Document/Exhibit Description Pages Size
1: 8-K Avteam, Inc. Form 8-K Dated 10/12/98 4 14K
2: EX-2.1 Asset Purchase Agreement 10/12/98 51 240K
3: EX-99.1 Press Release 3± 15K
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into on
October 12, 1998 by and among AVTEAM, INC., a Florida corporation ("AVTEAM"),
AVTEAM ENGINE REPAIR CORP., a Florida corporation and wholly-owned subsidiary
of AVTEAM ("AVTEAM Sub," and together with AVTEAM, the "Purchaser"), M&M
AIRCRAFT SERVICES, INC., a Florida corporation (the "Seller"), and the
shareholders of the Seller listed on the signature page hereto, who constitute
all of the shareholders of the Seller (collectively, the "Shareholders").
Certain other capitalized terms used herein are defined in Section 12.14 and
throughout this Agreement.
PRELIMINARY STATEMENT:
A. The Seller provides repair, maintenance, overhaul and related
services for gas turbine aircraft engines and component parts
for gas turbine aircraft engines (collectively, the
"Business").
B. AVTEAM, through AVTEAM Sub, desires to acquire and purchase,
and the Seller and the Shareholders desire to sell, convey,
transfer, assign and deliver to AVTEAM Sub, all of the Assets
(as defined in Section 2.1 hereof), Properties and Business
of the Seller upon the terms and subject to the conditions
set forth in this Agreement.
AGREEMENT
In consideration of the foregoing recitals, the mutual covenants,
representations, warranties and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the satisfaction or waiver of the conditions
contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE PRICE
Section 1.1 Purchase Price.
(a) The purchase price (the "Purchase Price") to be paid
by AVTEAM, through AVTEAM Sub, for the Assets (as defined in Section 2.1
hereof) shall be an amount in cash and shares of AVTEAM Class A Common Stock as
set forth in Section 1.1(b) hereof. The Purchase Price shall be paid and
delivered to the Seller and to the Escrow Agent (as defined in Section
1.1(b)(ii) hereof), subject to and in accordance with Section 1.1(b) hereof.
(b) At the Closing referred to in Section 3.1 hereof the
Purchase Price shall be paid and delivered as follows:
(i) An aggregate of $29,500,000 shall be paid
directly to the Seller by wire transfer in New York Clearing House Funds; and
(ii) An aggregate of $500,000 in New York
Clearing House Funds and 350,000 shares of AVTEAM's Class A Common Stock, par
value $.01 per share (the "AVTEAM Shares"; and collectively, the "Contingent
Payment") shall be delivered to First Union National Bank, a national banking
association (the "Escrow Agent"), as escrow agent. The Escrow Agent shall hold
the Contingent Payment, together with any increases thereupon (including any
income, interest, dividends or other distributions) (the "Escrow Fund") in
accordance with the terms of an Escrow Agreement (which shall be
attached hereto as Exhibit A and consistent with the provisions of this
Agreement) (the "Escrow Agreement") for a period of time commencing on the
Closing Date and expiring 19 months following the Closing Date (the "Escrow
Period"). Upon the expiration of the Escrow Period, the Contingent Payment
shall be paid directly to the Seller from the Escrow Fund, subject to any
deferrals or reductions as set forth in the Escrow Agreement or Article IX
hereof.
(c) Purchase Price Allocation.
(i) The Purchase Price shall be allocated among
the Assets in accordance with Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations promulgated thereunder. Upon
the completion by the Purchaser's independent accountants of an audit of the
Seller's financial records (as defined in Section 5.5 hereof), the Seller and
the Shareholders and the Purchaser shall jointly prepare within 10 days of such
audit a schedule for the allocation of the Purchase Price as contemplated by
the immediately preceding sentence (the "Purchase Price Allocation Schedule").
If the Seller and the Shareholders, on the one hand, and the Purchaser, on the
other, in good faith disagree with the Purchase Price Allocation Schedule, then
either party may notify the others in writing of such disagreement (the "Notice
of Disagreement"). The Notice of Disagreement shall set forth in reasonable
detail the basis for the disagreement. Thereafter, the Seller and the
Shareholders and the Purchaser shall attempt in good faith to resolve and
finally determine the Purchase Price Allocation Schedule. If the Seller and the
Shareholders and the Purchaser are unable to resolve the disagreement within 30
days after the delivery of the Notice of Disagreement, the Seller and the
Shareholders and the Purchaser shall select a mutually acceptable, nationally
recognized independent accounting firm (the "Independent Accountant") which
does not then have a material relationship with, the Purchaser, the Seller or
the Shareholders to resolve the disputed items and make a determination with
respect thereto. Such determination will be made, and written notice thereof
given to the Seller and the Shareholders and the Purchaser within 30 days after
such selection. The determination by the Independent Accountant shall be final,
binding and conclusive upon the parties hereto. The scope of the Independent
Accountant's engagement (which shall not be an audit) shall be limited to the
resolution of the items contained in the Notice of Disagreement, and the
recalculation, if any, of the Purchase Price Allocation Schedule in light of
such resolution and such firm shall be deemed to be acting as experts and not
as arbitrators. One-half of the fees, costs and expenses of the Independent
Accountants, if any, will be borne by the Purchaser and the balance by the
Seller and the Shareholders.
(ii) The Seller, the Shareholders and the
Purchaser agree to file timely all returns required under Code Section 1060 and
the regulations promulgated thereunder based on the allocations set forth on
the Purchase Price Allocation Schedule, and further agree that they will not
take any position inconsistent therewith on any return or other document of any
kind or in the course of any audit, examination or other proceeding by or
before any federal, state, local or other taxing authority (or other
governmental agency), court or tribunal.
(d) Each certificate for the AVTEAM Shares issued in
connection with this Agreement shall bear the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "1933
ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL NOT BE
TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I)
A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS OR (II) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO
THE COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES,
WHICH OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH SECURITIES MAY BE TRANSFERRED, SOLD, ASSIGNED OR
HYPOTHECATED WITHOUT
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REGISTRATION UNDER THE 1933 ACT OR APPLICABLE STATE
SECURITIES LAWS.
ARTICLE II
SALE AND PURCHASE OF ASSETS; ASSUMED LIABILITIES
Section 2.1 Sale and Purchase of Assets. On the terms and subject
to the satisfaction or waiver of the conditions of this Agreement, at the
Closing, the Seller shall sell, convey, transfer, assign and deliver to AVTEAM
Sub, and AVTEAM, through AVTEAM Sub, shall purchase, acquire and accept
delivery of, all of the Seller's right, title and interest in and to all of the
assets, properties, improvements and other rights which are owned, leased,
licensed or otherwise Used by the Seller in connection with the operation of
the Business as of the Closing Date, including without limiting the generality
of the foregoing:
(a) all cash, cash equivalents, certificates of deposit
and securities (including all petty cash, deposit and demand accounts in
financial institutions and money market investments). A more detailed list of
items included under this Section 2.1(a) shall be set forth on Schedule 2.1(a)
hereto;
(b) all trade accounts receivable arising from the
provision of services, sale of inventory, notes receivable and insurance
proceeds receivable (including without limitation, any claims, remedies and
other rights related thereto) evidencing rights to payment through the Closing
Date (other than the Excluded Assets referred to in Section 2.7 hereof). A more
detailed list of items included under this Section 2.1(b) shall be set forth on
Schedule 2.1(b) hereto (collectively, the "Receivables");
(c) all inventories of raw materials, work-in-process,
finished goods, purchased parts, component parts, spare parts, gas turbine
engines held for spare parts, inventory related paperwork and repair tags
(including those traceable to the original aircraft engine from which parts,
components or modules were removed) and related inventory items. A more
detailed list of items included under this Section 2.1(c) shall be set forth on
Schedule 2.1(c) hereto (collectively, the "Inventories");
(d) all assumable prepaid items for which the Purchaser
would receive an economic benefit following the Closing Date, including all
security and leasehold deposits reflected on Schedule 2.1(d) hereto
(collectively, the "Deposits");
(e) all machinery, equipment, owned gas turbine engines
(including gas turbine engines held for lease, if any), molds, tooling, jigs,
dies, measuring and calibrating devices, test cell equipment, automobiles and
other vehicles, files, systems, furniture, fixtures, shelving and racking,
office equipment, computers, computer equipment, computer software and computer
systems, library of engine manuals and repair books and catalogs, records and
engine repair procedures and leasehold improvements, including without
limitation, those items listed on Schedule 2.1(e) hereto (collectively, the
"Fixed Assets");
(f) all patents, patent applications, trademarks,
copyrights, trade names, all variants thereof and goodwill associated
therewith, trade secrets, engineering drawings, blue prints, know-how, trade
secrets, technical information and other related assets, including without
limitation, those items listed on Schedule 2.1(f) hereto (collectively, the
"Intellectual Property");
(g) all customer lists, vendor lists, referral lists,
domestic and foreign certificates and certifications, including without
limitation (but only to the extent transferable), Federal Aviation
Administration ("FAA") and Joint Aviation Authorities ("JAA") certificates or
authorizations, whether or not listed on Schedules to this Agreement,
franchises, Permits, licenses, telephone numbers, brochures, advertising
materials and data, restrictive covenants, chooses in action and similar
obligations owing to the Seller from present and former shareholders, officers,
employees and agents, and other proprietary intangible assets, whether or not
confidential, and all books, records, printouts, drawings, data, files, notes,
notebooks, accounts, invoices, correspondence and memoranda (including all
personnel and payroll records of all
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Employees (as defined in Section 5.8(a) hereof), who are offered and accept
employment with the Purchaser). A more detailed list of items included under
this Section 2.1(g) shall be set forth on Schedule 2.1(g) hereto;
(h) all other factory maintenance, tools, supplies and
materials and packaging and office supplies, whether or not expensed, including
without limitation, those items listed on Schedule 2.1(h) hereto (collectively,
the "Supplies");
(i) all rights and benefits under all: (A) purchase
orders on-hand and customer quotations; all general terms agreements and other
agreements with original equipment manufacturers; and all other contract
rights, commitments and claims which are specified under or pursuant to all
manufacturers' warranties and any licenses or license agreements relating to
any Intellectual Property; (B) contracts and agreements, including orders and
commitments covering the purchase of Inventories, repair services and/or
Supplies, the providing of gas turbine engine repair, overhaul or maintenance
services and/or products or parts to customers; and all agency, consultant and
distribution agreements, personal property leases, license agreements, and
other commitments, including such of the foregoing which are listed on Schedule
5.11 hereto, or otherwise expressly disclosed on other Schedules to this
Agreement; (C) contracts and agreements, including orders and commitments to
purchase those additional assets which have been ordered for the Business prior
to the Closing Date, whether or not received as at the Closing Date, and which
are listed or identified on Schedule 2.1(i) hereto to be provided by the Seller
to the Purchaser prior to the Closing Date; and (D) all other contracts, orders
and commitments which are not required to be scheduled pursuant to this
Agreement and (in the case of such unscheduled contracts, orders and
commitments) which have been entered into by the Seller in the normal and
ordinary course of business of the Seller prior to the Closing Date and since
the date hereof have not been entered into in violation of any of the Seller's
and the Shareholders' covenants and agreements contained in this Agreement
(collectively, the "Contracts");
(j) all of the real estate of the Seller which is leased
as described on Schedule 2.1(j) hereto;
(k) except as it may relate to the Unassumed Liabilities
(as defined in Section 2.3 hereof), all rights, benefits and claims of the
Seller, including rights of indemnification, awards, settlements, judgments,
monetary relief and/or replacement of Inventories, products and Supplies, which
may be asserted against any customer, vendor, manufacturer or supplier of the
Seller;
(l) the rights and benefits under all leases of Fixed
Assets;
(m) all customer cash proceeds in respect of the
Deposits;
(n) the goodwill and value of the Business as a going
concern;
(o) all other assets and properties owned by the Seller
on the Closing Date and Used in connection with the operation of the Business;
and
(p) all rights to refunds of Taxes.
It is specifically understood and agreed by the parties hereto that
AVTEAM Sub is acquiring, and the Seller is selling, all of the tangible and
intangible assets Used by the Seller in the Business (other than the Excluded
Assets as referred to in Section 2.7 hereof). The foregoing assets and
properties to be transferred to the Purchaser (but not the Excluded Assets as
referred to in Section 2.7 hereof) are hereinafter collectively referred to as
the "Assets." All of the Schedules identified in this Section 2.1 shall be
updated by the Seller to reflect any changes therein up to and including the
Closing Date and such Schedules, if changed, shall be approved by the Purchaser
in its sole and absolute discretion.
Section 2.2 Assumed Liabilities. Except as set forth in Section
2.3 hereof, AVTEAM Sub agrees to and will at the Closing assume and agree to
pay, discharge and perform when lawfully required (i) all of the obligations,
duties and liabilities of the Seller set forth on the Seller's Balance Sheet
dated
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June 30, 1998 (the "Latest Balance Sheet" and the date of such balance sheet
shall be the "Latest Balance Sheet Date") and not paid or discharged on or
prior to the Closing Date, and (ii) all of the obligations, duties and
liabilities of the Seller incurred since the Latest Balance Sheet Date in the
ordinary course of business consistent with past practice which are incurred in
accordance with the provisions of this Agreement (collectively, the "Assumed
Liabilities"). The Purchaser may, in accordance with Section 9.4 hereof, set
off against the Escrow Fund any amounts AVTEAM Sub pays in excess of the
Assumed Liabilities, in its sole discretion, in order to satisfy any
indebtedness, obligations, duties or liabilities of the Seller as of the
Closing Date which are enforceable in accordance with their terms and any such
amounts paid by the Purchaser shall be deemed Losses (as defined in Section 9.1
hereof) except that to the extent any such Loss is directly related to an Asset
acquired by the Seller on or before June 30, 1998 and not set forth on the
Latest Balance Sheet no such set off shall be made.
Section 2.3 Unassumed Liabilities. The parties expressly agree
that the Seller shall retain and the Purchaser shall not assume or otherwise
become liable for the following obligations or liabilities of the Seller or the
Shareholders: (i) any liability not set forth on the Latest Balance Sheet,
including Taxes for all periods ending on or prior to the Closing Date, (ii)
any liability or obligation related to (V) that certain property located at
13155 Ixora Court, Keystone Harbor Club, Unit 806, Miami, Florida (the
"Condominium"), (W) that certain Pratt & Whitney JT8D aircraft engine (serial
no. 689953) owned by the AGES Group, L.P. (the "AGES Engine"), (X) the repair
or replacement of No. 6 scavenge pump brackets on aircraft engines repaired by
the Seller prior to Closing, including labor, travel and out-of-pocket costs
incurred or to be incurred related to such repair or replacement, (Y) FAA
penalties or fines related to the Business or the work of the Seller completed
prior to the Closing Date, and (Z) the repair or replacement of engines or
engine parts required to be repaired or replaced by the Seller as a result of
FAA Airworthiness Directives or Service Bulletins relating to the work of the
Seller completed prior to the Closing Date and (iii) any liability since the
Latest Balance Sheet Date not incurred in the ordinary course of business
(collectively, the "Unassumed Liabilities"). The Purchaser shall be indemnified
against any liability or obligation related to the Unassumed Liabilities in
accordance with Article IX hereof.
Section 2.4 Instruments of Conveyance and Transfer of Books and
Records. At the Closing, the Seller shall deliver to the Purchaser, such deeds,
bills of sale, endorsements, assignments and other instruments of sale,
conveyance, transfer and assignment, reasonably satisfactory in form and
substance to the Purchaser and its counsel, as may be reasonably requested by
the Purchaser, in order to convey to AVTEAM Sub good and merchantable title to
the Assets, free and clear of all Liens, other than Liens relating to the
Assumed Liabilities set forth on Schedule 2.4 hereto. AVTEAM, through AVTEAM
Sub, shall pay all sales, use, transfer or stamp taxes, or similar charges, if
any, payable by reason of the sale hereunder.
Section 2.5 No Expansion of Third Party Rights. The assumption
by AVTEAM Sub of the Assumed Liabilities, and the transfer thereof by the
Seller, shall in no way expand the rights or remedies of any third party
against the Purchaser or the Seller as compared to the rights and remedies
which such third party would have had against the Seller had AVTEAM Sub not
assumed such Assumed Liabilities. Without limiting the generality of the
preceding sentence, the assumption by AVTEAM Sub of the Assumed Liabilities
shall not create any third party beneficiary rights.
Section 2.6 Assignment of Contracts. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an
assignment of any claim, contract, license, franchise, lease, commitment, sales
order, sales contract, supply contract, service agreement, purchase order or
purchase commitment if an attempted assignment thereof, without the consent of
a third party thereto, would constitute a breach thereof or in any way
adversely affect the rights of AVTEAM Sub thereunder. If such consent is not
obtained, or if any attempt at an assignment thereof would be ineffective or
would affect the rights of the Seller thereunder so that AVTEAM Sub would not
in fact receive all such rights, the Seller and the Shareholders shall
cooperate with the Purchaser to the extent necessary to provide for AVTEAM Sub
the benefits under such claim, contract, license, franchise, lease, commitment,
sales order, sales contract, supply contract, service agreement, purchase order
or purchase commitment, including enforcement for the benefit of AVTEAM Sub of
any and all rights of the Seller against a third party thereto arising out of
the breach or cancellation by such third party or otherwise.
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Section 2.7 Excluded Assets. Notwithstanding the foregoing, the
Assets to be acquired by the Purchaser pursuant to this Agreement shall not
include (i) any claim of the Seller or any judgment or settlement which may be
obtained in favor of the Seller in that certain case styled M&M Aircraft
Services, Inc. v. Aviation Distributors, Inc. and EC Technologies, Inc. filed
in Dade County, Florida Circuit Court (Case No. 97-29611 CA 06) or that certain
case styled EC Technologies, Inc. v. M&M Aircraft Services, Inc. filed in U.S.
District Court for the Western District of Texas, San Antonio Division (Case
No. SA-97-CA-1322-BF) or any case or cases (against Seller's insurance carrier
or others) arising from the same facts or involving the same parties thereto
and (ii) the Condominium, the improvements thereon and any and all furniture
and fixtures unrelated to the Business located at the Condominium
(collectively, the "Excluded Assets"). The Purchaser shall be indemnified
against any liability or obligation related to the Excluded Assets in
accordance with Article IX hereof.
ARTICLE III
CLOSING
Section 3.1 Closing. Subject to the satisfaction or waiver of
the conditions stated in Article VII hereof, the closing of the transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m., Miami, Florida
time, as of the month end date immediately after the conditions set forth in
Sections 7.1 through 7.3 hereof have been satisfied or waived, at the offices
of Baker & McKenzie, 1200 Brickell Avenue, 19th Floor, Miami, Florida 33131,
unless another date or place is agreed to in writing by the parties hereto. The
date upon which the Closing occurs is hereinafter referred to as the "Closing
Date." The Closing shall be deemed completed as of 11:59 p.m. Miami time on the
Closing Date.
Section 3.2 Deliveries by the Seller. At or prior to the
Closing, the Seller shall deliver to the Purchaser:
(i) a bill of sale in the form attached hereto
as Exhibit B ("Bill of Sale") and such
other deeds, bills of sale, certificates of
title, endorsements, assignments, releases,
Permits and other instruments, in such form
as is commercially reasonably satisfactory
to AVTEAM and as shall be sufficient to
vest in AVTEAM Sub good and merchantable
title to the Assets and shall deliver to
AVTEAM Sub immediate possession of the
Assets;
(ii) a certified copy of all necessary corporate
action on behalf of the Seller approving
its execution, delivery and performance of
this Agreement;
(iii) a certificate executed by the President of
the Seller to the effect that the
conditions set forth in Sections 7.3(a)
through 7.3(e) hereof, have been satisfied;
(iv) a certificate executed by the President or
Chief Financial Officer of the Seller
described in Section 7.3(j) hereof;
(v) the opinion of counsel set forth in Section
7.3(f) hereof;
(vi) evidence of the consents required pursuant
to Section 7.3(i) hereof;
(vii) evidence of amendment of Seller's FAA Air
Agency certificate to reflect the current
location of Seller's facilities; and
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(viii) such other documents or instruments
reasonably requested by the Purchaser
consistent with the consummation of the
transactions contemplated by this
Agreement.
Section 3.3 Deliveries by the Purchaser. At or prior to the
Closing, the Purchaser shall deliver to the Seller:
(i) by wire transfer in New York Clearing House
Funds to the Seller, the payment described
in Section 1.1(b)(i) hereof as being
required to be paid by AVTEAM, through
AVTEAM Sub, at Closing;
(ii) by delivery to the Escrow Agent, the AVTEAM
Shares described in Section 1.1(b)(ii)
hereof as being required to be delivered by
AVTEAM to the Escrow Agent at Closing;
(iii) a certified copy of all necessary corporate
action on behalf of each of AVTEAM and
AVTEAM Sub approving its execution,
delivery and performance of this Agreement
and the Collateral Agreements to which it
is a party;
(iv) a certificate executed by an authorized
officer of AVTEAM to the effect that the
conditions set forth in Sections 7.2(b) and
7.2(c) hereof have been satisfied;
(v) the opinion of counsel set forth in Section
7.2(d) hereof;
(vi) the executed Collateral Agreements to which
it is a party; and
(vii) such other documents or instruments
reasonably requested by the Seller
consistent with the consummation of the
transactions contemplated by this
Agreement.
Section 3.4 Termination in Absence of Closing. If by the close
of business on December 31, 1998 (the "Termination Date"), the Closing has not
occurred, then any party hereto may thereafter terminate this Agreement by
written notice to such effect to the other parties hereto without liability of
or to any party to this Agreement or any shareholder, director, officer,
employee or representative of such party unless the reason for the Closing
having not occurred is such party's willful breach of the provisions of this
Agreement; provided, however, that any termination pursuant to this Section 3.4
shall not relieve any party hereto who was responsible for the Closing having
not occurred of any liability for (x) such party's willful breach of the
provisions of this Agreement, or (y) the failure of such party to perform its
obligations under this Article III on such date, if all of the conditions to
such party's obligations set forth in Article VII (other than Section 7.1(c)
hereof) have been satisfied or waived in writing by the date scheduled for the
Closing pursuant to Section 3.1 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Seller and each of the Shareholders to
enter into this Agreement and to consummate the transactions contemplated
hereby, the Purchaser represents and warrants to the Seller and the
Shareholders as to the matters set forth on Exhibit C hereto, the full text of
which is incorporated herein by reference as if set forth herein in their
entirety.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE SHAREHOLDERS
As a material inducement to the Purchaser to enter into this Agreement
and to consummate the transactions contemplated hereby, the Seller and the
Shareholders, jointly and severally, hereby represent and warrant to the
Purchaser as to the matters set forth on Exhibit D hereto, the full text of
which is incorporated herein by reference as if set forth herein in their
entirety.
ARTICLE VI
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing, except as to
Sections 6.2 and 6.3 hereof as to which the obligations of Sections 6.2 and 6.3
hereof shall be from June 30, 1998 through the Closing:
Section 6.1 AVTEAM's Access to Information and Assets. The
Seller and the Shareholders shall permit AVTEAM and its authorized employees,
agents, accountants, legal counsel, lenders and other representatives, at
AVTEAM's own expense, to have access to the books, records, employees, counsel,
accountants, and other representatives of the Seller at all times reasonably
requested by AVTEAM for the purpose of conducting an investigation ("AVTEAM's
Due Diligence Investigation") of the Seller's financial condition, corporate
status, operations, business and Properties and, immediately after execution of
this Agreement, to commence a financial and environmental audit of the Seller.
The Seller and the Shareholders have made available and will continue to make
available to AVTEAM for examination and reproduction, at AVTEAM's own expense,
all documents and data of every kind and character relating to the Seller in
possession or control of, or subject to reasonable access by, the Shareholders
or the Seller, including, without limitation, all files, records, data and
information relating to the Assets (whether stored in paper, magnetic or other
storage media) and all agreements, instruments, contracts, assignments,
certificates, orders, and amendments thereto. The Seller and the Shareholders
have not withheld any information or documents from AVTEAM which may cause,
directly or indirectly, Losses (as defined in Section 9.1 hereof) to AVTEAM.
Also, the Seller shall allow AVTEAM, at AVTEAM's own expense, access to, and
the right to inspect, the Assets. Seller and the Shareholders hereby ratify and
confirm any access heretofore granted with respect to AVTEAM's Due Diligence
Investigation.
Section 6.2 Seller's Conduct of Business and Operations. The
Seller or the Shareholders shall keep AVTEAM advised as to all material
operations and proposed material operations relating to the Seller or the
Assets. The Seller shall (a) conduct its business in the ordinary course, (b)
use its best efforts to keep available to the Seller the services of present
employees, (c) maintain the Fixed Assets in good operating condition and repair
and utilize them in a workmanlike manner, (d) pay or cause to be paid all costs
and expenses (including but not limited to insurance premiums) incurred in
connection with the Business in a timely manner, (e) use reasonable efforts to
keep all Contracts listed or required to be listed on Schedule 5.11 hereto in
full force and effect, (f) comply in all material respects with all of the
covenants contained in all Contracts, (g) maintain in force until the Closing
Date insurance policies (subject to the provisions of Section 6.6 hereof)
equivalent to those in effect on the date hereof, (h) use its best efforts to
preserve the Assets, the Business and the goodwill related thereto, and the
relationships with its present customers, officers, employees, suppliers, staff
and others having a business relationship with it, and (i) comply in all
material respects with all applicable Legal Requirements. Except as otherwise
contemplated in this Agreement, the Shareholders shall use their best efforts
to preserve the present relationships of the Seller with persons having
significant business relations therewith.
Section 6.3 General Restrictions. Except as otherwise expressly
permitted in this Agreement, without the prior written consent of AVTEAM, the
Seller shall not:
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(i) except as disclosed on Schedule 6.3 (i)
hereto, (A) declare, set aside or pay any dividends on, or make any other
distribution (whether in cash, stock or property) in respect of, any of its
capital stock, (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in view
of or in substitution for shares of its capital stock, or (C) purchase, redeem
or otherwise acquire any shares of capital stock of the Seller or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) except as disclosed on Schedule 6.3 (ii)
hereto, issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities;
(iii) amend its articles of incorporation or
bylaws (or similar organizational documents), except as set forth in Section
6.19 hereof;
(iv) acquire or agree to acquire (A) by merging
or consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business of any corporation, partnership, joint
venture, association or other business organization or division thereof or (B)
any assets that are material, individually or in the aggregate, to the Seller,
except purchases of assets in the ordinary course of business consistent with
past practice;
(v) sell, lease, license, mortgage or otherwise
encumber or otherwise dispose of, or agree to sell, transfer, lease, mortgage,
encumber or otherwise dispose of, any Properties, including the Assets except
(A) in the ordinary course of business consistent with past practice, or (B)
pursuant to any Contracts;
(vi) (A) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
the Seller, guarantee any debt securities of another person, enter into any
"keep well" or other agreements to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
the foregoing, except for borrowings incurred in the ordinary course of
business consistent with past practice, or (B) make any loans, advances or
capital contributions to, or investments in, any other person;
(vii) except as disclosed on Schedule 6.3 (vii)
hereto, make or agree to make any new capital expenditure or expenditures
which, individually, is in excess of $25,000 or, in the aggregate, are in
excess of $100,000 (other than those required pursuant to currently outstanding
Contracts or in the ordinary course of business consistent with past practice);
(viii) make any material tax election which has or
could have a Material Adverse Effect on the Purchaser or settle or compromise
any material tax liability;
(ix) pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the Seller Financial Statements (or the notes thereto)
or incurred in the ordinary course of business consistent with past practice,
or waive any material benefits of, or agree to modify in any material respect,
any confidentiality, standstill or similar agreements to which the Seller is a
party;
(x) except in the ordinary course of business
consistent with past practice, modify, amend or terminate any Contract;
(xi) except in the ordinary course of business
consistent with past practice, enter into any contracts, agreements,
arrangements or understandings relating to performance by third parties of the
Seller's services;
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(xii) except as required to comply with applicable
law (A) adopt, enter into, terminate or amend any benefit plan or other
arrangement for the benefit or welfare of any director, officer or current or
former employee, (B) increase in any manner the compensation or fringe benefits
of, or pay any bonus to, any director, officer or employee (except in a manner
consistent with past practice or with the prior written approval of the
Purchaser), (C) pay any benefit not provided for under any benefit plan, (D)
grant any awards under any bonus, incentive, performance or other compensation
plan or arrangement or benefit plan (including the grant of stock options,
stock appreciation rights, stock based or stock related awards, performance
units or restricted stock, or the removal of existing restrictions in any
benefit plans or agreement or awards made thereunder) or (E) take any action to
fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or benefit plan except in
a manner consistent with past practice;
(xiii) make any change in any method of accounting
or accounting practice or policy other than those required by GAAP; or
(xiv) except in the ordinary course of business
consistent with past practice, issue credit memos representing price
adjustments related to services previously rendered to customers; or
(xv) authorize any of, or commit or agree to take
any of, the foregoing actions.
Section 6.4 Notice Regarding Changes. The Shareholders shall
promptly inform AVTEAM in writing of any change in facts and circumstances that
could render any of the representations, warranties or covenants made herein by
the Seller or the Shareholders inaccurate or misleading if such representations
and warranties had been made upon the occurrence of the fact or circumstance in
question. Subject to the limitations imposed by law, and/or the Nasdaq rules,
AVTEAM shall promptly inform the Shareholders in writing of any change in facts
and circumstances that could render any of the representations and warranties
made herein by it inaccurate or misleading if such representations and
warranties had been made upon the occurrence of the fact or circumstance in
question.
Section 6.5 Consents and Best Efforts. Each of the parties
hereto shall use all commercially reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, and consult and
fully cooperate with and provide reasonable assistance to each other party and
their respective representatives in order to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
hereafter, including without limitation, (i) using all commercially reasonable
best efforts to make all filings, applications, notifications, reports,
submissions and registrations with, and to obtain all consents, approvals,
authorizations or permits of, governmental entities or other persons or
entities as are necessary for the consummation of the transactions contemplated
by this Agreement, and (ii) taking such actions and doing such things as any
other party hereto may reasonably request in order to cause any of the
conditions to such other party's obligation to consummate the transactions
contemplated hereby, as specified in Article VII of this Agreement, to be fully
satisfied.
Section 6.6 Casualty Loss. If, between the date of this
Agreement and the Closing, any of the Properties of the Seller shall be
destroyed or damaged in whole or in part by fire, earthquake, flood, other
casualty or any other cause which materially affects the ability of the Seller
to conduct its business (a "Casualty Loss"), then the Shareholders may, if
requested by AVTEAM, (i) cause the Seller to cause such Properties to be
repaired or replaced prior to the Closing with Property of substantially the
same condition and function, (ii) cause the Seller to deposit in a separate
account an amount sufficient to cause such Property to be so repaired or
replaced, or (iii) enter into contractual arrangements with the Seller
satisfactory to AVTEAM in its sole and absolute discretion, so that the Seller
or the Assets will have at the Closing the same economic value as if such
casualty had not occurred.
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Section 6.7 Employee Matters. The Shareholders shall take
(or cause the Seller to take) all actions necessary or appropriate to cause
each plan or benefit program or agreement in effect on the date of this
Agreement to remain in full force and effect until the Closing Date.
Section 6.8 No Solicitation. The Shareholders and the Seller and
its officers, directors, employees, representatives and agents have immediately
ceased any discussions or negotiations with any parties, if any, with respect
to a Third Party Acquisition Proposal (as defined below). Neither the Seller
nor any of the Shareholders shall, nor shall they permit any of their
Affiliates to, nor shall they authorize or permit any of their officers,
directors or employees or any investment banker, attorney or other advisor or
representatives retained by them or any of their Affiliates to (i) solicit,
initiate or knowingly encourage the submission of, any Third Party Acquisition
Proposal, or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any non-public information with respect to, or take any
other action knowingly to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any Third
Party Acquisition Proposal. For purposes of this Agreement, "Third Party
Acquisition Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of all or a portion
or more of the assets of the Seller or all or a portion of any class of equity
securities of the Seller or any offer to acquire or purchase that if
consummated would result in any person beneficially owning all or a portion of
any class of equity securities of the Seller, or any merger, consolidation,
business combination, sale of assets, recapitalization, liquidation,
dissolution or similar transaction involving the Seller, other than the
transactions contemplated by this Agreement, or any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent or delay, or dilute materially the benefits to AVTEAM of the
transactions contemplated hereby. Until this Agreement is terminated in
accordance with its provisions, the Seller and the Shareholders will
immediately notify AVTEAM if any third party attempts to initiate any
solicitation, discussion or negotiation with respect to any of the foregoing
transactions.
Section 6.9 Trading in AVTEAM's Class A Common Stock. Except as
otherwise expressly consented to by AVTEAM, from the date of this Agreement
until the Closing Date, neither the Seller nor the Shareholders (nor any
Affiliates thereof) will, directly or indirectly, purchase or sell (including
short sales) any shares of AVTEAM's Class A Common Stock in any transactions
effected on Nasdaq or otherwise, or sell, transfer, pledge, dispose of or
otherwise part with any interest in or with respect to or in any other manner
reduce their investment risk with respect to any AVTEAM Shares to be received
pursuant to this Agreement.
Section 6.10 Shareholder Vote. Each of the Shareholders, in
executing this Agreement, consents as a shareholder of the Seller to the
transactions contemplated hereby, and waives notice of any meeting in
connection therewith, and hereby releases and waives all rights with respect to
the transactions contemplated hereby under the articles of incorporation or
bylaws of the Seller and any agreements among the Shareholders and the Seller
relating to the sale, purchase or voting of any capital stock of the Seller. At
Closing, the Shareholders agree that any and all agreements relating to the
sale, purchase or voting of capital stock of the Seller shall be terminated.
Section 6.11 Compliance with Covenants. The Shareholders shall
cause the Seller to comply with all of the respective covenants of the Seller
under this Agreement.
Section 6.12 Cooperation. Each of the parties agrees to cooperate
with the other in the preparation and filing of all forms, notifications,
reports and information, if any, required or reasonably deemed advisable
pursuant to any law, rule or regulation or the Nasdaq rules (or any exchange on
which AVTEAM's Class A Common Stock may be listed) in connection with the
transactions contemplated by this Agreement and to use their respective
commercially reasonably good faith efforts to agree jointly on a method to
overcome any objections by any Governmental Authority to any such transactions.
Section 6.13 Confidentiality; Publicity. Except as may be required
by law or as otherwise permitted or expressly contemplated herein, no party
hereto or their respective Affiliates, employees, agents and representatives
shall disclose to any third party this Agreement or the subject matter or terms
hereof without the prior consent of the other parties hereto. No press release
or other public
11
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior written approval of the
other parties, except that AVTEAM may make such public disclosure which it
believes in good faith to be required by law or by the terms of any listing
agreement with or requirements of Nasdaq.
Section 6.14 Employment Agreements. On or before the Closing,
each of the Shareholders shall have entered into employment agreements
substantially in the form attached hereto as Exhibits F.1, F.2 and F.3) (the
"Executive Employment Agreements"), which shall include non-competition
provisions, to take effect on and after the Closing Date.
Section 6.15 AGES Engine. The Purchaser hereby covenants and
agrees that the Seller or the Shareholders shall be permitted to prosecute or
defend, at its own expense and by its own counsel, any claim or action arising
out of or related to the AGES Engine. If the Seller or the Shareholders decide
to prosecute or defend such claim or action, the Purchaser shall make available
to the Seller or the Shareholders any books, records or other documents within
its control that are necessary or appropriate for such defense.
Section 6.16 Shipment of Engines and Engine Parts. Except in a
manner consistent with the Seller's prior business practices, the Seller and
the Shareholders covenant and agree to not ship any engines or engine parts to
any customer which has not paid in full (without reduction or offset) the
invoiced amount for the work performed on such engines or engine parts without
the prior written consent of AVTEAM which consent shall not be unreasonably
withheld.
ARTICLE VII
CONDITIONS TO SELLER'S, SHAREHOLDERS' AND PURCHASER'S OBLIGATIONS
Section 7.1 Conditions to Obligations of All Parties. The
respective obligations of each party to carry out the transactions contemplated
by this Agreement are subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) All filings with all Governmental Authorities
required to be made in connection with the transactions contemplated hereby
shall have been made, and all orders, permits, waivers, authorizations,
exemptions, and approvals of such entities required to be in effect on the date
of the Closing in connection with the transactions contemplated hereby shall
have been issued, and all such orders, permits, waivers, authorizations,
exemptions or approvals shall be in full force and effect on the date of the
Closing; provided, however, that no provision of this Agreement shall be
construed as requiring any party to accept, in connection with obtaining any
other requisite approval, clearance or assurance of non-opposition, avoiding
any challenge, or negotiating settlement, any condition that would materially
change or restrict the manner in which the Seller, AVTEAM or AVTEAM Sub
conducts or proposes to conduct its business, and no transfers of licenses
shall occur prior to the Closing.
(b) None of the parties hereto shall be subject to any
statute, rule, regulation, decree, ruling, injunction or other order issued by
any Governmental Authorities of competent jurisdiction (collectively, an
"Injunction") which prohibits, restrains, enjoins or restricts the consummation
of the transactions contemplated by this Agreement.
(c) Mutual agreement by the Seller and the Shareholders,
on the one hand, and the Purchaser, on the other, in the respective sole and
absolute discretion of each party, with respect to all environmental matters
relating to the Property located at Building 2120/703 at the Miami
International Airport known as Test Cell No. 6, and the assumption of any
liabilities or obligations for such environmental matters, provided that the
conditions set forth in this subsection (c) shall be deemed satisfied and
agreed upon by the parties, so long as the Seller's and the Shareholder's
liability for such environmental matters is limited to the amount of the Escrow
Fund.
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Section 7.2 Conditions to Obligations of the Seller and the
Shareholders. The obligations of the Seller and the Shareholders to carry out
the transactions contemplated by this Agreement are subject, at the option of
the Shareholders, to the satisfaction, or waiver by the Seller and the
Shareholders, of the following conditions:
(a) AVTEAM and AVTEAM Sub shall have furnished the Seller
and the Shareholders with a certified copy of all necessary corporate action on
their behalf approving their execution, delivery and performance of this
Agreement and each of the Collateral Agreements.
(b) All representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all respects at
Closing, as if such representations and warranties were made at and as of the
Closing, except for changes contemplated by the terms of this Agreement except
as and to the extent that the facts and conditions upon which such
representations and warranties are based are expressly required or permitted to
be changed by the terms thereof, and the Purchaser shall have performed and
satisfied in all material respects all covenants and agreements required by
this Agreement to be performed and satisfied by the Purchaser at or prior to
the Closing; provided, however, that neither the Seller nor the Shareholders
shall be entitled to refuse to consummate the transactions contemplated by this
Agreement in reliance upon their own breach or failure to perform.
(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of the
Shareholders or the Seller) shall be pending or threatened before any
Governmental Authority seeking to restrain the Seller or the Shareholders from
effectuating the transactions contemplated by this Agreement or prohibit the
Closing or seeking Damages against the Shareholders or the Seller as a result
of the consummation of the transactions contemplated by this Agreement.
(d) The Seller shall have received the opinion of Baker
& McKenzie, counsel to the Purchaser, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Seller, as to the matters set forth on
Exhibit F. In rendering such opinion, Baker & McKenzie may rely as to factual
matters on certificates of officers and directors of the Purchaser and on
certificates of governmental officials, and as to legal matters on opinions of
other counsel reasonably acceptable to the Seller.
(e) The Purchaser shall have executed the Escrow
Agreement.
(f) The Purchaser shall have executed and delivered to
the Shareholders and the Seller the documents referred to in Section 3.3
hereof.
Section 7.3 Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to carry out the transactions contemplated by this
Agreement are subject, at the option of the Purchaser, to the satisfaction, or
waiver by the Purchaser, of the following conditions:
(a) The Seller shall have furnished the Purchaser with a
certified copy of all necessary corporate action on its behalf approving its
execution, delivery and performance of this Agreement and each of the
Collateral Agreements to which it is a party.
(b) All representations and warranties of the
Shareholders and the Seller contained in this Agreement shall be true and
correct in all respects at Closing, as if such representations and warranties
were made at and as of the Closing, except for changes contemplated by the
terms of this Agreement except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms thereof, and the
Shareholders and the Seller shall have performed and satisfied in all material
respects all agreements and covenants required by this Agreement to be
performed and satisfied by Shareholders and the Seller at or prior to the
Closing; provided, however, that the Purchaser shall not be entitled to refuse
to consummate the transaction in reliance upon its own breach or failure to
perform.
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(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of the
Purchaser) shall be pending or threatened before any court or governmental
agency seeking to restrain the Purchaser or prohibit the Closing or seeking
Damages against the Purchaser, the Shareholders, the Seller or its Properties
as a result of the consummation of the transactions contemplated by this
Agreement.
(d) All notices and consents required to be given in
connection with the transactions contemplated by this Agreement shall have been
duly and timely given, and there shall not be any consent requirements with
respect to the transactions contemplated by this Agreement that have not
expired or been waived.
(e) Except for matters disclosed in the Schedules hereto,
from the date hereof up to and including the Closing there shall not have been
any damage, destruction or loss to the Seller (whether or not covered by
insurance) that had or would reasonably be likely to have a Material Adverse
Effect on the Seller.
(f) The Purchaser shall have received the opinion of
Cohen, Chase & Hoffman, P.A. ("Seller's Counsel"), counsel to the Seller and
the Shareholders, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Purchaser, as to the matters set forth on
Exhibit G. In rendering such opinion, Seller's Counsel may rely as to factual
matters on certificates of officers and directors of the Seller and the
Shareholders and on certificates of governmental officials, and as to legal
matters on opinions of other counsel reasonably acceptable to the Purchaser.
(g) The Shareholders shall have executed and delivered
to the Purchaser the Escrow Agreement.
(h) All proceedings to be taken by the Shareholders and
the Seller in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and their counsel, and the Purchaser and said
counsel shall have received all such counterpart originals or certified or
other copies of such documents as it or they may reasonably request.
(i) The Purchaser shall have received written evidence,
in form and substance reasonably satisfactory to the Purchaser, of the consent
to the transactions contemplated by this Agreement of all governmental,
quasi-governmental and private third parties (including, without limitation,
FAA, JAA and persons or other entities leasing real or personal property to the
Seller), except where the failure to have obtained any such consent would not
have a Material Adverse Effect on any of the parties hereto following the
Closing.
(j) The daily average revenues (the "Daily Average
Revenues") of the Seller from the Latest Balance Sheet Date through the date
which is three days prior to the Closing Date shall not be less than $100,000,
which shall be calculated by dividing (X) the net revenues for such period by
(Y) the total number of days for such period, and shall be accompanied by a
certificate executed by the Chief Financial Officer or President of the Seller
to the effect that the amount of the Daily Average Revenues for such period has
been calculated from the books and records of the Company and in a manner
consistent with the preparation of the Seller Financial Statements.
ARTICLE VIII
SURVIVAL
Section 8.1 Survival of Representations and Warranties of the
Seller and the Shareholders. All representations and warranties of the Seller
and the Shareholders shall survive the execution and delivery of this Agreement
and the Closing hereunder, and, except as otherwise specifically provided in
this Agreement shall thereafter terminate and expire 12 months from the Closing
Date, other than (i)
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Section 5.6(b) hereof, which shall survive with respect to liabilities relating
to engine repairs completed prior to the Closing for a period ending (30) days
after the expiration of any applicable warranty or contract period and (ii)
Sections 5.9, 5.14, 5.15(e), 5.17, 5.27, 5.28 and 5.29 hereof, which shall
survive the Closing until six months following the applicable statute of
limitations.
Section 8.2 Survival of Representations and Warranties of AVTEAM.
All representations and warranties of AVTEAM shall survive the execution and
delivery of this Agreement and the Closing hereunder, and, except as otherwise
specifically provided in this Agreement shall thereafter terminate and expire
12 months from the Closing Date, other than Sections 4.2, 4.6 and 4.7 hereof,
which shall survive the Closing and terminate and expire 24 months from the
Closing Date.
Section 8.3 Representations and Warranties In General.
Notwithstanding any right of any party hereto fully to investigate the affairs
of any other party hereto and notwithstanding any Knowledge of facts determined
or determinable by any party hereto pursuant to such investigation or right of
investigation, each of AVTEAM and AVTEAM Sub, on the one hand, and the Seller
and the Shareholders, on the other hand, has the right to rely fully upon the
representations, warranties, covenants and agreements of the Purchaser or the
Seller and the Shareholders, as the case may be, contained in this Agreement,
or in any certificate delivered pursuant to any of the foregoing; provided,
that no party hereto shall be entitled to rely on any representation or
warranty made by any other party hereto to the extent that such party has
Knowledge, and the other party or parties (or any of them) are not aware, that
such representation or warranty is untrue or incorrect in any material respect.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Obligation of the Shareholders to Indemnify. Subject
to the limitations contained in Article VIII and Article IX hereof, the
Shareholders, jointly and severally, agree to indemnify, defend and hold
harmless the Purchaser (and their Affiliates, successors and assigns and their
respective officers and directors) from and against all losses, liabilities,
damages, deficiencies, costs or expenses (including interest, penalties and
reasonable attorneys' fees and disbursements, but offset by any proceeds from
insurance and taking into account the present value of any tax savings to the
Purchaser or the Seller resulting from such losses, liabilities, damages,
deficiencies, costs or expenses) (collectively, "Losses") based upon, arising
out of or otherwise in respect of (i) any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of the Seller or the
Shareholders contained in this Agreement (except that the failure to include
any liability directly related to an Asset acquired by the Seller on or before
June 30, 1998 which is not set forth on the Latest Balance Sheet shall not be
deemed to be a breach of Section 5.6(a) hereof), (ii) any regulating or
licensing obligations of the Seller arising on or prior to the Closing Date,
(iii) any Taxes incurred by the Seller with respect to items attributable to
periods prior to the Closing Date, (iv) any subsequent adjustment by any Taxing
Authority with respect to items attributable to periods prior to the Closing
Date or (v) any warranty of the Seller attributable to any repair or
replacement work completed by the Seller prior to the Closing Date which,
individually or in the aggregate, is in excess of the amount of the warranty
reserves as set forth on the Closing Date Financial Statements referred to in
Section 11.7 hereof.
Section 9.2 Obligation of AVTEAM to Indemnify. Subject to the
limitations contained in Article VIII and Article IX hereof, AVTEAM agrees to
indemnify, defend and hold harmless the Seller and the Shareholders from and
against any Losses based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of AVTEAM contained in this Agreement or any engine repair completed
by AVTEAM after the Closing.
Section 9.3 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt
by any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would or might give rise to a
claim or the commencement (or threatened commencement) of any action,
15
proceeding or investigation (an "Asserted Liability") that may result in a
Loss, the Indemnitee shall give notice thereof (the "Claims Notice") to any
other party (or parties) obligated to provide indemnification pursuant to
Section 9.1 or 9.2 hereof (the "Indemnifying Party"). The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate the
amount (estimated, if necessary and to the extent feasible) of the Loss that
has been or may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may
elect to compromise or defend, at its own expense and by its own counsel, any
Asserted Liability. If the Indemnifying Party elects to compromise or defend
such Asserted Liability, it shall within thirty (30) days (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability. In the event
that the Indemnitee shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any proposed
settlement of any such claim by the Indemnifying Party might be expected to
adversely affect the Indemnitee's Tax liability or the ability of either AVTEAM
or AVTEAM Sub to conduct its business, or that the Indemnitee may have
available to it one or more defenses or counterclaims that are inconsistent
with one or more of those defenses that may be available to the Indemnifying
Party in respect of such claim or any litigation relating thereto, the
Indemnitee shall have the right at all times to take over and assume control
over the defense, settlement, negotiations or litigation relating to any such
claim at the sole cost of the Indemnifying Party. Notwithstanding the
foregoing, neither the Indemnifying Party nor the Indemnitee may settle or
compromise any claim over the objection of the other, provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the Indemnitee and the Indemnifying Party may participate, at their own
expense, in the defense of such Asserted Liability. If the Indemnifying Party
chooses to defend the claim, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its control
that are necessary or appropriate for such defense.
Section 9.4 Set-Off Rights.
(a) The Seller and each Shareholder specifically agree
that, subject to subsections (b) and (c) of this Section 9.4, any claims for
indemnification by the Purchaser against the Seller or the Shareholders (or any
of them) hereunder shall be satisfied solely against the Escrow Fund pursuant
to the Escrow Agreement, except with respect to a breach of Sections 5.14(b),
5.17, 5.20, 5.27 and 11.8 hereof. Any claim made against the Escrow Fund shall
be applied pari passu against the cash portion of the Escrow Fund and the
AVTEAM Shares in the Escrow Fund until all cash is exhausted, after which any
remaining Losses will be discharged against the remaining AVTEAM Shares.
(b) The Purchaser shall give Shareholders not less than
thirty (30) days' notice (the "AVTEAM Notice") of its intention to deduct or
set-off any amounts pursuant to this Section 9.4, including in such notice a
description of the Purchaser's indemnification claim. If none of the
Shareholders object in writing to such deduction or set-off at least two
business days prior to the date of the proposed set-off set forth in the AVTEAM
Notice (the "Set-Off Date"), then such proposed deduction or set-off shall
become effective on such date and shall not be subject to further review,
challenge or adjustment, absent fraud.
(c) If any of the Shareholders timely object in writing
to the set-off proposed in the AVTEAM Notice, and if the Purchaser and the
objecting Shareholder(s) are unable to resolve such dispute on or prior to the
Set-Off Date, then (i) the proposed deduction or set-off shall be effective
only as to undisputed amounts, and (ii) any disputed amounts shall be retained
in escrow to be held and disbursed by the Escrow Agent in accordance with the
terms of the Escrow Agreement. In the event that a dispute among the parties
arises pursuant to this Section 9.4(c), the party who is later determined to
have been in error in attempting to enforce or dispute the payment or set-off
shall (i) pay the reasonable legal and accounting fees, costs and expenses
incurred by the prevailing party in presenting, arguing and resolving such
dispute.
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Section 9.5 Minimum; Deductible.
(a) Subject to the exclusions and other provisions of
Sections 9.5 and 9.6 hereof, the Shareholders will have no liability (for
indemnification or otherwise) for the Losses described in Section 9.1 hereof
until the total of all Losses with respect to such matters exceeds $200,000
(the "Minimum"). Upon Losses exceeding such amount, the Shareholders shall be
liable, jointly and severally, for the full amount of such Losses in excess of
$200,000. In calculating Losses, the concept of materiality set forth in
individual representations and warranties shall be disregarded as to all Losses
once the Minimum is exceeded. The Minimum shall not apply to (i) any breach of
the representations and warranties of the Seller and the Shareholders contained
in Sections 5.6(b) and 5.7 hereof, (ii) the matters described in Section 9.5(b)
below, (iii) any breach of the obligations set forth in Section 11.8 hereof and
(iv) any breach of any of Seller's or the Shareholders' representations and
warranties of which either Seller or any Shareholder had Knowledge at any time
prior to the date on which such representation and warranty is made or any
intentional breach by either Seller or any Shareholder. The Shareholders shall
be fully liable, jointly and severally, for all Losses with respect to all
breaches to which the Minimum does not apply.
(b) The Shareholders will have no liability (for
indemnification or otherwise) with respect to Losses related to the
representations and warranties of the Seller and the Shareholders contained in
Section 5.6(d) hereof until the total of all Losses with respect to the matters
set forth in Section 5.6(d) hereof exceeds $50,000; provided, however, that
upon such Losses exceeding $50,000, the Shareholders shall be liable, jointly
and severally, for the full amount of such Losses in excess of $50,000.
Section 9.6 Shareholders' Limitations on Liability.
Notwithstanding any other provision of this Agreement, the indemnification
obligations of the Shareholders in respect of Losses shall not exceed (i)
$500,000, and the interest thereon plus (ii) the value of the AVTEAM Shares in
the Escrow Fund at the time a claim for indemnification is made (the "Indemnity
Cap"). The Indemnity Cap shall not apply to breaches of the representations and
warranties and covenants set forth in Sections 5.14(b), 5.17, 5.20, 5.27 and
11.8 hereof.
Section 9.7 AVTEAM's Limitations on Liability. Notwithstanding
any other provision of this Agreement, the indemnification obligations of
AVTEAM in respect of Losses shall not exceed $350,000. Such $350,000 indemnity
cap shall not apply to (i) the Assumed Liabilities set forth in Section 2.2
hereof and (ii) breaches of the representations and warranties forth in Section
4.6 hereof, provided, however, that AVTEAM shall have no liability in excess of
the amount of the Assumed Liabilities.
ARTICLE X
REGISTRATION RIGHTS
The Shareholders shall have the following registration rights with
respect to the AVTEAM Shares issued to them:
Section 10.1 Registration Rights for the AVTEAM Shares; Filing of
Registration Statement. If AVTEAM proposes to file a registration statement
(the "Registration Statement") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act"), for
the purpose of registering its Class A Common Stock for a public offering and
sale of such shares (other than one on Form S-8 or S-4), AVTEAM will, prior to
such filing, give written notice to the Holders of the AVTEAM Shares of its
intention to do so. For purposes of this Article X, a person is deemed to be a
"Holder" of AVTEAM Shares whenever such person is the record owner of the
AVTEAM Shares. Upon the written request of any Holder of the AVTEAM Shares
given within 20 days after AVTEAM provides such notice (which request shall
state the intended method of disposition of such AVTEAM Shares), AVTEAM shall
use its reasonable commercial efforts to cause all AVTEAM Shares which AVTEAM
has
17
been requested by the Holder to register to be registered in such Registration
Statement under the Securities Act to the extent necessary to permit their sale
or other disposition in accordance with the intended methods of distribution
specified in the Holders' request; provided, however, that AVTEAM shall have
the right to postpone or withdraw any registration effected pursuant to this
Section 10.1 without any obligation to the Holders whatsoever. In connection
with any registration under this Section 10.1, involving an underwritten
offering, AVTEAM shall not be required to include any AVTEAM Shares in such
registration unless the Holder(s) accept the terms of the underwriting as
reasonably agreed upon between AVTEAM and the underwriters selected by it. If,
in the opinion of the managing underwriter, it is appropriate because of
marketing factors to limit the number of AVTEAM Shares to be included in the
offering, then AVTEAM shall be required to include in the registration only
that number of AVTEAM Shares, if any, which the managing underwriter believes
should be included therein, and AVTEAM shall be entitled to include before such
AVTEAM Shares such number of shares of AVTEAM's Class A Common Stock to be
issued by AVTEAM or the person for which such registration is being effected in
the offering. If the number of AVTEAM Shares to be included in the offering in
accordance with the foregoing is less than the total number of AVTEAM Shares
which the Holder(s) have requested to be included, then the Holder(s) and the
other holders of securities entitled to be included in such registration shall
participate in the registration pro rata based upon their total ownership of
the unregistered AVTEAM Shares. Notwithstanding the foregoing, in the event
that a shareholder of AVTEAM requests registration of its shares of AVTEAM's
Class A Common Stock and has been granted piggyback registration rights
pursuant to that certain Registration Rights Agreement dated as of December 6,
1996 by and among AVTEAM, Clipper Capital Associates, L.P., Clipper/Merchant
Partners, L.P., Clipper Equity Partners I, L.P., Clipper/European Re, L.P. and
Clipper/Merban, L.P., such shareholder shall be entitled to include before the
AVTEAM Shares such number of shares of AVTEAM's Class A Common Stock held by
such shareholder.
Section 10.2 Expenses of Registration. AVTEAM shall pay all
expenses incurred by AVTEAM in connection with the registration, qualification
and/or exemption of the AVTEAM Shares, including any SEC and state securities
law registration and filing fees, printing expenses, fees and disbursements of
AVTEAM's counsel and accountants, transfer agents' and registrars' fees, fees
and disbursements of experts used by AVTEAM in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement or prospectuses contained
therein. AVTEAM shall not, however, be liable for any sales, broker's or
underwriting commissions or other selling expenses incurred upon sale by any
Holder of any of the AVTEAM Shares.
Section 10.3 Furnishing of Documents. AVTEAM shall furnish to the
Holders such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents as the Holders may reasonably request in order to facilitate the
offering of the AVTEAM Shares.
Section 10.4 Amendments and Supplements. AVTEAM shall prepare and
promptly file with the SEC and promptly notify the Holders of the filing of
such amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions
if, at the time when a prospectus relating to the AVTEAM Shares is required to
be delivered under the Securities Act, any event shall have occurred as a
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. AVTEAM shall also
advise the Holders promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceeding for that purpose and promptly use its reasonable best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such stop
order should be issued. If, after a Registration Statement becomes effective,
AVTEAM advises the Holders that AVTEAM considers it appropriate that the
Registration Statement be amended, the Holders shall suspend any further sales
of the AVTEAM Shares until AVTEAM advises the Holders that the Registration
Statement has been amended, in which case AVTEAM shall cause such amendment to
be filed as soon as reasonably practical.
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Section 10.5 Duration. AVTEAM shall maintain the effectiveness of
the Registration Statement until such time as AVTEAM reasonably determines,
based on an opinion of counsel, that the Holders will be eligible to sell all
of the Shares then owned by the Holders without the need for continued
registration of the shares, in the three month period immediately following the
termination of the effectiveness of the Registration Statement. AVTEAM's
obligations contained in this Article X shall commence on the date the AVTEAM
Shares are released from the Escrow Fund and terminate on the first anniversary
of the release of the AVTEAM Shares from the Escrow Fund, other than the
obligations of AVTEAM and the Holders of AVTEAM Shares under Section 10.7
hereof which shall survive the completion of any offering of AVTEAM Shares in a
registration statement under Article X hereof.
Section 10.6 If the AVTEAM Shares owned by a Holder are included
in any registration, such Holder shall furnish AVTEAM such information
regarding itself as AVTEAM may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
Section 10.7 Indemnification. In the event any AVTEAM Shares are
included in a registration statement under Article X hereof:
(a) To the extent permitted by law, AVTEAM will
indemnify, defend and hold harmless each Holder of AVTEAM Shares (each, an
"Indemnified Person"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or other federal or state law, insofar as such
losses, claim, damages, or liabilities (or actions in respect thereof) (the
"Indemnified Amount") arise out of or are based upon any of the following
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading or (iii) any violation or alleged
violation by AVTEAM of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and AVTEAM will pay to each such
Indemnified Person, as incurred, any legal or other expenses reasonably
incurred by the Indemnified Person in connection with investigating or
defending any Indemnified Amount; provided however, that the indemnity
agreement contained in this Section 10.7 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of AVTEAM (which consent shall not
be unreasonably withheld), nor shall AVTEAM be liable in any such case for any
such Indemnified Amount as to any Indemnified Person to the extent such
liability arises out of or is based upon a Violation that occurs, arises out of
or is based upon written information furnished expressly for use in connection
with such registration by such Indemnified Person.
(b) To the extent permitted by law, each selling Holder
of AVTEAM Shares will indemnify and hold harmless AVTEAM, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls AVTEAM within the meaning of the Securities Act,
any underwriter, any other holder of AVTEAM Shares selling securities in such
registration statement and any controlling person of any such underwriter or
other holder of AVTEAM Shares, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) (the "Holder Indemnified Amount") arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder of AVTEAM Shares expressly for use in
connection with such registration, and each such Holder of AVTEAM Shares will
pay, as incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section 10.7(b) in connection with
investigating or defending any Holder Indemnified Amount; provided however,
that the indemnity agreement contained in this Section 10.7(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the indemnifying
Holder of AVTEAM Shares (which consent
19
shall not be unreasonably withheld); and provided that, in no event shall any
indemnity under this Section 10.7(b) exceed the gross proceeds from the
offering received by such Holder of AVTEAM Shares.
(c) Promptly after receipt by a party entitled to
indemnification under this Section 10.7 of notice of the commencement of any
action (including any governmental action), such Indemnified Person will, if a
claim in respect thereof is to be made against any indemnifying party under
this Section 10.7, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided however,
that an Indemnified Person (together with all other Indemnified Persons that
may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such Indemnified Person by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
Indemnified Person under this Section 10.7 but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any Indemnified Person otherwise than under this Section
10.7.
(d) If the indemnification provided for in this Section
10.7 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Person with respect to any loss, liability, claim, damage, or
expense referred to herein, then the indemnifying party, in lieu of
indemnifying such Indemnified Person hereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the Indemnified
Person on the other in connection with the Violation that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the Indemnified Person shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the Indemnified Person and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in any underwriting
agreement entered into in connection with an underwritten public offering are
in conflict with the foregoing provisions, the provisions in such underwriting
agreement shall control if signed by the parties hereto.
(f) The obligations of AVTEAM and Holders of AVTEAM
Shares under this Section 10.7 shall survive the completion of any offering of
AVTEAM Shares in a registration statement under Article X hereof.
(g) Notwithstanding anything to the contrary contained
herein, the indemnification and contribution provisions set forth in this
Section 10.7 shall supersede the indemnification provisions set forth in
Article IX hereof.
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ARTICLE XI
POST-CLOSING OBLIGATIONS
Section 11.1 Further Assurances. Following the Closing, each of
the Seller, the Shareholders and the Purchaser shall execute and deliver such
documents, and take such other action, as shall be reasonably requested by any
other party hereto to carry out the transactions contemplated by this
Agreement.
Section 11.2 Publicity. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior written approval of the
other parties, except that AVTEAM may make such public disclosure which it
believes in good faith to be required by law or by the terms of any listing
agreement with or requirements of Nasdaq.
Section 11.3 Access to Records. From and after the Closing, (i)
the Seller and the Shareholders shall (A) permit the Purchaser and its
authorized employees, agents, accountants, legal counsel and other
representatives to have access to the books, records, files, agreements and
other information in the possession of the Shareholders or their respective
Affiliates, and (B) use their reasonable commercial best efforts to permit the
Purchaser and its authorized employees, agents, accountants, legal counsel and
other representatives to have access to the employees, counsel, accountants and
other representatives of the Seller and Shareholders and their respective
Affiliates, in each case, to the extent and at all times reasonably requested
by the Purchaser for the purpose of investigating or defending any claim made
against the Seller or the Shareholders relating to the Assets or the Business
in connection with periods ending on or before or including the Closing Date
and (ii) the Purchaser shall use its reasonable commercial best efforts to
permit the Seller and the Shareholders and their respective authorized
employees, agents, accountants, legal counsel and other representatives to have
access to the employees, counsel, accountants and other representatives of the
Purchaser, to the extent and at all times reasonably requested by the Seller or
the Shareholders, or any of them, for the purpose of investigating or defending
any claim made against the Seller or the Shareholders in connection with
Article IX or in prosecuting the case or cases described in Section 2.7 hereof.
Section 11.4 Restrictive Covenants. In order to assure that the
Purchaser will realize the benefits of the transactions contemplated hereby,
the Seller agrees with the Purchaser that it will not:
(a) for a period of five years from the Closing Date,
directly or indirectly, alone or as a partner, joint venturer, officer,
director, member, employee, consultant, agent, independent contractor or
shareholder of, or lender to, any company or business, engage in any business
in the aerospace industry in direct competition with the business of the
Purchaser, as such business now exists or as it may exist at the time of
termination of this Section 11.4 hereof, anywhere in the United States;
provided, however, that, the beneficial ownership of less than two percent (2%)
of the shares of stock of any other corporation having a class of equity
securities actively traded on a national securities exchange, Nasdaq or
over-the-counter market shall not be deemed, in and of itself, to violate the
prohibitions of this Section 11.4;
(b) for a period of five years from the Closing Date,
directly or indirectly (i) induce any Person which is a customer of the Seller,
the Purchaser or any Affiliate of the Seller or the Purchaser to patronize any
business in the aerospace industry directly or indirectly in competition with
business conducted by the Seller, the Purchaser or any Affiliate of the Seller
or the Purchaser; (ii) canvass, solicit or accept from any Person which is a
customer of the Seller, the Purchaser or any Affiliate of the Seller or the
Purchaser, any such competitive business; or (iii) request or advise any Person
which is a customer or supplier of the Seller, the Purchaser or any Affiliate
of the Seller or the Purchaser, to withdraw, curtail or cancel any such
customer's or supplier's business with the Seller, the Purchaser or any
Affiliate of the Seller or the Purchaser, or its or their successors; or
21
(c) for a period of five years from the Closing Date,
directly or indirectly employ, or knowingly permit any company or business
directly or indirectly controlled by it, to employ, any person who was employed
by the Seller, the Purchaser or any Affiliate of the Seller or the Purchaser at
or within the prior six months, or in any manner seek to induce any such person
to leave his or her employment.
The Seller agrees and acknowledges that the restrictions contained in this
Section 11.4 are reasonable in scope and duration and are necessary to protect
the Purchaser after the Closing Date. If any provision of this Section 11.4 as
applied to any party or to any circumstance is adjudged by a court to be
invalid or unenforceable, the same will in no way affect any other circumstance
or the validity or enforceability of this Agreement. If any such provision, or
any part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision, and/or to delete specific words or phrases, and in its reduced
form, such provision shall then be enforceable and shall be enforced. The
parties agree and acknowledge that the breach of this Section 11.4 will cause
irreparable damage to the Purchaser and upon breach of any provision of this
Section 11.4, the Purchaser shall be entitled to injunctive relief, specific
performance or other equitable relief; provided, however, that, this shall in
no way limit any other remedies which the Purchaser may have (including,
without limitation, the right to seek monetary damages).
Section 11.5 Board Seat. Following the Closing, the number of
members of the Board of Directors of AVTEAM (the "Board") shall be increased by
one. The Board shall nominate and elect the person selected by a majority of
the Shareholders (the "Designee") to fill the vacancy on the Board, to serve
until the next annual meeting of shareholders of AVTEAM, or such Designee's
earlier death, disability, removal or resignation.
Section 11.6 Name Change. Immediately following the Closing, the
Shareholders shall cause the Seller to amend its articles of incorporation to
change the name of the Seller to any name that is not similar to and is not
confusing with the present name of the Seller or the Purchaser.
Section 11.7 Closing Date Financial Statements.
(a) As promptly as practical, but in any event not later
than 60 days after the Closing Date referred to in Section 3.1 hereof, the
Seller and the Shareholders shall cause to be prepared and delivered to the
Purchaser an unaudited balance sheet and the related statements of income,
shareholders' equity and cash flows, including the notes thereto, for the
Seller as of the Closing Date (the "Closing Date Financial Statements"). The
Closing Date Financial Statements shall (i) be prepared from the books and
records of the Seller, (ii) present fairly the financial condition of the
Seller and its results of operations as at and for the period then ended, (iii)
be prepared in accordance with GAAP and (iv) be accompanied by an accountant's
review report from Berkowitz Dick Pollack & Brant, LLP. The reserve for losses
or bad debts related to the Seller's accounts receivable and the reserve for
warranty claims (collectively, the "Reserves") shall be set forth on the
Closing Date Financial Statements.
(b) If the Seller and the Shareholders and the Purchaser
in good faith disagree with the amount of the Reserves, then either party may
notify the others in writing of such disagreement pursuant to a Notice of
Disagreement. The Notice of Disagreement shall set forth in reasonable detail
the basis for the disagreement. Thereafter, the Seller and the Shareholders and
the Purchaser shall attempt in good faith to resolve and finally determine the
Reserves. If the Seller and the Shareholders and the Purchaser are unable to
resolve the disagreement within 30 days after the delivery of the Notice of
Disagreement, the Seller and the Shareholders and the Purchaser shall select a
mutually acceptable Independent Accountant which does not then have a material
relationship with, the Purchaser, the Seller or the Shareholders to resolve the
disputed items and make a determination with respect thereto. Such
determination will be made, and written notice thereof given to the Seller and
the Shareholders and the Purchaser within 30 days after such selection. The
determination by the Independent Accountant shall be final, binding and
conclusive upon the parties hereto. The scope of the Independent Accountant's
engagement (which shall not be an audit) shall be limited to the resolution of
the items contained in the Notice of Disagreement, and the recalculation, if
any, of the Reserves in light of such resolution and such
22
firm shall be deemed to be acting as experts and not as arbitrators. One-half
of the fees, costs and expenses of the Independent Accountants, if any, will be
borne by the Purchaser and the balance by the Seller and the Shareholders.
Section 11.8 Past Due Accounts Receivable.
(a) The Seller and the Shareholders jointly and severally
guarantee payment in full of all accounts receivable of the Seller less the
amount of the applicable reserve for losses or bad debts on such accounts
receivable, as reflected on the Closing Date Financial Statement. If any
accounts receivable of the Seller remain uncollected 180 days after the
applicable date of invoice (the "Past Due Accounts Receivable"), the Seller and
the Shareholders jointly and severally agree to repurchase the Past Due
Accounts Receivable from AVTEAM Sub and pay to AVTEAM Sub the face amount
thereof, less the applicable reserve for losses or bad debts (a "Repurchase"),
provided that a Repurchase shall not be required until 180 days from the
Closing Date. However, in the event that the Purchaser has a dispute with a
customer unrelated to the work performed by the Seller and such customer fails
or refuses to pay its Past Due Accounts Receivable as a result of such dispute,
the Seller and the Shareholders shall be permitted to defer a Repurchase of
such Past Due Accounts Receivable until the earlier of (i) the date such
dispute is resolved or (ii) 270 days after the Closing Date.
(b) Notwithstanding anything to the contrary contained in
Section 11.8(a) hereof, a Repurchase is conditioned upon the following:
(i) The Purchaser shall assign to the Seller or
the Shareholders, as the case may be, the interest of the Purchaser in the Past
Due Accounts Receivable;
(ii) The Purchaser shall at all times act in a
commercially reasonable manner with respect to the collection of the accounts
receivable which become Past Due Accounts Receivable; and
(iii) AVTEAM Sub shall not have shipped engines or
engine parts to customers which have existing Past Due Accounts Receivable,
other than as (A) required by law or court order in the opinion of legal
counsel to the Purchaser, (B) consented to by the Seller or the Shareholders or
(C) determined in the reasonable good faith business judgment of the Purchaser.
Section 11.9 Seller's Health Insurance Plans. The Purchaser
covenants and agrees that the Seller's medical, dental and vision plans (the
"Seller's Health Insurance Plans") will remain in effect for a period of at
least one year following the Closing and the benefits provided to the Seller's
employees under the Seller's Health Insurance Plans will not be changed in any
material respect during such one year period, so long as such benefits are
commercially available under the Seller Health Insurance Plans. During such one
year period, the Purchaser will compare the benefits and costs of the Seller's
Health Insurance Plans with the benefits and costs of the health insurance
plans that AVTEAM and its subsidiaries provide to their employees taken as a
whole (the "Insurance Analysis"). Mark Schuldiner shall serve on a committee
which performs the Insurance Analysis and recommends to the Purchaser the
health insurance plans to be provided to the Seller's employees which are
employed by the Purchaser. Based upon the foregoing, the Purchaser shall make a
commercially reasonable, good faith determination to provide health insurance
to the Seller's employees who are employed by the Purchaser which takes into
consideration the benefits and costs of the Seller's Health Insurance Plans and
is consistent with the overall health insurance benefits to be provided to
AVTEAM's and its subsidiaries' employees taken as a whole.
Section 11.10 AGES Engine. The Purchaser hereby covenants and
agrees that the Seller or the Shareholders shall be permitted to prosecute or
defend, at its own expense and by its own counsel, any claim or action arising
out of or related to the AGES Engine. If the Seller or the Shareholders decide
to prosecute or defend such claim or action, the Purchaser shall make available
to the Seller or the Shareholders any books, records or other documents within
its control that are necessary or appropriate for such defense.
23
Section 11.11 Rule 144 Sales. With a view to making available the
benefits of certain rules and regulations of the SEC which may permit the sale
of the AVTEAM Shares to the public without registration under the Securities
Act, AVTEAM agrees to:
(a) Use its reasonable commercial best efforts
to file with the SEC in a timely manner all reports and other documents
required to be filed by AVTEAM with the SEC under the Securities Act and the
Exchange Act; and
(b) Furnish to each Holder upon written request
of a Holder or its legal counsel, a written statement by AVTEAM as to its
compliance with the reporting requirements of Rule 144 promulgated under the
Securities Act (or any successor rule) and, a copy of the most recent annual or
quarterly report of AVTEAM which has been filed by AVTEAM with the SEC, and
such other reports and documents filed by AVTEAM with the SEC as a Holder may
reasonably request.
The obligations of AVTEAM contained in this Section 11.11 shall commence on the
date the AVTEAM Shares are released from the Escrow Fund and terminate on the
date the AVTEAM Shares are sold pursuant to Rule 144 promulgated under the
Securities Act (or any successor rule).
ARTICLE XII
MISCELLANEOUS
Section 12.1 No Commissions. Regardless of whether the Closing
shall occur, (i) each Shareholder shall jointly and severally indemnify and
hold harmless the Purchaser from and against any and all liability for any
brokers or finders' fees arising with respect to brokers or finders retained or
engaged by the Seller or any of the Shareholders in respect of the transactions
contemplated by this Agreement, and (ii) the Purchaser shall indemnify and hold
harmless the Seller and the Shareholders from and against any and all liability
for any brokers' or finders' fees arising with respect to brokers or finders
retained or engaged by the Purchaser in respect of the transactions
contemplated by this Agreement.
Section 12.2 Expenses. Each of the parties to this Agreement
shall bear its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby; provided, that (i) the Purchaser shall pay the expense of
auditing the Seller referred to in Section 6.1 hereof and (ii) any expenses
incurred by the Seller in connection with this Agreement and the transactions
contemplated hereby in excess of the amount set forth on Schedule 12.2 hereto
shall be borne by the Shareholders, provided, however, that the Seller and the
Shareholders may incur up to an additional $25,000 of expenses related to the
resolution of the Seller's environmental matters and the Purchaser will pay
such expenses on behalf of the Seller and the Shareholders in the event that
the transactions contemplated by this Agreement are consummated. In the event
that the transactions contemplated by this Agreement are not consummated, the
Seller will bear the expenses for the resolution of the Seller's environmental
matters.
Section 12.3 Notices. Any notice, request, instruction,
correspondence or other document to be given hereunder by any party hereto to
another (herein collectively called "Notice") shall be in writing and delivered
personally or mailed by registered or certified mail, postage prepaid and
return receipt requested, or by telecopier, as follows:
The Purchaser: AVTEAM, Inc.
3230 Executive Way
Miramar, Florida 33025
Attention: Mr. Donald A. Graw
Telecopy No.: (954) 431-7675
24
With a copy to: Baker & McKenzie
1200 Brickell Avenue, 19th Floor
Miami, Florida 33131
Attention: Noel H. Nation, Esq.
Telecopy No.: (305) 789-8953
The Seller or
Shareholders: M&M Aircraft Services, Inc.
8130 N.W. 74th Avenue
Medley, Florida 33166
Attention: Mr. James L. McLellan
Mr. Leon Sacco
Mr. Mark Schuldiner
Telecopy No.: (305) 885-1085
With a copy to: Cohen, Chase & Hoffman, P.A.
9400 South Dadeland Blvd.
Miami, Florida 33156
Attention: Fredric A. Hoffman, Esq.
Telecopy No.: (305) 670-6152
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall
be effective upon actual receipt if received during the recipient's normal
business hours, or at the beginning of the recipient's next normal business day
after receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to
the contrary contained herein notwithstanding, Notices to any party hereto
shall not be deemed effective with respect to such party until such Notice
would, but for this sentence, be effective both as to such party and as to all
other persons to whom copies are provided above to be given.
Section 12.4 Governing Law. The provisions of this Agreement and
the documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Florida (excluding any conflict of law
rule or principle that would refer to the laws of another jurisdiction). Each
party hereto irrevocably submits to the jurisdiction of the Circuit Court
located in Dade or Broward County, Florida, in any action or proceeding arising
out of or relating to this Agreement or any of the Collateral Agreements, and
each party hereby irrevocably agrees that all claims in respect of any such
action or proceeding must be brought and/or defended in such court; provided,
however, that matters which are under the exclusive jurisdiction of the Federal
courts shall be brought in the Federal District Court for the Southern District
of Florida. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
Section 12.5 Representations and Warranties. Each of the
representations and warranties of each of the parties to this Agreement shall
be deemed to have been made at the date hereof and at and as of the Closing
Date.
Section 12.6 Entire Agreement, Amendments and Waivers. This
Agreement, together with all exhibits and schedules attached hereto,
constitutes the entire agreement between the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and
there are no warranties, representations or other agreements between the
parties in connection with the subject matter hereof except as set forth
specifically herein or contemplated hereby. No supplement, modification or
waiver of this Agreement
25
shall be binding unless executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (regardless of whether
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
Section 12.7 Binding Effect and Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns; but neither this Agreement nor any
of the rights, benefits or obligations hereunder shall be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their respective permitted successors and assigns, any rights, benefits or
obligations hereunder.
Section 12.8 Remedies. The rights and remedies provided by this
Agreement are cumulative, and the use of any one right or remedy by any party
hereto shall not preclude or constitute a waiver of its right to use any or all
other remedies. Such rights and remedies are given in addition to any other
rights and remedies a party may have by law, statute, or otherwise.
Section 12.9 Exhibits and Schedules. The exhibits and schedules
referred to herein are attached hereto and incorporated herein by this
reference. Disclosure of a specific item in any one schedule shall be deemed
restricted only to the Section to which such disclosure specifically relates
except where (i) there is an explicit cross-reference to another Schedule, and
(ii) the Purchaser could reasonably be expected to ascertain the scope of the
modification to a representation intended by such cross-reference.
Section 12.10 Multiple Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 12.11 References. Whenever required by the context, and as
used in this Agreement, the singular number shall include the plural and
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identification the person may
require. References to monetary amounts and specific named statutes are intended
to be and shall be construed as references to United States dollars and statutes
of the United States of the stated name, respectively, unless the context
otherwise requires.
Section 12.12 Survival. Any provision of this Agreement which
contemplates performance or the existence of obligations after the Closing Date,
and any and all representations and warranties set forth in this Agreement,
shall not be deemed to be merged into or waived by the execution and delivery of
the instruments executed at the Closing, but shall expressly survive Closing for
the time period set forth in Article VIII hereof and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
Section 12.13 Attorneys' Fees. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
Section 12.14 Definitions. Capitalized terms used in this Agreement
shall have the respective meanings ascribed to such terms in this Section 12.14,
unless otherwise defined in this Agreement.
"Affiliate" shall mean, with respect to any person, any other
person controlling, controlled by or under common control with such person. The
term "Control" as used in the preceding sentence means, with respect to a
corporation, the right to exercise, directly or indirectly, more than fifty
percent (50%) of the voting rights attributable to the shares of the controlled
corporation and, with respect to any
26
person other than a corporation, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person.
"Collateral Agreements" shall mean any or all of the
following agreements, the forms of which are attached hereto as exhibits to
this Agreement:
Exhibit A - Escrow Agreement
Exhibit B - Bill of Sale
Exhibit E - Executive Employment Agreements
and any and all other agreements, instruments or documents required or expressly
provided under this Agreement to be executed and delivered in connection with
the transactions contemplated by this Agreement.
"Damages" shall mean any and all damages, liabilities,
obligations, penalties, fines, judgments, claims, deficiencies, losses, costs,
expenses and assessments (including without limitation income and other Taxes,
interest, penalties and attorneys' and accountants' fees and disbursements).
"Environmental Law" shall mean any governmental statute, law,
ordinance, code, rule, regulation, order or decree relating to or imposing
liability or standards of conduct as may now be in effect regarding any air
emission, water discharge or use, storage, handling, generation or disposal of
any Hazardous Substances, including, without limitation, the following, and all
regulations promulgated thereunder or in connection therewith: the
Comprehensive Environmental Response, Compensation, and Liability Act, the
Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act, the Used Oil Recycling Act, the
Occupational Safety and Health Act, the Federal Safe Drinking Water Act, the
Federal Water Pollution Control Act, the Oil Pollution Act, the Emergency
Planning and Community Right-to-Know Act, and all other federal, state, tribal
and local laws, rules and regulations relating to protection of human health
and the environment, reclamation of land, wetlands and waterways or relating to
the use, storage, emissions, discharge, clean-up or release of Hazardous
Substances on or into the work-place or the environment (including, without
limitation, ambient air, oceans, waterways, wetlands, surface water, ground
water (tributary and nontributary), land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation or handling of contaminants, as
all of the foregoing may be amended, supplemented and reauthorized from time to
time.
"GAAP" shall mean generally accepted accounting principles
applied on a basis consistent with past practices (except for the omission of
footnotes in any interim financial statements).
"Governmental Authority" shall mean any nation or country
(including but not limited to the United States) and any commonwealth,
territory or possession thereof and any political subdivision of any of the
foregoing, including but not limited to courts, departments, commissions,
boards, bureaus, agencies, ministries or other instrumentalities.
"Hazardous Substances" shall mean industrial, toxic or
hazardous substances or wastes or other pollutants, contaminants, petroleum
products, asbestos, polychlorinated biphenyls ("PCBs") or chemicals, all as
defined and regulated under Environmental Law.
"Knowledge" shall mean the actual knowledge of a party or, in
the case of the Seller or the Purchaser, any of their respective directors or
executive officers who are shareholders with respect to the representation
being made, and such knowledge of any such persons as reasonably should have
obtained upon due investigation and inquiry into the representation being made.
"Legal Requirements", when described as being applicable to
any person or entity, shall mean any and all laws (statutory, judicial or
otherwise), ordinances, regulations, judgments, orders,
27
directives, injunctions, writs, decrees or awards of, and any contracts with,
any Governmental Authority, in each case as and to the extent applicable to
such person or entity or such person's or entity's business, operations or
Properties.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited to, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code or comparable law or any jurisdiction in connection
with such mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Effect" shall mean any change in the
assets, business, operations, prospects, properties, securities or financial
condition of a party to this Agreement that had or would reasonably be likely
to have a material adverse effect on the assets, business, operations,
prospects, properties, securities or financial condition of such party
("Material Adverse Effect").
"Permits" shall mean any and all permits or orders under any
Legal Requirement or otherwise granted by any Governmental Authority.
"Properties" shall mean any and all properties and Assets
(real, personal or mixed, tangible or intangible).
"Regulations" shall mean any and all regulations promulgated
by the Department of the Treasury pursuant to the Code.
"Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, worker's compensation,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code ss59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Taxing Authority or Authorities" means any Governmental
Authority responsible for the imposition of Taxes.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Used" shall mean, with respect to the Assets, those owned,
leased, licensed or otherwise held by the Seller which were acquired for use or
held for use by the Seller in connection with the Seller's Business and
operations, whether or not reflected on the Seller's books of account.
Section 12.15 Severability. If any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
28
EXECUTED as of the date first written above.
AVTEAM, INC.
By: /s/ Donald A. Graw
-------------------------------------
Donald A. Graw
President and Chief Executive Officer
AVTEAM ENGINE REPAIR CORP.
By: /s/ Donald A. Graw
-------------------------------------
Donald A. Graw
President and Chief Executive Officer
M&M AIRCRAFT SERVICES, INC.
By: /s/ James L. McLellan
-------------------------------------
Name: James L. McLellan
-----------------------------------
Title: President
----------------------------------
SHAREHOLDERS:
/s/ James L. McLellan
----------------------------------------
JAMES L. McLELLAN
/s/ Leon Sacco
----------------------------------------
LEON SACCO
/s/ Mark Schuldiner
----------------------------------------
MARK SCHULDINER
29
LIST OF SCHEDULES AND EXHIBITS
[Enlarge/Download Table]
Schedule 2.1(a) - Cash and Cash Equivalents
Schedule 2.1(b) - Receivables
Schedule 2.1(c) - Inventories
Schedule 2.1(d) - Prepaid Items and Deposits
Schedule 2.1(e) - Fixed Assets
Schedule 2.1(f) - Intellectual Property
Schedule 2.1(g) - Other Proprietary Assets
Schedule 2.1(h) - Supplies
Schedule 2.1(i) - Contracts
Schedule 2.1(j) - Leased Real Estate
Schedule 2.4 - Liens
Schedule 4.1 - Articles of Incorporation and Bylaws of AVTEAM
Schedule 4.3 - Purchaser Required Consents
Schedule 5.1(a) - Articles of Incorporation and Bylaws
Schedule 5.3 - Seller and Shareholder Required Consents
Schedule 5.5 - Seller Financial Statements
Schedule 5.6(a) - Liabilities and Obligations
Schedule 5.6(b) - Warranties
Schedule 5.7 - Assigned or Pledged Accounts Receivable
Schedule 5.8(a) - Employee Matters
Schedule 5.8(b) - Compensation Plans
Schedule 5.8(c) - Employment Agreements
Schedule 5.8(f) - Compliance with Laws
Schedule 5.8(g) - Labor Matters
Schedule 5.8(h) - Termination of Employment
Schedule 5.9 - Employee Benefit Plans
Schedule 5.10 - Absence of Certain Changes
Schedule 5.11 - Contracts
Schedule 5.14(b) - Condition of Assets
Schedule 5.15(e) - Noncompliance with FAA Airworthiness Directives and Engine Manual Repair
Specifications
Schedule 5.16 - Litigation
Schedule 5.17 - Environmental Matters
Schedule 5.18 - Banks
Schedule 5.19 - Suppliers and Customers
Schedule 5.25 - Government Inquiries
Schedule 5.27 - Tax Matters
Schedule 6.3(i) - Bonuses and Dividends
Schedule 6.3(ii) - Securities Matters
Schedule 6.3(vii) - Expenditures
Schedule 12.2 - Expenses Borne by the Shareholders
Exhibit A - Escrow Agreement
Exhibit B - Bill of Sale
Exhibit C - Purchaser's Representations
Exhibit D - Seller's and Shareholders' Representations
Exhibit E - Executive Employment Agreements
Exhibit F - Opinion of Baker & McKenzie
Exhibit G - Opinion of Cohen, Chase and Hoffman, P.A.
EXHIBIT B
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, M&M AIRCRAFT
SERVICES, INC. (the "Seller"), a Florida corporation, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
does hereby grant, bargain, sell, and transfer to AVTEAM ENGINE REPAIR CORP.
("AVTEAM Sub"), a Florida corporation, its successors and assigns, all of the
Assets (other than the Excluded Assets) as such terms are defined in the Asset
Purchase Agreement, dated October ____, 1998 by and among AVTEAM Sub, AVTEAM,
Inc., the Seller, James L. McLellan, Leon Sacco and Mark Schuldiner.
TO HAVE AND TO HOLD, all and singular, the Assets (other than the
Excluded Assets) hereby sold, and transferred to AVTEAM Sub, its successors and
assigns, to and for its own use and benefit forever.
Seller hereby binds itself, its successors and assigns, to warrant and
defend the title to all the Assets (other than the Excluded Assets) unto AVTEAM
Sub, its successors and assigns, against every person whomsoever lawfully
claiming or to claim the Assets (other than the Excluded Assets) or any part
thereof.
This instrument shall be binding upon the Seller, its successors and
assigns, and shall inure to the benefit of AVTEAM Sub and its successors and
assigns.
This Bill of Sale shall be governed by the laws of the State of
Florida.
IN WITNESS WHEREOF, this Bill of Sale is executed this __ day of
November, 1998, and shall be effective on this date.
M&M AIRCRAFT SERVICES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
EXHIBIT C
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Seller and each of the Shareholders to
enter into this Agreement and to consummate the transactions contemplated
hereby, the Purchaser hereby represents and warrants to the Seller and the
Shareholders as follows:
Section 4.1 Corporate Existence and Qualification; Corporate
Documents. Each of AVTEAM and AVTEAM Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida,
and is not required to be qualified to do business as a foreign corporation in
any other jurisdiction where the failure to so qualify would have a Material
Adverse Effect on either AVTEAM or AVTEAM Sub, as the case may be. AVTEAM has
all required corporate power and authority to own its properties and to carry
on its business as presently conducted. AVTEAM Sub is a wholly owned direct
subsidiary of AVTEAM and has been formed for the purpose of acquiring the
Assets. Copies of the Articles of Incorporation and Bylaws of each of AVTEAM
and AVTEAM Sub on Schedule 4.1 hereto are complete and reflect all amendments
thereto through the date hereof.
Section 4.2 Authority, Approval and Enforceability. This
Agreement has been duly executed and delivered by the Purchaser and the
Purchaser has all requisite power and legal authority to (i) execute and
deliver this Agreement and all Collateral Agreements executed and delivered or
to be executed and delivered in connection with the transactions provided for
hereby, (ii) consummate the transactions contemplated hereby and by the
Collateral Agreements, and (iii) perform its obligations hereunder and under
the Collateral Agreements. This Agreement and each Collateral Agreement to
which each of AVTEAM and AVTEAM Sub is a party constitutes, or upon execution
and delivery will constitute, the legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equity remedies
may be limited by the application of general principles of equity (regardless
of whether such equitable principles are applied in a proceeding at law or in
equity).
Section 4.3 No Defaults or Consents. Except as set forth on
Schedule 4.3 hereto and except for any waiver, consent, action, approval or
authorization of, or registration, declaration, notice or filing with the FAA
or the JAA in connection with the transactions contemplated hereby, neither the
execution and delivery of this Agreement nor the carrying out of the
transactions contemplated hereby will:
(i) violate or conflict with any of the terms,
conditions or provisions of the Articles of Incorporation or Bylaws of AVTEAM
or AVTEAM Sub;
(ii) violate any Legal Requirements applicable to
the Purchaser;
(iii) violate, conflict with, result in a breach
of, constitute a default under (whether with or without notice or the lapse of
time or both), or accelerate or permit the acceleration of the performance
required by, or give any other party the right to terminate, any material
contract or Permit applicable to the Purchaser;
(iv) result in the creation of any lien, charge
or other encumbrance on the shares of capital stock or any Property of AVTEAM
or AVTEAM Sub; or
(v) require the Purchaser to obtain or make any
waiver, consent, action, approval or authorization of, or registration,
declaration, notice of or filing with, any private non-governmental third party
or any Governmental Authority. Any and all consents required to be obtained by
the Purchaser as set forth on Schedule 4.3 hereto shall be obtained.
Section 4.4 No Proceedings. No suit, action or other
proceeding is pending or, to the Knowledge of the Purchaser, threatened before
any Governmental Authority seeking to restrain AVTEAM or AVTEAM Sub or prohibit
their entry into this Agreement or prohibit the Closing, or seeking damages
against AVTEAM or AVTEAM Sub or their Properties, as a result of the
consummation of the transaction contemplated by this Agreement.
Section 4.5 AVTEAM's Class A Common Stock. Upon
consummation of the transactions contemplated by this Agreement and the
issuance and delivery of certificates representing AVTEAM's Class A Common
Stock to the Seller, such shares of Class A Common Stock will be validly
issued, fully paid and non-assessable.
Section 4.6 No Commissions. Neither AVTEAM, AVTEAM Sub
nor any of their Affiliates has paid or become obligated to pay any fee or
commission to any broker, finder's investment banker or other intermediary in
connection with the transactions contemplated by this Agreement.
Section 4.7 SEC Filings. Except where the failure to
have done so did not and would not have a Material Adverse Effect on AVTEAM,
AVTEAM has filed all reports and registration statements, together with any
amendments thereto, that it was required to file with the SEC, including but
not limited to reports on Forms 10-K, 10-Q and 8-K and proxy statements on
Schedule 14A under the Exchange Act.
2
EXHIBIT D
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS
As a material inducement to the Purchaser to enter into this Agreement
and to consummate the transactions contemplated hereby, the Seller and the
Shareholders, jointly and severally, hereby represent and warrant to the
Purchaser as follows:
Section 5.1 Corporate Existence and Qualification: Corporate
Documents.
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida, and is
not required to be qualified to do business as a foreign corporation in any
other jurisdiction where the failure to so qualify would have a Material
Adverse Effect on the Seller. Each Shareholder represents that he is an
individual residing in the State of Florida, and each Shareholder has the
requisite competence and authority to execute and deliver this Agreement, to
perform his respective obligations hereunder and to consummate the transactions
contemplated hereby. The Seller has all required corporate power and authority
to own its Properties and to carry on the Business as presently conducted. The
Articles of Incorporation and Bylaws of the Seller, copies of which are
attached on Schedule 5.1(a) hereto, are complete and reflect all amendments
thereto through the date hereof.
(b) The stock and minute books of the Seller that have
been made available to the Purchaser for review contain a complete and accurate
record of all shareholders of the Seller and all material actions of the
shareholders and directors (and any committees thereof) taken at meetings of
shareholders or directors of the Seller.
(c) The Seller does not have any subsidiaries,
participate in any partnership or joint venture, or own any outstanding capital
stock of any other corporation.
Section 5.2 Capitalization and Ownership. As of the date of this
Agreement, the entire authorized capital stock of the Seller consists of fifty
(50) shares of no par common stock ("Seller Capital Stock") of which fifteen
(15) shares are issued and outstanding. The issued and outstanding shares of
Seller Capital Stock are owned of record and beneficially by the Shareholders
as follows: Leon Sacco, five (5) shares; James Louis McLellan, five (5) shares;
and Mark Schuldiner, five (5) shares. All of the presently outstanding shares
of capital stock of the Seller have been validly authorized and issued and are
fully paid and nonassessable. The Seller has not issued any other shares of its
capital stock and there are no outstanding options, warrants, subscriptions or
other rights or obligations to purchase or acquire any of such shares, nor any
outstanding securities convertible into or exchangeable for such shares. Except
as contemplated under this Agreement and the M&M Aircraft Services, Inc.
Stockholders Buy-Sell Agreement dated May 17, 1994, as amended, by and between
the Seller and the Shareholders which shall be terminated prior to Closing,
there are no agreements to which the Seller is a party regarding the issuance,
registration, voting or transfer of its outstanding shares of its capital
stock. No dividends are accrued but unpaid on any capital stock of the Seller.
Section 5.3 No Seller Defaults or Consents. Except as set forth
on Schedule 5.3 hereto and except for any waiver, consent, action, approval or
authorization of, or registration, declaration, notice or filing with the FAA
or the JAA in connection with the transactions contemplated hereby, neither the
execution and delivery of this Agreement nor the carrying out of the
transactions contemplated hereby will:
(i) violate or conflict with any of the terms,
conditions or provisions of the Articles of Incorporation or Bylaws of the
Seller;
(ii) violate any Legal Requirements applicable to
the Seller;
(iii) violate, conflict with, result in a breach
of, constitute a default under (whether with or without notice or the lapse of
time or both), or accelerate or permit the acceleration of the performance
required by, or give any other party the right to terminate, any Contracts or
Permits applicable to the Seller;
(iv) result in the creation of any lien, charge
or other encumbrance on the shares of capital stock or any Property of the
Seller; or
(v) require any of the Shareholders or the
Seller to obtain or make any waiver, consent, action, approval or authorization
of, or registration, declaration, notice or filing with, any private
non-governmental third party or any Governmental Authority. Any and all
consents required to be obtained by the Seller as set forth on Schedule 5.3
hereto shall be obtained and copies thereof delivered to the Purchaser upon
execution of this Agreement.
Section 5.4 No Proceedings. No suit, action or other proceeding
is pending or, to the Knowledge of the Seller or the Shareholders, threatened
before any Governmental Authority seeking to restrain any of the Shareholders
or prohibit their entry into this Agreement or prohibit the Closing, or seeking
damages against the Seller or its Properties, as a result of the consummation
of the transactions contemplated by this Agreement.
Section 5.5 Financial Statements. Attached on Schedule 5.5 hereto
are true and correct copies of the Seller's (i) Latest Balance Sheet and the
related statements of income, shareholders' equity and cash flows for the six
months ended June 30, 1998 (collectively, the "Seller Interim Financial
Statements") and (ii) the Seller's balance sheet and statements of income,
shareholders' equity and cash flows as of and for each of the three fiscal
years ended December 31, 1995, 1996 and 1997 (the "Seller 1995 - 1997 Financial
Statements", and together with the Seller Interim Financial Statements, the
"Seller Financial Statements"). The Seller Financial Statements (i) have been
prepared from the books and records of the Seller, (ii) present fairly the
financial condition of the Seller and its results of operations as at and for
the respective periods then ended, and (iii) have been prepared in accordance
with GAAP. The Seller's balance sheet as of December 31, 1997 has been audited
by the accounting firm of Berkowitz Dick Pollack & Brant, LLP.
Section 5.6 Liabilities and Obligations.
(a) Except as set forth on Schedule 5.6(a) hereto, the
Latest Balance Sheet reflects all liabilities of the Seller as determined in
accordance with GAAP arising out of transactions effected or events occurring
on or prior to June 30, 1998.
(b) All reserves set forth on the Closing Date Financial
Statements will fully cover any Losses which may arise, relating to each such
reserve or the contingency for which it was established. Set forth on Schedule
5.6(b) hereto is a complete and accurate list of all warranties provided by the
Seller which sets forth the name and serial number of the engine or engine part
repaired or replaced, the date on which the warranty for such repair or
replacement will expire and the name of the customer entitled to such warranty.
None of the warranties to be set forth on Schedule 5.6(b) hereto will be in
excess of 18 months from the Closing Date.
(c) Except as set forth on the Latest Balance Sheet
(including the Notes thereto), the Seller is not liable upon or with respect
to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity.
(d) Except as set forth on Schedule 5.6(a) hereto, the
Latest Balance Sheet reflects all trade accounts payable of the Seller
determined in accordance with GAAP arising out of transactions effected or
events occurring on or prior to June 30, 1998.
2
Section 5.7 Receivables. The accounts receivable reflected on the
Seller's financial records and all accounts receivable arising between June 30,
1998 and the Closing, arose or will arise from bona fide transactions in the
ordinary course of business, and the goods and services involved have been or
will have been sold, delivered and/or performed to the account of the obligors,
and no further filings (with Governmental Authorities, insurers or others) are
or will be required to be made, no further goods are or will be required to be
provided and no further services are or will be required to be rendered in
order to complete the sales and fully render the services and to entitle the
Seller to collect such accounts receivable in full. Except as set forth on
Schedule 5.7 hereto, no such accounts receivable has been or will have been
assigned or pledged to any other person, firm or corporation, and, except only
to the extent fully reserved against as set forth on the Seller Financial
Statements or Closing Date Financial Statements, no defense or setoff to any
such account has been asserted by the account obligor.
Section 5.8 Employee Matters.
(a) Schedule 5.8(a) hereto contains a complete and
accurate list of the names, titles and compensation of all employees and
consultants used on a regular and continuing basis of the Seller (collectively,
the "Employees"), regardless of compensation levels, and other employees who
are currently compensated at a rate in excess of $25,000 per year (including
any reasonably anticipated bonus) or who earned in excess of $25,000 during the
year ended December 31, 1997 (collectively, the "Seller Key Employees"). In
addition, Schedule 5.8(a) contains a complete and accurate description of (i)
all increases in compensation of the Seller Key Employees during the years
ended December 31, 1997 and (ii) any promised increases in compensation of the
Seller Key Employees that have not yet been effected.
(b) Schedule 5.8(b) hereto contains a complete and
accurate list of all compensation plans sponsored by the Seller or to which the
Seller contributes on behalf of its employees, other than the Employee Benefit
Plans listed on Schedule 5.9 hereto.
(c) Schedule 5.8(c) hereto contains a complete and
accurate list of all Employment Agreements. As used in Sections 5.8(c) and
5.8(e) hereof, "Employment Agreements" shall mean and include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements to which the Seller is a party.
(d) The Seller has provided the Purchaser with a complete
and accurate list of all significant written employee policies and procedures
of the Seller.
(e) To the Knowledge of the Seller, no unwritten material
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans, Employment Agreements or
employee policies and procedures.
(f) To the Knowledge of the Seller, except as set forth
on Schedule 5.8(f) hereto, the Seller (i) has been and is in material
compliance with all laws, rules, regulations and ordinances respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and (ii) is not liable in any material amount for any arrears
of wages or penalties for failure to comply with any of the foregoing. The
Seller has not engaged in any unfair labor practice or discriminated on the
basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices. There are no (i) material unfair labor
practice charges or complaints or racial, color, religious, sex, national
origin, race or handicap discrimination charges or complaints pending or, to
the Knowledge of the Seller, threatened against the Seller before the National
Labor Relations Board or any similar state or foreign commission or agency or
(ii) existing or threatened material labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Seller.
(g) Except as set forth on Schedule 5.8 (g) hereto, (i)
the Seller has not been a party to any agreement with any union, labor
organization or collective bargaining unit, (ii) the employees of the Seller
have not been represented by any union, labor organization or collective
bargaining unit, (iii) the employees of the Seller have not threatened to
organize or join, or circulated a petition to organize or join,
3
a union, labor organization or collective bargaining unit and (iv) the
employees of the Seller have not caused, or threatened to cause, any work
stoppages.
(h) Except as disclosed on Schedule 5.8(h) hereto, no
Seller Key Employee has indicated his or her desire or intent to terminate
employment with the Seller, and the Seller has no present intent of terminating
the employment of any Seller Key Employee.
Section 5.9 Employee Benefit Matters.
(a) Schedule 5.9 hereto contains a complete and accurate
list of each Employee Benefit Plan (as hereinafter defined) sponsored by the
Seller or to which the Seller contributes on behalf of its Employees and all
Employee Benefit Plans previously sponsored or contributed to on behalf of its
Employees within three years preceding the date hereof. No unwritten amendment
exists with respect to any Employee Benefit Plan. An Employee Benefit Plan
means (i) each "employee benefit plan" as such term is defined in Section 3(3)
of ERISA and (ii) each retirement plan, pension plan, stock option plan,
restricted stock plan, bonus plan, incentive award plan, profit sharing plan,
savings plan, fringe benefit plan, insurance plan, supplemental benefit plan,
medical and dental plan, vacation policy, severance pay or termination pay
plan, policy or agreement, deferred compensation agreement, executive
compensation or supplemental income agreement, consulting agreement, employment
agreement and each other employee benefit plan, agreement, arrangement,
program, practice or understanding that is not described in Section 5.9(a)(i).
(b) Each Employee Benefit Plan of the Seller and each
other corporation, trade or business that together with the Seller would be
under common control with the Seller pursuant to Sections 414(b), (c), (m) or
(o) of the Code (each such other corporation, trade or business to be known as
an "ERISA Affiliate") has been administered and maintained in compliance with
all laws, rules and regulations, except for such noncompliance that would not
have a Material Adverse Effect on the Seller. No Employee Benefit Plan of the
Seller or an ERISA Affiliate is currently the subject of an audit,
investigation, enforcement action or other similar proceeding conducted by any
state or federal agency. No prohibited transactions (within the meaning of
Section 4975 of the Code and Section 406 of ERISA) have occurred with respect
to any Employee Benefit Plan. No pending or, to the Knowledge of the Seller or
an ERISA Affiliate, threatened, claims, suits or other proceedings exist with
respect to any Employee Benefit Plan other than benefit claims filed by
participants or beneficiaries.
(c) The Seller has received a favorable determination
letter or ruling from the Internal Revenue Service for each Employee Benefit
Plan intended to be qualified within the meaning of Section 401(a) of the Code
and/or tax exempt within the meaning of Section 501(a) of the Code, which
letter or ruling is current and covers all required amendments to each such
Employee Benefit Plan of the Seller through the Closing Date. In the event that
a favorable determination letter is not current, as described in the preceding
sentence, then none of the Employee Benefit Plans of the Seller intended to be
qualified has been operated in a manner that would result in the revocation of
the qualified status of any such Employee Benefit Plan. No proceedings exist
or, to the Knowledge of the Seller, have been threatened that could result in
the revocation of any such favorable determination letter or ruling.
(d) No accumulated funding deficiency (within the meaning
of Section 412 of the Code), whether waived or unwaived, exists with respect to
any Employee Benefit Plan of the Seller or any plan sponsored by any ERISA
Affiliate. Neither the Seller nor any ERISA Affiliate maintains any Employee
Benefit Plan subject to Title IV of ERISA. With respect to each Employee
Benefit Plan of the Seller described in Section 501(c)(9) of the Code, the
assets of each such plan are at least equal in value to the present value of
accrued benefits as of the date hereof. Neither the Seller nor any ERISA
Affiliate has any liability to pay excise taxes with respect to any Employee
Benefit Plan under applicable provisions of the Code or ERISA. Neither the
Seller nor any ERISA Affiliate is or ever has been obligated to contribute to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
4
(e) No reportable event (within the meaning of Section
4043 of ERISA) for which the notice requirement has not been waived has
occurred with respect to any Employee Benefit Plan of the Seller subject to the
requirements of Title IV of ERISA.
(f) Except in accordance with COBRA, the Seller has no
obligation or commitment to provide medical, dental or life insurance benefits
to or on behalf of any of its employees who may retire or any of its former
employees who have retired from employment with the Seller.
Section 5.10 Absence of Certain Changes. Except as set forth on
Schedule 5.10 hereto, from the Latest Balance Sheet Date to the date of this
Agreement, the Seller has not:
(a) suffered any material adverse change, whether or not
caused by any deliberate act or omission of the Seller, or any Shareholder, in
its condition (financial or otherwise), operations, assets, liabilities,
business or prospects;
(b) contracted for the purchase of any capital assets
having a cost in excess of $25,000 or paid any capital expenditures in excess
of $25,000, except in the ordinary course of business consistent with past
practice;
(c) incurred any indebtedness for borrowed money, except
in the ordinary course of business consistent with past practice, or issued or
sold any debt securities;
(d) incurred or discharged any liabilities or obligations
except in the ordinary course of business consistent with past practice;
(e) paid any amount on any indebtedness prior to the due
date, forgiven or canceled any debts or claims or released or waived any rights
or claims, except in the ordinary course of business consistent with past
practice;
(f) mortgaged, pledged or subjected to any security
interest, Lien, lease or other charge or encumbrance any of its Properties or
Assets, except in the ordinary course of business consistent with past
practice;
(g) suffered any damage or destruction to or loss of any
Assets (whether or not covered by insurance) that has Materially Adversely
Effected, or could Materially Adversely Effect, the Seller;
(h) acquired or disposed of any Assets, except in the
ordinary course of business consistent with past practice or as permitted by
Section 1.2 hereof;
(i) written up or written down the carrying value of any
of the Assets, except in the ordinary course of business consistent with past
practice;
(j) changed any accounting principles methods or
practices followed or changed the costing system or depreciation methods of
accounting for the Assets;
(k) waived any material rights or forgiven any material
claims;
(l) lost, terminated or experienced any change in the
relationship with any employee, customer, joint venture partner or supplier,
which termination or change has materially adversely affected, or could
reasonably be expected to materially adversely affect, the Business or Assets;
(m) increased the compensation of any director or
officer;
5
(n) increased the compensation of any employee, except in
the ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any
person or entity, except in the ordinary course of business consistent with
past practice;
(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change the terms and conditions of any such rights or paid any
dividends or made any distribution to the holders of the Seller's capital
stock;
(r) entered into any material agreement with any person
or group, or modified or amended in any material respect the terms of any
material existing agreement except in the ordinary course of business
consistent with past practice;
(s) entered into, adopted or amended any Employee Benefit
Plan;
(t) issued any credit memos representing price
adjustments related to services previously rendered to customers except in the
ordinary course of business consistent with past practice; or
(u) entered into any agreement (written or oral) to do
any of the foregoing, except in the ordinary course of business consistent with
past practice.
Section 5.11 Commitments. (a) Except for the Contracts set forth
on Schedule 5.11 hereto, the Seller has not entered into, nor is the capital
stock, the Assets or the Business of the Seller bound by, whether or not in
writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement,
except in the ordinary course of business;
(iii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iv) employment, consulting or compensation
agreement or arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another, except in the ordinary course of business;
(vii) deed or other document evidencing an
interest in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or
commission agents, investment bankers, financial advisors, business brokers,
public relations or advertising agencies, accountants or attorneys, except with
respect to confidentiality agreements;
6
(ix) lease of real or personal property, whether
as lessor, lessee, sublessor or sublessee;
(x) agreement between the Seller and any
Affiliate;
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of the Seller;
(xii) agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition
covenants;
(xv) other contract or arrangement that involves
either an unperformed commitment in excess of $5,000 or that terminates more
than thirty (30) days after the date hereof, except in the ordinary course of
business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 5.22 hereof; or
(xvii) other agreement or commitment not made in
the ordinary course of business that is material to the Business or financial
condition of the Seller.
True, correct and complete copies of the written Contracts, and true, correct
and complete written descriptions of the oral Contracts, have heretofore been
delivered or made available to the Purchaser in accordance with, and subject to
the limitations of, AVTEAM's Due Diligence Investigation. There are no existing
material defaults, material events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute material defaults by the Seller, and no material penalties have been
incurred nor are amendments pending, with respect to the Contracts. The
Contracts are in full force and effect and are valid and enforceable
obligations of the Seller, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally, and except as
the availability of equity remedies may be limited by the application of
general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity). The Seller has not received
notice of any material default with respect to any Contracts. For the purposes
of this Section 5.11(a), the term "material" shall mean a condition the
existence or breach of which could result in damage or loss to the Seller
valued in excess of $50,000 individually or $250,000 in the aggregate.
(b) Except as contemplated hereby, the Seller has not
received notice of any plan or intention of any other party to any Contract to
exercise any right to cancel or terminate any Contract. The Seller does not
currently contemplate, and has no reason to believe any person or entity
currently contemplates, any amendment or change to any Contract. None of the
customers, joint venture partners or suppliers of the Seller has refused, or
communicated that it will or may refuse, to purchase or supply goods or
services, as the case may be, or has communicated that it will or may
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, the Seller.
Section 5.12 Insurance. The Seller has had in effect, and will
maintain through the Closing Date, comprehensive insurance coverage, including
without limitation product liability insurance coverage which is not less than
$50,000,000 (combined single limit and in the annual aggregate), with respect
to its Business and Assets. The Seller has previously made available to the
Purchaser all insurance policies of the Seller. All of such policies are valid
and enforceable against the Seller.
7
Section 5.13 Patents, Trademarks, Service Marks and Copyrights.
(a) Except as set forth on Schedule 2.1(f) hereto, the
Seller owns all Intellectual Property necessary to conduct its business, or
possesses adequate licenses or other rights, if any, therefor, without conflict
with the rights of others. Set forth on Schedule 2.1(f) hereto is a true and
correct description of all Intellectual Property.
(b) The Seller has the sole and exclusive right to use
the Intellectual Property without infringing or violating the rights of any
third parties and, upon the consummation of the transactions contemplated
hereby, the Purchaser will have the right to use all Intellectual Property
without any obligation to pay any additional amounts whatsoever. Use of the
Intellectual Property does not require the consent of any other person and the
Intellectual Property is freely transferable. No claim has been asserted by any
person to the ownership of or right to use any Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement constituting a part of any Intellectual Property. Each of the
Intellectual Property is valid and subsisting, has not been canceled, abandoned
or otherwise terminated and, if applicable, has been duly issued or filed.
(c) Year 2000. Seller believes that on and after June 30,
1999, each hardware, software or firmware component of the computer hardware
and software system or systems owned, operated or used by or on behalf of
Seller or in connection with the operation or conduct of its business shall be
able accurately to process data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the twentieth and twenty-first
centuries, including leap year calculations, without material diminution in
function or performance.
Section 5.14 Title to Assets; Condition of Assets.
(a) A description of all interests in real property owned
by the Seller is set forth in Schedule 2.1(j).
(b) Except as disclosed on Schedule 5.14(b) hereto, the
Seller has good and merchantable title to the Assets, including, without
limitation, those reflected on the Latest Balance Sheet (other than those since
disposed of in the ordinary course of business), free and clear of all security
interests, Liens, charges and other encumbrances, except for (i) liens for
Taxes not yet due and payable or being contested in good faith in appropriate
proceedings (all of which contested liens are listed on Schedule 5.14(b)), and
(ii) encumbrances that are incidental to the conduct of the Business or
ownership of property, not incurred in connection with the borrowing of money
or the obtaining of credit, and which do not in the aggregate materially
detract from the value of the Assets affected or materially impair their use by
the Seller. All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or Used by the Seller are in good operating condition
and repair, normal wear and tear excepted, are adequate and sufficient for the
Seller's Business and conform in all material respects with all applicable
ordinances, regulations and laws relating to their use and operation.
(c) A listing of all real property leases, their terms
and total lease payments is attached hereto as Schedule 2.1(j) hereto. The
Seller enjoys peaceful and undisturbed possession under all real property
leases under which the Seller is operating, and all such leases are valid and
subsisting and none of them is in default, except for those defaults which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Seller.
(d) All Inventories of the Seller consist, and at the
Closing Date will consist, of a quality and quantity usable and saleable in the
ordinary course of business, except for items of obsolete materials.
8
Section 5.15 Compliance with Laws; Compliance with FAA Matters and
Engine Repair Manuals.
(a) The Seller has all material franchises, Permits,
licenses and other rights and privileges necessary to permit it to own its
properties and to conduct the Business as presently conducted. The Business and
operations of the Seller have been and are being conducted in accordance in all
material respects with all applicable laws, rules and regulations, and the
Seller is not in violation of any judgment, law or regulation except where any
such violation would not have a Material Adverse Effect on the Seller.
(b) Neither the Seller, nor any of its employees or
agents, has made any payment of funds in connection with the Business of the
Seller which is prohibited by law, and no funds have been set aside to be used
in connection with the Business of the Seller for any payment prohibited by
law.
(c) The Seller is and at all times has been in compliance
in all material respects with the terms and provisions of the Immigration
Reform and Control Act of 1986, as amended (the "Immigration Act"). With
respect to each Employee (as defined in 8 C.F.R. 274a.1(f)) of the Seller for
whom compliance with the Immigration Act is required, the Seller has on file a
true, accurate and complete copy of (i) each Employee's Form I-9 (Employment
Eligibility Verification Form) and (ii) all other records, documents or other
papers prepared, procured and/or retained by the Seller pursuant to the
Immigration Act. The Seller has not been cited, fined, served with a Notice of
Intent to Fine or with a Cease and Desist Order, nor has any action or
administrative proceeding been initiated or threatened against the Seller, by
the Immigration and Naturalization Service by reason of any actual or alleged
failure to comply with the Immigration Act.
(d) The Seller is not subject to any Contract, decree or
injunction in which the Seller is a party which restricts the continued
operation of the Business of the Seller or the expansion thereof to other
geographical areas, customers and suppliers or lines of business.
(e) Except as set forth on Schedule 5.15(e) hereto, the
Seller is and at all times has been in compliance in all material respects with
all FAA Airworthiness Directives, applicable to Seller and engine manufacturer
engine manual repair specifications which relate to the Business and the
engines and engine parts repaired or replaced by the Seller.
Section 5.16 Litigation: Default. Except as set forth on Schedule
5.16 hereto, there are no claims, actions, suits, investigations or proceedings
against the Seller pending or, to the Knowledge of the Seller, threatened in
any court or before or by any Governmental Authority, or before any arbitrator,
that could reasonably be expected to have a Material Adverse Effect (whether
covered by insurance or not) on the Seller. The Seller is not in default under,
and no condition exists (whether covered by insurance or not) that with or
without notice or lapse of time or both would (i) constitute a default under,
or breach or violation of, any Contract or any Legal Requirement or Permit
applicable to the Seller, or (ii) accelerate or permit the acceleration of the
performance required under, or give any other party the right to terminate, any
Contract, other than defaults, breaches, violations or accelerations that would
not have a Material Adverse Effect on the Seller.
Section 5.17 Environmental Matters.
(a) Except as listed on Schedule 5.17 hereto, to the
Knowledge of the Seller and the Shareholders, there are no PCBs, TCE, PCE, or
asbestos containing materials generated, used, treated, stored, maintained,
disposed of, or otherwise deposited in, or located on any premises at which the
Business is or was, or at which the business or, to the Knowledge of the Seller
and the Shareholders, the Seller's predecessors was, located which would have a
Material Adverse Effect on the Seller.
(b) Except as described on Schedule 5.17 hereto, there
are and were no underground storage tanks used, stored, maintained, located on
any premises at which the Business is or was, or, to the Knowledge of the
Seller, at which the business of its predecessors was, located which
9
would have a Material Adverse Effect on the Seller. With respect to underground
storage tanks, Schedule 5.17 hereto sets forth the size, location,
construction, installation date, use and testing history of all underground
storage tanks (whether or not excluded from regulation under Environmental
Law), including all underground storage tanks in use, out of service, closed,
abandoned, decommissioned, or sold to a third party.
(c) Except as listed on Schedule 5.17 hereto, to the
Knowledge of the Seller and the Shareholders, there has been no "release" as
defined in 42 U.S.C. 9601(22) or, to the Knowledge of the Seller and the
Shareholders, threat of a "release" of any Hazardous Substance on, from or
under any premises from which (i) the Seller's operations have been or are
being conducted related to the Business or (ii) to the Knowledge of the Seller
and the Shareholders, the operations of any predecessor of the Seller which
would have a Material Adverse Effect on the Seller.
(d) Except as listed on Schedule 5.17 hereto, the Seller
and its predecessors have not received written notice alleging any potential
liability with respect to the contamination, investigation, or cleanup of any
site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, discharged, emitted or disposed of and, to the
Knowledge of the Seller and the Shareholders, there are no past or present
events, facts, conditions or circumstances which may interfere with or prevent
material compliance by the Seller with any Environmental Law, or with any
order, decree, judgment, injunction, notice or demand issued, entered,
promulgated or approved thereunder, or which may give rise to any liability
under applicable law including, without limitation, any Environmental Law, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to
the manufacture, process, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened
release into the environment of Hazardous Substances by the Seller or, to the
Knowledge of the Seller and the Shareholders, by any predecessor of the Seller,
as a result of any act or omission of the Seller or predecessors related to the
Business.
(e) Except as disclosed on Schedule 5.17 hereto, all of
the Seller's and, to the Knowledge of the Seller and the Shareholders, the
Seller's predecessor's, Hazardous Substances disposal and recycling practices
related to the Business have been accomplished in material compliance with all
applicable Environmental Laws.
The Seller's and the Shareholders' representation(s) with respect to
this Section 5.17 shall not be interpreted to imply that the Purchaser has
constructive knowledge regarding any aspect of the Business with respect to
environmental matters nor to limit the scope of any of the Seller's or any
Shareholders' representations under this Agreement. No such due diligence
examination or related activities of, or on behalf of, the Purchaser however,
shall constitute a waiver or relinquishment by the Purchaser of its right to
rely upon the Seller's or any Shareholders' representations, warranties,
covenants and agreements as made herein or pursuant hereto, and no such
disclosure shall constitute an assumption by the Purchaser of any conditions or
liabilities, and such disclosure shall not relieve the Seller or any
Shareholder of their duties and obligations hereunder.
Section 5.18 Banks. Schedule 5.18 hereto sets forth (i) the name
of each bank, trust company or other financial institution and stock or other
broker with which the Seller has an account, credit line or safe deposit box or
vault, (ii) the names of all persons authorized to draw thereon or to have
access to any safe deposit box or vault, (iii) the purpose of each such
account, safe deposit box or vault, and (iv) the names of all persons
authorized by proxies, powers of attorney or other like instrument to act on
behalf of the Seller in matters concerning any of the Business or its affairs.
No such proxies, powers of attorney or other like instruments are irrevocable.
Section 5.19 Suppliers and Customers Sales. Schedule 5.19 hereto
sets forth all the Seller's material suppliers, together with the dollar amount
of goods purchased by the Seller from each such supplier during the twelve
month period ended December 31, 1997, and the six month period ended June 30,
1998, as well as each of the principal customers of the Seller. Except as
otherwise set forth on Schedule 5.19 hereto, since June 30, 1998, there has
been no material adverse change in the business
10
relationship of the Seller with any supplier or customer named on Schedule 5.19
hereto. No customer or supplier named on Schedule 5.19 hereto has terminated or
materially altered, or notified the Seller of any intention to terminate or
materially alter, its relationship with the Seller, and the Seller has no
reason to believe that any such customer or supplier will terminate or
materially alter its relationship with the Seller or to materially decrease its
services or supplies to the Seller or its direct or indirect usage of the
services of the Seller. For purposes of Sections 5.19 and 5.22 hereof,
"material suppliers" refers to suppliers from whom the Seller purchased five
percent (5%) or more of the total amount of the goods purchased by the Seller
during the twelve month period ended December 31, 1997, and the six month
period ended June 30, 1998, and "principal customers" refers to customers who
accounted for 5% or more of the Seller's total revenues during the twelve month
period ended December 31, 1997, and the six month period ended June 30, 1998.
Section 5.20 No Commissions. Neither the Seller, the Shareholders
nor any of their Affiliates has paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement.
Section 5.21 Disclosure; Due Diligence. This Agreement and the
Exhibits and Schedules hereto, when taken as a whole with other documents and
certificates furnished by the Seller or the Shareholders to the Purchaser or
its counsel, do not contain any untrue statement of material fact or omit any
material fact necessary in order to make the statements therein not misleading.
Section 5.22 Ownership Interests of Interested Persons. No
director or executive officer of the Seller or the Shareholders or their
respective spouses or children, owns directly or indirectly, on an individual
or joint basis, any material interest in, or serves as an officer or director
of, any principal customer or material supplier which has a business
relationship with the Seller or any organization that has a Contract or
arrangement with the Seller.
Section 5.23 Investments in Competitors. No director or executive
officer of the Seller or the Shareholders owns directly or indirectly any
material interest or has any investment equal to 5% or more of the outstanding
voting securities in any corporation, business or other person that is a direct
competitor of the Seller.
Section 5.24 Certain Payments. Neither the Seller, nor any
director, officer or employee of the Seller, or the Shareholders, has paid or
caused to be paid, directly or indirectly, in connection with the Business of
the Seller, to any government or agency thereof or any agent of any supplier or
customer (a) any bribe, kick-back or other similar payment; or (b) any material
contribution to any political party or candidate (other than from personal
funds of directors, officers or employees not reimbursed by their respective
employers or as otherwise permitted by applicable law).
Section 5.25 Government Inquiries. Except as set forth on Schedule
5.25 hereto, there have been no material inspection reports, questionnaires,
inquiries, demands or requests for information received by the Seller from, or
any material statement, report or other document filed by the Seller with, the
federal government or any federal administrative agency (including but not
limited to, the FAA, JAA, Department of Transportation, National Transportation
Safety Board, Justice Department, Internal Revenue Service, Department of
Labor, Occupational Safety and Health Administration, Federal Trade Commission,
National Labor Relations Board, and Interstate Commerce Commission), Dade
County, Florida Department of Environmental Regulatory Management, any state
securities administrator or any local or state taxing authority.
Section 5.26 Other Transactions. Neither the Seller nor any
Shareholder has entered into any agreements or arrangements and there are no
pending offers or discussions concerning or providing for the merger, sale or
consolidation of the Seller or all or any substantial portion of the Assets of
the Seller, the sale by the Seller or any Shareholder of any securities of the
Seller or any similar transaction affecting the Seller or the Shareholders.
11
Section 5.27 Tax Matters.
(a) Except as set forth on Schedule 5.27 hereto:
(i) the Seller has timely filed with the
appropriate Tax Authorities all Tax Returns required to be filed under
applicable laws and regulations and, as of the date hereof, none of such Tax
Returns has been audited.
(ii) all such Tax Returns were true and accurate
in all material respects;
(iii) the Seller has paid all Taxes due and owing
by it (whether or not such Taxes are required to be shown on a Tax Return) and
has withheld and paid over to the appropriate Taxing Authority all Taxes which
it is required to withhold from amounts paid or owing to any employee,
shareholder, creditor, independent contractor or other third party;
(iv) the accrual for Taxes on the Closing Date
Balance Sheet is sufficient to pay in full all liabilities for Taxes of the
Seller related to periods up to and including the Closing Date;
(v) the Seller has been a validly existing S
corporation within the meaning of Sections 1361 and 1362 of the Code at all
times since January 1, 1992, and will continue to be an S corporation up to and
including the date immediately preceding the Closing Date;
(vi) the Seller has disclosed in its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning of Section
6662 of the Code.
(b) There are no Liens on any Assets that arose in
connection with any failure or alleged failure to pay any Tax.
(c) To the Knowledge of the Seller or the Shareholders:
(i) there are no foreign, federal, state or
local Tax audits or administrative or judicial proceedings threatened, pending
or being conducted with respect to the Seller;
(ii) no information related to Tax matters has
been requested by any foreign, federal, state or local Taxing Authority and no
written notice indicating an intent to open an audit or other review has been
received by the Seller from any foreign, federal, state or local Taxing
Authority; and
(iii) there are no material unresolved claims
concerning the Seller's Tax liability.
(d) To the Knowledge of the Seller or the Shareholders,
no claim has been made by any Taxing Authority in a jurisdiction where the
Seller does not file Tax Returns that the Seller is or may be subject to
taxation by that jurisdiction as a withholding agent or otherwise.
(e) No waivers of statutes of limitation have been given
or requested with respect to the Seller in connection with any Tax Returns
covering the Seller, except where such waiver would not have a Material Adverse
Effect on the Seller.
(f) The Seller does not expect any Taxing Authority to
assess any additional Taxes for any period for which Tax Returns have been
filed.
(g) The Seller has not executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; nor has the
Seller agreed to or is required to make any adjustments pursuant to Section
481(a) of the Code or any similar provision of state, local or foreign law by
reason of a change in
12
accounting method initiated by the Seller. Neither the Seller nor the
Shareholders have any Knowledge that the Internal Revenue Service has proposed
any such adjustment or change in accounting method, or have any Knowledge with
respect to any application pending with any Taxing Authority requesting
permission for any changes in accounting methods that relate to the Business or
operations of the Seller.
(h) The Seller has not made an election under Section
341(f) of the Code.
(i) The Seller is not liable for the Taxes of another
person.
(j) The Seller is not a party to any Tax sharing
agreement.
(k) The Seller shall prepare or cause to be prepared and
file or cause to be filed all federal, state, local and foreign income Tax
Returns for the Seller for tax periods ending on or prior to, or including, the
Closing Date which are filed after the Closing Date. The Seller shall permit
the Purchaser to review and comment on each such Tax Return described in the
preceding sentence prior to filing and the Purchaser shall have the right to
approve each such Tax Return that is not prepared in accordance with past
practices or affects the Purchaser. In the event that the Seller has not been
notified by the Purchaser within 10 business days of the Purchaser's receipt of
any Tax Return that the Purchaser intends to review and comment on such Tax
Return, such Tax Return shall be deemed approved by the Purchaser and the
Seller shall be permitted to file such Tax Return with the appropriate
Governmental Authority.
(l) The Purchaser, the Seller and the Shareholders shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section 5.27 and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request)
the provision of records and information which are reasonably relevant to any
such audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder.
Section 5.28 Authority, Approval and Enforceability. This
Agreement has been duly executed and delivered by each of the Seller and the
Shareholders and each of the Seller and the Shareholders has all requisite
power and legal authority to (i) execute and deliver this Agreement and all
Collateral Agreements executed and delivered or to be executed and delivered in
connection with the transactions provided for hereby, (ii) consummate the
transactions contemplated hereby and by the Collateral Agreements, and (iii)
perform its obligations hereunder and under the Collateral Agreements. This
Agreement and each Collateral Agreement to which each of the Seller and the
Shareholders is a party constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of the Seller and the
Shareholders, enforceable in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equity remedies
may be limited by the application of general principles of equity (regardless
of whether such equitable principles are applied in a proceeding at law or in
equity).
Section 5.29 Investment Representations.
(a) The Seller, and following the distribution of the
AVTEAM Shares to the Shareholders, each of the Shareholders will be acquiring
the AVTEAM Shares for its own account and not on behalf of any other person;
the Seller and each Shareholder are aware and acknowledge that the AVTEAM
Shares have not been registered under the Securities Act, and may not be
offered or sold unless the AVTEAM Shares are registered under the Securities
Act or an exemption from the registration requirements of the Securities Act is
available;
(b) The Seller and each Shareholder have been furnished
all information that each deems necessary to enable them to evaluate the merits
and risks of an investment in AVTEAM, including but not limited to filings made
by AVTEAM with the SEC, including the most recent filing by AVTEAM on
13
its Form S-1 Registration Statement dated May 29, 1998 and Form 10-K, and all
of its press releases and filings on Schedule 14A and Forms 10-Q or 8-K since
the end of AVTEAM's last fiscal year end; the Seller and each Shareholder have
had a reasonable opportunity to ask questions of and receive answers from
AVTEAM concerning AVTEAM and the AVTEAM Shares, and all such questions, if any,
have been answered to the full satisfaction of the Seller and each Shareholder;
(c) No person or entity other than the Seller and each
Shareholder has (i) any rights in and to the AVTEAM Shares, which rights were
obtained through or from the Seller and each Shareholder or (ii) any rights to
acquire the AVTEAM Shares, which rights were obtained through or from the
Seller and each Shareholder;
(d) The Seller and each Shareholder have such Knowledge
and expertise in financial and business matters (including Knowledge and
expertise in the aviation industry) that each of them is capable of evaluating
the merits and risks involved in an investment in the AVTEAM Shares; and the
Seller and each Shareholder are financially able to bear the economic risk of
the investment in the AVTEAM Shares, including a total loss of such investment;
(e) The Seller and each Shareholder represent that each
of them has adequate means of providing for each of their current needs and
have no need for liquidity in each of their investment in the AVTEAM Shares;
the Seller and each Shareholder have no reason to anticipate any material
adverse change in each of their financial condition for the foreseeable future;
(f) The Seller and each Shareholder are aware that the
acquisition of the AVTEAM Shares is an investment involving a risk of loss and
that there is no guarantee that the Seller and each Shareholder will realize
any gain from this investment, and that the Seller and each Shareholder could
lose the total amount of each of their investment;
(g) The Seller and each Shareholder understand that no
United States federal or state agency has made any finding of determination
regarding the fairness of the offering of the AVTEAM Shares for investment, or
any recommendation or endorsement of the offering of the AVTEAM Shares;
(h) The Seller and each Shareholder are acquiring the
AVTEAM Shares for investment, with no present intention of dividing or allowing
others to participate in such investment or of reselling, or otherwise
participating, directly or indirectly, in a distribution of the AVTEAM Shares,
and shall not make any sale, transfer or pledge thereof without registration
under the Securities Act and any applicable securities laws of any state or
unless an exemption from registration is available;
(i) Except as set forth herein, no representations or
warranties have been made to the Seller or any Shareholder by AVTEAM or any
agent, employee or Affiliate of AVTEAM, and in entering into this transaction
the Seller and each Shareholder are not relying upon any information, other
than from the results of independent investigation by the Seller and each
Shareholder;
(j) The Seller and each Shareholder understand that the
AVTEAM Shares are being offered to each of them in reliance on specific
exemptions from the registration requirements of United States federal and
state securities laws and that AVTEAM is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Seller and each Shareholder set forth herein in order to determine the
applicability of such exemptions and the suitability of the Seller and each
Shareholder to acquire the AVTEAM Shares; and
(k) The Seller and each Shareholder will not sell, assign
or transfer any of the AVTEAM Shares except (i) pursuant to an effective
registration statement under the Securities Act, (ii) in a transaction which,
in the opinion of the general counsel of AVTEAM, or other counsel reasonably
satisfactory to AVTEAM, is not required to be registered under the Securities
Act.
14
EXHIBIT F
FORM OF OPINION OF COUNSEL TO THE PURCHASER
(a) AVTEAM and AVTEAM Sub are corporations validly
existing and in good standing under the laws of the State of Florida, and have
qualified to do business as foreign corporations in each jurisdiction in which
each of AVTEAM and AVTEAM Sub conducts its business, except where the failure
to so qualify would not have a Material Adverse Effect on AVTEAM or AVTEAM Sub.
(b) The Asset Purchase Agreement and the Collateral
Agreements have been duly executed and delivered by AVTEAM and AVTEAM Sub to
the extent applicable to each as a party thereto, and AVTEAM and AVTEAM Sub
have all requisite corporate power and legal authority to execute, deliver and
perform the Asset Purchase Agreement and the documents, instruments and
agreements contemplated thereby, including the Collateral Agreements, to
consummate the transactions contemplated by the Asset Purchase Agreement and by
the Collateral Agreements, and to perform fully their obligations thereunder.
The Asset Purchase Agreement and each of the Collateral Agreements to which
AVTEAM and AVTEAM Sub is a party constitute the legal, valid and binding
obligation of AVTEAM and AVTEAM Sub, to the extent applicable to each as a
party thereto, enforceable in accordance with their terms.
(c) The offer, sale and issuance by AVTEAM of the AVTEAM
Shares has been duly authorized by AVTEAM. When delivered against payment
therefor as contemplated by the Asset Purchase Agreement, the AVTEAM Shares
will be duly and validly issued, fully paid and nonassessable with no personal
liability attaching to the ownership thereof.
(d) To our Knowledge, AVTEAM is not subject to any
obligation (contingent or otherwise) to issue additional shares of Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), or other
securities convertible into or exchangeable for its shares of Class A Common
Stock, as a result of the issuance of the AVTEAM Shares to the Seller pursuant
to the Purchase Agreement.
(e) Subject to the proviso in this paragraph, the
issuance of the AVTEAM Shares to the Seller is a transaction exempt from the
registration provisions of the federal securities laws and the Florida
Securities Act; provided, however, we express no opinion with respect to any
contemporaneous or subsequent act or any present intention of the Seller to
transfer, assign or grant a security interest in the AVTEAM Shares, or (ii) the
effect of such intention or act on the exemptions from registration.
Notes
1. Standard bankruptcy exceptions will be included.
2. Antitrust and securities law opinions will not be included.
3. The foregoing opinions will be subject to the Florida Bar Report on legal
opinions.
4. Capitalized terms used in the foregoing opinions have the respective meanings
ascribed to such terms in the Asset Purchase Agreement (the "Purchase
Agreement").
EXHIBIT G
FORM OF OPINION OF COUNSEL TO THE SELLER AND THE SHAREHOLDERS
(a) The Seller is a corporation validly existing and in
good standing under the laws of the State of Florida, and has qualified to do
business as a foreign corporation in each jurisdiction in which the Seller
conducts its Business, except where the failure to so qualify would not have a
Material Adverse Effect on the Seller. The Seller has all required corporate
power and authority and Permits necessary to own its Assets and Properties and
to carry on its Business as presently conducted.
(b) The Asset Purchase Agreement and the Collateral
Agreements have been duly executed and delivered by the Seller and the
Shareholders and the Seller and the Shareholders have all requisite power and
legal authority to execute, deliver and perform the Asset Purchase Agreement
and the documents, instruments and agreements contemplated thereby, including
the Collateral Agreements, to consummate the transactions contemplated by the
Asset Purchase Agreement and by the Collateral Agreements, and to perform fully
their obligations thereunder. The Asset Purchase Agreement and each of the
Collateral Agreements to which the Seller or the Shareholders is a party
constitute the legal, valid and binding obligation of the Seller and the
Shareholders, enforceable in accordance with their terms.
(c) The issued and outstanding shares of Seller Capital
Stock are owned of record and beneficially by the Shareholders as follows: Leon
Sacco, five (5) shares; James Louis McLellan, five (5) shares; and Mark
Schuldiner, five (5) shares. The Seller has not issued any other shares of its
capital stock and there are no outstanding options, warrants, subscriptions or
other rights or obligations to purchase or acquire any of such shares, nor any
outstanding securities convertible into or exchangeable for such shares.
(d) Neither the execution and delivery of the Asset
Purchase Agreement or the Collateral Agreements nor the carrying out of the
transactions contemplated thereby will: (i) violate or conflict with any of the
terms, conditions or provisions of the Articles of Incorporation or Bylaws of
the Seller;
(ii) violate any Legal Requirements applicable to
the Seller;
(iii) violate, conflict with, result in a breach
of, constitute a default under (whether with or without notice or the lapse of
time or both), or accelerate or permit the acceleration of the performance
required by, or give any other party the right to terminate, any Permit or
material Contract applicable to the Seller;
(iv) result in the creation of any lien, charge
or other encumbrance on the Assets, Seller Capital Stock or any Property of the
Seller; or
(v) require any of the Shareholders or the
Seller to obtain or make any waiver, consent, action, approval or authorization
of, or registration, declaration, notice or filing with, any private
non-governmental third party or any Governmental Authority which has not been
obtained or made prior to the date hereof. Any and all consents to the
transactions contemplated by the Asset Purchase Agreement required to be
obtained by the Seller have been obtained.
(e) No suit, action or other proceeding is pending or
threatened before any Governmental Authority seeking to restrain the Seller or
any of the Shareholders or prohibit their entry into the Asset Purchase
Agreement or the Collateral Agreements or prohibit the Closing, or seeking
damages against the Seller or its Assets or Properties, as a result of the
consummation of the transactions contemplated by the Asset Purchase Agreement
or the Collateral Agreements.
(f) No claims, actions, suits, investigations or
proceedings against the Seller are pending or, to counsel's knowledge,
threatened in any court or before or by any Governmental Authority,
or before any arbitrator, that could reasonably be expected to have a Material
Adverse Effect (whether covered by insurance or not) on the Seller.
Notes
1. Standard bankruptcy exceptions will be accepted.
2. Capitalized terms used in the foregoing opinions have the respective
meanings ascribed to such terms in the Asset Purchase Agreement (the "Asset
Purchase Agreement").
2
SCHEDULE 4.3
PURCHASER REQUIRED CONSENTS
Prior to the closing of the transactions contemplated by the Asset Purchase
Agreement, AVTEAM is required to obtain (i) the consent and waiver of
NationsBank, N.A. and the other syndicate lenders under AVTEAM's existing
credit facility and (ii) the consent of the Federal Aviation Administration and
Joint Aviation Authorities.
Dates Referenced Herein and Documents Incorporated by Reference
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