KELLSTROM INDUSTRIES INC, PRE 14A, 2000-12-22

KELLSTROM INDUSTRIES INC
PRE 14A, 2000-12-22
AIRCRAFT ENGINES & ENGINE PARTS

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<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

KELLSTROM INDUSTRIES, INC.
1100 INTERNATIONAL PARKWAY
SUNRISE, FLORIDA 33323

Dear Stockholder: January ___, 2000

You are cordially invited to attend Kellstrom's Annual Meeting of
Stockholders to be held on Tuesday, February 6, 2001 at 10:00 a.m., local time,
at the Wyndham Hotel, 250 Racket Club Road, Weston, Florida 33326.

The formal Notice of Meeting and the accompanying Proxy Statement set
forth proposals for your consideration this year. At the meeting, the Board of
Directors will also report on the affairs of Kellstrom, and a discussion period
will be provided for questions and comments of general interest to stockholders.

We look forward to greeting personally those of you who are able to be
present at the meeting. However, it is important that your shares be
represented, whether or not you are able to be with us at the meeting. The Board
of Directors recommends that stockholders vote FOR each of the matters described
in the accompanying Proxy Statement. Accordingly, PLEASE SIGN, DATE AND MAIL THE
ENCLOSED PROXY, AT YOUR EARLIEST CONVENIENCE, IN THE ENVELOPE PROVIDED FOR YOUR
USE.

Thank you for your cooperation.

Very truly yours,

ZIVI R. NEDIVI
Chief Executive Officer and President

YOAV STERN
Chairman of the Board

<PAGE> 3

KELLSTROM INDUSTRIES, INC.
1100 INTERNATIONAL PARKWAY
SUNRISE, FLORIDA 33323

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 6, 2001

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
KELLSTROM INDUSTRIES, INC. will be held on Tuesday, February 6, 2001 at 10:00
a.m., local time, at the Wyndham Hotel, 250 Racket Club Road, Weston, Florida
33326 for the following purposes:

(1) To elect three Class II directors to a two year term of office
expiring at the 2002 Annual Meeting of Stockholders and until
a successor of each has been duly elected and qualified;

(2) To consider and vote upon a proposal to approve and adopt
Kellstrom's 2000 Stock Option Plan;

(3) To consider and vote upon a proposal to approve and adopt an
amendment to Kellstrom's 1998 Stock Purchase Plan;

(4) To ratify the reappointment of KPMG LLP as Kellstrom's
independent certified public accountants for the fiscal year
ending December 31, 2000; and

(5) To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.

Only stockholders of record at the close of business on January 4, 2000
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.

All stockholders are cordially invited to attend the Annual Meeting in
person. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
EACH STOCKHOLDER IS URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. No postage is
required if the proxy is mailed in the United States. Stockholders who attend
the Annual Meeting may revoke their proxy and vote their shares in person.

By order of the Board of Directors,

OSCAR TORRES
Secretary

Sunrise, Florida
January __, 2000

PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED
FOR THAT PURPOSE.

<PAGE> 4

KELLSTROM INDUSTRIES, INC.
1100 INTERNATIONAL PARKWAY
SUNRISE, FLORIDA 33323

---------------------------------------
PROXY STATEMENT
---------------------------------------

GENERAL

This Proxy Statement is furnished to the holders of common stock, par
value $.001 per share (the "Common Stock"), of Kellstrom Industries, Inc. in
connection with the solicitation by our Board of Directors of proxies for use at
the Annual Meeting of Stockholders (the "Annual Meeting") or at any adjournment
thereof, pursuant to the accompanying Notice of Annual Meeting of Stockholders.
The Annual Meeting will be held on February 6, 2001 at 10:00 a.m., local time,
at the Wyndham Hotel, 250 Racket Club Road, Weston, Florida 33326. This Proxy
Statement, the Notice of Annual Meeting, the proxy card and our Annual Report on
Form 10-K to Stockholders were mailed to our stockholders on or about January
__, 2000.

It is proposed that at the Annual Meeting: (i) three Class II directors
will be elected, (ii) Kellstrom's 2000 Stock Option Plan (the "2000 Plan") will
be approved and adopted, (iii) an amendment to Kellstrom's 1998 Stock Purchase
Plan will be approved and adopted (the "1998 Stock Purchase Plan"), and (iv) the
reappointment of KPMG LLP as our independent certified public accountants for
the fiscal year ending December 31, 2000 will be ratified. Management currently
is not aware of any other matters which will come before the Annual Meeting. If
any other matters properly come before the Annual Meeting, the persons
designated as proxies intend to vote in accordance with their best judgment on
such matters.

Proxies for use at the Annual Meeting are being solicited by our Board
of Directors. Proxies will be solicited chiefly by mail; however, certain or our
officers, directors, employees and agents, none of whom will receive additional
compensation therefor, may solicit proxies by telephone, telegram or other
personal contact. We will bear the cost of the solicitation of the proxies,
including postage, printing and handling, and will reimburse the reasonable
expenses of brokerage firms and others for forwarding material to beneficial
owners of shares of Common Stock.

REVOCABILITY AND VOTING OF PROXY

A form of proxy for use at the Annual Meeting and a return envelope for
the proxy are enclosed. Shares of Common Stock represented by properly executed
proxies, which are received by us prior to the Annual Meeting, will be voted in
accordance with the instructions specified in such proxies. If no specifications
are given, the proxies intend to vote the shares represented thereby "for" the
election of each of the nominees for director as shown on the form of proxy,
"for" the other proposals set forth in the Notice of Annual Meeting and in
accordance with their best judgment on any other matters which may properly come
before the meeting. Stockholders may revoke the

<PAGE> 5

authority granted by their execution of a proxy at any time prior to the
effective exercise of the powers conferred by that proxy, by delivering to our
Secretary a written notice of revocation or a duly executed proxy bearing a
later date, or by voting in person at the Meeting.

RECORD DATE AND VOTING RIGHTS

Only stockholders of record at the close of business on January 4, 2000
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting
or any adjournment thereof. On the Record Date, there were _____ shares of
Common Stock outstanding, each of which is entitled to one vote upon each of the
matters to be presented at the Annual Meeting. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy and entitled
to vote, will constitute a quorum at the Annual Meeting. Broker non-votes will
be counted for purposes of determining the presence or absence of a quorum, but
will not be counted with respect to the specific matter being voted upon.
"Broker non-votes" are shares held by brokers or nominees which are present in
person or represented by proxy, but which are not permitted to be voted on a
particular matter in the absence of instructions from the beneficial owners of
the shares. Abstentions from voting as to any proposal will be counted for the
purpose of determining the presence or absence of a quorum and will be
considered present and entitled to vote with respect to the specific matter
being voted upon.

The affirmative vote of the holders of a plurality of the shares of
Common Stock present in person or represented by proxy and entitled to vote at
the Annual Meeting is required for the election of directors. The affirmative
vote of the holders of a majority of the shares of Common Stock present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required for the approval and adoption of the 2000 Plan, the approval and
adoption of an amendment to the 1998 Stock Purchase Plan, and the ratification
of the reappointment of KPMG LLP. An independent inspector shall count the votes
and ballots. Broker non-votes will have no effect on any of the proposals
brought to a vote at the Annual Meeting. Abstentions from voting on any of the
proposals brought to a vote at the Annual Meeting will have the effect of votes
against the specific matter being voted upon. If less than a majority of the
outstanding shares of Common Stock are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting from time
to time without further notice.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of December 15,
2000 regarding the beneficial ownership of Common Stock by (i) each stockholder
known to us to beneficially own more than five percent (5%) of the outstanding
shares of Common Stock; (ii) each of our directors; (iii) each of our executive
officer's named in the Summary Compensation Table which appears elsewhere in
this Proxy Statement; and (iv) all directors and executive officers as a group.
The percentage of beneficial ownership for each person or entity in the table is
based on 11,910,981 shares of Common Stock outstanding as of December 15, 2000,
including for each person or entity

<PAGE> 6

any shares of Common Stock which may be acquired by such person or entity within
60 days upon exercise of outstanding options, warrants or other rights to
acquire shares of Common Stock.

Shares Beneficially Owned
---------------------------------
Name and Address of Beneficial Owner (1) Number Percent
------------------------------------ ------ -------
<S> <C> <C>
Yoav Stern(2)(3)................................................. 906,035 7.2%
Zivi R. Nedivi(2)(4)............................................. 895,535 7.1%
David Jan Mitchell(5)............................................ 193,287 1.6%
John S. Gleason(6)............................................... 136,199 1.1%
Niv Harizman(7).................................................. 51,000 *
Gideon Vaisman(8)................................................ -- *
Fred von Husen(9)................................................ 99,166 *
General William Lyon(10)......................................... 40,000 *
Admiral William J. Crowe, Jr.(11)................................ 33,000 *
All executive officers and directors as a group (18
persons)(12)..................................................... 2,643,940 18.9%
</TABLE>

-------------------
* Less than 1%

(1) The address of each person named is 1100 International Parkway,
Sunrise, Florida 33323.

(2) Excludes certain shares of Common Stock that may be deemed to be
beneficially owned as a member of a "group" for the purposes of Section
13(d) under the Exchange Act by virtue of a Stockholders Agreement,
dated August 24, 1995, as amended, between Messrs. Stern and Nedivi.
Each party thereto agreed not to sell, encumber or otherwise dispose of
any shares of Common Stock beneficially owned by him except in
accordance with the terms of said agreement. In addition, each party
thereto agreed to vote all shares of Common Stock beneficially owned by
him as directed by a majority of such parties. As a result, each of
Messrs. Stern and Nedivi may be deemed to share voting and dispositive
power, and therefore to beneficially own, the shares of Common Stock
beneficially owned by the other.

(3) Includes 677,000 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days,
and 6,636 shares issuable upon the exercise of warrants which are
currently exercisable.

(4) Includes 677,000 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days,
and 6,636 shares issuable upon the exercise of warrants which are
currently exercisable.

(5) Includes 112,250 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days.

(6) Includes 119,999 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days.

<PAGE> 7

(7) Includes 50,000 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days.

(8) As of January 2, 2000, Mr. Vaisman was no longer an officer of
Kellstrom and according to our records Mr. Vaisman no longer owns any
shares of our Common Stock.

(9) Includes 96,666 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days.

(10) Consists of 40,000 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days.

(11) Includes 30,000 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days.

(12) Includes 2,048,020 shares issuable upon the exercise of options to
purchase Common Stock, which options are exercisable within 60 days,
and 96,772 shares issuable upon the exercise of warrants which are
currently exercisable.

BIOGRAPHICAL INFORMATION REGARDING
DIRECTORS/NOMINEES AND EXECUTIVE OFFICERS

DIRECTORS

Set forth below is biographical information for each member of our
Board of Directors, and each nominee for election as a director, at the Annual
Meeting.

YOAV STERN, age 47, has served as our Chairman of the Board of
Directors since June 1995 and an executive officer since April 1999. From our
inception until June 1995, Mr. Stern was our Co-Chief Executive Officer and
Co-President. Mr. Stern was a founder of Kellstrom, and has served as a director
since our inception. Since August 1995, Mr. Stern has served as a director and
member of the executive committee of Bogen Communications International, Inc.
("Bogen"), a company engaged in the digital voice processing business whose
shares are traded on the Nasdaq National Market, and since November 1997, Mr.
Stern has served as Co-Chairman of Bogen. Prior to August 1995, Mr. Stern was a
Co-Chief Executive Officer of Bogen's predecessor company. Earlier, until 1994,
Mr. Stern was President and a director of WordStar International, Inc. (NYSE:
TLC), and Vice President of Business Development of Elron Electronic Industries
Ltd. (NASDAQ: ELRNF). He also served as a director of Random Access, Inc. Mr.
Stern previously served in the Israeli Air Force for ten years as an F-15, A-4,
Mirage and Kfir fighter pilot, avionic systems officer, commander of Operational
Training Unit and a Deputy Squadron Commander. Mr. Stern earned a Practical
Engineering Diploma (MAGNA CUM LAUDE) in advance mechanics and automation from
ORT Technological College, Israel, graduated from the Israel Air Force Academy
and earned a B.S. degree (MAGNA CUM LAUDE) in mathematics and computer science
from Tel Aviv University.

ZIVI R. NEDIVI, age 42, has been our Chief Executive Officer, President
and a director of Kellstrom since June 1995. Mr. Nedivi was the founder,
President and Chief Executive Officer of

<PAGE> 8

our predecessor, an indirectly wholly-owned subsidiary of Rada Electronic
Industries Ltd. ("Rada"), from its establishment in 1990 until June 1995. From
September 1994 until June 1995, Mr. Nedivi also served as Corporate Vice
President of Rada, a public company traded on the Nasdaq National Market which
is engaged in the business of avionics for the commercial and military aviation
industries. From October 1984 to September 1990, Mr. Nedivi was co-founder and
General Manager of Maakav Ltd., a private aviation management company based in
Israel. Maakav represented certain American companies in Israel, including
companies active in the distribution of aircraft parts. In 1988 and 1989, Mr.
Nedivi was also co-founder and director of NBC Aviation Inc., a private company
based in Texas active in the sale of commercial jet engines and related
components. Mr. Nedivi also serves as a director of Bogen Communications
International, Inc. A graduate of the Israel Air Force Academy, Mr. Nedivi
served in the Israel Air Force as an F-15 fighter pilot for seven years and held
the rank of Major. He also served as a Human Engineering Consultant to Israel
Aircraft Industries Ltd. on the Lavi fighter aircraft program.

DAVID JAN MITCHELL, age 39, has served as our director since December
1993. Since January 1991, Mr. Mitchell has been the President of Mitchell & Co.,
Ltd., a merchant banking company founded by him. Since March 1998, Mr. Mitchell
has served as the Chairman of Empire Direct, a direct marketing and finance
company that is an equity partner of the Fingerhut Companies, a division of
Federated Department Stores. Mr. Mitchell also serves as Chief Executive Officer
of Bion Environmental Technologies, an environmental technology firm and is the
immediate past President of AmeriCash, a national network of ATM Machines, which
was sold to American Express. From April 1988 to December 1990, Mr. Mitchell was
a Managing Principal and a Director of Rodman & Renshaw, Inc., a publicly held
investment banking and brokerage firm. From March 1985 to April 1988, he was a
Managing Director of Laidlaw Adams & Peck Inc., also an investment banking and
brokerage firm. From April 1984 to March 1985, Mr. Mitchell was a Senior Vice
President of Cralin & Co., an investment banking and brokerage firm and, from
March 1981 to August 1984, he was a Vice President at Bear Sterns & Co. From
September 1979 to February 1981 he was employed at Oppenheimer & Co.

NIV HARIZMAN, age 36, has served as our director since December 1997.
Mr. Harizman has been a Director in the Mergers and Acquisitions group of Credit
Suisse First Boston since May 2000. Prior to Credit Suisse First Boston, Mr.
Harizman served as a Managing Director at Deutsche Banc Alex. Brown and its
predecessor, BT Alex. Brown Incorporated from January 1998 to May 2000. From
June 1996 until January 1998, Mr. Harizman was a Vice President with BT Alex.
Brown. He started with BT Alex. Brown in 1995. While at BT Alex. Brown, he has
advised companies in a broad range of manufacturing and service industries in
their merger and acquisitions activities and helped clients finance targeted
acquisitions. Prior to working at BT Alex. Brown, from 1994 until 1995, Mr.
Harizman was a member of the mergers and acquisitions group at the investment
banking firm of Wasserstein Perella & Co., where he performed comprehensive
strategic advisory assignments including financial restructuring, leveraged
buyouts, recapitalizations, acquisitions, and divestitures. Prior to working at
Wasserstein, Mr. Harizman was an investment analyst for Henry Crown and Company
in Chicago, where he was involved in transactions in the cellular, media,
manufacturing, entertainment and agricultural industries. Mr. Harizman also
worked at the Chicago Board Options Exchange in equity and index options
trading. Mr. Harizman received a B.B.A. in Finance from the

<PAGE> 9

College of Business Administration at the University of Texas at Austin, and an
M.B.A. with a specialization in Finance from the University of Chicago Graduate
School of Business.

GENERAL WILLIAM LYON, age 76, has served as our director since October
1998. General Lyon is Chairman of the Board, President and Chief Executive
Officer of William Lyon Homes, Inc. General Lyon also serves as Chairman of the
Board of The Presley Companies, a public company traded on the New York Stock
Exchange which is engaged in the home design, construction and sales business.
General Lyon has previously served as Chairman, President and Chief Executive
and Operating Officer of AirCal, a Southern California-based regional airline
which was sold to American Airlines in 1987. From 1987 until 1995, General Lyon
served on the Board of Directors of American Airlines. In 1989, General Lyon
established Air/Lyon, Inc., a private company which provides ground service to
airlines and aircraft maintenance services. General Lyon is a retired United
States Air Force General, and has received 17 awards and decorations including
the Distinguished Service Medal Legion of Merit, the Distinguished Flying Cross,
the Air Medal with two oak leaf clusters and the Presidential Unit Citation.
From 1975 through 1979, General Lyon served as Chief of the U.S. Air Force
Reserve. General Lyon currently serves as a director of Board of Fidelity
National Financial, Inc., and is a Life Member of the University of Southern
California Board of Trustees. In addition, General Lyon is Chairman of the
Falcon Foundation, which provides scholarships to youths hoping to attend the
Air Force Academy, and is Chairman of the Academy of the Research and
Development Institute, also at the Air Force Academy. General Lyon attended the
University of Southern California and Dallas Aviation School and Air College.

ADMIRAL WILLIAM J. CROWE, JR., age 76, has served as our director since
March 1999. From 1985 until 1989, Admiral Crowe held the position of Chairman of
the Joint Chiefs of Staff under President Reagan. After retirement from the
military in 1989, Admiral Crowe was a Counselor at the Center for Strategic and
International Studies in Washington and a Professor of Geopolitics at the
University of Oklahoma. He served as Chairman of the President's Foreign
Intelligence Advisory Board from 1993 to 1994, and from 1994 until 1997, Admiral
Crowe served as U.S. Ambassador to the United Kingdom and Northern Ireland.
Admiral Crowe has previously served as a director of several public companies,
including Merrill Lynch, Texaco and General Dynamics, and currently serves as a
director of several private companies. From 1997 until 1999, Admiral Crowe
served as a part-time professor at George Washington University. Admiral Crowe
currently serves as a part-time professor at the United States Naval Academy,
and as a senior advisor to Global Options L.L.C. Admiral Crowe is a graduate of
the United State Naval Academy, and received an M.A. in Education from Stanford
University and a Ph.D. in Politics from Princeton University.

EXECUTIVE OFFICERS

Set forth below is biographical information for each of the persons who
serve as one of our executive officers and who is not currently a director or
nominee for director.

D. SCOTT KALISTER, age 47, has served as Chief Operating Officer of
Kellstrom since November 2000. From January 1995 until November 2000, Mr.
Kalister held various Vice President

<PAGE> 10

positions with Raytheon Aircraft Company ("Raytheon") including Vice President
of Customer Support, Marketing and International Sales. From 1978 until 1994,
Mr. Kalister served in various positions with Beech Aircraft Company ("BAC") and
its sales and service subsidiaries, including Vice President of Corporate
Marketing for United Beechcraft and Vice President/General Manager of Hangar
One, Inc. Mr. Kalister earned his undergraduate degree in Finance and Economics
and an M.B.A from Oklahoma State University.

JOHN S. GLEASON, age 51, has served as one of our Executive Vice
Presidents since January 1997. From July 1997 until March 1999, Mr. Gleason
served as our director, and from July 1995 until October 1997, Mr. Gleason
served as Chief Financial Officer. From October 1997 until March 1999, Mr.
Gleason served as President of Kellstrom Commercial Aircraft, Inc., one of our
wholly owned subsidiaries. From January 1986 until July 1995, Mr. Gleason served
as the Vice President of Finance of International Aircraft Support L.P.
("IASI"), a seller of new and used aircraft engine parts. Mr. Gleason was also
responsible for buying, selling and leasing IASI's commercial jet engines on a
worldwide basis, as well as the procurement of jet engine inventory consignment
arrangements. We acquired the assets of IASI in January 1997. Mr. Gleason is a
Certified Public Accountant and earned a B.B.A. degree from Florida Atlantic
University in 1971.

FRED VON HUSEN, age 55, has served as one of our Executive Vice
Presidents since January 1997. From 1987 to January 1997, Mr. von Husen was
IASI's President and Chief Executive Officer. Mr. von Husen has 35 years of
experience in the aviation industry, primarily in engine and aircraft
maintenance and financial and organization management. Prior to joining IASI, he
served as Senior Vice President of Operations and earlier as Vice President of
Technical Services at AirCal, a passenger airline based in California. Mr. von
Husen also spent 17 years at United Airlines in various positions including
engine maintenance, engineering, corporate and financial planning. Mr. von Husen
received a B.S.B.A. degree in organization management and finance from the
College of Notre Dame.

PAUL F. STEELE, age 41, has served as one of our Senior Vice Presidents
since 1997. From 1995 until 1997, Mr. Steele was one of our Vice Presidents.
From 1994 until 1995, Mr. Steele was the Vice President of Purchasing for our
predecessor, and from 1993 until 1994, Mr. Steele served as a Director of
Operations of such company. Prior to 1993, Mr. Steele held the position of Vice
President of Technical Sales at The AGES Group, a subsidiary of Volvo Flygmotor
and supplier of commercial aircraft engines. Mr. Steele graduated from Bolton
Street College, Dublin.

ROBERT V. HOGAN, age 45, has served as one of our Senior Vice
Presidents and General Manager of our Commercial Engine Parts Division since
October 1999. From 1995 to 1999, Mr. Hogan held various positions with AAR
Corporation including Vice President of P&W Large Commercial Products. Prior to
joining AAR, Mr. Hogan spent 15 years with Pratt & Whitney at various positions
including Manager of P&W's High Thrust Engine Product Line. Mr. Hogan also
served in the U.S. Navy and logged nearly 2,000 flight hours in P3-B & C
aircraft and is a Vietnam era veteran. Mr. Hogan holds an Associate in Science
Degree in Business Management from Post College and a Bachelor of Science Degree
from Teikyo Post University. Mr. Hogan attended the

<PAGE> 11

Hartford Graduate Center's Executive Masters Degree Program (EMP) for his Master
of Science in Management.

MOTI MARKOWICZ, age 47, has served as one of our Senior Vice Presidents
since January 1999, and as a General Manager of our Certified Division since
April 1999. From September 1997 until January 1999, Mr. Markowicz served as an
Executive Vice President of Aero Support Holdings, Inc., a wholly owned
subsidiary of Kellstrom, and from 1985 until September 1997, as an Executive
Vice President of Aero Support USA Inc. ("Aero Support"). The assets of Aero
Support were acquired by Kellstrom in September 1997. Mr. Markowicz received a
B.S. in Electrical Engineering from Polytechnic University and an M.B.A. from
New York Institute of Technology.

MICHAEL NAVON, age 39, has served as one of our Senior Vice Presidents
since January 1999, and as a General Manager of our Certified Division since
April 1999. From September 1997 until January 1999, Mr. Navon served as an
Executive Vice President of Aero Support Holdings Inc., and from 1989 until
September 1997, Mr. Navon served in various positions with Aero Support. Mr.
Navon received a B.S. in Marketing and an M.B.A. from Baruch.

AMI ZELCER, age 51, has served as one of our Senior Vice Presidents
since February 1999. From 1996 until 1999, Mr. Zelcer was President of AAR
Aircraft Component Services. From 1991 until 1995, Mr. Zelcer was the Vice
President of Marketing with TAT Technologies in Israel. From 1976 to 1991, Mr.
Zelcer held various positions with Vickers Incorporated, Sundstrand Corporation,
Urdan Corporation (in Israel) and Speco Corporation. Mr. Zelcer received a
Bachelor's Degree in Mechanical Engineering and a Master's degree in Mechanical
Engineering from Ohio State University.

OSCAR TORRES, age 30, has served as our Chief Financial Officer since
February 2000. From January 1999 until February 2000, Mr. Torres served as our
Vice President of Finance and Corporate Controller. Prior to joining us, Mr.
Torres was a Manager at KPMG LLP at which he held various positions since July
1993. Mr. Torres is a Certified Public Accountant licensed in Florida and earned
his undergraduate degree in Accounting from Florida International University in
1991 and an M.B.A. from the University of Miami in 1992.

LANCE BERBERIAN, age 38, has served as one of our Senior Vice
Presidents and Chief Information Officer since January 2000. From 1997 to 1999,
Mr. Berberian was Chief Information Officer at Interim Healthcare. Prior to
joining Interim, Mr. Berberian also spent three years at Corning Clinical
Laboratories as Chief Information Officer. Mr. Berberian received a B.A. degree
in Business Administration from Thomas Edison State College in New Jersey.

JACK PORTLOCK, age 44, has served as one of our Senior Vice Presidents
since October 2000. From February 2000 until October 2000, Mr. Portlock served
as our Vice President of Operations of the Commercial Engine Business. From
September 1997 until February 2000, Mr. Portlock

<PAGE> 12

served as our Vice President of Inventory Control, and from August 1995 until
September 1997 as the Chief Financial Officer of Aero Support.

MICHAEL OLESIK, age 44, has served as one of our Senior Vice Presidents
since December 2000. From December 1999 until December 2000, Mr. Olesik served
as President of the Airframe division of Aviation Sales Distribution Company.
From August 1997 until November 1999, Mr. Olesik served as Senior Director of
Technical Purchasing and Materials Management of Atlas Air, Inc. and from June
1996 until August 1997 as Vice President of Purchasing of AAR Allen Aircraft.

BOARD OF DIRECTORS

MEETINGS OF THE BOARD. The Board of Directors of the Company (the
"Board") holds meetings when necessary and otherwise acts by written consent.
Before each Board or Committee meeting, directors are typically furnished with
an agenda and background materials relating to the matters to be discussed.
During 1999, there were twelve (12) Board of Director (the "Board") meetings. In
addition, the Board took action by unanimous written consent on seven (7)
occasions during 1999. General William Lyon was appointed as a new Class I
director in October 1999. Admiral William Crowe was appointed as a Class II
director in March 1999 to fill the vacancy resulting from Mr. Gleason's
resignation from the Board at such time. During the fiscal year ended December
31, 1999, all incumbent directors were present in person or by proxy at least
75% of the meetings of the Board and at least 75% of the meetings of each of the
Committees on which they served (during the period that they served as
directors).

The Executive Committee, the Audit Committee and the Compensation
Committee are the standing committees of the Board, and may meet concurrently
with the Board's meetings.

EXECUTIVE COMMITTEE. The Executive Committee has the responsibility,
between meetings of the Board, to advise and aid our officers in all matters
concerning the management of the business while the Board is not in session. The
Executive Committee met weekly in 1999. The current members of the Executive
Committee are Yoav Stern and Zivi R. Nedivi.

AUDIT COMMITTEE. The Audit Committee is responsible for providing
assistance to the Board in fulfilling its responsibilities relating to corporate
accounting and reporting practices and to maintain a direct line of
communication between the directors and the independent accountants. It reviews
our system of internal audits, selects independent auditors, reviews the scope
and results of the independent audit process and evaluates the adequacy of our
internal accounting procedures. The Audit Committee met three (3) times in 1999.
The current members of the Audit Committee are Niv Harizman, David Jan Mitchell
and Yoav Stern. The Audit Committee has adopted a written charter (see Annex A).

In accordance with Nasdaq rules, Niv Harizman and David Mitchell are
independent directors. Yoav Stern is not an independent director because he is
the Chairman of the Board and

<PAGE> 13

an executive officer of Kellstrom. The Board intends to replace Yoav Stern on
the Audit Committee with a member who is an independent director in accordance
with Nasdaq rules by June 14, 2001, which is the date the Nasdaq rules require
that all audit committee members, rather than a majority, be independent.

REPORT OF THE AUDIT COMMITTEE

The following statement made by the Audit Committee shall not be deemed
incorporated by reference into any filing under the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and shall not otherwise be deemed filed under such
acts.

In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and Kellstrom that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees," and
discussed with the auditors their independence from Kellstrom and its
management.

The Audit Committee discussed and reviewed with the independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Audit Committee reviewed the audited financial
statements of the Corporation for the fiscal year ended December 31, 1999 with
management and the independent auditors. Management has the responsibility for
the preparation of Kellstrom's financial statements and the independent auditors
have the responsibility for the examination of those statements.

Based upon the above-mentioned review and discussions with management
and the independent auditors, the Audit Committee recommended to the Board that
Kellstrom's audited financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended the
reappointment, subject to stockholder approval, of KPMG LLP as Kellstrom's
independent auditors and the Board concurred in such recommendation.

SUBMITTED BY THE AUDIT COMMITTEE

NIV HARIZMAN
DAVID JAN MITCHELL
YOAV STERN

<PAGE> 14

COMPENSATION COMMITTEE. The Compensation Committee is responsible for
reviewing our compensation philosophy and programs, recommending to the Board
the compensation to be paid to executive officers, and, at the option of the
Board, administering stock option plans. The Compensation Committee met three
(3) times in 1999. The current members of the Compensation Committee are David
Jan Mitchell and Niv Harizman, each of whom is an "outside director" within the
meaning of Rule 162(m) ("Rule 162(m)") of the Internal Revenue Code of 1986, as
amended.

EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The following statement made by the Compensation Committee shall not be
deemed incorporated by reference into any filing under the Securities Act or the
Exchange Act and shall not otherwise be deemed filed under such acts.

PHILOSOPHY. Kellstrom's executive compensation philosophy is to provide
competitive levels of compensation, integrate the compensation of its executive
officers with the achievement of our annual and long-term performance goals,
reward above average corporate performance, recognize individual initiative and
achievement and assist Kellstrom in attracting and retaining qualified
management. To meet these objectives, the Compensation Committee attempts to set
the compensation of Kellstrom's executive officers at levels that it believes
are competitive with other companies of the same size in Kellstrom's industry,
in light of Kellstrom's current and anticipated performance. The Compensation
Committee endorses the position that equity interest in Kellstrom by management
is beneficial in aligning executive officers' and stockholders' interests in the
enhancement of stockholder value. The Compensation Committee believes that
Kellstrom's unique blend of compensation, performance bonuses and stock option
awards is essential to attract and retain its executive management in order to
maintain and strengthen its competitive position in an industry that is highly
fragmented, rapidly consolidating and characterized by intense competition.

COMPONENTS OF EXECUTIVE COMPENSATION. Compensation of Kellstrom's
executive officers consists of both cash payments and grants of stock options.
The annual cash compensation consists of a base salary and an annual bonus.
Long-term incentives are provided through the grant of stock options.

BASE SALARIES AND BONUSES. The Compensation Committee attempts to set
base salaries of its executive officers at levels that it believes are
competitive with other companies of the same size in Kellstrom's industry.
Information about appropriate salary levels has been determined by reviewing the
public disclosure of Kellstrom's competitors and through Kellstrom's recruiting
activities. Except as described below, salaries are reviewed annually, and any
increases are based on competitive practices as well as the performance of
Kellstrom and the executive officer.

Cash bonuses have been a standard and expected component of
compensation at Kellstrom when Kellstrom has experienced particularly positive
financial results. Kellstrom's bonuses (the

<PAGE> 15

"Performance Bonuses") are paid to executives and can vary between $0 and a
maximum dollar amount for each executive (which is pre-determined annually by
the Compensation Committee). The final annual amount of the Performance Bonuses
depends on the profitability of Kellstrom, and has no discretionary component.
In March 2000, Performance Bonuses in an aggregate of approximately $557,082
were paid to 11 executives of Kellstrom for our 1999 fiscal year as compared to
an aggregate of approximately $1.4 million dollars which were paid to our
executives for our 1998 fiscal year.

All of Kellstrom's executive officers are parties to employment
agreements with Kellstrom. Each employment agreement provides for a base salary
and a specified bonus based upon Kellstrom achieving minimum target net income
levels during its fiscal year.

STOCK OPTIONS. Kellstrom is operating in a unique environment in which
Kellstrom's relatively small number of employees (consisting of less than 20
executives and less than 350 employees as of December 31, 1999) make the daily
decisions that directly affect Kellstrom's operational and financial results.
Kellstrom 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
Compensation Committee believes that Kellstrom's stock option plans are an
essential component of Kellstrom's compensation package which promote the
interests of Kellstrom and stockholders by strengthening Kellstrom's ability to
attract, retain and incentivize competent employees and executives and making
service on Kellstrom's Board of Directors more attractive to present and
prospective non-employee directors. Such stock option plans encourage stock
ownership and proprietary interest in Kellstrom by the individuals upon whose
judgment, initiative and efforts the financial success and growth of Kellstrom
largely depend.

Kellstrom has historically granted stock options to its executive
officers as an inducement for employment and as part of employee compensation
packages. The Compensation Committee (or the Board) has the authority to
determine the individuals to whom stock options are awarded, the terms at which
option grants are made, the duration of the options and the number of shares
subject to each option. The size of the option grants are generally based on the
position level of the recipient, the executive's capabilities as determined by
his or her performance during the two to three quarters preceding the grant and,
in particular, the executive's projected future contribution to Kellstrom and
the need to incentivize him or her by means of a vesting schedule that
encourages continued long-term commitment to Kellstrom. Through the award of
stock options, the objective of aligning executive officers' long range
interests with those of the stockholders is met by providing the executive
officers with the opportunity to build a meaningful stake in Kellstrom. All of
Kellstrom's outstanding stock options have an exercise price at least equal to
the fair market value of Kellstrom's Common Stock on the day of the grant.
Kellstrom's 1998 Stock Option Plan prohibits, granting any options with exercise
prices less than the fair market value of the Common Stock on the date of the
grant. Kellstrom's 2000 Stock Option Plan will, if its adoption is approved by
Kellstrom's stockholders, prohibits granting any options with an exercisable
price less than the higher of (i) the unweighted average of the daily closing
prices per share of Common Stock for the

<PAGE> 16

20 consecutive trading days prior to the date of grant and (ii) the closing
price per share of Common Stock for the trading day preceding the date of grant.

It is the Compensation Committee's intention that, over time,
compensation opportunities from option grants will constitute a significant
portion of each executive officer's total compensation. However, there are no
automatic annual grants to executive offices. Instead, the Compensation
Committee (or the Board) reviews the performance of Kellstrom overall and of
each individual executive officer, as well as past option grants to each
executive officer, and makes decisions about recipients and grant sizes for the
year. Kellstrom's awards of stock options serve as a key mechanism to attract
and retain experienced executives in the industry. Kellstrom believes that its
option grants to date have enabled Kellstrom to provide executives compensation
levels which equal or exceed those offered by its competitors. Therefore,
Kellstrom believes that its stock option plans are a substantial and essential
component of Kellstrom's ability to maintain its competitive position in its
industry.

Since Kellstrom's formation in early 1994, Kellstrom has granted stock
options for the purchase of an aggregate of approximately 2,988,165 shares of
Common Stock, representing approximately 14.6% of the diluted weighted average
shares of Common Stock outstanding. Such granted options have vested as to
approximately 2,338,443 shares of Common Stock, or approximately 11.4% of the
diluted weighted average shares of Common Stock outstanding.

COMPENSATION OF CHIEF EXECUTIVE OFFICER. The Compensation Committee
considered a number of factors in determining the compensation to be paid to
Kellstrom's Chief Executive Officer, including levels generally paid to
executives in Kellstrom's industry, the capabilities of the Chief Executive
Officer and his projected contribution to Kellstrom's performance on a short-
and long-term basis.

COMPLIANCE WITH RULE 162(M). Kellstrom will continue to analyze its
executive compensation practices and plans on an ongoing basis with respect to
Section 162(m) of the Internal Revenue Code. Where it deems advisable, Kellstrom
will take the appropriate action to maintain the tax deductibility of its
executive compensation.

SUBMITTED BY THE COMPENSATION COMMITTEE

DAVID J. MITCHELL
NIV HARIZMAN

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our Compensation Committee, which was formed in 1999, consists of Niv
Harizman and David Jan Mitchell. There were no interlocks with other companies
within the meaning of the SEC's proxy rules during 1999.

<PAGE> 17

PERFORMANCE GRAPH

The following graph compares the total return on our Common Stock with
the cumulative total return on the Standard & Poor's 500 Index (the "S&P 500
Index") and a peer group index selected by Kellstrom, for the last five fiscal
years.

The peer group selected by Kellstrom is comprised of the following
companies: AAR Corp., Aviation Sales Company, Aviall, Inc. and Banner Aerospace,
Inc.

These indices relate only to stock prices and do not purport to afford
direct comparison of the business or financial performance of the companies
comprising such indices with Kellstrom nor with each other.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN *

Kellstrom
Measurement Period Industries,
(Fiscal Year Covered) Inc. S&P 500 INDEX PEER GROUP
--------------------- ----------- ------------- ----------
<S> <C> <C> <C>
DEC 94 100 100 100
DEC 95 115.93 137.58 146.57
DEC 96 194.18 169.17 190.71
DEC 97 573.85 225.60 274.85
DEC 98 666.60 290.08 254.76
DEC 99 211.57 351.12 158.51

</TABLE>

* Assumes $100 invested on December 31, 1994, including reinvestment of
dividends, in our Common Stock, the S&P 500 Index and the companies
comprising the peer group.

COMPENSATION TABLES

The following table summarizes the aggregate compensation paid during
each of the years ended December 31, 1997, 1998 and 1999 to our Chief Executive
Officer (the "CEO") and our four most highly compensated executive officers
other than the CEO in 1999. The CEO and such other executive officers are
sometimes referred to herein as the "Named Executives."

<PAGE> 18

SUMMARY COMPENSATION TABLE

Long-term
Annual Compensation Compensation
--------------------------- ------------
Securities All Other
Name and Underlying Compen-
Principal Position Year Salary ($) Bonus ($) Options (#) Sation ($)
------------------ ------ ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Zivi R. Nedivi (1), 1997 240,000 345,600 421,000 9,095(2)
Chief Executive 1998 480,000 720,000 283,000(3) 8,057(4)
Officer, President 1999 480,000 157,736 -- 8,095(4)
and Director

Yoav Stern (1)(5), 1997 -- -- 421,000 1,000(6)
Chairman 1998 -- -- 283,000(3) --
1999 320,000 157,736 -- --

John S. Gleason, 1997 190,000 129,600 165,000 1,262(6)
Executive 1998 225,000 187,500 115,000(7) 11,250(8)
Vice President 1999 240,000 41,077 -- 12,000(8)

Fred von 1997 190,000 129,600 75,000 1,333(6)
Husen(9), 1998 200,000 150,000 55,000 10,000(8)
Executive Vice 1999 220,000 36,148 -- 10,000(8)
President

Gideon Vaisman 1997 -- -- -- --
(10), Senior Vice 1998 200,000 112,500 150,000 2,292(11)
President 1999 200,000 32,862 -- 16,000(8)

</TABLE>
--------------------

(1) Until its dissolution in August 1999, Messrs. Nedivi and Stern owned
interests in Helix Management Company II, L.L.C., which until March 30,
1999, provided certain merger, acquisition and financial advisory
services to Kellstrom pursuant to an engagement letter agreement under
which it received a retainer and was entitled to certain transaction
fees under certain circumstances. Amounts reported exclude amounts paid
to Helix Management Company II, L.L.C. See "Certain Relationships and
Related Transactions."

<PAGE> 19

(2) Consisting of a $8,095 life insurance premium and a $1,000 holiday
bonus.

(3) Includes an option to purchase 176,000 shares, originally granted in
1997 and repriced (and vesting schedule extended) as of October 8,
1999.

(4) Consisting of a life insurance premium.

(5) Mr. Stern became an executive officer of Kellstrom in March 1999.

(6) Consisting of a holiday bonus.

(7) Includes an option to purchase 65,000 shares, originally granted in
1997 and repriced (and vesting schedule extended) as of October 8,
1999.

(8) Consisting of a contribution to an employee-directed investment fund.

(9) Mr. von Husen joined Kellstrom in January 1997.

(10) Mr. Vaisman joined Kellstrom in April 1999 and as of January 2, 2000
was no longer an officer of Kellstrom.

(11) Consisting of Kellstrom's matching contribution to its 401(k) Savings
Plan.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

No options or stock appreciation rights were granted to the Named
Executives in the fiscal year ended December 31, 1999.

The following table sets forth information concerning the value
realized by the Named Executives upon exercise of stock options during the
fiscal year ended December 31, 1999, and the value of unexercised stock options
held by the Named Executives at December 31, 1999.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)

Shares Value Number of Securities Underlying Value of Unexercised In-The-
Acquired on Realized Unexercised Options At Fiscal Money Options At
Name Exercise (#) ($) Year-end (#) Fiscal Year-end ($)
---- ------------ --- -------------- -------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Zivi R. Nedivi -- -- 589,000 88,000 534,150 --
Yoav Stern -- -- 589,000 88,000 534,150 --
John S. Gleason 120,000 1,412,707 98,332 76,668 57,200 --
Fred von Husen -- -- 61,666 73,334 52,333 26,167
Gideon -- -- 50,000 100,000 -- --
Vaisman(2)

</TABLE>

------------------------------------

(1) No stock appreciation rights are held by any of the Named Executives.
(2) As of January 2, 2000, Mr. Vaisman was no longer an officer of
Kellstrom.

<PAGE> 20

COMPENSATION OF DIRECTORS

All directors are reimbursed for out-of-pocket expenses incurred in
attending Board meetings or for otherwise acting on our behalf. Messrs. Nedivi
and Stern did not receive any compensation for service as our directors beyond
that paid to them under their respective Employment Agreements on account of
their services as our executive officers. During 1999, the other directors each
received stock options on account of their service as our directors to purchase
30,000 shares each at an exercise price of $19.00 per share.

The options granted to our directors in 1999 were granted under our
1998 Stock Option Plan (the "1998 Plan"). During 1999, the 1998 Plan was
administered by the Board and by the Compensation Committee. Under the 1998
Plan, options are granted by the Board or the Compensation Committee on such
terms and at such prices as may be determined by the Board or the Compensation
Committee, except that the exercise price per share of stock options may not be
less than the fair market value of a share of Common Stock at the time of grant.
Each option is for a term of not more than 10 years and vests at such time or
times and during such period as determined by the Board or the Compensation
Committee. Under the terms of the 1998 Plan, in the event of our change in
control (as defined in such plans), unless otherwise determined by the Board,
the purchaser of our assets or stock may, in its sole discretion, deliver the
same consideration as is delivered to our stockholders as a result of such
transaction or the Board may cancel all outstanding options in exchange for cash
or other consideration equal in value to the value of the consideration that the
option holder would have received had the option been exercised (to the extent
then exercisable) prior to such transaction, less the exercise price therefor.
Upon any such transaction, the Plan provides that all outstanding options
generally become immediately exercisable in full.

EMPLOYMENT AGREEMENTS

NEDIVI EMPLOYMENT AGREEMENT. We entered into an Employment Agreement
with Mr. Nedivi, effective as of March 30, 1999 and amended as of December 27,
1999, pursuant to which Mr. Nedivi is employed as our President and Chief
Executive Officer. The Employment Agreement provides for the employment of Mr.
Nedivi through December 31, 2004, at an annual base salary of $480,000, subject
to annual review and upward adjustment, and a bonus of between $0 and an amount
equal to 150% of the then-current salary, based upon our net income during each
calendar year in relation to our target net income, as determined in advance by
the Compensation Committee, for such year. In addition, the Employment Agreement
provides that Mr. Nedivi will be paid severance equal to two years of the
then-current base salary, plus an amount equal to the bonus paid to Mr. Nedivi
on account of each of the two then-preceding calendar years, if employment is
terminated without cause. Under the Employment Agreement, Mr. Nedivi may not
compete with us during the term of the Agreement or for three years following
termination other than involuntary termination or termination by Mr. Nedivi for
good reason (as defined therein). Under the terms of the Employment Agreement,
we continue to pay the premium on a life insurance policy on the life of Mr.
Nedivi which had been maintained by us and transferred to Mr. Nedivi.

<PAGE> 21

STERN EMPLOYMENT AGREEMENT. We entered into an Employment Agreement
with Mr. Stern, effective as of March 30, 1999 and amended as of March 31, 1999
and December 27, 1999, pursuant to which Mr. Stern is employed as our Chairman
through December 31, 2004, on substantially the same terms as those included in
the Employment Agreement with Mr. Nedivi. Under the terms of such Employment
Agreement, Mr. Stern is responsible for the development and implementation of
the strategic plans for the growth and development of our business and
operations, including overseeing all aspects of our mergers and acquisitions
activities (including, without limitation, analyzing, structuring, negotiating
and effecting acquisitions and integrating newly acquired businesses with our
business and operations).

GLEASON EMPLOYMENT AGREEMENT. We entered into an Amended and Restated
Employment Agreement with Mr. Gleason, effective as of July 1, 2000, pursuant to
which Mr. Gleason is employed as one of our executive officer's. The agreement,
as amended, provides for the employment of Mr. Gleason through July 1, 2005, at
an annual base salary of $265,000, subject to annual review and upward
adjustment, and a bonus for the calendar year ending December 31, 2000 of
between $0 and $187,500, and for such calendar year during the Employment Period
(as defined therein) commencing with the year ending December 31, 2001, of
between $0 and $205,000, based upon our net income and of our Kellcad division
during each calendar year in relation to our target net incomes and the Kellcad
division, respectively, as determined in advance by the Compensation Committee,
for such year. If Mr. Gleason's employment is terminated without cause, the
employment agreement provides that Mr. Gleason will be paid a severance payment
equal to four months of his base salary, provided that if termination is in
connection with a change of control, Mr. Gleason will be paid an amount equal to
twelve months of his base salary. A change of control is defined in the
agreement as (i) any transaction which results in our stockholders of Kellstrom
immediately before the transaction ceasing to own at least 51% of our voting
stock or of the entity which results from the transaction, (ii) a merger,
consolidation or other transaction where we are not the surviving entity or
(iii) a disposition of all or substantially all of our assets. Under the
Employment Agreement, Mr. Gleason may not compete with us during the term of the
Employment Agreement or for two years following termination other than
involuntary termination or termination by Mr. Gleason for good reason (as
defined therein). Under the terms of the Employment Agreement, we maintain a
life insurance policy on the life of Mr. Gleason in the amount of $2 million,
and transferred such policy without consideration to Mr. Gleason in January 1999
pursuant to the terms of the Employment Agreement.

VON HUSEN EMPLOYMENT AGREEMENT. We entered into an Employment Agreement
with Mr. von Husen, effective as of October 25, 1996 and amended as of December
27, 1999, pursuant to which Mr. von Husen is employed as one of our executive
officers. The agreement provides for the employment of Mr. von Husen through
January 15, 2002, at an annual base salary of $190,000, subject to annual review
and upward adjustment, and a bonus of between $0 and $135,000, based upon our
net income during each calendar year in relation to our target net income, as
determined in advance by the Compensation Committee, for such year. If Mr. von
Husen's employment is terminated without cause, the Employment Agreement
provides that Mr. von Husen will be paid severance payment equal to four months
of his base salary, provided that if termination is in

<PAGE> 22

connection with a change of control (as previously defined), Mr. von Husen will
be paid an amount equal to eight months of his base salary. Under the Employment
Agreement, Mr. von Husen may not compete with us during the term of the
Agreement or for two years following termination other than involuntary
termination (in which case the non-compete period expires one year after
termination), termination in the event of a change of control (in which case the
non-compete period expires six months after termination) or termination by Mr.
von Husen for good reason (as defined therein).

VAISMAN EMPLOYMENT AGREEMENT. We (through our wholly-owned subsidiary,
Integrated Technology Holdings Corp.) entered into an Employment Agreement with
Mr. Vaisman, effective as of February 27, 1998 and amended as of September 15,
1998, pursuant to which Mr. Vaisman was employed as one of our executive
officers through January 1, 2000. The agreement, as amended, originally provided
for the employment of Mr. Vaisman through April 1, 2001, at an annual base
salary of $200,000, subject to annual review and upward adjustment, and a bonus
of between $0 and $150,000. Mr. Vaisman was also granted options to purchase
150,000 shares of Common Stock pursuant to the Employment Agreement. Under the
Employment Agreement, unless we are determined to be in default of our
obligation to make certain payments under the Purchase Agreement pursuant to
which we purchased the assets of Integrated Technologies Corp., Mr. Vaisman may
not compete with us during the term of the Agreement or for two years following
termination other than termination by Mr. Vaisman for good reason (as defined
therein). Effective as of January 1, 2000, we entered into an agreement with Mr.
Vaisman pursuant to which the Employment Agreement was terminated, and Mr.
Vaisman was retained by us as a consultant for a period of three months. In
connection with the termination of the Employment Agreement, the stock options
previously granted to Mr. Vaisman were also terminated. The restrictions on
competition by Mr. Vaisman under the Employment Agreement remain in effect in
accordance with their original terms.

REPORT OF THE BOARD OF DIRECTORS ON STOCK OPTION REPRICING AND EXTENSION OF
VESTING SCHEDULES

STOCK OPTION REPRICING. In early October 1999, we faced a significant
decline in the market price of our Common Stock, while our financial and
operating performance remained strong. As a result, a significant portion of the
stock options previously issued to executive officers and other employees,
including a large number of such options which were to vest that month, had
exercise prices which exceeded the then-current market value of the underlying
shares. In an effort to continue to incentivize executive officers and other
employees while securing their long-term commitment to us, the Board, in lieu of
granting additional options to existing executives and employees, approved the
repricing of certain previously granted options to reflect the then-current
market price of our Common Stock. We offered all our executive officers and
other employees and directors who held options which had been granted under our
1995, 1996 and 1997 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, 1999, for a corresponding number of options having an
exercise price of $10.125. We also offered this opportunity to certain
individuals

<PAGE> 23

(including an executive officer) who held options granted outside of such stock
option plans.

EXTENSION OF VESTING SCHEDULES OF STOCK OPTIONS. We used the October
1999 repricing as an opportunity to secure the long term commitment of employees
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, fifty
percent (50%).

SUMMARY OF STOCK OPTION REPRICING. The following table sets forth
certain information with respect to the repricing and extension of vesting
schedules of certain stock options held by our executive officers.

<PAGE> 24

10-YEAR OPTION REPRICINGS

Length of
Original
Number of Market Price Exercise Option
Securities of Stock At Price At Time Term
Underlying Time of of Repricing Remaining
Options Repricing or or New At Date of
Repriced or Amendment Amendment Exercise Repricing or
Name Date Amended (#) ($) ($) Price ($) Amendment
---- ---- ----------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Yoav Stern, 10/8/98 107,000 10.125 25.75 10.125 116 months
Chairman of the 10/8/98 176,000 10.125 18.625 10.125 108 months
Board

Zivi R. Nedivi, 10/8/98 107,000 10.125 25.75 10.125 116 months
CEO and 10/8/98 176,000 10.125 18.625 10.125 108 months
President

John S. Gleason, 10/8/98 50,000 10.125 25.75 10.125 116 months
Executive Vice 10/8/98 65,000 10.125 18.625 10.125 108 months
President

Fred von Husen, 10/8/98 30,000 10.125 25.75 10.125 116 months
Executive Vice 10/8/98 25,000 10.125 18.625 10.125 108 months
President

Anthony Motisi, 10/8/98 17,000 10.125 25.75 10.125 116 months
Senior Vice 10/8/98 25,000 10.125 18.625 10.125 108 months
President --
Operations(1)

Gideon Vaisman, 10/8/98 50,000 10.125 24.00 10.125 114 months
Senior Vice
President(2)

Michael W. 10/8/98 17,000 10.125 25.75 10.125 116 months
Wallace, CFO(3) 10/8/98 17,500 10.125 18.625 10.125 108 months
10/8/98 25,000 10.125 15.25 10.125 107 months
10/8/98 15,000 10.125 13.625 10.125 101 months

</TABLE>
-------------------

(1) As of January 2, 2000, Mr. Vaisman was no longer employed by us.
(2) As of January 15, 2000, Mr. Motisi was no longer employed by us.
(3) As of February 15, 2000, Mr. Wallace was no longer employed by us.

SUBMITTED BY THE BOARD OF DIRECTORS

YOAV STERN
ZIVI R. NEDIVI
DAVID JAN MITCHELL
NIV HARIZMAN
WILLIAM LYON
WILLIAM J. CROWE, JR.

<PAGE> 25

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a summary of certain agreements and transactions
between or among Kellstrom and certain related parties. It is our policy to
enter into transactions with related parties on terms that, on the whole, are no
less favorable than those that would be available from unaffiliated parties. It
is also our policy to submit any such proposed transactions to a committee of
independent directors for review and approval. Based on our experience in the
industries in which we operate and the terms of our transactions with
unaffiliated parties, it is our belief that all of the transactions described
below involving us met that standard at the time such transactions were
effected.

We have previously engaged Helix Management Company II, L.L.C.
("Helix"), a company which had been controlled by Messrs. Stern and Nedivi, to
act as our exclusive financial advisor with respect to merger and acquisition
transactions and as principal financial adviser with respect to other
transactions for a term that commenced effective January 1, 1997. We terminated
the agreement with Helix effective as of March 30, 1999, pursuant to a
Termination Agreement (the "Helix Termination Agreement"). Under the terms of
the original agreement with Helix, entered into as of March 28, 1997, Helix
received a monthly retainer of $25,000 and a success fee that was determined by
us and Helix on a per transaction basis, but not less than 2% of the aggregate
consideration paid in connection with the applicable transaction. Payments under
the agreement with Helix were in lieu of any fees payable to Mr. Stern as our
Chairman of the Board. A significant portion of the retainer was paid by Helix
to Mr. Stern, who as our Chairman of the Board actively participates in leading
business development efforts and our strategic growth and direction. As a result
of ownership interests held by Messrs. Stern and Nedivi in Helix, a portion of
the transaction fees paid by us to Helix were distributed by Helix to Messrs.
Stern and Nedivi during 1999. We paid Helix $1.5 million in connection with
certain merger and acquisition transactions that occurred during 1999. Under the
terms of the Helix Termination Agreement, we were required to pay Helix success
fees only in those transactions procured by Helix which had either been
consummated or signed prior to the date of termination. Helix waived all other
fees to which it may have been entitled, including monthly retainer fees on
account of the ninety day period following termination and success fees on
account of any transactions procured by Helix and undertaken by us within one
year of termination. Helix also agreed to provide, for no additional
consideration, such assistance to us (including access to its members and
employees and copies of its records and files) as necessary to assure an orderly
transition in the services previously provided by Helix.

Until March 30, 1999, we were a party to a management agreement with
East Shore Ventures, Inc. ("East Shore"), an entity wholly owned by Mr. Nedivi,
pursuant to which Mr. Nedivi provided the services of Chief Executive Officer to
us. The Management Agreement provided for an annual base fee of $240,000,
subject to annual review and upward adjustment, and a bonus of between $0 and
$360,000, depending solely on our profitability. Under the terms of the
Management Agreement, we maintained a life insurance policy on the life of Mr.
Nedivi in the amount of $4 million, which policy was transferred without
consideration to Mr. Nedivi in January 1999 pursuant to the terms of such
Management Agreement. We entered into a Termination Agreement with East Shore
effective as of March 30, 1999, pursuant to which the parties agreed to
terminate the

<PAGE> 26

Management Agreement and agreed that East Shore would only be paid management
fees and related benefits prorated through the date of termination.

We have from time to time loaned money to certain of our executive
officers and directors for the purpose of purchasing shares of Common Stock in
the open market (including loans pursuant to our 1998 Stock Purchase Plan which
was approved by our stockholders at the 1998 Annual Meeting of Stockholders), or
pursuant to the terms of employment agreements between us and our executive
officers. The following table sets forth, with respect to each executive officer
or director who was indebted to us in an amount in excess of $60,000 at any time
since January 1, 1999, the largest aggregate amount of indebtedness outstanding
at any time during such period, the date such indebtedness was incurred, the
amount thereof outstanding as of December 1, 2000, the rate of interest charged
thereon and the nature of the loan.

<TABLE>
<CAPTION>
Largest Aggregate
Amount Amount Outstanding as of Interest
Name Outstanding ($) Date Incurred December 1, 2000 ($) Rate (%)
---- --------------- ------------- ------------------------ --------
<S> <C> <C> <C> <C>
Zivi R. Nedivi(1), 135,000 7/24/97 105,000 6.54%
President 250,000 6/15/98 200,000 5.69%
80,400 8/05/98 64,320 5.69%
55,500 8/10/98 44,400 5.69%
------- -------
Total 520,900 413,720

Yoav Stern(1), 135,000 2/28/97 105,000 6.10%
Chairman 250,000 6/15/98 200,000 5.69%
134,000 8/05/98 120,600 5.57%
100,000 5/10/00 100,000 6.30%
------- -------
Total 619,000 525,600

John Gleason(1), 45,000 4/02/97 35,000 6.10%
Executive Vice 98,861 6/15/98 79,089 5.69%
President 100,000 9/28/98 80,000 5.47%
------- -------
Total 243,861 194,089

Michael Wallace(1), 100,000 6/15/98 50,000 5.69%
Former Chief
Financial Officer

Ami Zelcer 100,000(1) 8/23/99 75,000 5.87%
Senior Vice 75,000(2) 2/17/99 50,000 4.66%
President 75,000(2) 5/28/99 50,000 5.15%
50,000(1) 5/2/00 50,000 6.30%
------- -------
Total 300,000 225,000

Robert Hogan(3), 150,000 10/05/99 100,000 5.35%
Senior Vice President 20,000(1) 3/24/00 20,000 6.69%
10,000(1) 5/1/00 10,000 6.30%
------- -------
Total 180,000 130,000

David Mitchell(1) 83,638 8/25/99 75,274 5.87%

</TABLE>

<PAGE> 27

------------------------

(1) These loans were granted for the purpose of purchasing shares of Common
Stock on the open market. Such loans are payable over four years for
employees or five years for directors at an interest rate based on the
"Applicable Federal Rate" at the time of the loan. Accrued interest is
to be paid annually in arrears beginning on the first anniversary of
the date of the loan. The loans provide for mandatory prepayment if the
officer or director sells any shares of our Common Stock. While the
loans are unsecured, officers and directors are obligated to repay such
loans in full regardless of the market value of the Common Stock upon
any such sale.

(2) These loans were granted pursuant to the terms of the Employment
Agreement between Kellstrom and Mr. Zelcer dated February 1, 1999.
Interest accrues on the loans at an interest rate based on the
"Applicable Federal Rate" at the time of the loan. On May 25, 2000, the
Employment Agreement was amended to provide that on May 28, 2000, May
28, 2001 and May 28, 2002, provided that Mr. Zelcer is then employed by
Kellstrom, $25,000 of the principal amount of each loan will be
forgiven, together with any interest which shall have accrued on the
loan during such year. The Employment Agreement further provides that
in the event of the termination of the Employment Agreement prior to
the end of the Employment Period (as defined therein), the full
principal amount of the loans then outstanding, together with all
accrued interest thereon, will be immediately due and payable.

(3) This loan was granted pursuant to the terms of the Employment Agreement
between Kellstrom and Mr. Hogan dated October 6, 1999. Interest accrues
on the loan at an interest rate based on the "Applicable Federal Rate"
at the time of the loan. The Employment Agreement provides that at the
end of each of the first, second and third yearly anniversaries of the
commencement of Mr. Hogan's employment under the Employment Agreement,
provided that Mr. Hogan is then employed by us, $50,000 of the
principal amount of the loan will be forgiven, together with any
interest which shall have accrued on the loan during such year. The
Employment Agreement further provides that in the event of the
termination of the Employment Agreement prior to the end of the
Employment Period (as defined therein), the full principal amount of
the loans then outstanding, together with all accrued interest thereon,
will be immediately due and payable.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING

The Exchange Act requires our executive officers, directors and
beneficial owners of more than 10% of a class of our equity securities to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Based solely upon a review of Forms 3, 4 and 5,
and amendments thereto, furnished to us during our most recent fiscal year,
except for one report disclosing no transactions filed by Robert Hogan and one
report disclosing one transaction filed by William J. Crowe, we believe that
during the year ended December 31, 1999, all reporting persons timely complied
with all filing requirements applicable to them.

<PAGE> 28

PROPOSAL NO. 1
ELECTION OF DIRECTORS

The Board is divided into two classes, each of which serves for a term
of two years, with only one class of directors being elected in each year. The
term of office of the Class II directors, presently consisting of Admiral
William J. Crowe, Jr., Zivi R. Nedivi and Yoav Stern, will expire at the Annual
Meeting, and the term of office of the Class I directors, presently consisting
of Niv Harizman, General William Lyon and David Jan Mitchell, will expire at the
next succeeding annual meeting of stockholders. In each case, a director will
hold office until the next annual meeting of stockholders at which his class of
directors is to be elected.

Unless otherwise specified, the enclosed proxy will be voted in favor
of Messrs. Crowe, Nedivi and Stern (each of whom is currently one of our
director's) to serve until the second succeeding annual meeting of stockholders
and until their respective successors shall have been duly elected and
qualified. If any of these nominees becomes unavailable for any reason, or if a
vacancy should occur before the election, the shares represented by the proxy
will be voted for the person, if any, who is designated by the Board to replace
the nominee or to fill the vacancy on the Board. All nominees have consented to
be named and have indicated their intent to serve if elected. The Board has no
reason to believe that any of the nominees will be unable to serve or that any
vacancy on the Board will occur.

NOMINEES FOR CLASS I DIRECTORS

Admiral William J. Crowe, Jr.
Zivi R. Nedivi
Yoav Stern

Biographical information relating to each of the nominees for directors
appears starting on page 4 of this Proxy Statement under the heading
"BIOGRAPHICAL INFORMATION REGARDING DIRECTORS/NOMINEES AND EXECUTIVE OFFICERS."

VOTE REQUIRED AND BOARD RECOMMENDATION

THE BOARD OF DIRECTORS DEEMS THE ELECTION AS DIRECTORS OF THE THREE
NOMINEES LISTED ABOVE TO BE IN THE BEST INTERESTS OF KELLSTROM AND OUR
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THESE NOMINEES. PROXY CARDS EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.

<PAGE> 29

PROPOSAL NO. 2
ADOPTION AND APPROVAL OF
2000 STOCK OPTION PLAN

Our 2000 Stock Option Plan (the "2000 Plan") was adopted by the Board
effective as of December ___, 2000, subject to stockholder approval at the
Annual Meeting, to provide for the grant of options to purchase shares of Common
Stock to our employees, and to outside members of the Board as an incentive for
their service on the Board.

The Board believes that stock options are important to promote the
interest of the Company and its stockholders. Options strengthen the Company's
ability to attract and retain competent executives and other employees and make
service on the Company's Board more attractive to present and prospective
non-employee directors. Options also provide a way to encourage stock ownership
and proprietary interest in Kellstrom by non-employee directors and valued
executives and other employees upon whose judgment, initiative and efforts the
Company's financial success and growth largely depend. While we have granted a
significant number of options under our existing stock option plans, very few
of these options have been exercised. At present, these options have an average
exercise price of approximately $10.00, which exercise price is substantially
above the current share price of our Common Stock. The Board continues to
believe that our stock option plans are an essential component of our
compensation package which enables us to attract and retain qualified management
in order to maintain and strengthen our competitive position in an industry that
is highly fragmented, rapidly consolidating and characterized by intense
competition. Given the average exercise price of our outstanding options, these
options do not provide the incentives which management believes are necessary to
attract and retain competent executives and employees and to make service on our
Board attractive to our present and prospective non-employee directors. The
proposed options would enable the Company to incentivize and attract employees
and outside directors while minimizing the cash and other compensation which the
Company would otherwise have to incur.

The adoption of the 2000 Plan is subject to stockholder approval at the
Annual Meeting. Stockholder approval will allow us to obtain a tax deduction for
the full amount allowable with respect to the exercise of options granted under
the Plan and will provide us with the flexibility to grant options qualifying as
incentive stock options for tax purposes ("incentive options").

THE PRINCIPAL PROVISIONS OF THE 2000 PLAN ARE SUMMARIZED BELOW. SUCH
SUMMARY DOES NOT, HOWEVER, PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY THE TERMS OF THE 2000 PLAN. A COPY OF THE 2000 PLAN IS ATTACHED
HERETO AS ANNEX A AND IS INCORPORATED HEREIN BY REFERENCE.

DESCRIPTION OF THE PLAN

The 2000 Plan provides that options may be granted to employees of
Kellstrom or any of our subsidiaries, or to non-employee members of our Board. A
total of One Million (1,000,000) shares of Common Stock are reserved for
issuance under the 2000 Plan. Based on the closing price of $2.781 for a share
of Common Stock on December 20, 2000, the aggregate value of the shares reserved
for issuance under the 2000 Plan is $2,781,000. The 2000 Plan will terminate 10
years after the Effective Date and no options may be granted under the 2000 Plan
thereafter.

<PAGE> 30

The 2000 Plan may be administered by the Board or a committee (the
"Committee") consisting of not less than two non-employee directors appointed by
the Board. The Board or the Committee selects the persons to whom options will
be granted.

The exercise price of options granted under the 2000 Plan shall be as
determined by the Board or the Committee, provided, however, that the exercise
price may not be less than the higher of (i) the unweighted average of the daily
closing prices per share of Common Stock for the 20 consecutive trading days
prior to the date of grant and (ii) the closing price per share of Common Stock
for the trading day preceding the date of grant (and provided that in the case
of an incentive stock option granted to an optionee beneficially owning more
than 10% of the outstanding Common Stock, the exercise price may not be less
than the higher of (i) the unweighted average of the daily closing prices per
share of Common Stock for the 20 consecutive trading days prior to the date of
grant and (ii) 110% of the closing price per share of Common Stock for the
trading day preceding the date of grant). The maximum option term is 10 years
(or five years in the case of an incentive stock option granted to an optionee
beneficially owning more than 10% of the outstanding Common Stock) from the date
the option is granted. Options vest and become exercisable at such time or times
and during such period as determined by the Board or the Committee as provided
in the particular option agreement.

In the event of our Change in Control (as defined in the 2000 Plan),
unless otherwise determined by the Board, the purchaser in such transaction may,
in its discretion, deliver to the option grantees the same kind of consideration
delivered to our stockholders in such transaction, or the Board may cancel all
outstanding options in exchange for cash or other consideration, in each case
equal in value to the value of consideration the grantee would have received had
the option been exercised, less the exercise price therefor. In addition, upon
any Change in Control, notwithstanding any provisions in the 2000 Plan or in a
particular option agreement to the contrary, all outstanding options issued
under the 2000 Plan immediately become exercisable (except that under certain
such circumstances the Board has the discretion whether to accelerate the
exercisability of such options). Under the 2000 Plan, a Change in Control is
defined, in general, as the occurrence of any of the following: (1) a
liquidation or dissolution of us, or the sale or other disposition of all or
substantially all of our assets, or a reorganization, merger, consolidation or
other transaction or series of transactions which results in our stockholders
immediately prior thereto no longer owning more than 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, (2) the acquisition by any person (or group) who prior to such time
owned less than 50% of the combined voting power entitled to vote generally in
the election of directors of beneficial ownership of 50% or more of the combined
voting power entitled to vote generally in the election of directors, (3) the
failure of the individuals who constituted the Board as of the Effective Date
(as defined in the 2000 Plan) to constitute at least a majority of the Board, or
(4) the acquisition by any person, entity or group of beneficial ownership of
19% or more of the then outstanding shares of Common Stock or of the combined
voting power of our then outstanding voting securities entitled to vote
generally in the election of directors.

If any grantee's employment with us or a subsidiary terminates by
reason of death or permanent disability, options held by such grantee which are
then exercisable may be exercised for

<PAGE> 31

a period of 12 months from the date such grantee ceases to perform services for
us (but not later than the date the option would otherwise expire). If any
grantee's employment with us or a subsidiary is terminated by us for cause or
because the grantee is in breach of any employment agreement or if the grantee
resigns, options held by such grantee shall terminate on the date the grantee
ceases to perform services for us. If any grantee's employment with us or a
subsidiary terminates for any other reason, options held by such grantee which
are then exercisable may be exercised for a period of three months after the
date of such termination (but not later than the date the option would otherwise
expire). Notwithstanding the foregoing or any provision in the 2000 Plan or
individual option agreement to the contrary, the Board may provide, in its
discretion, that a grantee may exercise an option, in whole or in part, at any
time subsequent to grantee's termination of employment or service with us and
prior to the expiration of the option in accordance with its terms, either
subject to or without regard to any vesting or other limitation on exercise
imposed under the 2000 Plan. Payment for shares of Common Stock purchased under
options granted pursuant to the 2000 Plan may generally be made in cash or in
shares of Common Stock.

If the outstanding shares of Common Stock are changed into or exchanged
for a different number or kind of our shares or securities or another
corporation by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, or
stock dividend payable in capital stock, appropriate adjustment will be made in
the number and kinds of shares subject to the 2000 Plan, and in the number,
kinds and per share exercise price of shares subject to outstanding options
granted under the 2000 Plan. Any such adjustment in an outstanding option,
however, will be made without a change in the total price applicable to the
unexercised portion of the option, and with a corresponding adjustment in the
exercise price per share.

The Board may at any time terminate or make such modification of the
2000 Plan as it deems advisable, provided, however, that (i) the Board may not,
without approval by a majority vote of our stockholders, 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 2000 Plan, and (ii)
any modification or amendment of the 2000 Plan shall be subject to the approval
of our stockholders if such 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 Securities Exchange Act of 1934, as amended) or applicable stock exchange
or automated quotation system on which the Common Stock may then be listed.
Unless previously terminated, the 2000 Plan will terminate automatically on
___________, 2010, the tenth anniversary of the date of adoption of the 2000
Plan by the Board. Except as otherwise provided in the 2000 Plan, no
termination, modification or amendment of the 2000 Plan may, without the consent
of the person to whom an option has been granted, adversely affect the rights of
the holder of the option.

FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

GENERAL

The following discussion is a summary of some of the principal federal
income tax consequences of stock option grants under the Plan and recipients of
grants under the Plan should

<PAGE> 32

consult with their personal tax advisors with respect to such grants and
transactions in stock acquired pursuant to the Plan.

The grant of an option is not a taxable event for the optionee or us.

NON-QUALIFYING OPTIONS

Upon exercising a non-qualifying option, an optionee will recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the Common Stock on the date of exercise. If we
comply with applicable reporting requirements, it will be entitled to a business
expense deduction in the same amount. Non-qualifying options under the Plan are
intended to satisfy the requirements applicable to "qualified
performance-related compensation") under the Code, so that we should be entitled
to deduct the full amount of such compensation income without regard to the
$1,000,000 limitation imposed on the deduction of annual compensation paid to
each of the chief executive officer and the four other most highly compensated
officers of a publicly held corporation. Upon a taxable disposition of shares
acquired pursuant to the exercise of non-qualifying option, the optionee will
have taxable gain or loss, measured by the difference between the amount
realized on the disposition and the tax basis of the shares (generally, the
amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).

If the optionee surrenders shares of Common Stock in payment of part or
all of the exercise price for non-qualifying options, no gain or loss will be
recognized with respect to the shares surrendered and the optionee will be
treated as receiving an equivalent number of shares pursuant to the exercise of
the option in a non-taxable exchange. The basis of the shares surrendered will
be treated as the substituted tax basis for an equivalent number of option
shares received. However, the fair market value of any shares received in excess
of the number of shares surrendered will be taxed as ordinary income.

INCENTIVE OPTIONS

Upon exercising an incentive option, an optionee will not recognize
taxable income and any gain realized upon a disposition of shares received
pursuant to the exercise of an incentive option will be taxed as long-term
capital gain if the optionee holds the shares for at least two years after the
date of grant and for one year after the date of exercise of the option.
However, the excess of the fair market value of the shares subject to an
incentive option on the exercise date over the option exercise price will be
included in the optionee's alternative minimum taxable income in the year of
exercise for purposes of the alternative minimum tax. An optionee may be
entitled to a credit against regular tax liability in future years for minimum
taxes paid with respect to the exercise of incentive options. We and our its
subsidiaries and affiliates will not be entitled to any business expense
deduction with respect to the grant or exercise of an incentive option, except
as discussed below.

For the exercise of any incentive option to qualify for the foregoing
tax treatment, the optionee generally must be our employee or our subsidiaries
employed from the date the option is granted through a date within three months
before the date of exercise. In the case of an optionee who is disabled, this
three-month period is extended to one year. In the case of an employee who

<PAGE> 33

dies, the three-month period and the holding period for shares received pursuant
to the exercise of the option are waived.

If all of the foregoing requirements for incentive option treatment are
met except for the special holding period rules set forth above, the optionee
will recognize ordinary income upon the disposition of the shares in an amount
equal to the excess of the fair market value of the shares at the time the
option was exercised over the option exercise price. The balance of the realized
gain, if any, will be long- or short-term capital gain, depending upon whether
or not the shares were sold more than one year after the option was exercised.
If the optionee sells the shares prior to the satisfaction of the holding period
rules but at a price below the fair market value of the shares at the time the
option was exercised (or other applicable measurement date), the amount of
ordinary income (and the amount included in alternative minimum taxable income,
if the sale occurs during the same year as the option was exercised) will be
limited to the excess of the amount realized on the sale over the option
exercise price. If we comply with applicable (if any) reporting requirements, it
will be allowed a business expense deduction to the extent the optionee
recognizes ordinary income.

If an optionee exercises an incentive option by tendering shares of
Common Stock with a fair market value equal to part or all of the option
exercise price, the exchange of shares generally will be treated as a
non-taxable exchange (except that this treatment would not apply if the optionee
had acquired the shares being transferred pursuant to the exercise of an
incentive option and had not satisfied the special holding period requirements
summarized above). If the exercise is treated as a tax-free exchange, the
optionee would have no taxable income from the exchange and exercise (other than
minimum taxable income as discussed above) and the tax basis of the shares
exchanged would be treated as the substituted basis for the shares received. If
the optionee used shares received pursuant to the exercise of an incentive
option (or another statutory option) as to which the optionee had not satisfied
the applicable holding period requirement, the exchange would be treated as a
taxable disqualifying disposition of the exchanged shares, with the result that
the excess of the fair market value of the shares tendered over the optionee's
basis in the shares would be taxable.

OPTIONS GRANTED UNDER THE PLAN

As of the date of this Proxy Statement, we have not granted any options
under the 2000 Plan.

VOTE REQUIRED AND BOARD RECOMMENDATION

Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of the holders of a majority of the total shares of Common
Stock present at the Annual Meeting, in person or by proxy, and entitled to vote
at the Annual Meeting is required to approve and adopt the 2000 Plan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL AND
ADOPTION OF THE PLAN. PROXY CARDS EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.

<PAGE> 34
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE
1998 STOCK PURCHASE PLAN

An amendment to our 1998 Stock Purchase Plan increasing the aggregate
outstanding principal amount of loans to $4 million at any given time and
providing for the purchase of any of our securities was adopted by the Board on
December 8, 2000, subject to stockholder approval at the Annual Meeting.
Currently, the 1998 Stock Purchase Plan allows the Board to approve loans in the
aggregate outstanding amount of up to $3 million to certain of our employees,
officers, and directors for purposes of purchasing our common stock. Any loans
granted thereunder shall be unsecured with full recourse, and shall be payable
over four years for employees and five years for directors at an interest rate
based on the "Applicable Federal Rate" at the time of loan. Accrued interest
shall be paid annually in arrears beginning on the first anniversary of the date
of the loan. Such loans shall be subject to mandatory prepayment by the borrower
upon any sale of the securities securing such loan. The aggregate amount of
outstanding loans granted under the 1998 Stock Purchase Plan to any employee,
officer or director shall not exceed $1 million. Of the $3 million aggregate
outstanding amount currently authorized, approximately $1.7 million is
outstanding as of December 15, 2000.

The Board believes that the 1998 Stock Purchase Plan is important to
promote our interests and the interests of our stockholders by strengthening our
ability to encourage ownership and proprietary interest in Kellstrom by
officers, non-employee directors and valued employees and other individuals upon
whose judgment, initiative and efforts for our financial success and growth
largely depend. The Board believes that, by encouraging purchases of securities
by employees, officers and directors through the 1998 Stock Purchase Plan, we
are increasing the likelihood that the interests of our management will more
closely align with the interests of our stockholders. The Board believes that
the 1998 Stock Purchase Plan serves as an integral component of our compensation
package which enables us to attract and retain qualified management in order to
maintain and strengthen our competitive position in an industry that is highly
fragmented, rapidly consolidating and characterized by intense compensation.

VOTE REQUIRED AND BOARD RECOMMENDATION

Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of the holders of a majority of total shares of Common Stock
voted at the Annual Meeting is required to approve and adopt the amendment to
the 1998 Stock Purchase Plan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL AND
ADOPTION OF AN AMENDMENT TO THE 1998 STOCK PURCHASE PLAN. PROXY CARDS EXECUTED
AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED
THEREON.

<PAGE> 35

PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

The stockholders will be asked to ratify the appointment of KPMG LLP as
our independent certified public accountants for the fiscal year ending December
31, 2000. KPMG LLP audited our financial statements for the fiscal year ended
December 31, 1999. A representative of KPMG LLP is expected to be present at the
Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so and is expected to be available to respond to appropriate
questions from stockholders.

VOTE REQUIRED AND BOARD RECOMMENDATION

Ratification of the Board's selection of KPMG LLP will require the
affirmative vote of the holders of a majority of the total shares of Common
Stock at the Annual Meeting, in person or by proxy, and entitled to vote thereon
at the Annual Meeting.

THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 4 TO BE IN THE BEST
INTERESTS OF KELLSTROM AND OUR STOCKHOLDERS AND RECOMMENDS A
VOTE "FOR" APPROVAL THEREOF. PROXIES EXECUTED AND RETURNED WILL
BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.

STOCKHOLDER PROPOSALS

All stockholder proposals which are intended to be presented at our
Annual Meeting of Stockholders to be held in 2001 must be received by us no
later than ______________, 2001 for inclusion in the proxy statement and form of
proxy relating to that meeting. It is suggested that proponents submit their
proposals by certified mail, return receipt requested. No stockholder proposals
were received for inclusion in this Proxy Statement.

If a Stockholder does not seek to have a proposal included in the proxy
statement, but nevertheless wishes to present a proper proposal at the Annual
Meeting and the proposal is received by us on or before ______________, we will
provide information in the proxy statement relating to that Annual Meeting as to
the nature of the proposal and how persons named in the proxy solicited by the
Board intend to exercise their discretion to vote on the proposal.

OTHER BUSINESS

You are invited to attend the Annual Meeting at which our management
will present a review of our progress and operations.

<PAGE> 36

The Board knows of no other business to be acted upon at the Annual
Meeting. However, if any other business properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment. The prompt return of
your proxy will be appreciated and helpful in obtaining the necessary vote.
Therefore, whether or not you expect to attend the Annual Meeting, please sign
the proxy and return it in the enclosed envelope.

By order of the Board of Directors,

OSCAR TORRES
Secretary

January __, 2000

A COPY OF OUR ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: KELLSTROM
INDUSTRIES, INC., ATTENTION: OSCAR TORRES, 1100 INTERNATIONAL PARKWAY,
SUNRISE, FLORIDA 33323.

<PAGE> 37
ANNEX A

AUDIT COMMITTEE CHARTER

The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the compliance
by the Company with legal and regulatory requirements and (3) the independence
and performance of the Company's internal and external auditors.

The members of the Audit Committee shall meet the independence and experience
requirements of the Nasdaq Stock Market, Inc. The members of the Audit Committee
shall be appointed by the Board.

The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.

The Audit Committee shall make regular reports to the Board.

The Audit Committee shall:

1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
3. Review an analysis prepared by management and the independent auditor
of significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements.
4. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of its Form 10-Q.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor or
management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board.
8. Review and approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence consistent with Independence Standards Board
Standard 1, discuss such reports with the auditor, and if so determined
by the Audit Committee, take or recommend that the full Board take
appropriate action to oversee the independence of the auditor.
10. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that
the Board replace the independent auditor.

<PAGE> 38

11. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.

12. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.

13. Obtain reports from management and the independent auditor that the
Company's subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Company's accounting policies and
procedures.

14. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.

15. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:

(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or
access to required information.

(b) Any changes required in the planned scope of the audit.

16. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.

17. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's accounting policies and procedures.

18. Review with the Company's legal counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators
or governmental agencies.

19. Meet at least annually with the chief financial officer and the
independent auditor in separate executive sessions.

While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's accounting policies and procedures.
<PAGE> 39
ANNEX B

KELLSTROM INDUSTRIES, INC. 2000 STOCK OPTION PLAN

1. PURPOSE OF THE PLAN.

The purpose of the Kellstrom Industries, Inc. 2000 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 executives,
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 ________________, by resolution of
the Board. The Plan is subject to ratification by a majority vote of the
stockholders of the Company at its 2000 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

<PAGE> 40

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 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
newly-hired executives and other 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)
newly-hired executives and other employees of the Company or of any of its
subsidiaries, or (ii) non-employee directors 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

<PAGE> 41

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:

(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 the higher of
(i) the unweighted average of the daily closing
prices per share of Common Stock for the 20
consecutive trading days prior to the date of grant
and (ii) 110% of the closing price per share of
Common Stock for the trading day preceding the date
of grant; and

(ii) The incentive stock option shall have a term expiring
not more than five (5) years from the date of the
granting thereof.

<PAGE> 42

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 50,000 during any calendar year, subject to adjustment as provided in
Section 14 hereof.

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 higher of (i) the unweighted
average of the daily closing prices per share of Common Stock
for the 20 consecutive trading days prior to the date of
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 not be
less than the higher of (i) the unweighted average of the
daily closing prices per share of Common Stock for the 20
consecutive trading days prior to the date of grant and (ii)
the closing price per share of Common Stock for the trading
day preceding the date of grant (and provided that in the case
of an incentive stock option granted to an Optionee
beneficially owning more than 10% of the outstanding Common
Stock, the exercise price may not be less than the higher of
(i) the unweighted average of the daily closing prices per
share of Common Stock for the

<PAGE> 43

20 consecutive trading days prior to the date of grant and
(iii) 110% of the closing price per share of Common Stock for
the trading day preceding the date of grant).

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.

<PAGE> 44

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

<PAGE> 45

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 12(a), either subject to or
without regard to any vesting or other limitation on
exercise imposed hereunder.

13. TRANSFERABILITY OF OPTIONS.

Each Option shall provide that such Option shall not be transferable by
the Optionee, except to a Permitted Transferee (as defined below), whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution and any Option granted hereunder, except if transferred to a
Permitted Transferee, shall be exercisable during the lifetime of such Optionee
only by such Optionee. Permitted Transferee shall mean (i) a grandparent,
parent, sibling, child of a sibling, grandchild of a sibling, spouse and/or
descendant of such Optionee; (ii) a trust established solely for the benefit of
such Optionee and/or persons set forth in (i); (iii) a corporation whose
shareholders consist solely of such Optionee and/or persons set forth in (i);
(iv) a partnership whose partners consist solely of such Optionee and/or persons
set forth in (i); (v) the guardian or conservator of such Optionee and/or
persons set forth in (i); (vi) if such Optionee is a corporation, the
shareholders of such corporation; or (vii) if such Optionee is a partnership,
the partners of such partnership, PROVIDED, HOWEVER, THAT, any Permitted
Transferee first agrees in writing prior to such transfer to become a party to
and abide by the terms and conditions of this Plan, or any agreement governing
the Option, and to hold the Options so transferred subject to the terms and
conditions of this Plan (and any amendments hereto) or any agreement governing
the 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

<PAGE> 46

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 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

<PAGE> 47

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 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.

<PAGE> 48

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 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

<PAGE> 49

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 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

<PAGE> 50

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.

(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.

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. 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
(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.

23. 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

<PAGE> 51

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.

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, to the address as
appearing on the records of the Company.

<PAGE> 52

KELLSTROM INDUSTRIES, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 6, 2001.

Zivi R. Nedivi and Oscar Torres, and each of them, as the true and
lawful attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote all shares of
Common Stock of Kellstrom Industries, Inc. (the "Company") held of record by the
undersigned on January 4, 2001, at the Annual Meeting of Stockholders to be held
at 10:00 a.m. on Tuesday, February 6, 2001, at the Wyndham Hotel, 250 Racket
Club Road, Weston, Florida 33326 and any adjournment thereof. Any and all
proxies heretofore given are hereby revoked.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED
BY THE UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES AND FOR PROPOSAL NOS. 2, 3 AND 4.

1. Election of Class II Directors -- Nominees are: Admiral William J.
Crowe, Jr., Zivi R. Nedivi and Yoav Stern.

[ ] FOR all listed nominees (except do not vote for the
nominee(s) whose name(s) appear(s) below):

[ ] WITHHOLD AUTHORITY to vote for the listed nominees.

2. Approval and Adoption of an amendment to the Company's 2000 Stock Plan.

[ ] FOR

[ ] AGAINST

[ ] ABSTAIN

3. Approval and Adoption of an amendment to the Company's 1998 Stock
Purchase Plan.

[ ] FOR

[ ] AGAINST

[ ] ABSTAIN

4. The appointment of KPMG LLP as the independent certified public
accountants of the Company for the fiscal year ending December 31,
2000.

[ ] FOR

[ ] AGAINST

[ ] ABSTAIN

5. Discretionary authority is hereby granted with respect to such other
matters as may properly come before the meeting.

IMPORTANT: PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. EACH JOINT
OWNER SHALL SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC.
SHOULD GIVE FULL TITLE AS SUCH. IF SIGNOR IS A CORPORATION, PLEASE
GIVE FULL CORPORATE NAME BY DULY AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED
PERSON.

Dated: _________________

-------------------------------
Signature

-------------------------------
Signature if held jointly

THE ABOVE-SIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS AND THE PROXY STATEMENT FURNISHED THEREWITH. PLEASE SIGN, DATE
AND RETURN THIS PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.