisfactory to it of the release and termination of
all Liens other than Permitted Liens.
(n) SYNDICATION MARKET. There shall not have occurred any
change which is materially adverse in the market for syndicated bank
credit facilities, or a material disruption of,
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or a material adverse change in, financial, banking or capital market
conditions, in each case as determined by the Agent and the Syndication
Agent in their sole discretion.
SECTION 5.2. ALL LOANS; LETTERS OF CREDIT. At the time of making of
each Loan, including the Initial Loans and all subsequent Loans, and the
issuance of the VRDN Letter of Credit and each other Letter of Credit:
(a) all of the representations and warranties made or deemed
to be made under this Agreement (including the representation regarding
Absence of Defaults contained in SECTION 6.1(r)) shall be true and
correct in all material respects at such time both with and without
giving effect to the Loan to be made at such time and the application
of the proceeds thereof,
(b) the corporate actions of the Borrowers (and any Subsidiary
Guarantors) referred to in SECTION 5.1(d) shall remain in full force
and effect and the incumbency of officers shall be as stated in the
certificates of incumbency delivered pursuant to SECTION 5.1 or as
subsequently modified and reflected in a certificate of incumbency
delivered to the Agent, and
(c) each request or deemed request for any Borrowing hereunder
shall be deemed to be a certification by the Borrowers to the Agent and
the Secured Parties as to the matters set forth in SECTION 5.2(A) and
(B) and the Agent may, without waiving either condition, consider the
conditions specified in SECTIONS 5.2(a) and (b) fulfilled and a
representation by the Borrowers to such effect made, if no written
notice to the contrary is received by the Agent prior to the making of
the Loan then to be made.
SECTION 5.3. CONDITIONS AS COVENANTS. In the event that the Lenders
make the Initial Loans or any Letter of Credit is issued prior to the
satisfaction of all conditions precedent set forth in SECTION 5.1, and such
conditions are not waived in writing by the Required Lenders, the Borrowers
shall nevertheless cause such condition or conditions to be satisfied within 30
days after the making of such Initial Loans or the issuance of any other Letter
of Credit.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
SECTION 6.1. REPRESENTATIONS AND WARRANTIES. Each Borrower represents
and warrants to the Agent and to the Lenders as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. Each Borrower and each
of its Subsidiaries is a corporation, duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation, having the power and authority to own its properties and
to carry on its business as now being and hereafter proposed to be
conducted and is duly qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of
its business requires such qualification or authorization. The
jurisdictions in which each Borrower and each of its Subsidiaries is
qualified to do business as a foreign corporation are listed on
SCHEDULE 6.1(a). The Trust is duly organized and validly existing under
the laws of its jurisdiction of its formation, and has the power and
legal authority to own or lease property and to carry on its business.
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(b) CAPITALIZATION. The outstanding capital stock of each
Borrower has been duly and validly issued and is fully paid and
nonassessable, and the number and owners of such shares of capital
stock of each Borrower are set forth on SCHEDULE 6.1(b). Each issuance
and sale of each Borrower's capital stock was made in accordance with
applicable federal, state and foreign securities laws or pursuant to an
exemption therefrom. Except as set forth on SCHEDULE 6.1(b), there are
no shareholder agreements, options, subscription agreements or other
agreements or understandings to which any Borrower is a party in effect
with respect to the capital stock of such Borrower, including, without
limitation, agreements providing for special voting requirements or
arrangements for approval of corporate actions or other matters
relating to corporate governance or restrictions on share transfer or
providing for the issuance of any securities convertible into shares of
the capital stock of such Borrower, any warrants or other rights to
acquire any shares or securities convertible into such shares, or any
agreement that obligates such Borrower, either by its terms of at the
election of any other Person, to repurchase such shares under any
circumstances.
(c) SUBORDINATED INDEBTEDNESS. The issuance and sale of all
instruments evidencing the Subordinated Indebtedness have been
registered or qualified under applicable federal and state securities
laws or pursuant to an exemption therefrom. Each document evidencing or
relating to the Subordinated Indebtedness is the legally valid and
binding obligation of the applicable Borrower enforceable against the
Borrower in accordance with its terms (including those pertaining to
subordination). The Borrowers have delivered to the Agent a complete
and correct copy of all documents evidencing or relating to the
Subordinated Indebtedness.
(d) SUBSIDIARIES. SCHEDULE 6.1(d) correctly sets forth the
name of each Subsidiary of each Borrower, its jurisdiction of
incorporation, the name of its immediate parent or parents, and the
percentage of its issued and outstanding securities owned by a Borrower
or any other Subsidiary of a Borrower and indicating whether such
Subsidiary is a Consolidated Subsidiary. Except as set forth on
SCHEDULE 6.1(d),
(i) no Subsidiary of a Borrower has issued any
securities convertible into shares of such Subsidiary's
capital stock or any options, warrants or other rights to
acquire any shares or securities convertible into such shares,
(ii) the outstanding stock and securities of each
Borrower other than Kellstrom are owned by Kellstrom, free and
clear of all Liens, warrants, options and rights of others of
any kind whatsoever, and each Borrower other than Kellstrom is
a Wholly-Owned Subsidiary of Kellstrom, and
(iii) no Borrower has any Subsidiaries.
The outstanding capital stock of each Subsidiary of each Borrower has
been duly and validly issued and is fully paid and nonassessable by the
issuer, and the number and owners of the shares of such capital stock
are set forth on SCHEDULE 6.1(d).
(e) AUTHORIZATION OF AGREEMENT, NOTES, LOAN DOCUMENTS AND
BORROWING. Each Borrower has the right, power and authority to execute,
deliver and perform this Agreement and each of the Loan Documents to
which it is a party in accordance with their respective terms. This
Agreement and each of the Loan Documents have been duly executed and
delivered by the duly authorized officers of each Borrower party
thereto and each is, or each when executed and delivered in accordance
with this Agreement will be, a legal, valid and binding obligation of
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each Borrower party thereto, enforceable in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in
equity.
(f) COMPLIANCE OF AGREEMENT, NOTES, LOAN DOCUMENTS AND
BORROWING WITH LAWS, ETC. Except as set forth on SCHEDULE 6.1(f), the
execution, delivery and performance of this Agreement and each of the
Loan Documents in accordance with their respective terms and the
borrowings hereunder do not and will not, by the passage of time, the
giving of notice or otherwise, (i) require any Governmental Approval or
violate any Applicable Law relating to any Borrower or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute a
default under the articles or certificate of incorporation or by-laws
of any Borrower or any of its Subsidiaries, (iii) conflict with, result
in a breach of or constitute a default under any material provisions of
any indenture, agreement or other instrument to which any Borrower or
any of its Subsidiaries is a party or by which any Borrower or any of
its Subsidiaries or any of a Borrower's or such Subsidiaries' property
may be bound, including, without limitation, all documentation related
to the Convertible Subordinated Notes and the Equitable Subordinated
Loan, or any Governmental Approval relating to a Borrower or any of its
Subsidiaries, or (iv) result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or hereafter
acquired by any Borrower or any of its Subsidiaries other than the
Security Interest.
(g) BUSINESS. Each Borrower is engaged principally in the
business set forth next to its name on SCHEDULE 6.1(g).
(h) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. (i) Except as
set forth in SCHEDULE 6.1(h), each Borrower and each of its
Subsidiaries (A) has all Governmental Approvals, including permits
relating to federal, state, local and foreign Environmental Laws,
ordinances and regulations, required by any Applicable Law for it to
conduct its business, each of which is in full force and effect, is
final and not subject to review on appeal and is not the subject of any
pending or, to the knowledge of any Borrower, threatened attack by
direct or collateral proceeding, and (B) is in compliance with each
Governmental Approval applicable to it and in compliance with all other
Applicable Laws relating to it, including, without being limited to,
all Environmental Laws and all occupational health and safety laws
applicable to any Borrower, any of its Subsidiaries or their respective
properties, except for instances of noncompliance which would not,
singly or in the aggregate, cause a Default or Event of Default or have
a Materially Adverse Effect and in respect of which reserves in respect
of such Borrower's or such Subsidiary's reasonably anticipated
liability therefor have been established on the consolidated books of
the Borrowers. (ii) Without limiting the generality of the above,
except as disclosed on a report delivered pursuant to SECTION 5.1(d) or
with respect to matters which could not reasonably be expected to have,
singly or in the aggregate, a Materially Adverse Effect: (A) the
operations of each Borrower and each of its Subsidiaries comply in all
material respects with all applicable environmental, health and safety
requirements of Applicable Law; (B) each Borrower and each of its
Subsidiaries has obtained all environmental, health and safety permits
necessary for its operation, and all such permits are in good standing
and each Borrower and each of its Subsidiaries is in compliance in all
material respects with all terms and conditions of such permits; (C)
neither any Borrower nor any of its Subsidiaries nor any of their
respective present or past property or operations are subject to any
order from or agreement with any public authority or party respecting
(x) any environmental, health or safety requirements of Applicable Law,
(y) any Remedial Action, or (z) any liabilities and costs arising from
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the Release or threatened Release of a Contaminant into the
environment; (D) none of the operations of any Borrower or of any of
its Subsidiaries is subject to any judicial or administrative
proceeding alleging a violation of any environmental, health or safety
requirement of Applicable Law; (E) none of the present nor past
operations of any Borrower or any of its Subsidiaries is the subject of
any investigation by any public authority evaluating whether any
Remedial Action is needed to respond to a Release or threatened Release
of a Contaminant into the environment; (F) neither any Borrower nor any
of its Subsidiaries has filed any notice under any requirement of
Applicable Law indicating past or present treatment, storage or
disposal of a hazardous waste, as that term is defined under 40 CFR
Part 261 or any state equivalent; (G) neither any Borrower nor any of
its Subsidiaries has filed any notice under any requirement of
Applicable Law reporting a Release of a Contaminant into the
environment; (H) except in compliance in all material respects with
applicable Environmental Laws, during the course of any Borrower's or
any of its Subsidiaries' ownership of or operations on the Real Estate,
there have been no (1) generation, treatment, recycling, storage or
disposal of hazardous waste, as that term is defined under 40 CFR Part
261 or any state equivalent, (2) use of underground storage tanks or
surface impoundments, (3) use of asbestos-containing materials, or (4)
use of polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other equipment; (I) neither any Borrower
nor any of its Subsidiaries has entered into any negotiations or
agreements with any Person (including, without limitation, any prior
owner of any of the Real Estate or other property of any Borrower or
any of its Subsidiaries) relating to any Remedial Action or
environmental related claim; (J) neither any Borrower nor any of its
Subsidiaries has received any notice or claim to the effect that it is
or may be liable to any Person as a result of the Release or threatened
Release of a Contaminant into the environment; (K) neither any Borrower
nor any of its Subsidiaries has any material contingent liability in
connection with any Release or threatened Release of any Contaminant
into the environment; (L) no Environmental Lien has attached to any of
the Real Estate or other property of any Borrower or of any of its
Subsidiaries; (M) the presence and condition of all asbestos-containing
material which is on or part of the Real Estate (excluding any raw
materials used in the manufacture of products or products themselves)
do not violate in any material respect any currently applicable
requirement of Applicable Law; and (N) neither any Borrower nor any of
its Subsidiaries manufactures, distributes or sells, and has never
manufactured, distributed or sold, products which contain
asbestos-containing material. (iii) Each Borrower has notified the
Agent of the receipt by it or any of its Subsidiaries of any notice of
a material violation of any Environmental Laws and occupational health
and safety laws applicable to such Borrower, Subsidiaries or any of
their respective properties.
(i) TITLE TO PROPERTIES. Except as set forth in SCHEDULE
6.1(i), each Borrower and each of its Subsidiaries has valid and legal
title to or leasehold interest in all personal property, Real Estate
owned and other assets used in its business, including, but not limited
to, those reflected on the most recent balance sheets of the Borrowers
delivered pursuant to SECTION 6.1(o).
(j) LIENS. Except as set forth in SCHEDULE 6.1(j), none of the
properties and assets of any Borrower or any of its Subsidiaries is
subject to any Lien, except Permitted Liens. Other than the Financing
Statements, the Airframe and Engine Mortgage and the Mortgage
Supplements, no financing statement under the Uniform Commercial Code
or similar laws of any jurisdiction, no filing with the FAA, and no
other instrument evidencing a Lien which names any Borrower or any of
its Subsidiaries as debtor has been filed (and has not been terminated)
in any jurisdiction, and neither any Borrower nor any of its
Subsidiaries has signed any such financing statement, FAA filing or
other instrument or any security agreement authorizing any
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secured party thereunder to file any such financing statement or
instrument, except to perfect those Liens listed on SCHEDULE 6.1(j).
(k) INDEBTEDNESS AND GUARANTIES. SCHEDULE 6.1(k) is a complete
and correct listing of all Indebtedness for Money Borrowed and
Guaranties of each Borrower and its Subsidiaries. Each Borrower and its
Subsidiaries has performed and is in compliance in all material
respects with all of the terms of such Indebtedness and Guaranties and
all instruments and agreements relating thereto, and no default or
event of default, or event or condition which with notice or lapse of
time or both would constitute such a default or event of default,
exists with respect to any such Indebtedness or Guaranty.
(l) LITIGATION. Except as set forth on SCHEDULE 6.1(L), there
are no actions, suits or proceedings pending (nor, to the knowledge of
any Borrower, are there any actions, suits or proceedings threatened,
or any reasonable basis therefor) against or in any other way relating
to or affecting any Borrower or any of its Subsidiaries or any of any
Borrower's or any of its Subsidiaries' other properties in any court or
before any arbitrator of any kind or before or by any governmental
body, except actions, suits or proceedings of the character normally
incident to the kind of business conducted by the Borrowers or any of
its Subsidiaries which, if adversely determined, would not singly or in
the aggregate have a Materially Adverse Effect, and there are no
strikes or walkouts in progress, pending or, to the knowledge of any
Borrower, threatened, relating to any labor contracts to which any
Borrower or any of its Subsidiaries is a party, relating to any labor
contracts being negotiated, or otherwise.
(m) TAX RETURNS AND PAYMENTS. Except as set forth on SCHEDULE
6.1(m), all United States federal, state and local as well as foreign
national, provincial and local and other tax returns of each Borrower
and each of its Subsidiaries required by Applicable Law to be filed
have been duly filed, and all United States federal, state and local
and foreign national, provincial and local and other taxes, assessments
and other governmental charges or levies upon each Borrower and each of
its Subsidiaries and each Borrower's and any of its Subsidiaries'
property, income, profits and assets which are due and payable have
been paid, except any such nonpayment which is at the time permitted
under SECTION 9.6. The charges, accruals and reserves on the books of
each Borrower and each of its Subsidiaries in respect of United States
federal, state and local and foreign national, provincial and local
taxes for all fiscal years and portions thereof since the organization
of each Borrower and each of its Subsidiaries are in the judgment of
each Borrower adequate, and no Borrower knows of any reason to
anticipate any additional assessments for any of such years which,
singly or in the aggregate, might have a Materially Adverse Effect.
(n) BURDENSOME PROVISIONS. Neither any Borrower nor any of its
Subsidiaries is a party to any indenture, agreement, lease or other
instrument, or subject to any charter or corporate restriction,
Governmental Approval or Applicable Law compliance with the terms of
which might have a Materially Adverse Effect.
(o) FINANCIAL STATEMENTS.
(i) The Borrowers have furnished to the Agent and the
Lenders (A) copies of the annual audited consolidated balance
sheet of Kellstrom and its Consolidated Subsidiaries as of
December 31, 1997 and the related audited consolidated
statements of operations, cash flows and shareholder's equity
for the fiscal year ended on such date,
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reported on by KPMG Peat Marwick LLP and (B) copies of the
unaudited consolidated balance sheet of Kellstrom and its
Consolidated Subsidiaries as of October 31, 1998 and of the
related statements of operations and cash flows for the
10-month period then ended. Such financial statements present
fairly, in all material respects, as of their respective dates
and in accordance with GAAP (subject to year-end adjustments
and but for the omission of footnotes in the unaudited
statements) the consolidated financial condition of Kellstrom
and its Consolidated Subsidiaries as of such dates and the
consolidated results of operations of Kellstrom and its
Consolidated Subsidiaries for the periods ended on such dates.
(ii) The Borrowers have furnished to the Agent and
the Lenders copies of the Projections. The Projections have
been be prepared by the Borrowers in light of the past
operations of the business of the Borrowers and their
Subsidiaries and represent as of the respective dates thereof
the good faith opinion of the Borrowers and their senior
management concerning the likely course of business of the
Borrowers and their Subsidiaries.
(iii) Except as disclosed or reflected in the
financial statements described in CLAUSES (i) and (ii) above,
no Borrower nor any of its Subsidiaries has any material
liabilities, contingent or otherwise, and there were no
material unrealized or anticipated losses of any Borrower or
any of its Subsidiaries.
(p) ADVERSE CHANGE. Since the date of the audited financial
statements of the Borrowers delivered to the Agent pursuant to SECTION
6.1(o)(i), (i) no material adverse change has occurred in the business,
assets, liabilities, financial condition, results of operations or
business prospects of any Borrower or any of its Subsidiaries, and ()
no event has occurred or failed to occur which has had, or may have,
singly or in the aggregate, a Materially Adverse Effect.
(q) ERISA.
(i) Neither any Borrower nor any Related Company
maintains or contributes to any Benefit Plan other than those
listed on SCHEDULE 6.1(q).
(ii) No Benefit Plan has been terminated or partially
terminated, and no Multiemployer Plan is insolvent or in
reorganization, nor have any proceedings been instituted to
terminate any Benefit Plan or to reorganize any Multiemployer
Plan.
(iii) Neither any Borrower nor any Related Company
has withdrawn from any Benefit Plan or Multiemployer Plan, nor
has a condition occurred which if continued would result in a
withdrawal.
(iv) Neither any Borrower nor any Related Company has
incurred any withdrawal liability, including contingent
withdrawal liability, to any Multiemployer Plan pursuant to
Title IV of ERISA.
(v) Neither any Borrower nor any Related Company has
incurred any liability to the PBGC other than for required
insurance premiums which have been paid when due.
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(vi) No Reportable Event has occurred with respect to
a Plan.
(vii) No Benefit Plan has an "accumulated funding
deficiency" (whether or not waived) as defined in Section 302
of ERISA or in Section 412 of the Internal Revenue Code.
(viii) Each Plan is in substantial compliance with
ERISA, and neither any Borrower nor any Related Company has
received any communication from a governmental agency
asserting that a Plan is not in compliance with ERISA.
(ix) Each Plan which is intended to be a qualified
Plan has been determined by the IRS to be qualified under
Section 401(a) of the Internal Revenue Code as currently in
effect or will be submitted to the IRS for such determination
prior to the end of the remedial amendment period under
Section 401(b) of the Internal Revenue Code and the
regulations promulgated thereunder and neither any Borrower
nor any Related Company knows or has reason to know why each
such Plan should not continue to be so qualified, and each
trust related to such Plan that has been submitted to the IRS
for determination of exempt status has been determined to be
exempt from federal income tax under Section 501(a) of the
Internal Revenue Code or will be submitted to the IRS for a
determination of exempt status.
(x) Except as provided on SCHEDULE 6.1(q), neither
any Borrower nor any Related Company maintains or contributes
to any employer welfare benefit plan within the meaning of
Section 3(l) of ERISA which provides benefits to employees
after termination of employment other than as required by
Section 601 of ERISA.
(xi) Schedule B to the most recent annual report
filed with the IRS with respect to each Benefit Plan and
furnished to the Agent is complete and accurate. Since the
date of each such Schedule B, there has been no adverse change
in funding status or financial condition of the Benefit Plan
relating to such Schedule B.
(xii) Neither any Borrower nor any Related Company
has failed to make a required installment under Subsection (m)
of Section 412 of the Internal Revenue Code or any other
payment required under Section 412 of the Internal Revenue
Code on or before the due date for such installment or other
payment.
(xiii) Neither any Borrower nor any Related Company
is required to provide security to a Benefit Plan under
Section 401(a)(29) of the Internal Revenue Code due to a
Benefit Plan amendment that results in an increase in current
liability for the plan year.
(xiv) Neither any Borrower nor any Related Company,
nor any other "party-in-interest" or "disqualified person" has
engaged in a nonexempt "prohibited transaction," as such terms
are defined in Section 4975 of the Internal Revenue Code and
Section 406 of ERISA, in connection with any Plan or has taken
or failed to take any action which would constitute or result
in a Termination Event.
(xv) Neither any Borrower nor any Related Company has
failed to comply with the health care continuation coverage
requirements of Section 4980B of the Internal
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Revenue Code in respect of employees and former employees of
such Borrower or such Related Company and their dependents and
beneficiaries which alone or in the aggregate would subject
such Borrower or such Related Company to any material
liability.
(xvi) Neither any Borrower nor any Related Company
has (i) failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made a complete or partial
withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. Except as provided on SCHEDULE 6.1(q), to
the best knowledge of each Borrower after due inquiry, neither
any Borrower nor any Related Company shall have any obligation
to (A) make contributions to any Multiemployer Plan on or
after the Effective Date, or (B) pay withdrawal liability to
any Multiemployer Plan in an amount in excess of a "de minimis
amount" as such term is defined in Section 4209 of ERISA.
(r) ABSENCE OF DEFAULTS. Neither any Borrower nor any of its
Subsidiaries is in default under its articles or certificate of
incorporation or by-laws and no event has occurred, which has not been
remedied, cured or waived, (i) which constitutes a Default or an Event
of Default, or (ii) which constitutes, or which with the passage of
time or giving of notice or both would constitute, a default or event
of default by any Borrower or any of its Subsidiaries under any
material agreement (other than this Agreement) or judgment, decree or
order to which any Borrower or any of its Subsidiaries is a party or by
which any Borrower, any of its Subsidiaries or any of their properties
may be bound or which would require any Borrower or any of its
Subsidiaries to make any payment under any such agreement, judgment,
decree or order prior to the scheduled maturity date therefor, except,
in the case only of any such agreement, for alleged defaults which are
being contested in good faith by appropriate proceedings and with
respect to which reserves in respect of any Borrower's or such
Subsidiary's reasonably anticipated liability have been established on
the books of such Borrower or Subsidiary.
(s) ACCURACY AND COMPLETENESS OF INFORMATION.
(i) All written information, reports and other papers
and data produced by or on behalf of the Borrowers were, at
the time the same were so furnished, complete and correct in
all material respects. No fact is known to any Borrower which
has had, or may in the future have, a Materially Adverse
Effect which has not been set forth in the financial
statements or disclosure delivered prior to the Effective
Date, in each case referred to in SECTION 6.1(o), or in such
written information, reports or other papers or data or
otherwise disclosed in writing to the Agent and the Lenders
prior to the Agreement Date. No document furnished or written
statement made to the Agent or any Lender by any Borrower or
any of its Subsidiaries in connection with the negotiation,
preparation or execution of this Agreement or any of the Loan
Documents contains or will contain any untrue statement of a
fact material to the creditworthiness of any Borrower or any
of its Subsidiaries or omits or will omit to state a material
fact necessary in order to make the statements contained
therein not misleading.
(ii) No Borrower has any reason to believe that any
document furnished or written statement made to the Agent or
any Lender by any Person other than the Borrowers in
connection with the negotiation, preparation or execution of
this Agreement or any of the Loan Documents contained any
incorrect statement of a material fact or omitted to state a
material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not
misleading.
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(t) SOLVENCY. In each case after giving effect to the
Indebtedness represented by the Loans outstanding and to be incurred
and the transactions contemplated by this Agreement, each Borrower and
each of its Subsidiaries is solvent, having assets of a fair salable
value which exceeds the amount required to pay its debts as they become
absolute and matured (including contingent, subordinated, unmatured and
unliquidated liabilities), and each Borrower and each of its
Subsidiaries is able to and anticipates that it will be able to meet
its debts as they mature and has adequate capital to conduct the
business in which it is or proposes to be engaged.
(u) RECEIVABLES.
(i) STATUS.
(A) Each Receivable reflected in the
computations included in any Borrowing Base
Certificate meets the criteria enumerated in the
definition of Eligible Receivables, and each Lease
Receivable reflected in the computations included in
any Borrowing Base Certificate as an Eligible
Domestic Receivable or an Eligible Foreign Receivable
meets the criteria enumerated in the definition of
Eligible Domestic Receivable or Eligible Foreign
Receivable, as applicable, except in each case as
disclosed in such Borrowing Base Certificate or as
disclosed in a timely manner in a subsequent
Borrowing Base Certificate or otherwise in writing to
the Agent.
(B) No Borrower has any knowledge of any
fact or circumstance not disclosed to the Agent in a
Borrowing Base Certificate or otherwise in writing
which would impair the validity or collectibility of
any Receivable of $100,000 or more or of Receivables
which (regardless of the individual amount thereof)
aggregate $500,000 or more.
(C) Each Lease Agreement is substantially in
the form of the lease agreements delivered to the
Agent prior to the Agreement Date, or in such other
form as shall have been approved by Agent in
accordance with SECTION 8.4(b). Each Lease Agreement
dated after the Effective Date has been executed in
the manner set forth in SECTION 8.4(c). Other than as
has been disclosed to the Agent in writing, no Lease
Agreement is in default.
(ii) CHIEF EXECUTIVE OFFICE. The chief executive
office of each Borrower and the books and records relating to
the Receivables are located at the address or addresses set
forth on SCHEDULE 6.1(u); no Borrower has maintained its chief
executive office or books and records relating to any
Receivables at any other address at any time during the five
years immediately preceding the Agreement Date except as
disclosed on SCHEDULE 6.1(u).
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(v) INVENTORY.
(i) SCHEDULE OF INVENTORY. All Inventory included in
any Schedule of Inventory or Borrowing Base Certificate
delivered to the Agent or any Lender pursuant to SECTION 8.12
meets the criteria enumerated in the definition of Eligible
Inventory, and all Inventory classified on any Schedule of
Inventory or Borrowing Base Certificate as Eligible Domestic
Leased Engine Inventory, Eligible Foreign Leased Engine
Inventory, Eligible Foreign Leased Airframe Inventory,
Eligible Leased Airframe Inventory or Eligible Inventoried
Engine and Parts Inventory meets all of the criteria set forth
for such type of Inventory in its definition, except in each
case as disclosed in such Schedule of Inventory or Borrowing
Base Certificate or in a subsequent Schedule of Inventory or
Borrowing Base Certificate, or as otherwise specifically
disclosed in writing to the Agent.
(ii) CONDITION. All Inventory is in good condition,
meets all standards imposed by any governmental agency, or
department or division thereof, having regulatory authority
over such goods, their use, sale or lease, and is currently
either usable, leaseable or salable in the normal course of
the applicable Borrower's business, except to the extent
reserved against in the financial statements referred to in
SECTION 6.1(o) or delivered pursuant to ARTICLE 10 or as
disclosed on a Schedule of Inventory delivered to the Agent
and the Lenders pursuant to SECTION 8.12(B).
(iii) LOCATION. All Inventory other than Inventory
subject to a Lease Agreement is located on the premises set
forth on SCHEDULE 6.1(v), is Inventory in transit to one of
such locations, or is Inventory in transit to or being
maintained, serviced, repaired or overhauled at an
FAA-certified repair station, except as otherwise disclosed in
writing to the Agent; no Borrower has, in the last year,
located such Inventory at premises other than those set forth
on SCHEDULE 6.1(v), except for at such times as such Inventory
was subject to a Lease Agreement or was off-site for
maintenance, service, repair or overhaul.
(w) EQUIPMENT. All Equipment is in good order and repair in
all material respects and is located on the premises set forth on
SCHEDULE 6.1(w) and has been so located at all times during the last
year.
(x) REAL PROPERTY. No Borrower owns any Real Estate or leases
any Real Estate other than that described on SCHEDULE 6.1(x) and other
than Real Estate acquired or leased after the Effective Date for which
the Borrowers have complied with the requirements of SECTION 8.14.
(y) CORPORATE AND FICTITIOUS NAMES. Except as otherwise
disclosed on SCHEDULE 6.1(y), during the five-year period preceding the
Agreement Date, no Borrower, nor any predecessor thereof nor any
Subsidiary of any Borrower has been known as or used any corporate or
fictitious name other than the corporate names of the Borrowers on the
Effective Date.
(z) FEDERAL RESERVE REGULATIONS. No Borrower nor any of its
Subsidiaries is engaged and none will engage, principally or as one of
its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" (as each of
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the quoted terms is defined or used in Regulation U of the Board of
Governors of the Federal Reserve System). No part of the proceeds of
any of the Loans will be used for so purchasing or carrying margin
stock or, in any event, for any purpose which violates, or which would
be inconsistent with, the provisions of Regulations T, U or X of such
Board of Governors. If requested by the Agent or any Lender, the
Borrowers will furnish to the Agent and the Lenders a statement or
statements in conformity with the requirements of said Regulations T, U
or X to the foregoing effect.
(aa) INVESTMENT COMPANY ACT. No Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in
the Investment Company Act of 1940, as amended).
(bb) EMPLOYEE RELATIONS. Each Borrower has a stable work force
in place and is not, except as set forth on SCHEDULE 6.1(bb), party to
any collective bargaining agreement nor has any labor union been
recognized as the representative of any Borrower's or any of its
Subsidiaries' employees, and no Borrower knows of any pending or
threatened strikes, work stoppage or other labor disputes involving any
Borrower's or any of its Subsidiaries' employees.
(cc) PROPRIETARY RIGHTS. SCHEDULE 6.1(cc) sets forth a correct
and complete list of all of the Proprietary Rights. None of the
Proprietary Rights is subject to any licensing agreement or similar
arrangement except as set forth on SCHEDULE 6.1(cc) or as entered into
in the sale or distribution of any Borrower's Inventory in the ordinary
course of business. To the best of each Borrower's knowledge, none of
the Proprietary Rights infringes on or conflicts with any other
Person's property, and, to each Borrower's knowledge, no other Person's
property infringes on or conflicts with the Proprietary Rights. The
Proprietary Rights described on SCHEDULE 6.1(cc) constitute all of the
property of such type necessary to the current and anticipated future
conduct of each Borrower's business.
(dd) TRADE NAMES. All trade names or styles under which any
Borrower sells or leases Inventory or Equipment or creates Receivables
or enters into Lease Agreements, or to which instruments in payment of
Receivables are made payable, are listed on SCHEDULE 6.1(dd).
(ee) BANK ACCOUNTS, LOCKBOXES, ETC. SCHEDULE 6.1(ee) is a
complete and correct list of all checking accounts, deposit accounts,
lockboxes and other bank accounts maintained by any Borrower.
(ff) YEAR 2000 COMPLIANCE. Each Borrower (a) has initiated a
review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by
suppliers, vendors and customers) that could be adversely affected by
the "Year 2000 Problem" (that is, the risk that computer applications
used by such Borrower or any of its Subsidiaries (or suppliers, vendors
and customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (b) will by March 31, 1999 have developed a
plan and timeline for addressing the Year 2000 Problem on a timely
basis, and (c) will implement that plan in accordance with that
timetable. Based on the foregoing, each Borrower believes that all
computer applications (including those of its suppliers, vendors and
customers) that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be
able to perform properly date-sensitive functions for all dates before
and after January 1, 2000 (that is, be "Year 2000 compliant").
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(gg) SUBORDINATED INDEBTEDNESS. The Secured Obligations (i)
constitute "Senior Debt" as defined in the documents evidencing the
Equitable Subordinated Loan, and (ii) constitute "Designated Senior
Indebtedness" as defined in the Indentures relating to the Convertible
Subordinated Notes.
SECTION 6.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties set forth in this ARTICLE 6 and all statements
contained in any certificate, financial statement, or other instrument delivered
by or on behalf of any Borrower pursuant to or in connection with this Agreement
or any of the Loan Documents (including, but not limited to, any such
representation, warranty or statement made in or in connection with any
amendment thereto) shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall be made or deemed to be made at and as of the Agreement Date, at and as of
the Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable only to one
such date shall be deemed to be made only at and as of such date. All
representations and warranties made or deemed to be made under this Agreement
shall survive and not be waived by the execution and delivery of this Agreement,
any investigation made by or on behalf of the Lender or any borrowing hereunder.
ARTICLE 7
SECURITY INTEREST
SECTION 7.1. SECURITY INTEREST.
(a) To secure the payment, observance and performance of the
Secured Obligations, each Borrower hereby mortgages, pledges and
assigns all of its right, title and interest in and to the Collateral
to the Agent, for the benefit of the Secured Parties, and grants to the
Agent, for the benefit of the Secured Parties, a continuing security
interest in, and a continuing Lien upon, all of its right, title and
interest in and to the Collateral.
(b) As additional security for all of the Secured Obligations,
each Borrower grants to the Agent, each Lender and the Affiliates of
the Lenders, for the benefit of the Secured Parties, a security
interest in, and assigns to the Agent, for the benefit of the Secured
Parties, all of such Borrower's right, title and interest in and to,
any deposits or other sums at any time credited by or due from each
Lender and each Affiliate of a Lender to such Borrower, or credited by
or due from any participant of any Lender to such Borrower, with the
same rights therein as if the deposits or other sums were credited by
or due from such Lender. Each Borrower hereby authorizes each Lender
and each Affiliate of such Lender and each participant to pay or
deliver to the Agent, for the account of the Secured Parties, without
any necessity on the Agent's or any Lender's part to resort to other
security or sources of reimbursement for the Secured Obligations, at
any time during the continuation of any Event of Default or in the
event that the Agent, on behalf of the Secured Parties, should make
demand for payment hereunder and without further notice to any Borrower
(such notice being expressly waived), any of the aforesaid deposits
(general or special, time or demand, provisional or final) or other
sums for application to any Secured Obligation, irrespective of whether
any demand has been made or whether such Secured Obligation is mature,
and the rights given the Secured Parties and participants hereunder are
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cumulative with such Person's other rights and remedies, including
other rights of set-off. The Agent will promptly notify Kellstrom of
its receipt of any such funds for application to the Secured
Obligations, but failure to do so will not affect the validity or
enforceability thereof. The Agent may give notice of the above grant of
a security interest in and assignment of the aforesaid deposits and
other sums, and authorization to, and make any suitable arrangements
with, any Lender, any such Affiliate of any Lender or participant for
effectuation thereof, and each Borrower hereby irrevocably appoints the
Agent as its attorney to collect any and all such deposits or other
sums to the extent any such payment is not made to the Agent or any
Lender by such Lender, Affiliate or participant.
SECTION 7.2. CONTINUED PRIORITY OF SECURITY INTEREST.
(a) The Security Interest granted by each Borrower (or Trust)
shall at all times be valid, perfected and enforceable against each
Borrower (or Trust) and all third parties in accordance with the terms
of this Agreement, as security for the Secured Obligations, and the
Collateral shall not at any time be subject to any Liens that are prior
to, on a parity with or junior to the Security Interest, other than
Permitted Liens.
(b) Each Borrower (or Trust) shall, at its sole cost and
expense, take all action that may be necessary or desirable, or that
the Agent may reasonably request, so as at all times to maintain the
validity, perfection, enforceability and rank of the Security Interest
in the Collateral in conformity with the requirements of SECTION
7.2(a), or to enable the Agent and the Lenders to exercise or enforce
their rights hereunder, including, but not limited to:
(i) paying all taxes, assessments and other claims
lawfully levied or assessed on any of the Collateral, except
to the extent that such taxes, assessments and other claims
constitute Permitted Liens,
(ii) obtaining, after the Agreement Date, landlords'
and mortgagees' releases, subordinations or waivers, and using
all reasonable efforts to obtain mechanics' releases,
subordinations or waivers,
(iii) delivering to the Agent, for the benefit of the
Secured Parties, any and all Chattel Paper, marked as the
"chattel paper original", as well as the original of any
letter of credit supporting the obligations evidenced by such
Chattel Paper,
(iv) delivering to the Agent, for the benefit of the
Secured Parties, endorsed or accompanied by such instruments
of assignment as the Agent may specify, and stamping or
marking, in such manner as the Agent may specify, any and all
instruments, letters and advices of guaranty and documents
evidencing or forming a part of the Collateral, and
(v) executing and delivering financing statements,
Mortgage Supplements, pledges, designations, hypothecations,
notices and assignments in each case in form and substance
satisfactory to the Agent relating to the creation, validity,
perfection, maintenance or continuation of the Security
Interest under the Uniform Commercial Code or other Applicable
Law.
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(c) The Agent is hereby authorized to file one or more
financing or continuation statements or amendments thereto and Airframe
and Engine Mortgages and Mortgage Supplements without the signature of
or in the name of any Borrower or Trust for any purpose described in
SECTION 7.2(b). The Agent will give the Borrowers notice of the filing
of any such statements or amendments, which notice shall specify the
locations where such statements or amendments were filed. A carbon,
photographic, xerographic or other reproduction of this Agreement or of
any of the Security Documents or of any financing statement filed in
connection with this Agreement is sufficient as a financing statement.
(d) Each Borrower shall mark its books and records as directed
by the Agent and as may be necessary or appropriate to evidence,
protect and perfect the Security Interest and shall cause its financial
statements to reflect the Security Interest.
ARTICLE 8
COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and
all the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided in SECTION 15.11:
SECTION 8.1. COLLECTION OF RECEIVABLES.
(a) At the request of the Agent, each Borrower and the Trust
shall cause all Lease Receivables to be delivered directly by the
Account Debtors by wire transfer to an Agency Account and all monies,
checks, notes, drafts and other payments relating to or constituting
proceeds of all Receivables other than Lease Receivables to be
forwarded to a Lockbox for deposit in an Agency Account in accordance
with the procedures set out in the corresponding Agency Account
Agreement. The Borrowers will promptly cause all monies, checks, notes,
drafts and other payments relating to or constituting proceeds of
Receivables other than Lease Receivables, of any other Collateral and
of any trade accounts receivable that are not forwarded to a Lockbox to
be transferred to or deposited in an Agency Account. In particular,
each Borrower will:
(i) advise each Account Debtor on trade accounts
receivable to address all remittances with respect to amounts
payable on account thereof to a specified Lockbox,
(ii) advise each other Account Debtor that makes
payment to such Borrower by wire transfer, automated
clearinghouse transfer or similar means to make payment
directly to an Agency Account, and
(iii) stamp all invoices relating to trade accounts
receivable with a legend satisfactory to the Agent indicating
that payment is to be made to such Borrower via a specified
Lockbox.
(b) The Borrowers and the Agent shall cause all balances in
each Agency Account to be transmitted daily by wire transfer,
depository transfer check or other means in accordance
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with the procedures set forth in the corresponding Agency Account
Agreement, to the Agent at the Agent's Office:
(i) for application, on account of the Secured
Obligations, as provided in SECTIONS 2.3(c), 12.2, and 12.3,
such credits to be entered as of the Business Day they are
received if they are received prior to 1:30 p.m. (Atlanta
time) and to be conditioned upon final payment in cash or
solvent credits of the items giving rise to them, and
(ii) with respect to the balance, so long as no
Default or Event of Default has occurred and is continuing,
for transfer by wire transfer or depository transfer check to
a Disbursement Account.
(c) Any monies, checks, notes, drafts or other payments
referred to in SUBSECTION (a) of this SECTION 8.1 which,
notwithstanding the terms of such subsection, are received by or on
behalf of a Borrower or Trust will be held in trust for the Agent and
will be delivered to the Agent or a Clearing Bank, as promptly as
possible, in the exact form received, together with any necessary
endorsements for application by the Agent directly to the Secured
Obligations or, if applicable, for deposit in the Agency Account
maintained with a Clearing Bank and processing in accordance with the
terms of the corresponding Agency Account Agreement.
SECTION 8.2. VERIFICATION AND NOTIFICATION. The Agent shall have the
right at any time and from time to time,
(a) in the name of the Agent, the Lenders or in the name of
any Borrower, to verify the validity, amount or any other matter
relating to any Receivables by mail, telephone, telegraph or otherwise,
(b) to review, audit and make extracts from all records and
files related to any of the Receivables, and
(c) to notify the Account Debtors under any Receivables of the
assignment of such Receivables to the Agent, for the benefit of the
Secured Parties, and to direct such Account Debtor to make payment of
all amounts due or to become due thereunder directly to the Agent, for
the account of the Lenders, and, upon such notification and at the
expense of the Borrowers, to enforce collection of any such Receivables
and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as the Borrowers might have
done.
SECTION 8.3. DISPUTES, RETURNS AND ADJUSTMENTS.
(a) In the event any amounts due and owing under any
Receivable for an amount in excess of $250,000 are in dispute between
an Account Debtor and a Borrower or Trust, the Borrowers shall provide
the Agent with prompt written notice thereof.
(b) The Borrowers shall notify the Agent promptly of all
returns and credits in excess of $250,000 in respect of any Receivable,
which notice shall specify the Receivable affected.
(c) The Borrowers may, in the ordinary course of business
unless a Default or an Event of Default has occurred and is continuing,
grant any extension of time for payment of any
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Receivable or compromise, compound or settle the same for less than the
full amount thereof, or release wholly or partly any Person liable for
the payment thereof, or allow any credit or discount whatsoever
therein; PROVIDED that (i) no such action results in the reduction of
more than $100,000 in the amount payable with respect to any Receivable
or of more than $250,000 with respect to all Receivables in any fiscal
year (in each case, excluding the allowance of credits or discounts
generally available to Account Debtors in the ordinary course of the
Borrowers' business and appropriate adjustments to the accounts of
Account Debtors in the ordinary course of business), and (ii) the Agent
is promptly notified of the amount of such adjustments and the
Receivable(s) affected thereby.
SECTION 8.4. INVOICES AND LEASE AGREEMENTS.
(a) No Borrower will use any invoices other than invoices in
the form delivered to the Agent prior to the Agreement Date without
giving the Agent 30 days prior notice of the intended use of a
different form of invoice together with a copy of such different form.
(b) Without the Agent's approval, no Borrower or Trust will
use a form of Lease Agreement that differs in any material respect from
the forms of Lease Agreement delivered to the Agent prior to the
Agreement Date. A Borrower's request for approval of a different form
of Lease Agreement shall be accompanied by a copy of such different
form for the review of the Agent and its counsel.
(c) Each Borrower and Trust shall, prior to executing any
Lease Agreement, mark in a plain, distinct, permanent and conspicuous
manner that one single original Lease Agreement is the chattel paper
original, and each Borrower (or Trust) shall cause all executed
counterparts of such Lease Agreement to be marked as duplicate
originals.
(d) No Borrower or Trust shall terminate any Lease Agreement
(other than because of a default by the Account Debtor under such Lease
Agreement), or enter into any amendment, modification, or consent with
respect to a Lease Agreement that materially affects any Borrower's or
Trust's rights under such Lease Agreement, unless the Agent consents to
such amendment, modification or consent.
(e) Upon the request of the Agent, each Borrower shall deliver
to the Agent, at the Borrowers' expense, copies of customers' invoices
or the equivalent, original shipping and delivery receipts or other
proof of delivery, customers' statements, customer address lists, the
original copy of all documents, including, without limitation,
repayment histories and present status reports, relating to Receivables
and such other documents and information relating to the Receivables as
the Agent shall specify.
SECTION 8.5. DELIVERY OF INSTRUMENTS, CHATTEL PAPER AND MORTGAGE
SUPPLEMENTS. In the event any Receivable is at any time evidenced by a
promissory note, trade acceptance or any other instrument for the payment of
money, the Borrowers will promptly thereafter deliver such instrument to the
Agent, appropriately endorsed to the Agent, for the benefit of the Secured
Parties. All Chattel Paper shall be marked as such by the Borrowers, and shall
be promptly delivered to the Agent, along with the original of any letter of
credit supporting the obligation evidenced by the Chattel Paper, duly assigned
to the Agent for the benefit of the Secured Parties. Each time any Borrower or
Trust acquires an interest in Engine Inventory (including Engine Inventory
acquired by virtue of an Account Debtor returning to a Borrower an engine not
previously owned by a Borrower in substitution for the engine originally subject
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to the Lease Agreement with such Account Debtor (an "Engine Exchange")),
Airframe Inventory or a Lease Agreement, such Borrower or Trust shall execute
and deliver to the Agent a Mortgage Supplement in the form attached to the
Airframe and Engine Mortgage, granting to the Agent, for the benefit of the
Secured Parties, a perfected, first-priority purchase money Security Interest in
such Inventory, and a perfected, first-priority Security Interest in any Lease
Agreement relating thereto (which Lease Agreement shall be filed for recording
with the FAA by the Borrower), along with copies of the necessary FAA
Application for Aircraft or Engine Registration and FAA bill of sale, if
applicable, and, to the extent necessary, copies of Lien releases and lease
terminations relating to any FAA filings against any such Inventory, together
with such additional legal opinions and documents as the Agent might request. In
the case of an Engine Exchange, the Agent shall execute a partial release of
mortgage with respect to the Engine Inventory being exchanged by the Borrower,
and the Borrower shall execute and deliver a Mortgage Supplement with respect to
the Engine Inventory received by the Borrower in connection with the Engine
Exchange, which Mortgage Supplement shall subject such Engine to the Security
Interest and to no other Lien whatsoever.
SECTION 8.6. SALES AND LEASES OF INVENTORY. All sales and leases of
Inventory will be made in compliance with all requirements of Applicable Law.
SECTION 8.7. OWNERSHIP AND DEFENSE OF TITLE.
(a) Except for Permitted Liens, the Borrowers and the Trust
shall at all times be the sole owners of each and every item of
Collateral and shall not create any lien on, or sell, lease, exchange,
assign, transfer, pledge, hypothecate, grant a security interest or
security title in or otherwise dispose of, any of the Collateral or any
interest therein, except for (i) sales and leases of Inventory in the
ordinary course of business, for cash or on open account or on terms of
payment ordinarily extended to its customers, (ii) Engine Exchanges,
provided such new engine is not subject to any Lien other than
Permitted Liens, and (iii) other dispositions that are expressly
permitted under this Agreement. The inclusion of "proceeds" of the
Collateral under the Security Interest shall not be deemed a consent by
the Agent or the Lenders to any other sale or other disposition of any
part or all of the Collateral.
(b) Each Borrower shall, and shall cause the Trust to, defend
its title or leasehold interest in and to, and the Security Interest
in, the Collateral against the claims and demands of all Persons.
SECTION 8.8. INSURANCE.
(a) The Borrowers shall at all times maintain insurance (or
cause insurance to be maintained) on the Inventory and Equipment
against loss or damage by fire, theft (excluding theft by employees),
burglary, pilferage, loss in transit and such other hazards as are
specified in the Airframe and Engine Mortgage or as the Agent shall
reasonably specify, in amounts not to exceed those obtainable at
commercially reasonable rates and under policies issued by insurers
acceptable to the Agent in the exercise of its reasonable judgment. All
premiums on such insurance shall be paid by the Borrowers and copies of
the policies delivered to the Agent. The Borrowers will not use or
permit the Inventory or Equipment to be used in violation of Applicable
Law or in any manner which might render inapplicable any insurance
coverage.
(b) All insurance policies required under SECTION 8.8(a) shall
name the Agent, for the benefit of the Secured Parties, as an
additional insured and shall contain loss payable clauses
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in the form submitted to the Borrowers by the Agent, or otherwise in
form and substance satisfactory to the Agent, naming the Agent, for the
benefit of the Secured Parties, as loss payee, as its interests may
appear, and providing that
(i) all proceeds thereunder shall be payable to the
Agent, for the benefit of the Secured Parties,
(ii) no such insurance shall be affected by any act
or neglect of the insurer or owner of the property described
in such policy, and
(iii) such policy and loss payable clauses may be
canceled, amended or terminated only upon at least 30 days
prior written notice given to the Agent.
(c) Any proceeds of insurance referred to in this SECTION 8.8
which are paid to the Agent, for the account of the Secured Parties,
shall be, at the option of the Required Lenders in their sole
discretion, either (i) applied to replace the damaged or destroyed
property, or (ii) applied to the payment or prepayment of the Secured
Obligations.
SECTION 8.9. LOCATION OF OFFICES AND COLLATERAL.
(a) No Borrower will change the location of its chief
executive office or the place where it keeps its books and records
relating to the Collateral or change its name, its identity or
corporate structure without giving the Agent 60 days prior written
notice thereof.
(b) All Inventory, other than Inventory subject to a Lease
Agreement, Inventory at an FAA-approved repair facility, and Inventory
in transit to any such location, will at all times be kept by each
Borrower at the locations set forth in SCHEDULE 6.1(v), and shall not,
without the prior written consent of the Agent, be removed therefrom
except pursuant to sales or leases of Inventory permitted under SECTION
8.7(a). In the event Inventory with an aggregate Net Book Value greater
than $750,000 will be at a location other than one of the locations set
forth in SCHEDULE 6.1(v) for more than a 30 day period, the Borrowers
shall give the Agent prior written notice thereof, and the Agent shall
have the right, at its option, to take such steps as it deems
reasonably necessary to protect the Security Interest in such
Inventory.
(c) If any Inventory is in the possession or control of any of
a Borrower's agents or processors, such Borrower shall notify such
agents or processors of the Security Interest (and shall promptly
provide copies of any such notice to the Agent and the Lenders) and,
upon the occurrence of an Event of Default, shall instruct them (and
cause them to acknowledge such instruction) to hold all such Inventory
for the account of the Lenders, subject to the instructions of the
Agent.
SECTION 8.10. RECORDS RELATING TO COLLATERAL.
(a) Each Borrower will at all times
(i) keep complete and accurate records of Inventory
on a basis consistent with past practices of such Borrower so
as to permit comparison of Inventory records relating to
different time periods, itemizing and describing the kind,
type and quantity of
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Inventory and such Borrower's cost therefor and a current
price list for such Inventory, and
(ii) keep complete and accurate records of all other
Collateral.
(b) Each Borrower will provide the Agent and each Lender a
listing of all Inventory (other than bulk inventory that is not costed
or counted), wherever located, at least annually.
SECTION 8.11. INSPECTION. The Agent and each Lender (by any of their
officers, employees or agents) shall have the right, to the extent that the
exercise of such right shall be within the control of the Borrowers,
(a) with respect to the Agent, at any time or times, and with
respect to any Lender, upon the occurrence of an Event of Default, to
visit the properties of the Borrowers and their Subsidiaries, inspect
the Collateral and the other assets of the Borrowers and their
Subsidiaries, and inspect and make extracts from the books and records
of the Borrowers and their Subsidiaries, including but not limited to
management letters prepared by independent accountants, all during
customary business hours at such premises;
(b) at any time or times, to discuss the Borrowers' and its
Subsidiaries' business, assets, liabilities, financial condition,
results of operations and business prospects, insofar as the same are
reasonably related to the rights of the Agent or the Lenders hereunder
or under any of the Loan Documents, with the Borrowers' and its
Subsidiaries' (i) principal officers, (ii) independent accountants, and
(iii) any other Person (except that any such discussion with any third
parties shall be conducted only in accordance with the Agent's or such
Lender's standard operating procedures relating to the maintenance of
the confidentiality of confidential information of borrowers); and
(c) with respect to the Agent, at any time or times, and with
respect to any Lender, upon the occurrence of an Event of Default, to
verify the amount, quantity, value and condition of, or any other
matter relating to, any of the Collateral and in this connection to
review, audit and make extracts from all records and files related to
any of the Collateral, including all maintenance records, flight
records and mileage logs. In respect to any inspection of Airframe
Inventory subject to a Lease Agreement, such inspection shall occur
during regularly-scheduled maintenance of such Airframe Inventory, and
shall not interfere with any Borrower's, Trust's, or Account Debtor's
operations or maintenance, unless an Event of Default exists, in which
case such inspection may occur at any time or times. Upon Agent's
request, such Borrower or Trust shall promptly notify Agent of the
maintenance operations then scheduled for each aircraft for the
six-month period following such request. Neither the Agent nor any
Lender shall have any duty to make any such inspection, and shall not
incur any liability or obligation by reason of not making such
inspection.
The Borrowers will deliver to the Agent, for the benefit of the Secured Parties,
any instrument necessary for the Agent to obtain records from any service bureau
maintaining records on behalf of the Borrowers or any of its Subsidiaries (or
any of them).
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SECTION 8.12. INFORMATION AND REPORTS.
(a) SCHEDULE OF RECEIVABLES. The Borrowers shall deliver to
the Agent and to each Lender on or before the Effective Date and not
later than the 15th day of each calendar month thereafter a Schedule of
Receivables which
(i) shall be as of the last Business Day of the
immediately preceding month,
(ii) shall be reconciled to the Borrowing Base
Certificate as of such last Business Day,
(iii) shall show a separate detailed listing of each
Lease Receivable, including the name and address of the
Account Debtor with respect to such Lease Receivable, a
statement of funds on deposit under each Lease Agreement for
maintenance reserves and security deposits, a statement of the
remaining term and the lease number of the Lease Agreement,
and such other information as the Agent shall request, and
(iv) shall set forth a detailed aged trial balance of
all of the Borrowers' then existing Receivables, specifying
the names, addresses and balance due for each Account Debtor
obligated on a Receivable so listed.
(b) SCHEDULE OF INVENTORY. The Borrowers shall deliver to the
Agent and to each Lender on or before the Effective Date and not later
than the 15th day of each calendar month thereafter a Schedule of
Inventory as of the last Business Day of the immediately preceding
calendar month, itemizing and describing the kind, type and quantity of
the Borrowers' Inventory, the location thereof, whether such Inventory
is subject to a Lease Agreement, the Net Book Value thereof, and such
other detail as the Agent may require. With respect to each item of
Engine Inventory and Airframe Inventory, the Schedule of Inventory
shall show the make, model and serial number, the jurisdiction in which
such Inventory is registered and, if registered with the FAA, the FAA
registration number of such Inventory. If such Inventory is subject to
a Lease Agreement, the Schedule of Inventory shall also reference the
lease number of such Lease Agreement and, with respect to Engine
Inventory, shall disclose the jurisdiction of registration of the
airframe on which such Engine Inventory is installed, as well as the
type and serial number of the airframe on which such Engine Inventory
is installed.
(c) SCHEDULE OF EQUIPMENT. The Borrowers shall deliver to the
Agent upon the Agent's request, a Schedule of Equipment, describing
each item of the Borrowers' Equipment and the location, cost and then
current book value thereof.
(d) BORROWING BASE CERTIFICATE. The Borrowers shall deliver to
the Agent and to each Lender on or before the Effective Date and not
later than 10 days after the end of each calendar month a Borrowing
Base Certificate prepared as of the close of business on the last
Business Day of the immediately preceding month; provided, however, at
any time that Availability falls below $25,000,000, the Borrowers shall
deliver a Borrowing Base Certificate once every two weeks, not later
than 5 days after the end of each two-week period.
(e) ACCOUNTS PAYABLE LISTINGS. The Borrowers shall deliver to
the Agent, on or before the Effective Date and not later than 15 days
after the end of each calendar month thereafter, a listing of all of
the Borrowers' then existing trade payables as of the last Business Day
of such month, specifying the name of and balance due to each trade
creditor of the Borrowers. Upon the
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Agent's request, the Borrowers shall deliver to the Agent monthly
detailed trade payable agings in form acceptable to the Agent.
(f) APPRAISALS. The Borrowers shall deliver to the Agent on or
before the Effective Date, prior to including any item of Airframe
Inventory on the Borrowing Base, and not earlier than 15 days prior to
each anniversary of the Effective Date (and not later than each
anniversary of the Effective Date), appraisals of all aircraft owned by
any Borrower or Trust, which appraisals shall set forth the Fair Market
Value of the airframe, each engine and the aircraft as a whole. The
Borrowers shall deliver to the Agent not earlier than 15 days prior to
each anniversary of the Effective Date (and not later than each
anniversary of the Effective Date) appraisals of all other Inventory
owned by any Borrower or Trust, which appraisals shall set forth the
Fair Market Value of all Inventory other than the Parts Inventory and
the Orderly Liquidation Value of all Parts Inventory. Each appraisal
shall be conducted at the Borrowers' expense by an appraiser
satisfactory to the Agent in its reasonable discretion, and each
appraisal shall be in form reasonably acceptable to the Agent. Advance
rates against Eligible Domestic Leased Engine Inventory, Eligible
Foreign Leased Engine Inventory, Eligible Leased Airframe Inventory and
Eligible Inventoried Engine and Parts Inventory shall be adjusted each
year by the Agent based on the appraisals in accordance with the
definition of Borrowing Base, which adjustment shall take place within
10 days of the Agent's receipt of all such annual appraisals.
(g) NOTICE OF DIMINUTION OF VALUE. The Borrowers shall give
prompt notice to the Agent of any matter or event which has resulted
in, or may result in, the diminution in excess of $200,000 in the value
of any Collateral, except for any such diminution in the value of any
Receivables or Inventory in the ordinary course of business which has
been appropriately reserved against, as reflected in financial
statements previously delivered to the Agent and the Lenders pursuant
to ARTICLE 10.
(h) ADDITIONAL INFORMATION. The Agent may in its discretion
from time to time request that the Borrowers deliver the schedules,
certificates, notices, and appraisals described in SECTIONS 8.12(a),
(b), (c), (d), (e), (f) and (g) more or less often and on different
schedules than specified in such Sections and the Borrowers will comply
with such requests. The Borrowers will also furnish to the Agent and
each Lender such other information with respect to the Collateral as
the Agent or such Lender may from time to time reasonably request.
SECTION 8.13. POWER OF ATTORNEY. Each Borrower hereby appoints the
Agent as its attorney, with power
(a) at any time or times, pursuant to the terms of the Lockbox
Agreement, to endorse the name of such Borrower on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security
that may come into the Agent's or any Lender's possession,
(b) at any time or times, to sign the name of such Borrower on
any drafts against customers related to letters of credit, on notices
of assignment, financing statements, Mortgage Supplements and other
public records relating to the perfection or priority of the Security
Interest, and
(c) effective at any time or times following the occurrence of
a Default or Event of Default, or upon any Borrower's failure to do so
within 5 Business Days of the Agent's request, to sign the name of such
Borrower an any invoice or bill of lading relating to any Receivable,
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Inventory or other Collateral, on schedules and assignments of
Receivables furnished to the Agent or any Lender by the Borrowers (or
any of them), and on verifications of account and on notices to or from
customers.
SECTION 8.14. ADDITIONAL REAL ESTATE AND LEASES.
(a) Promptly upon any Borrower's acquisition of any ownership
or long-term leasehold interest in any Real Estate, the Borrowers shall
deliver to the Agent, for the benefit of the Secured Parties, an
executed Mortgage in form and substance satisfactory to the Agent,
conveying to the Agent, for the benefit of the Secured Parties, a first
priority Lien on such Real Estate, including, if requested by the
Agent, on any long-term leasehold interest therein, subject only to
such prior Liens as the Agent shall consent to in writing. If requested
by the Agent, the Borrowers shall also deliver to the Agent at
Borrowers' expense a mortgagee title insurance policy in favor of the
Agent and the Lenders insuring such Mortgage to create and convey such
Lien, subject only to such exceptions consented to by the Agent, and
shall deliver to the Agent the other items set forth in SECTION
5.1(d)(xvii), (xxi), (xxii) and (xxiii) with respect to such Real
Estate, all in form and substance satisfactory to the Agent.
(b) Promptly upon any Borrower's entry into any lease of Real
Estate (other than a lease conveying a long-term leasehold interest in
Real Estate, which shall be subject to the provisions of CLAUSE (a)
above), the Borrowers shall deliver to the Agent an executed landlord's
waiver and consent with respect to such lease in form and substance
satisfactory to the Agent.
SECTION 8.15. ASSIGNMENT OF CLAIMS ACT. Upon the request of the Agent,
the Borrowers (or any of them) shall execute any documents or instruments and
shall take such steps or actions reasonably required by the Agent so that all
monies due or to become due under any contract with the United States of
America, the District of Columbia or any state, county, municipality or other
domestic or foreign governmental entity, or any department, agency or
instrumentality thereof, will be assigned to the Agent, for the benefit of the
Secured Parties, and notice given thereof in accordance with the requirements of
the Assignment of Claims Act of 1940, as amended, or any other laws, rules or
regulations relating to the assignment of any such contract and monies due to or
to become due.
SECTION 8.16. VRDN MORTGAGE. In the event that, for any reason, the
VRDN Letter of Credit has not been issued by NationsBank on or before March 5,
1999, Kellstrom shall, on or before March 15, 1999, deliver to the Agent, for
the benefit of the Secured Parties, an executed Mortgage in form and substance
satisfactory to the Agent, conveying to the Agent, for the benefit of the
Secured Parties, a first priority Lien on the VRDN Real Estate, subject only to
such prior Liens as the Agent shall consent to in writing. In connection
therewith, Kellstrom shall also deliver to the Agent, at Kellstrom's expense, a
mortgagee title insurance policy in favor of the Agent and the Lenders insuring
such VRDN Mortgage to create and convey such Lien, subject only to such
exceptions consented to by the Agent, and shall deliver to the Agent the other
items set forth in SECTION 5.1(d)(xvii), (xxi), (xxii) and (xxiii) with respect
to such VRDN Real Estate, all in form and substance satisfactory to the Agent.
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ARTICLE 9
AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and
all the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided for in SECTION 15.11, each
Borrower will, and will cause each of its Subsidiaries to, and, with respect to
SECTIONS 9.1 through 9.7, will cause the Trust to:
SECTION 9.1. PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS.
Preserve and maintain its corporate existence (or existence as a trust), rights,
franchises, licenses and privileges in the jurisdiction of its incorporation
(or, with respect to the Trust, its formation) and qualify and remain qualified
as a foreign corporation and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its business requires
such qualification or authorization.
SECTION 9.2. COMPLIANCE WITH APPLICABLE LAW. Comply in all material
respects with all Applicable Law relating to such Borrower, such Subsidiary, or
Trust except to the extent being contested in good faith by appropriate
proceedings and for which reserves in respect of such Borrower's, such
Subsidiary's or such Trust's reasonably anticipated liability therefor have been
appropriately established.
SECTION 9.3. MAINTENANCE OF PROPERTY. In addition to, and not in
derogation of, the requirements of SECTION 8.7 and of the Security Documents,
(a) protect and preserve all properties material to its
business, including all Proprietary Rights, and maintain in good
repair, working order and condition in all material respects, with
reasonable allowance for wear and tear, all tangible properties, and
(b) from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such
properties necessary for the conduct of its business, so that the
business carried on in connection therewith may be properly and in
accordance with past practices conducted at all times.
SECTION 9.4. CONDUCT OF BUSINESS. At all times engage only in the
business described in SECTION 6.1(g).
SECTION 9.5. INSURANCE. Maintain, in addition to the coverage required
by SECTION 8.8 and the Security Documents, insurance with responsible insurance
companies against such risks and in such amounts as is customarily maintained by
similar businesses or as may be required by Applicable Law, and from time to
time deliver to the Agent or any Lender upon its request a detailed list of the
insurance then in effect, stating the names of the insurance companies, the
amounts and rates of the insurance, the dates of the expiration thereof and the
properties and risks covered thereby.
SECTION 9.6. PAYMENT OF TAXES AND CLAIMS. Pay or discharge when due
(a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any properties
belonging to it, except that real property ad valorem taxes shall be
deemed to have been so paid or discharged if the same are paid before
they become delinquent, and
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(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals
which, if unpaid, might become a Lien on any of its properties;
except that this SECTION 9.6 shall not require the payment or discharge of any
such tax, assessment, charge, levy or claim which is being contested in good
faith by appropriate proceedings and for which reserves in respect of the
reasonably anticipated liability therefor have been appropriately established.
SECTION 9.7. ACCOUNTING METHODS AND FINANCIAL RECORDS. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP and, with respect to
Kellstrom only, shall comply with all timeframes applicable to annual and
quarterly financial reporting promulgated by the SEC.
SECTION 9.8. USE OF PROCEEDS.
(a) Use the proceeds of
(i) the initial Revolving Credit Loan to pay amounts
indicated on SCHEDULE 9.8 to the Persons indicated thereon,
and
(ii) all subsequent Loans only for working capital
and general business purposes, Permitted Acquisitions and to
pay Indebtedness under the VRDN Documents, and
(b) not use any part of such proceeds to purchase or, to carry
or reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulation G or U of the
Board of Governors of the Federal Reserve System) or, in any event, for
any purpose which would involve a violation of such Regulation G or U
or of Regulation T or X of such Board of Governors, or for any purpose
prohibited by law or by the terms and conditions of this Agreement.
SECTION 9.9. HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL
REQUIREMENTS.
(a) In addition to, and not in derogation of, the requirements
of SECTION 9.2 and of the Security Documents, comply with all
Environmental Laws and all Applicable Laws relating to occupational
health and safety (except for instances of noncompliance that are being
contested in good faith by appropriate proceedings if reserves in
respect of such Borrower's or such Subsidiary's reasonably anticipated
liability therefor have been appropriately established), promptly
notify the Agent of its receipt of any notice of a violation of any
such Environmental Laws or other such Applicable Laws, and indemnify
and hold the Agent and the Lenders harmless from all loss, cost,
damage, liability, claim and expense incurred by or imposed upon the
Agent or any Lender on account of such Borrower's failure to perform
its obligations under this SECTION 9.9.
(b) Whenever such Borrower gives notice to the Agent pursuant
to this SECTION 9.9 with respect to a matter that reasonably could be
expected to result in liability to such Borrower or Subsidiary in
excess of $500,000 in the aggregate, such Borrower shall, at the
Agent's request
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and the Borrowers' expense (i) cause an independent environmental
engineer acceptable to the Agent to conduct an assessment, including
tests where necessary, of the site where the noncompliance or alleged
noncompliance with Environmental Laws has occurred and prepare and
deliver to the Agent a report setting forth the results of such
assessment, a proposed plan to bring such Borrower or Subsidiary into
compliance with such Environmental Laws (if such assessment indicates
noncompliance) and an estimate of the costs thereof, and (ii) provide
to the Agent a supplemental report of such engineer whenever the scope
of the noncompliance, or the response thereto or the estimated costs
thereof, shall materially adversely change.
SECTION 9.10. YEAR 2000 COMPLIANCE. Promptly notify the Agent in the
event such Borrower discovers or determines that any computer application
(including those of its suppliers, vendors and customers) that is material to
its or any of its Subsidiaries' business and operations will not be Year 2000
compliant (as defined in SECTION 6.1(FF)).
SECTION 9.11. ADDITIONAL BORROWERS. Upon Kellstrom's request and the
approval of the Agent (such approval to be granted or denied in the Agent's sole
discretion), cause any wholly-owned U.S. Subsidiary of any Borrower to become a
party to this Agreement as a Borrower by: (a) causing such Subsidiary to execute
a Joinder Agreement in substantially the same form as EXHIBIT F hereto, (b)
causing such Subsidiary to execute a Note in favor of each Lender, and (c)
delivering such other documentation as the Agent may reasonably request in
connection with the foregoing, including, without limitation, appropriate UCC-1
financing statements (and lien searches), security agreements (and FAA lien
searches), landlord waivers, certified resolutions and other organizational and
authorizing documents of such Subsidiary and favorable opinions of counsel to
such Subsidiary (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to above), all
in form, content and scope reasonably satisfactory to the Agent.
SECTION 9.12. ADDITIONAL TRUSTS; SUBSIDIARY GUARANTORS. Upon the
formation of a Trust by any Borrower, prior to permitting such trust to hold
title to and ownership of any Airframe Inventory or Engine Inventory, and upon
the formation or acquisition of any new direct or indirect Subsidiaries by any
Borrower, if such Subsidiary is not made a Borrower pursuant to SECTION 9.11,
then in each instance, within 10 days after such formation or acquisition, at
its expense:
(a) cause each such U.S. Subsidiary (each, a "Subsidiary
Guarantor") to duly execute and deliver to the Agent a Guaranty, in
form and substance satisfactory to the Agent, guaranteeing the payment
in full of the Secured Obligations and the performance of all of the
Borrowers' obligations under the Loan Documents (each a "Subsidiary
Guaranty"),
(b) cause each such U.S. Subsidiary to duly execute and
deliver to the Agent, for the benefit of the Secured Parties,
mortgages, pledges, assignments and other security agreements, as
specified by and in form and substance consistent with this Agreement
and otherwise reasonably satisfactory to the Agent, securing such
Subsidiary's obligations under its Subsidiary Guaranty and constituting
first priority Liens on all of such Subsidiary's assets (real and
personal), subject only to Permitted Liens,
(c) duly execute and deliver to the Agent, for the benefit of
the Secured Parties, a stock pledge agreement and blank stock power, as
specified by and in form and substance satisfactory to the Agent,
securing the Secured Obligations and constituting a first priority Lien
on, in the case of U.S. Subsidiaries, all of each such U.S.
Subsidiary's capital stock, and in the
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case of foreign Subsidiaries, 65% of each such foreign Subsidiary's
voting stock and 100% of such foreign Subsidiary's non-voting stock,
subject only to Permitted Liens,
(d) cause each such Trust to duly execute and deliver to the
Agent a Guaranty, in form and substance satisfactory to the Agent,
guaranteeing the payment in full of the Secured Obligations and the
performance of all of the Borrowers' obligations under the Loan
Documents (each a "Trust Guaranty"),
(e) cause each such Trust to duly execute and deliver to the
Agent, for the benefit of the Secured Parties, mortgages, pledges,
assignments and other security agreements, as specified by and in form
and substance consistent with this Agreement and otherwise reasonably
satisfactory to the Agent, securing such Trust's obligations under its
Trust Guaranty and constituting first priority Liens on all of such
Trust's assets (real and personal), subject only to Permitted Liens,
(f) cause the Borrower that is the owner participant of such
Trust to duly execute and deliver a collateral assignment of its
interest in the Trust, in form and substance satisfactory to the Agent,
(g) take, and cause each Subsidiary Guarantor or such Trust to
take, such action (including, without limitation, the recording of
mortgages, the filing of Uniform Commercial Code financing statements,
the filing of security agreements, and the delivery of original stock
certificates) as may be reasonably necessary or advisable in the
opinion of the Agent to vest in the Agent, for the benefit of the
Secured Parties, valid and subsisting perfected Liens on the properties
purported to be subject to the mortgages, pledges, assignments and
security agreements delivered pursuant to this SECTION 9.12,
enforceable against all third parties in accordance with their terms,
subject only to Permitted Liens,
(h) deliver to the Agent, upon the request of the Agent in its
sole discretion, a signed copy of a favorable opinion of counsel for
the Borrowers, such Subsidiary Guarantor or such Trust, addressed to
the Agent and the other Lenders, acceptable to the Agent as to the
matters contained in CLAUSES (a), (b), (c), (d), (e), (f) and (g)
above, as applicable, as to such guaranties, mortgages, pledges,
assignments and security agreements being legal, valid and binding
obligations of each party thereto enforceable in accordance with their
terms, and as to such other matters as the Agent may reasonably
request, and
(i) deliver to the Agent, upon the request of the Agent in its
sole discretion, with respect to each parcel of real property owned or
held by such Subsidiary Guarantor or such Trust, all items set forth in
SECTION 5.1(d)(xvii), (xxi) and (xxii) with respect to such real
property, together with such environmental audits of such real property
as the Agent reasonably requests, all in form and substance reasonably
satisfactory to the Agent.
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ARTICLE 10
INFORMATION
Until the Revolving Credit Facility has been terminated and
all the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner set forth in SECTION 15.11, the Borrowers
will furnish to the Agent and to each Lender at the offices then designated for
such notices pursuant to SECTION 15.1:
SECTION 10.1. FINANCIAL STATEMENTS.
(a) AUDITED YEAR-END STATEMENTS. As soon as available, but in
any event not later than 2 Business Days after the date that Kellstrom
is required to file its 10K with the SEC for such year, copies of the
consolidating and consolidated balance sheets of the Borrowers and
their Consolidated Subsidiaries as at the end of such fiscal year and
the related statements of operations, shareholders' equity and cash
flows for such fiscal year, in each case setting forth in comparative
form the figures for the previous fiscal year, reported on, as to such
consolidated statements, without qualification by independent certified
public accountants of nationally recognized standing;
(b) MONTHLY FINANCIAL STATEMENTS. As soon as available after
the end of each month, but in any event within 30 days after the end of
each month, copies of the unaudited consolidated balance sheet of the
Borrowers and their Consolidated Subsidiaries as at the end of such
month and the related unaudited consolidated statements of operations
for the Borrowers and their Consolidated Subsidiaries for such month
and for the portion of the fiscal year through such month, certified by
the Financial Officer as presenting fairly the financial condition and
results of operations of the Borrowers and their Consolidated
Subsidiaries (subject to normal year-end audit adjustments);
(c) QUARTERLY STATEMENTS OF CASH FLOW. As soon as available
after the end of each quarter, but in any event not later than 2
Business Days after the date that Kellstrom is required to file its 10Q
with the SEC for such quarter, copies of the unaudited statements of
cash flows of the Borrowers and their Consolidated Subsidiaries as at
the end of such quarter and for the portion of the fiscal year through
such quarter, certified by the Financial Officer as presenting fairly
the financial condition and results of operations of the Borrowers and
their Consolidated Subsidiaries (subject to normal year-end audit
adjustments);
(d) PROJECTIONS. Not later than 30 days prior to each
anniversary of the Effective Date, the Projections; and
(e) ANNUAL BUDGET. As soon as available, but in any event at
least 15 days prior to the beginning of each fiscal year, an operating
budget for the Borrowers and their Consolidated Subsidiaries for such
fiscal year, in the form customarily prepared by management of the
Borrowers consistent with past practice, together with a statement of
the assumptions upon which such budget was prepared.
All such financial statements referred to in CLAUSES (a), (b) and (c) shall be
complete and correct in all material respects and prepared in accordance with
GAAP (except, with respect to interim financial
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statements described in CLAUSES (b) and (c), for the omission of footnotes and
for the effect of normal year-end audit adjustments) applied consistently
throughout the periods reflected therein.
SECTION 10.2. ACCOUNTANTS' CERTIFICATE. Together with the financial
statements referred to in SECTION 10.1(a), the Borrowers shall deliver a
certificate of such accountants addressed to the Agent
(a) stating that in making the examination necessary for the
certification of such financial statements, nothing has come to their
attention to lead them to believe that any Default or Event of Default
exists and, in particular, they have no knowledge of any Default or
Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature, and
(b) having attached the calculations, prepared by the
Borrowers and reviewed by such accountants, required to establish
whether or not the Borrowers are in compliance with the covenants
contained in SECTIONS 11.1, 11.2, 11.5, 11.10 and 11.11, as at the date
of such financial statements.
SECTION 10.3. OFFICER'S CERTIFICATE. At the time that the Borrowers
furnish the financial statements pursuant to SECTION 10.1(b) for any month that
is the last month of a fiscal quarter of the Borrowers, the Borrowers shall also
furnish a certificate of the Financial Officer
(a) setting forth as at the end of such fiscal quarter or
fiscal year, as the case may be, the calculations required to establish
whether or not the Borrowers were in compliance with the requirements
of SECTIONS 11.1, 11.2, 11.5, 11.10 and 11.11, as at the end of each
respective period,
(b) stating that the information on the schedules to this
Agreement are complete and accurate as of the date of such certificate
or, if such is not the case, attaching to such certificate updated
schedules, and
(c) stating that, based on a reasonably diligent examination,
no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the
Borrowers with respect to such Default or Event of Default.
SECTION 10.4. COPIES OF OTHER REPORTS.
(a) Promptly upon receipt thereof, copies of all reports, if
any, submitted to any Borrower or its Board of Directors by its
independent public accountants, including, without limitation, any
management report.
(b) As soon as practicable, copies of all financial statements
and reports that any Borrower shall send to its shareholders generally
and of all registration statements and all regular or periodic reports
which any Borrower shall file with the Securities and Exchange
Commission or any successor commission.
(c) As soon as reasonably practicable following each request,
which request may be made at any time or times by the Agent, but which
request may be made by a Lender only upon the occurrence of a Default
or Event of Default, such forecasts, data, certificates, reports,
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statements, opinions of counsel, documents or further information
regarding the business, assets, liabilities, financial condition,
results of operations or business prospects of any Borrower or any of
its Subsidiaries as the Agent or any Lender may reasonably request and
that any Borrower has or (except in the case of legal opinions relating
to the perfection or priority of the Security Interest) without
unreasonable expense can obtain. The rights of the Agent and the
Lenders under this SECTION 10.4 are in addition to and not in
derogation of their rights under any other provision of this Agreement
or of any other Loan Document.
(d) If requested by the Agent or any Lender, statements in
conformity with the requirements of Federal Reserve Form U-1 referred
to in Regulation U of the Board of Governors of the Federal Reserve
System.
SECTION 10.5. NOTICE OF LITIGATION AND OTHER MATTERS. Prompt notice of:
(a) the commencement, to the extent any Borrower is aware of
the same, of all proceedings and investigations by or before any
governmental or nongovernmental body and all actions and proceedings in
any court or before any arbitrator against or in any other way relating
to or affecting any Borrower, any of its Subsidiaries, any Trust, or
any of any Borrower's or any of its Subsidiaries' properties, assets or
businesses, which might, singly or in the aggregate, result in the
occurrence of a Default or an Event of Default, or have a Materially
Adverse Effect,
(b) any amendment of the articles of incorporation or by-laws
of any Borrower or any of its Subsidiaries or to the organizational or
trust agreement applicable to the Trust,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of any Borrower
or any of its Subsidiaries which has had or may have, singly or in the
aggregate, a Materially Adverse Effect and any change in the executive
officers of any Borrower or any of its Subsidiaries, and
(d) any Default or Event of Default or any event which
constitutes or which with the passage of time or giving of notice or
both would constitute a default or event of default by any Borrower or
any of its Subsidiaries under any material agreement (other than this
Agreement) to which such Borrower or any of its Subsidiaries is a party
or by which such Borrower, any of its Subsidiaries or any of their
properties may be bound.
SECTION 10.6. ERISA. As soon as possible and in any event within 30
days after any Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Plan has occurred
or will occur, or
(b) the aggregate present value of the Unfunded Vested Accrued
Benefits under all Plans is equal to an amount in excess of $0, or
(c) any Borrower or any of its Subsidiaries is in "default"
(as defined in Section 4219(c)(5) of ERISA) with respect to payments to
a Multiemployer Plan required by reason of any Borrower's or such
Subsidiary's complete or partial withdrawal (as described in Section
4203 or 4205 of ERISA) from such Multiemployer Plan,
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a certificate of the Financial Officer setting forth the details of such event
and the action which is proposed to be taken with respect thereto, together with
any notice or filing which may be required by the PBGC or other agency of the
United States government with respect to such event.
SECTION 10.7. ACCURACY OF INFORMATION. All written information,
reports, statements and other papers and data furnished to the Agent or any
Lender, whether pursuant to this ARTICLE 10 or any other provision of this
Agreement or of any other Loan Document, shall be, at the time the same is so
furnished, complete and correct in all material respects to the extent necessary
to give the Agent and the Lenders materially true and accurate knowledge of the
subject matter.
SECTION 10.8. REVISIONS OR UPDATES TO SCHEDULES. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, as part of the
officer's certificate required pursuant to SECTION 10.3(b), such revisions or
updates to such Schedule(s) as may be necessary or appropriate to update or
correct such Schedule(s), PROVIDED that no such revisions or updates to any
Schedule(s) shall be deemed to have amended, modified or superseded such
Schedule(s) as originally attached hereto, or to have cured any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such Schedule(s), unless and until the Required Lenders in their sole and
absolute discretion, shall have accepted in writing such revisions or updates to
such Schedule(s).
SECTION 10.9. SUBORDINATED INDEBTEDNESS CERTIFICATE. Not less than five
Business Days prior to any scheduled payment of any principal of, or interest or
other amounts on, the Subordinated Indebtedness, and as a condition precedent to
making such payment, the Borrowers shall furnish a certificate of the Financial
Officer stating:
(a) that no Default or Event of Default is in existence as of
the date of the certificate or will be in existence as of the date of
such payment, both with and without giving effect to the making of such
payment, and
(b) the amount of principal and interest to be paid.
ARTICLE 11
NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full, unless the Required Lenders shall
otherwise consent in the manner set forth in SECTION 15.11, the Borrowers will
not directly or indirectly and, in the case of SECTIONS 11.2 through 11.18, will
not permit any of their Subsidiaries to:
SECTION 11.1. FINANCIAL RATIOS.
(a) MINIMUM CONSOLIDATED ADJUSTED NET WORTH. Permit the
Consolidated Adjusted Net Worth of the Borrowers and their Consolidated
Subsidiaries (i) to be less than $130,000,000 as of the end of the
Borrowers' 1998 fiscal year or (ii) for any fiscal year end thereafter,
to be less than the Borrowers' actual Consolidated Adjusted Net Worth
as of the immediately preceding fiscal year end plus $10,000,000. No
secondary equity offering, debt
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offering, or conversion of the Convertible Subordinated Notes or other
Subordinated Indebtedness to equity shall be included for purposes of
determining whether annual step-ups in Consolidated Adjusted Net Worth
have been achieved.
(b) MAXIMUM CONSOLIDATED FUNDED INDEBTEDNESS TO CONSOLIDATED
EBITDA RATIO. Permit the ratio of the Consolidated Funded Indebtedness
of the Borrowers and their Consolidated Subsidiaries as of any fiscal
quarter end, to the Consolidated EBITDA of the Borrowers and their
Consolidated Subsidiaries (including for purposes of this calculation
the pro forma EBITDA of any Person acquired by any Borrower in
connection with a Permitted Acquisition, which pro forma EBITDA shall
be taken from Kellstrom's filing with the SEC with respect to such
Permitted Acquisition and approved by the Agent in its sole discretion)
for the preceding four fiscal quarters, to be greater than 6.5 to 1.
(c) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit
the ratio of (i) the Consolidated EBITDA of the Borrowers and their
Consolidated Subsidiaries, minus income taxes paid in cash, Unfunded
Capital Expenditures and dividends, to (ii) the Consolidated Fixed
Charges of the Borrowers and their Consolidated Subsidiaries, as of the
end of any fiscal quarter of the Borrowers, measured for the
immediately preceding four fiscal quarters, to be less than 1.5 to 1.
(d) MINIMUM CONSOLIDATED NET INCOME. Permit the Consolidated
Net Income of the Borrowers and their Consolidated Subsidiaries as of
the end of any fiscal quarter of the Borrowers, measured for the
immediately preceding four fiscal quarters, to be less than $5,000,000.
SECTION 11.2. INDEBTEDNESS FOR MONEY BORROWED. Create, assume, or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding any Indebtedness for
Money Borrowed, except that this SECTION 11.2 shall not apply to:
(a) Indebtedness for Money Borrowed represented by the Loans
and the Notes,
(b) Indebtedness for Money Borrowed existing on the Effective
Date and reflected on SCHEDULE 6.1(k) (excluding any such Indebtedness
that is to be paid in full on the Effective Date),
(c) Permitted Aircraft Purchase Money Indebtedness,
(d) Permitted Purchase Money Indebtedness, and
(e) the Subordinated Indebtedness.
SECTION 11.3. GUARANTIES. Become or remain liable with respect to any
Guaranty of any obligation of any other Person, other than (a) any Subsidiary
Guaranty or Trust Guaranty under SECTION 9.12, (b) the VRDN Guaranty and (c) any
Guaranty required under Section 10.11 of the Securities Purchase Agreement
related to the Equitable Subordinated Loan.
SECTION 11.4. INVESTMENTS. Acquire, after the Agreement Date, any
Business Unit or Investment or, after such date, maintain any Investment, other
than Permitted Investments.
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SECTION 11.5. CAPITAL EXPENDITURES. Make or incur any Capital
Expenditures, except that the Borrowers and their Subsidiaries in the aggregate
may make or incur Capital Expenditures in any fiscal year in an amount not to
exceed, in the aggregate, $5,000,000. For purposes of calculating Capital
Expenditures of the Borrowers and their Subsidiaries for the 1998 fiscal year,
the costs and expenses actually incurred by Kellstrom in fiscal year 1998 in
connection with the construction of its headquarters on the VRDN Real Estate
shall be excluded from the calculation of Capital Expenditures.
SECTION 11.6. RESTRICTED DIVIDEND PAYMENTS AND PURCHASES, ETC. Declare
or make any Restricted Dividend Payment, Restricted Payment or Restricted
Purchase; provided, however, Kellstrom may make the following payments: (a)
payments of retainers and advisory fees to Helix Capital, and (b) payment of
management fees to Zivi R. Nedivi or to any Person wholly owned by Zivi R.
Nedivi, pursuant to the then-effective management agreement by and between
Kellstrom and Zivi R. Nedivi.
SECTION 11.7. MERGER, CONSOLIDATION AND SALE OF ASSETS. Merge or
consolidate with any other Person or sell, lease or transfer or otherwise
dispose of all or a substantial portion of its assets to any Person other than
sales and leases of Inventory in the ordinary course of business.
SECTION 11.8. TRANSACTIONS WITH AFFILIATES. Effect any transaction with
any Affiliate on a basis less favorable to the Borrowers or such Subsidiary than
would be the case if such transaction had been effected with a Person not an
Affiliate.
SECTION 11.9. LIENS. Create, assume or permit or suffer to exist or to
be created or assumed any Lien on any of the Collateral or its other assets,
other than Permitted Liens.
SECTION 11.10. CAPITALIZED LEASE OBLIGATIONS. Incur or permit to exist
any Capitalized Lease Obligation if such Capitalized Lease Obligation when added
to existing Capitalized Lease Obligations and Permitted Purchase Money
Indebtedness of the Borrowers and their Subsidiaries would exceed $5,000,000 in
the aggregate.
SECTION 11.11. OPERATING LEASES. Enter into any Operating Lease if the
aggregate annual rental payable under all Operating Leases of the Borrowers and
their Subsidiaries would exceed $800,000 in the aggregate at any time after the
Effective Date.
SECTION 11.12. REAL ESTATE LEASES. Enter into any real property lease,
including a lease relating to the Real Estate occupied by the Borrowers or their
Subsidiaries on the Effective Date, without the prior written consent of the
Agent, on behalf of the Secured Parties, which consent shall not be unreasonably
withheld.
SECTION 11.13. PLANS. Permit any condition to exist in connection with
any Plan which might constitute grounds for the PBGC to institute proceedings to
have such Plan terminated or a trustee appointed to administer such Plan, and
any other condition, event or transaction with respect to any Plan which could
result in the incurrence by any Borrower or its Subsidiaries of any material
liability, fine or penalty.
SECTION 11.14. SALES AND LEASEBACKS. Enter into any arrangement with
any Person providing for any Borrower's or its Subsidiaries' leasing from such
Person any real or personal property which has been or is to be sold or
transferred, directly or indirectly, by such Borrower or Subsidiaries to such
Person.
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SECTION 11.15. AMENDMENTS OF OTHER AGREEMENTS. Amend in any way the (a)
subordination provisions applicable to the Subordinated Indebtedness, (b)
definition of "Change of Control" as defined in the Securities Purchase
Agreement relating to the Equitable Subordinated Loan or "Change in Control" as
defined in the Indentures relating to the Convertible Subordinated Notes, (c)
definitions of "Senior Debt" in the documents evidencing the Equitable
Subordinated Loan or "Designated Senior Indebtedness" as defined in the
Indentures relating to the Convertible Subordinated Notes, or (d) interest rate
(or formula pursuant to which such interest rate is determined) or principal
amount or schedule of payments of principal and interest with respect to any
Indebtedness (other than the Secured Obligations) other than to reduce the
interest rate or extend the schedule of payments with respect thereto.
SECTION 11.16. MINIMUM AVAILABILITY. Permit Availability to be less
than $10,000,000 at any time.
SECTION 11.17. FISCAL YEAR. Change the end of their fiscal year from
December 31.
SECTION 11.18. INSURANCE; PROHIBITED COUNTRIES. Permit any Inventory or
any part thereof to be operated in or to any area excluded from coverage by any
insurance required by the provisions of SECTION 8.8 or the insurance provisions
of the Airframe and Engine Mortgage, or permit any Inventory or any part thereof
to be operated in or to any Prohibited Country.
SECTION 11.19. INTEREST RATE PROTECTION AGREEMENTS. Enter into any
Interest Rate Protection Agreements other than for the purpose of managing
existing or anticipated interest rate risks in connection with the Loans
hereunder.
ARTICLE 12
DEFAULT
SECTION 12.1. EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or nongovernmental body:
(a) DEFAULT IN PAYMENT. The Borrowers shall default in any
payment of principal of or interest on any Loan or any Note when and as
due (whether at maturity, by reason of acceleration or otherwise);
provided, however, that if Borrowers are in compliance with the minimum
Availability covenant set forth in SECTION 11.16, and making such
payment of principal of or interest on such Loan or Note would not
cause noncompliance with SECTION 11.16, then failure to make any such
payment, other than any payment due upon the maturity (by reason of
acceleration or otherwise) of the Loans, shall not be a default unless
the Borrowers fail to make such payment within 2 Business Days
following the date written notice of such failure has been given to
Kellstrom by the Agent.
(b) OTHER PAYMENT DEFAULT. The Borrowers shall default in the
payment, as and when due, of principal of or interest on, any other
Secured Obligation, and such default shall continue for more than 5
days after written notice has been given to Kellstrom by the Agent.
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(c) MISREPRESENTATION. Any representation or warranty made or
deemed to be made by any Obligor under this Agreement or any Loan
Document, or any amendment hereto or thereto, shall at any time prove
to have been incorrect or misleading in any material respect when made.
(d) DEFAULT IN PERFORMANCE. Any Borrower shall default in the
performance or observance of any term, covenant, condition or agreement
to be performed by the Borrowers (or any of them), contained in:
(i) ARTICLES 7, 10 or 11 or SECTIONS 8.1, 8.2, 8.4,
8.5, 8.6, 8.7, 8.9, 8.10, 8.11, 8.12, 8.13, 9.1, 9.2, 9.6,
9.7, 9.8, 9.11 and 9.12 of this Agreement;
(ii) SECTIONS 8.3, 8.8, 8.14, 8.15, 9.3, 9.4, 9.5,
9.9 or 9.10 and such default shall continue for a period of 10
days after the earlier of (A) the date on which an officer of
any Borrower becomes aware of such default or (B) written
notice thereof has been given to any Borrower by the Agent; or
(iii) any other provision of this Agreement (other
than as specifically provided for otherwise in this SECTION
12.1) and such default shall continue for a period of 30 days
after the earlier of (A) the date on which an officer of any
Borrower becomes aware of such default or (B) written notice
thereof has been given to Kellstrom by the Agent.
(e) INDEBTEDNESS CROSS-DEFAULT.
(i) Any Borrower or any Subsidiary of any Borrower
shall fail to pay when due and payable the principal of or
interest on the Subordinated Indebtedness or any other
Indebtedness for Money Borrowed (other than the Loans) in an
amount in excess of $1,000,000, provided that the Borrowers'
failure to make a payment of the principal of or interest on
the Subordinated Indebtedness on account of the operation of
the subordination provisions applicable thereto shall not be
an Event of Default, or
(ii) the maturity of any such Indebtedness described
in clause (i) shall have (A) been accelerated in accordance
with the provisions of any indenture, contract or instrument
providing for the creation of or concerning such Indebtedness,
or (B) been required to be prepaid prior to the stated
maturity thereof, or
(iii) any event shall have occurred and be continuing
which would permit any holder or holders of such Indebtedness
described in clause (i), any trustee or agent acting on behalf
of such holder or holders or any other Person so to accelerate
such maturity, and such Borrower or Subsidiary shall have
failed to cure such default prior to the expiration of any
applicable cure or grace period, or
(iv) any default or event of default shall occur
under the VRDN Documents and Kellstrom shall have failed to
cure such default or event of default prior to the expiration
of any applicable cure or grace period.
(f) OTHER CROSS-DEFAULTS. Any Obligor shall default in the
payment when due, or in the performance or observance, subject to
applicable cure periods, of any obligation or condition
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of any agreement, contract or lease (other than this Agreement, the
Security Documents or any such agreement, contract or lease relating to
Indebtedness for Money Borrowed) if the existence of any such defaults,
singly or in the aggregate, could in the reasonable judgment of the
Agent have a Materially Adverse Effect; provided, however, that for the
purposes of this provision where such a default could result only in a
monetary loss, a Materially Adverse Effect shall not be deemed to have
occurred unless the aggregate of such losses would exceed $1,000,000.
(g) VOLUNTARY BANKRUPTCY PROCEEDING. Any Obligor shall (i)
commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect), (ii) file a petition seeking to take advantage of
any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of
debts, (iii) consent to or fail to contest in a timely and appropriate
manner any petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator
of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of
authorizing any of the foregoing.
(h) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other
proceeding shall be commenced against any Obligor in any court of
competent jurisdiction seeking (i) relief under the federal bankruptcy
laws (as now or hereafter in effect) or under any other laws, domestic
or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or adjustment of debts, or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of such Obligor, or of all
or any substantial part of the assets, domestic or foreign, of such
Obligor, and such case or proceeding shall continue undismissed or
unstayed for a period of 60 consecutive calendar days, or an order
granting the relief requested in such case or proceeding against such
Obligor (including, but not limited to, an order for relief under such
federal bankruptcy laws), shall be entered.
(i) FAILURE OF AGREEMENTS. Any Obligor shall challenge the
validity and binding effect of any provision of any Loan Document after
delivery thereof or shall state its intention to make such a challenge
in writing, or any Loan Document, after delivery thereof hereunder,
shall for any reason (except to the extent permitted by the terms
thereof) cease to create a valid and perfected first priority Lien
(except for Permitted Liens) on, or security interest in, any of the
Collateral purported to be covered thereby.
(j) JUDGMENT. A final, unappealable judgment or order for the
payment of money in an amount which exceeds $250,000 shall be entered
against any Obligor by any court and such judgment or
order shall continue undischarged or unstayed for 30 days.
(k) ATTACHMENT. A warrant or writ of attachment or execution
or similar process which exceeds $250,000 in value shall be issued
against any property of any Obligor, and such warrant or process shall
continue undischarged or unstayed for 30 days.
(l) LOAN DOCUMENTS. Any event of default under any Loan
Document shall occur or any Obligor shall default in the performance or
observance of any term, covenant, condition or agreement contained in,
or the payment of any other sum covenanted to be paid by any Obligor,
under, any Loan Document; PROVIDED, HOWEVER that no event of default
under any Loan
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Document shall be deemed to have occurred until any notice required
under such Loan Document has been given and any grace period granted
under such Loan Document has expired.
(m) ERISA.
(i) Any Termination Event with respect to a Plan
shall occur that, after taking into account the excess, if
any, of (A) the fair market value of the assets of any other
Plan with respect to which a Termination Event occurs on the
same day (but only to the extent that such excess is the
property of the Borrowers) over (B) the present value on such
day of all vested nonforfeitable benefits under such other
Plan, results in an Unfunded Vested Accrued Benefit in excess
of $0, or
(ii) any Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue
Code or Section 302 of ERISA) for which a waiver has not been
obtained in accordance with the applicable provisions of the
Internal Revenue Code and ERISA, or
(iii) any Borrower or any of its Subsidiaries is in
"default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from a
Borrower's or any of its Subsidiaries complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA)
from such Multiemployer Plan.
(n) CHANGE IN CONTROL. At any time after the Agreement Date,
(i) a Person or "group" of Persons (within the meaning of Section 13(d)
of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder), shall acquire, beneficially or of record, 25%
or more of the outstanding voting stock (stock entitled to vote for
election of directors excluding rights subject to a contingency) of
Kellstrom, or (ii) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted the Board
of Directors of any Borrower (together with any new directors whose
election by the Board of Directors of such Borrower or whose nomination
for election by the shareholders of such Borrower, as the case may be,
was approved by a vote of a majority of the directors then still in
office who either 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 of such
Borrower, as the case may be, then in office, or (iii) a "Change in
Control" as defined in the Indentures relating to the Convertible
Subordinated Notes occurs, or (iv) a "Change of Control" as defined in
the Securities Purchase Agreement relating to the Equitable
Subordinated Loan occurs.
(o) CHANGE IN MANAGEMENT. For any reason Zivi R. Nedivi is no
longer actively involved in the day-to-day operations of the Borrowers,
unless a replacement reasonably satisfactory to the Required Lenders is
appointed within 90 days.
(p) GENERAL INSECURITY. The occurrence of any act, omission,
circumstance, event or condition or series of acts, omissions,
circumstances, events or conditions which have or, in the Agent's or
the Required Lenders' judgment, would have, either individually or in
the aggregate, a Materially Adverse Effect.
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SECTION 12.1. REMEDIES.
(a) AUTOMATIC ACCELERATION AND TERMINATION OF FACILITIES. Upon
the occurrence of an Event of Default specified in SECTION 12.1(g) or
(h), (i) the principal of and the interest on the Loans and any Note at
the time outstanding, and all other amounts owed to the Agent or the
Lenders under this Agreement or any of the Loan Documents and all other
Secured Obligations, shall thereupon become due and payable without
presentment, demand, protest, or other notice of any kind, all of which
are expressly waived, anything in this Agreement or any of the Loan
Documents to the contrary notwithstanding, and (ii) the Revolving
Credit Facility and the right of the Borrowers to request borrowings
under this Agreement shall immediately terminate.
(b) OTHER REMEDIES. If any Event of Default shall have
occurred, and during the continuance of any such Event of Default, the
Agent may, and at the direction of the Required Lenders in their sole
and absolute discretion shall, do any of the following:
(i) declare the principal of and interest on the
Loans and any Note at the time outstanding, and all other
amounts owed to the Agent or the Lenders under this Agreement
or any of the Loan Documents and all other Secured
Obligations, to be forthwith due and payable, whereupon the
same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all
of which are expressly waived, anything in this Agreement or
the Loan Documents to the contrary notwithstanding;
(ii) terminate the Revolving Credit Facility and any
other right of the Borrowers to request borrowings or Letters
of Credit hereunder;
(iii) notify, or request the Borrowers to notify, in
writing or otherwise, any Account Debtor with respect to any
one or more of the Receivables to make payment to the Agent,
for the benefit of the Secured Parties, or any agent or
designee of the Agent, at such address as may be specified by
the Agent and if, notwithstanding the giving of any notice,
any Account Debtor shall make payments to the Borrowers, the
Borrowers shall hold all such payments they receive in trust
for the Agent, for the account of the Lenders, without
commingling the same with other funds or property of, or held
by, the Borrowers, and shall deliver the same to the Agent or
any such agent or designee of the Agent immediately upon
receipt by the Borrowers in the identical form received,
together with any necessary endorsements;
(iv) settle or adjust disputes and claims directly
with Account Debtors on Receivables for amounts and on terms
which the Agent considers advisable and in all such cases only
the net amounts received by the Agent, for the account of the
Lenders, in payment of such amounts, after deductions of costs
and attorneys' fees, shall constitute Collateral and the
Borrowers shall have no further right to make any such
settlements or adjustments or to accept any returns of
merchandise;
(v) enter upon any premises at which Inventory or
Equipment may be located and, without resistance or
interference by the Borrowers, take physical possession of any
or all thereof and maintain such possession on such premises
or move the same or any part thereof to such other place or
places as the Agent shall choose, without being liable to the
Borrowers on account of any loss, damage or depreciation that
may occur as a result thereof, so long as the Agent shall act
reasonably and in good faith;
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(vi) require the Borrowers to and the Borrowers
shall, without charge to the Agent or any Lender, assemble the
Inventory and Equipment and maintain or deliver it into the
possession of the Agent or any agent or representative of the
Agent at such place or places as the Agent may designate and
as are reasonably convenient to both the Agent and the
Borrowers;
(vii) at the expense of the Borrowers, cause any of
the Inventory and Equipment to be placed in a public or field
warehouse, and the Agent shall not be liable to the Borrowers
on account of any loss, damage or depreciation that may occur
as a result thereof, so long as the Agent shall act reasonably
and in good faith;
(viii) without notice, demand or other process, and
without payment of any rent or any other charge, enter any of
the Borrowers' premises and, without breach of the peace,
until the Agent, on behalf of the Lenders, completes the
enforcement of its rights in the Collateral, take possession
of such premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of
the Borrowers' Equipment, for the purpose of (A) completing
any work-in-process, preparing any Inventory for disposition
and disposing thereof, and (B) collecting any Receivable, and
the Agent for the benefit of the Secured Parties is hereby
granted a license or sublicense and all other rights as may be
necessary, appropriate or desirable to use the Proprietary
Rights in connection with the foregoing, and the rights of the
Borrowers under all licenses, sublicenses and franchise
agreements shall inure to the Agent for the benefit of the
Secured Parties (provided, however, that any use of any
federally registered trademarks as to any goods shall be
subject to the control as to the quality of such goods of the
owner of such trademarks and the goodwill of the business
symbolized thereby);
(ix) exercise any and all of its rights under any
and all of the Security Documents;
(x) apply the funds in the Cash Collateral Account
and any other Collateral consisting of cash to the payment of
the Secured Obligations in any order in which the Agent, on
behalf of the Lenders, may elect or use such cash in
connection with the exercise of any of its other rights
hereunder or under any of the Security Documents;
(xi) establish or cause to be established one or more
Lockboxes or other arrangement for the deposit of proceeds of
Receivables, and, in such case, the Borrowers shall cause to
be forwarded to the Agent at the Agent's Office, on a daily
basis, copies of all checks and other items of payment and
deposit slips related thereto deposited in such Lockboxes,
together with collection reports in form and substance
satisfactory to the Agent; and
(xii) exercise all of the rights and remedies of a
secured party under the Uniform Commercial Code and under any
other Applicable Law, including, without limitation, the
right, without notice except as specified below and with or
without taking the possession thereof, to sell the Collateral
or any part thereof in one or more parcels at public or
private sale, at any location chosen by the Agent, for cash,
on credit or for future delivery, and at such price or prices
and upon such other terms as the Agent may deem commercially
reasonable. The Borrowers agree that, to the extent notice of
sale
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shall be required by law, at least 10 days notice to the
Borrowers of the time and place of any public sale or the time
after which any sale is to be made shall constitute reasonable
notification, but notice given in any other reasonable manner
or at any other reasonable time shall constitute reasonable
notification. The Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been
given. The Agent may adjourn any public or sale from time to
time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(c) ADDITIONAL LOUISIANA REMEDIES. Certain of the Collateral
described in this Agreement is located in the State of Louisiana or may
be subject to the laws of the State of Louisiana (provided, however,
the parties by this Section in no way intend to derogate from the
choice of law contained in SECTION 15.19 below). With respect to such
Collateral, the following subsections (i) through (vii) shall apply.
(i) CONFESSION OF JUDGMENT; EXECUTORY AND OTHER
PROCESS. Each Borrower confesses judgment in favor of the
Agent, for the benefit of itself as Agent and the Lenders, for
the full amount of the Secured Obligations. Each Borrower
agrees that, upon the occurrence and during the continuance of
an Event of Default, the Agent may, without making further
demand and without further notice or putting in default (which
are hereby expressly waived), cause the Collateral, or any
portion of it, to be seized and sold with or without appraisal
(at Agent's option) by executory process issued by any
competent court or enforce this Agreement in any other manner
provided by law. The Agent may exercise the rights and
remedies set forth in this paragraph in addition to (and
whether or not) it also exercises its rights under any other
provision of this Agreement or any other agreements between
and among the Borrowers (or any of them), the Agent and the
Lenders with respect to the Secured Obligations. If any
proceedings (by executory process or otherwise) are commenced,
all declarations of fact made by authentic act by a person
declaring that he or she has personal knowledge of the facts
shall constitute authentic evidence of the facts for all
purposes.
(ii) NO COURT HEARING. Each Borrower recognizes that
the Agent shall have the right to cause the Collateral to be
seized and sold by executory process without any prior court
hearing at which such Borrower could appear and make
objection. Each Borrower specifically waives any right that it
may have to a court hearing prior to the seizure and sale of
the Collateral.
(iii) WAIVERS. Each Borrower expressly waives: (A)
the benefit of appraisement, as provided in articles 2332,
2336, 2723 and 2724 of the Louisiana Code of Civil Procedure,
and all other laws conferring the same; (B) the demand and
three days' delay provided by articles 2331, 2639, 2721 and
2722 of the Louisiana Code of Civil Procedure and all other
laws conferring the same; and (C) the notice of seizure as
provided in articles 2293 and 2721 of the Louisiana Code of
Civil Procedure. Each Borrower expressly agrees to the
immediate seizure of the Collateral in the event of suit to
enforce this Agreement. The Agent shall not be obligated to
take advantage of the waiver of appraisal or any other waiver
set forth herein but may at its option cause the Collateral to
be appraised upon foreclosure in accordance with law and
observe the statutory provisions referred to in this
paragraph.
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(iv) KEEPER. Each Borrower and the Agent designate
the Agent or any agent or nominee of the Agent as keeper of
the Collateral and also authorize the Agent to name another
keeper of the Collateral or any portion thereof at the time of
seizure in any action for the recognition or enforcement of
this Agreement, but the Agent shall not be required to seek
the appointment of a keeper. This Agreement is made pursuant
to La. R.S. 9: Section 5136 ET SEQ., the provisions of which
shall govern the powers and duties of the keeper. The keeper
shall be paid as compensation for its services an amount equal
to $500 per day. All sums paid by the Agent as keeper's fees
and related costs and expenses, with interest thereon at the
default rate specified above in SECTION 4.1(d), shall be
Secured Obligations secured by this Agreement.
(v) SEARCH. If it becomes necessary for the Agent to
search for all or any of the Collateral at the time of
foreclosure, the Agent may do so and the Borrowers shall
reimburse the Agent on demand for the expenses incurred by the
Agent in doing so with interest at the default rate specified
above in SECTION 4.1(D), and this amount shall be Secured
Obligations secured by this Agreement.
(vi) WAIVER OF EXEMPTIONS. Each Borrower waives in
favor of the Agent all homestead exemptions and other
exemptions from seizure to which it may be entitled.
(vii) POWER OF ATTORNEY. The grant of authority
contained in this SECTION 12.2(C) is intended by each Borrower
to be an irrevocable power of attorney, coupled with an
interest, as permitted by Louisiana law, including, but not
limited to, the provisions of La. R.S. 9: Section 5388.
SECTION 12.3. APPLICATION OF PROCEEDS. All proceeds from each sale of,
or other realization upon, all or any part of the Collateral following an Event
of Default shall be applied or paid over as follows:
(a) FIRST: to the payment of all costs and expenses incurred
in connection with such sale or other realization, including reasonable
attorneys' fees,
(b) SECOND: to the payment of the Secured Obligations (with
the Borrowers remaining liable for any deficiency) in accordance with
SECTION 4.8(e), and
(c) THIRD: the balance (if any) of such proceeds shall be paid
to the Borrowers, subject to any duty imposed by law, or otherwise to
whomsoever shall be entitled thereto.
THE BORROWERS SHALL REMAIN JOINTLY AND SEVERALLY LIABLE AND WILL PAY, ON DEMAND,
ANY DEFICIENCY REMAINING IN RESPECT OF THE SECURED OBLIGATIONS, TOGETHER WITH
INTEREST THEREON AT A RATE PER ANNUM EQUAL TO THE HIGHEST RATE THEN PAYABLE
HEREUNDER ON SUCH SECURED OBLIGATIONS, WHICH INTEREST SHALL CONSTITUTE PART OF
THE SECURED OBLIGATIONS.
SECTION 12.4. POWER OF ATTORNEY. In addition to the authorizations
granted to the Agent under SECTION 8.13 or under any other provision of this
Agreement or of any other Loan Document, during the continuance of an Event of
Default, each Borrower hereby irrevocably designates, makes, constitutes and
appoints the Agent (and all Persons designated by the Agent from time to time)
as such Borrower's true and lawful attorney, and agent in fact, and the Agent,
or any agent of the Agent, may, without notice to
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any Borrower, and at such time or times as the Agent or any such agent in its
sole discretion may determine, in the name of such Borrower, another Borrower,
the Agent or the Lenders,
(a) demand payment of the Receivables,
(b) enforce payment of the Receivables by legal proceedings or
otherwise,
(c) exercise all of the Borrowers' rights and remedies with
respect to the collection of Receivables,
(d) settle, adjust, compromise, extend or renew any or all of
the Receivables,
(e) settle adjust or compromise any legal proceedings brought
to collect the Receivables,
(f) discharge and release the Receivables or any of them,
(g) prepare, file and sign the name of any Borrower on any
proof of claim in bankruptcy or any similar document against any
Account Debtor,
(h) prepare, file and sign the name of any Borrower on any
notice of Lien, assignment or satisfaction of Lien, or similar document
in connection with any of the Collateral,
(i) endorse the name of any Borrower upon any chattel paper,
document, instrument, notice, freight bill, bill of lading or similar
document or agreement relating to the Receivables, the Inventory or any
other Collateral,
(j) use the stationery of any Borrower and sign the name of
any Borrower to verifications of the Receivables and on any notice to
the Account Debtors,
(k) open the Borrowers' mail,
(l) notify the post office authorities to change the address
for delivery of the Borrowers' mail to an address designated by the
Agent, and
(m) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Receivables, Inventory or other Collateral to which any Borrower have
access.
SECTION 12.5. MISCELLANEOUS PROVISIONS CONCERNING REMEDIES.
(a) RIGHTS CUMULATIVE. The rights and remedies of the Agent
and the Lenders under this Agreement, the Notes and each of the Loan
Documents shall be cumulative and not exclusive of any rights or
remedies which it or they would otherwise have. In exercising such
rights and remedies the Agent and the Lenders may be selective and no
failure or delay by the Agent or any Lender in exercising any right
shall operate as a waiver of it, nor shall any single or partial
exercise of any power or right preclude its other or further exercise
or the exercise of any other power or right.
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(b) WAIVER OF MARSHALING. Each Borrower hereby waives any
right to require any marshaling of assets and any similar right.
(c) LIMITATION OF LIABILITY. Nothing contained in this ARTICLE
12 or elsewhere in this Agreement or in any of the other Loan Documents
shall be construed as requiring or obligating the Agent, any Lender or
any agent or designee of the Agent or any Lender to make any demand, or
to make any inquiry as to the nature or sufficiency of any payment
received by it, or to present or file any claim or notice or take any
action, with respect to any Receivable or any other Collateral or the
monies due or to become due thereunder or in connection therewith, or
to take any steps necessary to preserve any rights against prior
parties, and the Agent, the Lenders and their agents or designees shall
have no liability to the Borrowers (or any of them) for actions taken
pursuant to this ARTICLE 12, any other provision of this Agreement or
any of the other Loan Documents so long as the Agent or such Lender
shall act reasonably and in good faith.
(d) APPOINTMENT OF RECEIVER. In any action under this ARTICLE
12, the Agent shall be entitled during the continuance of an Event of
Default to the appointment of a receiver, without notice of any kind
whatsoever, to take possession of all or any portion of the Collateral
and to exercise such power as the court shall confer upon such
receiver.
ARTICLE 13
ASSIGNMENTS
SECTION 13.1. SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrowers, the Lenders, the Agent, all future holders of
the Notes, and their respective successors and assigns, except that no
Borrower may assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Each Lender may, with the consent of Kellstrom (which
shall not be unreasonably withheld, and which shall not be required if
an Event of Default exists or if the assignment is to an Affiliate of
such Lender) and the Agent's consent (which consent shall not be
unreasonably withheld and shall not be required if the assignment is to
an Affiliate of such Lender), assign to one or more Eligible Assignees
all or a portion of its interests, rights and obligations under this
Agreement (including, without limitation, all or a portion of the Loans
at the time owing to it and the Notes held by it); PROVIDED, HOWEVER,
that (i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and
obligations under this Agreement, (ii) the amount of the Commitment of
the assigning Lender that is subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Agent) shall in no event be less
than the Minimum Commitment, (iii) in the case of a partial assignment,
the amount of the Commitment that is retained by the assigning Lender
(determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Agent) shall in no event be less
than the Minimum Commitment, (iv) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance and
recording in the Register (as hereinafter defined) an Assignment and
Acceptance, together with any Note or Notes subject to such assignment,
(v) such assignment shall not, without the consent of the Borrowers,
require any Borrower to file
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a registration statement with the SEC or apply to or qualify the Loans
or the Notes under the blue sky laws of any state, (vi) the
representation contained in SECTION 13.2 hereof shall be true with
respect to any such proposed assignee, and (vii) the parties to such
assignment shall deliver to the Agent a processing fee of $5,000. Upon
such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution
thereof, (x) the assignee thereunder shall be a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder, and (y) the Lender assignor
thereunder shall, to the extent provided in such assignment, be
released from its obligations under this Agreement (except with respect
to its obligations under SECTION 14.7).
(c) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows: (i)
other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, such Lender assignor makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such Lender
assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrowers
(or any of them) or the performance or observance by the Borrowers (or
any of them) of any of their obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in SECTION
6.1(o) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently
and without reliance upon the Agent, such Lender assignor or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the
names and addresses of the Lenders and the Commitment Percentage of,
and principal amount of the Loans owing to, each Lender from time to
time (the "Register"). The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrowers, the Agent and the
Lenders may treat each person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Eligible Assignee together with any Note
or Notes subject to such assignment, the fee described in CLAUSE (vii)
of SECTION 13.1(b), and the written consent to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and
is in the form of
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EXHIBIT D, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, (iii) give prompt notice
thereof to the Lenders and the Borrowers, and (iv) promptly deliver a
copy of such Assignment and Acceptance to the Borrowers. Within five
Business Days after receipt of notice, the Borrowers shall execute and
deliver to the Agent in exchange for the surrendered Note or Notes a
new Note or Notes to the order of such Eligible Assignee in amounts
equal to the Commitment Percentage assumed by such Eligible Assignee
pursuant to such Assignment and Acceptance and a new Note or Notes to
the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially
the form of the assigned Notes delivered to the assignor Lender.
Following the Agent's receipt of the new Note or Note, each surrendered
Note or Notes shall be cancelled and returned to the Borrowers.
(f) Each Lender may, without the consent of the Borrowers,
sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its commitments hereunder and
the Loans owing to it and the Notes held by it); PROVIDED, HOWEVER,
that (i) each such participation shall be in an amount not less than
the Minimum Commitment, (ii) such Lender's obligations under this
Agreement (including, without limitation, its commitments hereunder)
shall remain unchanged, (iii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iv) such Lender shall remain the holder of the Notes held
by it for all purposes of this Agreement, (v) the Borrowers, the Agent
and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under this Agreement; PROVIDED, that such Lender may agree with any
participant that such Lender will not, without such participant's
consent, agree to or approve any waivers or amendments which would
reduce the principal of or the interest rate on any Loans, extend the
term or increase the amount of the commitments of such participant,
reduce the amount of any fees to which such participant is entitled,
extend any scheduled payment date for principal or release Collateral
securing the Loans (other than Collateral disposed of pursuant to
SECTION 8.7 hereof or otherwise in accordance with the terms of this
Agreement or the Security Documents), and (vi) any such disposition
shall not, without the consent of the Borrowers, require any Borrower
to file a registration statement with the SEC to apply to qualify the
Loans or the Notes under the blue sky law of any state. Any Lender
selling a participation to any bank or other entity that is not an
Affiliate of such Lender shall give prompt notice thereof to the
Borrowers.
(g) Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation pursuant
to this SECTION 13.1, disclose to the assignee, participant, proposed
assignee or proposed participant, any information relating to the
Borrowers and its Subsidiaries furnished to such Lender by or on behalf
of the Borrowers; PROVIDED that, prior to any such disclosure, each
such assignee, proposed assignee, participant or proposed participant
shall agree with the Borrowers or such Lender (which in the case of an
agreement with only such Lender, the Borrowers shall be recognized as a
third party beneficiary thereof) to preserve the confidentiality of any
confidential information relating to the Borrowers and its Subsidiaries
received from such Lender.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign and pledge all or any
portion of its Loans and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
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SECTION 13.2. REPRESENTATION OF LENDERS. Each Lender hereby represents
that it will make each Loan hereunder as a commercial loan for its own account
in the ordinary course of its business; PROVIDED, however, that subject to
SECTION 13.1 hereof, the disposition of the Notes or other evidence of the
Secured Obligations held by any Lender shall at all times be within its
exclusive control.
ARTICLE 14
AGENT
SECTION 14.1. APPOINTMENT OF AGENT. Each of the Lenders hereby
irrevocably designates and appoints NationsBank, N.A. as the Agent of such
Lender under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the Agent, as the agent for such Lender to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and such other Loan
Documents, including, without limitation, to make determinations as to the
eligibility of Inventory and Receivables, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Agent.
SECTION 14.2. DELEGATION OF DUTIES. The Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 14.3. EXCULPATORY PROVISIONS. Neither the Agent nor any of its
trustees, officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable to any Lender (or any Lender's participants) for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct), or (ii) responsible
in any manner to any Lender (or any Lender's participants) for any recitals,
statements, representations or warranties made by the Borrowers or any of its
Subsidiaries or any officer thereof contained in this Agreement or the other
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Borrowers or any of its
Subsidiaries to perform its obligations hereunder or thereunder. The Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrowers or any of its Subsidiaries; provided, however, the Agent agrees to
conduct 2 field examinations each fiscal year upon the request of the Required
Lenders.
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SECTION 14.4. RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrowers or any of its
Subsidiaries), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with SECTION
13.1. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the Notes in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
SECTION 14.5. NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrowers
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders; PROVIDED
that unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) continue making Revolving Credit Loans to
the Borrowers on behalf of the Lenders in reliance on the provisions of SECTION
4.7 and take such other action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
SECTION 14.6. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrowers and its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrowers and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers and its Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder or by
the other Loan Documents, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Borrowers and its Subsidiaries which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
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SECTION 14.7. INDEMNIFICATION. The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), ratably according to
their respective Commitment Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; PROVIDED that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct or
resulting solely from transactions or occurrences that occur at a time after
such Lender has assigned all of its interests, rights and obligations under this
Agreement pursuant to SECTION 13.1 or, in the case of a Lender to which an
assignment is made hereunder pursuant to SECTION 13.1, at a time before such
assignment. The agreements in this subsection shall survive the payment of the
Notes, the Secured Obligations and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 14.8. AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrowers and its Subsidiaries as if the Agent were
not the Agent hereunder. With respect to its Commitment, the Loans made or
renewed by it and any Note issued to it and any Letter of Credit issued by it,
the Agent shall have and may exercise the same rights and powers under this
Agreement and the other Loan Documents and is subject to the same obligations
and liabilities as and to the extent set forth herein and in the other Loan
Documents for any other Lender. The terms "Lenders" or "Required Lenders" or any
other term shall, unless the context clearly otherwise indicates, include the
Agent in its individual capacity as a Lender or one of the Required Lenders.
SECTION 14.9. SUCCESSOR AGENT. The Agent may resign as Agent upon 30
days written notice to the Lenders and the Borrowers; provided, however, that
such resignation shall not take effect until a successor agent has been
appointed. If the Agent shall resign as Agent under this Agreement, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders which successor agent shall be approved by the Borrowers (which approval
shall not be unreasonably withheld and shall not be required if an Event of
Default has occurred and is continuing), whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent, and the term "Agent"
shall mean such successor agent effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. If the Required Lenders
have failed to appoint a successor agent within 30 days after the resignation
notice given by the Agent as provided above, then the Agent shall be entitled to
appoint a successor agent from among the Lenders. After any Agent's resignation
hereunder as Agent, the provisions of ARTICLE 14 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 14.10. NOTICES FROM AGENT TO LENDERS. The Agent shall promptly,
upon the written request from any Lender, forward to each Lender copies of any
written notices, reports or other information supplied to it by the Borrowers
(but which the Borrowers are not required to supply directly to the Lenders).
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SECTION 14.11. SYNDICATION AGENT. Each of the parties to this Agreement
acknowledges that, other than any rights and duties explicitly assigned to the
Syndication Agent under this Agreement, the Syndication Agent does not have any
obligations hereunder and shall not be responsible or accountable to any other
party hereto for any action or failure to act hereunder.
ARTICLE 15
MISCELLANEOUS
SECTION 15.1. NOTICES.
(a) METHOD OF COMMUNICATION. Except as specifically provided
in this Agreement or in any of the Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by
telephone, subsequently confirmed in writing. Notices in writing shall
be delivered personally or sent by certified or registered mail,
postage pre-paid, or by overnight courier, telex or facsimile
transmission and shall be deemed received in the case of personal
delivery, when delivered, in the case of mailing, when receipted for,
in the case of overnight delivery, on the next Business Day after
delivery to the courier, and in the case of telex and facsimile
transmission, upon transmittal, provided that in the case of notices to
the Agent, notice shall be deemed to have been given only when such
notice is actually received by the Agent. A telephonic notice to the
Agent, as understood by the Agent, will be deemed to be the controlling
and proper notice in the event of a discrepancy with or failure to
receive a confirming written notice.
(b) ADDRESSES FOR NOTICES. Notices to any party shall be sent
to it at the following addresses, or any other address of which all the
other parties are notified in writing
If to the Borrowers: Kellstrom Industries, Inc.
14000 N.W. 4th Street
Sunrise, Florida 33325
Attn.: Michael W. Wallace, CFO
Facsimile No.: (954) 858-2449
with a courtesy copy to: Akerman, Senterfitt & Eidson, P.A.
Suite 950
450 East Las Olas Boulevard
Ft. Lauderdale, Florida 33301
Attn.: Bruce March, Esq.
Facsimile No.: (954) 463-2224
If to the Agent: NationsBank, N.A.
Business Credit Division
600 Peachtree Street
13th Floor
Atlanta, Georgia 30308
Attn.: Robert J. Walker, VP
Facsimile No.: 404-607-6281
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with a courtesy copy to: Troutman Sanders LLP
NationsBank Plaza
Suite 5200
600 Peachtree Street
Atlanta, Georgia 30308-2216
Attn: Christine N. Schneider, Esq.
Facsimile No.: 404-885-3900
If to a Lender: At the address of such Lender set forth on
the signature page hereof.
(c) AGENT'S OFFICE. The Agent hereby designates its office
located at 600 Peachtree Street, Atlanta, Georgia 30308, or any
subsequent office which shall have been specified for such purpose by
written notice to the Borrowers, as the office to which payments due
are to be made and at which Loans will be disbursed.
SECTION 15.2. EXPENSES. The Borrowers jointly and severally agree to
pay or reimburse on demand all costs and expenses incurred by the Agent and the
Syndication Agent, including, without limitation, the reasonable fees and
disbursements of counsel, in connection with
(a) the negotiation, preparation, execution, delivery,
administration, enforcement and termination of this Agreement and each
of the other Loan Documents, whenever the same shall be executed and
delivered, including, without limitation
(i) the out-of-pocket costs and expenses incurred in
connection with the administration and interpretation of this
Agreement and the other Loan Documents;
(ii) the costs and expenses of appraisals of the
Collateral;
(iii) the costs and expenses of lien and title
searches and title insurance;
(iv) the costs and expenses of environmental reports
with respect to the Real Estate; and
(v) taxes, fees and other charges for recording the
Mortgages, filing the Financing Statements and continuations
and the costs and expenses of taking other actions to perfect,
protect, and continue the Security Interests, including all
filings with the FAA;
(b) the preparation, execution and delivery of any waiver,
amendment, supplement or consent by the Agent and the Lenders relating
to this Agreement or any of the Loan Documents;
(c) sums paid or incurred to pay any amount or take any action
required of the Borrowers under the Loan Documents that the Borrowers
fails to pay or take;
(d) costs of inspections and verifications of the Collateral,
including, without limitation, standard per diem fees charged by the
Agent for travel, lodging, and meals for
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inspections of the Collateral and the Borrowers' operations and books
and records by the Agent's employees or agents up to four times per
year and whenever an Event of Default exists;
(e) costs of inspections, verifications and field examinations
of the Collateral incurred prior to the Effective Date;
(f) costs and expenses of forwarding loan proceeds, collecting
checks and other items of payment, and establishing and maintaining
each Disbursement Account, Agency Account and Lockbox;
(g) costs and expenses of preserving and protecting the
Collateral; and
(h) consulting, after the occurrence of a Default, with one or
more Persons, including appraisers, accountants and lawyers, concerning
the value of any Collateral for the Secured Obligations or related to
the nature, scope or value of any right or remedy of the Agent or any
Lender hereunder or under any of the Loan Documents, including any
review of factual matters in connection therewith, which expenses shall
include the fees and disbursements of such Persons.
The Borrowers jointly and severally agree to pay or reimburse on demand all
costs and expenses incurred by the Agent and the Lenders, including, without
limitation, the reasonable fees and disbursements of counsel, experts and other
consultants to the Agent and any Lender, in connection with (a) any Default or
Event of Default or any modification, amendment, waiver, restructuring or
forbearance with respect to any of the Loan Documents in connection with such
Default or Event of Default, and (b) any actions taken to obtain payment of the
Secured Obligations, enforce the Security Interests, sell or otherwise realize
upon the Collateral, and otherwise enforce the provisions of the Loan Documents,
or to prosecute or defend any claim in any way arising out of, related to or
connected with, this Agreement or any of the Loan Documents.
The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrowers. Each
Borrower hereby authorizes the Agent and the Lenders to debit such Borrower's
Loan Accounts (by increasing the principal amount of the Revolving Credit Loan)
in the amount of any such costs and expenses owed by the Borrowers when due.
SECTION 15.3. STAMP AND OTHER TAXES. The Borrowers will pay any and all
stamp, registration, recordation and similar taxes, fees or charges and shall
indemnify the Agent and the Lenders against any and all liabilities with respect
to or resulting from any delay in the payment or omission to pay any such taxes,
fees or charges, which may be payable or determined to be payable in connection
with the execution, delivery, performance or enforcement of this Agreement and
any of the Loan Documents or the perfection of any rights or security interest
thereunder, including, without limitation, the Security Interest.
SECTION 15.4. SETOFF. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
during the continuance of any Event of Default, each Lender, any participant
with such Lender in the Loans and each Affiliate of each Lender are hereby
authorized by each Borrower at any time or from time to time, without notice to
any Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured) and any other
indebtedness at any time held or
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owing by any Lender or any Affiliate of any Lender or any participant to or for
the credit or the account of any Borrower against and on account of the Secured
Obligations irrespective or whether or not
(a) the Agent or such Lender shall have made any demand under
this Agreement or any of the Loan Documents, or
(b) the Agent or such Lender shall have declared any or all of
the Secured Obligations to be due and payable as permitted by SECTION
12.2 and although such Secured Obligations shall be contingent or
unmatured.
SECTION 15.5. LITIGATION. THE BORROWERS, THE AGENT, THE SYNDICATION
AGENT AND EACH LENDER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN
WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE BORROWERS (OR ANY OF THEM),
THE AGENT, THE SYNDICATION AGENT AND SUCH LENDER ARISING OUT OF THIS AGREEMENT,
THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR
DISPUTE WHATSOEVER BETWEEN THE BORROWERS (OR ANY OF THEM) AND THE AGENT, THE
SYNDICATION AGENT OR ANY LENDER OF ANY KIND OR NATURE. THE BORROWERS, THE AGENT,
THE SYNDICATION AGENT AND THE LENDERS HEREBY AGREE THAT THE FEDERAL COURT OF THE
NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE AGENT, THE SYNDICATION
AGENT OR ANY LENDER, ANY COURT IN WHICH THE AGENT, THE SYNDICATION AGENT OR SUCH
LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWERS
(OR ANY OF THEM) AND THE AGENT, THE SYNDICATION AGENT OR SUCH LENDER, PERTAINING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER
ARISING THEREFROM. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY
WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR
PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
THE BORROWERS AT THE ADDRESS OF THE BORROWERS SET FORTH IN SECTION 15.1. SHOULD
ANY BORROWER FAIL TO APPEAR OR ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS
SO SERVED WITHIN 30 DAYS AFTER THE MAILING THEREOF, IT SHALL BE DEEMED IN
DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS DEMANDED OR
PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE NONEXCLUSIVE
CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY APPROPRIATE JURISDICTION.
SECTION 15.6. WAIVER OF RIGHTS. EACH BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH SUCH BORROWER HAS UNDER
CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE
ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE AGENT OR ANY
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LENDER, OR THE SUCCESSORS AND ASSIGNS OF THE AGENT, THE SYNDICATION AGENT OR
SUCH LENDER TO POSSESSION OF THE COLLATERAL UPON AN EVENT OF DEFAULT. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT
WHICH THE AGENT, THE SYNDICATION AGENT OR THE LENDERS MAY HAVE, EACH BORROWER
CONSENTS THAT IF LENDER FILES A PETITION FOR AN IMMEDIATE WRIT OF POSSESSION IN
COMPLIANCE WITH SECTIONS 44-14-261 AND 44-14-262 OF THE OFFICIAL CODE OF GEORGIA
OR UNDER ANY SIMILAR PROVISION OF APPLICABLE LAW, AND THIS WAIVER OR A COPY
HEREOF IS ALLEGED IN SUCH PETITION AND ATTACHED THERETO, THE COURT BEFORE WHICH
SUCH PETITION IS FILED MAY DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN WAIVED
AND MAY ISSUE FORTHWITH AN IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE WITH
CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY
SIMILAR PROVISION OF APPLICABLE LAW, WITHOUT THE NECESSITY OF AN ACCOMPANYING
BOND AS OTHERWISE REQUIRED BY SECTION 44-14-263 OF THE OFFICIAL CODE OF GEORGIA
OR BY ANY SIMILAR PROVISION UNDER APPLICABLE LAW. EACH BORROWER HEREBY
ACKNOWLEDGES THAT IT HAS READ AND FULLY UNDERSTANDS THE TERMS OF THIS WAIVER AND
THE EFFECT HEREOF.
SECTION 15.7. CONSENT TO ADVERTISING AND PUBLICITY. With the prior
written consent of the Borrowers, which consent shall not be unreasonably
withheld, the Agent, on behalf of the Lenders, may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, including the name and address of each Borrower, the amount,
interest rate, maturity, collateral and a general description of the Borrowers'
business.
SECTION 15.8. REVERSAL OF PAYMENTS. The Agent and each Lender shall
have the continuing and exclusive right to apply, reverse and re-apply any and
all payments to any portion of the Secured Obligations in a manner consistent
with the terms of this Agreement. To the extent any Borrower makes a payment or
payments to the Agent, for the account of the Lenders, or any Lender receives
any payment or proceeds of the Collateral for the Borrowers' benefit, which
payment(s) or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the Secured Obligations or part thereof intended
to be satisfied shall be revived and continued in full force and effect, as if
such payment or proceeds had not been received by the Agent or such Lender.
SECTION 15.9. INJUNCTIVE RELIEF. Each Borrower recognizes that, in the
event such Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy at law may prove to
be inadequate relief to the Agent and the Lenders; therefore, each Borrower
agrees that if any Event of Default shall have occurred and be continuing, the
Agent and the Lenders, if the Agent or any Lender so requests, shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damages.
SECTION 15.10. ACCOUNTING MATTERS. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrowers to determine whether they are in compliance with any covenant
contained herein, shall, unless this Agreement otherwise provides or unless
Required Lenders shall otherwise consent in writing, be performed in accordance
with GAAP.
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SECTION 15.11. AMENDMENTS.
(a) Except as set forth in SUBSECTION (b) below, any term,
covenant, agreement or condition of this Agreement or any of the Loan
Documents may be amended or waived, and any departure therefrom may be
consented to by the Required Lenders, if, but only if, such amendment,
waiver or consent is in writing signed by the Required Lenders and, in
the case of an amendment (other than an amendment described in SECTION
15.11(d)), by the Borrowers, and in any such event, the failure to
observe, perform or discharge any such term, covenant, agreement or
condition (whether such amendment is executed or such waiver or consent
is given before or after such failure) shall not be construed as a
breach of such term, covenant, agreement or condition or as a Default
or an Event of Default; PROVIDED that:
(i) without the written consent of NationsBank, no
amendment or waiver shall be made to any provision of ARTICLE
3 hereof or any of NationsBank's rights or obligations with
respect to Letters of Credit,
(ii) without the written consent of NationsBank, no
amendment or waiver shall be made to any of NationsBank's
rights or obligations with respect to Non-Ratable Loans,
(iii) without the written consent of the Agent, no
amendment or waiver shall be made to any provision of ARTICLE
14 as such provisions apply to the Agent or to any other
provision of any Loan Document as such provisions relate to
the rights and obligations of the Agent, and
(iv) without the written consent of the Syndication
Agent, no amendment or waiver shall be made to SECTION 14.11
or to any other provision of any Loan Document as such
provisions relate to the rights and obligations of the
Syndication Agent.
Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given. In the event
that any such waiver or amendment is requested by the Borrowers, the
Agent and the Lenders may require and charge a fee in connection
therewith and consideration thereof in such amount as shall be
determined by the Agent and the Required Lenders in their discretion.
(b) Except as otherwise set forth in this Agreement, without
the prior unanimous written consent of the Lenders,
(i) no amendment, consent or waiver shall affect the
amount (except as provided in the definition of "Revolving
Credit Facility") or extend the time of the obligation of the
Lenders to make Loans or extend the originally scheduled time
or times of payment of the principal of any Loan or alter the
time or times of payment of interest on any Loan or the amount
of the principal thereof or the rate of interest thereon or
the amount of any commitment fee payable hereunder or permit
any subordination of the principal or interest on such Loan,
permit the subordination of the Security Interests in any
material Collateral or amend the provisions of ARTICLE 12 or
of this SECTION 15.11(b),
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(ii) no material Collateral shall be released by the
Agent other than releases of Collateral in connection with the
sale of any such Collateral in the ordinary course of a
Borrower's business or as otherwise specifically permitted in
this Agreement,
(iii) no amendment shall be made to the definitions
of "Commitment", "Commitment Percentage", "Eligible Assignee",
"Proportionate", "Ratable", "Required Lenders" or "Secured
Obligations",
(iv) neither the Agent nor any Lender shall consent
to any amendment to or waiver of the amortization, deferral or
subordination provisions of the Subordinated Indebtedness or
any other instrument or agreement evidencing or relating to
obligations of the Borrowers that are expressly subordinate to
any of the Secured Obligations if such amendment or waiver
would be adverse to the Lenders in their capacities as Lenders
hereunder;
(v) no Borrower or Guarantor shall be released;
(vi) no amendment shall be made or waiver or consent
given that increases the advance rates set forth in the
definition of "Borrowing Base" (other than the annual changes
in advance rates based on the appraisals required under
SECTION 8.12(f)); and
(vii) no amendment shall be made or waiver or consent
given that decreases the minimum Availability required under
SECTION 11.16 to less than $5,000,000;
PROVIDED, HOWEVER, that anything herein to the contrary
notwithstanding, the Required Lenders shall have the right to waive any
Default or Event of Default (unless such Default or Event of Default
arises out of a provision of this Agreement which can only be amended
with the unanimous consent of the Lenders) and the consequences
hereunder of such Default or Event of Default and shall have the right
to enter into an agreement with the Borrowers providing for the
forbearance from the exercise of any remedies provided hereunder or
under the other Loan Documents without waiving any Default or Event of
Default.
(c) The making of Loans hereunder by the Lenders during the
existence of a Default or Event of Default shall not be deemed to
constitute a waiver of such Default or Event of Default.
(d) Notwithstanding any provision of this Agreement or any
other Loan Document to the contrary, no consent, written or otherwise,
of the Borrowers shall be necessary or required in connection with any
amendment to ARTICLE 14 or SECTION 4.7, and any amendment to such
provisions shall be effected solely by and among the Agent and the
Lenders, provided that no such amendment shall impose any obligation on
the Borrowers.
SECTION 15.12. ASSIGNMENT. All the provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights under this Agreement.
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SECTION 15.13. PERFORMANCE OF BORROWERS' DUTIES.
(a) The Borrowers' obligations under this Agreement and each
of the Loan Documents shall be performed by the Borrowers at their sole
cost and expense.
(b) If the Borrowers shall fail to do any act or thing which
they have covenanted to do under this Agreement or any of the Loan
Documents, the Agent, on behalf of the Lenders, may (but shall not be
obligated to) do the same or cause it to be done either in the name of
the Agent or the Lenders or in the name and on behalf of the Borrowers,
and the Borrowers hereby irrevocably authorize the Agent so to act.
SECTION 15.14. INDEMNIFICATION. The Borrowers jointly and severally
agree to reimburse the Agent, the Syndication Agent and the Lenders and each of
their Affiliates, agents, employees, officers, directors, Subsidiaries,
successors and assigns (the "Indemnitees") for all costs and expenses, including
reasonable counsel fees and disbursements, incurred, and to indemnify and hold
the Indemnitees harmless from and against all losses suffered by, any Indemnitee
in connection with
(i) the exercise by any Indemnitee of any right or
remedy granted to it under this Agreement or any of the Loan
Documents,
(ii) any claim, and the prosecution or defense
thereof, arising out of or in any way connected with this
Agreement or any of the Loan Documents, including without
limitation any claim relating to Environmental Laws,
(iii) the collection or enforcement of the Secured
Obligations or any of them, and
(iv) any Acquisition or proposed Acquisition by the
Borrowers or any of their Subsidiaries,
other than such costs, expenses and liabilities arising out of such Indemnitee's
gross negligence or willful misconduct.
SECTION 15.15. ALL POWERS COUPLED WITH INTEREST. All powers of attorney
and other authorizations granted to the Agent and the Lenders and any Persons
designated by the Agent or the Lenders pursuant to any provisions of this
Agreement or any of the Loan Documents shall be deemed coupled with an interest
and shall be irrevocable so long as any of the Secured Obligations remain unpaid
or unsatisfied.
SECTION 15.16. SURVIVAL. Notwithstanding any termination of this
Agreement,
(a) until all Secured Obligations have been irrevocably paid
in full or otherwise satisfied and all Commitments have been
terminated, the Agent, for the benefit of the Secured Parties, shall
retain its Security Interest and shall retain all rights under this
Agreement and each of the Security Documents with respect to such
Collateral as fully as though this Agreement had not been terminated,
(b) the indemnities to which the Agent and the Lenders are
entitled under the provisions of this ARTICLE 15 and any other
provision of this Agreement and the Loan Documents shall continue in
full force and effect and shall protect the Agent and the Lenders
against events arising after such termination as well as before, and
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(c) in connection with the termination of this Agreement and
the release and termination of the Security Interests, the Agent, on
behalf of itself as agent and the Lenders, may require such assurances
and indemnities as it shall reasonably deem necessary or appropriate to
protect the Agent and the Lenders against loss on account of such
release and termination, including, without limitation, with respect to
credits previously applied to the Secured Obligations that may
subsequently be reversed or revoked.
SECTION 15.17. TITLES AND CAPTIONS. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 15.18. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement or any Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 15.19. GOVERNING LAW. This Agreement and the Notes shall be
construed in accordance with and governed by the law of the State of Georgia.
SECTION 15.20. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 15.21. REPRODUCTION OF DOCUMENTS. This Agreement, each of the
Loan Documents and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Agent or any Lender, and (c) financial
statements, certificates and other information previously or hereafter furnished
to the Agent or any Lender, may be reproduced by the Agent or such Lender by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and such Person may destroy any original document so produced.
Each party hereto stipulates that, to the extent permitted by Applicable Law,
any such reproduction shall be as admissible in evidence as the original itself
in any judicial or administrative proceeding (whether or not the original shall
be in existence and whether or not such reproduction was made by the Agent or
such Lender in the regular course of business), and any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 15.22. TERM OF AGREEMENT. This Agreement shall remain in effect
from the Agreement Date through the Termination Date and thereafter until all
Secured Obligations shall have been irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 15.23. PRO-RATA PARTICIPATION.
(a) Each Lender agrees that if, as a result of the exercise of
a right of setoff, banker's lien or counterclaim or other similar right
or the receipt of a secured claim it receives any payment in respect of
the Secured Obligations, it shall promptly notify the Agent thereof
(and the Agent
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shall promptly notify the other Lenders). If, as a result of such
payment, such Lender receives a greater percentage of the Secured
Obligations owed to it under this Agreement than the percentage
received by any other Lender, such Lender shall purchase a
participation (which it shall be deemed to have purchased
simultaneously upon the receipt of such payment) in the Secured
Obligations then held by such other Lenders so that all such recoveries
of principal and interest with respect to all Secured Obligations owed
to each Lender shall be pro rata on the basis of its respective amount
of the Secured Obligations owed to all Lenders, PROVIDED that if all or
part of such proportionately greater payment received by such
purchasing Lender is thereafter recovered by or on behalf of the
Borrowers from such Lender, such purchase shall be rescinded and the
purchase price paid for such participation shall be returned to such
Lender to the extent of such recovery, but without interest.
(b) Each Lender which receives such a secured claim shall
exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this SECTION
15.23 to share in the benefits of any recovery on such secured claim.
(c) Each Borrower expressly consents to the foregoing
arrangements and agrees that any holder of a participation in any
Secured Obligation so purchased or otherwise acquired may exercise any
and all rights of banker's lien, set-off or counterclaim with respect
to any and all monies owing by such Borrower to such holder as fully as
if such holder were a holder of such Secured Obligation in the amount
of the participation held by such holder.
SECTION 15.24. FINAL AGREEMENT. This Agreement and the other Loan
Documents are intended by the parties hereto as the final, complete and
exclusive expression of the agreement among them with respect to the subject
matter hereof and thereof. This Agreement and the other Loan Documents supersede
any and all prior oral or written agreements between the parties hereto relating
to the subject matter hereof and thereof, it being understood that the Fee
Letter (as described in SECTION 4.2(a)) shall survive the execution and delivery
of this Agreement.
SECTION 15.25. WAIVER OF CONSEQUENTIAL DAMAGES, ETC.. THE BORROWERS
AGREE NOT TO ASSERT ANY CLAIM AGAINST THE AGENT, THE SYNDICATION AGENT, ANY
LENDER, ANY OF THEIR AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS AND AGENTS, ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE RELATING
TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR IN ANY OTHER LOAN DOCUMENT OR
THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE LOANS.
[Signatures commence on next page.]
-122-
<PAGE> 130
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers in several
counterparts all as of the day and year first written above.
BORROWERS:
Kellstrom Industries, Inc.
By:
-----------------------------------------
Michael W. Wallace
Chief Financial Officer
[CORPORATE SEAL]
KELLSTROM COMMERCIAL AIRCRAFT, INC.
By:
-----------------------------------------
Michael W. Wallace
Vice President
[CORPORATE SEAL]
AERO SUPPORT HOLDINGS, INC.
By:
-----------------------------------------
Michael W. Wallace
Vice President
[CORPORATE SEAL]
<PAGE> 131
INTEGRATED TECHNOLOGY HOLDINGS CORP.
By:
-------------------------------------------------------
Michael W. Wallace
Vice President
[CORPORATE SEAL]
AEROCAR AVIATION CORP.
By:
-------------------------------------------------------
Michael W. Wallace
Vice President
[CORPORATE SEAL]
AEROCAR PARTS, INC.
By:
-------------------------------------------------------
Michael W. Wallace
Vice President
[CORPORATE SEAL]
LENDERS:
NATIONSBANK, N.A.
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 600 Peachtree Street, N.E.
13th Floor
Atlanta, Georgia 30308
Attn.: Robert J. Walker, Business Credit
Facsimile No.: 404-607-6281
<PAGE> 132
UNION PLANTERS BANK, N.A.
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 1799 West Oakland Park Blvd., 3rd Floor
Ft. Lauderdale, Florida 33311
Attn.: Mr. Tom Thureson
Facsimile No.: 954-714-3142
BANK LEUMI Le-Israel B.M., Miami Agency
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 800 Brickell Avenue, 14th Floor
Miami, Florida 33131
Attn.: Mr. Joseph F. Realini
Facsimile No.: 305-377-6542
IBJ SCHRODER Business Credit Corporation
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 1100 Circle 75 Parkway, Suite 800
Atlanta, Georgia 30339
Attn.: Mr. Vernon Woods
Facsimile No.: 770-933-1609
<PAGE> 133
COMERICA BANK
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 100 N.E. 3rd Avenue, Suite 200
Ft. Lauderdale, Florida 33301
Attn.: Mr. Michael Orozco
Facsimile No.: 954-468-0641
MELLON BANK, N.A.
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 1010 Huntcliff, Suite 1350
Atlanta, Georgia 30350
Attn.: Mr. Jack Guy
Facsimile No.: 770-993-0327
FIRST UNION NATIONAL BANK
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: One First Union Center
301 South College Street, DC-4
Charlotte, North Carolina 28288-0479
Attn.: Terri Lins
Facsimile No.: 704-374-2703
<PAGE> 134
THE CIT GROUP/BUSINESS CREDIT, INC.
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 1200 Ashwood Parkway, Suite 150
Atlanta, Georgia 30338
Attn.: Ken Butler, VP
Facsimile No.: 770-522-7673
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 3379 Peachtree Road, N.E., Suite 600
Atlanta, Georgia 30326
Attn.: Elaine L. Moore, SVP
Facsimile No.: 404-262-9032
NATIONAL BANK OF CANADA, Canadian chartered
bank
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 5100 Town Center Circle, Suite 430
Boca Raton, Florida 33486
Attn.: Frank H. D'Alto, VP
Facsimile No.: 561-367-1705
<PAGE> 135
BANKATLANTIC, a Federal Savings Bank
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 1750 East Sunrise Boulevard
Ft. Lauderdale, Florida 33304-3013
Attn.: Shawn J. Byrd, SVP
Facsimile No.: 954-760-5554
NATIONAL CITY COMMERCIAL FINANCE, INC.
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 35 Technology Parkway South, Suite 170
Norcross, Georgia 30092
Attn.: Carrie C. Tate, VP
Facsimile No.: 770-613-5349
PNC BANK, N.A.
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: One South Orange Avenue, Suite 500
Orlando, Florida 32801-2627
Attn.: Michael E. Picard, VP
Facsimile No.: 407-206-7243
<PAGE> 136
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 420 North 20th Street
Birmingham, Alabama 35203
Attn.: Florida Corporate Banking
Facsimile No.: 727-898-5319
SUNTRUST BANK, ATLANTA
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: Mail Code 075
25 Park Place, 26th Floor
Atlanta, Georgia 30303
Attn.: Rainer C. Zeck, VP
Facsimile No.: 404-575-2693
AGENT:
NATIONSBANK, N.A.
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: 600 Peachtree Street, N.E.
13th Floor
Atlanta, Georgia 30308
Attn.: Robert J. Walker, Business Credit
Facsimile No.: 404-607-6281
<PAGE> 137
SYNDICATION AGENT:
NationsBanc Montgomery Securities LLC
By:
-------------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Address: NationsBank Corporate Center, 7th Floor
100 North Tryon Street
Charlotte, North Carolina 28255-0001
Attn.: Peter Hall
Facsimile No.: 704-388-9941
<PAGE> 138
ANNEX I
PERFORMANCE PRICING MATRIX
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Ratio of Consolidated Funded Indebtedness to Consolidated
EBITDA (trailing 12 months) Prime Rate Margin Eurodollar Rate Margin
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Greater than 4 to 1 .50% 2.5%
- -----------------------------------------------------------------------------------------------------------------------
Greater than 3.5 to 1 but less than or equal to 4.0 to 1 .25% 2.25%
- -----------------------------------------------------------------------------------------------------------------------
Greater than 3.0 to 1 but less than or equal to 3.5 to 1 0% 2%
- -----------------------------------------------------------------------------------------------------------------------
Greater than 2.5 to 1 but less than or equal to 3.0 to 1 0% 1.75%
- -----------------------------------------------------------------------------------------------------------------------
less than or equal to 2.5 to 1 0% 1.5%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 139
ANNEX II
COMMITMENTS
1. Union Planters Bank, N.A. $ 10,710,808.18
2. Bank Leumi Le-Israel B.M., Miami Agency $ 7,789,678.68
3. IBJ Schroder Business Credit Corporation $ 7,789,678.68
4. Comerica Bank $ 24,342,745.86
5. Mellon Bank, N.A. $ 17,039,922.10
6. First Union National Bank $ 15,092,502.43
7. The CIT Group/Business Credit, Inc. $ 10,710,808.18
8. General Electric Capital Corporation $ 20,204,479.07
9. National Bank of Canada, a Canadian chartered bank $ 24,342,745.86
10. BankAtlantic, a Federal Savings Bank $ 17,039,922.10
11. National City Commercial Finance, Inc. $ 19,474,196.69
12. PNC Bank, N.A. $ 10,710,808.18
13. SouthTrust Bank, National Association $ 10,710,808.18
14. SunTrust Bank, Atlanta $ 15,092,502.43
15. NationsBank, N.A. $ 38,948,393.38
<PAGE> 1
EXHIBIT 10.22
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
$ _______________ DATE: DECEMBER ____, 1998
FOR VALUE RECEIVED, on the Termination Date (as such term is defined
in the Loan Agreement described below), KELLSTROM INDUSTRIES, INC., a Delaware
corporation, KELLSTROM COMMERCIAL AIRCRAFT, INC., a Delaware corporation, AERO
SUPPORT HOLDINGS, INC., a Delaware corporation, INTEGRATED TECHNOLOGY HOLDINGS
CORP., a Delaware corporation, AEROCAR AVIATION CORP., a Florida corporation,
and AEROCAR PARTS, INC., a Florida corporation (collectively, the "Borrowers"),
promise to pay to the order of ______________________________________________
(hereinafter, together with any holder hereof, called "Holder") at the
Atlanta, Georgia office of the Agent (as hereinafter defined), or at such other
place as the Holder may designate in writing to the undersigned, the principal
amount of ____________________________ ($___________) or so much thereof as has
been advanced hereunder.
The undersigned shall pay interest as provided in that certain Amended
and Restated Loan and Security Agreement (as the same may be amended, modified
or supplemented from time to time, the "Loan Agreement"), dated as of December
___, 1998, by and among the Borrowers, the financial institutions party thereto
from time to time (the "Lenders"), NationsBank, N.A., as agent for the Lenders,
and NationsBanc Montgomery Securities LLC, as syndication agent.
It is contemplated that the principal sum evidenced by this Note may
be reduced from time to time and that additional advances may be made from time
to time, as provided in the Loan Agreement.
This Note is subject to the terms and conditions of the Loan
Agreement. This Note is entitled to the benefits of the Security Documents (as
defined in the Loan Agreement). The Loan Agreement contains provisions for the
acceleration of the maturity hereof upon the happening of certain stated
events.
No delay or failure on the part of the Holder in the exercise of any
right or remedy hereunder, under the Loan Agreement or at law or in equity
shall operate as a waiver thereof, and no single or partial exercise by the
Holder of any right or remedy hereunder, under the Loan Agreement or at law or
in equity shall preclude or estop another or further exercise thereof or the
exercise of any other right or remedy.
Principal and interest on this Note shall be payable and paid in
lawful money of the United States of America.
<PAGE> 2
The undersigned waive presentment, notice of dishonor and protest.
Time is of the essence of this Note and, in case this Note is
collected by law or through an attorney at law, or under advice therefrom, the
undersigned agree to pay all costs of collection, including reasonable
attorneys' fees if collected by or through an attorney.
The provisions of this Note shall be construed and interpreted and all
rights and obligations of the parties hereunder determined in accordance with
the laws of the State of Georgia.
The undersigned are jointly and severally liable for all obligations
under this Note.
IN WITNESS WHEREOF, each of the undersigned has caused this Note to be
executed and sealed in its corporate name, by and through its duly authorized
officers, as of the day and year first above written.
KELLSTROM INDUSTRIES, INC
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
----------------------------
Name:
---------------------------
Title:
--------------------------
[CORPORATE SEAL]
KELLSTROM COMMERCIAL AIRCRAFT, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
----------------------------
Name:
---------------------------
Title:
--------------------------
[CORPORATE SEAL]
[Signatures continued on next page]
2
<PAGE> 3
[Signatures continued from previous page]
AERO SUPPORT HOLDINGS, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
----------------------------
Name:
---------------------------
Title:
--------------------------
[CORPORATE SEAL]
INTEGRATED TECHNOLOGY HOLDINGS CORP.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
----------------------------
Name:
---------------------------
Title:
--------------------------
[CORPORATE SEAL]
AEROCAR AVIATION CORP.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
----------------------------
Name:
---------------------------
Title:
--------------------------
[CORPORATE SEAL]
[Signatures continued on next page]
3
<PAGE> 4
[Signatures continued from previous page]
AEROCAR PARTS, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
----------------------------
Name:
---------------------------
Title:
--------------------------
[CORPORATE SEAL]
4
<PAGE> 5
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of December, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of _______________,
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of Kellstrom Industries,
Inc., a Delaware corporation, who executed the foregoing Revolving Credit Note
on behalf of such corporation and acknowledged to me that such corporation
executed the foregoing pursuant to its by-laws or a resolution of its board of
directors, said execution taking place in the State of Georgia, County of
Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 6
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of December, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of ________________,
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of Kellstrom Commercial
Aircraft, Inc., a Delaware corporation, who executed the foregoing Revolving
Credit Note on behalf of such corporation and acknowledged to me that such
corporation executed the foregoing pursuant to its by-laws or a resolution of
its board of directors, said execution taking place in the State of Georgia,
County of Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 7
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of December, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of ______________,
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of Aero Support Holdings,
Inc., a Delaware corporation, who executed the foregoing Revolving Credit Note
on behalf of such corporation and acknowledged to me that such corporation
executed the foregoing pursuant to its by-laws or a resolution of its board of
directors, said execution taking place in the State of Georgia, County of
Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 8
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of December, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of ________________,
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of Integrated Technology
Holdings Corp., a Delaware corporation, who executed the foregoing Revolving
Credit Note on behalf of such corporation and acknowledged to me that such
corporation executed the foregoing pursuant to its by-laws or a resolution of
its board of directors, said execution taking place in the State of Georgia,
County of Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 9
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of _________, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of _______________,
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of Aerocar Aviation Corp.,
a Florida corporation, who executed the foregoing Revolving Credit Note on
behalf of such corporation and acknowledged to me that such corporation
executed the foregoing pursuant to its by-laws or a resolution of its board of
directors, said execution taking place in the State of Georgia, County of
Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 10
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of December, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of ______________,
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of Aerocar Parts, Inc., a
Florida corporation, who executed the foregoing Revolving Credit Note on behalf
of such corporation and acknowledged to me that such corporation executed the
foregoing pursuant to its by-laws or a resolution of its board of directors,
said execution taking place in the State of Georgia, County of Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 11
AFFIDAVIT REGARDING DELIVERY
I, ________________________________ hereby certify that I am a
___________________________ of _____________________ and that the foregoing was
delivered to me as a representative of _______________________ in the State of
_____________________, County of _________________.
---------------------------------------
Signature of Officer of Agent or Lender
On this the ____ day of December, 1998, before me, the undersigned, a
Notary Public in and for the State of _________________, County of
_________________________, _________________________________, personally known
to me or proved to me on the basis of satisfactory evidence to be the
_____________________ of ____________________________, a
________________________________________, who executed the foregoing affidavit
on behalf of such ________________________________________ and acknowledged to
me that such ________________________________________ executed the foregoing
pursuant to its by-laws or a resolution of its board of directors, said
execution taking place in the State of ____________________, County of
___________________________ .
- ----------------------------------
Notary Signature
<PAGE> 1
EXHIBIT 10.28
KELLSTROM INDUSTRIES, INC. 1996 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of the Kellstrom Industries, Inc.
1996 Stock Option Plan (the "Plan") is to promote the interests of Kellstrom
Industries, Inc., a Delaware corporation (the "Company"), and its stockholders
by strengthening the Company's ability to attract and retain competent
employees, to make service on the Board of Directors of the Company (the
"Board") more attractive to present and prospective non-employee directors of
the Company and to provide a means to encourage stock ownership and proprietary
interest in the Company by officers, non-employee directors and valued employees
and other individuals upon whose judgment, initiative and efforts the financial
success and growth of the Company largely depend. The Plan became effective on
July 10, 1996, by resolution of the Board, and was ratified by a majority vote
of the stockholders of the Company at its 1996 Annual Meeting of Stockholders.
The Plan was amended by the Board on October 8, 1998.
2. STOCK SUBJECT TO THE PLAN.
(a) The total number of shares of the authorized but unissued
or treasury shares of the Common Stock, $.001 par value per share, of the
Company ("Common Stock") for which options and stock appreciation rights
("SARs") may be granted under the Plan shall be 1,100,000, provided that 700,000
of such options and SARs may not be granted until at least 75% of the 4,600,000
outstanding Redeemable Common Stock Purchase Warrants which were issued to the
public in the Company's 1994 initial public offering are exercised by the
holders thereof or redeemed by the Company in accordance with the terms of such
Warrants, subject to adjustment as provided in Section 14 hereof, which shares
may be of any class of Common Stock; provided, however, that such number of
shares may from time to time be reduced to the extent that a corresponding
number of issued and outstanding shares of Common Stock are purchased by the
Company and set aside for issue upon the exercise of options.
(b) If an option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for subsequent option grants
under the Plan; provided, however, that shares as to which an option has been
surrendered in connection with the exercise of a related SAR will not again be
available for subsequent option or SAR grants under the Plan.
(c) Stock issuable upon exercise of an option or SAR granted
under the Plan may be subject to such restrictions on transfer, repurchase
rights or other restrictions as shall be determined by the Board.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board. No member of the Board shall act upon any matter exclusively affecting an
option or SAR granted or to be granted to himself or herself under the Plan. A
majority of the members of the Board shall constitute a quorum, and any action
may be taken by a majority of those present and voting at any meeting. The
decision of the Board as to all questions of interpretation and application of
the Plan shall be final, binding and conclusive on all persons. The Board may,
in its sole discretion,
<PAGE> 2
grant options to purchase shares of Common Stock, grant SARs and issue shares
upon exercise of such options and SARS, as provided in the Plan. The Board shall
have authority, subject to the express provisions of the Plan, to construe the
respective option and SAR agreements and the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option and SAR agreements, which may but need not
be identical, and to make all other determinations in the judgment of the Board
necessary or desirable for the administration of the Plan. The Board may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any option or SAR agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect and shall be the sole and final judge of
such expediency. No director shall be liable for any action or determination
made in good faith. The Board may, in its discretion, delegate its power, duties
and responsibilities to a committee, consisting of two or more members of the
Board. If a committee is so appointed, all references to the Board herein shall
mean and relate to such committee, unless the context otherwise requires.
4. TYPE OF OPTIONS. Options granted pursuant to the Plan shall be
authorized by action of the Board (or a committee designated by the Board) and
may be designated as either incentive stock options meeting the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-qualified options which are not intended to meet the requirements of Section
422 of the Code, the designation to be in the sole discretion of the Board.
Options designated as incentive stock options that fail to continue to meet the
requirements of Section 422 of the Code shall be redesignated as non-qualified
options automatically on the date of such failure to continue to meet the
requirements of Section 422 of the Code without further action by the Board.
5. ELIGIBILITY. Options designated as incentive stock options may be
granted only to officers and key employees of the Company or of any subsidiary
corporation (herein called "subsidiary" or "subsidiaries"), as defined in
Section 424 of the Code and the Treasury Regulations promulgated thereunder (the
"Regulations"). Directors who are not otherwise employees of the Company or a
subsidiary shall not be eligible to be granted incentive stock options pursuant
to the Plan. SARs and options designated as nonqualified options may be granted
to (i) officers and key employees of the Company or of any of its subsidiaries,
or (ii) agents and directors of and consultants to the Company, whether or not
otherwise employees of the Company.
In determining the eligibility of an individual to be granted an option
or SAR, as well as in determining the number of shares to be optioned to any
individual, the Board shall take into account the recommendation of the
Company's Chairman, the position and responsibilities of the individual being
considered, the nature and value to the Company or its subsidiaries of his or
her service and accomplishments, his or her present and potential contribution
to the success of the Company or its subsidiaries, and such other factors as the
Board may deem relevant.
6. RESTRICTIONS ON INCENTIVE STOCK OPTIONS. Incentive stock options
(but not non-qualified options) granted under this Plan shall be subject to the
following restrictions:
2
<PAGE> 3
(a) LIMITATION ON NUMBER OF SHARES. The aggregate fair market
value of the shares of Common Stock with respect to which incentive stock
options are granted, determined as of the date the incentive stock options are
granted, exercisable for the first time by an individual during any calendar
year shall not exceed $100,000. If an incentive stock option is granted pursuant
to which the aggregate fair market value of shares with respect to which it
first becomes exercisable in any calendar year by an individual exceeds such
$100,000 limitation, the portion of such option which is in excess of the
$100,000 limitation, and any such options issued subsequently in the same
calendar year, shall be treated as a non-qualified option pursuant to Section
422(d)(1) of the Code. In the event that an individual is eligible to
participate in any other stock option plan of the Company or any parent or
subsidiary of the Company which is also intended to comply with the provisions
of Section 422 of the Code, such $100,000 limitation shall apply to the
aggregate number of shares for which incentive stock options may be granted
under this Plan and all such other plans.
(b) TEN PERCENT (10%) STOCKHOLDER. If any employee to whom an
incentive stock option is granted pursuant to the provisions of this Plan is on
the date of grant the owner of stock (as determined under Section 424(d) of the
Code) possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary of the Company, then the
following special provisions shall be applicable to the incentive stock options
granted to such individual:
(i) The option price per share subject to such
incentive stock options shall be not less than 110% of the fair market
value of the stock determined at the time such option was granted. In
determining the fair market value under this clause (i), the provisions
of Section 8 hereof shall apply.
(ii) The incentive stock option shall have a term
expiring not more than five (5) years from the date of the granting
thereof.
7. OPTION AGREEMENT. Each option and SAR shall be evidenced by an
agreement (the "Agreement") duly executed on behalf of the Company and by the
grantee to whom such option or SAR is granted, which Agreement shall comply with
and be subject to the terms and conditions of the Plan. The Agreement may
contain such other terms, provisions and conditions which are not inconsistent
with the Plan as may be determined by the Board, provided that options
designated as incentive stock options shall meet all of the conditions for
incentive stock options as defined in Section 422 of the Code. No option or SAR
shall be granted within the meaning of the Plan and no purported grant of any
option or SAR shall be effective until the Agreement shall have been duly
executed on behalf of the Company and the optionee. More than one option and SAR
may be granted to an individual.
8. OPTION PRICE.
(a) The option price or prices of shares of Common Stock for
options designated as non-qualified stock options shall be as determined by the
Board.
3
<PAGE> 4
(b) Subject to the conditions set forth in Section 6(b)
hereof, the option price or prices of shares of Common Stock for options
designated as incentive stock options shall be at least the fair market value of
such Common Stock at the time the option is granted as determined by the Board
in accordance with clause (c) below.
(c) If the Common Stock is then listed on any national
securities exchange, the fair market value shall be the mean between the high
and low sales prices, if any on the largest such exchange on the date of the
grant of the option or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in accordance with
Regulations Section 25.2512-2. If the Common Stock is not then listed on any
such exchange, the fair market value shall be the mean between the closing "Bid"
and the closing "Ask" prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of the
grant of the option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in accordance with
Regulations Section 25.2512-2. If the Common Stock is not then either listed on
any such exchange or quoted in NASDAQ, the fair market value shall be the mean
between the average of the "Bid" prices, if any, as reported in the National
Daily Quotation Service for the date of the grant of the option, or, if none,
shall be determined by taking a weighted average of the means between the
highest and lowest sales on the nearest date before and the nearest date after
the date of grant in accordance with Regulations Section 25.2512-2. If the fair
market value of the Common Stock cannot be determined under the preceding three
sentences, it shall be determined in good faith by the Board in accordance with
the Regulations promulgated under Section 422 of the Code.
9. MANNER OF PAYMENT; MANNER OF EXERCISE.
(a) Options granted under the Plan may provide for the payment
of the exercise price by delivery of (i) cash or a check payable to the order of
the Company in an amount equal to the exercise price of such options, (ii)
shares of Common Stock owned by the optionee having a fair market value equal in
amount to the exercise price of such options, or (iii) any combination of (i)
and (ii); provided, however, that payment of the exercise price by delivery of
shares of Common Stock owned by such optionee may be made only upon the
condition that such payment does not result in a charge to earnings for
financial accounting purposes as determined by the Board, unless such condition
is waived by the Board. The fair market value of any shares of Common Stock
which may be delivered upon exercise of an option shall be determined by the
Board in accordance with Section 8 hereof.
(b) To the extent that the right to purchase shares under an
option has accrued and is in effect, options may be exercised in full at one
time or in part from time to time, by giving written notice, signed by the
person or persons exercising the option, to the Company, stating the number of
shares with respect to which the option is being exercised, accompanied by
payment in full for such shares as provide din subparagraph (a) above. Upon such
exercise, delivery of a certificate for paid-up non-assessable shares shall be
made at the principal office of
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the Company to the person or persons exercising the option at such time, during
ordinary business hours, after three (3) days but not more than ninety (90) days
from the date of receipt of the notice by the Company, as shall be designated in
such notice, or at such time, place and manner as may be agreed upon by the
Company and the person or persons exercising the option.
10. EXERCISE OF OPTIONS AND SARS. Each option and SAR granted under the
Plan shall, subject to Section 11(b) and Section 13 hereof, be exercisable at
such time or times and during such period as shall be set forth in the
Agreement; provided, however, that no option or SAR granted under the Plan shall
have a term in excess of ten (10) years from the date of grant. To the extent
that an option or SAR is not exercised when it becomes initially exercisable, it
shall not expire but shall be carried forward and shall be exercisable, on a
cumulative basis, until the expiration of the exercise period. No partial
exercise may be made for less than one hundred (100) full shares of Common
Stock. The exercise of an option shall result in the cancellation of the SAR to
which it relates with respect to the same number of shares of Common Stock as to
which the option was exercised.
11. TERM OF OPTIONS AND SARS; EXERCISABILITY.
(a) TERM.
(i) Each option shall expire not more than ten (10)
years from the date of the granting thereof, except as (a) otherwise
provided pursuant to the provisions of Section 6(b) hereof, and (b)
earlier termination as herein provided.
(ii) Except as otherwise provided in this Section 11,
an option or SAR granted to any grantee who ceases to perform services
for the Company or one of its subsidiaries shall terminate three months
after the date such grantee ceases to perform services for the Company
or one of its subsidiaries, or on the date on which the option or SAR
expires by its terms, whichever occurs first.
(iii) If the grantee ceases to perform services for
the Company because of dismissal for cause or because the grantee is in
breach of any employment agreement, such option or SAR will terminate
on the date the grantee ceases to perform services for the Company or
one of its subsidiaries.
(iv) If the grantee ceases to perform services for
the Company because the grantee has become permanently disabled (within
the meaning of Section 22(e)(3) of the Code), such option or SAR shall
terminate twelve months after the date such grantee ceases to perform
services for the Company, or on the date on which the option or SAR
expires by its terms, whichever occurs first.
(v) In the event of the death of any grantee, any
option or SAR granted to such grantee shall terminate twelve months
after the date of death, or on the date on which the option or SAR
expires by its terms, whichever occurs first.
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(b) EXERCISABILITY.
(i) Except as provided below, an option or SAR
granted to a grantee who ceases to perform services for the Company or
one of its subsidiaries shall be exercisable only to the extent that
such option or SAR has accrued and is in effect on the date such
grantee ceases to perform services for the Company or one of its
subsidiaries.
(ii) An option or SAR granted to a grantee who ceases
to perform services for the Company or one of its subsidiaries because
he or she has become permanently disabled (as defined above) shall be
exercisable with respect to the full number of shares covered thereby,
whether or not under the provisions of Section 10 hereof the grantee
was entitled to do so at the date he or she became permanently
disabled, and may be exercised by a legal representative on behalf of
the grantee.
(iii) In the event of the death of any grantee, the
option or SAR granted to such grantee may be exercised with respect to
the full number of shares covered thereby, whether or not under the
provisions of Section 10 hereof the grantee was entitled to do so at
the date of his or her death, by the estate of such grantee, or by any
person or persons who acquired the right to exercise such option or SAR
by bequest or inheritance or by reason of the death of such grantee.
12. OPTIONS NOT TRANSFERABLE. The right of any grantee to exercise any
option or SAR granted to him or her shall not be assignable or transferable by
such grantee other than by will or the laws of descent, and any such option or
SAR shall be exercisable during the lifetime of such grantee only by him. Any
option or SAR granted under the Plan shall be null and void and without effect
upon the bankruptcy of the grantee to whom the option is granted, or upon any
attempted, assignment or transfer except as herein provided, including without
limitation, any purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition, attachment, trustee process or
similar process, whether legal or equitable, upon such option or SAR.
13. TERMS AND CONDITIONS OF SARS.
(a) An SAR may be granted separately or in connection with an
option (either at the time of grant or at any time during the term of the
option).
(b) The exercise of an SAR granted in connection with an
option shall result in the cancellation of the option to which it relates with
respect to the same number of shares of Common Stock as to which the SAR was
exercised.
(c) An SAR granted in connection with an option shall be
exercisable or transferable only to the extent that such related option is
exercisable or transferable.
(d) Upon the exercise of an SAR related to an option, the
holder will be entitled to receive payment of an amount determined by
multiplying:
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(i) the difference obtained by subtracting the
purchase price of a share of Common Stock specified in the related
option from the fair market value of a share of Common Stock on the
date of exercise of such SAR (as determined by the Board in accordance
with Section 8 hereof), by
(ii) the number of shares as to which such SAR is
exercised.
(e) An SAR granted without relationship to an option shall be
exercisable as determined by the Board, but in no event after ten years from the
date of grant.
(f) An SAR granted without relationship to an option will
entitle the holder, upon exercise of the SAR, to receive payment of an amount
determined by multiplying:
(i) the difference obtained by subtracting the fair
market value of a share of Common Stock on the date the SAR was granted
from the fair market value of a share of Common Stock on the date of
exercise of such SAR (as determined by the Board in accordance with
Section 8 hereof), by
(ii) the number of shares as to which such SAR is
exercised.
(g) Notwithstanding subsections (d) and (f) above, the Board
may limit the amount payable upon exercise of an SAR. Any such limitation shall
be determined as of the date of grant and noted on the instrument evidencing the
SAR granted.
(h) At the discretion of the Board, payment of the amount
determined under subsections (d) and (f) above may be made either in whole
shares of Common Stock valued at their fair market value on the date of exercise
of the SAR (as determined by the Board in accordance with Section 8 hereof), or
solely in cash, or in a combination of cash and shares. If the Board decides to
make full payment in shares of Common Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.
(i) Neither an SAR nor an option granted in connection with an
SAR granted to a person subject to Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") may be exercised before six months
after the date of grant.
14. RECAPITALIZATION, REORGANIZATION AND THE LIKE. In the event that
the outstanding shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, or
dividends payable in capital stock, appropriate adjustment shall be made in
accordance with Section 424(a) of the Code in the number and kind of shares as
to which options and SARs may be granted under the Plan and as to which
outstanding options and SARs or portions thereof then unexercised shall be
exercisable, to the end that the proportionate interest of the grantee shall be
maintained as before the occurrence of such event; such
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adjustment in outstanding options and SARs shall be made without change in the
total price applicable to the unexercised portion of such options and SARs and
with a corresponding adjustment in the exercise price per share.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of any Change in Control (as hereinafter defined) of the
Company, the purchaser(s) of the Company's assets or stock may, in his, her or
its discretion, deliver to the optionee the same kind of consideration that is
delivered to the stockholders of the Company as a result of such Change in
Control, or the Board may cancel all outstanding options and SARs in exchange
for consideration in cash or in kind which consideration in both cases shall be
equal in value to the value of those shares of stock or other Securities the
optionee would have received had the option been exercised (to the extent then
exercisable) and no disposition of the shares acquired upon such exercise been
made prior to such Change in Control, less the exercise price therefor. Upon
receipt of such consideration, the options and SARs shall immediately terminate
and be of no further force and effect. The value of the stock or other
securities the grantee would have received if the option had been exercised
shall be determined in good faith by the Board, and in the case of shares of
Common Stock, in accordance with the provisions of Section 8 hereof.
Notwithstanding anything to the contrary contained in this Plan or the
option agreements executed in connection herewith, upon any Change in Control
under subsection (a), (b) or (c) of the following paragraph, all outstanding
options and SARs shall immediately become exercisable. Upon any Change in
Control under subsection (d) of the following paragraph, the Board shall have
the power and right, in its sole discretion, to accelerate the exercisability of
any outstanding options or SARs. Upon any acceleration pursuant to this
paragraph, any options or portion thereof originally designated as incentive
stock options that no longer qualify as incentive stock options under Section
422 of the Code as a result of such acceleration shall be redesignated as non
qualified stock options.
For purposes hereof, a "Change in Control" shall mean:
(a) (i) a reorganization, merger, consolidation or other form
of corporate transaction or series of transactions, in each case, with respect
to which persons who were the stockholders of the Company immediately prior to
such reorganization, merger or consolidation or other transaction do not,
immediately thereafter, own more than fifty percent (50%) of the combined voting
power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or (ii) a liquidation or dissolution of the Company or (iii) the
sale, lease, exchange or other disposition of all or substantially all of the
assets of the Company; or
(b) the acquisition by any person, or any two or more persons
acting as a group, and all affiliates of such person or persons, who prior to
such time owned less than fifty percent (50%) of the combined voting power
entitled to vote generally in the election of directors, of additional voting
power in one or more transactions, or series of transactions, such that
following such transaction or transactions, such person or group and affiliates
beneficially
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own fifty percent (50%) or more of the combined voting power entitled to vote
generally in the election of directors; or
(c) individuals who, as of the date hereof, constitute the
Company's Board (as of the date hereof the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
(d) the acquisition (other than from the Company or its
subsidiaries) by any person, entity or "group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, (excluding, for this purpose, the
Company or its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 19% or more of either the then
outstanding shares of the Company's Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally in
the election of directors.
If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board shall
authorize the issuance or assumption of a stock option or stock options in a
transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Board may grant an option or options upon
such terms and conditions as it may deem appropriate for the purpose of
assumption of the old option, or substitution of a new option for the old
option, in conformity with the provisions of such Section 424(a) of the Code and
the Regulations thereunder, and any such option shall not reduce the number of
shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any option or SAR, but in the event any adjustment hereunder in the
number of shares covered by the option or SAR shall cause such number to include
a fraction of a share, such fraction shall be adjusted to the nearest smaller
whole number of shares.
15. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in the Plan or in
any option or SAR granted under the Plan shall confer upon any grantee any right
with respect to the continuation of his or her employment by the Company (or any
subsidiary) or interfere in any way with the right of the Company (or any
subsidiary), subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease
the compensation of the grantee from the rate in existence at the time of the
grant of an option or SAR. Whether an authorized leave of absence, or absence in
military or government service, shall constitute termination of employment shall
be determined in accordance with Regulations Section 1.421-7(h)(2).
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16. WITHHOLDING. The Company's obligation to deliver shares upon the
exercise of any non-qualified option or SAR granted under the Plan shall be
subject to the option holder's satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements. The Company and
optionee may agree to withhold shares of Common Stock purchased upon exercise of
an option or SAR to satisfy the above-mentioned withholding requirements;
provided, however, that no such agreement may be made by a grantee who is an
"officer" or "director" within the meaning of Section 16 of the Exchange Act,
except pursuant to a standing election to so withhold shares of Common Stock
purchased upon exercise of an option, such election to be made not less than six
months prior to such exercise and which election may be revoked only upon six
months prior written notice.
17. RESTRICTIONS ON ISSUANCE OF SHARES.
(a) Notwithstanding the provisions of Section 9 hereof, the
Company may delay the issuance of shares covered by the exercise of an option or
SAR and the delivery of a certificate for such shares until one of the following
conditions shall be satisfied:
(i) The shares with respect to which such option or
SAR has been exercised are at the time of the issue of such shares
effectively registered or qualified under applicable Federal and state
securities acts now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an
opinion, which opinion shall not be unreasonably conditioned or
withheld, that such shares are exempt from registration and
qualification under applicable Federal and state securities acts now in
force or as hereafter amended.
(b) It is intended that all exercises of options and SARs
shall be effective, and the Company shall use its best efforts to bring about
compliance with the above conditions, within a reasonable time, except that the
Company shall be under no obligation to qualify shares or to cause a
registration statement or a post-effective amendment to any registration
statement to be prepared for the purpose of covering the issue of shares in
respect of which any option may be exercised, except as otherwise agreed to by
the Company in writing.
18. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT
REGISTRATION. Unless the shares to be issued upon exercise of an option or SAR
granted under the Plan have been effectively registered under the Securities Act
of 1933, as amended (the "1933 Act"), the Company shall be under no obligation
to issue any shares covered by any option or SAR unless the person who exercises
such option, in whole or in part, shall give a written representation and
undertaking to the Company which is satisfactory in form and scope to counsel
for the Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option or SAR for his or her own account as an investment and
not with a view to, or for sale in connection with, the distribution of any such
shares, and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer
under the 1933 Act, or any
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other applicable law, and that if shares are issued without such registration, a
legend to this effect may be endorsed upon the securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an option or SAR shall have been exercised, or to qualify
any such shares for exception from the 1933 Act or other applicable statutes,
then the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein-
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
19. LOANS. At the discretion of the Board, the Company may loan to the
optionee some or all of the purchase price of the shares acquired upon exercise
of an option granted under the Plan.
20. MODIFICATION OF OUTSTANDING OPTIONS AND SARS. Subject to
limitations contained herein, the Board may authorize the amendment of any
outstanding option or SAR with the consent of the grantee when and subject to
such conditions as are deemed to be in the best interests of the Company and in
accordance with the purposes of the Plan.
21. APPROVAL OF STOCKHOLDERS. The Plan was approved by a majority vote
of the stockholders of the Company voting in person or by proxy at the Company's
1996 Annual Meeting of Stockholders. The Plan became effective on July 10, 1996
by resolution of the Board. The Plan was amended by the Board on October 8,
1998.
22. TERMINATION AND AMENDMENT OF PLAN. Unless sooner terminated as
herein provided, the Plan shall terminate on July 9, 2006. The Board may at any
time terminate the Plan or make such modification or amendment thereof as it
deems advisable; provided, however, that (i) the Board may not, without approval
by a majority vote of the stockholders of the Company, increase the maximum
number of shares for which options and SARs may be granted or change the
designation of the class of persons eligible to receive options and SARs under
the Plan, and (ii) anysuch modification or amendment of the Plan shall be
approved by a majority vote of the stockholders of the Company to the extent
that such stockholder approval is necessary to comply with applicable provisions
of the Code, rules promulgated pursuant to Section 16 of the Exchange Act,
applicable state law, or applicable National Association of Securities Dealers,
Inc. or exchange listing requirements. Termination or any modification or
amendment of the Plan shall not, without the consent of an optionee, affect his
or her rights under an option or SAR theretofore granted to him or her.
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23. LIMITATION OF RIGHTS IN THE UNDERLYING SHARES. A holder of an
option or SAR shall not be deemed for any purpose to be a stockholder of the
Company with respect to such option or SAR except to the extent that such option
or SAR shall have been exercised with respect thereto and, in addition, a stock
certificate shall have been issued theretofore and delivered to the holder.
24. NOTICES. Any communication or notice required or permitted to be
given under the Plan shall be in writing, and mailed by registered or certified
mail or delivered by hand, if to the Company, to its principal place of
business, attention: Chairman, and, if to the holder of an option or SAR, to the
address as appearing on the records of the Company.
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EXHIBIT 10.29
KELLSTROM INDUSTRIES, INC. 1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of the Kellstrom Industries, Inc. 1997 Stock Option Plan
(the "Plan") is to promote the interests of Kellstrom Industries, Inc., a
Delaware corporation (the "Company"), and its stockholders by strengthening the
Company's ability to attract and retain competent employees, to make service on
the Board of Directors of the Company (the "Board") more attractive to present
and prospective non-employee directors of the Company and to provide a means to
encourage stock ownership and proprietary interest in the Company by officers,
non-employee directors and valued employees and other individuals upon whose
judgment, initiative and efforts the financial success and growth of the Company
largely depend. The Plan became effective on October 27, 1997, by resolution of
the Board, and was amended by the Board on each of April 9, 1998 and October 8,
1998. The Plan was ratified by a majority vote of the stockholders of the
Company at its 1998 Annual Meeting of Stockholders.
2. STOCK SUBJECT TO THE PLAN.
(a) The total number of shares of the authorized but unissued or
treasury shares of the common stock, $.001 par value per
share, of the Company ("Common Stock") for which options may
be granted under the Plan shall be One Million (1,000,000),
which shares may be of any class of Common Stock; provided,
however, that such number of shares may from time to time be
reduced to the extent that a corresponding number of issued
and outstanding shares of Common Stock are purchased by the
Company and set aside for issue upon the exercise of options.
(b) If an option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in
full, the unpurchased shares subject thereto shall again be
available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the
Plan may be subject to such restrictions on transfer,
repurchase rights or other restrictions as shall be determined
by the Board.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board. No member of the Board
shall act upon any matter exclusively affecting an option granted or to be
granted to himself or herself under the Plan. The decision of the Board as to
all questions of interpretation and application of the Plan shall be final,
binding and conclusive on all persons. The Board may, in its sole discretion,
grant options to purchase shares of Common Stock and issue shares upon exercise
of such options, as provided in the Plan. The Board shall have authority,
subject to the express provisions of the Plan, to construe the respective option
agreements and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
<PAGE> 2
option agreements, which may but need not be identical, and to make all other
determinations in the judgment of the Board necessary or desirable for the
administration of the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the manner and to the extent it shall deem expedient to carry the Plan into
effect and shall be the sole and final judge of such expediency. No director
shall be liable for any action or determination made in good faith. The Board
may, in its discretion, delegate its power, duties and responsibilities to a
committee (the "Committee"), consisting of two or more members of the Board. If
a Committee is so appointed, all references to the Board in Sections 3, 4, 8, 9
and 10 hereof shall mean and relate to such Committee, unless the context
otherwise requires. The membership of the Committee shall be constituted so as
to comply at all times with the then applicable requirements for an "outside
director" under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations thereunder and as a "Non-Employee Director"
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Committee shall serve at the pleasure of the
Board and shall have the powers designated herein and such other powers as the
Board may from time to time confer upon it.
4. TYPE OF OPTIONS.
Options granted pursuant to the Plan shall be authorized by action of
the Board and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Code, or non-qualified options which are not
intended to meet the requirements of Section 422 of the Code, the designation to
be in the sole discretion of the Board. Options designated as incentive stock
options that fail to continue to meet the requirements of Section 422 of the
Code shall be redesignated as non-qualified options automatically on the date of
such failure to continue to meet the requirements of Section 422 of the Code
without further action by the Board.
5. ELIGIBILITY.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or "subsidiaries"), as defined in Section 424 of the
Code and the Treasury Regulations promulgated thereunder (the "Regulations").
Directors who are not otherwise employees of the Company or a subsidiary shall
not be eligible to be granted incentive stock options pursuant to the Plan.
Options designated as nonqualified options may be granted to (i) officers and
key employees of the Company or of any of its subsidiaries, or (ii) agents and
directors of and consultants to the Company, whether or not otherwise employees
of the Company.
In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Board shall take into account the recommendation of the
Company's Chairman, the position and responsibilities of the individual being
considered, the nature and value to the Company or its subsidiaries of his or
her service and accomplishments, his or her present and potential contribution
to the success of the Company or its subsidiaries, and such other factors as the
Board may deem relevant.
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6. RESTRICTIONS ON INCENTIVE STOCK OPTIONS.
Incentive stock options (but not non-qualified options) granted under
this Plan shall be subject to the following restrictions:
(a) LIMITATION ON NUMBER OF SHARES. The aggregate fair market
value of the shares of Common Stock with respect to which
incentive stock options are granted, determined as of the date
the incentive stock options are granted, exercisable for the
first time by an individual during any calendar year shall not
exceed $100,000. If an incentive stock option is granted
pursuant to which the aggregate fair market value of shares
with respect to which it first becomes exercisable in any
calendar year by an individual exceeds such $100,000
limitation, the portion of such option which is in excess of
the $100,000 limitation, and any such options issued
subsequently in the same calendar year, shall be treated as a
non-qualified option pursuant to Section 422(d)(1) of the
Code. In the event that an individual is eligible to
participate in any other stock option plan of the Company or
any parent or subsidiary of the Company which is also intended
to comply with the provisions of Section 422 of the Code, such
$100,000 limitation shall apply to the aggregate number of
shares for which incentive stock options may be granted under
this Plan and all such other plans.
(b) TEN PERCENT (10%) STOCKHOLDER. If any employee to whom an
incentive stock option is granted pursuant to the provisions
of this Plan is on the date of grant the owner of stock (as
determined under Section 424(d) of the Code) possessing more
than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the
Company, then the following special provisions shall be
applicable to the incentive stock options granted to such
individual:
(i) The option price per share subject to such incentive
stock options shall be not less than 110% of the fair
market value of the stock determined at the time such
option was granted; and
(ii) The incentive stock option shall have a term expiring
not more than five (5) years from the date of the
granting thereof.
(c) In determining the fair market value under this Section 6, the
provisions of Section 9(c) hereof shall apply.
7. LIMITATION ON GRANT.
Notwithstanding any other provision of this Plan, and in addition to
any other requirements of this Plan, the aggregate number of shares of Common
Stock subject to options granted to any one optionee under the Plan may not
exceed 500,000 during any calendar year, subject to adjustment as provided in
Section 14 hereof.
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8. OPTION AGREEMENT.
Each option shall be evidenced by an agreement (the "Agreement") duly
executed on behalf of the Company and by the grantee to whom such option is
granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board, provided that options designated as incentive stock options shall
meet all of the conditions for incentive stock options as deemed in Section 422
of the Code. No option shall be granted within the meaning of the Plan and no
purported grant of any option shall be effective until the Agreement shall have
been duly executed on behalf of the Company and the optionee. More than one
option may be granted to an individual.
9. OPTION PRICE.
(a) The option price or prices of shares of Common Stock for
options designated as non-qualified stock options shall be as
determined by the Board, provided, however, in no event shall
such price be less than the fair market value of the Common
Stock (as determined in accordance with clause (c) below)
subject to such options on the day of the grant.
(b) Subject to the conditions set forth in Section 6(b) hereof,
the option price or prices of shares of Common Stock for
options designated as incentive stock options shall be at
least the fair market value of such Common Stock at the time
the option is granted as determined by the Board in accordance
with clause (c) below.
(c) If the Common Stock is then listed on any national securities
exchange, the fair market value shall be the mean between the
high and low sales prices, if any, on the largest such
exchange on the date of the grant of the option or, if none,
shall be determined by taking a weighted average of the means
between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in
accordance with Regulations Section 25.2512-2. If the Common
Stock is not then listed on any such exchange, the fair market
value shall be the mean between the closing "Bid" and the
closing "Ask" prices, if any, as reported in the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") for the date of the grant of the option, or, if
none, shall be determined by taking a weighted average of the
means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in
accordance with Regulations Section 25.2512-2. If the Common
Stock is not then either listed on any such exchange or quoted
in NASDAQ, the fair market value shall be the mean between the
average of the "Bid" prices, if any, as reported in the
National Daily Quotation Service for the date of the grant of
the option, or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest
sales on the nearest date before and the nearest date after
the date of grant
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in accordance with Regulations Section 25.2512-2. If the fair
market value of the Common Stock cannot be determined under
the preceding three sentences, it shall be determined in good
faith by the Board in accordance with the Regulations
promulgated under Section 422 of the Code.
10. MANNER OF PAYMENT, MANNER OF EXERCISE.
(a) Options granted under the Plan may provide for the payment of
the exercise price by delivery of (i)cash or a check payable
to the order of the Company in an amount equal to the exercise
price of such options, (ii) shares of Common Stock owned by
the optionee having a fair market value equal in amount to the
exercise price of such options, or (iii) any combination of
(i) and (ii); provided, however, that payment of the exercise
price by delivery of shares of Common Stock owned by such
optionee may be made only upon the condition that such payment
does not result in a charge to earnings for financial
accounting purposes as determined by the Board, unless such
condition is waived by the Board. The fair market value of any
shares of Common Stock which may be delivered upon exercise of
an option shall be determined by the Board in accordance with
Section 9(c) hereof.
(b) To the extent that the right to purchase shares under an
option has accrued and is in effect, options may be exercised
in full at one time or in part from time to time, by giving
written notice, signed by the person or persons exercising the
option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by
payment in full for such shares as provided in subparagraph
(a) above. Upon such exercise, delivery of a certificate for
paid-up non-assessable shares shall be made at the principal
office of the Company to the person or persons exercising the
option at such time, during ordinary business hours, after
three (3) days but not more than ninety (90) days from the
date of receipt of the notice by the Company, as shall be
designated in such notice, or at such time, place and manner
as may be agreed upon by the Company and the person or persons
exercising the option.
11. EXERCISE OF OPTIONS.
Each option granted under the Plan shall, subject to Section 12(b)
hereof, be exercisable at such time or times and during such period as shall be
set forth in the Agreement; provided, however, that no option granted under the
Plan shall have a term in excess of ten (10) years from the date of grant. To
the extent that an option is not exercised when it becomes initially
exercisable, it shall not expire but shall be carried forward and shall be
exercisable, on a cumulative basis, until the expiration of the exercise period.
No partial exercise may be made for less than one hundred (100) full shares of
Common Stock.
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12. TERM OF OPTIONS; EXERCISABILITY.
(a) TERM.
(i) Each option shall expire automatically and without
notice not more than ten (10) years from the date of
the granting thereof, except as (a) otherwise
provided pursuant to the provisions of Section 6(b)
hereof, and (b) earlier termination as herein
provided.
(ii) Except as otherwise provided in this Section 12, an
option granted to any grantee who ceases to perform
services for the Company or one of its subsidiaries
shall terminate three months after the date such
grantee ceases to perform services for the Company or
one of its subsidiaries, or on the date on which the
option expires by its terms, whichever occurs first.
(iii) If the grantee ceases to perform services for the
Company because of resignation by grantee, dismissal
for cause or a breach of any employment agreement by
grantee, such option will terminate on the date the
grantee ceases to perform services for the Company or
one of its subsidiaries.
(iv) If the grantee ceases to perform services for the
Company because the grantee has become permanently
disabled (within the meaning of Section 22(e)(3) of
the Code), such option shall terminate twelve months
after the date such grantee ceases to perform
services for the Company, or on the date on which the
option expires by its terms, whichever occurs first.
(v) In the event of the death of any grantee, any option
granted to such grantee shall terminate twelve months
after the date of death, or on the date on which the
option expires by its terms, whichever occurs first.
(b) EXERCISABILITY.
(i) Except as provided below and subject to Section 12(a)
hereof, an option granted to a grantee who ceases to
perform services for the Company or one of its
subsidiaries shall be exercisable only to the extent
that such option has vested and is in effect on the
date such grantee ceases to perform services for the
Company or one of its subsidiaries.
(ii) Options granted to a grantee who ceases to perform
services for the Company or one of its subsidiaries
because he or she has become permanently disabled (as
defined above) shall be exercisable for a period of
12 months from the date such grantee ceases to
perform services for the Company only with respect to
the number of shares subject to the options which
have vested as of the date the grantee ceases to
perform services for the Company, and may be
exercised by a legal representative on behalf of
the grantee;
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(iii) In the event of the death of any grantee, the options
granted to such grantee shall be exercisable only
with respect to the shares subject to the options
which have vested on the date of death, and may be
exercised by the estate of such grantee, or by any
person or persons who acquired the right to exercise
such options by bequest or inheritance or by reason
of the death of such grantee.
(iv) Notwithstanding the foregoing, the Board may provide,
in its discretion, that a grantee may exercise an
option, in whole or in part, at any time subsequent
to termination of employment or service with the
Company and prior to termination of the option
pursuant to Section 12(a), either subject to or
without regard to any vesting or other limitation on
exercise imposed hereunder.
13. OPTIONS NOT TRANSFERABLE.
The right of any grantee to exercise any option granted to him or her
shall not be assignable or transferable by such grantee other than by will or
the laws of descent. Any option granted under the Plan shall be null and void
and without effect upon the bankruptcy of the grantee to whom the option is
granted, or upon any attempted assignment or transfer except as herein provided,
including without limitation, any purported assignment, whether voluntary or by
operation of law, pledge, hypothecation or other disposition, attachment,
trustee process or similar process, whether legal or equitable, upon such
option.
14. RECAPITALIZATION, REORGANIZATION AND THE LIKE.
In the event that the outstanding shares of Common Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividends payable in capital stock, appropriate
adjustment shall be made in accordance with Section 424(a) of the Code in the
number and kind of shares as to which options may be granted under the Plan and
as to which outstanding options or portions thereof then unexercised shall be
exercisable, to the end that the proportionate interest of the grantee shall be
maintained as before the occurrence of such event; such adjustment in
outstanding options shall be made without change in the total price applicable
to the unexercised portion of such options and with a corresponding adjustment
in the exercise price per share.
Notwithstanding any provisions of the prior paragraph of this Section
14 to the contrary, unless otherwise determined by the Board in its sole
discretion, in the case of any Change in Control (as hereinafter defined) of the
Company, the purchaser(s) of the Company's assets or stock may, in his, her or
its discretion, deliver to the optionee the same kind of consideration that is
delivered to the stockholders of the Company as a result of such Change in
Control, or the
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Board may cancel all outstanding options in exchange for consideration in cash
or in kind, which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities the optionee would have
received had the option been exercised and no disposition of the shares acquired
upon such exercise been made prior to such Change in Control, less the exercise
price therefor. Upon receipt of such consideration, the options shall
immediately terminate and be of no further force and effect. The value of the
stock or other securities the grantee would have received if the option had been
exercised shall be determined in good faith by the Board, and in the case of
shares of Common Stock, in accordance with the provisions of Section 9(c)
hereof.
Notwithstanding anything to the contrary contained in this Plan or the
option agreements executed in connection herewith, upon any Change in Control
under subsection (a), (b) or (c) of the following paragraph, all outstanding
options shall immediately become exercisable. Upon any Change in Control under
subsection (d) of the following paragraph, the Board shall have the power and
right, in its sole discretion, to accelerate the exercisability of any
outstanding options. Upon any acceleration pursuant to this paragraph, any
options or portion thereof originally designated as incentive stock options that
no longer qualify as incentive stock options under Section 422 of the Code as a
result of such acceleration shall be redesignated as non qualified stock
options.
For purposes hereof, a "Change in Control" shall mean:
(a) (i) a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case,
with respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately
thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (ii) a liquidation or
dissolution of the Company or (iii) the sale, lease, exchange
or other disposition of all or substantially all of the assets
of the Company; or
(b) the acquisition by any person, or any two or more persons
acting as a group, and all affiliates of such person or
persons, who prior to such time owned less than fifty percent
(50%) of the combined voting power entitled to vote generally
in the election of directors, of additional voting power in
one or more transactions, or series of transactions, such that
following such transaction or transactions, such person or
group and affiliates beneficially own fifty percent (50%) or
more of the combined voting power entitled to vote generally
in the election of directors; or
(c) individuals who, as of the date hereof, constitute the
Company's Board (as of the date hereof the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at
least a majority of the directors then
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comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member
of the Incumbent Board; or
(d) the acquisition (other than from the Company or its
subsidiaries) by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act,
(excluding, for this purpose, the Company or its subsidiaries,
or any employee benefit plan of the Company or its
subsidiaries) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 19% or more
of either the then outstanding shares of the Company's Common
Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in
the election of directors.
If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board shall
authorize the issuance or assumption of a stock option or stock options in a
transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Board may grant an option or options upon
such terms and conditions as it may deem appropriate for the purpose of
assumption of the old option, or substitution of a new option for the old
option, in conformity with the provisions of such Section 424(a) of the Code and
the Regulations thereunder, and any such option shall not reduce the number of
shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any option, but in the event any adjustment hereunder in the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
15. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any grantee any right with respect to the continuation of his
or her employment by the Company (or any subsidiary) or interfere in any way
with the right of the Company (or any subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the grantee from the
rate in existence at the time of the grant of an option. Whether an authorized
leave of absence, or absence in military or government service, shall constitute
termination of employment shall be determined in accordance with Regulations
Section 1.421-7(h)(2).
16. WITHHOLDING.
The Company's obligation to deliver shares upon the exercise of any
non-qualified option granted under the Plan shall be subject to the option
holder's satisfaction of all applicable
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Federal, state and local income and employment tax withholding requirements. The
Company and optionee may agree to withhold shares of Common Stock purchased upon
exercise of an option to satisfy the above-mentioned withholding requirements;
provided, however, that no such agreement may be made by a grantee who is an
"officer" or "director" within the meaning of Section 16 of the Exchange Act,
except pursuant to a standing election to so withhold shares of Common Stock
purchased upon exercise of an option, such election to be made not less than six
months prior to such exercise and which election may be revoked only upon six
months prior written notice.
17. RESTRICTIONS ON ISSUANCE OF SHARES.
(a) Notwithstanding the provisions of Section 10 hereof, the
Company may delay the issuance of shares covered by the
exercise of an option and the delivery of a certificate for
such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares
effectively registered or qualified under applicable
Federal and state securities acts now in force or as
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion,
which opinion shall not be unreasonably conditioned
or withheld, that such shares are exempt from
registration and qualification under applicable
Federal and state securities acts now in force or as
hereafter amended.
(b) It is intended that all exercises of options shall be
effective, and the Company shall use its best efforts to bring
about compliance with the above conditions, within a
reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration
statement or a post-effective amendment to any registration
statement to be prepared for the purpose of covering the issue
of shares in respect of which any option may be exercised,
except as otherwise agreed to by the Company in writing.
18. PURCHASE FOR INVESTMENT, RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
amended (the "1933 Act"), the Company shall be under no obligation to issue any
shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the 1933 Act, or any
other
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applicable law, and that if shares are issued without such registration, a
legend to this effect may be endorsed upon the securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an option shall have been exercised, or to qualify any
such shares for exception from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
19. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under the Exchange Act
and Section 162(m) of the Code, any ambiguities or
inconsistencies in construction of the Plan shall be
interpreted to give effect to such intention, and if any
provision of the Plan is found not to be in compliance with
Rule 16b-3 or Section 162(m), such provision shall be deemed
null and void to the extent required to permit the Plan to
comply with Rule 16b-3 and Section 162(m). The Committee or
the Board may from time to time adopt rules and regulations
under, and amend, the Plan in furtherance of the intent of the
foregoing.
(b) The Plan shall be administered and interpreted so that all
incentive stock options granted under the Plan will qualify as
incentive stock options under Section 422 of Code. If any
provision of the Plan should be held invalid for the granting
of incentive stock options or illegal for any reason, such
determination shall not affect the remaining provisions
hereof, but instead the Plan shall be construed and enforced
as if such provision had never been included in the Plan.
(c) This Plan shall be governed by the laws of the State of
Delaware.
(d) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
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20. LOANS.
At the discretion of the Board, the Company may loan to the optionee
some or all of the purchase price of the shares acquired upon exercise of an
option granted under the Plan.
21. MODIFICATION OF OUTSTANDING OPTIONS.
Subject to limitations contained herein, the Board may authorize the
amendment of any outstanding option with the consent of the grantee when and
subject to such conditions as are deemed to be in the best interests of the
Company and in accordance with the purposes of the Plan.
22. APPROVAL OF STOCKHOLDERS.
The Plan was approved by a majority vote of the stockholders of the
Company voting in person or by proxy at the Company's 1998 Annual Meeting of
Stockholders. The Plan became effective on October 27, 1997 by resolution of the
Board. The Plan was amended by the Board on each of April 9, 1998 and October 8,
1998.
23. TERMINATION AND AMENDMENT OF PLAN.
Unless sooner terminated as herein provided, the Plan shall terminate
on October 27, 2007. The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
(i) the Board may not, without approval by a majority vote of the stockholders
of the Company, increase the maximum number of shares for which options may be
granted or change the designation of the class of persons eligible to receive
options under the Plan, and (ii) any modification or amendment of the Plan shall
be subject to the approval of the Company's stockholders if such stockholder
approval is necessary to comply with federal or state law (including without
limitation Rule 162(m) of the Code and Rule 16b-3 of the Exchange Act) or
applicable stock exchange or automated quotation system on which the Common
Stock may then be listed. Except to the extent provided in Sections 12 and 14
hereof, termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
theretofore granted to him or her.
24. LIMITATION OF RIGHTS IN THE UNDERLYING SHARES.
A holder of an option shall not be deemed for any purpose to be a
stockholder of the Company with respect to such option except to the extent that
such option shall have been exercised with respect thereto and, in addition, a
stock certificate shall have been issued theretofore and delivered to the
holder. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 14 hereof.
25. NOTICES.
Any communication or notice required or permitted to be given under
the Plan shall be in
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writing, and mailed by registered or certified mail or delivered by hand, if to
the Company, to its principal place of business, attention: Chairman, and, if to
the holder of an option, to the address as appearing on the records of the
Company.
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EXHIBIT 10.30
KELLSTROM INDUSTRIES, INC. 1998 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of the Kellstrom Industries, Inc. 1998 Stock Option Plan
(the "Plan") is to promote the interests of Kellstrom Industries, Inc., a
Delaware corporation (the "Company"), and its stockholders by strengthening the
Company's ability to attract and retain competent employees, to make service on
the Board of Directors of the Company (the "Board") more attractive to present
and prospective non-employee directors of the Company and to provide a means to
encourage stock ownership and proprietary interest in the Company by officers,
non-employee directors and valued employees and other individuals upon whose
judgment, initiative and efforts the financial success and growth of the Company
largely depend. The Plan became effective on November 15, 1998, by resolution of
the Board.
2. STOCK SUBJECT TO THE PLAN.
(a) The total number of shares of the authorized but unissued or
treasury shares of the common stock, $.001 par value per
share, of the Company ("Common Stock") for which options may
be granted under the Plan shall be Two Hundred Fifty Thousand
(250,000), which shares may be of any class of Common Stock;
provided, however, that such number of shares may from time to
time be reduced to the extent that a corresponding number of
issued and outstanding shares of Common Stock are purchased by
the Company and set aside for issue upon the exercise of
options.
(b) If an option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in
full, the unpurchased shares subject thereto shall again be
available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the
Plan may be subject to such restrictions on transfer,
repurchase rights or other restrictions as shall be determined
by the Board.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board. No member of the Board
shall act upon any matter exclusively affecting an option granted or to be
granted to himself or herself under the Plan. The decision of the Board as to
all questions of interpretation and application of the Plan shall be final,
binding and conclusive on all persons. The Board may, in its sole discretion,
grant options to purchase shares of Common Stock and issue shares upon exercise
of such options, as provided in the Plan. The Board shall have authority,
subject to the express provisions of the Plan, to construe the respective option
agreements and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
option agreements, which may but need not be identical, and to make all other
determinations in the judgment of the Board necessary or desirable for the
administration of the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the
<PAGE> 2
manner and to the extent it shall deem expedient to carry the Plan into effect
and shall be the sole and final judge of such expediency. No director shall be
liable for any action or determination made in good faith. The Board may, in its
discretion, delegate its power, duties and responsibilities to a committee (the
"Committee"), consisting of two or more members of the Board. If a Committee is
so appointed, all references to the Board in Sections 3, 4, 7, 8 and 9 hereof
shall mean and relate to such Committee, unless the context otherwise requires.
The membership of the Committee shall be constituted so as to comply at all
times with the then applicable requirements for an "outside director" under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder and as a "Non-Employee Director" under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee shall serve at the pleasure of the Board and shall have the
powers designated herein and such other powers as the Board may from time to
time confer upon it.
4. TYPE OF OPTIONS.
Options granted pursuant to the Plan shall be authorized by action of
the Board and shall be non-qualified options which are not intended to meet the
requirements of Section 422 of the Code.
5. ELIGIBILITY.
Options may be granted to (i) officers and key employees of the Company
or of any of its subsidiaries, or (ii) agents and directors of and consultants
to the Company, whether or not otherwise employees of the Company.
In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Board shall take into account the recommendation of the
Company's Chairman, the position and responsibilities of the individual being
considered, the nature and value to the Company or its subsidiaries of his or
her service and accomplishments, his or her present and potential contribution
to the success of the Company or its subsidiaries, and such other factors as the
Board may deem relevant.
6. LIMITATION ON GRANT.
Notwithstanding any other provision of this Plan, and in addition to
any other requirements of this Plan, the aggregate number of shares of Common
Stock subject to options granted to any one optionee under the Plan may not
exceed 30,000 during any calendar year, subject to adjustment as provided in
Section 13 hereof.
7. OPTION AGREEMENT.
Each option shall be evidenced by an agreement (the "Agreement") duly
executed on behalf of the Company and by the grantee to whom such option is
granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board. No option shall be granted within the meaning of the Plan and no
purported grant of any
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option shall be effective until the Agreement shall have been duly executed on
behalf of the Company and the optionee. More than one option may be granted to
an individual.
8. OPTION PRICE.
(a) The option price or prices of shares of Common Stock shall be
as determined by the Board, provided, however, in no event
shall such price be less than the fair market value of the
Common Stock (as determined in accordance with clause (b)
below) subject to such options on the day of the grant.
(b) If the Common Stock is then listed on any national securities
exchange, the fair market value shall be the mean between the
high and low sales prices, if any, on the largest such
exchange on the date of the grant of the option or, if none,
shall be determined by taking a weighted average of the means
between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in
accordance with Regulations Section 25.2512-2. If the Common
Stock is not then listed on any such exchange, the fair market
value shall be the mean between the closing "Bid" and the
closing "Ask" prices, if any, as reported in the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") for the date of the grant of the option, or, if
none, shall be determined by taking a weighted average of the
means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in
accordance with Regulations Section 25.2512-2. If the Common
Stock is not then either listed on any such exchange or quoted
in NASDAQ, the fair market value shall be the mean between the
average of the "Bid" prices, if any, as reported in the
National Daily Quotation Service for the date of the grant of
the option, or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest
sales on the nearest date before and the nearest date after
the date of grant in accordance with Regulations Section
25.2512-2. If the fair market value of the Common Stock cannot
be determined under the preceding three sentences, it shall be
determined in good faith by the Board.
9. MANNER OF PAYMENT, MANNER OF EXERCISE.
(a) Options granted under the Plan may provide for the payment of
the exercise price by delivery of (i)cash or a check payable
to the order of the Company in an amount equal to the exercise
price of such options, (ii) shares of Common Stock owned by
the optionee having a fair market value equal in amount to the
exercise price of such options, or (iii) any combination of
(i) and (ii); provided, however, that payment of the exercise
price by delivery of shares of Common Stock owned by such
optionee may be made only upon the condition that such payment
does not result in a charge to earnings for financial
accounting purposes as determined by the Board, unless such
condition is waived by the Board. The fair market value of any
shares of Common Stock which may be delivered upon exercise of
an option shall be determined by the Board in accordance with
Section 8(b) hereof.
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<PAGE> 4
(b) To the extent that the right to purchase shares under an
option has accrued and is in effect, options may be exercised
in full at one time or in part from time to time, by giving
written notice, signed by the person or persons exercising the
option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by
payment in full for such shares as provided in subparagraph
(a) above. Upon such exercise, delivery of a certificate for
paid-up non-assessable shares shall be made at the principal
office of the Company to the person or persons exercising the
option at such time, during ordinary business hours, after
three (3) days but not more than ninety (90) days from the
date of receipt of the notice by the Company, as shall be
designated in such notice, or at such time, place and manner
as may be agreed upon by the Company and the person or persons
exercising the option.
10. EXERCISE OF OPTIONS.
Each option granted under the Plan shall, subject to Section 11(b)
hereof, be exercisable at such time or times and during such period as shall be
set forth in the Agreement; provided, however, that no option granted under the
Plan shall have a term in excess of ten (10) years from the date of grant. To
the extent that an option is not exercised when it becomes initially
exercisable, it shall not expire but shall be carried forward and shall be
exercisable, on a cumulative basis, until the expiration of the exercise period.
No partial exercise may be made for less than one hundred (100) full shares of
Common Stock.
11. TERM OF OPTIONS; EXERCISABILITY.
(a) TERM.
(i) Each option shall expire automatically and without
notice not more than ten (10) years from the date of
the granting thereof, except for any earlier
termination as herein provided.
(ii) Except as otherwise provided in this Section 11, an
option granted to any grantee who ceases to perform
services for the Company or one of its subsidiaries
shall terminate three months after the date such
grantee ceases to perform services for the Company or
one of its subsidiaries, or on the date on which the
option expires by its terms, whichever occurs first.
(iii) If the grantee ceases to perform services for the
Company because of resignation by grantee, dismissal
for cause or a breach of any employment agreement by
grantee, such option will terminate on the date the
grantee ceases to perform services for the Company or
one of its subsidiaries.
(iv) If the grantee ceases to perform services for the
Company because the grantee has become permanently
disabled (within the meaning of Section 22(e)(3) of
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<PAGE> 5
the Code), such option shall terminate twelve months
after the date such grantee ceases to perform
services for the Company, or on the date on which the
option expires by its terms, whichever occurs first.
(v) In the event of the death of any grantee, any option
granted to such grantee shall terminate twelve months
after the date of death, or on the date on which the
option expires by its terms, whichever occurs first.
(b) EXERCISABILITY.
(i) Except as provided below and subject to Section 11(a)
hereof, an option granted to a grantee who ceases to
perform services for the Company or one of its
subsidiaries shall be exercisable only to the extent
that such option has vested and is in effect on the
date such grantee ceases to perform services for the
Company or one of its subsidiaries.
(ii) Options granted to a grantee who ceases to perform
services for the Company or one of its subsidiaries
because he or she has become permanently disabled (as
defined above) shall be exercisable for a period of
12 months from the date such grantee ceases to
perform services for the Company only with respect to
the number of shares subject to the options which
have vested as of the date the grantee ceases to
perform services for the Company, and may be
exercised by a legal representative on behalf of the
grantee;
(iii) In the event of the death of any grantee, the options
granted to such grantee shall be exercisable only
with respect to the shares subject to the options
which have vested on the date of death, and may be
exercised by the estate of such grantee, or by any
person or persons who acquired the right to exercise
such options by bequest or inheritance or by reason
of the death of such grantee.
(iv) Notwithstanding the foregoing, the Board may provide,
in its discretion, that a grantee may exercise an
option, in whole or in part, at any time subsequent
to termination of employment or service with the
Company and prior to termination of the option
pursuant to Section 11(a), either subject to or
without regard to any vesting or other limitation on
exercise imposed hereunder.
12. OPTIONS NOT TRANSFERABLE.
The right of any grantee to exercise any option granted to him or her
shall not be assignable or transferable by such grantee other than by will or
the laws of descent. Any option granted under the Plan shall be null and void
and without effect upon the bankruptcy of the grantee to whom the option is
granted, or upon any attempted assignment or transfer except as herein provided,
including without limitation, any purported assignment, whether voluntary or by
operation of law, pledge,
5
<PAGE> 6
hypothecation or other disposition, attachment, trustee process or similar
process, whether legal or equitable, upon such option.
13. RECAPITALIZATION, REORGANIZATION AND THE LIKE.
In the event that the outstanding shares of Common Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividends payable in capital stock, appropriate
adjustment shall be made in accordance with Section 424(a) of the Code in the
number and kind of shares as to which options may be granted under the Plan and
as to which outstanding options or portions thereof then unexercised shall be
exercisable, to the end that the proportionate interest of the grantee shall be
maintained as before the occurrence of such event; such adjustment in
outstanding options shall be made without change in the total price applicable
to the unexercised portion of such options and with a corresponding adjustment
in the exercise price per share.
Notwithstanding any provisions of the prior paragraph of this Section
13 to the contrary, unless otherwise determined by the Board in its sole
discretion, in the case of any Change in Control (as hereinafter defined) of the
Company, the purchaser(s) of the Company's assets or stock may, in his, her or
its discretion, deliver to the optionee the same kind of consideration that is
delivered to the stockholders of the Company as a result of such Change in
Control, or the Board may cancel all outstanding options in exchange for
consideration in cash or in kind, which consideration in both cases shall be
equal in value to the value of those shares of stock or other securities the
optionee would have received had the option been exercised and no disposition of
the shares acquired upon such exercise been made prior to such Change in
Control, less the exercise price therefor. Upon receipt of such consideration,
the options shall immediately terminate and be of no further force and effect.
The value of the stock or other securities the grantee would have received if
the option had been exercised shall be determined in good faith by the Board,
and in the case of shares of Common Stock, in accordance with the provisions of
Section 8(b) hereof.
Notwithstanding anything to the contrary contained in this Plan or the
option agreements executed in connection herewith, upon any Change in Control
under subsection (a), (b) or (c) of the following paragraph, all outstanding
options shall immediately become exercisable. Upon any Change in Control under
subsection (d) of the following paragraph, the Board shall have the power and
right, in its sole discretion, to accelerate the exercisability of any
outstanding options.
For purposes hereof, a "Change in Control" shall mean:
(a) (i) a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case,
with respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately
thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's
then outstanding voting securities, or (ii) a liquidation or
dissolution of the Company or (iii) the sale,
6
<PAGE> 7
lease, exchange or other disposition of all or substantially
all of the assets of the Company; or
(b) the acquisition by any person, or any two or more persons
acting as a group, and all affiliates of such person or
persons, who prior to such time owned less than fifty percent
(50%) of the combined voting power entitled to vote generally
in the election of directors, of additional voting power in
one or more transactions, or series of transactions, such that
following such transaction or transactions, such person or
group and affiliates beneficially own fifty percent (50%) or
more of the combined voting power entitled to vote generally
in the election of directors; or
(c) individuals who, as of the date hereof, constitute the
Company's Board (as of the date hereof the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the
Incumbent Board; or
(d) the acquisition (other than from the Company or its
subsidiaries) by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act,
(excluding, for this purpose, the Company or its subsidiaries,
or any employee benefit plan of the Company or its
subsidiaries) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 19% or more
of either the then outstanding shares of the Company's Common
Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in
the election of directors.
If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board shall
authorize the issuance or assumption of a stock option or stock options, then,
notwithstanding any other provision of the Plan, the Board may grant an option
or options upon such terms and conditions as it may deem appropriate for the
purpose of assumption of the old option, or substitution of a new option for the
old option, and any such option shall not reduce the number of shares otherwise
available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any option, but in the event any adjustment hereunder in the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
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<PAGE> 8
14. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any grantee any right with respect to the continuation of his
or her employment by the Company (or any subsidiary) or interfere in any way
with the right of the Company (or any subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the grantee from the
rate in existence at the time of the grant of an option. Whether an authorized
leave of absence, or absence in military or government service, shall constitute
termination of employment shall be determined in accordance with Regulations
Section 1.421-7(h)(2).
15. WITHHOLDING.
The Company's obligation to deliver shares upon the exercise of any
option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements. The Company and optionee may agree to withhold
shares of Common Stock purchased upon exercise of an option to satisfy the
above-mentioned withholding requirements; provided, however, that no such
agreement may be made by a grantee who is an "officer" or "director" within the
meaning of Section 16 of the Exchange Act, except pursuant to a standing
election to so withhold shares of Common Stock purchased upon exercise of an
option, such election to be made not less than six months prior to such exercise
and which election may be revoked only upon six months prior written notice.
16. RESTRICTIONS ON ISSUANCE OF SHARES.
(a) Notwithstanding the provisions of Section 9 hereof, the
Company may delay the issuance of shares covered by the
exercise of an option and the delivery of a certificate for
such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares
effectively registered or qualified under applicable
Federal and state securities acts now in force or as
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion,
which opinion shall not be unreasonably conditioned
or withheld, that such shares are exempt from
registration and qualification under applicable
Federal and state securities acts now in force or as
hereafter amended.
(b) It is intended that all exercises of options shall be
effective, and the Company shall use its best efforts to bring
about compliance with the above conditions, within a
reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration
statement or a post-effective amendment to any registration
statement to be prepared for the purpose of covering the issue
of shares in respect of which any option may be exercised,
except as otherwise agreed to by the Company in writing.
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<PAGE> 9
17. PURCHASE FOR INVESTMENT, RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
amended (the "1933 Act"), the Company shall be under no obligation to issue any
shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the 1933 Act, or any
other applicable law, and that if shares are issued without such registration, a
legend to this effect may be endorsed upon the securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an option shall have been exercised, or to qualify any
such shares for exception from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
18. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b- 3 promulgated under the Exchange Act,
any ambiguities or inconsistencies in construction of the Plan
shall be interpreted to give effect to such intention, and if
any provision of the Plan is found not to be in compliance
with Rule 16b-3, such provision shall be deemed null and void
to the extent required to permit the Plan to comply with Rule
16b-3. The Committee or the Board may from time to time adopt
rules and regulations under, and amend, the Plan in
furtherance of the intent of the foregoing.
(b) If any provision of the Plan should be held illegal for any
reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and
enforced as if such provision had never been included in the
Plan.
(c) This Plan shall be governed by the laws of the State of Delaware.
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<PAGE> 10
(d) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
19. LOANS.
At the discretion of the Board, the Company may loan to the optionee
some or all of the purchase price of the shares acquired upon exercise of an
option granted under the Plan.
20. MODIFICATION OF OUTSTANDING OPTIONS.
Subject to limitations contained herein, the Board may authorize the
amendment of any outstanding option with the consent of the grantee when and
subject to such conditions as are deemed to be in the best interests of the
Company and in accordance with the purposes of the Plan.
21. TERMINATION AND AMENDMENT OF PLAN.
Unless sooner terminated as herein provided, the Plan shall terminate
on November 15, 2008. The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
any modification or amendment of the Plan shall be subject to the approval of
the Company's stockholders if such stockholder approval is necessary to comply
with federal or state law (including without limitation Rule 16b-3 of the
Exchange Act) or applicable stock exchange or automated quotation system on
which the Common Stock may then be listed. Except to the extent provided in
Sections 11 and 13 hereof, termination or any modification or amendment of the
Plan shall not, without the consent of an optionee, affect his or her rights
under an option theretofore granted to him or her.
22. LIMITATION OF RIGHTS IN THE UNDERLYING SHARES.
A holder of an option shall not be deemed for any purpose to be a
stockholder of the Company with respect to such option except to the extent that
such option shall have been exercised with respect thereto and, in addition, a
stock certificate shall have been issued theretofore and delivered to the
holder. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 13 hereof.
23. NOTICES.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: Chairman, and, if to the holder of an option, to the address as
appearing on the records of the Company.
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<PAGE> 1
EXHIBIT 10.38
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is entered into as of
February 27, 1998, between Integrated Technology Holdings Corp., a Delaware
corporation, having its principal place of business at 14000 Northwest 4th
Street, Sunrise, Florida 33325 (the "COMPANY"), and Gideon Vaisman, an
individual residing at 22 Woodland Drive, Tenafly, New Jersey 07670 (the
"EMPLOYEE").
W I T N E S S E T H:
WHEREAS, Integrated Technology Corp. ("ITC"), a New Jersey
corporation, and the Employee, the owner of all the outstanding capital stock
of ITC, on the one hand, and Kellstrom Industries, Inc., a Delaware
corporation, having its principal place of business at 14000 Northwest 4th
Street, Sunrise, Florida 33325 ("KELLSTROM"), and the Company, a wholly-owned
subsidiary of Kellstrom, on the other hand, have entered into a Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), pursuant to
which Kellstrom has agreed to acquire, through the Company, substantially all
of the assets of ITC;
WHEREAS, the Employee is a principal executive of ITC with unique and
special skills, and as a material inducement to Kellstrom to enter into the
Purchase Agreement, the Employee has agreed to be employed by the Company
pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Employee hereby agree as follows:
1. DEFINITIONS.
(a) The "BOARD" shall mean the Board of Directors of the Company.
(b) The "EFFECTIVE DATE" shall mean the date that the transactions
contemplated by the Purchase Agreement are consummated, it being understood and
agreed that this Agreement and all of the obligations of each of the parties
hereto shall terminate and be of no force or effect in the event that such
transactions are not consummated.
(c) The "EMPLOYMENT PERIOD" shall mean the period commencing on the
Effective Date and ending on the third anniversary of the Effective Date.
(d) The "EXECUTIVE COMMITTEE" shall mean the Executive Committee of
the Board of Directors of Kellstrom.
(e) "GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time.
2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the
Employee, and the Employee hereby agrees to be employed by the Company, for the
duration of
<PAGE> 2
the Employment Period and pursuant to the other terms and conditions provided
herein. This Agreement shall terminate at the end of the Employment Period,
unless earlier terminated under Section 5 below.
3. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES. During the Employment Period the Employee
shall serve as a Senior Vice President of the Company. The Employee shall
perform such duties as the Board or Chief Executive Officer of the Company
shall from time to time determine, consistent with his position as a Senior
Vice President. In the performance of his duties, the Employee shall comply
with the stated policies of the Company.
(b) RELOCATION. The principal place of employment of the Employee
initially shall be at 776 Grand Avenue, Ridgefield, New Jersey. The Company may
relocate all or part of its operations to a location outside of New Jersey
following the Closing of the Purchase Agreement, in which case, it shall
provide the Principal during the term of the Employment Agreement (including
any renewals thereof) with a New Jersey office and support personnel
commensurate with his operational needs.
(c) COMPENSATION.
(i) BASE SALARY. The Employee's annual salary (the "SALARY") shall
be at the rate of $200,000 per annum, payable twice monthly, for the duration
of the Employee's employment hereunder. During the Employment Period, the
Employee's Salary may be reviewed and changed by the Board of Directors at its
sole discretion; however, the Company shall not pay the Employee a Salary less
than such amount during the Employment Period.
(ii) ANNUAL COMPANY BONUS. Subject to paragraph (F) below, for
each calendar year commencing with the year ending December 31, 1998, during
which the Employee is employed by the Company:
(A) if Kellstrom has Net Income (as hereinafter defined) for such
year of an amount equal to Kellstrom's target net income as determined in the
sole discretion of the Board of Directors of Kellstrom (or the Executive
Committee) for such year (the "TARGET"), the Employee shall be entitled to a
bonus in the amount equal to $100,000.
(B) if Kellstrom has Net Income for such year more than the Target
and less than 150% of the Target, the Employee shall be entitled to a bonus as
calculated below:
B = $100,000 + [$100,000 x (NI - T)]
----------
T
<PAGE> 3
where:
B = the bonus earned in such year.
T = the Target for such year.
NI = the actual Net Income of Kellstrom for such year as
determined in accordance with GAAP.
(C) if Kellstrom has Net Income for such year of 150% of the
Target or more, the Employee shall be entitled to a bonus of $150,000.
(D) if Kellstrom has Net Income for such year of less than 50% of
the Target, the Employee shall not be entitled to a bonus.
(E) if Kellstrom has Net Income for such year of at least 50% of
the Target but less than the Target, the Employee shall be entitled to a bonus
as calculated below:
B = $100,000 - [$100,000 x 2 X (T - NI)]
--------------
T
where:
B = the bonus earned in such year.
T = the Target for such year.
NI= the actual Net Income of Kellstrom for such year as determined
in accordance with GAAP.
(F) for any calendar year regarding which the Employee is entitled
to a Bonus under the foregoing provisions of this clause (ii) but during which
year the Employee did not work the entire calendar year, the Employee shall be
entitled to a Bonus equal to the product of the Bonus, as calculated under the
foregoing provisions, multiplied by a fraction, the numerator of which is the
number of months during such calendar year that the Employee was employed with
the Company and the denominator of which is twelve.
(d) STOCK OPTIONS. Under the terms of the Option Agreement, in the
form attached hereto as EXHIBIT A, as soon as practicable following the
Effective Date, the Company shall issue to the Employee options to purchase
150,000 shares of Kellstrom's common stock, which options shall be exercisable
at a price equal to the average closing price of the Kellstrom common stock on
<PAGE> 4
the five trading days prior to the date hereof and which shall vest with the
Employee over three years in three equal annual installments.
(e) BENEFITS. In addition to the compensation payable to the Employee
as set forth in Section 3(c) above, during the Employment Period the Employee
shall be eligible for similar health insurance, pension plan, incentive, stock
option grants, savings, welfare (including without limitation medical and
dental insurance) plans, practices, policies and programs on or after the
Effective Date applicable generally to the executive vice presidents of
Kellstrom.
(f) VACATION. During the Employment Period, the Employee shall be
entitled to paid vacation in accordance with the policies and practices
applicable on or after the Effective Date to other executive vice presidents of
Kellstrom; PROVIDED that the Employee shall be entitled to a minimum of three
(3) weeks of paid vacation per full calendar year (pro rated if the Employee
serves for less than the full calendar year).
(g) HOLIDAYS AND SICK LEAVE. The Employee shall be entitled to all
holidays that are prescribed by the Company's policies and practices. The
Employee shall be entitled to six days paid sick leave per year. Unused sick
leave days may not be carried over to the following calendar year or years.
(h) AUTOMOBILE. During the Employment Period, the Company shall make
available to the Employee the current Mercedes Benz 400 SEL automobile used by
the Employee through the termination of the current lease agreement covering
such automobile. Following the termination of such lease, during the Employment
Period, the Company shall make available to the Employee an automobile similar
to the automobiles currently made available to other executive vice presidents
of Kellstrom, and the Company shall pay or reimburse the Employee for all
expenses of insurance, maintenance and operation of such automobile.
(i) EXPENSES. The Company shall pay or reimburse the Employee for
reasonable expenses incurred or paid by him during the Employment Period in the
performance of his services under this Agreement upon presentation of expense
statements or such other supporting information as may be required for other
officers of Kellstrom in accordance with Kellstrom's policy.
4. EMPLOYEE'S OBLIGATIONS AND REPRESENTATIONS; INDEMNITY.
(a) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote substantially all of his attention and time during normal business
hours to the business and affairs of the Company and to perform faithfully and
efficiently the responsibilities assigned to the Employee by the Company.
<PAGE> 5
(b) The Employee represents and warrants to the Company that there are
no agreements or arrangements, whether written or oral, in effect which would
prevent the Employee from rendering exclusive service to the Company during the
Employment Period. The Employee further represents, warrants and agrees with
the Company that as of the Effective Date he has not made and will not make
during the Employment Period any commitment or do any act in conflict with this
Agreement, or take any action that might divert from the Company any
opportunity which would be in the scope of any present or future business of
the Company or any subsidiary thereof.
(c) The Company shall indemnify and hold harmless the Employee from
all claims, losses, liabilities, damages and causes of action relating to or
arising out of the Employee's performance, duties and responsibilities to, for,
or on behalf of the Company to the extent provided by the Company's certificate
of incorporation and by-laws.
(d) All transactions between the Company and FSI shall be approved by
an officer of Kellstrom Industries, Inc.
5. TERMINATION.
(a) DEATH. This Agreement shall terminate automatically upon the
Employee's death. If the Employee's employment is terminated by reason of the
Employee's death, the Employee's legal representative shall be entitled to
receive (i) the Employee's full Salary through the last day of the month in
which his death occurs, payable as and when such Salary would otherwise have
been payable to the Employee, (ii) an amount equal to the Employee's Annual
Company Bonus, pro rated through the date of the Employee's death in accordance
with Section 3(c)(ii)(F), payable when such bonus would otherwise have been
paid to the Employee and (iii) the reimbursement of reasonable expenses
incurred by the Employee prior to his death.
(b) DISABILITY. If the Company, in consultation with an independent
physician, determines in good faith that the Employee has a "disability" (as
defined below), it may give the Employee written notice of its intention to
terminate the Employee's employment. In such event, the Employee's employment
with the Company shall terminate effective on the 30th day after receipt by the
Employee of such notice. No such notice of termination by reason of disability
shall be given until the Employee has experienced a period of two consecutive
months of disability and the disability is continuing. The notice of
termination shall not be effective if the Employee returns to full-time
performance of his duties prior to the expiration of the 30-day notice period.
For purposes of this Agreement, "DISABILITY" shall mean a physical or mental
condition which, two months after its commencement, is determined by an
independent physician selected by the Company to be a total and permanent
condition which substantially prevents Employee from performing the services to
be provided by him hereunder. The
<PAGE> 6
Employee shall be entitled to all compensation and benefits provided for under
this Agreement during the two-month waiting period for the disability
determination and during the 30-day notice of termination period. In the event
that the Company provides long-term disability benefits for the Employee, such
benefits shall not commence until after the employment of the Employee has been
terminated and the Company has ceased paying the Employee compensation pursuant
to the foregoing sentence. If the Employee's employment is terminated by reason
of the Employee's disability, this Agreement shall terminate without further
obligations to the Employee or the Employee's legal representatives under this
Agreement, other than those obligations accrued, earned or vested by the
Employee as of the date of the termination, including, without limitation, an
amount equal to the Employee's annual Company Bonus, pro rated through the date
of termination in accordance with Section 3(c)(ii)(F), payable when such bonus
would otherwise have been paid to the Employee.
(c) CAUSE. During the Employment Period, the Company may terminate the
Employee's employment for "cause" as defined below. For purposes of this
Agreement, "CAUSE" shall mean:
(i) an act or acts of fraud, embezzlement or any other act that
would constitute a felony under the laws of the state of Florida taken by the
Employee;
(ii) repeated violations by the Employee of his obligations under
Section 4(a) of this Agreement which are not remedied within a reasonable
period of time after receipt of written notice from the Company of such
violations or a breach by the Employee of his representations or obligations
under any of Section 4(b), 6, 7 or 8 of this Agreement;
(iii) the indictment of the Employee of a crime, where the Company
reasonably believes it would impair the Employee's ability to perform his
services under this Agreement; or
(iv) if (x) the PBT (as defined in APPENDIX X to SCHEDULE 2.03(A)
of the Purchase Agreement) of the RR-JT8 Division in any Payment Year is less
than 50% of the Target amount for such Payment Year.
If the Employee's employment is terminated for cause, this Agreement shall
terminate without further obligations to the Employee under this Agreement,
other than those obligations accrued, earned or vested by the Employee as of
the date of the termination. The Employee shall not be entitled to any Bonus in
respect of the year of termination in the event the Employee's employment is
terminated for cause pursuant to this Section 5(c).
<PAGE> 7
(d) GOOD REASON. During the Employment Period, the Employee may
terminate his employment for "good reason" as defined below. For purposes of
this Agreement, "GOOD REASON" shall mean:
(i) the assignment to the Employee of any duties materially
inconsistent with Employee's position, duties and responsibilities as set forth
in Section 3(a) of this Agreement or any action by the Company which results in
a material diminution in such position, authority, duties or responsibilities,
excluding for this purpose (x) any isolated, insubstantial and inadvertent
action by the Company which is not taken in bad faith, (y) the relocation of
the Business after the Closing Date and (z) any action by the Company or any
circumstances which are remedied by the Company within sixty (60) days of
receiving written notice thereof by the Employee particularly describing the
actions or circumstances; or
(ii) any failure by the Company to comply with any of the
provisions of Sections 3(c) through 3(i) of this Agreement regarding the
Employee's compensation, benefits, vacation, holidays and sick leave other than
an isolated, insubstantial and inadvertent action by the Company which is not
taken in bad faith and any action of the Company or any circumstances which are
remedied by the Company within sixty (60) days of receiving written notice
thereof by the Employee particularly describing the actions or circumstances;
or
(iii) the Company requiring the Employee to be based at any office
or location other than that described in Section 3(b) of this Agreement, except
for travel reasonably required in the performance of Employee's
responsibilities.
In the event that the Employee terminates his employment for good reason as
defined in this Section 5(d), the Company shall (i) pay the Employee's Salary
through the remainder of the term of this Agreement, payable when the Salary
would otherwise have been paid to the Employee; (ii) continue to pay the
Employee an amount equal to the Employee's Annual Company Bonus under Section
3(c)(ii) above, through the remainder of the term of the Agreement, payable
when such bonus would otherwise have been paid to the Employee; and (iii) to
the extent permissible under Kellstrom's medical plans then in effect, continue
to provide the Employee with medical insurance in effect at the time of the
termination of the employment.
(e) VOLUNTARY TERMINATION. The Employee agrees to provide the Company
with 15 days' notice prior to voluntarily terminating his employment (other
than for "good reason" as defined in Section 5(d) above). At the end of such
15-day period, this Agreement shall terminate automatically and the Company
shall have no further obligations to the Employee under this Agreement, other
than those obligations accrued, earned or vested by the Employee as of the date
of the termination. The Employee shall not be entitled to any annual Company
Bonus in respect of the year of termination in the event the Employee's
employment is terminated pursuant to this Section 5(e).
<PAGE> 8
(f) ADDITIONAL PAYMENTS UNDER PURCHASE AGREEMENT. Anything contained
in this Agreement to the contrary notwithstanding, the termination of this
Agreement for any reason, whether pursuant to the terms and conditions of this
Agreement or otherwise, at law or in equity, prior to its expiration by its
terms shall not affect the Employee's right to receive and retain all
Additional Payments to which he is entitled under the Purchase Agreement,
except to the extent specifically set forth therein.
6. CONFIDENTIALITY.
(a) ACKNOWLEDGEMENT AND PURPOSES. The Employee acknowledges that, with
respect to ITC, he has learned, developed and had access to, and with respect
to the Company and Kellstrom during the Employment Period, he will learn,
develop and have access to, Confidential Information relating to the business
and affairs of the Company and Kellstrom. As used in this Agreement,
"CONFIDENTIAL INFORMATION" shall mean all trade secrets and other confidential
information concerning the business and affairs of ITC, the Company and
Kellstrom 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, but shall not include information
contained in books and records constituting "Excluded Assets," as defined in
the Purchase Agreement.
The Company, ITC and Kellstrom are engaged in a highly competitive
business; their competitive position depends in great measure upon the ability
to develop or acquire and maintain the confidentiality of Confidential
Information; and they have expended and are likely to continue to expend
considerable efforts and resources in the development or acquisition of
Confidential Information. Based upon the foregoing, the Employee recognizes
that the unauthorized disclosure of Confidential Information in violation of
the terms hereof is likely to result in serious and irrevocable harm to the
Company and Kellstrom.
<PAGE> 9
(b) RESTRICTIONS ON THE USE OF CONFIDENTIAL INFORMATION. The Employee
agrees and covenants as follows:
(i) All documents and other materials made or compiled by or made
available to the Employee prior to the date hereof by ITC or during the
Employment Period by the Company and Kellstrom and any copies thereof, whether
or not containing Confidential Information, are and shall be the property of
the Company and Kellstrom, respectively and shall, at the request of the
Company or Kellstrom, be delivered to the Company or Kellstrom by the Employee
immediately upon the conclusion of his engagement as an Employee. Except as
required in connection with the services to be performed hereunder, the
Employee agrees not to remove from the Company's premises, without permission,
any papers or drawings belonging to the Company, including those prepared or
worked on by him. The Employee will treat as trade secrets all Confidential
Information acquired by him prior to the date hereof with respect to ITC or
during the Employment Period with respect to the Company and Kellstrom, and
shall not at any time use any Confidential Information for his own benefit nor
disclose it or any part of it to any other person, firm or corporation not
connected with the Company (A) without the prior written consent of the Company
or (B) unless such disclosure is required by law or in response to a legal
order or (C) unless such Confidential Information has become generally
available to the public other than through the breach the Employee of the terms
hereof.
(ii) All ideas, reports, and other creative works conceived by the
Employee during the Employment Period and relating to Confidential Information,
shall be disclosed to the Company and shall be the sole property of the
Company.
7. NON-COMPETITION. The Employee agrees that during the Employment
Period and for two (2) years after the Employment Period he will not, anywhere
in the world, directly or indirectly, engage or participate or make any
financial investments in or become employed by or render advisory or other
services to or for any person, firm or corporation, or in connection with any
business activity which directly or indirectly is in competition with any of
the business operations or activities of the Company or Kellstrom as of the
date of termination of his employment, or of the Company, Kellstrom or ITC for
any time prior thereto.
Notwithstanding anything in this Agreement to the contrary, (a) in the
event that it is finally determined under the procedure set forth in Section
2.03 of the Purchase Agreement, or agreed to by Kellstrom that Kellstrom is
required to pay to Company the Additional Payments (as defined in Schedule 2.03
to the Purchase Agreement), and Kellstrom is in default of such payments, or
(b) if Employee leaves the employ of the Company for good reason (as defined in
Section 5(e) of this Agreement), the non-competition provisions set forth
herein shall terminate.
Nothing herein contained, however, shall restrict the Employee from:
<PAGE> 10
(x) 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 the Company or Kellstrom and does not involve the record or
beneficial ownership of more than 2% of the equity interests in such business
or enterprise;
(y) owning shares of capital stock of FSI, currently owned by the
Employee, and serving as a director or as an officer of FSI so long as the
Employee's acting as a shareholder, director and officer of FSI do not,
together with any activities under clause (z) below, materially interfere with
the Employee's duties and obligations under this Agreement and Employee shall
not invest in any Debt Financing (as defined in the Purchase Agreement) or
Equity or Equity Equivalent Securities (as defined in the Purchase Agreement)
of FSI other than his ownership of shares of capital stock of FSI as of the
date hereof, without the prior written consent of Kellstrom; and
(z) owning an equity interest (without otherwise being materially
involved so long as such non-material involvement, together with any activities
under clause (y) above, does not materially interfere with the Principal's
duties and obligations under this Agreement) in any entity which owns rights to
the so-called "AirFoil Recast" technology so long as such entity is not
utilizing the so-called "AirFoil Recast" technology in connection with the
refurbishing or repair of jet, turbo prop or other aircraft engines or jet,
turbo prop or other aircraft engine parts, or any other aircraft parts.
Termination of this Agreement or the provisions of this Section 7
shall in no way affect or diminish the obligations of the Employee pursuant to
the non-competition requirements contained in the Purchase Agreement.
8. RESTRICTION ON SOLICITATION. The Employee agrees that during the
Employment Period and for two (2) years thereafter he will not:
(i) directly or indirectly solicit, raid, entice or induce any
employee of the Company or Kellstrom to become an employee of any person, firm
or corporation which is, directly or indirectly, in competition with the
business or activities of the Company or Kellstrom;
(ii) directly or indirectly approach any such employee for these
purposes;
(iii) authorize or knowingly approve the taking of such actions by
other persons on behalf of any such person, firm or corporation, or assist any
such person, firm or corporation in taking such action; or
<PAGE> 11
(iv) directly or indirectly solicit, raid, entice or induce any
person, firm or corporation who or which on the date hereof is, or at the time
during his employment with the Company or Kellstrom shall be, a customer of the
Company or Kellstrom to become a customer for the same or similar products
which it purchased from the Company or Kellstrom, of any other person, firm or
corporation, and the Employee shall not approach any such customer for such
purpose or authorize or knowingly approve the taking of such actions by any
other person.
9. REMEDIES. The Employee hereby acknowledges that in the event of a
breach or threatened breach by him of the provisions of Section 6, 7 or 8 of
this Agreement, the Company or Kellstrom would suffer irreparable harm for
which there would be no adequate remedy at law. Accordingly, the Employee
agrees that in such event, in addition to any other remedies which the Company
or Kellstrom may have in law or in equity for money damages or other relief,
the Company or Kellstrom shall be entitled to temporary and/or injunctive
relief, without the necessity of proving damages, to enforce the provisions
hereof.
10. BOARD OF DIRECTORS. The Employee shall be elected as a member of the
Board and to the executive committee of the Company, if any, during the term
(including any renewals thereof) of this Agreement. All material decisions
regarding the Business (as defined in the Purchase Agreement) of the Company,
including the possible relocation of the Business following the Closing, shall
be taken by the Board and executive committee of the Company thereof, if any.
In addition, the parties anticipate, without intending to be legally bound
hereby, that the Employee's counsel will be sought on all material business
matters relating to the Business of the Company following the Closing (as
defined in the Purchase Agreement).
11. SUCCESSORS. This Agreement is personal to the Employee and without the
prior written consent of the Company shall not be assignable by the Employee.
The Company may assign its rights and obligations hereunder, provided that the
Company will require the assignee to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such assignment had taken place.
12. BINDING ARBITRATION. In the event that the Company and the Employee
cannot agree on an interpretation of any provision of this Agreement, or in the
event that either of the parties fails to make any payments or otherwise
fulfill any obligations required by the terms of this Agreement, the Company
and the Employee agree to resolve any such dispute through arbitration in New
York, New York under the rules then obtaining of the American Arbitration
Association in the State of New York.
<PAGE> 12
13. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida.
(b) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
(c) All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been given if sent by facsimile
transmission, delivered by overnight or other carrier service, or mailed,
certified first class mail, postage prepaid, return receipt requested, to the
parties hereto at the following addresses:
If to the Company, to:
Integrated Technology Holdings Corp.
14000 Northwest 4th Street
Sunrise, Florida 33325
Attn: Chief Executive Officer
Telecopier:
If to the Employee, to:
Gideon Vaisman
22 Woodland Drive
Tenafly, New Jersey 07670
or to such other address as either party shall have furnished to the other in
accordance herewith.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
<PAGE> 13
(f) A party's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(g) This Agreement embodies the entire agreement between the Company
and the Employee and supersedes all prior agreements and understandings, oral
or written, with respect to the subject matter hereof.
(h) This Agreement has been duly authorized by all required action on
behalf of the Company, is a valid and binding obligation of the Company, is
enforceable against the Company in accordance with its terms, and does not
violate the Company's Certificate of Incorporation, by-laws, or any material
agreement to which the Company is a party or by which it may be bound, or any
laws or regulations applicable to the Company.
(i) This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which, together, shall constitute one
and the same instrument.
<PAGE> 14
IN WITNESS WHEREOF, the Employee has hereunto set his hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
INTEGRATED TECHNOLOGY
HOLDINGS CORP.
By:
------------------------------------
Zivi R. Nedivi
President
EMPLOYEE
---------------------------------------
Gideon Vaisman
The undersigned, Kellstrom Industries, Inc., hereby
guarantees all payments and obligations of the Company and its assignees under
this Agreement. Nothing herein shall constitute a waiver by Kellstrom
Industries, Inc. of any defense that the Company may have as a result of a
breach by the Employee of his obligations under this Agreement.
KELLSTROM INDUSTRIES, INC.
By:
------------------------------------
Zivi R. Nedivi
President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.43
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
KELLSTROM INDUSTRIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 5,000 Shares
FOR VALUE RECEIVED, Kellstrom Industries, Inc., a Delaware corporation
(the "Company"), hereby certifies that Helix Management Company II LLC (the
"Purchaser") or its permitted assigns, is entitled to purchase from the
Company, at any time or from time to time commencing on the date hereof (the
"Commencement Date") and prior to 5:00 P.M., New York City time, on June 17,
2001, Five Thousand (5,000) fully paid and non-assessable shares of the common
stock, $.001 par value per share, of the Company for an aggregate purchase
price of $130,000 (computed on the basis of $26.00 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, 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. 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 June 17, 2001. Exercise of this Warrant by
the Holder shall be made by the surrender of this Warrant (with the
subscription form at the end hereof, or a reasonable facsimile thereof, duly
executed) at the address set forth in Subsection 11(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part
thereof if this Warrant is exercised in part.
<PAGE> 2
Payment for Warrant Shares shall be made by certified or official bank check
payable to the order of the Company. 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 (a) issue a certificate or certificates in
the name of 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 Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first
refusal and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, keep the shares of the Common Stock receivable upon the
exercise of this Warrant authorized for listing on such exchange upon notice of
issuance.
3. PROTECTION AGAINST DILUTION. (a) In case the Company shall
hereafter (i) pay a dividend or make a distribution on its capital stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Company, the Per Share Warrant
Price shall be adjusted so that the Holder upon the exercise hereof shall be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which it 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, adjustment for which would be made pursuant to Subsection 3(a), and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor and accrued after the date hereof 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
2
<PAGE> 3
Warrant Price then in effect by a fraction, the numerator of which shall be the
then current market price of the Common Stock (defined as the average for the
thirty consecutive business days immediately prior to the record date of the
daily closing price of the Common Stock as reported by the national securities
exchange upon which the Common Stock is then listed or if not listed on any
such exchange, the average of the closing prices as reported by 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 NASDAQ, or
if not then publicly traded, the fair market price as determined by the
Company's Board of Directors) 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 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 Holder of the
Warrants not less than 15 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(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
3
<PAGE> 4
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 distribution, offer
or subscription right or to vote on such dissolution, liquidation or winding
up.
(f) If, as a result of an adjustment made pursuant to this Section
3, the Holder of any Warrant, thereafter surrendered for exercise shall become
entitled to receive shares or 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) If at any time or from time to time the Company shall take any
action affecting its Common Stock or any other capital stock of the Company,
not otherwise described in any of the foregoing subsections of this Section 3,
then, if the failure to make any adjustment would in the reasonable opinion of
the Board of Directors of the Company have a materially adverse effect upon the
rights of the Holder of the Warrant, the number of shares of Common Stock or
other stock comprising a Warrant Share, or the Per Share Warrant Price, shall
be adjusted in such manner and at such time as the Board of Directors of the
Company may in good faith determined to be equitable under the circumstances.
(h) 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,
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<PAGE> 5
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 and from time to time
during the period beginning on the Commencement Date and ending on the second
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 "Registration
Statement") under the Act (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
the Company 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 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 Holder's request, be included in such
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 Registration Statement all Warrant Shares which it
has been so requested to include, (iii) use its best efforts to cause such
Registration Statement to become effective as soon as practicable and (iv) take
all other action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such Registration Statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation of any governmental authority for the period necessary for
the Holder and such Holders to effect the proposed sale or other disposition.
(b) The Company agrees that if the Company shall not have
authorized the filing of a Registration Statement pursuant to Subsection 5(a)
hereof within one (1) year after the Commencement Date, then at any time
thereafter during the period ending on the second anniversary of the date the
Warrants are exercised in full, if the Holder and/or the Holders of Warrants
and/or Warrant Shares who or which shall hold not less than 50% of the
aggregate number of Warrants and Warrant Shares outstanding at such time and
not previously sold (the "Covered Warrant Shares") pursuant to this Section 5
shall request that the Company file a registration statement under the Act
covering not less than 50% of the Covered Warrant Shares, the Company will (i)
promptly notify each Holder of the Warrants and each Holder of Warrant Shares
not so previously sold that such registration statement will be filed and that
the Warrant Shares which are then held, and /or may be acquired upon exercise
of the Warrants by the Holder and such Holders, will be included in such
registration statement at the Holder's and such Holders' request, (ii) cause
such registration statement to be filed with the Securities and Exchange
Commission (the "Commission") as soon as possible following such request and to
cover all Warrant Shares which it has been so requested to include, (iii) use
its best efforts to cause such registration statement to become effective as
soon as
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<PAGE> 6
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 government 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(b) on one occasion only; provided that a request for
registration shall not be deemed to constitute a registration pursuant to this
Subsection 5(b) if: (i) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied other than by reason of some act or omission by
the Holder; (ii) the Company voluntarily takes any action that would result in
the Holder not being able to sell such Warrant Shares covered thereby; (iii)
the Holder determines not to proceed following any delay imposed hereunder by
the Company; provided, HOWEVER, that prior to such delay, the Holder shall not
have sold more than ninety percent (90%) of the Warrant Shares included in such
registration; or (iv) other than by action of the Holder, such registration
does not remain effective for ninety (90) days or more. Notwithstanding the
foregoing, (a) if the Holder exercises its right to request that a registration
statement be filed pursuant to this Subsection 5(b) 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 or
(b) in lieu of causing a registration statement to be filed under this Section
5(b), the Company may elect, by providing written notice (the "Repurchase
Notice") to the Holder or Holders requesting registration within ten (10) days
of the Company's receiving such request, to repurchase from the requesting
Holder or Holders either (x) the Warrants relating to the Warrant Shares
requested to be registered, at a price per Warrant equal to the difference
between the Market Price per share of the Common Stock (as defined below) and
the Per Share Warrant Price or (y) if the Warrants relating to the Warrant
Shares requested to be registered had already been exercised, such Warrant
Shares at a price per Warrant Share equal to the Market Price per share of the
Common Stock. As used in this Section 5(b), the "Market Price per share of the
Common Stock" shall mean the average of the last sale price of the Common
Stock, or if no last sale price is reported, the average of the asked and bid
prices of the Common Stock, on the Nasdaq National Market or Nasdaq Small Cap
Market, as applicable, for the 20 consecutive trading days ending on the day
prior to the delivery by the Holder or Holders of the request for a
registration statement pursuant to this Section 5(b). Any repurchase of the
Warrants or the Warrant Shares under this Section 5(b) shall be made within 30
days of the delivery by the Company of the Repurchase Notice.
(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
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<PAGE> 7
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 furnish to each Holder participating in an
offering pursuant to a registration statement under this Section 5 and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under
the underwriting agreement), and (ii) a "comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountant's letter with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(e) The Company shall enter into an underwriting agreement with the
managing underwriters selected by Holders holding 50% of the Covered Warrant
Shares requested to be included in a registration statement filed pursuant to
Section 5(b). Such agreement shall be reasonably satisfactory in form and
substance to the Company, each Holder and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type as used by
the managing underwriters.
(f) 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.
(g) In connection with any public offering by the Company involving
an underwriting of its securities effected pursuant to Section 5(a) 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 period of up to 180 days after the effective
date of the registration statement by which such public offering is being
effected (or such longer period as may be requested by any securities exchange
upon which the Common Stock is then listed). 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 of the Company
having similar registration rights as of the date thereof (collectively, the
"Kellstrom Shareholders") exceeds the amount of securities that can be offered
without adversely affecting the offering by the Company, then the Company may
reduce the number of shares to be registered by
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<PAGE> 8
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.
(h) 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 for any legal or other expenses reasonably incurred by such
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, nor shall the Company be liable to
any Holder Indemnitee of 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.
(i) The Holder will indemnify and hold harmless the Company, each
of its employees, officers, directors or persons who control the Company within
the meaning of the Act or the 1934 Act, and each agent or underwriter for the
Company or any other person or entity engaged by the Company to sell the
Company's securities offered in the registration statement, or any of their
respective directors, officers, partners, agents, employees or control persons
(collectively, a "Company Indemnitee"), against any losses, claims, damages,
liabilities or expenses (joint or several) to which the Company or any such
Company Indemnitee may become subject
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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 upon 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.
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, 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.
(j) Promptly after receipt by an indemnified party under
Subsections 5(h) or (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 part 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, provide the
an indemnified part 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 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 prejudice, but the
failure to so deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under Subsection 5(h) or (i), respectively.
(ii) The obligations of the Company and the Holders under
Subsections 5(h) and (i), 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(h) and (i) shall include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
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<PAGE> 10
(k) If the indemnification provided for in the preceding
Subsections 5(h) or (i) 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
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. 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.
(l) 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.
(m) In connection with the Company's obligations to effect a
registration under Section 5, the Company will:
(i) cooperate and assist in any filings required to be made
with the National Association of Securities Dealers, Inc., and before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to counsel selected by Holder copies of all such
documents proposed to be filed, which documents will be subject to their review
and comments;
(ii) cause the prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act;
(iii) notify the Holder promptly (A) when the prospectus or any
prospectus supplement or post-effective amendment has been filed, and with
respect to the registration statement or any post-effective amendment, when the
same has become effective; (B) of any request by the Commission for any
amendments or supplements to the registration statement or the prospectus or
for additional information; (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or the
initiation of any proceedings for the purpose; (D) if, at any time prior to the
closing contemplated by an underwriting agreement entered into in connection
with such registration statement, that the representations and warranties of
the Company contained in such agreement cease to be true and correct in any
material respect; (E) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Warrant Shares for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; and (F) of the happening of any event which makes any statement made
in the registration statement, the prospectus of or any document incorporated
therein by reference untrue in any material respect and which requires the
making of any changes in the registration statement, the prospectus or any
document incorporated therein by reference in order to make the statement
therein not materially misleading;
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(iv) make commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement;
(v) if required, prepare a supplement or post-effective
amendment to the registration statement, the related prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Warrant Shares, the prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(vi) cause all Warrant Shares covered by the registration
statement to be listed on each securities exchange on which identical
securities issued by the Company are then listed if requested by the Holder or
the managing underwriters, if any;
(vii) provide and cause to be maintained a transfer agent and
registrar for all Warrant Shares covered by such registration statement from
and after a date not later than the effective date of such registration
statement;
(viii) use its best efforts to provide a CUSIP number for the
Warrant Shares, not later than the effective date of the registration
statement;
(ix) make available for inspection, in connection with the
preparation of a registration statement pursuant to this Agreement, by the
Holder, and any attorney or accountant retained by the Holder, all financial
and other records and pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative, attorney or
accountant in connection with such registration; PROVIDED, HOWEVER, that any
records, information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such persons unless disclosure of
such records, information or documents is required by court or administrative
order;
(x) if so required by the managing underwriter, not sell, make
any short sale of, loan, grant any option for the purpose of, effect any public
sale or distribution of or otherwise dispose of its equity securities or
securities convertible into or exchangeable or exercisable for any of such
securities during the ten days prior to and the 90 days after any underwritten
registration pursuant hereto has become effective, except as part of such
underwritten registration and except pursuant to registrations on Form S-4 or
S-8 or any successor or similar forms thereto, except that the Company may make
grants of options under its stock option plans and may issue securities
issuable upon the exercise or conversion of outstanding convertible securities,
stock options and other options, warrants and rights of the Company; and
(xi) otherwise use its best effort to comply with all
applicable rules and regulations of the Commission and make available to its
security holders as soon as reasonably practicable, an earnings statement which
satisfies the provision of Section 11(a) of the Act.
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(n) 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 without
limitation as to volume.
(o) The Company will use its reasonable best efforts to file with
the Commission all information required to be filed under Section 13 or 15(d)
of the 1934 Act.
6. LIMITED TRANSFERABILITY. This Warrant may not be offered, sold,
transferred, assigned, hypothecated or otherwise disposed of by the Holder
except pursuant to an effective registration statement under the Act and/or
applicable state securities laws or an exemption from registration under the
Act and such laws which, in the opinion of counsel for the Holder, which
counsel and opinion are reasonably satisfactory to the Company, is available.
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 or her 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. SECURITIES ACT OF 1933 LEGEND. This Warrant, the Warrant Shares and
any of the other securities issuable upon exercise of this Warrant have not
been registered under the Act. Upon exercise of this Warrant, in part or in
whole, the certificates representing the Warrant Shares and any of the other
securities issuable upon exercise of this Warrant shall bear the following
legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE OR SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN
THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION
ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS
AVAILABLE.
8. 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.
9. 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.
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10. INFORMATION TO HOLDER. The Company agrees that it shall 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.
11. 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 1100 International Parkway, Sunrise,
Florida 33323, Attn: Chief Executive Officer, facsimile no. 954-858-2449, or
such other address as the Company has designated in writing to the Holder, or
(b) if to the Holder at 98 Battery Street, Suite 600, San
Francisco, California 94111, facsimile no. 415-956-9951, or such other address
as the Holder has designated in writing to the Company.
12. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
13. 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. Venue shall be in Broward County,
Florida.
IN WITNESS WHEREOF, Kellstrom Industries, Inc. has caused this Warrant
to be signed by its Chief Financial Officer and its corporate seal to be
hereunder affixed and attested by its Secretary as of the 18th day of December,
1998.
KELLSTROM INDUSTRIES, INC.
By: /s/ MICHAEL W. WALLACE
-------------------------------------------
Michael W. Wallace, Chief Financial Officer
ATTEST:
- -------------------------
Secretary
[Corporate Seal]
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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 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: _____________________________
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SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 1)
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, 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 of 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
below.
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> 1
EXHIBIT 10.46
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
KELLSTROM INDUSTRIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 2,250 Shares
FOR VALUE RECEIVED, Kellstrom Industries, Inc., a Delaware corporation
(the "Company"), hereby certifies that Helix Management Company II LLC (the
"Purchaser") or its permitted assigns, is entitled to purchase from the Company,
at any time or from time to time commencing on the date hereof (the
"Commencement Date") and prior to 5:00 P.M., New York City time, on December 31,
2002, Two Thousand Two Hundred Fifty (2,250) fully paid and non-assessable
shares of the common stock, $.001 par value per share, of the Company for an
aggregate purchase price of $60,750 (computed on the basis of $27.50 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, 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
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 December 31, 2002. Exercise of this
Warrant by the Holder shall be made by the surrender of this Warrant (with the
subscription form at the end hereof, or a reasonable facsimile
<PAGE> 2
thereof, duly executed) at the address set forth in Subsection 12(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 by certified or official bank check payable to the
order of the Company. 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 (a) issue a certificate or certificates in the name of 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.
(b) Notwithstanding Section 1(a), at any time prior to the
Expiration Date of any Warrants, the Holder may, at its option, exchange such
warrants, in whole or in part, (a "Warrant Exchange"), into the number of fully
paid and non-assessable Warrant Shares determined in accordance with this
Section 1(b), by surrendering the Warrant to the Company, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange (the "Exchange
Date"). Certificates for the Warrant Shares issuable upon such Warrant Exchange
and, if applicable, a new Warrant of like tenor evidencing the balance of the
Warrant Shares remaining subject to the Holder's Warrant, shall be issued as of
the Exchange Date and delivered to the Holder within three days following the
Exchange Date. In connection with any Warrant Exchange, the Holder's Warrant
shall represent the right to subscribe for and acquire the number of Warrant
Shares (rounded to the nearest number of Warrant Shares) equal to (A) the number
of Warrant Shares specified by the Holder in its Notice of Exchange (the "Total
Share Number") less (B) the number of Warrant Shares equal to the quotient
obtained by dividing (i) the product of the Total Share Number and the existing
Exercise Price per Warrant Share by (ii) the Market Price of a share of Common
Stock. For purposes of this Section 1(b), "Market Price" shall have the meaning
ascribed to such term in Section 3(i) 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 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, (b) if
the Company hereafter lists its Common Stock on any national securities
exchange, keep the shares of the Common Stock receivable upon the exercise of
this Warrant authorized for listing on such exchange upon notice of issuance,
and (c) if the
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<PAGE> 3
Common Stock is not listed on a national securities exchange, maintain the
Common Stock listed on NASDAQ such that Warrant Shares are authorized for
trading on NASDAQ.
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 it 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,
adjustment for which would be made pursuant to Subsection 3(a), and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor and accrued after the date hereof if the full amount thereof
is equivalent to not more than an amount equal to 10% 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 of the Common Stock (defined as the average for the
thirty consecutive business days immediately prior to the record date of the
daily closing price of the Common Stock as reported by the national securities
exchange upon which the Common Stock is then listed or if not listed on any such
exchange, the average of the closing prices as reported by 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 NASDAQ, or
if not then publicly traded, the fair market price as determined by the
Company's Board of Directors) 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
3
<PAGE> 4
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(c) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holder of the Warrants
not less than 15 days prior to such event. A sale of all or substantially all of
the assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(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 distribution,
offer or subscription right or to vote on such dissolution, liquidation or
winding up.
(f) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant, thereafter surrendered for exercise shall
become entitled to receive shares of two or
4
<PAGE> 5
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) If at any time or from time to time the Company shall take
any action affecting its Common Stock or any other capital stock of the Company,
not otherwise described in any of the foregoing subsections of this Section 3,
then, if the failure to make any adjustment would in the reasonable opinion of
the Board of Directors of the Company have a materially adverse effect upon the
rights of the Holder of the Warrant, the number of shares of Common Stock or
other stock comprising a Warrant Share, or the Per Share Warrant Price, shall be
adjusted in such manner and at such time as the Board of Directors of the
Company may in good faith determined to be equitable under the circumstances.
(h) 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.
(i) If at any time after the date of this Agreement, the
Company shall issue or sell any share of Common Stock at a price per share of
Common Stock that is lower than the Market Price per share of Common Stock in
effect immediately prior to such sale or issuance, the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such sale or
issuance, and the denominator of which shall be sum of (A) the number of shares
of Common Stock outstanding immediately prior to such sale or issuance, plus (B)
the number of shares of Common Stock which the aggregate consideration received
by the Company for such sale or issuance would purchase at such Market Price per
share of Common Stock. Such adjustment shall be made successively whenever such
Common Stock are issued or sold and shall be effective immediately after such
issuance or sale. This Section (i) does not apply to: (1) the conversion or
exchange of other securities convertible or exchangeable for Common Stock;
provided that the exercise price of such securities was not less than the Market
Price of the Common Stock at the time of issuance of such security; (2) Common
Stock issued upon the exercise of rights or Warrants; and (3) Common Stock
issued in a bona fide public offering pursuant to a firm commitment
underwriting. For purposes of this Section, (a) "Market Price" at any date shall
be deemed to be the (x) last reported sale price, or, in case no such reported
sale takes place on such day, the average of the last reported sale prices for
the last three trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed and admitted
to trading quoted or by the Nasdaq Stock Market, National Market ("Nasdaq"), or,
if the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted by Nasdaq, the average closing bid price as
furnished by the National Association of Securities Dealers,
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<PAGE> 6
Inc. ("NASD") through Nasdaq or a similar organization if Nasdaq is no longer
reporting such information, of (y) if the Common Stock is not quoted on Nasdaq,
as determined in good faith by resolution of the Board of Directors of the
Company (A) taking into account the most recently completed arms-length
transaction between the Company and a person other than an Affiliate of the
Company the closing of which shall have occurred within the thirty-day period
preceding the date the Market Price is determined, or (B) if no transaction
shall have occurred during such thirty-day period, taking into account the fair
market value of the security as determined by an Independent Financial Expert,
and (b) "Independent Financial Expert" means a United States investment banking
or valuation firm of national or regional standing in the United States (i)
which does not, and whose directors, officers and employees or Affiliates do not
have a direct or indirect material financial interest for its proprietary
account in the Company or any of its Affiliates and (ii) which, in the judgment
of the Board of Directors of the Company, is otherwise independent with respect
to the company and its Affiliates and qualified to perform the task of which it
is to be engaged.
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 and from time to
time during the period beginning on the Commencement Date and ending on the
second 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 "Registration
Statement") under the Act (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 the Company 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 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 Holder's request, be included in such
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 Registration Statement all Warrant Shares which it has been so
requested to include, (iii) use its best efforts to cause such Registration
Statement to become effective as soon as practicable and (iv) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such Registration Statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation
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<PAGE> 7
of any governmental authority for the period necessary for the Holder and such
Holders to effect the proposed sale or other disposition.
(b) The Company agrees that if, at any time during the period
commencing on the six (6) month anniversary of the Commencement Date and ending
on the second anniversary of the date the Warrants are exercised in full, the
Holder and/or the Holders of Warrants and/or Warrant Shares who or which shall
hold not less than 50% of the aggregate number of Warrants and Warrant Shares
outstanding at such time (the "Covered Warrant Shares") shall request that the
Company file a registration statement under the Act covering not less than 50%
of the Covered Warrant Shares, the Company will (i) promptly notify each Holder
of the Warrants and each Holder of Warrant Shares not so previously sold that
such registration statement will be filed and that the Warrant Shares which are
then held, and /or may be acquired upon exercise of the Warrants by the Holder
and such Holders, will be included in such registration statement at the
Holder's and such Holders' request, (ii) cause such registration statement to be
filed with the Securities and Exchange Commission (the "Commission") as soon as
possible following such request and to cover all Warrant Shares which it has
been so requested to include, (iii) use its best efforts to cause such
registration statement to become effective as soon as practicable and (iv) take
all other action necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of, and will maintain such compliance with each such Federal and state
law and regulation of any government 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(b) on one occasion only; provided that a request for registration shall not be
deemed to constitute a registration pursuant to this Subsection 5(b) if: (i) the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied
other than by reason of some act or omission by the Holder; (ii) the Company
voluntarily takes any action that would result in the Holder not being able to
sell such Warrant Shares covered thereby; (iii) the Holder determines not to
proceed following any delay imposed hereunder by the Company; PROVIDED, HOWEVER,
that prior to such delay, the Holder shall not have sold more than ninety
percent (90%) of the Warrant Shares included in such registration; or (iv) other
than by action of the Holder, such registration does not remain effective for
ninety (90) days or more. Notwithstanding the foregoing, (a) if the Holder
exercises its right to request that a registration statement be filed pursuant
to this Subsection 5(b) 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 or (b) in lieu of causing
a registration statement to be filed under this Section 5(b), the Company may
elect, by providing written notice (the "Repurchase Notice") to the Holder or
Holders requesting registration within ten (10) days of the Company's receiving
such request, to repurchase from the requesting Holder or Holders either (x) the
Warrants relating to the Warrant Shares requested to be registered, at a price
per Warrant equal to the difference between the Market Price per share of the
Common Stock (as defined below) and the Per Share Warrant Price or (y) if the
Warrants relating to the Warrant Shares requested to be registered had already
been exercised, such Warrant Shares at a price per Warrant Share equal to the
Market Price per share of the Common Stock. As used in this Section 5(b), the
"Market Price per share of the Common Stock" shall mean
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<PAGE> 8
the average of the last sale price of the Common Stock, or if no last sale price
is reported, the average of the asked and bid prices of the Common Stock, on the
Nasdaq National Market or Nasdaq Small Cap Market, as applicable, for the 20
consecutive trading days ending on the day prior to the delivery by the Holder
or Holders of the request for a registration statement pursuant to this Section
5(b). Any repurchase of the Warrants or the Warrant Shares under this Section
5(b) shall be made within 15 days of the delivery by the Company of the
Repurchase Notice.
(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 furnish to each Holder participating in
an offering pursuant to a registration statement under this Section 5 and to
each underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "comfort" letter dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountant's letter with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(e) The Company shall enter into an underwriting agreement
with the managing underwriters selected by Holders holding 50% of the Covered
Warrant Shares requested to be included in a registration statement filed
pursuant to Section 5(b). Such agreement shall be reasonably satisfactory in
form and substance to the Company, each Holder and such managing underwriters,
and shall contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that type as
used by the managing underwriters.
(f) 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
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<PAGE> 9
underwriting discounts, applicable transfer taxes relating to the Warrant Shares
and the fees and expenses of counsel for the Holders of the Warrant Shares.
(g) In connection with any public offering by the Company
involving an underwriting of its securities effected pursuant to Section 5(a)
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 period of up to 180 days after the effective
date of the registration statement by which such public offering is being
effected (or such longer period as may be requested by any securities exchange
upon which the Common Stock is then listed). 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 of the Company
having similar registration rights as of the date thereof (collectively, the
"Kellstrom Shareholders") exceeds the amount of securities that can be offered
without adversely affecting the offering by the Company, 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.
(h) 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
for any legal or other expenses reasonably incurred by such 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, nor shall the Company
9
<PAGE> 10
be liable to any Holder Indemnitee of 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.
(i) The Holder will indemnify and hold harmless the Company,
each of its employees, officers, directors or persons who control the Company
within the meaning of the Act or the 1934 Act, and each agent or underwriter for
the Company or any other person or entity engaged by the Company to sell the
Company's securities offered in the registration statement, or any of their
respective directors, officers, partners, agents, employees or control persons
(collectively, a "Company Indemnitee"), against any losses, claims, damages,
liabilities or expenses (joint or several) to which the Company or any such
Company Indemnitee may become subject under the Act, the 1934 Act, or other
federal or state law, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereto) arise solely out of or are based solely
upon 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.
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, 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.
(j) Promptly after receipt by an indemnified party under
Subsections 5(h) or (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 part so desires, jointly with any other indemnifying party
similarly noticed, to assume and control the defense thereof with counsel
10
<PAGE> 11
mutually satisfactory to the indemnified and indemnifying parties, provided that
the 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 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 prejudice, but the
failure to so deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under Subsection 5(h) or (i), respectively.
(ii) The obligations of the Company and the Holders
under Subsections 5(h) and (i), 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(h) and (i) shall include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
(k) If the indemnification provided for in the preceding
Subsections 5(h) or (i) 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 correct
and prevent any statement or omission, and any other equitable considerations
appropriate under the circumstances; provided, however that in no case shall any
Holder be required to contribute any amount in excess of the amount which such
Holder would be required to pay if the indemnification provided in this Section
were available. 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.
(l) 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.
(m) In connection with the Company's obligations to effect a
registration under Section 5, the Company will:
11
<PAGE> 12
(i) cooperate and assist in any filings required to
be made with the National Association of Securities Dealers, Inc., and before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to counsel selected by Holder copies of all
such documents proposed to be filed, which documents will be subject to their
review and comments;
(ii) cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act;
(iii) notify the Holder promptly (A) when the
prospectus or any prospectus supplement or post-effective amendment has been
filed, and with respect to the registration statement or any post-effective
amendment, when the same has become effective; (B) of any request by the
Commission for any amendments or supplements to the registration statement or
the prospectus or for additional information; (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for the purpose; (D) if, at any
time prior to the closing contemplated by an underwriting agreement entered into
in connection with such registration statement, that the representations and
warranties of the Company contained in such agreement cease to be true and
correct in any material respect; (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Warrant
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and (F) of the happening of any event which makes
any statement made in the registration statement, the prospectus of or any
document incorporated therein by reference untrue in any material respect and
which requires the making of any changes in the registration statement, the
prospectus or any document incorporated therein by reference in order to make
the statement therein not materially misleading;
(iv) make commercially reasonable efforts to obtain
the withdrawal of any order suspending the effectiveness of the registration
statement;
(v) if required, prepare a supplement or
post-effective amendment to the registration statement, the related prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Warrant
Shares, the prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein not
misleading;
(vi) cause all Warrant Shares covered by the
registration statement to be listed on each securities exchange on which
identical securities issued by the Company are then listed if requested by the
Holder or the managing underwriters, if any;
(vii) provide and cause to be maintained a transfer
agent and registrar for all Warrant Shares covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(viii) use its best efforts to provide a CUSIP number
for the Warrant Shares, not later than the effective date of the registration
statement;
12
<PAGE> 13
(ix) make available for inspection, in connection
with the preparation of a registration statement pursuant to this Agreement, by
the Holder, and any attorney or accountant retained by the Holder, all financial
and other records and pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, attorney or
accountant in connection with such registration; PROVIDED, HOWEVER, that any
records, information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such persons unless disclosure of
such records, information or documents is required by court or administrative
order;
(x) if so required by the managing underwriter, not
sell, make any short sale of, loan, grant any option for the purpose of, effect
any public sale or distribution of or otherwise dispose of its equity securities
or securities convertible into or exchangeable or exercisable for any of such
securities during the ten days prior to and the 90 days after any underwritten
registration pursuant hereto has become effective, except as part of such
underwritten registration and except pursuant to registrations on Form S-4 or
S-8 or any successor or similar forms thereto, except that the Company may make
grants of options under its stock option plans and may issue securities issuable
upon the exercise or conversion of outstanding convertible securities, stock
options and other options, warrants and rights of the Company; and
(xi) otherwise use its best effort to comply with all
applicable rules and regulations of the Commission and make available to its
security holders as soon as reasonably practicable, an earnings statement which
satisfies the provision of Section 11(a) of the Act.
(n) 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 without limitation as
to volume.
(o) The Company will use its reasonable best efforts to file
with the Commission all information required to be filed under Section 13 or
15(d) of the 1934 Act.
6. LIMITED TRANSFERABILITY. This Warrant may not be offered, sold,
transferred, assigned, hypothecated or otherwise disposed of by the Holder
except pursuant to an effective registration statement under the Act and/or
applicable state securities laws or an exemption from registration under the Act
and such laws which, in the opinion of counsel for the Holder, which counsel and
opinion are reasonably satisfactory to the Company, is available. 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 or her 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. SECURITIES ACT OF 1933 LEGEND. This Warrant, the Warrant Shares and
any of the other securities issuable upon exercise of this Warrant have not been
registered under the Act. Upon
13
<PAGE> 14
exercise of this Warrant, in part or in whole, the certificates representing the
Warrant Shares and any of the other securities issuable upon exercise of this
Warrant shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE OR SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL
FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
8. 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.
9. 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.
10. INFORMATION TO HOLDER. The Company agrees that it shall 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.
11. HOLDER INFORMATION. For purposes of this Agreement, the parties
hereby agree that the only written information pertaining to a Holder in a
prospectus or registration statement shall be the Holders name and address and
such other information as shall be required to be disclosed under applicable
securities laws, rules or regulations, or the rules or regulations of any
exchange on which shares of Common Stock shall then be traded.
12. 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 1100 International Parkway, Sunrise,
Florida 33323, Att.: Chief Executive Officer, facsimile no. 954-858-2449, or
such other address as the Company has designated in writing to the Holder, or
14
<PAGE> 15
(b) if to the Holder at 98 Battery Park, Suite 600, San
Francisco, California 94111, facsimile no. 415-956-9951, or such other address
as the Holder has designated in writing to the Company.
13. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
14. 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. Venue shall be in Broward County,
Florida.
IN WITNESS WHEREOF, Kellstrom Industries, Inc. has caused this Warrant
to be signed by its President and its corporate seal to be hereunder affixed and
attested by its Chief Financial Officer as of the 23 day of March, 1999.
KELLSTROM INDUSTRIES, INC.
By: ______________________________________
Zivi R. Nedivi, President
ATTEST:
- --------------------------------
Secretary
[Corporate Seal]
15
<PAGE> 16
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 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: __________________________________
16
<PAGE> 17
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 1)
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, 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 of 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 below.
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.
17
<PAGE> 1
EXHIBIT 10.47
TERMINATION AGREEMENT
This TERMINATION AGREEMENT (this "Termination Agreement") is entered
into as of March 30, 1999 between East Shore Ventures, Inc., a Florida
corporation ("East Shore"), and Kellstrom Industries, Inc., a Delaware
corporation ("Kellstrom").
RECITALS
East Shore and Kellstrom are parties to that certain Management
Agreement dated as of January 1, 1997 (the "Management Agreement") pursuant to
which East Shore has provided the Company, through the services of its
President, Zivi R. Nedivi ("Nedivi"), with the management services necessary of
the chief executive officer responsible for the overall direction of the
operations and administration of the business of the Company. Kellstrom has
decided that it is in its best interests to employ Nedivi directly to provide
those services which have been provided by East Shore under the Management
Agreement, and the parties desire to set forth the terms on which they have
agreed to terminate the Management Agreement.
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereby agree as follows:
1. DEFINITIONS. All defined terms used herein without definition shall
have the meanings ascribed to them in the Management Agreement.
2. TERMINATION OF MANAGEMENT AGREEMENT. Subject to the terms of this
Termination Agreement, the parties mutually agree that the Management Agreement
shall terminate effective as of the date first written above (the "Termination
Date"). Except as expressly set forth herein, each of the provisions of the
Management Agreement shall terminate and be of no further force and effect
following the Termination Date.
3. PAYMENT OF PREVIOUSLY EARNED FEES. Notwithstanding anything to the
contrary set forth herein, Kellstrom shall pay to East Shore the following fees
and provide East Shore and Nedivi with the following benefits which are required
to be provided to them under the terms of the Management Agreement:
(a) Kellstrom shall pay to East Shore the unpaid portion of
any Base Annual Fee required to be paid by it under Section 3(a) of the
Management Agreement through the Termination Date.
(b) Kellstrom shall reimburse East Shore in accordance with
the terms of the Management Agreement for any reasonable and actual
out-of-pocket expenses incurred by
<PAGE> 2
it prior to the Termination Date in connection with the provision of
services under the Management Agreement.
(c) Kellstrom shall pay to East Shore any Federal, state and
local payroll and related taxes required to be paid by it under Section
3(c) of the Management Agreement.
(d) Kellstrom shall continue to provide to East Shore and
Nedivi with any and all benefits required to be provided to them under
the terms of the Management Agreement through the Termination Date.
4. SURVIVAL. East Shore and Kellstrom agree that notwithstanding
anything to the contrary set forth herein, Sections 15, 16, 17 and 20 of the
Management Agreement shall survive termination thereof and remain in full force
and effect following the Termination Date.
5. RELEASE. Except as expressly provided for herein, Kellstrom and East
Shore hereby release and forever discharge each other, including their
respective officers, directors, shareholders, members, employees,
representatives, agents, contractors, subsidiaries, affiliates, heirs, personal
representatives, successors and assigns, from any and all manner of action and
actions, cause and causes of action, suits, debts, sums of money, accounts,
reckonings, covenants, warranties, obligations, agreements, contracts, promises,
damages, claims and demands whatsoever, in law or in equity, which either party
ever had, now has, or may have in the future, which any personal representative,
successor, heir or assign of either party hereafter can, shall or may have
against the other party (whether known or unknown as of the date hereof),
accruing or arising, directly or indirectly, in whole or in part, for, upon or
by reason of the obligations of either under the Engagement Agreement.
6. MISCELLANEOUS.
(a) This Termination Agreement shall be governed by and
construed in accordance with the laws of the State of Florida and the
federal laws of the United States of America applicable therein. Any
controversy or claim arising out of or relating to this Termination
Agreement shall be settled by arbitration in accordance with the rules
of the American Arbitration Association and judgment upon an award in
connection therewith may be entered in any court of competent
jurisdiction.
(b) The captions of this Termination Agreement are not part of
the provisions hereof and shall have no force or effect.
(c) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
sent by facsimile transmission, delivered by overnight or other carrier
service, or mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties hereto at the following addresses:
2
<PAGE> 3
If to Kellstrom, to:
Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, Florida 33323
Attn: Yoav Stern, Chairman
Telecopier: (954) 858-2449
If to East Shore, to:
East Shore Ventures, Inc.
1100 International Parkway
Sunrise, Florida 33323
Attn: Zivi R. Nedivi, President
Telecopier: (954) 858-2449
or to such other address as either party shall have furnished to the
other in accordance herewith.
(d) The invalidity or unenforceability of any provision of
this Termination Agreement shall not affect the validity or
enforceability of any other provision of this Termination Agreement.
(e) No provision of this Termination Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing by the party against whom the same is
sought to be enforced and no failure by either party to enforce its
rights hereunder shall, except as mentioned above, be deemed a waiver
of such right. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any provision
of this Termination Agreement to be performed by such other party shall
be deemed to be a waiver of a similar or dissimilar provision hereof of
the same or any prior or subsequent time.
(f) This Termination Agreement embodies the entire agreement
between Kellstrom and East Shore and supersedes all prior agreements
and understandings, oral or written, with respect to the subject matter
hereof, including, without limitation, the Engagement Agreement. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Termination Agreement.
(g) This Termination Agreement may be executed in
counterparts, each of which shall be deemed an original and all of
which, together, shall constitute one and the same instrument.
3
<PAGE> 4
(h) All covenants, promises, conditions, representations and
agreements herein contained shall be binding upon and apply and inure
to the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
[Signatures On Following Page]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Termination
Agreement as of the date first written above.
KELLSTROM INDUSTRIES, INC.
By:__________________________________________
Michael W. Wallace
Chief Financial Officer
EAST SHORE VENTURES, INC.
By:__________________________________________
Zivi R. Nedivi
President
5
<PAGE> 1
EXHIBIT 10.48
TERMINATION AGREEMENT
This TERMINATION AGREEMENT (this "Termination Agreement") is entered
into as of March 30, 1999 between Helix Management Company II, LLC, a California
limited liability company ("Helix"), and Kellstrom Industries, Inc., a Delaware
corporation ("Kellstrom").
RECITALS
Helix and Kellstrom are parties to that certain Engagement Agreement
dated as of March 28, 1997 (as amended, the "Engagement Agreement") pursuant to
which Helix has served as Kellstrom's exclusive merger and acquisition and
principal financial advisor, and has, among other things, assisted Kellstrom in
evaluating, structuring, negotiating and completing a series of significant
transactions which have been critical to the growth and development of
Kellstrom. Kellstrom has decided that it is in the best interests of its
shareholders to internalize the services which have been provided by Helix under
the Engagement Agreement, and the parties desire to set forth the terms on which
they have agreed to terminate the Engagement Agreement.
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereby agree as follows:
1. DEFINITIONS. All defined terms used herein without definition shall
have the meanings ascribed to them in the Engagement Agreement.
2. TERMINATION OF ENGAGEMENT AGREEMENT. Subject to the terms of this
Termination Agreement, the parties agree that the Engagement Agreement shall
terminate effective as of the date first written above (the "Termination Date").
Except as expressly set forth herein, each of the provisions of the Engagement
Agreement (including without limitation, Sections 2.3 and 2.8) shall terminate
and be of no further force and effect following the Termination Date.
3. PAYMENT OF PREVIOUSLY EARNED FEES. Notwithstanding anything to the
contrary set forth herein, Kellstrom shall pay to Helix the following fees which
have previously been earned by it under the terms of the Engagement Agreement:
(a) Kellstrom shall pay to Helix the unpaid portion of any
monthly retainer required to be paid by it under Section 2.3.1 of the
Engagement Agreement through the Termination Date, prorated for any
partial month.
(b) Kellstrom shall reimburse Helix in accordance with the
terms of the Engagement Agreement for any reasonable and actual
out-of-pocket expenses incurred by
<PAGE> 2
it prior to the Termination Date in connection with the provision of
services under the Engagement Agreement.
(c) Kellstrom shall pay to Helix the balance of any success
fees required to be paid by it under Section 2.3.3 of the Engagement
Agreement on account of the acquisition of Aero Support USA, Inc. and
Integrated Technology Corp., each of which were completed by Kellstrom
on or prior to the Termination Date.
(d) Kellstrom shall pay to Helix the success fees required to
be paid by it under Section 2.3.3 of the Helix Agreement on account of
the acquisition of Certified Aircraft Parts, Inc. which has been signed
by Kellstrom prior to the Termination Date and in which Helix has
provided significant assistance.
4. WAIVER OF FURTHER HELIX RIGHTS. Notwithstanding anything to the
contrary set forth herein, Helix hereby agrees to waive the following rights
which it has under the terms of the Engagement Agreement:
(a) Helix hereby waives the right to receive at least ninety
(90) days notice (the "Termination Notice Period") prior to the
termination of the Engagement Agreement.
(b) Helix hereby waives the right to receive the monthly
retainer fee required to be paid to it under Section 2.3.1 of the
Engagement Agreement during the Termination Notice Period.
(c) Helix hereby waives the right to receive a success fee
required to be paid to it under Section 2.3.3 of the Engagement
Agreement on account of any Transaction undertaken by Kellstrom within
one year following the Termination Date with a party introduced by or
that was in contact with Helix within the term of the Engagement
Agreement, except as expressly agreed to be paid under Section 3 above.
5. SURVIVAL. Helix and Kellstrom agree that notwithstanding anything to
the contrary set forth herein, Sections 2.5 and 2.6 of the Engagement Agreement
shall survive termination thereof and remain in full force and effect following
the Termination Date.
6. TRANSITION. Helix agrees that it will, for no additional
consideration, provide to Kellstrom following the Termination Date such
assistance (including, without limitation, access to its employees and members
and copies of its records and files) as shall be reasonably requested by
Kellstrom in effecting an orderly transition in the services provided by Helix
under the Engagement Agreement.
7. RELEASE. Except as expressly provided for herein, Kellstrom and
Helix hereby release and forever discharge each other, including their
respective officers, directors, shareholders, members, employees,
representatives, agents, contractors, subsidiaries, affiliates, heirs, personal
representatives, successors and assigns, from any and all manner of action and
actions, cause and
2
<PAGE> 3
causes of action, suits, debts, sums of money, accounts, reckonings, covenants,
warranties, obligations, agreements, contracts, promises, damages, claims and
demands whatsoever, in law or in equity, which either party ever had, now has,
or may have in the future, which any personal representative, successor, heir or
assign of either party hereafter can, shall or may have against the other party
(whether known or unknown as of the date hereof), accruing or arising, directly
or indirectly, in whole or in part, for, upon or by reason of the obligations of
either under the Engagement Agreement.
8. MISCELLANEOUS.
(a) This Termination Agreement shall be governed by and
construed in accordance with the laws of the State of Florida and the
federal laws of the United States of America applicable therein. Any
controversy or claim arising out of or relating to this Termination
Agreement shall be settled by arbitration in accordance with the rules
of the American Arbitration Association and judgment upon an award in
connection therewith may be entered in any court of competent
jurisdiction.
(b) The captions of this Termination Agreement are not part of
the provisions hereof and shall have no force or effect.
(c) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
sent by facsimile transmission, delivered by overnight or other carrier
service, or mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties hereto at the following addresses:
If to Kellstrom, to:
Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, Florida 33323
Attn: Michael W. Wallace, Chief Financial Officer
Telecopier: (954) 858-2449
If to Helix, to:
Helix Management Company II, LLC
98 Battery Street, Suite 600
San Francisco, CA 94111
Attention: Yoav Stern, Managing Member
Telecopier: (415) 956-9951
or to such other address as either party shall have furnished to the
other in accordance herewith.
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(d) The invalidity or unenforceability of any provision of
this Termination Agreement shall not affect the validity or
enforceability of any other provision of this Termination Agreement.
(e) No provision of this Termination Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing by the party against whom the same is
sought to be enforced and no failure by either party to enforce its
rights hereunder shall, except as mentioned above, be deemed a waiver
of such right. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any provision
of this Termination Agreement to be performed by such other party shall
be deemed to be a waiver of a similar or dissimilar provision hereof of
the same or any prior or subsequent time.
(f) This Termination Agreement embodies the entire agreement
between Kellstrom and Helix and supersedes all prior agreements and
understandings, oral or written, with respect to the subject matter
hereof, including, without limitation, the Engagement Agreement. No
agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Termination Agreement.
(g) This Termination Agreement may be executed in
counterparts, each of which shall be deemed an original and all of
which, together, shall constitute one and the same instrument.
(h) All covenants, promises, conditions, representations and
agreements herein contained shall be binding upon and apply and inure
to the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
[Signatures On Following Page]
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IN WITNESS WHEREOF, the parties have executed this Termination
Agreement as of the date first written above.
KELLSTROM INDUSTRIES, INC.
By:__________________________________________
Michael W. Wallace
Chief Financial Officer
HELIX MANAGEMENT COMPANY II, LLC
By:__________________________________________
Yoav Stern
Managing Member
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EXHIBIT 10.49
-------------------------------------------------------
STOCK PURCHASE AGREEMENT
among
KELLSTROM INDUSTRIES, INC.,
CERTIFIED AIRCRAFT PARTS, INC.,
R. DEAN STICKLER
and
DONALD E. MARSHALL
-------------
March 27, 1999
-------------------------------------------------------
<PAGE> 2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
March 27, 1999 among Kellstrom Industries, Inc., a Delaware corporation
("Kellstrom"), Certified Aircraft Parts, Inc., a Florida corporation
("Certified"), R. Dean Stickler ("Stickler") and Donald E. Marshall
("Marshall"), each of whom is a resident of the State of Florida and who
together constitute the sole shareholders of Certified (together the
"Shareholders").
RECITALS
Certified is engaged in the purchase, sale and support of aircraft
parts and the provision of related services. Kellstrom desires to purchase, and
the Shareholders desire to sell, all of the issued and outstanding shares of
capital stock of Certified, on the terms and subject to the conditions contained
in this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Acquisition" means the acquisition of the Shares (as
hereinafter defined) by Kellstrom from the Shareholders.
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations promulgated under
the Exchange Act (as hereinafter defined), as in effect on the
date hereof.
"Common Stock" means the shares of common stock, $5.00 par
value per share, of Certified.
"Contract" means any agreement, contract, lease, note,
mortgage, indenture, loan agreement, franchise agreement,
covenant, employment agreement, license agreement, instrument,
purchase or sales order, commitment, undertaking or
obligation, in each case, whether written or oral, express or
implied.
<PAGE> 3
"Designated Automobiles" means that certain 1998 BMW 7401L,
vehicle identification number WBAGJ83234WDM16459, and that
certain 1998 Chrysler Van, vehicle identification number
K4GP54G3WB557836, owned by Certified.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Environmental Report" means that certain Environmental Report
dated March 17, 1999 prepared by Kellstrom's Environmental
Consultant (as hereinafter defined), and any further reports
prepared by Kellstrom's Environmental Consultant based on any
samples taken during the course of the preparation thereof.
"Familial Affiliate" means (a) any descendent of a common
grandparent of any officer, director or shareholder of
Certified, (b) any spouse of any person covered by subsection
(a) of this definition, and (c) any entity in which any person
covered by subsections (a) or (b) of this definition owns or
has any beneficial interest.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof,
and any entity or official exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indebtedness" means any indebtedness for borrowed money
(including, but not limited to, accrued but unpaid interest),
whether owed to a bank or any other Person, remaining payments
on capitalized equipment leases and remaining payments on
covenants not to compete.
"Independent Accountants" means a firm of independent
certified public accountants of national reputation which has
not performed services for Kellstrom, Certified or either of
the Shareholders or any of their respective Affiliates during
the preceding three (3) year period, which is selected by
Kellstrom and the Shareholders (or if they cannot agree, by
Kellstrom's Accountants and the Shareholders' Accountants).
"Kellstrom's Environmental Consultant" means Miller Legg and
Associates, Inc.
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"Kellstrom's Accountants" means KPMG LLP.
"Lease" means that certain Lease dated January 1, 1996 between
the Partnership (as hereinafter defined) and Certified with
respect to the Leased Premises (as hereinafter defined)
located at 2870 Stirling Road, Hollywood, Florida 33020 (the
"Property"), as amended by that certain Addendum to Lease
dated January 1, 1996 and that certain Second Addendum to
Lease dated December 17, 1997.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not
limited to, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of
or agreement to give any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in
connection with such mortgage, pledge, security interest,
encumbrance, lien or charge).
"Material Adverse Change (or Effect)," with respect to any
Person, means a change (or effect) in condition (financial or
otherwise), properties, assets, liabilities, rights,
obligations, operations or business of such Person which
change (or effect), individually or in the aggregate, is
materially adverse to such condition (financial or otherwise),
properties, assets, liabilities, rights, obligations,
operations or business.
"Modified GAAP" means GAAP which has been applied in the
manner and with the modifications and adjustments consistently
applied by Certified in the preparation of its audited
financial statements, which manner, modifications and
adjustments are set forth on SCHEDULE 1.1(A).
"Partnership" means the Stickler and Marshall Partnership.
"Permitted Liens" means (a) Liens arising by operation of law,
including, without limitation, materialmen's, mechanics',
workmen's and repairmen's Liens, in each case securing
obligations of Certified (i) which are reflected on the
Current Balance Sheet and not heretofore paid or discharged,
(ii) incurred in the ordinary course of business consistent
with past practice since the date of the Current Balance
Sheet, or (iii) set forth on SCHEDULE 4.11(A) which were
incurred in the ordinary course of business prior to the date
of the Current Balance Sheet and, in accordance with GAAP
consistently applied, were not required to be recorded
therein; and (b) Liens for Taxes not yet due and payable.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, estate, trust,
unincorporated association, joint venture, Governmental
Authority or other entity, of whatever nature.
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"Post-Closing Period" means a Tax period beginning and ending
after the Closing Date.
"Pre-Closing Period" means a Tax period ending on or prior to
the Closing Date.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders' Environmental Consultant" means Nutting
Environmental of Florida, Inc.
"Shareholders' Accountants" means Grant Thornton LLP.
"Shares" means all of the issued and outstanding shares of
Common Stock.
"Tax Return" means any return (including any information
return), report, statement, schedule, notice, form or other
document or information filed with or submitted to or required
to be filed with or submitted to any Governmental Authority in
connection with or with respect to the determination,
assessment, collection or payment of any Taxes.
"Taxes" means all taxes, including, but not limited to,
income, excise, property, sales, franchise, intangible,
withholding, social security and unemployment taxes, levies,
assessments, tariffs, duties (including customs duties),
deficiencies or other fees, imposed, assessed or collected by
or under the authority of any Governmental Authority, or
payable pursuant to any tax sharing agreement or other
contract relating to the sharing or payment of any such tax,
levy, assessment, tariff, duty (including customs duties),
deficiency or other fee, and any related charge or amount,
including, but not limited to, any fine, penalty, interest or
additional tax.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) All terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
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(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall, except as
expressly set forth herein, be determined in accordance with GAAP applied on a
basis consistent with prior periods.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(e) Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
(f) Whenever this Agreement provides for a payment to be made
by any party, such payment shall be made by wire transfer of immediately
available United States funds.
(g) Whenever Kellstrom shall be required to make a payment to
the Shareholders under this Agreement, the Escrow Agreement (as defined below)
or the Environmental Escrow Agreement (as defined below), Kellstrom shall make
such payment to the Shareholders in proportion to the number of Shares owned by
each Shareholder.
(h) Any reference in this Agreement to the knowledge of a
Person shall mean the actual knowledge of such Person or any then current
officer or director of such Person, after diligent inquiry; provided, however,
that such diligent inquiry shall not be deemed to require any Person to engage a
third party professional or consultant to conduct such inquiry.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 THE ACQUISITION. Subject to the terms and conditions of this
Agreement, the Shareholders shall at the Closing (as defined below) sell,
convey, transfer, assign and deliver to Kellstrom, and Kellstrom shall at the
Closing purchase, acquire and accept from the Shareholders, the Shares, free and
clear of any Liens (including, without limitation, any Liens disclosed herein or
in any of the schedules attached hereto).
2.2 PURCHASE PRICE. The aggregate purchase price to be paid by
Kellstrom to the Shareholders in exchange for the Shares (the "Purchase Price")
shall be Sixteen Million Seventy Five Thousand Dollars ($16,075,000) MINUS the
positive amount, if any, by which the Net Worth of Certified as of the time of
the Closing is less than Six Million Nine Hundred Fifty Thousand Dollars
($6,950,000). As used throughout this document, "Net Worth" means the amount if
any, by which the aggregate total assets of Certified exceeds the aggregate
total liabilities of Certified, in each case, determined in accordance with
Modified GAAP.
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2.3 PAYMENT OF ESTIMATED PURCHASE PRICE. At least two days prior to the
Closing Date, Kellstrom and the Shareholders shall estimate by mutual agreement
the amount of the Purchase Price (the "Estimated Purchase Price"). The Estimated
Purchase Price shall be calculated from the books and records of Certified, and
the parties shall endeavor to cause the Estimated Purchase Price to accurately
reflect the Net Worth of Certified as of the time of the Closing. At the
Closing, Kellstrom shall pay the Estimated Purchase Price, as follows:
(a) Kellstrom shall deliver to IBJ Whitehall Bank & Trust
Company or such other third party as may be agreed upon by the parties (the
"Escrow Agent") (i) the sum of Three Million Two Hundred Twenty Thousand Dollars
($3,220,000) (the "Escrowed Amount") to be held in accordance with the terms of
Article IX and the Escrow Agreement (as hereinafter defined), and (ii) the sum
of Seven Hundred Fifty Thousand Dollars ($750,000) (or such lesser amount as may
be mutually agreed upon by the parties on or prior to the Closing Date) (the
"Environmental Escrowed Amount") to be held in accordance with the terms of
Article IX and the Environmental Escrow Agreement (as hereinafter defined); and
(b) Kellstrom shall pay to the Shareholders the balance of the
Estimated Purchase Price (the "Closing Date Payment").
2.4 CLOSING DATE PAYMENT ADJUSTMENT. Within ninety (90) days following
the Closing Date, Kellstrom shall cause Kellstrom's Accountants to prepare an
audit of the financial statements of Certified for the portion of the fiscal
year in which the Closing took place through and including the time of the
Closing, and such financial statements shall be prepared in accordance with GAAP
(the "Audited Closing Date Financial Statements"). The Shareholders shall be
entitled to participate in the conduct of such audit. Upon completion of the
audit, Kellstrom shall prepare and deliver to the Shareholders a certificate
verified as to accuracy by its Chief Financial Officer (the "Actual Purchase
Price Certificate") (a) attaching a copy of the Audited Closing Date Financial
Statements, (b) attaching a copy of the unaudited, internally prepared balance
sheet of Certified as of the time of the Closing (the "Adjusted Closing Date
Balance Sheet"), which shall be based upon the balance sheet of Certified as of
the time of the Closing included in the Audited Closing Date Financial
Statements (the "Audited Closing Date Balance Sheet"), as adjusted by (i)
applying Modified GAAP consistent with the methodology used in the preparation
of the Current Balance Sheet (as hereinafter defined), (ii) reversing any
reserve set forth on the Audited Closing Date Balance Sheet on account of any
Remediation (as hereinafter defined) required to be paid for by the Shareholders
under Section 6.23, (iii) writing down the book value of the inventory as
reflected on the Audited Closing Date Balance Sheet by the book value of any
inventory which was owned by Certified as of the date of the Current Balance
Sheet but was not reflected on the Current Balance Sheet or was reflected on the
Current Balance Sheet at zero value, and (iv) increasing the Net Worth of
Certified as of the time of the Closing by the book value as of the time of the
Closing of any Designated Automobiles which have been transferred to the
Shareholders, and (c) setting forth the actual amount of the Purchase Price
(which actual amount is referred to as the "Actual Purchase Price") and the
method of calculation thereof in reasonable detail, which amount shall be
determined based upon the Net Worth of Certified as of the time of the Closing
as set forth in the Adjusted Closing Date Balance Sheet. Kellstrom shall pay any
costs or expenses incurred by it in connection with the preparation of the
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Audited Closing Date Financial Statements. If within twenty (20) business days
after the Actual Purchase Price Certificate is delivered to the Shareholders,
the Shareholders shall not have given written notice to Kellstrom setting forth
in detail any objection to the Actual Purchase Price, then such determination of
the Actual Purchase Price shall be final and binding on the parties hereto. If
within such twenty (20) business day period following delivery of the Actual
Purchase Price Certificate, the Shareholders shall give written notice to
Kellstrom setting forth in reasonable detail any objection to such determination
of the Actual Purchase Price, Kellstrom and the Shareholders shall endeavor to
reach agreement within the twenty (20) business day period following the receipt
by Kellstrom of the notice of objection. If the parties shall reach agreement on
the objections of the Shareholders, then the Actual Purchase Price as adjusted
by the parties shall become the Actual Purchase Price for purposes of this
Agreement (except as otherwise specifically provided herein). If the parties are
unable to reach agreement within such twenty (20) business day period, then (i)
the matter shall be submitted as soon as practicable to the Independent
Accountants for determination of the Actual Purchase Price, and (ii) to the
extent that any portion of the Actual Purchase Price is undisputed by the
parties, such undisputed portion shall be paid within ten (10) business days
following the end of such period. If the parties shall submit the determination
of the Actual Purchase Price to the Independent Accountants, then the
determination of the Independent Accountants shall be final and binding on the
parties and such amount shall become the Actual Purchase Price for purposes of
the remainder of this Agreement (except as otherwise specifically provided
herein). The parties (and their professional advisors) shall cooperate with one
another in furtherance of determining the Actual Purchase Price, and the parties
shall make their books and records and personnel reasonably available, and
Kellstrom shall make the work papers utilized by Kellstrom's Accountants and
shall make Kellstrom's Accountants reasonably available, in furtherance of
making such determination. In connection with the resolution of any dispute,
each party shall pay its own fees and expenses, including, without limitation,
legal, accounting and consultant fees and expenses. If the Actual Purchase Price
as determined by the Independent Accountants is greater than the Actual Purchase
Price as set forth in the Actual Purchase Price Certificate by more than two
percent (2%), then the cost and expense of the Independent Accountants shall be
paid by Kellstrom. If the Actual Purchase Price as determined by the Independent
Accountants is greater than the Actual Purchase Price as set forth in the Actual
Purchase Price Certificate by two percent (2%) or less, or is less than the
Actual Purchase Price as set forth in the Actual Purchase Price Certificate,
then the cost and expense of the Independent Accountants shall be paid by the
Shareholders. If the Estimated Purchase Price is greater than the Actual
Purchase Price, then the Shareholders shall repay to Kellstrom within ten (10)
business days following receipt of the Actual Purchase Price Certificate or, if
disputed, within ten (10) business days following the earlier of the date on
which the parties resolve the dispute or the date of determination of the Actual
Purchase Price by the Independent Accountants, the difference between the
Estimated Purchase Price and the Actual Purchase Price. If the Shareholders
shall fail to pay such amount when due, then Kellstrom shall have the right (but
not the obligation), in addition to any other remedies which it may have, to
deem such amount to be Kellstrom Indemnifiable Damages in accordance with
Article IX (provided that the Kellstrom Indemnification Threshold shall not be
applicable to such amount and such amount shall not count against the Kellstrom
Indemnification Cap). If the Actual Purchase Price is greater than the Estimated
Purchase Price, then Kellstrom shall pay to the Shareholders within ten (10)
business days following receipt of the Actual Purchase Price Certificate or, if
disputed, within ten (10) business
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days following the earlier of the date on which the parties resolve the dispute
or the date of determination of the Actual Purchase Price by the Independent
Accountants, the difference between the Actual Purchase Price and the Estimated
Purchase Price.
2.5 THE CLOSING. Subject to the terms and conditions of this Agreement,
the consummation of the Acquisition (the "Closing") shall take place as promptly
as practicable (and in any event within five (5) business days) after
satisfaction or waiver of the conditions set forth in Articles VII and VIII, at
the offices of Akerman, Senterfitt & Eidson, P.A., Ft. Lauderdale, Florida, or
such other time and place as the parties may otherwise agree (the "Closing
Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KELLSTROM
As a material inducement to the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, Kellstrom
makes the following representations and warranties to the Shareholders:
3.1 CORPORATE STATUS. Kellstrom is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own or lease its
properties and to carry on its business as now being conducted.
3.2 CORPORATE POWER AND AUTHORITY. Kellstrom has the corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Kellstrom has
taken all actions necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by Kellstrom and constitutes a legal, valid and binding obligation of Kellstrom,
enforceable against Kellstrom in accordance with its terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
3.4 NO VIOLATION. Except as set forth in SCHEDULE 3.4, none of the
execution or delivery of this Agreement by Kellstrom, the performance by
Kellstrom of its obligations hereunder or the consummation by it of the
transactions contemplated by this Agreement will (i) contravene any provision of
the Restated Certificate of Incorporation or Bylaws of Kellstrom, each as
amended to date, (ii) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against Kellstrom, (iii) conflict with, result
in any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice
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or both, constitute a default) under, or give rise to a right to terminate,
amend, modify, abandon or accelerate, any Contract which is applicable to,
binding upon or enforceable against Kellstrom, (iv) result in or require the
creation or imposition of any Lien upon or with respect to any of the property
or assets of Kellstrom or (v) require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person, except any SEC and other filings required
to be made by Kellstrom and any filings required to be made by the parties under
the HSR Act, if any.
3.5 NO COMMISSIONS. Kellstrom has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby, other than fees which will
be paid by, and are the sole obligation of, Kellstrom.
3.6 SECURITIES AND EXCHANGE COMMISSION FILINGS. Kellstrom has
heretofore furnished or made available to Certified a true and complete copy of
each Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report
on Form 8-K and definitive proxy statement filed by Kellstrom with the SEC since
January 1, 1998. None of such documents as of the dates they were respectively
filed with the SEC contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except as heretofore disclosed in filings with the SEC, as
otherwise publicly announced or as disclosed to Certified in writing, since
December 31, 1997, Kellstrom has conducted its business only in the ordinary and
usual course and there has not occurred any Material Adverse Change with respect
to Kellstrom.
3.7 INVESTMENT INTENT. Kellstrom is an accredited investor (as defined
in Regulation D promulgated under the Securities Act), and is a sophisticated
investor which has such knowledge and experience in financial, business and
aviation industry matters, that it is capable of evaluating the risk of
acquiring the Shares. The Shares are being acquired by Kellstrom for its own
account and without any view towards distribution, transfer or resale. Kellstrom
acknowledges that the Shares are subject to various restrictions on resale under
state and federal securities laws.
3.8 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. Kellstrom acknowledges
that neither of the Shareholders, Certified nor any other Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding Certified or either Shareholder,
except as expressly set forth in this Agreement or the schedules attached
hereto, or in any certificates, instruments or other documents delivered
pursuant to the terms of this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
CERTIFIED AND THE SHAREHOLDERS
As a material inducement to Kellstrom to enter into this Agreement and
to consummate the transactions contemplated hereby, Certified and the
Shareholders, jointly and severally, make the following representations and
warranties to Kellstrom:
4.1 CORPORATE STATUS. Certified is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida and
has the requisite corporate power and authority to own or lease its properties
and to carry on its business as now being conducted. Certified is legally
qualified to transact business as a foreign corporation, and is in good standing
as such, in those jurisdictions set forth on SCHEDULE 4.1, which jurisdictions
represent all of the jurisdictions in which the nature of its properties and/or
the conduct of its business requires such qualification. Certified has complied
in all material respects with all of the requirements of any statute governing
the use and registration of fictitious names, and has the legal right to use the
names under which it operates its business. Except as set forth on SCHEDULE 4.1,
(a) Certified has not changed its name or at any time used any assumed or
fictitious name since the date of its organization, (b) Certified has not been
the surviving entity in a merger or acquired any businesses since the date of
its organization, and (c) Certified has not changed its principal place of
business or chief executive office since December 31, 1991. There is no pending
or threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of Certified.
4.2 POWER AND AUTHORITY. Certified has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Certified has
taken all action necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. The Shareholders are individual United
States citizens residing in the State of Florida, and have the requisite
competence and authority to execute and deliver this Agreement, to perform their
obligations hereunder and to consummate the transactions contemplated hereby.
4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by Certified and each of the Shareholders, and constitutes the legal, valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
4.4 CAPITALIZATION. Certified has (a) one hundred (100) shares of
Common Stock authorized and no shares of any other class of capital stock
authorized, (b) one hundred (100) shares of Common Stock issued and outstanding,
and (c) no shares of Common Stock held in treasury. All of the Shares have been
duly authorized and validly issued and are fully paid and non-assessable,
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and were issued in compliance with all applicable state and federal securities
laws, and none of the Shares were issued in violation of any preemptive rights
or rights of first refusal. No preemptive rights or rights of first refusal
exist with respect to the shares of capital stock of Certified, and no such
rights arise by virtue of or in connection with the transactions contemplated
hereby. There are no outstanding or authorized rights, options, warrants,
convertible securities, subscription rights, conversion rights, exchange rights
or other agreements or commitments of any kind that could require Certified to
issue or sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to Certified. There are no proxies, voting rights or other agreements or
understandings with respect to the voting or transfer of the capital stock of
Certified. Certified is not obligated to redeem or otherwise acquire any of its
outstanding shares of capital stock.
4.5 SHAREHOLDERS. SCHEDULE 4.5 sets forth the name, address and social
security number of each shareholder of Certified and the number of Shares owned
beneficially and of record by each such shareholder. Except as set forth on
SCHEDULE 4.5, the Shareholders own beneficially and of record all of the issued
and outstanding shares of capital stock of Certified, and the Shareholders own
such shares free and clear of any Liens, claims or restrictions of any kind.
4.6 NO VIOLATION. Except as set forth in SCHEDULE 4.6, none of the
execution or delivery of this Agreement by Certified or either of the
Shareholders, the performance by any of them of their respective obligations
hereunder or the consummation by any of them of the transactions contemplated by
this Agreement will (i) contravene any provision of the Articles of
Incorporation or Bylaws (or other organizational documents), as amended to date,
of Certified, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against Certified or either of the Shareholders, (iii)
conflict with, result in any breach of, or constitute a default (or an event
which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any Designated Contract (as hereinafter defined)
or any Contract which is binding upon or enforceable against either of the
Shareholders, (iv) result in or require the creation or imposition of any Lien
upon or with respect to any of the property or assets of either Certified or the
Shares or (v) require the consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person, except any SEC and other filings required to be
made by Kellstrom and any filings required to be made by the parties under the
HSR Act, if any.
4.7 RECORDS OF CERTIFIED. The copies of the Articles of Incorporation
and Bylaws of Certified which were provided to Kellstrom are true, accurate and
complete and reflect all amendments made through the date of this Agreement. The
minute books for Certified made available to Kellstrom for review were correct
and complete in all material respects as of the date of such review; no further
entries have been made therein through the date of this Agreement; and the
records contained in such minute books contain the true signatures of the
persons purporting to have signed them, and each such minute book contains an
accurate record of all material corporate
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actions of the shareholders and directors (and any committees thereof) of
Certified taken by written consent or at a meeting since the date of its
organization. All material corporate actions taken by Certified have been duly
authorized or ratified. The stock ledgers of Certified, as previously made
available to Kellstrom, contain complete and accurate records of all issuances,
transfers and cancellations of shares of the capital stock of Certified.
4.8 SUBSIDIARIES. Certified does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or control, any
corporation, partnership, joint venture or other business entity.
4.9 FINANCIAL STATEMENTS. The Shareholders have delivered to Kellstrom
the unaudited financial statements of Certified for the year ended July 31,
1996, including the notes thereto, reviewed by Seldine & Ingber (the "Unaudited
Annual Financial Statements"), and the audited financial statements of Certified
for the year ended July 31, 1997, including the notes thereto, audited by the
Shareholders' Accountants (the "Audited Annual Financial Statements", and
together with the Unaudited Annual Financial Statements, the "Annual Financial
Statements"), and the unaudited financial statements of Certified for the five
(5) month period ended December 31, 1998 (the "Interim Financial Statements",
and together with the Annual Financial Statements, the "Financial Statements"),
copies of which are attached to SCHEDULE 4.9 hereto. The balance sheet of
Certified dated as of December 31, 1998 included in the Interim Financial
Statements is referred to herein as the "Current Balance Sheet." Except as set
forth on SCHEDULE 4.9, the Financial Statements fairly present in all material
respects the financial position of Certified at each of the balance sheet dates
and the results of operations for the periods covered thereby, and in the case
of the Audited Annual Financial Statements, have been prepared in accordance
with GAAP consistently applied throughout the periods indicated. There are no
extraordinary items of income or expense during the periods covered by the
Financial Statements, and the balance sheets included in the Financial
Statements do not reflect any writeup or revaluation increasing the book value
of any assets, except as specifically disclosed in the notes thereto or
otherwise reflected therein.
4.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth
on SCHEDULE 4.10, since the date of the Current Balance Sheet, Certified has
operated in the ordinary course of business consistent with past practice and
has not (i) issued any capital stock or other securities; (ii) made any
distribution of or with respect to its capital stock or other securities, or
purchased or redeemed any of its securities; (iii) paid any bonus to or
increased the rate of compensation of any of its officers or salaried employees
(in the case of salaried employees, other than in the ordinary course of
business consistent with past practice), or amended any other terms of
employment of any officers or salaried employees (in the case of salaried
employees, other than in the ordinary course of business consistent with past
practice); (iv) sold, leased or transferred any of its properties or assets
other than the sale of inventory in the ordinary course of business consistent
with past practice; (v) made or obligated itself to make capital expenditures in
excess of Fifty Thousand Dollars ($50,000) in the aggregate; (vi) made any
payment in respect of its liabilities other than in the ordinary course of
business consistent with past practice; (vii) incurred any obligations or
liabilities (including any Indebtedness) or entered into any transaction or
series of transactions involving in excess of Fifty Thousand Dollars ($50,000)
in the aggregate out of the ordinary course
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of business, except for this Agreement and the transactions contemplated hereby;
(viii) suffered any theft, damage, destruction, casualty loss or extraordinary
loss, whether or not covered by insurance and whether or not a timely claim was
filed with respect thereto, in excess of Fifty Thousand Dollars ($50,000) in the
aggregate; (ix) waived, canceled, compromised or released any rights having a
value in excess of Fifty Thousand Dollars ($50,000) in the aggregate; (x) made
or adopted any change in its accounting practice or policies; (xi) made any
adjustment to its books or records other than in respect of the conduct of its
business activities in the ordinary course consistent with past practice; (xii)
entered into any transaction with any Affiliate or Familial Affiliate; (xiii)
entered into any employment agreement; (xiv) terminated, amended or modified any
Designated Contract; (xv) imposed any security interest or other Lien on any of
its assets other than Permitted Liens; (xvi) delayed paying any accounts payable
which are due and payable except to the extent being contested in good faith,
other than in the ordinary course of business consistent with past practice;
(xvii) made or pledged any charitable contributions in excess of Fifty Thousand
Dollars ($50,000) in the aggregate; (xviii) entered into any other transaction
or, to the knowledge of Certified or either of the Shareholders, been subject to
any event specifically applicable to Certified and not generally to similarly
situated companies, which has or may have a Material Adverse Effect on
Certified; or (xix) agreed to do or authorized any of the foregoing.
4.11 LIABILITIES OF CERTIFIED. Certified does not have any liabilities
or obligations, whether accrued, absolute, contingent or otherwise, except (a)
to the extent reflected on the Current Balance Sheet and not heretofore paid or
discharged, (b) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Current Balance Sheet (none
of which relates to breach of contract, breach of warranty, tort, infringement
or violation of law, or which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding), (c) liabilities set forth on SCHEDULE
4.11(A) and (d) liabilities which were incurred in the ordinary course of
business prior to the date of the Current Balance Sheet and which, in accordance
with GAAP consistently applied, were not required to be recorded thereon (none
of which relates to breach of contract, breach of warranty, tort, infringement
or violation of law of which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding) and which in the aggregate would not
have a Material Adverse Effect on Certified. SCHEDULE 4.11(B) contain a true and
complete list of Indebtedness of Certified, including the name of the lender,
pay-off amount, per diem interest and any prepayment penalties or premiums.
4.12 LITIGATION. Except as disclosed on SCHEDULE 4.12 hereto, there is
no action, suit, or other legal or administrative proceeding or governmental
investigation pending, or, to the knowledge of Certified or either of the
Shareholders, threatened against or by Certified or any of Certified's
properties or assets or the Shares or which relates to or questions the validity
or enforceability of this Agreement or the transactions contemplated hereby, and
to the knowledge of Certified and each of the Shareholders, there is no basis
for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which
Certified is or was a party which have not been complied with in full by
Certified or which continue to impose any obligations on Certified.
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4.13 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 4.13, each of the
Companies (as defined in clause (g) below) is and has at all times been in full
compliance with all Environmental Laws (as defined in clause (g) below)
governing its business, operations, properties or assets, including, without
limitation: (i) all requirements under Environmental Laws relating to the
Discharge (as defined in clause (g) below) or Handling (as defined in clause (g)
below) of Hazardous Substances (as defined in clause (g) below); (ii) all
requirements under Environmental Laws relating to notice, record keeping or
reporting; (iii) all requirements under Environmental Laws relating to obtaining
or maintaining Licenses (as defined in clause (g) below) for the ownership
and/or use of its properties or assets or the operation of its business as
presently conducted, including Licenses relating to Hazardous Substances; and
(iv) all applicable writs, orders, judgements, injunctions, governmental
communications, decrees, informational requests or demands issued pursuant to,
or arising under, any Environmental Laws.
(b) Except as set forth in SCHEDULE 4.13, there are no (and
there is no reasonable basis for any) non-compliance orders, warning letters,
notices of violation (collectively "Notices"), claims, suits, actions,
judgments, penalties, fines, or administrative or judicial investigations or
proceedings (collectively "Proceedings") pending or, to the knowledge of
Certified or either of the Shareholders, threatened against or involving any of
the Companies or any of their respective businesses, operations, properties or
assets, issued by any Governmental Authority or third party with respect to any
Environmental Laws or Licenses issued to any of the Companies thereunder in
connection with, related to or arising out of the ownership by any of the
Companies of their respective properties or assets or the operation of their
respective businesses, which have not been resolved to the satisfaction of the
issuing Governmental Authority or third party in a manner that would not impose
any obligation, burden or continuing liability on Kellstrom or any of the
Companies in the event that the transactions contemplated by this Agreement are
consummated, or which could have a Material Adverse Effect on Kellstrom or any
of the Companies, including, without limitation: (i) Notices or Proceedings
related to any of the Companies being a potentially responsible party or a
possible potentially responsible party for a federal or state environmental
cleanup site or for corrective action under any applicable Environmental Laws;
(ii) Notices or Proceedings relating to any of the Companies being responsible
to undertake any response, removal or remedial actions or clean-up actions under
any applicable Environmental Law; or (iii) Notices or Proceedings related to any
of the Companies being liable under any Environmental Laws for personal injury,
property damage, natural resource damage, or clean up obligations.
(c) Except as set forth on SCHEDULE 4.13, none of the
Companies has Discharged, or allowed or arranged for any third party to
Discharge, Hazardous Substances in violation of Environmental Laws, to, at or
upon (i) any location other than a site lawfully permitted to receive such
Hazardous Substances, (ii) any real property currently or previously owned or
leased by any of the Companies, or (iii) any site which, pursuant to any
Environmental Laws, (x) has been placed on the National Priorities List or its
state equivalent, or (y) the Environmental Protection Agency or the relevant
state agency or other Governmental Authority has notified any of the Companies
that such Governmental Authority has proposed or is proposing to place on the
National Priorities List
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or its state equivalent. There has not occurred, nor is there presently
occurring, a Discharge, or, to the knowledge of the Companies or either of the
Shareholders, threatened Discharge, of any Hazardous Substance on, into or
beneath the surface of, or adjacent to, any real property currently or
previously owned or leased by any of the Companies in an amount requiring a
notice or report to be made to a Governmental Authority or in violation other
than of any applicable Environmental Laws. Except as set forth on SCHEDULE 4.13,
there does not presently exist on any real property currently or previously
owned or leased by any of the Companies any conditions or circumstances which
require or may, in the future, require cleanup, removal or other remedial action
or other response under applicable Environmental Laws, permits or licenses, to
be undertaken by Certified or Kellstrom or that would subject Certified or
Kellstrom to penalties, damages or injunctive relief.
(d) SCHEDULE 4.13 identifies the operations and activities,
and locations thereof, which have been conducted or are being conducted by any
of the Companies on any real property currently or previously owned or leased by
any of the Companies within the last ten (10) years which have involved the
Handling or Discharge of Hazardous Substances.
(e) None of the Companies use, nor has used, any Aboveground
Storage Tanks (as defined in clause (g) below) or Underground Storage Tanks (as
defined in clause (g) below), and there are not now nor have there ever been any
Underground Storage Tanks beneath any real property currently or previously
owned or leased by any of the Companies that are required to be registered under
applicable Environmental Laws.
(f) SCHEDULE 4.13 identifies (i) all environmental audits,
assessments or occupational health studies undertaken by any of the Companies or
any of their agents or undertaken by any Governmental Authority or any third
party, in any case undertaken by or on behalf of Certified or either of the
Shareholders within the last six years or which are otherwise known to and
reasonably available to Certified or either of the Shareholders, relating to or
affecting any of the Companies or any real property currently or previously
owned or leased by any of the Companies; (ii) the results of any ground, water,
soil, air or asbestos monitoring undertaken by any of the Companies or any of
their agents or undertaken by any Governmental Authority or any third party, in
any case undertaken by or on behalf of Certified or either of the Shareholders
within the last six years or which are otherwise known to and reasonably
available to Certified or either of the Shareholders, relating to or affecting
any of the Companies or any real property currently or previously owned or
leased by any of the Companies which indicate the presence of Hazardous
Substances at levels requiring a notice or report to be made to a Governmental
Authority or in violation of any applicable Environmental Laws; (iii) all
material written communications between any of the Companies and any
Governmental Authority during the last six years or which are otherwise known to
and reasonably available to Certified or either of the Shareholders, arising
under or related to Environmental Laws; and (iv) all outstanding citations
issued under OSHA, or similar state or local statutes, laws, ordinances, codes,
rules, regulations, orders, ruling, or decrees, relating to or affecting any of
the Companies or any real property currently or previously owned or leased by
any of the Companies.
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(g) For purposes of this Section 4.13, the following terms
shall have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Aboveground Storage
Tanks.
"Companies" means Certified and any Affiliates of Certified
for whose acts or omissions Certified may be held liable under any
Environmental Law.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be
defined in any Environmental Law, into any medium including, without
limitation, ground water, surface water, soil or air.
"Environmental Laws" means all existing federal, state, regional or
local statutes, laws, rules, regulations, codes, orders, plans,
injunctions, decrees, rulings and ordinances, and changes or judicial
or administrative interpretations thereof, or similar laws of foreign
jurisdictions where any of the Companies conducts business, any of
which govern (or purport to govern) or relate to pollution, protection
of the environment, public health and safety, air emissions, water
discharges, hazardous or toxic substances, solid or hazardous waste or
occupational health and safety, as any of these terms are or may be
defined in such statutes, laws, rules, regulations, codes, orders,
plans, injunctions, decrees, rulings and ordinances, or changes or
judicial or administrative interpretations thereof, including, without
limitation: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment and
Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(collectively "CERCLA"); the Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act of 1976 and subsequent
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et
seq. (collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as
amended, 33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended
(42 U.S.C. Section 7401- 7642); the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 2601 et seq.; the Federal Insecticide,
Fungicide, and Rodenticide Act as amended, 7 U.S.C. Section 136-136y
("FIFRA"); the Emergency Planning and Community Right-to-Know Act of
1986 as amended, 42 U.S.C. Section 11001, et seq. (Title III of SARA)
("EPCRA"); and the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Section 651, et seq. ("OSHA").
"Environmental Liabilities" means any and all expenses,
losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable counsel and paralegal fees and expenses)
of any kind, whether known or unknown, fixed or contingent, arising
from or relating to any (i) violations of Environmental Laws by any of
the Companies on or prior to the Closing Date, (ii) Existing Conditions
(as hereinafter defined) and any other matters set forth on SCHEDULE
4.13, (iii) breach of any representation or warranty set forth in
Section 4.13 or any covenant set forth in Section 6.23, (iv) release of
Hazardous Substances in violation
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of Environmental Laws on or from the Leased Premises on or prior to the
Closing Date, (v) exposure of any Person to Hazardous Substances in
violation of Environmental Laws by any of the Companies on or prior to
the Closing Date, (vi) contamination of waste disposal facilities or
waste disposal sites in violation of Environmental Laws by Hazardous
Substances generated by any of the Companies on or prior to the Closing
Date or (vii) death or bodily injuries to any person, destruction or
damage to any real or personal property, or contamination of or adverse
effects on the environment arising from or relating to any of the
foregoing.
"Handle" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring, labeling,
handling, manufacturing or using, as any of such terms may be defined
in any Environmental Law, of any Hazardous Substances or Waste.
"Hazardous Substances" shall mean any toxic or hazardous
substance, material, or waste, and any other contaminant, pollutant or
constituent thereof, whether liquid, solid, semi-solid, sludge and/or
gaseous, including without limitation chemicals, compounds,
by-products, pesticides, asbestos containing materials, petroleum or
petroleum products, and polychlorinated biphenyls, the presence of
which requires investigation or remediation under any Environmental
Laws or which are or become regulated, listed or controlled by, under
or pursuant to any Environmental Laws, including, without limitation,
RCRA, CERCLA, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the Clean Air Act, the Clean Water Act, FIFRA,
EPCRA and OSHA, or any similar state statute, or regulations
implementing such statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, or which has been determined
or interpreted by any Governmental Authority to be a hazardous or toxic
substance regulated under any other statute, law, regulation, order,
code, rule, order, or decree.
"Licenses" means all licenses, certificates, permits,
approvals and registrations required to comply with any Environmental
Law.
"Underground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Underground Storage
Tanks.
4.14 REAL ESTATE.
(a) Certified does not own and has never owned any real
property or any interest therein.
(b) SCHEDULE 4.14 sets forth a list of all leases, licenses or
similar agreements of or relating to real property (collectively, "Leases") to
which Certified is a party (copies of which have previously been furnished to
Kellstrom), in each case setting forth the lessor and lessee thereof and the
date and term of each of the Leases, and the street address of each property
covered thereby
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(the "Leased Premises"). In the case of the Lease which is denoted with an '*'
on SCHEDULE 4.14, Certified has provided Kellstrom with a copy of such Lease
which has not been fully executed by all of the parties thereto; PROVIDED,
HOWEVER, that Certified and the Shareholders represent and warrant to Kellstrom
that such copy conforms to the copy that has been fully executed by all of the
parties thereto. Except as set forth in SCHEDULE 4.14, the Leases are in full
force and effect and have not been amended. Except as set forth in SCHEDULE
4.14, (i) Certified is not in default or breach under any Lease, (ii) to the
knowledge of Certified and the Shareholders, no other party thereto is in
default or breach under any Lease, and (iii) no event has occurred which, with
the passage of time or the giving of notice or both, would cause a breach by
Certified of or default by Certified under any Lease or, to the knowledge of
Certified or either of the Shareholders, would cause a breach by any other party
or a default by any other party under any Lease, in any case which default or
breach gives rise to, or with the passage of time or the giving of notice or
both, would give rise to, any right of Certified or any other party thereto to
terminate such Lease or which could have a Material Adverse Effect on Certified.
With respect to each of the Leased Premises (i) Certified has valid leasehold
interests in the Leased Premises, free and clear of any Liens or any covenants,
easements or title defects created by or of which Certified or either
Shareholder has knowledge, except Permitted Liens, and (ii) neither Certified
nor either of the Shareholders has received notice of any condemnation
proceeding with respect to any portion of any of the Leased Premises or any
access thereto or any special assessment which may affect any of the Leased
Premises.
(c) SCHEDULE 4.14 contains a list of (i) the principal place
of business and chief executive office of Certified, (ii) all other offices and
places of business maintained by Certified and (iii) all other locations where
the equipment, inventory, chattel paper and books and records of Certified are
located.
4.15 GOOD TITLE TO AND CONDITION OF ASSETS.
(a) SCHEDULE 4.15(a) contains a list as of the date of this
Agreement of all inventory owned by Certified which is included in the inventory
line item on Certified's financial statements (collectively, the "Designated
Inventory"), setting forth for each such item of inventory, a description, the
quantity and the value at which such item of inventory is carried on the books
and records of Certified. All of the Designated Inventory is of a quality usable
or salable in the ordinary course of business of Certified. All inventory owned
by Certified which is obsolete or of below- standard quality has been written
off, written down or adequately reserved against to its net realizable value on
the books and records of Certified. All Designated Inventory has been recorded
at the lower of cost or net realizable value on the books and records of
Certified, and has been depreciated consistent with its economic life. Any
inventory purchased by Certified on or after January 1, 1999 from the
Shareholders or any Familial Affiliate or any privately held entity in which any
such Person has or owns a beneficial interest was, taken as a whole, purchased
on terms no less favorable to Certified than the terms on which such inventory
could be purchased from an unaffiliated third party in an arms length
transaction and are, taken as a whole, saleable by Certified in the ordinary
course of business consistent with past practice. Except as set forth on
SCHEDULE 4.15(A), Certified has good and marketable title to all of the
Designated Inventory and all of its other inventory and Assets (as hereinafter
defined), free and clear of any Liens or restrictions or use other
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than Permitted Liens. For purposes of this Agreement, the term "Assets" means
all of the properties and assets of Certified (other than the Leased Premises),
whether personal or mixed, tangible or intangible, wherever located, reflected
on the Current Balance Sheet or acquired in the ordinary course of business
since such date. Except as set forth in SCHEDULE 4.15(a), Certified does not own
any aircraft or aircraft engines.
(b) SCHEDULE 4.15(b) contains a list as of the date of this
Agreement of all inventory owned by third parties and held by Certified on a
consignment basis (the "Consigned Inventory"), setting forth for each such item
of inventory, a description, the quantity and the name, address and telephone
number of the owner thereof.
(c) The Fixed Assets (as hereinafter defined) necessary for
the business or operations of Certified as currently conducted are in good
operating condition and repair, normal wear and tear excepted. For purposes of
this Agreement, the term "Fixed Assets" means all vehicles, machinery,
equipment, tools, supplies, leasehold improvements, furniture and fixtures used
by or located on the premises of Certified or set forth on the Current Balance
Sheet or acquired by Certified since the date of the Current Balance Sheet.
SCHEDULE 4.15(C) lists the vehicles owned, leased or used by Certified, setting
forth the make, model, vehicle identification number, and year of manufacture,
and for each vehicle, whether it is owned or leased, and if owned, the name of
any lienholder and the amount of the lien, and if leased, the name of the lessor
and the general terms of the lease.
4.16 COMPLIANCE WITH LAWS.
(a) Certified is and has been in compliance with all laws,
regulations and orders applicable to it, its properties and assets (in each
case, owned or used by it now or in the past), and its business and operations
(as conducted by it now and in the past). Certified has not been cited, fined or
otherwise notified of any asserted past or present failure to comply with any
laws, regulations or orders and no proceeding with respect to any such violation
is pending or threatened.
(b) Neither Certified nor any of its employees or agents has
made any payment of funds in connection with the business of Certified which is
prohibited by law, and no funds have been set aside to be used in connection
with the business of Certified for any payment prohibited by law.
(c) Certified is and at all times has been in full compliance
with the terms and provisions of the Immigration Reform and Control Act of 1986,
as amended (the "Immigration Act"). With respect to each Employee (as defined in
8 C.F.R. 274a.1(f)) of Certified for whom the compliance with the Immigration
Act is required, Certified has on file a true, accurate and complete copy of (i)
each Employee's Form I-9 (Employment Eligibility Verification Form) and (ii) all
other records, documents or other papers prepared, procured and/or retained
pursuant to the Immigration Act. Certified has not been cited, fined, served
with a Notice of Intent to Fine or with a Cease and
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Desist Order, nor has any action or administrative proceeding been initiated or,
to the knowledge of Certified or either of the Shareholders, threatened against
Certified, by the Immigration and Naturalization Service by reason of any actual
or alleged failure to comply with the Immigration Act.
(d) Certified is not subject to any contract or decree, or any
injunction specifically applicable to it and not generally to similarly situated
companies, which restricts the continued operation of Certified or the expansion
thereof to other geographical areas, customers and suppliers or lines of
business.
4.17 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 4.17 sets forth the name,
address, social security number and current rate of compensation of each of the
employees of Certified as of the date of this Agreement. Certified is not a
party to or bound by any collective bargaining agreement or any other agreement
with a labor union, and there has been no effort by any labor union during the
twenty-four (24) months prior to the date hereof to organize any employees of
Certified into one or more collective bargaining units. There is no pending or,
to the knowledge of Certified or either of the Shareholders, threatened labor
dispute, strike or work stoppage which affects or which may affect the business
of Certified or which may interfere with its continued operations. Neither
Certified nor any agent, representative or employee of Certified has within the
last twenty-four (24) months committed any unfair labor practice as defined in
the National Labor Relations Act, as amended, and there is no pending or, to the
knowledge of Certified or either of the Shareholders, threatened charge or
complaint against Certified by or with the National Labor Relations Board or any
representative thereof. There has been no strike, walkout or work stoppage or
threat of union activity involving any of the employees of Certified during the
twenty-four (24) months prior to the date hereof. Neither Certified nor either
of the Shareholders has knowledge that any executive has, or that a material
number of employees have, any plans to terminate his, her or their employment
with Certified as a result of the Acquisition or otherwise. Certified has
complied with applicable laws, rules and regulations relating to employment,
civil rights and equal employment opportunities, including but not limited to,
the Civil Rights Act of 1964, the Fair Labor Standards Act, the Americans with
Disabilities Act, as amended, and the Immigration Reform and Control Act of
1986, as amended.
4.18 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 4.18 contains a list
setting forth each employee benefit plan or arrangement of Certified, including
but not limited to employee pension benefit plans, as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
multiemployer plans, as defined in Section 3(37) of ERISA, employee welfare
benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans,
stock option plans, bonus plans, stock purchase plans, hospitalization,
disability and other insurance plans, severance or termination pay plans and
policies, whether or not described in Section 3(3) of ERISA, in which employees,
their spouses or dependents participate ("Employee Benefit Plans") (true and
accurate copies of which, together with the most recent annual reports on Form
5500 and summary plan descriptions with respect thereto, were furnished to
Kellstrom).
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(b) COMPLIANCE WITH LAW. With respect to each Employee Benefit
Plan, (i) each has been administered in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"); (ii) no actions, suits, claims or
disputes are pending or, to the knowledge of Certified or either of the
Shareholders, threatened, except for claims for benefits in the normal course of
the Plan; (iii) no audits, inquiries, reviews, proceedings, claims, or demands
are pending with any governmental or regulatory agency; (iv) there are no facts
which provide a reasonable basis for any liability in the event of any such
investigation, claim, action, suit, audit, review, or other proceeding; (v) all
material reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and (vi) no "prohibited transaction" has occurred
within the meaning of the applicable provisions of ERISA or the Code that would
subject Certified to any liability.
(c) QUALIFIED PLANS. With respect to each Employee Benefit
Plan intended to qualify under Code Section 401(a) or 403(a), (i) the Internal
Revenue Service has issued a favorable determination letter, true and correct
copies of which have been furnished to Kellstrom, that such plans are qualified
and exempt from federal income taxes; (ii) no such determination letter has been
revoked nor has revocation been threatened, nor has any amendment or other
action or omission occurred with respect to any such plan since the date of its
most recent determination letter or application therefor in any respect which
would adversely affect its qualification or materially increase its costs,
except for plan changes required by the Small Business Job Protection Act of
1996 and the Tax Reform Act of 1997; (iii) no such plan has been amended in a
manner that would require security to be provided in accordance with Section
401(a)(29) of the Code; (iv) no reportable event (within the meaning of Section
4043 of ERISA) has occurred, other than one for which the thirty (30) day notice
requirement has been waived; (v) as of the Closing Date, the present value of
all liabilities that would be "benefit liabilities" under Section 4001(a)(16) of
ERISA if benefits described in Code Section 411(d)(6)(B) were included will not
exceed the then current fair market value of the assets of such plan (determined
using the actuarial assumptions used for the most recent actuarial valuation for
such plan); (vi) all contributions to, and payments from and with respect to
such plans, which may have been required to be made in accordance with such
plans and, when applicable, Section 302 of ERISA or Section 412 of the Code,
have been timely made; and (vii) all such contributions to the plans, and all
payments under the plans (except those to be made from a trust qualified under
Section 401(a) of the Code) and all payments with respect to the plans
(including, without limitation, PBGC (as defined below) and insurance premiums)
for any period ending before the Closing Date that are not yet, but will be,
required to be made are properly accrued and reflected on the Current Balance
Sheet.
(d) MULTIEMPLOYER PLANS. None of the Employee Benefit Plans is
a multiemployer plan, as described in Section 4001(a)(3) of ERISA.
(e) WELFARE PLANS. (i) Certified is not obligated under any
employee welfare benefit plan as described in Section 3(1) of ERISA ("Welfare
Plan") to provide medical or death benefits with respect to any employee or
former employee of Certified or its predecessors after termination of
employment, except as required by applicable law; (ii) Certified has complied
with
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the notice and continuation coverage requirements of Section 4980B of the Code
and the regulations thereunder with respect to each Welfare Plan that is, or was
during any taxable year for which the statute of limitations on the assessment
of federal income taxes remains, open, by consent or otherwise, a group health
plan within the meaning of Section 5000(b)(1) of the Code; and (iii) there are
no reserves, assets, surplus or prepaid premiums under any Welfare Plan which is
an Employee Benefit Plan. The consummation of the transactions contemplated by
this Agreement will not entitle any individual to severance pay, and will not
accelerate the time of payment or vesting, or increase the amount of
compensation, due to any individual under any Employee Benefit Plan.
(f) CONTROLLED GROUP LIABILITY. Neither Certified nor any
entity that would be aggregated with it under Code Section 414(b), (c), (m) or
(o), (i) has ever terminated or withdrawn from any employee benefit plan under
circumstances resulting (or expected to result) in liability to the Pension
Benefit Guaranty Corporation ("PBGC"), the fund by which the employee benefit
plan is funded, or any employee or beneficiary for whose benefit the plan is or
was maintained (other than routine claims for benefits); (ii) has any assets
subject to (or expected to be subject to) a lien for unpaid contributions to any
employee benefit plan; (iii) has failed to pay premiums to the PBGC when due;
(iv) is subject to (or expected to be subject to) an excise tax under Code
Section 4971; (v) has engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; or (vi) has violated
Code Section 4980B or Section 601 through 608 of ERISA.
(g) OTHER LIABILITIES. (i) None of the Employee Benefit Plans
obligates Certified to pay separation, severance, termination or similar
benefits solely as a result of any transaction contemplated by this Agreement or
solely as a result of a "change of control" (as such term is defined in Section
280G of the Code); (ii) all required or discretionary (in accordance with
historical practices) payments, premiums, contributions, reimbursements, or
accruals for all periods ending prior to or as of the Closing Date shall have
been made or properly accrued on the Current Balance Sheet or will be properly
accrued on the books and records of Certified as of the Closing Date; and (iii)
none of the Employee Benefit Plans has any unfunded liabilities which are not
reflected on the Current Balance Sheet or the books and records of Certified.
4.19 TAX MATTERS. All Tax Returns required to be filed on or prior to
the date hereof with respect to Certified or any of its income, properties,
franchises or operations, have been timely filed where required to be filed,
each such Tax Return has been prepared in compliance with all applicable laws
and regulations, and all such Tax Returns are true and accurate in all respects.
All Taxes due and payable by or with respect to Certified have been fully and
timely paid or are accrued on the Current Balance Sheet and adequate reserves or
accruals for Taxes have been provided in its books and records with respect to
any period for which Tax Returns have not yet been filed or for which Taxes are
not yet due and payable. Except as set forth on SCHEDULE 4.19: (i) with respect
to each taxable period of Certified, either such taxable period has been audited
by the relevant taxing authority or the time for assessing or collecting Taxes
with respect to each such taxable period has closed and such taxable period is
not subject to review by any relevant taxing authority; (ii) no deficiency or
proposed adjustment which has not been settled or otherwise resolved for any
amount of Taxes has been asserted or assessed by any taxing authority against
Certified; (iii) Certified has not consented to extend the time in which any
Taxes may be assessed or collected by any taxing
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authority; (iv) Certified has not requested or been granted an extension of the
time for filing any Tax Return to a date later than the Closing Date; (v) there
is no action, suit, taxing authority proceeding, or audit or claim for refund
now in progress, pending or threatened against or with respect to Certified
regarding Taxes; (vi) Certified has not made an election or filed a consent
under Section 341(f) of the Code (or any corresponding provision of state, local
or foreign law) on or prior to the Closing Date; (vii) there are no Liens for
Taxes (other than for current Taxes not yet due and payable) upon the assets of
Certified; (viii) Certified will not be required (A) as a result of a change in
method of accounting for a taxable period ending on or prior to the Closing
Date, to include any adjustment under Section 481(c) of the Code (or any
corresponding provision of state, local or foreign law) in taxable income for
any taxable period (or portion thereof) beginning after the Closing Date or (B)
as a result of any "closing agreement," as described in Section 7121 of the Code
(or any corresponding provision of state, local or foreign law), to include any
item of income or exclude any item of deduction from any taxable period (or
portion thereof) beginning after the Closing Date; (ix) Certified has not been a
member of an affiliated group (as defined in Section 1504 of the Code) or filed
or been included in a combined, consolidated or unitary income Tax Return; (x)
Certified is not a party to or bound by any tax allocation or tax sharing
agreement or has any current or potential contractual obligation to indemnify
any other Person with respect to Taxes; (xi) there are no Taxes due or owing or
which may become due or owing by Certified for or on account of any period for
which Tax Returns have been filed, except as reflected on the Current Balance
Sheet; (xii) Certified has not made any payments, nor will it become obligated
(under any Contract entered into on or before the Closing Date) to make any
payments, that will be non-deductible under Sections 162(m) or 280G of the Code
(or any corresponding provision of state, local or foreign law); (xiii)
Certified has not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code (or any corresponding provisions of
state, local or foreign law) during the applicable period specified in Section
897(c)(1)(a)(ii) of the Code (or any corresponding provision of state, local or
foreign law); (xiv) no claim has ever been made by a taxing authority in a
jurisdiction where Certified does not file Tax Returns that it is or may be
subject to Taxes assessed by such jurisdiction; (xv) Certified has no permanent
establishment in any foreign country, as defined in the relevant tax treaty
between the United States of America and such foreign country; (xvi) true,
correct and complete copies of (A) all income and sales Tax Returns filed by or
with respect to Certified for the past three years and (B) any audit report
issued within the last five years, have been furnished or made available to
Kellstrom, and all material tax elections of Certified are clearly set forth on
such Tax Returns; (xvii) Certified will not be subject to any Taxes for the
period ending at the Closing Date or any period for which a Tax Return has not
been filed imposed pursuant to Section 1374 or Section 1375 of the Code (or any
corresponding provision of state, local or foreign law); (xviii) no sales or use
tax, non-recurring intangible tax, documentary stamp tax or other excise tax (or
comparable tax imposed by any Governmental Entity) will be payable by Kellstrom
by virtue of the transactions contemplated by this Agreement; and (xix) no issue
has been raised by any taxing authority in any examination which, by application
of the same or similar principles, could reasonably be expected to result in a
proposed deficiency for any subsequent taxable period.
4.20 INSURANCE. SCHEDULE 4.20 contains (i) a complete and correct list
of all insurance policies covering Certified and its properties, assets and
business (the "Insurance Policies") (copies of which have been provided to
Kellstrom) designating the insurance company, type of insurance,
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insured's name and policy number and (ii) a detailed description of each claim
pending as of the date of this Agreement under any of the Insurance Policies for
an amount in excess of Ten Thousand Dollars ($10,000) that relates to loss or
damage to the properties, assets or business of Certified. Such Insurance
Policies are in full force and effect, and all premiums due thereon have been
paid. As of the Closing Date, each of the Insurance Policies will be in force
and effect. Certified has complied with the provisions of the Insurance
Policies. Certified has not failed to give, in a timely manner, any notice
required under any of the Insurance Policies necessary to preserve its rights
thereunder, and neither Certified nor either of the Shareholders has any
knowledge of any uninsured claims or losses.
4.21 RECEIVABLES. All of the Receivables (as hereinafter defined) are
valid and legally binding, represent bona fide transactions and arose in the
ordinary course of business of Certified. All of the receivables are good and
collectible receivables, and will be collected in full in accordance with the
terms of such receivables (and in any event within twelve (12) months following
the Closing), without setoff or counterclaims, subject to the allowance for
doubtful accounts, if any, set forth on the Current Balance Sheet. For purposes
of this Agreement, the term "Receivables" means all receivables of Certified,
including all trade account receivables arising from the provision of services,
sale of inventory, notes receivable and insurance proceeds receivable. SCHEDULE
4.21 contains a true, complete and correct list of all receivables of Certified
as of the date hereof.
4.22 LICENSES, PERMITS AND APPROVALS. Certified possesses all licenses
and required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its businesses and operations, except where
Certified's failure to possess a Permit would not have a Material Adverse Effect
on Certified, and SCHEDULE 4.22 contains a true and complete list of all such
Permits. All such Permits are valid and in full force and effect, and Certified
is in full compliance with the respective requirements thereof, and no
proceeding is pending or, to the knowledge of Certified or either of the
Shareholders, threatened to revoke or amend any of them.
4.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATED TRANSACTIONS. Except as set forth in SCHEDULE 4.23(a), the
Inventory and other Assets and the Leased Premises constitute, in the aggregate,
all of the assets and properties necessary for the conduct of the business of
Certified in substantially the manner in which and to the extent to which such
business is currently being conducted. No current supplier to Certified of items
essential to the conduct of its business has threatened within the last twenty
four (24) months to terminate such current supplier's business relationship with
Certified for any reason. Except as set forth in SCHEDULE 4.23(b), Certified
does not have any direct or indirect interest in any customer, supplier or
competitor of Certified, or in any person from whom or to whom Certified leases
real or personal property. Except as set forth in SCHEDULE 4.23(b), no officer,
director, shareholder or other Affiliate of Certified or any Familial Affiliate,
or any entity in which any such person owns any beneficial interest, is a party
to any Contract or transaction with Certified or has any interest in any
property used by Certified. Other than Pride Aircraft Parts Company, Inc.
("Pride") and Air Marshall, Inc. ("Air Marshall"), none of the entities listed
on SCHEDULE 4.23(b) presently owns any aircraft parts or aircraft engine parts.
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4.24 INTELLECTUAL PROPERTY. Certified owns or has the right to use all
trademarks, service marks, trade names, copyrights, know-how, patents, trade
secrets, proprietary computer software, data bases and compilations, licenses
(including licenses for the use of computer software programs) and other
intellectual property used by it in the conduct of its business as currently
conducted (the "Intellectual Property"), and SCHEDULE 4.24 contains a true and
complete list of the Intellectual Property. Certified has not granted any rights
in any Intellectual Property to any third party. The business of Certified as
presently conducted does not infringe or misappropriate any intellectual
property rights held or asserted by any Person. No Person is infringing on the
Intellectual Property owned by Certified. Except as set forth on SCHEDULE 4.24,
no payments are required for the continued use of the Intellectual Property.
None of the Intellectual Property owned by Certified and, to the knowledge of
Certified and the Shareholders, none of the other Intellectual Property, has
ever been declared invalid or unenforceable, or is the subject of any pending
or, to the knowledge of Certified or either of the Shareholders, threatened
action for opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
4.25 CONTRACTS. SCHEDULE 4.25 sets forth a list of each Contract to
which Certified is a party or by which it or its properties and assets are bound
that provides for aggregate payments of more than Fifty Thousand Dollars
($50,000) or has a duration of more than six months or which is material to its
business, assets, prospects or properties, in any instance which is in effect on
the date of this Agreement (the "Designated Contracts"). In the case of those
Designated Contracts which are denoted with an "*" on SCHEDULE 4.25, Certified
has provided Kellstrom with copies of such Designated Contracts which have not
been fully executed by all of the parties thereto; PROVIDED, HOWEVER, that
Certified and the Shareholders represent and warrant to Kellstrom that each such
copy conforms to the copy that has been fully executed by the parties thereto.
True and correct copies of each written Designated Contract have been provided
to Kellstrom and true and correct summaries of each oral Designated Contract are
set forth on SCHEDULE 4.25. The copy of each written Designated Contract and the
summary of each oral Designated Contract furnished to Kellstrom is a true and
complete copy or summary of all material terms, as the case may be, of the
document it purports to represent and reflects all amendments thereto. Certified
has complied with all of the covenants to be performed by it under, and has not
violated any of the terms or conditions of, any of the Designated Contracts, and
to the knowledge of Certified and each of the Shareholders, each of the other
parties to the Designated Contracts has complied with all of the covenants to be
performed by it under, and has not violated any of the terms or conditions of,
any of the Designated Contracts. No party to any Designated Contract has made a
claim for breach of, or indemnification under, or has delivered a notice of
termination or default under, any Designated Contract. No event has occurred
which constitutes, or after notice or the passage of time, or both, would
constitute, a default by Certified under any Designated Contract, and, to the
knowledge of Certified and each of the Shareholders, no such event has occurred
which constitutes or would constitute a default by any other party. Certified is
not subject to any liability or payment resulting from renegotiation of amounts
paid to it or required to be paid to it under any Designated Contract.
4.26 ACCURACY OF INFORMATION FURNISHED BY CERTIFIED OR THE SHAREHOLDER.
No representation or warranty made under this Agreement to Kellstrom contains
any untrue statement of fact or omits to state any fact necessary to make the
information contained therein not misleading
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in light of the circumstances under which they were made. Certified and the
Shareholders have provided Kellstrom with true, accurate and complete copies of
all documents listed or described in the various Schedules attached hereto.
4.27 BANK ACCOUNTS. SCHEDULE 4.27 sets forth all accounts of Certified
with any bank, broker or other depository institution, and the names of all
persons authorized to withdraw funds from each such account.
4.28 NO COMMISSIONS. Neither Certified nor either of the Shareholders
has incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby, other than the fee set forth in SCHEDULE 4.28, which shall
be the sole responsibility of the Shareholders.
4.29 YEAR 2000 COMPLIANCE. All computer applications used by Certified
are able to perform properly date-sensitive functions for all dates before and
during the year 2000, except where such failure would not have a Material
Adverse Effect on Certified. Neither Certified nor the Shareholders have
knowledge that any of its suppliers or vendors use computer applications that
will not be able to perform properly date-sensitive functions for any dates
before or during the year 2000, except where such failure would not have a
Material Adverse Effect on Certified.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE ACQUISITION
5.1 CONDUCT OF BUSINESS BY CERTIFIED PENDING THE ACQUISITION. Certified
and each of the Shareholders covenants and agrees that, between the date of this
Agreement and the Closing Date, the business of Certified shall be conducted
only in, and Certified shall not take any action except in, the ordinary course
of business, consistent with past practice. Certified shall during such period
use its best efforts to preserve intact its business organization, to keep
available the services of its current officers, employees and consultants, and
to preserve its present relationships with customers, suppliers and other
Persons with which it has significant business relations. By way of
amplification and not limitation, Certified shall not, between the date of this
Agreement and the Closing Date, except as set forth in SCHEDULE 5.1, directly or
indirectly, do or propose or agree to do any of the following without the prior
written consent of Kellstrom:
(a) amend or otherwise change its Articles of Incorporation or
Bylaws or equivalent organizational documents;
(b) (i) issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge or disposition of, or grant of an
encumbrance on, any shares of its capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest, of it, or (ii)
issue, sell, pledge, dispose of, encumber or lease, or authorize the issuance,
sale, pledge, disposition or lease of, or grant of an
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encumbrance on, any of its assets, tangible or intangible, except sales of
inventory in the ordinary course of business, consistent with past practice, in
transactions not exceeding One Hundred Thousand Dollars ($100,000) in the
aggregate;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, for cash or
shares of stock, by merger, consolidation, or acquisition of stock or assets)
any interest in any corporation, partnership or other business organization or
division thereof, or make any investment either by purchase of stock or
securities, contributions of capital or property transfer, or, except in the
ordinary course of business, consistent with past practice, in transactions not
exceeding One Hundred Thousand Dollars ($100,000) in the aggregate, purchase any
property or assets of any other Person, (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for, the obligations of any Person, or
make any loans or advances other than de minimus advances to employees, (iii) to
the extent not prohibited by any other provision of this Section 5.1, enter into
any Contract other than in the ordinary course of business, consistent with past
practice, providing for a term of not more than six months and payments not
exceeding Fifty Thousand Dollars ($50,000) in the aggregate over the term of
such Contract, (iv) make capital expenditures exceeding Fifty Thousand Dollars
($50,000), or purchases of inventories exceeding Fifty Thousand Dollars
($50,000), in each case, in the aggregate, or (v) engage in any transaction with
(A) any officer, director, shareholder or other Affiliate of Certified, (B) any
Familial Affiliate, or (C) any entity in which any person covered by subsections
(A) or (B) above owns or has any beneficial interest;
(f) increase the compensation payable or to become payable to
its officers or employees or, except as presently bound to do, grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any of its directors, officers or other employees, or establish,
adopt, enter into or amend or take any action to accelerate any rights or
benefits which any collective bargaining, bonus, profit sharing, trust,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers or
employees;
(g) take any action other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or procedures;
(h) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of due and payable
liabilities reflected or reserved against in its financial statements, as
appropriate, or
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liabilities incurred after the date hereof in the ordinary course of business
and consistent with past practice;
(i) materially increase or decrease prices charged to its
customers, or take any other action which might reasonably be expected to result
in any material increase in the loss of customers through non-renewal or
termination of contracts or other causes; or
(j) agree, in writing or otherwise, to take or authorize any
of the foregoing actions.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS. Each party shall
execute and deliver such additional instruments and other documents and shall
take such further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby. The Shareholders shall cause Certified to use
its best efforts to comply with all of the covenants of Certified under this
Agreement.
6.2 COOPERATION. Each of the parties agrees to use its best efforts to
cooperate with the others in the preparation and filing of all forms,
notifications, reports and information, if any, required or deemed advisable
pursuant to any law, rule or regulation (including, without limitation, any
rules or regulations of any securities exchange upon which the securities of
Kellstrom may be listed or traded) in connection with the transactions
contemplated by this Agreement, and to use its best efforts to agree jointly on
a method to overcome any objections by any Governmental Authority to any such
transactions.
6.3 HSR ACT AND OTHER ACTIONS. Each of the parties hereto shall (i)
make promptly (and in no event later than five (5) business days following the
execution of this Agreement) its respective filings, if any, and thereafter make
any other required submissions, under the HSR Act, with respect to the
transactions contemplated hereby, and shall seek early termination of the
applicable waiting period under the HSR Act, (ii) take all appropriate
reasonable actions, and do, or cause to be done, all things necessary, proper or
advisable under any applicable laws, rules and regulations and Contracts to
consummate and make effective the transactions contemplated herein, including,
without limitation, obtaining all licenses, permits, consents, approvals,
authorizations, qualifications and orders of any Governmental Authority and
parties to Contracts with Certified as are necessary for it to consummate the
transactions contemplated hereby, (iii) make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by it
to consummate and make effective the transactions contemplated hereby, (iv)
defend all lawsuits or other legal proceedings brought against it which
challenge this Agreement or the consummation of the transactions contemplated
hereby, and (v) take all actions necessary or advisable to lift or rescind
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any injunction or restraining order or other order adversely affecting its
ability to consummate the transactions contemplated hereby.
6.4 ACCESS TO INFORMATION. From the date hereof to the Closing Date,
Certified shall (and shall cause its directors, officers, employees, auditors,
counsel and agents to) afford Kellstrom and Kellstrom's officers, employees,
auditors, counsel and agents access during normal business hours to its
properties, offices and other facilities, to its officers and employees and to
all books and records, and shall furnish such persons with all financial,
operating and other data and information as may be requested. The parties agree
and acknowledge that all such information shall be and remain subject to that
certain Confidentiality Agreement dated April 14, 1998 between Kellstrom and
Geneva Corporate Finance, Inc. Notwithstanding anything to the contrary set
forth herein, neither the due diligence investigation made by Kellstrom in
connection with the Acquisition nor the information provided to or obtained by
Kellstrom shall affect any representation or warranty contained in this
Agreement.
6.5 NOTIFICATION OF CERTAIN MATTERS. Certified and the Shareholders
shall give prompt notice to Kellstrom of the occurrence or non-occurrence of any
event of which Certified or either of the Shareholders has knowledge which would
likely cause any representation or warranty contained herein made by either of
them to be materially untrue or inaccurate, or any covenant, condition, or
agreement contained herein applicable to it not to be materially complied with
or satisfied. Kellstrom shall give prompt notice to Certified and the
Shareholders of the occurrence or non-occurrence of any event of which Kellstrom
has knowledge which would likely cause any representation or warranty contained
herein made by Kellstrom to be materially untrue or inaccurate, or any covenant,
condition, or agreement contained herein applicable to it not to be materially
complied with or satisfied.
6.6 RESTRICTIVE COVENANTS. In order to assure that Kellstrom will
realize the benefits of the Acquisition, each of the Shareholders severally, but
not jointly, agrees with Kellstrom that he will not:
(i) for the period commencing on the Closing Date
and ending on the third anniversary of the Closing Date, directly or
indirectly, alone or as a partner, joint venturer (either expressly or
as a participant in the profits under the terms of any lease
arrangement), officer, director, employee, consultant, agent,
independent contractor, lender or security holder of any company or
business, engage in purchasing, refurbishing, overhauling, marketing,
distributing, selling or leasing of (a) aircraft, (b) aircraft engines,
(c) aircraft parts or (d) engine parts anywhere in the world; provided,
however, that the beneficial ownership of less than five percent (5%)
of the shares of stock of any other corporation having a class of
equity securities actively traded on a natural securities exchange or
over the counter market shall not be deemed in and of itself, to
violate the prohibitions of this Section 6.6;
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(ii) for the period commencing on the Closing Date
and ending on the third anniversary of the Closing Date, directly or
indirectly, employ any person, other than any child or the spouse of
such Shareholder, who was employed by Kellstrom or Certified, or any of
their respective Affiliates, subsidiaries, successors or assigns
(collectively, the "Kellstrom Companies") at or within the then prior
six (6) months, or in any manner seek to induce any such person to
leave his or her employment; or
(iii) at any time following the Closing Date, directly
or indirectly, in any way utilize, disclose, copy, reproduce or retain
in its possession any of the Kellstrom Companies' proprietary rights or
records, including, but not limited to, any of their respective
customer lists.
Each of the Shareholders agrees and acknowledges that the restrictions contained
in this Section 6.6 are reasonable in scope and duration and are necessary to
protect the Kellstrom Companies after the Closing Date. If any provision of this
Section 6.6 as applied to any party or to any circumstance is adjudged by a
court to be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of this Agreement. If any such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the breach of this Section 6.6
will cause irreparable damage to the Kellstrom Companies and upon breach of any
provision of this Section 6.6, the Kellstrom Companies shall be entitled to
injunctive relief, specific performance or other equitable relief without the
need to post a bond or other security or prove special damages; PROVIDED,
HOWEVER, that, this shall in no way limit any other remedies which the Kellstrom
Companies may have (including, without limitation, the right to seek monetary
damages). Kellstrom and the Shareholders hereby agree that Kellstrom may assign,
without limitation, the foregoing restrictive covenants to any successor to or
Affiliates of Kellstrom.
6.7 CONFIDENTIALITY; PUBLICITY. No party hereto or their respective
Affiliates, employees, agents or representatives shall disclose to any third
party the existence of this Agreement or the subject matter or terms hereof and
no party hereto shall issue any press release or other public announcement
related to this Agreement or the transactions contemplated hereby, in each such
case, except (a) with the prior approval of the other parties, (b) if such party
believes in good faith such disclosure to be required by law or by the terms of
any listing agreement with or requirements of a securities exchange upon which
its securities may be listed or traded or (c) if such disclosure relates to any
legal proceeding between Kellstrom and Certified or the Shareholders arising out
of this Agreement; PROVIDED, HOWEVER, that each party shall use commercially
best efforts to coordinate with the other parties in making any public
disclosure pursuant to clause (b) of this sentence.
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6.8 NO OTHER DISCUSSIONS. From the date hereof until the Closing Date,
neither Certified nor either of the Shareholders nor any of their respective
Affiliates, employees, agents representatives shall (a) solicit, encourage,
consider or accept any offer from any Person to acquire all or any portion of
the assets (other than in the case of inventory, in the ordinary course of
business consistent with past practice) of or any interest in Certified, (b)
participate in any negotiations or discussions with any other Person concerning
the sale of all or any portion of the assets (other than in the case of
inventory, in the ordinary course of business consistent with past practice) of
or any interest in Certified, (c) provide any non-public information about
Certified (other than to Certified's lenders or advisors or Kellstrom and its
agents and consultants as provided herein), (d) enter into any agreement or
commitment (whether or not binding) with respect to any of the foregoing, or (e)
otherwise cooperate in any way with, or assist, facilitate or encourage any
effort by any other person seeking to acquire all or any portion of the assets
(other than in the case of inventory, in the ordinary course of business
consistent with past practice) of or any interest in Certified. Certified and
the Shareholders shall immediately notify Kellstrom in writing of any such
inquiry or proposal which any of Certified or the Shareholders may receive with
respect to the foregoing transactions, including the terms and identity of the
inquirer or offeror.
6.9 TRADING IN COMMON STOCK OF KELLSTROM. Except as otherwise expressly
consented to by Kellstrom in writing, from the date of this Agreement until the
Closing Date, neither Certified nor either of the Shareholders (nor any
Affiliate thereof) will directly or indirectly purchase or sell (including short
sales) any shares of common stock of Kellstrom or securities derivative
therefrom in any transactions effected on the Nasdaq Stock Market or otherwise.
6.10 CERTAIN TAX MATTERS.
(a) The books of Certified shall be closed as of the Closing
Date and its income Tax liability for the period ending on the Closing Date
shall be determined in accordance with Treasury Regulation Section 1.1502.76(b),
and no election shall be made under subsection (2)(ii) thereof. The Shareholders
shall duly prepare, or cause to be prepared, and file, or cause to be filed, on
a timely basis, all Tax Returns for income Taxes due and owing by Certified for
any Pre-Closing Period and shall in connection therewith pay any Taxes required
to be paid thereunder in an amount which exceeds the amount reserved therefor on
the Adjusted Closing Date Balance Sheet. The Shareholders shall provide such Tax
Returns to Kellstrom for review at least sixty (60) days prior to their due date
(including extensions where applicable). The Shareholders shall not file any
amended Tax Returns for Certified without the prior written consent of
Kellstrom, which will not be unreasonably withheld. Kellstrom shall not permit
Certified to agree to any extension of the statute of limitations applicable to
a review of the income Taxes payable by Certified on account of any Pre-Closing
Period without the prior written consent of the Shareholders, which shall not be
unreasonably withheld. Kellstrom shall pay to the Shareholders any Tax refunds
received by Certified for income Taxes paid by Certified on account of any
Pre-Closing Periods.
(b) The Shareholders shall duly prepare, or cause to be
prepared, and file, or cause to be filed, as of the Closing Date, a Tax Return
for sales Tax due and owing to the State of Florida
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by Certified for any Pre-Closing Period and Certified shall in connection
therewith pay any Taxes required to be paid thereunder.
6.11 SHAREHOLDER VOTE. Each of the Shareholders, in executing this
Agreement, consents as a shareholder of Certified to the Acquisition and the
transactions contemplated hereby, and waives notice of any meeting in connection
therewith, and hereby releases and waives all rights with respect to the
Acquisition and the transactions contemplated hereby under the Articles of
Incorporation and/or Bylaws of Certified, applicable state law, and any
agreements relating to the sale, purchase or voting of any capital stock of the
Certified. At Closing, the Shareholder and Certified agree that any and all
agreements relating to the sale, purchase or voting of capital stock of
Certified shall be, and hereby are, terminated.
6.12 DELIVERY OF SHARES, RELEASES AND LANDLORD'S WAIVER. At the
Closing, the Shareholders shall deliver to Kellstrom (a) all certificates
evidencing the Shares, duly endorsed for transfer to Kellstrom, free and clear
of any Liens (including, without limitations, any Liens disclosed hereunder or
on any Schedule hereto), (b) a release from each of the Shareholders in such
form as is reasonably satisfactory to Kellstrom, releasing all claims of any
nature against Certified, if any PROVIDED, HOWEVER, that such releases shall not
cover any rights of the Shareholders against Kellstrom under this Agreement or
any other agreement executed in connection herewith, (c) a release from the
Partnership, in such form as is reasonably satisfactory to Kellstrom, releasing
any and all claims which it may have under Section VI of that certain Addendum
to Lease dated January 1, 1996 between the Partnership and Certified, and (d) a
Landlord's Waiver and Agreement executed by the Partnership in the form attached
hereto as EXHIBIT A, with such changes or modifications thereto as may be
reasonably required by Kellstrom's lenders.
6.13 RESIGNATIONS. Each of the Shareholders shall resign from their
respective positions as directors, officers and/or employees of Certified at the
Closing.
6.14 PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, Certified shall
request and deliver to Kellstrom payoff and estoppel letters from First Union
National Bank and the holders of any Indebtedness of Certified designated by
Kellstrom, which letters shall contain payoff amounts, per diem interest and
wire transfer instructions.
6.15 CONSULTING AGREEMENTS AND EMPLOYMENT AGREEMENTS. Kellstrom and
each of the Shareholders shall on the Closing Date enter into a consulting
agreement in the form attached as EXHIBIT B hereto (the "Consulting
Agreements"), and the Shareholders shall provide such assistance as may
reasonably be requested by Kellstrom in causing each of the employees of
Certified listed on SCHEDULE 6.15 to on the Closing Date enter into employment
agreements with Kellstrom in the form attached as EXHIBIT C hereto (the
"Employment Agreements").
6.16 LEASE AMENDMENT. On the Closing Date, Certified shall and the
Shareholders shall cause the Partnership to enter into that certain Amendment to
Lease, Landlord's Consent and Tenant Acknowledgment in the form attached as
EXHIBIT D hereto (the "Lease Amendment"), amending the Lease.
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6.17 ESCROW AGREEMENT AND ENVIRONMENTAL ESCROW AGREEMENT. Prior to or
at the Closing, Kellstrom, the Shareholders and the Escrow Agent shall enter
into (i) an agreement (the "Escrow Agreement") in the form attached as EXHIBIT E
hereto, providing for the retention of the Escrowed Amount by the Escrow Agent
in accordance with the terms of Article IX and the terms thereof, and (ii) an
agreement (the "Environmental Escrow Agreement") in the form attached as EXHIBIT
F hereto, providing for the retention of the Environmental Escrowed Amount by
the Escrow Agent in accordance with the terms of Article IX and the terms
thereof.
6.18 POST-CLOSING ACCESS AND COOPERATION. Kellstrom shall for a period
of seven (7) years from the date hereof preserve and keep any books and records
of Certified which may be needed by the Shareholders in connection with the
preparation of Tax Returns for, or the prosecution or defense of Tax audits
relating to, Certified for any Pre-Closing Period. After the Closing, Kellstrom
shall permit the Shareholders reasonable access to all books and records of
Certified as may be necessary or advisable in connection with the preparation of
Tax Returns for, or the prosecution or defense of Tax audits relating to,
Certified or other third party claims or as may otherwise be reasonably
requested by the Shareholders for a reasonable business purpose.
6.19 1998 FINANCIAL STATEMENTS. As soon as reasonably possible
following the date hereof (but in no event less than five (5) business days
prior to the Closing Date), the Shareholders shall deliver to Kellstrom the
audited financial statements of Certified for the year ended July 31, 1998,
including the notes thereto, audited by the Shareholders' Accountants and
prepared in accordance with GAAP consistently applied (the "1998 Financial
Statements"), which financial statements shall indicate that Certified's
operating profits for the year ended July 31, 1998 were not less than the amount
set forth in SCHEDULE 6.19. On the Closing Date, Certified and the Shareholders
shall deliver to Kellstrom a certificate, dated as of such date and duly signed
by Certified and each of the Shareholders (in the case of Certified by its
President), in which Certified and the Shareholders, jointly and severally,
shall represent and warrant to Kellstrom that, notwithstanding any fact or
matter disclosed in SCHEDULE 4.9, (a) the 1998 Financial Statements fairly
present in all material respects the financial position of Certified as of July
31, 1998 and the results of operations for the year ended July 31, 1998, and
have been prepared in accordance with GAAP consistently applied, (b) there are
no extraordinary items of income or expense during the period covered by the
1998 Financial Statements, and (c) the balance sheet included in the 1998
Financial Statements does not reflect any writeup or revaluation increasing the
book value of any assets, except as may specifically be disclosed in the notes
thereto or otherwise reflected therein.
6.20 PERSONAL GUARANTEES. Kellstrom shall use its best efforts to cause
the release as of the Closing of all guarantees previously made by the
Shareholders (or either of them) on behalf of Certified which are identified on
SCHEDULE 6.20 (the "Shareholder Guarantees") and shall, if requested by the
recipient of any such Shareholder Guarantee, provide a guarantee of Kellstrom in
replacement of such Shareholder Guarantee. If Kellstrom is unable to obtain the
release of any Shareholder Guarantees as of the Closing, Kellstrom shall
indemnify and hold harmless the Shareholders with respect to any obligations of
Certified arising after the Closing for which the Shareholders are responsible
thereunder and Kellstrom hereby waives any right of set off which it
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may have with respect thereto. If Kellstrom shall fail to pay any amount due
under the previous sentence, then the Shareholders shall have the right (but not
the obligation), in addition to any other remedies they may have, to deem such
amount to be Shareholder Indemnifiable Damages in accordance with Article IX
hereof (provided that the Shareholder Indemnification Threshold shall not be
applicable to such amount and such amount shall not count against the
Shareholder Indemnification Cap).
6.21 REPAYMENT OF INDEBTEDNESS TO FIRST UNION. Kellstrom shall on the
Closing Date repay the Indebtedness owed by Certified to First Union National
Bank under that certain First Amended and Restated Revolving Credit and Security
Agreement dated December 13, 1996, as amended (the "First Union Loan"), in an
amount not to exceed the maximum amount set forth therefor on SCHEDULE 4.11(B).
6.22 ACCOUNTS RECEIVABLE. Kellstrom shall cause Certified to use
commercially reasonable efforts consistent with past practice to collect all
accounts receivables reflected on the Adjusted Closing Date Balance Sheet. Any
payments received by Certified from a customer following the Closing Date shall
be applied to the unpaid invoices issued to such customer in the order in which
such invoices were issued; PROVIDED, HOWEVER, that if any such customer shall
dispute in writing all or a portion of an unpaid invoice (a copy of any
correspondence relating to such dispute shall be provided to the Shareholders),
then any payment thereafter received from such customer shall not be applied to
the disputed invoice or portion thereof, but shall be applied to the balance of
such invoice and then to the next invoice issued to such customer (in each case,
until the dispute with such customer shall be resolved).
6.23 CERTAIN ENVIRONMENTAL MATTERS.
(a) The Shareholders and Kellstrom each acknowledge receipt of
the Environmental Report. The parties agree that the following actions shall be
taken to remedy certain of the matters identified in the Environmental Report:
(i) The Shareholders shall cause an environmental
assessment to be performed at the Property to fully delineate the
horizontal and vertical extent of impacts of chlorinated solvents and
RCRA metals contamination (if any) to the ground water previously
identified in the Environmental Report or chemical impacts to the soil
and ground water, if any, identified in any subsequent environmental
assessment activities conducted by Certified or the Shareholders (in
the case of Certified, on or prior to the Closing Date) (collectively,
the "Existing Conditions"), and shall prepare a report documenting any
such delineated soil and ground water impacts in accordance with
applicable Environmental Laws.
(ii) Promptly after the date hereof, the Shareholders
shall provide written notice to all applicable regulatory agencies
(collectively, the "Regulatory Agencies") of the Existing Conditions at
the Property.
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(iii) The Shareholders shall cause all assessments,
remedial and monitoring actions as required by the Regulatory Agencies
to be performed to respond to the Existing Conditions until they shall
have been corrected and are no longer in violation of the applicable
cleanup criteria and the Shareholders shall have received written
approval from the Regulatory Agencies that no further action is
required for the Property.
(iv) The Shareholders shall cause the following
corrective actions to be undertaken at the Property: (A) the removal or
sealing-off of each catch basin located within the Property's chemical
operational areas, or such other reasonable actions as shall be
necessary to prevent any chemical or stormwater runoff in such areas
from reaching any such catch basin; (B) installation of secondary
containment for all chemical/waste handling and storage areas; (C)
installation of paving on all pervious surfaces located within the
Property's operation area, after the completion of any assessment
report and the remediation of soil contamination, if any, found on the
Property; and (D) installation of proper identification signage for all
chemical/waste storage areas and implementation of facility procedures
and policies for continued compliance with Environmental Laws.
(v) The Shareholders shall pay for any penalties
arising out of Certified's past operations at the Property without the
required air permits.
(vi) Kellstrom shall (A) cause an air emissions
evaluation of quantities of volatile organic compounds (VOCs) and
hazardous air pollutants (HAPs) emitted by Certified's operations at
the Property to be conducted and (B) apply for and obtain any federal,
state and/or local permits, licenses and registrations which, based on
such evaluation, are necessary for Certified's operations at the
Property, provided that Kellstrom shall be responsible for any costs in
excess of Seventy Five Thousand Dollars ($75,000) incurred in
connection therewith.
(vii) Kellstrom shall implement an Environmental
Safety and Health Program which complies with the Occupational Safety
and Health Administration's General Industry Standard, 29 CFR 1910, to
document the procedures and policies facility-wide for the handling of
chemicals and wastes, provided that Kellstrom shall be responsible for
any costs in excess of Twenty Five Thousand Dollars ($25,000) incurred
in connection therewith.
(b) Promptly after the date hereof, the Shareholders shall
undertake the actions set forth in items (i) through (v) of Section 6.23(a)
above (collectively, the "Cleanup"). Any written contract entered into by the
Shareholders with the Shareholders' Environmental Consultant or any other party
in connection with the Cleanup (collectively, the "Shareholders' Environmental
Advisors") shall be in writing and shall require that Kellstrom and Certified be
named as additional insured parties under any policies of liability insurance
maintained by such Shareholders' Environmental Advisor in connection with its
operations, and the Shareholders shall use best efforts
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to cause any such written contract to provide for the indemnification of
Certified and Kellstrom to the same extent as the indemnification of the
Shareholders. The Shareholders shall provide Kellstrom with copies of any
correspondence with or reports from any of the Shareholders' Environmental
Advisors and the Regulatory Agencies promptly upon the receipt thereof.
Kellstrom shall provide the Shareholders and the Shareholders' Environmental
Advisors with reasonable access to the Leased Premises in connection with the
Cleanup. All activities related to assessment and Cleanup shall be scheduled and
coordinated with Kellstrom in such a manner as to not unreasonably interfere
with Kellstrom's or Certified's use of the Property. The Shareholders shall use
their best efforts to cause the Cleanup to be conducted and completed as
promptly as reasonably possible.
(c) Promptly after the date hereof, Kellstrom shall undertake
the actions set in items (vi) and (vii) of Section 6.23(a) above (collectively,
the "Corrective Actions", and together with the Cleanup, the "Remediation").
Kellstrom shall use its best efforts to cause the Corrective Actions to be taken
and completed as promptly as reasonably possible.
(d) Any costs and expenses incurred by (i) the Shareholders in
connection with the Remediation activities undertaken by it under Section
6.23(a)(i) through (v) above, (ii) Kellstrom in connection with the Remediation
activities undertaken by it under Section 6.23(a)(vi) above in an amount not to
exceed Seventy Five Thousand Dollars ($75,000), and (iii) Kellstrom in
connection with the Remediation activities undertaken by it under Section
6.23(a)(vii) above in an amount not to exceed Twenty Five Thousand Dollars
($25,000), shall, upon the request of the party incurring such costs and
expenses, be paid out of the Environmental Escrowed Amount, in accordance with
the provisions of Section 9.8 of this Agreement and the provisions of the
Environmental Escrow Agreement.
6.24 CERTAIN AUTOMOBILES. Notwithstanding Section 5.1 hereof, Certified
may, prior to the Closing Date, transfer the Designated Automobiles to the
Shareholders at no cost, and Certified may, prior to the Closing, transfer to
any party any other automobile owned by Certified together with any outstanding
obligations therefor, PROVIDED, HOWEVER, that for purposes of calculating the
Actual Purchase Price, the Net Worth of Certified as of the time of the Closing
shall be reduced by the net book value as of the Closing Date of any automobiles
so transferred (other than the Designated Automobiles).
6.25 CONTRIBUTION OF PRIDE INVENTORY. At or prior to the Closing, the
Shareholders shall cause Pride to contribute each item of inventory currently
owned by Pride, as set forth in SCHEDULE 4.15(B) (the "Pride Inventory"), free
and clear of any Liens or other restrictions, to Certified, at no cost to
Certified.
6.26 CERTAIN INSURANCE MATTERS. The Shareholders shall, if and to the
extent requested by Kellstrom, cause Q.C. Laboratories, Inc. ("Q.C.
Laboratories") to continue to make available to Certified, for up to six (6)
months after the Closing, coverage under any insurance policy or policies owned
by Q.C. Laboratories and made available to Certified as of the date hereof, and
Certified shall reimburse Q.C. Laboratories for Certified's pro-rata share of
the cost to maintain such policy or policies.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF KELLSTROM
The obligations of Kellstrom to effect the Acquisition shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions,
any or all of which may be waived in whole or in part in writing by Kellstrom:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Certified and the
Shareholders contained in this Agreement shall be true and correct at and as of
the Closing Date with the same force and effect as though made at and as of that
time except (i) for changes specifically permitted by or disclosed on any
schedule to this Agreement, (ii) that those representations and warranties which
address matters only as of a particular date shall remain true and correct as of
such date, and (iii) for such changes which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on Certified.
Certified and the Shareholders shall have performed and complied in all material
respects with all of their respective obligations required by this Agreement to
be performed or complied with at or prior to the Closing Date. Certified and the
Shareholders shall have delivered to Kellstrom a certificate, dated as of the
Closing Date, duly signed (in the case of Certified, by its President and Chief
Financial Officer), certifying that such representations and warranties are true
and correct except for such changes which, individually or in the aggregate,
could not reasonably be expected to have Material Adverse Effect on Certified
and that all such obligations have been complied with and performed in all
material respects.
7.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Closing Date, (i) there shall have been no Material Adverse
Change to Certified, and (ii) none of the properties or assets of Certified
shall have been damaged by fire, flood, casualty, act of God or the public enemy
or other cause, in any instance not covered by insurance, which damage may have
a Material Adverse Effect on Certified, and there shall have been delivered to
Kellstrom a certificate to that effect, dated the Closing Date and duly signed
(in the case of Certified by its President and Chief Financial Officer) by or on
behalf of Certified and the Shareholders.
7.3 CORPORATE CERTIFICATE. The Shareholders shall have delivered to
Kellstrom (i) copies of the Articles of Incorporation and Bylaws of Certified as
in effect immediately prior to the Closing Date, (ii) copies of resolutions
adopted by the Board of Directors and the shareholders of Certified authorizing
the transactions contemplated by this Agreement, and (iii) a certificate of good
standing for Certified issued by the Secretary of State of the state of its
incorporation as of a date not more than ten (10) business days prior to the
Closing Date, certified in the case of subsections (i) and (ii) of this Section
as of the Closing Date by the Secretary of Certified as being true, correct and
complete.
7.4 CONSENTS. Kellstrom shall have received the consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any of their respective rights or obligations from any Person from whom such
consent or waiver is required under any Contract set
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forth on SCHEDULE 3.4, or under the HSR Act or other law, rule or regulation
(except in the case of such other law, rule or regulation, where the failure to
obtain such consent would not have a Material Adverse Effect on Certified or
Kellstrom).
7.5 LICENSES. Kellstrom shall have received all material permits and
licenses that are necessary to own and operate the business of Certified as
currently being conducted.
7.6 NO ADVERSE LITIGATION. There shall not be pending any action or
proceeding by or before any court or other governmental body which shall seek to
restrain, prohibit, invalidate or collect damages which would if determined
adversely to Certified or Kellstrom have a Material Adverse Effect on Certified.
7.7 HSR ACT WAITING PERIOD. Any applicable HSR Act waiting period shall
have expired or been terminated.
7.8 RESIGNATIONS. The Shareholders shall have delivered the
resignations referred to in Section 6.13 hereof.
7.9 DELIVERY OF SHARES AND MINUTE BOOKS. The Shareholders shall have
delivered to Kellstrom (i) the original certificates evidencing the Shares,
endorsed in blank and free and clear of any Liens (including without limitation,
any Liens disclosed herein or in the schedules attached hereto), and (ii) the
original corporate minute book and stock transfer ledger of Certified.
7.10 DELIVERY OF PAYOFF AND ESTOPPEL LETTERS. The Shareholders shall
have delivered to Kellstrom the payoff and estoppel letters referred to in
Section 6.14 hereof.
7.11 DELIVERY OF CONSULTING AGREEMENTS AND EMPLOYMENT AGREEMENTS. The
Shareholders shall have executed and delivered to Kellstrom the Consulting
Agreements and shall have delivered to Kellstrom the Employment Agreements
executed by those Persons set forth on SCHEDULE 6.15.
7.12 DELIVERY OF LEASE AMENDMENT. The Shareholders shall have delivered
to Kellstrom the Lease Amendment fully executed by Certified and the
Partnership.
7.13 DELIVERY OF ESCROW AGREEMENT AND ENVIRONMENTAL ESCROW AGREEMENT.
The Shareholders and the Escrow Agent shall have executed and delivered to
Kellstrom the Escrow Agreement and the Environmental Escrow Agreement.
7.14 DELIVERY OF 1998 FINANCIAL STATEMENTS AND CERTIFICATE. The
Shareholders shall have delivered to Kellstrom the 1998 Financial Statements,
which financial statements shall indicate that Certified's operating profits for
the year ended July 31, 1998 were not less than the amount set forth in SCHEDULE
6.19, and Certified and the Shareholders shall have executed and delivered the
certificate referred to in Section 6.19 hereof.
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7.15 CONTRIBUTION OF PRIDE INVENTORY. The Pride Inventory shall have
been contributed to Certified pursuant to the terms of Section 6.25 hereof.
7.16 DELIVERY OF RELEASES AND LANDLORD'S WAIVER. The Shareholders shall
have delivered to Kellstrom the releases and the Landlord's Waiver and Agreement
referred to in Section 6.12 hereof.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE SHAREHOLDERS
The obligation of the Shareholders to effect the Acquisition shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part in writing by
the Shareholders:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Kellstrom contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made at and as of that
time except (i) for changes specifically permitted by or disclosed pursuant to
this Agreement, and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date; PROVIDED, HOWEVER, that if any such representation or warranty is already
qualified by materiality, for purposes of determining whether this condition has
been satisfied, such representation or warranty as so qualified shall be true
and correct in all respects. Kellstrom shall have performed and complied in all
material respects with all of its obligations required by this Agreement to be
performed or complied with by it at or prior to the Closing Date. Kellstrom
shall have delivered to the Shareholders a certificate, dated as of the Closing
Date, and signed by its President and Chief Financial Officer, certifying that
such representations and warranties are true and correct in all material
respects and that all such obligations have been complied with and performed in
all material respects.
8.2 CORPORATE CERTIFICATE. Kellstrom shall have delivered to the
Shareholders (i) copies of resolutions adopted by the Board of Directors of
Kellstrom authorizing the transactions contemplated by this Agreement, and (ii)
a certificate of good standing for Kellstrom issued by the Secretary of State of
the state of its incorporation as of a date not more than ten (10) business days
prior to the Closing Date, certified in the case of subsection (i) of this
Section as of the Closing Date by the Secretary of Kellstrom as being true,
correct and complete.
8.3 PURCHASE PRICE. Kellstrom shall have made the Closing Date Payment
in respect of the Purchase Price.
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8.4 NO ORDER OR INJUNCTION. No court of competent jurisdiction or other
governmental body shall have issued or entered any order or injunction
restraining or prohibiting the transactions contemplated hereby, which remains
in effect at the time of Closing.
8.5 HSR ACT WAITING PERIOD. Any applicable HSR Act waiting period shall
have expired or been terminated.
8.6 ESCROW AGREEMENT AND ENVIRONMENTAL ESCROW AGREEMENT. Kellstrom and
the Escrow Agent shall have executed and delivered to the Shareholders the
Escrow Agreement and the Environmental Escrow Agreement, and Kellstrom shall
have delivered the Escrowed Amount and the Environmental Escrow Amount in
accordance therewith.
8.7 DELIVERY OF CONSULTING AGREEMENTS. Kellstrom shall have delivered
to the Shareholders the Consulting Agreements.
8.8 PAY OFF OF FIRST UNION LOAN. Kellstrom shall have repaid the First
Union Loan.
ARTICLE IX
INDEMNIFICATION
9.1 AGREEMENT BY THE SHAREHOLDERS TO INDEMNIFY. The Shareholders
jointly and severally (except that the Shareholders shall be severally, but not
jointly, liable for any breach of Section 6.6) agree to indemnify and hold
Kellstrom and each of the Kellstrom Companies and each of their respective
officers, directors, employees, attorneys and Affiliates (each a "Kellstrom
Indemnified Party" and collectively the "Kellstrom Indemnified Parties")
harmless from and against the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including, without limitation, reasonable
counsel and paralegal fees and expenses) incurred or suffered by any of the
Kellstrom Indemnified Parties arising out of or resulting from (i) any breach of
a representation or warranty made by Certified or the Shareholders (or either of
them) in or pursuant to this Agreement (including the schedules hereto and any
certificates executed and delivered by Certified or the Shareholders (or either
of them) pursuant to or in connection herewith), (ii) any breach of a covenant
or agreement made by Certified or the Shareholders (or either of them) in or
pursuant to this Agreement, (iii) any inaccuracy in any statement made by
Certified or the Shareholders (or either of them) in any certificate executed
and delivered by Certified or the Shareholders (or either of them) pursuant to
or in connection with this Agreement, (iv) any liability of Certified or the
Shareholders (or either of them) for income Taxes arising from or relating to
any Pre-Closing Period (whether or not disclosed in this Agreement or disclosed,
referenced or incorporated by reference in any of the schedules hereto) in an
amount which exceeds the amount set forth or reserved therefor in the Adjusted
Closing Date Balance Sheet, (v) any Environmental Liabilities (whether or not
disclosed in this Agreement or disclosed, referenced or incorporated by
reference in any of the schedules hereto) arising from or relating to any facts,
circumstances or events occurring on or prior to the Closing Date with respect
to Certified or its business or the Property, except for any Environmental
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Liabilities arising from any change in any law, rule or regulation following the
Closing Date, (vi) any claims of any third parties arising from or relating to
any facts, circumstances or events occurring on or prior to the Closing Date
with respect to Certified or its business other than those (a) arising from a
change in any law, rule or regulation following the Closing Date, (b) set forth
or reserved for on the Adjusted Closing Date Balance Sheet, or (c) expressly and
specifically disclosed in this Agreement or any of the schedules hereto, and
(vii) any claims, obligations or liabilities arising from or relating to the
business and operations of QC Metallurgical, Inc. (collectively, "Kellstrom
Indemnifiable Damages"). Notwithstanding the foregoing provisions or anything
contained herein to the contrary, (a) no claim for Kellstrom Indemnifiable
Damages shall be asserted by the Kellstrom Indemnified Parties until the
aggregate of all Kellstrom Indemnifiable Damages exceeds Three Hundred Thousand
Dollars ($300,000) (the "Kellstrom Indemnification Threshold"), at which time
the Kellstrom Indemnified Parties shall only be entitled to the aggregate amount
by which the Kellstrom Indemnifiable Damages exceeds the Kellstrom
Indemnification Threshold, PROVIDED, HOWEVER, that the Kellstrom Indemnification
Threshold shall not apply to (i) any Kellstrom Indemnifiable Damages arising
under subsections (iv) or (vii) of this Section 9.1 above, (ii) a breach of any
covenant or agreement of Shareholders contained in Article II, Section 6.6,
Section 6.10 or Section 6.23 hereof, or (iii) any Kellstrom Indemnifiable
Damages arising with subsection (v) of this Section 9.1 which constitute
Remediation Costs, and (b) the total Kellstrom Indemnifiable Damages for which
the Shareholders shall be liable hereunder shall not exceed an aggregate of
Eight Million Dollars ($8,000,000) (the "Kellstrom Indemnification Cap"),
PROVIDED, HOWEVER, that the Kellstrom Indemnification Cap shall not apply to and
there shall be no limitation or restriction whatsoever on the liability of the
Shareholders under this Article IX for Kellstrom Indemnifiable Damages with
respect to or arising from any one or more of the following, and no Kellstrom
Indemnifiable Damages arising therefrom shall be included in determining whether
the Kellstrom Indemnification Cap has been met: (i) a breach of any one or more
of the representations or warranties set forth in the first or last sentence of
Section 4.1, or in Section 4.2, Section 4.3, Section 4.4, Section 4.5, Section
4.13 or the sixth sentence of Section 4.15(a), (ii) any Kellstrom Indemnifiable
Damages arising under subsections (iv), (v) or (vii) of this Section 9.1 above,
(iii) any act of fraud in connection with the execution, delivery or performance
of this Agreement, including, without limitation, any fraudulent representation
or warranty made in or pursuant to this Agreement, or (iv) a breach of any
covenant or agreement contained in Article II or Section 6.6, Section 6.10 or
Section 6.23 hereof.
9.2 AGREEMENT BY KELLSTROM TO INDEMNIFY. Kellstrom agrees to indemnify
and hold the Shareholders and their respective heirs and personal
representatives (each a "Shareholder Indemnified Party" and together the
"Shareholder Indemnified Parties") harmless from and against the aggregate of
all expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable counsel and paralegal fees and expenses) incurred
or suffered by any of the Shareholder Indemnified Parties arising out of or
resulting from (i) any breach of a representation or warranty made by Kellstrom
in or pursuant to this Agreement (including the schedules hereto and any
certificates executed and delivered by Kellstrom pursuant to or in connection
herewith), (ii) any breach of a covenant or agreement made by Kellstrom in or
pursuant to this Agreement, (iii) any inaccuracy in any statement made by
Kellstrom in any certificate executed and delivered by Kellstrom pursuant to or
in connection with this Agreement, (iv) any liability of Certified for income
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Taxes arising from or relating to any Post-Closing Tax Period, and (v) any
claims of any third parties arising from or relating to any facts, circumstances
or events occurring after the Closing Date with respect to Certified or its
business (collectively, "Shareholder Indemnifiable Damages"). Notwithstanding
the foregoing provisions or anything contained herein to the contrary, (a) no
claim for Shareholder Indemnifiable Damages shall be asserted by the Shareholder
Indemnified Parties until the aggregate of all Shareholder Indemnifiable Damages
exceeds Three Hundred Thousand Dollars ($300,000) (the "Shareholder
Indemnification Threshold"), at which time the Shareholder Indemnified Parties
shall only be entitled to the aggregate amount by which the Shareholder
Indemnifiable Damages exceeds the Shareholder Indemnification Threshold,
PROVIDED, HOWEVER, that, the Shareholder Indemnification Threshold shall not
apply to (i) any Shareholder Indemnifiable Damages arising under subsection (iv)
of this Section 9.2 above, (ii) a breach of any covenant or agreement by
Kellstrom contained in Article II or Sections 6.10, 6.18, 6.20, 6.21 or 6.23
hereof, (iii) any obligation to the Shareholders or any Familial Affiliates
reflected on the Adjusted Closing Date Balance Sheet, or (iv) any obligations to
make payments under the Lease from and after the Closing Date, and (b) the total
Shareholder Indemnifiable Damages for which Kellstrom shall be liable hereunder
shall not exceed an aggregate of Eight Million Dollars ($8,000,000) (the
"Shareholder Indemnification Cap"), PROVIDED, HOWEVER, that the Shareholder
Indemnification Cap shall not apply to and there shall be no limitation or
restriction whatsoever on the liability of Kellstrom under this Article IX for
Shareholder Indemnifiable Damages with respect to or arising from any one or
more of the following, and no Shareholder Indemnifiable Damages arising
therefrom shall be included in determining whether the Shareholder
Indemnification Cap has been met: (i) a breach of any one or more of the
representations or warranties set forth in Section 3.1, Section 3.2 or Section
3.3, (ii) any Kellstrom Indemnifiable Damages arising under subsection (iv) of
this Section 9.2 above, (iii) any act of fraud in connection with the execution,
delivery or performance of this Agreement including, without limitation, any
fraudulent representation or warranty made in or pursuant to this Agreement,
(iv) a breach of any covenant or agreement contained in Article II or Sections
6.10, 6.18, 6.20, 6.21 or 6.22 hereof, (v) any obligation to the Shareholders or
any Familial Affiliates reflected on the Adjusted Closing Date Balance Sheet,
and (vi) any obligations to make payments under the Lease from and after the
Closing Date.
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties and each of the indemnities set forth in
subsections (i), (ii), (iii) and (vi) of the first sentence of Section 9.1 and
subsections (i), (ii), (iii) and (v) of the first sentence of Section 9.2 made
by the Shareholders or Kellstrom in this Agreement or pursuant hereto shall
survive the closing of the transactions contemplated hereby for a period of two
(2) years following the Closing Date; PROVIDED, HOWEVER, that (i) the
representations and warranties set forth Section 3.1, and in Section 3.2 and
Section 3.3, the first and last sentence of Section 4.1, and in Section 4.2,
Section 4.3, Section 4.4, Section 4.5 and the sixth sentence of Section 4.15(a)
and the indemnities set forth in subsections (vii) of the first sentence of
Section 9.1 shall survive indefinitely, (ii) the representations and warranties
set forth in Section 4.19 and the indemnities set forth in subsection (iv) of
the first sentence of Section 9.1 and subsection (iv) of the first sentence of
Section 9.2 shall expire thirty (30) days following the time the latest
applicable statute of limitations expires for the enforcement by an applicable
Governmental Authority or any other Person of any remedy with respect to a
violation of or the subject matter covered by such representations and
warranties and (iii) the representations
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and warranties set forth in SECTION 4.13 and the indemnities set forth in
subsection (v) of the first sentence of Section 9.1 shall survive the closing of
the transactions contemplated hereby for a period of six (6) years following the
Closing Date. No claim for the recovery of any Kellstrom Indemnifiable Damages
or Shareholder Indemnifiable Damages with respect to any of the representations,
warranties and indemnities set forth in this Agreement may be asserted by any of
the Kellstrom Indemnified Parties or by the Shareholder Indemnified Parties
after the survival period for such representations, warranties and indemnities
shall expire in accordance with the terms of this Agreement; PROVIDED, HOWEVER,
that claims for Kellstrom Indemnifiable Damages or Shareholder Indemnifiable
Damages first asserted in writing within the applicable period shall not
thereafter be barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right to
fully rely on the representations, warranties, covenants, agreements and
indemnities of the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each representation,
warranty, covenant, agreement and indemnity of the parties contained in this
Agreement is independent of each other representation, warranty, covenant,
agreement and indemnity.
9.4 THIRD PARTY ACTIONS.
(a) For the purpose of this Section 9.4, the term
"Indemnifiable Damages" means Kellstrom Indemnifiable Damages or Shareholder
Indemnifiable Damages, as the context requires, the term "Indemnified Party"
means the Kellstrom Indemnified Parties or the Shareholder Indemnified Parties,
as the context requires, and the term "Indemnifying Party" means the party
(Kellstrom or the Shareholders) against whom a claim for Indemnifiable Damages
is to be made.
(b) If any claim or action shall be commenced or asserted
against an Indemnified Party which, if successful, could give rise to
Indemnifiable Damages, the Indemnified Party shall give the Indemnifying Party
prompt written notice of such claim or action (provided that the failure to give
such notice shall not relieve the Indemnifying Party of its indemnification
obligations except where, and solely to the extent that, the failure to provide
such notice actually and materially prejudices the rights of the Indemnifying
Party). Upon receipt of written notice of any such claim or action, the
Indemnifying Party shall have the option to assume the defense thereof by
providing written notice of such election to the Indemnified Party within ten
(10) business days after receipt of written notice of any such claim or action
(an "Indemnification Notice"). If the Indemnifying Party shall elect to assume
the defense of any claim or action by the delivery of an Indemnification Notice
within such ten (10) business day period, then, subject to the terms set forth
below, (i) the Indemnifying Party shall have the right to assume and control the
defense of the claim or action , (ii) the Indemnified Party may at its own cost
and expense participate in (but not control) the defense thereof, and (iii) the
Indemnifying Party shall be fully responsible (with no reservation of rights)
for all Indemnifiable Damages relating to the claim or action. If the
Indemnifying Party states in an Indemnification Notice that it will not assume
the defense of the claim or action, or if the Indemnifying Party fails to
provide the Indemnified Party with an Indemnification Notice within such ten
(10) business day period, then (i) the Indemnified Party shall have the right to
assume and control the defense of the claim or action, (ii) the Indemnifying
Party may at its own cost and expense participate in (but not control) the
defense thereof, and (iii) the Indemnifying Party shall be
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responsible for any Indemnifiable Damages (including, without limitation, the
costs incurred by the Indemnified Party in the defense thereof) relating to the
claim or action subject to and in accordance with the terms and conditions set
forth in this Agreement. If the Indemnifying Party provides, within such ten
(10) business day period, an Indemnification Notice stating that it shall assume
the defense of the claim or action, then the Indemnifying Party shall, at its
own cost and expense, diligently defend such claim or action, and the
Indemnifying Party will not be liable to the Indemnified Party pursuant to the
provisions of Sections 9.1 or 9.2 for any related counsel and paralegal fees and
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation, unless (i) the
defendants in any action include both the Indemnified Party and the Indemnifying
Party and there is a conflict of interest as reasonably determined by counsel
for the Indemnifying Party which would prevent such counsel from also
representing the Indemnified Party, (ii) 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 the commencement
of the action, or shall have failed to diligently defend such action, or (iii)
the Indemnifying Party has authorized the employment of counsel for the
Indemnified Party at the expense of the Indemnifying Party. Notwithstanding
anything to the contrary in this Section 9.4, the Indemnifying Party shall have
no right to settle or compromise any action for which it has assumed the defense
to the extent the settlement or compromise provides for any injunctive or other
equitable relief against the Indemnified Party or otherwise provides for any
continuing obligations of any nature against the Indemnified Party or loss of
rights of the Indemnified Party, and nothing stated in this Section 9.4 shall
otherwise affect the Indemnifying Party's obligation to pay the Indemnified
Party all Indemnifiable Damages (other than such related counsel and paralegal
fees and expenses) pursuant to Section 9.1 or Section 9.2. With respect to any
such third party action, the parties agree to provide each other with all
material information that they request relating to the handling of such matter.
The parties shall reasonably cooperate with one another in furtherance of
resolving any claims for which indemnification is sought hereunder. No
Indemnified Party shall admit liability with respect to, or settle, compromise,
pay or discharge, any Indemnifiable Claim without the prior written consent of
the Indemnifying Party, so long as the Indemnifying Party is diligently
defending same in accordance with this Section 9.4. An Indemnified Party shall
not unreasonably withhold its consent to a settlement of a matter.
9.5 SET OFF AGAINST THE ESCROWED AMOUNT. As security for Kellstrom's
rights under Section 9.1 hereof, at Closing Kellstrom shall deliver the Escrowed
Amount to the Escrow Agent. The Shareholders acknowledge that for tax purposes
Kellstrom shall be deemed the owner of the Escrowed Amount until disbursed in
accordance with the provisions of the Escrow Agent, and each of Kellstrom and
the Shareholders shall under the terms of the Escrow Agreement grant each other
reciprocal security interests in and to the Escrowed Amount and all interest
that may accrue on the Escrowed Amount. Any claims by Kellstrom for Kellstrom
Indemnifiable Damages shall first be satisfied out of the Escrowed Amount before
any payments shall be required to be made by the Shareholders. Kellstrom may
claim against the Escrowed Amount any Indemnifiable Damages for which the
Shareholders (or either of them) are responsible pursuant to this Agreement,
subject, however, to the following terms and conditions:
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(a) Kellstrom shall give written notice to the Escrow Agent
and the Shareholders of any claim for Indemnifiable Damages or any other damages
hereunder, which notice shall set forth (i) the amount of Indemnifiable Damages
which Kellstrom claims to have sustained by reason thereof, and (ii) the basis
of the claim therefor in reasonable particularity, including the Section of this
Agreement (or other document or instrument) under which such claim arises;
(b) The Escrow Agent shall deliver to Kellstrom the actual
amount of Indemnifiable Damages sustained by Kellstrom on the later to occur of
the expiration of ten (10) business days from the date of such notice (the
"Notice of Contest Period") or, if such claim is contested, the date the dispute
is resolved in favor of Kellstrom, and such amount, if any, shall be charged
against and reduce the Escrowed Amount; and
(c) If, prior to the expiration of the Notice of Contest
Period, the Shareholders shall notify the Escrow Agent and Kellstrom in writing
of an intention to dispute the claim and if such dispute is not resolved within
ninety (90) days after expiration of such period, then Kellstrom may take any
action or exercise any remedy available to it by appropriate legal proceedings
to enforce its rights and remedies hereunder.
9.6 DELIVERY OF ESCROWED AMOUNT. The Escrow Agent shall deliver to the
Shareholders no later than ten (10) business days following the two (2) year
anniversary of the Closing Date any Escrowed Amount then held by it unless there
then remains unresolved any claim for Kellstrom Indemnifiable Damages or other
damages hereunder as to which written notice has been given, in which event the
Escrow Agent shall deliver to the Shareholders any Escrowed Amount in excess of
the maximum amount of Kellstrom Indemnifiable Damages at issue in connection
with any then unresolved claim, and any Escrowed Amount remaining on deposit
after such claim shall have been satisfied or resolved shall be returned to the
Shareholders promptly after the time of satisfaction.
9.7 NO BAR; WAIVER. If the Escrowed Amount is insufficient to set off
any claim for Kellstrom Indemnifiable Damages made hereunder (or has been
delivered to the Shareholders prior to the making or resolution of such claim),
then Kellstrom may take any action or exercise any remedy available to it by
appropriate legal proceedings to collect the Kellstrom Indemnifiable Damages to
which it may be entitled under Section 9.1, subject to the limitations contained
in this Article IX.
9.8 SET OFF AGAINST THE ENVIRONMENTAL ESCROWED AMOUNT.
(a) As security for the Shareholders' obligations and for
Kellstrom's rights under Section 6.23 hereof, at Closing Kellstrom shall deliver
the Environmental Escrowed Amount to the Escrow Agent. The Shareholders
acknowledge that for tax purposes Kellstrom shall be deemed the owner of the
Environmental Escrowed Amount until disbursed in accordance with the provisions
of the Environmental Escrow Agreement, and each of Kellstrom and the
Shareholders shall under the terms of the Environmental Escrow Agreement grant
each other reciprocal security interests in and to the Environmental Escrowed
Amount and all interest that may accrue on the Environmental Escrowed Amount.
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(b) Subject to the terms of Section 6.23(d), either the
Shareholders or Kellstrom may from time to time request that portions of the
Environmental Escrowed Amount be disbursed to satisfy amounts paid or payable to
conduct the Remediation activities to be undertaken by them under Section
6.23(a), (collectively, "Remediation Costs"). The Shareholders shall give
written notice to Kellstrom, and Kellstrom shall give written notice to the
Shareholders (in either case, an "Environmental Claim Notice"), of any
Remediation Costs which the party providing such notice (the "Notifying Party")
claims to have incurred, which notice shall include (i) the amount of
Remediation Costs which the Notifying Party claims to have incurred, (ii) a
description of the services or work performed or other claim which gave rise to
such Remediation Costs, (iii) a copy of the invoice delivered to the Notifying
Party, if applicable, for such Remediation Costs and (iv) a proposed form of
joint instruction letter to be signed by authorized representatives of each of
Kellstrom and the Shareholders, instructing the Escrow Agent to disburse that
portion of the Environmental Escrowed Amount sufficient to satisfy the claimed
Remediation Costs. Within fifteen (15) business days of receipt of an
Environmental Claim Notice, the receiving party shall either (i) deliver to the
Notifying Party the joint instruction letter included in the Environmental Claim
Notice, signed by a person authorized to give disbursement instructions pursuant
to the terms of the Environmental Escrow Agreement, or (ii) advise the Notifying
Party in writing of any objection it may have to the Notifying Party's claim for
recovery of Remediation Costs, in which case Kellstrom and the Shareholders
shall endeavor to reach agreement within the twenty (20) business day period
following such notice of objection. If the parties shall reach agreement within
such twenty (20) day period, the parties shall, if appropriate, promptly execute
and deliver to the Escrow Agent a joint instruction letter authorizing the
disbursement of the mutually agreed upon amount of Remediation Costs incurred or
suffered by the Notifying Party. If the parties are unable to reach agreement
within such twenty (20) day period, then the Notifying Party may take any action
or exercise any remedy available to it by appropriate legal proceedings to
collect any Remediation Costs to which it may be entitled under this Agreement.
The Escrow Agent shall deliver to the party specified in any joint instruction
letter delivered pursuant hereto the amount of Remediation Costs no later than
(10) business days from its receipt of any such joint instruction letter, and
such amount shall be charged against and reduce the Environmental Escrowed
Amount.
(c) Within ten (10) business days following the completion of
the Remediation, Kellstrom shall deliver to the Escrow Agent written
instructions, authorizing the Escrow Agent to release to the Shareholders the
balance, if any, of the Environmental Escrowed Amount, and all interest earned
thereon; PROVIDED, HOWEVER, that if there then remains unresolved any claim by
Kellstrom for disbursement of any portion of the Environmental Escrowed Amount
as to which written notice has been given, then Kellstrom shall deliver to the
Escrow Agent written instructions authorizing the Escrow Agent to release to the
Shareholders any Environmental Escrowed Amount in excess of the maximum amount
of costs and expenses at issue in connection with any then unresolved claim for
Remediation Costs, and, after such claim shall have been satisfied or resolved,
Kellstrom shall deliver to the Escrow Agent written instructions authorizing the
Escrow Agent to release to the Shareholders any Environmental Escrowed Amount
then remaining on deposit, and all interest thereon.
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(d) If Kellstrom's Environmental Consultant and the
Shareholders' Environmental Consultant shall at any time after the Regulatory
Agencies' approval of the remediation plan mutually agree that the total amount
of Remediation Costs likely to be incurred by the Shareholders and Kellstrom,
together with the total amount of any Remediation Costs which shall at such time
have been incurred but not yet paid out of the Environmental Escrowed Amount, is
less than the portion of the Environmental Escrowed Amount then remaining, then
Kellstrom shall deliver to the Escrow Agent written instructions authorizing the
Escrow Agent to release to the Shareholders any such excess amount.
(e) Notwithstanding anything to the contrary contained in this
Agreement, if the Environmental Escrowed Amount is insufficient to set off any
claim for Remediation Costs, then any unpaid Remediation Costs which Kellstrom
shall be entitled to be paid shall be deemed Kellstrom Indemnifiable Damages,
and Kellstrom may take any action or exercise any remedy available to it by
appropriate legal proceedings to collect such Kellstrom Indemnifiable Damages to
which it may be entitled under Section 9.1 (provided that the Kellstrom
Indemnification Threshold shall not be applicable to any such amount and such
amount shall not count against the Kellstrom Indemnification Cap).
9.9 ADJUSTMENT TO PURCHASE PRICE. All set offs, recoupments and
payments for Indemnifiable Damages made pursuant to this Article shall be
treated as adjustments to the Purchase Price.
9.10 WAIVER. The Shareholders hereby waive any right to contribution or
any similar rights they may have against Certified as a result of their
agreement to indemnify Kellstrom under this Article IX.
9.11 REDUCTION FOR TAX BENEFIT. To the extent that any Kellstrom
Indemnified Party shall receive any tax benefit as a result of any Kellstrom
Indemnifiable Damages, the amount payable by the Shareholders on account of such
Kellstrom Indemnifiable Damages shall be reduced by the amount of the tax
benefit actually received by the Kellstrom Indemnified Party (assuming the
application of the highest marginal State and Federal tax rates applicable to
the Kellstrom Indemnified Party in the year in which such tax benefit is
received). To the extent that any Shareholder Indemnified Party shall receive
any tax benefit as a result of any Shareholder Indemnifiable Damages, the amount
payable by Kellstrom on account of such Shareholder Indemnifiable Damages shall
be reduced by the amount of the tax benefit actually received by the Shareholder
Indemnified Party (assuming the application of the highest marginal State and
Federal tax rates applicable to the Shareholder Indemnified Party in the year in
which such tax benefit is received).
9.12 REDUCTION FOR INSURANCE PROCEEDS. To the extent that any Kellstrom
Indemnified Party shall receive payment under any insurance policies on account
of damages which constitute Kellstrom Indemnifiable Damages which are payable to
the Kellstrom Indemnified Party under the terms of Section 9.1, (a) if the
Shareholders shall have paid the Kellstrom Indemnified Party under this Article
IX on account of such Kellstrom Indemnifiable Damages, then such Kellstrom
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Indemnified Party shall repay (or if it shall fail to repay, then Kellstrom
shall pay) to the Shareholders the amount of such payment up to the amount
actually received by the Kellstrom Indemnified Party under such insurance
policies (net of any reasonable costs incurred by the Kellstrom Indemnified
Party in collecting under such insurance policies), (b) if the Shareholders
shall be required to pay (but shall not yet have paid) the Kellstrom Indemnified
Party under this Article IX on account of such Kellstrom Indemnifiable Damages,
then Kellstrom and the Kellstrom Indemnified Party shall credit to the
Shareholders the amount of such payment up to the amount actually received by
the Kellstrom Indemnified Party under such insurance policies (net of any
reasonable costs incurred by the Kellstrom Indemnified Party in collecting under
such insurance policies), and (c) any such amount repaid, paid or credited to
the Shareholders shall not be deemed Kellstrom Indemnifiable Damages for
purposes of calculating whether the Kellstrom Indemnification Threshold shall
have been met, and shall not count against the Kellstrom Indemnification Cap for
purposes of determining whether the Kellstrom Indemnification Cap shall have
been met. To the extent that any Shareholder Indemnified Party shall receive
payment under any insurance policies on account of damages which constitute
Shareholder Indemnifiable Damages which are payable to the Shareholder
Indemnified Party under the terms of Section 9.2, (x) if Kellstrom shall have
paid the Shareholder Indemnified Party under this Article IX on account of such
Shareholder Indemnifiable Damages, then such Shareholder Indemnified Party shall
repay (or if it shall fail to repay, then the Shareholder shall pay) to
Kellstrom the amount of such payment up to the amount actually received by the
Shareholder Indemnified Party under such insurance policies (net of any costs
incurred by the Shareholder Indemnified Party in collecting under such insurance
policies), (y) if Kellstrom shall be required to pay (but shall not yet have
paid) the Shareholder Indemnified Party under this Article IX on account of such
Shareholder Indemnifiable Damages, then the Shareholder and the Shareholder
Indemnified Party shall credit to Kellstrom the amount of such payment up to the
amount actually received by the Shareholder Indemnified Party under such
insurance policies (net of any costs incurred by the Shareholder Indemnified
Party in collecting under such insurance policies), and (z) any such amount
repaid, paid or credited to Kellstrom shall not be deemed Shareholder
Indemnification Damages for purposes of calculating whether the Shareholder
Indemnification Threshold shall have been met and shall not count against the
Shareholder Indemnification Cap for purposes of determining whether the
Shareholder Indemnification Cap shall have been met. Notwithstanding anything to
the contrary set forth herein, no party required to make a payment under
Sections 9.1 or 9.2 of this Agreement shall be permitted to delay making such
payment when due on account of the availability of any insurance policies to the
party to which such payment is to be made. Each party shall use its best efforts
to avail itself of any insurance provisions which inure to such party's benefit
in connection with any claims for which indemnification is sought hereunder.
9.13 EXCLUSIVE REMEDY. The remedies provided herein shall,
notwithstanding any provisions contained herein to the contrary, be the sole
remedies for Kellstrom Indemnifiable Damages and Shareholders Indemnifiable
Damages, but shall not preclude any party from asserting any other rights or
seeking any other remedies against each other for fraud or from seeking any
equitable relief.
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ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written consent of all of the parties; or
(b) by Kellstrom in the event of a material breach by
Certified or either of the Shareholders of any provision of this Agreement which
material breach is not cured within thirty (30) days of the Shareholders'
receipt of written notice thereof from Kellstrom or which breach by its nature
cannot be cured prior to Closing; or
(c) by the Shareholders in the event of a material breach by
Kellstrom of any provision of this Agreement which material breach is not cured
within thirty (30) days of Kellstrom's receipt of written notice thereof from
the Shareholders or which breach by its nature cannot be cured prior to Closing;
or
(d) by any party in the event that the Closing shall not have
occurred on or prior to May 15, 1999, PROVIDED, HOWEVER, that the failure of the
Closing to occur by such date shall not have been the result of the failure of
the party seeking to terminate this Agreement to perform or fulfill any of its
obligations hereunder; and PROVIDED FURTHER that any party shall have the right
to extend such date for up to an additional thirty (30) days upon written notice
to the other parties in the event that the only then-unsatisfied condition to
Closing is the expiration or termination of any applicable HSR Act waiting
period as required pursuant to Sections 7.7 and 8.5.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 10.1, this Agreement (other than the provisions of
Section 6.7 and Articles IX and XI, which shall survive any expiration or
termination of this Agreement) shall forthwith become void and of no further
force and effect and the parties shall be released from any and all obligations
and liabilities hereunder; PROVIDED, HOWEVER, that (a) nothing herein shall
relieve any party from liability for fraud or any act in the nature of fraud
committed in connection with any of its representations, warranties, covenants
or agreements set forth in this Agreement, (b) nothing herein shall relieve any
party from any liability for any breach or violation hereof, and (c) the
Confidentiality Agreement shall survive any termination hereof.
49
<PAGE> 51
ARTICLE XI
GENERAL PROVISIONS
11.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) IF TO KELLSTROM TO:
Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, Florida 33323
Attn: Zivi R. Nedivi, President
Telecopy: (954) 858-2449
WITH A COPY TO:
Akerman, Senterfitt & Eidson, P.A.
450 East Las Olas Boulevard, Suite 950
Fort Lauderdale, Florida 33301
Attn: Bruce I. March, Esq.
Telecopy: (954) 463-2224
(b) IF TO CERTIFIED (PRIOR TO CLOSING) AND/OR THE SHAREHOLDERS
TO:
2870 Stirling Road
Hollywood, Florida 33020-1199
Telecopy: (954) 925-0988
WITH A COPY TO:
Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A.
Museum Tower
150 West Flagler Street
Miami, Florida 33130
Attn: Teddy D. Klinghoffer, Esq.
Telecopy: (305) 789-3395
50
<PAGE> 52
Notice shall be deemed given on the date sent if sent by facsimile transmission
and on the date delivered (or the date of refusal of delivery) if sent by
overnight delivery or certified or registered mail.
11.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto) and the other documents delivered at the Closing
pursuant hereto contains the entire understanding of the parties in respect of
its subject matter and supersedes all prior agreements and understandings (oral
or written) between or among the parties with respect to such subject matter.
The Exhibits and Schedules constitute a part hereof as though set forth in full
above.
11.3 EXPENSES. Except as otherwise provided herein, the Shareholders
shall pay their own and Certified's fees and expenses, including accounting and
counsel fees, incurred in connection with this Agreement and the transactions
contemplated hereby, and Kellstrom shall pay its own fees and expenses,
including accounting and counsel fees, incurred in connection with this
Agreement and the transactions contemplated hereby. Any HSR fees of, and any
documentary stamp or intangible taxes imposed on, the parties hereto in
connection with the transactions contemplated hereby shall be paid by Kellstrom.
11.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. Except as otherwise provided herein, the rights and remedies
of the parties under this Agreement are in addition to all other rights and
remedies, at law or equity, that they may have against each other.
11.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective heirs, executors, personal representatives, trustees, guardians,
attorneys-in-fact, successors and assigns. Nothing expressed or implied herein
shall be construed to give any other person any legal or equitable rights
hereunder. Except as expressly provided herein, no party may assign any of its
rights or delegate any of its obligations under this Agreement without the prior
written consent of the non-assigning or non- delegating parties; PROVIDED,
HOWEVER, that notwithstanding anything to the contrary contained in this
Agreement, Kellstrom may assign any or all of its rights and privileges under
this Agreement to its lenders from time to time, without the consent of
Certified or the Shareholders, provided that any such assignee shall take such
assignment subject to all of the terms, conditions and limitations set forth in
the Agreement.
51
<PAGE> 53
11.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which taken together
shall constitute one and the same instrument.
11.7 INTERPRETATION. Any reference made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit shall be deemed to be
to the referenced article, section, paragraph, clause, schedule or exhibit of
this Agreement unless otherwise indicated. The headings contained in this
Agreement and on the Exhibits and Schedules hereto are for reference purposes
only and shall in no way affect in any way the meaning or interpretation of this
Agreement or the Exhibits or Schedules hereto. Time shall be of the essence in
this Agreement.
11.8 SEVERABILITY. If any word, phrase, sentence, clause, section,
subsection or provision of this Agreement as applied to any party or to any
circumstance is adjudged by a court to be invalid or unenforceable, the same
will in no way affect any other circumstance or the validity or enforceability
of any other word, phrase, sentence, clause, section, subsection or provision of
this Agreement. If any provision of this Agreement, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby or otherwise, the parties agree that the court making such
determination shall have the power to reduce the duration and/or area of such
provision, and/or to delete specific words or phrases, and in its reduced form,
such provision shall then be enforceable and shall be enforced.
11.9 GOVERNING LAW; JURISDICTION. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State. Any suit, action or proceeding against Kellstrom, Certified or the
Shareholders (or either of them) arising out of, or with respect to, this
Agreement or any judgment entered by any court in respect thereof shall be
brought in the courts of Broward County, Florida or in the U.S. District Court
for the Southern District of Florida and each party hereby irrevocably (a)
accepts and consents to the exclusive personal jurisdiction of such courts for
the purpose of any suit, action or proceeding (b) waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to this
Agreement or any judgment entered by any court in respect thereof brought in
such courts and (c) waives any claim that any suit, action or proceedings
brought in such courts has been brought in an inconvenient forum.
11.10 ARM'S LENGTH NEGOTIATIONS. Each party hereto expressly agrees
that (a) before executing this Agreement, it has fully informed itself of the
terms, contents, conditions and effects of this Agreement; (b) it has relied
solely and completely upon its own judgment in executing this Agreement; (c) it
has had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) it has acted voluntarily and of its own free will
in executing this Agreement; (e) it is not acting under duress, whether economic
or physical, in executing this Agreement; and (f) this Agreement is the result
of arm's length negotiations conducted by and among the parties and their
respective counsel.
52
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
KELLSTROM INDUSTRIES, INC., a Delaware
corporation
By: _______________________________________
Zivi R. Nedivi
President and Chief Executive Officer
CERTIFIED AIRCRAFT PARTS, a Florida
corporation
By:_______________________________________
Donald E. Marshall
President
------------------------------------------
R. DEAN STICKLER, individually
------------------------------------------
DONALD E. MARSHALL, individually
53
<PAGE> 55
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Landlord's Waiver and Agreement
Exhibit B Form of Shareholder Consulting Agreements
Exhibit C Employment Agreements
Exhibit D Form of Lease Amendment
Exhibit E Form of Escrow Agreement
Exhibit F Environmental Escrow Agreement
Schedule 1.1(a) Modified GAAP
Schedule 3.4 Kellstrom Consents
Schedule 4.1 Foreign Qualifications/Names
Schedule 4.5 Shareholders
Schedule 4.6 Violations
Schedule 4.9 Financial Statements
Schedule 4.10 Changes Since the Current Balance Sheet Date
Schedule 4.11(a) Liabilities of Certified
Schedule 4.11(b) Indebtedness
Schedule 4.12 Litigation
Schedule 4.13 Environmental Matters
Schedule 4.14 Real Estate
Schedule 4.15(a) Inventory
Schedule 4.15(b) Consigned Inventory
Schedule 4.15(c) Vehicles
Schedule 4.17 Employees
Schedule 4.18 Employee Benefit Plans
Schedule 4.19 Tax Matters
Schedule 4.20 Insurance Policies
Schedule 4.21 Receivables
Schedule 4.22 Permits
Schedule 4.23(a) Adequacy of the Assets
Schedule 4.23(b) Affiliated Transactions
Schedule 4.24 Intellectual Property
Schedule 4.25 Contracts
Schedule 4.27 Bank Accounts
Schedule 4.28 Commissions
Schedule 5.1 Conduct of Business Pending the Acquisition
Schedule 6.15 Certain Employees
Schedule 6.19 1998 Financial Statements
Schedule 6.20 Personal Guarantees
Schedule 7.4 Consents Under Designated Contracts
54
<PAGE> 1
EXHIBIT 10.50
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "AGREEMENT"), dated as of January 15,
1999, is by and between SOLAIR, INC., a Florida corporation (the "APPLICANT
BORROWER"), KELLSTROM INDUSTRIES, INC., a Delaware corporation, as agent for
the Borrowers ("KELLSTROM") , the financial institutions party from time to
time to the below-referenced Loan Agreement, and NATIONSBANK, N.A., as agent
for the Lenders (the "AGENT"), under that certain Amended and Restated Loan and
Security Agreement (as amended and modified, the "LOAN AGREEMENT"), dated as of
December 14, 1998, by and among Kellstrom and certain related borrowing
entities (the "BORROWERS"), the Lenders and the Agent. All of the defined terms
in the Loan Agreement are incorporated herein by reference.
The Applicant Borrower has indicated its desire to become a Borrower
pursuant to the terms of the Loan Agreement.
Accordingly, the Applicant Borrower hereby agrees as follows with the
Agent and the Lenders:
1. The Applicant Borrower hereby acknowledges, agrees and confirms
that, by its execution of this Agreement, the Applicant Borrower will be deemed
to be a party to the Loan Agreement and a "Borrower" for all purposes of the
Loan Agreement and the other Loan Documents and a co-maker of each of the
Notes, and shall have all of the obligations of a Borrower thereunder as if it
had executed the Loan Agreement and the other Loan Documents. The Applicant
Borrower hereby ratifies, as of the date hereof, and agrees to be bound by, all
of the terms, provisions and conditions contained in the Loan Agreement and in
the Loan Documents which are binding upon the Borrowers, including, without
limitation (a) all of the representations and warranties of the Borrowers set
forth in Article 6 of the Loan Agreement, as supplemented from time to time in
accordance with the terms thereof, and (b) all of the covenants set forth in
Articles 7, 8, 9, 10 and 11 of the Loan Agreement.
2. Without limiting the generality of the foregoing terms of paragraph
1, the Applicant Borrower hereby grants to the Agent for the benefit of the
Secured Parties a continuing security interest in, and a right of set off
against, any and all right, title and interest of the Applicant Borrower in and
to the Collateral (as such term is defined in Section 1.1 of the Loan
Agreement) of the Applicant Borrower.
<PAGE> 2
3. The Applicant Borrower acknowledges and confirms that it has
received a copy of the Loan Agreement and the Schedules and Exhibits thereto.
The Schedules to the Loan Agreement are amended to include the information
shown on the attached SCHEDULE A.
4. Kellstrom confirms that all of the other Borrowers' obligations
under the Loan Agreement are, and upon the Applicant Borrower becoming a
Borrower shall continue to be, in full force and effect. Kellstrom further
confirms that immediately upon the Applicant Borrower becoming a Borrower the
term "Secured Obligations", as used in the Loan Agreement, shall include all
Secured Obligations of such Applicant Borrower under the Loan Agreement and
under each other Loan Document.
5. Each of Kellstrom and the Applicant Borrower agrees that at any
time and from time to time, upon the written request of the Agent, it will
execute and deliver such further documents and do such further acts and things
as the Agent may reasonably request in order to effect the purposes of this
Agreement.
6. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
7. This Agreement shall be governed by and construed and interpreted
in accordance with the laws of the State of Georgia.
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of Kellstrom and the Applicant Borrower has
caused this Agreement to be duly executed by its authorized officers, and the
Agent has caused the same to be accepted by its authorized officer, as of the
day and year first above written.
Solair, Inc.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
--------------------------------------
KELLSTROM INDUSTRIES, INC., for itself and
for the other Borrowers
By:
-----------------------------------------
Name:
----------------------------------------
Title:
--------------------------------------
NATIONSBANK, N.A., as Agent for itself and
for the other Lenders
By:
-----------------------------------------
Name:
----------------------------------------
Title:
--------------------------------------
-3-
<PAGE> 4
SCHEDULE A
<PAGE> 5
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of _____________, 199_, before me, the
undersigned, a Notary Public in and for the State of _______________, County of
_____________, Michael W. Wallace personally appeared, personally known to me
or proved to me on the basis of satisfactory evidence to be the Vice President
of Solair, Inc., a Florida corporation, who, being by me first duly sworn,
stated that:
1. He executed the foregoing Joinder Agreement on behalf of Solair, Inc.
pursuant to its by-laws or a resolution of its board of directors, said
execution taking place in the State of _______________, County of
_____________; and
2. He has this day delivered the foregoing instrument to NationsBank, N.A.,
as agent for the Lenders, at Fulton County, Georgia.
Signature of Borrower's Officer:
By:
-----------------------------
Michael W. Wallace
Sworn to and subscribed before me this ___ day of _____________, 199_:
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 6
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of ____________, 199_, before me, the
undersigned, a Notary Public in and for the State of _______________, County of
_____________, Michael W. Wallace personally appeared, personally known to me
or proved to me on the basis of satisfactory evidence to be the Chief Financial
Officer of Kellstrom Industries, Inc., a Delaware corporation, who, being by me
first duly sworn, stated that:
1. He executed the foregoing Joinder Agreement on behalf of Kellstrom
Industries, Inc., as agent for the Borrowers, pursuant to its by-laws or a
resolution of its board of directors, said execution taking place in the
State of _______________, County of _____________; and
2. He has this day delivered the foregoing instrument to NationsBank, N.A.,
as agent for the Lenders, at Fulton County, Georgia.
Signature of Borrower's Officer:
By:
------------------------------
Michael W. Wallace
Sworn to and subscribed before me this ___ day of _____________, 199_:
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 7
AFFIDAVIT REGARDING DELIVERY
On this the ____ day of ______________, 199_, before me, the
undersigned, a Notary Public in and for the State of Georgia, County of Cobb,
M. Steven Liff personally appeared, personally known to me or proved to me on
the basis of satisfactory evidence to be a Vice President of NationsBank, N.A.,
who, being by me first duly sworn, stated that NationsBank, N.A. has received
delivery of the foregoing Joinder Agreement in the State of Georgia, County of
Fulton.
----------------------------------------
Signature of Officer of NationsBank, N.A.
Sworn to and subscribed before me this ___ day of ________________, 1999:
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 1
EXHIBIT 10.51
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
DATED AS OF FEBRUARY 1, 1999
BETWEEN
KELLSTROM INDUSTRIES, INC.
AND
NATIONSBANK, N.A.
$6,670,000.00
KELLSTROM INDUSTRIES, INC.
TAXABLE VARIABLE RATE DEMAND NOTES
SERIES 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS...................................................................................2
ARTICLE II REPRESENTATIONS BY COMPANY;
CONDITIONS TO ISSUANCE OF LETTER OF CREDIT...................................................10
Section 2.01 Representations by Company............................................................10
Section 2.02 Letter of Credit Commitment...........................................................16
Section 2.03 Conditions Precedent to Issuance of the Letter of Credit..............................16
Section 2.04 Provisions Regarding Approval of Requisitions and
Disbursements from Construction Fund.................................................19
Section 2.05 Foundation Survey.....................................................................21
Section 2.06 Cost-Breakdown Updates................................................................22
Section 2.07 Consent to Final Disbursement from the Construction Fund..............................22
Section 2.08 Capitalized Interest..................................................................22
ARTICLE III REIMBURSEMENT OBLIGATION;
OTHER PAYMENTS; LETTER OF CREDIT FEES........................................................23
Section 3.01 Reimbursement and Other Payments......................................................23
Section 3.02 Fees..................................................................................25
Section 3.03 Supplemental Payments.................................................................26
Section 3.04 Computation of Interest: Form and Place of Payment...................................26
Section 3.05 Security for Reimbursement Obligations................................................27
Section 3.06 Acquisition of Notes..................................................................27
ARTICLE IV COVENANTS OF THE COMPANY; OTHER AGREEMENTS...................................................28
Section 4.01 Special Covenants of Company..........................................................28
Section 4.02 Continuous Obligations: Obligations Absolute.........................................30
Section 4.03 Transfer of Letter of Credit..........................................................30
Section 4.04 Reduction and Reinstatement of Stated Amount of Letter of Credit......................30
Section 4.05 Survival of Commitment................................................................30
Section 4.06 Termination of Loan Agreement.........................................................30
ARTICLE V DEFAULTS AND REMEDIES........................................................................31
Section 5.01 Events of Default.....................................................................31
Section 5.02 No Waiver: Remedies Cumulative.......................................................33
ARTICLE VI MISCELLANEOUS................................................................................34
Section 6.01 Right of Set-off......................................................................34
Section 6.02 Liabilities...........................................................................34
Section 6.03 Consent to Service of Process.........................................................35
Section 6.04 Estoppel Certificate..................................................................35
Section 6.05 Amendments............................................................................35
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 6.06 Successors............................................................................35
Section 6.07 Fees and Expenses: Expenses of Collection.............................................35
Section 6.08 Notices...............................................................................36
Section 6.09 Severability..........................................................................38
Section 6.10 Assignment............................................................................38
Section 6.11 Participations........................................................................38
Section 6.12 Counterparts..........................................................................38
Section 6.13 Rule of Construction..................................................................38
Section 6.14 Governing Law.........................................................................38
Section 6.15 Preamble: Preliminary Recitals........................................................38
Section 6.16 Indenture.............................................................................38
Section 6.17 Credit Institution Representation.....................................................38
Section 6.18 Consent to Jurisdiction: Waiver of Jury Trial.........................................38
SCHEDULE 3.01(a) OPTIONAL REDEMPTIONS.........................................................................42
</TABLE>
<PAGE> 4
THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT (the "AGREEMENT"), made
as of the 1st day of February, 1999, between KELLSTROM INDUSTRIES, INC., a
Delaware corporation (the "COMPANY"), and NATIONSBANK, N.A., a national banking
association, having a designated place of business in Atlanta, Georgia (the
"CREDIT Institution");
PREAMBLE: RECITALS:
WHEREAS, pursuant to the terms and provisions of that certain
Indenture of Trust, dated as of February 1, 1999 (the "INDENTURE"), by and
between the Company and Norwest Bank Minnesota, N.A., as trustee (the
"TRUSTEE"), the Company is issuing its Taxable Variable Rate Demand Notes,
Series 1999, in the aggregate principal amount of Six Million Six Hundred
Seventy Thousand Dollars ($6,670,000.00) (herein, the "NOTES"); and
WHEREAS, the proceeds of the Notes will be used to finance the
reimbursement to the Company of the construction and renovation of the
Company's corporate headquarters located in Sunrise, Florida (herein, the
"PROJECT"); and
WHEREAS, the proceeds of the Notes will be deposited on the Date of
Issuance (as hereinafter defined) in the Construction Fund created and
established under the Indenture and held by the Trustee thereunder to be
disbursed to the Company pursuant to the terms and provisions of the Indenture,
this Agreement and the other Financing Documents (as hereinafter defined); and
WHEREAS, the Company has agreed to pay the principal of or purchase
price of the Notes and the interest thereon in accordance with the provisions
of the Indenture; and
WHEREAS, to enhance the marketability of the Notes and to pay the
principal of or purchase price of the Notes and the interest thereon in
accordance with the provisions of the Indenture, the Company has requested that
the Credit Institution issue, in favor of the Trustee, its irrevocable direct
pay letter of credit in the initial stated amount of $6,746,751.00 in the form
attached hereto as Exhibit A (the "LETTER OF CREDIT"); and
WHEREAS, the Company and the Credit Institution desire (a) to specify
the conditions precedent to the issuance of the Letter of Credit by the Credit
Institution and to obtain the Credit Institution's approval of disbursements of
proceeds of the Notes for the benefit of the Company, and (b) to provide for
the payment to the Credit Institution of certain fees for the Letter of Credit,
the reimbursement by the Company of amounts paid by the Credit Institution
under the Letter of Credit, the indemnity by the Company of the Credit
Institution pursuant to the terms of this Agreement, the security to be
provided by or on behalf of the Company to secure its performance under this
Agreement, and certain other matters;
NOW, THEREFORE, in consideration of the premises and the agreements
contained in this Agreement, the Company and the Credit Institution agree as
follows:
<PAGE> 5
ARTICLE I
DEFINITIONS
The terms "Construction Fund," "Cost of the Project," "Fiscal Agent,"
"Maximum Rate," "Placement Agreement," "Remarketing Agent," "Remarketing
Agreement," "Substitute Letter of Credit" and all other capitalized terms used
and not defined herein shall have the meanings given thereto in the Indenture.
As used in this Agreement, in addition to the terms previously defined herein or
defined in Section 1.01 of the Indenture, the following terms shall have the
meanings as provided in this Article I. Unless otherwise provided, each of the
financial terms not specifically defined herein shall have the meaning given to
it under Generally Accepted Accounting Principles applied on a consistent basis,
and the computation of any such term is to be determined both as to
classification of items and as to amounts in accordance with Generally Accepted
Accounting Principles. Unless otherwise indicated, references to Articles or
Sections refer to those in this Agreement.
The Recitals are hereby incorporated herein by this reference.
"A Drawing" shall mean a drawing made under the Letter of Credit by
sight draft accompanied by a certificate in the form required thereunder to pay
scheduled principal of and interest on the Notes or to pay the redemption price
of the Notes due to an optional redemption of the Notes pursuant to the
provisions of the Indenture.
"Affiliate" shall mean, with respect to any Person, any other person
(i) directly or indirectly controlling (including, but not limited to, all
directors and officers of such person) controlled by, or under direct or
indirect common control with, such Person or (ii) that directly or indirectly
owns more than 5% of the voting securities of such Person. A Person shall be
deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership or voting
securities, by contract or otherwise.
"Anniversary Date" shall mean the same day and month as the Date of
Issuance occurring in any subsequent year.
"Assignment Agreement" shall mean that certain Collateral Assignment
of Agreements Affecting Real Estate dated as of February 1, 1999, by and
between the Company and the Credit Institution by which the Company has, with
the consent and acknowledgment of the parties to the contracts therein referred
to, assigned and granted a security interest to the Credit Institution in all
construction and architectural documents relating to the Project and in all
permits and licenses relating to the Project, as the same may be amended,
modified or supplemented from time to time in accordance with its terms.
"B Drawing" shall mean a drawing made under the Letter of Credit by
sight draft accompanied by a certificate in the form required thereunder to pay
the purchase price of the Notes due to an optional tender for purchase or a
mandatory tender for purchase directed by the Company pursuant to the
provisions of the Indenture.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 ET. SEQ., as
amended.
<PAGE> 6
"Business Day" shall have the same meaning as provided in the Letter
of Credit.
"Butters" shall mean Butters Construction & Development, Inc., a
Florida corporation.
"C Drawing" shall mean a drawing made under the Letter of Credit by
sight draft accompanied by a certificate in the form required thereunder to pay
the purchase price of the Notes due to a mandatory purchase of the Notes as a
result of an event of default under the Indenture or as a result of the
provision of a substitute Letter of Credit or to pay the redemption price of
the Notes due to the expiration or termination of the Letter of Credit, all as
provided pursuant to the provisions of the Indenture.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and all
rules and regulations from time to time promulgated thereunder.
"Collateral" shall mean all real and personal property of the Company
and/or the Guarantors (to the extent described in the Corporate Guaranty) in
which the Credit Institution has been granted a collateral assignment, lien or
security interest pursuant to the terms and provisions of the Financing
Documents.
"Commitment Letter" shall mean the letter dated October 26, 1998,
whereby the Credit Institution agreed to issue the Letter of Credit for the
benefit of the Company, and the Company accepted such commitment.
"Construction Contract" shall mean that standard form of agreement
dated as of May 27, 1998 between the Company and Butters Construction &
Development, Inc. ("BUTTERS"), as contractor, where the basis of payment is the
cost of work plus a fee without a guaranteed maximum price, as the same may be
amended, modified or supplemented from time to time in accordance with its
terms.
"Controlled Group" shall mean (i) the controlled group of corporations
as defined in Section 1563 of the United States Internal Revenue Code of 1986,
as amended, or (ii) the group of trades or businesses under common control as
defined in Section 414 of the United States Internal Revenue Code of 1986, as
amended, of which the Company is a part or may become a part.
"Corporate Guaranty" shall mean that certain Guaranty Agreement of the
Guarantors dated the Date of Issuance in favor of the Credit Institution, as
the same may be amended, modified or supplemented from time to time in
accordance with its terms.
"Cost Certificate" shall have the meaning given in Section 2.03(l)
hereof.
"Cost of the Project" means the costs of the Project as described in
Section 4.07 of the Indenture.
3
<PAGE> 7
"Date of Issuance" shall mean the date on which the Letter of Credit
is issued and becomes effective hereunder.
"Default" shall mean any condition or event which with the giving of
notice or lapse of time or both, would constitute an Event of Default
hereunder.
"Environmental Claim" shall mean any accusation, allegation, notice of
violation, claim, demand, abatement order, or other order or direction
(conditional or otherwise) by any Governmental Authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease, or death), tangible or intangible property damage, contribution,
indemnity, direct or consequential damages, damage to the environment,
nuisance, pollution, contamination, or other adverse effects on the
environment, or for fines, penalties, or restrictions, in each case relating
to, resulting from, or in connection with Hazardous Materials and relating to
the Company, or any property leased, owned, operated, or used by the Company.
"Environmental Laws" shall mean any and all federal, state local, or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, or requirements of any Governmental Authority regulating, relating to
or imposing liability or standards of conduct concerning, any Hazardous
Materials or environmental protection or health and safety, as now or at any
time hereafter be in effect, including without limitation: the Clean Water Act,
also known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C.
Section 1251 ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET
SEQ.; the Federal Insecticide, Fungicide, and Rodenticide Act 66 ("FIFRA"), 7
U.S.C. Section 136 ET SEQ.; the Surface Mining Control and Reclamation Act
("SMCRA"), 30 U.S.C. Section 1201 ET SEQ.; the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 ET
SEQ.; the Superfund Amendment and Reauthorization Act of 1986 ("SARA"), Public
Law 99-499, 100 Stat. 1613; the Emergency Planning and Community Right to Know
Act ("EPCRKA"), 42 U.S.C. Section 11001 ET SEQ.; the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 6901 ET SEQ.; and the Occupational
Safety and Health Act, as amended ("OSHA"), 29 U.S.C. Section 655 and Section
657; together, in each case, with any amendments and the regulations adopted
and publications promulgated thereunder and all substitutions thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, including any rules and regulations promulgated thereunder.
"Event of Default" shall mean any of the Events of Default as defined
in Section 5.01 hereof.
"Financing Documents" shall mean the Notes, the Letter of Credit, this
Agreement, the Loan Agreement, the Construction Contract, the Mortgage, the
Corporate Guaranty, UCC financing statements, the Assignment Agreement, the
Indenture, and any and all other agreements or other instruments now or
hereafter executed and delivered by the Company, the Guarantors or any other
person in connection with, or as security for the payment or performance of
this Agreement or the Corporate Guaranty.
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<PAGE> 8
"Generally Accepted Accounting Principles" or "GAAP" shall mean
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants (or other governmental or regulatory agency,
board, institute or body having jurisdiction on thereover), and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other Person or entity as may be approved by a significant
segment of the accounting profession, that are applicable to the circumstances
as of the date of determination.
"Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency, department or
other governmental subdivision having jurisdiction over the Company, any
Affiliate or Subsidiary of the Company or any of their respective businesses,
operations or properties.
"Guarantors" shall mean collectively, Kellstrom Commercial Aircraft,
Inc., a Delaware corporation, Aero Support Holdings, Inc., a Florida
corporation, Integrated Technology Holdings Corp., a Delaware corporation,
Aerocar Aviation Corp., a Florida corporation, Aerocar Parts, Inc., a Florida
corporation, Solair, Inc., a Florida corporation, and any other Subsidiaries of
the Company, either presently existing or acquired hereafter (with the
exception of Kellstrom International Sales Corporation, so long as such
corporation is a foreign sales corporation).
"Guaranty" of any Person shall mean any contract, agreement or
understanding of the Person pursuant to which the Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "PRIMARY OBLIGOR")
in any manner, whether directly or indirectly, and including without limitation
agreements: (i) to purchase the Indebtedness or the collateral for the
Indebtedness, (ii) to provide funds (a) for the purchase or payment of the
Indebtedness or (b) to maintain net worth or working capital or other balance
sheet conditions, (iii) to purchase property, securities or services primarily
for the purpose of assuring the holder of the Indebtedness of the ability of
the Primary Obligor to make payment of the Indebtedness, and (iv) otherwise to
assure the holder of the Indebtedness against loss.
"Hazardous Materials" shall mean any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or
toxic substances, or similar materials defined as such in any Environmental
Laws.
"Hazardous Substance Agreement" shall mean that certain Hazardous
Substance Certificate and Indemnification Agreement of even date herewith by
the Company, the Guarantors, Kellstrom International Sales Corporation, a U.S.
Virgin Islands corporation and the Bank.
"Indebtedness" of any Person shall mean all indebtedness, obligations
and liabilities of the Person, including without limitation: (i) all
"liabilities" which would be reflected on a balance sheet of the Person
prepared in accordance with GAAP, (ii) all obligations of the Person under any
Guaranty, (iii) all obligations of the Person under any capital lease, (iv) all
obligations, indebtedness and liabilities secured by any Lien or any security
interest on any property or assets of the Person, and (v) all redeemable
preferred stock of the Person valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends.
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<PAGE> 9
"Indenture" shall mean the Indenture of Trust, dated as of February 1,
1999, between the Company and the Trustee, as amended or supplemented from time
to time in accordance with its terms.
"Interest Requirement" shall mean an amount equal to the total
interest accruing on outstanding Notes for a period of 35 days, calculated at
an assumed rate equal to twelve percent (12%) per annum over a year of 365 or
366 days, as applicable.
"Letter of Credit" shall mean the Letter of Credit issued by the
Credit Institution to the Trustee pursuant to this Agreement in the form of
Exhibit A attached hereto.
"Lien" shall mean any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designed to secure the repayment of Indebtedness,
whether arising by agreement or under any statute or law or otherwise.
"Loan Agreement" shall mean that certain $250,000,000.00 Amended and
Restated Loan and Security Agreement, dated as of December 14, 1998, among the
Company and certain subsidiaries named therein, the financial institutions
party thereto from time to time, the Credit Institution for itself and as
agent, and NationsBanc Montgomery Securities LLC, as the same may be amended,
modified or supplemented from time to time in accordance with its terms.
"Material Adverse Effect" shall mean any material adverse effect upon
(a) the business, assets, properties, liabilities, condition (financial or
otherwise), results of operations or business prospects of the Borrower and its
Subsidiaries taken as a whole or the Guarantors, or other Person, (b) the value
of the Collateral, (c) the Security Interest or the priority of the Security
Interest, (d) the respective ability of the Borrower, Guarantors or other
Person to perform any obligations under this Agreement or any other Note
Documents or Financing Documents to which it is a party, (e) the legality,
validity, binding effect, enforceability or admissibility into evidence of any
Financing or Note Document or the ability of the Credit Institution to enforce
any rights or remedies under or in connection with any Loan Document, or (f)
the ability of the Borrower and its subsidiaries taken as a whole to conduct
its business as currently conducted or contemplated.
"Maximum Rate" shall mean the lesser of (a) the highest interest rate
which may be borne by the Notes under Florida law or (b) twelve percent (12%)
per year.
"Mortgage" shall mean that certain Mortgage, Assignment of Rents and
Security Agreement dated as of February 1, 1999, from the Company to the Credit
Institution, pursuant to which the Company has granted a first lien mortgage in
the Project and Project Site to secure the Company=s Obligations under this
Agreement, as the same may be amended, modified or supplemented from time to
time in accordance with its terms.
"Note Documents" shall mean collectively, the Placement Agreement, the
Remarketing Agreement, and the Placement Memorandum, as the same may be
amended, modified or supplemented from time to time in accordance with their
respective terms.
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<PAGE> 10
"Notes" shall mean the Taxable Variable Demand Notes, Series 1999, in
the aggregate principal amount of Six Million Six Hundred Seventy Thousand
Dollars ($6,670,000.00) to be issued pursuant to the terms and conditions of
the Indenture.
"Notes Closing" shall mean the authentication and delivery of the
Notes pursuant to the Indenture.
"Obligations" shall mean all loans and all other advances, debts,
liabilities, obligations, covenants and duties owing, arising, due or payable
from the Company to the Credit Institution of any kind or nature, present or
future, whether or not evidenced by any note, guaranty, swap agreement, hedge
agreement or other instrument, whether arising under this Agreement or any of
the other Financing Documents or Note Documents or otherwise, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorney's fees, and any other sums chargeable to the
Company under any of the Note Documents or Financing Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"Permitted Encumbrances" shall have the meaning as provided in the
Mortgage.
"Permitted Liens" shall mean (i) Liens granted to the Credit
Institution to secure the Obligations, (ii) pledges or deposits made to secure
payment of worker's compensation insurance (or to participate in any fund in
connection with worker's compensation insurance), unemployment insurance,
pensions or social security programs or under payment or performance bonds or
as a condition to the transaction of any business, (iii) Liens imposed by
mandatory provisions of law such as for materialmen's, mechanics',
warehousemen's and other like Liens arising in the ordinary course of business,
securing Indebtedness whose payment is not yet due or is due but is being
contested in good faith by appropriate proceedings and as to which adequate
reserves have been provided, (iv) Liens for taxes, assessments and governmental
charges or levies imposed upon a Person or upon such Person's income or profits
or property (excluding any Lien imposed pursuant to any of the provisions of
ERISA), if the same are not yet due and payable or if the same are being
contested in good faith and as to which adequate cash reserves have been
provided, (v) Liens arising from good faith deposits in connection with
tenders, leases, real estate bids or contracts (other than contracts involving
the borrowing of money), pledges or deposits to secure public or statutory
obligations, deposits to secure (or in lieu of) surety, stay, appeal or customs
bonds, and deposits to secure the payment of taxes, assessments, customs duties
or other similar charges in the ordinary course of business, (vi) purchase
money security interests in after-acquired personal property, which property
has an aggregate value (when combined with all other Indebtedness of the
Company) not exceeding $5,000,000.00, (vii) the Liens in favor of the Credit
Institution under the Financing Documents, (viii) Permitted Encumbrances and
other Liens on the Project Site in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property or
minor defects or irregularities in the title to any real property, which do not
materially detract from the value of such property or impair the use thereof in
the business of the Company or its Subsidiaries, (ix) existing
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<PAGE> 11
liens as of the date of this Agreement that have been disclosed to the Credit
Institution through the Loan Agreement, financial statements or otherwise, (x)
Liens on money deposited by residents or others with the Company as security
for or as prepayment of rent, and (xi) Liens on property received by the
Company through gifts, grants or bequests, such Liens being due to restrictions
on such gifts, grants or bequests of property or the income thereon.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, joint
venture or a government or agency or political subdivision or instrumentality
thereof.
"Placement Agent" means NationsBank, N.A., the placement agent under
the Placement Agreement with respect to the initial placement of the Notes.
"Placement Agreement" shall mean the Placement Agreement, dated as of
February 1, 1999, by and between the Company and the Placement Agent.
"Placement Memorandum" shall mean the Private Placement Memorandum
dated February 16, 1999, relating to the sale of the Notes by the Placement
Agent and the Remarketing Agent.
"Plan" shall mean an employee benefit plan or other plan maintained
for employees of the Company covered by Title IV of ERISA, or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code of
1986, as amended.
"Prime Rate" shall mean that fluctuating rate of interest per annum
established from time to time by the Credit Institution as its Prime Rate. The
Company acknowledges and agrees that the Prime Rate is a reference used in
determining interest rates on certain loans by the Credit Institution and is
not intended to be the best or lowest rate of interest charged on any extension
of credit to any customer. The rate of interest charged on amounts payable
under the Financing Documents shall not exceed applicable legal limits.
"Project" shall mean (i) the financing, in whole or in part, of the
reimbursement to the Company cost of the acquisition, construction and
equipping of a headquarters facility for the Company in Sunrise, Florida and
(ii) the payment of the costs of issuance of the Notes and other related costs.
"Project Manager" shall mean the person appointed by Butters and
approved by the Company to manage the building of the Project Site.
"Project Site" shall mean the real and personal property and all
improvements subject to the Mortgage and described on Schedule A to the
Mortgage.
"Reimbursement Account" shall mean the Reimbursement Account
established pursuant to Section 3.01 hereof.
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<PAGE> 12
"Release" shall mean any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal dumping,
leaching, or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers, or other closed receptacles containing any Hazardous
Materials), or into or out of any property owned, leased, operated, or used by
the Company or any Subsidiaries (if any), including the movement of any
Hazardous Material through the air, soil, surface water, groundwater, or
property.
"Remarketing Agent" shall mean, initially, NationsBank, N.A., and any
successor agent or agents appointed from time to time pursuant to the terms of
the Indenture.
"Remarketing Agreement" means initially the Remarketing and Interest
Services Agreement between the Remarketing Agent and the Company, dated as of
February 1, 1999, and any and all modifications, alterations, amendments and
supplements thereto and (b) any agreement between the Company and any successor
remarketing agent appointed pursuant to the terms of the Indenture.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA.
"Stated Expiration Date" shall have the same meaning as provided in
the Letter of Credit.
"Stated Amount" shall mean the face amount of the Letter of Credit,
initially, up to $6,746,751.00 representing a $6,670,000.00 principal portion
and up to $76,751.00 interest portion to cover 35 days' interest on the Notes
at the Maximum Rate, as it may be reduced and reinstated from time to time in
accordance with the terms of the Letter of Credit.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not, at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any thereof, such stock is at such time owned by such Person
and/or one or more Subsidiaries of such Person) and (ii) any partnership,
limited liability company, association, joint venture or other entity in which
such Person and/or one or more Subsidiaries of such Person has more than a 50%
equity interest at the time. Unless the context indicates otherwise, all
references herein to Subsidiaries are references to subsidiaries of the
Company.
"Termination Date" shall mean the last day a drawing is available
under the Letter of Credit.
"UCC" shall mean the Uniform Commercial Code in effect in
jurisdictions where assets of the Company or the Guarantors are located or
subject to jurisdiction at any time during the term hereof.
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<PAGE> 13
ARTICLE II
REPRESENTATIONS BY COMPANY;
CONDITIONS TO ISSUANCE OF LETTER OF CREDIT
Section II.1 REPRESENTATIONS BY COMPANY. The Company makes the
following representations:
(a) All representations and warranties made by the Company in
the Financing Documents and the Note Documents are incorporated herein by
reference and shall be deemed thereby to have been made and reaffirmed by the
Company for the benefit of the Credit Institution as if they were fully set
forth herein.
(b) Other than Affiliates of the Company, there is no person,
firm, partnership, limited liability company, joint venture or corporation that
controls, is controlled by or is under common control with the Company.
(c) The Company owns fee simple title to the Project Site and
is in sole possession of the Project Site. The Mortgage will be a first lien
against the Project Site, and there are and will be no encumbrances against the
Project Site other than those listed in Schedule B-II of the Attorneys' Title
Insurance Fund title commitment #C-2698338, dated February 22, 1999.
(d) The Company has the power to own its property and to
carry on its business as now being conducted and is in good standing in each
jurisdiction in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary.
(e) The Company has full corporate power and authority to
enter into and execute and deliver each of the Financing Documents and the Note
Documents to which it is a party and to incur and perform the obligations
provided for herein and therein, all of which have been duly authorized by all
proper and necessary corporate action. No consent or approval of members or of
any other person or Governmental Authority or regulatory body is required as a
condition to the validity or enforceability of any of such Financing Documents
or Note Documents, or if required the same has been duly obtained. The Company
makes no representations as to compliance with federal securities laws or state
blue sky laws with respect to the Notes.
(f) The contemplated use of the Project is and will continue
to be in conformity with all applicable governmental laws, ordinances, rules
and regulations (including, but not limited to, all Environmental Laws, the
Americans with Disabilities Act, health, safety and zoning laws, ordinances,
rules and regulations), and all variances and exceptions granted with respect
thereto; all governmental approvals necessary to acquire, construct and equip
the Project have been obtained when needed; all site plans have been approved
and all construction plans have been approved by the appropriate Governmental
Authority and no building moratoria are in effect relating to the Project Site;
all building permits have been issued by the appropriate Governmental Authority
with respect to the construction of the Project when needed; no appeal has been
filed with respect to any applicable zoning laws, ordinances, rules or
regulations or with respect to the issuance of such
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<PAGE> 14
building permits; and there is no existing, threatened or pending action, suit,
proceeding, inquiry or investigation wherein an unfavorable decision, ruling or
finding would in any way have an adverse effect on the Project, or its existing
or intended use, or the repayment of the Notes or the Obligations.
(g) The Company is in compliance with all applicable
governmental laws and regulations applicable to the conduct of its business and
the operation of the Project, the noncompliance with which would have a
Material Adverse Effect.
(h) All of the Financing Documents and Note Documents to
which the Company is a party have been duly authorized, executed and delivered
by the Company, constitute valid and legally binding obligations of the Company
and are fully enforceable against the Company in accordance with their
respective terms.
(i) The execution, delivery and performance by the Company of
the Financing Documents and Note Documents will not: conflict with or result in
a breach of any of the terms, conditions or provisions of the articles of
incorporation or bylaws of the Company or any of its Affiliates; result in a
breach of any governmental requirement applicable to the Company or any of its
Affiliates; conflict with, result in a breach of or require consent under any
agreement, instrument or indenture to which the Company or any of its
Affiliates is a party, or by which any of them or any of their property is
bound, or constitute (with notice, lapse of time, or both) a default
thereunder; result in the creation or imposition of any lien (other than the
Lien created by or under the Financing Documents) upon any of the property or
assets of the Company or any of its Affiliates; or result in or require the
acceleration of any Indebtedness of the Company or any of its Affiliates.
(j) Except as described in the Loan Agreement, there are no
actions, claims, suits or proceedings pending, or, to the knowledge of the
Company, threatened against or directly involving the Company, at law or in
equity or before or by any Governmental Authority. The Company has received no
notice that it is in default with respect to any governmental requirement or
any judgment, order, writ, injunction, decree, rule, award or regulation of any
Governmental Authority.
(k) The Company is not in default under any contract,
agreement, commitment or other instrument which default would have a Material
Adverse Effect on the Company, or in the performance of any covenants or
conditions respecting any of its Indebtedness. No holder of any Indebtedness of
the Company has given notice of any asserted default thereunder. No liquidation
or dissolution of the Company and no receivership, insolvency, bankruptcy,
reorganization or other similar proceeding relative to the Company or its
properties is pending or, to the knowledge of the Company, is contemplated or
threatened against it.
(l) All financial and other information heretofore furnished
to the Credit Institution concerning the Company and the Guarantors is complete
and correct and fairly presents the financial position of the Company and the
Guarantors. There are no liabilities, direct or indirect, fixed or contingent,
of the Company and the Guarantors except as reflected therein. There has been
no Material Adverse Change in the financial condition or operations of the
Company and the Guarantors since the most recent date as of which such
financial information has been furnished to
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<PAGE> 15
the Credit Institution (and to the Company's knowledge no such Material Adverse
Change is pending or threatened). Neither the Company nor any of the Guarantors
have guaranteed the obligations of, or made any investment in or advances to,
any person except as disclosed in such financial and other information provided
to the Credit Institution. Each of the Company and the Guarantors has good and
marketable title to all of its and their properties and assets, and all of such
properties and assets are free and clear of encumbrances, except as reflected
in such financial information.
(m) Neither the Company nor any of the Guarantors is in
default in the payment of the principal of or interest on any of its or their
Indebtedness for borrowed money, nor is the Company or any of the Guarantors in
default under any provision of any instrument under or subject to which any
Indebtedness for borrowed money has been incurred, and no event has occurred
and is continuing under the provisions of any such instrument that with the
lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
(n) No information (financial or otherwise) furnished by or
on behalf of the Company in connection with the negotiation of the issuance of
the Letter of Credit or the issuance of the Notes contains any untrue statement
of a material fact or omits a material fact necessary to make such information
not misleading. There is no fact that the Company has not disclosed to the
Credit Institution that materially adversely affects or so far as the Company
can now foresee based on facts known to it, and based on opinions of the
Company's directors, officers, employees, agents and advisors concerning such
facts, will materially adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of the Company and the
Guarantors, the ability of the Company to acquire, construct, equip and operate
the Project, or the ability of the Company and the Guarantors to perform their
respective obligations under the Financing Documents.
(o) The Company is not a party to, or bound by, any contract,
the performance by Company under which would have a Material Adverse Effect.
(p) Every draw under the Letter of Credit shall constitute,
without the necessity of specifically containing a written statement, a
representation and warranty by the Company that no Default or Event of Default
exists and that all representations and warranties by the Company contained in
this Agreement, the Note Documents and the other Financing Documents are true
and correct as of the date the advance is to be made.
(q) The proceeds of the Notes will be used by the Company
only for the purposes set forth herein and in the other Financing Documents and
Note Documents. The Company's uses of the proceeds are, and continue to be,
legal and proper corporate uses, and the uses are and will be consistent with
all applicable laws and regulations, as in effect from time to time. None of
the proceeds of the Notes will be used for the purposes of purchasing or
carrying any "margin stock" as defined in Regulation U, Regulation X, or
Regulation G of the Code of Federal Regulations, Parts 221, 224, and 207,
respectively, or for the purpose of reducing or retiring any Indebtedness which
was originally incurred to purchase or carry "margin stock," or for any other
purpose which might cause this transaction to be deemed a "purpose credit"
within the meaning given in Regulation U, Regulation X or Regulation G. The
Company is not engaged in the business of extending credit
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<PAGE> 16
for the purpose of purchasing or carrying margin stocks. The Company, or any
Person acting on behalf of the Company, has not taken and will not take any
action which might cause any violation of Regulation U, Regulation X, or
Regulation G or any other regulations of the Board of Governors of the Federal
Reserve System or any violation of Section 8 of the Securities Exchange Act of
1934 or any rule or regulation thereunder as now or hereafter in effect.
(r) All tax returns required to be filed by the Company in
any jurisdiction have been filed and all taxes, assessments and other
governmental charges on the Company or on any of its respective properties,
income or franchises were paid timely, except for taxes contested in good faith
by appropriate legal proceedings for which reserves have been established in an
amount determined in accordance with GAAP. Other than current real estate taxes
and special assessments, there is no proposed tax assessment against the
Company, and there is no basis for any such assessment. No extension of time
for assessment or payment of any tax by the Company is in effect. The tax
returns of the Company have not been audited.
(s) The Company has not incurred any accumulated unfunded
deficiency within the meaning of ERISA, or incurred any liability to the PBGC
(or any successor thereto) established under ERISA in connection with any Plan
established or maintained by the Company or any other member of a Controlled
Group, and no Reportable Event (as defined in ERISA) has occurred or is
occurring.
(t) The Company is not, and no Person having "control" (as
that term is defined in U.S.C. Section 376(b)(5) or in regulations promulgated
pursuant thereto) of such Person is, an "executive officer," "director," or
"principal shareholder" (as those terms are defined in U.S.C. Section 375(b) or
in regulations promulgated pursuant thereto) of the Credit Institution, or of
any bank at which the Credit Institution maintains a "correspondent account" (as
such term is defined in such statute or regulations), or of any bank which
maintains a correspondent account with the Credit Institution.
(u) The Company has complied with, and will continue to comply
with, the provisions of the Fair Labor Standards Act of 1938, 29 U.S.C. Section
200, ET SEQ., as amended from time to time (the "FLSA"), including specifically,
but without limitation, 29 U.S.C. Section 215(a). This representation and
warranty, and each reconfirmation hereof, shall constitute written assurance
from the Company, given as of the date hereof and as of the date of each
reconfirmation, that the Company has complied with the requirements of the FLSA.
(v) To the best knowledge of the Company and except as
disclosed in writing to the Credit Institution, the operations of the Company
have been and are conducted in a manner such that said operations have not
created any level of regulatory concern with Environmental Laws or harm or
potential harm to third parties from material violation of any Environmental
Laws. The Company has obtained all material governmental authorizations under
Environmental Laws necessary to its operations, and all such governmental
authorizations are in good standing, and the Company is in compliance with all
material terms and conditions of such governmental authorizations.
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(w) The Company has not received: (i) any notice or claim to
the effect that it is or may be liable to any person as a result of or in
connection with any Hazardous Materials, or (ii) any letter or request for
information under Section 104 of CERCLA or comparable state laws, and, to the
best of the Company's knowledge, none of the operations of the Company have
been subject to any federal or state investigation relating to or in connection
with any Hazardous Materials at any location.
(x) None of the operations of the Company is or will be
subject to any judicial or administrative proceeding alleging the violation of
or liability under any Environmental Law which, if adversely determined, could
have a Material Adverse Effect on the Company. The Company and its facilities
or operations are not subject to any outstanding written order or agreement
with any Governmental Authority or private party relating to any Environmental
Laws.
(y) The Company has no contingent liability in connection
with any Release of any Hazardous Materials in a reportable quantity by the
Company.
(z) Except as previously disclosed in writing to the Credit
Institution, neither the Company, nor to the best knowledge of the Company, any
predecessor of the Company, has filed any notice under any Environmental Laws
indicating past or present treatment or Release of Hazardous Materials in a
reportable quantity at any property owned, leased, operated, or used by the
Company, and none of the Company's operations involves the generation,
transportation, treatment, storage, or disposal of Hazardous Materials in a
manner which violates any Environmental Laws.
(aa) Except as previously disclosed in writing to the Credit
Institution, to the best of the Company's knowledge, no Hazardous Materials
exist on, under, or about any property owned, leased, operated, or used by the
Company in a manner that has a reasonable possibility of giving rise to any
Environmental Claim that could have a Material Adverse Effect. The Company has
not filed any notice or report of the Release of any Hazardous Materials that
has a reasonable possibility of giving rise to any Environmental Claim that
could have a Material Adverse Effect. Except as disclosed in writing to the
Credit Institution, neither the Company nor, to the best knowledge of the
Company, any of its predecessors entitled to the real property encumbered by
the Mortgage has disposed of any Hazardous Materials in a manner that has a
reasonable possibility of giving rise to an Environmental Claim that could have
a Material Adverse Effect.
(bb) Except as previously disclosed in writing to the Credit
Institution, to the best of the Company's knowledge no underground storage
tanks or subsurface impoundments are on or at any property owned, leased,
operated, or used by the Company. To the best of the Company's knowledge, and
after reasonable inquiry, no Lien in favor of any Person relating to or in
connection with any Environmental Claim has been filed or has been attached to
any property owned, leased, operated, or used by the Company.
(cc) The Company is not an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as amended,
and is not controlled by such a company.
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(dd) The Company is solvent, and, after consummation of this
Agreement, the other Financing Documents and the Note Documents and the
contemplated transactions hereunder and thereunder, the Company will be
solvent.
(ee) All of the representations and warranties by the Company
shall survive delivery of this Agreement, the other Financing Documents and the
Note Documents. Any investigation at any time made by or on behalf of the
Credit Institution will not diminish the Credit Institution's right to rely on
the representations and warranties set forth herein and therein.
(ff) The Construction Contract is in full force and effect.
No event has occurred and is continuing under the provisions of the
Construction Contract that with lapse of time or giving of notice, or both,
would constitute an Event of Default thereunder.
(gg) The Company (a) has initiated a review and assessment of
all areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company or any of its Subsidiaries (or suppliers,
vendors and customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999), (b) will by March 31, 1999 have developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (c) will
implement that plan in accordance with that timetable. Based on the foregoing,
the Company believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before
and after January 1, 2000 (that is, be "Year 2000 compliant").
Section II.2 LETTER OF CREDIT COMMITMENT.
(a) Subject to the terms and conditions set forth in this
Agreement, the Credit Institution agrees to issue its Letter of Credit, in the
form of Exhibit A hereto, in the original Stated Amount.
(b) The Letter of Credit will expire three (3) years from the
date the Notes are issued (unless 120 days prior to such expiration date the
Credit Institution notifies the Company (at the Credit Institution's sole
discretion) that the Letter of Credit will be renewed for an additional
one-year period), unless earlier terminated as provided in the Letter of
Credit. If the Company desires to request that the Credit Institution extend
the expiration date of the Letter of Credit beyond February 22, 2002, or beyond
any Stated Expiration Date to which the Letter of Credit has been previously
extended, the Company must send a written request for such extension to the
Credit Institution on or before ninety (90) days prior to the then Stated
Expiration Date of the Letter of Credit. The Credit Institution agrees that, if
it receives such a written request for an extension of the Letter of Credit
from the Company on or before ninety (90) days prior to the then Stated
Expiration Date of the Letter of Credit, the Credit Institution will, subject
to the next succeeding sentence, consider such request in good faith and notify
the Company in writing, on or before forty-five (45) days prior to the then
Stated Expiration Date of the Letter of Credit, whether the Credit Institution
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will or will not agree to the requested extension. The Company acknowledges and
agrees that the Credit Institution shall have no obligation to extend the
Letter of Credit beyond February 22, 2002, and that the decision whether to
agree to any requested extension of the Stated Expiration Date of the Letter of
Credit shall be made by the Credit Institution in its sole discretion.
Section II.3 CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF CREDIT.
It is a condition precedent to the obligation of the Credit Institution to
issue the Letter of Credit that it shall have received each of the following
documents or other items in form and substance satisfactory to the Credit
Institution, and, in the case of appraisals, environmental reports, insurance
and architectural certifications and the like, prepared by professionals
satisfactory to the Credit Institution; or if any such item shall be waived by
the Credit Institution as a condition to the issuance of the Letter of Credit
such item shall, at the option of the Credit Institution, be a condition to the
Credit Institution's approval of any requisition of moneys from the
Construction Fund to pay any Cost of the Project under Section 4.07 of the
Indenture:
(a) Certified copies of the articles of incorporation, bylaws
and resolutions of, and incumbency certificates for, the Company and its
officers, accompanied by an opinion of Akerman, Senterfitt & Eidson, P.A.,
counsel to the Company, in form and substance reasonably satisfactory to the
Credit Institution, including but not limited to an opinion to the effect that
the Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, the Notes are validly issued
pursuant to the terms of the Indenture, and that the Financing Documents, the
Note Documents and any other documents to which the Company is a party and
relating to the financing of the Project, have been duly authorized, executed
and delivered by the Company and constitute legal, valid and binding
obligations of the Company enforceable in accordance with their terms except as
enforceability may be limited by public policy, bankruptcy, insolvency,
reorganization, moratorium or other laws or equitable principles relating to or
limiting creditors' rights generally and except as rights of indemnification
relating to liability under federal and state securities laws may be limited by
applicable law;
(b) Copies of the fully executed Financing Documents and Note
Documents;
(c) An ALTA lender's title insurance policy (the "TITLE
POLICY") on the Project and Project Site from Attorney's Title Insurance Fund,
Inc. with minimum coverage in an amount not less than the original Stated
Amount of the Letter of Credit. The Title Policy shall insure that the Mortgage
in favor of the Credit Institution is a first lien on the Project and Project
Site subject only to such exceptions as are Permitted Encumbrances and shall
contain such endorsements and affirmative coverage as shall be requested by the
Credit Institution;
(d) Evidence that the Mortgage has been recorded in the
office of land records for real property located in Broward County, Florida;
(e) An opinion of Mays & Valentine, counsel to the
Remarketing Agent, in form and substance satisfactory to the Credit
Institution;
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(f) A current boundary survey of the Project and the Project
Site on which the Project is to be constructed certified to the Credit
Institution using the Credit Institution's certification language and otherwise
acceptable to the Credit Institution, which survey shall be prepared in
accordance with the minimum technical standards of Florida and certified by a
certified Florida land surveyor, shall indicate the absence of any
encroachments and shall designate, without limitation, (i) the boundaries of
the Project Site, (ii) the location of the buildings and the other improvements
constituting the Project to be constructed thereon, (iii) the location of all
items shown as exceptions to title on the Title Policy, including, without
limitation, all easements of record affecting the Project or the Project Site,
specifying the holder of each such easement and the pertinent recordation
information, (iv) any and all building restrictions and/or setback lines, (v)
all easements for ingress and egress across adjoining properties, and (vi) the
location of all utilities, whether above or below ground;
(g) An "as built" and "stabilized" appraisal of the Project
by an appraiser engaged by the Credit Institution in form and substance
satisfactory to the Credit Institution based on an internal review by the
Credit Institution of the data, assumptions and conclusions found in the
appraisal and which satisfies all applicable regulations of bank regulatory
agencies having jurisdiction over the Credit Institution;
(h) An environmental engineer's phase I and II audit report,
as deemed necessary by the Credit Institution, addressing environmental matters
and reflecting the degree to which the Project Site is free of Hazardous
Materials and toxic substances and otherwise complying with the requirements of
the Commitment Letter;
(i) The Corporate Guaranty fully executed and in original
form has been delivered to the Credit Institution;
(j) Opinions of counsel, acceptable to the Credit
Institution, to the effect that each of the Guaranties is the legal, valid and
binding agreement of the respective Guarantor, enforceable in accordance with
its terms and with respect to the Guarantors, such entities have the ability to
borrow money for and guarantee debt of, the Company.
(k) Evidence satisfactory to the Credit Institution that all
utilities (including drainage both onsite and offsite) necessary for the
occupancy, use and operation of the Project are available to and adequate for
the Project, that the Project is or can be connected thereto without further
governmental approvals and that all requisite tap-on and connection fees have
been or will be paid.
(l) A detailed cost-breakdown of the Project showing the
intended use of the proceeds of the Letter of Credit (cost-breakdown should
include all direct and indirect cost items associated with the construction and
financing of the Project, including but not limited to the amounts allocated to
pay the costs of issuing the Notes and the amount allocated to pay capitalized
interest during construction) in form and substance acceptable to the Credit
Institution (the "COST CERTIFICATE").
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(m) Evidence satisfactory to the Credit Institution that the
Project complies and will comply with all applicable zoning and subdivision
ordinances, building codes and other governmental laws and regulations.
(n) A soil engineer's report relating to the Project
acceptable to the Credit Institution.
(o) Subject to Section 3.02(b) hereof, payment to the Credit
Institution in cash of all fees due the Credit Institution including all
reasonable attorneys' fees and expenses which are due on the Date of Issuance
under Section 3.02 hereunder; and
(p) Such other documents as may have been reasonably
requested by the Credit Institution.
Section 2.04 PROVISIONS REGARDING APPROVAL OF REQUISITIONS
AND DISBURSEMENTS FROM CONSTRUCTION FUND.
(a) The Company acknowledges and agrees that it shall have no
right to receive any disbursement from the Construction Fund unless it has
submitted a requisition to the Credit Institution in substantially the form
attached to the Indenture as Exhibit C relating to that disbursement and such
requisition has been approved by the Credit Institution as evidenced by its
execution thereof (the "REQUISITION"). The Company further agrees that it will
not submit any Requisition to the Trustee unless such Requisition has first
been submitted to the Credit Institution and approved by the Credit
Institution. Upon approval of the Requisition by the Credit Institution (which
approval shall be subject to fulfillment of the conditions listed herein), the
Credit Institution shall submit the Requisition directly to the Trustee on
behalf of the Company.
(b) Each Requisition shall be submitted by the Company to the
Credit Institution at least ten (10) Business Days prior to the date on which
its approval is desired. The Credit Institution shall not be required to
approve a Requisition more often than once each calendar month.
(c) Prior to approval by the Credit Institution of the first
requisition submitted by the Company, the following conditions precedent must
be satisfied unless waived by the Credit Institution in its sole and absolute
discretion:
(i) Evidence satisfactory to the Credit Institution that
the Mortgage has been recorded in Broward County, Florida, and that a title
commitment has been issued in a form satisfactory to the Credit Institution;
(ii) Evidence satisfactory to the Credit Institution
that all insurance required by the terms of the Commitment Letter and/or
Mortgage to be in place at the time of the first Requisition is in effect. The
Credit Institution reserves the right to require certifications regarding other
insurance required by the terms of the Commitment Letter and/or Mortgage as a
condition of approval of subsequent Requisitions.
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(iii) The Credit Institution shall have received a copy
of the site plan of the Project which site plan shall have been approved by all
governmental agencies having jurisdiction over the Project, along with a
complete and final set of working plans and specifications which have been
approved by the Credit Institution, initialed for identification by the
Company, the Project Manager, and the architect for the Project and assigned to
the Credit Institution in form and substance satisfactory to the Credit
Institution. Any and all subsequent changes to the plans and specifications
must be approved by the Credit Institution (which approval shall not be
unreasonably withheld) and any governmental agencies having jurisdiction over
the Project whose approval may be required by applicable federal, state or
local laws, rules or regulations. Unless waived by the Credit Institution, all
such plans and specifications shall have been approved, prior to approval of
the first Requisition, by all necessary governmental agencies.
(iv) The Credit Institution shall have received copies
of the Company's contract with the Project Manager and the Company's contract
with the architect for the Project. The Project Manager, the architect for the
Project and the terms and conditions of their respective contracts must be
acceptable to the Credit Institution. The Construction Contract (and any
specified subcontracts) and the architect's contract shall be assigned to the
Credit Institution pursuant to the terms of the Assignment Agreement, as
additional security for the Company's obligations under this Agreement with the
concurrence of the Project Manager (and subcontractors) and the architect to
continue to perform under the contracts for the Credit Institution or its
assigns if the Company should default under the Financing Documents, the
Construction Contract (or subcontract) or the architect's contract, provided
that the Project Manager (and subcontractors) and the architect continue to be
paid in accordance with their respective contracts.
(v) The architect for the Project shall certify that the
hard costs set forth in the Cost Certificate and all updates thereof are fair
and reasonable and that the Cost Certificate and all updates thereof include
all items necessary to complete the Project fully in accordance with the final
approved plans and specifications. The Company shall also provide the Credit
Institution with copies of all executed contracts and material subcontracts and
a final construction budget and draw a schedule prepared by the Project Manager
and accepted by the Company. For the purpose of the preceding sentence, the
term "material subcontracts" shall mean any subcontract wherein the Company is
obligated to pay more than $100,000.00 thereunder.
(d) The Credit Institution shall have no obligation to
approve any Requisition unless, in connection with the Requisition, it has
received (i) if requested by the Credit Institution, copies of all contracts,
invoices, billings, paid receipts and other documents which relate to that
portion of the construction of the Project for which the Requisition was
submitted and support the amount of the Requisition, (ii) appropriate
construction lien waivers from the general contractor and each subcontractor
performing work or providing materials to be paid from the proceeds of the
Requisition, (iii) contractor's requisition forms which have been appropriately
signed by both the Project Manager and the architect and notarized, (iv) title
updates in form and substance satisfactory to the Credit Institution, and (v)
such other documents and agreements as may be requested by the Credit
Institution.
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(e) If in the reasonable determination of the Credit
Institution the unpaid balance of the cost to complete the Project at any time
exceeds the balance remaining in the Construction Fund, the Company shall, if
requested by the Credit Institution as a condition to approval of further
Requisitions, pay to the Trustee for deposit into the Construction Fund cash in
an amount that together with the amount of other undisbursed funds in the
Construction Fund equals the amount necessary to complete the Project. If the
actual costs within one of the cost categories set forth in the Cost
Certificate should be less than the allocated amount, at the Credit
Institution=s sole option, the additional funds may be allocated to other
categories as deemed appropriate by the Credit Institution. If the actual or
anticipated costs within any of such cost categories shall exceed the allocated
amount, further Requisitions for such costs need not be approved by the Credit
Institution until any costs or anticipated costs in excess of such projected
amounts shall be paid in cash by the Company to the Trustee for deposit into
the Construction Fund.
(f) The Credit Institution may withhold approval of any
Requisition or any part of any Requisition requesting a disbursement from the
Construction Fund, or terminate or limit payments by the Trustee from the
Construction Fund, on account of (i) the occurrence of Default or an Event of
Default hereunder, (ii) defective work with respect to the construction of the
Project not remedied to the satisfaction of the Credit Institution after notice
and opportunity to cure has been given, or work not performed in a good and
workmanlike fashion in all material respects in accordance with the approved
plans and specifications, (iii) claims or Liens filed by contractors, builders
or materialmen in connection with the construction of the Project that are not
bonded to the satisfaction of the Credit Institution within the time period
prescribed by the Credit Institution, or evidence indicating, in the opinion of
the Credit Institution, the probable filing of claims or Liens, (iv) failure or
inability of the Project Manager to make payments to subcontractors or for
materials or labor, (v) in the reasonable opinion of the Credit Institution,
the Project cannot be fully completed and all bills paid from funds not yet
disbursed from the Construction Fund or otherwise available to the Company,
(vi) failure of the Company to repair any damage to the Project, or any part
thereof, to the reasonable satisfaction of the Credit Institution within the
time period prescribed by the Credit Institution, (vii) condemnation of, or the
pendency of condemnation proceedings against the Project or any part thereof,
or (viii) the filing of a petition in bankruptcy by or against the Company, or
any Guarantor. To the extent that the above grounds are removed and no Default
or Event of Default otherwise exists hereunder, the Credit Institution shall
approve Requisitions for funds withheld solely because of such grounds.
(g) No Requisition shall be approved unless all work done in
the construction and equipping of the Project to the date of such Requisition
has been done in a good and workmanlike manner, as determined by the Credit
Institution.
(h) Except as provided in the next succeeding sentence, no
Requisition shall be approved for materials stored on the Project site unless
approved by the Credit Institution in its sole discretion on a case by case
basis. If materials are suitably stored on the Project site, insured and the
cost thereof does not exceed 10% of the Cost Certificate, the Credit
Institution agrees not to withhold approval of the Requisition submitted for
payment of such materials if all other conditions precedent for approval of
such Requisition are satisfied.
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(i) No Requisition shall be approved if any of the
conditions set forth in Section 2.03 hereof are no longer satisfied, as
determined in the sole discretion of the Credit Institution.
Section 2.05 FOUNDATION SURVEY. Within thirty (30) days after a
request from the Credit Institution, the Company shall provide to the Credit
Institution a foundation survey of the Project meeting the minimum technical
standards of Florida prepared and certified by a licensed certified Florida
land surveyor with an updated certification, showing all improvements then
constructed thereon and all horizontal lengths of all sides and relation
thereof by distances to (a) all boundary lines of the Project Site and service
easements, (b) all established building lines, and (c) all street lines,
certified to the Credit Institution using the Credit Institution=s
certification language and otherwise acceptable to the Credit Institution.
Section 2.06 COST-BREAKDOWN UPDATES. As requested by the Credit
Institution from time to time as construction of the Project progresses, the
Company shall provide to the Credit Institution periodic updates of the Cost
Certificate for the Project.
Section 2.07 CONSENT TO FINAL DISBURSEMENT FROM THE CONSTRUCTION FUND.
The Credit Institution shall have no obligation to approve the Requisition
requesting the final disbursement from the Construction Fund unless the Credit
Institution shall have received each of the following documents in form and
substance satisfactory to the Credit Institution:
(a) An as-built survey of the Project meeting the minimum
technical standards of Florida certified to the Credit Institution using the
Credit Institution=s certification language and otherwise acceptable to the
Credit Institution.
(b) A copy of the certificate of occupancy for the Project
issued by the appropriate Governmental Authority and a certificate of
completion signed by the Company, the Project Manager, and the architect
stating that the Project has been properly completed in accordance with the
final approved plans and specifications and that the Project is operable and is
otherwise in form and substance satisfactory to the Credit Institution.
(c) Final construction lien waivers from the Project Manager
and each subcontractor in form and substance satisfactory to the Credit
Institution.
(d) A final title update in form and substance satisfactory
to the Credit Institution.
(e) Such other documents, agreements and other items as are
reasonably requested by the Credit Institution.
Section 2.08 CAPITALIZED INTEREST. Notwithstanding the conditions for
approval of a Requisition set forth in Section 2.04 hereof, the Company is
authorized to allow the Trustee, without the necessity of a Requisition, to
release moneys on deposit in the Construction Fund for reimbursement to the
Credit Institution for payment under the Letter of Credit for an A Drawing,
provided the amount released to reimburse the Credit Institution does not
exceed the amounts set forth in the cost breakdown for capitalized interest
provided to Credit Institution pursuant to Section
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2.03(l) hereof, unless a greater amount is first approved by the Credit
Institution. Notwithstanding the foregoing, such amounts will not be released
without the written approval of the Credit Institution in the event the amounts
remaining in the Construction Fund are insufficient to complete the Project.
ARTICLE III
REIMBURSEMENT OBLIGATION;
OTHER PAYMENTS; LETTER OF CREDIT FEES
Section 3.01 REIMBURSEMENT AND OTHER PAYMENTS.
(a) The Company hereby agrees to establish an
interest-bearing escrow account with the Credit Institution known as the
Kellstrom Industries, Inc. Reimbursement Account (the "REIMBURSEMENT ACCOUNT")
and to pay to the Credit Institution (and the Credit Institution is hereby
authorized to deduct from any and all operating accounts maintained by the
Company with the Credit Institution) the following amounts in the manner and at
the times set forth below:
(i) Any amounts in the appropriate subaccount of the
Reimbursement Account on the date any payment is due under any subparagraph
hereof shall be credited against the amount due. Any balance remaining in the
Reimbursement Account after the Termination Date and the payment of all
Obligations of the Company due the Credit Institution hereunder and under all
of the other Financing Documents and the Note Documents shall be paid to the
Company.
(ii) On or before the first Business Day of each month,
beginning in the first month prior to the earlier of the date amounts in the
Construction Fund are no longer available, or amounts in the Construction Fund
are no longer authorized to be used to reimburse the Credit Institution for an
"A Drawing" pursuant to the provisions of the last sentence of Section 2.08,
the Company shall deposit an amount equal to the Interest Requirement in the
interest subaccount of the Reimbursement Account and the Company shall, on the
first Business Day of each month thereafter, pay the Credit Institution for
deposit in the interest subaccount of the Reimbursement Account an amount equal
to the "A Drawing" made in the previous month, in order to reimburse the Credit
Institution for the amounts it advanced under an "A Drawing", which amounts
when paid by the Company shall be deposited in the interest subaccount of the
Reimbursement Account. The amounts received by the Credit Institution pursuant
to this subparagraph shall be deposited in the interest subaccount of the
Reimbursement Account and shall be debited by the Credit Institution as
necessary to reimburse the Credit Institution for an "A Drawing".
(iii) Each January 15 (or the next succeeding Business
Day) during the term of this Agreement, the Company shall pay the Credit
Institution for deposit in the principal subaccount of the Reimbursement
Account the amounts the Credit Institution will be required to advance under
each "A Drawing" on the next succeeding interest payment date for the Notes in
accordance with the provisions for optional redemptions set forth in Schedule
3.01(a) attached hereto, which amounts shall not be less than the amount shown
on Schedule 3.01(a) for such interest payment date. The principal amounts
received by the Credit Institution pursuant to this subparagraph shall be
deposited in the principal subaccount of the Reimbursement Account and shall
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be debited by the Credit Institution as necessary to reimburse the Credit
Institution for an "A Drawing" in connection with an optional redemption of the
Notes. In the event the Trustee credits the amount to be drawn under the Letter
of Credit for any principal payment made otherwise than from a draw on the
Letter of Credit, a corresponding credit shall be granted to the Company for
the amounts due hereunder. The Company hereby covenants to give the Trustee
written instructions by January 1 (or the next succeeding Business Day) to give
notice of optional redemption of the Notes in the manner provided in the
Indenture for the optional redemption of the Notes, in part, on each February 1
(or the next succeeding Business Day) as shown on Schedule 3.01(a) during the
term of this Agreement. Subject to credits available to the Company described
in the next preceding sentence, unless waived by the Credit Institution in a
writing delivered to the Trustee prior to the date notice of optional
redemption is given, the minimum amount of each optional redemption described
above shall be the amount shown on Schedule 3.01(a).
(b) In the event of a "B Drawing" under the Letter of Credit
to purchase Notes for the account of the Company pursuant to optional or
mandatory tenders under the provisions of the Indenture, the Company shall
continue to make the payments required by subparagraph (a)(iii) above, and such
payments shall be applied first to optionally redeem Notes purchased with the
proceeds of such "B Drawing" and held for the account of the Company or the
Credit Institution as of any optional redemption date provided for in the
Indenture. The Company shall cause all amounts received from the remarketing of
such Notes prior to any optional redemption date provided for in the Indenture
to be paid to the Credit Institution to reimburse it for the amount of such "B
Drawing." On the Termination Date, the Company shall pay the Credit Institution
the aggregate amount of any and all "B Drawings" that have not been previously
reimbursed, subject to the applicable interest charges described herein for
such late reimbursement and subject to a credit for any amounts available
therefor in the principal subaccount of the Reimbursement Account.
(c) In the event of a "C Drawing" under the Letter of Credit
to make payments due on the Notes as a result of any other redemption or
acceleration of the Notes as provided in the Indenture, the Company shall by no
later than 12:00 noon (Dallas, Texas time) on the day of such "C Drawing" pay
to the Credit Institution an amount sufficient to reimburse the Credit
Institution for such "C Drawing" to the extent funds are not available in the
principal subaccount of the Reimbursement Account to cover such "C Drawing"
reimbursement.
(d) In the event of a "B Drawing" under the Letter of Credit
pursuant to subparagraph (b) above, the Company shall pay the Credit
Institution interest on the entire amount of such "B Drawing" at the Prime Rate
from the date of the draw until such amount is reimbursed in full, which
interest shall be payable in arrears on the first Business Day of each month,
on the Termination Date or on an earlier date of reimbursement pursuant to
Section 3.06 hereof; provided, however, that if an Event of Default occurs
hereunder prior to the date the entire amount of such "B Drawing" has been
reimbursed in full, then from and after the date of such Event of Default such
unreimbursed amount shall bear interest at the lesser of the maximum rate
permitted by law or eighteen percent (18%) per annum until it has been repaid
in full.
(e) In the event, if as a result of an "A Drawing," the
Credit Institution pays any amount under the Letter of Credit in excess of the
amount in the Reimbursement Account applied
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to reimburse the Credit Institution therefor, the Company shall upon demand
immediately reimburse the Credit Institution for such amount. Any amounts not
so paid shall bear interest at the lesser of the maximum rate permitted by law
or eighteen percent (18%) per annum, which interest shall be payable on demand
and failure to so reimburse shall be an Event of Default hereunder.
(f) In the event the payments required by subparagraph (c),
or (e) above and (h) or (i) below are not made on the due date thereof, it
shall be an Event of Default hereunder and the Company shall pay the Credit
Institution interest on such outstanding amounts from the due date thereof
until such amounts are paid in full at the lesser of the maximum rate permitted
by law or eighteen percent (18%) per annum and failure to so reimburse shall be
an Event of Default hereunder.
(g) In the event the Credit Institution holds Notes pursuant
to the provisions of Section 3.06 hereof as pledgee or for its own account
pursuant to a "B Drawing" and it receives payment in full for such Notes and
for all amounts due to it under this Agreement, the Credit Institution shall
release such Notes to the Fiscal Agent as provided in the Indenture.
(h) The Company shall pay the Credit Institution upon each
transfer of the Letter of Credit in accordance with its terms to any new
Trustee appointed under the Indenture, such amount (and interest on such amount
at the Prime Rate) as shall at the time of any transfer then be the charge
which the Credit Institution is customarily making for transfer of similar
letters of credit.
(i) The Company shall pay the Credit Institution on demand
any and all reasonable charges and expenses, including reasonable legal fees
(and interest on such amounts at the Prime Rate), which the Credit Institution
may pay or incur relative to the Letter of Credit or in reviewing,
interpreting, administering or enforcing any of its rights or responsibilities
under this Agreement or the other Financing Documents.
Section 3.02 FEES.
(a) On the Date of Issuance, the Company shall pay to the
Credit Institution a one-time internal construction administration fee of
$5,000.00. In addition to any other fees payable to the Credit Institution, the
Company shall pay to the Credit Institution a fee with respect to the Letter of
Credit equal to one percent (1%) per annum of the Initial Stated Amount of the
Letter of Credit for the first year and of the Stated Amount of the Letter of
Credit then in effect for each year thereafter as it is reduced from time to
time by virtue of an "A Drawing" to redeem the principal of the Notes but not
"B Drawings" to purchase Notes subject to optional or mandatory tender and as
so determined on the date each fee payment is due. The full amount of such fee
shall be paid by the Company in advance for each year (except for the payment
due on the Date of Issuance) or portion of a year that the Letter of Credit is
outstanding (beginning on the Date of Issuance and each Anniversary Date
thereof) from the Date of Issuance until the Termination Date. The fee (herein,
the "LETTER OF CREDIT FEE") shall be prepaid in full no later than fifteen (15)
days prior to the first and each successive Anniversary Date, and in all cases
shall be deemed earned upon receipt by the Credit Institution. Except as
provided in the next succeeding sentence, there shall be no refund of any
portion of such prepaid fee by reason of expiration, reduction,
recertification, termination,
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redemption or prepayment of any of the Stated Amount, the Letter of Credit or
the Notes subsequent to the date of receipt of such fee by the Credit
Institution. Notwithstanding the next preceding sentence, if the Obligations
under this Agreement shall ever be recast as a new loan with Credit
Institution, the Company shall receive a pro rata credit for any fees that have
been paid in advance as described above.
Section 3.03 SUPPLEMENTAL PAYMENTS.
(a) If after the Date of Issuance (i) the Credit Institution
determines or acquiesces in the determination by a court or administrative or
Governmental Authority that its obligations under this Agreement or the Letter
of Credit are a deposit insured by the Federal Deposit Insurance Company
(AFDIC@) or (ii) the Credit Institution determines that any law or regulation,
or any change in any law or regulation or in the interpretation thereof by any
court or administrative or Governmental Authority charged with the
administration thereof shall either (A) impose, modify or deem applicable any
insurance (including, without limitation, FDIC insurance), reserve, capital
adequacy, special deposit or similar requirement for or against letters of
credit issued or assets held by, or deposits in or for the account of, the
Credit Institution or (B) impose on the Credit Institution any other condition
regarding this Agreement or the Letter of Credit, including any relating to
capital adequacy, and the result of any event referred to in clause (a)(i) or
(ii) above shall be to increase the cost to the Credit Institution of issuing
or maintaining the Letter of Credit (which increase in cost shall be the result
of the Credit Institution's reasonable allocation of the aggregate of such cost
increases resulting from such events and shall be calculated without giving
effect to any participation granted in the Letter of Credit) then, upon demand
by the Credit Institution, the Company shall immediately pay to the Credit
Institution all additional amounts which are necessary to compensate the Credit
Institution for such increased cost incurred by the Credit Institution. A
certificate as to such increased cost incurred by the Credit Institution as a
result of any event referred to in clause (a)(i) or (ii) above submitted by the
Credit Institution to the Company shall be conclusive, absent manifest error,
as to the amount thereof.
(b) The Company shall also pay interest on such increased
costs at the highest rate of interest permitted from time to time by applicable
law from the date of such change until such amount is paid in full.
Section 3.04 COMPUTATION OF INTEREST: FORM AND PLACE OF PAYMENT. The
interest payable hereunder shall be computed on the basis of the actual number
of days elapsed over a year of 365 days or 366 days, as applicable. If the
Prime Rate changes, the interest rate on all amounts due hereunder shall be
adjusted on the day of each change in the Prime Rate. All payments by the
Company to the Credit Institution hereunder shall be made in lawful currency of
the United States and in immediately available funds on the date such payment
is due at the Credit Institution's office at Letter of Credit Department, 901
Main Street, 9th Floor, Dallas, Texas 75202, Attention: Ginger Downs or Deborah
Gassiot.
Section 3.05 SECURITY FOR REIMBURSEMENT OBLIGATIONS.
(a) As security for the payment of all of its Obligations
under this Agreement, whether now existing or hereafter arising, the Company
shall grant to the Credit Institution a first
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lien on, and first priority assignment of and security interest in, the
Project, all leases of and rents derived from the Project pursuant to the
Mortgage and other Financing Documents and hereby grants to the Credit
Institution a first priority assignment of and security interest in the other
Collateral described in the Financing Documents in the manner provided therein.
(b) The Company hereby pledges, assigns, hypothecates,
transfers, and delivers to the Credit Institution all its right, title and
interest in and to the Reimbursement Account and hereby grants to the Credit
Institution a lien on, and security interest in, the Company's right, title and
interest in and to the Reimbursement Account and in all proceeds thereof and
substitutions therefore as additional collateral security for the prompt and
complete payment when due of all amounts due from the Company to the Credit
Institution and performance by the Company of its Obligations under this
Agreement and the other Financing Documents and Note Documents.
Section 3.06 ACQUISITION OF NOTES.
(a) In the event the Remarketing Agent is able to remarket
any Notes as of the date of any "B Drawing" and the proceeds of such
remarketing are paid to the Credit Institution on the date of such drawing, the
Credit Institution shall relinquish any interest it may have had in the Notes
purchased with the proceeds of such drawing but only to the extent of such
payment, and the Trustee and the Fiscal Agent shall deliver Notes, in a
principal amount equal to the amount so paid, to the purchasers of such Notes
free of any claim of the Credit Institution.
(b) Subject to the provisions of this Agreement, in the event
that as of the date of any "B Drawing", the Remarketing Agent has been unable
to remarket any or all Notes that were subject to either optional or mandatory
tender, a principal amount of Notes equal to the amount owed the Credit
Institution for such "B Drawing" shall immediately as of such date become, and
be deemed to be, held by the Credit Institution as pledgee of the Company (or,
at the option of the Credit Institution upon prior written notice to the
Company, the Trustee and the Fiscal Agent, for its own account), and the
Company hereby pledges to the Credit Institution, and grants the Credit
Institution a security interest in, all Notes so purchased for the account of
the Company with the proceeds of a "B Drawing". The Company hereby irrevocably
agrees that any Notes purchased with proceeds of a "B Drawing" shall not be
extinguished or discharged until all Obligations of the Company relating to
such "B Drawing" are paid and satisfied and the Notes are otherwise canceled
under the terms of the Indenture.
(c) Upon notice to the Credit Institution that any of the
Notes held by the Credit Institution as pledgee or for its own account are to
be remarketed and upon payment to the Credit Institution of the proceeds
thereof and all accrued interest which is due the Credit Institution on the "B
Drawing" used to purchase such Notes, the Credit Institution shall release to
the Trustee and the Fiscal Agent, for delivery to the purchasers thereof, a
principal amount of Notes equal to the principal amount of such payment from
the proceeds of the remarketing thereof, free of any pledge or ownership
interest of the Credit Institution.
(d) The obligations of the Credit Institution hereunder shall
remain in effect until the Termination Date.
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(e) All amounts paid to the Credit Institution by the Company
on Notes held by the Credit Institution as pledgee or for its own account shall
be credited against amounts due from the Company under Section 3.01 (b) and (d)
hereof.
ARTICLE IV
COVENANTS OF THE COMPANY; OTHER AGREEMENTS
Section 4.01 SPECIAL COVENANTS OF COMPANY. All covenants of the
Company in the other Financing Documents and the Note Documents to which it is
a party, to the extent not inconsistent herewith, are incorporated herein by
reference and shall be deemed thereby to have been made and reaffirmed by the
Company for the benefit of the Credit Institution as if they were fully set
forth herein. The Company shall give the Credit Institution written notice
prior to any amendment of the Financing Documents that affects any covenants of
the Company; all such amendments shall be incorporated herein as if set forth
herein. The Company hereby further covenants and agrees that until the
Termination Date and payment to the Credit Institution of all amounts due and
performance of all other Obligations of the Company under the Financing
Documents and the Note Documents to which it is a party, it shall comply with
the following additional affirmative and negative covenants, unless the Credit
Institution shall otherwise consent in writing:
(a) ACCESS TO PROJECT AND RECORDS. The Company shall at any
reasonable time and from time to time, upon reasonable prior notice from the
Credit Institution, permit the Credit Institution or any agents or
representatives thereof (i) to examine and make copies of and abstracts from
all relevant records and books of account of the Company, (ii) to discuss all
relevant affairs, finances and accounts of the Company with any of its officers
so designated by the Company to provide such information, and (iii) to inspect
the Project. ANY APPROVAL BY THE CREDIT INSTITUTION OF ANY PLANS AND
SPECIFICATIONS RELATING TO THE PROJECT AND ANY INSPECTIONS OF THE PROJECT BY
THE CREDIT INSTITUTION SHALL IN NO WAY CONSTITUTE A WARRANTY TO ANY PARTY AS TO
THE TECHNICAL SUFFICIENCY OR ADEQUACY OF THE CONSTRUCTION OF THE PROJECT, OR
THE STRUCTURAL, SOIL OR, ENVIRONMENTAL CONDITIONS OF THE FACILITIES.
(b) PREPAYMENT OF OBLIGATIONS. In addition to the Company's
optional redemption of the Notes pursuant to Section 3.01(a)(iii) hereof, the
Company may cause, at any time, any optional prepayment of the Obligations as
may be permitted under the Financing Documents and direct any corresponding
optional redemption of Notes as may be permitted under the Indenture by
providing the Credit Institution with notice of the desired prepayment and by
making satisfactory arrangements with the Credit Institution for reimbursing
the Credit Institution in full for the "A Drawing" on the Letter of Credit
necessary to effect such redemption of the Notes by no later than the date on
which the Trustee first sends notice thereof to the owners of the Notes.
Thereupon the Credit Institution shall notify the Trustee to begin redemption
proceedings and to draw on the Letter of Credit as required by the Indenture.
Notwithstanding the foregoing, the Company may not prepay the Obligations (and
direct a corresponding optional redemption of the Notes) in part from proceeds
of an insurance recovery or condemnation award with respect to the Project
unless the Company has first obtained the prior written consent of the Credit
Institution.
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(c) NOTICE OF DEFAULTS. The Company shall promptly notify the
Credit Institution of any default by the Company under any of the Financing
Documents or any filing by or against the Company of a petition in bankruptcy
or any similar insolvency proceeding.
(d) NOTICE OF LITIGATION. The Company shall promptly inform
the Credit Institution of any litigation, the adverse determination of which
might have a Material Adverse Effect with respect to the payment of the Notes,
the performance of the Company's Obligations under the Financing Documents, or
the operation of the Project.
(e) COMPLIANCE WITH LAWS: PAYMENT OF OBLIGATIONS. The Company
shall comply with all valid and applicable statutes, rules and regulations, and
shall pay all taxes, assessments, governmental charges, claims for labor,
supplies and rent, and other obligations which, if unpaid, might become a Lien
against the Project (except liabilities being contested in good faith and
against which, if requested by the Credit Institution, the Company shall set up
reserves satisfactory to the Credit Institution).
(f) SALE OR LEASE OF THE PROJECT. The Company shall not sell,
lease or otherwise assign any interest in the Project or any portion thereof to
any Person.
(g) OPERATING LICENSES. The Company shall comply, and shall
cause each of the Affiliates to comply, with all applicable rules and
regulations of regulatory authorities having jurisdiction over the Project and
shall maintain all licenses necessary to operate the Project.
(h) YEAR 2000 COMPLIANCE. The Company shall promptly notify
the Credit Institution in the event the Company discovers or determines that
any computer application (including those of its suppliers, vendors and
customers) that is material to its or any of its Subsidiaries' business and
operations will not be Year 2000 compliant (as defined in Section 2.01 (gg)).
(i) AMENDMENT OF FINANCING DOCUMENTS. The Company shall not
amend or consent to the amendment of any of the Financing Documents without the
prior written consent of the Credit Institution.
(j) SUBSTITUTE LETTER OF CREDIT. Except during any period a
default or event of default under any Financing Documents has occurred and is
continuing the Company shall be authorized to provide a Substitute Letter of
Credit for the Notes.
(k) CERTIFICATE AS TO NO DEFAULT. The Company shall furnish
to the Credit Institution within 120 days after the close of each of its fiscal
years a certificate signed by the President and the Chief Financial Officer of
the Company stating that during such fiscal year and as of the date of such
certificate no event or condition has happened or existed or is happening or
existing, which constitutes a default or event of default under any Financing
Documents or with notice or lapse of time or both would be an Event of Default,
or if such an event or condition has occurred or is occurring, specifying the
nature and period of such event or condition and what action the Company has
taken, is taking and proposes to take with respect thereto.
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(l) PRINCIPAL AMOUNT OF THE NOTES. The Company agrees that
the principal amount of the Notes will not exceed 75% of the lesser of the
appraised value or the cost of the property covered by the Project. The Company
shall demonstrate compliance with this covenant on a quarterly basis. The "cost
of the property" shall mean the purchase price of the Project Site plus the
amount of the construction cost through and after completion of construction.
Section 4.02 CONTINUOUS OBLIGATIONS: OBLIGATIONS ABSOLUTE. This
Agreement is a continuing obligation and shall (a) be binding upon the Company,
its successors and assigns, and (b) inure to the benefit of and be enforceable
by the Credit Institution and its successors, transferees and assigns; provided
that the Company may not assign all or any part of this Agreement without the
prior written consent of the Credit Institution. The obligations of the Company
under this Agreement shall be paid or performed strictly in accordance with the
terms of this Agreement under all circumstances whatsoever, and shall be
absolute, irrevocable, and unconditional.
Section 4.03 TRANSFER OF LETTER OF CREDIT. The Letter of Credit may be
transferred in accordance with the provisions set forth therein and upon any
transfer the Company shall pay the Credit Institution its then applicable
transfer fee.
Section 4.04 REDUCTION AND REINSTATEMENT OF STATED AMOUNT OF LETTER OF
CREDIT. The reduction and reinstatement of the Stated Amount by virtue of
drawings under the Letter of Credit shall be as provided therein.
Section 4.05 SURVIVAL OF COMMITMENT. The terms and conditions of the
Commitment Letter shall survive the issuance of the Letter of Credit to the
extent they are not inconsistent with the terms of this Agreement or the other
Financing Documents (which shall control to the extent of any inconsistency),
and failure to comply therewith shall constitute a Default hereunder.
Section 4.06 TERMINATION OF LOAN AGREEMENT. If the Loan Agreement is
not renewed or extended, or is terminated before maturity during the term of
the Letter of Credit, the Company shall within forty-five (45) days of such
termination redeem all outstanding Notes and reimburse the Credit Institution
in full for all amounts owing by the Company to the Credit Institution. Failure
to fulfill this covenant shall constitute an Event of Default under this
Agreement.
ARTICLE V
DEFAULTS AND REMEDIES
Section V.1 EVENTS OF DEFAULT. Unless waived by the Credit Institution
pursuant to Section 5.02 hereof, the following shall constitute an Event of
Default under this Agreement:
(a Any representation or warranty made in this Agreement, in
any certificate, report or opinion (including legal opinions), financial
statement or other instrument furnished in connection with this Agreement or
any of the other Financing Documents or in any of the Note Documents to which
the Company is a party proves to have been untrue or incomplete in any material
respect when made;
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(b) The Company fails to pay on the date on which the same is
due and payable as herein provided any payment required by this Agreement to be
paid by the Company and such default shall continue unremedied for five (5)
Business Days provided the Credit Institution has provided written notice to
the Company of such nonpayment; provided however, that the Credit Institution's
failure to give notice of nonpayment shall not toll the five (5) day grace
period if in fact (as determined by admission of an officer of the Company or
by a court of competent jurisdiction), an officer of the Company had
independent actual notice of such nonpayment, and provided further that no
additional grace period shall apply in the event of a violation of Section 4.06
hereof;
(c) If, for any reason (other than release by the Credit
Institution), the Mortgage or any other Financing Document ceases to be in full
force and effect and the same is not cured within fifteen (15) days after
written notice thereof from the Credit Institution to the Company;
(d) The Company defaults in the due and punctual observance or
performance of any other term, covenant or agreement herein contained (other
than as specified in subsection (b) of this Section), which default remains
unremedied for thirty (30) days (or such other cure period as may be specified
herein) after written notice from the Credit Institution to the Company of such
breach or such longer period as may be permitted by the Credit Institution in
its reasonable discretion if such breach cannot be cured within such thirty
(30) day period, and the Company has commenced to cure such breach within such
thirty (30) day period and continues to cure such breach with due diligence;
(e) The Company is dissolved;
(f) Any judgment against the Company or any attachment or
levy against the property of the Company which involves potential liability of
the Company or any affiliate in an amount in excess of $300,000.00 individually
or $1,000,000.00 in the aggregate not adequately insured or indemnified
against, remains unpaid, unstayed on appeal, undischarged or undismissed for a
period of thirty (30) days or such longer period that may be permitted by the
Credit Institution in its reasonable discretion if such breach or such longer
period that may be permitted by the Credit Institution in its discretion if
such breach cannot be cured within such thirty (30) day period, and the Company
has commenced to cure such breach within such thirty (30) day period and
continues to cure such breach with due diligence;
(g) An "event of default" or "Event of Default" occurs under
any of the other Financing Documents or the Note Documents;
(h) The Company shall fail to make any payment due from it on
any indebtedness or other security for borrowed money in excess of
$1,000,000.00 in aggregate principal amount then outstanding beyond any
applicable cure period (whether its liability therefor is direct or
contingent), or if any event (other than the mere passage of time) or any
condition in respect of any indebtedness or other security for borrowed money
of the Company in excess of $1,000,000.00 in aggregate principal amount then
outstanding (whether its liability therefor is direct or contingent) or under
any agreement securing or relating to such indebtedness or other security for
borrowed money shall occur the effect of which, after the giving of any
required notice and the expiration of any applicable cure
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period, is to cause (or permit any holder of such indebtedness or other
security or a trustee to cause) such indebtedness or other security, or a
portion thereof, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, or if any such indebtedness or other
security for borrowed money otherwise is accelerated and becomes due prior to
its stated maturity or prior to its regularly scheduled dates of payment;
(i) The determination by the Credit Institution in good faith
that a Material Adverse Effect has occurred in the financial condition of the
Company or any Guarantor, and such adverse change in financial condition is not
remedied to the satisfaction of the Credit Institution within fifteen (15) days
after written notice from the Credit Institution to the Company and/or any
Guarantor that the Credit Institution has made such a determination;
(j) (i) Failure of the Company or any Guarantor to pay
generally its debts as they become due, (ii) commencement by the Company or any
Guarantor of a voluntary case under the Bankruptcy Code, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, (iii) consent by the Company or any Guarantor to the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official for the Company or any Guarantor or any
substantial part of its property, or to the taking possession by any such
official of any substantial part of the property of the Company or any
Guarantor, (iv) making by the Company or any Guarantor of any assignment for
the benefit of creditors, or (v) taking of action by the Company or any
Guarantor in furtherance of any of the foregoing;
(k) The (i) entry of any decree or order for relief by a court
having jurisdiction over the Company or any Guarantor or the property of any of
them in an involuntary case under the Bankruptcy Code, as now or hereafter
constituted, or any other applicable federal or state bankruptcy insolvency or
other similar law, (ii) appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official for the Company or any
Guarantor or any substantial part of the property of any of them, or (iii)
entry of any order for the termination or liquidation of the Company or any
Guarantor;
(l) Failure of the Company or any Guarantor within sixty (60)
days after the commencement of any proceedings against it under the Bankruptcy
Code or any other applicable federal or state bankruptcy, insolvency or other
similar law, to have such proceedings dismissed or stayed;
(m) Notwithstanding the provisions of Section 6.09 hereof, any
material provision of this Agreement at any time for any reason ceases to be
valid and binding on the Company, or is declared to be null and void, or the
validity or enforceability thereof is contested by the Company or any
governmental agency or authority, or the Company denies that it has any or
further liability or obligation under this Agreement or any of the other
Financing Documents; or
(n) Any "event of default" occurs under any loan or financing
agreement where the lender is the Credit Institution and the borrower or the
guarantor is either the Company or the Guarantors, including without limitation
the Loan Agreement.
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Upon the occurrence of an Event of Default under this Agreement, the
Credit Institution, by notice to the Company, may (in its sole discretion) but
shall not be obligated to (i) declare all amounts outstanding and payable by
the Company under this Agreement to be forthwith due and payable, and the same
shall thereupon become immediately due and payable without demand, presentment,
protest or further notice of any kind, all of which are hereby expressly waived
and (ii) pursue any other remedy permitted to the Credit Institution under the
Financing Documents under any other collateral agreements securing the
Company's obligations hereunder, or at law or in equity, including but not
limited to directing the Trustee to accelerate and make a Default Drawing under
the Letter of Credit to pay or purchase the Notes in accordance with Sections
8.02 and 8.03 of the Indenture. Upon the occurrence of an Event of Default
hereunder, the Credit Institution may also exercise any right of a secured
party under the UCC of the State of Florida as to (i) any Notes held by it as
pledgee pursuant to a "B Drawing", (ii) the collateral in the Reimbursement
Account, and (iii) the other Collateral.
Section 5.02 NO WAIVER: REMEDIES CUMULATIVE. No failure by the Credit
Institution to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement preclude any other further exercise
thereof or the exercise of any other right. No waiver under this Agreement
shall be valid unless in writing signed by the Company and the Credit
Institution, and, unless otherwise specified in such waiver, shall be effective
only in the specific instance and for the specific purpose for which given and
shall not preclude the right of the Credit Institution to require strict
compliance with the terms hereof in any subsequent instance, whether similar or
dissimilar. The remedies in this Agreement are cumulative and not exclusive of
any remedies provided by law.
ARTICLE VI
MISCELLANEOUS
Section 6.01 RIGHT OF SET-OFF. In addition to any other right or
remedy that the Credit Institution may have by operation of law or otherwise,
upon the occurrence of any Event of Default under this Agreement the Credit
Institution shall be entitled to exercise its banker's lien upon and its right
to setoff any and all balances, credits, deposits, accounts or moneys at any
time held and other indebtedness at any time owing by the Credit Institution to
or for the credit or account of the Company and apply the same against the
payment of any and all of the obligations of the Company now or hereafter
existing under this Agreement or any of the other Financing Documents.
Section 6.02 LIABILITIES. All acts, including any failure to act,
relating to the Project and the issuance of the Notes and the Letter of Credit
by any director, officer, employee, agent, representative or designee of the
Credit Institution are performed solely for the benefit of the Credit
Institution to assure repayment of the Company's obligations to the Credit
Institution hereunder and under the other Financing Documents are not for the
benefit of the Company or the benefit of any other person. Under no
circumstances whatsoever shall the Credit Institution, its directors, officers
or employees, be deemed to assume any responsibility for, or obligation or duty
with respect to, any part or all of the collateral of any nature or kind
whatsoever, or in any matter or proceedings arising out of or relating thereto.
The Credit Institution shall not be required to take any action of any kind to
collect or protect any interest in the collateral, including but not limited
to, the taking of any action
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necessary to preserve the Credit Institution, the Company or rights against
prior parties to any of the collateral. To the extent permitted by law, the
Credit Institution shall not be liable or responsible in any way for the
safekeeping, care or custody of any of the collateral, for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default
of the Company or any of their agents or any third party, but the safekeeping
shall be at the Company's sole risk at all times. Neither the Credit
Institution nor any of its directors, officers or employees shall be liable or
responsible for: (a) the use which may be made of the Letter of Credit or
moneys drawn thereunder or for any acts or omissions of the Trustee and any
beneficiary in connection therewith; (b) the validity, sufficiency or
genuineness of documents, or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (c) payment by the Credit Institution
against presentation of documents provided such documents on their face appear
to be in order and in compliance with the Letter of Credit; and (d) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit, except only that the Company shall have a claim against the Credit
Institution, and the Credit Institution shall be liable to the Company, to the
extent, but only to the extent, of any direct, as opposed to consequential,
damages suffered by the Company which the Company proves were caused by (i) the
Credit Institution's negligence in determining whether documents presented
under the Letter of Credit comply with the terms of the Letter of Credit or
(ii) the Credit Institution's willful failure to pay under the Letter of Credit
after the presentation to it by the Trustee or a successor trustee of a sight
draft and certificate strictly complying with the terms and conditions of the
Letter of Credit (absent issuance of a court order purporting to enjoin such
payment). In furtherance and not in limitation of the foregoing, the Credit
Institution may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
Section 6.03 CONSENT TO SERVICE OF PROCESS. The Company hereby
consents to process being served in any suit, action, or proceeding instituted
in connection with this Agreement, the other Financing Documents and any
related documents by (i) the mailing of a copy thereof by certified mail,
postage prepaid, return receipt requested, to the Company at the address
provided in Section 6.08 hereof; and (ii) serving a copy thereof upon Michael
Wallace, who is the agent irrevocably designated and appointed by the Company
as the Company's agent for service of process by or pursuant to the provisions
hereof. The Company irrevocably agrees that upon receipt of both such notices,
such notices shall be deemed to be service of process upon the Company in any
such suit, action or proceeding. Nothing in this paragraph shall affect the
right of the Credit Institution to serve process in any manner otherwise
permitted by law.
Section 6.04 ESTOPPEL CERTIFICATE. The Company will, upon not less
than ten (10) days' request by the Credit Institution, execute, acknowledge and
deliver to the Credit Institution or to such other person(s) as the Credit
Institution shall identify a statement in writing, certifying (a) that this
Agreement is unmodified and in full force and effect and the payments required
by this Agreement to be paid by the Company have been paid, and (b) the then
unpaid principal balance of the Obligations arising hereunder; and stating
whether or not to the knowledge of the signer of such certificate any party to
any of the Financing Documents or the Note Documents, is in default in the
performance of any covenant, agreement or condition contained therein and, if
so, specifying each such default of which the signer may have knowledge, it
being intended that any such statement delivered pursuant to this section may
be relied upon by the Credit Institution and such other person(s) to whom such
statement is made.
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Section 6.05 AMENDMENTS. No provision hereof shall be modified,
altered or limited except by written instrument expressly referring to this
Agreement and to the provisions that are modified, altered or limited, and
executed by the parties to this Agreement.
Section 6.06 SUCCESSORS. This Agreement shall inure to the benefit of
and shall be binding upon each successor or assign of each party and shall
continue in full force and effect until the Credit Institution shall no longer
be bound to fund under the Letter of Credit and the Company shall have paid all
amounts due hereunder and under the other Financing Documents or the Note
Documents, and complied with all other provisions and conditions herein and
therein.
Section 6.07 FEES AND EXPENSES: EXPENSES OF COLLECTION. The Company
shall pay all fees of the Trustee, the Fiscal Agent, the Placement Agent and
the Remarketing Agent and shall pay all fees and expenses of, or reimburse the
Credit Institution for amounts therefor paid by it to, all appraisers
(regardless of whether engaged by the Company or the Credit Institution),
engineers, surveyors, environmental auditors, architects, title insurers and
counsel performing services for the Trustee, the Company, the Fiscal Agent, the
Placement Agent, the Remarketing Agent and the Credit Institution and counsel
to the Remarketing Agent with respect to or in any way connected with the
issuance of the Notes, the Financing Documents, the Note Documents and the
transactions contemplated thereby. The Company agrees to pay all expenses,
including reasonable attorneys fees, which are incurred or paid by the Credit
Institution in administering this Agreement, determining its rights and
responsibilities hereunder and under the other Financing Documents and the Note
Documents and collecting any amounts due it or protecting or enforcing any of
its rights hereunder and thereunder, and notwithstanding any disposition of any
collateral securing the Credit Institution hereunder and thereunder, the
Company shall pay to the Credit Institution any deficiencies which remain after
such disposition. In addition, the Company shall pay any and all stamp,
recording, transfer and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and any recording of
any Financing Documents and the Note Documents and agrees to save the Credit
Institution harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes and fees.
The Company shall pay any brokerage fees or commissions arising from the
issuance of the Notes and the Letter of Credit and shall defend, indemnify, and
hold the Credit Institution harmless against any and all expenses, liabilities
and losses arising from such claims in connection therewith.
Section 6.08 NOTICES. All demands, notices, approvals, consents,
requests and other communications provided for hereunder shall be in
electronic, telephonic or written (including bank wire, telegram, telecopier,
telex or similar writing) form and shall be given to the party to whom sent,
addressed to it, at its address or telephone, telecopier or telex number set
forth below or such other address or telephone, telecopier or telex number as
such party may hereafter specify for the purpose by notice to the other party
set forth below. Each such notice, request or communication shall be effective
(a) if given by telephone, telex, telecopier or other electronic means, when
such communication is transmitted to the address specified below and any
appropriate answerback is received, (b) if given by mail, three (3) Business
Days after such communication is deposited in the
34
<PAGE> 38
mails with first class postage prepaid, addressed as aforesaid, or (c) if given
by any other means, when delivered at the address specified below:
(i) if to the Company:
Mr. Michael W. Wallace
Kellstrom Industries, Inc.
1100 International Parkway
Sunrise, FL 33323
Telephone No. (954) 845-0428
Telecopier No. (954) 845-0427
with a copy to:
Bruce March, Esq.
Akerman, Senterfitt & Eidson, P.A.
Las Olas Centre, Suite 950
450 East Las Olas Blvd.
Ft. Lauderdale, FL 33301
Telephone No. (954) 463-2700
Telecopier No. (954) 463-2224
(ii) if to the Credit Institution:
Mr. Robert Walker
NationsBank Business Credit
600 Peachtree Street, 13th Floor
Atlanta, GA 30308
Telephone No. (404) 607-5387
Telecopier No. (404) 607-6281
and
Ms. Ginger Downs or Ms. Deborah Gassiot
NationsBank, N.A.
Letter of Credit Department
901 Main Street, 9th Floor
Dallas, TX 75202
Telephone No. (214) 508-3092
Telecopier No. (214) 508-2543
35
<PAGE> 39
<PAGE> 40
with a copy to:
Judith L. Keiser, Esq.
English, McCaughan & O=Bryan, P.A.
100 N.E. Third Avenue, Suite 1100
Fort Lauderdale, FL 33301
Telephone No. (954) 462-3300
Telecopier No. (954) 763-2439
or (iv) in either of the foregoing cases, at such other address or telex,
telecopier, bank wire or telephone number as the addressee may hereafter
specify for the purpose in a notice to the other party specifically captioned
"Notice of Change of Address pursuant to Section 6.08 of the Letter of Credit
Reimbursement Agreement."
Section 6.09 SEVERABILITY. If any term of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity of all other terms hereof
shall in no way be affected thereby.
Section 6.10 ASSIGNMENT. This Agreement may not be assigned by the
Company without the prior written consent of the Credit Institution.
Section 6.11 PARTICIPATIONS. The Company recognizes that the Credit
Institution or a participant may sell and transfer interests in the Letter of
Credit to one or more participants or subparticipants and that all
documentation, financial statements, appraisals and other data, or copies
thereof, relevant to the Company or the Letter of Credit may be exhibited to
and retained by any such participant or subparticipant whether actual or
prospective.
Section 6.12 COUNTERPARTS. This Agreement may be executed by the
parties in counterparts and each such counterpart shall be deemed to be an
original, but both such counterparts shall together constitute but one and the
same Agreement.
Section 6.13 RULE OF CONSTRUCTION. As to the rights and obligations of
the Company and the Credit Institution against and to each other, the
provisions of this Agreement shall control to the extent they are inconsistent
with the provisions of the Indenture, or any other Financing Agreement or Note
Document.
Section 6.14 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Florida.
Section 6.15 PREAMBLE: PRELIMINARY RECITALS. The Preliminary Recitals
set forth in the Preamble are hereby incorporated and made part of this
Agreement.
Section 6.16 INDENTURE. The Credit Institution and the Company
acknowledge and consent to the provisions of the Indenture.
36
<PAGE> 41
Section 6.17 CREDIT INSTITUTION REPRESENTATION. Notwithstanding
anything to the contrary that may be contained in the Commitment Letter, this
Agreement, the other Financing Documents or the Note Documents or in any
written or oral communication, neither the issuance of the Letter of Credit nor
the consideration to be received for the same is conditioned upon the
appointment of the Credit Institution or any of its Affiliates serving as
Remarketing Agent, Placement Agent or in any other capacity with respect to the
Notes. The Company hereby acknowledges that the foregoing representation of the
Credit Institution is true and correct.
Section 6.18 CONSENT TO JURISDICTION: WAIVER OF JURY TRIAL.
(a) The Company hereby agrees and consents that any action or
proceeding arising out of or brought to enforce the provisions of this
Agreement, the other Financing Documents, the Note Documents and any related
documents may be brought in any appropriate court in Broward County, Florida,
and by the execution of this Agreement the Company irrevocably consents to the
jurisdiction of such courts in Broward County, Florida. The Company irrevocably
waives, to the fullest extent permitted by law, any objection that the Company
may now or hereafter have to the laying of the venue of any such suit, action,
or proceeding brought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. Final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding upon the Company and
may be enforced in any court in which the Company is subject to jurisdiction by
a suit upon such judgment provided that service of process is effected upon the
Company as provided in this Agreement or as otherwise permitted by applicable
law.
(b) WAIVER OF JURY TRIAL. BY ACCEPTANCE HEREOF, THE COMPANY
AGREES THAT NEITHER THE COMPANY NOR ANY OF ITS ASSIGNEES OR SUCCESSORS (ALL OF
WHOM ARE HEREINAFTER REFERRED TO AS THE "PARTIES") SHALL SEEK A JURY TRIAL IN
ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING DOCUMENTS
OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES, OR ANY OF
THEM. NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A
JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL HAS NOT
BEEN WAIVED. THIS WAIVER IS KNOWINGLY, VOLUNTARILY AND INTENTIONALLY MADE BY
COMPANY, AND THE COMPANY HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR
OPINION HAVE BEEN MADE BY ANY INDIVIDUAL OR ENTITY TO INDUCE THIS WAIVER OR
TRIAL BY JURY OR TO IN ANY MODIFY OR NULLIFY ITS EFFECT. THE COMPANY FURTHER
REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY NEGOTIATED BY THE
PARTIES WITH CREDIT INSTITUTION, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. THE CREDIT INSTITUTION HAS IN NO WAY AGREED WITH OR REPRESENTED TO
ANY OF THE PARTIES THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
37
<PAGE> 42
WITNESS the following signatures, all as of the date first above
written.
Attest: KELLSTROM INDUSTRIES, INC.
By: /s/ By: /s/
-------------------------------- ------------------------------
Title: Secretary Title: Chief Financial Officer
----------------------------- ---------------------------
Attest: NATIONSBANK, N.A.
By: /s/
-----------------------------
Title: Senior Vice President
--------------------------
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
THE FOREGOING INSTRUMENT was acknowledged before me this 19 day of
February, 1999, by Michael W. Wallace the CFO of Kellstrom Industries, Inc., a
Delaware corporation, on behalf of the Company. He/she is personally known to
me or produced FL DL as identification.
/s/ REGINA L. COVILLE
-------------------------------
Notary Public, State of Florida
Print Name: Regina L. Coville
--------------------
My Commission Expires:
40
<PAGE> 43
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD)
THE FOREGOING INSTRUMENT was acknowledged before me this 19th day of
February, 1999, by Robert J. Walker, as SVP of NationsBank, N.A., a national
banking association, on behalf of the Credit Institution. He/she is personally
known to me or produced FLDL as identification.
/s/ REGINA L. COVILLE
-------------------------------
Notary Public, State of Florida
Print Name: Regina L. Coville
--------------------
My Commission Expires:
41
<PAGE> 44
SCHEDULE 3.01(A)
OPTIONAL REDEMPTIONS
KELLSTROM INDUSTRIES
Amortization Schedule:
OUTSTANDING
PERIOD YEAR REDEMPTION BALANCE
- ---------------------------------------------------------------------------
0 2/22/99 0 6,670,000
1 2/1/00 200,000 6,470,000
2 2/1/01 200,000 6,270,000
3 2/1/02 200,000 6,070,000
4 2/1/03 300,000 5,770,000
5 2/1/04 300,000 5,470,000
6 2/1/05 300,000 5,170,000
7 2/1/06 300,000 4,870,000
8 2/1/07 300,000 4,570,000
9 2/1/08 300,000 4,270,000
10 2/1/09 300,000 3,970,000
11 2/1/10 300,000 3,670,000
12 2/1/11 400,000 3,270,000
13 2/1/12 400,000 2,870,000
14 2/1/13 400,000 2,470,000
15 2/1/14 400,000 2,070,000
16 2/1/15 400,000 1,670,000
17 2/1/16 400,000 1,270,000
18 2/1/17 400,000 870,000
19 2/1/18 400,000 470,000
20 2/1/19 470,000 0
40
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
Kellstrom Commercial Aircraft, Inc. Delaware
Solair, Inc. Florida
Aero Support Holdings, Inc. Delaware
Integrated Technology Holdings Corp. Delaware
Aerocar Aviation Corp. Florida
Aerocar Parts, Inc. Florida
Kellstrom International Sales Corporation U.S. Virgin Islands
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Kellstrom Industries, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-20727, No. 333-41159 and No. 333-62247) on Form S-8 and in the registration
statements (No. 333-10313, No. 333-44019 and No. 333-52917) on Form S-3 of
Kellstrom Industries, Inc. and subsidiaries of our report dated February 17,
1999, except as to Note 18, which is as of March 30, 1999, relating to the
consolidated balance sheets of Kellstrom Industries, Inc. and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of earnings,
stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 1998, and the related
financial statement schedule, which report appears in the December 31, 1998
annual report on Form 10-K of Kellstrom Industries, Inc. and subsidiaries.
KPMG LLP
Ft. Lauderdale, Florida
March 29, 1999
<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 YEAR
ENDED DECEMBER 3, 1998 AND IS QUALIFIED INITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,107,102
<SECURITIES> 0
<RECEIVABLES> 36,785,331
<ALLOWANCES> 5,417,996
<INVENTORY> 149,957,320
<CURRENT-ASSETS> 272,729,783
<PP&E> 19,759,387
<DEPRECIATION> 3,004,202
<TOTAL-ASSETS> 434,050,496
<CURRENT-LIABILITIES> 42,147,181
<BONDS> 237,586,821
0
0
<COMMON> 11,762
<OTHER-SE> 149,747,476
<TOTAL-LIABILITY-AND-EQUITY> 434,050,496
<SALES> 148,901,686
<TOTAL-REVENUES> 180,048,809
<CGS> 100,221,300
<TOTAL-COSTS> 139,019,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,259,749
<INCOME-PRETAX> 31,256,760
<INCOME-TAX> 11,678,641
<INCOME-CONTINUING> 19,578,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,578,119
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.53
</TABLE>
