<PAGE>
                           KELLSTROM INDUSTRIES, INC.

                   11 3/4% SENIOR SUBORDINATED NOTES DUE 2004

                    ($15,000,000 Aggregate Principal Amount)

                                       and

                   WARRANTS TO PURCHASE SHARES OF COMMON STOCK

                          SECURITIES PURCHASE AGREEMENT

                          Dated as of January 15, 1997



 
<PAGE>

<PAGE>




                                TABLE OF CONTENTS

                             (NOT PART OF AGREEMENT)

<TABLE>
<S>            <C>                                                                         <C>
       Section 1.     Authorization of the Securities......................................  1

       Section 2.     Purchase and Sale of Securities; Closing.............................  2
               2.1    Purchase and Sale....................................................  2
               2.2    Allocation of Purchase Price.........................................  2
               2.3    Closing..............................................................  2

       Section 3.     Fees.................................................................  3

       Section 4.     Prepayment of Notes..................................................  3
               4.1    Mandatory Redemption.................................................  3
               4.2    Optional Redemption with Premium.....................................  3
               4.3    Optional Redemption upon Public Offering.............................  3
               4.4    Contingent Redemption Upon Change of Control.........................  4
               4.5    Contingent Redemption in the Event of Excess Sale Proceeds...........  4
               4.6    Special Optional Redemption..........................................  5
               4.7    Notice of Optional Redemptions; Officers' Certificate................  5
               4.8    Allocation of Partial Prepayments....................................  5
               4.9    Maturity; Surrender, etc.............................................  6
               4.10   Acquisition of Notes.................................................  6

       Section 5.     Representations and Warranties of the Company........................  6
               5.1    Corporate Existence and Power........................................  6
               5.2    Subsidiaries.........................................................  7
               5.3    Possession of Franchises, Licenses, etc..............................  7
               5.4    Corporate Authority..................................................  7
               5.5    Binding Effect.......................................................  7
               5.6    Consents, etc........................................................  7
               5.7    No Conflicts with Agreements, etc....................................  8
               5.8    Litigation; No Violation of Government Orders or Laws................  8
               5.9    Financial Statements.................................................  9
               5.10   Inventories..........................................................  9
               5.11   No Illegal or Improper Transactions..................................  9
               5.12   Accounts Receivable.................................................. 10
               5.13   Contracts and Leases................................................. 10
               5.14   Acquisition Sub...................................................... 11
               5.15   Related Documents and Senior Debt Instruments........................ 11
               5.16   Outstanding Debt and Undisclosed Liabilities......................... 11
               5.17   Capital Stock........................................................ 11
               5.18   Taxes................................................................ 12

</TABLE>


 
<PAGE>

<PAGE>


                                TABLE OF CONTENTS

                                   (continued)
<TABLE>
<S>                   <C>                                                                   <C>
               5.19   Title to Properties.................................................. 13
               5.20   Intellectual Property................................................ 14
               5.21   Labor Matters........................................................ 14
               5.22   Compliance with ERISA................................................ 14
               5.23   Offering of Securities; Compliance with Securities Laws.............. 16
               5.24   Environmental Regulations............................................ 16
               5.25   Status under Certain Laws............................................ 17
               5.26   Foreign Assets Control Regulations................................... 17
               5.27   Legality............................................................. 17
               5.28   Solvency............................................................. 18
               5.29   Margin Regulations; Use of Proceeds.................................. 18
               5.30   Affiliates........................................................... 18
               5.31   Disclosure........................................................... 18
               5.32   Representations in Related Documents................................. 18
               5.33   Broker's or Finder's Commissions..................................... 19

       Section 6.     Representations of Purchaser......................................... 19
               6.1    Purchase for Investment.............................................. 19
               6.2    ERISA................................................................ 19
               6.3    U.S. Person.......................................................... 20
               6.4    Restricted Securities................................................ 20
               6.5    Transfer Restrictions................................................ 20

       Section 7.     Closing Conditions................................................... 20
               7.1    Representations and Warranties True, etc.; Certificates.............. 21
               7.2    Opinions of Purchaser's Special Counsel.............................. 21
               7.3    Opinion of Counsel for the Company................................... 21
               7.4    Other Opinions....................................................... 21
               7.5    Your Purchase Permitted by Applicable Laws; Legal Investment......... 21
               7.6    Compliance with Securities Laws...................................... 21
               7.7    Proceedings Satisfactory............................................. 22
               7.8    Related Documents.................................................... 22
               7.9    Acquisition.......................................................... 22
               7.10   Senior Debt Instruments.............................................. 22
               7.11   Consent of Lenders to this Agreement................................. 22
               7.12   Fees Payable at Closing.............................................. 23
               7.13   Legislative Changes.................................................. 23
               7.14   Solvency............................................................. 23
               7.15   PPN Application...................................................... 23
               7.16   Material Adverse Effect.............................................. 23

</TABLE>


                                       -2-



 
<PAGE>

<PAGE>


                                TABLE OF CONTENTS

                                   (continued)

<TABLE>
<S>                   <C>                                                                   <C>
        Section 8.    Financial Statements and Information................................. 23

        Section 9.    Inspection of Properties and Books................................... 28

       Section 10.    Affirmative Covenants................................................ 29
               10.1   Legal Existence; Compliance with Laws, etc........................... 29
               10.2   Maintenance of Property and Insurance................................ 29
               10.3   Payment of Taxes..................................................... 30
               10.4   Payment of Other Debt, etc........................................... 30
               10.5   Environmental Laws................................................... 30
               10.6   Further Assurances................................................... 30
               10.7   Reservation of Common Stock.......................................... 31
               10.8   Consolidated Interest and Dividend Coverage Ratio.................... 31
               10.9   Compliance with Related Documents.................................... 31
               10.10  Subsidiary Guaranties, etc........................................... 31
               10.11  Certain Amendment.................................................... 32
               10.12  Application of Certain Proceeds...................................... 32

       Section 11.    Negative Covenants................................................... 33
               11.1   Debt................................................................. 33
               11.2   Liens, etc........................................................... 34
               11.3   Restricted Investments............................................... 36
               11.4   Restricted Payments.................................................. 37
               11.5   Minimum Net Worth.................................................... 39
               11.6   Transactions with Affiliates......................................... 39
               11.7   Consolidation or Merger, Sale of Assets, etc. ....................... 39
               11.8   Subsidiary Stock and Debt............................................ 41
               11.9   Compliance with ERISA................................................ 41
               11.10  Restrictions Affecting Subsidiaries.................................. 43
               11.11  Amendment of Senior Credit Agreements................................ 43
               11.12  Nature of Business................................................... 43
               11.13  Transactions Affecting Notes......................................... 44
               11.14  Limitation on Other Subordinated Indebtedness........................ 44

       Section 12.    Events of Default.................................................... 44
               12.1   Events of Default; Remedies.......................................... 44
               12.2   Suits for Enforcement................................................ 46
               12.3   Remedies Cumulative.................................................. 47
               12.4   Remedies Not Waived.................................................. 47

        Section 13.  Subordination......................................................... 47
</TABLE>

                                            -3-



 
<PAGE>

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                                TABLE OF CONTENTS

                                   (continued)
<TABLE>
<S>                   <C>                                                                   <C>
               13.1   General.............................................................. 47
               13.2   Payment Defaults..................................................... 47
               13.3   Non-Payment Defaults................................................. 47
               13.4   Notice of Defaults................................................... 48
               13.5   Notice of Acceleration............................................... 48
               13.6   Bankruptcy, etc...................................................... 48
               13.7   Amounts in Trust..................................................... 49
               13.8   Subrogation.......................................................... 49
               13.9   Reinstatement........................................................ 49
               13.10  Proofs of Claim...................................................... 49
               13.11  Reliance on Orders................................................... 50
               13.12  Rights of Senior Debt................................................ 50
               13.13  No Modification, etc................................................. 50
               13.14  Further Assurances................................................... 50
               13.15  Waiver of Notice..................................................... 51
               13.16  Specific Performance................................................. 51
               13.17  Events of Default.................................................... 51
               13.18  Obligations Unconditional............................................ 51
               13.19  Absence of Notice.................................................... 51
               13.20  Information.......................................................... 52
               13.21  Intercreditor Subordination.......................................... 52

       Section 14.    Registration, Exchange and Transfer of Notes......................... 53

       Section 15.    Lost, Stolen, Damaged and Destroyed Securities....................... 53

       Section 16.    Definitions.......................................................... 54
               16.1   General Terms........................................................ 54
               16.2   Accounting Terms..................................................... 69

       Section 17.    Miscellaneous........................................................ 69
               17.1   Home Office Payment; Endorsements of the Notes....................... 69
               17.2   Amendment and Waiver................................................. 70
               17.3   Expenses............................................................. 70
               17.4   Survival of Representations and Warranties........................... 71
               17.5   Successors and Assigns............................................... 71
               17.6   Rights Confined to Parties and Holders............................... 71
               17.7   Notices.............................................................. 71
               17.8   Governing Law........................................................ 72
               17.9   Submission to Jurisdiction; WAIVER OF JURY TRIAL..................... 72
               17.10  Indemnification...................................................... 72

</TABLE>

                                            -4-



 
<PAGE>

<PAGE>


                                TABLE OF CONTENTS

                                   (continued)

<TABLE>
<S>                   <C>                                                                   <C>
               17.11  Integration.......................................................... 73
               17.12  Counterparts......................................................... 73
               17.13. Headings............................................................. 74
</TABLE>

                                            -5-



 
<PAGE>

<PAGE>



                           KELLSTROM INDUSTRIES, INC.

                          SECURITIES PURCHASE AGREEMENT

                                                    Dated as of January 15, 1997

To the Purchaser
Listed in the Attached
Schedule I

Ladies and Gentlemen:

               The   undersigned,   KELLSTROM   INDUSTRIES,   INC.,  a  Delaware
corporation (the "Company"), has authorized the issuance and sale of $15,000,000
aggregate principal amount of its 11 3/4 Senior Subordinated Notes due 2004 (the
"Notes") and Warrants  (the  "Warrants")  to purchase  305,660  shares of Common
Stock.  Pursuant to an Asset  Purchase  Agreement,  dated as of October 28, 1996
(the  "Acquisition  Agreement"),  among  the  Company,  IASI  Inc.,  a  Delaware
corporation   and  a  Subsidiary  of  the  Company   ("Kellstrom   Subsidiary"),
International  Aircraft Support,  L.P. ("IASI") and William Lyon, a principal of
each of the  general  partners of IASI,  the Company has agreed to acquire  (the
"Acquisition")  substantially  all of the  assets  and  business  of  IASI.  The
proceeds of the Notes to be issued and sold  hereunder  are to be applied to the
purchase price of IASI.  Prior to entering into this Agreement,  the Company has
entered  into a Note  Purchase  Agreement,  dated as of January  9,  1997,  with
Bedford Falls Investors,  L.P. and the other purchasers  identified  therein for
issue  and  sale  of  $6,000,000   aggregate  principal  amount  of  10%  Senior
Subordinated  Notes and  warrants  to  purchase  up to 450,000  shares of Common
Stock.

               Certain  capitalized  terms used in this Agreement are defined in
Section 16; references to a Section are, unless otherwise  specified,  to one of
the Sections of this Agreement and references to an "Exhibit" or "Schedule" are,
unless otherwise specified, to one of the exhibits or schedules attached hereto.
As used herein,  the term "Securities" shall include,  collectively,  the Notes,
the  Warrants  and any  shares of Common  Stock  issuable  or issued to you upon
exercise  of  any  Warrants.  You  are  herein  sometimes  referred  to  as  the
"Purchaser".

               Section 1. Authorization of the Securities.  Prior to the Closing
Date, the Company shall have duly authorized the issue, sale and delivery to the
Purchaser of:

               (a)  its    113/4%  Senior  Subordinated  Note  due  2004  in the
principal amount  specified  opposite such Purchaser's name on Schedule I, to be
dated the date of issue  thereof,  to bear interest  (computed on the basis of a
360-day  year of  twelve  30-day  months)  from  such  date  on the  outstanding
principal amount thereof at the Applicable Rate per annum payable semi-annually,
in arrears on the 15th day of January and July in each year (commencing July 15,
1997) and at maturity, and to bear

                                       -1-



 
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<PAGE>



interest  (so  computed)  after  maturity  at the  rate per  annum  equal to the
Applicable Rate plus 2%, whether by  acceleration  or otherwise,  until paid, on
any overdue principal and any premium and, to the extent permitted by applicable
law, on any overdue interest, until the same shall be paid, to mature on January
15, 2004, and to be substantially in the form of Exhibit A; and

               (b)  Warrants to purchase the  aggregate  number of shares of the
Company's  common stock,  par value $.001 per share (the "Common  Stock"),  such
Common Stock having the rights set forth in the Certificate of  Incorporation of
the Company (the  "Certificate of  Incorporation")  attached as Exhibit B hereto
(all shares of Common Stock  originally  issued pursuant to this  Agreement,  or
delivered in  substitution  or exchange for any thereof,  are herein referred to
collectively  as the  "Common  Shares"),  equal to the total  number of  Warrant
Shares (as defined in the Warrant),  to be dated the date of issue thereof,  and
to be substantially in the form of Exhibit C.

               Section 2.    Purchase and Sale of Securities; Closing.

               2.1 Purchase and Sale. Subject to the terms and conditions herein
set forth,  the Company  hereby  agrees to sell to you,  and you hereby agree to
purchase  from the  Company,  in  accordance  with the  provisions  hereof,  the
aggregate principal amount of Notes and Warrants set forth opposite your name in
Schedule I hereto at 100% of the principal amount of the Notes to be purchased.

               2.2 Allocation of Purchase Price. The Company has determined that
for United  States  federal  income tax purposes the "issue  price" of the Notes
under Section 1273(b) of the Code,  based upon the relative fair market value of
the Notes and the Warrants,  shall equal $14,850,000.  The Company agrees to use
the  foregoing  issue price for United States  federal  income tax purposes with
respect to this transaction.

               2.3 Closing.  The purchase and delivery of the  Securities  to be
purchased by you hereunder shall take place at the New York offices of Fulbright
& Jaworski  L.L.P. at 10:00 a.m., New York City time on January 15, 1997 or such
other  date not later  than  January  31,  1997 as shall be  agreed  upon by the
Company and the Purchaser  (herein  called the "Closing  Date").  On the Closing
Date, the Company will deliver to you:

               (a)  Notes,  registered  in  your  name  or in the  name  of your
nominee,  each such Note to be duly  executed and dated the Closing Date, in any
denominations  (multiples of $1,000) and in an aggregate principal amount (which
shall be an integral  multiple of $1,000) to be  purchased  by you as  specified
above,  all as you may  specify  by timely  notice to the  Company  (or,  in the
absence of such notice,  one Note registered in your name in a principal  amount
equal to the aggregate principal amount of Notes to be purchased by you from the
Company hereunder), and

                                       -2-



 
<PAGE>

<PAGE>



               (b)  Warrants  issued in your name or in the name of your nominee
exercisable  for the number of shares of Common  Stock equal to the total number
of Warrant  Shares,  in such  denominations  as you may specify by timely notice
(or, in the absence of such notice, one Warrant exercisable for the total number
of  Warrant  Shares),  in each case  against  your  delivery  to the  account or
accounts  designated by the Company (at least three  Business Days in advance of
the Closing) of immediately  available  funds in the amount  specified  opposite
your name on  Schedule  I  constituting  the  aggregate  purchase  price of such
Warrants.

               If at the date on which the  Closing  is  scheduled  to occur the
Company shall fail to tender to you any of the Securities to be purchased by you
under this  Section 2.3, or any of the  conditions  specified in Section 7 shall
not have been satisfied, you shall, at your election, be relieved of all further
obligations under this Agreement,  without waiving any other rights you may have
by reason of such failure or such non-fulfillment.

               Section 3. Fees. The Company agrees to pay to Alliance Capital on
the Closing Date, in consideration of the services  provided by Alliance Capital
in arranging  for the purchase of the  Securities to be purchased at the Closing
hereunder  by you, a  transaction  fee equal to  $225,000  by wire  transfer  of
immediately available funds to Account No. 3026-3303 at Citibank, N.A., 399 Park
Avenue,  New York,  New York, ABA No.  021-000-089,  for the account of Alliance
Capital  Management,  L.P.  The  Company  agrees  that  such fee is the only fee
payable to Alliance  Capital,  the Purchaser or their  respective  Affiliates in
connection with the foregoing transactions.

               Section 4.    Prepayment of Notes.

               4.1 Mandatory  Redemption.  On each of January 15, 2002,  January
15, 2003 and January 15,  2004,  the Company  will redeem  $5,000,000  principal
amount  of the  Notes  (or  such  lesser  principal  amount  as  shall  then  be
outstanding), at the principal amount of the Notes so redeemed, without premium,
provided  that,  upon any other  redemption  of less than all of the Notes,  the
principal  amount of each required  redemption  of the Notes  becoming due under
this  Section 4.1 on and after the date of such  redemption  shall be reduced in
the same  proportion as the aggregate  unpaid  principal  amount of the Notes is
reduced as a result of such redemption.

               4.2 Optional  Redemption  with  Premium.  The Company may, at its
option,  upon notice as provided in Section 4.7, redeem at any time all, or from
time to time any part (in an amount of at least  $500,000 in the aggregate or an
integral  multiple of $1,000 in excess  thereof) of, the Notes at the  principal
amount so redeemed,  plus accrued and unpaid  interest to the date of redemption
and the Make-Whole Premium.

               4.3 Optional Redemption upon Public Offering. The Company may, at
its option, upon notice as provided in Section 4.7, redeem at any time on or
prior to January 15, 2000, concurrently with or within five days after the
occurrence of any

                                       -3-



 
<PAGE>

<PAGE>



Public  Offering,  up to $4,500,000  principal  amount (in an amount of at least
$500,000 in the aggregate or an integral  multiple of $1,000 in excess  thereof)
of the Notes, at the aggregate  principal  amount so redeemed,  plus accrued and
unpaid  interest to the date of redemption  and a premium equal to the lesser of
(a) the Make-Whole Premium and (b) 9.0% of the aggregate principal amount of the
Notes so redeemed,  provided that no  redemption  shall be made pursuant to this
Section 4.3 unless,  immediately  after giving  effect to such  redemption,  the
aggregate principal amount of the Notes remaining  outstanding shall be not less
than $10,500,000.

               4.4 Contingent Redemption Upon Change of Control. In the event of
the  occurrence  of a Change of  Control,  then the  Company  shall give  prompt
written  notice  thereof to each holder of the Notes,  by  registered  mail (and
shall confirm such notice by prompt telephonic  advice to an investment  officer
of each such holder), which notice shall contain a written, irrevocable offer by
the Company to redeem,  on a date  specified in such notice (which date shall be
not less than 30 days and not more than 60 days after the date of such  notice),
the Notes held by such holder in full (and not in part).  Upon the acceptance of
such offer by such  holder  mailed to the  Company at least 10 days prior to the
date of redemption  specified in the Company's  offer,  such redemption shall be
made at the principal  amount of the Notes so redeemed,  plus a premium equal to
1.0% of the principal amount of the Notes so redeemed.  Any offer by the Company
to redeem the Notes  pursuant  to this  Section 4.4 shall be  accompanied  by an
Officers'  Certificate  certifying  that the conditions of this Section 4.4 have
been fulfilled and specifying the particulars of such fulfillment. If the holder
of any Notes shall accept such offer,  the principal  amount of such Notes shall
become due and payable on the date specified in such offer.

               4.5  Contingent  Redemption in the Event of Excess Sale Proceeds.
In the event that at any time there shall be Excess Sale  Proceeds of $1,000,000
or more,  then the Company  shall give  prompt  written  notice  thereof to each
holder of the Notes, by registered mail (and shall confirm such notice by prompt
telephonic  advice to an investment  officer of each such holder),  which notice
shall contain a written,  irrevocable  offer by the Company to redeem, on a date
specified in such notice (which date shall be not less than 30 days and not more
than 60 days after the date of such notice), the Notes in an aggregate principal
amount equal to the amount of Excess Sale Proceeds.  Upon the acceptance of such
offer by such holder mailed to the Company at least 10 days prior to the date of
redemption  specified in the Company's  offer,  such redemption shall be made at
the principal  amount of the Notes so prepaid,  plus a premium equal to (a) 6.0%
of the  aggregate  principal  amount  of the Notes so  redeemed,  if the date of
redemption  shall  be on or  prior  to  January  15,  1999,  and (b) 5.0% of the
aggregate  principal  amount of the Notes so prepaid,  if the date of prepayment
shall be after  January 15,  1999.  Any offer by the Company to prepay the Notes
pursuant to this Section 4.5 shall be  accompanied  by an Officers'  Certificate
certifying  that the  conditions  of this  Section 4.5 have been  fulfilled  and
specifying the particulars of such fulfillment. If the holder of any Notes shall
accept  such offer,  the  principal  amount of such Notes to be  redeemed  shall
become  due  and  payable  on  the  date  specified  in  such  offer.  Upon  the
consummation of the redemption of all the Notes tendered pursuant

                                       -4-



 
<PAGE>

<PAGE>



to a redemption offer under this Section 4.5, the amount of Excess Sale Proceeds
shall be reset at zero.

               4.6 Special  Optional  Redemption.  At any time prior to December
31, 1998, but subject to the provisions of Section 10.12, the Company may redeem
in the aggregate up to $3,750,000 of the original  principal amount of the Notes
with the Net  Cash  Proceeds  from the  exercise  of the  Company's  outstanding
warrants,  currently traded on NASDAQ under "KELLW",  at the principal amount of
the Notes so redeemed plus accrued and unpaid interest to the date of redemption
and a premium, at the option of any holder of the Notes as specified in a notice
from such holder  given the Company at least 10 days prior to the date fixed for
such redemption, equal to either (i) 1% of the principal amount thereof, or (ii)
2% of the principal  amount thereof,  provided that at least  $11,250,000 of the
Notes remains outstanding after such redemption. The premium specified in clause
(ii)  shall be paid in the form of such  number of  additional  Warrants  as the
Company and holders of a majority of the outstanding  Notes shall agree is equal
in value to such 2% premium (the  "Premium  Warrants"),  such  Premium  Warrants
having an exercise  price equal to the lower of (a) the Market Price at the time
of such redemption,  or (b) the Exercise Price (as such terms are defined in the
Warrant), provided that in the absence of notice from a holder as referred to in
this Section 4.6 or in the absence of such agreement prior to the date fixed for
redemption, the premium shall be paid in cash as set forth in clause (i).

               4.7    Notice of Optional Redemptions; Officers' Certificate.

               (a) The Company will give each holder of any Notes written notice
of each optional  redemption  under Section 4 not less than 30 days and not more
than 60  days  prior  to the  date  fixed  for  such  redemption,  in each  case
specifying  such  date,  the  aggregate  principal  amount  of the  Notes  to be
redeemed,  the principal amount of each Note held by such holder to be redeemed,
and the premium,  if any,  applicable to such  redemption.  Such notice shall be
accompanied by an Officers'  Certificate  certifying that the conditions of such
section have been fulfilled and specifying the particulars of such fulfillment.

               (b) In the event that there shall have been a partial  redemption
of the Notes under Section 4.2, 4.3, 4.4 or 4.5, the Company shall promptly give
notice to the  holders  of the Notes,  accompanied  by an  Officers  Certificate
setting  forth the  principal  amount of each of the Notes that was redeemed and
specifying how each such amount was  determined,  and if some but not all of the
Notes  were  redeemed,  setting  forth  the  reduced  amount  of  each  required
redemption  thereafter  becoming due with respect to the Notes under Section 4.1
and certifying  that such reduction has been computed in accordance with Section
4.1.

               4.8  Allocation  of  Partial  Prepayments.  In the  case  of each
partial  redemption  (except a redemption  pursuant to Section 4.4 or 4.5 of the
Notes held by some but not all holders), the principal amount of the Notes to be
redeemed  shall be allocated (in integral  multiples of $1,000) among all of the
Notes at the time

                                       -5-



 
<PAGE>

<PAGE>



outstanding in proportion,  as nearly as practicable,  to the respective  unpaid
principal   amounts  thereof  not  theretofore   called  for  redemption,   with
adjustments,  to the extent practicable, to compensate for any prior redemptions
not made exactly in such proportion.

               4.9 Maturity; Surrender, etc. In the case of each redemption, the
principal  amount of each Note to be  redeemed  shall  mature and become due and
payable on the date fixed for such  redemption,  together  with interest on such
principal amount accrued to such date and the applicable  premium,  if any. From
and after such date,  unless the Company shall fail to pay such principal amount
when so due and payable,  together  with the  interest  and premium,  if any, as
aforesaid,  interest on such  principal  amount shall cease to accrue.  Any Note
paid or redeemed in full shall be  surrendered  to the Company and  canceled and
shall not be  reissued,  and no Note  shall be  issued  in lieu of any  redeemed
principal amount of any Note.

               4.10  Acquisition  of Notes.  The Company  will not, and will not
permit any Subsidiary or Affiliate to, purchase, redeem or otherwise acquire any
Note except upon the  redemption  thereof in  accordance  with the terms of this
Agreement and such Note.

               Section 5.  Representations and Warranties of the Company.  The
Company represents and warrants to the Purchaser that:

               5.1    Corporate Existence and Power.

               (a) Each of the Company  and its  Subsidiaries  is a  corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
jurisdiction  of its  incorporation  and is duly  qualified  to do business as a
foreign  corporation  in each  additional  jurisdiction  where the failure to so
qualify  would  have a  Material  Adverse  Effect  and,  in any  event,  in each
jurisdiction so specified with respect to it in Schedule 5.2.

               (b) Each of the Company and its  Subsidiaries  has all  requisite
power  (corporate  and other) to own its properties and to carry on its business
as now being conducted and as proposed to be conducted,  and to execute, deliver
and perform its obligations  under the Related  Documents to which it is a party
and in addition, in the case of the Company, to execute, deliver and perform its
obligations  under  this  Agreement,   to  execute,   deliver  and  perform  its
obligations  under the Notes and the Warrants and to issue, sell and deliver the
Common Shares issuable upon exercise of any Warrants, and in each case to engage
in the respective transactions contemplated hereby and thereby.

               (c) The Company has furnished the Purchaser with true and correct
copies of the  Certificate of  Incorporation  of the Company and each Subsidiary
and the By-laws of the Company  and each  Subsidiary,  each as in full force and
effect on the

                                       -6-



 
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<PAGE>



date hereof.

               5.2  Subsidiaries.  Set  forth  in  Schedule  5.2 is a  true  and
complete list of all Subsidiaries of the Company in existence as of the Closing,
setting forth as to each such Subsidiary its jurisdiction of incorporation, each
jurisdiction  where it is  authorized  or  qualified to do business as a foreign
corporation  and the  percentage  of each  outstanding  class of  capital  stock
thereof owned directly or indirectly by the Company.  As of the Closing,  except
as set forth on  Schedule  11.3(f):  (i) the  Company  will not have any  equity
interest (direct or indirect) in any Person other than the Subsidiaries shown on
Schedule  5.2,  (ii) all  outstanding  shares  of  capital  stock  of each  such
Subsidiary   will  have  been  duly  and   validly   issued,   fully   paid  and
non-assessable,  (iii) the Company  will have good title to all of the shares of
capital stock it owns of each of its  Subsidiaries,  in each case free and clear
of any Lien, other than Permitted Liens, and (iv) neither any of such shares nor
any unissued or treasury  shares of capital stock of any such Subsidiary will be
subject to any option, warrant, right to call, preemptive right or commitment of
any kind or character.

               5.3 Possession of Franchises,  Licenses, etc. The Company and its
Subsidiaries  possess all material  authorizations,  licenses and permits of any
Governmental  Body granted or assigned to the Company or any Subsidiary or under
which the Company and its Subsidiaries  have the right to operate,  and the same
constitute the only material authorizations,  licenses and permits of any public
or governmental  regulatory body which are required or necessary for the conduct
of the  respective  businesses  of  the  Company  and  its  Subsidiaries  as now
conducted  or  proposed to be  conducted,  and none of the Company or any of its
Subsidiaries is in violation of any thereof.

               5.4 Corporate Authority. The execution,  delivery and performance
by the Company of this  Agreement  and by the Company or any  Subsidiary  of the
Related  Documents  to which  the  Company  or any  Subsidiary  is a party,  the
execution,  delivery  and  performance  of the Notes and the  Warrants,  and the
issuance,  sale and delivery of the Common Shares  issuable upon exercise of any
Warrants have been duly authorized by all necessary corporate action on the part
of the  Company  or such  Subsidiary,  as the  case may be,  and  such  Person's
stockholders.

               5.5 Binding Effect.  This Agreement and the Related  Documents to
which the Company or any Subsidiary is a party are the legal,  valid and binding
obligations of the Company or such  Subsidiary,  and the Securities  when issued
and delivered  against  payment  therefor as herein  provided will be the legal,
valid and binding obligations of the Company, enforceable against such Person in
each case in accordance with their respective terms.

               5.6 Consents,  etc. No consent,  approval or  authorization of or
declaration,   registration  or  filing  with  any  Governmental   Body  or  any
nongovernmental Person, including without limitation any creditor or stockholder
of the  Company or its  Subsidiaries,  is  required to be obtained or made on or
prior to the Closing Date in

                                       -7-



 
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connection with the execution,  delivery and performance of this Agreement,  the
Related Documents,  the Securities,  or the transactions  contemplated hereby or
thereby,  or as a condition to the legality,  validity or enforceability of this
Agreement,  the Related Documents,  or the offer, issuance,  sale or delivery of
the  Securities to the Purchaser  hereunder or the  fulfillment of or compliance
with the terms and  provisions  of the  Securities  being  purchased  hereunder,
except for such consents, approvals, authorizations, declarations, registrations
and filings as are set forth in Schedule  5.6,  including,  without  limitation,
such  consents,  approvals,  authorizations,  declarations  and  filings  as are
required  by the  Hart-Scott-Rodino  Anti-Trust  Improvements  Act of  1976,  as
amended, all of which have been, or will on the Closing Date have been, obtained
or made and are or will then be in full force and effect.

               5.7 No Conflicts with  Agreements,  etc.  Neither the Company nor
any of its  Subsidiaries  is a party to any  contract or agreement or subject to
any  restriction  contained  in the charter or by-laws of any such  Person,  the
performance of which,  or compliance  with which,  will  individually  or in the
aggregate have a Material Adverse Effect.  Neither the execution and delivery of
this Agreement, the Related Documents or the Securities,  nor the fulfillment of
or compliance  with the terms and provisions  hereof and thereof,  will conflict
with,  or result in a breach  of the  terms,  conditions  or  provisions  of, or
constitute  (or with notice or lapse of time would  constitute) a default under,
or result in any violation of, the  Certificate of  Incorporation  or By-laws of
the Company or any Subsidiary,  any contract,  agreement,  mortgage,  indenture,
lease, instrument,  Order, statute, law, rule or regulation to which any of them
or any of their respective  assets is subject,  or result in the creation of any
Lien  (other  than the Liens in favor of the Senior  Lenders  created  under the
terms of the Senior Debt Instruments) on any properties or assets of the Company
or its  Subsidiaries,  or require for its validity any  authorization,  consent,
approval,  exemption  or other  action  by any  Governmental  Body or any of the
stockholders  of the Company or its  Subsidiaries.  After  giving  effect to the
transactions  contemplated by this Agreement and the Related Documents,  neither
the Company nor any of its Subsidiaries is in violation of, or in default under,
any contract,  mortgage,  indenture, lease, instrument or agreement binding upon
any of them or upon any of their respective assets,  which violation or default,
individually or in the aggregate, might have a Material Adverse Effect.

               5.8    Litigation; No Violation of Government Orders or Laws.

               (a) Except as  disclosed  in the  Company  SEC  Reports or as set
forth in Schedule 5.8, there are no actions, suits or proceedings pending or, to
the knowledge of the Company,  threatened, nor is there, to the knowledge of the
Company, any investigation  pending or threatened (or any basis in fact therefor
known  to  the  Company),  against  or  affecting  any  of  the  Company  or its
Subsidiaries  which,  if  adversely  determined,  would have a Material  Adverse
Effect,  or which seeks to enjoin, or otherwise prevent the consummation of, any
of the  transactions  contemplated  hereby  or by the  Related  Documents  or to
recover any damages or obtain any relief as a result of any of the  transactions
contemplated hereby or thereby in any court or before any arbitrator of any kind
or before or by any Governmental Body.

                                       -8-



 
<PAGE>

<PAGE>




               (b) After giving effect to the transactions  contemplated by this
Agreement  and  the  Related  Documents,  neither  the  Company  nor  any of its
Subsidiaries  is (i) subject to any Order  arising  out of any  action,  suit or
proceeding  or in default  under or in violation of any statute or law or of any
rule or regulation of any Governmental  Body,  respecting  antitrust,  monopoly,
restraint  of trade,  unfair  competition  or similar  matters or (ii) except as
disclosed in the Company SEC Reports or as set forth in Schedule 5.8, in default
under or  violation  of any statute or law or of any rule or  regulation  of any
Governmental  Body,  or any  Order,  which  default  or  violation  might have a
Material Adverse Effect.

               5.9    Financial Statements.

               (a) The pro forma  combined  balance sheet of the Company and its
Subsidiaries as at September 30, 1996,  attached hereto as Schedule  5.9(a),  is
accurate  and  presents  fairly the  consolidated  and  consolidating  financial
condition  of the  Company  and  its  Subsidiaries  as at  such  date  as if the
transactions  contemplated by the Acquisition  Documents to have occurred on the
Acquisition  Closing Date, and the  transactions  contemplated by this Agreement
and the other  Related  Documents to occur on the Closing  Date, as the case may
be, had occurred on such date and contains all pro forma  adjustments  necessary
in order to fairly reflect such assumptions.

               (b) Attached hereto, as Schedule  5.9(b)(i) through 5.9(b)(v) are
copies of the  Company's  (i) Annual  Report on Form  10-KSB for the fiscal year
ended December 31, 1995,  (ii) Quarterly  Reports for the fiscal  quarters ended
March 31, 1996,  June 30, 1996 and September 30, 1996,  and (iii) the Definitive
Proxy  Statement for the Annual Meeting dated July 23, 1996  (collectively,  the
"Company SEC Reports").  The Company SEC Reports, when filed with the Securities
and  Exchange  Commission  (the  "SEC"),  complied  as to form  in all  material
respects  with the  requirements  of the Exchange  Act, as amended.  As of their
respective  dates,  the SEC  Reports  did not  contain  an untrue  statement  of
material fact or omit to state a material  fact  required to be stated  therein.
There have been no Forms 8-K filed by the Company  with the SEC since the filing
of the Company's  Quarterly  Report on Form 10-QSB for the fiscal  quarter ended
September 30, 1996. Since the filing of the Company's Form 10-QSB for the fiscal
quarter ended September 30, 1996, there has been no Material Adverse Effect.

               5.10  Inventories.  All  Inventories  set forth on the  Company's
balance sheet,  dated as of September 30, 1996 (the "September  Balance Sheet"),
are valued in  accordance  with GAAP.  In the good faith opinion of the Company,
all Inventories  included therein consist, and at the Closing will consist, of a
quality and quantity  usable and  saleable in the  ordinary  course of business,
except for items of  obsolete  materials,  which have been  written  down on the
September   Balance  Sheet,  to  realizable   market  value.  In  the  Company's
experience,  the present  quantities of Inventories are, and at Closing will be,
reasonable and warranted in light of the Company's business.

               5.11   No Illegal or Improper Transactions.  The Company has not,
nor  has  any  stockholder,  officer  or  employee  of  the Company, directly or
indirectly, used

                                       -9-



 
<PAGE>

<PAGE>



funds or other assets of the Company, or made any promise or undertaking in such
regards, for (a) illegal contributions,  gifts,  entertainment or other expenses
relating to political  activity;  (b) illegal  payments to or for the benefit of
governmental  officials or employees,  whether domestic or foreign;  (c) illegal
payments to or for the benefit of any person, firm, corporation or other entity,
or any director,  officer, employee, agent or representative thereof; (d) gifts,
entertainment  or other expenses that jeopardize the normal  business  relations
between  the  Company  and any of its  customers;  or (e) the  establishment  or
maintenance  of a  secret  or  unrecorded  fund.  There  have  been no  false or
fictitious entries made in the books or records of the Company,  and the Company
has records that accurately and validly reflect its  transactions and accounting
controls  sufficient  to insure that such  transactions  are (i) in all material
respects  executed  in  accordance  with its  management's  general or  specific
authorization and (ii) recorded in conformity with GAAP.

               5.12 Accounts  Receivable.  Except as set forth in Schedule 5.12,
each of the  accounts  receivable  of the  Company  reflected  on the  September
Balance Sheet (a) arose from bona fide sales in the ordinary course of business,
(b) was entered into under  circumstances  and by methods usual and customary in
the Company's  business in the applicable  state,  and the collection  practices
used with respect  thereto have been in all material  respects legal and proper,
and (c) was entered into, and credit granted pursuant  thereto,  consistent with
the Company's historical credit policies and practices. The books of the Company
correctly record the principal balance of all accounts  receivable,  and each of
the security instruments securing any account receivable,  if any, constitutes a
valid lien in favor of the Company upon the property which it describes,  and is
enforceable  by the Company  and its  transferees.  The  reserves  for  doubtful
accounts shown or reflected in the Company's  financial  statements are adequate
and were calculated consistent with past practice.

               5.13  Contracts  and Leases.  The Company SEC Reports  contain an
accurate and complete listing of all material contracts,  leases,  agreements or
understandings,  whether  written or oral,  required to be described  therein or
filed as exhibits  thereto pursuant to the Exchange Act and the applicable rules
and regulations  thereunder.  Except as set forth on Schedule 5.13, each of such
contracts, leases, agreements and understandings is in full force and effect and
(a) none of the Company or its Subsidiaries or, to the Company's best knowledge,
any other party thereto, has breached or is in-default thereunder,  (b) no event
has  occurred  which,  with the  passage of time or the  giving of notice  would
constitute such a breach or default, (c) no claim of material default thereunder
has, to the Company's best  knowledge,  been asserted or threatened and (d) none
of the Company or its  Subsidiaries  or, to the Company's  best  knowledge,  any
other  party  thereto  is  seeking  the  renegotiation   thereof  or  substitute
performance  thereunder,  except  where such  breach or  default,  or  attempted
renegotiation or substitute performance,  individually or in the aggregate, does
not have and  would  not be  reasonably  expected  (so far as can be  reasonably
foreseen at this time) to have a Material Adverse Effect.

                                      -10-



 
<PAGE>

<PAGE>



               5.14  Acquisition  Sub.  Kellstrom  Subsidiary  was  organized on
October  25,  1996,  and  since  inception  (i) has at no  time  had  assets  or
liabilities in excess of $500 in the aggregate,  and (ii) has not carried on any
activities or incurred any liabilities or obligations  whatsoever  other than in
connection  with  its  organization  and  the  execution  and  delivery  of  the
Acquisition Agreement.

               5.15 Related Documents and Senior Debt  Instruments.  The Company
has delivered,  or will on or prior to the Closing Date deliver, to you and your
special counsel true and correct copies of each of the Acquisition Documents and
Senior Debt  Instruments  (including  all Exhibits and Schedules  thereto) as in
effect on the Closing Date and each document,  certificate or statement required
to be delivered by any party thereunder (and there have not been and will not be
any  amendments  or  modifications  or  supplements  to any  of the  Acquisition
Documents and Senior Debt Instruments except as consented to by you in writing).

               5.16  Outstanding Debt and Undisclosed  Liabilities.  The Company
SEC Reports or Schedule 5.16 sets forth a correct and complete list  identifying
all Debt of the Company and its  Subsidiaries  and all Liens securing such Debt,
outstanding or existing on the date of this  Agreement.  Neither the Company nor
any of its Subsidiaries has any Debt or liability, absolute or contingent, known
or unknown, liquidated or unliquidated,  which is not reflected in the pro forma
combined  balance  sheet as at September  30, 1996  attached  hereto as Schedule
5.9(a)  as  required  by GAAP,  except  Debt and  liabilities  incurred  for the
purchase of equipment in the ordinary  course of business  since  September  30,
1996 (provided that the aggregate  amount of Debt and liabilities of the Company
as of the Closing  Date is not in excess of the amount  thereof as shown on such
balance sheet plus  $1,000,000) or provided for in this Agreement or the Related
Documents.

               5.17   Capital Stock.

               (a) The  authorized  capital  stock of the  Company  consists  of
20,000,000  shares of Common  Stock,  of which  3,871,001  shares are issued and
outstanding  as of January 13, 1997 and 1,000,000  shares of Preferred  Stock of
which no shares are issued and outstanding on the date hereof.

               (b) As of  January  13,  1997  there  are  currently  outstanding
warrants (including Unit Purchase Options) to acquire 4,695,817 shares of Common
Stock,   which  warrants   (including  Unit  Purchase   Options)  are  currently
exercisable, for an aggregate exercise price of $24,753,065. These warrants have
been duly  authorized  and are the legal,  valid and binding  obligations of the
Company and the shares of Common Stock  issuable upon the exercise  thereof have
been duly authorized and reserved for issuance.  With reference to the Company's
warrants  previously issued to public investors ("Public  Warrants"),  which the
Company  represents  are currently  traded on NASDAQ under  "KELLW",  and to GKN
Securities  Corp.   ("GKN")  and  Brean  Murray,   Foster   Securities  Inc.  as
underwriters  in the form of Unit Common Share  Equivalents,  such  warrants are
currently exercisable. (The aggregate number of shares of Common Stock issuable

                                      -11-



 
<PAGE>

<PAGE>



pursuant to the Unit Common Share  Equivalents is 600,000.) The Public  Warrants
will be  redeemable  by the Company if the last sales price of the Common  Stock
has been at least  $8.50 on each of the twenty  (20)  consecutive  trading  days
ending on the third business day prior to the date on which notice of redemption
is given.  The Company  intends to redeem such Public  Warrants at such time, if
any, that it may do so under the terms  thereof,  and the Company has heretofore
delivered to  Purchaser a complete and correct copy of the consent  given by GKN
to such  redemption,  which  consent  is in full force and effect and may not be
revoked or modified without the Purchaser's consent.

               (c) The Common Shares issuable upon exercise of the Warrants have
been duly  authorized  and  reserved  for  issuance  and,  when  issued upon due
exercise of the Warrants,  will be validly issued, fully paid and non-assessable
and  will be free  and  clear of all  preemptive  rights  and  Liens  except  as
otherwise  provided  herein and will be entitled to the voting  powers and other
rights  as  are  set  forth  with  respect   thereto  in  the   Certificate   of
Incorporation.

               (d) On the Closing Date,  after giving effect to the transactions
contemplated hereby and by the Related Documents, except as contemplated by this
Agreement,  or as set forth in Schedule  5.17 or the Company  SEC  Reports,  the
Company  will not  have  outstanding  any  capital  stock  or  other  securities
convertible  into or exchangeable for any of its capital stock, nor will it have
outstanding  any rights to  subscribe  for or to  purchase,  or any  warrants or
options  for the  purchase  of,  or any  agreements  (contingent  or  otherwise)
providing  for the  issuance  of,  or any  calls,  commitments  or claims of any
character  relating to, any of its capital stock or any  securities  convertible
into or  exchangeable  for any of its capital stock.  Except as disclosed in the
Company SEC Reports or as set forth in Schedule 5.17, after giving effect to the
transactions  contemplated  hereby and by the  Related  Documents,  neither  the
Company  nor  any  of  its  Subsidiaries  will  be  subject  to  any  obligation
(contingent  or otherwise)  to repurchase or otherwise  acquire or retire any of
the Company's capital stock.

               5.18   Taxes.

               (a)  Each  of the  Company  and  its  Subsidiaries  (referred  to
separately  and  collectively  as the "Company  Taxpayers")  or the  affiliated,
combined or unitary  group of which any such  Person is or was a member,  as the
case may be, has (x) filed when due (taking  into account  extensions)  with the
appropriate federal,  state, local, foreign and other governmental agencies, all
material  tax  returns,  estimates  and reports  required to be filed by it with
respect to Taxes (as hereinafter defined), and (y) paid when due and payable all
required  federal,  state,  local or foreign  taxes,  levies,  imposts,  duties,
licenses and registration fees and charges of any nature whatsoever,  including,
without limitation,  unemployment and social security taxes, interest, penalties
and additions to tax with respect thereto ("Taxes") or has established  reserves
on  their  respective  balance  sheets  that,  in the  aggregate,  are  adequate
therefor.  Complete  and  accurate  copies of all such  returns,  estimates  and
reports have been made available to

                                      -12-



 
<PAGE>

<PAGE>



the Purchaser,  upon its request. Federal, state and local income tax returns of
the Company have not been  examined and  reported on by the  appropriate  taxing
authority or closed by applicable statute.

               (b) Except as  disclosed  in the  Company  SEC  Reports or as set
forth on Schedule  5.18,  there are no Taxes  assessed or asserted in writing in
respect of any tax returns  filed by the Company  Taxpayers  or the  affiliated,
combined or unitary  group of which any such  Person is or was a member,  as the
case  may be,  or  claimed  in  writing  to be due by any  taxing  authority  or
otherwise that e.re not reserved for on the applicable  financial  statements in
accordance with GAAP. Except as set forth on Schedule 5.18, no tax return of the
Company  Taxpayers or the common parent of any  affiliated,  combined or unitary
group of which such entity is or was a member is currently  being audited by the
Internal  Revenue  Service  or  other  taxing  authority   (whether  foreign  or
domestic).  Except as  disclosed  in the  Company SEC Reports or as set forth on
Schedule  5.18,  none of the  Company  Taxpayers  or the  common  parent  of any
affiliated,  combined  or  unitary  group of which  any such  Person is or was a
member has  executed  or filed with the  Internal  Revenue  Service or any other
taxing  authority  (whether foreign or domestic) any agreement or other document
extending,  or having  the effect of  extending,  the  period of  assessment  or
collection  of any Taxes.  All final  adjustments  made by the Internal  Revenue
Service  with  respect to any federal tax return of the Company  Taxpayers  have
been reported to the relevant state,  local or foreign taxing authorities to the
extent  required  by law. No requests  for ruling or  determination  letters are
pending with any taxing authority.

               (c)  None  of the  Company  Taxpayers  has (i)  filed  a  consent
pursuant to Section  341(f) of the Code or agreed to have  Section  341(f)(2) of
the Code apply to any disposition of a subsection (f) asset owned by it, (ii) is
a party to an agreement  that  provides for the payment of any amount that would
constitute an "excess  parachute  payment" within the meaning of Section 280G of
the Code,  (iii)  agreed to or is  required to make any  adjustment  pursuant to
Section 481(a) of the Code by reason of a change in accounting  method initiated
by the  taxpayer or has any  knowledge  that the  Internal  Revenue  Service has
proposed any such adjustment or change in accounting method, (iv) any obligation
under any tax sharing or similar agreement, or (v) participated in or cooperated
with any international boycott within the meaning of Section 999 of the Code.

               5.19  Title  to   Properties.   Each  of  the   Company  and  its
Subsidiaries has (i) good and marketable fee simple title to its respective real
properties (other than real properties which are leased from others), subject to
no Lien of any  kind  except  Liens  which  are set  forth on  Schedule  5.19 or
Permitted  Liens and (ii) good title to all of its other  respective  properties
and assets (other than properties and assets leased from others),  subject to no
Lien of any kind except Liens which are  disclosed in the Company SEC Reports or
as set forth on Schedule  5.19 or Permitted  Liens.  Each of the Company and its
Subsidiaries  has the right to peaceful  and  undisturbed  possession  under all
leases of real or personal  property  necessary in any material  respect for the
operation  of its  business  and assets,  none of which  contains any unusual or
burdensome

                                      -13-



 
<PAGE>

<PAGE>



provisions  which might have a Material  Adverse  Effect and all such leases are
valid and subsisting and in full force and effect. Schedule 5.19 contains a true
and complete list and brief  description of all real property owned or leased by
the Company or its Subsidiaries on the date hereof.

               5.20 Intellectual  Property. The Company and its Subsidiaries own
or have  the  right  to use all  Intellectual  Property,  free  from  burdensome
restrictions  or any licenses to or rights of others in respect  thereof,  which
are used in or are necessary for the operation of their respective businesses as
presently  conducted or proposed to be conducted.  Schedule 5.20 contains a true
and correct list and brief description of all Intellectual  Property owned by or
licensed to any of the Company or its Subsidiaries as of the date hereof. Except
as set forth in Schedule 5.20,  nothing has come to the attention of the Company
or its  Subsidiaries to the effect that (i) any of their  respective  present or
contemplated  operations or other use of Intellectual  Property may infringe any
patent, trademark,  service mark, trade name, franchise,  copyright,  license or
other right owned by any other  Person,  or (ii) there is pending or  threatened
any claim or litigation against or affecting any of them contesting the right of
any of them to engage in any such  operation,  or contesting the validity of any
of  the  Intellectual   Property,  and  neither  the  Company  nor  any  of  its
Subsidiaries knows of any basis for any such charge or claim.

               5.21 Labor Matters.  During the past three years,  there has been
no strike, work stoppage, slowdown or other labor dispute or grievance involving
the Company or its Subsidiaries or their respective employees,  or threat of any
of the  foregoing,  nor to  their  knowledge  is any  such  action,  dispute  or
grievance  currently  pending or  threatened  against  the Company or any of its
Subsidiaries  which in any case might have a Material Adverse Effect.  Except as
disclosed in the Company SEC Reports or as set forth in Schedule  5.21,  neither
the Company nor any of its Subsidiaries is a party to any collective  bargaining
agreement and neither the Company nor any of its  Subsidiaries has any knowledge
of any pending or  threatened  effort to organize any of their  employees nor to
their knowledge has there been any such organizing  effort within the past three
years.

               5.22 Compliance with ERISA.  Except as disclosed in the Company's
SEC  Reports or as set forth in  Schedule  5.22,  (a) each Plan  established  or
maintained by the Company or any of its  Subsidiaries  or any ERISA Affiliate or
to which the  Company or any of its  Subsidiaries  or any ERISA  Affiliate  make
contributions or in which any employee of the Company or any of its Subsidiaries
or any ERISA Affiliate  participates or with respect to which the Company or any
of its  Subsidiaries  otherwise  may have  liability,  and each  related  trust,
insurance contract or other funding arrangement (any such Plan, trust, insurance
contract or other funding  arrangement being referred to hereafter as a "Company
Plan"),  if any, is in compliance with the requirements  provided by any and all
statutes,  Orders or governmental rules or regulations in effect, including, but
not limited to,  ERISA and the Code that are  applicable  to the Plans;  (b) all
required  reports and  descriptions  of each  Company Plan  (including,  but not
limited to, Form 5500 Annual Reports, Form 1024 Application for

                                      -14-



 
<PAGE>

<PAGE>



Recognition  of Exemption  under Section  501(c)9,  Summary  Annual  Reports and
Summary Plan Descriptions)  have been timely filed and distributed;  (c) none of
the Company,  its  Subsidiaries  or any fiduciary in respect of any Company Plan
has  failed to give any  notices  required  by ERISA or the  Code,  or any other
applicable law, or any applicable ruling or regulation with respect to the Plan,
including,  but not limited to, any notices  required by Sections 204(h) and 606
of ERISA and Sections  162(k)(6) and  4980B(f)(6) of the Code where such failure
could have a Material Adverse Effect; (d) none of the Company,  its Subsidiaries
or any fiduciary has breached any of the responsibilities, duties or obligations
imposed  on it by the Code or ERISA  with  respect to any  Company  Plan,  which
breach has given rise to or could in the future be  reasonably  expected to give
rise to any Material Adverse Effect;  (e) no prohibited  transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code) has  occurred  with respect
to any of the Company Plans, which could subject the Company or its Subsidiaries
to any liability with respect to a non-exempt  prohibited  transaction described
in Section 406 of ERISA or Section  4975 of the Code which might have a Material
Adverse  Effect  or a  material  adverse  effect  on the  assets,  operation  or
prospects of any Plan;  (f) none of the Company  Plans is a  multiemployer  plan
(within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA) and for the
preceding five calendar years,  neither the Company nor any of its  Subsidiaries
or any ERISA  Affiliate has any  obligation  to contribute  to, or any liability
under, any multiemployer plan; (g) no Company Plan which is subject to Part 3 of
Subtitle  B of Title I of ERISA or  Section  412 of the Code had an  accumulated
funding  deficiency  (as such term is defined in Section 302 of ERISA or Section
412 of the Code),  whether or not waived,  as of the last day of the most recent
plan year of such Company Plan heretofore  ended, and as of January 1, 1996, the
assets  of each  such  Company  Plan  are  sufficient  to  provide  all  benefit
liabilities (as defined in Section 4001(a)(16) of ERISA) thereof as contemplated
under Section 4041(a) of ERISA,  using the Company Plan's actuarial  assumptions
as set forth in the most recent actuarial  reports for such Company Plan; (h) no
liability to the PBGC (other than required insurance premiums, all of which have
been paid) has been  incurred  with respect to any Company  Plan;  there has not
been any  Reportable  Event with respect to any Company  Plan;  the PBGC has not
instituted or  threatened a proceeding to terminate any Company Plan,  and there
has been no event or condition  which presents a material risk of termination of
any Company Plan by the PBGC; (i) no event has occurred with respect to any Plan
which  might  give rise to a  material  liability  to the  Company or any of its
Subsidiaries  or any ERISA  Affiliate  under  Section 4069 of ERISA or any other
provision  of  ERISA  or the  Code;  (j)  neither  the  Company  nor  any of its
Subsidiaries or any ERISA  Affiliate has any material  liability with respect to
any Plan for  termination  of a single  employer  plan or any multiple  employer
plan, nor has incurred or expects to incur  withdrawal  liability under Title IV
of ERISA; (k) none of the Company Plans that is an employee welfare benefit plan
provides for  continued  medical,  health,  life or other  welfare  benefits for
employees  after  they  leave  the  employment  of  any  Company  or  any of its
Subsidiaries  (other than any such welfare  benefits  required to be provided by
the  Consolidated  Omnibus  Budget  Reconciliation  Act of 1985 or other similar
law); and (l) there are no material  liabilities  under any of the Company Plans
that are employee welfare benefit plans providing for medical,  health,  life or
other welfare benefits that are not insured by fully paid

                                      -15-



 
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<PAGE>



non-assessable insurance policies.

               5.23   Offering of Securities; Compliance with Securities Laws.

               (a) Neither the  Company  nor any of its  Subsidiaries  or any of
their  respective  Affiliates or  representatives  has,  directly or indirectly,
offered any of the  Securities  or any security  similar to any of them for sale
to, or solicited any offers to buy any of the Securities or any security similar
to any of them from, or otherwise  approached or negotiated with respect thereto
with, more than 35 Persons,  and neither the Company nor any of its Subsidiaries
or any of their respective  Affiliates or representatives has taken or will take
any action which would subject the issuance or sale of any of the  Securities to
the  provisions of Section 5 of the  Securities Act or violate the provisions of
any securities or Blue Sky law of any applicable jurisdiction.

               (b) The offering,  issuance and sale of the Securities under this
Agreement  complies  with all  applicable  requirements  of  federal  and  state
securities laws.

               (c) The Company  has filed all reports  required to be filed with
the SEC since the date it first became subject to such requirements.

               5.24   Environmental Regulations.

               Except as disclosed in the Company SEC Reports or as set forth in
Schedule 5.24:

               (a) Each of the Company and its  Subsidiaries has complied and is
in compliance with all Environmental Laws in all material respects.

               (b) Each of the Company and its  Subsidiaries  has  obtained  and
complied  with,  and is in  compliance  with,  all  permits,  licenses and other
authorizations  that  are  required  pursuant  to  Environmental  Laws  for  the
occupation  of  its  facilities  and  the  operation  of its  business,  without
transfer, reissuance, or other governmental approval or action.

               (c) Neither the Company nor any of its  Subsidiaries has received
any written claim, complaint,  citation,  report or other written or oral notice
regarding any liabilities or potential liabilities, including any investigatory,
remedial or corrective obligations, arising under Environmental Laws.

               (d) No  underground  storage  tanks or  surface  impoundments  or
asbestos-containing  material in any form or  condition  exists at any  property
owned or occupied by the Company or any of its Subsidiaries.

               (e)  Neither the Company nor any of its Subsidiaries has treated,
stored,  disposed of,  arranged for or permitted  the disposal of,  transported,
handled, or released

                                      -16-



 
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<PAGE>



any substance,  including without limitation any Hazardous Material, or owned or
operated any facility or property, in a manner that would reasonably be expected
to give  rise to  liabilities  of the  Company  or any of its  Subsidiaries  for
response costs,  natural  resources damages or attorneys fees pursuant to CERCLA
or other Environmental Laws.

               (f) No  facts,  events  or  conditions  relating  to the  past or
present facilities,  properties or operations of the Company or its Subsidiaries
will prevent, hinder or limit continued compliance with Environmental Laws, give
rise to any  investigatory,  remedial  or  corrective  obligations  pursuant  to
Environmental  Laws,  or  give  rise  to  any  other  liabilities   pursuant  to
Environmental  Laws,  including  without  limitation  any  relating to onsite or
offsite  Releases  (as defined in CERCLA) or  threatened  Releases of  Hazardous
Material or otherwise regulated materials, substance or wastes, personal injury,
property damage or natural resources damage.

               (g) Neither the Company nor any of its  Subsidiaries  has, either
expressly  or by  operation  of law,  assumed or  undertaken  any  liability  or
corrective or remedial  obligation of any other Person relating to Environmental
Laws.

               5.25 Status under  Certain  Laws.  Neither the Company nor any of
its Subsidiaries is an "investment  company" or a "person directly or indirectly
controlled by or acting on behalf of an investment  company"  within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company",  or a
"subsidiary  company" of a "holding  company",  or an  "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public  Utility  Holding  Company Act of 1935,  as amended,  or a "United
States  real  property  holding  corporation"  within the meaning of the Foreign
Investment in Real Property Tax Act of 1980, as amended.

               5.26  Foreign  Assets  Control  Regulations.  Neither the sale or
issuance  by the  Company of the Notes or the  Warrants  (or the  Common  Shares
issuable  upon the exercise  thereof) nor the use of the proceeds of any thereof
as contemplated hereby will violate the Foreign Assets Control Regulations,  the
Foreign Funds Control  Regulations,  the Transaction  Control  Regulations,  the
Cuban Assets Control Regulations,  the Iranian Assets Control  Regulations,  the
Nicaraguan  Trade Control  Regulations,  the Libyan Sanctions  Regulations,  the
South African Transactions Regulations, the Panamanian Transactions Regulations,
the Iranian  Transactions  Regulations,  the Kuwaiti Assets Control Regulations,
the Iraqui Sanctions  Regulations,  the Haitian  Transactions  Regulations,  the
Federal Republic of Yugoslavia (Serbia and Montenegro)  Sanctions Regulations or
the  Unita  (Angola)  Sanctions   Regulations  of  the  United  States  Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended).

               5.27 Legality.  Each of the Company and its  Subsidiaries,  after
giving  effect  to the  transactions  contemplated  hereby  and  by the  Related
Documents,  will be a  "solvent  institution",  as such term is used in  Section
1405(c) of the New York Insurance Law, whose  obligations ... are not in default
as to principal or interest," as

                                      -17-



 
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<PAGE>



such terms are used in said Section.

               5.28  Solvency.  Each  of the  Company  and its  Subsidiaries  is
Solvent prior to and after giving  effect to the  transactions  contemplated  by
this Agreement and the Related Documents.

               5.29 Margin Regulations; Use of Proceeds. Neither the Company nor
any of its  Subsidiaries  owns or now intends to acquire  any "margin  stock" as
defined in Regulation G of the Board of Governors of the Federal  Reserve System
(12 CFR 207).  The proceeds  (net of expenses of the  transactions  contemplated
hereby to be  consummated on the Closing Date) of the issuance of the Securities
hereunder will be used to pay the purchase price in the Acquisition.  No part of
the proceeds of the Securities  will be used,  directly or  indirectly,  for the
purpose of buying or carrying any margin stock within the meaning of  Regulation
G of the Board of Governors of the Federal  Reserve  System (12 CFR 207), or for
the  purpose  of buying or  carrying  or trading  in any  securities  under such
circumstances  as to  involve  the  Company  or  any of  its  Subsidiaries  in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation  of  Regulation  T of said Board (12 CFR 220).  As used in
this Section,  the term "purpose of buying or carrying" has the meaning assigned
thereto in the aforesaid Regulation G.

               5.30 Affiliates.  Except as otherwise disclosed on Schedule 5.30,
neither the Company nor any of its Subsidiaries is, or has been since inception,
a party to any contract or agreement,  or otherwise  engaged in any  transaction
with,  any of its  Affiliates,  the  cancellation  or termination of which would
detrimentally affect the Company and its Subsidiaries.

               5.31  Disclosure.  To the best  knowledge  of the Company and its
Subsidiaries,  neither  this  Agreement,  the  Related  Documents  nor any other
document, certificate or statement furnished to the Purchaser by or on behalf of
the Company or its Subsidiaries in connection herewith or therewith  (including,
without  limitation,  the Private  Placement  Memorandum)  contained,  as of its
respective  date, any untrue statement of a material fact or as of any such date
omitted  to state a  material  fact  necessary  in order to make the  statements
contained  herein or therein  (as the case may be) not  misleading.  There is no
fact known to the Company or its Subsidiaries  which,  when taken in conjunction
with all other facts, has a Material Adverse Effect or in the future may (so far
as the Company and its Subsidiaries can now reasonably  foresee) have a Material
Adverse Effect.

               5.32  Representations in Related Documents.  All  representations
and warranties  made by the Company and its  Subsidiaries  and by IASI in any of
the Related  Documents and in any document,  certificate or statement  delivered
pursuant  to the terms of the  Related  Documents  are true and  correct  in all
material  respects.  The Company  agrees that you shall be entitled to rely upon
such  representations  and  warranties  as if made to you by the Company and its
Subsidiaries and by IASI in this Agreement.

                                      -18-



 
<PAGE>

<PAGE>




               5.33 Broker's or Finder's Commissions. Except for the fee payable
to  Alliance  Capital  pursuant  to  Section 3 and to Alex.  Brown & Sons in the
amount  heretofore  disclosed to the  Purchaser,  no broker's or finder's fee or
commission  or similar  payment  will be  payable  by the  Company or any of its
Subsidiaries  with  respect to the issuance  and sale of the  Securities  or the
transactions contemplated by this Agreement.

               Section 6.    Representations of Purchaser.

               6.1 Purchase for  Investment.  You represent,  and in making this
sale to you it is specifically understood and agreed, that you are acquiring the
Securities to be purchased by you  hereunder  for the purpose of investment  and
not  with a view to or for sale in  connection  with  any  distribution  thereof
(other than pursuant to the terms of the Warrant or otherwise in compliance with
the Securities Act and all applicable state securities laws), provided, that the
disposition  of your  property  shall at all times be of and remain  within your
control.

               6.2 ERISA.  You  represent,  with respect to the funds with which
you are  acquiring  the  Securities,  that  all of such  funds  are  from or are
attributable to one or more of:

               (a) your general account assets or assets of one or more segments
of such general  account as such term is used in PTCE 95-60 issued by the United
States  Department  of Labor and the  amount of  reserves  and  liabilities  (as
defined in the annual  statement for life  insurance  companies  approved by the
National  Association of Insurance  Commissioners  (the "NAIC Annual Statement")
and before  reduction  for  credits on account of any  reinsurance  ceded on the
coinsurance  basis) (the "Reserves and  Liabilities"),  for the general  account
contract(s)  held by or on behalf of any Plan,  together  with the amount of the
Reserves  and  Liabilities  for the general  account  contract(s)  held by or on
behalf of any other Plans  maintained by the same  employer (or any  "affiliate"
thereof  within the meaning of Section  V(a)(1) of PTCE 95-60),  does not exceed
10% of the total Reserves and  Liabilities of such general account plus surplus,
as set forth in the NAIC  Annual  Statement  filed with the state of domicile of
the insurance company maintaining such general account;

               (b)    a "separate account" (as defined in Section 3 of ERISA):

                      (i)    in  respect  of  which  all   requirements  for  an
                             exemption  under DOL Prohibited  Transaction  Class
                             Exemption  90-1 are met with  respect to the use of
                             such funds to purchase the Securities;

                      (ii)   that  is  comprised  of  employee   benefit   plans
                             identified  by you in writing  and with  respect to
                             which the Company  hereby  warrants and  represents
                             that as of the  Closing  Date,  neither the Company
                             nor any ERISA Affiliate is a "party in interest"

                                      -19-



 
<PAGE>

<PAGE>



                             (as   defined   in   Section   3  of  ERISA)  or  a
                             "disqualified  person" (as defined in Section  4975
                             of  the  Code)   with   respect   to  any  plan  so
                             identified; or

                      (iii)  that is maintained solely in connection with  fixed
                             contractual  obligations  of an insurance  company,
                             under which any amounts  payable,  or credited,  to
                             any  employee  benefit  plan  having an interest in
                             such account and to any  participant or beneficiary
                             of  such  plan  (including  an  annuitant)  are not
                             affected   in  any   manner   by   the   investment
                             performance of the separate account (as provided by
                             29 CFR ss.2510.3-101(h)(1)(iii));

               (c) an  "investment  fund"  managed by a "qualified  professional
asset  manager"  (as  such  terms  are  defined  in  Part  V of  DOL  Prohibited
Transaction  Class Exemption  84-14) and all the  requirements  for an exemption
under such  Exemption  are met with  respect to the use of the funds to purchase
the Securities; or

               (d) an employee benefit plan that is excluded from the provisions
of Section 406 of ERISA by virtue of Section 4(b) of ERISA.

               6.3 U.S. Person. You represent and warrant that you are a "United
States person" within the meaning of Section 7701(a)(30) of the Internal Revenue
Code and an exempt recipient for purposes of back-up withholding and information
reporting provisions of applicable law.

               6.4  Restricted  Securities.  The Notes shall bear a  restrictive
legend in substantially the following form:

        THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933 AND
        MAY NOT BE SOLD,  TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED  PURSUANT
        TO  AN  EFFECTIVE   REGISTRATION   STATEMENT,   OR  AN  EXEMPTION   FROM
        REGISTRATION UNDER SAID ACT IS AVAILABLE.

               6.5 Transfer  Restrictions.  You agree that you shall not sell or
otherwise transfer the Notes or Warrants to AGES Group LP, a limited partnership
with  offices  in  Florida,  AAR  Corporation,  a Delaware  corporation,  Banner
Aerospace  Inc., a Delaware  corporation,  Greenwich  Air  Services,  a Delaware
corporation,  UNC, Inc., a Delaware  corporation,  Heico Corporation,  a Florida
corporation or Aviation Sales Inc., a Delaware corporation,  provided,  that the
disposition  of the Notes or  Warrants  shall at all times  remain  within  your
control.

               Section 7. Closing  Conditions.  Your  obligation to purchase and
pay for the  Securities  to be  purchased  by you  hereunder on the Closing Date
shall be subject to the  satisfaction,  on or before the  Closing  Date,  of the
following conditions:

                                      -20-



 
<PAGE>

<PAGE>




               7.1 Representations and Warranties True, etc.;  Certificates.  As
of the  Closing,  the  representations  and  warranties  contained  in Section 5
(including without limitation,  all Schedules  referenced therein) shall be true
in all  material  respects at and as of the  Closing  with the same effect as if
such  representations and warranties had been made on and as of the Closing Date
(and with respect to any scheduled item, there shall not have occurred since the
date  hereof  any  adverse  changes  or  developments);   the  Company  and  its
Subsidiaries  shall have  performed in all material  respects all  agreements on
their part required to be performed under this Agreement,  the Related Documents
and the  Securities  on or prior to the Closing  Date;  there shall exist on the
Closing  Date no Default or Event of Default;  the Company and its  Subsidiaries
shall have delivered to you an Officer's Certificate, dated the Closing Date, to
the effect of the foregoing matters stated in this Section 7.1 and to the effect
of the  matters  set forth in  Sections  7.8,  7.9 and 7.10;  and you shall have
received  such  certificates  or other  evidence as you may request to establish
that the  proceeds of the sale of the  Securities  on the  Closing  Date will be
applied as contemplated by Section 5.29.

               7.2 Opinions of Purchaser's Special Counsel. On the Closing Date,
you shall have received  from Friedman & Kaplan LLP,  which is acting as special
counsel for you in connection with this transaction, an opinion addressed to you
and dated the Closing  Date,  covering  such matters  incidental  to the matters
herein contemplated as you may reasonably request.

               7.3 Opinion of Counsel for the Company.  On the Closing Date, you
shall have received from Fulbright & Jaworski  L.L.P.,  counsel for the Company,
an opinion addressed to you dated the Closing Date, substantially in the form of
Exhibit  D. Such  opinions  shall  cover such other  matters  incidental  to the
matters herein contemplated as you may reasonably request.

               7.4 Other  Opinions.  On the Closing  Date,  you shall  receive a
letter,  in form and  substance  satisfactory  to you, from Irell & Manella LLP,
entitling you to rely on the opinion  rendered by such firm in  connection  with
the closing of the transactions contemplated under the Acquisition Agreement.

               7.5 Your Purchase Permitted by Applicable Laws; Legal Investment.
As of the Closing Date,  your  purchase of and payment for the  Securities to be
purchased by you hereunder shall be permitted by the laws and regulations of the
jurisdictions  to which  you are  subject,  without  reference  to any  "basket"
provisions of such laws such as New York Insurance Law Section  1405(a)(8);  and
you  shall  have  received  such  certificates  or  other  evidence  as you  may
reasonably request to establish compliance with this condition.

               7.6 Compliance with Securities Laws. The offering and sale of the
Notes and Warrants to you shall have complied with all  applicable  requirements
of  federal  and state  securities  laws and you shall  have  received  evidence
thereof in form and substance reasonably satisfactory to you.

                                      -21-



 
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<PAGE>



               7.7  Proceedings  Satisfactory.  As  of  the  Closing  Date,  all
corporate  and other  proceedings  taken or to be taken in  connection  with the
transactions  contemplated hereby and all documents  incidental thereto shall be
reasonably  satisfactory in form and substance to you and your special  counsel,
and you and your  special  counsel  shall  have  received  all such  counterpart
originals  or  certified  or other  copies of such  documents as you or they may
reasonably request.

               7.8  Related  Documents.  As of the  Closing  Date,  each  of the
Related  Documents  shall have been duly  executed and  delivered by the parties
thereto and shall be in full force and effect,  and no term or condition thereof
shall have been  supplemented,  amended,  modified or waived  without your prior
written consent.

               7.9 Acquisition. Prior to or simultaneously with the consummation
of the  transactions  contemplated  hereby  at  the  Closing,  the  transactions
contemplated by the Acquisition Documents,  including,  without limitation,  the
Acquisition,  shall  have  been  consummated  in  conformity  with the terms and
provisions thereof, and you shall have received such evidence thereof as you may
request,  including,  without  limitation,  certified  copies of the Acquisition
Documents,  all of which shall be reasonably  satisfactory in form and substance
to  you;  all  conditions  to the  obligation  of  each  of the  parties  to the
Acquisition Agreement to effect the Acquisition shall have been satisfied in all
respects  without  regard to any waiver of any of the  provisions  thereof;  and
except  as set  forth  on  Schedule  7.9,  neither  the  Company  nor any of its
Subsidiaries  shall have consented or agreed to (or requested) the taking of any
action or the failure to take any action by any other  party to the  Acquisition
Agreement, or given its approval to any act or thing, which consent,  agreement,
request or approval is required by the terms of the Acquisition Agreement.

               7.10 Senior Debt Instruments.  As of the Closing Date, all terms,
conditions and provisions of the Senior Debt  Instruments  shall be satisfactory
to you in all  respects,  including  without  limitation  provisions  respecting
principal  amounts,  rates of interest,  prepayment  charges (if any),  fees and
expenses,  affirmative and negative  covenants,  conditions to  disbursements of
loan  funds,  defaults  and  remedies  therefor,  collateral  and loans  thereby
contemplated.  The  disbursements of loan funds  contemplated by the Senior Debt
Instruments (in the amount of $4 million under the Barnett Facility,  and in the
amount  of $6  million  under  the  Bridge  Facility)  shall  have  been made in
accordance with the terms thereof and you shall receive such evidence thereof as
you may request,  including  without  limitation  certified copies of the Senior
Debt Instruments.

               7.11  Consent  of Lenders to this  Agreement.  As of the  Closing
Date, all terms, conditions and provisions of this Agreement and the Notes shall
be satisfactory to the Senior Lenders under the Senior Credit  Agreements in all
respects, including without limitation the subordination provisions contained in
Section 13, and you shall receive such evidence thereof as you may request.

                                      -22-



 
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               7.12 Fees  Payable at  Closing.  On the  Closing  Date,  Alliance
Capital shall have received payment of the fees described in Section 3 as due on
the Closing  Date,  and your special  counsel shall have received the legal fees
and  expenses  required to be paid or  reimbursed  by the Company as provided in
Section 17.3 for statements rendered on or prior to the Closing Date.

               7.13 Legislative Changes.  After the date hereof, no legislation,
Order,  rule,  ruling or regulation,  or interpretation of any of the foregoing,
shall have been  enacted,  made or released by or on behalf of any  Governmental
Body, nor shall have any legislation  been introduced or favorably  reported for
passage to either  House of  Congress by any  committee  of either such House to
which such legislation has been referred for consideration, nor, with respect to
any previously introduced legislation,  shall have any development occurred that
makes passage more likely, nor shall any Order have been rendered which, in your
reasonable  judgment,  would materially  affect leveraged  transactions or would
otherwise  materially and adversely affect any of the Securities or the benefits
expected to be derived by the Purchaser from its purchase of such  Securities or
by the Company from its sale of such Securities.

               7.14  Solvency.  On the Closing Date,  you shall have received an
Officer's Certificate of the Company,  dated the Closing Date,  substantially in
the  form  of  Exhibit  E,  to the  effect  that,  after  giving  effect  to the
transactions  contemplated  by this  Agreement  and the Related  Documents,  the
Company is Solvent.

               7.15 PPN  Application.  The  Company  shall  have  furnished  the
Purchaser  with a certificate or other  evidence  satisfactory  to the Purchaser
that (i) the Company  has filed,  on the  Purchaser's  behalf,  with  Standard &
Poor's  Corporation  CUSIP Service Bureau an application for the assignment of a
PPN with  respect  to the  Notes,  and (ii) all  fees and  expenses  payable  in
connection with said application shall have been paid by the Company.

               7.16  Material  Adverse  Effect.  Since the  respective  dates of
information  set forth in the  Private  Placement  Memorandum  and except as set
forth therein, there shall not have been any Material Adverse Effect.

               Section 8. Financial Statements and Information. The Company will
furnish to you and to any of your  Affiliates,  so long as you or such Affiliate
shall  hold  any  Securities,  and to each  other  institutional  holder  of any
Securities (such a holder in any such case being hereinafter called an "Eligible
Holder"), in duplicate:

               (a) as soon as  available  and in any event  within 45 days after
the end of the first,  second  and third  quarterly  accounting  periods in each
fiscal year of the Company,

                      (i)    copies  of  the  consolidated   and   consolidating
                             balance sheets of the Company and its  Subsidiaries
                             as of the end of such accounting period, and of the
                             related consolidated and

                                            -23-



 
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<PAGE>



                             consolidating  statements  of income  and  expense,
                             statements  of cash flow and  changes in  financial
                             position  for such  accounting  period  and for the
                             portion of the fiscal  year ended with the last day
                             of  such  accounting  period,   together  with  the
                             accompanying  notes  thereto,   all  in  reasonable
                             detail  and   stating  in   comparative   form  the
                             consolidated and  consolidating  figures as for the
                             end of and for the corresponding date and period in
                             the  previous  fiscal  year,  all  certified by its
                             chief financial officer as complete and correct and
                             as  presenting  fairly  the  information  contained
                             therein  in  accordance   with  GAAP   consistently
                             applied,  consistent  with  the  audited  financial
                             statements  required  pursuant to subsection (b) of
                             this  Section 8 subject to  recurring  non-material
                             changes resulting from year-end audit  adjustments,
                             together with a management summary of the Company's
                             performance during such quarter; and

                      (ii)   a  written  statement  of  such  financial  officer
                             setting forth  computations  in  reasonable  detail
                             showing  whether  or  not as at  the  end  of  such
                             accounting period there was compliance with Section
                             10.8;

               (b) as soon as  available  and in any event  within 90 days after
the end of each fiscal year of the Company,

                      (i)    copies  of  the  consolidated   and   consolidating
                             balance sheets of the Company and its  Subsidiaries
                             as of  the  end of  such  fiscal  year,  and of the
                             related  consolidated and consolidating  statements
                             of  income  and  expense,   retained  earnings  and
                             changes in  financial  position  and  stockholders'
                             equity,  and  statements  of cash  flow,  for  such
                             fiscal year,  all in reasonable  detail and stating
                             in comparative form the respective consolidated and
                             consolidating  figures as of the end of and for the
                             previous    fiscal   year,    together   with   the
                             accompanying  notes thereto,  and  accompanied by a
                             report thereon of independent public accountants of
                             recognized   national   standing  selected  by  the
                             Company and acceptable to the Eligible Holders (the
                             "Accountants"),  which report shall be  unqualified
                             as to going  concern  and  scope of audit and shall
                             state that such financial statements present fairly
                             the  financial  position  of the  Company  and  its
                             Subsidiaries  as at the dates  indicated  and their
                             consolidated   income,   cash  flows  and  retained
                             earnings for the periods  indicated  in  conformity
                             with GAAP applied on a basis  consistent with prior
                             years  (except  for such  changes  with  which  the
                             Accountants  shall concur) and that the examination
                             by such


                                            -24-



 
<PAGE>

<PAGE>



                             Accountants  in connection  with such  consolidated
                             financial  statements  has been made in  accordance
                             with generally accepted auditing standards, and

                      (ii)   computations in reasonable detail  showing  whether
                             or not as at the end of such  fiscal year there was
                             compliance  with  Section  10.8,  accompanied  by a
                             letter from the Accountants  stating that in making
                             the examination  necessary for their report on such
                             financial  statements,  nothing  has  come to their
                             attention  that would  cause them to believe  there
                             has  been  any  default  by the  Company  or by its
                             Subsidiaries  in  the  fulfillment  of  any  of the
                             terms, covenants,  provisions or conditions of this
                             Agreement,  or if such  Accountants  shall  believe
                             there  has been any such  default,  specifying  the
                             nature and status thereof;

               (c) concurrently with the financial statements furnished pursuant
to  subsections  (a) and (b) of this Section 8, an Officer's  Certificate of the
Company stating that, based upon such examination or investigation and review of
this  Agreement and the Related  Documents,  and such other  materials as in the
opinion of the signer is  necessary  to enable the signer to express an informed
opinion  with  respect  thereto,  no  default  by the  Company  or by any of its
Subsidiaries  in the fulfillment of any of the terms,  covenants,  provisions or
conditions  of this  Agreement  or the Related  Documents  exists or has existed
during such period or, if such a default shall exist or have existed, the nature
and period of existence  thereof and what action the Company or such Subsidiary,
as the case may be,  has  taken,  is taking  or  proposes  to take with  respect
thereto;

               (d) on or  before  April 15 of each  year,  a  written  statement
setting forth the amount, if any, of any distribution with respect to the Common
Stock made, or deemed to be made  pursuant to any provision of the Code,  during
the prior  calendar  year that  constitutes  a "dividend"  within the meaning of
Section 316 of the Code or any successor provision;

               (e) promptly  after the receipt  thereof by the Company or any of
its Subsidiaries and in any event within 15 days thereof,  copies of any reports
as to material  inadequacies in accounting controls (including reports as to the
absence  of  any  such  inadequacies)  submitted  to  any  such  Person  by  the
Accountants in connection with any audit of such Person made by the Accountants;

               (f) promptly  upon receipt  thereof,  copies of all audit reports
submitted to the Company by independent  public  accountants in connection  with
each  interim  or  special  audit  of the  books  of the  Company  made  by such
accountants  and copies of all  representation  letters from  management  of the
Company or any of its Subsidiaries to such accountants;

                                      -25-



 
<PAGE>

<PAGE>



               (g) promptly after the same are available and in any event within
15 days  thereof,  copies  of all proxy  statements,  financial  statements  and
reports  as the  Company  or its  Subsidiaries  shall  send  or  make  available
generally  to any of their  security  holders,  and  copies of all  regular  and
periodic reports and of all registration  statements  (other than on Form S-8 or
Form 701 or any similar  form) which the Company or its  Subsidiaries  or any of
them may file with the SEC or with any securities exchange;

               (h) promptly (and in any event within three  Business Days) after
becoming  aware of (i) the  existence  of any Default or Event of Default on the
part of the Company or any of its Subsidiaries,  an Officer's Certificate of the
Company,  specifying the nature and period of existence  thereof and what action
the  Company  or such  Subsidiary  is taking or  proposes  to take with  respect
thereto;  or (ii) any Debt being  declared due and payable  before its expressed
maturity,  or any  holder  of such Debt  having  the then  exercisable  right to
declare  such Debt due and payable  before its stated  maturity,  because of the
occurrence  of any default  under such Debt,  an  Officer's  Certificate  of the
Company  describing  the nature and status of such  matters  and what action the
Company or such Subsidiary is taking or proposes to take with respect thereto;

               (i) promptly  (and in any event within 30 days) after the Company
knows or, in the case of a single employer Pension Plan has reason to know, that
a  Reportable  Event with  respect to any Pension  Plan for which notice has not
been  waived  has  occurred,  that  any  Pension  Plan  is  or is  likely  to be
terminated,  reorganized,  partitioned or declared  insolvent  under Title IV of
ERISA (in each  case,  to the extent  such  event  could give rise to a material
liability  under  ERISA),  or that the  Company or its  Subsidiaries  will or is
likely to incur any material  liability to or on account of a Pension Plan under
Section 4062, 4063, 4064, 4201 or 4204 of ERISA or any other material  liability
under  ERISA has been  asserted  against  the  Company or its  Subsidiaries  the
Company  will  deliver to you an Officers'  Certificate  of the Company  setting
forth  information as to such occurrence and what action, if any, the Company or
any such  Subsidiary  is  required or  proposes  to take with  respect  thereto,
together with any notices  concerning such occurrences which are (i) required to
be filed by the Company or such Subsidiary or the plan administrator of any such
Pension  Plan  controlled  by the Company or such  Subsidiary  with the Internal
Revenue  Service or the PBGC, or (ii) received by the Company or such Subsidiary
from any plan  administrator  of a Pension  Plan not under their  control.  Each
notice  required to be delivered  hereunder  shall be delivered no later than 30
days after the later of the date such notice is filed with the Internal  Revenue
Service or the PBGC or the date such notice is received by the Company or any of
its Subsidiaries;

               (j) promptly (and in any event within three  Business Days) after
becoming aware of any Material  Adverse Effect,  with respect to which notice is
not  otherwise  required to be given  pursuant to this  Section 8, an  Officer's
Certificate  of the Company  setting forth the details of such Material  Adverse
Effect and stating  what action the  Company or its  Subsidiaries  are taking or
propose to take with respect

                                      -26-



 
<PAGE>

<PAGE>



thereto;

               (k) at  least  15  days  prior  to the  voluntary  prepayment  or
reduction of any material Debt, including without limitation Debt incurred under
the Senior Debt  Instruments (but other than repayment of debt under a revolving
credit or like  facility in the  ordinary  course),  or the  amendment  or other
modification of any of the terms of payment of principal of, or interest on, any
such Debt, or the amendment,  modification  or waiver of any of the terms of the
Senior Debt Instruments,  an Officer's Certificate of the Company describing the
nature  and  status  of  such  matters  and  what  action  the  Company  or  its
Subsidiaries or any of them is taking or proposes to take with respect thereto;

               (l) promptly  (and in any event within 15 days) after the Company
knows of (i) the institution of, or non-frivolous  threat of, any action,  suit,
proceeding,  governmental  investigation or arbitration against or affecting the
Company  or its  Subsidiaries  or their  respective  properties  or  assets  not
disclosed  herein,  or (ii) any material  development in any such action,  suit,
proceeding, governmental investigation or arbitration, which, in either case, if
adversely  determined,  could  reasonably be expected to have a Material Adverse
Effect, an Officer's Certificate of the Company describing the nature and status
of such matter in reasonable detail;

               (m)  promptly  upon  their  being  filed,  copies  of any and all
periodic  or special  reports  filed by the Company or any  Subsidiary  with any
Governmental  Body, if such reports  indicate any Material Adverse Effect on the
Company or any of its  Subsidiaries  or if copies  thereof are  requested by the
Purchaser,  and  copies  of any and all  material  notices  and  other  material
communications  from any Governmental Body (including  without limitation notice
of any lapse or other  termination  of any  consent  or  approval  issued to the
Company by any  Governmental  Body or any other  Person  that is material to the
operation of the Company business) which  specifically  relate to the Company or
any of its Subsidiaries or which could reasonably be expected to have a Material
Adverse Effect on the Company or any of its Subsidiaries;

               (n) if the Company  receives  notice from any  Governmental  Body
that any Facility,  or any real property  adjacent to or that may affect, or may
have been affected by, any Facility,  has or may become  contaminated or subject
to a cleanup order or decree by a Governmental Body having jurisdiction over the
Company or any Subsidiary of the Company, upon request from the Purchaser,  such
reports, certificates,  engineering studies or other written material or data as
the  Purchaser  reasonably  may require from them so as to satisfy the Purchaser
that the Company and each  Subsidiary of the Company is in  compliance  with all
applicable  laws and  regulations in connection  with any EPA Matter;  provided,
that with respect to real estate adjacent to a Facility, reports,  certificates,
studies  and other  material or data shall not be required to be provided by the
Company or any  Subsidiary if (i) they are not otherwise  required to be created
or provided pursuant to statute,  regulation,  Order or otherwise, and (ii) such
contamination is not attributable to the acts or omissions of the Company or any
Subsidiary  or  Affiliate  of the Company or  predecessor  of any of them or any
previous

                                      -27-



 
<PAGE>

<PAGE>



owner, lessee, lessor or other user of the Facility;

               (o) promptly upon delivery thereof,  copies of any notices, other
than administrative or other routine notices that are not material, delivered by
the Company or any Subsidiary to the Senior Lenders  pursuant to the Senior Debt
Instruments; and

               (p) any other information, including without limitation financial
statements  and  computations,  relating to the  performance  of this  Agreement
and/or the affairs of the Company or its Subsidiaries  that the Purchaser or any
other  Eligible  Holder  may from time to time  reasonably  request  (including,
without limitation,  a brief statement containing a management discussion and an
analysis of the  financial  condition  of the Company and its  Subsidiaries  and
describing  the results of operations  and  significant  events  relating to the
Company and its  Subsidiaries  for any fiscal period;  copies of all information
furnished to  stockholders  of the Company;  a copy of a list of stockholders of
the  Company;  and,  if  the  Company  is not  then  subject  to  the  reporting
requirements  of the Exchange Act,  copies of the minutes of all meetings of the
Board of  Directors  of the Company or any  committee  thereof and copies of all
information furnished to members of the Board of Directors of the Company or any
committee thereof).

               The Company will keep at its principal  executive  offices a true
and  correct  copy of this  Agreement  and  each  Related  Document,  and of all
amendments, modifications and supplements to any of the foregoing, and cause the
same to be available for inspection at said office during normal  business hours
by any  holder of any of the  Securities  or any  prospective  purchaser  of any
thereof designated by the holder thereof.

               Section 9.  Inspection of Properties  and Books.  You, so long as
you shall be obligated to purchase or shall hold any Securities,  and each other
Eligible  Holder  of any of the  Securities,  shall  have the right to visit and
inspect any of the Properties of the Company and its Subsidiaries  during normal
business  hours (subject to the rights of the tenants of such  properties)  upon
reasonable prior notice, to examine their books of account and records,  to make
such  copies and  extracts  therefrom  at their  expense  as you may  reasonably
request, to discuss their affairs, finances and accounts with, and to be advised
as to the same by,  its and  their  officers  and  employees,  and its and their
independent  public  accountants  (whose fees and expenses  shall be paid by the
Company or such  Subsidiary)  and by this  provision each of the Company and its
Subsidiaries  authorizes its  accountants  to discuss its affairs,  finances and
accounts,  whether or not any of its  representatives  is  present,  all at such
times and intervals and in such reasonable manner as you or such Eligible Holder
may desire,  so long as no  unreasonable  interference  with the business of the
Company and its Subsidiaries  results  therefrom.  So long as you shall hold any
Securities, you and each other Eligible Holder of any of the Securities may meet
with the senior  management  of the Company,  at such times and intervals and in
such reasonable manner as you or such Eligible Holder may desire, to discuss the
business, financial condition,  assets, operations,  budget, plans and prospects
of the Company. The Company and its Subsidiaries will likewise afford you

                                      -28-



 
<PAGE>

<PAGE>



and any such Eligible Holder the opportunity to obtain any  information,  to the
extent they  possess  such  information  or can acquire it without  unreasonable
effort  or   expense,   necessary   to  verify  the   accuracy  of  any  of  the
representations and warranties made by each of them hereunder.

               Section 10.  Affirmative  Covenants.  The Company  covenants  and
agrees  that,  commencing  on the  Closing  Date and so long as any of the Notes
shall remain outstanding:

               10.1 Legal  Existence;  Compliance  with Laws,  etc.  The Company
will, and will cause each  Subsidiary to (except insofar as failure to do any of
the following would not have a Material Adverse Effect):  maintain its corporate
existence and business;  maintain all properties which are reasonably  necessary
for the conduct of such business,  now or hereafter  owned by the Company or any
Subsidiary,  in good  repair,  working  order  and  condition;  and,  except  as
otherwise  provided herein,  comply in all material respects with all applicable
statutes,  rules,  regulations  and Orders of, and all  applicable  restrictions
imposed by, all  Governmental  Bodies in respect of the conduct of its  business
and  the  ownership  of  its  properties  (including,  without  limitation,  all
Environmental Laws and all applicable statutes, rules,  regulations,  Orders and
restrictions relating to safety and other similar standards or controls) and the
material  terms of all  material  leases,  agreements  and  licenses;  provided,
however, that neither the Company nor any Subsidiary shall be required by reason
of this  subsection  to comply  therewith  at any time while the Company or such
Subsidiary  shall  be  contesting  its  obligation  to do so in  good  faith  by
appropriate proceedings promptly initiated and diligently conducted,  and if (a)
it shall have set aside on its books such reserves, if any, with respect thereto
as are required by GAAP and deemed  adequate by the Company and its  independent
public  accountants,  and (b) such  failure  to comply  shall not be  materially
adverse to the  interests  of the  holders of the Notes.  Without  limiting  the
generality of the foregoing, whenever there is potential non-compliance with any
Environmental  Law  by  the  Company  or any  of  its  Subsidiaries  that  might
reasonably be expected to have a Material Adverse Effect,  the Company shall, at
the  reasonable  request of a  majority  of the  holders  of the Notes,  provide
information to such holders with respect  thereto and take such other actions at
the  Company's   expense  as  may  be   reasonably   necessary  to  remedy  such
noncompliance.

               10.2  Maintenance of Property and  Insurance.  The Company shall,
and shall cause each of its  Subsidiaries  to: (a)  maintain all of its Property
necessary and useful (in the reasonable judgment of the Company's management) in
its business in good  operating  condition  and repair,  ordinary  wear and tear
excepted;  and (b) maintain with financially  sound and reputable  insurers such
insurance  with  respect to its Property and  business  against  casualties  and
contingencies   of  such  types   (including,   without   limitation,   business
interruption,  libel and slander,  environmental  liability,  public  liability,
product liability, and larceny, embezzlement or other criminal misappropriation)
and in such  amounts  as is  customary  for  Persons of  established  reputation
engaged in the same or a similar  business and  similarly  situated,  naming the
holders of the Notes, at their request,  as additional  insureds under each such
policy.

                                      -29-



 
<PAGE>

<PAGE>




               10.3  Payment of Taxes.  The  Company  will,  and will cause each
Subsidiary  to, pay and  discharge  promptly  as they become due and payable all
taxes,  assessments and other governmental  charges or levies imposed upon it or
its income or upon any of its property or assets,  or upon any part thereof,  as
well as all lawful claims of any kind (including claims for labor, materials and
supplies)  which,  if unpaid,  might by law  become a Lien or a charge  upon its
property; provided that neither the Company nor any Subsidiary shall be required
to pay  any  such  tax,  assessment,  charge,  levy  or  claim  if  the  amount,
applicability  or validity thereof shall currently be contested in good faith by
appropriate  proceedings or other  appropriate  actions  promptly  initiated and
diligently conducted and if the Company or such Subsidiary,  as the case may be,
shall have set aside on its books such reserves, if any, with respect thereto as
are required by GAAP and deemed appropriate by the Company and their independent
public accountants.

               10.4  Payment of Other  Debt,  etc.  Except as to  matters  being
contested  in good  faith and by  appropriate  proceedings,  and  subject to the
provisions of this  Agreement,  the Company will, and will cause each Subsidiary
to, pay promptly when due, or in  conformance  with customary  trade terms,  all
material Debt and obligations incident to the conduct of its business.

               10.5 Environmental  Laws. The Company shall, and shall cause each
of its  Subsidiaries  to,  conduct  its  business  in full  compliance  with all
material  Environmental  Laws applicable to it, including,  without  limitation,
those relating to the Company's or any Subsidiary's  generation,  handling, use,
storage, and disposal of hazardous and toxic wastes and substances. No Hazardous
Material  shall be used by any Person for any purpose at or upon any Facility or
stored thereon or disposed or discharged therefrom,  except in compliance in all
material  respects  with any  Environmental  Law or any  permit or Order  issued
pursuant to an Environmental  Law. The Company shall take prompt and appropriate
action  to  respond  to any  non-compliance  with  Environmental  Laws and shall
regularly report to the holders of the Notes on such response.  Without limiting
the generality of the foregoing, whenever there is potential non-compliance with
any  Environmental  Law by the Company or any of its  Subsidiaries,  the Company
shall,  at the  request  of the  holders  of more  than  50% of the  outstanding
principal  amount  of  the  Notes  and  the  Company's  expense:  (a)  cause  an
independent  environmental  engineer  acceptable  to the holders of the Notes to
conduct  such  tests  of the  site  where  the  Company's  or such  Subsidiary's
non-compliance or alleged  non-compliance  with  Environmental Laws has occurred
and prepare and deliver to the holders of the Notes a report  setting  forth the
results of such  tests,  a proposed  plan for  responding  to any  environmental
problems  described  therein,  and an  estimate  of the costs  thereof;  and (b)
provide  to the  holders  of the Notes a  supplemental  report of such  engineer
whenever the scope of the environmental problems, or the response thereto or the
estimated costs thereof, shall change.

               10.6 Further Assurances. From time to time hereafter, the Company
will  execute and  deliver,  or will cause to be executed  and  delivered,  such
additional  instruments,  certificates  or  documents,  and  will  take all such
actions, as the Purchaser

                                      -30-



 
<PAGE>

<PAGE>



may reasonably  request,  for the purposes of implementing  or effectuating  the
provisions of this Agreement,  the Related Documents, the Notes and the Warrants
(including,  without limitation, taking reasonable steps to obtain an assignment
of a PPN with respect to the Notes as referred to in Section 7.15).

               10.7  Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its  authorized but unissued  shares of Common
Stock,  for the purpose of effecting  the exercise of the Warrants and otherwise
complying with the terms of this  Agreement,  such number of its duly authorized
shares of Common  Stock as shall be  sufficient  to effect the  exercise  of the
Warrants or otherwise to comply with the terms of the Warrants. The Company will
use its best  efforts to obtain any  authorization,  consent,  approval or other
action by or make any filing with any court or  administrative  body that may be
required under  applicable  U.S. state  securities  laws in connection  with the
issuance of the Warrant Shares upon exercise of the Warrants or any requirements
of any  domestic  securities  exchange  upon which shares of Common Stock may be
listed  (except  for  official  notice of  issuance  which  will be  immediately
transmitted by the Company upon  issuance);  provided that the Company shall not
for any such  purpose  be  required  to  qualify  to do  business  as a  foreign
corporation or to consent to the  jurisdiction of any court or subject itself to
suit, in any jurisdiction wherein it is not qualified.

               10.8  Consolidated  Interest and  Dividend  Coverage  Ratio.  The
Company  will  cause  to be  maintained  for  each  period  set  forth  below  a
Consolidated Interest and Dividend Coverage Ratio in an amount not less than the
amount set forth opposite such period:


<TABLE>
<CAPTION>

                    Period                        Consolidated Interest
                                                  and Dividend Coverage
                                                  Ratio
                                                  --------------------------
<S>                                                 <C>
Closing - December 31, 1997                               2.0  to 1.00
January 1, 1998 - December 31, 1999                       2.25 to 1.00
January 1, 2000 - December 31, 2000                       2.50 to 1.00
Thereafter                                                2.75 to 1.00

</TABLE>

               10.9 Compliance with Related  Documents.  The Company shall,  and
shall cause each of its  Subsidiaries  to, comply in all material  respects with
the terms and provisions of each Related Document to which it is a party.

               10.10  Subsidiary  Guaranties,  etc. The Company  shall cause any
Person that is currently or hereafter  becomes a Wholly-Owned  Subsidiary of the
Company, other than a Non-US Subsidiary,  to execute and deliver, on the Closing
Date or such later date that such Person becomes a Subsidiary, to the holders of
the Notes,  a Guaranty in the form of Exhibit F with respect to the  obligations
of the Company

                                      -31-



 
<PAGE>

<PAGE>



hereunder and under the Notes.  Notwithstanding the foregoing, the Purchaser has
entered into the Collateral  Agency  Agreement and has waived the condition that
such Guaranty be delivered by IASI Inc. at the Closing.  However,  if within 120
days after the  Closing  Date (or such later time to which  Purchaser,  if it so
elects,  may consent in its sole discretion) IASI Inc.  executes and delivers to
Purchaser a Subsidiary Guaranty (and Purchaser receives such other documentation
in  connection  therewith  as  it  may  reasonably  request,  including  without
limitation  satisfactory  opinions  of  counsel  to IASI  Inc.  and  counsel  to
Purchaser  with  respect  thereto),   Purchaser  will  agree  to  terminate  the
Collateral  Agency Agreement in accordance with the terms thereof.  If Purchaser
determines  in its  reasonable  judgment  that the  provisions  of the preceding
sentence have been complied with, the Company shall be deemed to have "Satisfied
the Section 10.10 Condition."

               10.11    Certain Amendment.

               (a) If requested by holders of a majority in principal  amount of
the  outstanding  Notes,  the Company will as promptly as  practicable  take all
action  necessary  (in  accordance  with  applicable  law) to  provide  that the
Warrants held by such holders  shall be  exercisable  for shares of  "Non-Voting
Stock"  rather than Common  Stock,  including  such  amendments  to the Warrant,
Section 10.7 of this Agreement and (subject to the following  provisions of this
Section 10.11) the Certificate of Incorporation as reasonably  requested by such
holder to effectuate  the  provisions of this Section  10.11.  In such event and
subject  to the  fiduciary  duties of the  Company's  Board of  Directors  under
applicable  law as advised in writing by  counsel,  the  Company  shall take all
lawful  action  to  adopt  and  cause  to  become  effective  a  Certificate  of
Designation  to  the  Certificate  of  Incorporation  or  an  amendment  to  the
Certificate of Incorporation;  and promptly thereafter the Company shall furnish
to the Purchaser a legal opinion of its outside  counsel,  in form and substance
reasonably  satisfactory to the Purchaser,  as to the effectiveness and validity
of such amendment.

               (b) With  reference  to the  foregoing,  the  holders may request
either that a class of  Non-Voting  Convertible  Preferred  Stock or  Non-Voting
Common  Stock  ("Non-Voting  Stock")  be issued  (in either  case  having  terms
corresponding  to those set forth in the form attached hereto as Exhibit G, with
changes as reasonably  requested by such holders if the stock is to be Preferred
Stock). In the event that an amendment to the Certificate of Incorporation  must
be  approved by the  stockholders  of the  Company,  the Company may present the
amendment  at the next  stockholders  meeting that is at least 45 days after the
request to adopt such  amendment,  rather than  calling a special  stockholders'
meeting.

               10.12 Application of Certain  Proceeds.  Subject to the following
proviso,  the Company shall apply (as promptly as  permissible  under the Bridge
Notes) any and all  proceeds  from the  exercise  of the  Company's  outstanding
warrants,  currently  traded on NASDAQ under  "KELLW",  to the redemption of any
Bridge Notes  outstanding,  provided that the Company may apply such proceeds to
the  repayment  of other  Senior Debt if (a) at the time it is not  permitted to
repay the Bridge Notes, (b) it has no

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reason to believe  that an amount equal to such  proceeds  will not be available
for  borrowing  under the Barnett  Credit  Facility for purposes of repaying the
Bridge  Notes  promptly  when  permissible  and (c) it repays such amount of the
Bridge Notes promptly when permissible under the terms of the Bridge Notes.

               Section 11. Negative  Covenants.  The Company covenants that from
the date of this Agreement  through the Closing and thereafter so long as any of
the Notes are outstanding:

               11.1  Debt.  The  Company  will  not,  and  will not  permit  any
Subsidiary to, directly or indirectly,  create,  incur,  assume,  guarantee,  or
otherwise  become or remain  directly or indirectly  liable with respect to, any
Debt,  or  create,  issue,  sell,  or  otherwise  become or remain  directly  or
indirectly liable with respect to, any Disqualified Stock, except:

               (a) Debt evidenced by the Notes;

               (b) Debt outstanding  pursuant to the Senior Credit Agreements in
an aggregate outstanding principal amount not to exceed at any time $40,000,000;

               (c) Debt incurred to refund the Debt outstanding under the Senior
Credit  Agreements (which shall not include any extension or modification of the
Senior Credit  Agreements or any  restructuring of the Senior Credit  Agreements
involving  the same or  substantially  the same  parties  as the  parties to the
Senior Credit  Agreements on the date hereof) or any previous  refunding thereof
(any such Debt  being  referred  to as  "Refunding  Debt") if (i) the  principal
amount of such Refunding  Debt does not exceed the principal  amount of the Debt
being  refunded,  (ii) the Weighted  Average Life to Maturity of such  Refunding
Debt is not shorter  than that of the Debt being  refunded,  (iii) the terms and
conditions  of such  Refunding  Debt shall when  viewed as a totality be no less
favorable  to the  Company  than the Debt being  refunded,  and (iv) the rate or
rates of interest applicable to such Refunding Debt does not exceed the interest
rate or rates (including the rate of interest payable upon the occurrence of any
default or event of default thereunder) permitted to be charged under the Senior
Credit Agreements as in effect on the date hereof;

               (d) Debt and Disqualified  Stock  outstanding on the date of this
Agreement and referred to in Schedule 11.1(d);

               (e) Debt or Disqualified Stock subordinate in right of payment to
the Notes and (i) issued by the Company and held by a Subsidiary  or (ii) issued
by any Subsidiary and held by the Company;

               (f) Debt incurred in connection  with the purchase of real estate
and  improvements  thereto  used in the conduct cf the  business of the Company,
provided that the aggregate  principal amount of such Debt shall not exceed $3.5
million;

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               (g) Debt  incurred in  connection  with the purchase of Property,
other than pursuant to Section 11.1(f),  acquired by the Company or a Subsidiary
after the Closing Date, provided that the aggregate principal amount outstanding
of such Debt plus the aggregate principal amount outstanding of Debt referred to
in the second paragraph of Schedule  11.1(d),  shall not at any time exceed $1.5
million;

               (h) Senior  Debt  (which  may be  pursuant  to the Senior  Credit
Agreements) in addition to that otherwise permitted by the foregoing  provisions
of this Section 11.1 in an aggregate  principal amount outstanding not to exceed
$4,000,000 at any time of determination; and

               (i) Debt (which may be pursuant to the Senior Credit  Agreements)
in addition to that  otherwise  permitted by the  foregoing  provisions  of this
Section 11.1,  provided that, on the date the Company or any Subsidiary  becomes
liable with respect to such Debt and immediately after giving effect thereto and
to the concurrent retirement of any other Debt:

                             (i)    the  Consolidated  Interest   and   Dividend
                                    Coverage  Ratio  (calculated  on a  proforma
                                    basis as if such Debt had been  incurred  on
                                    the  first day of the  applicable  Reference
                                    Period)  is no less  than  2.0 to 1.00  from
                                    January 15, 1997 until  December  31,  1997,
                                    2.25 to 1.00  from  January  1,  1998  until
                                    December 31, 1999, 2.50 to 1.00 from January
                                    1, 2000 until  December 31, 2000 and 2.75 to
                                    1.00 thereafter;

                             (ii)   the ratio of Debt plus Disqualified Stock to
                                    Adjusted EBIT shall not exceed 4.5 to 1.0 as
                                    of any  date on or  prior  to  December  31,
                                    1997,  4.25  to  l.0 as of  any  date  after
                                    December   31,  1997  and  on  or  prior  to
                                    December 31, 1998,  and 4.0 to 1.0 as of any
                                    date after December 31, 1998; and

                             (iii)  no  condition  or event  shall  exist  which
                                    constitutes an Event of Default or Potential
                                    Event of Default.

               11.2 Liens,  etc.  The Company  will not, and will not permit any
Subsidiary to, directly or indirectly,  create, incur, assume or permit to exist
any Lien on or with respect to any property or asset  (including any document or
instrument  in respect of goods or  accounts  receivable)  of the Company or any
Subsidiary,  whether now owned or held or hereafter  acquired,  or any income or
profits  therefrom,  without equally and ratably securing the Notes,  except for
Permitted Liens.

               The term "Permitted Liens" means:

                                      -34-



 
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               (a) Liens for taxes,  assessments or other  governmental  charges
the  payment of which is not at the time  required  by Section  10.3 or that are
being contested in good faith by appropriate proceedings promptly instituted and
diligently  concluded,  provided that any reserve or other appropriate provision
as shall be required in accordance with GAAP shall have been made therefor;

               (b)   statutory   Liens  of  landlords  and  Liens  of  carriers,
warehousemen,  mechanics  and  materialmen  incurred in the  ordinary  course of
business  for  sums  not yet due or the  payment  of  which  is not at the  time
required by Section 10.3;

               (c) Liens  (other  than any Lien  imposed by ERISA or the Code in
connection  with a Plan)  incurred or deposits  made in the  ordinary  course of
business (i) in connection with workers'  compensation,  unemployment  insurance
and other types of social  security,  or (ii) to secure (or to obtain letters of
credit that secure) the performance of tenders,  statutory  obligations,  surety
and appeal bonds, bids, leases,  performance  bonds,  purchase,  construction or
sales contracts and other similar obligations, in each case not incurred or made
in connection  with the borrowing of money,  the obtaining of advances or credit
or the payment of the deferred purchase price of property;

               (d) any  attachment  or  judgment  Lien,  unless the  judgment it
secures shall not, within 60 days after the entry thereof,  have been discharged
or execution  thereof stayed pending  appeal,  or shall not have been discharged
within 60 days after the expiration of any such stay;

               (e)  leases  or   subleases   granted   to   others,   easements,
rights-of-way,  restrictions and other similar charges or encumbrances,  in each
case  incidental  to, and not  interfering  with,  the  ordinary  conduct of the
business of the Company or any Subsidiary;

               (f) Liens incurred to secure Debt (other than Subordinated  Debt)
of the Company  outstanding in compliance with Section 11.l(b) or (c) or (if the
Debt  referred to in Section  11.1(h) is incurred  pursuant to the Senior Credit
Agreements) Section 11.1(h);

               (g) Liens existing on the date of this Agreement and securing the
Debt of the Company and its Subsidiaries referred to in Schedule 11.1(d);

               (h) any Lien  created to secure  all or any part of the  purchase
price,  or to secure  Debt  incurred  or  assumed  to pay all or any part of the
purchase  price, of Property  acquired by the Company or a Subsidiary  after the
Closing Date,  provided  that (i) any such Lien shall be confined  solely to the
item or items of  Property  so  acquired  and,  if  required by the terms of the
instrument originally creating such Lien, other Property which is an improvement
to or is acquired for specific use in connection  with such  acquired  Property,
(ii) the principal  amount of the Debt secured by any such Lien shall at no time
exceed an amount equal to 100% of the lesser of (A) the cost to

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the Company or such  Subsidiary  of the  Property  so acquired  and (B) the fair
market value of such Property (as  determined in good faith by the Board) at the
time of such acquisition,  and (iii) any such Lien shall be created within three
months  after,  in the case of  Property,  its  acquisition,  or, in the case of
improvements, their completion;

               (i) any Lien existing on Property of a Person  immediately  prior
to its being consolidated with or merged into the Company or a Subsidiary or its
becoming a  Subsidiary,  or any Lien  existing on any  Property  acquired by the
Company or any  Subsidiary at the time such Property is so acquired  (whether or
not the Debt secured  thereby  shall have been  assumed),  provided that no such
Lien shall have been created or assumed in contemplation  of such  consolidation
or  merger  or such  Person's  becoming  a  Subsidiary  or such  acquisition  of
Property,  and  provided  further  that  each  such  Lien  shall at all times be
confined solely to the item or items of Property so acquired and, if required by
the terms of the instrument  originally creating such Lien, other Property which
is an  improvement  to or is acquired for specific use in  connection  with such
acquired Property;

               (j) any Lien renewing,  extending or refunding any Lien permitted
by  subdivision  (f),  (g), (h) or (i) of this Section  11.2,  provided that the
principal amount of Debt secured by such Lien  immediately  prior thereto is not
increased or the maturity thereof reduced and such Lien is not extended to other
Property,  and  provided  further  that  each  such  Lien  shall at all times be
confined  solely  to the item or items of  Property  subject  to the Lien  being
renewed, extended or refunded;

               (k) Liens  securing  Debt of a Subsidiary  owed to the Company or
another Subsidiary,  provided, however, that Liens under this clause (k) will no
longer  continue  to be  Permitted  Liens in the event  that (i) any  subsequent
issuance or transfer of any capital stock, or other circumstance, results in any
such  Subsidiary  ceasing to be a  Subsidiary  or (ii) the Debt  secured by such
Liens is transferred  to a Person other than the Company or another  Subsidiary;
and

               (i) Liens securing Debt of a Non-US  Subsidiary  that are imposed
as a matter of law or common  commercial  practice in the  jurisdiction  of such
Subsidiary's  organization,  provided that any such Liens are confined solely to
Property of such Subsidiary located in such jurisdiction.

               11.3 Restricted  Investments.  The Company will not, and will not
permit any Subsidiary to,  directly or indirectly  make or own any Investment in
any  Person,  or create or become or be liable  with  respect  to any  Guaranty,
except:

               (a)  Cash Equivalents;

               (b)  Investments  in any Person  which  simultaneously  therewith
becomes a Wholly-Owned Subsidiary of the Company if such Person is a corporation
organized  under  the laws of the  United  States or any  state  thereof  or the
District of Columbia and at least 90% of the fair market value of its assets are
located and at least 90% of its

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business (as  measured on the basis of revenues) is conducted  within the United
States,  in each case as determined in the  reasonable  judgment of the Board of
Directors of the Company;

               (c)  advances,  Investments  or  loans by any  Subsidiary  to the
Company;

               (d)  advances,  Investments  or  loans  by  the  Company  or  any
Subsidiary to any Wholly-Owned Subsidiary;

               (e) receivables acquired by the Person to whom such receivable is
payable,  provided,  however,  such  receivables  are created or acquired in the
ordinary  course of business and payable or  dischargeable  in  accordance  with
customary trade terms;

               (f) Investments existing on the date of this Agreement and listed
on Schedule 11.3(f);

               (g)   advances  for   payroll,   relocation,   travel  and  other
employee-related  expenses  incurred in the  ordinary  course of business not to
exceed, in the aggregate, $150,000 at any time outstanding;

               (h)  Investments  by the  Company  in a joint  venture  or  joint
ventures  relating to the purchase of engines for inventory  and engine  leasing
not to exceed at any time an aggregate  of  $5,000,000  or 30% of the  Company's
Adjusted Net Worth;

               (i) Investments by the Company in Non Wholly-Owned  Subsidiaries,
Non-US Subsidiaries and in Capital Stock of Rada Electronic  Industries Limited,
a company  organized  under the laws of the State of Israel,  and other entities
engaged  in  businesses   related  to  the  business  of  the  Company  and  its
Subsidiaries, in an amount not to exceed at any time in the aggregate $4,000,000
or such higher amount (which shall in no event exceed $7,000,000) if the Company
could on the date of such  Investment  and after giving  effect  thereto,  incur
$1.00 of additional Debt under Section 11.1(i); and

               (j)  Guaranties of Senior Debt permitted under Section 11 hereof.

               11.4 Restricted  Payments.  (a) The Company will not, directly or
indirectly,  and will not permit any Subsidiary to declare,  order, pay, make or
set apart any sum or Property for any Restricted  Payment,  unless,  immediately
after giving effect to any such proposed action:

                        (i)  no condition or event shall exist which constitutes
                             an Event of Default or Potential  Event of Default;
                             and

                        (ii) the sum of the  aggregate  amount  of all  sums and
                             Property   included  in  all  Restricted   Payments
                             directly or  indirectly  declared,  ordered,  paid,
                             made or set apart by the Company

                                      -37-



 
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<PAGE>



                             during  the  period  from the  Closing  Date to and
                             including  the date of such  proposed  action shall
                             not exceed the sum of:

               (A) 50% (but, in the case of a deficit, 100%) of Consolidated Net
        Income  from  the  Closing  Date to the end of the  most  recent  fiscal
        quarter  ending  at  least 45 days  prior  to the date of such  proposed
        action; plus

               (B) the aggregate amount of the Net Cash Proceeds received during
        such period from the issuance and sale other than to a Subsidiary of its
        capital stock (other than Disqualified  Stock), and as consideration for
        the  issuance  and  sale  during  such  period  of Debt  of the  Company
        convertible into its capital stock (other than Disqualified  Stock), but
        only to the extent that any such Debt has been  converted into shares of
        such stock during such period,  provided  that the  aggregate  amount of
        such Net Cash  Proceeds to be taken into  account for such period  shall
        not exceed the aggregate of the amounts  expended by the Company  during
        such  period  for  the   redemption,   retirement,   purchase  or  other
        acquisition,  direct or indirect,  of any shares of capital stock of the
        Company or for the retirement,  purchase or other acquisition, direct or
        indirect,  of any Debt which is pari passu with or  subordinated  to the
        Note;

provided that any dividend  which could be paid in compliance  with this Section
11.4 at the date of its declaration may be paid within the following 60 days (if
the condition specified in clause (a) (i) above would be satisfied at such time)
notwithstanding  that the  conditions  set forth in clause  (a)(ii) would not be
satisfied at such time.

               (b) The  provisions  of Section  11.4  shall  not,  so long as no
condition  or event  shall  exist  which  constitutes  an Event  of  Default  or
Potential  Event of Default,  prevent (i) the retirement,  redemption,  or other
acquisition  of any  shares  of any  class  of the  Company's  capital  stock in
exchange  for,  or out of the Net Cash  Proceeds of a  substantially  concurrent
sale, of other shares of its capital stock (other than Disqualified Stock), (ii)
the retirement, redemption, or other acquisition of any Debt which is pari passu
with or  subordinated  to the  Notes  in  exchange  for,  or out of the Net Cash
Proceeds of a  substantially  concurrent  sale,  of shares of the capital  stock
(other than Disqualified  Stock), (iii) the acquisition by the Company of shares
of the capital  stock of any  Subsidiary  from a third party in exchange for, or
out of the Net Cash Proceeds of a substantially concurrent sale of shares of the
capital  stock  (other than  Disqualified  Stock) of the  Company,  and (iv) any
dividend or  distribution  payable solely in capital stock of the Company (other
than Disqualified Stock).

               (c) For the purposes of this Section 11.4, the amount involved in
any Restricted Payment directly or indirectly declared,  ordered,  paid, made or
set apart in  Property  shall be the  greater of the fair  market  value of such
Property  (as  determined  in good  faith by the  Board)  and the net book value
thereof on the books of the Company  (determined in accordance with GAAP) on the
date such Restricted Payment is declared,  ordered, paid, made or set apart. The
Company will not declare any dividend  (other than a dividend  payable solely in
shares of its own stock) on any shares

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of any class of its stock  which is payable  more than 60 days after the date of
declaration thereof.

               11.5  Minimum Net Worth.  The Company  will not, as of the end of
any fiscal quarter of the Company, permit Adjusted Net Worth to be less than the
sum of $12,000,000  and 50.0% (but, in the case of a deficit,  100%, and in each
case on a cumulative  basis) of Consolidated  Net Income for the period from the
Closing Date to and including the date of determination.

               11.6 Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, directly or indirectly,  engage in any transaction
(or series of related transactions) including, without limitation, the purchase,
sale or exchange of assets or the  rendering of any service,  with any Affiliate
of the Company,  except in the ordinary course of and pursuant to the reasonable
requirements  of the Company's or such  Subsidiary's  business and upon fair and
reasonable  terms that are no less favorable to the Company or such  Subsidiary,
as the case may be,  than  those  which  might be  obtained,  in the good  faith
judgment of the Company, in an arm's length transaction at the time from Persons
which are not Affiliates.  In the case of any such transaction with an Affiliate
involving  aggregate  consideration  in excess of  $500,000,  the Company  shall
deliver to each holder of Notes an Officer's  Certificate  certifying  that such
transaction  complies  with  this  Section  11.6;  and in the  case of any  such
transaction  with an Affiliate  involving  aggregate  consideration in excess of
$2,000,000,  (a) the Company  shall  deliver to each holder of Notes a favorable
opinion as to the fairness to the Company or such Subsidiary of such transaction
from a financial  point of view,  issued by an investment  banking or accounting
firm of national  standing and (b) such transaction  shall have been approved by
the Audit  Committee  of the Board or, if  appropriate,  the entire  Board.  The
restriction  contained in this Section 11.6 shall not apply to (i)  transactions
between  the  Company  and a  Wholly-Owned  Subsidiary  or between  Wholly-Owned
Subsidiaries,  (ii)  employment  arrangements  or advisory fees for officers and
directors  who  are not  otherwise,  by  virtue  of  stock  ownership  or  other
circumstances,  Affiliates  of the  Company and (ii) the  purchase of  inventory
(including  without  limitation,  the purchase,  sale,  lease or exchange of any
assets or the rendering of any service),  in each case in the ordinary course of
business.

               11.7  Consolidation or Merger,  Sale of Assets,  etc. The Company
will not, and will not permit any  Subsidiary  (other than a Non-US  Subsidiary)
to, directly or indirectly,

               (a) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into it, except:

                        (i)  a merger or consolidation involving no person other
                             than  the  Company   and/or  one  or  more  of  its
                             Wholly-Owned Subsidiaries; or

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                        (ii) a merger or consolidation  involving the Company or
                             a  Subsidiary   pursuant  to  which  the  surviving
                             corporation  or  partnership  is a  corporation  or
                             partnership  organized and existing  under the laws
                             of the United States of America or a state thereof,
                             with at least 90% of the fair  market  value of its
                             assets located and at least 90% of its business (as
                             measured on the basis of revenues) conducted within
                             the United  States,  in each case as  determined in
                             the  reasonable  judgment of the Board of Directors
                             of  the  Company,   and  (x)  such  corporation  or
                             partnership  (if  other  than the  Company  or such
                             Subsidiary)   expressly   assumes,    through   the
                             execution of an instrument of assumption reasonably
                             satisfactory  to the Purchaser,  the obligations of
                             the Company or such Subsidiary as applicable, under
                             this   Agreement   and   under  the  Notes  or  the
                             Subsidiary  Guaranties,  and (y) immediately  after
                             giving  effect  to  such   transaction   (and  such
                             assumption)  (A) such  corporation  or  partnership
                             could  incur at least $1.00 of  additional  Debt in
                             compliance   with   Section   11.1(i)  and  (B)  no
                             condition or event shall exist which constitutes an
                             Event of Default or a  Potential  Event of Default;
                             or

               (b) sell,  issue,  convey,  transfer,  lease or otherwise dispose
(including,  without limitation,  by way of merger,  consolidation,  or sale and
leaseback transaction) (collectively, a "transfer"),  directly or indirectly, in
one or a series  of  related  transactions,  of:  (i) any  capital  stock of any
Subsidiary;  (ii) all or  substantially  all of the properties and assets of any
division or line of business  of the Company or its  Subsidiaries,  or (iii) any
other  properties or assets of the Company or any  Subsidiary  other than in the
ordinary course of business, except:

                        (i)  transfers by any Wholly-Owned Subsidiary of all or
                             substantially  all its  assets  to the  Company  or
                             another Wholly-Owned Subsidiary;

                        (ii) transfer by the Company or a  Subsidiary  of all or
                             substantially  all its  assets  (including  capital
                             stock of a Subsidiary  provided  such capital stock
                             constitutes   all  the   capital   stock   of  such
                             Subsidiary)  to  any  corporation  into  which  the
                             Company or such Subsidiary could be consolidated or
                             merged in compliance  with  subdivision (a) (ii) of
                             this Section  11.7,  provided  that (x) each of the
                             conditions set forth in such  subdivision  (a) (ii)
                             shall  have  been   fulfilled,   and  (y)  no  such
                             disposition  shall  relieve  the  Company  from its
                             obligations under this Agreement or the Notes;

                        (iii)transfers of obsolete inventory and equipment;

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                        (iv) during any  Reference  Period,  transfers of assets
                             having a Fair Market Value in the  aggregate of not
                             more  than 10% of the  Consolidated  assets  of the
                             Company  shown on the balance  sheet of the Company
                             as of the end of the fiscal quarter ending at least
                             45  days  prior  to (1)  the  commencement  of such
                             Reference  Period or, if less, (2) the date of such
                             asset sale;

                        (v)  transfers  pursuant  to which  the  gross  proceeds
                             received  by the Company  and its  Subsidiaries  is
                             less than $250,000 in the aggregate; and

                        (vi) transfers of (i) assets  (other than capital  stock
                             of any  Subsidiary)  or (ii) all (but not less than
                             all) of the capital stock of a  Subsidiary,  if (x)
                             at least 85% of the consideration is in the form of
                             immediately  available  funds  consisting of United
                             States  Dollars  or  Cash  Equivalents,   (y)  such
                             consideration  is at least equal to the Fair Market
                             Value of the  shares  or  assets to be sold and (z)
                             the Net Cash Proceeds thereof shall, on or prior to
                             the 120th day  following  such sale,  be applied to
                             the prepayment of the Notes to the extent  required
                             pursuant to Section 4.5,  unless prior to such date
                             such proceeds have been:

               (A)  reinvested  in another  asset or  business as  permitted  by
        Section 11.2; or

               (B) applied to the prepayment of Senior Debt of the Company.

               11.8  Subsidiary Stock and Debt.

               (a) The Company will not, and will not permit any  Subsidiary to,
directly or indirectly, sell, assign, pledge or otherwise dispose of any Debt of
the  Company or any  Wholly-Owned  Subsidiary  except to the  Company or another
Subsidiary, or as permitted by Section 11.2.

               (b) The  Company  will not  permit  any  Wholly-Owned  Subsidiary
existing on the date hereof to issue or have  outstanding  any shares of capital
stock,  or options,  warrants or securities  convertible  into shares of capital
stock,  other than  shares of capital  stock which are owned by the Company or a
Wholly-Owned Subsidiary.

               11.9  Compliance  with ERISA.  The Company will not, and will not
permit any Subsidiary to,

               (a)  engage  in any  transaction  in  connection  with  which the
Company or any  Subsidiary  could be subject to either a civil penalty  assessed
pursuant to Section

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502(I) of ERISA or a tax  imposed  by  Section  4975 of the Code,  terminate  or
withdraw from any Plan (other than a Multi employer  Plan) in a manner,  or take
any other action with respect to any such Plan (including, without limitation, a
substantial  cessation of  operations  within the meaning of Section  4062(f) of
ERISA),  which could result in any liability of the Company or any Subsidiary to
the PBGC,  to a trust  established  pursuant to Section  4041(c) (3) (B) (ii) or
(iii) or 4042(I) of ERISA,  or to a trustee  appointed  under Section 4042(b) or
(c) of ERISA,  incur any liability to the PBGC on account of a termination  of a
Plan under  Section  4064 of ERISA,  fail to make full  payment  when due of all
amounts  which,  under the provisions of any Plan, the Company or any Subsidiary
is required to pay as contributions  thereto, or permit to exist any accumulated
funding deficiency,  whether or not waived, with respect to any Plan (other than
a Multi  employer  Plan),  if, in any such  case,  such  penalty  or tax or such
liability,  or the  failure  to make  such  payment,  or the  existence  of such
deficiency, as the case may be, could have a Material Adverse Effect;

               (b) permit the present value of all vested accrued benefits under
all Plans  maintained at any time by the Company and any Subsidiary  (other than
Multi employer Plans)  guaranteed  under Title IV of ERISA to exceed the current
value of the assets of such Plans  allocable to such vested accrued  benefits by
more than $2,000,000;

               (c) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with  respect to Multi  employer  Plans  incurred by the
Company and its Subsidiaries to exceed $1,000,000; or

               (d) permit the sum of (i) the amount by which the  current  value
of all vested accrued  benefits  referred to in subdivision  (b) of this Section
11.9 exceeds the current value of the assets referred to in such subdivision (b)
and (ii) the amount of the aggregate incurred  withdrawal  liability referred to
in subdivision (c) of this Section 11.9 to exceed $2,000,000.

For the purposes of subdivisions (c) and (d) of this Section 11.9, the amount of
the withdrawal  liability of the Company and its  Subsidiaries at any date shall
be the aggregate  present value of the amount claimed to have been incurred less
any  portion  thereof  as  to  which  the  Company  reasonably  believes,  after
appropriate  consideration of possible  adjustments  arising under Sections 4219
and 4221 of ERISA, it and its Subsidiaries will have no liability, provided that
the Company  shall  obtain  prompt  written  advice from  independent  actuarial
consultants  supporting such determination.  The Company agrees (i) once in each
calendar year to request and obtain a current statement of withdrawal  liability
from each Multi  employer Plan and (ii) to transmit a copy of such  statement to
each holder of any Notes, within 15 days after the Company receives the same. As
used in this Section 11.9, the term  "accumulated  funding  deficiency"  has the
meaning  specified in Section 302 of ERISA and Section 412 of the Code,  and the
terms "present value",  "current value" and "accrued  benefit" have the meanings
specified in Section 3 of ERISA.

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               11.10 Restrictions Affecting Subsidiaries.  The Company will not,
and will not permit any Wholly-Owned  Subsidiary other than a Non-US  Subsidiary
to, create or otherwise  permit to exist any  restriction  on the ability of any
such  Subsidiary  to (a) pay  dividends or make any other  distributions.on  its
capital  stock or any other  interest in its profits owned by the Company or any
other Wholly-Owned Subsidiary,  or pay any Debt owed to the Company or any other
Wholly-Owned  Subsidiary;  (b) make any loan or  advance  to the  Company or any
other Wholly-Owned  Subsidiary;  or (c) transfer any of its properties or assets
to the  Company  or any  other  Wholly-Owned  Subsidiary,  other  than  any such
restriction:

                        (i)  in  effect  on  the  date  of  this  Agreement  and
                             described in Schedule 11.10;

                        (ii) in effect pursuant to Debt of a Person  outstanding
                             at the time such Person becomes a Subsidiary (other
                             than Debt incurred in contemplation of its becoming
                             a Subsidiary), provided that such restriction shall
                             at all times be  confined  solely to the  Person or
                             the  assets  and   properties   of  the  Person  so
                             acquired;

                        (iii)in  effect  pursuant  to Debt  incurred  to  renew,
                             extend or refund any Debt  referred to in paragraph
                             (i) or (ii) of this Section  11.10,  provided  that
                             the restrictions in effect under such Debt shall be
                             no less  favorable to the holders of the Notes than
                             those in effect prior thereto;

                        (iv) contained  in  security  agreements   permitted  by
                             Section  10.2   securing   Debt  of  a  Subsidiary,
                             provided that such  restriction  shall at all times
                             be confined solely to the item or items of property
                             covered by such security agreement; and

                        (v)  consisting of customary  non-assignment  provisions
                             in  leases  governing  leasehold  interests  to the
                             extent such  provisions  restrict  the  transfer of
                             such leasehold interests.

               11.11 Amendment of Senior Credit Agreements. The Company will not
enter  into any  amendment  or  modification  of the  Senior  Credit  Agreements
containing  terms that would not be permitted in  Refunding  Debt under  Section
11.1(c).

               11.12  Nature of  Business.  The Company  will not,  and will not
permit any  Subsidiary  to, (a) change the nature of the business in which it is
presently engaged to any business which is not a reasonable  extension  thereof,
(b) acquire any  Subsidiary  engaged in a business that the Company itself could
not engage in under this Section 11.12, or (c) except as specifically  permitted
hereby,  purchase or invest,  directly or indirectly,  in any assets or property
other than assets or property  which are useful in,  necessary for and are to be
used in its business as permitted to be conducted hereunder.

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               11.13  Transactions  Affecting  Notes.  The Company will not, and
will permit any Subsidiary to, enter into any transaction which could reasonably
be expected to materially  and adversely  affect the Company's  ability to repay
the Notes.

               11.14 Limitation on Other Subordinated Indebtedness.  Neither the
Company nor any  Subsidiary  will create,  incur,  issue,  assume,  guarantee or
otherwise  in any manner  become  directly  or  indirectly  liable  for, or with
respect to, or otherwise  permit to exist any Debt that is  subordinate in right
of payment to any debt of the Company or of such Subsidiary, as the case may be,
unless  such debt is also pari passu with the Notes or  subordinate  in right of
payment to the Notes in the same manner as the Notes are subordinate in right of
payment to Senior Debt.

               Section 12.  Events of Default.

               12.1 Events of Default;  Remedies.  If, at any time that any Note
shall be  outstanding,  any of the following  events  (herein  called "Events of
Default")  shall have occurred and be  continuing  (whatever the reason for such
Event of  Default  and  whether  it  shall be  voluntary  or  involuntary  or by
operation of law or otherwise):

               (a) the Company shall default in the due and punctual  payment or
prepayment  of all or any part of the  principal  of or premium  (if any) on the
Notes  when and as the same  shall  become  due and  payable,  whether at stated
maturity, by acceleration, by notice of prepayment or otherwise;

               (b) the Company shall default in the due and punctual  payment or
prepayment  of any interest on any Note when and as such  interest  shall become
due and payable,  or shall fail to pay any other amount payable  hereunder,  and
such default or failure to pay shall  continue until the tenth  consecutive  day
following  the date on which notice of such default shall have been given to the
Company;

               (c) the Company or any of its  Subsidiaries  shall default in the
performance  or  observance  of any of the  covenants,  agreements or conditions
contained in Section 11.1, 11.4, 11.7 or 11.8 (other than defaults which are the
subject of any other paragraph of this Section 12.1);

               (d) the Company or any of its  Subsidiaries  shall default in the
performance  or  observance  of  any  other  of  the  covenants,  agreements  or
conditions  contained in this  Agreement and such default  shall  continue for a
period of 30 days after the earlier of (i) delivery of notice of such default to
the  Company by any holder of Notes and (ii) the  Company's  otherwise  becoming
aware of such default;

               (e)  Debt of the  Company  or any of its  Subsidiaries  having  a
principal  amount of at least  $1,000,000 in the aggregate shall be declared due
and  payable,  or  required to be prepaid  other than by a required  prepayment,
prior to the stated maturity  thereof,  and the Company or such Subsidiary shall
fail to pay such Debt when due;

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               (f) any of the Company or its Subsidiaries shall (i) apply for or
consent to the  appointment  of, or the  taking of  possession  by, a  receiver,
custodian,  trustee or liquidator  of itself or of all or a substantial  part of
its  property,  (ii) be  generally  unable to pay its debts as such debts become
due,  (iii) make a general  assignment  for the benefit of its  creditors,  (iv)
commence a voluntary case under the Federal Bankruptcy Code, (v) file a petition
seeking to take  advantage of any other law providing for the relief of debtors,
(vi) fail to  controvert  in a timely or  appropriate  manner,  or  acquiesce in
writing  to, any  petition  filed  against it in an  involuntary  case under the
Federal  Bankruptcy  Code, (vii) admit in writing its inability to pay its debts
generally as such debts become due, (viii) take any action under the laws of its
jurisdiction of organization analogous to any of the foregoing, or (ix) take any
requisite corporate action for the purpose of effecting any of the foregoing;

               (g)  a  proceeding  or  case  shall  be  commenced,  without  the
application or consent of the Company or any of its Subsidiaries in any court of
competent   jurisdiction,   seeking   (i)   the   liquidation,   reorganization,
dissolution,  winding-up,  or composition or readjustment of the debts of any of
them, (ii) the appointment of a trustee, receiver, custodian,  liquidator or the
like of any of them or of all or any substantial part of their assets,  or (iii)
similar relief in respect of any of them, under any law providing for the relief
of debtors, and such proceeding, case or appointment shall continue undismissed,
or unstayed and in effect, for a period of 60 days; or an order for relief shall
be entered in an involuntary case under the Federal Bankruptcy Code, against any
of the Company or any of its  Subsidiaries;  or action  analogous  to any of the
foregoing shall be taken with respect to the Company or any of its  Subsidiaries
and shall continue  undismissed,  or unstayed and in effect,  for a period of 60
days;

               (h)  final  judgment  for the  payment  of  money  in  excess  of
$1,000,000 shall be rendered by a court of competent jurisdiction against any of
the Company or its Subsidiaries,  and the Company or any such Subsidiary, as the
case may be,  shall not  discharge  the same or  provide  for its  discharge  in
accordance  with its terms,  or procure a stay or execution  thereof,  within 60
days from the date of entry  thereof and within said period of 60 days,  or such
longer  period during which  execution of such judgment  shall have been stayed,
appeal  therefrom  and cause the  execution  thereof  to be stayed  during  such
appeal; or

               (i) any  representation  or warranty  made by or on behalf of the
Company or its Subsidiaries or any officer of any of them in this Agreement,  by
the Company or any Subsidiary in any Related  Document,  or which is made in any
certificate or other instrument or document delivered under or pursuant to or in
connection with any provision of this Agreement or any Related  Document,  shall
prove to have been false or incorrect or breached in any material respect on the
date as of  which  made  with  respect  to the  Company  and its  then  existing
Subsidiaries taken as a whole;

then,  subject to the  provisions of Section 13, (i) upon the  occurrence of any
Event of Default described in subsection (f) or (g), the unpaid principal amount
of all Notes,  together  with the  interest  accrued  thereon and, to the extent
permitted by law, an

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additional  amount  equal to the  Make-Whole  Premium in respect of such amount,
shall  automatically  become  immediately  due and  payable,  or (ii)  upon  the
occurrence  of any other  Event of  Default,  the holders of at least 35% of the
unpaid  principal  amount of the Notes at the time  outstanding  may, by written
notice to the Company and the Agent (as defined in the Senior Credit Agreements)
(although  the failure to provide  such notice to the Agent shall not affect the
rights of the holders of the Notes  except as provided in Section  13),  declare
the unpaid  principal  amount of all Notes to be,  and the same shall  forthwith
become,  immediately due and payable, together with the interest accrued thereon
and,  to the  extent  permitted  by  law,  an  additional  amount  equal  to the
Make-Whole Premium in respect of such amount, all without  presentment,  demand,
notice,  protest  or other  requirements  of any kind,  all of which are  hereby
expressly  waived;  provided  that,  during the existence of an Event of Default
described in subsection  (a) or (b) with respect to any Note,  the holders of at
least 25% of the unpaid  principal  amount of the Notes at the time  outstanding
may, by written notice to the Company, declare such Note or Notes to be, and the
same shall forthwith become, due and payable, together with the interest accrued
thereon and, to the extent  permitted by law, an additional  amount equal to the
Make-Whole Premium in respect of such amount, all without  presentment,  demand,
notice,  protest  or other  requirements  of any kind,  all of which are  hereby
expressly  waived.  If any  holders  of any  Notes  shall  exercise  the  option
specified in the proviso to the preceding  sentence,  the Company will forthwith
give written  notice thereof to the holders of all other  outstanding  Notes and
each such  holder may  (whether  or not such  notice is given or  received),  by
written notice to the Company,  declare the principal of all Notes held by it to
be, and the same shall forthwith become,  immediately due and payable,  together
with interest accrued thereon and, to the extent permitted by law, an additional
amount equal to the Make-Whole Premium in respect of such amount.

               The provisions of this Section 12.1 are subject,  however, to the
conditions  that if, at any time  after any Note  shall  have so become  due and
payable,  the  Company  shall pay all  arrears of  interest on the Notes and all
payments  on account of the  principal  of the Notes which shall have become due
otherwise  than by  acceleration  (with  interest on such  principal and, to the
extent  permitted by law, on overdue  payments of interest),  at the  respective
rates per annum  provided  for in the Notes in  respect  of  overdue  amounts of
principal and interest,  and all Events of Default  (other than  non-payment  of
principal of, and accrued interest on Notes, due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 17.2, then, and in
every  such  case,  the  holder  or  holders  of at least a  majority  in unpaid
principal amount of the Notes at the time outstanding,  by written notice to the
Company,  may rescind and annul any such  acceleration and its consequences with
respect to the Notes; but no such action shall affect any subsequent  Default or
Event of Default or impair any right consequent thereon.

               12.2 Suits for  Enforcement.  If any Event of Default  shall have
occurred  and be  continuing,  the holder of any Note may proceed to protect and
enforce  its  rights,  either by suit in  equity  or by action at law,  or both,
whether for the specific  performance of any covenant or agreement  contained in
this Agreement or in aid of the

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exercise of any power granted in this  Agreement,  or the holder of any Note may
proceed to enforce  the payment of all sums due upon such Note or to enforce any
other legal or equitable right of the holder of such Note.

               The Company  covenants that, if it shall default in the making of
any  payment  or  principal  of or  interest  or  premium  on any Note or in the
performance or observance of any agreement contained in this Agreement,  it will
pay to the holder thereof such further amounts,  to the extent lawful,  as shall
be  sufficient  to pay the costs and  expenses  of  collection  or of  otherwise
enforcing such holder's rights, including counsel fees and costs.

               12.3 Remedies Cumulative.  No remedy herein conferred upon you or
the holder of any Note is intended to be  exclusive of any other remedy and each
and every such  remedy  shall be  cumulative  and shall be in  addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.

               12.4  Remedies  Not  Waived.  No course of  dealing  between  the
Company  and you or the  holder of any  other  Note and no delay or  failure  in
exercising  any  rights  hereunder  or under any Note in respect  thereof  shall
operate  as a waiver of any of your  rights or the  rights of any holder of such
Note.

               Section 13.  Subordination.

               13.1  General.  The  Company,  for  itself  and its  Wholly-Owned
Subsidiaries  and their  respective  successors and assigns,  and each holder of
Subordinated  Debt,  by its  acceptance  thereof,  agree that the payment of the
Subordinated  Debt is and  shall be  junior  in right of  payment  to the  prior
payment in full in cash or cash equivalents of all Senior Debt to the extent and
in the manner  hereinafter  set forth in this  Section 13. Each holder of Senior
Debt shall have been deemed to have  acquired  such Senior Debt in reliance upon
the  subordination  provisions  set forth in this Section 13. The  provisions of
this  Section 13 are, and are  intended,  solely for the purpose of defining the
relative  rights of the holders of the  Subordinated  Debt, on the one hand, and
the holders of Senior Debt, on the other hand.

               13.2 Payment  Defaults.  During the continuance of any default in
the payment of any Senior Debt, whether at maturity, upon redemption or pursuant
to  acceleration  or  otherwise  (a  "Payment  Default"),  no direct or indirect
payment of any kind shall be made with  respect to  principal  of or interest or
premium (if any) on the  Subordinated  Debt until such Payment  Default has been
cured or waived.

               13.3 Non-Payment Defaults. During the continuance of any event of
default on or in respect of Senior  Debt  (other  than a Payment  Default)  that
entitles  the  holders of such  Senior Debt to  accelerate  the  maturity of the
obligations  outstanding  thereunder  (a  "Non-Payment  Default"),  no direct or
indirect  payment of any kind  shall be made with  respect  to  principal  of or
interest (other than interest  payable in the form of additional  Securities) or
premium (if any) on the Subordinated Debt, and no holders

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of Subordinated  Debt shall accept any such payment,  for a period  beginning on
the date on which written notice of such default (a "Blockage  Notice") is given
to the  Company  by the  holders  of  Senior  Debt of an  aggregate  of at least
$3,000,000  in principal  amount and ending on the earlier of (x) 179 days after
delivery  of such  Blockage  Notice,  or (y) the date on which such  Non-Payment
Default is cured or waived,  after which  period the Company  shall  immediately
make all  past-due  payments  and  shall  resume  all  other  required  payments
hereunder, including any payments omitted pursuant to this Section 13. No single
Non-Payment  Default  may serve as the basis for more than one  Blockage  Notice
(other  than a  Non-Payment  Default  that has  been  cured  for a period  of 90
consecutive  days); no Non-Payment  Default in existence on the date of delivery
of a Blockage Notice shall serve as the basis for any subsequent Blockage Notice
unless  such  Non-Payment  Default  shall  have  been  cured  for a period of 90
consecutive days; and during any 360-day period the holders of Senior Debt shall
not give more than one Blockage Notice.  The Company agrees to deliver copies of
all  Blockage  Notices to the  holders of  Subordinated  Debt  immediately  upon
receipt,  although  the  failure  of the  Company  to do so shall not affect the
rights of holders of Senior Debt under this Section 13.

               13.4 Notice of Defaults.  The Company  shall give prompt  written
notice to each holder of  Subordinated  Debt then  outstanding of any default or
event of default in respect of Senior Debt referred to in Section 13.2 or 13.3.

               13.5 Notice of Acceleration.  Until all Senior Debt has been paid
in full in cash or Cash  Equivalents,  no  holder  of  Subordinated  Debt  shall
accelerate  the  maturity  of any  Subordinated  Debt,  unless  such  holder  of
Subordinated  Debt shall give written  notice at least seven Business Days prior
thereto to the Senior Lenders of its intention to accelerate,  provided that any
payment to such holder of Subordinated Debt resulting from any such acceleration
shall be subject to the provisions of this Section 13.

               13.6  Bankruptcy,  etc.  Upon any  distribution  of assets of the
Company of any kind or  character  upon any  dissolution,  winding up,  total or
partial  liquidation or  reorganization  of the Company  (whether in bankruptcy,
insolvency or receivership  proceedings or upon an assignment for the benefit of
creditors or otherwise):

               (a) the  holders of all Senior  Debt shall  first be  entitled to
receive payment in full in cash or cash equivalents of all obligations  owing in
respect  thereof  before any payment is made on account of the  principal  of or
interest or premium (if any) on the Subordinated Debt; and

               (b) any payment or  distribution  of assets of the Company of any
kind or character, whether in cash, property or securities, to which the holders
of Subordinated Debt would be entitled except for the provisions of this Section
13 shall be paid by the liquidating trustee or agent or other Person making such
payment  or  distribution  directly  to the  holders  of  Senior  Debt or  their
representative  or  representatives  under the agreements  pursuant to which the
Senior Debt may have been  issued,  to the extent  necessary  to make payment in
full of all Senior Debt remaining unpaid after giving

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effect to any concurrent payment or distribution to the holders of  such  Senior
Debt.

               Notwithstanding the foregoing,  nothing herein shall be construed
as prohibiting  the holders of Subordinated  Debt from receiving  Reorganization
Securities in connection with any such dissolution,  winding up,  liquidation or
reorganization of the Company.

               13.7 Amounts in Trust.  If any payment or  distribution of assets
of  the  Company  of any  kind  or  character,  whether  in  cash,  property  or
securities,  shall be received by the holders of Subordinated Debt on account of
principal  of or  interest or premium  (if any) on the  Subordinated  Debt that,
because of the  provisions of this Section 13,  should not have been made,  then
such payment or distribution  shall be received and held in trust for, and shall
be paid over to, the holders of the Senior Debt  remaining  unpaid or unprovided
for or their representative or representatives  under the agreements pursuant to
which the Senior  Debt may have been  issued for  application  to the payment of
such Senior Debt until all such Senior Debt shall have been paid in full,  after
giving effect to any concurrent  payment or  distribution to the holders of such
Senior Debt.

               13.8  Subrogation.  Subject to the  holders of Senior Debt having
received  payment in full of all Senior Debt, the holders of  Subordinated  Debt
shall be  subrogated  to the  rights of the  holders  of Senior  Debt to receive
payments or distributions of assets of the Company made on the Senior Debt until
all amounts payable in respect of the  Subordinated  Debt shall be paid in full.
For purposes of such  subrogation,  no payment or distribution to the holders of
the  Senior  Debt  of  assets,   whether  in  cash,   property  or   securities,
distributable to the holders of Senior Debt under the provisions of this Section
13 to which the holders of the  Subordinated  Debt would be entitled  except for
the provisions of this Section 13, and no payment  pursuant to the provisions of
this Section 13 to the holders of Senior Debt by the holders of the Subordinated
Debt shall, as between the Company,  its creditors other than the holders of the
Senior Debt, and the holders of the Subordinated Debt, be deemed to be a payment
by the Company to or on account of such Senior Debt.

               13.9  Reinstatement.  If, at any time, all or part of any payment
with respect to Senior Debt  theretofore made by the Company or any other Person
is rescinded  for any reason  whatsoever  (including,  without  limitation,  the
insolvency,  bankruptcy or  reorganization of the Company or such other Person),
the subordination  provisions set forth herein shall continue to be effective or
be reinstated, as the case may be, all as though such payment had not been made.

               13.10 Proofs of Claim. So long as any Senior Debt is outstanding,
if any Event of Default under Section 12(f) or (g) occurs,  and if any holder of
Subordinated Debt fails to file any claim or proof of claim necessary to enforce
the obligations of the Company in respect of such Subordinated Debt at least ten
days  before  the time to file  such  claim or proof of claim has  expired,  any
holder of Senior Debt may (but shall have no obligation  to) file any such claim
or proof of claim, and each holder of a Note hereby acknowledges that any Senior
Lender may so file any such claims and proofs of claim.

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               13.11 Reliance on Orders.  Upon any distribution of assets of the
Company  referred to in this  Section 13, the holders of the  Subordinated  Debt
shall  be  entitled  to rely  upon  any  Order or  decree  made by any  court of
competent  jurisdiction  in which  such  bankruptcy,  insolvency,  receivership,
dissolution,  winding-up,  liquidation,  reorganization  or other  proceeding is
pending,  or a certificate of the  liquidating  trustee or agent or other Person
making any  distribution to such holders,  for the purpose of  ascertaining  the
Persons entitled to participate in such distribution,  the holders of the Senior
Debt,  the  amount  thereof or payable  thereon,  the amount or amounts  paid or
distributed thereon and all other facts pertinent thereto or to this Section 13.
Nothing in the foregoing sentence shall limit the right of the holders of Senior
Debt to receive payment in full of the Senior Debt.

               13.12 Rights of Senior  Debt.  Each holder of  Subordinated  Debt
agrees  and  consents  that  without  notice  to or  assent  by such  holder  of
Subordinated  Debt, and without affecting the liabilities and obligations of the
Company and the rights and  benefits of the holders of the Senior Debt set forth
in this Section 13:

               (a) the  obligations and liabilities of the Company and any other
party  or  parties  for or upon the  Senior  Debt  may,  from  time to time,  be
increased,   renewed,   refinanced,   extended,   modified,  amended,  restated,
compromised,  supplemented,  terminated,  waived  or  released  (but only to the
extent permitted by the terms of Section 11.1);

               (b)  the  holders  of  Senior  Debt,  and any  representative  or
representatives   acting  on  behalf  thereof,  may  exercise  or  refrain  from
exercising  any  right,  remedy or power  granted by or in  connection  with any
agreements relating to the Senior Debt; and

               (c) any  balance or  balances  of funds with any holder of Senior
Debt at any time  outstanding  to the credit of the  Company  may,  from time to
time, in whole or in part, be surrendered or released, all as the holders of any
Senior Debt, or any representative or representatives  acting on behalf thereof,
may deem advisable, and all without impairing, abridging, diminishing, releasing
or affecting the subordination of the obligations hereunder to Senior Debt.

               13.13 No Modification, etc. The provisions of this Section 13 are
for the benefit of the holders  from time to time of Senior Debt and, so long as
any Senior Debt remains outstanding,  may not be modified, rescinded or canceled
in whole or in part without the prior written  consent thereto of all holders of
Senior Debt.

               13.14 Further  Assurances.  Until all of the Senior Debt has been
fully paid,  each holder of Subordinated  Debt hereby  undertakes and agrees for
the benefit of the holders of Senior Debt that,  upon the  occurrence and during
the  continuance of any events set forth in Section 13.2 or 13.3, such holder of
Subordinated Debt shall take any actions  reasonably  requested by any holder of
Senior  Debt to  effectuate  the full  benefit  of the  subordination  contained
herein.

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               13.15 Waiver of Notice.  To the extent  permitted  by  applicable
law, the holders of Subordinated Debt and the Company hereby waive (i) notice of
acceptance  hereof by the holders of the Senior Debt and (ii) all  diligence  in
the collection or protection of or realization upon the Senior Debt.

               13.16  Specific  Performance.  The  Company  and the  holders  of
Subordinated  Debt  hereby  expressly  agree that the holders of Senior Debt may
enforce any and all rights derived  herein by suit,  either in equity or at law,
for specific  performance  of any agreement  contained in this Section 13 or for
judgment at law and any other relief  whatsoever  appropriate  to such action or
procedure.

               13.17 Events of Default. The failure to make a payment on account
of the principal of or interest or premium (if any) on the Subordinated  Debt by
reason of any  provision in this Section 13 shall not be construed as preventing
the occurrence of an Event of Default under Section 12.

               13.18  Obligations  Unconditional.   Nothing  contained  in  this
Section  13 or  elsewhere  in  this  Agreement  or in any  Subordinated  Debt is
intended to or shall impair, as between the Company and its creditors other than
the holders of Senior Debt, the obligations of the Company to the holders of the
Subordinated  Debt to pay any amount in respect of the Subordinated  Debt as and
when such  amount  shall  become due and  payable in  accordance  with the terms
hereof and  thereof,  or to affect  the  relative  rights of the  holders of the
Subordinated  Debt and creditors of the Company other than the holders of Senior
Debt, nor shall anything  herein  prevent any holder of  Subordinated  Debt from
exercising all remedies otherwise permitted by applicable law upon the happening
of an Event of Default under this  Agreement,  subject to Section 13.2,  13.3 or
13.5 and the rights, if any, under this Section 13 of the holders of Senior Debt
in respect of assets,  whether in cash,  property or securities,  of the Company
received upon the exercise of any such remedy.

               Nothing  contained  in  this  Section  13 or  elsewhere  in  this
Agreement or in the Subordinated  Debt shall,  except during the pendency of any
dissolution, winding-up, liquidation,  reorganization,  arrangement, adjustment,
composition,  recapitalization  or readjustment of the Company or its securities
or  debt  (whether  voluntary  or  involuntary  or  in  bankruptcy,  insolvency,
reorganization, liquidation, receivership proceedings, or upon an assignment for
the benefit of creditors,  or any other marshaling of the assets and liabilities
of the Company, or otherwise),  affect the obligation of the Company to make, or
prevent the Company from making,  at any time  (except  under the  circumstances
described  in Section  13.2 and  13.3),  payment of any amount in respect of the
Subordinated Debt.

               13.19 Absence of Notice. No holder of any Subordinated Debt shall
at any time be charged with  knowledge of the existence of any facts which would
prohibit  the making of any payment to it,  unless and until such  holder  shall
have received written notice thereof at the address set forth in Schedule I from
the  Company  or  from  one  or  more   holders  of  Senior  Debt  or  from  any
representative thereof; and prior to the receipt

                                      -51-



 
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<PAGE>



of any such  written  notice  each such  holder of  Subordinated  Debt  shall be
entitled to assume  conclusively  that no such facts  exist,  without,  however,
limiting  any rights of holders of Senior Debt under this  Section 13 to recover
from the holders of the  Subordinated  Debt any payment  made to any such holder
which it is not entitled under this Section 13 to retain.

               Each holder of any Subordinated Debt shall be entitled to rely on
the  delivery  to it of a written  notice by a Person  representing  himself  or
itself to be a holder of Senior  Debt to  establish  that such  notice  has been
given by a holder of Senior Debt. In the event that such holder of  Subordinated
Debt determines in good faith that further  evidence is required with respect to
the right of any Person as a holder of Senior Debt to participate in any payment
or distribution  pursuant to this Section 13, such holder of  Subordinated  Debt
may request  such Person to furnish  evidence  reasonably  satisfactory  to such
holder of Subordinated Debt as to the amount of Senior Debt held by such Person,
the extent to which such Person is entitled to  participate  in such  payment or
distribution,  and any other facts  pertinent to the rights of such Person under
this  Section  13,  and  if  such  evidence  is not  furnished  such  holder  of
Subordinated  Debt  may  defer  any  payment  to such  Person  pending  judicial
determination as to the right of such Person to receive such payment.

               13.20  Information.  The Company  will not publish or give to any
creditor or prospective  creditor of the Company any copy,  statement or summary
(or  acquiesce  in the  publication  or giving of any such  copy,  statement  or
summary)  as  to  the  subordination  of  the  rights  of  the  holders  of  the
Subordinated Debt without also stating or causing to be stated (in a conspicuous
manner in the case of any document)  that such  subordination  is solely for the
benefit  of the  holders  of Senior  Debt and not for the  benefit  of any other
creditor of the Company.

               13.21 Intercreditor  Subordination.  Notwithstanding  anything to
the contrary contained in this Section 13, for purposes of this Section 13:

               (a) As  between  the  holder of the Notes and the  holders of the
Bridge  Notes,  and  notwithstanding  anything  to the  contrary  in the  Bridge
Facility,  Debt of the Company owing under the Bridge  Facility shall be treated
as Senior  Debt,  and subject to paragraph  (c) below,  the  provisions  of this
Section 13 shall apply to the holders of the Notes and the holders of the Bridge
Notes mutatis mutandis with respect to each other.

               (b)  Debt  and  other  obligations  owing  under  any  Subsidiary
Guaranty shall be included within the definition of Subordinated Debt.

               (c) Any notice or other action which the Senior  Lenders have the
right to give or take pursuant to this Section 13 (including  but not limited to
giving a Blockage  Notice  pursuant to Section  13.3 and filing  proofs of claim
pursuant to Section  13.10)  shall be given or taken by the Senior  Lender under
the Barnett Facility in its sole discretion, and the holders of the Bridge Notes
shall have no right to give any such

                                      -52-



 
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<PAGE>



notice or take any such  action  unless  the  Senior  Lender  under the  Barnett
Facility has consented thereto in writing in its sole discretion,  provided that
the provisions of this Section 13 may not be modified,  rescinded or canceled in
whole or in part  without  the  prior  written  consent  of all  Senior  Lenders
(including the holders of the Bridge Notes).

               Section 14.  Registration,  Exchange and  Transfer of Notes.  The
Company  will  keep at its  principal  executive  office a  register,  in which,
subject to such reasonable  regulations as it may prescribe,  but at its expense
(other than transfer  taxes, if any), it will provide for the  registration  and
transfer of the Notes.

               Whenever any Notes shall be  surrendered  either at the principal
executive  office of the  Company or at the place of payment  named in the Note,
for  transfer or  exchange,  accompanied  (if so  required by the  Company) by a
written instrument of transfer in form satisfactory to the Company duly executed
by the holder thereof or by such holder's  attorney duly  authorized in writing,
the Company will  execute and deliver in exchange  therefor a new Note or Notes.
If  reasonably  requested by the Company,  in the case of a transfer to a Person
that is not a "qualified institutional buyer" (as defined in Rule 144A under the
Securities  Act), such holder shall furnish to the Company an opinion of counsel
in form and substance reasonably satisfactory to the Company, to the effect that
such transfer and exchange is in compliance  with the Federal  securities  laws.
Any Note issued in exchange for any other Note or upon  transfer  thereof  shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so  exchanged  or  transferred,  and neither  gain nor loss of interest
shall  result  from  any  such  transfer  or  exchange.   Any  transfer  tax  or
governmental  charge  relating to such  transaction  shall be paid by the holder
requesting the exchange.

               The Company and its agents may treat the Person in whose name any
Note is  registered  as the  owner of such  Note for the  purpose  of  receiving
payment on the principal of and prepayment  charge (if any) and interest on such
Note and for all other purposes whatsoever, whether or not such Note be overdue.

               Section 15. Lost, Stolen,  Damaged and Destroyed  Securities.  At
the  request of any holder of any Note or Warrant,  the  Company  will issue and
deliver at its expense,  in  replacement  of any Note or Warrant  lost,  stolen,
damaged or destroyed,  upon surrender thereof, if mutilated, a new Note or Notes
in the same unpaid  principal  amount and otherwise of the same tenor,  or a new
Warrant  containing  the  same  rights  with  respect  to  the  exercise  price,
conditions (if any) to exercise,  expiration date, anti-dilution provisions, and
number of shares and class of stock issuable thereunder,  as the Note or Warrant
reported by the holder thereof as lost, stolen,  damaged or destroyed,  upon the
receipt from such holder of an indemnity or security reasonably  satisfactory to
the  Company;  provided  that if such  holder  shall be you or your  nominee  or
another Eligible Holder or its nominee, your or such Eligible Holder's unsecured
agreement of indemnity shall be sufficient for purposes of this Section.

                                      -53-



 
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               Section 16.   Definitions.

               16.1  General  Terms.  For the  purposes of this  Agreement,  the
following terms shall have the following meanings:

               "Accountants" is defined in Section 8.

               "Acquisition" is defined in the first paragraph hereof.

               "Acquisition Agreement" is defined in the first paragraph hereof.

               "Acquisition  Closing  Date" means the date of the closing of the
transactions under the Acquisition Agreement.

               "Acquisition  Documents" means the Acquisition  Agreement and all
agreements, instruments and documents executed and delivered pursuant to each of
them, as the same may be amended,  modified or  supplemented  in accordance with
the terms hereof and thereof.

               "Adjusted EBIT" for any Reference Period,  means Consolidated Net
Income  before  dividends,  (a)  adjusted  by adding  thereto  (i)  Consolidated
Interest  Expense and (ii) income taxes,  all to the extent deducted in arriving
at the calculation of Consolidated Net Income for such Reference Period; and (b)
further adjusted by excluding  therefrom all extraordinary  gains and losses and
all other  extraordinary or  non-recurring  items (in each case as determined in
accordance with GAAP).

               "Adjusted  Net  Worth"  at any date of  determination,  means the
aggregate  Consolidated  stockholders' equity (including amounts attributable to
Preferred  Stock) shown on the balance sheet of the Company and its Consolidated
Subsidiaries  delivered  pursuant to Section 7 most recently prior to such date,
adjusted to exclude (to the extent  included in  calculating  such equity),  (a)
amounts  attributable to Disqualified Stock or treasury stock of the Company and
its Consolidated  Subsidiaries,  (b) all upward revaluations and other write-ups
in the book value of any asset of the Company or a Subsidiary  subsequent to the
Closing Date.

               "Affiliate"  means any Person directly or indirectly  controlling
or  controlled  by or under common  control with the Company or any  Subsidiary,
including (without  limitation) any Person  beneficially owning or holding 5% or
more of any class of voting  securities of the Company or any  Subsidiary or any
other  corporation  of which the Company or any  Subsidiary  owns or holds 5% or
more of any class of voting  securities,  provided  that,  for  purposes of this
definition,   "control"  (including,   with  correlative  meanings,   the  terms
"controlled  by" and "under common control  with"),  as used with respect to any
Person,  shall mean the  possession,  directly  or  indirectly,  of the power to
direct or cause the  direction  of the  management  and policies of such Person,
whether through the ownership of voting  securities or by contract or otherwise,
and  provided  further  that  neither  you  nor any  other  Person  which  is an
institutional investor shall

                                      -54-



 
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<PAGE>



be deemed to be an Affiliate of the Company or any of its Subsidiaries solely by
reason of  ownership  of the Notes or  Warrants  or other  securities  issued in
exchange  for the Notes or Warrants  or by reason of having the  benefits of any
agreements or covenants of the Company contained in this Agreement.

               "Agreement" means this Securities Purchase Agreement as it may be
amended, modified, supplemented or restated from time to time.

               "Alliance  Capital"  means  Alliance  Capital Management, L.P., a
Delaware limited partnership.

               "Applicable  Rate"  means 11 3/4%,  unless the  Bridge  Notes are
outstanding  after  January 15, 1998 in which event and from and after such date
the Applicable  Rate shall be 12 3/4% and shall remain at such rate at all times
after  January 15,  1998;  provided  that if the Company has not  Satisfied  the
Section 10.10 Condition, the Applicable Rate shall be (a) 14% from and after May
15, 1997 or (b) 15% from and after  January 15,  1998,  if any Bridge  Notes are
outstanding after such date, provided however that at such time that the Company
has Satisfied the Section 10.10 Condition the Applicable Rate will be reduced to
11 3/4% or 12 3/4%, as applicable.

               "Barnett Facility" has the meaning specified in the definition of
Senior Credit Agreements herein.

               "Board"  means  the  Board  of  Directors  of  the  Company  or a
committee of two or more directors  lawfully  exercising the relevant  powers of
the Board.

               "Bridge  Facility" has the meaning specified in the definition of
Senior Credit Agreements herein.

               "Bridge  Notes"  means  the  Senior   Subordinated  Notes  issued
pursuant to the Bridge Facility.

               "Business  Day"  means any day except a  Saturday,  a Sunday or a
legal holiday in the City of New York.

               "Capital  Lease"  as  applied  to any  Person,  any  lease of any
Property (whether real, personal or mixed) by such Person as lessee which would,
in accordance  with GAAP,  be required to be  classified  and accounted for as a
capital lease on a balance sheet of such Person,  other than, in the case of the
Company  or  a  Subsidiary,  any  such  lease  under  which  the  Company  or  a
Wholly-Owned Subsidiary is the lessor.

               "Capital  Lease  Obligation"  with respect to any Capital  Lease,
means the amount of the  obligation  of the lessee  thereunder  which would,  in
accordance  with GAAP,  appear on a balance  sheet of such  lessee in respect of
such Capital Lease.

               "Cash Equivalents" means

                                      -55-



 
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               (i)      marketable direct  obligations issued or unconditionally
                        guaranteed  by the United States of America or issued by
                        any  agency  thereof  and  backed by the full  faith and
                        credit of the  United  States of  America,  in each case
                        maturing  within  one year from the date of  acquisition
                        thereof,

               (ii)     marketable direct obligations issued by any state of the
                        United States of America or any political subdivision of
                        any such  state or any  public  instrumentality  thereof
                        maturing  within  one year from the date of  acquisition
                        thereof and having as at any date of  determination  the
                        highest rating  obtainable from either Standard & Poor's
                        Corporation or Moody's Investors Service, Inc.,

               (iii)    commercial paper maturing no more than 270 days from the
                        date of  creation  thereof  and having as at any date of
                        determination  the highest rating obtainable from either
                        Standard  &  Poor's  Corporation  or  Moody's  Investors
                        Service, Inc.,

               (iv)     certificates  of deposit  maturing  within one year from
                        the date of  acquisition  thereof  issued by  commercial
                        banks  incorporated  under the laws of the United States
                        of  America  or any state  thereof  or the  District  of
                        Columbia,  each  having as at any date of  determination
                        combined   capital   and   surplus   of  not  less  than
                        $300,000,000  ("Permitted  Banks")  or a foreign  branch
                        thereof,

               (v)      bankers'   acceptances  eligible  for  rediscount  under
                        requirements  of The Board of  Governors  of the Federal
                        Reserve System and accepted by Permitted Banks,

               (vi)     obligations of the type described in clauses (i) through
                        (iv) above purchased from a securities dealer designated
                        as a "primary dealer" by the Federal Reserve Bank of New
                        York or a Permitted Bank as  counterparty  pursuant to a
                        repurchase  agreement  obligating  such  counterparty to
                        repurchase such obligations not later than 14 days after
                        the  purchase   thereof  and  which  provides  that  the
                        obligations  which are the subject  thereof are held for
                        the  benefit of the Company  and its  Subsidiaries  by a
                        custodian which is a Permitted Bank and which is not the
                        counterparty  to the  repurchase  agreement in question,
                        and

               (vii)    the  securities  of any  investment  company  registered
                        under  the  Investment  Company  Act of 1940  which is a
                        "money market fund" within the meaning of regulations of
                        the Securities and Exchange  Commission,  or an interest
                        in a pooled fund  maintained by a Permitted  Bank having
                        comparable investment restrictions.

                                      -56-



 
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               "Certificate of Incorporation" is defined in Section l(b).

               "certified"  means,  when  used  with  respect  to any  financial
information of any Person to be certified by any of its respective  financial or
accounting officers, that such information is to be accompanied by a certificate
to the effect that such  financial  information  has been prepared in accordance
with GAAP, subject in the case of interim financial  information to non-material
recurring year-end audit adjustments (which, if anticipated,  shall be footnoted
and be taken into account for all purposes of this Agreement) and the absence of
notes thereto,  and presents fairly the information  contained therein as at the
dates and for the periods covered thereby.

               "Change of Control" means (a) the sale,  lease or transfer of all
or  substantially  all of the Company's  assets to any Person or "group" (within
the  meaning  of  Section  13(d) of the  Exchange  Act,  hereinafter  a "Group")
together with any Affiliates  thereof,  (b) the liquidation of the Company,  (c)
the acquisition after the date hereof by any Person or Group,  together with any
Affiliates thereof, of a majority of the Voting Stock of the Company, or (d) the
success by any Person or Group, together with any Affiliates thereof, in causing
its or their nominees to be elected to the Board such that such  nominees,  when
added to any  director  remaining  on the Board who is an  Affiliate  or Related
Person of such  Person or Group,  shall  constitute  a majority  of the Board of
Directors.

               "Closing" means the closing of the  transactions  contemplated to
occur on the Closing Date.

               "Closing  Costs" means all fees,  costs and expenses  incurred by
the  Company  and  its  Subsidiaries  in  connection  with  the  closing  of the
transactions contemplated hereunder,  including, without limitation, legal fees,
accounting fees, financing fees and broker's fees.

               "Closing Date" is defined in Section 2.3.

               "Code" means the Internal Revenue Code of 1986, as amended.

               "Collateral   Agency   Agreement"  means  the  Collateral  Agency
Agreement,  dated as of the date  hereof,  among  Barnett  Bank N.A.  (as Senior
Lender and as Collateral Agent), Purchaser and the Company.

               "Common Shares" is defined in Section 1(b).

               "Common Stock" is defined in Section 1(b).

               "Company"  is  defined  in the first  paragraph  hereof and shall
include any  successor  in interest to the Company by merger,  consolidation  or
otherwise.

               "Company Plan" is defined in Section 5.20.

                                      -57-



 
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               "Company SEC Reports" is defined in Section 5.9(b).

               "Company Taxpayers" is defined in Section 5.16.

               "Consolidated"  means,  when used with reference to any financial
term in this  Agreement,  the aggregate for the Company and its  Subsidiaries of
the  amounts  signified  by such  term  determined  on a  consolidated  basis in
accordance with GAAP.

               "Consolidated  Interest  and  Dividend  Coverage  Ratio"  for any
Reference Period, means the ratio of (a) Adjusted EBIT for such Reference Period
to (b) the sum of (i) Consolidated  Interest Expense for such Reference  Period,
plus (ii) capitalized  interest for such Reference  Period,  plus (iii) all cash
dividends accrued or paid on capital stock, including Disqualified Stock, of the
Company during such Reference Period.

               "Consolidated  Interest  Expense" for any Reference  Period means
(a) the  Interest  Expense  of the  Company  and its  Subsidiaries  during  such
Reference Period,  less (b) the Interest Expense of any Non-US Subsidiary during
such Reference Period.

               "Consolidated Net Income" for any Reference Period, means (a) the
net income (or  deficit)  of the Company  and its  Subsidiaries  for such period
(taken  as  a  cumulative  whole),   after  deducting  all  operating  expenses,
provisions  for all taxes and  reserves  and all other  proper  deductions,  all
determined in accordance with GAAP on a consolidated  basis, less (k) the sum of
(i) the net income (or deficit) of any Wholly-Owned  Subsidiary which is subject
to a  restriction  of the  type  referred  to in  Section  11.10  and of any Non
Wholly-Owned  Subsidiary  and (ii) the net  income  (or  deficit)  of any Non-US
Subsidiary.

               "Consolidated  Tangible  Net  Worth"  means  Adjusted  Net Worth,
adjusted  by  deducting  therefrom  the net book  amount  of all  assets,  after
deducting any reserves applicable thereto,  which would be treated as intangible
under GAAP.

               "Controlled  Group" shall mean all members of a controlled  group
of corporations and all trades or businesses (whether or not incorporated) under
common  control  which,  together  with the  Company,  are  treated  as a single
employer under Section 414 of the Code.

               "Credit  Documents"  means the Senior Credit  Agreements  and all
agreements,  instruments and documents  executed and delivered pursuant thereto,
as the  same may from  time to time be  amended,  modified  or  supplemented  in
accordance with the terms hereof and thereof.

               "Debt" as applied to any Person (without duplication) means:

               (a) any  indebtedness  for  borrowed  money which such Person has
        directly or indirectly created, incurred or assumed; and

                                      -58-



 
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               (b) any  indebtedness  secured by any Lien in respect of Property
        owned by such  Person,  whether or not such Person has assumed or become
        liable for the payment of such indebtedness; and

               (c) any indebtedness with respect to which such Person has become
        directly or indirectly  liable and which represents or has been incurred
        to finance the purchase price (or a portion  thereof) of any property or
        services  or  business  acquired by such  Person,  whether by  purchase,
        consolidation, merger or otherwise; and

               (d)  any  indebtedness  of any  other  Person  of  the  character
        referred  to in  subdivision  (a),  (b) or (c) of this  definition  with
        respect to which the Person  whose Debt is being  determined  has become
        liable by way of a Guaranty.

               "Debt for Borrowed  Money" as to any Person means Debt in respect
of borrowed money, any Capital Lease or the deferred purchase price of Property.

               "Default" means any event or condition which,  with due notice or
lapse of time or both, would become an Event of Default.

               "Disqualified  Stock" means (a) any capital  stock of the Company
or any Subsidiary  that, by its terms,  matures,  or is mandatorily  redeemable,
pursuant to a sinking fund  obligation  or  otherwise,  or is  redeemable at the
option of the holder or holders thereof,  in whole or in part on or prior to the
date of final maturity of the Notes,  (b) any Preferred Stock of any Subsidiary,
(c) any capital stock  issuable or issued  pursuant to the Rights Plan,  and (d)
any capital stock of the Company or any Subsidiary  which is convertible into or
exchangeable for any stock described in clauses (a), (b) and (c) above.

               "EBITDA"  shall mean for any period the sum of (i) Adjusted EBIT,
(ii) depreciation  expenses for such period and (iii) amortization  expenses for
such period.

               "Eligible Holder" is defined in Section 8.

               "Environmental   Laws"  means  the  Comprehensive   Environmental
Response,  Compensation,  and  Liability  Act,  the  Resource  Conservation  and
Recovery Act, the Emergency  Planning and Community Right to Know Act, the Clean
Water  Act,  the Safe  Drinking  Water  Act,  the Clean Air Act,  any  so-called
"Superfund"  or "Superlien"  law, or any other federal,  state or local statute,
law, ordinance,  code, rule,  regulation,  Order, decree or other requirement of
any Governmental Body regulating, relating to or imposing liability or standards
of conduct concerning, health, safety and any Hazardous Material.

               "EPA Matters" is defined in Section 5.22.

                                      -59-



 
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               "ERISA"  means the  Employee  Retirement  Income  Security Act of
1974, as amended.

               "ERISA  Affiliate" means any corporation or other Person which is
or was a member of the same  controlled  group  (within  the  meaning of Section
414(b) of the Code) of  corporations  or other Persons as the Company,  or is or
was under common control (within the meaning of Section 414(c) of the Code) with
the Company.

               "Event of Default" is defined in Section 12.1.

               "Excess Sale  Proceeds"  means Net Cash  Proceeds  which have not
been reinvested or applied pursuant to Section 11.7(b)(vi)(A) or (B).

               "Exchange  Act" meats the  Securities  Exchange  Act of 1934,  as
amended.

               "Facility" means any real property owned,  operated, or leased by
the Company or any Subsidiary of the Company, either as of the date hereof or at
any time previously or thereafter.

               "Fair  Market  Value"  with  respect to any sale of assets of the
Company or any of its  Subsidiaries  pursuant  to Section  11.7,  means the fair
market  value  of the  assets  to be  sold  (a) in the  case of any  asset  sale
involving  consideration  of  $5,000,000 or less, as determined in good faith by
the Board and evidenced by a resolution filed with the minutes of the meeting of
the Board and (b) in the case of any asset sale involving  consideration of more
than  $5,000,000,  as determined by an investment  banking or accounting firm of
national standing selected by the Company.

               "Federal Bankruptcy Code" means the United States Bankruptcy Code
of 1978, as amended.

               "Financial Statements" means any financial statements required to
be given to the Eligible Holders under this Agreement.

               "Fiscal Year" means the accounting  period of each of the Company
and its Subsidiaries ending on December 31 of each year.

               "GAAP" means generally accepted accounting  principles the United
States of America in effect  from time to time,  applied on a  consistent  basis
both as to classification of items and amounts.

               "Governmental Body" means any federal, state, county, city, town,
village, municipal or other governmental department,  commission, board, bureau,
agency, authority, instrumentality or court, domestic or foreign.

               "Guaranty" as applied to any Person, means any direct or indirect
liability,  contingent  or  otherwise,  of  such  Person  with  respect  to  any
indebtedness, lease,

                                      -60-



 
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dividend or other obligation of another, including, without limitation, any such
obligation  directly or  indirectly  guaranteed,  endorsed  (otherwise  than for
collection or deposit in the ordinary  course of business) or discounted or sold
with  recourse by such  Person,  or in respect of which such Person is otherwise
directly  or  indirectly  liable,  including,   without  limitation,   any  such
obligation in effect guaranteed by such Person through any agreement (contingent
or otherwise) to purchase,  repurchase or otherwise  acquire such  obligation or
any security therefor,  or to provide funds for the payment or discharge of such
obligation  (whether in the form of loans,  advances,  stock purchases,  capital
contributions or otherwise), or to maintain the solvency or any balance sheet or
other financial condition of the obligor of such obligation,  or to make payment
for any products,  materials or supplies or for any  transportation  or services
regardless of the non-delivery or  non-furnishing  thereof,  in any such case if
the  purpose  or intent of such  agreement  is to  provide  assurance  that such
obligation will be paid or discharged,  or that any agreements  relating thereto
will be complied with, or that the holders of such  obligation will be protected
against loss in respect  thereof.  The amount of any Guaranty  shall be equal to
the outstanding principal amount of the obligation guaranteed.  For the purposes
of Section  11.3,  the amount  involved  in any  Guaranty  which  constitutes  a
Restricted  Investment  made during any period shall be the aggregate  amount of
the obligation guaranteed,  less any amount by which the guarantor may have been
discharged with respect  thereto  (including any discharge by way of a reduction
in the amount of the obligation  guaranteed),  provided that the guarantor shall
not be deemed to have been discharged with respect to any Guaranty to the extent
the guarantor  shall have been required to perform such Guaranty  (except to the
extent  that  any  loss  on  such  Guaranty  has  been  recognized  in  reducing
Consolidated Net Income).

               "Hazardous   Materials"   means   any   chemicals,    pollutants,
contaminants,  wastes,  hazardous or toxic  substances,  radioactive  materials,
asbestos, genetically modified organisms, petroleum or hydrocarbon and petroleum
or hydrocarbon products.

               "Indemnified Liabilities" is defined in Section 17.10(a).

               "Indemnitee" is defined in Section 17.10(a).

               "Intellectual  Property" means all of the following,  whether now
owned or hereafter arising or acquired: licenses, franchises,  permits, patents,
patent  rights,  copyrights,  works which are the subject  matter of copyrights,
trademarks,  tradenames,  tradestyles,  patent and  trademark  applications  and
licenses and rights thereunder,  including,  without limitation,  those patents,
trademarks and copyrights set forth on Schedule 5.20, and all other rights under
any  of  the  foregoing,   all  extensions,   renewals,   reissues,   divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to sue for past,  present,  and  future  infringement  of any of the  foregoing;
inventions, trade secrets, formulae,  processes,  compounds,  drawings, designs,
blueprints,  surveys,  reports,  manuals,  and  operating  standards;  goodwill,
customer and other lists, in whatever form maintained;  and trade secret rights,
copyright rights, rights in works of authorship, and contract rights relating to
computer software programs, in whatever

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form created or maintained.

               "Interest  Coverage  Ratio" means the ratio of (i) EBITDA to (ii)
Interest Expense.

               "Interest Expense" as applied to any Person with reference to any
period,  means  interest  expense  of such  Person  for such  period,  including
amortization of debt discount and expense and imputed  interest on Capital Lease
Obligations  properly chargeable to income during such period in accordance with
GAAP.

               "Inventories"  means  goods  held for sale or lease or  furnished
under contract of service or raw  materials,  work in progress or materials used
or consumed in the operation of the Company's business.

               "Investments"  means any advances or loans to, or investments (by
way of transfers of property,  contribution to capital,  acquisitions of stocks,
securities  or evidences of  indebtedness  or  otherwise)  in, or  guarantees on
behalf of any Person.

               "Lien"  as to any  Person,  means  any  mortgage,  lien,  pledge,
adverse claim,  charge,  security interest or other encumbrance in or on, or any
interest or title of any vendor,  lessor, lender or other secured party to or of
such Person under any  conditional  sale or other title  retention  agreement or
Capital  Lease with  respect  to, any  property  or asset  owned or held by such
Person,  or the  signing or filing of a  financing  statement  which  names such
Person as debtor, or the signing of any security agreement authorizing any other
party as the secured party thereunder to file any financing statement.

               "Make-Whole  Premium"  with respect to any Note,  means a premium
equal  to the  excess,  if  any,  of the  Discounted  Value  of the  outstanding
principal  amount  of such  Note at the time of  determination  over the  Called
Principal of such Note.  The  Make-Whole  Premium shall in no event be less than
zero.  As used in this  definition,  the  following  terms  have  the  following
meanings:

        "Called Principal" with respect to any Note, means the principal of such
        Note that is to be prepaid, subject to a Make-Whole Premium, pursuant to
        Section  4.2 or 4.3 or is  declared  to be  immediately  due and payable
        pursuant to Section 12, as the context requires.

        "Discounted  Value" with  respect to the Called  Principal  of any Note,
        means  the  amount  obtained  by  discounting  all  Remaining  Scheduled
        Payments  with respect to such Called  Principal  from their  respective
        scheduled due dates to the  Settlement  Date with respect to such Called
        Principal,  in  accordance  with  accepted  financial  practice and at a
        discount   factor   (applied  on  a  semiannual   basis)  equal  to  the
        Reinvestment Yield with respect to such Called Principal.

        "Reinvestment  Yield" with respect to the Called  Principal of any Note,
        means the

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        sum of (a) 1.0% plus (b) the yield to maturity  determined  by reference
        to the Treasury Constant Maturity Series yields reported, for the latest
        day for which such yields  shall have been  reported as of the  Business
        Day next  preceding  the  Settlement  Date with  respect to such  Called
        Principal,  in Federal  Reserve  Statistical  Release H.15 (519) (or, if
        such Statistical Release is not published, any publicly available source
        of similar  market  data  acceptable  to the holders of more than 50% in
        principal amount of the Notes being prepaid or accelerated) for actively
        traded U.S. Treasury  securities having a constant maturity equal to the
        Remaining  Average Life of such Called  Principal as of such  Settlement
        Date.  Such implied  yield shall be  determined,  if  necessary,  (x) by
        converting U.S.  Treasury bill quotations to  bond-equivalent  yields in
        accordance   with  accepted   financial   practice  and  (y)  by  linear
        interpolation between reported yields.

        "Remaining  Average  Life" with  respect to the Called  Principal of any
        Note, means the number of years  (calculated to the nearest  one-twelfth
        year) obtained by dividing (a) such Called Principal into (b) the sum of
        the  products  obtained  by  multiplying  (i) each  Remaining  Scheduled
        Payment of such Called  Principal (but not of interest  thereon) by (ii)
        the number of years  (calculated to the nearest  one-twelfth year) which
        will elapse  between  the  Settlement  Date with  respect to such Called
        Principal  and  the  scheduled  due  date of  such  Remaining  Scheduled
        Payment.

        "Remaining  Scheduled  Payments" with respect to the Called Principal of
        any Note,  means all  payments of such  Called  Principal  and  interest
        thereon that would be due on or after the  Settlement  Date with respect
        to such Called  Principal  if no payment of such Called  Principal  were
        made prior to its scheduled due date.

        "Settlement  Date" with  respect to the  Called  Principal  of any Note,
        means the date on which such Called  Principal is to be prepaid pursuant
        to Section 4.2 or 4.3 or is declared to be  immediately  due and payable
        pursuant to Section 12, as the context requires.

               "Material  Adverse  Effect" means any change(s) or effect(s) that
individually or in the aggregate is or may (so far as can be reasonably foreseen
at the time) be  materially  adverse to (i) the  assets,  business,  operations,
income,  prospects or condition  (financial or otherwise) of the Company and its
Subsidiaries,  taken as a whole, or, if so expressly provided in this Agreement,
the Company or any of its Subsidiaries, or the transactions contemplated by this
Agreement  or the  Related  Documents,  or (ii) the  ability  of the  Company to
perform its obligations under this Agreement,  the Related Documents to which it
is a party  and any of the  Securities,  as the case  may be,  and of any of its
Subsidiaries  to perform its  obligations  under the Related  Documents to which
such Subsidiary is a party.

               "Net Cash  Proceeds"  means,  for any Asset Sale, any other sale,
lease,  transfer or other  disposition of any asset, or for any sale or issuance
of any security,

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by any Person,  the  aggregate  amount of cash  received by such Person for such
asset or security  after  deducting  therefrom  (a) the amount of such  proceeds
required  to be  applied  at such  time to  repay  Senior  Debt,  (b)  brokerage
commissions,  legal fees,  finder's fees and other similar fees and commissions,
(c) the amount of taxes  currently  payable in connection with or as a result of
such  transaction,  and (d) other  out-of-pocket  costs  incurred in  connection
therewith,  in the case of each of clauses  (a),  (b),  (c) and (d) above to the
extent, but only to the extent, that the amounts so deducted are, at the time of
receipt of such cash,  paid to a Person that is not an  Affiliate of such Person
(or, if paid to such an  Affiliate,  to the extent the terms of such payment are
no more favorable to such Affiliate than such terms would be in an  arm's-length
transaction)  and are properly  attributable to such transaction or to the asset
or security that is the subject thereof.

               "Net  Income"  means,  for any  period,  net  income  (or  loss),
excluding extraordinary, unusual and non-recurring items, of the Company and its
Subsidiaries  for  such  period,   determined  in  accordance  with  GAAP  on  a
consolidated basis.

               "Non-US  Subsidiary"  means any  Subsidiary not  incorporated  or
organized under the laws of one of the states of the United States.

               "Non Wholly-Owned Subsidiary" means any Subsidiary of the Company
which is not a Wholly-Owned Subsidiary.

               "Notes" is defined in the first paragraph hereof.

               "Obligations" means all Debt,  obligations and liabilities of the
Company to the Purchaser  incurred under or arising out of or in connection with
this Agreement and the Notes, whether for principal,  interest,  premium,  fees,
expenses or otherwise.

               "Officer's Certificate" means with respect to any corporation,  a
certificate signed by the Chairman of the Board, the President,  one of the Vice
Presidents or the chief financial officer of the specified corporation.

               "Order" includes any order, writ, injunction,  decree,  judgment,
award,   determination  or  written  direction  of  any  court,   arbitrator  or
Governmental Body.

               "PBGC"  means the Pension  Benefit  Guaranty  Corporation  or any
governmental authority succeeding to any of its functions.

               "Permitted Liens" is defined in Section 11.2.

               "Pension Plan" means an employee pension benefit plan, as defined
in Section 3(2) of ERISA, maintained by the Company or any of its Subsidiaries.

               "Person" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any

                                      -64-



 
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<PAGE>



department or agency thereof.

               "Plan" and "Plans" means any employee  benefit plan as defined in
Section 3 of ERISA established or maintained for the benefit of employees of the
Company or any of its Subsidiaries.

               "Potential  Event of Default" means any condition or event which,
with notice or lapse of time or both, would become an Event of Default.

               "Preferred Stock" as applied to any corporation,  means shares of
such  corporation  which shall be entitled to  preference  or priority  over any
other shares of such  corporation  in respect of either the payment of dividends
or the distribution of assets upon liquidation or both.

               "Private Placement Memorandum" means the Private Placement
Memorandum prepared by Alex. Brown & Sons Incorporated for use in connection
with the Company's private placement of the Notes and Warrants.

               "Property"  means any  interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.

               "Public  Offering" means an underwritten  primary public offering
of Common Stock of the Company pursuant to an effective  registration  statement
under the  Securities Act such that,  after giving effect to such offering,  the
Company shall have  received net proceeds from such public  offering of at least
$8,000,000.

               "Purchaser" is defined in the second paragraph hereof.

               "Reference  Period"  as of any date of  determination,  means the
four  consecutive  full fiscal quarters (or such lesser period during which such
Person has been in existence) ended most recently prior to such date.

               "Related Documents" means the Warrants,  the Subsidiary Guaranty,
the Collateral Agency Agreement,  the Acquisition Documents, and the Senior Debt
Instruments,  and all other documents and  instruments  executed or delivered in
connection therewith or pursuant thereto.

               "Related  Person"  means any trade or  business,  whether  or not
incorporated,  which,  together with the Company,  is under common  control,  as
described in Section 414(b) or (c) of the Code.

               "Reorganization  Securities" means, as to any Person,  securities
of such  Person as  reorganized  or  readjusted  or  securities  of such  Person
provided for by a plan of reorganization,  arrangement, adjustment, composition,
recapitalization  or  readjustment,  or  other  securities  (including,  without
limitation,   equity  securities),   in  each  case  the  payment  of  which  is
subordinate, at least to the extent provided in

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Section 13 with respect to the  Subordinated  Debt, to the payment of all Senior
Debt at the time  outstanding  and to the  payment of all  securities  issued in
exchange therefor to holders of such Senior Debt at the time outstanding.

               "Reportable  Event"  means any of the events set forth in Section
4043(b) of ERISA or the  regulations  thereunder  (with the  exception  of those
events for which the 30-day notice is waived by regulations).

               "Required  Holders"  means,  at any time, the holders of at least
51% of the aggregate principal amount of the Subordinated Debt then outstanding.

               "Restricted  Payment" means (a) any declaration or payment of any
dividend or other distribution,  direct or indirect, on account of any shares of
any class of stock of the Company or any of its Subsidiaries  (other than to the
Company or to other  Subsidiaries),  now or  hereafter  outstanding,  other than
pursuant to the Rights Plan; (b) any redemption,  retirement,  purchase or other
acquisition,  direct  or  indirect,  of any  shares of any class of stock of the
Company now or hereafter outstanding,  or of any warrants,  rights or options to
acquire  any such  shares,  (other  than (x) stock held by the  Company or other
Subsidiaries,  (y) stock  issued  upon  exercise  of the  Company's  outstanding
publicly  traded  warrants in accordance  with the terms of such warrants or (z)
stock  issued  pursuant  to the Rights  Plan);  and (c) any  payment,  direct or
indirect,  of or on account of any  principal of or premium on any  Subordinated
Debt now or hereafter  outstanding or any  redemption,  retirement,  purchase or
other acquisition,  direct or indirect, of any Subordinated Debt (except for any
sinking  fund,  other  required  prepayment  or mandatory  installment  or final
payment  at  maturity  pursuant  to the  provisions  thereof  and except for any
payment consisting solely of shares of stock, which is not Disqualified Stock or
of other Subordinated Debt).

               "Rights Plan" means the Rights  Agreement,  approved by the Board
of Directors of the Company,  on January 13, 1997, and to be entered into by the
Company and Continental Stock Transfer and Trust Company, in the form heretofore
delivered to the Purchaser.

               "Satisfied the Section 10.10 Condition" has the meaning set forth
in Section 10.10.

               "Securities" is defined in the second paragraph hereof.

               "Securities Act" means the Securities Act of 1933, as amended.

               "SEC" means the United States Securities and Exchange Commission,
and any governmental body or agency succeeding to the functions thereof.

               "Senior Credit  Agreements"  shall mean (i) the Revolving Credit,
Term Loan and  Security  Agreement,  dated as of December  23,  1996,  among the
Company and Barnett Bank, N.A., a national banking  association,  as lender (the
"Barnett Facility"),

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(ii) Second Amended and Restated Credit  Agreement,  dated as of April 29, 1996,
as amended by First  Amendment to Second Amended and Restated  Credit  Agreement
and  Security  Agreements,  dated as of  November  21,  1996,  April  29,  1996,
September 7, 1995 and November 27, 1990, between International Aircraft Support,
L.P. and Union Bank of California,  (iii) the Note Purchase Agreement,  dated as
of January 9, 1997,  as amended on the date  hereof,  between  the  Company  and
Bedford Falls Investors,  L.P. and the other purchasers  identified therein (the
"Bridge  Facility")  and (iv) any Refunding  Debt  incurred  pursuant to Section
11.(c),  in each case as the same may be amended from time to time in accordance
with the terms hereof and thereof.

               "Senior  Debt"  means  all  Debt  of  the  Company   incurred  in
connection  with Section 11.1 hereof,  other than trade debt, that is not by its
terms pari passu with or subordinated to the Notes, including in respect thereof
obligations for payments of principal, premium if any, or mandatory prepayments,
interest (including post-petition interest), fees, expenses and indemnification.

               "Senior  Debt  Instruments"  means the Credit  Documents  and all
agreements,   instruments  and  documents  creating,  evidencing,   securing  or
guaranteeing  Debt  referred to in of the  definition  of Senior  Debt,  as such
agreements, instruments and documents may from time to time be amended, modified
or supplemented in accordance with the terms hereof and thereof.

               "Senior Lenders" means the lenders named in the Senior Credit
Agreements.

               "Solvent" means,  when used with respect to any Person,  that (a)
the fair  salable  value of all its  assets  exceeds  the  amount  that  will be
required  to pay the  probable  liability  on its  debts  (including  contingent
liabilities);  (b) it does not have unreasonably  small capital to carry out its
business as now conducted and as proposed to be conducted, including its capital
needs;  (c) it will not have  incurred  liabilities,  and does not  intend to or
believe  that  it  will  incur  liabilities,  beyond  its  ability  to pay  such
liabilities  as they become due; and (d) it is not  "insolvent"  as such term is
defined in Section 101(31) of the Federal Bankruptcy Code.

               "Subordinated  Debt"  means  all Debt now or  hereafter  existing
under the Notes or this  Agreement  (whether  created  directly  or  acquired by
assignment or otherwise), including the obligations of the Company under Section
17 or any other Section of this  Agreement,  and any  indemnities  payable under
this Agreement.

               "Subsidiary" means any corporation,  association,  partnership or
other  business  entity at least 50% (by number of votes) of the Voting Stock of
which is at the time owned (i) by the Company,  (ii) by one or more Subsidiaries
or (iii) by the Company and one or more Subsidiaries.

               "Subsidiary Guaranty" means each Guaranty Agreement,  the form of
which is  attached  hereto as Exhibit F, to be executed by any current or future
Wholly-Owned

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<PAGE>



Subsidiary of the Company other than Non-US Subsidiaries.

               "Taxes" is defined in Section 5.16.

               "Termination  Event"  shall  mean  (i) a  Reportable  Event  with
respect to any Plan or  Multiemployer  Plan;  (ii) the  withdrawal of either the
Company or any member of the Controlled Group from a Plan or Multiemployer  Plan
during a plan year in which such entity was a "substantial  employer" as defined
in  Section  4001(a)(2)  of ERISA;  (iii) the  providing  of notice of intent to
terminate  a Plan in a distress  termination  described  in  Section  4041(c) of
ERISA;  (iv) the  institution  by the PBGC of proceedings to terminate a Plan or
Multiemployer  Plan;  (v) any  event or  condition  (a) which  might  constitute
grounds under Section 4042 of ERISA for the  termination  of, or the appointment
of a trustee to  administer,  any Plan or  Multiemployer  Plan,  or (b) that may
result in  termination  of a  Multiemployer  Plan  pursuant to Section  4041A of
ERISA; or (vi) the partial or complete  withdrawal within the meaning of Section
4203 and 4205 of ERISA,  of either the  Company or any member of the  Controlled
Group from a Multiemployer Plan.

               "Unit Common Share  Equivalents"  shall mean those Unit  Purchase
Options issued to GKN Securities Corp. and Brean Murray,  Foster Securities Inc.
in connection with the initial public offering of the Company  pursuant to which
a holder may  purchase one share of Common Stock of the Company and two warrants
of the Company.

               "Voting  Stock" means capital stock or other equity  interests of
any class or classes of a  corporation  or other entity the holders of which are
ordinarily,  in the absence of contingencies,  entitled to vote for the election
of directors (or Persons performing similar functions).

               "Warrant  Shares"  shall  have  the  meanings  set  forth  in the
Warrants.

               "Warrants" is defined on the first page hereof.

               "Weighted Average Life to Maturity" as applied to any Debt at any
date,  means the number of years  obtained by dividing (a) the then  outstanding
principal  amount of such Debt into (b) the total of the  products  obtained  by
multiplying  (i) the amount of each then  remaining  installment,  sinking fund,
serial maturity or other regularly scheduled required payment, including payment
at final maturity,  in respect thereof,  by (ii) the number of years (calculated
to the nearest  one-twelfth) which will elapse between such date and the date on
which such payment is to be made; as applied to any Preferred Stock at any date,
the number of years obtained by dividing (x) the then liquidation  value of such
Preferred  Stock into (y) the total of the products  obtained by multiplying (A)
the amount of each then  remaining  installment,  sinking fund or other required
redemption,  including redemption at final maturity,  in respect thereof, by (B)
the number of years  (calculated to the nearest  one-twelfth)  which will elapse
between such date and the making of such redemption.

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               "Wholly-Owned"  as applied to any Subsidiary,  means a Subsidiary
all the outstanding shares (other than directors' qualifying shares, if required
by law) of every class of stock of which are at the time owned by the Company or
by one or  more  Wholly-Owned  Subsidiaries  or by the  Company  and one or more
Wholly-Owned Subsidiaries.

               16.2 Accounting Terms.  Except as otherwise  provided herein, all
accounting  tests or  standards  used in this  Agreement  shall be computed on a
consolidated basis for the Company and each of its Subsidiaries.  Any accounting
terms not specifically  defined herein shall have the meanings customarily given
them in  accordance  with  GAAP.  In the event  that  changes  in GAAP  shall be
mandated  by the  Financial  Accounting  Standards  Board  and/or  the  American
Institute of Certified  Public  Accountants  or any similar  accounting  body of
comparable  standing,   or  shall  be  recommended  by  the  Company's  and  its
Subsidiaries'  certified  public  accountants,  then  to the  extent  that  such
adjustments or changes would modify such accounting terms or the  interpretation
or computation  thereof as contemplated  hereby at the time of their  execution,
then in such event such  adjustments  or changes  shall be  followed in defining
such accounting  terms only after the Company and you shall have agreed to amend
this Agreement to reflect their original intent in light of such  adjustments or
changes.

               Section 17.   Miscellaneous.

               17.1     Home Office Payment; Endorsements of the Notes.

               (a) Notwithstanding anything to the contrary in this Agreement or
in the  Securities,  the  Company  agrees  that,  so long as you or any  nominee
designated  by you  shall  hold any  Securities,  the  Company  shall  cause all
payments of  principal,  interest  and  premium  (if any) on the Notes,  and all
payments of dividends and other amounts  payable to you in respect of the Common
Stock issued to you upon exercise of Warrants or the Common  Shares,  to be made
to you in the manner and to the address  specified  in Schedule I hereto,  or in
such other manner or to such other address as you may designate in writing.  You
agree that prior to the sale,  transfer or disposition of any Note you will make
a notation  thereon of the portion of the  principal  amount paid or prepaid and
the date to which  interest  has been  paid  thereon  or  surrender  the same in
exchange  for  a new  Note  or  Notes  of  the  same  tenor  and  of  authorized
denominations  in principal  amount equal to the unpaid  principal amount of the
Note or Notes so  surrendered,  duly executed by the Company.  The Company shall
enter into an agreement similar to that contained in this Section with any other
Eligible Holder (or nominee thereof).

               (b) You are  authorized  to  endorse  the date and amount of each
payment or prepayment  under the Notes on the Schedule  annexed to and forming a
part of the Notes,  which  endorsements shall constitute prima facie evidence of
the accuracy of the information so recorded.

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               17.2     Amendment and Waiver.

               (a) Any term, covenant,  agreement or condition of this Agreement
may, with the consent of the Company, be amended, or compliance therewith may be
waived (either generally or in a particular instance and either retroactively or
prospectively),  by one or more  substantially  concurrent  written  instruments
signed by the holder or holders of at least a majority  of the unpaid  principal
amount of the Notes at the time outstanding except that:

               (i) no such  amendment or waiver shall reduce the  principal  of,
premium (if any) on, or the rate of  interest  on, or extend the time of payment
of interest or any  Make-Whole  Premium on, any of the Notes,  modify any of the
provisions  of this  Agreement  or of the  Notes  with  respect  to the terms of
subordination  provided  for by Section 13, or the  provisions  of Section  4.4,
reduce the percentage of Notes required with respect to any such amendment or to
effectuate any such waiver, or modify any provision of this Section, without the
consent  of the  holders of 66.7% in  principal  amount of the Notes at the time
outstanding; and

               (ii) no  waiver  shall  extend to or affect  any  obligation  not
expressly waived or impair any right consequent thereon.

               (b) Any  amendment  or waiver  pursuant to  subsection  (a) above
shall apply  equally to all the holders of the  Securities at the time and shall
be binding upon them, upon each future holder of any of the Securities, and upon
the  Company,  in each case  whether or not a notation  thereof  shall have been
placed on any of the Securities.

               17.3   Expenses.   The  Company   agrees,   whether  or  not  the
transactions hereby contemplated are consummated,  to pay, and save you harmless
against  liability  for the payment of, all  reasonable  out-of-pocket  expenses
arising in connection with the preparation,  negotiation, execution and delivery
of this Agreement, the instruments and documents executed pursuant thereto or in
connection   therewith,   and  the  consummation  of  the  transactions   hereby
contemplated,  and all such expenses incurred with respect to the administration
of and  enforcement of any provision of this Agreement or any such instrument or
document  (other  than  time  charges,  if  any,  of  Purchaser's  employees  in
connection  with  routine  administration)  and the  consideration  of any legal
questions relevant thereto (including, without limitation,  consideration of any
waiver or  amendment  of the terms of this  Agreement  or the  Securities),  all
reasonable  expenses,  incurred  in  connection  with the  reproduction  of such
agreements,  instruments  and  documents  and all stamp and other  similar taxes
(together in each case with interest and penalties, if any) which may be payable
in respect of the execution  and delivery of such  agreements,  instruments  and
documents,  or the issuance,  delivery or  acquisition by you of any Security or
otherwise pursuant to this Agreement,  and the reasonable fees and disbursements
in  connection  with any of the  foregoing  of Friedman & Kaplan LLP, and of any
other special or local counsel, and the reasonable fees and disbursements of the
Accountants.  The  obligations  of the  Company  under this  Section  17.3 shall
survive the payment or transfer of any Security, the enforcement of

                                      -70-



 
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any  provision  hereof or thereof,  any such  amendments or waivers and any such
consideration of legal questions.

               17.4   Survival   of   Representations   and   Warranties.    All
representations  and  warranties  contained  herein or made in  writing by or on
behalf of any party to this Agreement or otherwise in connection  herewith shall
(i) survive the execution and delivery of this Agreement and the delivery of the
Securities to you and the consummation of the transactions  contemplated hereby,
as long as any Security is  outstanding,  and (ii) be deemed to have been relied
upon by you, regardless of any investigation made by you or on your behalf.

               17.5 Successors and Assigns. All covenants and agreements in this
Agreement  contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the parties hereto and their  respective  successors and
permitted  assigns  whether so  expressed  or not,  except that you shall not be
obligated to purchase any Note,  Common  Shares or Warrant from any Person other
than the Company.  The  provisions of this  Agreement are intended to be for the
benefit of all permitted holders, from time to time, of any Securities purchased
pursuant hereto, and shall be enforceable by any such holder,  whether or not an
express  assignment to such holder of rights under this  Agreement has been made
by you or your  successor or assign;  provided that the benefit of Section 8 and
Section  17.10 (as to  satisfactory  indemnity)  shall be  limited  as  provided
therein.

               17.6 Rights  Confined to Parties and Holders.  Except as provided
in Section 13 and Section 17.5,  nothing  expressed or implied in this Agreement
is intended or shall be construed to confer upon or to give to any Person, other
than the parties hereto and their respective  permitted  successors and assigns,
any right,  remedy or claim under or by reason of this Agreement or of any term,
covenant or condition hereof.

               17.7 Notices. All communications  provided for hereunder shall be
in writing and  delivered  personally  or by  overnight  delivery (by courier or
nationally  recognized  overnight  delivery  service)  or  sent by  first  class
registered or certified mail, postage prepaid and return receipt  requested,  or
sent by facsimile  (with such telecopy to be confirmed  promptly in writing sent
personally,  by overnight  delivery or by first class mail), sent (i) if to you,
to the address or facsimile number set forth by you for such  communications  on
Schedule I hereto,  or to such other address or facsimile number as you may have
designated to the Company in writing;  (ii) if to any other holder of any Notes,
to the address or  facsimile  number (if any) of such holder as set forth in the
register  maintained pursuant to Section 14; (iii) if to any other holder of any
shares of Common Stock, to the last address of such holder shown in the official
stock  transfer  register  maintained  by the  Company;  (iv) if to the Company,
Kellstrom  Industries,  Inc.,  14000 N.W. 4th Street,  Sunrise,  Florida  33325,
Attention:  Zivi R. Nedivi,  telephone  number (954) 845-0427,  facsimile number
(954) 854-0428.  All such  communications  shall be deemed to have been given or
made when so delivered by hand or sent by  facsimile,  or one Business Day after
being sent by overnight delivery or five Business Days after being so mailed.

                                      -71-



 
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               17.8  Governing Law. This  Agreement,  the Notes and the Warrants
shall be construed in accordance with and shall be governed by the internal laws
of the State of New York, without regard to the choice of law principles of such
State.

               17.9     Submission to Jurisdiction; WAIVER OF JURY TRIAL.

               (a)      The Company hereby irrevocably and unconditionally:

                             (i)    submits  for itself and its  Property in any
                                    legal action or proceeding  relating to this
                                    Agreement and any Related  Document to which
                                    it  is  a  party,  or  for  recognition  and
                                    enforcement  of any  judgment  in respect of
                                    any thereof,  to the  non-exclusive  general
                                    jurisdiction  of the  courts of the State of
                                    New York, the courts of the United States of
                                    America  for the  Southern  District  of New
                                    York, and appellate courts of any thereof;

                             (ii)   consents  that any such action or proceeding
                                    may be  brought in such  courts,  and waives
                                    any  objection  that it may now or hereafter
                                    have to the  venue  of any  such  action  or
                                    proceeding  was  brought in an  inconvenient
                                    court and  agrees  not to plead or claim the
                                    same;

                             (iii)  agrees  that  service of process in any such
                                    action  or  proceeding  may be  effected  by
                                    mailing  a copy  thereof  by  registered  or
                                    certified mail (or any substantially similar
                                    form  and  mail),  postage  prepaid,  to the
                                    Company at its  address set forth in Section
                                    17.7 or at such  other  address of which the
                                    Purchaser shall have been notified  pursuant
                                    thereto; and

                             (iv)   agrees that nothing  herein shall affect the
                                    right to effect  service  of  process in any
                                    other manner permitted by law or shall limit
                                    the right to sue in any other jurisdiction.

               (b)  THE  COMPANY  AND  THE  PURCHASER  HEREBY   IRREVOCABLY  AND
UNCONDITIONALLY  WAIVE TRIAL BY .JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED
TO IN PARAGRAPH (a) ABOVE.

               17.10  Indemnification.  In  consideration  of the  execution and
delivery of this Agreement by you, the Company  agrees to indemnify,  defend and
hold you and your Affiliates (including,  without limitation,  Alliance Capital)
and  each of your  and  their  shareholders,  officers,  directors,  controlling
persons, advisors, employees and

                                      -72-



 
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agents (herein called the "Indemnitees")  free and harmless from and against any
and all actions,  causes of action, suits, losses,  liabilities and damages, and
expenses in connection therewith,  including,  without limitation,  counsel fees
and disbursements (herein called the "Indemnified Liabilities"),  incurred by or
asserted or awarded against any  Indemnitees,  in each case arising out of or in
connection  with or by reason of, or in connection  with the  preparation  for a
defense of, any investigation,  litigation or proceeding arising out of, related
to or in connection with

               (a) (i) the  Acquisition,  any of the  transactions  contemplated
hereby  or any use  made or  proposed  to be made by the  Company  or any of its
Subsidiaries of all or any portion of the proceeds of the sale of the Securities
hereunder by the Company or any of its  Subsidiaries  or Affiliates,  whether or
not an  Indemnitee  is a party  thereto  and  whether  or not  the  transactions
contemplated hereby are consummated or (ii) the execution, delivery, performance
or enforcement of this  Agreement or any instrument  contemplated  hereby by any
Indemnitee, and

               (b)  notwithstanding  the generality of the foregoing  subsection
(a), any liability or alleged liability which arises under any Environmental Law
or by reason of any  governmental  response costs pursuant to any  Environmental
Law;  provided that to the extent that the Company is strictly  liable under any
Environmental Law, the obligation of the Company to an Indemnitee shall likewise
be without regard to fault on the part of the Company or any of its Subsidiaries
with  respect to any  action or  omission  which  results  in  liability  to any
Indemnitee,  and if and to the  extent  that the  foregoing  undertaking  may be
unenforceable  for any  reason,  the Company  hereby  agrees to make the maximum
contribution  to the  payment  and  satisfaction  of  each  of  the  Indemnified
Liabilities  which is permissible under applicable law, in either case except to
the extent such claim,  damage,  loss, liability or expense is found in a final,
nonappealable  judgment by a court of competent  jurisdiction  to have  resulted
from such Indemnitee's gross negligence or wilful misconduct.

               The provisions of, and the obligations  under, this Section 17.10
shall  survive the  execution  and  delivery of this  Agreement,  the  delivery,
payment or transfer of any Security,  the enforcement of any provision hereof or
thereof,  the consummation of the transactions to occur on the Closing Date, any
investigation  made by or on behalf of any  holder of  Subordinated  Debt or any
Person  controlling  any such  holder  or by or on behalf  of the  Company,  its
officers or  directors  or any other Person  controlling  the  Company,  and any
amendments or waivers and any such  consideration of legal questions as provided
in Section 17.3.

               17.11  Integration.  This Agreement embodies the entire agreement
and  understanding  between  you  and  the  Company  and  supersedes  all  prior
agreements and understandings relating to the subject matter hereof.

               17.12 Counterparts. This Agreement may be executed in two or more
counterparts,  each of which shall be deemed an original  but all of which shall
together constitute one and the same instrument.

                                      -73-



 
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               17.13.  Headings. The section and paragraph headings contained in
this  Agreement are for reference  purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

                                      * * *


                                      -74-



 
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               If you are in agreement with the foregoing,  please sign the form
of acceptance in the space provided  below  whereupon this letter shall become a
binding agreement between you and the undersigned.

                                                   Very truly yours,

                                                   KELLSTROM INDUSTRIES, INC.

                                                   By  _________________________
                                                       Name:
                                                       Title:

Accepted as of January 15, 1997

THE EQUITABLE LIFE ASSURANCE SOCIETY
  OF THE UNITED STATES

By  _________________________________
    Name:
    Title:

                                      -75-



 
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<PAGE>



                                   SCHEDULE I

                              SCHEDULE OF PURCHASER

<TABLE>
<CAPTION>

                                                                 Principal Amount
              Name of Address                                    of Notes; Number
               of Purchaser                                        of Warrants
               ------------                                        -----------
<S>                                                          <C> 
THE EQUITABLE LIFE INSURANCE                                 Principal Amount of Note:
SOCIETY OF THE UNITED STATES

(1)   All   payments  by  wire  transfer of                  $15,000,000
immediately  available funds (other than in
respect of transaction fees) to:                             Number of Warrants: 305,660
</TABLE>

        The Chase Manhattan Bank, N.A.
        110 West 52nd Street
        New York, New York  10019
        ABA No. 021-000021

        A/C The Equitable Life Assurance
         Society of the United States
         Account No. 037-2-409417

Each such wire  transfer  shall set forth the name of the  Company,  the private
placement number,  the due date of the payment being made and if such payment is
a final payment.

Payments  by  wire  transfer  of  immediately  available  funds  in  respect  of
transaction fees to:

        Citibank, N.A.
        399 Park Avenue
        New York, New York  10021
        ABA No. 021000089

        A/C Alliance Capital
          Management, L.P.
        Account No. 3026-3303


                                      -76-



 
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(2)     All notices of payment and written
confirmation of such wire transfers to:

        The Equitable Life Assurance
          Society of the United States
        c/o Alliance Capital Management,
          L.P.
        135 West 50th Street
        6th Floor
        New York, New York  10020
        Attention:  Cash Operations

(3)     All other communications to be sent to:

        The Equitable Life Assurance
          Society of the United States
        c/o Alliance Capital Management,
          L.P.
        1345 Avenue of the Americas
        41st Floor
        New York, New York  10105

(4)     Securities to be delivered to:

        The Equitable Life Assurance
          Society of the United States
        787 Seventh Avenue
        TW/41
        New York, New York  10019

(5)     TIN 13-5570651

                                      -77-




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