Equipment Lease Agreement

EQUIPMENT LEASE AGREEMENT


This EQUIPMENT LEASE AGREEMENT (the "LEASE") by and among AVIATION SALES DISTRIBUTION SERVICES COMPANY, a Delaware corporation (the "LESSOR"), whose principal address is 3601 Flamingo Road, Miramar, Florida 33027, AVIATION SALES COMPANY, a Delaware corporation ("AVS"), whose principal address is 3701 Flamingo Road, Miramar, Florida 33027, and KELLSTROM INDUSTRIES, INC., a Delaware corporation (the "LESSEE"), whose principal address is 1100 International Parkway, Sunrise, Florida 33323, is made this 1st day of December, 2000 (the "EFFECTIVE DATE").


WHEREAS, Lessee desires to enjoy the exclusive use of the Equipment (as hereafter defined); and


WHEREAS, Lessor is willing to provide such Equipment for Lessee's exclusive use under this Lease;


WHEREAS, AVS is the parent of Lessor and joins in the execution of this Agreement for the purposes stated herein;


NOW, THEREFORE, in consideration of the foregoing recitals, the rental payments made hereunder, and the representations, warranties and covenants herein contained, Lessor and Lessee agree as follows, intending to be legally bound:


SECTION 1. LEASING AND PURPOSE.


1.1 Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the equipment more particularly described on SCHEDULE 1.1 (the "EQUIPMENT"). Lessor represents that the Equipment does not include any "equipment" as defined in that certain Participation Agreement dated as of December 17, 1998 among AVS, as construction agent and lessee; First Security Bank, N.A., f/k/a First Security Bank of Utah, N.A., not individually, except as expressly stated in such Participation Agreement, but solely as Owner Trustee under the Aviation Sales Trust 1998-1; the various banks and other financial institutions a party thereto from time to time, as holders and lenders thereunder; and Nationsbank, N.A., as administrative agent for the lenders (the "TROL EQUIPMENT") and, in addition thereto, does not include any equipment that is located in the Ardmore Facilities (as defined in that certain Transition Services Agreement dated as of the date hereof among Lessor, Lessee and AVS (the "TRANSITION SERVICES AGREEMENT")), such equipment being referred to as the "ARDMORE EQUIPMENT". At such time as Lessor ceases operations at the Ardmore Facilities in accordance with Article III of the Transition Services Agreement, the Ardmore Equipment shall become part of the Equipment and the Rent (as defined below) shall be adjusted in the manner described in Section 3.2 below.


1.2 Lessee agrees that the Equipment will be used by the Lessee only for lawful purposes and in the normal and ordinary course of Lessee's business. Lessee understands and agrees


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that it acquires no right of ownership or equity in the Equipment solely as a result of the payment of Rent (as defined below) hereunder.


SECTION 2. ACKNOWLEDGMENT. The parties acknowledge and agree that Lessor has made no representation or warranty of any kind, express or implied, with respect to such Equipment, except as provided in Section 1.1 above and Section 4 below.


SECTION 3. TERM, RENT, OPTIONS, ADDITIONAL CONSIDERATION AND AUDIT.


3.1 The term of this Lease shall run from the Effective Date through the date which is twelve (12) months from and after the Effective Date, unless earlier terminated pursuant to the terms of this Lease (such period of time being hereinafter referred to as the "TERM"). The last day of the Term hereof shall be hereinafter referred to as the "TERMINATION DATE." Any use of the Equipment by Lessee beyond the Termination Date shall be deemed an extension of the original Term on a month-to-month basis and all obligations of Lessee under this Lease (including the obligation to pay Rent) shall continue until the Equipment is returned to Lessor as provided under Section 12. For purposes hereof, the term "Senior Loan Agreement" means that certain Amended and Restated Loan and Security Agreement dated as of December 14, 1998 among Lessee and certain subsidiaries of Lessee, as borrowers, and Bank of America, N.A., certain other lenders and other parties thereto, as amended through the date hereof.


3.2 During the twelve (12) month Term hereof, Lessee agrees to pay to Lessor monthly rental (the "RENT") for the Equipment, in an amount equal to one percent (1.0%) of the net book value of the Equipment as shown on SCHEDULE 1.1 (the "NET BOOK VALUE"). The initial Rent hereunder shall be in the amount of Seventy Seven Thousand Three Hundred Eighty-Five and 67/100 Dollars ($77,385.67) per month. After the Lessor ceases operations at the Ardmore Facilities in accordance with Article III of the Transition Services Agreement, and the Ardmore Equipment becomes part of the Equipment pursuant to Section 1.1 above, the Rent shall be adjusted to take into consideration the Net Book Value of the Ardmore Equipment. The Rent to be paid hereunder is due and payable on a monthly basis in advance, the first such payment being due and payable on the Effective Date and each subsequent payment being due and payable on the first day of each month of the Term, all without demand. In the event the Lease does not begin on the first day of the month or end on the last day of the month, the first and last lease payments hereunder may be prorated for the actual number of days the Lease is outstanding during the first and last month. Lessee agrees to pay the Rent and all other payments to Lessor at the address referred to in Section 15 below, or where Lessor may otherwise require. This Lease is a NET Lease, under which Lessee's obligations are to pay all Rent and other sums payable hereunder, and Lessee shall pay all costs, expenses and obligations of every kind and nature relating to the Equipment other than claims relating to indebtedness incurred by Lessor or claims arising at any time that are attributable to Lessor. Net Book Value, as used herein, shall not be altered from the amount set forth on SCHEDULE 1.1 hereof, notwithstanding the passage of time or other circumstances which might change the net book value of the Equipment for accounting purposes; however, Net Book Value may be reduced in the event that any of the Equipment is lost, damaged or taken and paid for by Lessee pursuant to Section 8.2. Any such reduction in the aggregate Net Book Value of all the Equipment shall be in an amount of the Net


-2- 3 Book Value for the particular equipment lost, damaged or taken (and paid for by Lessee in accordance with Section 8.2).


3.3 Lessee acknowledges and agrees that Lessor may sell all or part of the Equipment to a third party purchaser (a "SUPPLEMENTAL PURCHASER"). In the event that Lessor sells all or part of the Equipment to a Supplemental Purchaser (such sold Equipment hereinafter referred to as the "SOLD EQUIPMENT"), such sale shall be subject to the terms and conditions contained in this Lease. Thereafter, Lessee shall continue to pay Rent hereunder in the same amount as prior to such sale to a Supplemental Purchaser, however, the Rent payments shall be divided in accordance with written instructions jointly provided to Lessee by Lessor and such Supplemental Purchaser. Any Equipment sold to a Supplemental Purchaser shall continue to be subject to the Equipment Purchase Agreement, and such Supplemental Purchaser's purchase of the Equipment shall be subject to the Equipment Purchase Agreement.


3.4 The Lessor and Lessee shall conduct a joint inventory of the Equipment, to be completed within ninety (90) days of the Effective Date. Upon completion of such audit, the parties will prepare and attach hereto an amended SCHEDULE 1.1 hereto, whereupon the Net Book Value and the Rent calculated therefrom shall each be adjusted to reflect the findings of the audit. Any overage or underage in payments of Rent made hereunder prior to completion of the audit shall be applied toward the next scheduled payment date after audit completion.


SECTION 4. REPRESENTATIONS AND WARRANTIES OF LESSOR.


4.1 Other than Permitted Liens (as defined in that certain Asset Purchase Agreement by and between Lessor, Lessee, and AVS (the "ASSET PURCHASE AGREEMENT")), Lessor has good and marketable title to all of the Equipment. Lessor will as of the Effective Date own the Equipment free and clear of any Liens (as defined in the Asset Purchase Agreement) other than Permitted Liens, with full power to lease the same to Lessee free and clear of any Liens (other than Permitted Liens). The Equipment, taken as a whole, is in good operating condition, normal wear and tear excepted. SCHEDULE 1.1 represents all of the Furniture, Fixtures and Equipment line items of the Base Balance Sheet (as defined in the Asset Purchase Agreement), except that SCHEDULE 1.1 does not contain the Ardmore Equipment or the TROL Equipment. If the Lessee pays the Rent as provided hereunder, and observes all other material terms, covenants and conditions hereof, it may peaceably and quietly have, hold and enjoy the Equipment during the Term.


4.2 NOTWITHSTANDING ANYTHING CONTAINED IN THIS SECTION OR ANY OTHER PROVISION HEREOF, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT THE LESSOR AND THE LESSEE ARE NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS SECTION 4 OR IN ANY TRANSACTION DOCUMENTS (AS DEFINED IN THE ASSET PURCHASE AGREEMENT), INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO ANY OF THE EQUIPMENT, AND EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE TRANSACTION


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DOCUMENTS, IT IS UNDERSTOOD THAT LESSEE IS LEASING ALL OF THE EQUIPMENT ON AN "AS-IS" "WHERE-IS" BASIS.


SECTION 5. TITLE, IDENTIFICATION, INSPECTION AND REPORTS. Lessee acknowledges and agrees that unless and until the Equipment is sold pursuant to the Equipment Purchase Agreement (a) ownership of and title to the Equipment and all accessions thereto remain with Lessor (or a Supplemental Purchaser to the extent applicable); (b) Lessee will make no claim or assert any right to any such Equipment inconsistent with Lessor's ownership, and will make appropriate entries upon the books and records disclosing Lessor's title to the Equipment; (c) if Lessor so requests, Lessee will specifically identify the Equipment in a manner reasonably acceptable to Lessor as being owned and leased by the Lessor, (d) Lessee, at its expense, will protect and defend Lessor's title to the Equipment from and against all claims, encumbrances, liens and legal processes other than those arising out of indebtedness incurred by Lessor or otherwise attributable to Lessor; (e) Lessee will, whenever requested by Lessor, execute and deliver to Lessor all agreements, instruments and documents necessary to fully consummate all of the transactions contemplated herein and necessary for the protection of Lessor's title to the Equipment; (f) Lessee will allow Lessor to inspect the Equipment at reasonable times; (g) Lessee agrees to provide to Lessor at least thirty (30) days prior written notice in the event any portion of the Equipment shall be moved to a location other than as is set forth on SCHEDULE 5 attached hereto; and (h) Lessee agrees not to move any portion of the Equipment that remains subject to the Lease out of the United States.


SECTION 6. USE AND MAINTENANCE.


6.1 Lessee's use and operation of the Equipment shall be in compliance with the provisions of all applicable Insurance Policies (as hereafter defined) and all pertinent rules, regulations, permits, certification, ordinances and laws of all governmental or regulatory bodies having jurisdiction over Lessee, the Equipment or the use or operation thereof by Lessee. Lessee will use and operate the Equipment in compliance with normal, safe operating procedures for such Equipment and in conformance with applicable operating manuals. Lessee, at its expense, will pay for all required operating services, materials, maintenance and repair and will keep the Equipment in good, safe and satisfactory repair and in the same good and safe operating condition and appearance as when received, excepting only reasonable wear and tear.


6.2 Lessee shall not materially alter, modify, make additions or make improvements to the Equipment without prior written approval of Lessor (which shall not be unreasonably withheld). Lessee shall promptly notify Lessor in writing of the nature of any such material change to the Equipment and, if Lessor's approval is given, Lessee shall subsequently notify Lessor that the required work has been accomplished in accordance with Lessor's approval. All such Lessor-approved alterations, modifications, additions and improvements made to the Equipment shall become the property of Lessor and Lessee shall be in default under this Lease if Lessee shall make any material alterations, modifications, or additions to the equipment that have not been approved in writing by Lessor.


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SECTION 7. INSURANCE. Lessee will, at its expense, at all times during the Term, and until the Equipment is returned pursuant to Section 12 or purchased pursuant to the Equipment Purchase Agreement, procure and maintain insurance covering the Equipment, and such insurance shall be of the type, in the amount and with the insurers currently used by Lessee or other insurers of recognized reputation and responsibility. In no event shall such insurance be in amounts less than the applicable Net Book Value for the Equipment. A description of all insurance policies covering the Equipment is set forth on SCHEDULE 7 attached hereto (the "Insurance Policies"). All Insurance Policies shall name Lessor and Lessor's assignee (if any) as additional insured and additional loss payee, as their interests may appear, and shall provide that the policies may be altered or cancelled by Lessee or insurer only after 30 days' prior written notice to Lessor, and, within 15 days prior to the expiration of any insurance policy, Lessee shall furnish Lessor with a copy of each replacement insurance policy written with respect to Equipment and with evidence that the required insurance remains current and in full force and effect and has been renewed for the applicable period. Any operation of the Equipment by Lessee while required insurance is not in full force and effect will constitute a default by Lessee under this Lease. The insurance policy or policies evidencing cover ...