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EXHIBIT 3
EXECUTION COPY
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LOAN AGREEMENT
between
HAWKER PACIFIC AEROSPACE
As the Company
and
LUFTHANSA TECHNIK AG
As Lender
DATED SEPTEMBER 20, 2000
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TABLE OF CONTENTS
1. DEFINITIONS.............................................................................................1
2. LOAN, AVAILABILITY, PAYMENTS AND LOAN DOCUMENTS.........................................................1
3. WARRANT.................................................................................................6
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................................6
5. COVENANTS..............................................................................................11
6. CONDITIONS PRECEDENT...................................................................................21
7. EVENTS OF DEFAULT......................................................................................23
8. SUBORDINATION..........................................................................................24
9. ARBITRATION............................................................................................24
10. NOTICES................................................................................................25
11. INDEMNIFICATION........................................................................................26
12. MISCELLANEOUS..........................................................................................27
ANNEX I - DEFINITIONS
EXHIBITS:
EXHIBIT A - FORM OF PROMISSORY NOTE
EXHIBIT B - WARRANT
SCHEDULES:
SCHEDULE 4.2 CAPITALIZATION
SCHEDULE 4.3 SUBSIDIARIES
SCHEDULE 4.4 CONCERTS
SCHEDULE 4.5 LITIGATION
SCHEDULE 4.6 LIABILITIES
SCHEDULE 4.8 CERTAIN CHANGE
SCHEDULE 4.13 EMPLOYMENT AGREEMENTS
SCHEDULE 4.15 ENVIRONMENTAL
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LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made this 20th day of
September, 2000 by and between Lufthansa Technik AG, a company organized under
the laws of Germany ("Lender") and Hawker Pacific Aerospace, a California
corporation (the "Company").
WHEREAS, the Company desires to borrow an amount equal to NINE MILLION
THREE HUNDRED THOUSAND U.S. DOLLARS (U.S.$9,300,000) for a term of three (3)
years and the Lender desires to lend to the Company the such amount on the terms
and conditions set forth herein;
WHEREAS, the Lender requires the Company enter into this Agreement and
issue the Warrant (as defined below) as an inducement for the Lender to
consummate the transaction contemplated in the Purchase Agreement (as defined
below); and
WHEREAS, the Lender and Company among others have entered into as of
the date hereof that certain shareholders rights and voting agreement pursuant
to which the Company and other parties set forth therein have agreed to afford
Lender certain rights as a shareholder of the Company (the "Shareholders Rights
and Voting Agreement");
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein, the Company and the Lender agree as follows:
1. DEFINITIONS
For purposes of this Agreement, and except as otherwise expressly
provided herein or unless the context otherwise requires, capitalized terms
shall have the meaning ascribed to them in Annex I or this Agreement.
2. LOAN, AVAILABILITY, PAYMENTS AND LOAN DOCUMENTS
2.1. Upon the terms and conditions in this Agreement, the Lender
acknowledges and agrees to lend to the Company a principal
amount of NINE MILLION THREE HUNDRED THOUSAND U.S. DOLLARS
(U.S. $9,300,000) (the "Loan"). This Agreement shall be
effective as of the date hereof (the "Effective Date").
2.2. The Lender and the Company shall certify on the date hereof
the Lender has paid to the Company the principal in the sum of
NINE MILLION THREE HUNDRED THOUSAND U.S. DOLLARS
(U.S.$9,300,000) to an account designated by the Company.
2.3. The Loan shall have the terms and conditions and shall bear
the interest at the rates for the corresponding periods set
forth below:
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2.3.1 On or before June 30 and December 31 in each calendar
year during the term of the Loan, the Company shall
pay an amount of interest accruing to such date at
the rate provided herein on the outstanding principal
balance under the Loan. The first interest payment
shall be due on September 19, 2001. The annual
interest rate shall be equal to the higher of (a) 10%
per annum or (b) 5% per annum plus USD LIBOR as
published on the Effective Date which shall be
applicable for the first six months and USD LIBOR as
published each six month anniversary thereafter for
each subsequent six month period, to the extent
permitted by Applicable Law; provided, however, the
interest rate shall in no event exceed 11%.
2.3.2. The principal amount of the Loan shall be paid as
follows: (a) on the first anniversary of Effective
Date, the Company shall make a payment to Lender in
the amount of $2,325,000 which represents 25% of the
principal; (b) on the second anniversary of the
Effective Date, the Company shall make a payment to
Lender in the amount of $2,325,000 which represents
25% of the principal.
2.3.3. On the third anniversary of the Effective Date, the
Loan shall mature and $4,650,000 (which represents
the remaining 50% of the principal) together with any
accrued but unpaid interest hereunder, shall be due
and payable in full by the Company.
2.4. Subject to Section 2.10 and Section 2.14 with respect to
exercise of the Warrants, all payments shall be made to the
Lender in immediately available funds to Lender's account no.
00000000 with CITIBANK, New York, swift code: citi us 33/ABA
000000000 or to such other account notified to the Company not
later than 7 days prior to the respective obligation falling
due. Subject to Section 2.3.1, interest shall be calculated on
a basis of the actual number of days elapsed and a 360 day
year.
2.5. All amounts payable by the Company under this Agreement shall
be paid in full without set-off or counterclaim or right of
retention or other restrictions and free and clear of and save
to the extent required by law, without any deduction or
withholding for or on account of any taxes or charges or
otherwise.
2.6. If payments are not made on their due date, additional 1% per
annum (one percent per annum), calculated from the due date to
the actual date of payment, shall be due and payable to the
Lender, to the extent permitted by Applicable Law.
2.7. The Loan shall be evidenced by a duly executed promissory note
of the Company (the "Note") substantially in the form attached
hereto as Exhibit A and delivered to the Lender as of the date
hereof. At the Closing of that certain stock purchase
agreement dated September 20, 2000 by and between Lender and
the shareholders listed therein (the "Purchase Agreement"),
the Company shall deliver to the Lender (a) the Note and (b)
any other documents reasonably requested by Lender and
necessary to effectuate the Loan as described herein.
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2.8 The Company shall have the right at any time to prepay the
Loan, in whole or in part, without penalty or premium. Any
such prepayment shall be applied first to the accrued interest
and then to the principal.
2.9. USE OF PROCEEDS. The proceeds of the loan shall be used for
the following purposes:
2.9.1. to retire and pay in full all indebtedness, including
principal and accrued but unpaid interest, for
borrowed money owing by the Company to Unique
Investment Corp.("Unique") equal to TWO MILLION EIGHT
HUNDRED AND NINE THOUSAND AND ONE HUNDRED AND FORTY
FIVE DOLLARS ($2,809,145) and all fees and expenses
owing to Unique Investment Corp. equal to TWO HUNDRED
AND EIGHTY THREE THOUSAND THREE HUNDRED AND THIRTY
THREE DOLLARS ($283,333) pursuant to certain Amended
and Restated Subordinated Promissory Note dated
December 22, 1998 ("the UIC Agreement") by and
between the Company and Unique.
2.9.2. only after the payments have been made under Sections
2.9.1 and upon the prior written approval of Lender,
to pay the senior managers of the Company identified
below the "change of control" payments, as agreed to
in writing between the Lender and the Company from
time to time, in an amount not to exceed TWO HUNDRED
AND FIFTY THOUSAND FOUR HUNDRED AND NINETY SIX
DOLLARS ($250,496) (the "Change of Control Payment")
as set forth below:
2.9.2.1. The following senior managers shall be paid
out of the proceeds from the Loan their
respective share of the Change of Control
Payment as follows: (i) Xxxxxxx Xxxxx shall
receive $72,959 in accordance with the
payment deferment agreement between Xxxxxxx
Xxxxx, the Lender and the Company and (ii)
Xxxxx Xxxx shall receive $177,537 in
accordance with the employment agreement, as
amended, between Xxxxx Xxxx and the Company.
2.9.2.2. The Company and Lender acknowledge that the
following senior managers are entitled to
the following amounts for change of control
payments pursuant to their respective
employment agreements; provided, however
that such payments shall be payable in
accordance with the respective Payment
Deferment Agreement and in no event payable
on the Effective Date (i) Xxxx Xxxxxx shall
receive $344,877; (ii) Xxxxxx Xxxxx shall
receive $368,178; (iii) Xxxxxxx Xxxxx shall
receive $72,959 and (iv) Xxxxxx Xxxxxxx
shall receive $202,537; provided however,
the Company shall not use the proceeds of
the Loan as the sole source of funds for
these change of control payments; provided,
further, the Company shall use funds other
than the proceeds from the Loan before using
the proceeds from the Loan for such
payments.
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2.9.2.3. Unless otherwise agreed between the Company,
the Lender and the respective senior
manager, for any other amounts owed to such
senior manager in connection with the change
of control provision in their respective
employment agreement which are not paid on
the Effective Date, the payment schedule
shall be as set forth in the respective
payment deferment agreement; provided
however, such payments shall not exceed in
the aggregate the amount of the Change of
Control Payment.
2.9.2.4. The Company represents and warrants to
Lender that no other change of control
payments or similar payments are owed to any
other employee of the Company.
2.9.3. to pay in part the indebtedness owed by the Company
to Xxxxxx Financial, Inc. under that certain Loan and
Security Agreement dated December 22, 1998 by and
among Hawker Pacific Aerospace, Hawker Pacific
Aerospace Limited, and NMB-Xxxxxx Limited (the
"Xxxxxx Revolving Loan"), such payment to be in
amount up to approximately FIVE MILLION NINE HUNDRED
AND FIFTY SEVEN THOUSAND AND TWENTY SIX DOLLARS
($5,957,026) and to be made available for working
capital needs; provided, however, Lender acknowledges
that any sums paid in accordance with Section 12.10
may be paid out of such working capital.
2.10. The Lender acknowledges and agrees that the Loan shall be
considered paid in full by the Company upon the earlier of:
(i) the repayment to the Lender in full in immediately available funds
in U.S. Dollars by the Company of the principal and accrued and unpaid interest
of the Loan or
(ii) the repayment to the Lender in the form of: X + Y
where X= the number of Warrant Shares exercised by the Lender
multiplied by the Exercise Price and which shall constitute partial payment and
partial cancellation of the Loan; provided, however, the Lender may elect in its
sole discretion, at the time of the exercise of the Warrant, whether the payment
is towards (A) principal only or (B) principal plus any accrued and unpaid
interest.
where Y = on the date of the issuance of the Warrant Shares, the
payment to Lender in immediately available funds in U.S. Dollars by the Company
of an amount equal to [the sum of the total balance of the principal plus any
accrued and unpaid interest as of the exercise date of the Warrant] minus [X]
("Remaining Balance");
provided, however, at Lender's sole discretion, the Remaining Balance shall
continue to be paid in accordance with the payment terms set forth in Section
2.3 above rather than paid in full upon the exercise of the Warrant; provided,
further that the amount represented by X shall be allocated first to the payment
of the outstanding principal amount as of the date of exercise of the Warrant.
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2.11. Upon the issuance of the Warrant Shares, in whole or in part
pursuant to the exercise of the Warrant by Lender, as partial
payment for the Loan, in accordance with either 2.10 or 2.14,
if the Company does not pay the Remaining Balance on the date
the Warrant Shares are so issued, the Company shall issue an
amended promissory note in the form of Exhibit A hereto for an
amount equal to the Remaining Balance and such amended
promissory note may be presented by Lender as payment for any
remaining Warrant Shares in accordance with the terms of the
Warrant.
2.12. Taxes.
2.12.1. All payments to be made by the Company to the Lender
under this Agreement shall be made free and clear of,
and without any deduction or withholding for or on
account of, any taxes, charges or other deductions.
If the Company is required to make such payment
subject to any deduction or withholding, the sum
payable by the Company in respect of which such
deduction or withholding is required to be made shall
be increased to the extent necessary to ensure that,
after the making of the required deduction or
withholding, the Lender receives and retains (free
from any liability in respect of any such deduction
or withholding) a net sum equal to the sum which it
would have received and so retained had no such
deduction or withholding been made or required to be
made.
2.12.2. Without prejudice to the provisions in Section
2.12.1, if the Lender is required to make any payment
on account of tax (not being tax imposed on the net
income of its principal office by the jurisdiction in
which it is organized or in which its principal
office is located) or otherwise on or in relation to
any sum received or receivable under this Agreement
by the Lender (including without limitation, any sum
received or receivable under this clause) or any
liability in respect of any such payment is asserted,
imposed, levied or assessed against the Lender, the
Company shall, upon demand of the Lender, promptly
indemnify the Lender against such payment or
liability, together with any interest, penalties and
expenses payable or incurred in connection therewith.
2.12.3. Upon the reasonable request of the Company, the
Lender agrees to complete U.S. Internal Revenue
Service forms (including Form W-8) identified to it
and provided by the Company that are relevant to
reducing or eliminating any withholding of tax on
payments made under this Agreement. The failure of
Lender to complete such forms for any reason shall
not alter any obligations of the Company under this
Agreement.
2.13. In the event that Lender finds a Person to refinance the
Xxxxxx Refinancing and such refinancing provides sufficient
funds to cover the principal and accrued but unpaid interest
of this Loan, Lender may in its sole discretion request the
Company repay Lender in full or in part amounts owed Lender
under this Loan out of the proceeds of such refinancing.
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2.14. At Lender's election, the interest payments due in accordance
with Section 2.3.1 shall be paid either (A) in immediately
available funds in accordance with Section 2.4 or (B) upon the
exercise of the number of Warrant Shares exercised by the
Lender multiplied by the Exercise Price which shall equal the
amount of interest accrued but unpaid as of exercise date.
Lender shall notify Company of its election under this Section
2.14 no later than three (3) Business Days prior to the date
on which interest payments are due.
3. WARRANT
3.1. As a condition to Lender's obligation herein the Company shall
issue a Warrant as of the date hereof for two million five
hundred thousand (2,500,000) shares of Common Stock of the
Company at FOUR U.S. DOLLARS AND TWENTY-FIVE CENTS (U.S.$4.25)
per share exercisable anytime between the date of the
shareholders' approval of such issuance and the first
anniversary of the Effective Date (the "Warrant") attached
hereto as Exhibit B.
3.2. At Lender's election, presentment of the Note shall be deemed
payment in full of the Exercise Price for any shares acquired
by Lender pursuant to the Warrant, whether the Lender
exercises the Warrant in whole or in part. Upon presentment of
the Note at the time of the exercise of the Warrant if the
Company does not immediately pay the Remaining Balance as set
forth in Section 2.10, or at Lender's request if Lender
exercises the Warrant under Section 2.14, the Company shall
issue an amended promissory note in accordance with Section
2.11 hereof in the amount of the Remaining Balance. Such
amended promissory note may be presented by Lender at any
subsequent date as payment in full of the Exercise Price for
any shares thereafter exercised by Lender in accordance with
the Warrant.
3.3. The shares represented by the Warrant, upon Lender's exercise
of the Warrant, in whole or in part, shall benefit in full
from rights set forth in the Shareholders Rights and Voting
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Lender that:
4.1. Organization. The Company (i) is a corporation duly organized,
validly existing and in good standing under the Applicable
Laws of the State of California; (ii) has all requisite
corporate power and authority to own, lease and operate its
property and to conduct its business as it is now being
conducted and currently proposes to be conducted; (iii) is in
compliance with all Applicable Laws applicable to it or its
business, including but not limited to Tax Laws, for which
non-compliance could reasonably be expected to have a Material
Adverse Effect on it or its business, and (iv) has obtained
and maintained all material Licenses and Permits required to
conduct its business as it is currently being conducted and
presently proposes to be conducted. The Company is duly
qualified, licensed or admitted to do business
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and is in good standing in all jurisdictions in which the
ownership, use or leasing of its assets and properties, or the
conduct or nature of its business, makes such qualification,
licensing or admission necessary. The Company is not in
violation of (i) its Organizational Documents (ii) any
Contracts, except where breach of such Contract would not have
a Material Adverse Affect on it or its business, or (iii) any
Applicable Laws or Orders. The failure to elect a staggered
board prior to the date hereof does not have a Material
Adverse Effect on the Company or its business and does not
adversely effect the validity of any actions taken by the
Board of Directors of the Company on or before the date
hereof.
4.2. Capitalization. The Company has issued and outstanding (i) as
of September 18, 2000, 6,083,431 shares of Common Stock
representing 96.2% of the total issued and outstanding capital
stock of the Company on a fully diluted basis in accordance
with GAAP and (ii) 300 shares of preferred stock.. Except as
set forth on Schedule 4.2, there are no voting trusts, voting
agreements, rights (contingent or otherwise, including
preemptive rights), options, warrants, subscriptions, calls,
convertible securities, restrictions of any kind, nature or
description, or other agreements, commitments or
understandings, written or oral, pursuant to which the Company
is or may become obligated to issue, transfer, sell, register,
redeem, repurchase or otherwise acquire any shares of the
capital stock of any Person or any securities or rights
convertible into or exchangeable or exercisable for any such
shares. Schedule 4.2 attached hereto sets forth a complete
list of all outstanding shareholders, option holders and other
security holders of the Company (A) with 5% or more ownership
interest or (B) who are senior management or directors of the
Company. The outstanding Common Stock of the Company is duly
and validly issued, and such Common Stock, and all outstanding
options and other securities of the Company, have been issued
in full compliance with the registration and prospectus
delivery requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the registration and
qualification requirements of all applicable state securities
laws, or in compliance with applicable exemptions therefrom,
and all other provisions of applicable federal and state
securities laws, including, without limitation, anti-fraud
provisions.
4.3. Subsidiaries. Except as set forth on Schedule 4.3, the Company
does not have any subsidiaries and does not presently own, of
record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock,
or any other equity or similar interest, in any Person; nor is
the Company, directly or indirectly, a participant in any
joint venture, partnership or other noncorporate entity.
4.4. No Conflict or Violation. The execution, delivery and
performance of this Agreement and the Other Transaction
Documents, the consummation of the transactions contemplated
hereby, the compliance with any of the provisions hereof, and
the conduct of their businesses as conducted and as proposed
to be conducted will not: (i) conflict with, or result in a
breach or violation of the Organizational Documents of the
Company; (ii) except as set forth on Schedule 4.4 , (A)
conflict with, or result in a violation or breach of, or
constitute (with or
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without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, vesting,
payment, exercise, acceleration, suspension, revocation or
modification) under, any of the terms, conditions or
provisions of any note, credit agreement, bond, mortgage, deed
of trust, security instrument, indenture, lease, License,
Contract, plan or other instrument or obligation to which the
Company is a party or by which the Company or any of its
properties or assets may be bound or affected ("Third Party
Obligation"), (B) result in the creation or imposition of any
Lien on any of the assets or properties of the Company or (C)
require any filing or notification to any third party or
Governmental Entity or consent or approval under any Third
Party Obligation or from any Governmental Entity; or (iii)
violate any Order or Applicable Law applicable to the Company
or any of its properties or assets.
4.5. Litigation. Except as set forth on Schedule 4.5, there is no
Order or arbitral award in effect or any claim, Action or
Proceeding (whether at law or equity, before or by any
Government Entity or before any arbitrator) pending or, to the
Knowledge of the Company, threatened against or affecting the
Company or any of its respective activities or assets or
properties. To the Company's Knowledge, there is no factual or
legal basis for any Action or Proceeding that has, will or is
reasonably likely to result in a Material Adverse Effect on
the Company.
4.6. Financial Statements. Since December 31, 1997, the Company has
filed all reports, registration statements and other filings,
together with any amendments or supplements required to be
made with respect thereto, that it has been required to file
with the SEC under the Securities Act and the Exchange Act
(the "SEC Filings"). The SEC Filings were prepared and filed
in accordance with the rules and regulations of the SEC. As of
their respective dates, the SEC Filings did not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial
statements of the Company (including any related notes or
schedules) included in the SEC Filings were prepared in
accordance with GAAP (except as otherwise noted in such
financial statements) and present fairly in all material
respects the consolidated financial condition, results of
operations and cash flows of the Company as of the dates
thereof and for the periods indicated, subject, in the case of
interim financial statements, to normal year end audit
adjustments. Except as set forth or reflected in the SEC
Filings filed subsequent to May 1, 2000 or in Schedule 4.6,
the Company does not have any liabilities or obligations of
any nature whatsoever (whether accrued, absolute, contingent,
or otherwise) that individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
4.7. Insurance. The Company has obtained, and will maintain,
general commercial liability, fire and casualty insurance
policies with extended coverage, sufficient in amount (subject
to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed.
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4.8. Absence of Certain Changes or Events. Except as set forth on
Schedule 4.8, since the June 30, 2000 (the "Balance Sheet
Date"), the Company has conducted its business in the ordinary
and regular course, and there has not been:
4.8.1. any Material Adverse Effect;
4.8.2. any material damage, destruction or casualty loss,
not covered by insurance, to any material asset or
property of the Company;
4.8.3. any sale, assignment, transfer or other disposition,
lease, Lien encumbrance of any assets of the Company
except in the ordinary course of business and
consistent with past practice;
4.8.4. any borrowing of money by the Company, except in the
ordinary course of business;
4.8.5. any transaction with any officer, director or
shareholder (including any of their respective family
members) of the Company or any of its Affiliates;
4.8.6. any declaration or payment of any dividend or other
distribution on or with respect to, or any redemption
or purchase or other acquisition of, the shares of
the Company;
4.8.7. any agreement, arrangement or understanding, whether
oral or written, to do any of the foregoing matters
listed in clauses (i) through (vi) inclusive; or
4.8.8. any other event or condition of which has (or will)
materially and adversely affected (or affect) the
assets, properties, financial condition, operating
results or business of the Company.
4.9. Absence of Undisclosed Liabilities. Except (i) for as
disclosed or reserved against on the Financial Statements for
the year ended December 31, 1999 or in the footnotes thereto
or (ii) as incurred after December 31, 1999 in the ordinary
course of business and that are not reasonably likely to have
a Material Adverse Effect on the Company, the Company does not
have any liabilities or obligations of any nature, absolute,
accrued, contingent or otherwise and whether due or to become
due, that, individually or in the aggregate, are or would have
a Material Adverse Effect on the Company, its assets or
properties.
4.10. Guarantees. The Company is not directly or indirectly, (i)
liable under any discount or repurchase agreement or in any
other way to provide funds with respect to, or (ii) obligated
to guarantee or assume, any debt, dividend or other obligation
of any Person.
4.11. Books and Records. The minutes books and other similar records
and any other information or documents of the Company as made
available to the Buyer prior to the Closing Date contain a
true, complete and correct record, in all material
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respects, of (i) all material actions taken at all meetings
and by all written consents in lieu of meetings of the members
the Board of Directors and shareholders of the Company up to
and including the Closing Date and (ii) all material
information, instruments, agreements or other documents
relevant to the financial results, capitalization, or business
operations of the Company.
4.12. Title to Properties and Assets. The Company has good and
marketable title to its properties and assets held in each
case subject to no mortgage, pledge, Lien, encumbrance,
security interest or charge of any kind. With respect to the
property and assets it leases, the Company is in compliance
with such leases and, the Company holds valid leasehold
interests in such assets free of any liens, encumbrances,
security interests or claims of any party other than the
lessors of such property and assets.
4.13. Employment Agreements. The senior management agreements set
forth on Schedule 4.13 are the only agreements, oral or
written, pursuant to which there are any obligations to make
an additional payment upon a change of control (as defined in
such senior management agreements) and the amount of such
payments are set forth on Schedule 4.13.
4.14. ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur,
could reasonably be expected to result in a Material Adverse
Effect.
4.15. Environmental Matters. Except as set forth on Schedule 4.15,
(i) the Company has conducted and is conducting the Business
in compliance in all material respects with all applicable
Environmental Laws, (ii) there is no Order in effect or Action
or Proceeding or investigation pending under any Environmental
Laws, or to the Company's Knowledge, there is no threatened
investigation or inquiry by any Government Entity, or alleging
that it is subject to any investigatory or remedial
obligations under any Environmental Laws, in each case with
respect to any of the Real Property, and (iii) to the
Company's Knowledge, no Hazardous Materials have been disposed
of, released or transported in violation of, or as would
result in liability under, any applicable Environmental Law to
or from any of the Real Property.
4.16. Valid Issuance. The Company has taken all necessary corporate
action to authorize and reserve for issuance and to permit it
to issue, upon the exercise of the Warrant, and at all times
from the date hereof through the expiration of the Warrant
will have reserved, 2,500,000 authorized and unissued shares
of Common Stock, such amount being subject to adjustment as
provided in the Warrant, (and the Company will take all
necessary corporate action to authorize and reserve for
issuance all additional shares of Common Stock or other
securities that may be issued pursuant to adjustment as
provided in the Warrant). Upon delivery of the Warrant Shares
in accordance with the terms of the Warrant, the Warrant
Shares shall be duly authorized, validly issued and
nonassessable and
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Lender shall acquire complete and absolute legal, marketable
and equitable title to the Warrant Shares, free and clear of
all claims, liens, pledges, options, preemptive rights,
restrictions of any kind or nature, and Liens or encumbrances
of any kind. The issuance of the Warrant Shares shall be
exempt from registration under the Securities Act and,
assuming, if required, the expiration of the applicable
waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act") prior to
the exercise of the Warrant, does not otherwise violate
Applicable Law.
4.17. Disclosure. No representation or warranty by the Company in
this Agreement or any exhibit or schedule hereto or any Other
Transaction Documents or any exhibit or schedule thereto, or
any certificate furnished or to be furnished by the Company in
connection with this Agreement, contains or will contain an
untrue statement of material fact, or omits or will omit to
state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in
which they were made, not misleading. The copies of the
Organizational Documents, minute books, corporate records and
other documents provided to Lender or its Representatives
prior to the Effective Date are true, correct and complete
copies of such documents and the minute books contain all
minutes of any meetings, or actions taken without a meeting,
of the Board of Directors or shareholders of the Company,
except where the failure to maintain such minutes would not
result in a Material Adverse Effect; provided, however, there
was no action taken during any meetings that are not evidenced
by minutes which action would constitute a Material Adverse
Effect on the Company.
5. COVENANTS.
From the Effective Date until the Agreement has expired or been
terminated and the principal of and interest on the Loan payable hereunder shall
have been paid in full, the Company covenants and agrees with the Lender that:
5.1. Pay-Off Letters and Evidence.
5.1.1. Upon the consummation of the transaction described in
Section 2.9.1, the Company shall obtain and deliver
to Lender (i) a written acknowledgement from Unique
of the satisfaction and payment in full of any
indebtedness owed to it by the Company pursuant to
that certain Management Services Agreement by and
between the Company and Unique and the release in
full of the Company of any further obligations of the
Company or claims Unique may have against the Company
and (ii) copies of all written documentation
evidencing the transaction described in Section
2.9.1.
5.1.2. Upon the payment to each senior manager listed above
in Section 2.9.2, the Company shall obtain and
deliver to Lender (i) a written acknowledgement from
each such senior manager of the satisfaction and
payment in full of any payment owed to it by the
Company on the
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Effective Date pursuant to their respective
employment agreements and the release in full of the
Company of any further obligations of the Company
with respect to that portion of the change of control
payments or claims such senior manager may have
against the Company with respect to such payment and
(ii) copies of all written documentation evidencing
the transactions described in Section 2.9.2.
5.1.3. Upon the satisfaction of any amounts owed to First
Union Securities, Inc. ("FUSI"), such sum to be paid
from funds other than the Loan proceeds, the Company
shall deliver to Lender (i) a written acknowledgement
from FUSI of the satisfaction and payment in full of
any fees owed to it pursuant to that certain
agreement dated October 1, 1999 by and between
Company and FUSI and the release in full of the
Company of any further obligations of the Company
under the agreement or claims FUSI may have against
the Company and (ii) copies of all written
documentation evidencing such payment; provided
however, in accordance with that certain
Indemnification Agreement by and between the Sellers
(as that term is defined in the Purchase Agreement)
and the Company, the Company shall in no event pay in
excess of $250,000 to FUSI, any amounts owed FUSI
above $250,000 shall be the sole liability of the
Sellers.
5.1.4. Upon the consummation of the transaction described in
Section 2.9.3, the Company shall obtain and deliver
to Lender (i) a written acknowledgement from Xxxxxx
Financial, Inc. of the satisfaction and payment in
part of any indebtedness owed to it by the Company
pursuant to the Xxxxxx Revolving Loan of an amount up
to $6,382,277 and the release of the Company of any
further obligations with respect to that portion of
the Xxxxxx Revolving Loan and (ii) copies of all
written documentation evidencing the transaction
described in Section 2.9.3; provided, however, after
such partial payment, the Lender acknowledges that
Company may seek to borrow additional funds under the
Xxxxxx Revolving Loan or related instrument, subject
to Section 5.10.
5.2. Financial Statements and Other Information. The Company shall
furnish, or cause to be furnished, to the Lender:
5.2.1. within 120 days after the end of each fiscal year of
the Company, its audited consolidated balance sheet
and related statements of operations, stockholders'
equity (or members' or partners' capital) and cash
flows as of the end of and for such year, setting
forth in each case in comparative form the figures
for the previous fiscal year, all reported on by
independent public accountants of recognized national
standing (without a "going concern" or like
qualification or exception and without any
qualification or exception as to the scope of such
audit) to the effect that such consolidated financial
statements present fairly in all material respects
the financial condition and results of operations of
the Company
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and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied;
5.2.2. within 50 days after the end of each of the first
three fiscal quarters of each fiscal year of the
Company, its consolidated balance sheet and related
statements of operations, stockholders' equity (or
members' or partners' capital) and cash flows as of
the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the
corresponding period or periods of (or, in the case
of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its authorized
officers as presenting fairly in all material
respects the financial condition and results of
operations of the Company and its consolidated
Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal
year-end audit adjustments and the absence of
footnotes;
5.2.3. concurrently with any delivery of financial
statements under clause 5.2.1 or 5.2.2 above, a
certificate of an authorized officer of the Company
(i) certifying as to whether an Event of Default has
occurred and, if an Event of Default has occurred,
specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations
demonstrating compliance with this Article 5, and
(iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of
the audited financial statements referred to in
Section 4.6 and, if any such change has occurred,
specifying the effect of such change on the financial
statements accompanying such certificate;
5.2.4. concurrently with any delivery of financial
statements under clause 5.2.1 above, a certificate of
the accounting firm that reported on such financial
statements stating whether they obtained knowledge
during the course of their examination of such
financial statements of any Event of Default (which
certificate may be limited to the extent required by
accounting rules or guidelines);
5.2.5. promptly after the same become publicly available,
copies of all periodic and other reports, proxy
statements and other materials filed by the Company
or any Subsidiary with the SEC or any Governmental
Entity succeeding to any or all of the functions of
the SEC, or with any national securities exchange or
NASD, or distributed by the Company to its
shareholders generally, as the case may be;
5.2.6. promptly following any request therefor, such other
information regarding the operations, business
affairs and financial condition of the Company or any
Subsidiary as such information reasonably applies to
the enforcement of this Agreement, or compliance with
the terms of this Agreement, as the Lender may
reasonably request; and
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5.2.7. promptly following their execution, approval,
adoption or filing with the SEC or NASD, copies of
any and all material amendments to the Organizational
Documents.
5.3. Notices of Material Events. The Company shall furnish to
Lender prompt written notice of the following:
5.3.1. the occurrence of any Event of Default;
5.3.2. the filing or commencement of any investigation,
action, suit or proceeding by or before any
arbitrator or Governmental Entity against or
affecting the Company or any Affiliate thereof that,
if adversely determined, could reasonably be expected
to result in a Material Adverse Effect;
5.3.3. the occurrence of any ERISA Event that, alone or
together with any other ERISA Events that have
occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an
aggregate amount exceeding $1,000,000; and
5.3.4. any other development that results in, or could
reasonably be expected to result in, a Material
Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
an authorized officer of the Company setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
5.4. Existence; Conduct of Business.
5.4.1. The Company shall, and shall cause each of its
Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force
and effect its legal existence and the rights,
registrations, Licenses, permits, Contracts,
privileges and franchises material to the conduct of
its business. The Company shall conduct is business
in the ordinary course of business consistent with
its past practices.
5.4.2. The Company shall keep in full force and effect its
Organizational Documents and all material Contracts
and Licenses and shall maintain its good standing in
the jurisdiction where it is incorporated and foreign
qualifications in all jurisdictions where it would
have a Material Adverse Effect on the Company to not
be so qualified. The Company shall not agree to any
amendment to any material Contract or License, if
such amendment could reasonably be expected to have a
Material Adverse Effect, without the consent of the
Lender.
5.5. Payment Obligations. The Company shall, and shall cause each
of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material
Adverse Effect before the same shall become delinquent or in
default,
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except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) the
Company or such Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (c)
the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.
5.6. Maintenance of Properties; Insurance; Business Relationships.
The Company shall, and shall cause each of its Subsidiaries
to, (a) keep and maintain all property material to the conduct
of its business in good working order and condition, ordinary
wear and tear excepted, (b) maintain, with financially sound
and reputable insurance companies, insurance in such amounts
and against such risks as are customarily maintained by
companies engaged in the same or similar businesses operating
in the same or similar locations, (c) not mortgage, pledge or
otherwise encumber any of its properties or assets; and (d)
use reasonable commercial efforts to preserve and maintain its
business organizations, employees and advantageous business
relationships with the effect of maintaining its goodwill.
5.7. Books and Records; Inspection Rights. The Company shall, and
shall cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its
business and activities. The Company shall, and shall cause
each of its Subsidiaries to, permit any representatives
designated by the Lender, upon reasonable prior notice, to
visit and inspect its properties, to examine and make extracts
from its books and records, and to discuss its affairs,
finances and condition with its officers and independent
accountants, all at such reasonable times and as often as
reasonably requested, and, in each case, only to the extent
necessary to enforce the provisions of this Agreement.
5.8. Compliance with Laws. The Company shall, and shall cause each
of its Subsidiaries to, comply with all Applicable Laws,
rules, regulations and orders of any Governmental Entity
applicable to it or its business operations, property or
assets, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a
Material Adverse Effect.
5.9. Use of Proceeds. The proceeds of the Loan shall be used solely
for the purposes set forth in Section 2.9.
5.10. Indebtedness. Without the prior written consent of Lender, the
Company shall not, and shall not permit any Subsidiary to,
create, incur, assume or permit to exist any Indebtedness in
excess of $75,000, except for (i) trade payables incurred in
connection with the ordinary course of business and (ii)
indebtedness that was incurred prior to the Effective Date and
disclosed in the Financial Statements for the year ended
December 31, 1999 or otherwise disclosed in writing to the
Lender prior to the Effective Date.
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5.11. Liens. The Company shall not, and shall not permit any
Subsidiary to, create, incur, assume or permit to exist any
Lien on any property or asset now owned or hereafter acquired
by it, or assign or sell any income or revenues (including
accounts receivable) or rights in respect of any thereof,
except: (i) Permitted Encumbrances or (ii) with the prior
consent of Lender.
5.12. Fundamental Changes.
5.12.1. The Company shall not, and shall not permit any
Subsidiary to, without the prior written notice to
and consent of the Lender, merge into or consolidate
with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (in one transaction or
in a series of transactions) all or substantially all
of its assets, or all or substantially all of the
stock of any of its Subsidiaries (in each case,
whether now owned or hereafter acquired), or
liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto
no Event of Default shall have occurred and be
continuing (i) any Subsidiary or other Person may
merge into the Company in a transaction in which the
Company is the surviving corporation and which does
not result in any reclassification of, or change in,
the outstanding shares of Common Stock, (ii) any
Subsidiary or other Person may merge into any
Subsidiary in a transaction in which the surviving
entity is a Subsidiary and (iii) any Subsidiary may
sell, transfer, lease or otherwise dispose of its
assets to the Company or to another Subsidiary.
5.12.2. The Company shall not, and shall not permit any of
its Subsidiaries to, engage in any business other
than businesses of the type conducted by the Company
and its Subsidiaries on the date of execution of this
Agreement, without the prior written consent of
Lender.
5.12.3. The Company shall not, and shall not permit any
Subsidiary to, take any action adverse to the Lender
and which is inconsistent with this Agreement or any
of the Other Transaction Documents to which the
Company is a party.
5.12.4. The Company shall not without prior notice to and
consent of the Lender, (i) take any action that would
have the effect of preventing the Lender from
exercising the Warrant or otherwise acquiring Common
Stock of the Company, (ii) issue any Common Stock or
other securities convertible into or exchangeable for
Common Stock, (iii) issue any stock dividend, (iv)
subdivide the outstanding Common Stock, (v) propose
to dissolve, liquidate or wind-up voluntarily, (vi)
change the number of authorized or outstanding Common
Stock or issue any Common Stock or any warrants,
options, or other rights to subscribe for or to
purchase any Common Stock or securities convertible
into or exchangeable or exercisable for any Common
Stock of the Company, (vii) enter into any capital
reorganization or any reclassification of its Common
Stock, (viii) issue
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any Common Stock distribution; (ix) issue, sell,
distribute or grant any rights to subscribe or
purchase any Common Stock, or any warrants or options
to purchase any Common Stock, except for any such
option grants made pursuant to the 1997 Stock Option
Plan as approved by the Board of Directors which is
consistent with the Company's past practice as of the
Effective Date or (x) amend or grant any waiver to
the Rights Agreement to any Person other than Lender
or its Affiliates.
5.12.5. Investments, Loans, Advances, Guarantees and
Acquisitions. Except for shares owned as of the date
hereof or acquired hereafter by the Lender, without
the prior written consent of the Lender, the Company
shall not, and shall not permit any of its
Subsidiaries to, purchase, hold or acquire (including
pursuant to any merger with any Person that was not a
wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other
securities (including any option, warrant or other
right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee
any obligations of, or make or permit to exist any
investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets
of any other Person constituting a business unit.
5.13. Transactions with Affiliates. The Company shall not, and shall
not permit any of its Subsidiaries to, sell, lease or
otherwise transfer any property or assets to, or purchase,
lease or otherwise acquire any property or assets from, or
otherwise engage in any other transactions with or enter into
any service, clearing agreements or other agreements with, any
of its Affiliates, except in the ordinary course of business
at prices and on terms and conditions not less favorable to
the Company or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties.
5.14. Restrictive Agreements. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly,
enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition
upon (a) the ability of the Company or any Subsidiary to
create, incur or permit to exist any Lien upon any of its
property or assets, or (b) the ability of any Subsidiary to
pay dividends or other distributions with respect to any
shares of its capital stock or to make or repay loans or
advances to the Company or any other Subsidiary or to
Guarantee Indebtedness of the Company or any other Subsidiary;
provided that the foregoing shall not apply to restrictions
and conditions imposed by Applicable Law or by this Agreement.
5.15. Change in Control. The Company shall not permit a Change in
Control to occur.
5.16. Tangible Net Worth. The Company shall not permit its Tangible
Net Worth to be less than 70% of its Tangible Net Worth as of
the Effective Date.
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5.17. Net Capital. The Company shall not permit Net Capital to be
less than an amount equal to (i) between the Effective Date
and the date the Lender exercises in full the Warrant,
$7,500,000 or (ii) after the Lender exercises in full the
Warrant, $18,125,000 ((i) and (ii) respectively, the "Net
Capital Threshold"); provided however, if at any time Lender
in reasonably determines the Company's Net Capital has
materially increased, the Lender reserves the right to in its
sole and reasonable discretion, upon written notice to the
Company, to increase the Net Capital Threshold applicable to
this Section 5.17; provided further, in no event shall the Net
Capital Threshold, pursuant to such an adjustment by Lender,
be equal to an amount greater than 75% of the Net Capital as
disclosed in the preceding applicable SEC Filing of the
Company.
5.18. Confidentiality.
5.18.1. Disclosure of Terms. The terms and conditions of this
Agreement (the "Terms"), including its existence,
shall be considered confidential information and
shall not be disclosed by any party hereto to any
third party except in accordance with the provisions
set forth below.
5.18.2. Press Releases, Etc. Within sixty (60) days of the
date of the Stock Purchase Agreement, the Company may
issue a press release, only after Company receives
the prior written approval of Lender for any such
press release or form of press release, disclosing
that the Lender has purchased an interest in the
Company and made this debt investment. The Lender's
name and the fact that the Lender is an investor in
the Company can be included in a reusable press
release boilerplate statement, so long as the Lender
has given the Company its initial approval of such
boilerplate statement and the boilerplate statement
is reproduced in exactly the form in which it was
approved. No other announcements regarding the Lender
in a press release, conference, advertisement,
announcement, professional or trade publication, mass
marketing materials or otherwise to the general
public may be made without Lender's prior written
consent, which consent could be withheld at the
Lender's sole discretion. The Company and Lender have
and shall make, or cause to be made, only limited
public statements or press releases consistent with
the form of press release to which Lender has
approved in writing and that any such public
statements or press releases shall be general in
nature and remain within the limited scope permitted
by the Securities Act such that the exemption from
registration remains valid.
5.18.3. Permitted Disclosures. Notwithstanding the foregoing,
any party may disclose any of the Terms to its
employees, investment bankers, lenders, accountants
and attorneys, in each case only where such persons
or entities are under appropriate nondisclosure
obligations.
5.18.4. Legally Compelled Disclosure. In the event that any
party is requested or becomes legally compelled
(including without limitation, pursuant to
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securities laws and regulations) to disclose the
existence of this Agreement, Other Transaction
Documents or any of the Terms hereof in contravention
of the provisions of this Section 5.18, such party
(the "Disclosing Party") shall provide the other
parties (the "Non-Disclosing Party") with prompt
written notice of that fact so that the appropriate
party may seek (with the cooperation and reasonable
efforts of the other parties) a protective order,
confidential treatment or other appropriate remedy.
In such event, the Disclosing Party shall furnish
only that portion of the information which is legally
required or which has been previously released in a
public filing and shall exercise reasonable efforts
to obtain reliable assurance that confidential
treatment shall be accorded such information to the
extent reasonably requested by any Non-Disclosing
Party. Notwithstanding the preceding, each Party
acknowledges that the other Party shall be required
to make certain filings with SEC with respect to this
Agreement or the Other Transaction Documents; each
Disclosing Party shall provide the Non-Disclosing
Party with prior notice of any such filings, and no
such filing shall be made without the prior written
approval of the Non-Disclosing Party to the
applicable disclosures.
5.19. Warrant Shares. The Company shall propose and recommend to
Board of Directors that within 120 days of the Effective Date
the Board of Directors approve and recommend to the
shareholders of the Company and seek the approval of the
shareholders of the Company for the issuance of the Exercise
Amount (as defined in the Warrant) equal to 2,500,000 shares
of Common Stock. The Company shall not take any action or omit
to take any action which would hinder the above described
actions by the Board of Directors or the shareholders of the
Company. Company shall duly list any additional shares
represented by shares exercised under the Warrant with the
applicable national securities market. Upon shareholder
approval of the 2,500,000 shares of Common Stock represented
by the Exercise Amount until the first anniversary of the
Effective Date, the Company shall keep reserved an aggregate
of 2,500,000 shares of Common Stock of the Company authorized
and unissued shares of Common Stock, such amount being subject
to adjustment as provided in the Warrant, (and the Company
will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Common Stock or
other securities that may be issued pursuant to adjustment as
provided in the Warrant).
5.20. Board Seats.
5.20.1. The Company shall recommend to the Board of Directors
to take such actions as are necessary at the Special
Meeting to:
5.20.1.1.1. increase the number of the Board of Directors from
seven (7) to nine (9) directors in accordance with
the Charter Documents.
5.20.1.1.2. elect and thereafter continue in office as
directors of the Company such individuals who may be
nominated by the Lender and the Lender shall have the
exclusive right to make two (2) nominations of
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directorships for the newly created Board seats and
each director so designated shall sit in Class II
which shall be established at the Special Meeting and
shall sit for a term expiring at the second
succeeding annual meeting of the shareholders of the
Company held following the Special Meeting.
5.20.1.1.3. elect and establish a board which, pursuant to
Article IV of the Articles of Incorporation of the
Company, shall be classified into two classes. Upon
the increase of the board to 9 directors pursuant to
Section 5.20.1.1.1, Class I shall be comprised of 5
directors and Class II shall be comprised of 4
directors. At the Special Meeting, the directors of
Class I shall be elected to hold office for a term
expiring at the next succeeding annual meeting of the
shareholders following the Special Meeting and the
directors of Class II shall be elected to hold office
for a term expiring at the second succeeding annual
meeting of the shareholders following the Special
Meeting. At each subsequent annual meeting of the
shareholders of the Company, the successors to the
class of directors whose term shall then expire shall
be elected to hold office for a term expiring at the
second succeeding annual meeting of the shareholders
of the Company.
5.20.1.1.4. (a) two of the three directors nominated by Lender
and elected pursuant to Section 2.1.1 of the
Shareholders Rights and Voting Agreement shall be
elected and serve in Class II and the remaining one
director nominated by the Lender and elected pursuant
to Section 2.1.1 Shareholders Rights and Voting
Agreement shall be elected and serve in Class I, (b)
the two directors nominated by Lender pursuant to
Section 5.20.1.1.2 and elected upon the increase of
the board size to 9 pursuant to Section 5.20.1.1.1,
shall each be elected and serve in Class II, and (c)
the remaining directors not nominated by the Investor
shall be elected and serve in Class I.
5.20.1.1.5. ratify the actions taken by the Board of the
Company since the 1999 annual meeting of the
shareholders of the Company.
5.20.2. The Company shall use its best efforts to ensure that
within 120 days of the date hereof all such actions
are taken and that any actions are proposed to the
shareholders of the Company for their approval, if
required, by the expiration of such 120 day period.
5.20.3. The Company hereby agrees to recommend to the Board
of Directors to take such actions as are necessary,
and take such other actions as are necessary, so that
at the next annual meeting of the shareholders of the
Company (a) those directors nominated by the Investor
and elected to Class I at the Special Meeting or such
other individuals nominated by Investor shall be
nominated for election at the next annual meeting of
the shareholders of the Company for a two year term
expiring at the 2003 annual meeting of the
shareholders of the Company and (b) those directors
nominated by the Investor and elected to Class II at
the Special Meeting or such other individuals
nominated by Investor shall be confirmed at the
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next annual meeting of the shareholders of the
Company for their then current term expiring at the
2002 annual meeting of the shareholders of the
Company.
5.20.4. If, at the end of the initial term of the directors
elected pursuant to Section 5.20.1.1.2 above, the
Lender beneficially owns (which ownership shall
include shares issuable under the Warrant) at least
40% of the total issued and outstanding shares of
Common Stock, such individuals or such other
individuals as Lender designates shall be nominated
for a two-year term and the Company shall recommend
such nomination to the Board of Directors; provided;
however, if the Company fails to make such
recommendation Lender, as a shareholder, may nominate
its designees in accordance with the Charter
Documents.
5.20.5. The Company hereby agrees to recommend to the Board
of Directors to take such actions as are necessary,
for the removal of any director upon the request of
the party or parties designating such director and
for the election to the Board of Directors of a
substitute designated by such party.
5.20.6. The Company hereby agrees to recommend to the Board
of Directors take such actions as are necessary or
appropriate to ensure that any vacancy on the Board
of Directors of the Company (occurring for any
reason) shall be filled by the election to the Board
of Directors of a replacement designated by the party
or parties who designated the director whose failure
to continue to serve causes the applicable vacancy.
5.21. Rights Agreement. The Company shall recommend to the Board of
Directors that it adopt an amendment to the Rights Agreement
pursuant to which the effectiveness of the Rights Agreement is
waived with respect to Lender.
5.22. Principal Amount. Upon the request of the Lender, the Company
and Lender agree to negotiate in good faith and enter into an
amendment of this Agreement to increase the principal amount
up to an amount equal to Nine Million Seven Hundred Thousand
Dollars ($9,700,000), such amendment to be on terms and
conditions substantially similar to those contained in this
Agreement and mutually acceptable to the Parties. Upon the
execution of any such amendment, the Company shall issue an
amended Note to reflect the agreed upon revised principal
amount.
6. CONDITIONS PRECEDENT
The obligations of the Lender to make the Loan hereunder shall not
become effective until each of the following conditions is satisfied:
6.1. Opinion of Counsel. The Company shall deliver to Lender as of
the Effective Date an opinion of counsel reasonably
satisfactory to Lender.
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6.2. Board Approval. Company shall have received approval of its
Board of Directors for execution and delivery of and
performance under this Agreement and the Other Transaction
Documents. The Board of Directors of the Company shall have
approved the reservation of 2,500,000 shares of authorized and
unissued capital stock in connection for the Warrant Shares in
accordance with Section 5.19.
6.3. Representations and Warranties and Events of Default. The
Company shall have delivered an officer's certificate
certifying that (A) the representations and warranties
contained herein are true and correct on and as of the
Effective Date and (B) at the time of and immediately after
giving effect to this Agreement, no Default or Event of
Default has occurred and is continuing as of the Effective
Date.
6.4. Performance. The Company shall have delivered an officer's
certificate certifying that the Company has performed in all
material respects all obligations and agreements, and complied
in all material respects with all covenants and conditions
contained in the Agreement or the Other Transaction Documents
to be performed or complied with by it prior to or as of the
Effective Date.
6.5. Company Organization and Authorization. The Company shall
deliver to the Lender as of the Effective Date:
6.5.1. a certificate of incumbency for the officers
executing the documents on behalf of the Company;
6.5.2. a certified copy of the resolutions duly adopted by
the directors of the Company and signed by the
Secretary or Assistant Secretary (A) authorizing the
transactions contemplated by this Agreement and the
Other Transaction Documents to which the Company is a
party (B) authorizing the reservation of shares as
set forth in Section 5.19 (C) electing Lender's
nominees to the Board of Directors, (D) electing a
Secretary to replace such officer vacancy, and (E)
waiving the Rights Agreement with respect to Lender ;
6.5.3. a certificate of the Secretary or Assistant Secretary
certifying that the resolutions referred to in
Section 6.5.2 have not been rescinded, modified or
withdrawn and that such resolutions are in full force
and effect as of the Closing Date;
6.5.4. a certified copy of the Organizational Documents and
a certified copy of a certificate of good standing of
the Company issued by the Secretary of State of
California;
6.6. The delivery of an amendment to the Rights Agreement duly
adopted by the Board of Directors pursuant to which the
effectiveness of the Rights Agreement is waived with respect
to Lender;
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6.7. The delivery of the Note executed by the Company;
6.8. The delivery of the Warrant executed by the Company;
6.9. The delivery of the Shareholders Rights Agreement executed by
the Company;
6.10. The delivery of the Registration Rights Agreement executed by
the Company;
6.11. (a) The receipt of a written consent by Deephaven to the
transactions contemplated herein and in the Warrant and (b)
the consummation of the transactions contemplated in the
Deephaven Purchase Agreement;
6.12. The consummation of the transactions contemplated in the
Purchase Agreement;
6.13. The receipt of the consents required under Section 10(f) of
the Purchase Agreement;
6.14. The receipt of a written waiver and consent by Xxxxxx Xxxxxxx
Xxxx Xxxxxx to the Shareholders Rights Agreement with respect
to shares owned by the applicable Shareholders;
6.15. The receipt of fully executed copies of (i) each of the
Payment Deferment Agreements and (ii) the Amendment to
Management Incentive Program Agreement;
6.16. The receipt of a fully executed copy of the Indemnification
Agreement;
6.17. such further certificates and documents evidencing the
consummation by the Company of the transactions contemplated
hereby as Lender shall reasonably request.
7. EVENTS OF DEFAULT.
7.1. The occurrence of any of the following events shall constitute
an Event of Default hereunder:
7.1.1. the Company shall fail to make any payment required
under this Agreement or the Note when due, or, shall
fail to perform any of its obligations in this
Agreement and Note, and such failure continues for a
period of fifteen (15) days after written notice
thereof;
7.1.2. the Company shall (i) make an assignment or establish
a trust for the benefit of creditors, (ii) petition
or apply for appointment of a liquidator, receiver or
the like, (iii) commence or acquiesce to any
proceeding under any bankruptcy, insolvency or
similar law, or (iv) become unable to pay its debts
as they mature;
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7.1.3. proceedings shall have commenced against the Company
under any bankruptcy, insolvency or similar law,
which proceedings are not dismissed within sixty (60)
days, or an order for relief shall be entered in any
bankruptcy proceeding relating to the Company or its
properties; or
7.1.4. the Company shall dissolve, liquidate, or terminate
its existence or business.
7.1.5. the Company shall have breached a material
representation, warranty, covenant or agreement under
either (A) the Shareholders Rights Agreement, (B) the
Warrant, (C) the Registration Rights Agreement or (D)
Article 4 and Article 5 of this Agreement.
7.1.6. the Company shall fail to receive an affirmative vote
of the requisite percentage of shareholders of the
Company in accordance with the Organizational
Documents to approve the Warrant within 120 days of
the Effective Date.
7.2. If an Event of Default occurs, and after the passing of any
applicable grace period, at the option of the Lender, the
entire unpaid principal of the Loan and all accrued and unpaid
interests thereon shall become immediately due and payable in
full. Such acceleration of the maturity of amounts due shall
not affect any other rights of the Lender. If any Events of
Default shall have occurred, the Lender may proceed to protect
and enforce its rights by suit or any other appropriate
proceeding.
8. SUBORDINATION.
8.1. Upon reasonable request by the Company, Lender shall execute
and deliver a subordination agreement relating to this
arrangement in favor of a third party lender, provided that
the terms and conditions of the agreement shall be
satisfactory to the Lender in its sole discretion and approved
in advance in writing by Lender.
8.2. The indebtedness evidenced hereby and all liens securing such
indebtedness are subordinated in the manner and to the extent
set forth in that certain Subordination Agreement (the
"Subordination Agreement") dated as of September 20, 2000
among Lufthansa Technik AG, Hawker Pacific Aerospace, and
Xxxxxx Financial, Inc., to the Senior Debt (as defined in such
Subordination Agreement), and each lender hereunder, by its
acceptance hereof, shall be bound by the provisions of the
Subordination Agreement.
9. ARBITRATION
9.1. Disputes. Within fifteen (15) days of the written request of
either Party, the Parties shall meet to negotiate in good
faith a resolution of any dispute, claim, controversy or claim
arising out of or relating to this Agreement or the subject
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matter of this Agreement, or the breach, termination or
invalidity thereof (a "Dispute").
9.2. Arbitration. Any Dispute which cannot be resolved pursuant to
Section 9.1 above within twenty (20) days of the written
request provided pursuant to Section 9.1, will be finally
settled by arbitration before a sole arbitrator in accordance
with the Commercial Rules of Arbitration of the American
Arbitration Association in effect on the date of this
Agreement. The arbitrator shall be appointed in accordance
with the applicable rules of arbitration. The arbitrator shall
be an individual with significant experience in the aircraft
maintenance sector.
9.3. Timing and Location of Arbitration. The Parties agree that any
arbitration process related to this Agreement shall be
structured to the fullest extent possible in accordance with
the applicable arbitration rules in such a way as to enable a
decision to be rendered by the arbitrators within ninety (90)
days of the date of the commencement of such arbitration. The
place of arbitration will be Salt Lake City, Utah. By this
agreement to arbitrate, the Parties waive their right to any
form of appeal or recourse to a court of law or other judicial
authority, to the fullest extent permitted by law, provided
that any judgment upon an award rendered by the arbitrator may
be entered in any court having jurisdiction therefore.
9.4. Confidentiality; Expenses.
9.4.1. The parties shall keep the arbitration confidential
and shall not disclose to any Person, other than
those necessary to the proceedings, the existence of
the arbitration, any document submitted or exchanged
in connection with it, any oral submissions or
testimony, transcripts, or any award unless
disclosure is required by law or is necessary to
challenge, recognize or enforce an award. The
arbitrators and any experts shall be required to
agree to comply with this confidentiality provision
accepting appointment.
All expenses of the arbitration procedure and tribunal will be
borne equally by the Parties, or as otherwise prescribed by
the applicable arbitration rules. Each Party's expenses with
respect to the conduct of the arbitration, including the fees
of attorneys, accountants, or other experts used in connection
with the arbitration, will be borne by the unsuccessful party
in the arbitration, in whole or in part as determined by the
arbitration tribunal.
10. NOTICES.
10.1. All notices, requests, demands, and other communications
provided in this Agreement shall be in writing and shall be
deemed given if delivered personally, transmitted by facsimile
(receipt confirmed), sent by internationally recognized
overnight courier service, to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice, provided that notices of a change of
address shall be effective only on receipt of such notice):
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10.1.1. if to the Lender to:
Lufthansa Technik XX
Xxx xxxx Xxxxx 000
X-00000 Xxxxxxx, XXXXXXX
Attention: HAM-TB/B
Fax: 000 00 00 0000 0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax: 000 000 0000
10.1.2. if to the Company to:
Hawker Pacific Aerospace
00000 Xxxxxxx Xxx
Xxx Xxxxxx, Xxxxxxxxxx, 00000
Attention: Chief Financial Officer
Fax: 000 000 0000
All notices, requests, demands, and other communications shall be deemed to have
been given as of the date so delivered or telefaxed and, if given by any other
means, shall be deemed given only when actually received by the addressees.
11. INDEMNIFICATION
11.1. The Company shall indemnify the Lender, and each Affiliate or
Representative of the Lender (each such Person being called an
"Indemnitee") against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities ("Losses")
and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by
or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) a material breach of
the Company's representations and warranties contained in
Article 4; (ii) the performance by the parties hereto of their
respective obligations hereunder or the consummation of the
Transactions or any other transactions contemplated hereby,
(iii) the proceeds from the Loan, or (iv) any actual or
prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract,
tort or any other theory and regardless of whether any
Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent
that such Losses or related expenses are determined by a court
of competent jurisdiction by final and nonappealable judgment
to have resulted from the gross negligence or willful
misconduct of such Indemnitee. The Company shall not settle
any claim without the prior consent of Indemnitee.
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11.2. To the extent permitted by applicable law, the Company shall
not assert, and hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a
result of, this Agreement or any agreement or instrument
contemplated hereby, the Transactions, the Loan or the use of
the proceeds thereof.
12. MISCELLANEOUS.
12.1. Further Assurances. Each party agrees to take all such other
and further actions and to execute and deliver all such other
and further documents and instruments as shall be reasonably
requested by the other party to carry out the intent and
purposes of this Agreement.
12.2. Cumulative Rights. All of the Lender's rights and remedies
hereunder shall be cumulative and in addition to its rights
and remedies otherwise available under law. No delay or
omission by the Lender in the exercise of any rights shall
operate as a waiver. No waiver of a breach or default
hereunder shall be considered valid unless in writing and
signed by the party giving such waiver, and no such waiver
shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
12.3. Severability. Nothing shall require the payment of any amount
if such payment would be unlawful. In any such event, this
Agreement or the Note, as the case may be, shall automatically
be deemed amended so that interests charges and all other
payments required shall be equal to but not greater than the
maximum permitted by law. If any portion if this Agreement
shall be held invalid by any court of competent jurisdiction,
the remaining portions shall continue in effect and shall not
be affected thereby. Any provision of this Agreement which is
invalid or unenforceable shall be ineffective to the extent of
such invalidity or unenforceability, provided, that such
invalidity or unenforceability does not deny any party the
material benefits of the transactions for which it has
bargained and such invalidity or unenforceability shall not
affect in any way the remaining provisions hereof.
12.4. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Lender, the Company, and their
respective legal representatives, successors and assigns. The
Lender may assign this Agreement without the prior consent of
the Company. The Company may not assign this Agreement without
the prior written consent of the Lender.
12.5. Amendment. No provision of this Agreement or the Note may be
amended, terminated, or waived except by written instrument
signed by the Company and the Lender.
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12.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered,
shall be deemed an original and all of which together shall
constitute one instrument.
12.7. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive
laws of the State of California.
12.8. Entire Agreement. This Agreement, the Note and any other
instruments or documents executed in connection herewith
constitute the entire agreement of the Company and the Lender,
concerning the subject matter hereof and supersede all prior
commitment letters, agreements and understandings between
them.
12.9. Captions; Interpretation. The section and other headings
contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this
Agreement. All references to sections, articles, Exhibits or
Schedules shall mean the sections, articles, Exhibits or
Schedules of this Agreement. Terms used with initial capital
letters will have the meanings specified, applicable to both
singular and plural forms, for all purposes of this Agreement.
The words "include" and "exclude" and derivatives of those
words are used in this Agreement in an illustrative sense
rather than a limiting sense.
12.10. Fees and Expenses. Except as otherwise provided in this
Agreement, the Company shall bear all costs, fees and other
charges and expenses of any kind incurred by Lender in
connection with the negotiation, execution and implementation
of this Agreement up to an aggregate amount of $30,000;
including any expenses incurred in the enforcement of any
rights of Lender in connection with this Agreement. The Lender
shall have the right to make the payments referred to in this
Section 12.10 on behalf of the Company. The fees and expenses
so paid by Lender shall be immediately reimbursed by the
Company upon demand by the Lender.
12.11. Specific Performance. The Company hereby acknowledge and agree
that the failure of it to perform its obligations under this
Agreement and the Other Transaction Documents in accordance
with their specific terms or to otherwise comply with such
obligations will cause irreparable injury to Lender for which
damages, even if available, will not be adequate remedy.
Accordingly, the Company hereby consent to the issuance of
injunctive relief to prevent breaches, and to the granting by
any such court of the remedy of specific performance of the
terms and provisions of this Agreement and the Other
Transaction Documents.
12.12. Waivers. No waiver of a breach or default hereunder shall be
considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a
waiver of any subsequent breach or default of the same or
similar nature.
12.13. No Lender Affiliate Liability. Each of the following is herein
referred to as a "Lender Affiliate": (a) any direct or
indirect holder of any equity interests or
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securities of the Lender (whether such holder is a limited or
general partner, member, stockholder or otherwise), (b) any
Affiliate of the Lender, or (c) any director, officer,
employee, representative or agent of (i) Lender, (ii) any
Affiliate of Lender, or (iii) any such holder of equity
interests or securities referred to in clause (a) above. No
:Lender Affiliate shall have any liability or obligation of
any nature whatsoever in connection with or under this
Agreement or any of the Other Transaction Documents or the
transactions contemplated hereby or thereby (whether or not
such Lender Affiliate has called or received capital for
contribution to Buyer), and the Company hereby waive and
release all claims related to any such liability or
obligation.
[signature page follows]
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IN WITNESS WHEREOF, the Company and the Lender have caused this
Agreement to be duly executed by their respective authorized officers or
representatives, as of the date first above written.
COMPANY:
HAWKER PACIFIC AEROSPACE
By: /s/ XXXXX X. XXXXXX
----------------------------
Name: XXXXX X. XXXXXX
--------------------------
Title: PRESIDENT/CEO
-------------------------
LENDER:
LUFTHANSA TECHNIK AG
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Signature Page to Loan Agreement by and between
Hawker Pacific Aerospace and Lufthansa Technik AG
33
Annex I
Definitions
"Action or Proceeding" means any action, suit, claim, arbitration, proceeding or
Government Entity investigation or audit.
"Affiliate" shall mean, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such Person. For the purposes of this definition, a Person shall be
deemed to control another Person if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
other Person, whether through ownership of voting securities, by contract or
otherwise, or the power to elect at least 50% of the directors, managers,
general partners, or persons exercising similar authority with respect to such
Person.
"Agreement" means this Loan Agreement.
"Amendment to Management Incentive Program Agreement" shall mean the amendment
to Management Incentive Program Agreement by and between the Company and each of
the following respectively: Xxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxx Xxxx, Xxxx
Xxxxxxxxx, and Xxxxx Xxxxx.
"Applicable Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law in the United States of America,
Germany, or any state, province, county, municipality or other political
subdivision thereof, including without limitation all governmental permits,
licenses, franchises and authorizations required for any Person to conduct its
respective business as currently conducted.
"Balance Sheet Date" shall have the meaning given it in Section 4.8.
"Books and Records" means all titles, documents, instruments, papers, books and
records relating to the business and operations of a Person, including financial
statements, tax returns and related workpapers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates, and books, stock transfer ledgers, contracts,
licenses, customer lists, computer files and programs, retrieval programs,
operating data and plans and environmental studies and plans.
"Business" shall mean the Company and the businesses and operations of the
Company.
"Business Day" means a day other than (i) Saturday, (ii) Sunday, or (iii) any
day on which banks located in New York, New York or Hamburg, Germany are
generally closed.
34
"Change of Control" means the (i) sale, conveyance or other disposition of all
or substantially all of the Company's property or business, or merger into or
consolidation with any other corporation (other than a wholly-owned subsidiary),
or any transaction or series of related transactions in which at least 50% of
the voting power of the Company or 50% of the Company's assets are disposed of
or (ii) Lender holds fewer than 3 seats (or 40% of) on the Board of Directors of
the Company.
"Class I" shall mean the first class of directors to be established pursuant to
Article IV of the Articles of Incorporation of the Company.
"Class II" shall mean the second class of directors to established pursuant to
Article IV of the Articles of Incorporation of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Company" has the meaning given it in the introductory statements of this
Agreement.
"Common Stock" shall mean the common stock of the Company, par value $0.01 per
share.
"Contract" means any contract, agreement, understanding or commitment.
"Deephaven Purchase Agreement" means that certain purchase agreement by and
between Lender and Deephaven Private Placement Trading Ltd ("Deephaven") for the
purchase of all of preferred stock beneficially owned by Deephaven.
"Default" means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived become an
Event of Default.
"Disclosing Party" shall have the meaning given it in Section 5.18.4.
"Dispute" shall have the meaning given it in Section 9.
"Effective Date" shall mean the date of this Agreement written in the
introductory paragraph.
"Environmental Law" shall mean any federal, state, or local law or regulation
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment (including without limitation air,
surface water, ground water, land surface and subsurface strata), health, safety
or natural resources, including without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release, threatened
release, discharge, investigation and cleanup of Hazardous Materials, or which
imposes requirements relating to Hazardous Materials in connection with a
transfer of stock or assets.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that, together with the Company, is treated as a single employer under Section
414(b) or (c) of the Code or, solely
35
for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as
a single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Company or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Company or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Company or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Company or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" shall mean those events set forth in Article 7.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Financial Statements" shall have the meaning given it in Section 4.6.
"GAAP" shall mean the generally accepted accounting principles of the United
States consistently applied.
"Government Entity" means any court or tribunal or administrative, governmental
or regulatory body, agency, commission, division, department, public body or
other authority.
"Guarantee" of or by the Company or any Subsidiary (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
36
"Hazardous Materials" shall mean (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant or
waste under any Environmental Law.
"Xxxxxx Refinancing" shall mean the refinancing of the indebtedness owed to
Xxxxxx Financial, Inc. pursuant to the Junior Participation Agreement between
Xxxxxx Financial, Inc. and Lender.
"Indebtedness" means, with respect to any Person, all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under lease agreements, including sale-lease back agreements, that are
required to be capitalized under GAAP consistently applied, (v) with respect to
Taxes relating to any period other than the current fiscal year of such Person
("Prior Period") (or to transactions effected in any such Prior Period),
including Taxes that are deemed to be owing by such Person as a result of any
Government Entity claim, Action or Proceeding contesting the validity or amount
of such Taxes, and (vi) in the nature of guarantees of the obligations described
in clauses (i) through (v) above of any other Person.
"Indemnitee" shall have the meaning given it in Article 11.
"Indemnification Agreement" shall mean that certain indemnification agreement by
and among the Company and the Sellers (as that term is defined in the Purchase
Agreement) with respect to the settlement of amounts owed to First Union
Securities Inc.
"Knowledge" means, (i) with respect to any natural Person, the actual or
constructive knowledge of such Person and (ii) with respect to any non-natural
Person, that each member of the board of directors and senior management of such
Person has or should have after reasonable inquiry.
"Liabilities" means all Indebtedness, obligations, and other liabilities of a
Person (whether absolute, accrued, contingent, fixed or otherwise, or whether
due or to become due).
"Licenses" means all licenses, permits, certificates, approvals, registrations,
franchises and similar consents granted or issued by a Government Entity or any
other Person.
"Lien" means any mortgage, security interest, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or otherwise), charge,
preference, priority or other security agreement, option, warrant, attachment,
right of first refusal, preemptive, conversion, put, call or other claim or
right, restriction on transfer (other than restrictions imposed by applicable
securities Laws), or preferential arrangement of any kind or nature whatsoever
(including any restriction on the transfer of any assets), any conditional sale
or other title retention agreement, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any financing
statement with the pertinent public or private registry.
37
"Losses" has the meaning given it in Article 11.
"Material Adverse Effect" means, with respect to the Company, a material adverse
effect on the business, prospects, assets, liabilities, revenues, costs and
expenses, income before provision for income taxes, operations or condition,
financial or otherwise, of the Company. In determining whether any individual
event would result in a Material Adverse Effect, notwithstanding that such event
does not of itself have such effect, a Material Adverse Effect shall be deemed
to have occurred if the cumulative effect of such event and all other then
existing events could reasonably be expected to result in a Material Adverse
Effect.
"Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.
"NASD" means the National Association of Securities Dealers, Inc., or any other
self-regulatory organization that succeeds to the functions thereof.
"Net Capital" means total assets less total liabilities.
"NYSE" means the New York Stock Exchange, Inc.
"Non-Disclosing Party" shall have the meaning given it in Section 18.4.
"Note" shall have the meaning given to it in Section 2.7.
"Order" means any writ, judgment, decree, injunction or similar order of any
Government Entity (in each case whether preliminary or final).
"Organizational Documents" means with respect to any Person, articles of
incorporation, certificates of incorporation, by-laws, partnership agreement,
operating agreement, articles of association, joint venture or other agreement,
instrument or documents, individually or collectively, pursuant to which such
Person is established or organized, and that govern the internal affairs of such
Person or such documents as they may be amended from time to time.
"Other Transaction Documents" shall mean the Purchase Agreement, the Promissory
Note, the Warrant, the Shareholders Rights and Voting Agreement, and the
Registration Rights Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.
"Parties" shall have the meaning given to it in the introductory statements of
this Agreement.
"Payment Deferment Agreement" shall mean that certain agreement by and between
the Company and the applicable senior manager with respect to deferment of
change of control payments.
"Permitted Encumbrances" means:
38
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.5;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of business
and securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.5
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; and
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Company or any Subsidiary;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Person" means and includes any individual, partnership, joint venture,
corporation, trust, limited liability company, joint stock company, an
unincorporated organization, a Government Entity or any political subdivision or
agency thereof, or any other entity.
"Plan" means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Promissory Note" shall mean that promissory note issued by the Company in favor
of the Buyer in connection with this Agreement.
"Purchase Agreement" shall have the meaning given to it in Section 2.7.
"Real Property" shall mean land, together with all Improvements located thereon,
and all easements, rights-of-way, benefits, hereditaments, and appurtenances
thereto and covenants and restrictions thereon, whether owned or leased by the
Company.
"Registration Rights Agreement" shall mean that certain registration rights
agreement of even date herewith by and between the Company and Lender pursuant
to which Lender is granted certain rights to register its shares of Common Stock
of the Company upon the Lender's exercise of the Warrant.
39
"Representatives" shall mean as to any natural person, such person's financial
advisors, attorneys, accountants, agents and Affiliates, and, as to any entity,
such entity's officers, directors, managers, partners, employees, financial
advisors, attorneys, accountants, agents and Affiliates.
"Rights Agreement" means that rights plan dated as of March 10, 1999, as filed
with the Securities and Exchange Commission (the "SEC") on March 23, 1999, as
amended and filed with the SEC on April 7, 1999 and as amended on August 15,
2000.
"SEC Filings" shall have the meaning given it in Section 4.6.
"Securities Act" shall have the meaning given it in Section 4.2.
"Shareholders" shall mean the shareholders listed in the Shareholders Rights and
Voting Agreement, namely: Xxxxx Xxxxxx, Xxxxx Xxxx, Xxxxxxx Xxxxx and Xxxxxx
Xxxxx.
"Shareholders Rights and Voting Agreement" shall have the meaning given it in
the recitals.
"Special Meeting" shall mean that special meeting of the shareholders of the
Company to be held within 120 days of the Effective Date.
"Subsidiary" means, with respect to Company (the "parent") at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
"Tangible Net Worth" means, at any date of determination thereof, all amounts
that would, in accordance with GAAP, be included under shareholders' equity and
preferred stock capital on the balance sheet of the Company, at such date, less
all assets of the Company at such date that would be classified as intangible
assets in accordance with GAAP, including without limitation, trade or service
marks, franchises, trade names and goodwill.
"Taxes" means (a) any and all taxes, levies or other like assessments, charges
or fees (including estimated taxes, charges and fees), including, without
limitation, income, corporation, add-on minimum, ad valorem, advance
corporation, gross receipts, transfer, excise, property, sales, use,
value-added, License, payroll, employment, severance, pay as you earn,
withholding on amounts paid by or to the relevant party, social security and
franchise or other governmental taxes or charges, imposed by the United States
of America, or any state, province, county, local or foreign government or
subdivision or agency thereof; and such term shall include any interest
40
(punitive or otherwise), penalties or additions to tax related or attributable
to such taxes; or (b) Liability for the payment of any amounts of the type
described in (a) as a result of any obligation to indemnify any other Person.
"Tax Return" means any report, return, statement or other written information
required to be supplied to a taxing authority in connection with Taxes.
"Terms" shall have the meaning given it in Section 5.18.1.
"USD LIBOR" means the rate per annum as calculated and published by the
information vendor for the time being designated by the British Banker's
Association as the British banker's Association interest settlement rate for USD
for the relevant interest period or the nearest equivalent thereto (presently
appearing on Telerate pages 3740 and 3750) at or about 11:00 am (London time).
"Warrant" shall have the meaning given to it in Section 3.1 hereof.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
41
Exhibit A
FORM OF
PROMISSORY NOTE
[$9,300,000] [September 20, 2000]
Hawker Pacific Aerospace, a corporation organized under the laws of the
State of California and having its principal place of business at 00000 Xxxxxxx
Xxx, Xxx Xxxxxx, Xxxxxxxxxx, 00000, (the "Company"), for value received,
promises to pay to Lufthansa Technik AG having its principal place of business
at Weg beim Jager 000X-00000 Xxxxxxx, XXXXXXX or its assigns, in lawful money of
the United States, the principal sum of [NINE MILLION THREE HUNDRED THOUSAND
DOLLARS ($9,300,000)] and to pay interest on the unpaid principal balance
thereof at the rate set forth below, such principal and interest to be paid in
immediately available funds in U.S. Dollars within the term set forth below in
accordance with the Loan Agreement of even date herewith between the Company and
the Lender (the "Loan Agreement"). Capitalized terms used, but not otherwise
defined, herein shall have the respective meanings ascribed to such terms in the
Loan Agreement.
The Company shall pay principal and interest at terms and the rates for
the corresponding periods as set forth below:
(a) On or before June 30 and December 31 in each calendar year during
the term of the Loan, the Company shall pay an amount of interest accruing to
such date at the rate provided herein on the outstanding principal balance under
the Loan. The first interest payment shall be due on September 19, 2001. The
annual interest rate shall be equal to the higher of (a) 10% per annum or (b) 5%
per annum plus USD LIBOR as published on the Effective Date which shall be
applicable for the first six months and USD LIBOR as published each six month
anniversary thereafter for each subsequent six month period, to the extent
permitted by Applicable Law; provided, however, the interest rate shall in no
event exceed 11%.
(b) The principal amount of the Loan shall be paid as follows: (a) on
the first anniversary of Effective Date, the Company shall make a payment to
Lender in the amount of $2,325,000 which represents 25% of the principal; (b) on
the second anniversary of the Effective Date, the Company shall make a payment
to Lender in the amount of $2,325,000 which represents 25% of the principal.
(c) On the third anniversary of the Effective Date, the Loan shall
mature and $4,650,000 (which represents the remaining 50% of the principal)
together with any accrued but unpaid interest hereunder, shall be due and
payable in full by the Company.
Subject to Section 2.10 and Section 2.14 of the Loan with respect to
exercise of the Warrants, all payments shall be made to the Lender in
immediately available funds to Lender's account no. 00000000 with CITIBANK, New
York, swift code: citi us 33/ABA 000000000 or to such other account notified to
the Company not later than 7 days prior to the respective
42
obligation falling due. Subject to Section (a) above, interest shall be
calculated on a basis of the actual number of days elapsed and a 360 day year.
All amounts payable by the Company under this Agreement shall be paid
in full without set-off or counterclaim or right of retention or other
restrictions and free and clear of and save to the extent required by law,
without any deduction or withholding for or on account of any taxes or charges
or otherwise.
If payments are not made on their due date, additional 1% per annum
(one percent per annum), calculated from the due date to the actual date of
payment, shall be due and payable to the Lender, to the extent permitted by
Applicable Law.
This Note may be prepaid at any time in whole or in part, and from time
to time, without penalty or premium.
This Note shall be subject to all terms and conditions of the Loan
Agreement between the parties, which Agreement is incorporated herein by
reference and made a part hereof.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of California.
The indebtedness evidenced hereby and all liens securing such
indebtedness are subordinated in the manner and to the extent set forth in that
certain Subordination Agreement (the "Subordination Agreement") dated as of
September 20, 2000 among Lufthansa Technik AG, Hawker Pacific Aerospace, and
Xxxxxx Financial, Inc., to the Senior Debt (as defined in such Subordination
Agreement), and each lender hereunder, by its acceptance hereof, shall be bound
by the provisions of the Subordination Agreement.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as an instrument under seal by its duly authorized officer on the day
and year first above written.
HAWKER PACIFIC AEROSPACE
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
43
EXHIBIT B
Form of Warrant
See Attached
44
SCHEDULE 4.2
CAPITALIZATION
Royce & Associates, Inc. 395,100 shares 6.8%
Dimensional Fund Investors 367,200 shares 6.3%
Senior management
Xxxxx Xxxxxx 138,930 shares 72,105 options
Xxxxx Xxxx 28,706 shares 14,420 options
Xxxxxxx Xxxxx 28,706 shares 14,420 options
Xxxxxx Xxxxx 28,841 options
Xxxxxx Xxxxxxx 43,261 options
Directors
Mellon Baird 2,000 shares
Xxxx XxXxxxxx 2,000 shares
Xxxxxx Xxxxxx 2,000 shares
45
SCHEDULE 4.3
SUBSIDIARIES
Hawker Pacific Aerospace, Ltd.
Xxxx 0 Xxxxxx Xxxx
Xxxxxxx Xxx
Xxxxx, Xxxxxxxxx XX0 0XX
46
SCHEDULE 4.4
CONSENTS
The following contracts have a right of termination upon Change of Control:
Customer contracts
American Airlines landing gear exchange and overhaul contract dated September 9,
1997
British Airways landing gear overhaul services agreement dated February 4, 1998
Federal Express bailment and services agreement dated September 1, 1997
Leases
Industrial Centers Corp. lease agreements dated September 1, 1994
Loan and Security agreements
Xxxxxx Financial loan agreement dated December 22, 1998
Vendor
Xxxxxxx
The following contracts automatically terminate upon Change of Control:
Insurance
American International Companies - Directors, Officers and Corporate Liability
Policy dated January 29, 1998
Reliance Insurance Company of Illinois - Employment Practices Liability Policy
dated January 29, 2000
47
SCHEDULE 4.5
LITIGATION
On October 1, 1999 the Company entered into an agreement with First Union
Securities, Inc. to provide the Company with professional services. Final
payments under this agreement are in dispute and have the potential for future
litigation or arbitration.
48
SCHEDULE 4.6
LIABILITIES
On October 1, 1999 the Company entered into an agreement with First Union
Securities, Inc. to provide the Company with professional services. Final
payments under this agreement are in dispute and have the potential for future
litigation or arbitration.
49
SCHEDULE 4.8
Certain Changes
4.8.5 Deferred Payment Agreements. The Company and four of its officers
(Xxxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxx and Xxxxxxx Xxxxx) will execute
Deferred Payment Agreements on September 1, 2000 to defer change of control
payments pursuant to such officers' respective employment agreements, as
amended.
4.8.5. UIC Termination Fee. In August 2000 the Board of Directors of the
Company authorized a $150,000 termination fee to Unique Investment Corporation
in connection with the termination of management services performed by UIC for
the Company.
4.8.6 Dividends. The Company continues to accrue cumulative dividends on its
Series C preferred stock.
4.8.8 Cash Shortage. The Company's results of operations have been adversely
affected during the last several months as heavy capital expenditure
requirements for the UK facility have decreased the level of working capital
available.
4.8.8 Senior Lender Charges. The Company's senior lender, Xxxxxx Financial
Inc., has charged the Company material fees in accordance with Amendment 4 of
the Loan Agreement between Xxxxxx and the Company, dated April 5, 2000.
50
SCHEDULE 4.13
EMPLOYMENT AGREEMENTS
Xxxxxx Xxxxx:
Employment Agreement dated September 9, 1998, as amended. Management
Incentive Program Agreement dated February 4, 2000, as amended. Change
of Control payment: $368,178.
Xxxxxx Xxxxxxx:
Employment Agreement dated October 1, 1998, as amended. Management
Incentive Program Agreement dated February 4, 2000, as amended. Change
of Control payment: $202.537.
Xxxxxxx Xxxxx:
Employment Agreement dated November 11, 1996, as amended. Management
Incentive Program Agreement dated February 4, 2000, as amended. Change
of Control payment: $145,918.
Xxxxx Xxxx:
Employment Agreement dated November 1, 1996, as amended. Management
Incentive Program Agreement dated February 4, 2000, as amended. Change
of Control payment: $177,537.
Xxxxx Xxxxxx:
Employment Agreement dated November 1, 1996, as amended. Management
Incentive Program Agreement dated February 4, 2000, as amended. Change
of Control payment: $344,877.
51
SCHEDULE 4.15
ENVIRONMENTAL
None.
