ASSET SALE AGREEMENT
This Asset Sale Agreement (this "Agreement") is made and entered into
as of February 20, 2002, by and between (i) KIAC, Inc., a Delaware corporation
("KIAC"), and (ii) Xxxxxxxxx Industries, Inc., a Delaware corporation (including
its successors and permitted assigns, "Xxxxxxxxx"), and each of the corporations
listed in Schedule 1 hereto (including its successors and permitted assigns, a
"Subsidiary Seller").
RECITALS
WHEREAS, each of Xxxxxxxxx and the Subsidiary Sellers (each of
Xxxxxxxxx and such Subsidiary Sellers being hereinafter referred to as a
"Seller") intends, promptly following the execution and delivery of this
Agreement by each of KIAC and Sellers, to file in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") a petition in
bankruptcy under Chapter 11 of the Bankruptcy Code; and
WHEREAS, each Seller wishes (a) to sell, transfer, convey, assign and
deliver (and, with respect to the Foreign Assets, to cause the Foreign
Subsidiaries to sell, transfer, convey, assign and deliver) to KIAC, as promptly
as practicable following such filings and in accordance with Sections 363 and
365 of the Bankruptcy Code, all of the Purchased Assets, (b) to assume and
assign to KIAC the Miramar Lease and the other Assumed Contracts (in each case,
as defined hereinbelow) and (c) to appoint KIAC as its agent to sell, lease,
exchange or otherwise transfer the Consigned Inventory (in each case, as
hereinafter defined and upon the terms and subject to the conditions set forth
in this Agreement); and
WHEREAS, KIAC wishes (a) to purchase and take delivery of such
Purchased Assets, (b) to assume such Miramar Lease and other Assumed Contracts,
and (c) to accept on consignment and act as Sellers' agent in respect of the
Consigned Inventory, upon such terms and subject to such conditions).
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, KIAC and each of Sellers hereby agree as follows:
ARTICLE I
DEFINITIONS
All terms which are defined in the preceding provisions of this
Agreement shall, when used in this Agreement, have the meanings ascribed to them
in such provisions. All other capitalized terms used in this Agreement shall
have the following meanings:
"Affiliate" shall mean, with respect to any Person, any other person
that, directly or indirectly, controls, is controlled by, or is under common
control with that Person.
"Agent" shall mean (i) Bank of America, N.A., a national banking
association, as agent for the lenders under that certain Amended and Restated
Loan and Security Agreement, dated as of December 14, 1998 (the "Senior Loan
Agreement"), by and among Xxxxxxxxx, certain subsidiaries of Xxxxxxxxx, Bank of
America, N.A. and the financial institutions parties thereto from time to time
and (ii) any successor agent appointed pursuant to such agreement.
"Agent's Lien" shall have the meaning set forth in Section 9.3(b)
hereof.
"Agreement Termination Amount" shall mean the sum of $2,000,000.
"Approved Vendor" shall have the meaning set forth in Section 6.3(d)
hereof.
"Assumed Contracts" shall mean the contracts or agreements listed in
Schedule 7A hereto (including, but not limited to, the Retention Agreements, the
Miramar Lease and all agreements which any Seller shall enter into following the
Petition Date, which by their terms are assignable and which KIAC elects to take
an assignment of and assume pursuant to Section 9.2(c) hereof, but (except as
otherwise expressly provided in this Agreement) no other contracts or
agreements; provided, however, that the Assumed Contracts shall not include any
contract or agreement listed in Schedule 7A hereto which KIAC shall, at any time
prior to the entry of the Sale Procedures Order, determine to exclude from the
Assumed Contracts; and provided, further, that the Assumed Contracts shall also
include any contract or agreement not listed in Schedule 7A hereto which Sellers
and KIAC shall, at any time prior to the entry of the Sale Procedures Order,
agree in writing to include in the Assumed Contracts. In the event that KIAC
shall so determine to exclude or include any such contract or agreement, KIAC
shall so inform Sellers in writing and Schedule 7A shall be amended ipso facto
to reflect such exclusion or inclusion.
"Assumed Liabilities" shall mean all of the liabilities and obligations
of each Seller listed or described under such Seller's name in Schedule 7B
hereto, including, but not limited to, (i) the liabilities and obligations of
such Seller under (A) each of the Retention Agreements to which such Seller
shall be a party and (B) the Assumed Contracts to which it is a party (but, in
each case, only to the extent that such liabilities and obligations arise
following the Closing and are not in any way related to a period that precedes
the Closing), (ii) all liabilities of Sellers for which KIAC is to be
responsible by reason of the prorations which are to be made pursuant to Section
4.4 hereof, but no other liabilities or obligations unless otherwise expressly
provided in this Agreement.
"Assumption Agreement" shall have the meaning set forth in Section
5.3(b)9ii) hereof.
"Auction Sale" shall mean the auction sale to be conducted under
Section 363 of the Bankruptcy Code in accordance with the Sale Procedures Order.
"AVS" means Aviation Sales Company, a Delaware corporation.
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"Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
U.S.C. ss. 101 et seq., as amended, or any successor thereto, and any rules
and regulations promulgated thereunder.
"Bankruptcy Code Liens" shall have the meaning set forth in the
definition of "lien" in ss. 101(33) of the Bankruptcy Code.
"Bankruptcy Court" shall have the meaning set forth in the first
WHEREAS clause of the Recitals of this Agreement.
"Benefit Plans" shall have the meaning set forth in Section 7.16(b)
hereof.
"Xxxx of Sale" shall mean the general xxxx of sale and assignment
referred to in Section 5.2(a)(i) hereof.
"Book Value" shall at any time mean, in respect of any asset owned by
any Person, the value at which such asset was carried in the accounting books
and records of Sellers, net of all depreciation and other write-downs reflected
in such books and records, on the date of this Agreement. With respect to any
asset that was not assigned a specific value on a Seller's books on the date of
this Agreement, such asset shall be valued at the lower of (x) the lot cost or
bulk cost thereof consistent with Sellers' past practices and (y) the Fair
Market Value thereof.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York City, New York are authorized or
required by Law to close.
"Cash Portion of the Purchase Price" shall have the meaning set forth
in clause (ii) of Section 4.1 hereof.
"Cash Receipts Report" shall have the meaning set forth in Section
6.6(b) hereof.
"Chapter 11 Cases" shall mean the voluntary cases to be commenced by
the respective Sellers under Chapter 11 of the Bankruptcy Code pursuant to
Section 9.11(a) hereof.
"Closing" shall have the meaning set forth in Section 5.2 hereof.
"Closing Date" shall mean the date on which the Closing shall take
place.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
all regulations promulgated thereunder.
"Collateral Agreements" shall mean the Xxxx of Sale, Assumption
Agreement and the other assignment or transfer documents delivered at the
Closing.
"Competing Offer" shall have the meaning set forth in the Sale
Procedures Order.
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"Consent" shall mean any consent, approval or authorization of, notice
to, or designation, registration, declaration or filing with, any Person.
"Consigned Inventory" shall mean all Parts that are included in the
Retained Assets, except for (a) any Parts sold or otherwise disposed of by any
Seller in accordance with the provisions of Section 4.3(b) hereof and (b) any
other Retained Asset which shall have ceased to be owned by any Seller at any
time on or after the date of this Agreement and prior to the commencement of the
Consignment Period; provided, however, that (i) any Part sold pursuant to this
Agreement, but entitled to be returned by the purchaser thereof shall, upon such
return as provided herein, automatically and without further act be deemed to
constitute Consigned Inventory hereunder, (ii) any Part returned as provided in
Section 6.3(j) hereof shall upon such return or other disposition automatically
and without further act cease to be deemed to constitute Consigned Inventory
hereunder, and (iii) any Part received in an exchange transaction pursuant to
Section 6.5(h) hereof shall automatically and without further act be deemed to
constitute Consigned Inventory hereunder.
"Consigned Verified Parts" shall mean those Parts listed on Schedule 28
hereto and verified to exist pursuant to the physical inventory performed by
Sellers pursuant to, and in accordance with, Section 6.7(e) hereof and consigned
to KIAC pursuant hereto.
"Consignment Period" shall mean the period commencing on the Closing
Date and ending on the Consignment Termination Date.
"Consignment Report" shall have the meaning set forth in Section 6.6(a)
hereof.
"Consignment Report Date" shall have the meaning set forth in Section
6.6(a) hereof.
"Consignment Termination Date" shall have the meaning set forth in
Section 6.9(b) hereof.
"Consignment Termination Event" shall have the meaning set forth in
Section 6.9(a) hereof.
"Contract" shall mean any agreement, contract, lease, commitment,
license, undertaking or other legally binding contractual right or obligation to
which a Person is a party or by which such Person or any of its assets or
properties is bound.
"Credit Limit Payment Date" shall have the meaning set forth in Section
6.5(d) hereof.
"Data" shall mean all documents, books, drawings, logs, manuals and
records relating to the Purchased Assets, the Miramar Facility, the Miramar
Leasehold or the Consigned Inventory (including, without limitation, maintenance
and operations records relating to the Parts).
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"Deposit" shall mean the deposits in the aggregate amount of $5,000,000
to be made by KIAC pursuant to Section 5.1(b) hereof.
"Designated Location" shall mean (i) each of the locations listed on
Schedule 21 hereto, (ii) each other location to which Sellers hereafter consent
upon written request by KIAC to designate as a Designated Location (which
consent shall not be unreasonably withheld or delayed and shall be deemed given
in the event that Sellers do not respond within ten days after receipt of
written request from KIAC), and (iii) with respect to any item of Consigned
Inventory that is sent to an Approved Vendor, the location of such Approved
Vendor for the duration of such item's presence at such Approved Vendor
location.
"DIP Financing Agreement" shall mean that certain Post-Petition Loan
and Security Agreement, to be dated on or about February 20, 2002 by and among
Xxxxxxxxx, certain subsidiaries named therein, the financial institutions party
thereto and Bank of America, N.A., as agent.
"Engine" shall mean any aircraft engine and each part or parts attached
thereto.
"Environmental Claim" shall mean any written notice by any Governmental
Authority or Person alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) (A) which would have a material and adverse effect on any of the
Purchased Assets, the Miramar Facility or the Miramar Leasehold, the
consummation of the transactions contemplated hereby or KIAC's ability to own or
lease, use or operate (as the case may be) the Purchased Assets, the Miramar
Facility or the Miramar Leasehold, in substantially the same manner as the
Purchased Assets, the Miramar Facility and the Miramar Leasehold, are presently
owned, leased, used or operated by Seller and (B) arising out of, based on or
resulting from (x) the presence, or release into the environment, of any
Material of Environmental Concern at any location, whether or not owned by any
Seller or KIAC or (y) any material violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" shall mean all Laws applicable to the respective
Purchased Assets, the Miramar Facility or the Miramar Leasehold relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern arising from or relating to the Purchased Assets, the
Miramar Facility or the Miramar Leasehold, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern arising from or
relating to the Purchased Assets, the Miramar Facility or the Miramar Leasehold,
or the ownership or lease, use or operation (as the case may be) thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
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"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement referred to in
Section 5.1(b) hereof.
"Event of Default" shall have the meaning set forth in Section 6.9(c)
hereof.
"Event of Loss" shall mean with respect to any item of Consigned
Inventory following the delivery thereof to KIAC in accordance with Section 5.4
of this Agreement and prior to any transfer thereof to a third party or return
thereof to any Seller (in each case, in accordance with the provisions of this
Agreement), (i) any loss of such property or use thereof due to theft,
disappearance, destruction or damage beyond economic repair, (ii) any damage to
such property which results in an insurance settlement with respect to such
property under the Property Insurance on the basis of a total loss or a
compromised or constructive total loss, (iii) the condemnation, confiscation,
appropriation or seizure of or requisition of title to such property or the use
of such property by or on authority of any government or governmental authority
to the extent that such loss is a covered loss under the provisions of the
Property Insurance, or compensation is paid by any government or governmental
authority, or (iv) ten days following receipt by KIAC of written notice from any
Seller of the removal of such property to any location other than a Designated
Location (other than in connection with a sale, lease or exchange transaction).
"Exchange Fee" shall mean the price (including, without limitation, any
late fee) charged by KIAC to a third party in connection with an exchange
transaction (but excluding any amount charged to the third party for repairing
the Part exchanged by such third party).
"Existing Repair Orders" shall have the meaning set forth in Section
6.3(e) hereof.
"FAA" shall mean the Federal Aviation Administration or any successor
thereto.
"Fair Market Value" shall mean, with respect to any asset at any time,
the value of such asset, as mutually agreed by KIAC and the Agent to be the fair
market value of such asset (or, if KIAC and the Agent cannot agree, the value
ascribed to such asset as its fair market value at such time by a third party
appraiser of nationally recognized reputation mutually selected by KIAC and the
Agent (or, if KIAC and the Agent cannot reach agreement on the selection of a
third party appraiser, a third party appraiser shall be selected by the
Independent Accountants)).
"Federal Aviation Act" shall mean those chapters of Title 49 of the
United States Code known as the United States Federal Aviation Act of 1958, as
amended, and all regulations, rulings, interpretations and guidelines published
thereunder and from time to time in effect.
"FF&E" shall mean the Leased FF&E and the Owned FF&E.
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"Final Order" shall mean an order or judgment the operation or effect
of which is not stayed, and as to which order or judgment (or any revision,
modification or amendment thereof), the time to appeal or seek review or
rehearing has expired, and as to which no appeal or petition for review or
motion for reargument has been taken or been made and is pending for argument.
"Force Majeure Waiting Period" shall mean the 90-day or 15-day period
referred to in Section 6.10(b) hereof.
"Foreign Assets" shall mean all of the assets of the Foreign
Subsidiaries which are listed or described in Schedule 26 to this Agreement.
"Foreign Subsidiaries" shall mean each of the Subsidiaries of Sellers
which are listed or described in Schedule 27 to this Agreement.
"Governmental Authority" shall mean any federal, state, local or
foreign government or any subdivision, agency, instrumentality, authority,
department, commission, board or bureau thereof or any federal, state, local or
foreign court, tribunal or arbitrator (including, without limitation, the
Bankruptcy Court).
"Gross Sales Price" shall mean the total price invoiced in connection
with the sale, lease or exchange of any item of Consigned Inventory (including,
without limitation, any Part) minus any amount or amounts invoiced to the
customer for the actual cost of insurance, freight, shipping, Sales Taxes,
customs and duties, rebates and discounts and allowances and third party
handling charges included in such total price or amount owed.
"HSR Act" means Xxxx-Xxxxx-Xxxxxx Act of 1976, as amended.
"Improvements" shall have the meaning set forth in Section 7.18(b)
hereof.
"Independent Accountants" shall mean KPMG or any other firm of
independent certified public accountants of national reputation mutually
agreeable to KIAC and Sellers.
"Initial Performance Benchmark" shall have the meaning set forth in the
definition of "Performance Benchmark".
"Insured Value" shall mean, with respect to any Part, an amount equal
to the Fair Market Value of such Part, as determined by the insurer thereof at
the time the insurance policy is issued or renewed.
"Intellectual Property" shall mean (i) all inventions (whether
patentable or not patentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, divisions, continuations,
continuations-in-part, revisions, renewals, extensions, and reexaminations
thereof, (ii) all registered and unregistered trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
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adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (iii) all works of authorship, including, without
limitation, all copyrightable works, all copyrights, and all applications,
registrations and renewals in connection therewith, and all moral rights, (iv)
all databases, data compilations and data collections, (v) all trade secrets and
confidential information (including, without limitation, ideas, research and
development, know-how, processes, methods, techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business, technical and marketing plans and proposals), (vi)
all domain names, web addresses and websites, (vii) all computer software,
source code and object code, whether embodied in software, firmware or otherwise
(including related data and documentation), (viii) all other intellectual
property and proprietary rights, and (ix) all copies and tangible embodiments of
all of the foregoing (i) through (ix) in any form or medium. Without in any way
limiting the generality of the foregoing, it is expressly acknowledged and
agreed that Intellectual Property shall include the design data for Parts
Manufacturing Authorizations, STCs, Phoenix Inventory Management System and
Xxxxxxxxx Xxxxxx.xxx listed or described in Schedule 5 hereto.
"Intercreditor and Sharing Agreement" shall have the meaning set forth
in Section 9.3(b) hereof.
"Inventory Locator Service" shall mean the computerized on-line service
used within the aviation industry for the marketing for sale, lease or exchange
of aviation parts and inventory or such other substantially equivalent
computerized on-line service as may replace it.
"KAV" means KAV Inventory, LLC, a Delaware limited liability company.
"KIAC Credit Agreement" shall mean, the credit agreement among KIAC,
General Electric Capital Corporation, as agent, and the lenders party thereto
from time to time, as the same may be amended, restated, modified, refinanced,
refunded or replaced from time to time.
"KIAC Expenses" shall mean KIAC's reasonable out of pocket expenses
including, but not limited to, reasonable and documented fees and expenses of
KIAC's attorneys and financial advisors, accountants and other consultants (if
any) incurred at any time subsequent to October 31, 2001 in connection with the
negotiation and performance of this Agreement and its due diligence
investigation of Sellers and the Purchased Assets, the Miramar Facility, the
Miramar Leasehold and the Consigned Inventory in connection with this Agreement,
but excluding those paid in connection with filings under the HSR Act.
"KIAC Lender" shall mean, initially, General Electric Capital
Corporation as agent for itself and the other lenders party to the KIAC Credit
Agreement from time to time, together with its respective successors and assigns
and any lender(s) refunding, refinancing or otherwise replacing the obligations
of KIAC under KIAC Credit Agreement.
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"KIAC Lender Lien" shall have the meaning set forth in Section 9.3(c)
hereof.
"KIAC's Percentage" shall have the meaning set forth in Section 4.3(a)
hereof.
"Knowledge" shall mean, with respect to any corporation or similar
entity, the knowledge of (i) any officer of such entity after due inquiry by
each such officer of each appropriate employee of such entity (including,
without limitation, each employee who has responsibility for the day-to-day
oversight of the area covered by the section of this Agreement in which the term
"Knowledge" is used) and (ii) each such appropriate employee and "Knowledge of
Sellers" or "Sellers' Knowledge" shall mean the Knowledge (as so defined) of any
Seller.
"KPMG" shall mean KPMG LLP.
"Labor Costs" shall mean the cost of any third-party labor charges paid
by KIAC which are incurred in the repair, maintenance, overhaul, refurbishment,
certification or modification of any Part in accordance with the terms of this
Agreement.
"Law" shall mean any federal, state, local or foreign order, writ,
injunction, decree, ordinance, award, stipulation, statute, judicial or
administrative doctrine, rule or regulation enacted, promulgated, issued or
entered by a Governmental Authority, including without limitation, the
Bankruptcy Code, the Federal Aviation Act and any Environmental Laws.
"Leased FF&E" shall mean all furniture, fixtures and equipment leased
by any Seller as of the date hereof, including, (but not limited to), the
furniture, fixtures and equipment located at the Miramar Facility as set forth
on Schedule 20 hereto; provided, however, that Leased FF&E shall not include any
furniture, fixtures or equipment listed on Schedule 20A hereto.
"Lenders' Agreement" shall mean an agreement in the form attached as
Exhibit A hereto.
"Lenders' Obligations" shall have the meaning set forth in Section
4.3(e)(iv) hereof.
"Liability Insurance" shall have the meaning set forth in Section
6.7(a)(ii) hereof.
"Liens" shall mean all title defects or objections, mortgages, liens,
claims, charges, pledges, or other encumbrances of any nature whatsoever,
including (without limitation) licenses, leases, chattel or other mortgages,
collateral security arrangements, pledges, title imperfections, defect or
objection liens, security interests, conditional and installment sales
agreements, easements, encroachments or restrictions, of any kind and other
title or interest retention arrangements, reservations or limitations of any
nature.
"Liquidating Trust" shall mean the trust established by Sellers and to
which Sellers may, in connection with the Chapter 11 Cases and with Bankruptcy
Court approval, assign and transfer all right, title and interest of each Seller
in and to all or a
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part of this Agreement, the Consigned Inventory, and certain Retained Assets for
the benefit of the Senior Lenders as the beneficiaries of the trust.
"Liquidating Trustee" shall mean, on any date, the Person serving as
trustee of the Liquidating Trust.
"Makeup Price" shall have the meaning set forth in the definition of
Performance Benchmark.
"Material Adverse Effect" shall mean (a) a material adverse effect on
the business, results of operations or condition (financial or otherwise) of the
businesses operated by Sellers (taken as a whole), or (b) a material adverse
effect on (i) the transactions contemplated by this Agreement, (ii) the
legality, validity or enforceability of this Agreement and the agreements and
instruments to be entered into in connection herewith, or the realization of the
rights and remedies hereunder or thereunder, or (iii) the ability of Sellers to
perform their obligations under this Agreement.
"Material Costs" shall mean the aggregate of all costs charged to KIAC
by a third-party maintenance provider in accordance with the terms of this
Agreement for any material used in the repair, maintenance, overhaul,
refurbishment, certification or modification of any Part.
A "Material Reduction in Value" shall be deemed to have occurred on any
date if (a)(i) one or more of the representations or warranties made by any
Seller in Article VII or Section 9.3(a) hereof, or in any Collateral Agreement
was not true and correct in all respects (A) on the date hereof or on the date
of such Collateral Agreement (as the case may be) or (B) on the date on which
such Material Reduction in Value shall be deemed to have occurred (in either
case, a "Representation Date") or (ii) any Seller shall have theretofore
breached any covenant made by such Seller in this Agreement or in any Collateral
Agreement and (b)(i) the aggregate Fair Market Value of the Purchased Assets,
(excluding the Purchased Accounts Receivable), the Consigned Inventory and the
leasehold interest of the lessee under the Miramar Leasehold on the applicable
Representation Date is at least $3,000,000 less than such aggregate Fair Market
Value would have been had all of the representations and warranties of each
Seller been true and correct in all respects on the applicable Representation
Date and no such breach of covenant had occurred, (ii) the actual results of
operations or condition (financial or otherwise) of the business operated by
Sellers (taken as a whole) are materially less favorable than such results or
condition would have been had all of the representations and warranties of each
Seller been true and correct in all respects on the applicable Representation
Date and no such breach of covenant had occurred, or (iii) KIAC shall be
materially less able to conduct the business currently conducted by Sellers than
KIAC would have been able to so conduct such business had all of the
representations and warranties of each Seller been true and correct in all
respects on the applicable Representation Date and no such breach of covenant
had occurred. Without in any way limiting the generality of the foregoing, it is
acknowledged and agreed by each of KIAC and Sellers that, for purposes of
determining whether or not a representation or warranty was true and correct in
all respects within the meaning of this definition of Material
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Reduction in Value, each such representation or warranty shall be deemed to have
been made without any reference to, or limitation based upon, (i) the Knowledge
of any Person and (ii) whether or not any circumstance or circumstances would
result in or constitute a Material Adverse Effect.
"Materials of Environmental Concern" shall mean dangerous goods,
hazardous, toxic or regulated substances, materials or wastes as defined in the
Environmental Laws.
"Miramar Facility" shall mean the office and warehouse facility located
at 0000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx.
"Miramar Lease" shall mean that certain sublease of the Miramar
Facility, dated as of December 1, 2000, by and between AVS (as sublessor) and
Xxxxxxxxx (as sublessee), as amended, supplemented or otherwise modified as of
the date hereof and as hereafter amended, supplemented or modified with the
prior written consent of KIAC subsequent to the date hereof.
"Miramar Leasehold" shall mean all of the right, title and interest of
the lessee under the Miramar Lease in and to the Miramar Facility.
"Monthly True Up Payment Date" shall have the meaning set forth in
Section 6.5(c) hereof.
"Net Sales Proceeds" shall mean with respect to any item of Consigned
Inventory sold, leased or exchanged by KIAC pursuant hereto, the Gross Sales
Price therefor by or for the account of KIAC, minus the unreimbursed
Reimbursable Expenses with respect to such item upon such sale, lease or
exchange.
"Net Sales Revenue" shall mean, with respect to the sale, lease or
exchange of any item of Consigned Inventory, the Net Sales Proceeds therefor
less the applicable Consignee Commission.
"Non-Reimbursable Expenses" shall mean all costs and expenses incurred
by KIAC which are not Reimbursable Expenses, including, without limitation, all
KIAC employee salaries, overhead and costs and expenses incurred by KIAC in
connection with (i) the supervision by KIAC employees of the repair,
maintenance, overhaul, refurbishment, certification or modification of any
Parts, (ii) the sale, lease or exchange of Parts, (iii) Parts tracking and
accountability, (iv) Parts warehousing, (v) extensions of credit for sales, (vi)
except as otherwise set forth herein, the shipping of sold, leased or exchanged
Parts, unless such costs have been previously approved by the Sellers (which
approval shall not be unreasonably withheld or delayed), (vii) the provision of
the Reports, (viii) records review and records tracing, (ix) the payment to
Sellers of amounts owed to them under this Agreement on a monthly basis, (x) the
provision of marketing guidance, and (xi) other responsibilities as contained in
this Agreement, including, without limitation, KIAC's obligation, if any, to pay
certain taxes.
"Objection" shall have the meaning set forth in Section 6.6(c)(i)
hereof.
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"Owned FF&E" shall mean all furniture, fixtures and equipment owned by
Sellers as of the date hereof including (but not limited to) the furniture,
fixtures and equipment located at the Miramar Facility as set forth on Schedule
6 hereto, but excluding any of the Leased FF&E which under applicable Law may be
deemed to be owned by a Seller.
"Part" shall mean any Engine or any aircraft part or component.
"PB18" shall have the meaning set forth in the definition of
Performance Benchmark.
"PB24" shall have the meaning set forth in the definition of
Performance Benchmark.
"PB36" shall have the meaning set forth in the definition of
Performance Benchmark.
"PB48" shall have the meaning set forth in the definition of
Performance Benchmark.
"PB60" shall have the meaning set forth in the definition of
Performance Benchmark.
"Performance Benchmark" shall have the following meaning:
With respect to the period commencing on the date hereof and
ending on the earlier of (i) the last day of the 12th month following
the month in which the Closing shall have occurred (the "Closing
Month") and (ii) the last day of the 16th month following the month in
which this Agreement shall have been executed and delivered by each of
the parties hereto (the "Agreement Month"), the Performance Benchmark
shall mean aggregate Gross Sales Price of at least $30,000,000 (the
"Initial Performance Benchmark").
With respect to the period commencing on the date hereof and
ending on the earlier of (i) the last day of the 18th month following
the Closing Month and (ii) the last day of the 22nd month following the
Agreement Month, the Performance Benchmark shall mean aggregate Gross
Sales Price of at least $38,000,000 ("PB18").
With respect to the period commencing on the date hereof and
ending on the earlier of (i) the last day of the 24th month following
the Closing Month and (ii) the last day of the 28th month following the
Agreement Month, the Performance Benchmark shall mean an aggregate
Gross Sales Price of at least $50,000,000 ("PB24").
With respect to the period commencing on the date hereof and
ending on the earlier of (i) the last day of the 36th month following
the Closing Month and (ii) the last day of the 40th month following the
Agreement Month, the
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Performance Benchmark shall mean aggregate Gross Sales Price of at
least $63,000,000 (the "PB36").
With respect to the period commencing on the date hereof and
ending on the earlier of (i) the last day of the 48th month following
the Closing Month and (ii) the last day of the 52nd month following the
Agreement Month, the Performance Benchmark shall mean aggregate Gross
Sales Price of at least $74,000,000 (the "PB48").
With respect to the period commencing on the date hereof and
ending on the earlier of (i) the last day of the 60th month following
the Closing Month and (ii) the last day of the 64th month following the
Agreement Month, the Performance Benchmark shall mean aggregate Gross
Sales Price of at least $84,000,000 (the "PB60").
In the event that a Performance Benchmark shall not be
achieved, KIAC shall have the right to purchase Parts selected by KIAC
in its sole discretion having a Fair Market Value, in the aggregate,
sufficient so that 100% of the Fair Market Value thereof will result in
such Performance Benchmark being achieved. The purchase price (the
"Makeup Price") for such Parts shall be equal to 70% of the Fair Market
Value of the Parts selected. KIAC shall remit to Sellers on or prior to
the 30th day following the last day of the relevant Performance
Benchmark period an amount equal to the Makeup Price, provided,
however, that 100% of the Fair Market Value of such Parts shall be
deemed Gross Sales Price for purposes of determining whether the
relevant Performance Benchmark has been achieved. If KIAC elects to
exercise its right to purchase Parts sufficient to achieve a
Performance Benchmark, it shall submit to Sellers a list of the Parts
it intends to purchase, and purchase the same within 30 days following
the relevant Performance Benchmark period. Such payments shall only be
included in the computation of the Performance Benchmark being
satisfied by such purchases notwithstanding the fact that such payments
are made during a subsequent measuring period.
"Permits" shall mean all permits, licenses, approvals, franchises,
notices and authorizations issued by any Governmental Authority that relate to
or otherwise are used or are necessary in connection with the ownership,
operation or other use of any of the Purchased Assets.
"Permitted Liens" shall mean (i) the Lien on the Purchased Accounts
Receivable referred to in Section 9.3(b) hereof, (ii) any inchoate mechanics
Liens existing on the Closing Date in connection with Existing Repair Orders in
respect of the Purchased Assets and (iii) with respect to the Consigned
Inventory, (A) all Liens in favor of Agent (provided, however, that Liens in
favor of Agent shall only be Permitted Liens if and to the extent that, on or
prior to the Closing Date, the Agent and KIAC shall have entered into a mutually
satisfactory agreement pursuant to which the Agent shall agree not to enforce
any of such Liens prior to the Consignment Termination Date so long as no Event
of Default under Article VI of this Agreement shall have occurred or exist and
no
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provision of Article VI of this Agreement is waived by Sellers or amended in any
respect without Agent's prior written consent, (B) all Liens suffered or
incurred by KIAC in connection with the repair or maintenance of any Consigned
Inventory and (C) all Property Tax, ad valorem tax and similar tax liens (in
each case, with respect to taxes not yet due and payable).
"Person" shall mean any individual, general partnership, limited
partnership, limited liability company, joint venture, corporation, trust,
unincorporated organization, Governmental Authority or other entity.
"Petition Date" shall mean the date on which the Chapter 11 Cases are
commenced.
"Property Insurance" shall have the meaning set forth in Section
6.7(a)(i) hereof.
"Property Taxes" shall mean all property, excise, inventory and/or use
taxes assessed with respect to any Part or Parts.
"Purchase Price" shall mean the sum of (a) the aggregate amount of all
amounts payable by KIAC in respect of the Assumed Liabilities plus (b) the Cash
Portion of the Purchase Price.
"Purchased Accounts Receivable" shall mean all of the accounts
receivable (including, without limitation, all claims and rights of any nature
with respect thereto) of each Seller in existence or arising on the date hereof
(excluding the Purchased AVS Receivables) as listed or described in Schedule 3
hereto, all of which shall be included among the Purchased Assets to be acquired
by KIAC hereunder plus all accounts receivable arising from bona fide sales made
by any Seller, in the regular, usual and ordinary course of its business and
consistent with past practice, during the period commencing on the date
immediately following the date hereof and ending on (and including) the Closing
Date minus all accounts receivable paid or written off during the period
commencing on (and including) the date immediately following the date hereof and
ending on the Closing Date.
"Purchased A/R Lockbox" shall have the meaning set forth in Section
9.3(b) hereof.
"Purchased A/R Lockbox and Account" shall have the meaning set forth in
Section 9.3(c) hereof.
"Purchased Assets" shall mean (i)(a) all of the Parts listed or
described in Schedule 2 hereto, plus (b) all Parts purchased by any Seller
pursuant to this Agreement at any time prior to the Closing (other than any Part
or Parts held by a Seller as a consignee thereof, even if such Seller acquires
title thereto from the consignor incident to a sale of such Part by such Seller
to an unAffiliated third party), minus (c) all Parts listed or described in
Schedule 2 hereto or referred to in clause (i)(b) of this definition, which (in
either case) are sold or otherwise disposed of by any Seller pursuant to this
Agreement at any time prior to the Closing, (ii) subject to Section 10.2(d), all
of the
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Purchased Accounts Receivable, (iii) all of the employee notes receivable listed
or described in Schedule 4 hereto, (iv) all of the Intellectual Property listed
or described in Schedule 5 hereto, (v) all of the FF&E and (vi) all of the
Foreign Assets.
"Purchased AVS Receivables" shall mean all of the accounts receivable
(including claims and rights of any nature with respect thereto) sold by AVS to
Xxxxxxxxx, pursuant to that certain asset purchase agreement, dated on or about
September 20, 2001, which receivables remain outstanding on Xxxxxxxxx'x books on
the date hereof and are listed or described in Schedule 23 hereto.
"Purchased Verified Parts" shall mean those Parts listed on Schedule 25
hereto and verified to exist pursuant to the physical inventory performed by
Sellers pursuant to Section 5.4 hereof.
"Records" shall mean documentation and other records relating to the
maintenance, repair, traceability and/or life limited status of Parts, and any
other documentation required to be maintained with respect to Parts by the
Federal Aviation Act and standard industry practices.
"Reimbursable Expenses" shall mean with respect to any Part, all (i)
Labor Costs, (ii) Material Costs, (iii) any insurance, freight, shipping and
handling charges and packaging costs which are not charged to a purchaser,
lessee or exchange recipient (including, without limitation, any such charges
incurred in connection with the shipment of a Part to or return of a Part from
an Approved Vendor), which in the case of internal costs of KIAC must be either
(A) associated with preparation for shipment and upon terms no less favorable
than could have been obtained from a third party, or (B) in any other case,
approved by Sellers in writing, (iv) amounts assumed or paid by KIAC on account
of Existing Repair Orders, (v) reasonable and competitive in-house engine and
airframe disassembly costs incurred by KIAC with respect to such Part and not
charged to KIAC, lessee or exchange recipient of such Part, and (vi) all costs
associated with listing the Consigned Inventory with the Inventory Locator
Service.
"Representation Date" shall have the meaning set forth in the
definition of Material Reduction in Value.
"Retained Assets" shall mean all of the assets of any nature whatsoever
of any Seller other than the Purchased Assets and the rights of any Seller under
any of the Assumed Contracts; provided, however, that the Retained Assets shall
not include any asset which has been consigned to any Seller by an unAffiliated
third party owner of such asset or any capitalized costs related thereto.
"Retained Liabilities" shall mean all of the liabilities, obligations
or indebtedness of any nature whatsoever of each of the Sellers (whether
primary, secondary, direct, indirect or contingent) other than the Assumed
Liabilities.
"Retention Agreements" shall mean key employee retention agreements,
each in the form attached hereto as Exhibit B.
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"Returned Checks" shall have the meaning set forth in Section 9.3(b).
"Sale and Consignment Order" shall mean an order of the Bankruptcy
Court which shall be in the exact form and upon the specific terms attached as
Exhibit E to this Agreement or with such changes therein as KIAC may, in its
sole discretion, agree to in writing.
"Sale Procedures Order" shall mean an order of the Bankruptcy Court
(including all exhibits thereto), each of which order and exhibits shall be in
the exact form and upon the specific terms attached as Exhibit F to this
Agreement or with such changes therein as KIAC may, in its sole discretion,
agree to in writing.
"Sales Taxes" shall mean any and all sales, use, stamp, value-added,
transfer or other similar taxes and any transfer or other similar charges
incurred or assessed in respect of a sale, lease or exchange of any item of
Consigned Inventory.
"Scheduled Closing Date" shall mean June 30, 2002.
"Seller" shall have the meaning set forth in the first WHEREAS clause
of this Agreement.
"Senior Lenders" shall mean the holders, from time to time, of
indebtedness outstanding under the Senior Loan Agreement.
"Senior Loan Agreement" shall have the meaning set forth in the
definition of "Agent".
"Subsidiary" shall mean, with respect to any Person, any other Person
in which the first Person owns, directly or indirectly and beneficially or of
record, the power to vote 50% or more of the outstanding voting stock or other
equity interests, or (ii) otherwise controls the management or operation.
"Subsidiary Sellers" shall have the meaning set forth in the preamble
of this Agreement.
"Tax" and "Taxes" shall mean all federal, state, local, or foreign
income, payroll, employee withholding, unemployment insurance, social security,
sales, use, service, service use, leasing, leasing use, excise, franchise, gross
receipts, value added, alternative or add-on minimum, estimated, occupation,
real and personal property, stamp, transfer, workers' compensation, severance,
windfall profits, environmental (including taxes under Section 59A of the Code),
or other tax of the same or of a similar nature, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes or any amendment
thereto, and including any schedule or attachment thereto.
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ARTICLE II
PURCHASE OF ASSETS
2.1 Purchase and Sale of Purchased Assets. On the terms and
subject to the conditions set forth herein, at the Closing:
(a) Sellers shall sell, transfer, convey, assign and
deliver to KIAC, and KIAC shall purchase and accept from Sellers, all
of the right, title, and interest of every kind and nature whatsoever
of each of the Sellers in, to or in respect of the Purchased Assets
(other than the Foreign Assets) of every kind and nature whatsoever and
wherever located, free and clear of any and all Liens other than
Permitted Liens; and
(b) Sellers shall cause the Foreign Subsidiaries to sell,
transfer, convey, assign and deliver to KIAC, and KIAC shall purchase
and accept from the Foreign Subsidiaries, all of the right, title and
interest of every kind and nature of each of the Foreign Subsidiaries
in, to or in respect of the Foreign Assets of every kind and nature
whatsoever and wherever located, free and clear of any and all Liens
other than Permitted Liens.
Except for the specific representations and warranties contained in this
Agreement, Sellers make no representations or warranties regarding the Purchased
Assets and disclaim all warranties of merchantability and fitness for a
particular purpose.
2.2 Excluded Assets. Except as otherwise provided in Section 2.3
hereof, none of the Retained Assets shall be included in the Purchased Assets.
2.3 Miramar. At or prior to the Closing, Xxxxxxxxx shall (a) cause
the Miramar Lease to be amended in accordance with Section 5.5(f) of this
Agreement, (b) cause such amendment to be approved by the Bankruptcy Court to
the extent that such approval is required under applicable Law, and (c)
thereafter assume the Miramar Lease as so amended. At the Closing, Xxxxxxxxx
shall assign the Miramar Lease, as so amended, to KIAC in accordance with all of
the procedures and requirements applicable to its Chapter 11 Case. The Miramar
Lease, as so amended, shall be an "Assumed Contract" for all purposes of this
Agreement.
ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 Assumed Liabilities. On or before the Closing Date, Sellers
shall cure all defaults in respect of the Assumed Liabilities to the extent
required pursuant to the Bankruptcy Code to effectuate the assignment of the
Assumed Contracts to KIAC as contemplated by this Agreement. At and as of the
Closing, KIAC shall assume and thereafter in due course pay and fully satisfy
all of the Assumed Liabilities.
17
3.2 Retained Liabilities. Notwithstanding anything contained in
this Agreement to the contrary, KIAC shall not assume or agree to pay, satisfy,
discharge or perform, or take or agree to take any of the Purchased Assets, the
Miramar Leasehold, or the Consigned Inventory subject to (and shall not be
deemed by virtue of the execution and delivery of this Agreement or any document
delivered to KIAC at the Closing pursuant hereto, or as a result of the
consummation of the transactions contemplated hereby, to have assumed, or to
have agreed to assume, pay, satisfy, discharge or perform, or take, or to have
agreed to take, any of the Purchased Assets, the Miramar Leasehold or the
Consigned Inventory subject to) any of the Retained Liabilities, including (but
not limited to):
(a) any Retained Liabilities that relate to any of the
Purchased Assets, the Miramar Leasehold or (except as otherwise expressly
provided in this Agreement) any of the Consigned Inventory;
(b) any obligations or liabilities of any Seller or any
predecessor(s) or Affiliate(s) of any Seller relating to Taxes with respect to
the Purchased Assets, the Miramar Facility, the Miramar Leasehold or (except as
otherwise expressly provided herein) the Consigned Inventory for any period, or
portion thereof, on or prior to the Closing Date; and
(c) any obligations or liabilities for any legal,
accounting, investment banking, brokerage or similar fees or expenses incurred
by any Seller in connection with, resulting from, or attributable to, the
transactions contemplated by this Agreement.
ARTICLE IV
PURCHASE PRICE
4.1 Purchase Price. In consideration of the conveyance to KIAC of
the Purchased Assets and the rights granted to KIAC pursuant hereto and subject
to the conditions and in accordance with terms hereof, at the Closing KIAC shall
(i) assume the Assumed Liabilities and (ii) pay Sellers an aggregate of
$50,000,000 in cash (the "Cash Portion of the Purchase Price"), of which
$5,000,000 shall be paid by the Escrow Agent's delivering the Deposit to Sellers
pursuant to the Escrow Agreement. The amount of the Cash Portion of the Purchase
Price shall be subject to adjustment only in accordance with Sections 4.3, 4.4,
5.3(b)(i) and 12.1 of this Agreement.
4.2 Allocation of Purchase Price. At or prior to the Closing, KIAC
and Sellers shall enter into an agreement allocating the Purchase Price among
the Purchased Assets in accordance with Treasury Regulation 1.1060-1T. Such
agreement shall not allocate the Purchase Price in any manner that would subject
any Seller to a federal tax liability to which it would not otherwise be
subject. KIAC and Sellers shall report and file all Tax Returns (including
amended Tax Returns and claims for refund) consistent with such allocation, and
shall take no position contrary thereto or inconsistent therewith (including,
without limitation, in any audits or examinations by any taxing authority or in
any other proceedings). KIAC and Sellers shall cooperate in the filing of any
forms
18
(including Form 8594) with respect to such allocation, including any amendments
to such forms required with respect to any adjustment to the Purchase Price
pursuant to this Agreement. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing Date without
limitation. In the event that KIAC and Sellers do not enter into the agreement
contemplated by this Section 4.2 hereof at or prior to the Closing, the Closing
shall nevertheless take place, and each party hereto shall thereafter take such
position with respect to allocating the Purchase Price as it deems reasonable;
provided that no such allocation shall be binding upon or affect Agent or any of
the Senior Lenders.
4.3 Adjustments to Purchase Price.
(a) KIAC and Sellers acknowledge and agree that, during
the period from the date of this Agreement through and including the Closing
Date, Sellers or Foreign Subsidiaries may sell or otherwise dispose of one or
more of the items of inventory included in the Purchased Assets in the usual,
regular and ordinary course of their respective businesses as presently
conducted and consistent with past practice. If, and to the extent that, any
Seller or Foreign Subsidiary does so, KIAC shall be entitled to 75% of the Gross
Sales Price of each item so sold or otherwise disposed of ("KIAC's Percentage").
KIAC's Percentage shall be payable by reducing the Cash Portion of the Purchase
Price by an amount equal to the aggregate amount of KIAC's Percentage; provided,
however, that instead of so paying all or any portion of KIAC's Percentage to
KIAC, Sellers or Foreign Subsidiaries may, at their option, utilize all or such
portion of KIAC's Percentage to purchase one or more items of inventory selected
by Sellers' management and consistent in all respects (including, without
limitation, as to type, quality, mix and price) with the inventory included in
the Purchased Assets listed or described in Schedule 2 hereto, which item or
items so purchased shall automatically and immediately thereafter be included in
the Purchased Assets; provided, further, that, without the prior written consent
of KIAC (which consent shall not be unreasonably withheld or delayed), no Seller
or Foreign Subsidiary shall purchase (i) any individual item of inventory if the
purchase price of such item is greater than $50,000 or (ii) any individual lot
of inventory if the aggregate purchase price of such lot is greater than
$250,000. In the event that any portion of KIAC's Percentage is not utilized in
accordance with the first proviso to the preceding sentence hereof, the Cash
Portion of the Purchase Price shall be reduced by the dollar amount allocable to
that portion of KIAC's Percentage which is not so utilized. If any Seller or
Foreign Subsidiary exercises the option granted to it in such first proviso, on
the third Business Day of each calendar week, Sellers shall jointly prepare and
deliver to KIAC a report in form and substance acceptable to KIAC that sets
forth by Part number an itemized list of all inventory purchased by Sellers or
Foreign Subsidiaries with KIAC's Percentage during the preceding calendar week.
(b) In the event that, at any time during the period from
the date of this Agreement through and including the Closing Date, any Seller
shall sell or otherwise dispose of any of the inventory included in the Retained
Assets, KIAC shall be entitled to 25% of the Gross Sales Price of each such sale
or other disposition, as applicable, which amount shall (i) be payable by
reducing the Cash Portion of the Purchase Price by an
19
amount equal to the aggregate amount to which KIAC shall be entitled pursuant to
this Section 4.3(b) hereof; provided, however, that all or any portion of such
amount may, at the option of Sellers, be utilized by Sellers to purchase one or
more items of inventory selected by Sellers' management and consistent in all
respects (including, without limitation, as to type, quality, mix and price)
with the inventory included in the Purchased Assets listed or described in
Schedule 2 hereto, which item or items so purchased shall automatically and
immediately thereafter be included in the Purchased Assets; provided, further,
that, without the prior written consent of KIAC (which consent shall not be
unreasonably withheld or delayed), no Seller shall purchase (i) any individual
item of inventory if the purchase price of such item is greater than $50,000 or
(ii) any individual lot of inventory if the purchase price of such lot is
greater than $250,000. In the event that any portion of the amount payable to
KIAC pursuant to this Section 4.3(b) is not utilized in accordance with the
first proviso to this Section 4.3(b), the Cash Portion of the Purchase Price
shall be reduced by the dollar amount allocable to that portion of such amount
which is not so utilized.
(c) In the event that, as a result of the operation of
Section 12.1 hereof or in the event that any tangible Purchased Asset is damaged
as described in Section 12.1 hereof but such damage has not been fully repaired,
(i) the Cash Portion of the Purchase Price shall be reduced by an amount equal
to the Book Value of such Purchased Asset, if such Purchased Asset is destroyed,
or by an amount equal to the dollar amount necessary to repair any damaged
Purchased Asset so that it is restored to the condition in which it existed
immediately prior to the occurrence of such damage or (ii) at the option of
Sellers, Sellers may substitute, for any Purchased Asset that is damaged or
destroyed between the date hereof and the date on which risk of loss passes
pursuant to Section 12.1 hereof, one or more other "like-kind" assets then owned
by Sellers and acceptable to KIAC having a Book Value equal to the Book Value of
the destroyed or damaged Purchased Asset; provided, however, that Sellers shall
not be entitled to substitute any assets pursuant to this Section 4.3(c)(ii) if
the Book Value of the Purchased Assets that have been damaged or destroyed is
equal to or greater than $10,000,000.
(d) If, at the time of the Closing, the Book Value of the
inventory included in the Purchased Assets shall be in excess of $90,000,000,
the Cash Portion of the Purchase Price shall be increased by an amount equal to
such excess. For purposes of this Section 4.3(d) hereof, the Book Value of the
inventory to be included in the Purchased Assets shall be determined on the same
basis and in accordance with the same generally accepted accounting principles
consistently applied as were utilized in determining the Book Value of the
inventory listed or described in Schedule 2 to this Agreement
(e) If either the Sellers or KIAC shall claim any
adjustment (whether an increase or decrease) to the Cash Portion of the Purchase
Price pursuant to paragraphs (a), (b), (c) or (d) of this Section 4.3 (an
"Adjustment Claim"), then the following procedures shall apply:
(i) if, prior to Closing, either Sellers or KIAC
shall obtain information upon which it concludes that an Adjustment
Claim may be made,
20
then such party (the "Adjustment Claimant") shall promptly (and, in any
event, not less than five Business Days prior to the Closing) notify
the other party written notice of such Adjustment Claim, providing in
such notice a reasonable and good faith estimate of the amount of the
Adjustment Claim and the basis for the calculation of such Adjustment
Claim;
(ii) if the aggregate amount of the Adjustment
Claim that an Adjustment Claimant estimates that it will be entitled to
receive at Closing is in excess of $3 million, then one of the
following courses of action shall be pursued: (x) the parties may
proceed to close the transactions contemplated by this Agreement by
giving effect to the amount of the Adjustment Claim asserted by the
Adjustment Claimant (or by giving effect to a mutually agreed upon
Adjustment Claim in a lower amount), in which case such adjustment to
the Cash Portion of the Purchase Price shall be made at the Closing;
(y) the parties may proceed to close the transactions subject to the
Adjustment Claimant's withdrawing its Adjustment Claim or reducing its
Adjustment Claim to an amount equal to or less than $3 million (with
the amount of such Adjustment Claim as so reduced to be resolved
pursuant to Section 4.3(e)(iv)); or (z) either party may, at its
option, terminate this Agreement but without forfeiture by KIAC of the
Deposit and without any obligation on the part of Sellers to pay any
KIAC Expenses or the Agreement Termination Amount. If the parties elect
to close the transactions pursuant to clause (y) hereof, other than as
the result of the Adjustment Claimant's withdrawal of its Adjustment
Claim, then the provisions of Section 4.3(e)(iv) below shall apply to
resolve the unresolved amount of the Adjustment Claim (which shall in
no event exceed the lesser of any amount to which the Adjustment
Claimant elected to reduce its Adjustment Claim or $3 million);
(iii) if the aggregate amount of the Adjustment
Claim that an Adjustment Claimant estimates that it will be entitled to
receive at Closing is equal to or less than $3 million, then the
parties shall proceed to close the transactions contemplated by this
Agreement and, after the Closing, the amount of the Adjustment Claim
shall be resolved in accordance with the provisions of Section
4.3(e)(iv);
(iv) if the parties have closed the transactions
contemplated by this Agreement without having resolved at the Closing
the amount of any Adjustment Claim identified by the Adjustment
Claimant prior to Closing, or if, after the Closing, any Adjustment
Claim is identified by a party that was not asserted by it prior to
Closing (provided that any post-Closing assertion of an Adjustment
Claim must be asserted by a party prior to the 30th day following the
Closing or such Adjustment Claim shall be deemed to have been waived),
then the amount of the Adjustment Claim shall be resolved by mutual
agreement of the parties or by the determination of Independent
Accountants selected by and mutually agreed upon by the parties;
provided, however, that in no event shall the amount of the Adjustment
Claim (whether identified by the Adjustment Claimant prior to or after
the Closing) exceed the lesser of the amount, if any, to which the
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Adjustment Claimant reduced its Adjustment Claim prior to Closing or $3
million;
(v) if any Adjustment Claim results in a
reduction in the Cash Portion of the Purchase Price, such Adjustment
shall be given effect post-Closing by KIAC's offsetting the amount
thereof against any amounts thereafter payable by KIAC to Sellers. If
the Adjustment Claim results in an increase in the Cash Portion of the
Purchase Price, then such Adjustment shall be given effect post-Closing
by KIAC's payment of such increase to Sellers within five Business Days
after the date on which the amount of such Adjustment Claim has been
mutually agreed upon by the parties or determined by the aforesaid
Independent Accountants;
(vi) Sellers shall not be authorized to terminate
this Agreement pursuant to the provisions of Section 4.3(e)(ii) without
the consent of Agent. Provided that the Agent and all of the Senior
Lenders shall have complied, at all times and in all material respects,
with all of the obligations of the Agent and the Lenders (as defined in
the Lenders' Agreement) under Section 2 of the Lenders' Agreement (the
"Lenders' Obligations"), Sellers shall not be authorized to agree or
consent to the amount of any Adjustment Claim asserted by KIAC or
assert any Adjustment Claim in excess of $3 million without the consent
of Agent, and any such termination, consent, agreement or assertion by
Sellers without Agent's consent shall be void and of no force and
effect.
4.4 Prorations. (a) Sellers shall be liable for all (i) insurance
premiums that relate to any time prior to the Closing Date, (ii) Property Tax,
ad valorem tax and similar Taxes and fees with respect to the Purchased Assets
that relate to any time prior to the Closing Date, (iii) all employee payroll
costs (other than accrued vacation, sick or personal day expenses) that relate
to any time prior to the Closing Date and (iv) all payment and performance
obligations under agreements that are Assumed Contracts that relate to any time
prior to the Closing Date and KIAC shall be liable for (x) all such insurance
premiums, Property Tax, ad valorem tax and similar taxes and fees, employee
payroll costs and payment and performance obligations that relate to any time on
or subsequent to the Closing Date (regardless, in all of the cases referred to
in this sentence of the reporting or payment dates of the premiums, taxes, costs
and obligations referred to therein) and (y) all accrued vacation, sick or
personal day expenses. All such insurance premiums, Property Taxes, ad valorem
taxes and similar Taxes and fees, payroll costs (other than accrued vacation,
sick or personal day expenses) and payments under agreements that are Assumed
Contracts, shall be prorated between KIAC and Sellers as of 12:01 a.m. local
time on the Closing Date. It is expressly acknowledged and agreed that KIAC
shall have no obligation or liability with respect to any premiums for officers
and directors insurance or for insurance on any assets other than Purchased
Assets (regardless of the period to which they relate) and that no such premiums
shall be so prorated. At the Closing, (i) Sellers shall deposit into escrow
pursuant to an escrow agreement satisfactory in form and substance to each of
the parties to this Agreement, an amount equal to the aggregate amount of
Sellers' prorated share of all such insurance premiums, Property Taxes, ad
valorem taxes, similar Taxes and fees, payroll costs and
22
lease payments or similar payments for which Seller shall not have made payment
prior to the Closing and (ii) KIAC shall pay to Sellers, by increasing the Cash
Portion of the Purchase Price, an amount equal to the aggregate amount of KIAC's
prorated share of all such insurance premiums, Property Taxes, and valorem
taxes, similar Taxes and fees, payroll costs and payments under Assumed
Contracts or similar payments for which Seller shall have made prepayment prior
to the Closing; provided, however, that, in the event that KIAC shall have made
any payment to Sellers in accordance with this clause (ii) in respect of any
prepayment of which KIAC shall not receive the full benefit (for example,
because KIAC is unable to maintain in effect any insurance in respect of which a
premium was prepaid by any Seller), Sellers shall repay the amount so paid by
KIAC promptly upon their receipt of notice from KIAC that such repayment is due
hereunder. KIAC shall have (i) the right of reasonable review and approval of
Sellers' Property Tax assessments and returns (ii) reasonable access to all
books and records that substantiate such returns and (iii) the right to contest
any assessment for which KIAC bears any economic responsibility. Sellers shall
cooperate with KIAC to advance any such review, approval and contest.
(b) All refunds, reimbursements or credits receivable
with respect to the Purchased Assets and Assumed Contracts which relate to a
period that begins on a day before the Closing Date and ends on a day after the
Closing Date shall be prorated such that Sellers shall be entitled to that
portion of any such refund, reimbursement and credit, as the case may be,
applicable to the period preceding the Closing Date, and KIAC shall be entitled
to that portion of any such refund, reimbursement and credit, as the case may
be, applicable to any period from and after the Closing Date. If either party
hereto shall receive any such refund reimbursement or credit after the Closing
Date, it shall promptly remit to the other party its pro rata share of such
refund, reimbursement and credit, as the case may be.
(c) In connection with any payment or other obligation of
KIAC under this Section 4.4, KIAC shall have (i) the right of reasonable review
and approval of Sellers' property tax assessments and returns, (ii) reasonable
access to all books and records that substantiate such returns and (iii) the
right to contest any assessment for which KIAC bears any economic
responsibility. Sellers shall reasonably cooperate with KIAC to advance any such
review, approval and contest.
4.5 No Other Reduction. Except as expressly provided in Sections
4.1, 4.3, 4.4, 5.3(b)(i) and 12.1 of this Agreement, the Cash Portion of the
Purchase Price shall not be subject to any adjustment, offset, recoupment,
counterclaim or other increase or reduction whatsoever.
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ARTICLE V
EFFECTIVENESS AND CLOSING
5.1 Effectiveness.
(a) This Agreement shall become effective, and shall be
binding upon and enforceable against, KIAC and each Seller upon its execution
and delivery by each of such parties. Following the commencement of the Chapter
11 Cases, this Agreement shall remain in full force and effect (subject to all
applicable provisions of the Bankruptcy Code). Notwithstanding anything to the
contrary set forth in this Agreement, KIAC may terminate this Agreement at any
time prior to the Closing in the event that (i) the aggregate cost to the
Sellers of the insurance coverage required under Section 6.7(a) hereof shall
have increased by 50% or more or (ii) a Material Reduction in Value shall have
occurred; provided, however, that, in the event that any Seller or Agent shall
have notified KIAC in writing of the inaccuracy of any representation or
warranty herein or in any Collateral Agreement or the breach by any Seller of
any covenant herein or in any Collateral Agreement, then (whether or not a
Material Reduction in Value shall have occurred) the right of KIAC to terminate
this Agreement in accordance with clause (ii) of this sentence as a consequence
of such inaccuracy or breach shall only be exercisable for a period of 30 days
following the date of KIAC's receipt of such written notification.
(b) Unless this Agreement shall have theretofore been
terminated in accordance with any provision hereof, on or before the first
Business Days after the date on which the Agent shall have delivered to KIAC a
copy of the Lenders' Agreement duly executed by the Agent and each Senior
Lender, KIAC and Sellers shall enter into an Escrow Agreement, in the form of
Exhibit C hereto, and, pursuant thereto, KIAC shall deposit in escrow the sums
of $500,000 (concurrently with its receipt of such document) and $4,500,000, (on
or before the ninth Business Day thereafter), which sums shall thereafter be
held and disposed of in accordance with the terms of the Escrow Agreement and
Section 4.1 hereof.
5.2 Closing. The consummation of the sale and purchase of the
Purchased Assets contemplated hereby (the "Closing") shall take place at the
offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxx,
Xxxxxxx 00000, subject to the satisfaction or waiver of the conditions set forth
in Sections 5.5 and 5.6 hereof, as promptly as practicable following the
satisfaction of each of the conditions set forth in Sections 5.5(j) and 5.6(d)
hereof (and in any event not later than the Scheduled Closing Date), or at such
other time and place and on such other date as Sellers and KIAC shall agree.
5.3 Deliveries at Closing. At the Closing:
(a) Sellers shall execute and deliver to KIAC (or, with
respect to the Foreign Assets, shall cause the appropriate Foreign Subsidiaries
to execute and deliver to KIAC) the items described in clauses (i) through (vii)
below:
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(i) general bills of sale and assignment, in the
form of Exhibit D-1 hereto (each, a "Xxxx of Sale"), with respect to
the Purchased Assets and any other documents reasonably requested by
KIAC so as to convey to KIAC good and marketable title, free and clear
of all Liens that are not Permitted Liens, in and to the Purchased
Assets (other than any Engines), each executed by the appropriate
Seller or Sellers;
(ii) for each Engine, a xxxx of sale in the form
of Exhibit D-2 hereto;
(iii) the officers' certificates referred to in
Section 5.5(a) hereof;
(iv) all other documents, certificates,
instruments or writings (other than opinions of counsel) reasonably
requested by KIAC in connection herewith;
(v) a certificate of insurance naming KIAC an
additional insured and loss payee under all insurance policies
maintained by each Seller in respect of the Retained Assets insofar as
such policies relate to each Seller's "lease portfolio";
(vi) the Purchased Verified Parts physical
inventory report referred to in Section 5.4 hereof; and
(vii) the written instrument referred to in
Section 6.7(e) hereof that lists the Consigned Verified Parts included
in the Consigned Inventory.
(b) KIAC shall deliver to Sellers the items described in
clauses (i) through (iv) below:
(i) (A) the Cash Portion of the Purchase Price,
less (B) the amount of the Deposit delivered to Sellers in accordance
with Section 4.1 hereof, plus (C) the aggregate amount of all
adjustments to the Cash Portion of the Purchase Price to be made in
favor of the Sellers at the Closing in accordance with Section 4.3
hereof, less (D) the aggregate amount of all adjustments to the Cash
Portion of the Purchase Price to be made in favor of KIAC at the
Closing in accordance with Section 4.3 hereof, plus or less (E) the net
aggregate amount of all amounts payable at the Closing with respect to
prorations (as provided in Section 4.4 hereof), which sum shall, at the
time of the Closing, be deposited by KIAC into such account or accounts
as Sellers shall designate to KIAC in writing no later than two
Business Days prior to the Closing;
(ii) an Assumption Agreement, in the form of
Exhibit E hereto (the "Assumption Agreement"), pursuant to which KIAC
shall assume the Assumed Liabilities to be assumed at the Closing,
executed by KIAC;
(iii) the officer's certificate referred to in
Section 5.6(c) hereof; and
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(iv) all other documents, certificates,
instruments or writings (other than opinions of counsel) reasonably
requested by Sellers in connection herewith.
(c) Sellers and KIAC shall enter into a mutually
agreeable transition services agreement, pursuant to which KIAC shall agree to
make available to Sellers (at Sellers' sole cost and expense and to the extent
consistent with such employees' obligations to KIAC under the terms of their
employment agreements and otherwise) one or more employees of KIAC who were
formerly employed by Xxxxxxxxx to assist Sellers in their efforts to liquidate
or otherwise realize value from the Retained Assets (including any tax refund
claims). Such transition services agreement shall expressly provide that neither
KIAC nor any such employee shall have any liability of any nature whatsoever
with respect to any act or omission by KIAC or any such employee relating in any
manner to such transition services agreement or the provision of any service
thereunder. In the event that Sellers and KIAC are unable to reach agreement on
a transition services agreement prior to the Closing, the Closing shall
nevertheless take place.
5.4 Delivery of Purchased Assets and Consigned Inventory. At the
time of the Closing, Sellers shall (and, with respect to the Foreign Assets,
shall cause the appropriate Foreign Subsidiaries to) deliver the Purchased
Assets and Consigned Inventory to KIAC by providing KIAC with (i) Bills of Sale
with respect to the Purchased Assets, (ii) any other documents and instruments
of transfer reasonably requested by KIAC so as to convey to KIAC good and
marketable title, free and clear of all Liens that are not Permitted Liens, in
and to the Purchased Assets, (iii) the Sale and Consignment Order, which order
shall (A) entitle KIAC to have access to and possession and control of the
Purchased Assets (other than the Foreign Assets) and the Consigned Inventory and
(B) order and direct the Sellers to cause the Foreign Subsidiaries to provide
KIAC with access to and possession and control of the Foreign Assets and (iv)
any and all keys and security codes necessary to gain access to the Designated
Locations (excluding Approved Vendor locations) and any and all other premises
where the Purchased Assets and Consigned Inventory are located, warehoused or
stored, with the risk of loss remaining with the Sellers until KIAC takes
delivery in accordance with the provisions of this Section 5.4. Each Seller
shall conduct a physical inventory of all Purchased Verified Parts owned by it
as of the Closing Date, and Sellers shall cooperate to jointly prepare a single
report, by Purchased Verified Part number, that reflects the results of each
Seller's physical inventory of the Purchased Verified Parts.
5.5 Conditions Precedent to Obligations of KIAC. The obligations
of KIAC under this Agreement to consummate the transactions contemplated hereby
shall be subject to the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which may be waived in writing at the
option of KIAC:
(a) No Material Reduction in Value in respect of which
KIAC shall then have the right to terminate this Agreement pursuant to Section
5.1(a) hereof shall have occurred, and KIAC shall have received a certificate or
certificates, dated as of the Closing Date, executed on behalf of each Seller,
each by an authorized executive officer
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of such Seller, certifying in such detail as KIAC may reasonably request that no
such Material Reduction in Value shall have occurred.
(b) The waiting period under the HSR Act or any other
applicable competition, merger, control, antitrust Law or similar Law shall have
expired or terminated, and all Governmental Authorities whose consent is
required for consummation of the transactions contemplated hereby shall have
issued all approvals required for the transactions contemplated hereby, and no
condition or requirement unacceptable to KIAC in its sole discretion shall be
imposed on or required of KIAC or any of its Affiliates as a result of or as a
condition to any of the foregoing.
(c) All Consents listed or described in Schedule 9 hereto
shall have been obtained (without any limitation, restriction or condition not
otherwise applicable to any Seller being imposed on KIAC or its ownership or use
of any Purchased Assets), except where the failure to obtain such Consents have
not had, or would not be reasonably likely to have, a Material Adverse Effect.
(d) No action, suit or proceeding (including, without
limitation, any proceeding over which the Bankruptcy Court has jurisdiction
under 28 U.S.C. ss. 157(b) and (c)) shall be pending or overtly threatened by or
before any Governmental Authority or pending or overtly threatened by any other
Person to enjoin, restrain, prohibit or obtain substantial damages or
significant equitable relief in respect of or related to any of the transactions
contemplated by this Agreement, or that would be reasonably likely to prevent or
make illegal the consummation of any transactions contemplated by this Agreement
or that, if adversely determined, could be materially adverse to the operation,
use or occupancy of the Purchased Assets, Consigned Inventory or Miramar
Facility and any such actions, suits or proceedings that have theretofore been
brought and determined shall have become Final Orders.
(e) There shall not be in effect any Law of any
Governmental Authority of competent jurisdiction restraining, enjoining or
otherwise preventing the consummation of the transactions contemplated by this
Agreement.
(f) (i) The Sellers shall have acquired from AVS, free
and clear of any and all Liens (other than Permitted Liens), all of the Leased
FF&E, so that Sellers can sell, transfer, convey, assign and deliver all of such
Leased FF&E to KIAC in accordance with the terms of this Agreement; (ii) (A) the
owner of the real property which is the subject of the Miramar Lease and all
other Persons (if any) who have any interest in such real property which may
entitle or enable such Persons to terminate the Miramar Lease or evict KIAC
from, or otherwise disturb KIAC's possession and quiet enjoyment of, such real
property shall have delivered to KIAC written documents satisfactory in form and
substance to KIAC acknowledging and agreeing to KIAC's right to undisturbed
possession and quiet enjoyment of such real property throughout the term of the
Miramar Lease so long as KIAC is not in default under the Miramar Lease (in each
case, as amended in accordance with clause (B) below) and (B) the Miramar Lease
shall have been amended (upon the terms and conditions outlined in Schedule 29
to this Agreement and pursuant to a written document satisfactory in form and
substance to KIAC), and
27
shall have been assumed by Xxxxxxxxx and assigned to KIAC in accordance with the
terms of this Agreement and the requirements of the Bankruptcy Code; and (iii)
KIAC and KAV shall have entered into a consignment agreement, upon the terms and
conditions outlined in Schedule 30 to this Agreement and satisfactory in form
and substance to KIAC, pursuant to which KAV shall have consigned inventory to
KIAC.
(g) Sellers and the Foreign Subsidiaries shall have
delivered the Purchased Assets and Consigned Inventory to KIAC, in accordance
with Section 5.4 of this Agreement.
(h) Sellers shall have assumed and assigned to KIAC the
Assumed Contracts, pursuant to the Sale and Consignment Order and in accordance
with the requirements of the Bankruptcy Code.
(i) No loss or modification of, or limitation on, any
Assumed Contract shall have occurred since the date of this Agreement without
the prior written consent of KIAC in its sole discretion including, without
limitation, any forfeiture, expiration without renewal, termination or other
loss thereof, except for losses, modifications or limitations that, individually
or in the aggregate, have not had, or would not be reasonably likely to have, a
Material Adverse Effect.
(j) The Sale and Consignment Order shall have become a
Final Order.
(k) The employment by Xxxxxxxxx of Xxxx Xxxxx and Zivi
Nedivi, in the respective capacities in which such Persons are so employed on
the date hereof, shall not have been terminated without the prior written
consent of KIAC.
5.6 Conditions Precedent to Obligations of Sellers. The
obligations of Sellers under this Agreement to consummate the transactions
contemplated hereby to be consummated at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all the following conditions, any
one or more of which may be waived in writing at the option of Sellers with the
prior writing consent of the Agent (provided that the Agent shall, at all times
and in all material respects, have complied with the Lenders' Obligations):
(a) KIAC shall have tendered to the Sellers payment of
the amount described in Section 5.3(b)(i) of this Agreement.
(b) The waiting period under the HSR Act or any other
applicable competition, merger, control, antitrust Law or similar Law shall have
expired or terminated, and all Governmental Authorities whose consent is
required for consummation of the transactions contemplated hereby shall have
issued all approvals required for the transactions contemplated hereby.
(c) There shall not be in effect any Law of any
Governmental Authority of competent jurisdiction restraining, enjoining or
otherwise preventing consummation of the transactions contemplated by this
Agreement.
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(d) (i) The Sale and Consignment Order shall have
become a Final Order or (ii)(A) the Sale and Consignment Order shall have been
duly entered by the Bankruptcy Court and (B) neither the Sale and Consignment
Order nor the consummation of any of the transactions contemplated hereby or
thereby shall have been stayed, enjoined or otherwise prohibited by Law.
(e) (i) The Sellers shall have acquired from AVS,
free and clear of any and all Liens (other than Permitted Liens), all of the
Leased FF&E, so that Sellers can sell, transfer, convey, assign and deliver all
of such Leased FF&E to KIAC in accordance with the terms of this Agreement; (ii)
(A) the owner of the real property which is the subject of the Miramar Lease and
all other Persons (if any) who have any interest in such real property which may
entitle or enable such Persons to terminate the Miramar Lease or evict KIAC
from, or otherwise disturb KIAC's possession and quiet enjoyment of, such real
property shall have delivered to KIAC written documents satisfactory in form and
substance to KIAC acknowledging and agreeing to KIAC's right to undisturbed
possession and quiet enjoyment of such real property throughout the term of the
Miramar Lease so long as KIAC is not in default under the Miramar Lease (in each
case, as amended in accordance with clause (B) below and (B) the Miramar Lease
shall have been amended (upon the terms and conditions outlined in Schedule 29
to this Agreement and pursuant to a written document satisfactory in form and
substance to KIAC), and shall have been assumed by Xxxxxxxxx and assigned to
KIAC in accordance with the terms of this Agreement and the requirements of the
Bankruptcy Code; and (iii) (A) Sellers and KAV shall have entered into a
consignment agreement, upon the terms and conditions set forth in Schedule 30 to
this Agreement and satisfactory in form and substance to KIAC, pursuant to which
KAV shall have consigned inventory to Sellers, (B) the Bankruptcy Court shall
have approved such consignment agreement by a Final Order and (C) such
consignment agreement shall have been assigned to KIAC in accordance with the
terms of this Agreement and the requirements of the Bankruptcy Code.
(f) The aggregate amount required to be paid by Sellers
pursuant to Section 3.1 of this Agreement (exclusive of amounts required to cure
defaults, if any, under the Miramar Lease) shall not exceed $500,000.
5.7 Waiver of Conditions Precedent. In the event that the Closing
shall take place, each of KIAC and the Sellers shall be deemed to have validly
and effectively waived, in accordance with all of the terms and provisions of
this Agreement, any condition precedent to its respective obligations under this
Agreement which may not have been satisfied at the time of the Closing (whether
or not it shall theretofore have done so in writing) and none of KIAC or the
Sellers shall thereafter have any claim of any nature whatsoever against any
other party thereto by reason of any non-satisfaction of any such condition
precedent.
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ARTICLE VI
CONSIGNMENT OF ASSETS
6.1 Appointment and Acceptance of Agency.
(a) Subject to the terms and conditions hereof, each
Seller hereby appoints KIAC as its agent during the Consignment Period and
grants KIAC the exclusive right during the Consignment Period to market, through
sale, lease and exchange transactions in accordance with the terms and
conditions hereof, the Consigned Inventory owned by such Seller. KIAC hereby
accepts such appointment and agrees to market the Consigned Inventory for
Sellers through sale, lease and exchange transactions. Except as otherwise set
forth in this Agreement, KIAC acknowledges and agrees that KIAC shall not sell,
lease or exchange or otherwise transfer any Consigned Inventory to KIAC or any
Subsidiary of KIAC without the prior written consent of the applicable Seller,
which consent shall not be unreasonably withheld or delayed.
(b) Sales, leases and exchanges of Consigned Inventory by
KIAC shall be on an individual item or lot basis and on such terms and
conditions, at such prices and to such purchasers, lessees and exchange
recipients as KIAC deems appropriate; provided, that if, for any calendar
quarter, (i) the ratio of the aggregate Gross Sales Price for all Consigned
Inventory sold by KIAC during such calendar quarter to the Book Value of such
Consigned Inventory sold by KIAC during such calendar quarter is less than 50%
(excluding sales of Consigned Inventory sold as scrap pursuant to Section 6.2
hereof) or (ii) the aggregate Gross Sales Price for all Consigned Inventory sold
by KIAC during such calendar quarter is not at least 75% of the Fair Market
Value of such Consigned Inventory (excluding sales of Consigned Inventory sold
as scrap pursuant to Section 6.2 hereof), then Sellers shall have the right,
exercisable by written notice to KIAC, to require KIAC to receive the prior
consent of the applicable Seller or Agent to sell Consigned Inventory reasonably
likely to generate an aggregate Gross Sales Price in excess of $25,000. In the
event that KIAC seeks such consent (which consent shall not be unreasonably
withheld or delayed), it shall request the consent of the applicable Seller or
Agent on any Business Day by speaking by telephone or in person with an
authorized representative of such Seller or Agent, and promptly thereafter
confirming such request by e-mail. In the event that none of the foregoing
representatives of Sellers or Agent shall respond to such request for consent
within 24 hours after such e-mail is sent, such request for consent shall be
deemed granted. In the event that either of the Persons named above (or any
other designee referred to above) shall verbally respond to KIAC's request to
consent within the 24-hour period referred to above, such Person or designee
shall promptly thereafter send an e-mail confirmation of his or her response to
the employee of KIAC to whom the verbal response was given at the email address
provided by such employee. The obligation of KIAC to obtain such consent of
Sellers or Agent with respect to the sale of Consigned Inventory under this
Section 6.1(b) hereof shall terminate automatically upon the results of a
succeeding calendar quarter reflecting (i) a ratio of aggregate Gross Sales
Price to the Book Value for Consigned Verified Parts sold in such calendar
quarter greater than or equal to 50% (excluding sales of Consigned Inventory
sold as scrap pursuant to Section 6.2 hereof), or (ii) aggregate Gross Sales
30
Price for Consigned Inventory sold by KIAC during such calendar quarter is
greater than or equal to 75% of Fair Market Value of such Consigned Inventory
(excluding sales of Consigned Inventory sold as scrap pursuant to Section 6.2
hereof). Upon written notice from Sellers, the obligation of KIAC to obtain such
consent may be reinstated upon the results of a subsequent calendar quarter
reflecting that the aggregate Gross Sales Price does not meet either of the
thresholds set forth in the first sentence of this Section 6.1(b) hereof.
(c) It is the intent of KIAC to sell each Part in
"as-is", "where-is" condition without any representations or warranties, express
or implied, except (i) a warranty of good title and (ii) such representations
and warranties as KIAC may customarily provide in respect of any repair,
maintenance, overhaul, modification, refurbishment or other work (including,
without limitation, any assignable warranties of the manufacturers of such Part
or of any Person that has overhauled or maintained such Part; provided, that
KIAC shall not make or purport to make on behalf of any Seller, Agent or the
Liquidating Trust any such representation or warranty.
(d) Notwithstanding any appraisal performed in connection
with the calculations contemplated by Section 6.1(b) hereof, at any time and
from time to time during the Consignment Period, KIAC shall have the right, at
its sole expense, to cause an appraisal of the Consigned Verified Parts to be
performed by a third party appraiser selected by KIAC in its sole discretion,
but the results of any appraisal by such third party appraiser shall not be
binding upon Sellers, Agent or the Liquidating Trust.
6.2 Scrap. From time to time, KIAC shall furnish to Sellers, for
their review, a list of Consigned Inventory that KIAC has determined to be ready
for breakdown as scrap or non-saleable due to obsolescence, or a condition
beyond economic repair (other than as a result of an Event of Loss) or for other
reasons and, to the extent that Sellers concur with and consent to KIAC's
determination (which consent shall not be unreasonably withheld or delayed), the
items of Consigned Inventory set forth on such list shall be sold or otherwise
disposed of as scrap. In the event that Sellers fail to consent or object to
such list (or any item or items therein) within thirty calendar days after the
date such list is furnished to Sellers, KIAC shall be entitled to return such
item or items of Consigned Inventory to the applicable Seller and upon shipment
thereof to, or at the direction of, the applicable Seller, such item or items
shall cease to constitute Consigned Inventory.
6.3 Certain Responsibilities of KIAC.
(a) All Consigned Inventory held by KIAC pursuant to this
Article VI shall be held by KIAC as a bailee-for-hire, subject to the terms and
conditions hereof, and Sellers shall at all times retain title to all items of
Consigned Inventory held by KIAC and the Records related thereto wherever
located (unless and until title thereto shall pass to KIAC from the applicable
Seller of such item of Consigned Inventory as provided in Section 6.8(a)
hereof).
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(b) Without ten days prior written notice to and the
consent of Sellers (which consent shall not be unreasonably withheld or
delayed), KIAC shall not, except as otherwise expressly provided herein, locate
or maintain any Consigned Inventory at any location other than a Designated
Location or transfer any Consigned Inventory to any Person (other than in a
sale, lease or exchange transaction contemplated hereunder). Not less than ten
days prior to the Closing, KIAC shall give Sellers written notice of each
location where any Consigned Inventory, Records related thereto or any records
of KIAC relating to any Consigned Inventory shall be regularly kept and KIAC
shall thereafter give Sellers ten days prior written notice of any change in any
such location.
(c) At the expense of Sellers, KIAC shall continue to
list the Consigned Inventory for sale with the Inventory Locator Service unless
and until such time as it becomes no longer economically feasible to do so.
(d) KIAC shall, to the extent it deems appropriate,
identify items of Consigned Inventory for repair, overhaul, refurbishment or
modification to enhance the marketability, saleability, leasability or
exchangeability of the Consigned Inventory. KIAC shall maintain a list of
vendors (each, an "Approved Vendor"), which have been and hereafter shall be
approved by KIAC according to a vendor approval process consistent with its
quality manual as in effect from time to time. Any item of Consigned Inventory
identified for repair, overhaul, refurbishment or modification under this
Section 6.3(d) hereof shall only be sent to Approved Vendors. The Approved
Vendors list shall be made available to Sellers upon their request therefor.
KIAC shall repair, overhaul, refurbish or modify, or cause to be repaired,
overhauled, refurbished or modified, in accordance with this Agreement and all
applicable FAA rules, regulations and standards then in effect each item of
Consigned Inventory that KIAC determines, in its sole discretion. Any and all
amounts expended by KIAC to repair, overhaul, refurbish or modify the Consigned
Inventory shall be treated as a Reimbursable Expense; provided, however, that
the aggregate amount of Reimbursable Expenses due and payable by Sellers on any
Business Day during the Consignment Period shall not be in excess of
$[2,000,000] without the prior written approval of Sellers. If KIAC determines
in its sole discretion not to repair, overhaul, refurbish or modify an item of
Consigned Inventory, it shall be entitled to disassemble and "part out" the item
of Consigned Inventory requiring such repair, overhaul, refurbishment or
modification and shall report such determination to Sellers and Agent.
(e) KIAC and Sellers acknowledge that KIAC has agreed to
assume the payment of certain outstanding payment obligations relating to the
Consigned Inventory sent out for repair, refurbishment, overhaul or modification
prior to and on the Closing Date and which shall not be returned until after the
Closing Date (the "Existing Repair Orders"). KIAC shall be reimbursed for all
amounts so assumed and paid by KIAC in respect of Existing Repair Orders by
offsetting such amounts against all payments which KIAC would otherwise be
required to distribute and remit to Sellers under Section 6.5 hereof with
respect to the repaired, refurbished, overhauled or modified item of Consigned
Inventory.
32
(f) KIAC shall issue an invoice for each sale, lease or
exchange by it of any Consigned Inventory hereunder in accordance with its
customary business practices.
(g) KIAC shall (1) collect from each purchaser, lessee or
exchange recipient of any item of Consigned Inventory all applicable Sales
Taxes, (2) pay all Sales Taxes to the taxing authorities entitled thereto, (3)
file any and all Tax Returns in respect of Sales Taxes in accordance with
applicable Law, and (4) maintain records of the foregoing in accordance with all
applicable Laws and consistent with its customary business practices. KIAC
shall, as reasonably requested by Sellers, provide Sellers with copies of all
receipts, returns and other records which KIAC creates and/or receives in
connection with its obligations pursuant to this Section 6.3(g) hereof.
(h) KIAC shall physically inspect each item of Consigned
Inventory returned to it by a purchaser, lessee or exchange recipient thereof
and shall verify the serial number thereof (or, if such item of Consigned
Inventory shall have been delivered by Sellers to KIAC pursuant hereto without a
serial number, KIAC shall otherwise identify, to its reasonable satisfaction,
that the property returned to it is in fact the item of Consigned Inventory that
was shipped by it). No item of Consigned Inventory shall be accepted for return
by KIAC other than under circumstances under which returns are customarily
accepted by KIAC with respect to its own inventory.
(i) KIAC shall provide warehousing and storage facilities
for the Consigned Inventory (including the Records related thereto) subject to
this Article VI comparable to the facilities used by KIAC for the warehousing
and storage of its own inventory. KIAC shall locate and store such Consigned
Inventory (including the Records related thereto) as shall, from time to time,
be in the possession of KIAC and shall use commercially reasonable efforts to
identify the Consigned Inventory as Sellers' property unless and until shipped
to a purchaser, lessee or exchange recipient or returned to, or otherwise
disposed of, in accordance with this Agreement or at the direction of, the
applicable Seller, pursuant to Section 6.3(l) hereof. KIAC shall safeguard the
Consigned Inventory (including the Records related thereto) in a manner
consistent with procedures utilized for its own inventory.
(j) KIAC shall maintain accurate and complete records for
all Consigned Inventory based upon the records provided to KIAC by Sellers (and
not by performing a physical inventory of the Consigned Inventory or Consigned
Verified Parts), including, without limitation, inventory records, and
maintenance and repair records, and update the Records in connection with the
repair or overhaul of the Consigned Inventory in accordance with all applicable
FAA rules, regulations and standards. KIAC shall maintain all Permits as may be
required by the FAA or other applicable regulatory authority to perform the
undertakings contemplated hereby. As soon as practicable after the Closing Date
and on each Consignment Report Date during the Consignment Period, KIAC shall
provide to Sellers complete and correct copies of such records and FAA
reporting, as applicable in computer readable form reasonably acceptable to
Sellers and consistent with industry standards then in effect at the time such
records and reports are provided.
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(k) On any Consignment Termination Date arising from a
Consignment Termination Event described in Section 6.9(a) hereof, (A) (1) the
agency of KIAC hereunder shall cease; (2) Sellers or Agent shall have the right
to enter the premises of KIAC, or any Designated Location or any other location
where any Consigned Inventory is then located, and repossess such Consigned
Inventory (and the Records related thereto) then subject to this Agreement; and
(3) KIAC shall hold, in accordance with the terms and subject to the conditions
of Article VI hereof, and make available to Sellers or Agent for repossession
all Consigned Inventory (and the Records related thereto) then in the possession
and control of KIAC until such Consigned Inventory has been so repossessed (but
in no event longer than 90 days after the end of the Consignment Period) and (B)
to the extent that Sellers or Agent have not exercised their right to enter the
premises as described in clause (i) above, (1) the agency of KIAC hereunder
shall cease; (2) KIAC shall continue to hold, in accordance with the terms and
subject to the conditions of Article VI hereof, and all Consigned Inventory (and
the Records related thereto) then in the possession and control of KIAC for a
period of up to 90 days after the end of the Consignment Termination Date; (3)
during such 90-day period, KIAC shall return to Sellers, or at Sellers' request
dispose of, the Consigned Inventory that is subject to this Agreement as of the
Consignment Termination Date (together with the Records and any and all records
of KIAC described in Section 6.3(j) hereof relating to such Consigned Inventory
in such manner and at such locations in the United States as the Sellers shall
direct; and (4) prior to the end of such 90-day period, KIAC and Sellers shall
conduct a final accounting of all amounts payable pursuant to Article VI hereof.
Notwithstanding the foregoing, KIAC and Sellers (with the prior consent of
Agent) may mutually elect to extend the Consignment Period and the agency
created under Section 6.1(a) hereof with respect to any item of Consigned
Inventory and, if so extended, all of the provisions of this Article VI hereof
shall continue with respect to such item until it is sold, leased, exchanged, or
returned to the applicable Seller, and the rights and provisions of Section 6.5
hereof are satisfied. From and after any Consignment Termination Date, all
reasonable and documented costs incurred in connection with the return, disposal
or other disposition of any item of Consigned Inventory, Records related thereto
or other records pursuant to this Section 6.3(k) hereof, including shipping
costs and such other costs and expenses as are directly allocable to the return
or disposal of the Consigned Inventory, shall be paid in advance by Sellers.
Absent such payments, KIAC may after 30 days following notice and demand for
such pre-payment dispose of the Consigned Inventory in such manner as it, in its
sole discretion, shall determine.
(l) Upon the sale, lease, exchange, disposal or return to
Sellers of all Consigned Inventory pursuant to Section 6.3(k) hereof, Sellers
shall promptly pay to KIAC all Reimbursable Expenses for which KIAC has not
received reimbursement from Sellers under Section 6.5 hereof.
(m) KIAC shall not take title to any Consigned Inventory
in any jurisdiction in which the sale of such Consigned Inventory to KIAC would
be subject to any Sales Tax without either (i) obtaining Sellers' written
consent or (ii) providing a certificate of resale or analogous document for such
jurisdiction, in form and substance reasonably satisfactory to Sellers.
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6.4 Certain Responsibilities of Sellers.
KIAC shall (i) file any and all tax returns in respect of Property
Taxes in accordance with applicable Law, and (ii) maintain records of the
foregoing in accordance with all applicable Laws and prudent business practice.
Sellers shall reimburse KIAC, directly or by offset against any amounts due and
payable to Sellers under this Agreement, for any and all costs incurred by KIAC
in connection with its obligations under this Section 6.4 hereof (exclusive of
normal overhead) and for any and all Property Taxes required to be paid to any
taxing authorities on or in connection with the Consigned Inventory. Sellers
shall, as reasonably requested by KIAC, provide KIAC with copies of all
receipts, returns and other records which Sellers create and/or receive in
connection with their respective obligations pursuant to this Section 6.4
hereof.
6.5 Commissions and Payments.
(a) The Net Sales Proceeds for each item of Consigned
Inventory sold, leased or exchanged by KIAC hereunder shall be distributed 70%
to the applicable Seller and 30% to KIAC (the "Consignee Commission"), subject
to offset as provided in Section 6.11 hereof, but (notwithstanding anything to
the contrary set forth in this Agreement) only as so provided in such section.
(b) KIAC shall remit to Sellers monthly, not later than
the fifth Business Day of the calendar month following the calendar month in
which the Net Sales Proceeds are received and applied in the normal course by
KIAC against specified invoices as listed on the related remittance, an amount
equal to the Net Sales Revenue. All Net Sales Proceeds received by KIAC during
any calendar month shall be applied to the invoice in respect of which such Net
Sales Proceeds were remitted; provided; however, that, if KIAC is unable to make
such application because the customer does not provide sufficient detail with
its remittance, such payment shall be applied to the outstanding Purchased
Accounts Receivable of such customer (on an "oldest first" basis), and any
payments in excess of the outstanding amount of such outstanding Purchased
Accounts Receivable shall be applied (on an "oldest first" basis) to outstanding
accounts receivable arising from any sale by KIAC to such customer. Each payment
required to be remitted by KIAC pursuant to this Section 6.5(b) shall be made to
one or more bank accounts designated from time to time by Sellers by written
notice to KIAC. Each payment made by KIAC to Sellers pursuant to this Section
6.5(b) shall be accompanied by a cash receipts report in form and substance
mutually acceptable to KIAC and Sellers, which report shall reflect accounts
receivable collections received by KIAC during the immediately preceding
calendar month in respect of the sale, lease and exchange of Consigned
Inventory.
(c) KIAC shall remit to Sellers monthly, not later than
the fifth Business Day following the last day of each calendar month (each, a
"Monthly True Up Payment Date"), an amount equal to the Net Sales Revenue
related to accounts receivable arising from the sale of Consigned Inventory to
the extent that such accounts receivable have been outstanding for more than 120
calendar days.
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(d) If the aggregate amount due and payable to Sellers
under this Article VI shall exceed $5,000,000 on any Business Day during the
Consignment Period, KIAC shall, in its sole discretion, either (i) promptly (and
in any event within five Business Days following the date on which such amount
exceeded $5,000,000) remit to Sellers Net Sales Revenue in an amount equal to
such excess or (ii) cause all future sales, leases and exchanges of Consigned
Inventory to be conducted on a (A) cash in advance or (B) cash on delivery
basis, in each case, until such time as the aggregate Net Sales Revenue due and
payable to Sellers under this Article VI is no longer in excess of $5,000,000.
(e) KIAC shall be responsible for all invoicing
procedures and accounts receivable collections for the sale, lease or exchange
of the Consigned Inventory.
(f) On each relevant payment date, KIAC shall deduct from
the amount of Net Sales Revenue otherwise payable to Sellers hereunder (and
shall retain for its own account) all (i) amounts previously remitted to Sellers
for any Consigned Inventory sold by KIAC and returned by a purchaser thereof in
accordance with the terms of the sale during the calendar month to which such
payment date relates, (ii) amounts incurred by KIAC in connection with the
Property Insurance and Liability Insurance described in Section 6.7(a)(i) and
Section 6.7(a)(ii) hereof, and (iii) other amounts due to KIAC under this
Article VI hereof.
(g) Notwithstanding any other provision of this Agreement
to the contrary, if at any time any item of Consigned Inventory is sold by KIAC
to KIAC or any Subsidiary of KIAC, the item so sold shall be deemed to have been
sold for Net Sales Proceeds equal to the Fair Market Value of such item and to
have been paid for on the date of sale.
(h) KIAC may enter into exchange transactions with
third-party customers upon such terms and in such manner as shall be consistent
with the past practice of Sellers. Upon an exchange with an end-user of (but not
a dealer in) any item or items of Consigned Inventory for another item or items,
title to the item or items received in the exchange shall automatically pass to
Sellers (and KIAC shall provide all documentation Sellers may reasonably request
to evidence such passage of title) and thereafter, each such item shall be
considered an item of Consigned Inventory for all purposes of this Agreement.
Each such item so received shall have attributed to it the amount of the
Reimbursable Expenses allocable to the item of Consigned Inventory transferred
in exchange therefor. If KIAC receives an Exchange Fee in addition to the part
received in the exchange, then such Exchange Fee shall be treated as Net Sales
Proceeds to be allocated and distributed pursuant to Sections 6.5(a) and
(b)hereof. If KIAC scraps any part received in an exchange and treats the same
as a sale of the exchanged item to the exchange customer, such sale shall be
treated as a sale of such exchanged item hereunder and the proceeds of such sale
shall be allocated pursuant to Sections 6.5(a) and (b) hereof.
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6.6 Review and Reporting.
(a) On the 25th calendar day following the last day of
each calendar month (such date, a "Consignment Report Date"), KIAC shall provide
to Sellers and Agent a report in substantially the form described in Schedule 1
hereto (a "Consignment Report") relating to the calendar month immediately
preceding the Consignment Report Date. Each of Sellers and Agent shall have the
right to inspect the Consigned Inventory and all records relating to the
Consigned Inventory from time to time during the Consignment Period and during
KIAC's normal business hours, such inspections to be solely at the expense of
Sellers or Agent, as applicable, and conducted so as not to unreasonably disrupt
the operations of KIAC and its Affiliates.
(b) KIAC shall periodically review with Sellers KIAC's
standard operating procedures for the disassembly, repair, maintenance,
overhaul, refurbishment and modification of Consigned Inventory, and any
proposed modifications or amendments thereto.
(c) (i) Sellers shall review the Consignment Reports
and, no later than ten Business Days after receiving each Consignment Report,
shall notify KIAC in writing of any objections to such Consignment Report,
specifying in reasonable detail the grounds for such objection (the
"Objection"). KIAC shall no later than five Business Days after receipt by it of
any Objection, by written notice to Sellers accept or reject such Objection,
specifying in reasonable detail the grounds for any rejection thereof. If KIAC
accepts any Objection, the Consignment Report shall be revised accordingly and
reissued, and the amount payable to Sellers hereunder in respect of the
reporting period to which such Consignment Report relates shall also be adjusted
accordingly. KIAC shall promptly pay Sellers such additional amount as shall be
required to be paid to Sellers as a result of such adjustment. If KIAC rejects
any Objection, the parties shall meet within five Business Days after KIAC
notifies Sellers of such rejection to discuss and resolve any such Objection.
(ii) If the parties fail to reach agreement a
resolution of an Objection at such meeting, or at any mutually agreed upon
postponement or adjournment thereof, Sellers may at their option, by written
notice delivered to KIAC within five Business Days following the date of such
meeting or postponement or adjournment thereof, either (A) withdraw such
Objection (in which case no adjustments in respect of such withdrawn Objections
shall be made to such report), or (B) pursue the Objection by requiring the
Consignment Report to which the Objection relates to be examined and verified by
the Independent Accountants which shall review and resolve the Objection. KIAC
and Sellers shall cooperate fully with such accountants and shall provide such
accountants (if reasonably necessary to resolve the Objection) such records,
invoices, accounts, documents and other information relating to Article VI
hereof and the Consigned Inventory as such accountants shall request in
connection with their examination and verification of such Consignment Reports.
KIAC shall provide such accountants all information available to it related to
the Consigned Inventory and reasonably necessary to allow such accountants to
verify, if and to the extent applicable to the Objection, the following with
respect to the period to which the Objection relates:
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(A) the frequency of sales, leases and exchanges of Consigned Inventory and (B)
that the Labor Costs and Material Costs assessed as Reimbursable Expenses are
accurately reflected in the Consignment Reports. The criteria set forth in the
foregoing clauses (A) and (B) are hereinafter referred to as the "Accounting
Criteria". The accountants shall review the Accounting Criteria taking into
account KIAC's commercially reasonable business discretion, operational
capabilities and contract commitments. The resolution of the Objection and the
results of the calculations performed by the Independent Accountants shall be
accepted by KIAC and Sellers as final, nonappealable and conclusive for the
purpose of determining all amounts payable under Article VI hereof in respect of
all Consigned Inventory sold, leased or exchanged or deemed sold, leased or
exchanged during the reporting period subject to the Objection. KIAC and Sellers
each agree that they shall, within five Business Days following their respective
receipt of the final report by such Independent Accountants, make such payments,
if any, as shall be required to be made by them, as the case may be, as a result
of such final report.
(d) If, as a result of the examination and verification
by any such Independent Accountants of the Consignment Reports for any period of
six consecutive months, KIAC shall be required to pay Sellers an aggregate
amount in excess of 5% of the aggregate amount originally determined by KIAC to
be payable to Sellers in respect of the six-month period covered by such
Consignment Reports, all fees and expenses of the Independent Accountants in
connection with such examination and verification shall be paid solely by KIAC;
otherwise, such fees and expenses shall be paid solely by Sellers.
(e) In addition to any such examination and verification,
on or during the 30-day period prior to each anniversary of the Closing Date,
KIAC, at Sellers' prior written request and cost, shall permit Sellers (jointly)
or Agent to verify any of the Accounting Criteria specified by Sellers with
respect to the Consigned Inventory during the preceding 12 calendar months,
using the same procedures as are specified in Section 6.6(c) hereof. KIAC and
Sellers shall cooperate fully and KIAC shall provide Sellers on demand with such
records, invoices, accounts, documents and other information relating to this
Agreement and the Consigned Inventory as they shall request in connection with
their verification. Any unreconciled differences between the Consigned Inventory
as reported by KIAC in the Consignment Reports and the Consigned Inventory as
determined by Sellers or Agent, as applicable, pursuant to this Section 6.6(e)
hereof shall be treated as Events of Loss hereunder.
(f) KIAC and Sellers hereby agree that all Consignment
Reports and all other information learned and required to be provided by and in
any way relating to this Agreement, the Consigned Inventory or any of the
transactions contemplated hereby (including, without limitation, during any
period that due diligence is being conducted) shall be treated as confidential,
shall be used solely for the purpose of performing their respective obligations
hereunder and shall not be disclosed to any third party, except to prospective
successors and permitted transferees of KIAC or Sellers, or the counsel,
accountants, lenders, insurance brokers or other agents of KIAC, Sellers or the
aforementioned transferees who agree in advance, in writing, to keep such
information
38
confidential unless such information is required to be disclosed by Law, and
then only to the extent so required.
6.7 Insurance and Events of Loss.
(a) KIAC shall keep in full force and effect at all times
during the Consignment Period the following insurance coverage with insurers
used by KIAC or other insurers of recognized reputation and responsibility:
(i) All risk property, including in-transit
insurance, with respect to the Consigned Inventory and the Retained
Assets to the extent that such assets relate to a Seller's "lease
portfolio" in an amount equal to the Insured Value thereof (the
"Property Insurance"). Insofar as the relevant policies cover the
Consigned Inventory held by KIAC and the Retained Assets to the extent
that such assets relate to a Seller's "lease portfolio", Sellers shall
be named as additional insureds and sole loss payee as its interests
may appear, under the policy without imposing any obligation on Sellers
to pay the premiums thereof, and the insurer shall waive all rights of
subrogation with respect to Sellers.
(ii) Comprehensive general liability insurance in
an amount not less than $100,000,000 and products liability insurance
in an amount not less than $500,000,000 (together, "Liability
Insurance"), in each case combined single limit bodily injury and
property damage per occurrence/aggregate. Sellers shall be named as
additional insureds under each Liability Insurance policy without
imposing any obligation on Sellers to pay the premiums thereof. Each
Liability Insurance policy shall include broad-form contractual
liability subject to the terms and conditions of the policy. Each
Liability Insurance policy shall operate with respect to each
additional insured as though a separate policy were issued to each,
provided that such provisions shall not operate to increase the
insurer's limit of liability.
(iii) Workers compensation and employers liability
required by all applicable Laws.
(iv) Nothing in this Section 6.7 hereof shall
prohibit Sellers from obtaining (A) the insurance coverages referred to
in Sections 6.7(a)(i). (ii) and (iii) hereof should KIAC fail to do so,
or (B) additional insurance in respect of any Consigned Inventory
consigned hereunder so long as such additional insurance shall in no
manner invalidate any insurance maintained by KIAC in accordance with
the provisions of this Section 6.7 hereof.
(b) The insurance policies described in Sections
6.7(a)(i) and 6/7(a)(ii) hereof shall be endorsed to include breach of warranty
protection in favor of Sellers, and said insurance shall be primary insurance
over any such insurance carried by the Sellers.
(c) KIAC shall provide certificates of insurance from its
independent insurance broker or underwriters to Sellers evidencing the coverages
referred to in Sections 6.7(a)(i), (ii), and (iii) hereof at the Closing, upon
any increase in coverage or
39
amount of any insurance required by this Agreement, and upon policy renewal for
the term of the Consignment Period. The certificate shall provide for a 30 day
notice to Sellers of cancellation of or material change to the coverages
required hereby.
(d) Sellers shall be responsible for and shall reimburse
(to the extent such amount has not already been paid pursuant to Section 6.5(f)
hereof) KIAC promptly upon receipt from KIAC of a written request therefor for
their ratable share of the insurance premium cost incurred by KIAC in connection
with its obligation to maintain the insurance coverages referred to in Sections
6.7(a)(i) and (ii) hereof. Sellers' ratable share shall be based on the Insured
Value of the Consigned Inventory covered during the period for which the premium
is charged as allocated by the applicable insurance carrier. KIAC shall be
responsible for timely payment of the costs of insurance maintained by it
pursuant to Sections 6.7(a)(i) and (ii) hereof; provided, however, that such
allocation shall be reassessed on a quarterly basis and adjusted accordingly.
Any deductible for Property Insurance and Liability Insurance shall be borne by
KIAC and Sellers in proportion to the respective Fair Market Value (as
determined by the insurer or insurers thereof) of their insured assets against
which the deductible is to be applied. Any deductibles applicable under the
insurance policies required to be maintained by KIAC pursuant to Sections
6.7(a)(i) and (ii) hereof shall, with respect to each policy year, be applied
against claims in proportion to the average Fair Market Values (as determined by
the applicable insurer) of the assets of KIAC and Seller covered by such
policies during such policy year. In the event that, at any time before or after
the end of any policy year, it shall be determined that any deductible was
applied in any manner inconsistent with the provisions of the preceding sentence
hereof, the party against which a deductible was applied in a disproportionately
low manner shall pay to the other party, in cash or by offset, such amount or
amounts as shall be necessary to cause all deductibles for such policy year to
have been applied in accordance with such preceding sentence.
(e) Within 30 days following the date hereof, Sellers
shall begin a physical inventory of the Consigned Verified Parts included in the
Consigned Inventory, and within 30 days following the Closing Date, Sellers
shall execute and deliver to KIAC a written instrument listing or otherwise
identifying to their mutual satisfaction all Consigned Verified Parts included
in the Consigned Inventory existing and consigned to KIAC under this Agreement
as of the time of the Closing. Such instrument shall be jointly prepared by
Sellers on the basis of a physical inventory of the Consigned Verified Parts
included in the Consigned Inventory as of the Closing conducted by Sellers or
KPMG at the expense of the Sellers in accordance with generally accepted
accounting standards or on such other basis as KIAC and Sellers shall agree.
Within ten Business Days after the discovery of an Event of Loss with respect to
any item of Consigned Inventory or any item which shall become an item of
Consigned Inventory subsequent to the Closing, KIAC shall, as soon as is
practical, give Sellers written notice of such event. Promptly following receipt
by KIAC of any insurance proceeds or condemnation awards relating to any such
Event of Loss, KIAC shall pay the amount of such insurance proceeds or
condemnation awards (net of any Reimbursable Expenses and any Consignee
Commission related to the item of Consigned Inventory that is the subject of the
Event of Loss) to the applicable Seller to one or more bank accounts designated
by such Seller by written notice to KIAC. Each such payment shall be treated
identically to a payment by
40
KIAC to Sellers of the Net Sales Revenue with respect to the item of Consigned
Inventory suffering such Event of Loss, and accordingly, such payment shall be
allocated pursuant to Sections 6.5(a) and (b) hereof. In the event that any
insurance proceeds or condemnation awards on account of any Event of Loss with
respect to any item Consigned Inventory shall be paid directly to Sellers, then
Sellers shall promptly remit to KIAC the Reimbursable Expenses and Consignee
Commission with respect to such item upon receipt by Sellers of a request
therefor accompanied by reasonable evidence thereof.
6.8 Passage of Title Upon Sale, Warranties, Etc.
(a) Title to each item of Consigned Inventory (and the
Records related thereto) shall automatically pass from the applicable Seller to
KIAC, free and clear of all Liens except Permitted Liens, immediately prior to
the shipment of such item to the purchaser or exchange recipient thereof. At all
times prior to the passage of title in accordance with the first sentence of
this Section 6.8(a) hereof, title to each item of Consigned Inventory (and the
Records related thereto) shall remain in the applicable Seller.
(b) Each and every item of Consigned Inventory subject to
the terms and conditions of this Article VI is owned by a Seller, is free and
clear of all Liens that are not Permitted Liens and is being provided by Sellers
on an "as is" and "where is" basis.
(c) All Consigned Inventory sold, leased, exchanged or
otherwise transferred to a purchaser, lessee, exchange recipient or transferee
thereof shall be so sold, leased, exchanged or transferred with only those
warranties, if any, of KIAC as it may determine from time to time in its sole
discretion, and Sellers shall have no responsibility therefore except for
warranties relating to title and liens.
6.9 Termination of Consignment.
(a) The term "Consignment Termination Event," wherever
used herein, means any of the following events or conditions (whatever the
reason for such Consignment Termination Event and whether it shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any governmental rule or government action):
(i) the occurrence of an Event of Default;
(ii) the sale or other disposition by KIAC
hereunder of all Parts included in the Consigned Inventory;
(iii) the fifth anniversary of the Closing Date;
(iv) KIAC's failure to achieve a Performance
Benchmark; or
(v) the expiration of a Force Majeure Waiting
Period.
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(b) Upon the occurrence of any Consignment Termination
Event described in (a)(i) above, Sellers shall have the right at any time within
30 days of the occurrence thereof upon written notice to KIAC to terminate the
Consignment Period. Upon the occurrence of any Consignment Termination Event
described in clauses (a)(ii) or (iii) above, the Consignment Period shall
automatically terminate. Upon the occurrence of any Consignment Termination
Event described in clause (a)(iv) above and provided that KIAC shall not have
remitted the Make-Up Price to Sellers within 30 days following the last day of
the relevant Performance Benchmark period, Sellers shall have the right, within
30 days of KIAC's failure to remit the Make-Up Price, to terminate the
Consignment Period, which termination shall be effective immediately upon
written notice thereof to KIAC; provided, further, that irrespective of whether
Sellers elect to terminate the Consignment Period pursuant to the immediately
preceding proviso, KIAC shall have the right, within 30 days following any
failure by it to achieve the relevant Performance Benchmark, to terminate the
Consignment Period, which termination shall be effective immediately upon
written notice thereof to Sellers. Upon the occurrence of the Consignment
Termination Event described in clause (a)(v) above, the party whose performance
is not affected by the force majeure shall have the right at any time upon
written notice to the other party to terminate the Consignment Period. The date
on which the Consignment Period shall be terminated hereunder shall be referred
to herein as the "Consignment Termination Date". On the Consignment Termination
Date, the Consignment Period shall end and the provisions of Section 6.3(k)
hereof shall apply. Notwithstanding anything to the contrary set forth in this
Agreement, on or within 30 days after the Consignment Termination Date, all
amounts which are then owed to KIAC under any provision of this Agreement shall
be paid to KIAC in cash and the Consignment Period shall not end until such
payment shall have been received.
(c) The term "Event of Default," wherever used in this
Section 6.9 hereof, means any of the following events or conditions (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any governmental rule or governmental action):
(i) KIAC shall fail to make any payment not in
dispute (any and all undisputed portions shall be timely paid) when due
under this Article VI hereof and such payment shall remain overdue for
a period of three Business Days;
(ii) KIAC shall fail to perform or observe any
other material covenant, condition or agreement to be performed or
observed by it pursuant to or in connection with this Agreement
(including, without limitation, KIAC's obligation to provide the
Reports and to maintain accurate and complete records for the Parts
pursuant to Section 6.3(j) hereof) and such failure shall continue for
a period of 15 calendar days after written notice thereof is given by
Sellers to KIAC, provided, however, that such cure period shall be
extended if KIAC shall have made good faith efforts during such cure
period to cure the default but shall not have completed such cure, but
in no event shall such additional cure period extend for greater than
15 calendar days beyond the initial 15-day cure period;
42
(iii) KIAC shall make or permit any unauthorized
assignment or transfer of this Agreement or any interest therein or
intentionally use or permit the use of any item of Consigned Inventory
for an illegal purpose;
(iv) A petition against KIAC shall be filed in a
proceeding or case under the Bankruptcy Code or other Federal
insolvency law as now or hereafter constituted, or any other applicable
Federal bankruptcy, insolvency or other similar law, or a case is
commenced under any such Federal law to appoint a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
KIAC or for all or substantially all of its property, or to wind-up or
liquidate its affairs, and in any of such cases, such petition or case
shall not be withdrawn or dismissed within 60 days thereafter;
(v) Any judgment, decree or order for relief
shall be entered by a court having jurisdiction in respect of KIAC in
an involuntary case under any applicable state bankruptcy, insolvency
or other similar law, or appointing a sequestrator (or similar
official) of KIAC or for all or substantially all of its property, or
ordering the winding-up or liquidation of its affairs and any such
judgment, decree or order shall continue unstayed and in effect for a
period of 30 days after the entry thereof;
(vi) KIAC shall commence a voluntary case under
the Bankruptcy Code, or any other applicable Federal or State
bankruptcy, insolvency, corporate winding up or reorganization
provisions or other similar law, or KIAC shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of KIAC or for all or substantially all of its property, or KIAC shall
make any assignment for the benefit of creditors; or
(vii) KIAC shall discontinue its operations
related to the redistribution of aircraft parts and engine parts for a
period in excess of 60 consecutive calendar days.
(d) Upon the occurrence and continuance of any Event of
Default, and without limiting the terms of this Section 6.9 hereof, Sellers may
exercise any and all rights they may now or hereafter have under applicable Law,
whether existing at law or in equity, including, without limitation, the right
to enter the premises of KIAC, or any Designated Location or any other location
where any Consigned Inventory is then located, and repossess any item of
Consigned Inventory then subject to this Agreement and to proceed by appropriate
court action to enforce the terms hereof and to recover damages for the breach
hereof. No remedy referred to herein is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy referred to herein or
otherwise available to Sellers at law or in equity; and the exercise or
beginning of exercise by Sellers of any one or more such remedies shall not
preclude the simultaneous or later exercise by Sellers of any or all such other
remedies. No express or implied waiver by Sellers of any Event of Default
hereunder shall in any way be, or be construed to be, a waiver of any future or
subsequent Event of Default.
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6.10 Force Majeure
(a) If any performance by KIAC or Sellers under this
Article VI hereof is delayed or prevented by any acts of God (including severe
weather), strike, lockout, shortage of material or labor, restriction by any
governmental authority, civil riot, fire, explosions or other casualty, national
emergency, enemy action either directly or indirectly, and any other cause
beyond the reasonable control of a party, then the period of such party's
performance of the applicable obligation shall be automatically extended for the
same amount of time that such party is so delayed or hindered. The affected
party shall use its best efforts to remove the cause of delay. Both parties
shall notify each other in writing of the said failure within ten days after the
commencement of the event relied upon for its failure to comply with its
obligations.
(b) If a party shall fail to perform its obligations
under this Article VI hereof (other than an obligation by KIAC to remit monies
due and payable to any Seller within the time period provided in this Article
VI), for a period of 90 days or more, or if KIAC shall fail to remit monies due
and payable to any Seller for a period of 15 days or more beyond the time period
provided in this Article VI, by reason of any circumstance referred to in
Section 6.10(a) of this Agreement, the other party shall have the right to
terminate the Consignment Period pursuant to Section 6.9 hereof.
6.11 Payments by Seller; KIAC's Right of Offset. Any payment or
reimbursement due and payable from any Seller to KIAC (a) under this Article VI,
(b) in respect of the breach by any Seller of (i) any representation or warranty
that shall survive the Closing pursuant to Section 7.21 of this Agreement or
(ii) any covenant of any Seller set forth in Article X hereof (but not any
covenant set forth in Article IX hereof, none of which shall survive the
Closing) or (c) as otherwise expressly set forth in any other provision of this
Agreement shall be effected by KIAC offsetting the amount of such payment or
reimbursement to be paid by any Seller to KIAC against amounts due and payable
from KIAC to any Seller (to the extent of such amounts due and payable) and by
Sellers' remittance of the balance of any such payment or reimbursement to KIAC
in cash.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally make the following representations and
warranties to KIAC, each of which shall be true and correct as of the date of
this Agreement and as of the Closing Date (except to the extent expressly
relating to a specific date, in which event it shall be true and correct as of
such date) and shall be unaffected by any investigation heretofore or hereafter
made by or on behalf of KIAC. It is expressly acknowledged and agreed that no
Seller is making any representation or warranty whatsoever, expressed or implied
(including, without limitation, any representation as to the condition,
merchantability, suitability or fitness for a particular purpose of any of the
Purchased Assets or the Consigned Inventory), except as explicitly set forth in
this Article VII , any other provision of this Agreement or in any written
agreement, document or instrument
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executed and delivered by such Seller in connection with this Agreement or any
transaction contemplated hereby or thereby.
7.1 Organization and Good Standing. Each Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware (or such other jurisdiction as is identified in Schedule 1
hereto) and has the requisite corporate or other organizational power and
authority to own, lease or otherwise hold its properties and assets and carry on
its business as presently conducted. Each Seller is qualified or licensed to do
business as a foreign corporation and is in good standing in every jurisdiction
where the nature of the business conducted by it or the properties owned or
leased by it requires such qualification, except where the failure to be so
qualified, licensed or in good standing would not reasonably be expected to have
a Material Adverse Effect.
7.2 Authorization and Effect of Agreement. Each Seller has the
requisite corporate power and authority to execute and to deliver this Agreement
and the Collateral Agreements and, subject to the entry of the Sale Procedures
Order and the Sale and Consignment Order, to perform its obligations hereunder
and under the Collateral Agreements. The execution and delivery of this
Agreement and the Collateral Agreements by each Seller, and the performance by
such Seller of its obligations hereunder and thereunder and the consummation by
such Seller of the transactions contemplated hereby and thereby, have been duly
authorized by its board of directors and no other corporate action on the part
of Seller is necessary to authorize the execution and delivery of this
Agreement, the Collateral Agreements or the consummation of the transactions
contemplated hereby or thereby. This Agreement has been duly and validly
executed and delivered by each Seller and constitutes, and each of the
Collateral Agreements (when executed and delivered by each Seller which is a
party thereto) shall constitute, a valid and binding agreement of such Seller,
enforceable against such Seller in accordance with its terms, subject (in each
case) to the entry of the Sale Procedures Order and the Sale and Consignment
Order.
7.3 No Conflicts. The execution and delivery by each Seller of
this Agreement and each of the Collateral Agreements to which it is to be a
party do not, and will not, and the performance by each Seller of the
transactions contemplated by this Agreement or such Collateral Agreements, will
not, (a) conflict with, or result in any violation of, or constitute a default
under, or give rise to the creation of a Lien not expressly contemplated in this
Agreement upon any of the Purchased Assets, the Miramar Facility, the Miramar
Leasehold or the Consigned Inventory or to a right of termination, cancellation
or acceleration of any obligation or to a loss of a benefit under, (i) any
provision of the certificate of incorporation or bylaws or other applicable
constituent documents of any Seller or Foreign Subsidiary, (ii) any of the
terms, conditions or provisions of any Contract by which any Seller or Foreign
Subsidiary is bound, (iii) any Law applicable to or binding on any Seller or
Foreign Subsidiary or any of the assets of any Seller or Foreign Subsidiary, (b)
affect the ability of KIAC to own, use, operate or occupy (as the case may be)
the Purchased Assets or the Miramar Facility in substantially the same manner as
the Purchased Assets and the Miramar Facility are presently owned, used,
operated or occupied by Sellers or the Foreign Subsidiaries (or to
45
sell, lease or exchange the Consigned Inventory) following the Closing or (c)
accelerate or trigger any right or obligation of any party under any Assumed
Contract.
7.4 No Third Party Options. Except as otherwise set forth in
Schedule 11 hereto, there are no existing agreements, options or commitments
(other than agreements entered into, options granted or commitments undertaken
by any Seller or Foreign Subsidiary, in each case in the usual, regular and
ordinary course of its respective business and consistent with past practice)
granting to any Person the right to acquire any right, title or interest of any
Seller or Foreign Subsidiary, in or to any of the Purchased Assets, Consigned
Inventory or Miramar Leasehold or any interest therein.
7.5 Data. To Sellers' Knowledge, all Data (other than FAA
maintenance records) are true and correct in all material respects (it being
understood and agreed that, for purposes of this Section 7.5, Data shall be
deemed not to be "true and correct in all material respects" if any item or
items of Data are untrue or incorrect in any respect that (together with all
other failures of one or more items of Data to be true and correct in any
respect) materially impairs the ability of KIAC to own, operate, sell, lease,
exchange, finance or otherwise use the Purchased Assets or the Consigned
Inventory) and are accurately extracted from the books and records of Sellers.
To Sellers' Knowledge, all FAA maintenance records are true and correct in all
respects.
7.6 Consents and Approvals. (a) The execution and delivery by
Sellers of this Agreement and the Collateral Agreements do not and will not
require any Consent and (b) the consummation by Sellers of the transactions
contemplated hereby and thereby will not require any Consent other than the Sale
Procedures Order and the Sale and Consignment Order and any Consent that may be
required under the HSR Act.
7.7 Permits; Compliance with Law. Schedule 12 hereto sets forth a
true, correct and complete list of all Permits of Sellers and Foreign
Subsidiaries. Sellers and Foreign Subsidiaries possess all Permits necessary for
the operation and ownership of the Purchased Assets and Consigned Inventory and
the occupancy and utilization in the manner currently utilized by Sellers as the
Miramar Facility, except where a failure to be in possession of any Permit or
Permits would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect. All Permits issued to Sellers and Foreign
Subsidiaries are in full force and effect, except where a failure of one or more
Permits to be in effect would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect. No outstanding violations
are or have been recorded in respect of any of the Permits. The use and
operation by Sellers and Foreign Subsidiaries of the Purchased Assets and
Consigned Inventory, the occupancy and utilization by Sellers of the Miramar
Facility and the conduct by Sellers and Foreign Subsidiaries of their respective
businesses comply with all Laws and the requirements and conditions of all
Permits and all rules, regulations, directives and policies of all Governmental
Authorities having jurisdiction over any of the Purchased Assets or Consigned
Inventory and the businesses conducted by Sellers and Foreign Subsidiaries. No
proceeding is pending or, to any Seller's Knowledge, threatened to revoke,
withdraw or limit any such Permit, and there is no fact, error or admission
relevant to any Permit
46
that would permit the violation of or revocation, withdrawal or limitation or
result in the threatened violation of or revocation, withdrawal or limitation of
any such Permit.
7.8 Litigation. Except as set forth in Schedule 8 to this
Agreement, there are no (a) judicial or administrative actions, proceedings or
investigations pending or, to any Seller's Knowledge, threatened that question
the validity of this Agreement or any action taken or to be taken by any Seller
in connection with this Agreement; (b) lawsuits, claims, administrative or other
proceedings or investigations relating to the ownership or use of the Purchased
Assets or Consigned Inventory or the conduct by any Seller of its business or
otherwise affecting the Purchased Assets or Consigned Inventory pending, or, to
any Seller's Knowledge, threatened against any Seller; or (c) judgments, orders
or decrees of any Governmental Authority binding on any Seller that relate to
the Purchased Assets or Consigned Inventory or otherwise affect the Purchased
Assets or Consigned Inventory.
7.9 Title to and Condition and Adequacy of Assets. Each Seller
has, and at the Closing each Seller shall convey to KIAC, good, valid and
marketable title to the Purchased Assets (other than the Leased FF&E) to be sold
by such Seller to KIAC under this Agreement free and clear of all Liens (except
for Permitted Liens). Prior to the Closing one or more of the Sellers shall
acquire, and at the Closing shall convey to KIAC, good, valid and marketable
title to the Leased FF&E, free and clear of all Liens (except for Permitted
Liens). The inventory of Parts included in the Purchased Assets and Foreign
Assets is generally of the type, kind, quality and mix that Sellers and the
Foreign Subsidiaries have in the past acquired, and has generally been
maintained by Sellers and the Foreign Subsidiaries in the manner and to the
extent that Sellers and the Foreign Subsidiaries have in the past maintained
their inventory of similar Parts, in the ordinary course of their business,
taken as a whole. The Purchased Assets, Consigned Inventory and Miramar
Leasehold include all of the assets, of any and every nature whatsoever,
currently utilized by Sellers and the Foreign Subsidiaries in, or necessary for,
the operation of every business currently conducted by any Seller or Foreign
Subsidiary.
7.10 Assumed Contracts. The Assumed Contracts are valid and
enforceable in accordance with their terms, subject to applicable bankruptcy,
reorganization, moratorium, and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity. None of the Sellers is, and to Sellers' Knowledge, no other party
thereto is, in material default in the performance, observance or fulfillment of
any obligation under any Assumed Contract (other than payments or amounts due
thereunder, which shall be paid or discharged by one or more Sellers at or prior
to the Closing), and, to Sellers' Knowledge, no event has occurred which, with
or without the giving of notice or lapse of time, or both, would constitute a
material default thereunder. Except as otherwise set forth in Schedule 9 hereto,
none of the Assumed Contracts requires the Consent of any party to its
assignment (or prohibits assignment). True and complete copies of all Assumed
Contracts (including any amendments thereto) have been delivered to KIAC.
47
7.11 Engines.
(a) Schedule 1 hereto sets forth a true, correct and
complete list of all Engines owned or leased by any Seller or Foreign
Subsidiary, including a description of the type and engine number of each such
Engine.
(b) The Engines included in the Purchased Assets are
generally of the type, kind, quality and mix that Sellers and the Foreign
Subsidiaries have in the past acquired, and have generally been maintained by
Sellers and the Foreign Subsidiaries in the manner and to the extent that
Sellers and the Foreign Subsidiaries have in the past maintained their inventory
of similar Engines, in the ordinary course of their business, taken as a whole.
(c) Sellers and the Foreign Subsidiaries have maintained
or caused to be maintained in the ordinary course of their business, taken as a
whole, all Records, logs and other materials and records required to be
maintained in respect of such Engines by the FAA and any other applicable
Governmental Authority.
7.12 Insurance. Sellers and the Foreign Subsidiaries have in place
insurance policies with respect to the Purchased Assets and the Consigned
Inventory, in amounts and types that are customary in the industry for similar
assets, and all such policies are, and have been (without interruption), in full
force and effect.
7.13 Environmental Matters.
(a) Each Seller has complied with, and the Purchased
Assets, the Consigned Inventory and Miramar Facility have been and currently are
held, occupied or otherwise utilized in compliance with, all applicable
Environmental Laws, except to the extent that any and all failures to be in such
compliance would not, in the aggregate, constitute or result in a Material
Adverse Effect.
(b) There is no (i) Environmental Claim relating to the
ownership, lease, possession, occupancy or other utilization of any of the
Purchased Assets, the Consigned Inventory or the Miramar Facility pending (or,
to the Knowledge of any Seller, threatened) against any Seller or (ii) basis for
the assertion of any such Environmental Claim against any Seller, which (in all
such cases taken as a whole) would, if adversely resolved, result in or
constitute a Material Adverse Effect.
7.14 Taxes.
(a) All Tax Returns that were required to be filed by or
on behalf of any Seller on or before the date of this Agreement were, and all
Tax Returns that shall be required to be filed by or on behalf of any Seller
during the period from the date hereof through and including Closing Date shall
be, duly filed on a timely basis. All Taxes due with respect to any taxable
period or partial taxable period of each Seller ending on or before the Closing
Date have been or shall be timely paid or withheld and no claim for assessment
or collection of Taxes has been asserted against any Seller. No Seller has
48
executed or filed with the Internal Revenue Service or any other taxing
authority any agreement extending the period for filing any Tax Return.
(b) Each Seller has withheld and paid all Taxes required
to be withheld in connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(c) No Seller is a foreign person within the meaning of
Section 1445 of the Code.
(d) None of the Purchased Assets is (i) "tax-exempt use
property" within the meaning of Section 168(h) of the Code, (ii) "tax-exempt
bond-financed property" within the meaning of Section 168(g) of the Code, (iii)
"limited use property" within the meaning of Revenue Procedure 76-30, (iv)
subject to Section 168(g)(i)(A) of the Code or (v) property that is or shall be
required to be treated as being owned by any Person (other than a Seller)
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of
1954, as amended, and in effect immediately before the enactment of the Tax
Reform Act of 1986.
(e) There is no Contract, agreement, plan or arrangement
covering any Person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by any of the Sellers, KIAC
or their respective Affiliates by reason of Section 280G of the Code.
7.15 Labor Matters. Except as otherwise set forth in Schedule 14
hereto;
(a) No Seller is a party to any collective bargaining
agreement (including any side letter, supplemental agreement or memorandum of
understanding) covering any employees of any Seller.
(b) There are no controversies pending or, to the
Knowledge of Sellers, threatened, or which any Seller reasonably believes will
be more likely than not to occur, between Seller and any of its employees, which
controversies have or could have a Material Adverse Effect.
(c) To the Knowledge of Sellers, there is no petition
pending before the National Mediation Board seeking certification or any change
in certification of a labor representative with respect to any employee of any
Seller.
(d) There is no strike, slowdown, work stoppage, labor
action or lockout, or, to the Knowledge of Sellers, threat thereof, by or with
respect to any employee of any Seller.
(e) To the Knowledge of Sellers, there is no unfair labor
practice or analogous complaint or claim against any Seller pending before the
National Mediation Board or any similar board or agency or before any court of
competent jurisdiction or any other forum.
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7.16 Employee Matters.
(a) Schedule 15 hereto sets forth a true, correct and
complete list of all the current employees of each Seller, their current
respective positions or job classifications and their current respective wage
scales or salaries, as the case may be, as of the date of this Agreement. Each
Seller is in compliance in all material respects with all applicable Laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours.
(b) Schedule 16 hereto also sets forth a true, correct
and complete list and brief description of each "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), stock option, stock purchase, deferred
compensation plan or arrangement, and other material employee fringe benefit
plan or arrangement maintained, contributed to or required to be maintained or
contributed to by any Seller for the benefit of any present or former employees
of any Seller or their beneficiaries (all the foregoing herein called "Benefit
Plans"). Sellers have delivered to KIAC true, complete, and correct copies of
(1) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof) and (2) the most recent summary plan description for each
Benefit Plan (if any such description was required).
(c) Each Seller complies in all material respects with
the applicable requirements of Section 4980B(f) of the Code with respect to each
Benefit Plan that is a group health plan, as such term is defined in Section
5000(b)(1) of the Code.
(d) As of the Closing Date, each Seller shall have paid
all contributions which, subject to any applicable provision or provisions of
the Bankruptcy Code, are due and required by the Benefit Plans sponsored by
Seller in accordance with the terms of such Benefit Plans and all applicable
Laws.
7.17 Intellectual Property. Schedule 5 hereto contains an accurate
and complete list of all Intellectual Property owned or used by Sellers and the
Foreign Subsidiaries. Except as set forth in Schedule 5 hereto, Sellers own the
entire right, title and interest in and to the Intellectual Property (including,
without limitation, the right to use and license the same). Except as set forth
in Schedule 5 hereto, there are no pending or (to the Knowledge of Sellers)
threatened actions, claims or proceedings of any nature affecting or relating to
the Intellectual Property, which, if adversely resolved, would, individually or
in the aggregate, result in or constitute a Material Adverse Effect. Schedule 5
hereto lists all notices or claims currently pending or received by any Seller
or Foreign Subsidiary that claim infringement of any domestic or foreign letters
patent, patent applications, patent licenses, software licenses and know-how
licenses, trade names, trademark registrations and applications, service marks,
copyrights, copyright registrations or applications, trade secrets, technical
knowledge, know-how or other confidential proprietary information. Except as set
forth in Schedule 5 hereto, there is, to the Knowledge of Sellers, no reasonable
basis upon which any claim may be asserted against any Seller or Foreign
Subsidiary for infringement or misappropriation of any domestic or foreign
letters patent, patents, patent applications, patent licenses, software
50
licenses, and know-how licenses, trade names, trademark registrations and
applications, trademarks, service marks, copyrights, copyright registrations or
applications, trade secrets, technical knowledge, know-how or other confidential
proprietary information, which, if adversely resolved, would, individually or in
the aggregate, result in or constitute a Material Adverse Effect. All letters
patent, registrations and certificates issued by any Governmental Authority
relating to any of the Intellectual Property and all licenses and other
agreements pursuant to which any Seller uses any of the Intellectual Property
are valid and subsisting, have been properly maintained and neither any Seller
or Foreign Subsidiary, nor to the Knowledge of Sellers, any other Person, is in
default or violation thereunder.
7.18 The Miramar Facility.
(a) Except for the real property listed as described in
hereto, the Miramar Facility is the only real property of any nature whatsoever
which is leased by any Seller. The Seller which is the lessee under the Miramar
Lease has a valid leasehold interest in the Miramar Facility.
(b) All components of all improvements included within
the Miramar Facility, including, without limitation, the roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, mechanical, sewer, waste water, storm water, paving and parking
equipment, systems and facilities included therein (collectively, the
"Improvements"), to the extent required to be maintained, repaired or replaced
under the Miramar Lease, are (or, to the extent not so required to be
maintained, repaired or replaced, to Sellers' Knowledge, are), in each case, in
good working order and repair (ordinary wear and tear excepted). All water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems currently serving the Miramar
Facility are installed and operating and are sufficient to enable the Miramar
Facility to continue to be used and operated in the manner currently being used
and operated, and no Seller has any Knowledge of any factor or condition that
could result in the termination or material impairment of the furnishing
thereof. No Improvement or portion thereof is dependent for its access,
operation or utility on any land, building or other Improvement that is not
included in the Miramar Facility or available for use pursuant to a valid,
binding and enforceable easement agreement or other contractual right in favor
of any Seller.
(c) All Permits required to have been issued to any
Seller to enable the Miramar Facility to be lawfully occupied and used for all
of the purposes for which it is currently occupied and used by Sellers have been
lawfully issued and are in full force and effect. No Seller has received any
notice, or has any Knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting the Miramar Facility or any part thereof or
any proposed termination or impairment of any parking at the Miramar Facility or
of any sale or other disposition of the Miramar Facility or any part thereof in
lieu of condemnation.
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(d) No portion of the Miramar Facility has suffered any
material damage by fire or other casualty loss which has not heretofore been
completely repaired and restored to its original condition.
(e) Except as set forth in Schedule 17 hereto:
(i) no structure included within the Miramar
Facility fails to conform in any material respect with applicable
ordinances, regulations, zoning laws and restrictive covenants nor
encroaches upon real property of others, nor is any portion of the
Miramar Facility encroached upon by structures of others in any case in
any manner that would have or would be reasonably likely to have a
Material Adverse Effect;
(ii) no charges or violations have been filed,
served, made or threatened against any Seller, or, to the Knowledge of
Sellers, any other Person, against or relating to any such property or
structure on or any of the operations conducted at the Miramar
Facility, as a result of any violation or alleged violation of any
applicable ordinances, requirements, regulations, zoning laws or
restrictive covenants or as a result of any encroachment on the
property of others where the effect of same would have or would be
reasonably likely to have a Material Adverse Effect;
(iii) other than pursuant to applicable Laws,
rules, regulations or ordinances, covenants that run with the land or
provisions in any agreement listed in Schedule 17 hereto, there exists
no restriction on (A) the use of any portion of the Miramar Facility,
(B) the assignment of the Miramar Lease or (C) the sublease of the
Miramar Lease;
(iv) Sellers have adequate permanent rights of
ingress to and egress from all property used by any of them for the
operations conducted thereon; and
(v) there are no developments affecting any
portion of the Miramar Facility or interests of any Seller therein
pending or, to the Knowledge of Sellers, threatened which might
reasonably be expected to curtail or interfere in any material respect
with the use of any portion of the Miramar Facility for the purposes
for which it is now used.
7.19 Certain Payments. To the Knowledge of Sellers, no Seller or
Affiliate, predecessor or assign of any Seller or any of its or their respective
current or former subsidiaries, directors, officers, employees, agents or
independent contractors has, directly or indirectly, used any corporate funds
for unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment.
52
7.20 Disclosure. No representation or warranty of any Seller
contained herein, and no statement contained in any document or other instrument
to be furnished by any Seller to KIAC in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
representation, warranty or statement so made not misleading.
7.21 Survival. None of the representations or warranties by Sellers
in this Agreement (other than those made by Sellers in the first two sentences
of Section 7.9 of this Agreement or in Article VI hereof) shall survive the
Closing.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF KIAC
KIAC hereby makes the following representations and warranties to
Seller, each of which shall be true and correct as of the date of this Agreement
and as of the Closing Date (except to the extent expressly relating to a
specific date, in which event it shall be true and correct as of such date) and
shall be unaffected by any investigation heretofore or hereafter made. It is
expressly acknowledged and agreed that KIAC is making no representation or
warranty whatsoever, expressed or implied, except as explicitly set forth in
this Article VII hereof or in any other provision of this Agreement, or in any
written Agreement, document or instrument executed and delivered by KIAC in
connection with this Agreement or any transaction contemplated hereby or
thereby.
8.1 Corporate Organization. KIAC is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own, lease or otherwise
hold its properties and assets and to carry on its business as presently
conducted. KIAC is a "U.S. Citizen" within the meaning of the Federal Aviation
Act.
8.2 Authorization and Effect of Agreement. KIAC has the requisite
corporate power and authority to execute and deliver this Agreement and the
Collateral Agreements and to perform its obligations hereunder and thereunder.
The execution and delivery by KIAC of this Agreement and the performance by it
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of KIAC. This Agreement has been duly
executed and delivered by KIAC and constitutes a valid and binding agreement of
KIAC, enforceable against KIAC in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity. Each of the Collateral Agreements to which KIAC
will be a party, when executed and delivered by KIAC, will constitute a valid
and binding agreement of KIAC, enforceable against KIAC in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium, and similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity.
8.3 No Conflicts. The execution and delivery of this Agreement and
the Collateral Agreements by KIAC does not or will not (as applicable), and the
performance
53
by KIAC of the transactions contemplated by this Agreement and the Collateral
Agreements will not, conflict with, or result in any violation of, or constitute
a default under (a) any provision of the certificate of incorporation or by-laws
of KIAC, (b) any of the terms, conditions, or provisions of any material
agreement or other material document by which KIAC is bound, or (c) any Law or
order applicable to or binding on KIAC. Except for the confirmation of the
Chapter 11 Plan and the expiration of the waiting period under the HSR Act, no
Consent is required to be obtained, made or given (whether pursuant to
applicable Law, contract or otherwise) in connection with the execution and
delivery of this Agreement by KIAC or the performance by KIAC of the
transactions contemplated hereby.
8.4 Litigation. As of the date of this Agreement, there are no
judicial or administrative actions, proceedings or investigations pending or, to
KIAC's Knowledge, threatened that question the validity of this Agreement or any
action taken or to be taken by KIAC in connection with this Agreement.
8.5 Survival. None of the representations or warranties by KIAC
(other than those set forth in Article VI hereof) shall survive the Closing.
ARTICLE IX
PRE-CLOSING COVENANTS
9.1 Access. Prior to the Closing and upon reasonable notice from
KIAC, Sellers shall afford to the officers, attorneys, accountants or other
authorized representatives of KIAC reasonable access during normal business
hours to the employees of each Seller, the Purchased Assets, the Consigned
Inventory, the Miramar Facility and the other facilities of any Seller and the
books and records of any Seller relating to the Purchased Assets, the Consigned
Inventory then owned and in the possession or custody of, and/or operated by,
any Seller and the Miramar Facility so as to afford KIAC full opportunity to
make such review, examination and investigation of the Purchased Assets,
Consigned Inventory and the Miramar Facility as KIAC determines to be reasonably
necessary in connection with the consummation of the transactions contemplated
hereby. KIAC shall be permitted to make extracts from or to make copies of such
books and records as may be reasonably necessary in connection therewith. Prior
to the Closing, Seller shall promptly furnish KIAC with access to such
maintenance records, operating data and other information then owned and in the
possession or custody of, and/or operated by, any Seller as KIAC may reasonably
request. Each Seller shall promptly deliver to KIAC copies of all pleadings,
motions, notices, statements, schedules, applications, reports and other papers
filed by such Seller in its Chapter 11 Case; provided, however, that KIAC and/or
its counsel shall enter an appearance in each Chapter 11 Case and no Seller
shall be required to deliver to KIAC any document or material received by KIAC
or its counsel as a result of any such entry. Each Seller shall promptly provide
to KIAC all documents and materials relating to any proposed sale, of the
Purchased Assets, Consigned Inventory or Assumed Contracts or any portion
thereof, including, without limitation, with respect to competing bids, and
otherwise cooperate with KIAC, to the extent reasonably necessary in connection
with KIAC's preparation for
54
or participation in any part of any Chapter 11 Case in which KIAC's
participation is necessary, required or reasonably appropriate. Each Seller
shall promptly deliver to KIAC all pleadings, motions, notices, statements,
schedules, applications, reports and other papers filed in any other judicial or
administrative proceeding as KIAC may reasonably request. In addition, each
Seller shall consult with KIAC with respect to any written or oral communication
concerning, in whole or in part, the transactions contemplated by this
Agreement. Without limiting the generality of this Section 9.1 hereof, if
requested by KIAC, each Seller shall provide access to the Purchased Assets, the
Consigned Inventory and the Miramar Facility to KIAC and its representatives and
agents for purposes of conducting nonintrusive environmental assessments,
including Phase I analyses.
9.2 Conduct of Business. Except as expressly contemplated by this
Agreement (including, without limitation, by Section 9.11(a) hereof), or as
otherwise consented to by KIAC in writing, during the period from the date of
this Agreement and continuing until the Closing, each Seller shall:
(a) (i) conduct its business in the usual, regular and
ordinary course as presently conducted and consistent with past practice,
subject to and with due regard given to the requirements imposed upon Sellers by
the Bankruptcy Code and in accordance with the DIP Financing Agreement, (ii)
without limiting the generality of the covenant set forth in clause (i) of this
Section 9.2(a) hereof, continue to lease, exchange and sell inventory in the
usual, regular and ordinary course of business as presently conducted and
consistent with the past practice including, but not limited to, the type,
quantity, quality and terms of sale, lease or exchange, and continue to purchase
inventory that is consistent with the type, quality, mix and price of the
inventory listed or described in Schedule 2 hereto; provided, however, that
prior to its purchase of (A) any individual item of inventory having a purchase
price greater than $50,000 or (B) any individual lot of inventory having a
purchase price greater than $250,000, it shall obtain the prior written consent
of KIAC (which shall not be unreasonably withheld) and (iii) except as otherwise
contemplated by clause (ii) of this Section 9.2(a) hereof, safeguard and manage
the Purchased Assets in a manner consistent with past practice and, with respect
to items of inventory included in the Purchased Assets, keep such items and
Consigned Inventory intact and maintained in at least as good a condition as
their current condition (reasonable wear and tear excepted);
(b) use its reasonable best efforts to cause each of the
conditions set forth in Section 5.5 of this Agreement to be satisfied; and
(c) in connection with its Chapter 11 Case, refrain from
rejecting or amending any Assumed Contracts unless KIAC consents in writing to
such action.
9.3 Accounts Receivable.
(a) Set forth in Schedule 18 hereto is a list of all
accounts receivable of Sellers as of the date of this Agreement, and, with
respect to each, the obligor, the obligee and the amount thereof. All of the
Purchased Accounts Receivable are valid and
55
enforceable (subject to potential offsets, returns, defenses and warranty claims
which arise in the ordinary course of business) accounts receivable of Sellers
that have arisen from bona fide transactions in the regular, usual and ordinary
course of Sellers' respective businesses as presently conducted and consistent
with past practice; provided, however, that no representation or warranty is
made by any Seller as to the collectibility of any Purchased Accounts
Receivable. All accounts receivable arising after the date of this Agreement
shall arise from bona fide transactions in the regular, usual and ordinary
course of business as presently conducted by Sellers consistent with past
practice.
(b) KIAC and Sellers each agree that (i) KIAC Lender
shall have a Lien on the Purchased Accounts Receivable to secure KIAC's
obligations under the KIAC Credit Agreement (the "KIAC Lender Lien") and (ii)
Agent shall have a Lien on all outstanding Purchased Accounts Receivable to
secure the aggregate payments due Seller under Section 10.2(d) hereof (the
"Agent's Lien"). On the Closing Date, Agent, Sellers, KIAC and KIAC Lender shall
enter into a mutually acceptable intercreditor and sharing agreement (the
"Intercreditor and Sharing Agreement") establishing the relative rights and
priorities of Agent and KIAC Lender in respect of the Purchased Accounts
Receivable. The Intercreditor and Sharing Agreement will provide that the KIAC
Lender Lien and Agent's Lien shall be pari passu in priority with respect to the
Purchased Accounts Receivable and that the proceeds of all Purchased Accounts
Receivable will be applied and distributed in accordance with the terms of
Section 10.2(d) hereof irrespective of the priority of the KIAC Lender Lien or
the Agent's Lien thereon. The Intercreditor and Sharing Agreement shall contain
mutually acceptable provisions concerning application of payments from the same
account debtor and application of offsets and contra accounts to the specific
accounts giving rise to such claims. The Intercreditor and Sharing Agreement
shall also contain limitations with respect to the right of the KIAC Lender and
Agent to foreclose or otherwise enforce their respective Lien rights in respect
of the Purchased Accounts Receivable without the written consent of the other
except in the case of garnishment, attachment, bankruptcy or other events to be
agreed upon by KIAC Lender and Agent. The parties to the Intercreditor and
Sharing Agreement shall agree that all proceeds of the Purchased Account
Receivable will be directed into a lockbox and special deposit account at Bank
of America in the name of KIAC (the "Purchased A/R Lockbox and Account"). KIAC
shall cause all available funds in the Purchased A/R Lockbox and Account to be
distributed in accordance with Section 10.2(d) hereof. In addition, the KIAC
Lender shall, as collateral agent for itself and the Agent, enter into a control
agreement with KIAC and Bank of America to grant KIAC Lender a Lien upon the
Purchased A/R Lockbox and Account in its capacity as collateral agent to further
secure the obligations owing by KIAC to KIAC Lender and the Agent. The
liabilities of KIAC Lender to Bank of America under the agreements establishing
the Purchased A/R Lockbox and Account for uncollectible or returned items
(collectively, "Returned Checks") shall be limited to only that portion of the
funds derived from such Returned Checks which were distributed to KIAC Lender.
Similar liability limitations shall apply to KIAC for proceeds of Returned
Checks distributed in respect of KIAC. Upon the payment by KIAC of all amounts
payable to Sellers or their respective successors and assigns pursuant to
Section 10.2(d) hereof, the Agent's Lien and related rights in respect of the
Purchased Accounts Receivable shall terminate.
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(c) At all times from the date of this Agreement through
the time of the Closing, Sellers shall, and shall cause all of their respective
employees, agents and independent contractors, to:
(i) act with respect to all of the Purchased
Accounts Receivable in compliance with all applicable Laws and in a
manner consistent, in all material respects, with commercially
reasonable and generally accepted business practices; and
(ii) refrain from taking any action, of any
nature whatsoever, with respect to any of the Purchased Accounts
Receivable other than in the ordinary course of its business
(including, but not limited to, forgiving, releasing, discharging,
offsetting or otherwise compromising any Purchased Accounts Receivable
in an individual amount in excess of $100,000 or in an aggregate amount
in excess of $250,000), unless otherwise authorized by the Bankruptcy
Court.
9.4 Notification of Litigation. Sellers shall notify KIAC, and
KIAC shall notify Sellers, of any litigation, arbitration or administrative
proceeding pending or, to their Knowledge, threatened against any Seller or
KIAC, as the case may be, which challenges or would reasonably be likely to
materially affect the transactions contemplated hereby.
9.5 Notification of Changes. Sellers shall provide prompt written
notice to KIAC of any change in any of the information contained in the
representations and warranties made by any Seller in Article VII or Section
9.3(a) hereof or any exhibits or schedules referred to herein or attached hereto
and promptly furnish any information which KIAC may reasonably request in
relation to such change; provided, however, that no such notice shall operate to
cure any breach of the representations and warranties made by any Seller in
Article VI or Section 9.3(a) hereof or any exhibits or schedules referred to
herein or attached hereto. If the aggregate of all changes set forth in all such
notices from Sellers to KIAC shall result in a Material Reduction in Value, KIAC
shall have the right, within 30 days of receipt of the notice which causes such
result to occur, to terminate this Agreement.
9.6 No Inconsistent Action. Neither KIAC nor any Seller shall take
any action which is materially inconsistent with its obligations under this
Agreement.
9.7 Filings. Each party shall use its best efforts to obtain, and
to cooperate with the other party in obtaining, all authorizations, consents,
orders and approvals of any Governmental Authority that may be or become
necessary in connection with the consummation of the transactions contemplated
by this Agreement, and to take all reasonable actions to avoid the entry of any
order or decree by any Governmental Authority prohibiting the consummation of
the transactions contemplated hereby, [including without limitation, the
notifications required to be filed by it under the HSR Act,] and shall furnish
to the other all such information in its possession as may be necessary for the
completion of the notifications to be filed by the other; provided that, in
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complying with this Section 9.7 hereof, neither KIAC nor any Seller shall be
required to accept or become subject to any condition or requirement
unacceptable to such party in its sole discretion. No party shall withdraw any
such filing or submission prior to the termination of this Agreement without the
written consent of the other party. KIAC shall pay any filing fee required to be
paid in connection with any regulatory filings (including, without limitation,
under the HSR Act).
9.8 Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done as promptly as
practicable, all things necessary under applicable Laws and regulations to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, including, without limitation, the prompt
preparation by Sellers of all pleadings, motions, notices, statements,
schedules, applications, reports and other papers reasonably necessary in
connection with the Chapter 11 Cases.
9.9 [INTENTIONALLY OMITTED]
9.10 Publicity. The parties hereto shall consult with each other
and shall mutually agree (the agreement of each party not to be unreasonably
withheld or delayed) upon the content and timing of any press release or other
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation and agreement, except as may be required by
applicable Law or by obligations pursuant to any listing agreement with any
securities exchange or any stock exchange regulations as advised by counsel;
provided, however, that each party shall give prior notice to the other parties
of the content and timing of any such press release or other public statement
required by applicable Law or by obligations pursuant to any listing agreement
with any securities exchange or any stock exchange regulations.
9.11 Bankruptcy Court Approval.
(a) Promptly following the execution and delivery of this
Agreement by each Seller and KIAC, each Seller shall (in each case, in
accordance with all applicable requirements of, and procedures under, the
Bankruptcy Code) (i) file with the Bankruptcy Court a petition under Chapter 11
of the Bankruptcy Code, thereby commencing its Chapter 11 Case, (ii) use its
best efforts to assume, and to assign to KIAC at the Closing, each of the
Assumed Contracts to which it is a party, (iii) file with the Bankruptcy Court
motions, satisfactory in form and substance to KIAC, seeking approval of the
Sale Procedures Order and the Sale and Consignment Order and thereafter use its
best efforts to cause each of such orders to be issued, entered and a become
Final Order, and (iv) serve a copy of the notice of motion of entry of the Sale
Procedures Order (along with a copy of the proposed Sale Procedures Order) upon
each jurisdiction in which it is subject to Tax at least 30 days prior to the
hearing of the motions with respect to the Sale Procedures Order. Seller will
serve a copy of the notice of motion of entry of the Sale and Consignment Order
at least 30 days prior to the hearing to approve such order.
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(b) Sellers shall cooperate reasonably with KIAC and its
representatives in connection with the Sale Procedures Order, the Sale and
Consignment Order and the bankruptcy proceedings in connection therewith. Such
cooperation shall include, but not be limited to, consulting with KIAC at KIAC's
reasonable request concerning the status of such proceedings and providing KIAC
with copies of requested pleadings, notices, proposed orders and other documents
relating to such proceedings as soon as reasonably practicable promptly after
any submission thereof to the Bankruptcy Court.
(c) Prior to entry of the Sale and Consignment Order,
Sellers and KIAC shall accurately inform the Bankruptcy Court of all material
facts of which they are aware relating to this Agreement and the transactions
contemplated hereby.
(d) If following the Closing, the Sale Procedures Order,
the Sale and Consignment Order or any other order of the Bankruptcy Court
relating to this Agreement shall be appealed by any Person (or a petition for
certiorari or motion for rehearing or reargument shall be filed with respect
thereto), Sellers shall take all steps as may be reasonable and appropriate to
defend against such appeal, petition or motion, and KIAC agrees to cooperate in
such efforts, and each party hereto agrees to use its best efforts to obtain an
expedited resolution of such appeal.
9.12 Specific Enforcement of Covenants. Each Seller acknowledges
that irreparable damage would occur in the event that any of the covenants and
agreements of any Seller set forth in this Article IX hereof or in any other
part of this Agreement were not timely performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that KIAC
shall be entitled to an injunction or injunctions to prevent or cure any breach
of such covenants and agreements of Seller and to enforce specifically the terms
and provisions thereof, this being in addition to any other remedy to which it
may be entitled at law or in equity, it being understood that, after
commencement of the Chapter 11 Cases, the Bankruptcy Court shall have exclusive
jurisdiction over such matters; provided, however, that in the event the
Bankruptcy Court abstains from exercising or declines to exercise jurisdiction
with respect to any matter provided for in this sentence or is without
jurisdiction, such abstention, refusal or lack of jurisdiction shall have no
effect upon and shall not control, prohibit or limit the exercise of
jurisdiction of any other court having competent jurisdiction with respect to
any such matter.
9.13 Other Agreements. After the date of this Agreement, should any
Seller enter into any Contract (other than the DIP Financing Agreement), other
than in the usual, regular and ordinary course of its business and consistent
with past practice, such Seller shall (i) immediately deliver written notice to
KIAC of the occurrence of such event and provide KIAC with all the information
about such Contract as KIAC may reasonably request and (ii) if notified in
writing by KIAC prior to Closing, assign (to the extent assignable) to KIAC such
Contract (other than the DIP Financing Agreement) in the manner and on the terms
and conditions as if it were an Assumed Contract under this Agreement.
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9.14 Filing Under HSR Act. KIAC shall, at its own expense and not
later than the time that the Sale Procedures Order becomes a Final Order, make
all HSR Act filings as it deems appropriate; provided, however, that KIAC shall
have no obligation to make any such filing unless Sellers shall, on a timely
basis, have provided KIAC with all of the information which KIAC may reasonably
request in connection with such filing.
9.15 Purchases from KAV. At no time from and after the date hereof
through and including the Closing Date shall any Seller, directly or indirectly,
purchase any asset of any nature whatsoever from KAV without the prior written
consent of KIAC, unless such Seller shall pay the entire purchase price for such
asset, in cash, at or prior to the time of such purchase by such Seller.
ARTICLE X
POST-CLOSING COVENANTS
10.1 Right of Subrogation. Each Seller shall cooperate with KIAC,
at KIAC's expense, in connection with any action or proceeding by KIAC (whether
or not in the name of any Seller) to enforce after Closing any right of
subrogation to which KIAC might be entitled under any Assumed Contract.
10.2 Collection of Purchased Accounts Receivable.
(a) From and after the time of the Closing, KIAC shall,
and shall cause all of its employees, agents and independent contractors to, use
commercially reasonable and diligent efforts to collect the Purchased Accounts
Receivable in compliance with all applicable Laws, it being expressly understood
and agreed that, except as otherwise provided in Section 10.2(b)(iv), (v) and
(vii) and (c) hereof, KIAC may, in such manner as KIAC, in its sole discretion,
deems reasonable and prudent compromise, settle or otherwise dispose of any
Purchased Account Receivable the existence, amount or other terms of which is
disputed by the account debtor.
(b) KIAC shall:
(i) maintain a segregated accounts receivable
list for the Purchased Accounts Receivable, excluding therefrom all
accounts receivable of any nature whatsoever other than Purchased
Accounts Receivable (including, without limitation, any accounts
receivable created by the sale of any Consigned Inventory);
(ii) provide Sellers, on a monthly basis, with:
(A) a report detailing, on a
customer-by-customer basis, collections and credits since the
previous calendar month-end; and
(B) a detailed receivables aging,
reconciled to reflect the opening balance from the previous
month end, less collections, less allowed credits and the
closing month-end aging;
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(iii) provide Sellers and Agent access to examine
supporting documents including customer remittance vouchers, cash
receipts journal, sales journal, bank statements, and other
documentation in support of the Purchased Accounts Receivable and
accounts receivable created by the sale of Consigned Inventory;
(iv) with respect to the Purchased Accounts
Receivable that (A) have not been collected within 60 calendar days
following the Closing Date and are owed by account obligors with whom
KIAC is not then currently doing business, Agent (on behalf of the
Senior Lenders) shall have the option to require KIAC to submit such
accounts to a third party collection agency or attorney at Agent's sole
discretion and (B) have not been collected within 90 days following the
Closing Date, Agent (on behalf of the Senior Lenders) shall have the
option to require KIAC to assign such accounts to a third party
collection agent or attorney at Agent's sole discretion, in each case,
all costs of collection incurred as a result of the Agent's exercise of
an option pursuant to this Section 10.2(b)(iv) hereof shall be borne by
the Senior Lenders;
(v) not permit any offset, contra or other
deduction arising from a liability or obligation at any time owed by
KIAC to be applied to a Purchased Account Receivable;
(vi) permit Agent (on behalf of the Senior
Lenders), on a monthly basis, to confirm directly with customers up to
25% of the total outstanding Purchased Accounts Receivable, and assist
in any such effort and provide detailed statements of account;
(vii) not be entitled to issue credit notes,
offset balances, approve debit notes, apply volume rebates or
discounts, or write off account balances (each, a "Credit") in excess
of the lesser of (A) 10% of the balance of such account and (B) $10,000
without Agent's prior approval; and
Payments of accounts receivable are to be applied to the invoice in respect of
which each payment is made; provided, however, that, if KIAC is unable to make
such application because the customer does not provide sufficient detail on its
remittance, such payment shall be applied to the outstanding Purchased Accounts
Receivable of such customer (on an "oldest first" basis), and any payments in
excess of the outstanding amount of such outstanding Purchased Accounts
Receivable shall be applied to other accounts receivable owed by such customer
(on an "oldest first" basis).
(c) In the event that in any calendar month KIAC shall
have collected in respect of all Purchased Accounts Receivable paid (or
otherwise deemed forgiven, released, discharged or satisfied) in full during
such month an amount equal to less than 90% of the face amount (net of all
reserves, offsets, write-downs taken by any Seller and "contras") of all such
paid, forgiven, released, discharged or satisfied Purchased Accounts Receivable,
KIAC shall not thereafter compromise, settle or otherwise dispose of Purchased
Accounts Receivable in an aggregate face amount in excess of $1,000 per
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invoice without the prior written consent of Sellers (which shall not be
unreasonably withheld or delayed), unless and until there shall have
subsequently occurred a calendar month in which KIAC shall have collected in
respect of all Purchased Accounts Receivable paid (or otherwise deemed forgiven,
released, discharged or satisfied) in full during such month an amount equal to
not less than 90% of the face amount (net of all reserves, offsets, write-downs
taken by Sellers and "contras") of all such paid, forgiven, released, discharged
or satisfied Purchased Accounts Receivable.
(d) All proceeds collected or otherwise received, at any
time from and after the Closing, with respect to the Purchased Accounts
Receivable existing and owned by Sellers at the time of the Closing, net of all
out-of-pocket expenses reasonably incurred in connection with such collection or
receipt, shall be distributed of as follows:
(i) the first $15 million of such net proceeds
shall be retained by and be the property of KIAC;
(ii) fifty percent of the next $10 million of
such net proceeds shall also be retained by and be the property of KIAC
and the other fifty percent of such next $10 million shall be paid over
to and be the property of Sellers, or their assignees; and
(iii) thirty percent of all such net proceeds in
excess of $25 million shall also be retained by and be the property of
KIAC and the other seventy percent of such excess net proceeds shall be
paid over to and be the property of Seller or their assignees.
All proceeds payable to Sellers shall be paid to them by KIAC within five
Business Days following receipt thereof by KIAC.
10.3 Post-Closing Assignments. After the Closing Date and upon the
discovery by any Seller of any items included within the definition of Purchased
Assets or Assumed Contracts but not transferred, conveyed or assigned to or
assumed by KIAC in the Xxxx of Sale, the Assumption Agreement or any other
applicable instrument of conveyance, Sellers shall (i) immediately deliver
written notice to KIAC of the existence and non-transfer or non-assumption of
such item and provide KIAC with all the information about and with access to
such item as KIAC may reasonably request and (ii) if notified in writing by KIAC
within 30 days after the receipt of such notice, transfer, convey or assign to
KIAC such item in the manner and on the terms and conditions as the earlier
transferred Purchased Assets or Assumed Contracts, as applicable, under this
Agreement were transferred.
10.4 Post-Closing Retention of Records. For a period of not less
than six years after the Closing Date, KIAC shall preserve and retain all books
and records received from Sellers pertaining to the Purchased Assets; provided,
however, such six-year period shall be extended in the event that any proceeding
has been commenced or is pending or threatened at the expiration of such
six-year period and such extension shall continue until any such proceeding has
been settled or resolved with finality or is no longer
62
pending or threatened. Notwithstanding the foregoing, KIAC may at any time after
three years from the Closing Date discard or destroy any of such books and
records; provided, that it has given Sellers at least 60 days prior written
notice of KIAC's intent to discard or destroy such books and records and has
given Sellers the opportunity to take possession of any or all of such books and
records within such sixty-day period. Purchaser shall afford each Seller and its
representatives reasonable access during normal business hours to, and the right
to make copies of, all such books and records, for any legitimate business
purpose (including, without limitation, in connection with the preparation,
documentation and/or handling of any financial statements, tax returns, tax
audits, reports to governmental or regulatory agencies, litigation, disputes,
claims or controversies); provided, however, that any such access shall be
arrange so as not to unreasonably disrupt the operations of KIAC and its
Affiliates.
10.5 Further Assurances. From time to time following the Closing,
each Seller shall (and shall cause each Foreign Subsidiary to) execute,
acknowledge and deliver such additional documents, instruments of conveyance,
transfer and assignment or assurances and take such other action as KIAC may
reasonably request to more effectively assign, convey and transfer to KIAC, and
fully vest title in KIAC, with respect to the Purchased Assets.
ARTICLE XI
EMPLOYEE MATTERS
11.1 Key Employee Retention Program. Prior to the Closing, each
appropriate Seller shall enter into a Retention Agreement with such of its
employees as KIAC and the Sellers shall agree to in writing.
11.2 Offers of Employment.
(a) Following the Closing, KIAC may, in its sole
discretion, offer employment to the employees of Sellers listed in Schedule 19
hereto upon substantially the same terms as the terms upon which such employees
are currently employed by Sellers (including, without limitation, any existing
severance arrangements). In the event that KIAC shall so offer employment to any
employee of Sellers and such employee shall accept such offer, KIAC shall assume
and satisfy all of the legally enforceable obligations of Sellers to such
employee for accrued vacation, sick or personal days.
(b) In the event that KIAC does not offer employment to a
person whose name appears on Schedule 19 hereto, KIAC shall assume and satisfy
all of the legally enforceable obligations of Sellers, to such person for
accrued vacation, sick or personal days and shall pay such person the amount of
severance to which he or she is entitled pursuant to the severance arrangement
between such person and any Seller (other than those persons who are a party to
a Retention Agreement).
(c) Except as specified in Section 11.2(b) hereof, KIAC
shall not assume or otherwise be responsible for any liabilities or obligations
of any nature
63
whatsoever of any Seller to any of such Seller's past, present or future
respective employees (including, without limitation, for accrued but unpaid
salary or other compensation).
11.3 Tax Reporting. If requested by KIAC, pursuant to the
"Alternative Procedure" provided in Section 5 of Revenue Procedure 96-60, 1996-2
C.B. 399, (i) KIAC and Sellers shall report on a predecessor-successor basis as
set forth therein, (ii) Sellers shall be relieved from filing a Form W-2 with
respect to any employee of any Seller who accepts employment with KIAC, and
(iii) KIAC shall file (or cause to be filed) a Form W-2 for each such employee
for the year that includes the Closing Date (including the portion of such year
that such employee was employed by any Seller). Sellers shall provide KIAC with
all payroll and employment-related information reasonably requested by KIAC with
respect to each employee of any Seller who commences employment with KIAC.
ARTICLE XII
RISK OF LOSS
12.1 Risk of Loss on Sellers. Each Seller and Foreign Subsidiary
shall bear the entire risk of any loss or damage to any of the Purchased Assets
and Consigned Inventory which occurs at any time prior to the time that the
applicable Seller or Foreign Subsidiary delivers the Purchased Assets or
Consigned Inventory to KIAC in accordance with the provisions of Section 5.4
hereof. Sellers shall promptly notify KIAC if any such loss or damage occurs. If
any such Purchased Asset or item of Consigned Inventory has been damaged but not
destroyed, Sellers shall promptly repair (or cause the appropriate Foreign
Subsidiary to repair) such Purchased Asset or item of Consigned Inventory fully;
provided, however, that such repair obligation shall not exist if the cost of
repair would be sufficiently large that the only reasonable course of action
would be to treat such Purchased Asset or item of Consigned Inventory as a total
loss. In the event of any total loss (or loss treated as a total loss in
accordance with the immediately prior sentence) of any Purchased Asset or item
of Consigned Inventory, the Cash Portion of the Purchase Price shall be reduced
in accordance with Section 4.3(c) hereof.
ARTICLE XIII
TERMINATION OF THIS AGREEMENT
13.1 Termination. Provided that the party seeking to terminate this
Agreement shall not then be in material breach of any provision of this
Agreement or any Collateral Agreement, this Agreement may be terminated and the
transactions contemplated hereby may thereafter be abandoned at any time prior
to the Closing:
(a) by mutual agreement of Sellers (with the prior
consent of Agent if the Agent and all of the Senior Lenders have complied, at
all times and in all material respects, with all of Lenders Obligations) and
KIAC;
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(b) by Sellers (with the prior consent of Agent if the
Agent and all of the Senior Lenders have complied, at all times and in all
material respects, with all of the Lenders' Obligations) or by KIAC:
(i) if a Governmental Authority shall have
issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties hereto shall use their reasonable
best efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have
become final and nonappealable; or
(ii) pursuant to Section 4.3(e) hereof; or
(iii) if the Closing shall not have occurred on or
before the Scheduled Closing Date, except by reason of the failure of
the party seeking to terminate this Agreement to have complied with all
of its obligations under this Agreement.
(c) by KIAC:
(i) if the Sale Procedures Order shall not have
become a Final Order within 60 days from the date of this Agreement or
shall, at any time, be modified in any respect without the consent of
KIAC;
(ii) if any Seller shall fail to comply in all
respects with its obligations under Section 9.11(a);
(iii) if (A) the Lenders' Agreement shall not have
been executed and delivered by each of the parties thereto, other than
KIAC, on or before the fifth day following the date of this Agreement
or shall have terminated in accordance with the applicable provisions
thereof (other than by reason of Paragraph 5d thereof) or (B) the Agent
or any of the Senior Lenders shall fail at any time to comply, in all
material respects, with each of the Lenders' Obligations;
(iv) if, the DIP Financing Agreement shall not
have been executed and delivered by each of the parties thereto on or
before the fifth day following the date of this Agreement or shall
thereafter have been terminated or materially amended;
(v) if Sellers shall have accepted or selected,
and the Bankruptcy Court shall have approved, the bid or bids of any
Person or Persons other than KIAC to purchase all or any portion of the
Purchased Assets, Consigned Inventory or other assets or rights to be
purchased by KIAC pursuant to this Agreement (whether or not any
transaction contemplated by any such bid or bids shall be consummated);
65
(vi) if the Sale and Consignment Order has not
been entered by the Bankruptcy Court not less than ten Business Days
prior to the Scheduled Closing Date;
(vii) as provided in Section 5.1(a) of this
Agreement; or
(viii) as provided in Section 9.5 of this
Agreement.
(d) by Sellers (with the prior consent of Agent if the
Agent and all of the Senior Lenders have complied, at all times and in all
material respects, with all of the Lenders' Obligations) if (i) KIAC shall have
failed to make either of the deposits provided for in Section 5.1(b) hereof for
any reason other than the failure of any other party to the Escrow Agreement to
execute and deliver the Escrow Agreement to KIAC or (ii) each of the conditions
specified in Paragraph 4(b)(i) through (iv) of the Escrow Agreement shall have
been satisfied.
13.2 Payments. In the event that, prior to the first to occur of
the termination of this Agreement in accordance with Section 13.1 hereof or July
1, 2002,
(a) the Agent or any Senior Lender shall at any time fail
to comply with each of the Lenders' Obligations, Sellers shall pay to KIAC an
amount equal to the sum of the Agreement Termination Amount plus an amount equal
to the aggregate amount, not in excess of $1,300,000, of KIAC Expenses;
(b) Sellers shall fail to take any action specified in
Sections 9.8 or 9.11(a) (i), (ii) or (iii) of this Agreement, Sellers shall pay
to KIAC an amount equal to the aggregate amount, not in excess of $1,300,000, of
KIAC expenses;
(c) a trustee in bankruptcy shall be appointed for any
Seller or any Chapter 11 Case shall be converted to a case under Chapter 7 of
the Bankruptcy Code or shall be dismissed (in any such case, prior to the
consummation with KIAC of the transactions contemplated by the Sale and
Consignment Order and upon the motion or with the support of the Agent or any
Senior Lender), Sellers shall pay to KIAC (i) an amount equal to the aggregate
amount, not in excess of $1,300,000, of KIAC Expenses, plus (ii) in the event
that any such trustee shall thereafter consummate one or more sales of all or
any portion of the Purchased Assets, Consigned Inventory or other assets or
rights to be purchased by KIAC pursuant to this Agreement for an aggregate
purchase price equal to not less than $2 million in excess of the amount
otherwise payable by KIAC hereunder, an amount equal to the Agreement
Termination Amount;
(d) if Sellers shall have accepted or selected, and the
Bankruptcy Court shall have approved, the bid or bids of any Person or Persons
other than KIAC to purchase all or any portion of the Purchased Assets,
Consigned Inventory or other assets or rights to be purchased by KIAC pursuant
to this Agreement (whether or not any transaction contemplated by any such bid
or bids shall be consummated), Sellers shall pay to KIAC, in accordance with the
Sale Procedures Order, the Agreement Termination Amount plus an amount equal to
the aggregate amount, not in excess of $1,300,000, of KIAC Expenses; or
66
(e) except in the event that (i) Sellers fail to take any
action specified in Sections 9.8 or 9.11(a)(i), (ii) or (iii) of this Agreement,
(ii) a trustee in bankruptcy shall be appointed for such Seller, (iii) such
Seller's Chapter 11 Case shall be converted to a case under Chapter 7 of the
Bankruptcy Code or shall be dismissed or (iv) Sellers shall have accepted or
selected and the Bankruptcy Court shall have approved, the bid or bids of any
Person or Persons other than KIAC to purchase all or any portion of the
Purchased Assets, Consigned Inventory or other assets or rights to be purchased
by KIAC pursuant to this Agreement (in each of which events the provisions of
Sections 13.2(b), (c) or (d), as the case may be, shall be applicable), any
Seller shall refuse (or shall fail to attempt in good faith) to consummate the
sale of the Purchased Assets, the assignment of the Assumed Contracts or the
consignment of the Consigned Inventory, as contemplated by this Agreement,
Sellers shall pay to KIAC an amount equal to the aggregate amount, not in excess
of $1,300,000, of KIAC Expenses.
13.3 Procedure and Effect of Termination. This Agreement shall in
no event terminate unless and until any and all amounts payable to KIAC pursuant
to Section 13.2 hereof shall have been paid in full to KIAC. In the event of
termination and abandonment of the transactions contemplated hereby pursuant to
Section 13.1 hereof, written notice thereof shall forthwith be given to the
other parties to this Agreement and this Agreement (other than the provisions of
Section 13.2 hereof which shall survive any such termination) shall terminate
(subject to the provisions of this Section 13.3 hereof) and the transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided herein:
(a) upon request therefor, each party shall redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or after the execution
hereof, to the party furnishing the same; and
(b) no party hereto shall have any liability or further
obligation in connection herewith to any other party to this Agreement resulting
from such termination.
13.4 The Deposit. Notwithstanding anything to the contrary set
forth in this Agreement, in the event of the breach by KIAC of any of its
representations and warranties in, or obligations under, this Agreement, (a) the
sole remedy of the Sellers with respect to such breach shall be to receive and
retain the Deposit (but only if and to the extent that Sellers shall be entitled
to do so in accordance with the provisions of Section 4(b) of the Escrow
Agreement) and (b) Sellers shall be entitled to so receive and retain such
Deposit in (but only in) the circumstances described in such Section 4(b).
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ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Sellers.
(a) Each of the agreements, covenants, representations,
warranties, obligations, undertakings and liabilities (in each case, of any
nature whatsoever) of any Seller in this Agreement, any Collateral Agreement or
otherwise in connection with any matter contemplated hereby, or by any of the
Collateral Agreements, shall (in each case and for any purpose whatsoever) be a
joint and several agreement, covenant, representation, warranty, obligation,
undertaking and liability (as the case may be) of all Sellers.
(b) Any notice, consent, waiver, approval, acknowledgment
or other communication received by KIAC from any Seller (or by Xxxxxxxxx from
KIAC) with respect to this Agreement, any Collateral Agreement or otherwise in
connection with any matter contemplated hereby or by any of the Collateral
Agreements, shall be deemed (in each case and for any purpose whatsoever) to be
a notice, consent, waiver, approval, acknowledgment or other communication
received by KIAC from all Sellers or (as the case may be) received by all
Sellers from KIAC.
14.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, shall be deemed to have been duly given when delivered in person or
when dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) or one business day after having been dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:
(a) If to Sellers, to:
Xxxxxxxxx Industries, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Zivi Nedivi
Facsimile: (000) 000-0000
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with copies to:
Akerman, Senterfitt & Xxxxxx, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxxx 0000
Ft. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. March
Facsimile: (000) 000-0000
and
Xxxx Xxxxx LLP
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
and
Xxxxxx Xxxxxx Xxxxxx & Xxxxx LLP
1500 Marquis Two Tower
000 Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: C. Xxxxxx Xxxxx
Facsimile: (000) 000-0000
(b) If to KIAC, to:
KIAC, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
with copies to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and
69
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
or to such other address or addresses as any such noticed party may from time to
time designate as to itself by like notice.
14.3 Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay any expenses incurred by it incident to this Agreement
and in preparing to consummate and consummating the transactions provided for
herein.
14.4 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and, after approval of this Agreement by the Sale
and Consignment Order, their respective successors (including, without
limitation, any trustee appointed for any Seller) and, following the Closing,
the Liquidating Trust and permitted assigns; provided, however, that, without
the prior consent of the other party, no party may assign or delegate any right,
duty or interest hereunder except that (i) upon notice to Sellers delivered in
accordance with Section 14.1 hereof, KIAC may assign or delegate any or all of
its rights or obligations under this Agreement to any Affiliate thereof or to
any Person that directly or indirectly acquires, after the Closing, all or
substantially all of the assets or voting stock of KIAC, but such assignment or
delegation shall not relieve KIAC of any obligation hereunder; (ii) Sellers may
assign and delegate after Closing any or all of their rights and duties
hereunder to the Liquidating Trust; and (iii) Sellers may collaterally assign
all of their rights and remedies hereunder to Agent for itself and for the
benefit of the Senior Lenders.
(b) KIAC acknowledges and agrees that, after the Closing,
Sellers reserve the right to sell and assign to the Liquidating Trust all of
each Seller's right, title and interest in and to all of the Consigned
Inventory, Records and certain of the other Retained Assets and all or part of
each Seller's right, title and interest in, to and under this Agreement and the
Collateral Agreements, in each case, without representation or warranty and
without recourse. Effective from and after such sale and assignment, all
provisions of this Agreement (i) requiring the payment of money by KIAC to any
Seller shall be understood to mean and require payment to the Liquidating Trust
for the benefit of Agent and Senior Lenders; (ii) requiring the payment of money
by any Seller to KIAC shall be understood to mean and require payment by the
Liquidating Trust (in the manner authorized or required herein); (iii) requiring
the consent or approval of any or all of Sellers shall be understood to mean and
require the consent and approval of the Liquidating Trust (acting by and through
the Liquidating Trustee at the direction or with the consent of Agent); (iv)
requiring the giving of notice or the delivery of documents to a Seller shall be
understood to mean and require the giving of notice or delivery of documents to
the Liquidating Trust (to the attention of the Liquidating Trustee);
70
(v) relating to the title to any of the Consigned Inventory, Records or Retained
Assets shall be understood to mean the title of the Liquidating Trust; (vi)
relating to the obligation of any Seller to cooperate after Closing with KIAC
shall be understood to mean the obligation of the Liquidating Trust to so
cooperate; (vii) relating to any rights or remedies that may be exercised after
Closing (including, without limitation, the right to terminate the Consignment)
shall be understood to mean rights and remedies that may be exercised by the
Liquidating Trust (acting by and through the Liquidating Trustee at the
direction or with the consent of Agent); (viii) authorizing any Seller to
verify, inspect or examine any of the Consigned Inventory or records or
accountings of KIAC relating to the Consignment (including the Accounting
Criteria) shall be understood to authorize both the Liquidating Trustee and
Agent to make such examination; and (ix) requiring KIAC to name Sellers as loss
payees or additional insureds on any insurance required by Article VI shall be
understood to include Agent, and the Liquidating Trustee.
(c) Notwithstanding anything to the contrary set forth in
this Agreement, neither the Agent nor any Senior Lender shall have any duties or
obligations of any nature whatsoever to any Person under this Agreement.
14.5 Waiver. KIAC may, by written notice to Sellers, and Sellers
may (with the prior consent of the Agent, if the Agent and all of the Senior
Lenders have complied, at all times and in all material respects, with all
Lenders' Obligations), by written notice to KIAC, (a) extend the time for
performance of any of the obligations of the other party under this Agreement,
(b) waive any inaccuracies in the representations or warranties of the other
party contained in this Agreement, (c) waive compliance with any of the
conditions or covenants of the other party contained in this Agreement, or (d)
waive or modify performance of any of the obligations of the other party under
this Agreement; provided, however, that no such party may, without the prior
written consent of the other party, make or grant such extension of time, waiver
of inaccuracies or compliance or waiver or modification of performance with
respect to its representations, warranties, conditions or covenants hereunder.
Except as provided in the immediately preceding sentence, no action taken
pursuant to this Agreement shall be deemed to constitute a waiver of compliance
with any representations, warranties, conditions or covenants contained in this
Agreement or shall operate or be construed as a waiver of any subsequent breach,
whether of a similar or dissimilar nature.
14.6 Entire Agreement. This Agreement, which includes the Schedules
and exhibits hereto, supersedes any other agreement, whether written or oral,
that may have been made or entered into by any party relating to the matters
contemplated hereby.
14.7 Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by KIAC and Sellers (with the prior consent of Agent if the Agent and
all of the Senior Lenders have complied, at all times and in all material
respects, with all of the Lenders' Obligations) to be necessary, desirable or
expedient to further the purposes of this Agreement or to clarify the intention
of the parties.
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14.8 Rights of the Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any Person
other than the parties hereto and their permitted successors and assigns any
rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby; provided, however, that, in the event and to the extent,
that (a) the consent or agreement of the Agent shall be a precondition to the
taking (or omitting to take) of any action by any Seller under this Agreement,
the Agent shall have the right to enforce on its own behalf such precondition
and (b) this Agreement shall expressly provide for the Agent to have any other
rights under this Agent, the Agent shall have the right to enforce such right or
rights.
14.9 Applicable Law. This Agreement and the legal relations among
the parties hereto shall be governed by and construed in accordance with the
rules and substantive Laws of the State of New York, without regard to conflicts
of law provisions thereof.
14.10 Execution in Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement. Any counterpart may
be executed by facsimile signature and such facsimile signature shall be deemed
an original.
14.11 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under any present or future Law, and if
the rights or obligations under this Agreement of Sellers, on the one hand, and
KIAC, on the other hand, shall not be adversely affected thereby, (a) such
provision shall be fully severable; (b) this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; (c) the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance from this Agreement; and
(d) in lieu of such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Agreement a legal, valid, and enforceable
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible.
14.12 Titles and Headings. Titles and headings to Sections herein
are inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
14.13 Transfers. KIAC and Sellers shall cooperate and take such
action as may be reasonably requested by the other in order to effect a timely
and orderly transfer of the Purchased Assets and assignment of the Assumed
Contracts with a minimum of disruption to the operations and employees of the
businesses of KIAC or Sellers.
14.14 Brokers. Sellers hereby agree to indemnify and hold harmless
KIAC against any liability, claim, loss, damage or expense incurred by any
Seller relating to any fees or commissions owed to any broker, finder or
financial advisor as a result of actions taken by any Seller. KIAC hereby agrees
to indemnify and hold harmless Sellers against any liability, claim, loss,
damage or expense incurred by KIAC relating to any fees or
72
commissions owed to any broker, finder or financial advisor as a result of
actions taken by KIAC.
14.15 Principles of Interpretation. Whenever used in this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
any noun or pronoun shall be deemed to include the plural as well as the
singular and to cover all genders. Unless otherwise specified, the terms
"hereof," "herein," "hereby" and similar terms refer to this Agreement as a
whole (including the exhibits and schedules hereto), and references herein to
Articles or Sections refer to Articles or Sections of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Asset Sale
Agreement as of the day and year first above written.
KIAC, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
-----------------------------------
Title: Secretary
-----------------------------------
XXXXXXXXX INDUSTRIES, INC.
By: /s/ Zivi X. Xxxxxx
---------------------------------------
Name: Zivi X. Xxxxxx
------------------------------------
Title: President
------------------------------------
SELLERS:
Xxxxxxxxx Xxxxxx, Inc.
By: /s/ Zivi X. Xxxxxx
---------------------------------------
Name: Zivi X. Xxxxxx
------------------------------------
Title: President
------------------------------------
Certified Aircraft Parts, Inc.
By: /s/ Zivi X. Xxxxxx
---------------------------------------
Name: Zivi X. Xxxxxx
------------------------------------
Title: President
------------------------------------
Xxxxxxxxx Commercial
Aircraft, Inc.
By: /s/ Zivi X. Xxxxxx
---------------------------------------
Name: Zivi X. Xxxxxx
------------------------------------
Title: President
------------------------------------
74
