As filed with the Securities and Exchange Commission on January 28, 1997
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934 (fee required)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934 (no fee required)
For the transition period from ___________ to ____________
Commission file number 1-4604
HEICO CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 65-0341002
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3000 TAFT STREET, HOLLYWOOD, FLORIDA 33021
(Address of principal executive offices) (Zip Code)
(954) 987-6101
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b)of the Act:
COMMON STOCK, PAR VALUE
$.01 PER SHARE AMERICAN STOCK EXCHANGE
(Title of Each Class) (Name of Each Exchange
On Which Registered)
Securities registered pursuant to Section 12(g) of the Act:
PREFERRED STOCK PURCHASE RIGHTS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of December 31, 1996 was $73,020,000 based on the closing price of
$26 3/8 on December 31, 1996 as reported by the American Stock Exchange and
after subtracting from the number of shares outstanding on that date the number
of shares held by affiliates of the Registrant.
The number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date:
COMMON STOCK, $.01 PAR VALUE 5,306,430 SHARES
(Class) (Outstanding at January 17, 1997)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 1997 Annual Meeting of Shareholders are
incorporated by reference into Part III. See Item 14(a)(3) on page 40 for a
listing of exhibits.
Certain statements in this Report constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following: lower
commercial air travel, product pricing levels, general economic conditions and
competition on military programs.
PART I
- -------------------------------------------------------------------------------
ITEM 1. BUSINESS
GENERAL
HEICO Corporation (the Company) is principally engaged in the design,
manufacture and sale of aerospace products and services through HEICO Aerospace
Corporation (HEICO Aerospace) and HEICO Aviation Products Corp. (HEICO
Aviation), both wholly-owned subsidiaries of the Company. References in this
Annual Report on Form 10-K to the "Company" include each of the Company's
subsidiaries unless otherwise required by the context.
In July 1996, the Company consummated the sale of all of the outstanding
capital stock of its wholly-owned subsidiary MediTek Health Corporation
("MediTek"), representing the Company's health care services segment, to U.S.
Diagnostic, Inc. ("USDL"). For further information regarding the sale of the
Company's Health Care operations, see Note 3 to the Consolidated Financial
Statements. With the sale of MediTek, the Company's operations are all within a
single business segment.
In September 1996, the Company, through HEICO Aviation, acquired all of
the outstanding stock of Trilectron Industries, Inc. (Trilectron). Trilectron is
primarily a manufacturer of ground power, air conditioning and air starting
equipment for civil and military aircraft. For further information regarding the
acquisition of Trilectron, see Note 2 to the Consolidated Financial Statements.
Upon the purchase of Trilectron, the Company's operations were divided
into the Flight Support Group and the Ground Support Group. For a description of
the general development of the Company's Flight Support Group and Ground Support
Group, see the narrative below.
The Company was organized in 1993 creating a new holding company known
as HEICO Corporation and renaming the former holding company (formerly known as
HEICO Corporation, organized in 1957) as HEICO Aerospace Corporation. The
reorganization, which was completed in 1993, did not result in any change in the
business of the Company, its consolidated assets or liabilities or the relative
interests of its shareholders.
MARKETS AND DISTRIBUTION - FLIGHT SUPPORT GROUP
The Flight Support Group is operated by HEICO Aerospace and is composed of Jet
Avion Corporation (Jet Avion), LPI Industries Corporation (LPI), and Aircraft
Technology, Inc. (Aircraft Technology), all of which are wholly-owned
subsidiaries.
-2-
JET AVION CORPORATION - Jet Avion is primarily engaged in the development and
sale of certain replacement parts for commercial jet aircraft engines,
principally engine components for Pratt & Whitney JT8D engines, which are used
in Boeing 727 and 737 and McDonnell Douglas DC-9 and MD-80 commercial aircraft.
Since 1991, Jet Avion has expanded its program to obtain additional Federal
Aviation Administration ("FAA") approval to manufacture and sell other
replacement parts and has obtained FAA approvals on additional replacement parts
for: JT9D engines, which are used in Boeing 747 and 767, Airbus A300 and A310
and McDonnell Douglas DC-10 aircraft; PW2000 engines, which are utilized in
Boeing 757 aircraft; and PW4000 engines which are utilized in Boeing 747 and
767, Airbus A300, A310 and A330 and McDonnell Douglas MD-11 aircraft and certain
other commercial aircraft engines.
Jet Avion sells its jet engine replacement parts principally to domestic
and foreign commercial air carriers (passenger and cargo) and aircraft repair
(airmotive) companies through Jet Avion's sales force.
Jet Avion holds Parts Manufacturing Approvals (PMA) from the FAA for the
engine components which it sells. With PMA certification, Jet Avion may
manufacture and sell approved replacement parts as FAA certified. This approval
is obtained by submitting to the FAA a data package concerning replacement parts
intended to be manufactured by the Company, and, if the FAA finds such parts
qualify as original part replacements, PMA certification is then granted. For
information regarding pending litigation relating to certain of Jet Avion's
sales, see Item 3 to Part I of this Form 10-K.
LPI INDUSTRIES CORPORATION - LPI is engaged in the production of a variety of
component parts for the aerospace industry and manufactures a substantial
portion of Jet Avion's products. In addition, LPI manufactures and sells
component parts to original equipment manufacturers (OEMs) as a sub-contractor
and to U.S. military agencies as a replacement parts supplier. Orders are
obtained through LPI's sales force from outside customers (OEM and U.S. military
agencies) by competitive bidding and generally have contract terms from one to
three years. Currently, orders extending beyond one year are not significant.
AIRCRAFT TECHNOLOGY, INC. - Aircraft Technology is engaged primarily in the
overhaul and repair of certain of JT8D and JT3D jet engine components and
markets its services principally through Jet Avion's sales force.
ATI Heat Treat, a subsidiary of Aircraft Technology, provides commercial
heat treating and brazing services. In January 1997, the Company discontinued
offering such services to outside customers and sold the related assets. The
amount of revenues and earnings derived from outside customers for such services
and the proceeds from the sale of the related assets were not significant.
MARKETS AND DISTRIBUTION - GROUND SUPPORT GROUP
The Ground Support Group is operated by HEICO Aviation and is composed
principally of Trilectron.
-3-
Trilectron is primarily engaged in the design, manufacturer and sale of
aircraft ground support equipment used to fulfill power, jet starting and
air-conditioning requirements for commercial and military aircraft. Trilectron
also manufactures and sells military electronics.
Customers of Trilectron are primarily domestic and foreign commercial
air carriers (passenger and cargo), contracted ground support service providers
and military agencies (United States and foreign). Orders are obtained by
Trilectron's sales force or by independent sales representatives and generally
have contract terms from one to three years. Currently, orders extending beyond
one year are not significant.
PRINCIPAL PRODUCTS AND CUSTOMERS
Sales of the Flight Support Group accounted for 93% of the Company's total
consolidated sales from continuing operations in fiscal 1996, and all of the
Company's sales from continuing operations in fiscal 1995 and 1994. On a
proforma basis, assuming Trilectron had been acquired as of the beginning of
fiscal 1996, the Flight Support Group's sales would have accounted for 67% of
consolidated fiscal 1996 sales from continuing operations.
Sales of products and services related to JT8D engines accounted for
approximately 75% of the Company's sales from continuing operations in fiscal
1996.
No one customer accounted for sales of 10% or more of total consolidated
sales from continuing operations during any of the last three fiscal years.
Military sales were 3% of the Company's consolidated sales from continuing
operations in fiscal 1996.
COMPETITION
With respect to sales of jet engine replacement parts by the Flight Support
Group, the Company competes mainly with Pratt & Whitney, a division of United
Technologies Corporation. The competition is principally based on price and
service inasmuch as the Company's parts are interchangeable with the parts
produced by Pratt & Whitney. The Company believes that it supplies a substantial
portion of the market for certain JT8D engine components for which it holds a
PMA from the FAA, with Pratt & Whitney controlling the balance. With respect to
other aerospace products and services sold by the Flight Support Group, the
Company competes with a large number of machining, fabrication and repair
companies, some of which have greater financial resources than the Company.
Competition is based mainly on price, product performance, service and technical
capability.
The Company's Ground Support Group competes with several large and small
domestic and foreign competitors, some of which have greater financial resources
than the Company. The Company believes the market for its ground support
equipment is highly fragmented, with competition based mainly on price, product
performance and service.
-4-
BACKLOG
The Company's backlog of unshipped orders as of October 31, 1996 was $25 million
as compared to $23 million as of October 31, 1995 and $14 million as of October
31, 1994. The backlog includes $11 million related to the newly acquired Ground
Support Group's operations. The backlog also includes $9 million representing
forecasted shipments over the next 12 months for certain contracts of the Flight
Support Group pursuant to which customers provide estimated annual usage.
Substantially all of the backlog of orders as of October 31, 1996 are expected
to be delivered during fiscal 1997. For additional information regarding the
Company's backlog, see Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Backlogs."
RESEARCH, DEVELOPMENT AND PRODUCT IMPROVEMENT ACTIVITIES
The Company has expanded the engineering capabilities of its Flight Support
Group to manufacture and distribute additional jet engine components as
discussed above. In fiscal 1996, 1995 and 1994, the cost of such activities
amounted to approximately $2,400,000, $1,800,000 and $1,200,000, respectively.
In addition, the Company intends to increase the development of new products
within its Ground Support Group in order to expand the existing product line.
PATENTS, TRADEMARKS, ETC.
As discussed under "Markets and distribution" above, the Company's PMAs from the
FAA are material to the Company's operations. The Company does not have any
patents, trademarks or licenses that the loss of which would materially
adversely affect the Company.
RAW MATERIALS
The principal materials used in the manufacture of the Company's Flight Support
Group's products are high temperature alloy sheet metal and castings and
forgings. The principal materials used in the manufacture of the Company's
Ground Support Group's products are numerous raw materials, parts and
components, including diesel and gas powered engines, compressors, and
generators. The materials used by the Company's operations are generally
available from a number of sources and in sufficient quantities to meet current
requirements subject to normal lead times.
EMPLOYEES
At the end of fiscal 1996, the Company and its subsidiaries employed
approximately 370 persons, of which approximately 240 were employed within the
Flight Support Group and approximately 120 were employed within the Ground
Support Group.
-5-
ENVIRONMENTAL REGULATION
Compliance with federal, state and local provisions relating to the protection
of the environment has not had and is not expected to have a material effect
upon the capital expenditures, earnings or competitive position of the Company.
SEASONALITY
The Company believes that its business activities are not seasonal.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company has no operations located outside of the United States. See Note 13
to the Consolidated Financial Statements for additional information regarding
the Company's export sales.
-6-
- -------------------------------------------------------------------------------
ITEM 2. PROPERTIES
The Company's headquarters is located at 3000 Taft Street, Hollywood, Florida
and occupies approximately 5,000 square feet of office space at this location.
HEICO Aerospace and its subsidiaries occupy the remainder of this 140,000 square
foot facility, which is owned by HEICO Aerospace.
Trilectron is located at 12297 U.S. Highway 41 North, Palmetto, Florida
and occupies a 35,000 square foot facility under a lease expiring in 1998.
Trilectron currently intends to build a new facility aggregating approximately
75,000 square feet in 1997 on other property owned by Trilectron and located in
Palmetto, Florida.
The Company and its subsidiaries have adequate capacity to handle their
anticipated needs for the foreseeable future. The real property owned by the
Company, exclusive of the unimproved property owned by Trilectron, is subject to
mortgages. See Note 5 to the Consolidated Financial Statements.
-7-
- -------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS
In November 1989, HEICO Aerospace and Jet Avion were named defendants in a
complaint filed by United Technologies Corporation (United) in the United States
District court for the Southern District of Florida. The complaint, as amended
in fiscal 1995, alleges infringement of a patent, misappropriation of trade
secrets and unfair competition relating to certain jet engine parts and coatings
sold by Jet Avion in competition with Pratt & Whitney, a division of United.
United seeks approximately $10 million in damages for the patent infringement
and approximately $30 million in damages for the misappropriation of trade
secrets and the unfair competition claims. The aggregate damages referred to in
the preceding sentence do not exceed approximately $30 million because a portion
of the misappropriation and unfair competition damages duplicate the $10 million
patent infringement damages. The complaint also seeks, among other things,
pre-judgment interest and treble damages.
In July and November 1995, the Company filed its answers to United's
complaint denying the allegations. In addition, the Company filed counterclaims
against United for, among other things, malicious prosecution, trade
disparagement, tortious interference, unfair competition and antitrust
violations. The Company is seeking treble, compensatory and punitive damages in
amounts to be determined at trial. United filed its answer denying certain
counterclaims and moved to dismiss other counterclaims. A number of motions are
currently pending and no trial date has been set.
Based on currently known facts, the Company's legal counsel has advised
that it believes that the Company should be able to successfully defend the
patent infringement claims alleged in United's complaint. With respect to the
misappropriation and unfair competition claims, legal counsel to the Company has
advised that it believes the likelihood that United will be able to prove a case
regarding such claims within the statute of limitations is remote. Further, the
Company intends to vigorously pursue its counterclaims against United. The
ultimate outcome of this litigation is not certain at this time and no provision
for gain or loss, if any, has been made in the accompanying consolidated
financial statements.
The Company is involved in various other legal actions arising in the
normal course of business. After taking into consideration legal counsel's
evaluation of such actions, management is of the opinion that the outcome of
these other matters will not have a significant effect on the Company's
consolidated financial statements.
-8-
- -------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
There were no matters submitted to a vote of securities holders during the
fourth quarter of fiscal 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers are elected by the Board of Directors at the first
meeting following the annual meeting of shareholders and serve at the discretion
of the Board. The names and ages of, and offices held by, the executive officers
of the Company are as follows:
NAME AGE OFFICE
---- --- ------
Laurans A. Mendelson 58 Chairman of the Board,
President and Chief Executive
Officer of the Company
Thomas S. Irwin 50 Executive Vice President and
Chief Financial Officer of the
Company
Eric A. Mendelson 31 Director, Vice President of the
Company; President of HEICO
Aerospace Corporation
Victor H. Mendelson 29 Director, Vice President and
General Counsel of the Company;
President of HEICO Aviation
Products Corp.
James L. Reum 65 Executive Vice President and
Chief Operating Officer of
HEICO Aerospace Corporation
Mr. Laurans Mendelson has served as Chairman of the Board of the Company since
December 1990 and as Co-Chairman of the Board of the Company from January 1990
until December 1990. Mr. Mendelson has also served as Chief Executive Officer of
the Company since February 1990, President of the Company since September 1991
and President of MediTek Health Corporation from May 1994 until its sale in July
1996. He has been Chairman of the Board of Ambassador Square, Inc. (a Miami,
Florida real estate development and management company) since 1980 and President
of that company since 1988. He has been Chairman of Columbia Ventures, Inc. (a
private investment company) since 1985 and President of that company since 1988.
Mr. Mendelson is a Certified Public Accountant.
-9-
Mr. Irwin has served as Executive Vice President of the Company since September
1991 and served as Senior Vice President of the Company from 1986 to 1991 and
Vice President and Treasurer from 1982 to 1986. Mr. Irwin is a Certified Public
Accountant.
Mr. Eric Mendelson has served on the Company's Board of Directors since July
1992. He has served as a Vice President of the Company since March 1992 and
President of HEICO Aerospace Corporation since April 1993. He served as Director
of Planning and Operations of the Company and Executive Vice President of Jet
Avion Corporation from 1990 to March 1992. Eric Mendelson is the son of Laurans
Mendelson.
Mr. Victor Mendelson has served on the Company's Board of Directors since July
1996. He has served as President of HEICO Aviation Products Corp. since
September 1996 and as General Counsel of the Company since 1993. He served as
Executive Vice President of MediTek Health Corporation beginning in 1994 and its
Chief Operating Officer from 1995 until its sale in July 1996. He was the
Company's Associate General Counsel from 1992 until 1993. From 1990 until 1992,
he worked on a consulting basis with the Company developing and analyzing
various strategic opportunities. He is a member of the American Bar Association
and The Florida Bar. Victor Mendelson is the son of Laurans Mendelson.
Mr. James Reum has served as Executive Vice President of HEICO Aerospace since
April 1993 and Chief Operating Officer of HEICO Aerospace since May 1995. He
also has served as President of LPI Industries Corporation since August 1991 and
President of Jet Avion Corporation since March 1996. From January 1990 to August
1991, he served as Director of Research and Development for Jet Avion
Corporation. From 1986 to 1989, Mr. Reum was self-employed as a management and
engineering consultant to companies primarily within the aerospace industry.
From 1957 to 1986, he was employed in various management positions with
Chromalloy Gas Turbine Corp., Cooper Airmotive (later named Aviall, Inc.),
United Airlines, Inc. and General Electric Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the Company's
Directors, Executive Officers and 10% shareholders to file initial reports of
ownership and changes in ownership of Common Stock with the Securities and
Exchange Commission and the American Stock Exchange. Directors, Executive
Officers and 10% shareholders are required to furnish the Company with copies of
all Section 16(a) forms they file. Based on the review of such reports furnished
to the Company, the Company believes that during 1996, the Company's Directors,
Executive Officers and 10% shareholders complied with all Section 16(a) filing
requirements applicable to them except that Messrs. Laurans Mendelson, Thomas
Irwin, Eric Mendelson, Victor Mendelson and one former Executive Officer each
filed one late report relating to shares of Common Stock allocated to each of
these Executive Officers' participant accounts by the Company's 401-K Plan. The
reports were delayed because the information necessary to complete the filings
was not provided to the Plan participants until after the Section 16(a) required
filing date.
-10-
PART II
- -------------------------------------------------------------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the American Stock Exchange under the
Symbol "HEI". The following table sets forth the quarterly high and low sales
prices for the common stock on the American Stock Exchange and the amounts of
cash dividends paid per share during the last two fiscal years. In July 1995,
February 1996 and July 1996 the Company paid 10% stock dividends in addition to
its semi-annual cash dividends. The Company also distributed a three-for-two
stock split in April 1996. In December 1996, the Company declared a fourth 10%
stock dividend in addition to a semi-annual cash dividend of $.05 per share,
both payable January 17, 1997 to shareholders of record January 8, 1997. The
quarterly sales prices and cash dividend amounts set forth below have been
retroactively adjusted for the stock split and stock dividends, including the
stock dividend paid in January 1997.
1996 1995
----------------------------------- ----------------------------
FISCAL DIVIDENDS DIVIDENDS
QUARTER HIGH LOW PER SHARE HIGH LOW PER SHARE
----------------------------------- ----------------------------
First 9.52 9.02 $.041 4.84 4.10 $.034
Second 13.29 8.75 -- 6.83 4.78 --
Third 24.07 11.98 $.045 8.52 6.43 $.037
Fourth 17.73 14.09 -- 9.89 7.45 --
The Company had approximately 1,300 shareholders of record as of December 31,
1996.
-11-
- -------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------
(in thousands of dollars, except per share data)
OPERATING DATA(5)
Net sales $ 34,565 $ 25,613 $ 19,212 $ 19,856 $ 19,852
========== ========== ========== ========== ==========
Gross profit from sales $ 12,169 $ 8,116 $ 5,835 $ 5,119 $ 5,993
========== ========== ========== ========== ==========
Selling, general and
administrative expenses $ 7,657 $ 6,405 $ 5,495 $ 4,850 $ 4,750
========== ========== ========== ========== ==========
Insurance recovery of
litigation costs $ --- $ --- $ --- $ (190) $ (350)
========== ========== ========== ========== ==========
Non-recurring charge $ --- $ --- $ --- $ --- $ 1,900(1)
========== ========== ========== ========== ==========
Interest expense $ 185 $ 169 $ 59 $ 205 $ 183
========== ========== ========== ========== ==========
Net income:
From continuing operations
before cumulative effect
of change in accounting
principle $ 3,665 $ 1,437 $ 640 $ 728 $ 332
From discontinued operations(2) 963 1,258 830 256(3) (912)
From gain on sale of dis-
continued operations 5,264 --- --- --- ---
From cumulative effect on prior years
of change in accounting principle --- --- 381 --- ---
---------- ---------- ---------- ---------- ---------
Net income (loss) $ 9,892 $ 2,695 $ 1,851 $ 984 $ (580)
========== ========== ========== ========== ==========
Weighted average number of common
and common equivalent shares (4) 5,903,151 5,302,370 5,044,963 5,190,196 4,971,480
========== ========== ========== ========== ==========
Net income (loss) per share:
From continuing operations before
cumulative effect of change
in accounting principle (4) $ .62 $ .27 $ .13 $ .14 $ .07
From discontinued operations .17 .24 .16 .05 (.19)
From gain on sale of
discontinued operations .89 --- --- --- ---
From cumulative effect of change
in accounting principle (4) --- --- .08 --- ---
---------- ---------- ---------- ---------- ----------
Net income (loss) per share (4) $ 1.68 $ .51 $ .37 $ .19 $ (.12)
========== ========== ========== ========== ==========
Cash dividends per share (4) $ .086 $ .072 $ .068 $ .068 $ .068
========== ========== ========== ========== ==========
BALANCE SHEET DATA
Working capital $ 25,248 $ 14,755 $ 12,691 $ 12,517 $ 14,633
========== ========== ========== ========== ==========
Net property, plant and equipment $ 5,845 $ 9,296 $ 8,608 $ 7,734 $ 8,478
========== ========== ========== ========== ==========
Total assets $ 61,836 $ 47,401 $ 39,020 $ 33,738 $ 46,425
========== ========== ========== ========== ==========
Long-term debt $ 6,022 $ 7,076 $ 4,402 $ 2,864 $ 3,092
========== ========== ========== ========== ==========
Shareholders' equity $ 41,488 $ 30,146 $ 27,061 $ 25,513 $ 25,556
========== ========== ========== ========== ==========
(1)Represents a non-recurring charge for the restructuring of the aerospace
products and services segment.
(2)Represents income (loss) from the discontinued health care operations that
were sold in fiscal 1996.
(3)Includes a $194,000 loss from the discontinued health care operations and a
$450,000 reversal of a portion of reserves for costs related to the
laboratory products segment disposed of in 1990, which were determined not to
be required.
(4)Information has been adjusted to reflect a three-for-two stock split
distributed in April 1996 and 10% stock dividends paid in July 1995, February
1996, July 1996 and January 1997.
(5)The Operating Data has been restated to show the results of the Company's
health care operations as discontinued operations for all periods presented.
-12-
- -------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW OF CONTINUING OPERATIONS
Net sales in fiscal 1996 totaled $34,565,000, up 35% when compared to fiscal
1995 net sales of $25,613,000 and up 80% when compared to fiscal 1994 net sales
of $19,212,000.
The Company's net income from continuing operations totaled $3,665,000,
or $.62 per share, in fiscal 1996, improving 155% from net income from
continuing operations of $1,437,000, or $.27 per share, in fiscal 1995 and
improving 473% from net income of $640,000 (before the impact of an accounting
change), or $.13 per share, in fiscal 1994.
The Company paid 10% stock dividends in July 1995, February 1996 and
July 1996 and declared a fourth 10% stock dividend in December 1996, which is
payable in January 1997. In addition, the Company distributed a 3-for-2 stock
split in April 1996. All net income per share, dividends per share and common
stock outstanding information has been adjusted for all years presented to give
effect to the stock dividends and stock split, including the stock dividend
payable in January 1997.
In September 1996, the Company acquired all of the outstanding stock of
Trilectron, a manufacturer of ground power, air conditioning and air starting
equipment for civil and military aircraft, as well as a designer and
manufacturer of certain military electronics, for approximately $7 million in
cash and the assumption of debt aggregating $2.3 million. The acquisition of
Trilectron has been accounted using the purchase method of accounting and the
results of operations of Trilectron are included in the consolidated statements
of operations from September 1, 1996. For further information regarding the
acquisition of Trilectron, see Note 2 to the Consolidated Financial Statements.
The increase in fiscal 1996 sales over fiscal 1995 sales reflects a
$6,627,000, or 26% increase in revenues from the Company's Flight Support
products (HEICO Aerospace) and $2,325,000 in revenues from the Company's Ground
Support products, representing Trilectron's sales for the two months since its
acquisition. The $6,401,000 increase in fiscal 1995 sales over fiscal 1994 sales
is all attributable to HEICO Aerospace.
The increases in HEICO Aerospace's sales in fiscal 1996 and fiscal 1995
are principally due to increased sales volumes of jet engine replacement parts
to the Company's commercial airline industry customers.
The net income improvement in fiscal 1996 and fiscal 1995 is primarily
attributable to the increased sales volume of HEICO Aerospace and improved
profit margins as further discussed below.
-13-
SALE OF HEALTH CARE OPERATIONS
In July 1996, the Company consummated the profitable sale of all of the
outstanding capital stock of MediTek, representing the Company's health care
services segment, to U.S. Diagnostic, Inc. ("USDL"). In consideration for the
sale, the Company received $13,828,000 in cash and a five-year, 6-1/2%
promissory note in the principal amount of $10,000,000, which is convertible, at
the option of the Company, into 1,081,081 shares of USDL common stock.
The sale of MediTek resulted in a gain in fiscal 1996 of $5,264,000, or
$.89 per share, net of expenses and applicable income taxes. MediTek's results
of operations for the eight months ended June 30, 1996, fiscal 1995 and fiscal
1994 have been reported separately as discontinued operations in the
Consolidated Statement of Operations. For further information regarding the
Health Care operations, see Note 3 to the Consolidated Financial Statements.
RESULTS OF CONTINUING OPERATIONS
BACKLOGS
The Company's backlog of unshipped orders as of October 31, 1996 was $25 million
as compared to $23 million as of October 31, 1995 and $14 million as of October
31, 1994. The backlog includes $11 million related to the newly acquired
operations at Trilectron. The backlog also includes $9 million representing
forecasted shipments over the next 12 months for certain contracts of HEICO
Aerospace's operations pursuant to which customers provide estimated annual
usage. The decrease in HEICO Aerospace's current backlog from that of October
31, 1995 is principally due to expiration of certain customer contracts which
have been replaced by orders pursuant to shorter term purchase orders.
Substantially all of the backlog of orders as of October 31, 1996 are expected
to be delivered during fiscal 1997.
GROSS MARGINS AND OPERATING EXPENSES
The Company's gross profit margins averaged 35.2% in fiscal 1996 as compared to
31.7% in fiscal 1995 and 30.4% in fiscal 1994. The improvement reflects higher
margins in HEICO Aerospace primarily attributable to volume increases in sales
of higher margin products and manufacturing cost efficiencies.
Selling, general and administrative (SG&A) expenses were $7,657,000 in
fiscal 1996, $6,405,000 in fiscal 1995 and $5,495,000 in 1994. As a percentage
of net sales, SG&A expenses declined from 28.6% in fiscal 1994 to 25.0% in
fiscal 1995 and declined further to 22.2% in fiscal 1996, reflecting continuing
efforts to control costs while increasing revenues. The $1,252,000 increase from
fiscal 1995 to fiscal 1996 is due principally to increased HEICO Aerospace
selling expenses and SG&A expenses of Trilectron since its acquisition. The
$910,000 increase in SG&A expenses from fiscal 1994 to fiscal 1995 is due
principally to an increase in general corporate expenses and an increase in
HEICO Aerospace's sales efforts.
-14-
INCOME FROM OPERATIONS
Income from operations increased $2,801,000 to $4,512,000 in fiscal 1996 and
increased $1,371,000 to $1,711,000 in fiscal 1995. These improvements in
operating income are due primarily to the increases in sales and gross margins
of HEICO Aerospace discussed above.
INTEREST EXPENSE
Interest expense remained level in fiscal 1996 after increasing by $110,000 from
fiscal 1994 to fiscal 1995. The increase was due primarily to increases in
long-term debt associated with equipment financing.
INTEREST AND OTHER INCOME
Interest and other income in fiscal 1996 increased $392,000 over fiscal 1995 due
principally to interest income on the convertible note and cash received from
the sale of MediTek.
Fiscal 1995 interest and other income increased by $212,000 over fiscal
1994 due primarily to an increase in cash balances available for investment and
profits from the sale of certain excess equipment of HEICO Aerospace.
INCOME TAX EXPENSE
The Company's effective tax rate in fiscal 1996 declined from that of fiscal
1995 due principally to the tax benefits from tax-free investment income and
lower state taxes.
The Company's effective income tax rate in fiscal 1994 was less than the
statutory rate primarily due to tax benefits on export sales and the reversal of
excess tax provisions upon completion of tax audits.
For a detailed analysis of the provisions for income taxes and a
discussion of new income tax accounting standards adopted in fiscal 1994, see
Notes 1 and 7 to the Consolidated Financial Statements.
NET INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
Fiscal 1996 income from continuing operations before cumulative effect of change
in accounting principle totaled $3,665,000 and increased $2,228,000, or 155%,
over that of fiscal 1995, which increased $797,000, or 125%, over that of fiscal
1994. Both increases were due principally to the aforementioned improvements in
fiscal 1996 and 1995 income from operations.
INFLATION
The Company has generally experienced increases in its costs of labor, materials
and services consistent with overall rates of inflation. The impact of such
increases on the Company's net income from continuing operations has been
generally minimized by efforts to lower costs through manufacturing efficiencies
and cost reductions.
-15-
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operations aggregated $12.5 million over the last
three years, including $7.1 million in fiscal 1995. Net cash provided by
operations in fiscal 1996 declined as compared to fiscal 1995 primarily as a
result of planned increases in inventories to meet customer delivery
requirements.
The Company's current ratio remained strong at 3 to 1 as of October 31,
1996 and working capital increased by $11 million in fiscal 1996, including a $6
million increase in cash and cash equivalents.
During the past three years, the Company's principal cash proceeds from
investing activities was the $14 million from the sale of MediTek. The principal
cash used in investing activities the past three years were the acquisition of
Trilectron for $7 million, acquisitions by MediTek prior to its sale aggregating
$6 million and purchases of property, plant and equipment aggregating $5
million, including $3 million purchased by HEICO Aerospace primarily to expand
and improve its product development and manufacturing capabilities.
The Company's principal financing activities during the same three-year
period included the use of an aggregate of $6 million for scheduled payments on
short-term debt, long-term debt and capital leases. In addition, the Company
received $3 million from the issuance of long-term debt and $2 million from the
exercise of stock options.
The Company has available credit facilities aggregating $7 million and
unexpended industrial development revenue bond proceeds of $2.6 million
available for future qualified expenditures. See Note 5 to the Consolidated
Financial Statements for further information regarding credit facilities.
In addition, the Company has the right to demand prepayment of the $10
million convertible note received in the sale of MediTek until such time as the
common stock into which the note is convertible has been registered. See Note 3
to the Consolidated Financial Statements for further information regarding the
convertible note.
Funds necessary for future capital expenditures, debt payments, and
working capital requirements are expected to be derived from current cash
resources and internally generated funds.
-16-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1996 AND 1995
ASSETS
1996 1995
----------- -----------
Current assets:
Cash and cash equivalents.................... $11,025,000 $ 4,664,000
Short-term investments....................... -- 2,939,000
Accounts receivable, net..................... 7,879,000 6,709,000
Inventories.................................. 15,277,000 5,359,000
Prepaid expenses and other current assets.... 874,000 1,373,000
Deferred income taxes........................ 2,058,000 1,593,000
----------- -----------
Total current assets................... 37,113,000 22,637,000
Note receivable................................ 10,000,000 --
Property, plant and equipment, net............. 5,845,000 9,296,000
Intangible assets, net......................... 4,756,000 12,445,000
Investments in and advances to
unconsolidated partnerships.................. -- 2,094,000
Unexpended bond proceeds....................... 2,649,000 --
Other assets................................... 1,473,000 929,000
----------- -----------
Total assets........................... $61,836,000 $47,401,000
=========== ===========
See notes to consolidated financial statements.
-17-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1996 AND 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
1996 1995
----------- -----------
Current liabilities:
Current maturities of long-term debt and capital
leases......................................... $ 494,000 $ 794,000
Trade accounts payable........................... 4,803,000 1,499,000
Accrued expenses and other current liabilities... 5,903,000 5,046,000
Income taxes payable............................. 665,000 543,000
----------- -----------
Total current liabilities.................. 11,865,000 7,882,000
Long-term debt and capital leases, net of
current maturities............................... 6,022,000 7,076,000
Deferred income taxes.............................. 1,137,000 1,720,000
Other non-current liabilities...................... 1,324,000 470,000
----------- -----------
Total liabilities.......................... 20,348,000 17,148,000
----------- -----------
Minority interests................................. -- 107,000
----------- -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $.01 per share;
Authorized - 10,000,000 shares issuable
in series, 50,000 designated as Series A
Junior Participating Preferred Stock,
none issued.................................... -- --
Common stock, $.01 par value; Authorized -
20,000,000 shares; Issued - 5,275,551 shares
in 1996 and 5,075,283 in 1995 (as restated -
Note 4)........................................ 53,000 28,000
Capital in excess of par value................... 30,881,000 8,371,000
Retained earnings................................ 13,893,000 25,439,000
----------- -----------
44,827,000 33,838,000
Less: Note receivable from employee savings and
investment plan ......................... (3,339,000) (3,692,000)
----------- -----------
Total shareholders' equity................. 41,488,000 30,146,000
----------- -----------
Total liabilities and shareholders' equity. $61,836,000 $47,401,000
=========== ===========
See notes to consolidated financial statements.
-18-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
1996 1995 1994
------------ ------------ ------------
Net sales.......................... $ 34,565,000 $ 25,613,000 $ 19,212,000
------------ ------------ ------------
Operating costs and expenses:
Cost of sales (Note 13)............ 22,396,000 17,497,000 13,377,000
Selling, general and
administrative expenses.......... 7,657,000 6,405,000 5,495,000
------------ ------------ ------------
Total operating costs and
expenses......................... 30,053,000 23,902,000 18,872,000
------------ ------------ ------------
Income from operations............. 4,512,000 1,711,000 340,000
Interest expense................... (185,000) (169,000) (59,000)
Interest and other income.......... 1,058,000 666,000 454,000
------------ ------------ ------------
Income from continuing
operations before income taxes
and cumulative effect of change
in accounting principle.......... 5,385,000 2,208,000 735,000
Income tax expense................. 1,720,000 771,000 95,000
------------ ------------ ------------
Net income from continuing
operations before cumulative
effect of change in accounting
principle........................ 3,665,000 1,437,000 640,000
Discontinued operations (Note 3):
Net income from discontinued health
care operations, net of applicable
income taxes of $717,000, $894,000
and $618,000 in fiscal 1996, 1995
and 1994, respectively........... 963,000 1,258,000 830,000
Gain on sale of health care
operations, net of applicable
income taxes of $1,719,000....... 5,264,000 -- --
Cumulative effect on prior years of
change in accounting principle... -- -- 381,000
------------ ------------ ------------
Net income......................... $ 9,892,000 $ 2,695,000 $ 1,851,000
============ ============ ============
Net income per share:
From continuing operations before
cumulative effect of change in
accounting principle............. $ 0.62 $ 0.27 $ 0.13
From discontinued health care
operations....................... 0.17 0.24 0.16
From gain on sale of health
care operations.................. 0.89 -- --
From cumulative effect of change
in accounting principle.......... -- -- $ 0.08
------------ ------------ ------------
Net income per share............... $ 1.68 $ 0.51 $ 0.37
============ ============ ============
Weighted average number of common
and common equivalent shares
outstanding...................... 5,903,151 5,302,370 5,044,963
============ ============ ============
See notes to consolidated financial statements.
-19-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
CAPITAL IN
COMMON EXCESS OF RETAINED NOTE
STOCK PAR VALUE EARNINGS RECEIVABLE TOTAL
-------- ------------ ------------ ----------- ------------
Balances, October 31, 1993 ....................... $ 23,000 $ -0- $ 29,721,000 $(4,231,000) $ 25,513,000
Exercise of stock options (2,200
shares) ........................................ -- 22,000 -- -- 22,000
Payment on note receivable from employee
savings and investment plan .................... -- -- -- 253,000 253,000
Repurchases and retirements of 16,300
shares of common stock ......................... -- -- (238,000) -- (238,000)
Cash dividends ($.068 per share) ................. -- -- (340,000) -- (340,000)
Net income for the year .......................... -- -- 1,851,000 -- 1,851,000
-------- ------------ ------------ ----------- ------------
Balances, October 31, 1994 ....................... 23,000 22,000 30,994,000 (3,978,000) 27,061,000
Exercise of stock options (59,095
shares) ........................................ 1,000 589,000 -- -- 590,000
Payment on note receivable from employee
savings and investment plan .................... -- -- -- 286,000 286,000
Repurchases and retirements of 13,000
shares of common stock ......................... -- (117,000) -- -- (117,000)
Cash dividends ($.072 per share) ................. -- -- (369,000) -- (369,000)
10% common stock dividend paid July 28,
1995 (229,349 shares) .......................... 2,000 3,240,000 (3,242,000) -- --
10% common stock dividend paid
February 8, 1996 (254,209 shares) .............. 2,000 4,637,000 (4,639,000) -- --
Net income for the year .......................... -- -- 2,695,000 -- 2,695,000
-------- ------------ ------------ ----------- ------------
Balances, October 31, 1995 ....................... 28,000 8,371,000 25,439,000 (3,692,000) 30,146,000
Exercise of stock options (124,972
shares) ........................................ 2,000 1,562,000 -- -- 1,564,000
Payment on note receivable from employee
savings and investment plan .................... -- -- -- 353,000 353,000
Cash dividends ($.086 per share) ................. -- -- (475,000) -- (475,000)
Three for two common stock split distri-
buted April 24, 1996 (1,442,546 shares) ....... 14,000 (14,000) -- -- --
10% common stock dividend paid July 26,
1996 (432,644 shares) .......................... 4,000 10,827,000 (10,831,000) -- --
10% common stock dividend payable
January 17, 1997 (479,595 shares) .............. 5,000 10,127,000 (10,132,000) -- --
Other ............................................ -- 8,000 -- -- 8,000
Net income for the year .......................... -- -- 9,892,000 -- 9,892,000
-------- ------------ ------------ ----------- ------------
Balances, October 31, 1996 ....................... $ 53,000 $ 30,881,000 $ 13,893,000 $(3,339,000) $ 41,488,000
======== ============ ============ =========== ============
See notes to consolidated financial statements.
-20-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
1996 1995 1994
------------ ------------ ------------
Cash flows from operating activities:
Net income ............................................ $ 9,892,000 $ 2,695,000 $ 1,851,000
Adjustments to reconcile net income to
cash provided by operating activities:
Gain from sale of health care operations ............ (5,264,000) -- --
Depreciation and amortization ....................... 2,107,000 2,638,000 2,000,000
Deferred income taxes ............................... (1,048,000) (245,000) 171,000
Deferred financing costs ............................ (159,000) (56,000) (255,000)
(Income) loss from unconsolidated partnerships ...... (393,000) 590,000 724,000
Minority interest in consolidated partnerships ...... 313,000 144,000 34,000
Cumulative effect of change in accounting
principle ......................................... -- -- (381,000)
Change in assets and liabilities:
Decrease (increase) in accounts receivable ........ 166,000 (967,000) (717,000)
(Increase) in inventories ......................... (3,283,000) (98,000) (588,000)
Decrease (increase) in prepaid expenses and
other current assets ............................ 111,000 (147,000) (190,000)
(Decrease) increase in trade payables, accrued
expenses and other current liabilities .......... (14,000) 2,111,000 1,014,000
(Decrease) increase in income taxes payable
and deferred income taxes ....................... (983,000) 488,000 10,000
Increase in other non-current liabilities ......... 251,000 67,000 --
Other ............................................. (4,000) (97,000) --
------------ ------------ ------------
Net cash provided by operating activities ............. 1,692,000 7,123,000 3,673,000
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of health care operations,
net of cash sold of $304,000 ........................ 13,524,000 -- --
Sale (purchase) of short-term investments ............. 2,939,000 (2,939,000) --
Acquisitions:
Purchases of businesses, net of cash acquired ....... (6,555,000) (154,000) (1,518,000)
Contingent note payments ............................ (1,106,000) (1,945,000) (1,560,000)
Purchases of property, plant and equipment ............ (3,227,000) (800,000) (1,165,000)
Payments for deferred organization costs .............. (387,000) (358,000) (120,000)
Payment received from employee savings and
investment plan note receivable ..................... 353,000 286,000 253,000
Proceeds from the sale of property, plant
and equipment ....................................... 17,000 324,000 21,000
Distributions from (advances to) unconsolidated
partnerships ........................................ 60,000 (480,000) (114,000)
Distributions to minority interests ................... (216,000) (71,000) --
Other ................................................. 155,000 87,000 (189,000)
------------ ------------ ------------
Net cash provided by (used in) investing
activities .......................................... 5,557,000 (6,050,000) (4,392,000)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from the issuance of long-term debt .......... 1,343,000 201,000 1,418,000
Proceeds from the exercise of stock options ........... 1,525,000 570,000 22,000
Repurchases of common stock ........................... -- (117,000) (238,000)
Principle payments on short-term debt, long-term
debt and capital leases ............................. (3,289,000) (1,715,000) (594,000)
Cash dividends paid ................................... (475,000) (369,000) (340,000)
Other ................................................. 8,000 (9,000) --
------------ ------------ ------------
Net cash (used in) provided by financing
activities .......................................... (888,000) (1,439,000) 268,000
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents ......................................... 6,361,000 (366,000) (451,000)
Cash and cash equivalents at beginning of year ........ 4,664,000 5,030,000 5,481,000
------------ ------------ ------------
Cash and cash equivalents at end of year .............. $ 11,025,000 $ 4,664,000 $ 5,030,000
============ ============ ============
See notes to consolidated financial statements.
-21-
HEICO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended October 31, 1996, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
HEICO Corporation (the Company), through its subsidiaries, HEICO Aerospace
Corporation (HEICO Aerospace), including its subsidiaries, Jet Avion Corporation
(Jet Avion), LPI Industries Corporation (LPI), and Aircraft Technology, Inc.
(Aircraft Technology), and HEICO Aviation Products Corp. (HEICO Aviation) and
its subsidiary, Trilectron Industries, Inc. (Trilectron), is engaged in the
design, manufacture and sale of aerospace products and services throughout the
United States and abroad. Its customer base is primarily the commercial airline
industry. As of October 31, 1996, the Company's principal operations are located
in Hollywood and Palmetto, Florida.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions are eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated financial statements, the Company considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
SHORT-TERM INVESTMENTS
Investments with a maturity of less than one year that are not readily
convertible to cash before their maturity are classified as short-term
investments and are stated at their fair value (see Note 8).
INVENTORIES
Portions of the HEICO Aerospace and Trilectron inventories are stated at the
lower of cost or market, with cost being determined on the first-in, first-out
basis. The remaining portions of these inventories are stated at the lower of
cost or market, on a per contract basis, with estimated total contract costs
being allocated ratably to all units. The effects of changes in estimated total
contract costs are recognized in the period determined. Losses, if any, are
recognized fully when identified.
-22-
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation and amortization
is provided mainly on the straight-line method over the estimated useful lives
of the various assets, including assets recorded under capital leases which are
amortized over the shorter of their useful lives or the term of the related
leases. Property, plant and equipment useful lives are as follows:
Buildings and components............. 7 to 55 years
Building improvements................ 3 to 15 years
Machinery and equipment.............. 3 to 20 years
The costs of major renewals and betterments are capitalized. Repairs and
maintenance are charged to operations as incurred. Upon disposition, the cost
and related accumulated depreciation are removed from the accounts and any
related gain or loss is reflected in earnings.
INTANGIBLE ASSETS
Intangible assets include the excess of cost over the fair value of net assets
acquired and deferred charges which are amortized on the straight-line method
over their legal or estimated useful lives, whichever is shorter, as follows:
Excess of cost over the
fair market value
of net assets acquired............. 20 to 40 years
Deferred charges..................... 3 to 20 years
The Company continually evaluates the periods of intangible asset
amortization to determine whether events and circumstances subsequent to the
origination dates of such assets warrant revised estimates of useful lives. In
addition, the Company periodically reviews the excess of cost over the fair
value of net assets acquired (goodwill) to assess recoverability based upon
expectations of undiscounted cash flows and operating income of each
consolidated entity having a material goodwill balance. An impairment would be
recognized in operating results, based upon the difference between each
consolidated entities' respective present value of future cash flows and the
carrying value of the goodwill, if a permanent diminution in value were to
occur. There have not been any significant revised estimates nor recognition of
goodwill impairment during the three years ended October 31, 1996.
FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses and other current liabilities approximate fair
value due to the relatively short maturity of the respective instruments. The
Company's financial instruments also include a note receivable (see Note 3) and
long-term debt (see Note 5).
The carrying amount of the note receivable is $10,000,000 as of October
31, 1996, which approximates its fair market value. Long-term
-23-
debt at October 31, 1996 includes industrial development revenue bonds with a
carrying value of $5,480,000 and other long-term debt with a carrying value of
$1,036,000. The carrying value of long-term debt approximates fair market value
due to its floating interest rates.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments with
high credit quality financial institutions and limits the amount of credit
exposure to any one financial institution. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Company's customer base, and their dispersion across many
different geographical regions. At October 31, 1996, the Company had no
significant concentrations of credit risk.
REVENUE RECOGNITION
Revenues are recognized on an accrual basis, primarily upon shipment of products
and the rendering of services. Certain contracts of Trilectron are long-term
contracts and the related net costs and estimated earnings in excess of
billings, if any, are included in accounts receivable on a percentage of
completion basis. Revenue amounts set forth in the accompanying consolidated
statements of operations do not include any material amounts in excess of
billings related to long-term contracts.
INCOME TAXES
In fiscal 1994, the Company adopted, effective November 1, 1993, Statement of
Financial Accounting Standard (SFAS) No. 109 "Accounting for Income Taxes,"
which requires the use of the liability method of accounting for deferred income
taxes. The cumulative effect of this change in accounting for income taxes is a
$381,000 benefit ($.08 per share) and is reported separately in the Consolidated
Statements of Operations for the year ended October 31, 1994. The provision for
income taxes includes Federal, state and local income taxes currently payable
and those deferred because of temporary differences between the financial
statement and tax basis of assets and liabilities.
INCOME PER SHARE
Income per share is calculated on the basis of the weighted average number of
shares outstanding plus common share equivalents arising from the assumed
exercise of stock options, if dilutive, and has been adjusted for the effect of
any stock dividends and splits (see Note 4).
NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 established a fair value based method of
accounting for stock options. Entities may elect to either adopt the measurement
criteria of the statement for accounting purposes, thereby recognizing an amount
in results of operations on a prospective basis, or disclose the pro forma
effects of the new measurement criteria in Notes to Consolidated Financial
Statements. The Company intends to adopt the pro forma disclosure features of
SFAS 123, which are effective for fiscal year 1997.
-24-
NOTE 2 - ACQUISITION
In September 1996, the Company, through HEICO Aviation, acquired effective as of
September 1, 1996 all of the outstanding stock of Trilectron for $7.0 million in
cash and the assumption of debt aggregating $2.3 million. Trilectron is a
leading manufacturer of ground power, air conditioning and air starting
equipment for civil and military aircraft and is a designer and manufacturer of
certain military electronics.
The acquisition of Trilectron has been accounted using the purchase
method of accounting and the purchase price has been assigned to the net assets
acquired based on the fair value of such assets and liabilities at the date of
acquisition. The excess of the purchase price over the fair value of the
identifiable net assets acquired amounted to $2,838,000, which will be amortized
over 20 years using the straight line method. The results of operations of
Trilectron are included in the consolidated statements of operations from
September 1, 1996.
The following table presents unaudited proforma consolidated operating
results as if the acquisition of Trilectron had occurred at the beginning of
fiscal 1995. The proforma consolidated operating results do not purport to
present actual operating results had the acquisition been made at the beginning
of fiscal 1995, or the results which may occur in the future.
1996 1995
------------- -------------
Net sales.................................. $ 48,198,000 $ 39,544,000
============= =============
Net income from continuing operations...... $ 4,186,000 $ 1,685,000
============= =============
Net income................................. $ 10,413,000 $ 2,943,000
============= =============
Net income per share from continuing
operations.............................. $ 0.71 $ 0.32
============= =============
Net income per share....................... $ 1.76 $ 0.56
============= =============
NOTE 3 - SALE OF HEALTH CARE OPERATIONS
In July 1996, the Company consummated the sale of all of the outstanding capital
stock of its wholly-owned subsidiary MediTek Health Corporation ("MediTek"),
representing the Company's health care services segment, to U.S. Diagnostic,
Inc. ("USDL"). In consideration for the sale of MediTek, the Company received
$13,828,000 in cash and a five-year, 6-1/2% promissory note (the "Convertible
Note") in the principal amount of $10,000,000, which is convertible, at the
option of the Company, into 1,081,081 shares of USDL common stock.
In order to assure the Company's liquidity with respect to the
Convertible Note and the USDL common stock into which it is convertible, USDL
(i) granted the Company demand and piggy-back registration rights with respect
to such shares of USDL common stock, and (ii) agreed to prepay the Convertible
Note at the Company's request at any time until such registration is completed.
The terms of such demand registration rights, as amended in December 1996,
require USDL to use its best efforts to cause a registration statement
-25-
covering all of the USDL common stock into which the Convertible Note is
convertible to be declared effective by the Securities and Exchange Commission
by July 1, 1997. The terms of such piggy-back registration rights give the
Company rights to include such USDL common stock in certain registration
statements filed by USDL from January 1, 1997 until January 1, 2000. Upon 15
days' prior written notice, USDL may require the Company to convert the
Convertible Note into USDL common stock at any time beginning on the later of
December 31, 1997 or the date that such shares of USDL common stock have been
registered, if the closing price of the USDL common stock has averaged at least
$9.25 per share for the immediately preceding ten trading days. Also, beginning
on December 31, 1997, USDL may prepay the Convertible Note at any time upon 60
days' prior written notice. The Company retains the right to convert the
promissory note into the applicable shares of USDL common stock at any time
prior to prepayment.
The sale of MediTek resulted in a gain in fiscal 1996 of $5,264,000, net
of expenses and applicable income taxes. The income taxes on the gain are less
than the normal Federal statutory rate principally due to the utilization of a
$4.6 million capital loss carryforward partially offset by state income taxes.
MediTek's results of operations, net of taxes, for fiscal 1996, 1995 and 1994
have been reported separately as discontinued operations in the Consolidated
Statement of Operations. No amounts related to the discontinued operations
remain in the October 31, 1996 Consolidated Balance Sheet.
The condensed statement of operations related to the discontinued health
care services segment during fiscal years 1996, 1995 and 1994 are presented
below:
EIGHT MONTHS
ENDED JUNE 30, YEARS ENDED OCTOBER 31,
-------------- ---------------------------
1996 1995 1994
-------------- ----------- ------------
Net revenues................. $ 11,382,000 $14,766,000 $13,181,000
============== =========== ============
Income before income taxes... $ 1,680,000 $ 2,152,000 $ 1,448,000
Income tax expense........... 717,000 894,000 618,000
-------------- ----------- ------------
Net income................... $ 963,000 $ 1,258,000 $ 830,000
============== =========== ============
The effective tax rate used in calculating income tax expense related to
discontinued operations exceeds the normal Federal statutory tax rate due
principally to state income taxes.
With the sale of the health care services segment, the Company's
operations are within a single business segment, the aerospace products and
services industry.
NOTE 4 - STOCK DIVIDENDS AND SPLIT
In June 1996, December 1995 and May 1995, the Company's Board of Directors
declared 10% stock dividends that were paid in July 1996, February 1996 and July
1995, respectively. In March 1996, the Company's Board of Directors declared a
three-for-two stock split that was distributed in April 1996. On December 13,
1996, the Company's Board of Directors declared a 10% stock dividend payable
January 17, 1997 to shareholders of record on January 8, 1997. These
transactions were valued based on the closing market prices of the Company's
stock as of their respective declaration dates. During fiscal 1996, retained
earnings was charged $20,963,000 as a result of the issuance of a combined total
of 2,354,785 shares of the Company's common stock.
-26-
During fiscal 1995, retained earnings was charged $7,881,000 as a result of the
issuance of a combined total of 483,558 shares of the Company's common stock.
All income per share, dividend per share and common shares outstanding
information has been retroactively restated to reflect these stock dividends and
split.
NOTE 5 - CREDIT FACILITIES, LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt and capital leases consist of:
OCTOBER 31,
-----------------------------
1996 1995
---------- -----------
Industrial development revenue bonds.. $5,480,000 $1,980,000
Term loan borrowing under revolving
credit facility..................... 317,000 633,000
Equipment loans....................... 719,000 430,000
Mortgage note payable in monthly in-
stallments including interest at
at 8.625% due January, 1999......... -- 497,000
Capital leases with various ex-
piration dates from 1995 to 2003,
at various interest rates from
10.625% to 12.03%................... -- 3,812,000
Other long-term debt.................. -- 518,000
---------- -----------
6,516,000 7,870,000
Less current maturities............... (494,000) (794,000)
---------- -----------
$6,022,000 $7,076,000
========== ===========
The amount of long-term debt maturing in each of the next five years is
$494,000 in fiscal 1997, $170,000 in fiscal 1998, $170,000 in fiscal 1999,
$138,000 in fiscal 2000 and $71,000 in fiscal 2001.
INDUSTRIAL DEVELOPMENT REVENUE BONDS
The industrial development revenue bonds represent bonds issued by Broward
County, Florida in 1996 (the 1996 bonds) and in 1988 (the 1988 bonds).
The 1996 bonds were issued in the amount of $3,500,000 for the purpose
of renovating and expanding the Hollywood facility. As of October 31, 1996, the
Company has been reimbursed $851,000 for such qualified expenditures and the
balance of the unexpended bond proceeds of $2,649,000 are held by the trustee
and is available for future qualified expenditures. The 1996 bonds are due
October 2011 and bear interest at a variable rate calculated weekly (3.75% at
October 31, 1996). The 1996 bonds are secured by a letter of credit expiring in
October 2001 and a mortgage on the related properties pledged as collateral. The
letter of credit requires annual sinking fund payments beginning October 2000 in
the amount of $187,500.
The 1988 bonds are due April 2008 and bear interest at a variable rate
calculated weekly (3.70% at October 31, 1996). The 1988 bonds are secured by a
letter of credit expiring in February 1999, a bond sinking fund ($8,250 payable
monthly) and a mortgage on the related properties pledged as collateral.
-27-
The pledged properties for the 1996 and 1988 bonds have a carrying value
aggregating approximately $5,555,000 at October 31, 1996.
Trilectron has been approved by Manatee County, Florida for $3,000,000
of industrial development revenue bonds to finance the construction of a larger
facility in Palmetto, Florida and the purchase of additional equipment. These
bonds are expected to be issued in fiscal 1997.
REVOLVING CREDIT FACILITY
The Company has a $7 million credit facility available for funding acquisitions,
working capital and general corporate requirements. Borrowings under this credit
facility bear interest at 1/4% over the bank's prime rate, adjusted daily, and
are convertible to term loans that bear interest, at the Company's option, at
1/4% over the bank's prime rate, adjusted daily, or a fixed interest rate of 200
basis points over the bank's prime rate in effect on the day of the conversion.
Term loan borrowings under the credit facility are payable in 36 to 48 monthly
installments. The credit facility is secured by substantially all the assets of
HEICO Aerospace and its subsidiaries. The revolving portion of the facility
expires in April 1997 and may be renewed annually by mutual agreement. This
credit facility and the letters of credit securing the 1996 bonds and 1988 bonds
contain covenants which, among other things, restrict borrowings, capital
expenditures and cash dividends, require the maintenance of certain net worth,
working capital and debt service amounts and ratios, require the continued
employment of the current Chairman, President and Chief Executive Officer and
require that he and his affiliates maintain a specified ownership position in
the Company.
In October 1994, the Company borrowed $950,000 from the $7 million
credit facility, of which $317,000 is outstanding as of October 31, 1996 with
interest accruing at 8.5%.
EQUIPMENT LOAN FACILITY
In March 1994, a bank committed to advance up to $1,900,000, as amended in
fiscal 1995, for the purpose of purchasing equipment to be used in the Company's
operations. Each term loan is limited to 80% of the purchase price of the
related equipment and is repayable up to a maximum of 60 months with interest at
a rate equal to the bank's prime rate. The term loans are secured by collateral
representing the related purchased equipment, which has a carrying value of
approximately $905,000 at October 31, 1996. In December 1996, the Company
received a commitment to extend the facility until December 1997.
OTHER LONG-TERM DEBT
The mortgage note payable, capital leases and other long-term debt were assumed
by USDL as part of the sale of MediTek in July 1996. (See Note 3)
-28-
NOTE 6 - LEASE COMMITMENTS
The Company leases certain property and equipment, including manufacturing
facilities and office equipment under operating leases. Some of these leases
provide the Company with the option after the initial lease term either to
purchase the property at the then fair market value or renew its lease at the
then fair rental value. Generally, management expects that leases will be
renewed or replaced by other leases in the normal course of business.
Minimum payments for operating leases having initial or remaining
noncancelable terms in excess of one year are as follows:
Year ending October 31,
1997.................................. $ 332,000
1998.................................. 259,000
1999.................................. 133,000
2000.................................. 27,000
----------
Total minimum lease commitments....... $ 751,000
==========
Total rent expense charged to continuing operations for all operating
leases in fiscal 1996, fiscal 1995 and fiscal 1994 amounted to $166,000,
$133,000 and $68,000, respectively.
NOTE 7 - INCOME TAXES
The provision for income taxes on income from continuing operations before
cumulative effect of change in accounting principle for each of the three years
ended October 31, 1996 is as follows:
1996 1995 1994
---------- ---------- -----------
Current:
Federal..................... $4,084,000 $1,592,000 $ 407,000
State....................... 459,000 318,000 135,000
---------- ---------- -----------
4,543,000 1,910,000 542,000
Deferred...................... (387,000) (245,000) 171,000
---------- ---------- -----------
Total income tax expense ..... 4,156,000 1,665,000 713,000
Less income taxes for
discontinued operations..... (2,436,000) (894,000) (618,000)
---------- ---------- -----------
Income taxes on income from
continuing operations....... $1,720,000 $ 771,000 $ 95,000
========== ========== ===========
A net deferred tax liability of $661,000 relating to MediTek was written
off as a result of the sale of such discontinued operations described in Note 3.
-29-
The following table reconciles the federal statutory tax rate to the
Company's effective rate for continuing operations:
1996 1995 1994
-------- -------- --------
Federal statutory tax
rate........................ 34.0% 34.0% 34.0%
State taxes, less applicable
federal income tax
reduction................... 2.3 2.6 1.1
Tax benefits on export
sales....................... (5.1) (6.4) (13.6)
Tax benefits from tax free
investments................. (1.1) (.2) (1.2)
Tax benefits from dividend
income...................... (.2) (.1) (.2)
Nondeductible amortization
of intangible assets........ .3 .8 2.4
Reversal of excess
income tax provisions upon
completion of tax audit..... -- -- (8.0)
Other, net................... 1.7 4.2 (1.6)
-------- -------- --------
Effective tax rate........... 31.9% 34.9% 12.9%
-------- -------- --------
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities as of October
31, 1996, 1995 and 1994 are as follows:
OCTOBER 31,
----------------------------------------
1996 1995 1994
---------- ---------- -----------
Deferred tax assets:
Inventory........................... $ 600,000 $ 412,000 $ 306,000
Bad debt allowances................. 62,000 436,000 261,000
Retirement and deferred compen-
sation liabilities................ 148,000 102,000 76,000
Vacation accruals................... 147,000 112,000 115,000
Customer rebates and credits........ 860,000 371,000 279,000
Warranty accruals................... 94,000 -- --
Alternative minimum tax credit...... -- 13,000 147,000
Capital loss carryforward........... -- -- 1,560,000
Other............................... 147,000 147,000 67,000
---------- ---------- -----------
2,058,000 1,593,000 2,811,000
Valuation allowance................. -- -- (1,560,000)
---------- ---------- -----------
Total deferred tax assets........... 2,058,000 1,593,000 1,251,000
---------- ---------- -----------
Deferred tax liabilities:
Accelerated depreciation............ 927,000 1,208,000 948,000
Intangible asset amortization....... 345,000 545,000 280,000
Retirement plan liability........... (127,000) -- --
Equity in losses of partnerships.... -- (35,000) 387,000
Other............................... (8,000) 2,000 8,000
---------- ---------- -----------
Total deferred tax liabilities...... 1,137,000 1,720,000 1,623,000
---------- ---------- -----------
Net deferred tax asset (liability).. $ 921,000 $ (127,000) $ (372,000)
========== ========== ===========
The $1,560,000 deferred tax asset related to the Company's $4.6 million
capital loss carryforward had a 100% valuation allowance as of October 31, 1994.
-30-
NOTE 8 - INVESTMENT IN FINANCIAL INSTRUMENTS
In fiscal 1995, the Company entered into transactions in which it simultaneously
purchased and sold call options on an industry sector index of equity securities
(the Index Options) expiring in November 1995. The Index Options were purchased
with temporary surplus funds of approximately $2.9 million for investment
purposes. Prior to the end of fiscal 1995, the Company traded substantially all
of the purchase option position and entered into a similar purchase option
position having the same November 1995 expiration date. The gain realized in
fiscal 1995 fully utilized the Company's $4.6 million capital loss carryover.
The deferred tax asset related to the Company's $4.6 million capital loss
carryforward had a 100% valuation allowance as of October 31, 1994. As of
October 31, 1995, the investments in the purchased and sold call option
contracts are netted because the terms of the Index Option contracts provide for
a right of offset. The net investment as of October 31, 1995 in the amount of
$2.9 million is recorded at fair market value as represented by the net cash
proceeds realized upon termination of the option contracts in November 1995 and
is included in short-term investments. Upon termination of the option contracts
in November 1995, the Company recognized a $4.6 million capital loss for income
tax purposes. For financial statement purposes, the transactions did not result
in any material gain or loss.
NOTE 9 - PREFERRED STOCK PURCHASE RIGHTS PLAN
In November 1993, pursuant to a plan adopted by the Board of Directors on such
date, the Board declared a distribution of one Preferred Stock Purchase Right
(the Rights) for each outstanding share of common stock, par value $.01 per
share, of the Company. The Rights trade with the common stock and are not
exercisable or transferable apart from the common stock until after a person or
group either acquires 15% or more of the outstanding common stock or commences
or announces an intention to commence a tender offer for 30% or more of the
outstanding common stock. Absent either of the aforementioned events
transpiring, the Rights will expire at the close of business on November 2,
2003.
The Rights have certain anti-takeover effects and, therefore, will cause
substantial dilution to a person or group who attempts to acquire the Company on
terms not approved by the Company's Board of Directors or who acquires 15% or
more of the outstanding common stock without approval of the Company's Board of
Directors. The Rights should not interfere with any merger or other business
combination approved by the Board since they may be redeemed by the Company at
$.01 per Right at any time until the close of business on the tenth day after a
person or group has obtained beneficial ownership of 15% or more of the
outstanding common stock or until a person commences or announces an intention
to commence a tender offer for 30% or more of the outstanding common stock.
-31-
NOTE 10 - STOCK OPTIONS
The Company currently has two stock option plans, the 1993 Stock Option Plan
(1993 Plan) and the Non-Qualified Stock Option Plan (NQSOP). In March 1996,
shareholders of the Company approved an increase in the number of shares
issuable pursuant to the 1993 Plan by 251,178 shares. A third plan, the Combined
Stock Option Plan expired in February 1993 and was replaced by the 1993 Plan. In
September 1996, the Board of Directors reserved 70,180 shares for the issuance
of non-qualified stock options in conjunction with the purchase of Trilectron.
Under the terms of the plans, a total of 1,634,558 shares of the Company's stock
are reserved for issuance to directors, officers and key employees as of October
31, 1996. Options issued under the 1993 Plan may be designated incentive stock
options (ISO) or non-qualified stock options (NQSO). ISOs are granted at not
less than 100% of the fair market value at the date of grant (110% thereof in
certain cases) and are exercisable in percentages specified at date of grant
over a period up to ten years. Only employees are eligible to receive ISOs.
NQSOs may be granted at less than fair market value and may be immediately
exercisable. Options granted under the NQSOP may be granted to directors,
officers and employees at no less than the fair market value at the date of
grant and are generally exercisable in four equal annual installments commencing
one year from date of grant.
Information concerning all of the stock option transactions for the
three years ended October 31, 1996 follows:
SHARES UNDER OPTION
SHARES ---------------------------------
AVAILABLE PRICE
FOR OPTION SHARES PER SHARE
------------ ---------- -------------------
Outstanding,
October 31, 1993 418,940 1,301,854 $ 3.28 - $ 8.95
Granted............... (173,496) 173,496 $ 4.73 - $ 5.46
Cancelled............. 4,392 (63,178) $ 4.61 - $ 8.16
Exercised............. -- (4,831) $ 4.61
------------ ---------- -------------------
Outstanding,
October 31, 1994 249,836 1,407,341 $ 3.28 - $ 8.95
Granted............... (194,032) 194,032 $ 4.33 - $ 8.64
Cancelled............. 57,922 (62,316) $ 4.38 - $ 8.16
Exercised............. -- (126,924) $ 3.47 - $ 8.16
------------ ---------- -------------------
Outstanding,
October 31, 1995 113,726 1,412,133 $ 3.28 - $ 8.95
Additional shares
approved for 1993
Stock Option Plan... 251,178 -- --
Shares approved
for grant in
the Trilectron
acquisition......... 70,180 -- --
Granted............... (328,803) 328,803 $ 9.08 - $16.64
Cancelled............. 18,950 (29,412) $ 4.61 - $11.44
Exercised............. -- (202,197) $ 4.38 - $ 8.95
------------ ---------- -------------------
Oustanding,
October 31, 1996 125,231 1,509,327 $ 3.28 - $16.64
============ ========== ===================
-32-
All of the above options were granted at the fair market value of the
stock on the date of grant. As of October 31, 1996, options for 1,280,429 shares
were exercisable at a weighted average option price of $6.05. If there were a
change in control of the Company, options for an additional 228,898 shares would
become immediately exercisable. The weighted average option price for all
options outstanding as of October 31, 1996 is $6.86. All stock option share and
price per share information has been retroactively restated for stock dividends
and splits.
NOTE 11 - RETIREMENT PLANS
The Company has a qualified defined contribution retirement plan (the Plan)
under which eligible employees of the Company and its participating subsidiaries
may contribute up to 10% of their annual compensation, as defined, and the
Company will contribute specified percentages ranging from 25% to 50% of
employee contributions up to 3% of annual pay in Company stock or cash, as
determined by the Company. The Plan also provides that the Company may
contribute additional amounts in its common stock or cash at the discretion of
the Board of Directors.
In September 1992, the Company sold 658,845 shares of the Company's
stock to the Plan for an aggregate price of $4,122,000 entirely financed through
a promissory note with the Company. The promissory note is payable in nine equal
annual installments, inclusive of principal and interest at the rate of 8% per
annum, of $655,000 each and a final installment of $640,000 and is prepayable in
full or in part without penalty at any time. Prior to September 1992, the
Company sold an aggregate of 452,429 shares of its stock to the Plan in exchange
for two notes receivable, which have been fully satisfied.
Participants receive 100% vesting in employee contributions. Vesting in
Company contributions is based on number of years of service. Contributions to
the Plan charged to income from continuing operations for fiscal 1996, 1995 and
1994 totaled $364,000, $240,000 and $206,000, respectively, net of interest
income earned on the note received from the Plan of $272,000 in fiscal 1996,
$299,000 in fiscal 1995 and $331,000 in fiscal 1994.
In 1991, the Company established a Directors Retirement Plan covering
its then current directors. The net assets of this plan as of October 31, 1996
are not material to the financial position of the Company. During fiscal 1996,
1995 and 1994, $82,000, $75,000 and $73,000 respectively, was expensed for this
plan.
-33-
NOTE 12 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
Net sales:
1996.......... $ 6,978,000 $ 7,942,000 $ 8,059,000 $11,586,000
1995.......... $ 5,392,000 $ 6,394,000 $ 6,904,000 $ 6,923,000
Gross profit:
1996.......... $ 2,322,000 $ 2,716,000 $ 2,897,000 $ 4,234,000
1995.......... $ 1,740,000 $ 1,960,000 $ 2,205,000 $ 2,211,000
Net income from
continuing operations:
1996.......... $ 578,000 $ 647,000 $ 1,053,000 $ 1,387,000
1995.......... $ 191,000 $ 268,000 $ 514,000 $ 464,000
Net income:
1996.......... $ 870,000 $ 1,082,000 $ 6,553,000 $ 1,387,000
1995.......... $ 569,000 $ 652,000 $ 721,000 $ 753,000
Net income per share
share from continuing
operations:
1996.......... $ .10 $ .11 $ .17 $ .23
1995.......... $ .04 $ .05 $ .09 $ .08
Net income
per share:
1996.......... $ .15 $ .18 $ 1.07 $ .23
1995.......... $ .11 $ .13 $ .14 $ .14
Due to changes in the average number of common shares outstanding, net
income per share for the full fiscal year does not equal the sum of the four
individual quarters.
The amounts above differ from those previously reported on Forms 10-Q
because these amounts have been restated to reflect the results of the Company's
health care operations as discontinued operations for all periods presented.
-34-
NOTE 13 - OTHER CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS
AND STATEMENTS OF CASH FLOWS INFORMATION
Accounts receivable are composed of the following:
BALANCE AT OCTOBER 31,
-----------------------------
1996 1995
------------ -------------
Accounts receivable ............................................. $ 7,882,000 $ 9,531,000
Net costs and estimated earnings
in excess of billings on un-
completed contracts ........................................... 265,000 --
Less allowance for doubtful
accounts ...................................................... (268,000) (1,174,000)
Less contractual allowances ..................................... -- (1,648,000)
------------ -------------
Accounts receivable, net ........................................ $ 7,879,000 $ 6,709,000
============ =============
Inventories are composed of the following:
BALANCE AT OCTOBER 31,
-----------------------------
1996 1995
------------ -------------
Finished products ............................................... $ 4,428,000 $ 2,534,000
Work in process ................................................. 5,845,000 1,721,000
Materials, parts, assemblies and
supplies ...................................................... 5,004,000 1,104,000
Total inventories ............................................... $ 15,277,000 $ 5,359,000
============ =============
Inventories related to long-term contracts aggregated $628,000 as of
October 31, 1996. There were no such inventories as of October 31, 1995.
Property, plant and equipment, including capital leases, are composed of the
following:
BALANCE AT OCTOBER 31,
-----------------------------
1996 1995
------------ -------------
Land ............................................................ $ 523,000 $ 131,000
Buildings and improvements ...................................... 5,418,000 6,026,000
Machinery and equipment ......................................... 13,658,000 18,040,000
------------ -------------
19,599,000 24,197,000
Less accumulated depreciation ................................... (13,754,000) (14,901,000)
------------ -------------
Property, plant and equipment, net .............................. $ 5,845,000 $ 9,296,000
============ =============
Intangible assets are composed of the following:
BALANCE AT OCTOBER 31,
-----------------------------
1996 1995
------------ -------------
Excess of cost over the fair value
of net assets acquired ........................................ $ 4,882,000 $ 12,324,000
Deferred charges ................................................ 679,000 1,473,000
Other ........................................................... -- 25,000
------------ -------------
5,561,000 13,822,000
Less accumulated amortization ................................... (805,000) (1,377,000)
------------ -------------
Intangible assets, net .......................................... $ 4,756,000 $ 12,445,000
============ =============
Accrued expenses and other current liabilities are composed of the
following:
BALANCE AT OCTOBER 31,
-----------------------------
1996 1995
------------ -------------
Accrued employee compensation ................................... $ 2,071,000 $ 1,711,000
Accrued customer rebates and
credits ....................................................... 1,848,000 1,378,000
Accrued property taxes .......................................... 435,000 505,000
Other ........................................................... 1,549,000 1,452,000
------------ -------------
Total accrued expenses and other
current liabilities ........................................... $ 5,903,000 $ 5,046,000
============ =============
-35-
SALES
Export sales were $9,806,000 in fiscal 1996, $5,762,000 in fiscal 1995 and
$3,678,000 in fiscal 1994.
No one customer accounted for sales of 10% or more of consolidated sales
during the last three fiscal years.
RESEARCH AND DEVELOPMENT EXPENSES
Fiscal 1996, 1995 and 1994 cost of sales amounts include approximately
$2,400,000, $1,800,000 and $1,200,000, respectively, of new product research and
development expenses.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ARE AS FOLLOWS:
Cash paid for interest was $264,000, $386,000 and $193,000 in 1996, 1995 and
1994, respectively. Cash paid for income taxes was $4,421,000, $1,400,000 and
$881,000 in 1996, 1995 and 1994, respectively.
Non-cash investing and financing activities related to the acquisitions
and contingent note payments during fiscal 1996, 1995 and 1994 were as follows:
1996 1995 1994
------------ ------------ ------------
Fair value of assets acquired:
Intangible assets. $ 3,944,000 $ 1,945,000 $ 2,632,000
Inventories....... 6,635,000 -- --
Accounts re-
ceivable........ 3,051,000 -- 300,000
Property, plant
and equipment... 401,000 -- 249,000
Other assets...... 41,000 154,000 146,000
Cash paid, including
contingent note
payments............ (7,661,000) (2,099,000) (3,078,000)
------------ ------------ ------------
Liabilities assumed... $ 6,411,000 $ -- $ 249,000
============ ============ ============
Non-cash investing and financing activities related to purchases of
property, plant and equipment financed by capital leases during fiscal 1996,
1995 and 1994 amounted to $1,343,000, $2,257,000 and $1,044,000, respectively.
Non-cash investing and financing activities during fiscal 1995 also included
purchases of property, plant and equipment of $2,269,000, investments in and
advances to unconsolidated partnerships of $862,000, deferred charges of
$461,000 and other assets of $139,000 which were financed by capital leases
assumed, issuance of a note payable and distributions from an unconsolidated
partnership during fiscal 1995. Additionally, retained earnings was charged
$20,963,000 in fiscal 1996 and $7,881,000 in fiscal 1995 as a result of the 10%
stock dividends described in Note 4 above.
-36-
NOTE 14 - PENDING LITIGATION
In November 1989, HEICO Aerospace and Jet Avion were named defendants in a
complaint filed by United Technologies Corporation (United) in the United States
District court for the Southern District of Florida. The complaint, as amended
in fiscal 1995, alleges infringement of a patent, misappropriation of trade
secrets and unfair competition relating to certain jet engine parts and coatings
sold by Jet Avion in competition with Pratt & Whitney, a division of United.
United seeks approximately $10 million in damages for the patent infringement
and approximately $30 million in damages for the misappropriation of trade
secrets and the unfair competition claims. The aggregate damages referred to in
the preceding sentence do not exceed approximately $30 million because a portion
of the misappropriation and unfair competition damages duplicate the $10 million
patent infringement damages. The complaint also seeks, among other things,
pre-judgment interest and treble damages.
In July and November 1995, the Company filed its answers to United's
complaint denying the allegations. In addition, the Company filed counterclaims
against United for, among other things, malicious prosecution, trade
disparagement, tortious interference, unfair competition and antitrust
violations. The Company is seeking treble, compensatory and punitive damages in
amounts to be determined at trial. United filed its answer denying certain
counterclaims and moved to dismiss other counterclaims. A number of motions are
currently pending and no trial date has been set.
Based on currently known facts, the Company's legal counsel has advised
that it believes that the Company should be able to successfully defend the
patent infringement claims alleged in United's complaint. With respect to the
misappropriation and unfair competition claims, legal counsel to the Company has
advised that it believes the likelihood that United will be able to prove a case
regarding such claims within the statute of limitations is remote. Further, the
Company intends to vigorously pursue its counterclaims against United. The
ultimate outcome of this litigation is not certain at this time and no provision
for gain or loss, if any, has been made in the accompanying consolidated
financial statements.
The Company is involved in various other legal actions arising in the
normal course of business. After taking into consideration legal counsel's
evaluation of such actions, management is of the opinion that the outcome of
these other matters will not have a significant effect on the Company's
consolidated financial statements.
-37-
HEICO Corporation and Subsidiaries
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Shareholders of HEICO Corporation
We have audited the accompanying consolidated balance sheets of HEICO
Corporation and subsidiaries (the "Company") as of October 31, 1996 and 1995,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended October 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of October
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended October 31, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes effective November 1,
1993 to conform with Statement of Financial Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
December 27, 1996
-38-
- -------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
- -------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Directors of the Company is incorporated by reference
to the Company's definitive proxy statement which will be filed with the
Securities and Exchange Commission (Commission) within 120 days after the close
of fiscal 1996.
Information concerning the executive officers of the Company is set
forth at Part I hereof under the caption "Executive Officers of the Registrant."
- -------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is hereby incorporated by
reference to the Company's definitive proxy statement which will be filed with
the Commission within 120 days after the close of fiscal 1996.
- -------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is hereby incorporated by reference to the Company's definitive proxy
statement which will be filed with the Commission within 120 days after the
close of fiscal 1996.
- -------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is hereby
incorporated by reference to the Company's definitive proxy statement which will
be filed with the Commission within 120 days after the close of fiscal 1996.
-39-
PART IV
- -------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a)(1) Financial Statements:
The following consolidated financial statements of the
Company and subsidiaries are included in Part II, Item 8:
PAGE
Consolidated Balance Sheets at October 31, 1996
and 1995....................................... 17
Consolidated Statements of Operations for the
years ended October 31, 1996, 1995 and 1994.... 19
Consolidated Statements of Shareholders' Equity
for the years ended October 31, 1996, 1995
and 1994....................................... 20
Consolidated Statements of Cash Flows for the
years ended October 31, 1996, 1995 and 1994.... 21
Notes to Consolidated Financial Statements....... 22
Report of Independent Auditors................... 38
(a)(2) Financial Statement Schedules:
No schedules have been submitted because they are not applicable or the
required information is included in the financial statements or notes thereto.
(a)(3) Exhibits
2.1 Amended and Restated Agreement of Merger and Plan
of Reorganization, dated as of March 22, 1993, by
and among HEICO Corporation, HEICO Industries,
Corp. and New HEICO, Inc. is incorporated by
reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-4 (Registration
No. 33-57624) Amendment No. 1 filed on March 19,
1993.
2.2 Stock Purchase Agreement, dated June 20, 1996, by
and among HEICO Corporation, MediTek Health
Corporation and U.S. Diagnostic Labs Inc. is
incorporated by reference to Exhibit 2 to the Form
8-K dated July 11, 1996.
2.3 Stock Purchase Agreement, dated as of September
16, 1996, by and between HEICO Corporation and
Sigmund Borax is incorporated by reference to
Exhibit 2 to the Form 8-K dated September 16,
1996.
-40-
Item 14 (a) (3) Exhibits continued
3.1 Articles of Incorporation of the Registrant are
incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-4
(Registration No. 33-57624) Amendment No. 1 filed
on March 19, 1993.
3.2 Articles of Amendment of the Articles of
Incorporation of the Registrant, dated April 27,
1993, are incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form
8-B dated April 29, 1993.
3.3 Articles of Amendment of the Articles of
Incorporation of the Registrant, dated November 3,
1993, are incorporated by reference to Exhibit 3.3
to the Form 10-K for the year ended October 31,
1993.
3.4 Bylaws of the Registrant.
4.0 The description and terms of Preferred Stock
Purchase Rights are set forth in a Rights
Agreement between the Company and SunBank, N.A.,
as Rights Agent, dated as of November 2, 1993,
incorporated by reference to Exhibit 1 to the Form
8-K dated November 2, 1993.
10.1 Loan Agreement, dated March 1, 1988, between HEICO
Corporation and Broward County, Florida is
incorporated by reference to Exhibit 10.1 to the
Form 10-K for the year ended October 31, 1994.
10.2 SunBank Reimbursement Agreement, dated February
28, 1994, between HEICO Aerospace Corporation and
SunBank/South Florida, N.A. is incorporated by
reference to Exhibit 10.2 to the Form 10-K for the
year ended October 31, 1994.
10.3 Amendment, dated March 1, 1995, to the SunBank
Reimbursement Agreement dated February 28, 1994
between HEICO Aerospace Corporation and
SunBank/South Florida, N.A. is incorporated by
reference to Exhibit 10.3 to the Form 10-K from
the year ended October 31, 1995.
10.4 Loan Agreement, dated February 28, 1994, between
HEICO Corporation and SunBank/South Florida, N.A.
is incorporated by reference to Exhibit 10.3 to
the Form 10-K for the year ended October 31, 1994.
-41-
Item 14 (a) (3) Exhibits continued
10.5 The First Amendment, dated October 13, 1994, to
Loan Agreement dated February 28, 1994 between
HEICO Corporation and SunBank/South Florida, N.A.
is incorporated by reference to Exhibit 10.4 to
the Form 10-K for the year ended October 31, 1994.
10.6 Second Amendment, dated March 1, 1995, to the Loan
Agreement dated February 28, 1994 between HEICO
Corporation and SunBank/South Florida, N.A. is
incorporated by reference to Exhibit 10.6 to the
Form 10-K for the year ended October 31, 1995.
10.7 Loan Agreement, dated March 31, 1994, between
HEICO Corporation and Eagle National Bank of Miami
is incorporated by reference to Exhibit 10.5 to
the Form 10-K for the year ended October 31, 1994.
10.8 The First Amendment, dated May 31, 1994, to Loan
Agreement dated March 31, 1994 between HEICO
Corporation and Eagle National Bank of Miami is
incorporated by reference to Exhibit 10.6 to the
Form 10-K for the year ended October 31, 1994.
10.9 The Second Amendment, dated August 9, 1995, to the
Loan Agreement dated March 31, 1994 between HEICO
Corporation and Eagle National Bank of Miami is
incorporated by reference to Exhibit 10.9 to the
Form 10-K for the year ended October 31, 1995.
10.10 Loan Agreement, dated October 1, 1996, between
HEICO Aerospace Corporation and Broward County,
Florida.
10.11 SunTrust Bank Reimbursement Agreement, dated
October 1, 1996, between HEICO Aerospace
Corporation and SunTrust Bank, South Florida, N.A.
10.12 HEICO Savings and Investment Plan and Trust, as
amended and restated effective January 2, 1987 is
incorporated by reference to Exhibit 10.2 to the
Form 10-K for the year ended October 31, 1987.
10.13 HEICO Savings and Investment Plan, as amended and
restated December 19, 1994, is incorporated by
reference to Exhibit 10.11 to the Form 10-K for
the year ended October 31, 1994.
-42-
Item 14 (a) (3) Exhibits continued
10.14 HEICO Corporation 1993 Stock Option Plan.
10.15 HEICO Corporation Combined Stock Option Plan,
dated March 15, 1988, is incorporated by reference
to Exhibit 10.3 to the Form 10-K for the year
ended October 31, 1989.
10.16 Non-Qualified Stock Option Agreement for
Directors, Officers and Employees is incorporated
by reference to Exhibit 10.8 to the Form 10-K for
the year ended October 31, 1985.
10.17 HEICO Corporation Directors' Retirement Plan, as
amended, dated as of May 31, 1991, is incorporated
by reference to Exhibit 10.19 to the Form 10-K for
the year ended October 31, 1992.
10.18 Key Employee Termination Agreement, dated as of
April 5, 1988, between HEICO Corporation and
Thomas S. Irwin is incorporated by reference to
Exhibit 10.20 to the Form 10-K for the year ended
October 31, 1992.
10.19 Employment and Non-compete Agreement, dated as of
September 16, 1996, by and between HEICO
Corporation and Sigmund Borax is incorporated by
reference to Exhibit 10.1 to the Form 8-K dated
September 16, 1996.
10.20 Employment and Non-compete Agreements, dated as of
September 16, 1996, by and between HEICO
Corporation and Charles Kott is incorporated by
reference to Exhibit 10.2 to the Form 8-K dated
September 16, 1996.
10.21 Amendment to 6 1/2% Convertible Note, dated as of
December 24, 1996, by and among U.S. Diagnostic,
Inc. and HEICO Corporation.
10.22 Amendment to Registration and Sale Rights
Agreement, dated as of December 24, 1996, by and
among U.S. Diagnostic, Inc. and HEICO Corporation.
11 Computation of earnings per share.
21 Subsidiaries of the Company.
23.1 Consent of independent auditors.
-43-
Item 14 (a) (3) Exhibits continued
27 Financial Data Schedule
(b) Reports on Form 8-K
The only report on Form 8-K filed by the Company during the
fourth quarter of fiscal 1996 was dated September 16, 1996 and reported under
Item 2, "Acquisition of Disposition of Assets," the purchase of all the
outstanding capital stock of Trilectron Industries, Inc.
(c) Exhibits
See Item 14 (a) (3).
(d) Separate Financial Statements Required
Not applicable.
-44-
SIGNATURES
- -------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HEICO CORPORATION
Date: January 28, 1997 BY: /s/ THOMAS S. IRWIN
-------------------------
THOMAS S. IRWIN
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ LAURANS A. MENDELSON Chairman, January 28, 1997
- -------------------------------- President, Chief
LAURANS A. MENDELSON Executive Officer
and Director (Principal
Executive Officer)
/s/ JACOB T. CARWILE Director January 28, 1997
- --------------------------------
JACOB T. CARWILE
/s/ SAMUEL L. HIGGINBOTTOM Director January 28, 1997
- --------------------------------
SAMUEL L. HIGGINBOTTOM
/s/ PAUL F. MANIERI Director January 28, 1997
- --------------------------------
PAUL F. MANIERI
/s/ ERIC A. MENDELSON Director January 28, 1997
- --------------------------------
ERIC A. MENDELSON
/s/ VICTOR H. MENDELSON Director January 28, 1997
- --------------------------------
VICTOR H. MENDELSON
/s/ ALBERT MORRISON, JR. Director January 28, 1997
- --------------------------------
ALBERT MORRISON, JR.
/s/ ALAN SCHRIESHEIM Director January 28, 1997
- --------------------------------
ALAN SCHRIESHEIM
/s/ GUY C. SHAFER Director January 28, 1997
- --------------------------------
GUY C. SHAFER
-45-
Exhibit 3.4
BY-LAWS
OF
HEICO CORPORPORATION
F/K/A HEICO INDUSTRIES CORP.
(A FLORIDA CORPORATION)
(AS ADOPTED BY ITS BOARD OF DIRECTORS AS OF JANUARY 29, 1993)
TABLE OF CONTENTS
Article 1 - Shareholders................................................... 1
1.1 Annual Meeting............................................... 1
1.2 Special Meeting.............................................. 1
1.3 Place of Meeting............................................. 1
1.4 Notice of Meeting............................................ 1
1.5 Waiver of Notice Meeting..................................... 1
1.6 Fixing of Record Date........................................ 2
1.7 Voting Record................................................ 2
1.8 Quorum....................................................... 2
1.9 Voting Per Share............................................. 3
1.10 Voting of Shares............................................. 3
1.11 Proxies...................................................... 3
1.12 Manner of Action............................................. 3
1.13 Action Without a Meeting..................................... 4
1.14 Notification of Nomination of Directors...................... 4
1.15 Notice of Business at Annual Meetings........................ 5
Article 2 - Board of Directors............................................. 6
2.1 General Powers............................................... 6
2.2 Number, Terms and Classification............................. 6
2.3 Regular Meetings............................................. 7
2.4 Special Meetings............................................. 7
2.5 Waiver of Notice of Meeting.................................. 7
2.6 Quorum....................................................... 8
2.7 Presumption of Assent........................................ 8
2.8 Manner of Action............................................. 8
2.9 Action Without a Meeting..................................... 8
2.10 Meetings of the Board of Directors by Means of a Conference
Telephone or Similar Communications Equipment................ 8
2.11 Resignation.................................................. 8
2.12 Removal...................................................... 8
2.13 Vacancies.................................................... 9
2.14 Compensation................................................. 9
Article 3 - Committees of the Board of Directors........................... 9
Article 4 - Officers....................................................... 9
(i)
4.1 Officers..................................................... 9
4.2 Election and Term of Office.................................. 10
4.3 Resignation.................................................. 10
4.4 Removal...................................................... 10
4.5 Vacancies.................................................... 10
4.6 Chairman of the Board........................................ 10
4.7 Vice Chairman of the Board................................... 10
4.8 Chief Executive Officer...................................... 10
4.9 President.................................................... 11
4.10 Vice Presidents.............................................. 11
4.11 Secretary.................................................... 11
4.12 Treasurer.................................................... 11
4.13 Other Officers, Employees and Agents......................... 12
4.14 Compensation................................................. 12
Article 5 - Indemnification................................................ 12
Article 6 - Certificates of Stock.......................................... 13
6.1 Certificates for Shares...................................... 13
6.2 Transfer Agents and Registrars............................... 13
6.3 Transfer of Shares; Ownership of Shares...................... 13
6.4 Lost Certificates............................................ 13
Article 7 - Actions With Respect to Securities of Other Corporations....... 14
Article 8 - Amendments..................................................... 14
Article 9 - Gender......................................................... 14
(ii)
BY-LAWS OF HEICO INDUSTRIES CORP.
Article 1 - Shareholders
SECTION 1.1 ANNUAL MEETING. A meeting of shareholders shall be held each
year for the election of directors and for the transaction of any other business
that may come before the meeting. The time and place of the meeting shall be
designated by the Board of Directors.
SECTION 1.2 SPECIAL MEETING. Special meetings of the shareholders, for
any purpose or purposes, may be called by the chairman of the board, the
president or a majority of the Board of Directors, and shall be called by the
president or the secretary at the request of a majority of the directors then in
office or at the request of the holders of not less than one- tenth (1/10th) of
all outstanding shares of the corporation entitled to vote at the meeting.
SECTION 1.3 PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Florida, as the place of meeting
for any annual or special meeting of the shareholders called by the Board of
Directors. If no designation is made the place of meeting shall be the principal
office of the corporation in the State of Florida.
SECTION 1.4 NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by first-class mail, by, or at the direction of, the
president or the secretary, or the officer or other persons calling the meeting,
to each shareholder of record entitled to vote at such meeting. If the notice is
mailed at least thirty (30) days before the date of the meeting, it may be done
by a class of United States mail other than first-class. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
If, however, after the adjournment, the Board of Directors fixes a new record
date for the adjourned meeting, a notice of the adjourned meeting shall be given
as provided in this Section to each shareholder of record on the new record date
entitled to vote at such meeting.
SECTION 1.5 WAIVER OF NOTICE MEETING. Whenever any notice is required to
be given to any shareholder, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether signed before, during or after the time
of the meeting stated therein, shall be equivalent to the giving of such notice.
Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the shareholders need be specified in any written
waiver of notice unless so required in these by-laws, the Articles of
Incorporation or by law.
SECTION 1.6 FIXING OF RECORD DATE. In order that the corporation may
determine the shareholders entitled to notice of, or to vote at, any meeting of
shareholders or any adjourn- ment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than seventy (70) nor less than
ten (10) days before the date of such meeting, nor more than seventy (70) days
prior to any other action. A determination of share- holders of record entitled
to notice of, or to vote at, a meeting of shareholders shall apply to any
adjournment of the meeting unless the Board of Directors fixes a new record date
for the adjourned meeting.
SECTION 1.7 VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of stock of the corporation shall make, at least
ten (10) days before each meeting of shareholders, a complete list of
shareholders entitled to vote at such meeting, or any adjournment thereof,
arranged in alphabetical order, with the address of, the number and class and
series, if any, of shares held by, each shareholder. Such list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to inspection by any shareholder
at any time during usual business hours and such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the time of meeting.
SECTION 1.8 QUORUM. Except as may be otherwise provided in these
by-laws, the Articles of Incorporation or by law, a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders. If less than a majority of outstanding shares
entitled to vote are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
After a quorum has been established at any shareholders' meeting, the subsequent
withdrawal of shareholders, so as to reduce the number of shares entitled to
vote at the meeting below the number required for a quorum, shall not affect the
validity of any action taken at the meeting or any adjournment thereof.
-2-
SECTION 1.9 VOTING PER SHARE. Except as may be otherwise provided in
these by-laws, the Articles of Incorporation or by law, each shareholder
entitled to vote shall at every meeting of the shareholders be entitled to one
(1) vote for each share of voting stock held by him.
SECTION 1.10 VOTING OF SHARES. A shareholder may vote at any meeting
of sharehold- ers of the corporation, either in person or by proxy.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent or proxy designated by the by-laws of such
corporate shareholder or, in the absence of any applicable by-law, by such
person or persons as the Board of Directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the by-laws or other instrument of the corporate shareholder. In the
absence of any such designation or, in case of conflicting designation by the
corporate share- holder, the chairman of the board, the president, any vice
president, the secretary and the treasurer of the corporate shareholder shall be
presumed to possess, in that order, authority to vote such shares.
Shares held by an administrator, executor, personal representative,
guardian or conser- vator may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the name of
a trustee or custodian may be voted by him, either in person or by proxy, but no
trustee or custodian shall be entitled to vote shares held by him without a
transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name, if authority so to do is
contained in an appropriate order of the court by which such receiver was
appointed.
SECTION 1.11 PROXIES. Every shareholder entitled to vote at a meeting of
shareholders, or to express consent or dissent without a meeting, or his duly
authorized attorney-in-fact, may authorize another person to act for him by
proxy. Every proxy shall be in writing and shall be signed by the shareholder or
his attorney-in-fact. A proxy shall be filed with the secretary of the
corporation before or at the time of the meeting or before or at the time the
consent is given.
SECTION 1.12 MANNER OF ACTION. If a quorum is present, the affirmative
vote of a majority of the shares represented in person or by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
shareholders, unless the vote of a greater number or voting by classes is
required by these by-laws, the Articles of Incorporation or by law.
-3-
SECTION 1.13 ACTION WITHOUT A MEETING. Unless otherwise provided in the
Articles of Incorporation, action required or permitted to be taken at any
meeting of the shareholders may be taken without a meeting, without prior
notice, and without a vote if the action is taken by the holders of outstanding
shares of each voting group entitled to vote thereon having not less than the
minimum number of votes with respect to each voting group that would be
necessary to authorize or take such action at a meeting at which all voting
groups and shares entitled to vote thereon were present and voted. In order to
be effective, the action must be evidenced by one or more written consents
describing the action taken, dated and signed by approving shareholders having
the requisite number of votes of each voting group entitled to vote thereon, and
delivered to the corporation by delivery to its principal office in Florida, its
principal place of business, the corporate secretary, or another office or agent
of the corpora- tion having custody of the book in which proceedings of meetings
of shareholders are record- ed. No written consent shall be effective to take
the corporate action referred to herein unless, within sixty (60) days of the
date of the earliest dated consent delivered in the manner required by this
Section, written consents signed by the number of holders required to take
action are delivered to the corporation by delivery as set forth herein.
Any written consent may be revoked prior to the date that the
corporation receives the required number of consents to authorize the proposed
action. No revocation is effective unless in writing and until received by the
corporation at its principal office or its principal place of business, or
received by the corporate secretary or other officer or agent of the corporation
having custody of the book in which proceedings of meetings of shareholders are
recorded.
Within 10 days after obtaining such authorization by written consent,
notice must be given to those shareholders who have not consented in writing or
who are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action and, if the action be such for
which dissenters' rights are provided under the articles of incorporation or by
law, the notice shall contain a clear statement of the right of shareholders
dissenting therefrom to be paid the fair value of their shares upon compliance
with applicable law.
A consent signed as set forth in this Section has the effect of a
meeting vote and may be described as such in any document.
Whenever action is taken as set forth in this Section, the written
consent of the share- holders consenting thereto or the written reports of
inspectors appointed to tabulate such consents shall be filed with the minutes
of proceedings of shareholders.
SECTION 1.14 NOTIFICATION OF NOMINATION OF DIRECTORS. Nominations for
election to the Board of Directors of the Corporation at a meeting of
shareholders may be made by the Board of Directors or by any shareholder of the
Corporation entitled to vote for the election of
-4-
directors at such meeting who complies with the notice procedures set forth in
this Section 1.14. Such nominations, other than those made by or on behalf of
the Board of Directors, may be made only if notice in writing is personally
delivered to, or mailed by first class United States mail, postage prepaid, and
received by, the Secretary of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to such meeting; provided, however, that if
less than seventy (70) days' notice or prior public disclosure of the date of
the meeting is given to shareholders, such nomination shall have been mailed by
first class United States mail, postage prepaid, and received by, or personally
delivered to, the Secretary of the Corporation not later than the close of
business on the tenth (10th) day following the day on which notice of the date
of the meeting was mailed or such public disclosure was made, whichever occurs
first. Such notice shall set forth (a) as to each proposed nominee (i) the name,
age, business address and, if known, residence address of each such nominee,
(ii) the principal occupation or employment of each such nominee, (iii) the
number of shares, if any, of stock of the Corporation that are beneficially
owned by each such nominee and (iv) any other information concerning the nominee
that must be disclosed in proxy solicitations pursuant to the proxy rules of the
Securities and Exchange Commission if such person had been nominated, or
intended to be nominated, by the Board of Directors (including such person's
written consent to be named as a nominee and to serve as a director if elected);
and (b) as to the shareholder giving the notice (i) the name and address, as
they appear on the Corporation's books, of such shareholder, (ii) a
representation that such shareholder is a holder of record of shares of stock of
the Corporation entitled to vote at the meeting and the class and number of
shares of the Corporation which are beneficially owned by such shareholder,
(iii) a representa- tion that such shareholder intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice
and (iv) a description of all arrangements or understandings between such
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such shareholder. The Corporation also may require any proposed nominee to
furnish such other information as may reasonably be required by the Corporation
to determine the eligibility of such proposed nominee to serve as a director of
the Corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 1.15 NOTICE OF BUSINESS AT ANNUAL MEETINGS. At an annual meeting
of the shareholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, if such business
-5-
relates to the election of directors of the Corporation, the procedures in
Section 1.14 must be complied with. If such business relates to any other
matter, the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
personally delivered to, or mailed by first class United States mail, postage
prepaid, and received by, the Secretary of the Corporation not less than sixty
(60) days nor more than ninety (90) days prior to such meeting; PROVIDED,
HOWEVER, that if less than seventy (70) days' notice or prior public disclosure
of the date of the meeting is given to shareholders, such notice, to be timely,
must have been mailed by first class United States mail, postage prepaid, and
received by, or personally delivered to, the Secretary of the Corporation not
later than the close of business on the tenth (10th) day following the day on
which notice of the date of the meeting was mailed or such public disclosure was
made, whichever occurs first. A shareholder's notice to the Secretary of the
Corporation shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, (iii) a
representation that the shareholder is a holder of record of shares of stock of
the Corporation entitled to vote at the meeting and the class and number of
shares of the Corporation which are beneficially owned by the shareholder and
(iv) any material interest of the shareholder in such business. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
Section 1.15 and except that any shareholder proposal which complies with Rule
14a-8 of the proxy rules (or any successor provision) promulgated under the
Securities Exchange Act of 1934, as amended, and is to be included in the
Corporation's proxy statement for an annual meeting of sharehold- ers shall be
deemed to comply with the requirements of this Section 1.15.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.15, and if he should so
determine, he shall so declare to the meeting and the business not properly
brought before the meeting shall be disregarded.
ARTICLE 2 - BOARD OF DIRECTORS
SECTION 2.1 GENERAL POWERS. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, its Board of Directors.
SECTION 2.2 NUMBER, TERMS AND CLASSIFICATION. The Board of Directors of
the corporation shall consist of not less than one (1) but no more than nine (9)
persons, and shall be set by the Board of Directors from time to time. No
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. A director need not be
-6-
a citizen of the United States of America, nor a resident of the State of
Florida, nor a share- holder of the corporation. Each director shall hold office
until his successor shall have been elected and qualified or until his earlier
resignation, removal from office or death.
SECTION 2.3 REGULAR MEETINGS. An annual regular meeting of the Board of
Directors shall be held without notice immediately after, and at the same place
as, the annual meeting of shareholders for the purpose of the election of
officers and the transaction of such other business as may come before the
meeting, and at such other times and places as may be deter- mined by the Board
of Directors. The Board of Directors may, at any time and from time to time,
provide by resolution, the time and place, either within or without the State of
Florida, for the holding of the annual regular meeting or additional regular
meetings of the Board of Directors without other notice than such resolution.
SECTION 2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the chairman of the board, the vice chairman of the board, the
president or in their absence by any vice president or by a majority of the
Board of Directors.
The person or persons authorized to call special meetings of the Board
of Directors may designate any place, either within or without the State of
Florida, as the place for holding any special meeting of the Board of Directors
called by them. If no designation is made, the place of meeting shall be the
principal office of the corporation in the State of Florida.
Notice of any special meeting of the Board of Directors may be given by
any reasonable means, whether oral or written, and at any reasonable time prior
to such meeting. The reasonableness of any notice given in connection with any
special meeting of the Board of Directors shall be determined in light of all of
the pertinent circumstances. It shall be pre- sumed that notice of any special
meeting given at least five (5) days prior to such special meeting either orally
(whether telephonically or face-to-face), by facsimile transmission, or by
written notice delivered personally or mailed to each director at his business
or residence address, is reasonable. If mailed, such notice of any special
meeting shall be deemed to be delivered on the second day after it is deposited
in the United States mail, so addressed, with postage thereon prepaid. If notice
is given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Neither the business to be
transacted at, nor the purpose or purposes of, any special meeting of the Board
of Directors need be specified in the notice or in any written waiver of notice
of such meeting.
SECTION 2.5 WAIVER OF NOTICE OF MEETING. Notice of a meeting of the
Board of Directors need not be given to any director who signs a written waiver
of notice before, during or after the meeting. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place of the meeting, the time of the meeting and the
manner in which it has been called or convened, except when a director
-7-
states, at the beginning of the meeting, any objection to the transaction of
business because the meeting is not lawfully called or convened.
SECTION 2.6 QUORUM. A majority of the number of directors fixed by, or
in the manner provided in, these by-laws shall constitute a quorum for the
transaction of business; provided, however, that whenever, for any reason, a
vacancy occurs in the Board of Directors, a quorum shall consist of a majority
of the remaining directors until the vacancy has been filled.
SECTION 2.7 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken, unless
he votes against such action or abstains from voting in respect thereto because
of an asserted conflict of an interest.
SECTION 2.8 MANNER OF ACTION. Unless otherwise provided by law, the act
of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 2.9 ACTION WITHOUT A MEETING. Any action required to be taken at
a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors, may be taken without a meeting, without prior
notice, and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors and filed in the minutes of the
proceedings of the Board of Directors.
SECTION 2.10 MEETINGS OF THE BOARD OF DIRECTORS BY MEANS OF A
CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT. Members of the Board
of Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in person at a meeting.
SECTION 2.11 RESIGNATION. Any director may resign at any time by giving
written or oral notice to the chairman of the board, the president or the
secretary of the corporation. The resignation of any director shall take effect
immediately upon the receipt of such notice, or on any later date specified in a
written notice. The acceptance of any such resignation by the Board of Directors
shall not be required to make it effective.
SECTION 2.12 REMOVAL. Any director, or the entire Board of Directors,
may be removed at any time, with or without cause, by action of the holders of a
majority of the shares entitled to vote for the election of directors.
-8-
SECTION 2.13 VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 2.14 COMPENSATION. Each director may receive compensation and/or
reimbursement for his expenses for services rendered to the Company, including
but not limited to, service on the Board of Directors or any committee thereof.
No such payment shall preclude any director from serving the corporation in any
other capacity and receiving compen- sation therefor.
ARTICLE 3 - COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors, by resolution adopted by a majority of the whole
Board of Directors, may designate from among its members an executive committee
and one or more other committees each of which, to the extent provided in such
resolution, shall have and may exercise all the authority of the Board of
Directors, except as prohibited by law.
The Board of Directors, by resolution adopted by a majority of the whole
Board of Directors, shall designate a chairman for each committee it establishes
who shall preside at all meetings of such committee and who shall have such
additional duties as shall from time to time be designated by the Board of
Directors.
The Board of Directors, by resolution adopted by a majority of the whole
Board of Directors, may designate one or more directors as alternate members of
any such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
ARTICLE 4 - OFFICERS
SECTION 4.1 OFFICERS. The officers of the corporation may consist of a
chairman of the board, a vice chairman of the board, a chief executive officer,
a president, one or more vice presidents, a secretary, a treasurer and such
other officers and assistant officers as may be deemed necessary, and as shall
be approved, by the Board of Directors. Any two (2) or more offices may be held
by the same person. No officer need be a member of the Board of Directors.
-9-
SECTION 4.2 ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders. If the
election of officers shall not occur at such meeting, such election shall occur
as soon thereafter as practicable. Each officer shall hold office until his
successor shall have been duly elected and qualified, or until his earlier
resignation, removal from office or death.
SECTION 4.3 RESIGNATION. Each and every officer, employee and agent of
the corporation may resign from his respective office or position by giving
written or oral notice to the president or the secretary of the corporation. The
resignation of any officer, employee or agent of the corporation shall take
effect immediately upon the receipt of such notice, or on any later date
specified in a written notice, but the acceptance of any such resignation by the
Board of Directors shall not be required to make it effective.
SECTION 4.4 REMOVAL. Each and every officer, employee and agent of the
corporation may be removed from his respective office or position at any time,
with or without cause, by the affirmative vote of a majority of the whole Board
of Directors.
SECTION 4.5 VACANCIES. Any vacancy, however occurring, in any office
or position, may be filled by action of the Board of Directors.
SECTION 4.6 CHAIRMAN OF THE BOARD. The chairman of the board shall
preside as chairman of all meetings of the shareholders and of the Board of
Directors. The chairman may execute contracts, instruments and documents in the
name of the corporation, and appoint and discharge agents and employees. The
chairman of the board shall have duties as may be prescribed by the Board of
Directors from time to time.
SECTION 4.7 VICE CHAIRMAN OF THE BOARD. The vice chairman of the board
shall have the powers and duties incident to that office and shall have such
other powers and duties as may be prescribed from time to time by the Board of
Directors, or the chairman of the board. In the event of the incapacity of the
chairman of the board, the vice chairman of the board shall perform such duties
of the chairman of the board as the Board of Directors shall prescribe. In the
event of the resignation of the chairman of the board, the vice chairman of the
board shall have all of the power and duties of the chairman of the board until
such time as the chairman of the board is duly elected.
SECTION 4.8 CHIEF EXECUTIVE OFFICER. The chief executive officer shall
have general charge of the business of the corporation. He shall exercise the
powers and perform such duties as are incident to his office or are properly
required of him by the Board of Directors. He shall have supervisory management
and control of the affairs and business of the corpora- tion. He may sign or
countersign all certificates, contracts and other instruments of the corporation
as authorized by the Board of Directors and he may appoint and discharge agents
-10-
and employees. In the event of the incapacity of the chairman of the board, and
there being no vice chairman of the board, the chief executive officer shall
perform such duties of the chairman of the board as the Board of Directors shall
prescribe.
SECTION 4.9 PRESIDENT. The president shall be the chief operating
officer of the corporation and shall have the responsibility for supervising the
day-to-day management and affairs of the corporation. He shall keep the Board of
Directors and the chief executive officer fully informed and shall freely
consult with them concerning the business of the corporation in his charge. He
may sign or countersign all certificates, contracts, and other instruments of
the corporation as authorized by the Board of Directors and he may appoint and
discharge agents and employees. He shall do and perform such other duties as are
incident to his office or are properly required of him by the Board of
Directors. In the event of the incapacity of the chairman of the board, and
there being no vice chairman of the board or chief executive officer, the
president shall perform such duties of the chairman of the board as the Board of
Directors shall prescribe.
SECTION 4.10 VICE PRESIDENTS. Each vice president shall possess, and may
exercise, such power and authority, and shall perform such duties, as may from
time to time be assigned to him by the Board of Directors, the chief executive
officer or the president. In the event of the incapacity of the president, a
vice president designated by the Board of Directors shall perform such duties of
the president as the Board of Directors shall prescribe. A vice presi- dent may
execute contracts in the name of the corporation as authorized by the Board of
Directors.
SECTION 4.11 SECRETARY. The secretary shall keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose, see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law, be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized, and the
secretary shall possess, and may exercise, such power and authority, and shall
perform such duties, as may from time to time be assigned to him by the Board of
Directors and as are incident to the office of secretary.
SECTION 4.12 TREASURER. The treasurer shall have charge and custody of,
and be responsible for, all funds and securities of the corporation, receive and
give receipts for monies due and payable to the corporation from any source
whatsoever and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositaries as shall be utilized by the
corporation. He shall disburse the funds of the corporation in payment of the
just demands against the corporation, or as may be ordered by the president, the
chief executive officer or the Board of Directors, taking proper vouchers for
such disbursements, and shall render to the president, the chief executive
officer and the Board of Directors from time to time as may be required of him,
an account of all his transactions as treasurer and of
-11-
the financial condition of the corporation. In addition, the treasurer shall
possess, and may exercise such power and authority, and shall perform such
duties, as may from time to time be assigned to him by the Board of Directors
and as are incident to the office of treasurer.
SECTION 4.13 OTHER OFFICERS, EMPLOYEES AND AGENTS. Each and every other
officer, employee and agent of the corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to him by the Board of Directors, and such officer or officers
who may from time to time be designated by the Board of Directors to exercise
such supervisory authority.
SECTION 4.14 COMPENSATION. The compensation of the officers, employees
and agents of the corporation shall be fixed from time to time by the Board of
Directors or the officer or officers of the corporation who may from time to
time be designated by the Board of Directors to fix such compensation. The
payment of any compensation by the corporation to him shall not prevent any
officer, employee or agent of the corporation from serving the corporation in
any other capacity and receiving compensation therefor.
ARTICLE 5 - INDEMNIFICATION
This corporation shall indemnify and hold harmless each person who shall
serve at any time as a director or officer of the corporation from and against
any and all claims and liabilities to which such person shall have become
subject by reason of his having heretofore or hereafter been a director or
officer of the corporation, or by reason of any action alleged to have been
heretofore or hereafter taken or omitted by him as such director or officer, and
shall reimburse each such person for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability; PROVIDED,
HOWEVER, that no such person shall be indemnified against, or be reimbursed for
any expense incurred in connection with any claim or liability which shall be
finally adjudged to arise out of his own gross negligence or willful misconduct.
The rights accruing to any person under the foregoing provisions of this Article
shall not exclude any other rights to which he may be lawfully entitled, nor
shall anything herein contained restrict the right of the corporation to
indemnify or reimburse such person in any proper case even though not
specifically herein provided for.
The corporation, its directors, officers, employees and agents shall be
fully protected in taking any action or making any payment under this Article,
or in refusing so to do, in reliance upon the advice of counsel.
-12-
ARTICLE 6 - CERTIFICATES OF STOCK
SECTION 6.1 CERTIFICATES FOR SHARES. Certificates representing shares in
the corpora- tion shall be signed by the president, a vice president and the
treasurer, or an assistant treasurer or the secretary or an assistant secretary
and may be sealed with the seal of this corporation or a facsimile thereof. The
signatures of the president, a vice president and the treasurer, or an assistant
treasurer or the secretary or an assistant secretary may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or an employee of the corporation. In case any
officer who signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issuance.
SECTION 6.2 TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint one or more responsible banks or trust companies in such city or cities
as the board may from time to time deem advisable to act as transfer agents and
registrars of the stock of the corpora- tion; and, if and when such appointments
shall been made, no stock certificate shall be valid until countersigned by one
of such transfer agents and registered by one of such registrars.
SECTION 6.3 TRANSFER OF SHARES; OWNERSHIP OF SHARES. Transfers of shares
of stock of the corporation shall be made only upon the stock transfer books of
the corporation, and only after the surrender to the corporation of the
certificates representing such shares. The person in whose name shares stand on
the books of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes and the corporation shall not be bound to recognize any
equitable or other claim to, or interest in, such shares on the part of any
other person, whether or not it shall have express or other notice thereof,
except as provided by law.
SECTION 6.4 LOST CERTIFICATES. The corporation shall issue a new stock
certificate in the place of any certificate previously issued if the holder of
record of the certificate: (a) makes proof in affidavit form that the
certificate has been lost, destroyed or wrongfully taken; (b) requests the
issuance of a new certificate before the corporation has notice that the lost,
destroyed or wrongfully taken certificate has been acquired by a purchaser for
value in good faith and without notice of any adverse claim; (c) at the
discretion of the Board of Directors, gives bond in such form and amount as the
corporation may direct, to indemnify the corporation, the transfer agent and
registrar against any claim that may be made on account of the alleged loss,
destruction, or theft of a certificate; and (d) satisfies any other reasonable
requirements imposed by the corporation.
-13-
ARTICLE 7 - ACTIONS WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS
Unless otherwise directed by the Board of Directors, the chairman of the
board if he is present, or in his absence by the vice chairman, if any, or in
his absence by the president, or in his absence by any vice president who may be
present, shall have power to vote and otherwise act on behalf of the corporation
at any meeting of shareholders of, or with respect to, any action of
shareholders of any other corporation in which the corporation may hold
securities and to otherwise exercise any and all rights and powers which the
corporation may possess by reason of its ownership of securities in other
corporations.
ARTICLE 8 - AMENDMENTS
Alteration, amendment or repeal of these By-Laws may be made by a
majority of the shareholders entitled to vote at any meeting, or by the Board of
Directors by a majority vote of the directors at any regular or special meeting,
provided notice of such alteration, amendment or repeal has been given to each
director in writing at least three (3) days prior to said meeting.
ARTICLE 9 - GENDER
All words used in these by-laws in the masculine gender shall extend to
and shall include the feminine and neuter genders.
-14-
Exhibit 10.10
---------------------------------------------------------------
BROWARD COUNTY, FLORIDA
AND
HEICO AEROSPACE CORPORATION
------------------------------------
LOAN AGREEMENT
------------------------------------
Dated as of October 1, 1996
----------------------------------------------------------------
The interest of Broward County, Florida (the "Issuer") in this
Loan Agreement has been assigned (except for amounts payable under Sections
4.2(b), 7.2 and 8.4 hereof) pursuant to the Indenture of Trust dated as of the
date hereof from the Issuer to SunTrust Bank, Nature Coast, as trustee (the
"Trustee"), and is subject to the security interest of the Trustee thereunder.
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of October 1, 1996, between BROWARD
COUNTY, FLORIDA (the "Issuer") a political subdivision of the State of Florida
(the "State") and HEICO AEROSPACE CORPORATION, a corporation organized and
existing under the laws of the State of Florida (the "Company");
W I T N E S S E T H:
That the parties hereto, intending to be legally bound hereby,
and for and in consideration of the premises and the mutual covenants
hereinafter contained, do hereby covenant, agree and bind themselves as follows:
provided, that any obligation of the Issuer created by or arising out of this
Agreement shall never constitute a debt or a pledge of the faith and credit or
the taxing power of the Issuer or any political subdivision or taxing district
of the State of Florida but shall be payable solely out of the Trust Estate (as
defined in the Indenture), anything herein contained to the contrary by
implication or otherwise notwithstanding:
1
ARTICLE I
DEFINITIONS
All capitalized, undefined terms used herein shall have the same
meanings as used in Article I of the hereinafter defined Indenture. In addition,
the following words and phrases shall have the following meanings:
"Company Representative" means the authorized representative of
the Company empowered to act on behalf of the Company in the manner described
herein.
"Cost" with respect to the Project shall be deemed to include all
items permitted to be financed under the provisions of the Code and the Act.
"Default" means any Default under this Agreement as specified in
and defined by Section 8.1 hereof.
"Indenture" means the Indenture of Trust dated as of this date
between the Issuer and the Trustee, pursuant to which the Bonds are authorized
to be issued, and any amendments and supplements thereto.
"Issuance Costs" means all costs that are treated as costs of
issuing or carrying the Bonds under existing Treasury Department regulations and
rulings, including, but not limited to, (a) underwriter's spread (whether
realized directly or derived through purchase of the Bonds at a discount below
the price at which they are expected to be sold to the public); (b) counsel fees
(including bond counsel, underwriter's counsel, Issuer's counsel, Company
counsel, as well as any other specialized counsel fees incurred in connection
with the issuance of the Bonds); (c) financial adviser fees incurred in
connection with the issuance of the Bonds; (d) rating agency fees; (e) Trustee
fees incurred in connection with the issuance of the Bonds; (f) paying agent and
certifying and authenticating agent fees related to issuance of the Bonds; (g)
accountant fees related to the issuance of the Bonds; (h) printing costs of the
Bonds and of the preliminary and final offering materials; (I) publication costs
associated with the financing proceedings; (j) Issuer's closing fee of .5% of
the aggregate principal amount of Bonds issued and (k) costs of engineering and
feasibility studies necessary to the issuance of the Bonds; provided, that bond
insurance premiums and certain credit enhancement fees, to the extent treated as
interest expense under applicable regulations, shall not be treated as "Issuance
Costs."
"Issuance Fee" means a fee of 1/2 of 1% of up to the first $4
million of the aggregate principal amount of Bonds, which equals $17,500 to
which are issued to be payable to the Broward Economic Development Council.
"Issuer Representative" means the authorized representative of
the Issuer empowered to act on behalf of the Issuer in the manner described
herein.
"Mortgage" means the Mortgage and Security Agreement dated as of
October 1, 1996 from HEICO Aerospace Corporation to SunTrust Bank, South
Florida, National Association and Broward County.
2
"Net proceeds of the sale of the Bonds" means the proceeds from
the sale of the Bonds reduced by amounts in a reasonably required reserve or
replacement fund.
"Plans and Specifications" means the plans and specifications for
the Project submitted to the Bank and the Trustee.
"Project" means the Project Site, the Project Facilities and the
Project Equipment.
"Project Equipment" means the items of machinery, equipment, or
other tangible property described in EXHIBIT B hereof located on the Project
Site or used in connection within the Project Facilities and purchased with Bond
proceeds.
"Project Facilities" means those certain buildings or
improvements to buildings and all other facilities and improvements forming a
part of the Project existing or to be renovated, expanded or rehabilitated on
the Project Site and not constituting part of the Project Equipment, as they may
at any time exist, and which are described generally in EXHIBIT A hereto.
"Project Site" means the site located at 3000 Taft Street in the
City of Hollywood, Broward County, Florida on which the Project Facilities are
situated, and any other interests in real property, leasehold interests,
easements, licenses, and rights in real property hereafter acquired by the
Company with proceeds of the Bonds for use in connection with the Project.
"Qualified Project Costs" means costs and expenses of the Project
which constitute land costs or costs for property of a character subject to the
allowance for depreciation excluding specifically working capital and inventory
costs, provided, however, that (i) costs or expenses paid more than sixty (60)
days prior to the adoption by the Issuer of its resolution on May 28, 1996,
declaring its intent to reimburse Project expenditures with Bond proceeds, shall
not be deemed to be Qualified Project Costs; (ii) Issuance Costs shall not be
deemed to be Qualified Project Costs; (iii) interest during the Construction
Period shall be allocated between Qualified Project Costs and other costs and
expenses to be paid from the proceeds of the Bonds; (iv) interest following the
Construction Period shall not constitute a Qualified Project Cost; (v) letter of
credit fees and munici- pal bond insurance premiums which represent a transfer
of credit risk shall be allocated between Qualified Project Costs and other
costs and expenses to be paid from the proceeds of the Bonds; and (vi) letter of
credit fees and municipal bond insurance premiums which do not represent a
transfer of credit risk shall not constitute Qualified Project Costs.
"Requisition" means a written request for a disbursement from the
Construction Fund, signed by a Company Representative, substantially in the form
attached hereto as Exhibit C and satisfactorily completed as contemplated by
said form.
"State" means the State of Florida.
"Term of Agreement" means the term of this Agreement as specified
in Section 9.1 hereof.
3
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE
ISSUER. The Issuer represents, covenants and warrants that:
(a) The Issuer is a political subdivision of the State of
Florida. Under the provisions of the Act, the Issuer is authorized to
enter into the transactions contemplated by this Agree- ment and the
Indenture and to carry out its obligations hereunder and thereunder. The
Issuer has been duly authorized to execute and deliver this Agreement
and the Indenture.
(b) The Issuer covenants that it will not pledge the amounts
derived from this Agreement other than as contemplated by the Indenture.
SECTION 2.2. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE
COMPANY. The Company represents, covenants and warrants that:
(a) The Company is a corporation duly organized and validly
existing under the laws of the State of Florida. The Company is not in
violation of any provision of its Articles of Incorporation, as amended,
has the corporate power to enter into this Agreement, and has duly
authorized the execution and delivery of this Agreement, and is
qualified to do business and is in good standing under the laws of the
State.
(b) The Company agrees that during the Term of Agreement it will
maintain its existence, will not dissolve or otherwise dispose of all or
substantially all of its assets and will not consolidate with or merge
into another legal entity or permit one or more other legal entities to
consolidate with or merge into it, without the prior written consent of
the Issuer, the Bank and the Trustee.
(c) Neither the execution and delivery of this Agreement, the
Mortgage, the Guaran- ty, the Remarketing Agreement, the Credit
Agreement, the Tender Agent Agreement or the Pledge Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor
the fulfillment of or compliance with the terms and conditions hereof or
thereof conflicts with or results in a breach of the terms, conditions,
or provisions of any agreement or instrument to which the Company is now
a party or by which the Company is bound, or constitutes a default under
any of the foregoing, or results in the creation or imposition of any
lien, charge or encumbrance whatsoever upon any of the property or
assets of the Company under the terms of any such instrument or
agreement.
(d) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board
or body, known to be pending or threatened against or affecting the
Company or any of its officers, wherein an unfavorable decision, ruling,
or finding would materially adversely affect the transactions
contemplated by this Agreement or which would adversely affect, in any
way, the validity or enforceability of the Bonds, this Agreement, the
Mortgage, the Guaranty, the Pledge Agreement, the Tender Agent
Agreement, the Credit Agreement, the Remarketing Agreement, or any
agreement or instrument to which
4
the Company is a party, used or contemplated for use in the
consummation of the transactions contemplated hereby.
(e) The Project, to the best of the knowledge of the Company, is
of the type authorized and permitted by the Act, and its estimated Cost
is not less than $3,500,000.
(f) The proceeds from the sale of the Bonds will be used only for
payment of Costs of the Project.
(g) The Company will use due diligence to cause the Project to be
operated in accordance with the laws, rulings, regulations and
ordinances of the State and the depart- ments, agencies and political
subdivisions thereof. The Company has obtained or caused to be obtained
all requisite approvals of the State and of other federal, state,
regional and local governmental bodies for the renovation, expansion,
rehabilitation, improving and equipping of the Project.
(h) The Company will fully and faithfully perform all the duties
and obligations which the Issuer has covenanted and agreed in the
Indenture to cause the Company to perform and any duties and obligations
which the Company is required in the Indenture to perform. The foregoing
shall not apply to any duty or undertaking of the Issuer which by its
nature cannot be delegated or assigned.
(i) The issuance of the Bonds by the Issuer and the lending of
the proceeds thereof to the Company to enable the Company to renovate,
expand, rehabilitate and equip the Project have induced the Company to
locate the Project in the County which will directly result in an
increase in employment opportunities in the County.
SECTION 2.3. TAX-EXEMPT STATUS OF THE BONDS. The Company hereby
represents, warrants and agrees that the Tax Certificate and the Tax Regulatory
Agreement executed and delivered by the Company concurrently with the issuance
and delivery of the Bonds is true, accurate and complete in all material
respects as of the date on which executed and delivered.
SECTION 2.4. NOTICE OF DETERMINATION OF TAXABILITY. Promptly
after the Company first becomes aware of any Determination of Taxability, the
Company shall give written notice thereof to the Issuer and the Trustee.
5
ARTICLE III
ACQUISITION AND CONSTRUCTION
OF THE PROJECT;
ISSUANCE OF THE BONDS
SECTION 3.1. AGREEMENT TO RENOVATE, EXPAND, REHABILITATE AND
EQUIP THE PROJECT. The Company agrees to make all contracts and do all things
necessary for the renovation, expansion, rehabilitation and equipping of the
Project, with or without advertising for bids, and the Company agrees that it
will cause the Project Facilities to be constructed on the Project Site
substantially in accordance with the Plans and Specifications and that it will
cause the Project Equipment to be installed therein or located thereon. The
Company may make such change orders as it deems necessary or desirable provided,
however, that any change orders the cost of which, either individual- ly or in
the aggregate, shall exceed $100,000 shall be subject to the prior written
approval of the Bank.
The Company further agrees that it will renovate, expand,
rehabilitate and equip the Project with all reasonable dispatch and use its best
efforts to cause renovation, expansion, rehabilita- tion, equipping, and
occupancy of the Project Facilities to be completed by October 1, 1999, or as
soon thereafter as may be practicable, delays caused by FORCE MAJEURE as defined
in Section 8.1 hereof only excepted; but if for any reason such renovation,
expansion, rehabilitation and equipping is not completed by said date there
shall be no resulting liability on the part of the Company and no diminution in
or postponement of the payments required in Section 4.2 hereof to be paid by the
Company and the Company further agrees to keep the Project free of all
encumbrances except the permitted encumbrances set forth in Exhibit D and to
subject to the lien and security interest of the Mortgage each item of Project
Equipment prior to the delivery of the Bonds. The Company shall obtain mortgagee
title insurance in an amount not less than the principal amount of the Series
1996 Bonds insuring the Issuer's and the Trustee's interest under the Mortgage
and a current survey of the Project Site certified to the Issuer and the
Trustee.
SECTION 3.2. AGREEMENT TO ISSUE THE BONDS; APPLICATION OF BOND
PROCEEDS. In order to provide funds for the payment of a portion of the Cost of
the Project, the Issuer, concurrent- ly with the execution of this Agreement,
will issue, sell, and deliver the Bonds and deposit the net proceeds thereof
with the Trustee in the Construction Fund.
SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. The Issuer
has, in the Indenture, authorized and directed the Trustee to make disbursements
from the Construction Fund to pay the Costs of the Project, or to reimburse the
Company for any Cost of the Project paid by the Company. The Trustee shall not
make any disbursement from the Construction Fund until the Company shall have
provided the Trustee with a Requisition approved by the Bank in advance.
SECTION 3.4. FURNISHING DOCUMENTS TO THE TRUSTEE. The Company
agrees to cause such Requisitions to be directed to the Trustee as may be
necessary to effect payments out of the Construction Fund in accordance with
Section 3.3 hereof.
6
SECTION 3.5. ESTABLISHMENT OF COMPLETION DATE.
(a) The Completion Date shall be evidenced to the Issuer and the
Trustee by a certificate signed by a Company Representative stating that, except
for amounts retained by the Trustee at the Company's direction to pay any Cost
of the Project not then due and payable, (i) construction of the Project has
been substantially completed and all costs then due of labor, services,
materials and supplies used in such construction have been paid, (ii) all
equipment for the Project has been installed, such equipment so installed is
suitable and sufficient for the operation of the Project, and all costs then due
and expenses incurred in the acquisition and installation of such equipment have
been paid, and (iii) all other facilities necessary in connection with the
Project have been renovated, expanded, rehabilitated and equipped and all costs
and expenses incurred in connection therewith have been paid. Notwithstanding
the foregoing, such certificate shall state that it is given without prejudice
to any rights against third parties which exist at the date of such certificate
or which may subsequently come into being. Forthwith upon completion of the
renovation, expansion, rehabilitation and equipping of the Project, the Company
agrees to cause such certificate to be furnished to the Issuer and the Trustee.
Upon receipt of such certificate, the Trustee shall retain in the Construction
Fund a sum equal to the amounts necessary for payment of the Costs of the
Project not then due and payable according to such certificate. If any such
amounts so retained are not subsequently used, prior to any transfer of said
amounts to the General Account of the Bond Fund as provided below, the Trustee
shall give notice to the Company of the failure to apply said funds for payment
of the Costs of the Project. Any amount not to be retained in the Construction
Fund for payment of the Costs of the Project, and all amounts so retained but
not subsequently used, shall be transferred by the Trustee into the General
Account of the Bond Fund.
(b) As of the Completion Date, if at least ninety-five percent (95%) of
the net proceeds of the sale of the Bonds have not been used to pay Qualified
Project Costs, any amount (exclusive of amounts retained by the Trustee in the
Construction Fund for payment of Costs of the Project not then due and payable)
remaining in the Construction Fund shall be transferred by the Trustee into the
General Account of the Bond Fund and used by the Trustee (a) to redeem, or to
cause the redemption of, Bonds on the earliest redemption date permitted by the
Indenture without a premium, (b) to purchase Bonds on the open market prior to
such redemption date at prices not in excess of one hundred percent (100%) of
the principal amount of such Bonds, or (c) for any other purpose provided that
the Trustee is furnished with an opinion of Bond Counsel to the effect that such
use is lawful under the Act and will not require that interest on the Bonds be
included in gross income for federal income tax purposes. Until used for one or
more of the foregoing purposes, such segregated amount may be invested as
permitted by the Indenture provided that prior to any such investment the
Trustee is provided with an opinion of Bond Counsel to the effect that such
investment will not require that interest on the Bonds be included in gross
income for federal income tax purposes.
SECTION 3.6. COMPANY REQUIRED TO PAY IN EVENT CONSTRUCTION FUND
INSUFFICIENT. In the event the moneys in the Construction Fund available for
payment of the Costs of the Project should not be sufficient to pay the Costs of
the Project in full, the Company agrees to complete the Project and to pay that
portion of the Costs of the Project in excess of the moneys available therefor
in the Construction Fund. The Issuer does not make any warranty, either express
or implied, that the moneys paid into the Construction Fund and available for
payment of the Costs of the Project will be sufficient to pay all of the Costs
of the Project. The Company agrees that if after exhaustion of the moneys in the
Construction Fund, the Company should pay any portion of the Costs of the
Project pursuant to the provisions of this Section, the Company shall not be
entitled to any reimbursement
7
therefor from the Issuer, the Trustee or the Owners of any of the Bonds, nor
shall the Company be entitled to any diminution of the amounts payable under
Section 4.2 hereof. Costs of the Project shall include, but not be limited to,
conveyance, transfer and recording costs and all taxes and charges related
thereto.
SECTION 3.7. SPECIAL ARBITRAGE CERTIFICATIONS. The Company and
the Issuer covenant not to cause or direct any moneys on deposit in any fund or
account to be used in a manner which would cause the Bonds to be classified as
"arbitrage bonds" within the meaning of Section 148 of the Code, and the Company
certifies and covenants to and for the benefit of the Issuer and the Owners of
the Bonds that so long as there are any Bonds Outstanding, moneys on deposit in
any fund or account in connection with the Bonds, whether such moneys were
derived from the proceeds of the sale of the Bonds or from any other sources,
will not be used in a manner which will cause the Bonds to be classified as
"arbitrage bonds" within the meaning of Section 148 of the Code.
SECTION 3.8. DAMAGE, DESTRUCTION OR LOSS OF PROPERTY; OBLIGATION
TO REBUILD; USE OF INSURANCE PROCEEDS AND CONDEMNATION AWARDS. If prior to full
payment of all Bonds (or provision for payment thereof having been made in
accordance with the provisions of the Inden- ture), the Project, or any part or
component of the Project shall be damaged or destroyed, by whatever cause, or
shall be taken by any public authority or entity in the exercise of or acquired
under the threat of the exercise of its power of eminent domain, there shall be
no abatement or reduction in the Loan Installments payable under this Agreement,
and the Company will apply any insurance proceeds or condemnation awards
resulting from claims for such losses or takings as provided in this Section.
If prior to full payment of all Bonds (or provision for payment
thereof having been made in accordance with the provisions of the Indenture),
the Project, or any part or component of the Project shall be damaged,
destroyed, or the Project or any part or component of the Project, the Project
Site shall be taken by eminent domain or the threat of exercise of eminent
domain, the Company shall promptly give, or cause to be given, written notice
thereof to the Issuer, the Bank and the Trustee. All proceeds received from such
property insurance with respect to the Project and all condemnation awards with
respect to the Project shall be deposited with the Trustee to the credit of the
Construction Fund. Following the occurrence of such an event with respect to the
Project, the Company shall have the option of (1) continuing to pay all amounts
payable hereunder and to the extent permitted below proceeding promptly to
repair, rebuild, restore or replace the property damaged, destroyed or taken,
with such changes, alterations and modifications (including the substitution and
addition of other property) as may be desired by the Company and, with respect
to the Project, and as will comply with the limitations contained in this
Agreement, and the Trustee will deposit such proceeds to the credit of the
Construction Fund and make such disbursements therefrom, in accordance with
Section 3.3 hereof, as may be necessary to pay the cost of such repair,
rebuilding or restoration, either on completion thereof or as the work
progresses or (2) requesting the Issuer to cause the Bonds to be redeemed in
accordance with the terms of the Indenture.
SECTION 3.9. PURSUIT OF REMEDIES AGAINST CONTRACTORS,
SUBCONTRACTORS AND SURETIES. In the event of default of any contractor or
subcontractor, if any, under any contract made by it in connection with the
Project, the Company will promptly proceed, either separately or in conjunc-
8
tion with others, to exhaust its remedies against the contractor or
subcontractor so in default and against each surety for the performance of such
contract. The Company agrees forthwith to take such actions as may be necessary
or required to protect the interests of all parties with respect to the Project
unless directed to the contrary by the Trustee. Any amounts recovered by way of
damages, refunds, adjustments or otherwise in connection with the foregoing that
are needed to pay a portion of the cost of the Project shall be paid into the
applicable account in the Construction Fund.
ARTICLE IV
LOAN PROVISIONS; SUBSTITUTE
LETTER OF CREDIT
SECTION 4.1. LOAN OF PROCEEDS. The Issuer agrees, upon the terms
and conditions contained in this Agreement and the Indenture, to lend to the
Company the proceeds received by the Issuer from the sale of the Bonds. Such
proceeds shall be disbursed to or on behalf of the Company as provided in
Section 3.3 hereof.
SECTION 4.2. AMOUNTS PAYABLE.
(a) The Company hereby covenants and agrees to repay the loan, as
follows: on or before any Interest Payment Date for the Bonds or any other date
that any payment of interest, premium, if any, or principal or Purchase Price is
required to be made in respect of the Bonds pursuant to the Indenture, until the
principal of, premium, if any, and interest on the Bonds shall have been fully
paid or provision for the payment thereof shall have been made in accordance
with the Indenture, in immediately available funds, a sum which, together with
any other moneys available for such payment in any account of the Bond Fund,
will enable the Trustee to pay the amount payable on such date as Purchase Price
or principal of (whether at maturity or upon redemption or acceleration or
otherwise), premium, if any, and interest on the Bonds as provided in the
Indenture; provided, however, that the obligation of the Company to make any
payment hereunder shall be deemed satisfied and discharged to the extent of the
corresponding payment made by the Bank to the Trustee under the Letter of
Credit.
It is understood and agreed that all payments payable by the
Company under subsection (a) of this Section 4.2 are assigned by the Issuer to
the Trustee for the benefit of the Owners of the Bonds. The Company assents to
such assignment. The Issuer hereby directs the Company and the Company hereby
agrees to pay to the Trustee at the Principal Office of the Trustee all payments
payable by the Company pursuant to this subsection.
(b) The Company will also pay the Issuance Fee and reasonable
expenses of the Issuer related to the issuance of the Bonds and incurred upon
the written request of the Company and all reasonable ongoing costs and expenses
for any continuing duties or obligations of the Issuer related in any respect to
the Bonds, this Agreement, the Indenture or any other documents executed in
connection therewith after the issuance of the Bonds.
9
(c) The Company will also pay the reasonable fees and expenses of
the Trustee under the Indenture and all other amounts which may be payable to
the Trustee under Section 10.02 of the Indenture, such amounts to be paid
directly to the Trustee for the Trustee's own account as and when such amounts
become due and payable.
(d) The Company covenants, for the benefit of the Owners of the
Bonds, to pay or cause to be paid, to the Tender Agent, such amounts as shall be
necessary to enable the Tender Agent to pay the Purchase Price of Bonds
delivered to it for purchase, all as more particularly described in Sections
3.08, 4.01, 4.02 and 4.04 of the Indenture; PROVIDED, HOWEVER, that the
obligation of the Company to make any such payment under this subsection (d)
shall be reduced by the amount of moneys available for such payment described in
subsection (I) of Section 4.05 of the Indenture; and PROVIDED, FURTHER, that the
obligation of the Company to make any payment under this subsection (d) shall be
deemed to be satisfied and discharged to the extent of the corresponding payment
made by the Bank under the Letter of Credit.
(e)(i) In the event the Company should fail to make any of the
payments required in this Section 4.2, which are not otherwise paid by the Bank,
the item or installment so in default shall continue as an obligation of the
Company until the amount in default shall have been fully paid, and the Company
agrees to pay the same with interest thereon, to the extent permitted by law,
from the date when such payment was due, at the rate of interest borne by the
Bonds. (ii) In the event the Company should fail or refuse to comply with the
provisions of this Agreement or the Mortgage or the Indenture after the Letter
of Credit Termination Date, and such default continues for thirty (30) days
after written notice has been given by the Trustee, the Trustee may proceed,
subject to Section 9.03 of the Indenture, to protect and enforce the rights of
the Owners by mandamus or by action or suit in equity.
SECTION 4.3. OBLIGATIONS OF COMPANY UNCONDITIONAL. The
obligations of the Company to make the payments required in Section 4.2 and to
perform and observe the other agreements contained herein and in the Mortgage
shall be absolute and unconditional and shall not be subject to any defense or
any right of setoff, counterclaim or recoupment arising out of any breach by the
Issuer or the Trustee of any obligation to the Company, whether hereunder or
other- wise, or out of any indebtedness or liability at any time owing to the
Company by the Issuer or the Trustee, and, until such time as the principal of,
premium, if any, and interest on the Bonds shall have been fully paid or
provision for the payment thereof shall have been made in accordance with the
Indenture, the Company (i) will not suspend or discontinue any payments provided
for in Section 4.2 hereof, (ii) will perform and observe all other agreements
contained in this Agreement and in the Mortgage and (iii) except as otherwise
provided herein, will not terminate the Term of Agreement for any cause,
including, without limiting the generality of the foregoing, failure of the
Company to complete the renovation, expansion, rehabilitation and equipping of
the Project, the occurrence of any acts or circumstances that may constitute
failure of consideration, eviction or constructive eviction, destruction of or
damage to the Project, the taking by eminent domain of title to or temporary use
of any or all of the Project, commercial frustration of purpose, any change in
the tax or other laws of the United States of America or of the State or any
political subdivision of either thereof or any failure of the Issuer or the
Trustee to perform and observe any agreement, whether express or implied, or any
duty, liability or obligation arising out of or connected with this Agree- ment.
Nothing contained in this Section shall be construed as a waiver of any rights
of the Company or to release the Issuer or the Trustee from the performance of
any of the agreements on its part herein contained or contained in the Indenture
or the Mortgage, and in the event the Issuer or the
10
Trustee should fail to perform any such agreement on its part, the Company may
institute such action against the Issuer or the Trustee as the Company may deem
necessary to compel performance so long as such action does not abrogate the
obligations of the Company contained in the first sentence of this Section.
SECTION 4.4. SUBSTITUTE LETTER OF CREDIT. During the period in
which the Bonds bear interest at the Adjustable Rate, the Company may provide
for the delivery to the Trustee of a Substitute Letter of Credit. Any Substitute
Letter of Credit shall be delivered to the Trustee not less than sixty (60) days
prior to the expiration of the Letter of Credit it is being issued to replace,
shall be dated as of a date prior to the expiration date of the Letter of Credit
for which the same is to be substituted (which date may be subsequent to the
date of delivery of such Substitute Letter of Credit, but in any case such
Substitute Letter of Credit shall become effective prior to the expiration of
the Letter of Credit for which it is substituted), and shall expire on a date
which is fifteen days after an Interest Payment Date for the Bonds. On or before
the date of such delivery of a Substitute Letter of Credit to the Trustee, the
Company shall furnish to the Trustee (a) written evidence from each rating
agency by which the Bonds are then rated, to the effect that such rating agency
has reviewed the proposed Substitute Letter of Credit and that the substitution
of the proposed Substitute Letter of Credit will not, by itself, result in the
reduction or withdrawal of the then applicable rating(s) of the Bonds; (b) a
written opinion of Bond Counsel stating that the delivery of such Substitute
Letter of Credit will not adversely affect the exclusion from gross income of
interest on the Bonds for federal income tax purposes; and (c) a written opinion
of counsel to the Substitute Bank to the effect that the Substitute Letter of
Credit is a legal, valid, binding and enforceable obligation of the Substitute
Bank in accordance with its terms.
11
ARTICLE V
PREPAYMENT AND REDEMPTION
SECTION 5.1. PREPAYMENT AND REDEMPTION. The Company shall have
the option to prepay its obligations hereunder and under the Mortgage at the
times and in the amounts as neces- sary to exercise its option to cause the
Bonds to be redeemed as set forth in the Indenture and in the Bonds. The Company
hereby agrees that it shall prepay its obligations hereunder at the times and in
the amounts as necessary to accomplish the mandatory redemption of the Bonds as
set forth in the Indenture and in the Bonds. The Issuer, at the request of the
Company, shall forthwith take all steps (other than the payment of the money
required for such redemption) necessary under the applicable redemption
provisions of the Indenture to effect redemption of all or part of the
Outstanding Bonds, as may be specified by the Company, on the date established
for such redemption.
12
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.1. NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER.
THE ISSUER MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE PROJECT OR
THE CONDITION THEREOF, OR THAT THE PROJECT WILL BE SUITABLE FOR THE PURPOSES OR
NEEDS OF THE COMPANY. THE ISSUER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, THAT THE COMPANY WILL HAVE QUIET AND PEACEFUL POSSESSION OF THE
PROJECT. THE ISSUER MAKES NO REPRESENTATION OR WARRAN- TY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE MERCHANTABILITY, CONDITION OR WORKMANSHIP OF ANY PART OF THE
PROJECT OR ITS SUITABILITY FOR THE COMPAN- Y'S PURPOSES.
SECTION 6.2. ACCESS TO THE PROJECT. The Company agrees that the
Issuer, the Bank, the Trustee and their duly authorized agents, attorneys,
experts, engineers, accountants and representatives shall have the right to
inspect the Project during regular business hours and on reasonable notice. The
Issuer, the Bank, the Trustee and their duly authorized agents shall also be
permitted, at all reasonable times, to examine the books and records of the
Company with respect to the Project.
SECTION 6.3. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The
Issuer and the Company agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as may reasonably be
required for carrying out the expressed intention of this Agreement and the
Mortgage.
SECTION 6.4. ISSUER AND COMPANY REPRESENTATIVES. Whenever under
the provisions of this Agreement the approval of the Issuer or the Company is
required or the Issuer or the Company is required to take some action at the
request of the other, such approval or such request shall be given for the
Issuer by an Issuer Representative and for the Company by a Company
Representative. The Trustee shall be authorized to act on any such approval or
request.
SECTION 6.5. FINANCIAL REPORTS. After the Conversion Date, and
so long as any of the Bonds are Outstanding, the Company shall furnish or cause
to be furnished to the Trustee and the Issuer the following information:
(a) Within one hundred twenty (120) days after the close of each
fiscal year of the Company consolidated financial statements of the Company, and
thereafter a balance sheet of the Company as of the end of such fiscal year and
statements of income and surplus of the Company for such fiscal year, each
prepared in accordance with generally accepted accounting principles
consistently applied, in reasonable detail and certified by certified public
accountants of recognized standing.
(b) Within sixty (60) days after the close of each of the first
three quarters of the Company's fiscal year, a balance sheet of the Company as
of the end of such quarter, and a statement of income and surplus of the Company
for such quarter and for the period from the beginning of the then fiscal year
to the end of such quarter, prepared in accordance with generally
13
accepted accounting principles consistently applied (subject to year-end
adjustments), in reasonable detail and certified by a Company Representative.
(c) Upon request, copies of all such regular or periodic reports,
which are available for public inspection which the Company may be required to
file with any federal or state department, bureau, commission, or agency.
(d) Within one hundred twenty (120) days after the end of each
fiscal year, a certificate of a Company Representative stating whether the
Company is in compliance with all covenants and agreements made by the Company
in this Agreement and the Mortgage.
SECTION 6.6. FINANCING STATEMENTS. The Company agrees to execute
and file or cause to be executed and filed any and all financing statements or
amendments thereof or continua- tion statements necessary to perfect and
continue the perfection of the security interests granted in the Indenture and
the Mortgage. The Company shall pay all costs of filing such instruments.
SECTION 6.7. MAINTENANCE OF PROJECT. The Issuer and the Company
agree that the Company will (i) maintain, repair and operate the Project; and
(ii) pay, prior to any penalties accruing or the same becoming delinquent, all
taxes and governmental charges of any kind whatsoever that may at any time be
lawfully assessed or levied against the Company or the Issuer with respect to
the Project or any portion thereof or with respect to the original issuance of
the Bonds, including, without limiting the generality of the foregoing, any
taxes levied against the Company or the Issuer upon or with respect to the
income or profits of the Issuer from the Project or a charge on the loan
payments due hereunder prior to or on a parity with the charge under the
Indenture thereon and the pledge or assignment thereof to be created and made in
the Indenture, and including all ad valorem taxes lawfully assessed upon the
Project, all utility and other charges incurred in the operation, maintenance,
use, occupancy and upkeep of the Project, all assessments and charges lawfully
made by any governmental body against the Company or the Issuer on the loan
payments due hereunder; provided, however, that nothing in this subsection (ii)
shall require the payment of any such tax or charge or make provision for the
payment thereof, so long as the validity thereof shall be contested in good
faith by the Company by appropriate legal or administra- tive proceedings, and
further provided that, with respect to special assessments or other governmental
charges that may lawfully be paid in installments over a period of years, the
Company shall be obligated to pay only such installments as are required to be
paid during the Term of the Agreement.
SECTION 6.8. UNDERTAKING TO PROVIDE ONGOING DISCLOSURE.
(a) This Section 6.8 constitutes the written undertaking for the
benefit of the holders of the Bonds required by Section (b)(5)(i) of Securities
and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934,
as amended (17 CFR Part 240, ss. 240. 15c2-12) (the "Rule"), and shall apply
when and if the Company exercises the Conversion Option. It is the Company's
express intention that this Section 6.8 be assigned pursuant to and in accor-
dance with the terms of the Indenture to the Trustee for the benefit of the
Bondholders and that the Trustee and each Bondholder be a beneficiary of this
Section 6.8 with the right to enforce this Section 6.8 directly against the
Company. Capitalized terms used in this Section 6.8 and not
14
otherwise defined in this Agreement shall have the meanings assigned such terms
in subsection (d) hereof.
(b) The Company, as an "obligated person" within the meaning of
the Rule, undertakes to provide the following information as provided in this
Section 6.8:
(1) Annual Financial Information;
(2) Financial Statements, if any; and
(3) Material Event Notices.
(c) (1) Subject to the terms of this Section 6.8, the Company shall
while any Bonds are Outstanding provide the Annual Financial Information to the
Trustee on or before April 1 of each year after the election of the Conversion
Option (the "Submission Date"), and the Trustee shall provide to the Issuer and
to each then existing NRMSIR and the SID, if any, such Annual Financial
Information on or before April 30 of each year (the "Report Date") while any
Bonds are Outstand- ing or, if not received by the Trustee by the Submission
Date, then within fifteen (15) Business Days of its receipt by the Trustee. The
Company shall include with each submission of Annual Financial Information to
the Trustee and the Issuer a written representation addressed to the Trustee and
the Issuer to the effect that the Annual Financial Information is the Annual
Financial Informa- tion required by this Section 6.8 and that it complies with
the applicable requirements of this Section 6.8. The Company may adjust the
Submission Date and the Report Date if the Company changes its fiscal year by
providing written notice of the change of fiscal year and the new Submission
Date and Report Date to the Trustee, the Issuer, each then existing NRMSIR and
the SID, if any; provided that the new Report Date shall be one hundred twenty
(120) days after the end of the new fiscal year and the new Submission Date
shall be thirty (30) days prior to the Report Date, and provided further that
the period between the final Report Date relating to the former fiscal year and
the initial Report Date relating to the new fiscal year shall not exceed one
year in duration. It shall be sufficient if the Company provides to the Trustee
and the Issuer and the Trustee provides to each then existing NRMSIR and the
SID, if any, the Annual Financial Information by specific reference to documents
previously provided to each NRMSIR and the SID, if any, or filed with the
Securities and Exchange Commission and, if such a document is a final official
statement within the meaning of the Rule, available from the Municipal
Securities Rulemak- ing Board.
(2) If not provided as part of the Annual Financial Information,
the Company shall provide Financial Statements to the Trustee when and
if available while Bonds are Outstanding and the Trustee shall then
promptly provide the Issuer, each then existing NRMSIR and the SID, if
any, with such Financial Statements.
(3) (i) If a Material Event occurs while any Bonds are
Outstanding, the Company shall provide a Material Event Notice to the
Trustee in a timely manner and the Trustee shall promptly provide to the
Issuer, the Municipal Securities Rulemaking Board and the SID, if any,
such Material Event Notice. Each Material Event Notice shall be so
captioned and shall prominently state the date, title and CUSIP numbers
of the Bonds.
15
(ii) The Trustee shall promptly advise the Company whenever, in the
course of per- forming its duties as Trustee under the Indenture, the
Trustee identifies an occurrence which, if material, would require the
Company to provide a Material Event Notice pursuant to clause (2)(i);
provided that the failure of the Trustee so to advise the Company shall
not constitute a breach by the Trustee of any of its duties and
responsibilities hereunder.
(4) The Trustee shall, without further direction or instruction
from the Compa- ny, provide in a timely manner to the Municipal
Securities Rulemaking Board and to the SID, if any, notice of any
failure while any Bonds are Outstanding by the Trustee to provide to
each then existing NRMSIR and the SID, if any, Annual Financial
Information on or before the Report Date (whether caused by failure of
the Company to provide such information to the Trustee by the Submission
Date or for any other reason). For the purposes of determining whether
information received from the Company is Annual Financial Information,
the Trustee shall be entitled conclusively to rely on the Company's
written representation made pursuant to clause (c)(1) of this Section
6.8.
(5) If the Company provides to the Trustee information relating
to the Company or the Bonds, which information is not designated as a
Material Event Notice, and directs the Trustee to provide such
information to information repositories, the Trustee shall provide such
information in a timely manner to the Issuer, the Municipal Securities
Rulem- aking Board and the SID, if any.
(d) The following are the definitions of the capitalized terms
used in this Section and not otherwise defined in this Agreement.
(1) "Annual Financial Information" means the financial
information (which shall be based on financial statements prepared in
accordance with generally accepted accounting principles ("GAAP")) or
operating data with respect to the Company, provided at least annually,
of the type included in the official statement or other offering
document utilized in connection with the remarketing of Bonds after the
Conversion Option, which Annual Financial Information shall include
Financial Statements.
(2) "Financial Statements" means the Company's annual financial
statements, prepared in accordance with GAAP, and if audited,
accompanied by the report of the certified public accountant.
(3) "Material Event" means any of the following events, if
material, with respect to the Bonds.
(i) Principal and interest payment delinquencies;
(ii) Non-payment related defaults;
(iii) Unscheduled draws on debt service reserves reflecting
financial difficulties;
(iv) Unscheduled draws on credit enhancements reflecting
financial difficulties;
16
(v) Substitution of credit or liquidity providers, or their
failure to perform;
(vi) Adverse tax opinions or events affecting the tax-exempt
status of the security;
(vii) Modifications to rights of security holders;
(viii) Bond calls;
(ix) Defeasances;
(x) Release, substitution, or sale of property securing
repayment of the securi- ties; and
(xi) Rating changes.
(4) "Material Event Notice" means written or electronic notice of
a Material Event.
(5) "NRMSIR" means a nationally recognized municipal securities
information repository, as recognized from time to time by the
Securities and Exchange Commission for the purposes referred to in the
Rule; the NRMSIRs as of the date of this Agreement being as follows:
Thomson Municipal Services, Inc. of New York
Moody's Investor's Service (NRMSIR) of New York
Kenny Information Systems, Inc. of New York
Bloomberg Municipal Reposites of Princeton, New Jersey
Disclosure Inc. of Bethesda, Maryland
R.R. Donnelley Financial of Hudson, Massachusetts
(6) "SID" means a state information depository as operated or
designated by the State as such for the purposes referred to in the
Rule.
(e) Unless otherwise required by law and subject to technical and
economic feasibility, the Company and the Trustee shall employ such methods of
information transmission as shall be requested or recommended by the designated
recipients of the Company's information.
(f) The continuing obligation hereunder of the Company to provide Annual
Financial Information and Material Event Notices and the Trustee's obligations
under this Section 6.8 shall terminate immediately once the Bonds no longer are
Outstanding. This Section 6.8, or any provision hereof, shall be null and void
in the event that the Company delivers to the Trustee and the Issuer an opinion
of Bond Counsel to the effect that those portions of the Rule which require this
Section 6.8, or any such provisions, are invalid, have been repealed
retroactively or otherwise do not apply to the Bonds; provided that the Trustee
shall have provided notice of such delivery and the cancellation of this Section
6.8 to each then existing NRMSIR and the SID, if any. This
17
Section 6.8 may be amended without the consent of the Bondholders, but only upon
the delivery by the Company to the Trustee and the Issuer of the proposed
amendment and an opinion of nationally recognized bond counsel to the effect
that such amendment, and giving effect thereto, will not adversely affect the
compliance of this Section and by the Company with the Rule; provided that the
Trustee shall have provided notice of such delivery and of the amendment to each
then existing NRMSIR and the SID, if any.
(g) Any failure by the Company to perform in accordance with this
Section 6.8 shall not constitute an "Event of Default" under Article VIII
hereof, and the rights and remedies provided by Article VIII upon the occurrence
of an "Event of Default" shall not apply to any such failure. Neither the Issuer
nor the Trustee shall have any power or duty to enforce this Section 6.8.
(h) The Company shall reimburse the Trustee for any expenses incurred by
the Trustee in complying with the requirements of this Section 6.8.
(i) The Company shall comply with the requirements of Rule 15c2-12.
18
ARTICLE VII
ASSIGNMENT, SELLING, LEASING;
INDEMNIFICATION; REDEMPTION INSURANCE
SECTION 7.1. ASSIGNMENT, SELLING AND LEASING. This Agreement may
be assigned and the Project may be sold or leased, as a whole or in part, with
the prior written consent of the Bank and the Issuer, but without the necessity
of obtaining the consent of the Trustee; PROVIDED, however, that no such
assignment, sale or lease shall, in the opinion of Bond Counsel, result in
interest on any of the Bonds becoming includable in gross income for federal
income tax purposes, or shall otherwise violate any provisions of the Act;
PROVIDED FURTHER, however, that no such assignment, sale or lease shall relieve
the Company and the Guarantors of any of its obligations under this Agreement
for the period of time from the date of this Agreement to the date of such
transfer unless the assignee, purchaser or lessee shall have executed an
assumption agreement reasonably satisfactory to the Issuer and the Issuer
shall have consented to such assignment, sale or lease which consent shall not
be unreasonably withheld whereupon the Company shall be relieved of its
obligations under this Agreement and from and after the date of such assumption,
the Company shall no longer be liable thereupon.
SECTION 7.2. RELEASE AND INDEMNIFICATION COVENANTS.
(a) The Company shall and hereby agrees to indemnify and save the
Issuer and the Trustee harmless against and from all claims by or on behalf of
any person, firm, corporation or other legal entity arising from the conduct or
management of, or from any work or thing done on, the Project during the Term of
Agreement, including without limitation, (i) any condition of the Project, (ii)
any breach or default on the part of the Company in the performance of any of
its obligations under this Agreement, (iii) any act or negligence of the Company
or of any of its agents, contractors, servants, employees or licensees or (iv)
any act or negligence of any assignee or lessee of the Company, or of any
agents, contractors, servants, employees or licensees of any assignee or lessee
of the Company. The Company shall indemnify and save the Issuer and the Trustee
harmless from any such claim arising as aforesaid, or in connection with any
action or proceeding brought thereon, as well as from any claim arising from the
presence, disposal, release or threatened release of any Hazardous Substances
(as such term is defined in the Environmental Indemnification Agreement dated as
of October 1, 1996 between the Company and the Bank) and upon notice from the
Issuer or the Trustee, the Company shall defend them or either of them in any
such action or proceeding. The provisions of this Section shall survive the
payment in full of the obligations due hereunder.
(b) Notwithstanding the fact that it is the intention of the
parties hereto that the Issuer shall not incur any pecuniary liability by reason
of the terms of this Agreement or the undertakings required of the Issuer
hereunder, by reason of the issuance of the Bonds, by reason of the execution of
the Indenture or by reason of the performance of any act requested of the Issuer
by the Company, including all claims, liabilities or losses arising in
connection with the violation of any statutes or regulation pertaining to the
foregoing; nevertheless, if the Issuer should incur any such pecuniary
liability, then in such event the Company shall indemnify and hold the Issuer
harmless against all claims, demands or causes of action whatsoever, by or on
behalf of any person, firm or corporation or other legal entity arising out of
the same or out of any information provided by the
19
Company in any offering statement in connection with the sale or resale of the
Bonds and all costs and expenses incurred in connection with any such claim or
in connection with any action or proceeding brought thereon, and upon notice
from the Issuer, the Company shall defend the Issuer in any such action or
proceeding. All references to the Issuer in this Section 7.2 shall be deemed to
include its commissioners, directors, officers, employees, and agents.
Notwithstanding anything to the contrary contained herein, the
Company shall have no liability to indemnify the Issuer against claims or
damages resulting from the Issuer's own gross negligence or willful misconduct
or to indemnify the Trustee against claims or damages resulting from the
Trustee's own negligence or willful misconduct.
Notwithstanding anything to the contrary contained herein, this
provision 7.2 shall remain in effect after the termination of this Agreement.
SECTION 7.3. ISSUER TO GRANT SECURITY INTEREST TO TRUSTEE. The
parties hereto agree that pursuant to the Indenture, the Issuer shall assign to
the Trustee, in order to secure payment of the Bonds, all of the Issuer's right,
title, and interest in and to this Agreement, except for the Issuer's rights
under Sections 4.2(b), 7.2 and 8.4 hereof.
SECTION 7.4. INDEMNIFICATION OF TRUSTEE. The Company shall and
hereby agrees to indemnify the Trustee for, and hold the Trustee harmless
against, any loss, liability or expense (including the costs and expenses of
defending against any claim of liability) incurred without gross negligence or
willful misconduct by the Trustee and arising out of or in connection with its
acting as Trustee under the Indenture.
SECTION 7.5. MAINTENANCE, OPERATION AND INSURING OF PROJECT;
TAXES; NO OPERATION OF PROJECT BY ISSUER. The Company hereby agrees that it will
at its own expense maintain and operate all portions of the Project during their
useful lives or until they are replaced with facilities necessary in their
operation. The Company further agrees that, except for taxes contested in good
faith, it will pay all taxes levied with respect to the Project and the income
therefrom and that it will at its own expense keep the Project properly insured
against loss or damage from such perils usually insured against by businesses
operating or owning like properties and maintain public liability insurance and
all such worker's compensation or other similar insurance as may be required by
law. Evidence of such insurance will be furnished to the Trustee, Issuer and the
Bank upon request. Nothing contained in this Agreement shall be deemed to
authorize or require the Issuer to operate the Project or to conduct any
business enterprise in connection therewith.
20
ARTICLE VIII
DEFAULTS AND REMEDIES
SECTION 8.1. DEFAULTS DEFINED. The following shall be "Defaults"
under this Agreement and the term "Default" shall mean, whenever it is used in
this Agreement, any one or more of the following events:
(a) Failure by the Company to pay any amount required to be
paid under subsection (a) or (d) of Section 4.2 hereof.
(b) Failure by the Company to observe and perform any covenant,
condition or agreement on its part to be observed or performed, other than as
referred to in Section 8.1(a), for a period of thirty (30) days after written
notice specifying such failure and requesting that it be remedied shall have
been given to the Company by the Issuer or the Trustee, unless the Issuer and
the Trustee shall agree in writing to an extension of such time prior to its
expiration; provided, however, if the failure stated in the notice cannot be
corrected within the applicable period, the Issuer and the Trustee will not
unreasonably withhold their consent to an extension of such time if correc- tive
action is instituted by the Company within the applicable period and diligently
pursued until such failure is corrected.
(c) The dissolution or liquidation of the Company, except as
authorized by Section 2.2 hereof, or the voluntary initiation by the Company of
any proceeding under any federal or state law relating to bankruptcy,
insolvency, arrangement, reorganization, readjustment of debt or any other form
of debtor relief, or the initiation against the Company of any such proceeding
which shall remain undismissed for sixty (60) days, or failure by the Company to
promptly have discharged any execution, garnishment or attachment of such
consequence as would impair the ability of the Company to carry on its
operations at the Project, or assignment by the Company for the benefit of
creditors, or the entry by the Company into an agreement of composition with its
creditors or the failure generally by the Company to pay its debts as they
become due.
(d) The occurrence of a Default under the Indenture.
The provisions of subsection (b) of this Section are subject to the following
limitation: if by reason of FORCE MAJEURE the Company is unable in whole or in
part to carry out any of its agreements contained herein (other than its
obligations contained in Article IV hereof), the Company shall not be deemed in
Default during the continuance of such inability. The term "FORCE MAJEURE" as
used herein shall mean, without limitation, the following: acts of God; strikes
or other industrial disturbances; acts of public enemies; orders or restraints
of any kind of the government of the United States of America or of the State or
of any of their departments, agencies or officials, or of any civil or military
authority; insurrections; riots; landslides; earthquakes; fires; storms;
droughts; floods; explosions; breakage or accident to machinery, transmission
pipes or canals; and any other cause or event not reasonably within the control
of the Company. The Company agrees, however, to remedy with all reasonable
dispatch the cause or causes preventing the Company from carrying out its
agreement, provided that the settlement of strikes and other industrial
disturbances shall be entirely within the discretion of the Company and the
Company shall not be required to settle strikes, lockouts and other industrial
21
disturbances by acceding to the demands of the opposing party or parties when
such course is in the judgment of the Company unfavorable to the Company.
SECTION 8.2. REMEDIES ON DEFAULT. Whenever any Default referred
to in Section 8.1 hereof shall have happened and be continuing, the Trustee, or
the Issuer with the written consent of the Trustee, may take one or any
combination of the following remedial steps:
(a) If the Trustee has declared the Bonds immediately due and
payable pursuant to Section 9.02 of the Indenture, by written notice to the
Company, declare an amount equal to all amounts then due and payable on the
Bonds, whether by acceleration of maturity (as provided in the Indenture) or
otherwise, to be immediately due and payable, whereupon the same shall become
immediately due and payable;
(b) Have reasonable access to and inspect, examine and make
copies of the books and records and any and all accounts, data and income tax
and other tax returns of the Company during regular business hours of the
Company if reasonably necessary in the opinion of the Trustee; or
(c) Take whatever action at law or in equity may appear necessary
or desirable to collect the amounts then due and thereafter to become due, or to
enforce performance and obser- vance of any obligation, agreement or covenant of
the Company under this Agreement.
Any amounts collected pursuant to action taken under this Section
shall be paid into the Bond Fund and applied in accordance with the provisions
of the Indenture, except for anything collected pursuant to Section 4.2(b), 7.2
or 8.4 hereof which shall be applied to costs related thereto.
SECTION 8.3. NO REMEDY EXCLUSIVE. Subject to Section 9.02 of the
Indenture, no remedy herein conferred upon or reserved to the Issuer or the
Trustee is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under this Agreement or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or power accruing
upon any Default shall impair any such right or power or shall be construed to
be a waiver thereof, but any such right or power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle the Issuer or
the Trustee to exercise any remedy reserved to it in this Article, it shall not
be necessary to give any notice, other than such notice as may be required in
this Article. Such rights and remedies as are given the Issuer hereunder shall
also extend to the Trustee, and the Trustee and the Owners of the Bonds, subject
to the provisions of the Indenture, shall be entitled to the benefit of all
covenants and agreements herein contained.
SECTION 8.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In
the event the Company should default under any of the provisions of this
Agreement and the Issuer should employ attorneys or incur other expenses for the
collection of payments required hereunder or the enforce- ment of performance or
observance of any obligation or agreement on the part of the Company herein
contained, the Company agrees that it will on demand therefor pay to the Issuer
the reason- able fee of such attorneys and such other expenses so incurred by
the Issuer.
22
SECTION 8.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the
event any agreement contained in this Agreement should be breached by either
party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
23
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 TERM OF AGREEMENT. This Agreement shall remain in
full force and effect from the date hereof to and including October 1, 2011 or
until such time as all of the Bonds and the fees and expenses of the Issuer and
the Trustee and all amounts payable to the Bank under the Credit Agreement shall
have been fully paid or provision made for such payments, whichever is later;
provided, however, that this Agreement may be terminated prior to such date
pursuant to Article V of this Agreement.
SECTION 9.2. NOTICES. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed given
when delivered or mailed by registered mail, postage prepaid, addressed as
follows:
If to the Issuer: Broward County, Florida
Broward County Finance and Administrative
Services Department
115 South Andrews Avenue, Room 121
Fort Lauderdale, Florida 33301
Attention: Assistant Finance Director
with a copy to:
County Attorney's Office
Broward County Governmental Center
115 South Andrews Avenue, Suite 423
Fort Lauderdale, Florida 33301
Attention: Lori Smith-Lalla, Esq.
If to the Trustee: SunTrust Bank, Nature Coast
c/o SunTrust Bank, Central Florida, National
Association
225 East Robinson Street, Suite 250
Orlando, Florida 32801
Attention: Corporate Trust Department
If to the Company: HEICO Aerospace Corporation
3000 Taft Street
Hollywood, Florida 33521
Attention: Treasurer
with a copy to:
Weil, Gotshal & Manges LLP
701 Brickell Avenue, Suite 2100
Miami, Florida 33131
Attention: Richard A. Morrison, Esq.
24
If to the Bank: SunTrust Bank, South Florida, National
Association
501 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Attention: Corporate Banking Division
with a copy to:
SunTrust Bank, Atlanta
c/o SunTrust International
Services Inc.
25 Park Place, 16th Floor-3706
Atlanta, Georgia 30303
Attention: Corporate Banking Division
If to the issuer of a Its address designated in
Substitute Letter of Credit: writing to the Trustee
If to the Remarketing Agent: Its Principal Office
If to the Tender Agent: SunTrust Bank, Nature Coast
c/o SunTrust Bank, Central Florida, National
Association
225 East Robinson Street, Suite 250
Orlando, Florida 32801
Attention: Corporate Trust Department
If to Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: Corporate Department,
Structured Finance Group
If to S&P: Standard & Poor's Ratings Group
The McGraw Hill Companies
25 Broadway
New York, New York 10004
Attention: Corporate Finance Department
A duplicate copy of each notice, certificate or other communication given
hereunder by the Issuer or the Company shall also be given to the Trustee and
the Bank. The Issuer, the Company, the Trustee and the Bank may, by written
notice given hereunder, designate any further or different addresses to which
subsequent notices, certificates or other communications shall be sent.
SECTION 9.3 BINDING EFFECT. This Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Company, the Bank, the
Trustee, the Owners of Bonds and their
25
respective successors and assigns, subject, however, to the limitations
contained in Section 2.2(b) hereof.
SECTION 9.4. SEVERABILITY. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invali- date or render unenforceable any
other provision hereof.
SECTION 9.5. AMOUNTS REMAINING IN FUNDS. Subject to the
provisions of Section 6.11 of the Indenture, it is agreed by the parties hereto
that any amounts remaining in any account of the Bond Fund, the Construction
Fund, or any other fund (other than the Rebate Fund) created under the Indenture
upon expiration or earlier termination of this Agreement, as provided in this
Agreement, after payment in full of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture) and the
fees and expenses of the Trustee in accordance with the Indenture, shall belong
to and be paid to the Company by the Trustee.
SECTION 9.6. AMENDMENTS, CHANGES AND MODIFICATIONS. Subsequent to
the issuance of Bonds and prior to their payment in full (or provision for the
payment thereof having been made in accordance with the provisions of the
Indenture), and except as otherwise herein expressly provided, this Agreement
may not be effectively amended, changed, modified, altered or terminated without
the written consent of the Trustee and, prior to the Letter of Credit
Termination Date and payment of all amounts payable to the Bank under the Credit
Agreement, the consent of the Bank, in accordance with the provisions of the
Indenture.
SECTION 9.7. EXECUTION IN COUNTERPARTS. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
SECTION 9.8. APPLICABLE LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State.
SECTION 9.9. CAPTIONS. The captions and headings in this
Agreement are for convenience only and in no way define, limit or describe the
scope or intent of any provisions or Sections of this Agreement.
26
IN WITNESS WHEREOF, the Issuer and the Company have caused this
Agreement to be executed in their respective corporate names and their
respective corporate seals to be hereunto affixed and attested by their duly
authorized officers, all as of the date first above written.
(SEAL) BROWARD COUNTY, FLORIDA
Attest: By:______________________________
Title: Chair
By:___________________________________
Title: Assistant County Administrator
(SEAL) HEICO AEROSPACE CORPORATION
Attest: By:______________________________
Title:
By: ___________________________________
Title:
27
EXHIBIT A
PROJECT FACILITIES
The Project Facilities consist of an approximately 147,000 square foot
manufacturing facility located at 3,000 Taft Street, Hollywood, Florida.
1
EXHIBIT B
PROJECT EQUIPMENT
Laser cutting, drilling and welding equipment
Product development test and design equipment
Furniture and work stations
Machinery
Miscellaneous support and other equipment,
all to the extent purchased with the proceeds of the Bonds,
and located or used at the Project Facilities
1
EXHIBIT C
REQUISITION NO. ___
BROWARD COUNTY
Industrial Development Revenue Bonds
(HEICO Aerospace Corporation Project),
Series 1996
REQUISITION FOR PAYMENT
--------------------------------------
HEICO Aerospace Corporation, referred to herein and in the Loan
Agreement (the "Agreement") dated as of October 1, 1996, between Broward County,
Florida (the "Issuer") and HEICO Aerospace Corporation, a Florida corporation
(the "Company"), does hereby make application to SunTrust Bank, Nature Coast, as
trustee (the "Trustee") under the Indenture of Trust (the "Indenture") between
the Issuer and the Trustee, dated as of October 1, 1996, for reimburse- ment or
payment of advances, payments and obligations made or incurred by the Company in
connection with the renovation, expansion, rehabilitation and equipping of the
Project Facilities (as defined in the Agreement) and the issuance, delivery and
sale of the $3,500,000 Broward County Industrial Development Revenue Bonds
(HEICO Aerospace Corporation Project), Series 1996, as provided for or
contemplated in the Agreement and the Indenture.
All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Agreement and the Indenture.
The Company does hereby request disbursement of the amounts as
set forth on EXHIBIT A attached to this certificate, for reimbursement to the
Company for payments made to, or incurred for, the contractors or payees listed
on EXHIBIT A or for direct payment to the payees listed on EXHIBIT A, all as
provided on EXHIBIT A.
The undersigned further certifies that:
(i) the obligations described in EXHIBIT A (which includes a
description of the purpose and circumstances of such obligations in
reasonable detail and the name and address of the persons to whom such
obligations are owed and which is accom- panied by bills, invoices, or
statements of account for, or other written evidence of, such
obligations) in the stated amounts have been incurred in connection with
the issuance and sale of the Bonds or the financing, planning, design,
renovation, expansion, rehabilitation and equipping of the Project;
1
(ii) such obligations are permitted Costs of the Project, are
proper charges against the account in the Construction Fund and have not
been the basis for any previous disbursement from any account in the
Construction Fund;
(iii) no item in EXHIBIT A represents any portion of an
obligation which the Company is, as of the date hereof, entitled to
retain under any retained percentage agreement;
(iv) insofar as any obligation described in EXHIBIT A was
incurred for labor, services, materials, supplies or equipment (i) such
labor and services were actually performed in a satisfactory manner in
connection with the renovation, expansion, rehabilitation and equipping
of the Project and (ii) such materials, supplies and equipment were
actually used in connection with the acquisition, construction and
equipping of the Project or were delivered to the Project Site (and
remain at the Project Site) for that purpose;
(v) all sums previously advanced by the Trustee have been used
solely for purposes permitted by the Indenture and the specific items
which are the subject of this requisition will be so used;
(vi) there has not been recorded or filed with or served upon
the Compa- ny, notice of any lien, right to lien or attachment upon or
claim affecting the right to receive payment of, any moneys payable to
any of the persons or firms named in this requisition, which has not
been released or will not be released simultaneously with the payment of
such obligation;
(vii) each item in EXHIBIT A is or was appropriate in
connection with the renovation, expansion, rehabilitation and equipping
of the Project, as noted in EXHIBIT A;
(viii) the use of the disbursements requested hereunder will not
result in the covenants made by the Company in the Agreement being
violated. Accordingly, one of the following statements applies to the
requested disbursement:
(a) If all disbursements from the Construction Fund to be
used to pay Issuance Costs have not yet been made, the disbursement
requested hereunder will be used only to pay either Qualified Project
Costs or Issuance Costs.
(b) If all Issuance Costs to be paid with proceeds of the
Bonds have previously been requisitioned but the aggregate Qualified
Project Costs paid with previous disbursements and to be paid with the
disbursement requested hereunder do not equal or exceed substantially
all of the Costs of the Project paid (or to be paid) with the requested
and all previous disbursements, the disbursement requested hereunder
will be used only for Qualified Project Costs.
2
(c) If all Issuance Costs to be paid with proceeds of the
Bonds have previously been requisitioned and the aggregate Qualified
Project Costs paid with previous disbursements equals or exceeds
substantially all of the Costs of the Project paid with those previous
disbursements, the disbursement requested hereunder, when added to all
disbursements under previous requisitions, will not result in less than
substantially all of the total of such disbursements having been used to
pay Qualified Project Costs;
(ix) all disbursements related to Issuance Costs of the Bonds,
requested hereunder, when added to all disbursements for such Issuance
Costs under previous requisitions, will not result in more than two
percent (2%) of the proceeds of the Bonds having been drawn from the
Construction Fund or otherwise used to pay such Issuance Costs;
(x) no Event of Default under the Indenture has occurred and
is continu- ing and there exists no event or condition which, with the
giving of notice or the passage of time would constitute an Event of
Default under the Indenture; and
(xi) after payment of such disbursement, sufficient amounts
will remain in the Construction Fund, taking into account investment
earnings thereon, to pay all remaining unpaid costs of the Project which
are to be financed with proceeds of the Bonds.
Dated as of ___________, 199_.
HEICO Aerospace Corporation
By:_______________________________
Its:______________________________
Approved by SunTrust Bank, South Florida, National Association
By:__________________________
Authorized Representative
3
EXHIBIT D
Those matters set forth in Schedule B - Section 2 of the Commitment for
Title Insurance issued by Chicago Title Insurance Company, which is identified
as Commitment No. _____________________________ and bears an effective date of
October __, 1996.
1
EXHIBIT E
FORM OF NOTE
AFTER THE ENDORSEMENT OF THIS NOTE AS HEREIN PROVIDED, THIS NOTE MAY NOT BE
ASSIGNED, PLEDGED, ENDORSED OR OTHERWISE TRANSFERRED EXCEPT TO A SUCCESSOR OF
THE TRUSTEE UNDER THE TRUST INDENTURE REFERRED TO IN THE LOAN AGREEMENT REFERRED
TO HEREIN.
PROMISSORY NOTE
$3,500,000 October 18, 1996
FOR VALUE RECEIVED, HEICO Aerospace Corporation, a corporation organized
and existing under the laws of the State of Florida (the "Borrower"), by this
promissory note promises to pay to the order of Broward County, Florida (the
"Issuer") the principal sum of Three Million Five Hundred Thousand and No/100
Dollars ($3,500,000) which principal amount shall be due and payable on October
1, 2011.
The Borrower further agrees to pay interest on the unpaid principal
amount from the date of authentication and delivery of the Series 1996 Bonds
until the principal amount and all interest thereon is paid in full which shall
be paid on each Interest Payment Date (as defined in the Indenture hereinaf- ter
mentioned) at the rate of interest equal to the Adjustable Rate (as defined in
the Indenture) or the Fixed Rate (as defined in the Indenture), as applicable.
This Promissory Note is the "Note" referred to in the Loan Agreement
dated as of October 1, 1996 (the "Loan Agreement"), between the Borrower and the
Issuer and is entitled to the benefits thereof and subject to the conditions
thereof. Terms not otherwise defined herein shall have the definitions set forth
in the Loan Agreement.
Under the Loan Agreement, the Issuer has loaned to the Borrower the
proceeds received from the sale of the Issuer's $3,500,000 Industrial
Development Revenue Bonds (HEICO Aerospace Corporation Project), Series 1996
(the "Series 1996 Bonds"). The Series 1996 Bonds have been issued, concurrently
with the execution and delivery of this Note, pursuant to, and are secured by,
the Indenture of Trust between the Issuer and SunTrust Bank, Nature Coast, as
Trustee (the "Trustee") dated as of October 1, 1996 (the "Indenture" or the
"Trust Indenture"). The Series 1996 Bonds bear interest at the Adjustable Rate
prior to the Conversion Date (as defined in the Indenture) and at the Fixed Rate
on or subsequent to the Conversion Date. Such interest is payable on the
applicable Interest Payment Dates. This Note shall bear interest at the
Adjustable Rate or the Fixed Rate, whichever is applicable, during the same
periods as such rates are borne by the Series 1996 Bonds.
Borrower shall make payments of principal and interest on this Note in
amounts which will be sufficient to enable the Issuer to pay when due the total
amount of principal of (whether at maturity, upon acceleration or otherwise),
premium, if any, and interest on the Series 1996 Bonds. To the extent that
principal of, premium, if any, or interest on the Series 1996 Bonds shall be
paid, there shall be credited against unpaid principal of or interest on this
Note, as the case may be, an amount equal to the
2
principal of or interest on the Series 1996 Bonds so paid. The principal of,
premium, if any, and interest on this Note are payable in immediately available
funds of any coin or currency of the United States of America which on the
respective dates of payment thereof shall be legal tender for the payment of
public and private debts.
In addition, the Borrower agrees to pay when due in immediately
available funds all other amounts at the time the Issuer or the Trustee, on
behalf of the Issuer, may be required to pay the same pursuant to the Loan
Agreement, the Series 1996 Bonds or the Indenture.
The obligation of the Borrower to make the payments required hereunder
shall be absolute and unconditional without any defense, recoupment or right of
set-off by reason of any default by the Issuer under the Loan Agreement or for
any other reason.
Upon the occurrence of an Event of Default specified in the Loan
Agreement, the unpaid principal hereof interest hereon may become forthwith due
and payable as provided in the Loan Agreement, and in the event the Borrower
shall fail to pay any amount required to be paid under this Note when due, the
Borrower shall pay interest on such amount at a rate per annum equal to the
Adjustable Rate or the Fixed Rate, as applicable to the Series 1996 Bonds at the
time of such occurrence, or the maximum rate permitted by law, whichever is
lower.
The Borrower may at its option, and may under certain circumstances be
required to, prepay all or any part of the unpaid principal of this Note upon
the terms provided in the Loan Agreement.
The Borrower hereby promises to pay all costs of collection, including
reasonable attorneys' fees and disbursements, without regard to any statutory
presumption, in the case of a default under this Note or the Loan Agreement. The
Borrower hereby waives presentment, protest and notice of protest or dishonor.
This Note shall be construed in accordance with the laws of the State of
Florida.
2
IN WITNESS WHEREOF, the Borrower has caused this instrument to be
executed in its corporate name by its duly authorized officer and its corporate
seal to be affixed hereto all as of the date first above written.
HEICO AEROSPACE CORPORATION
[SEAL] By: _______________________________
Name: _______________________________
Title: _______________________________
3
ENDORSEMENT
Pay to the order of SunTrust Bank, Nature Coast, as Trustee for the
benefit of the Bondholders under the Trust Indenture dated as of October 1,
1996, between the Issuer and the Trustee, without recourse. This endorsement is
given and made without any warranty as to the authority and genuineness of the
signature of the maker of the foregoing Promissory Note.
This 18th day of October, 1996.
BROWARD COUNTY, FLORIDA
By: _______________________________
Title: _______________________________
4
Exhibit 10.11
SUNTRUST BANK REIMBURSEMENT AGREEMENT
This SunTrust Bank Reimbursement Agreement, dated as of the 1st
day of October, 1996 (the "Agreement"), by and between HEICO AEROSPACE
CORPORATION, a Florida corporation (the "Company"), and SUNTRUST BANK, SOUTH
FLORIDA, NATIONAL ASSOCIATION (the "Bank"),
W I T N E S S E T H:
WHEREAS, Broward County, Florida, a political subdivision of the
State of Florida (the "Issuer") (i) is issuing $3,500,000 principal amount of
Broward County, Florida, Industrial Development Revenue Bonds (HEICO Aerospace
Corporation Project), Series 1996 (the "Bonds"), and (ii) is loaning the
proceeds of the sale of the Bonds to the Company to finance the renovation,
expansion, rehabilitation and equipping of the Company's existing facility for
manufacturing aircraft parts (the "Project") on a tract of land located at 3000
Taft Street, Hollywood, Broward County, Florida, all pursuant to an Indenture of
Trust, dated as of October 1, 1996 (the "Indenture"), between the Issuer and
SunTrust Bank, Nature Coast, as trustee (the "Trustee"), and a Loan Agreement,
dated as of October 1, 1996 (the "Loan Agreement"), between the Issuer and the
Company; and
WHEREAS, the Bonds are variable rate demand bonds that are
convertible into fixed rate bonds at the option of the Company and otherwise in
accordance with the Indenture; and
WHEREAS, in order to provide liquidity and credit support for the
Bonds and thereby to enhance the marketability thereof, the Issuer required, as
a condition precedent to the issuance of the Bonds and the making of such loan
to the Company, that the Company obtain and deliver to the Trustee for the
benefit of the holders of the Bonds an irrevocable letter of credit to secure
payment of the Bonds; and
WHEREAS, the Company has requested the Bank, and the Bank has
agreed, to issue its letter of credit in the form attached as Exhibit "A" (the
"Letter of Credit"), in accordance with the terms and conditions of this
Agreement, and in accordance with the terms of the Indenture; and
WHEREAS, the Company has agreed to pay the Bank certain fees in
connection with such Letter of Credit and to reimburse the Bank for all payments
made by the Bank thereunder.
NOW, THEREFORE, in consideration of the foregoing premises and in
order to induce the Bank to issue the Letter of Credit, the parties hereto
hereby agree as follows:
SECTION 1. DEFINITIONS. In addition to the defined terms in the
preamble to this Agreement (capitalized terms not otherwise defined herein shall
have the meanings provided in the Indenture), the following terms shall have the
following meanings as used herein, unless the context otherwise requires:
"ADA" means, collectively, the Americans with Disabilities Act of
1990 and the Florida Americans with Disabilities Accessibility Implementation
Act.
"ADA INDEMNITY" means the agreement to comply with the Americans
with Disabilities Act of 1990 dated as of October 1, 1996, between the Company
and the Bank.
"A DRAWING" shall have the meaning specified in the Letter of
Credit, which shall be a drawing in respect of the payment of the portion of the
purchase price of Bonds corresponding to principal of the Bonds.
"AGREEMENT" means this SunTrust Bank Reimbursement Agreement,
including all exhibits, appendices and schedules hereto, by and between the
Company and the Bank, as the same may be modified, amended, supplemented or
extended from time to time.
"B DRAWING" shall have the meaning specified in the Letter of
Credit, which shall be a drawing in respect of the payment of principal of the
Bonds.
"BANK" means SunTrust Bank, South Florida, National Association,
acting as issuer of the Letter of Credit.
"BOND COUNSEL" means such nationally recognized bond counsel
appointed by the Issuer.
"BONDHOLDERS" means the registered owners of record of the Bonds
as shown in the Bond registration books of the Issuer maintained by the Trustee.
"BONDS" means the Broward County, Florida Industrial Development
Revenue Bonds (HEICO Aerospace Corporation Project), Series 1996, and any bonds
duly issued, in exchange or replacement therefor, including temporary bonds, if
any, authorized under the Indenture.
"BUSINESS DAY" means any day on which the corporate trust office
of the Trustee and commercial banks located in Orlando, Florida, Fort
Lauderdale, Florida and Atlanta, Georgia are required or permitted by law to be
open for the purpose of conducting a commercial banking business.
"C DRAWING" shall have the meaning specified in the Letter of
Credit, which shall be a drawing in respect of the payment of interest, or the
portion of the purchase price corresponding to interest, on the Bonds.
2
"CASH COLLATERAL ACCOUNT" means the Yield Restricted Cash
Collateral Account/HEICO Aerospace Corporation created pursuant to the Custodial
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, including, when appropriate, the statutory predecessor of the
Code, and all applicable regulations thereunder whether proposed, temporary or
final, including regulations issued and proposed pursuant to the statutory
predecessor of the Code, and, in addition, all official rulings and judicial
determinations applicable under the Code and under the statutory predecessor of
the Code and any successor provisions to the relevant provisions of the Code or
regulations.
"COMPANY" means HEICO Aerospace Corporation, a Florida
corporation, and its successors and assigns.
"COMPANY DOCUMENTS" means, collectively, the Indenture, the Loan
Agreement, the Note, the Mortgage, the Remarketing Agreement, the Tender Agent
Agreement, the Custodial Agreement, the Environmental Indemnity, the ADA
Indemnity and the Bonds.
"CONVERSION DATE" means the date on which the interest rate on
the Bonds is converted from the Adjustable Rate to the Fixed Rate in accordance
with the terms of the Indenture.
"COSTS" means Cost as defined in the Loan Agreement.
"CUSTODIAN" means SunTrust Bank, Central Florida, National
Association, and any successor thereto acting as custodian of the Cash
Collateral Account under the Custodial Agreement.
"CUSTODIAL AGREEMENT" means that certain Custodial Agreement
dated as of October 1, 1996, by and among the Company, the Bank and the
Custodian.
"DEBT" shall mean all interest-bearing indebtedness for money
borrowed, purchase money mortgages or security agreements, capitalized leases,
conditional sales contracts and similar title- retention instruments of
indebtedness. "Debt" shall include both short- and long-term maturities of
indebtedness.
"DEFAULT" means any of the events specified in Section 8 herein,
whether or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"ENVIRONMENTAL INDEMNITY" means the Environmental Indemnification
Agreement dated as of October 1, 1996, from the Company to the Bank.
"ERISA" means the Employee Retirement Income Security Act of
1974, and all related provisions of the Code, as the same may be
3
amended, supplemented or modified from time to time, together with all
applicable rulings and regulations issued under the provisions of either of
them.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which, together with the Company, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code.
"EVENT OF DEFAULT" means any of the events specified in Section 8
herein provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXPIRATION DATE" means the date upon which the Bank's
obligations under the Letter of Credit expire as set forth therein.
"FIRST REIMBURSEMENT AGREEMENT" means the SunBank Reimbursement
Agreement dated as of February 28, 1994, between the Company and the Bank (f/k/a
SunBank/South Florida, National Association) related to the Issuer's Industrial
Development Revenue Bonds (HEICO Corporation Project), Series 1988.
"FIXED INTEREST RATE" means the interest rate applicable to the
Bonds after the Conversion Date, established in accordance with Section 2.02(d)
of the Indenture.
"GAAP" means generally accepted accounting principles as defined
by the Financial Accounting Standards Board as from time to time in effect that
are consistently applied and, when used with respect to the Company, that are
consistent with the accounting practice of the Company, reflected in the
financial statements for the Company, with such changes as may be approved by an
independent public accountant satisfactory to the Bank.
"GUARANTORS" MEANS, collectively, Jet Avion Corporation, a
Florida corporation, LPI Industries Corporation, a Florida corporation, Aircraft
Technology, Inc., a Florida corporation, HEICO and HEICO-Newco, Inc., a Florida
corporation.
"GUARANTY" means each Unconditional Guarantee of Payment and
Performance dated as of October 1, 1996, made by each Guarantor in favor of the
Bank, executed and delivered to the Bank contemporaneously herewith, and
"Guaranties" means all of such instruments collectively.
"HAZARDOUS MATERIALS" means any petroleum product, and any
hazardous, toxic or dangerous waste, substance or material defined as such in
Hazardous Materials Law.
"HAZARDOUS MATERIALS LAWS" means, collectively, all federal,
state and local laws, ordinances or regulations, now or
4
hereafter in effect, relating to environmental conditions or Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.
9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901,
et seq., (the "RCRA"), the Clean Air Act, 42 U.S.C. ss. 7401, et seq. (the
"CAA"), the Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 through 2929
(the "TSCA"), and all similar federal, state and local laws and ordinances,
together with all regulations now or hereafter adopted, published or promulgated
pursuant thereto.
"HEICO" means HEICO Corporation, a Florida corporation.
"INDENTURE" means the Indenture of Trust, dated as of October 1,
1996, between the Issuer and the Trustee pursuant to which the Bonds are issued.
"INTEREST COMPONENT" means that portion of the Stated Amount of a
Letter of Credit equal to the sum of 50 days' interest on the series of Bonds
secured by such Letter of Credit, computed at the rate of 13% per annum,
notwithstanding the actual rates of interest borne by the Bonds.
"INTEREST RATE" means 2% over the Prime Rate, adjusted daily with
any change in the Prime Rate, based on a year containing 360 days, for the
actual number of days elapsed.
"ISSUER" means Broward County, Florida, as issuer of the Bonds.
"LEGAL REQUIREMENTS" means (i) any and all present and future
judicial decisions, statutes, rulings, directions, rules, regulations, permits,
certificates, ordinances or other requirements of any governmental or public
entity of in any way applicable to the Company or the Project, including,
without limitation, the ownership, use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction thereof, (ii) the Company's
presently or subsequently effective Bylaws and Certificate of Incorporation, and
(iii) any and all terms, provisions and conditions of any and all leases,
indentures and other contracts (written or oral) of any nature applicable to or
binding on the Project or the Company, including, without limitation, any lease
or other contract pursuant to which the Company is granted a possessory interest
in the Project.
"LETTER OF CREDIt" means the direct draw irrevocable letter of
credit issued by the Bank for the account of the Company to secure payment of
the principal of and interest on the Bonds prior to the Conversion Date, in the
form set forth in Exhibit "A" hereto, executed and delivered by the Bank
contemporaneously herewith, and all extensions thereof.
5
"Lien" means, as to any asset, (a) any lien, charge, claim,
mortgage, security interest, pledge or other encumbrance of any kind with
respect to such asset, (b) any interest of a vendor or lessor under any
conditional sale agreement, capitalized lease or other title retention agreement
relating to such asset, (c) any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
affecting such asset, or (d) any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"LOAN AGREEMENT" means the Loan Agreement, dated as of October 1,
1996, between the Issuer and the Company.
"MAXIMUM INTEREST RATE" means the maximum interest rate permitted
by applicable law.
"MORTGAGE" means the Mortgage and Security Agreement dated as of
October 1, 1996, executed by the Company, as mortgagor, in favor of the Bank and
the Issuer, as mortgagees.
"1988 BONDS" means the Broward County, Florida Industrial
Development Revenue Bonds (HEICO Corporation Project), Series 1988.
"NOTE" means the Promissory Note from the Company to the Issuer
dated October 18, 1996 in the principal amount of $3,500,000.
"PBGC" means the Pension Benefit Guaranty Corporation
and any successor thereto.
"PAYMENT OBLIGATIONS" means all amounts payable by the Company to
the Bank under Section 2 or any other provision hereof.
"PERMITTED ENCUMBRANCES" shall have the meaning ascribed thereto
in the Mortgage.
"PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture or
other entity or a government or any agency or political subdivision thereof.
"PLAN" means any plan of a type described in Section 402 1(a) of
ERISA which may be established or maintained by the Company in respect of which
the Company or an ERISA Affiliate is an "employer" as defined in Section 3(5) of
ERISA.
6
"PLEDGE AGREEMENT" means the Pledge and Security Agreement dated
as of October 1, 1996 by and between the Company and the Bank, and any
amendments and supplements thereto.
"PLEDGED BONDS" means all Bonds that have been purchased with
proceeds from a draw on the Letter of Credit, for which the Bank has not been
reimbursed in accordance with this Agreement and which have been pledged to the
Bank under the terms of the Pledge Agreement.
"PRIME RATE" means the annual interest rate announced by SunTrust
Banks of Florida, Inc. from time to time as its Prime Rate, which interest rate
is only a benchmark, is purely discretionary, and is not necessarily the best or
lowest rate charged borrowing customers of any subsidiary of SunTrust Banks of
Florida, Inc.
"PROJECT" means the renovation, expansion, rehabilitation and
equipping of the Company's existing facility for manufacturing aerospace and
defense parts on a tract of land located at 3000 Taft Street, Hollywood, Broward
County, Florida, as more particularly described in Exhibit A to the Loan
Agreement, including all fixtures therein and all equipment, machinery and other
personalty financed with proceeds of the Bonds, all as described in the Loan
Agreement.
"RELATED DOCUMENTS" means, collectively, the Letter of Credit,
this Agreement, the Guaranties, the Pledge Agreement, the Tender Agent Agreement
and any other agreement or instrument, relating to any of the above.
"REMARKETING AGREEMENT" means the Remarketing Agreement dated as
of October 1, 1996 between the Company and the Remarketing Agent.
"REPORTABLE EVENT" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"SECOND MORTGAGE" means the Second Mortgage and Security
Agreement dated as of February 28, 1994, from the Company to the Bank.
"STATED AMOUNT" shall have the meaning ascribed thereto in the
Letter of Credit.
"SUBSIDIARY" means any corporation of which more than fifty
percent (50%) of the outstanding shares of stock of each class having ordinary
voting power (other than stock having such power only by reason of the happening
of a contingency) is at the time owned by the Company or HEICO.
7
"SUNTRUST BANK LOAN AGREEMENT" collectively means the Loan
Agreement among the Bank, HEICO and the Company, dated as of February 28, 1994,
as amended by a First Amendment to Loan Agreement and Reaffirmation Agreement
dated as of October 13, 1994, a Second Amendment to Loan Agreement dated as of
March 1, 1995, and any further modifications, amendments or supplements thereto,
or any successor document pursuant to which the Bank makes available to the
Company and/or HEICO or any Subsidiary a line of credit.
"TRUSTEE" means SunTrust Bank, Nature Coast, as Trustee under the
Indenture.
Each accounting term not defined herein, and each accounting term
partly defined herein to the extent not completely defined, shall have the
meaning given to it under GAAP.
SECTION 2. APPLICATION, REIMBURSEMENT AND OTHER PAYMENTS.
(a) The Company hereby applies to the Bank for, and authorizes
and instructs the Bank to issue, the Letter of Credit in the amount of the
Stated Amount. The Principal Component shall not exceed $3,500,000, and the
Interest Component shall be an amount equal to 50 days' interest on the Bonds,
computed at a rate of 13% per annum, notwithstanding the actual rate borne from
time to time by the Bonds.
(b) The amount available under the Letter of Credit shall be
reduced and reinstated as described in the Letter of Credit.
(c) The Company hereby agrees to pay, or to cause to be paid,
to the Bank
(i) on the date that any amount is drawn and paid under the
Letter of Credit under a B Drawing or a C Drawing, a sum equal to such
amount drawn;
(ii) in the event any Bonds are purchased pursuant to an A
Drawing under the Letter of Credit pursuant to Sections 2.02(c), 4.01,
4.02 or 4.04 of the Indenture, on a date no later than the earlier of
ninety (90) days after the date such drawing is made or the date the
Letter of Credit expires, a sum equal to such amount drawn and paid, and
in the event any Bonds are purchased pursuant to an A Drawing under the
Letter of Credit pursuant to Section 3.08 of the Indenture, on the date
of such draw, a sum equal to such amount drawn;
(iii) upon each transfer of the Letter of Credit in accordance
with its terms to a successor Trustee under the Indenture, in addition
to a fee of $1,500, a sum in such amount as shall be necessary to cover
the transfer fee, costs
8
and expenses of the Bank incurred in connection with such transfer;
(iv) on demand, any amount that is paid by the Bank in connection
with its exercise of its discretionary rights pursuant to Sections 9(b)
and 9(c) of this Agreement;
(v) on demand, interest on any and all amounts unpaid by the
Company when due hereunder from the date such amounts become due until
payment in full, at the Interest Rate;
(vi) with respect to a drawing under the Letter of Credit
referred to in subparagraph (ii) above, if the amount of such drawing is
not due and payable immediately, monthly interest on the first day of
each month on unreimbursed amounts outstanding from the date of the
drawing to the date the Bank receives reimbursement in full of the
amount of any such drawing at the Prime Rate; provided, however, that
with respect to all drawings referred to in subparagraph (ii) above,
from and after such time as such unreimbursed drawings become due,
interest thereon shall accrue at the Interest Rate and shall be payable
on demand;
(vii) on demand, any and all expenses incurred by the Bank Bank
(including, without limitation, reasonable attorneys' fees) in enforcing
any rights under this Agreement;
(viii) the Company shall be permitted to treat as a credit
against the interest payable pursuant to clause (c)(vi) above, any
payments of interest received by the Bank in respect of Pledged Bonds
delivered to the Bank pursuant to the Pledge Agreement which payments do
not constitute the proceeds of a draw upon the Letter of Credit;
(ix) on the date hereof, a commitment fee of one-half of one
percent (0.50%) of the initial Stated Amount of the Letter of Credit
(less any portion of such commitment fee already paid by the Company to
the Bank);
(x) commencing on the date hereof, and continuing on the first
day of each month hereafter during the term of the Letter of Credit, a
fee equal to one twelfth (1/12) of the annual fee of one percent (1%) of
the excess, if any, of the Stated Amount of the Letter of Credit over
the balance in the Cash Collateral Account on the date of payment of
such fee;
(xi) Company will timely pay or cause to be paid the sums due
under Section 25 hereof at the times required thereby; and
(xii) a standard negotiation and reinstatement fee in the amount
of $100 for each draw (whether for principal, interest
9
or purchase price of Bonds) on the Letter of Credit, payable at the
time of each draw upon the Letter of Credit.
(d) If any change in any law or regulation or in the
interpretation thereof, as the same may be applied by any court or
administrative or governmental authority charged with the administration
thereof, or any change shall occur in generally accepted accounting principles
which shall be mandated and not optionally elected by Bank, shall either (i)
impose, modify or deem applicable any reserve, capital adequacy, special deposit
or similar requirement against letters of credit issued by the Bank similar in
form, type, purpose or amount to the Letter of Credit or (ii) impose on the Bank
any other condition relating, either directly or indirectly, to this Agreement
or the Letter of Credit, and the result of any event referred to in clause (i)
or (ii) above shall be to increase the cost to the Bank of issuing or
maintaining the Letter of Credit (which increase in costs may be the result of
the Bank's reasonable pro rata allocation of the aggregate of such cost
increases resulting from such events), then, (A) the Bank shall so notify the
Company and (B) upon receipt of such notice from the Bank, the Company shall
immediately pay to the Bank all additional amounts which are necessary to
compensate the Bank for such increased cost incurred or to be incurred by the
Bank. All payments of increased costs shall be accompanied by interest thereon
from the date of notice of such change until payment in full thereof at the
Interest Rate. A certificate as to such increased cost incurred by the Bank as a
result of any event mentioned in clause (i) or (ii) above showing the manner of
calculation thereof shall be submitted by the Bank to the Company and shall be
conclusive (absent manifest error) as to the amount thereof. In determining the
amount of any increased costs, the Bank may use any reasonable averaging and
attribution methods.
(e) If, after the date of this Agreement, the Bank shall have
determined that the adoption or implementation of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has the effect of reducing the
rate of return on the Bank's capital, on this credit facility or otherwise, as a
consequence of its obligations hereunder and under the Letter of Credit to a
level below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy) by an amount deemed by the Bank to be material, then from
time to time, promptly upon demand by the Bank, the Company hereby agrees to pay
the Bank such additional amount or amounts as will compensate the Bank for such
reduction. A certificate of the Bank claiming compensation
10
under this subsection and setting forth the additional amount or amounts to be
paid to it hereunder shall be conclusive absent manifest error and notice shall
be furnished to the Company and shall be conclusive (absent manifest error) as
to the amount thereof. In determining any such amount, the Bank may use any
reasonable averaging and attribution methods.
(f) The Company hereby agrees to pay to the Bank, on demand, any
and all reasonable charges and expenses which the Bank may pay or incur relative
to the Letter of Credit, and any and all expenses, including, without
limitation, reasonable attorneys' fees and disbursements of counsel for the Bank
incurred or paid by the Bank in connection with (i) the preparation and
negotiation of this Agreement and the instruments referred to herein; (ii) the
closing of the transactions contemplated hereby; (iii) protecting or collecting
the Company's indebtedness to the Bank under this Agreement; (iv) foreclosing
against or otherwise enforcing any collateral security therefor; (v) inspection
of the Project by the Bank or its agents in connection with clauses (iii) and
(iv) of this paragraph; (vi) the exercising by the Bank of its discretion- ary
rights pursuant to Section 9 of this Agreement; (vii) any and all claims,
damages, losses or liabilities of the Bank for which the Company has agreed to
indemnify the Bank pursuant to Sections 6(e), 6(ll), 6(mm) and 13 hereof; and
(viii) protecting, exercising or enforcing any or all of the Bank's rights and
remedies under this Agreement, including without limitation in connection with
any reorganization, insolvency or bankruptcy proceeding affecting the Company,
any of the Guarantors or any of the properties of any of the foregoing.
(g) All payments to the Bank by the Company hereunder shall be
made in lawful currency of the United States to the account of the Bank at its
office at SunTrust Bank, South Florida, National Association, 501 East Las Olas
Boulevard, Fort Lauderdale, Florida 33301, Attention: Corporate Banking
Division, by 2:00 p.m. Fort Lauderdale, Florida time on the date such payment
is due in immediately available funds. Funds received after such time shall be
deemed received on the next succeeding Business Day. Overdue payments shall
bear interest at the Interest Rate. Interest payable hereunder shall be computed
on the basis of a 360-day year, actual number of days elapsed.
(h) Upon receipt of a disbursement of money from the Trustee in
conjunction with a certification from the Trustee that money sufficient to pay
all principal of and interest on the Bonds are on deposit with the Trustee and
that all claims against the Issuer under the Indenture have been satisfied or
adequate provision has been made for the payment of all such claims, the Bank
shall apply all money so received:
(i) First, to the Payment Obligations of the Company under
this Agreement;
11
(ii) Second, to meet any other amounts owed by the Company
to the Bank under this Agreement;
(iii) Third, to meet any other amounts owed by the Company
to the Bank under any other Related Document; and
(iv) Lastly, to the extent remaining, as a disbursement to the
Company.
No money shall be distributed to the Company pursuant to this
Section 2(h) prior to the Expiration Date.
(i) As security for the payment of the obligations of the Company
pursuant to clause (c)(ii) above, and all interest on any amounts payable
thereunder, the Company will pledge to the Bank, and grant to the Bank a
security interest in, its right, title and interest in and to Bonds delivered to
the Bank in connection with A Drawings pursuant to the Pledge Agreement.
(j) After any C Drawing, the obligation of the Bank to honor
demands for payment under the Letter of Credit with respect to payment of
interest, or the portion of Purchase Price of the Bonds corresponding to
interest, on the Bonds will automatically be reinstated up to the total amount
specified therein, upon the terms and conditions set forth in the Letter of
Credit. Upon release by or on behalf of the Bank of any Pledged Bonds, the
obligation of the Bank to honor demands for payment under the Letter of Credit
with respect to payment of the principal, or the portion of Purchase Price of
the Bonds corresponding to principal, of such Bonds will be automatically
reinstated up to the total amount specified therein upon the terms and
conditions set forth in the Letter of Credit.
SECTION 3. CONDITIONS PRECEDENT TO THE ISSUANCE OF THE LETTER OF
CREDIT. The Bank's obligation to issue the Letter of Credit is subject to the
fulfillment of each of the following conditions precedent:
(a) On the date of issuance of the Letter of Credit and after
giving effect to the issuance of the Letter of Credit, there shall exist no
Default or Event of Default.
(b) On the date of issuance of the Letter of Credit and after
giving effect to the issuance of the Letter of Credit, all representations and
warranties of the Company contained herein, in the Company Documents or
otherwise made in writing in connection herewith shall be true and correct with
the same force and effect as though such representations and warranties had been
made on and as of such date.
(c) The Bank shall have received the following, all of which
shall be in form and substance satisfactory to the Bank:
12
(i) certified copies of all approvals, authorizations and
consents of any trustee or holder of any indebtedness or obligation of
the Company or any other Person necessary for the Company to enter into
this Agreement;
(ii) the opinion of Weil, Gotshal & Manges LLP, counsel to the
Company, addressing such matters, and in such form, as the Bank may
reasonably request;
(iii) evidence satisfactory to the Bank of any local government
approvals which may be required in connection with the transactions
contemplated hereby;
(iv) a copy of the Company's Certificate of Incorporation and
Bylaws;
(v) certified resolutions of the Board of Directors or the
Executive Committee of the Board of Directors of the Company authorizing
the execution, delivery and performance by the Company of this
Agreement, the Mortgage and those Company Documents to which the Company
is a party and approving the form and content of the Letter of Credit;
(vi) certificates of officers of the Company certifying the name
and true signatures of the officers of the Company authorized to sign
this Agreement and the other documents to be delivered by it hereunder;
(vii) an executed copy of each Guaranty;
(viii) certified resolutions of the Board of Directors or the
Executive Committee of the Board of Directors of each Guarantor
authorizing the execution, delivery and performance by such Guarantor of
the applicable Guaranty;
(ix) an executed copy of each Company Document and Related
Document;
(x) satisfaction of all other conditions of the Indenture and any
other conditions required by Bond Counsel, counsel to the Company or
Bank's counsel; and
(xi) such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates or executed copies thereof)
or opinions as the Bank may reasonably request.
(c) No change shall have occurred in any law or regulation
thereunder or interpretation thereof which in the opinion of counsel for the
Bank would make it illegal for the Bank to issue the Letter of Credit as
provided herein.
13
SECTION 4. OBLIGATIONS OF THE COMPANY. (a) The obligations of the
Company under this Agreement shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement,
under all circumstances whatsoever, including without limitation the following
circumstances:
(i) any lack of validity or enforceability of the Company
Documents or Related Documents;
(ii) any amendment or waiver of or any consent to departure from
all or any of the Company Documents or Related Documents;
(iii) the existence of any claim, set-off, defense or other
rights which the Company may have at any time against the Trustee, any
beneficiary or any transferee of the Letter of Credit (or any persons or
entities for whom the Trustee, any such beneficiary or any such
transferee may be acting), the Bank or any other person or entity,
whether in connection with this Agreement, any Company Documents, any
Related Document or any unrelated transaction;
(iv) any breach of contract or other dispute between the Company
and the Trustee, any beneficiary or any transferee of the Letter of
Credit, the Issuer, the holders of the Bonds, the Bank or any other
person or entity;
(v) any statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, unauthorized, invalid
or any statement therein being untrue or inaccurate in any material
respect whatsoever;
(vi) any delay, extension of time, renewal, compromise, or other
indulgence or modification granted or agreed to by the Bank, with or
without notice to or approval by the Company, in respect of any of the
Company's indebtedness or Payment Obligations to the Bank under this
Agreement; or
(b) The Bank shall not be obligated to issue any further credits,
to cure any Defaults hereunder or defaults under the Company Documents, or in
any other manner to extend any financial consideration to the Company. The
Company understands and agrees that no payment by it under any other agreement,
whether voluntary or involuntary or pursuant to court order or otherwise, shall
constitute a defense to the several obligations hereunder except to the extent
that the Bank has been indefeasibly paid in full.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants as of the date hereof as follows:
14
(a) ORGANIZATION, STANDING, CORPORATE POWER, ETC. It is duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation, and has corporate power and authority to own its
properties and to carry on its business as now being conducted, in every
jurisdiction where it is conducting its business, and has corporate power and
authority to execute, deliver and perform the Company Documents and the Related
Documents to which it is a party.
(b) AUTHORIZATION. The execution, delivery and performance by the
Company of the Company Documents and the Related Documents to which it is a
party:
(i) have been duly authorized by all requisite corporate action,
and do not require any consent or approval of any other Person,
including, without limitation, the stockholders or creditors of the
Company, which has not otherwise been obtained;
(ii) will not violate any Legal Requirements or any provision of
law, rule or regulation, or the articles of incorporation or by-laws, as
amended to the date hereof, of the Company;
(iii) will not violate or be in conflict with, result in a breach
of, or constitute a default under, any indenture, agreement and other
instrument to which the Company is a party or by which the Company, or
any of its properties, is bound, or any order, writ, injunction, decree
or award of any court or governmental institution; and
(iv) will, when executed and delivered for value, be valid and
binding obligations of the Company.
(c) LITIGATION. Except as set forth in the footnotes to the
Company's financial statements for the fiscal year ended October 31, 1995, there
are no actions, suits or proceedings pending, or to the knowledge of the Company
or any Guarantor, threatened against or adversely affecting them, or any of
them, at law or in equity or before or by any federal agency or instrumentality,
domestic or foreign, which involve any of the transactions herein contemplated,
or the possibility of any judgment or liability which is likely to result in any
material and adverse change in the business, operations, prospects, properties
or assets, or in the condition, financial or otherwise, of the Company or the
Guarantors, taken as a whole. Neither the Company nor any Guarantor, is in
default with respect to any judgment, order, writ, injunction, decree, rule or
regulation of any court, or federal, state, municipal or other governmental
department.
(d) FINANCIAL STATEMENTs. The Company heretofore has furnished to
Bank balance sheets, income statements, and other
15
financial information which are, to the best of its knowledge, correct and
complete, and accurately present the financial condition and the results of the
operations of the Company and the Guarantors on a consolidated basis as of the
dates and for the periods indicated up to and including October 31, 1995, and
said financial statements show all known direct liabilities or contingent
material liabilities as of the dates thereof, and have been prepared in
accordance with GAAP on a consolidated basis and consistently applied. Since the
date of the furnishing of the most recent financial statements, there has been
no material adverse change in the financial or other condition of the Company
and the Guarantors, taken as a whole.
(e) TAXES. The Company and each Guarantor have filed, or caused
to be filed, all federal and state tax returns which, to the knowledge of the
respective officers thereof, are required to be filed in accordance with any
Legal Requirements, and has paid or caused to be paid, all taxes as shown on
said returns or on any assessments received by it and not being contested in
good faith, to the extent that such taxes have become due.
(f) BURDENSOME RESTRICTIONS. Except as are reflected on the most
recent financial statements furnished to the Bank, neither the Company nor any
Guarantor is a party to any agreement or instrument or subject to any charter or
other corporate restrictions materially adversely affecting its business,
properties or assets, operations or condition, financial or otherwise.
(g) PROPERTY AND ASSETS. The Company and each Guarantor has good
and marketable title to all the property and assets reflected on the most recent
consolidated financial statement furnished to the Bank, except such as have been
disposed of in the ordinary course of business since the date of said financial
statement, and all such property and assets are free and clear of any Liens,
except Liens for taxes not yet due, Liens on personal or real property as
reflected in the most recent audited financial statement furnished to the Bank,
Permitted Encumbrances, and except for those Liens, if any, on properties
acquired subsequent to said statement until the date of this Agreement.
(h) ENFORCEABILITY. (i) This Agreement and each of the Company
Documents and the Related Documents to which the Company is a party, when
delivered, will constitute legal, valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the rights of creditors generally and (ii) each Guaranty when
delivered hereunder, will constitute the legal, valid and binding obligation of
the applicable Guarantor executing the same, enforceable against such Guarantor
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy,
16
insolvency or similar laws affecting the rights of creditors generally.
(i) DEFAULT. Neither the Company nor any Guarantor is in default
in any respect under, or with respect to any material contract, agreement or
other instrument to which it is a party or by which it or its assets may be
bound, and no Default or Event of Default has occurred and is continuing.
(j) REGULATIONS G, X and U. Neither the Company nor any Guarantor
is engaged nor will engage principally, or as one of its important activities,
in the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulations G, X or U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect. No part
of the proceeds of any loans hereunder will be used for "purchasing" or
"carrying" any "margin stock" as so defined or for any purpose which violates,
or would be inconsistent with, the provisions of any regulations of such Board
of Governors, and the execution, delivery and performance of this Agreement and
the use of the proceeds of the Bonds or any extension of credit hereunder do not
and will not constitute a violation of such regulations. Upon request, the
Company will furnish the Bank with a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in said Regulation U to the
foregoing effect.
(k) ERISA. (i) The Plans maintained by the Company and/or the
Guarantors or any of them and all ERISA Affiliates, if any, comply with
all applicable requirements of ERISA and of the Code, and with all
applicable rulings and regulations issued under the provisions of ERISA
and the Code. No Reportable Event has occurred and is outstanding with
respect to any Plan(s).
(ii) Each Plan has at all times been maintained by its terms and in
operation, in accordance with all applicable laws, except such
noncompliance (when taken as a whole) that will not have a materially
adverse effect on the Company, or upon its financial condition, assets,
business, operations, liabilities or prospects;
(iii) The Company is not currently or will not become subject to any
liability (including withdrawal liability), tax or penalty whatsoever to
any person whomsoever with respect to any Plan including, but not
limited to, any tax, penalty or liability arising under Title I or Title
IV of ERISA or Chapter 43 of the Code, except such liabilities (when
taken as a whole) as will not have a materially adverse effect on the
Company, or upon its financial condition, assets, business, operations,
liabilities or prospects; and
17
(iv) The Company and each ERISA Affiliate have made full and timely
payment of all amounts (A) required to be contributed under the terms of
each Plan and applicable law and (B) required to be paid as expenses of
each Plan. No Plan has or would have an "amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA) if such Plan
were terminated as of this date.
(l) APPROVALS. No consent of any person and no authori- zation or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the valid or due execution,
delivery and performance by the Company of this Agreement, any Company Document
or any Related Document to which the Company is a party, other than such
consents, authorizations, approvals or actions as have already been obtained or
which cannot be obtained on the date hereof and are not required to be obtained
on the date hereof. The Company is in compliance with all of the terms and
conditions of each such consent, authorization, approval or action already
obtained, has applied for each such consent, authorization, approval or action
that may be applied for at this time and has met or has made provisions adequate
for meeting all requirements for each such consent, authorization, approval or
action not yet obtained.
(m) PUBLIC UTILITY HOLDING COMPANY. Neither the Company nor any
Guarantor is (i) a "holding company," or (ii) a "subsidiary company" of a
"holding company," or (iii) an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(n) INFORMATION. No certificate, report or other paper furnished
by the Company or a Guarantor to the Bank or any other Person in connection with
this Agreement, the Company Documents or the Related Documents contains as of
its effective date any material misstatement of fact or fails to state a
material fact or any fact necessary to make the statements contained therein not
misleading in any material respect as of such date, and all of the information
contained therein is true, accurate and complete in all material respects as of
such date.
(o) NOT AN INVESTMENT COMPANY. Neither the Company nor any
Guarantor is an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(p) ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all federal, state and local environmental laws, rules,
regulations, ordinances and other Legal Requirements including, without
limitation, all Hazardous Materials Laws.
18
(q) HAZARDOUS SUBSTANCES. The site of the Project has not in the
past been used and is not presently being used for the handling, storage,
transportation or disposal of Hazardous Materials or toxic materials in
contravention of applicable state, federal or local law or regulation nor have
such materials ever been present on the Property in contravention of applicable
state, federal or local law or regulation.
SECTION 6. AFFIRMATIVE AND NEGATIVE COVENANTS OF THE COMPANY.
Until the payment in full of any and all amounts due and owing or payable to the
Bank hereunder and the expiration or termination of the Letter of Credit, the
Company shall abide by (and shall cause the Guarantors to abide by) all of the
following affirmative and negative covenants:
(a) The Company and each of the Guarantors shall do, or cause to
be done, all of the things necessary to preserve, renew and keep in full force
and effect, their corporate existence and their rights, licenses and permits
which are necessary for the operation of their respective businesses and shall
comply with all laws applicable to them, operate their respective businesses as
in a proper and efficient manner, and substantially as presently operated or
proposed to be operated, and at all times shall maintain, except as otherwise
previously disclosed in writing to Bank, preserve and protect all franchises and
trade names and preserve all property used or useful in the conduct of their
businesses, and keep the same in good repair, working order and condition, and
from time to time make or cause to be made any needed and proper repairs,
renewals, replacements, betterments and improvements thereto so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
(b) The Company and Guarantors shall at all times maintain true
and correct books and records and shall keep their books and records in
accordance with GAAP, and shall furnish to Bank such financial statements as may
be required by Bank on a yearly and interim basis as set forth in this
Agreement.
(c) The Company and Guarantors shall properly pay and discharge
(a) all taxes, assessments and governmental charges upon or against the Company,
a Guarantor or the assets of any of them prior to the date on which penalties
are attached thereto, unless, and to the extent, such taxes are being diligently
contested in good faith by appropriate proceedings and appropriate reserves
therefor have been established; and (b) all lawful claims for labor, materials,
supplies, services or anything else which might or could, if unpaid, become a
lien or charge upon the properties or assets of the Company or a Guarantor,
unless and to the extent only that the same are transferred to bond, being
diligently contested in good faith, and by appropriate proceedings and
appropriate reserves therefor have been established.
19
(d) The Company shall, at its sole cost and expense, comply with
all of the insurance requirements set forth in this Agreement, the Mortgage and
the Loan Agreement throughout the term of the Letter of Credit.
(e) In connection with any claims or lawsuits brought by third
parties in connection with the Letter of Credit or this Agreement, any Company
Document or any Related Document, the Company shall and does indemnify and save
harmless the Bank from any and all loss, liabilities, costs, charges or damages
of whatsoever kind and from any suits, claims, actions or demands, including,
without limitation, the Bank's reasonable legal fees and expenses, at all trial
and appellate levels, on account of any matter or thing arising out of this
Agreement, any Company Document or any Related Document, or in connection
herewith or therewith, or on account of any act or omission to act by Company in
connection with this Agreement, the Letter of Credit, any Company Document or
any Related Document, challenge the validity of any of the above referred to
instruments, it being the intention of the parties that this Agreement shall be
construed and applied to protect and indemnify the Bank against any and all
risks involved in, related to or arising out of the issuance of the Letter of
Credit, all of which risks are hereby assumed by the Company, including, without
limitation, any and all risks of the acts or omissions, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts and omissions, herein called "Government
Acts"); excepting for gross negligence or willful misconduct on the part of the
Bank or the violation by the Bank of any state or federal laws or regulations
governing national banking associations. The Company further agrees to pay any
and all taxes (other than taxes on or measured by net income of the Bank)
incurred or payable in connection with, related to or arising out of the
execution and delivery of this Agreement or the Letter of Credit. The Bank shall
not, in any way, be liable for any failure by the Bank or anyone else to pay any
draft under the Letter of Credit as a result of any Government Acts or any other
cause beyond the control of the Bank.
The Company further agrees to indemnify, protect and hold
harmless the Bank and all successors and assigns of the Bank (whether following
the foreclosure of the Mortgage or otherwise) from and against any and all
damages, losses, cleanup costs, liabilities, disabilities, fines, penalties,
costs or expenses (including reasonable attorneys' and paralegals' fees and
expenses) incurred or to be incurred, whether absolute, fixed or contingent,
civil or criminal, and whether arising under federal, state or local law,
incurred or to be incurred (i) in connection with the handling, storage,
transportation or disposal by anyone (other than the Bank or its successors or
assigns) of (A) Hazardous Materials, (B) "hazardous waste," as defined in the
Resource Conservation and Recovery Act and Section 403.703(21, FLORIDA STATUTES,
(C) "hazardous substance," as defined in the Comprehensive Environmental
20
Response, Compensation and Liability Act, and/or (D) petroleum products or
by-products or natural gas, or (ii) otherwise on account of any violation by the
Company of the Hazardous Materials Laws.
The obligations under this paragraph (e) shall survive expiration
of or satisfaction of the Letter of Credit and this Agreement.
(f) The Bank shall have the right, from time to time hereafter
and until the expiration of the Letter of Credit, to publicize and advertise in
any manner the Bank's participation as lender in connection with the Letter of
Credit, with the prior written consent of the Company, which consent shall not
be unreasonably withheld.
(g) The Company shall: (a) make full and timely payments of all
amounts due and owing under this Agreement, including, without limitation, the
Payment Obligations; (b) duly comply with all of the terms and covenants
contained in each of the Company Documents to which the Company is a party; and
(c) at all times maintain the liens and security interests provided for under or
pursuant to this Agreement and the Mortgage as valid and perfected liens and
security interests on the property intended to be covered thereby.
(h) The Company shall promptly notify the Bank upon the
commencement of any action, suit or claim or counter-claim or proceeding against
or investigation of Company or any Guarantor involving claims in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00), in the aggregate.
(i) The Company shall promptly notify the Bank in writing of (a)
any extraordinary material assessments against the Company or the Guarantors or
any of them by any taxing authorities for unpaid taxes as soon as Company has
knowledge thereof; and, (b) any alleged default by Company or a Guarantor in the
performance of any of the terms and conditions contained in any agreement,
mortgage or indenture or instrument to which the Company or the Guarantors or
any of them is a party, or, which is binding upon Company or the Guarantors or
any of them, which would materially affect the business operation of the Company
or Guarantors or any of them, and upon any default by Company or the Guarantors
or any of them in the payment of any of its indebtedness, in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00).
(j) The Company shall pay or caused to be paid all indebtedness
and obligations which, if not paid, would have a material adverse affect on the
business operation of the Company or any of the Guarantors, promptly and in
accordance with their respective terms and timely comply with all applicable
laws and governmental rules and regulations.
21
(k) The Company shall give the Bank prompt written notice of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency, the outcome of which might materially adversely
affect the operations or financial condition of the Company or adversely affect
the ability of any Guarantor to perform under its Guaranty.
(l) The Company shall give the Bank prompt written notice of any
Default or Event of Default hereunder, or any default or event of default with
respect to its or any Guarantor's obligations under any of the other Company
Documents or any Related Documents to which it is a party, indicating the nature
and status thereof and the action which the Company proposes to take or cause to
be taken with respect thereto.
(m) The Company shall give the Bank prompt written notice of the
organization of a Subsidiary, as well as such other information in respect
thereof as the Bank may reasonably request.
(n) The Company or a Guarantor shall not directly or indirectly
engage in any business activity which would represent a material change from the
kind of business activity currently engaged in by it, which would have a
substantial and material affect on the Company's or such Guarantor's business,
without the prior written consent of the Bank, which shall be in the Bank's sole
discretion.
(o) The Company shall not, upon the occurrence of an Event of
Default or an event which, with the giving of notice or the passage of time, or
both, would constitute an Event of Default, as well as during the continuance
thereof, (1) declare any dividend or make any other distribution with respect to
its stock (whether by reduction of capital or otherwise), or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for value or set apart
any sum for the redemption, retirement, purchase or other acquisition of,
directly or indirectly, any shares of its common stock or warrants or options to
purchase any shares of its common stock; or (2) declare dividends or make any
other distribution with respect to its stock (whether by reduction of capital or
otherwise).
(p) The Company shall not change its independent public
accountants without the prior written consent of the Bank unless to independent
public accountants of stature and national prominence substantially equal to
that of the firm presently employed by the Company.
(q) The Company shall provide to the Bank consolidated annual
audited financial statements of Company and all Guarantors and all Subsidiaries,
in form and substance acceptable to the Bank, prepared in accordance with GAAP,
and accompanied by an unqualified opinion of an independent certified public
accountant acceptable to
22
the Bank, within one hundred twenty (120) days following the end of each fiscal
year of Company. Additionally, HEICO shall provide to the Bank copies of
consolidated annual tax returns within fifteen (15) days of filing of the same,
unless such returns shall not be prepared on a consolidated basis, in which case
HEICO and each of its Subsidiaries shall provide their annual tax returns within
fifteen (15) days of filing.
(r) The Company shall provide to the Bank all Form 10-Q
statements filed by the Company and each Guarantor, as applicable, with the
Securities and Exchange Commission and all quarterly public or published
financial statements or information of the Company and all Guarantors, within
sixty (60) days of the end of each of the first three quarters of each fiscal
year of Company and each Guarantor, as applicable.
(s) The Company shall provide to the Bank all Form 10-K
statements filed by Company and each Guarantor, as applicable, with the
Securities and Exchange Commission, within one hundred twenty (120) days
following the end of each fiscal year of Company and each Guarantor, as
applicable.
(t) The Company shall provide to the Bank within sixty (60) days
after the expiration of each quarter of each fiscal year, a certificate executed
by the chief executive officer or chief financial officer of the Company that no
Default exists under this Agreement and that no default by the Company exists
under any Company Documents, the Related Documents or any other material
obligation of the Company or any Guarantor to the Bank.
(u) The Company shall provide the Bank with reasonable promptness
any other financial information or documents that the Bank shall reasonably
request.
(v) The Company shall maintain its principal operating accounts
with the Bank during the term of the Letter of Credit. The parties acknowledge
that the Bank has no right of set-off against the accounts.
(w) There shall be no merger, consolidation or reorganization of
Company or any Guarantor without the Bank's prior written consent, which consent
may be withheld in the Bank's sole discretion; provided, however, that this
paragraph shall not prohibit the merger or consolidation of the Company with one
or more Guarantors or of one or more Guarantors with each other, but the Company
may not transfer substantially all of its assets to HEICO-Newco, Inc.
(x) The Company, HEICO and the Subsidiaries of HEICO, on a
consolidated basis, shall maintain a minimum tangible net worth of $9,600,000 at
all times during the term of the Letter of Credit.
23
(y) The Company, HEICO and the Subsidiaries of HEICO, on a
consolidated basis, shall maintain a minimum net worth of $30,000,000.00 at all
times during the term of the Letter of Credit.
(z) The Company, HEICO and the Subsidiaries of HEICO, on a
consolidated basis, shall maintain a ratio of Debt to tangible net worth ratio
of not greater than 3.0:1.0 at all times during the term of the Letter of
Credit.
(aa) The Company, HEICO and the Subsidiaries of HEICO, on a
consolidated basis, shall maintain a minimum amount of working capital of
$8,300,000 at all times during the term of the Letter of Credit. The term
"minimum amount of working capital" shall be calculated excluding indebtedness
due under this Agreement and the Related Documents, but including required
payments under Section 25 of this Agreement, and excluding indebtedness due
under the First Reimbursement Agreement, but including required payments under
Section 25 of the First Reimbursement Agreement.
(bb) The Company, HEICO and the Subsidiaries of HEICO, on a
consolidated basis, shall maintain a current ratio of not less than 1.5:1.0 at
all times during the term of the Letter of Credit. The term "current ratio"
shall be calculated (i) excluding indebtedness due under this Agreement and the
Related Documents, but including, required payments under Section 25 of this
Agreement, and (ii) excluding indebtedness due under the First Reimbursement
Agreement, but including required payments under Section 25 of the First
Reimbursement Agreement.
(cc) The Company, HEICO and the Subsidiaries of HEICO, on a
consolidated basis, shall maintain a ratio of Debt to total net worth of not
greater than 1.0:1.0 at all times during the term of the Letter of Credit.
(dd) The Company, HEICO and the Subsidiaries of HEICO, on a
consolidated basis, shall maintain minimum debt service coverage (as hereinafter
defined) of not less than 1.2:1.0 at all times during the term of the Letter of
Credit. (Debt service coverage shall mean net profit after taxes and dividends
plus non-cash expenses (including, but not limited to, depreciation and
amortization, minority interests in consolidated partnerships, deferred income
taxes, deferred financing costs and losses from unconsolidated partnerships)
divided by the current maturity of long-term debt, and shall be calculated
excluding indebtedness due under this Agreement and the Related Documents but
including required payments under Section 25 of this Agreement, and excluding
indebtedness due under the First Reimbursement Agreement but including required
payments under Section 25 of the First Reimbursement Agreement.)
24
(ee) The Company may not hereafter grant subordinate or junior
liens on any of the collateral securing the Company's obligations hereunder,
whether such collateral be real or personal property. (The parties hereto,
however, acknowledge the existence of the lien created by the Mortgage
Documents, as such term is defined in the SunTrust Bank Loan Agreement.)
(ff) With respect to management and ownership of HEICO, the
Mendelson Reporting Group (as identified in the reports filed with the Security
and Exchange Commission) must at all times beneficially own and control,
directly or indirectly, at least ten (10%) percent of the issued and outstanding
common shares of stock of the HEICO during the term of the Letter of Credit.
Laurans A. Mendelson must be employed by HEICO as President and Chief Executive
Officer and actively manage HEICO during the term of the Letter of Credit.
(gg) The Company hereby indemnifies and holds harmless the Bank
of and from any and all liability in connection with the payment of any
necessary documentary stamp tax and intangible tax (including non-recurring
intangible tax) in connection with the Letter of Credit, this Agreement, the
Guaranties, the Mortgage and all other Company Documents and Related Documents,
which indemnification shall survive repayment of the obligations under this
Agreement and expiration of the Letter of Credit. The Company does also
authorize the Bank to pay said documentary stamp tax and intangible tax,
including without limitation non-recurring intangible tax, from any of Company's
accounts with the Bank at any time in the event the Bank deems the same
necessary, including any penalties and interest that may be associated
therewith.
(hh) The Company shall provide written notice to the Bank of any
default which results in the acceleration of indebtedness owing by Company or
any Guarantor in excess of Two Hundred Fifty Thousand Dollars ($250,000.00).
(ii) The Company shall execute and deliver to the Bank such
further instruments, provide it with such further data and information and take
such further action as the Bank may reasonably request or as may be necessary
further to effect the purposes of the Agreement, the Company Documents or the
Related Documents.
(jj) The Company shall cause all of its properties used or useful
in the conduct of its business as it relates to the Project to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the reasonable
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
25
(kk) The Company shall deliver to the Bank:
(i) Promptly after the occurrence thereof with respect to any
Plan, or any trust established thereunder, notice of (A) a Reportable
Event (other than a Reportable Event not subject to the provisions for
30-day notice to the PBGC under such regulations), or (B) any other
event which could subject the Company or any ERISA Affiliate to any
material tax, penalty or liability under Title I or Title IV of ERISA or
Chapter 43 of the Code;
(ii) At the same time and in the same manner as such notice must be
provided to the PBGC, or to a Plan participant, beneficiary or
alternative payee, any notice required under Section 101(d), 302(f)(4),
303, 307, 4041(b)(1)(A)s or 4041(c)(1)(A) of ERISA or under Section
401(a)(29) or 412 of the Code with respect to any Plan;
(iii) Upon the request of the Bank, (A) true and complete copies of
any and all documents, government reports and determination or opinion
letters for any Plan, or (B) a current statement of withdrawal liability
for each Multiemployer Plan.
(ll) The site of the Project will not in the future be used for
the handling, storage, transportation or disposal of Hazardous Materials or
toxic materials in contravention of applicable state, federal or local law or
regulation. The Company agrees to indemnify, defend, and hold the Bank harmless
from and against any loss to the Bank, including without limitation, reasonable
attorneys' fees incurred by the Bank as a result of such past, present or future
use, handling, storage, transportation or disposal of hazardous or toxic
materials, or their presence on the Property in contravention of applicable
state, federal or local law or regulation, which indemnification shall survive
the repayment of the obligations under this Agreement and the termination or
expiration of the Letter of Credit.
(mm) The Company will comply with the ADA and any and all
regulations and guidelines issued thereunder. The Company agrees to indemnify,
defend, and hold the Bank harmless from and against any loss to the Bank,
including without limitation, reasonable attorneys' fees incurred by the Bank as
a result of the Company's noncompliance with the ADA or the failure of the
Improvements to comply therewith (unless otherwise exempted thereunder) which
indemnification shall survive the repayment of the obligations under this
Agreement and the termination or expiration of the Letter of Credit.
(nn) The Company shall not transfer substantially all
of its assets to HEICO-Newco, Inc.
26
(oo) So long as no Event of Default has occurred and is
continuing, additional Debt, lease obligations and guaranties of the obligations
of others by the Company and the Guarantors shall be unrestricted. If an Event
of Default shall have occurred, neither the Company nor any of the Guarantors
shall incur additional Debt or lease obligations or enter into any guaranties of
the obligations of others.
(pp) The Company and each Guarantor shall provide the Bank with
advance written notice of the incurrence by any of them of any recourse
obligations or Debt, or the entering into by any of them of any guaranties of
the obligations of others, in excess of $250,000 and increments of $100,000
thereafter.
(qq) If the name of the Company, HEICO-Newco, Inc. or any other
Guarantor is changed, the Company will provide the Bank with appropriate
executed documentation evidencing such change and protecting all interests of
the Bank (including all relevant security interests of Bank) within ten (10)
Business Days of such change.
(rr) The Company shall not elect to purchase Bonds pursuant to
Section 3.08 of the Indenture without the advance written consent of the Bank.
(ss) The Company shall not (i) replace the Bank's letter of
credit securing the 1988 Bonds (other than with another letter of credit issued
by the Bank), (ii) terminate the First Reimburse- ment Agreement (other than
upon execution of a similar document between the Company and the Bank), or (iii)
elect to convert the interest rate on the 1988 Bonds from a floating or
adjustable rate to a fixed rate of interest if the effect thereof is that the
1988 Bonds will no longer be secured by a letter of credit issued by the Bank
unless (1) the Company elects to convert the interest rate on the Bonds to a
fixed rate and terminates this Agreement, or takes some other action the result
of which is that this Agreement is terminated, and in each such case all amounts
due and owing the Bank hereunder, including all interest, are paid in full, and
(2) all amounts due and owing the Bank under the First Reimbursement Agreement
(or any successor document between the Bank and the Company), including all
interest, are paid in full and the First Reimbursement Agreement is terminated,
and (3) at the option of the Bank, all amounts outstanding under the SunTrust
Bank Loan Agreement, including all interest, are repaid in full and the SunTrust
Bank Loan Agreement is terminated.
(tt) The Company shall complete the portion of the Project
consisting of interior renovations and roof replacement by July 18, 1997, and
shall acquire all equipment or other personalty constituting part of the Project
by October 18, 1999.
27
The Bank acknowledges that a default under the Second Mortgage or
the SunTrust Bank Loan Agreement shall not be a breach of any of the foregoing
covenants and therefore shall not constitute an Event of Default hereunder.
SECTION 7. DISBURSEMENT OF BOND PROCEEDS. The proceeds of the
Bonds will be deposited in the Construction Fund created under the Indenture and
disbursed only in accordance with the terms of the Indenture and upon approval
by the Bank of all requisitions for disbursement. Prior to the Bank granting
approval to a requisition from the Construction Fund, the following conditions
must be met:
(a) The Company shall have furnished to the Bank a complete set
of plans and specifications for the Project, to the extent the same are
available.
(b) The Company shall have secured and delivered to the Bank, at
the Company's expense, lien waivers or other assurances from the Company's
contractor, architect, engineer and all subcontractors, materialmen, laborers,
or others, including all parties who have served notices to owner, sufficient to
assure that the rights of all contractors, subcontractors, architects,
engineers, surveyors, sub-subcontractors and materialmen performing any work in
connection with the portion of the Project as to which payment of a requisition
is requested, or furnishing any services, labor or materials thereto shall be
subordinate and inferior to the Mortgage.
(c) There shall exist no Default or Event of Default under this
Agreement, and the Company shall not be in default in any material respect under
any other instrument with respect to any indebtedness or obligations owing to
the Bank.
(d) There shall be no eminent domain or other government or
judicial action or proceeding, of any nature, pending or threatened against the
Project or any part thereof.
(e) The Bank shall have received the following documents and
materials relating to the Project which shall be satisfactory in substance and
in form to the Bank:
(1) copies of all permits necessary for construction of the
Project pursuant to the plans and specifications, including any
necessary building permits for the Project;
(2) copies of all construction contracts relating to the Project
of all lienors in privity with the Company or HEICO.
(3) Back-up documentation for the requisition, including invoices
for soft costs and equipment and, if applicable, for hard construction
costs;
28
(4) If requisition covers material pieces of equipment, it must
be accompanied by individual invoices and lists of equipment being
purchased;
(5) Unless otherwise waived by the Bank, each requisition for
equipment or other personalty shall be accompanied by UCC-1 financing
statements naming the Company as debtor and the Bank and the Trustee as
secured parties, providing a detailed description of such equipment or
other personalty, or filing, at the expense of the Company, with the
Florida Secretary of State and in the public records of Broward County,
Florida and a UCC-11 search report of the records of the Florida
Secretary of State with respect to the Company; and
(6) such other evidence or back-up documentation as the Bank or
the Bank's counsel reasonably deems necessary.
(f) The Company shall have fully complied with all of the
covenants set forth herein; there shall be no breach of the Company's or any
Guarantor's representations and warranties set forth herein; each condition to
the approval of a requisition shall have been met or waived in writing by the
Bank; all of the other terms, provisions and conditions of this Agreement shall
have been complied with by the Company and the Guarantors; and the Project shall
not have suffered any material damage or loss.
(g) The portions of the Project for which reimbursement is being
requested shall have been constructed in strict compliance with the plans and
specifications and the construction thereof and materials used therein shall
have been in strict compliance with the plans and specifications and shall have
been certified to be so by the Company.
(h) The Company shall have furnished satisfactory proof to the
Bank that the undisbursed proceeds of the Construction Fund will be sufficient
to pay all remaining costs and expenses of the Project after taking into account
the Company's equity in the Project.
(i) The Bank shall have received a title insurance policy in form
and amount acceptable to the Bank and a survey in form, and with certification,
acceptable to the Bank.
(j) Prior to the final requisition from the Construction Fund,
the Bank shall have received (i) a certificate of completion or other similar
evidence of completion from the City of Hollywood, Florida for the roof
replacement, (ii) a certificate of completion or other similar evidence of
completion from the City of Hollywood, Florida related to the interior
renovation, (iii) final contractors' affidavits, (iv) final lien waivers and (v)
a final
29
owner's affidavit, all in form and substance satisfactory to the Bank.
Requisitions from the Construction Fund shall be submitted to the
Bank for approval no more frequently than once per calendar month.
The Bank or its representatives may, but shall not be obligated
to, make inspections of the Project upon receipt of a request for approval of a
requisition for disbursement from the Construction Fund to determine whether the
Project conforms to applicable law and regulations and is in compliance with the
plans and specifications. Such inspections if made shall be for the sole and
exclusive benefit of the Bank and shall not be for the direct or indirect
benefit of any other person or party.
SECTION 8. EVENTS OF DEFAULT. The occurrence of any of the
following events shall be an "Event of Default" hereunder unless waived by the
Bank pursuant to Section 10 hereof:
(a) Subject to the provisions of Section 9 hereof, the Company
shall fail to pay when due any amount referred to in Section 2(c)(i) or 2(c)(ii)
hereof;
(b) The Company shall fail to pay when due any other amount
referred to in Section 2 hereof, and such failure shall remain unremedied for
ten (10) days;
(c) Any representation or warranty (i) made by the Company
pursuant to Section 5 hereof, (ii) contained in any certificate delivered in
connection with this Agreement, or (iii) made to the Bank concerning the
financial condition or credit worthiness of the Company shall prove to have been
false or misleading in any material respect when made;
(d) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement (other than those referred to
in clauses (a), (b) and (c) above) and such failure shall continue for thirty
(30) days after notice of such Default shall have been given to the Company by
the Bank; provided, however, that no Event of Default shall be deemed to have
occurred under this subsection (d) if, in the reasonable opinion of the Bank,
corrective action has been instituted by the Company within the thirty-day
period after notice of default has been given to the Company and in being
diligently pursued; provided, however, that the additional period for pursuit of
such corrective action shall in no event exceed thirty (30) days beyond the
expiration of the thirty-day period following notice from the Bank to the
Company;
(e) The obtaining by any Person of an order or decree in any
court of competent jurisdiction enjoining or prohibiting the
30
Company or the Bank or either of them from consummating the transactions
contemplated by this Agreement;
(f) An "Event of Default" (as defined in the Indenture) shall
have occurred and be continuing under the Indenture;
(g) An "Event of Default" (as defined in the Loan Agreement)
shall have occurred and be continuing under the Loan Agreement;
(h) Any payment obligation of the Company included in this
Agreement or any Guarantor under a Guaranty shall at any time for any reason
cease to be valid and binding on the Company, or shall be declared to be null
and void, or the validity or enforceability thereof shall be contested by the
Company, a Guarantor or any governmental agency or authority or the Company or
any Guarantor shall deny, in whole or in part, that it has any or further
liability or obligation under this Agreement or a Guaranty;
(i) The Company or any one or more of the Guarantors shall (i)
apply for or consent to the appointment of a receiver, trustee in bankruptcy for
benefit of creditors, or liquidator of it or of any of its property; (ii) admit
in writing its inability to pay its debts as they mature or generally fail to
pay its debts as they mature; (iii) make a general assignment for the benefit of
creditors; (iv) be adjudicated as bankrupt or insolvent; (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors, or seeking to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
alleged in a petition filed against it in any proceeding under any such law; or
(vi) take any corporate action for the purpose of effecting any of the
foregoing;
(j) An order, judgment or decree shall be entered against the
Company or any Guarantor, without its application, approval or consent, or by
any court of competent jurisdiction, approving a petition seeking its
reorganization or appointing a receiver, trustee or liquidator of the Company or
a Guarantor or Guarantors, or of all or a substantial part of the assets
thereof, and such order, judgment or decree shall continue unstayed and in
effect for a period of thirty (30) days from the date of entry thereof;
(k) Final judgments, excluding claims covered by insurance, for
the payment of money in excess of Two Hundred Fifty Thousand Dollars
($250,000.00) in the aggregate, shall be rendered against the Company or any
Guarantor and/or Guarantors, and the same shall remain undischarged for a period
of thirty (30) consecutive days, during which execution shall not be effectively
stayed, provided that a judgment shall be deemed "final" only when the time for
appeal shall have expired without an appeal having
31
been claimed, or all appeals and further review claimed have been determined
adversely to it (however, a final judgment entered in favor of Bank incident to
a default under the Second Mortgage or the SunTrust Bank Loan Agreement, or any
document, instrument or agreement executed in connection therewith, shall not be
an Event of Default under this subparagraph);
(l) There shall be any material adverse change in the
financial condition of the Company and the Guarantors, taken as a whole;
(m) Any moneys, deposits or other property of the Company or any
Guarantor, now or hereafter on deposit with, or in the possession or under
control of the Bank, shall be attached or become subject to distraint
proceedings or any order or process of court, unless the same is either
dismissed or transferred to bond in accordance with applicable law, within
thirty (30) days of commencement;
(n) Any permits or licenses, the absence of which would have a
material adverse effect on the business of the Company and the Guarantors, taken
as a whole, are suspended or revoked;
(o) The Company or any one or more of the Guarantors shall
default and fail to make payment of principal or interest on any of their
indebtedness owed to third parties (other than the Bank) beyond any applicable
period of grace with respect thereto (if any), or fail in the performance of any
other agreement, term or condition contained in any agreement under which any
such obligation is created, if the effect of such default or failure is to cause
or permit the holder or holders of such obligation to accelerate the maturity
thereof and has a material adverse affect on the business of the Company and the
Guarantors, taken as a whole;
(p) The Company shall agree to entering into an indenture or
indentures supplemental to the Indenture without the written consent of the Bank
or shall agree to any amendment, change or modification of the Loan Agreement
without the consent of the Bank;
(q) The Company shall default under, or fail to timely perform
any of its obligations under, the Environmental Indemnity or the ADA Indemnity;
or
(r) An "Event of Default" shall occurred be continuing under the
First Reimbursement Agreement.
Notwithstanding the foregoing or any other provision of this
Agreement, the Mortgage or any other Related Document to the contrary, default
under the Second Mortgage or the SunTrust Bank Loan Agreement and/or any
document, instrument or agreement
32
executed in conjunction therewith shall not constitute an Event of Default under
the Mortgage, this Agreement or any Related Document.
The Company acknowledges and confirms that an Event of Default
hereunder shall constitute a breach of and default under the First Reimbursement
Agreement, the Second Mortgage and the SunTrust Bank Loan Agreement.
SECTION 9. RIGHTS AND REMEDIES.
(a) DEFAULTS UNDER THIS AGREEMENT. Notwithstanding any provision
hereof to the contrary, upon the occurrence and during the continuance of an
Event of Default hereunder, the Bank, in its sole discretion, may do any or all
of the following:
(i) send notice and a request to accelerate to the Trustee under
Section 9.01 of the Indenture, whereupon the Trustee shall immediately
declare the Bonds to be immediately due and payable and an amount equal
to the amount drawn under the Letter of Credit in connection with such
declaration shall become immediately due and payable by the Company
without presentment, demand, protest or other requirements of any kind,
all of which are hereby expressly waived by the Company; and
(ii) in the event that an Event of Default hereunder may be cured by
the Bank by the payment of money, the Bank is hereby authorized at any
time and from time to time, without notice to the Company (any such
notice being expressly waived by the Company), to set off and apply any
and all amounts held on deposit in the Cash Collateral Account against
any and all of the obligations of the Company now or hereafter existing
hereunder, irrespective of whether or not the Bank shall have made any
demand hereunder and although such obligations may be contingent and
unmatured, and without waiving any other right that the Bank may have
against the Company; and
(iii) exercise any rights and remedies available to it by law or
under this Agreement, the Mortgage or the Guaranties or any of them or
under any other Related Document.
(b) DEFAULTS UNDER RELATED DOCUMENTS. The Bank may cure a default
by the Company under any of the Related Documents or Company Documents that may
be cured by the payment of money; provided, however, that nothing contained
herein shall obligate the Bank to cure such default and no such payment shall be
deemed to constitute a waiver of any right of the Bank against the Company in
respect of such default. All sums so paid shall be for the account of the
Company, and the Company shall reimburse the Bank for all such sums on demand
therefor, with interest at the Interest Rate from the date of such advance by
the Bank until the date of reimbursement.
33
(c) RIGHT TO ADVANCE OR POST FUNDS. In the event of any default
or event of default under any of the Related Documents or Company Documents, or
if the Bank at any time in good faith determines that an event or condition
exists which could endanger, in its reasonable opinion, the Project or impede
the fulfillment or satisfaction of any condition or term of this Agreement or
any of the Company Documents or Related Documents, the Bank may cure such
default or event of default, or advance funds for the account of the Company to
correct such event or condition, in such manner as the Bank deems proper,
without prejudice to the Company's rights, if any, to recover such funds from
the party to whom paid. Such advances may be pursuant to such agreements as the
Bank deems proper, and may include agreements to indemnify a title insurer
against possible assertion of lien claims or to pay disputed amounts to
contractors if the Company is unable or unwilling to pay them. All sums so
advanced by the Bank to cure any such default or event of default or to correct
any such event or condition, or which are agreed to be paid pursuant to any such
agreement, shall be for the account of the Company, shall be reimbursed to the
Bank by the Company upon demand (with interest at the Interest Rate from the
date of such advance by the Bank until the date of reimbursement). Nothing in
this Agreement shall be construed as imposing under any circumstances any
obligation upon the Bank to cure any Default or Event of Default of the Company
under this Agreement or default or event of default under any of the Related
Documents or Company Documents, or otherwise to perform any of the Company's
obligations hereunder or thereunder.
(d) REMEDIES ARE CUMULATIVE. All remedies of the Bank provided
for herein are cumulative and shall be in addition to any and all other rights
and remedies provided in any document or by law. The exercise of any rights of
the Bank hereunder shall not in any way constitute a cure or waiver of a Default
hereunder or elsewhere, or invalidate any act done pursuant to any notice of
Default, or prejudice the Bank in the exercise of any of its other rights
hereunder or elsewhere, or invalidate any act done pursuant to any notice of
Default, or prejudice the Bank in the exercise of any of its other rights
hereunder or elsewhere unless, in the exercise of said rights, the Bank realizes
all amounts owed to it hereunder and under any other document.
SECTION 10. WAIVERS, ETC. No waiver of any provision of this
Agreement nor consent to any departure by the Company therefrom shall in any
event be effective unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given.
SECTION 11. ADDRESSES FOR NOTICES. Any notice shall be
conclusively deemed to have been received by either party hereto and be
effective on the day on which delivered to such party at the address set forth
below or such other address as Such party shall
34
specify to the other party in writing, or if sent prepaid by certified or
registered mail or by telegram or telex (where the receipt of such message is
verified by return) on the third Business Day after the day mailed (or sent),
addressed to such party at said address:
(a) if to the Company:
HEICO Aerospace Corporation
3000 Taft Street
Hollywood, Florida 33021
Attention: Treasurer
With a copy to:
Richard Morrison, Esq.
Weil, Gotshal & Manges LLP
Suite 2100
701 Brickell Avenue
Miami, Florida 33131
(b) if to the Bank:
SunTrust Bank, South Florida, National Association
501 East Las Olas Boulevard
Fort Lauderdale, FL 33301
Attention: Corporate Banking Division
SECTION 12. NO WAIVER; REMEDIES. No failure on the part of the
Bank to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof or otherwise preclude enforcement of any of its rights and
remedies; nor shall any single or partial exercise of any right hereunder
preclude any further exercise thereof or the exercise of any other right. The
Bank need not resort to any particular right or remedy before exercising or
enforcing any other. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 13. INDEMNIFICATION.. The Company shall indemnify and
hold harmless the Bank from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which the Bank may incur (or which may
be claimed against the Bank by the Company or any other person or entity
whatsoever) by reason of or in connection with (a) any breach by the Company of
any representation, warranty or covenant contained in the Agreement or contained
in any certificate by the Company delivered hereunder; and (b) the execution and
delivery or transfer to a successor beneficiary of, or payment or failure to pay
under, the Letter of Credit, provided, however, that the Company shall not be
required to indemnify the Bank for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, directly caused by (i)
the willful misconduct or gross negligence of the
35
Bank in determining whether a sight draft or certificate presented under the
Letter of Credit complied with the terms of the Letter of Credit or (ii) the
Bank's willful failure to pay under the Letter of Credit after the presentation
to it by the Trustee or a successor beneficiary of a sight draft or certificate
strictly complying with the terms and conditions of the Letter of Credit. The
indemnification in this Section 13 is in addition to the Company's reimbursement
and payment obligations contained in Section 2 hereof and in addition to any
other indemnities contained herein.
SECTION 14. CONTINUING OBLIGATION. This Agreement is a continuing
obligation and shall (a) be binding upon the Bank and the Company and their
respective successors, transferees and assigns, and (b)inure to the benefit of
and be enforceable by the Bank and the Company and their respective successors,
transferees and assigns; provided, however, that the Company may not assign or
transfer all or any part of this Agreement without the prior written consent of
the Bank.
SECTION 15. TRANSFER OF LETTER OF CREDIT. The Letter of Credit
may be transferred or assigned without the consent of the Bank, but only to a
successor Trustee under the terms of the Indenture.
SECTION 16. LIABILITY OF THE BANK. The Company assumes all risks
of the acts or omissions of the Trustee and any transferee of the Letter of
Credit with respect to its use of the Letter of Credit; provided, however, this
assumption with respect to the Bank is not intended to, and shall not, preclude
the Company from pursuing such rights and remedies as it may have against the
Trustee at law or under any other agreement. Neither the Bank nor any of its
officers or directors shall be liable or responsible for: (a) the use which may
be made of the Letter of Credit or for any acts or omissions of the Trustee and
any transferee of the Letter of Credit in connection therewith; (b) the form,
validity, sufficiency, accuracy genuineness or legal effect of documents, or of
any endorsements thereon, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (c)
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign the Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (d) failure of the Trustee to comply
fully with conditions required in order to draw upon the Letter of Credit; (e)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, or otherwise, whether or not they be
in cipher; (f) errors in interpretation of technical terms; (g) any loss or
delay in the transmission or otherwise of any document or draft required in
order to make a draw under the Letter of Credit or of proceeds thereof; (h) any
consequences
36
arising from causes beyond the control of the Bank; (i) payment by the Bank
against presentation of documents which do not comply with the terms of the
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit; or (j) any other circumstances
whatsoever in making or failing to make payment under the Letter of Credit;
provided, however, anything in the preceding clauses to the contrary
notwithstanding, the Company shall have a claim against the Bank to the extent,
but only to the extent, of any direct, as opposed to consequential, damages
suffered by the Company which the Company proves were directly caused by the
Bank's willful misconduct or gross negligence in determining whether documents
presented under the Letter of Credit comply with the terms of the Letter of
Credit after the presentation to it by the Trustee (or a successor beneficiary
to whom the Letter of Credit has been transferred in accordance with its terms
and the terms of this Agreement) of a sight draft and certificate and any other
documents or instruments expressly required by the Letter of Credit strictly
complying with the terms and conditions of the Letter of Credit. In furtherance
and not in limitation of the foregoing, the Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any, notice or information to the contrary. Subject
to the foregoing, the determination of whether a draft has been presented under
the Letter of Credit prior to the Expiration Date or whether a draft drawn under
the Letter of Credit or any accompanying document or instrument is in proper and
sufficient form shall be made by the Bank in its sole discretion, which
determination shall be conclusive and binding upon the Company. The Company
hereby waives any right to object to any payment made under the Letter of Credit
against a draft with accompanying documents in the forms provided for in the
Letter of Credit but varying in punctuation, capitalization, spelling or similar
matters of form.
SECTION 17. GOVERNING LAW. All documents executed pursuant to
the transactions contemplated herein, including without limitation this
Agreement and the Letter of Credit shall be deemed to be contracts made under,
and for all purposes shall be construed in accordance with, the internal laws
and judicial decisions of the State of Florida, without regard to principles of
conflicts of laws. THE COMPANY HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF
THE STATE AND FEDERAL COURTS OF FLORIDA FOR PURPOSES OF RESOLVING DISPUTES
HEREUNDER AND THEREUNDER OR FOR THE PURPOSES OF COLLECTION. THE COMPANY HEREBY
AGREES THAT THE FEDERAL AND STATE COURTS IN BROWARD COUNTY, FLORIDA ARE A
CONVENIENT FORUM AND AGREES NOT TO RAISE AS A DEFENSE THAT SUCH COURTS ARE NOT A
CONVENIENT FORUM.
SECTION 18. ASSIGNMENT BY THE BANK. The Bank may assign,
negotiate, pledge or otherwise hypothecate all or any portion of this Agreement
without the prior consent of the Company.
37
SECTION 19. HEADINGS. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
SECTION 20. FURTHER ASSURANCES. The Company agrees to do such
further acts and things and to execute and deliver to the Bank such additional
assignments, agreements, powers and instruments, as the Bank may require or deem
advisable to carry into effect the purposes of this Agreement or to better
assure and confirm unto the Bank its rights, powers and remedies hereunder.
SECTION 21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
agreements, representations and warranties made in this Agreement and in any
certificates delivered pursuant hereto shall survive the execution and delivery
of this Agreement and the issuance of the Letter of Credit hereunder until any
and all sums payable under this Agreement have been paid in full.
SECTION 22. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 23. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto
on.separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
SECTION 24. TIME. Time is of the essence of this Agreement, and
each and every provision hereof in which time is an element.
SECTION 25. SECURITY AND CASH COLLATERAL ACCOUNT.
(a) Company and Bank hereby confirm that an account entitled
"Yield Restricted Cash Collateral Account/HEICO Aerospace Corporation (the "Cash
Collateral Account") has been established under the Custodial Agreement by
Company with SunTrust Bank, Central Florida National Association, a national
banking association having its principal corporate trust office at 225 East
Robinson Street, Suite 250, Orlando, Florida 32801 as custodian for the benefit
of the Bank (the "Custodian"), in the name of Company as security for Company's
obligations under this Agreement. Company shall have no authority to withdraw
any amounts from the Cash Collateral Account and only Bank shall have such
authority in connection with the same. Company hereby agrees that any deposits
into or withdrawals from the Cash Collateral Account now or
38
hereafter directed by Bank in accordance with the terms of this Agreement are
authorized by Company; however, Company acknowledges that Company has no right
to direct such transfers at any time.
(b) Company agrees to deposit into the Cash Collateral Account
the sum of $15,625 on the first day of October, 2000, and a like amount on the
first day of each month thereafter during the remaining term of the Letter of
Credit.
(c) The parties acknowledge that the funds held in the Cash
Collateral Account will be invested by Custodian in its corporate trust
department securities accounts, in accordance with the written instructions from
Bond Counsel delivered to Bank contemporaneously herewith (the "Tax Letter") and
in accordance with written instructions delivered by Company to Bank and
Custodian, from time to time, consistent with the terms of the Tax Letter. The
Company acknowledges that the Tax Letter is being delivered to Bank so that the
return on investments made on the funds in the Cash Collateral Account will not
render the Bonds "arbitrage bonds" within the meaning of the applicable sections
of the Code, and applicable regulations promulgated thereunder. Company will not
give Bank written instructions directing the Bank to make investments which are
contrary to the instructions set forth in the Tax Letter and Company agrees to
indemnify and hold harmless Bank of and from any and all liability arising from
a determination that the Bonds are "arbitrage bonds" by virtue of the return on
the funds deposited in the Cash Collateral Account, so long as Bank makes the
investments in accordance with Company's written instructions. All investment
earnings on the Cash Collateral Account shall be retained therein.
(d) As collateral security for the Payment Obligations, whether
now existing or hereafter arising, whether direct or indirect, absolute or
contingent, Company hereby assigns, pledges and transfers to Bank all of its
rights, title and interest in and to the Cash Collateral Account and all sums
now or hereafter on deposit in or payable or withdrawable from said Cash
Collateral Account and any interest accrued or payable thereon. Upon an Event of
Default, Bank shall have the full and irrevocable right, power and authority to
demand, collect, withdraw, receipt for or sue for all amounts due, to become due
and payable hereunder from the Cash Collateral Account and at Bank's discretion
take any other action, including the transfer of said Cash Collateral Account to
Bank's own name, which Bank deems necessary or appropriate to preserve or
protect the security interests of Bank in the Cash Collateral Account and to
apply the same to pay all or any amounts due hereunder. Upon an Event of
Default, Bank shall have all of the rights and remedies provided by Section 9
hereof and applicable law. Company agrees to execute a UCC-1 Financing Statement
stating that the Cash Collateral Account and the investments held therein are
"general intangibles" or "instruments" within the meaning of Article 9 of the
Florida Uniform Commercial Code, to be filed with
39
the Secretary of State. Notwithstanding the foregoing or anything to the
contrary herein, however, the Bank shall not withdraw funds from the Cash
Collateral Account to make payments of draws under the Letter of Credit but may
apply such funds to reimburse itself for amounts due the Bank hereunder after
the occurrence of an Event of Default.
(e) Upon the expiration or termination of the Letter of Credit
and payment in full of the Payment Obligations and all other amounts payable
hereunder, as acknowledged in writing to the Custodian by the Bank, all funds
held in the Cash Collateral Account, together with all interest and earnings
thereon then remaining on deposit in the Cash Collateral Account, shall be
returned to Company.
(f) Upon the request of the Bank, the Company shall, at the
expense of the Company, execute and deliver a UCC-1 financing statement to be
filed in the office of the Florida Secretary of State naming the Company as
debtor and the Bank as secured party, providing a description of the Cash
Collateral Account as follows: "All moneys held in the Yield Restricted Cash
Collateral Account/HEICO Aerospace Corporation created pursuant to that certain
Custodial Agreement dated as of October 1, 1996, by and among Debtor, Secured
Party and SunTrust Bank, Central Florida, National Association, as custodian,
and any additions to, renewals, reinvestments, substitutions and proceeds
thereof."
SECTION 26. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY HEREBY
MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY
HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED
OR TO BE EXECUTED IN CONJUNCTION HEREWITH, UNDER ANY OF THE COMPANY DOCUMENTS OR
RELATED DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THE COMPANY ACKNOWLEDGES
THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL INDUCEMENT TO THE BANK IN ACCEPTING
THIS AGREEMENT AND THAT THE BANK WOULD NOT HAVE ACCEPTED THIS AGREEMENT WITHOUT
THIS JURY TRIAL WAIVER AND THAT THE COMPANY HAS BEEN REPRESENTED BY AN ATTORNEY
OR HAS HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY REGARDING THIS JURY TRIAL
WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS JURY TRIAL WAIVER.
40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers and authorized
representatives thereunto duly authorized as of the date first above written.
Signed, sealed and HEICO AEROSPACE CORPORATION,
delivered in the a Florida corporation
presence of:
_________________________ By _____________________________
Its_____________________________
_________________________
(SEAL)
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION
(SEAL) By ______________________________
Its______________________________
41
IRREVOCABLE LETTER OF CREDIT
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION
501 East Las Olas Boulevard, 7th Floor
Ft. Lauderdale, Florida 33301
October 18, 1996
IRREVOCABLE LETTER OF CREDIT NO. F070279
SunTrust Bank, Nature Coast, as Trustee
225 E. Robinson Street, Suite 250
Orlando, Florida 32801
Attention: Corporate Trust Department
At the request and on the instructions of our customer, HEICO
Aerospace Corporation, a Florida corporation (the "Company"), we hereby
establish in your favor, as Trustee under the Indenture of Trust, dated as of
October 1, 1996 (the "Indenture") between Broward County, Florida (the "Issuer")
and you pursuant to which $3,500,000 in aggregate principal amount of the
Issuer's Industrial Development Revenue Bonds (HEICO Aerospace Corporation
Project), Series 1996 (the "Bonds") may be issued, this Irrevocable Letter of
Credit in the initial amount of $3,563,195 (hereinafter, as reduced from time to
time in accordance with the provisions hereof, the "Stated Amount") of which (i)
an amount not exceeding $3,500,000 (as reduced from time to time in accordance
with the terms hereof (the "Principal Component"), may be drawn upon with
respect to payment of the unpaid principal amount or the portion of Purchase
Price corresponding to principal of the Bonds, and (ii) an amount not exceeding
$63,195 (as reduced from time to time in accordance with the terms hereof, the
"Interest Component") may be drawn upon with respect to payment of interest
accrued or the portion of Purchase Price corresponding to interest accrued on
the Bonds on or prior to their stated maturity date, effective immediately and
expiring on October 16, 2001, unless terminated earlier in accordance with the
provisions hereof or unless otherwise renewed or extended. All drawings under
this Letter of Credit will be paid with our own funds.
Funds under this Letter of Credit will be made available to you
against receipt by us of the following items at the time required below: (A) if
the drawing is being made with respect to the payment of the portion of the
Purchase Price of Bonds delivered to the Tender Agent (as defined in the
Indenture) pursuant to Section 2.02(c), 3.08, 4.01, 4.02 or 4.04 of the
Indenture, corresponding to the principal thereof (an "A Drawing"), receipt by
us of your written certificate in the form of Exhibit A attached hereto
appropriately completed and signed by an Authorized Officer; (B) if the drawing
is being made with respect to the payment of principal of the Bonds (a "B
Drawing"), receipt by us of your written certificate in the form of Exhibit B
attached hereto appropriately completed and signed by an Authorized Officer; and
(C) if the drawing is being made with respect to the payment of interest, or the
portion of Purchase Price corresponding to interest, on the Bonds (a "C
Drawing"), receipt by us of your written certificate in the form of Exhibit C
attached hereto appropriately completed and signed by an Authorized Officer.
Presentation of such certificate(s) shall be made at our office located at
SunTrust Bank, South Florida, National Association, c/o SunTrust International
Services, Inc., 25 Park Place, 16th Floor-3706, Atlanta, Georgia 30303, or at
any other office which may be designated by us by written notice delivered to
you.
If a drawing is made by you hereunder at or prior to 4:00 P.M.,
New York City time, on a Business Day, and provided that the requirements set
forth above have been strictly satisfied and that such drawing and the documents
presented in connection therewith conform to the terms and conditions hereof,
payment shall be made to you, or to your designee, of the amount specified in
immediately available funds, not later than 12:00 Noon, New York City time, on
the next succeeding Business Day or not later than 12:00 Noon, New York City
time, on such later Business Day as you may specify. If requested by you,
payment under this Letter of Credit will be made by deposit of immediately
available funds into a designated account that you maintain with us. If a demand
for payment made by you hereunder does not, in any instance, conform to the
terms and conditions of this Letter of Credit, we shall give you notice that the
demand for payment was not effected in accordance with the terms and conditions
of this Letter of Credit, stating the reasons therefor and that we will upon
your instructions hold any documents at your disposal or return the same to you.
Upon being notified that the demand for payment was not effected in conformity
with this Letter of Credit, you may attempt to correct any such non-conforming
demand for payment to the extent that you are entitled to do so. As used herein,
the term "Business Day" shall mean a day on which you, SunTrust Bank, South
42
Florida, National Association, and banks located in Orlando, Florida, Fort
Lauderdale, Florida and Atlanta, Georgia are required or permitted by law to be
open for the purpose of conducting a banking business.
Demands for payment hereunder honored by us shall not, in the
aggregate, exceed the Stated Amount, as the Stated Amount may have been
reinstated by us as provided in the next paragraph. Subject to the preceding
sentence, each "A Drawing" and each "B Drawing" honored by the Bank hereunder
shall PRO TANTO reduce the Principal Component, and each "C Drawing" honored by
the Bank hereunder shall PRO TANTO reduce the Interest Component; any such
reduction shall result in a corresponding reduction in the Stated Amount, it
being understood that after the effectiveness of any such reduction you shall no
longer have any right to make a drawing hereunder in respect of the amount of
such principal and/or interest on the Bonds or the payment of Purchase Price
corresponding thereto.
Upon release by us or on our behalf of any "Pledged Bonds" (as
defined in the Indenture), the Principal Component shall be reinstated
automatically by the principal amount of such Pledged Bonds. In addition, (i) if
you shall not have received, within ten Business Days after any payment in
respect of a "C Drawing", written notice from us that an Event of Default under
the SunTrust Bank Reimbursement Agreement dated as of October 1, 1996 by and
between the Company and us has occurred and is continuing, the Interest
Component shall be reinstated automatically, as of the close of business on such
tenth Business Day (unless the Interest Component previously has been reinstated
with respect to such "C Drawing"), by the amount of such "C Drawing" and (ii)
upon the release by us or on our behalf of any Pledged Bonds, the Interest
Component shall be reinstated automatically by the amount of the "C Drawing"
made to pay the portion of the Purchase Price corresponding to interest on such
Pledged Bonds (unless the Interest Component previously has been reinstated with
respect to such "C Drawing"); provided, however, that in no event shall the
Interest Component be reinstated to an amount in excess of 50 days' interest
(such amount computed as set forth in the second succeeding paragraph) on the
sum of the then applicable Principal Component plus the aggregate principal
amount of any Pledged Bonds.
Only you or your successor as Trustee may make a drawing under
this Letter of Credit. Upon the payment to you, to your designee or to your
account of the amount demanded hereunder, we shall be fully discharged on our
obligation under this Letter of Credit with respect to such demand for payment
and we shall not thereafter be obligated to make any further payments under this
Letter of Credit in respect of such demand for payment to you or any other
person who may have made to you or makes to you a demand for payment of
principal of, Purchase Price of, or interest on, any Bond. By paying to you an
amount demanded in accordance herewith, we make no representation as to the
correctness of the amount demanded.
This Letter of Credit applies only to the payment of principal or
the portion of Purchase Price of the Bonds corresponding to principal, and up to
50 days' interest accruing on the Bonds (computed at a rate of 13% per annum),
from the Date of Issuance through the Termination Date (computed on the basis of
(i) actual days elapsed in a 365- or 366-day year, as the case may be, so long
as the Interest Period is one week or one month in duration, and (ii) a 360-day
year comprised of twelve 30-day months, so long as the Interest Period is three
months or six months in duration, and does not apply to any interest that may
accrue thereon or any principal, premium or other amounts which may be payable
with respect to the Bonds subsequent to the expiration of this Letter of Credit.
Upon the earliest of (i) the honoring by us of the final drawing
available to be made hereunder, (ii) receipt of a certificate signed by an
Authorized Officer and a duly authorized officer of the Company stating that:
"(a) the conditions precedent to the acceptance of a Substitute Letter of Credit
(as defined in the Indenture) have been satisfied, (b) the Trustee has accepted
the Substitute Letter of Credit and (c) on the effective date of the Substitute
Letter of Credit, and after receipt by SunTrust Bank, South Florida, National
Association of this certificate, SunTrust Bank, South Florida, National
Association Irrevocable Letter of Credit No. F070279 shall terminate," (iii)
receipt of a certificate signed by an Authorized Officer stating that no Bonds
remain Outstanding (as defined in the Indenture), (iv) fifteen days after the
Conversion Date (as defined in the Indenture), and (v) the stated expiration
date hereof, this Letter of Credit shall automatically terminate and be
delivered to us for cancellation.
Communications with respect to this Letter of Credit shall be in
writing and shall be addressed to us at SunTrust Bank, South Florida, National
Association, c/o SunTrust International Services, Inc., 25 Park Place, 16th
Floor-3706, Atlanta, Georgia 30303, specifically referring thereon to this
Letter of Credit by number.
We agree to issue a substitute letter of credit to any successor
trustee (and to successively replace any such substitute letter of credit) upon
the return to us for cancellation of the original of the letter of credit to be
replaced, accompanied by a request relating to such letter of credit, which (i)
shall be substantially in the form of Exhibit D attached hereto with the
43
blanks appropriately completed, (ii) shall be signed by an Authorized Officer,
(iii) shall specify where indicated therein the same letter of credit number as
the number of the letter of credit to be replaced and (iv) shall state the name
and address of the successor trustee. Each substitute letter of credit will be
in substantially the form of this Letter of Credit except for the date and
letter of credit number.
As used herein (a) "Authorized Officer" shall mean any person
signing as one of your Vice Presidents, Assistant Vice Presidents, Trust
Officers or Assistant Trust Officers; and (b) all other capitalized terms used
herein and not otherwise defined shall have the respective meanings assigned to
such terms in the above-mentioned Indenture.
This Letter of Credit sets forth in full our undertaking, and
such undertaking shall not in any way be modified, amended, amplified or limited
by reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds), except only the certificate(s)
referred to herein; and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement except for such
certificate(s).
This credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs"). This Letter of Credit shall be
deemed to be a contract made under the laws of the State of Florida and shall,
as to matters not governed by the Uniform Customs, be governed by and construed
in accordance with the laws of such State.
Very truly yours,
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION
By:____________________________________
Title:
By:____________________________________
Title:
44
EXHIBIT A
CERTIFICATE FOR "A DRAWING"
[Date]
SunTrust Bank, South Florida,
National Association
c/o SunTrust International Services, Inc.
25 Park Place, 16th Floor-3706
Atlanta, Georgia 30303
RE: IRREVOCABLE LETTER OF CREDIT NO. F070279
The undersigned, a duly authorized officer of SunTrust Bank,
Nature Coast (the "Trustee"), hereby certifies to SunTrust Bank, South Florida,
National Association (the "Bank") that:
(1) The undersigned is the Trustee under the Indenture (as
hereinafter defined) for the holders of the Bonds.
(2) The undersigned, in its capacity as Trustee, is making a
drawing under the above-referenced Letter of Credit in the amount of
$___________ with respect to payment of the portion of the purchase
price of Bonds corresponding to the principal amount thereof, which
Bonds are to be purchased pursuant to Section [2.02(c)] [3.08] [4.01]
[4.02] or [4.04] of the Indenture (as hereinafter defined).
(3) The amount demanded hereby does not exceed the amount
available on the date hereof to be drawn under the above-referenced
Letter of Credit in respect of the portion of the Purchase Price of
Bonds corresponding to the principal amount thereof.
(4) The amount demanded hereby does not include any amount in
respect of the purchase of any Pledged Bonds.
(5) Upon receipt by the undersigned of the amount demanded
hereby, (a) the undersigned will apply the same directly to the payment
when due of the principal amount owing on account of the purchase of
Bonds pursuant to the Indenture (as hereinafter defined) and, upon
receipt of written request by the Bank, will cause the Tender Agent to
deliver to the Bank Pledged Bonds in an aggregate principal amount equal
to the amount demanded hereby (together with any and all due bills for
interest due on the next succeeding interest payment date delivered
pursuant to Section 4.04 of the Indenture (as hereinafter defined) in
respect of such Pledged Bonds), (b) no portion of said amount shall be
applied by the undersigned for any other purpose and (c) no portion of
said amount shall be commingled with other funds held by the
undersigned.
(6) With respect to any drawing hereunder pursuant to Section
3.08 of the Indenture, the undersigned certifies that the Trustee has
received a copy of your written consent to the purchase of Bonds
pursuant to said Section 3.08.
Any capitalized terms used herein and not otherwise defined shall
have the respective meanings assigned to such terms in the Indenture of Trust,
dated as of October 1, 1996 between Broward County, Florida and the undersigned,
as Trustee (the "Indenture").
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ____ day of ___________, ___.
A-1
SUNTRUST BANK, NATURE COAST,
as Trustee
By:_________________________________
Title:
A-2
EXHIBIT B
CERTIFICATE FOR "B DRAWING"
[Date]
SunTrust Bank, South Florida,
National Association
c/o SunTrust International Services, Inc.
25 Park Place, 16th Floor-3706
Atlanta, Georgia 30303
RE: IRREVOCABLE LETTER OF CREDIT NO. F070279
The undersigned, a duly authorized officer of SunTrust Bank,
Nature Coast (the "Trustee"), hereby certifies to SunTrust Bank, South Florida,
National Association (the "Bank") that:
(1) The undersigned is the Trustee under the Indenture (as
hereinafter defined) for the holders of the Bonds.
(2) The undersigned, in its capacity as Trustee, is making a
drawing under the above-referenced Letter of Credit in the amount of
$_________ with respect to the payment of principal of the Bonds, which
amount has, or will, on the Business Day immediately following the date
hereof, become due and payable pursuant to the Indenture (as hereinafter
defined), upon maturity or as a result of acceleration or redemption of
the Bonds.
(3) The amount demanded hereby does not include any amount in
respect of the principal amount of any Pledged Bonds.
(4) The amount demanded hereby, together with the aggregate of
all prior payments made pursuant to "B Drawings" under the
above-referenced Letter of Credit, does not exceed $_________.
(5) The amount demanded hereby does not exceed the amount
available on the date hereof to be drawn under the above-referenced
Letter of Credit in respect of the principal of the Bonds.
(6) Upon receipt by the undersigned of the amount demanded
hereby, (a) the undersigned will apply the same directly to the payment
when due of the principal amount owing on account of the Bonds pursuant
to the Indenture (as hereinafter defined), (b) no portion of said amount
shall be applied by the undersigned for any other purpose and (c) no
portion of said amount shall be commingled with other funds held by the
undersigned.
Any capitalized terms used herein and not otherwise defined shall
have the respective meanings assigned to such terms in the Indenture of Trust,
dated as of October 1, 1996 between Broward County, Florida and the undersigned,
as Trustee (the "Indenture").
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ______ day of _________, ____.
SUNTRUST BANK, NATURE COAST,
as Trustee
By:________________________________
Title:
B-1
B-2
EXHIBIT C
CERTIFICATE FOR "C DRAWING"
[Date]
SunTrust Bank, South Florida,
National Association
c/o SunTrust International Services, Inc.
25 Park Place, 16th Floor-3706
Atlanta, Georgia 30303
RE: IRREVOCABLE LETTER OF CREDIT NO. F070279
The undersigned, a duly authorized officer of SunTrust Bank,
Nature Coast (the "Trustee"), hereby certifies to SunTrust Bank, South Florida,
National Association (the "Bank") that:
(1) The undersigned is the Trustee under the Indenture (as
hereinafter defined) for the holders of the Bonds.
(2) The undersigned, in its capacity as Trustee, is making a
drawing under the above-referenced Letter of Credit in the amount of
$___________ with respect to payment of [the portion of the purchase
price of $___________ in principal amount of the Bonds corresponding to
the accrued interest thereon, which Bonds are to be purchased pursuant
to Section 3.08 or 4.04 of the Indenture (as hereinafter defined)
[interest on the Bonds, which amount has accrued and become due and
payable pursuant to the Indenture (as hereinafter defined), upon a
stated interest payment date or as a result of acceleration or
redemption of the Bonds]1 [interest on the Bonds, which has accrued or
will accrue during the calendar month for which this drawing is being
submitted, less, with respect to the final drawing of the Interest
Period (as defined in the Indenture, as that term is hereinafter
defined), investment earnings (if any) on any previous amounts drawn
under the Letter of Credit, which investment earnings are on deposit in
the Letter of Credit Account of the Bond Fund]2.
(3) The amount demanded hereby does not exceed the amount
available on the date hereof to be drawn under the above-referenced
Letter of Credit in respect of interest on the Bonds.
(4) The amount demanded hereby does not include any amount in
respect of the interest on any Pledged Bonds.
(5) Upon receipt by the undersigned of the amount demanded
hereby, (a) the undersigned will apply the same directly to the payment
when due of the [interest owing on account of the Bonds pursuant to the
Indenture (as hereinafter defined)] [portion of the Purchase Price of
Bonds pursuant to Section 3.08 or 4.04, as applicable, of the Indenture
(as hereinafter defined) corresponding to accrued interest thereon], (b)
no portion of said amount shall be applied by the undersigned for any
other purpose and (c) no portion of said amount shall be commingled with
other funds held by the undersigned.
- --------
1 For use when Interest Period (as defined in Indenture) is seven
days days one month in duration.
2 For use when Interest Period is three months or six
months in duration.
C-1
(6) With respect to any drawing hereunder pursuant to Section
3.08 of the Indenture, the undersigned certifies that the Trustee has
received a copy of your written consent to the purchase of Bonds
pursuant to said Section 3.08.
Any capitalized terms used herein and not otherwise defined shall
have the respective meanings assigned to such terms in the Indenture of Trust,
dated as of October 1, 1996 between Broward County, Florida and the undersigned,
as Trustee (the "Indenture").
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ____ day of _________, ____.
SUNTRUST BANK, NATURE COAST,
as Trustee
By:___________________________________
Title:
C-2
EXHIBIT D
INSTRUCTION TO ISSUE SUBSTITUTE LETTER OF CREDIT
[Date]
SunTrust Bank, South Florida,
National Association
c/o SunTrust International Services, Inc.
25 Park Place, 16th Floor-3706
Atlanta, Georgia 30303
RE: IRREVOCABLE LETTER OF CREDIT NO. F070279
Ladies and Gentlemen:
Reference is made to (i) the above-referenced letter of credit
(the "Old Letter of Credit") and (ii) the Indenture of Trust dated as of October
1, 1996 (the "Indenture") between Broward County, Florida and us.
[Name and address of successor trustee] (the "Successor Trustee")
has been appointed successor trustee under the Indenture. The Successor Trustee
has been properly appointed and qualified pursuant to Article X of the
Indenture. You are hereby requested to issue, in accordance with the terms of
the Old Letter of Credit, a new letter of credit to the Successor Trustee having
the same terms and providing for the same Stated Amount as the Old Letter of
Credit.
We submit herewith for cancellation the original of the Old
Letter of Credit.
The individual signing below on our behalf hereby represents that
he or she is duly authorized to so sign on our behalf.
Very truly yours,
SUNTRUST BANK, NATURE COAST,
as Trustee
By:___________________________________
Title:
D-1
EXHIBIT 10.14
HEICO CORPORATION
1993 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to advance the interests of
HEICO Corporation, a Florida corporation (the "Company"), and its Subsidiaries
by providing an additional incentive to attract and retain qualified and
competent persons who provide management and other services and upon whose
efforts and judgement the success of the Company and Subsidiaries is largely
dependent, through the encouragement of stock ownership in the Company by such
persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the stock option committee appointed
by the Board pursuant to Section 12 hereof, or if not appointed, the
Board.
(c) "Common Stock" shall mean the common stock, par value $.01
per share, of the Company.
(d) "Director" shall mean a member of the Board.
(e) "Disinterested Person" shall mean a Director who, during one
year prior to the time he serves on the Committee and during such
service, has not received Shares, options for Shares or any rights with
respect to Shares under this Plan or any other employee and/or Director
benefit plan of the Company or any of its affiliates except pursuant to
an election to receive annual director's fees in securities of the
Company.
(f) "Employee" and "employment" shall mean, except where the
context otherwise requires, mean or refer to a Director and his
Directorship as well as to a regular employee and his employment.
(g) "Fair Market Value" of a Share on any date of reference shall
mean the Closing Price of the Common Stock on such date, unless the
Committee in its sole discretion shall determine otherwise in a fair and
uniform manner. For this purpose, the Closing Price of the Common Stock
on any business day shall be (i) if the Common Stock is listed or
admitted for trading on any United States national securities exchange,
or if actual transactions are otherwise reported on a consolidated
transaction reporting system, the last reported sale price of Common
Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, or (ii) if the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), or any similar system of automated dissemination of
quotations of securities prices in common use, the mean between the
closing bid and asked quotations for Common Stock as reported by the
National Quotation Bureau, Incorporated, if at least two securities
dealers have inserted both bid and asked quotations for Common Stock on
at least 5 of the 10 preceding business days.
(h) "Grantee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such
person under this Plan by reason of death of such person or transfer of
such option as may be allowed under this Plan.
(i) "Incentive Stock Option" means an option to purchase Shares
of Common Stock which is intended to qualify as an incentive stock
option as defined in Section 422 of the Internal Revenue Code.
A-1
(j) "Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(k) "Key Employee" means any person, including officers and
Directors, in the regular full- time employment of the Company or any
Subsidiary who, in the opinion of the Committee, is or is expected to be
responsible for the management, growth or protection of some part or all
of the business of the Company or a Subsidiary.
(l) "Non-qualified Stock Option" means an option to purchase
Shares of Common Stock which is not intended to qualify as an Incentive
Stock Option.
(m) "Option" (when capitalized) shall mean any option granted
under this Plan.
(n) "Plan" shall mean this 1993 Stock Option Plan for HEICO
Corporation.
(o) "Share(s)" shall mean a share or shares of the Common
Stock.
(p) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations, beginning with the
Company if, at the time of the granting of the Option, each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing ten (10) percent or more of any class of any equity
security in one of the other corporations in such chain and has the
right to direct the management of the other corporation.
3. SHARES AND OPTIONS. The Company may grant to Grantees from time to
time Options to purchase an aggregate of up to 325,000 Shares from Shares held
in the Company's treasury or from authorized and unissued Shares. Of this
amount, all or any may be optioned as Incentive Stock Options, as Non-qualified
Stock Options, or any combination thereof. If any Option granted under this Plan
shall terminate, expire, or be cancelled or surrendered as to any Shares, new
Options may thereafter be granted covering such Shares.
4. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an Option Agreement, which
Option Agreement may be altered consistent with this Plan and with the
approval of both the Committee and the Grantee, that may contain terms
deemed necessary or desirable by the Committee, including, but not
limited to, a requirement that the Grantee agree that, for a specified
period after termination of his employment, he will not enter into any
employment with, or participate directly or indirectly in, any entity
which is directly or indirectly competitive with the Company or any of
its Subsidiaries, provided such terms are not inconsistent with this
Plan or any applicable law. Grantees shall be selected by the Committee
in its discretion and shall be employees and Directors who are not
employees; provided, however, that Directors who are not employees shall
not be eligible to receive Incentive Stock Options. Any person who files
with the Committee, in a form satisfactory to the Committee, a written
waiver of eligibility to receive any Option under this Plan shall not be
eligible to receive any Option under this Plan for the duration of such
waiver.
(b) In granting Options, the Committee shall take into
consideration the contribution the person has made to the success of the
Company or its Subsidiaries and such other factors as the Committee
shall determine. The Committee shall also have the authority to consult
with and receive recommendations from officers and other personnel of
the Company and its Subsidiaries with regard to these matters. The
Committee may from time to time in granting Options under the Plan
prescribe such other terms and conditions concerning such Options as it
deems appropriate, including, without limitation, (i) prescribing the
date or dates on which the Option becomes exercisable, (ii) providing
that the Option rights accrue or become exercisable in installments over
a period of years, or upon the attainment of stated goal or both, or
(iii) relating an Option to the continued employment of the Grantee for
a specified period of time, provided that such terms and conditions are
not more favorable to the Grantee than those expressly permitted herein.
A-2
(c) The Options granted to Grantees under this Plan shall be in
addition to regular salaries, Director's fees, pension, life insurance
or other benefits related to their employment or Directorships with the
Company or its Subsidiaries. Neither the Plan nor any Option granted
under the Plan shall confer upon any person any right to employment or
Directorship or continuation of employment or Directorship by the
Company or any of its Subsidiaries.
(d) The Committee in its sole discretion shall determine in each
case whether periods of military or government service shall constitute
a continuation of employment for the purposes of this Plan or any
Option.
(f) No employee may be granted any Incentive Stock Option
pursuant to this plan to the extent that the aggregate fair market value
(determined at the time the Option is granted) of the Shares with
respect to which Incentive Stock Options granted to the employee under
the terms of this Plan or its predecessor after December 31, 1986 are
exercisable for the first time by the employee during any calendar year
exceeds $100,000.
(g) Option agreements with respect to Incentive Stock Options
shall contain such terms and conditions under Section 422 of the
Internal Revenue Code, as such section may be amended from time to time.
5. OPTION PRICE. The option price per share of any Option shall be the
price determined by the Committee; provided, however, that in no event shall the
option price per Share of any Incentive Stock Option be less than (i) 100% or
(ii) in the case of an individual who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, 110%, of the
Fair Market Value of the Shares underlying such Option on the date such Option
is granted.
6. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee in its sole discretion have been made for
the Grantee's payment to the Company of the amount, if any, that is necessary to
withhold in accordance with applicable Federal or State tax withholding
requirements. Unless further limited by the Committee in any Option Agreement,
the option price of any Shares shall be paid in cash, by certified check or
official bank check, by money order, by the Grantee's promissory note, with
Shares (including Shares acquired pursuant to a partial and simultaneous
exercise of the Option) or by a combination of the above; provided further,
however, that the Committee in its sole discretion may accept a personal check
in full or partial payment of any Shares. If the exercise price is paid in whole
or in part with Shares, the value of the Shares surrendered shall be their Fair
Market Value on the business day immediately preceding the date the Option is
exercised. The company in its sole discretion may, on an individual basis or
pursuant to a general program established in connection with this Plan, lend
money to a Grantee to obtain the cash necessary to exercise all or a portion of
an Option granted hereunder or to pay any tax liability of the Grantee
attributable to such exercise. If the exercise price is paid in whole or in part
with the Grantee's promissory note, such note shall, unless specified by the
Committee at the time of grant or any time thereafter, (w) provide for full
recourse to the maker, (x) be collateralized by the pledge of the Shares that
the Grantee purchases upon exercise of the Option, (y) bear interest at the
prime rate of the Company's principal lender and (z) contain such other terms as
the Committee in its sole discretion shall reasonably require. No Grantee or
permitted transferee(s) thereof shall be deemed to be a holder of any Shares
subject to an Option unless and until exercise has been completed pursuant to
clauses (i-iii) above. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date of exercise,
except as expressly provided in Section 9 hereof.
7. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in the corresponding Option agreement, except as otherwise provided in
this Section 7.
A-3
(a) The expiration date of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Incentive Stock
Option be exercisable after the expiration of (i) ten (10) years from
the date of grant of the Option or (ii) in the case of an individual who
owns stock possessing more than 10% of the total combined voting power
of all classes of voting stock of the Company, five years from the date
of the grant of the Option.
(b) Except to the extent otherwise provided in any Option
agreement, each outstanding Option shall become immediately fully
exercisable
(i) if any "person" (as such term is used in Sections
13(d) and 14(d) (2) of the Securities Exchange Act of 1934),
except the Mendelson Reporting Group, as that group is defined in
an Amendment to a Schedule 13D filed on February 26, 1992 or any
subsequent amendment to the aforementioned 13D, is or becomes a
beneficial owner, directly or indirectly, of securities of the
Company representing 15% or more of the combined voting power of
the Corporation's then outstanding securities;
(ii) if, during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board cease for any reason to constitute at least a majority
thereof, unless the Board in existence immediately preceding the
two year period shall have nominated the new Directors whose
Directorships have create the altered Board composition; or
(iii) if the stockholders of the Company shall approve a
plan of merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive (unless the
merger, consolidation, reorganization, liquidation or dissolution
is subsequently abandoned) provided, however, that a merger or
reorganization pursuant to which the Company merges with a
Subsidiary which is owned principally by the Company's pre-merger
or reorganization shareholders and which becomes publicly traded
with five (5) business days thereafter shall not trigger
immediate exercisability under this Section 7; or
(iv) if the stockholders of the Company shall approve a
plan for the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Company
(unless such approved plan is subsequently abandoned).
(c) The Committee may in its sole discretion accelerate the
date on which any Option may be exercised.
8. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option shall automatically and
without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) one week after the date on which the Grantee's
employment is terminated for any reason other than by reason of
(A) cause (which, for purposes of this Plan, shall mean the
termination of the Grantee's employment by reason of the
Grantee's willful misconduct or gross negligence), (B) a mental
or physical disability as determined by a medical doctor
satisfactory to the Committee, or (C) death; provided, however,
that the one week period may be extended by the Committee to up
to three (3) months with respect to Incentive Stock Options and
up to thirty six (36) months in the case of Non-qualified Stock
Options;
(ii) immediately upon termination of the Grantee's
employment for cause, provided, however, that the Committee may
extend the period to up to three (3) months with respect to
Incentive Stock Options and up to thirty six (36) months in the
case of Non-qualified Stock Options;
A-4
(iii) six months after the date on which the grantee's
employment is terminated by reason of mental or physical
disability as determined by a medical doctor satisfactory to the
Committee, provided, however, that the Committee may extend the
period to up to thirty six (36) months in respect to
Non-qualified Stock Options;
(iv) (A) twelve months after the date of termination of
the Grantee's employment by reason of death of the Grantee, or
(B) three months after the date on which the Grantee shall die if
such death shall occur during the six (6) month period specified
in Subsection 8(a)(iii) hereof, provided, however, that the
Committee may extend the period to up to thirty six (36) months
in respect to Non-qualified Stock Options.
(b) The Committee in its sole discretion may by giving written
notice ("cancellation notice") cancel, effective upon the date of the
consummation of any corporate transaction described in Subsections
7(b)(iii) or (iv) hereof, any Option that remains unexercised on such
date. Such cancellation notice shall be given a reasonable period of
time prior to the proposed date of such cancellation and may be given
either before or after stockholder approval of such of such corporate
transaction.
9. ADJUSTMENT OF SHARES.
(a) If, at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the
number of issued and outstanding Shares through the declaration of a
stock dividend or through any recapitalization resulting in a stock
split-up, combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares available for grant under the plan, so that the
same percentage of the Company's issued and outstanding Shares
shall continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the number of
Shares and the option price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's
issued and outstanding Shares shall remain subject to purchase at
the same aggregate option price.
(b) Subject to the specific terms of any Option agreement, the
Committee may change the terms of Options outstanding under this Plan
with respect to the option price or the number of Shares subject to the
Options, or both, when, in the Committee's sole discretion, such
adjustments become appropriate by reason of a corporate transaction
described in Subsections 7(b)(iii) or (iv) hereof.
(c) Except as otherwise expressly provided herein, the issuance
by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either
in connection with direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the number of or option price of Shares then
subject to outstanding Options granted under this Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect
in any manner the right or power of the Company to make, authorize or
consummate (i) any or all adjustments, recapitalization, reorganizations
or other changes in the Company's capital structure or its business;
(ii) any merger or consolidation of the Company; (iii) any issuance by
the Company of debt securities or preferred or preference stock that
would rank above the Shares subject to outstanding Options; (iv) the
dissolution or liquidation of the Company; (v) any sale, transfer or
assignment of all or any part of the assets or business of the Company;
or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
A-5
10. TRANSFERABILITY OF OPTIONS. Each Option agreement shall provide that
the Option shall not be transferable by the Grantee otherwise than by will or
the laws of descent and distribution or, in the case on Non-qualified Stock
Options, pursuant to a qualified domestic relations order as defined by the
Internal Revenue Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder; provided, however, that the Committee may waive the
foregoing transferability restriction with respect to Non-qualified Stock
Options on a case-by-case basis.
11. ISSUANCE OF SHARES. As a condition of any sale or issuance of Shares
upon exercise of any Option, the Committee may require such arrangement or
undertakings, if any, as the Committee may deem necessary or advisable to ensure
compliance with any applicable federal or state securities law or regulation,
including, but not limited to, the following:
(i) a representation and warranty by the Grantee to the
Company, at the time any Option is exercised, that he is
acquiring the Shares to be issued to him for investment and not
with a view to, or for sale in connection with, the distribution
of any such shares; and
(ii) a representation, warranty and/or agreement to be
bound by any legends that are, in the opinion of the Committee,
necessary or appropriate to comply with the provisions of any
securities laws deemed by the Committee to be applicable to the
issuance of the Shares and are endorsed upon the Share
certificates.
12. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a stock option committee
(herein called the "Committee") consisting of not less than two (2)
Directors, all of whom shall be Disinterested Persons; provided,
however, that if no Committee is appointed, the Board may administer the
Plan. provided that all members of the Board at the time are
Disinterested Persons. The Committee shall have all of the powers of the
Board with respect to the Plan. Any member f the Committee may be
removed at any time, with or without cause, by resolution of the Board,
and any vacancy occurring in the membership f the Committee may be
filled by appointment of the Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes f the Plan. The determinations
and the interpretation and construction of any provision of the Plan by
the Committee shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the
Committee at a meeting or (ii) without a meeting by the unanimous
written approval of the members of the Committee.
13. INTERPRETATION.
(a) If any provision of the Plan should be held invalid for any
reason, such holding shall not affect the remaining provisions hereof,
but instead the Plan shall be construed and enforced as if such
provision had never been included in the Plan.
(b) This Plan shall be governed by the laws of the State of
Florida.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
A-6
14. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Committee may from
time to time amend the Plan or any Option consistent with the Plan; provided,
however, that (except to the extent provided in Section 9) no such amendment
may, without approval by the stockholders of the Company, (a) increase the
number of Shares reserved for Options, (b) change the requirements for
eligibility to receive Options, or (c) materially increase the benefits accruing
to the participants under the Plan; and provided, further, that (except to the
extent provided in Section 8) no amendment or suspension of the Plan or any
Option issued hereunder shall substantially impair any Option previously granted
to any Grantee without the consent of such Grantee.
15. EFFECTIVE DATE AND TERMINATION DATE. The effective date of this Plan
shall be March 17, 1993 provided that the Plan is approved by the Company's
Stockholder(s), and the Plan shall terminate on the tenth (10th) anniversary of
the effective date. After such termination date, no Options may be granted
hereunder; provided, however, that Options outstanding at such date may be
exercised pursuant to their terms.
Dated as of the 19th HEICO CORPORATION
day of March, 1996.
By: /s/ LAURANS A. MENDELSON
----------------------------
Laurans A. Mendelson
Chairman, President and
Chief Executive Officer
A-7
EXHIBIT 10.21
AMENDMENT TO SIX AND ONE HALF PERCENT CONVERTIBLE NEGOTIABLE
NOTE DUE JUNE 30, 2001
THIS AMENDMENT (this "Amendment") TO SIX AND ONE HALF PERCENT CONVERTIBLE
NEGOTIABLE NOTE DUE JUNE 30, 2001 (the "Note") is made as of December 24, 1996
by and among U.S. Diagnostic, Inc., a Delaware corporation ("USDL" or the
"Company") and HEICO Corporation, a Florida corporation (the "Payee" or "the
Holder of Note").
RECITALS
WHEREAS, the Company issued the Note to the Payee, which note is dated
July 1, 1996 and is a portion of the consideration for the purchase of MediTek
Health Corporation from the Payee; and
WHEREAS, both the Company and the Payee desire to extend by six months
the time period before which the Company is required to register the Company's
Common Stock receivable by the Payee upon conversion of the Note and to extend
the period of time before which the Company may prepay the Note.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Payee hereby agree as follows:
1. REQUIRED CONVERSION. Section 3 of the Note is hereby amended so that
the date upon which conversion of the Note may be required shall be extended to
the later of December 31, 1997 or the date that the shares of Common Stock into
which the Note are convertible are registered for resale by the Holder under the
Securities Act of 1933 as amended (such time being herein called the "Required
Conversion Date"), if the last sale price of the Common Stock averages at least
$9.25 per share for the ten (10) trading days immediately preceding the Required
Conversion Date, then upon written notice from the Company given within fifteen
(15) days following the Required Conversion Date, the Payee shall convert this
Note at the then applicable Conversion Rate.
2. PREPAYMENT. Section 4 of the Note is hereby amended so that the Note
may not be prepaid in whole or in part until any time after December 31, 1997,
upon sixty (60) days written notice by the Company to the Holder. The Holder
shall be permitted to convert the Note at any time prior to the date of
prepayment set forth in such notice.
3. NO OTHER CHANGES. With the exception of the foregoing, all of the
other terms and provisions of the Note shall remain unchanged. Any defined terms
set forth in this Amendment which are not defined in the Amendment, but are
defined in the Note, shall have the definitions ascribed to such defined terms
in the Note.
4. MISCELLANEOUS. All of the miscellaneous provisions contained in
Section 8 of the Note shall apply to this Amendment.
IN WITNESS WHEREOF, this Amendment has been executed and delivered on
the date first specified above by the duly authorized representatives of the
Company and the Holder.
U.S. Diagnostic, Inc.
BY: /s/ JOSEPH A PAUL
--------------------------------
Joseph A. Paul
President
HEICO Corporation
BY: /s/ LAURANS A. MENDELSON
--------------------------------
Laurans A. Mendelson
Chairman, President and
Chief Executive Officer
EXHIBIT 10.22
AMENDMENT
THIS AMENDMENT (this "Amendment") TO REGISTRATION AND SALE RIGHTS AGREEMENT (the
"Agreement") is made as of December 24, 1996 by and among U.S. Diagnostic, Inc.,
a Delaware corporation ("USDL" or the "Company") and HEICO Corporation, a
Florida corporation (the "Holder").
RECITALS
WHEREAS, the Company and the Holder entered into the Agreement as of
July 1, 1996 in relation to the sale of MediTek Health Corporation by the Holder
to the Company. The Agreement sets forth, among other things, the Company's
obligations with respect to registration of U.S.D.L. Common Stock which Holder
is entitled to receive upon conversion of a Note received in relation to such
acquisition of MediTek Health Corporation; and
WHEREAS, the Agreement requires the Company to file and use its best
efforts to cause to be declared effective by January 1, 1997 a registration
statement on Form S-3 with the Securities and Exchange Commission; and
WHEREAS, the Company and the Holder desire to extend the date by which
the Company shall be required to file and use its best efforts to have declared
effective such registration statement by six months and the Holder desires to
permit such extension.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Holder hereby agree to the following:
1. AMENDMENT OF SECTION 1.2(a). Section 1.2(a) of the Agreement is
hereby amended so that the Company shall file with and use its best efforts to
cause to be declared effective by, the SEC on or before July 1, 1997 a
registration statement on Form S-3 under the Act or such other form that is
available to the Company covering the registration of the Registrable
Securities.
2. AMENDMENT OF SECTION 1.2(b). Section 1.2(b) of the Agreement shall be
amended so that the Company shall be permitted to postpone the filing of any
registration pursuant to such Section 1.2 if during the period from May 1, 1997
to July 31, 1997, the Company is engaged or has fixed plans to engage prior to
August 31, 1997, in a registered public offering in which Registrable Securities
will not be included, or is engaged or has fixed plans to engage within sixty
(60) days of July 1, 1997 in a material acquisition or any other activity that
in the good faith determination of the Board of Directors of the Company would
require premature disclosure of such activity to the material determent of the
Company, then the Company may at its option direct that such filing be delayed
for a period not in excess of sixty (60) days from the effective date of such
offering, or the date of commencement of such other material activity, as the
case may be,
provided in any case that the effective date of such registration statement
shall not be later than September 1, 1997.
3. NO OTHER CHANGES. With the exception of the foregoing, all of the
other terms and provisions of the Agreement shall remain unchanged. Any defined
terms set forth in this Amendment which are not defined in this Amendment, but
are defined in the Agreement, shall have the definitions ascribed to such
defined terms in the Agreement.
4. MISCELLANEOUS. All of the miscellaneous provisions contained in
Section 3 of the Agreement shall apply to this Amendment.
IN WITNESS WHEREOF, this Amendment has been executed and delivered on
the date first specified above by the duly authorized representatives of the
Company and the Holder.
U.S. Diagnostic, Inc.
BY: /s/ Joseph A. Paul
-------------------------------
Joseph A. Paul
President
HEICO Corporation
BY: /s/ Laurans A. Mendelson
-------------------------------
Laurans A. Mendelson
Chairman, President and
Chief Executive Officer
Exhibit 11
HEICO CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
____________
Following are details of the computation of earnings per share:
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ --------------------------
FULLY FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
---------- ---------- ----------- ---------- ----------- ------------
Weighted average number of
common shares outstanding ............. 5,190,926 5,190,926 5,025,492 5,025,492 4,981,832 4,981,832
Common stock equivalents arising
from dilutive stock options (1) ....... 712,225 733,795 276,878 351,026 63,131 63,131
---------- ---------- ----------- ---------- ----------- ------------
5,903,151 5,924,721 5,302,370 5,376,518 5,044,963 5,044,963
========== ========== =========== ========== =========== ============
Net income:
From continuing operations
before cumulative effect
of change in accounting
principle ............................. $ 0.62 $ 0.62 $ 0.27 $ 0.27 $ 0.13 $ 0.13
From discontinued operations ............ $ 0.17 $ 0.16 $ 0.24 $ 0.23 $ 0.16 $ 0.16
From gain on sale of dis-
continued operations .................. $ 0.89 $ 0.89 -- -- -- --
From cumulative effect
of change in
accounting principle .................. -- -- -- -- $ 0.08 $ 0.08
---------- ---------- ----------- ---------- ----------- ------------
Net income per share .................... $ 1.68 $ 1.67 $ 0.51 $ 0.50 $ 0.37 $ 0.37
========== ========== =========== ========== =========== ============
[TABLE CONTINUED BELOW]
(1) Computed under the "treasury stock" method using the average market
price for the primary computation and using the higher of average or
ending market prices for the fully diluted computation.
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1993 1992
--------------------------- -----------------------------
FULLY
PRIMARY DILUTED PRIMARY DILUTED
----------- ---------- ----------- -----------
Weighted average number of
common shares outstanding ................ 5,111,521 5,111,521 4,832,701 4,832,701
Common stock equivalents arising
from dilutive stock options (1) .......... 78,675 127,014 138,779 156,836
----------- ---------- ----------- -----------
5,190,196 5,238,535 4,971,480 4,989,537
=========== ========== =========== ===========
Net income:
From continuing operations
before cumulative effect
of change in accounting
principle ................................ $ 0.14 $ 0.14 $ 0.07 $ 0.07
From discontinued operations ............... $ 0.05 $ 0.05 $ 0.19 $ 0.19
From gain on sale of dis-
continued operations ..................... -- -- -- --
From cumulative effect
of change in
accounting principle ..................... -- -- -- --
----------- ---------- ----------- -----------
Net income per share ....................... $ 0.19 $ 0.19 $ 0.12 $ 0.12
=========== ========== =========== ===========
(1) Computed under the "treasury stock" method using the average market
price for the primary computation and using the higher of average or
ending market prices for the fully diluted computation.
EXHIBIT 21
HEICO CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF COMPANY
NAME STATE OF INCORPORATION
- ---- ----------------------
HEICO Aerospace Corporation Florida
Jet Avion Corporation Florida
LPI Industries Corporation Florida
Aircraft Technology, Inc. Florida
ATI Heat Treat Corporation Florida
Jet Avion Heat Treat Corporation Florida
(Inactive)
HEICO International Corporation U.S. Virgin Islands
HEICO East Corporation Florida
HEICO-NEWCO, Inc. Florida
HEICO Engineering Corp. (Inactive) Florida
HEICO - Jet Corp. (Inactive) Florida
HEICO Bearings Corp. Florida
HEICO Aviation Products Corp. Florida
Trilectron Industries, Inc. New York
Subsidiaries of the Company, all of which are directly or indirectly
wholly-owned, are included in the Company's consolidated financial statements.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in Registration Statement Nos.
33-4945, 33-62156, 333-8063, and 333-19667 of HEICO Corporation on Forms S-8 of
our report dated December 27, 1996, appearing in this Annual Report on Form 10-K
of HEICO Corporation for the year ended October 31, 1996.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
January 24, 1997
5
YEAR
OCT-31-1996
OCT-31-1996
11,025,000
0
8,147,000
(268,000)
15,277,000
37,113,000
19,599,000
(13,754,000)
61,836,000
11,865,000
6,022,000
0
0
53,000
41,435,000
61,836,000
34,565,000
34,565,000
22,396,000
22,396,000
7,657,000
0
185,000
5,385,000
1,720,000
3,665,000
6,227,000
0
0
9,892,000
1.68
1.67