EXHIBIT 10.42
WAIVER AND AMENDMENT NO. 1
TO
LOAN AND SECURITY AGREEMENT
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This Waiver and Amendment No. 1 to Loan and Security Agreement (this
"Amendment") is entered into as of October 21, 1999 among HAWKER PACIFIC
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AEROSPACE, a California corporation ("U.S. Borrower"), HAWKER PACIFIC AEROSPACE
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LIMITED, a company organized under the laws of England and Wales ("U.K.
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Borrower" and, collectively with U.S. Borrower, "Borrowers"), the financial
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institution(s) listed on the signature pages hereof and their respective
successors and Eligible Assignees (each, individually, a "Lender" and,
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collectively, "Lenders"), XXXXXX FINANCIAL, INC., a Delaware corporation, as a
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Lender and as Agent for Lenders ("Agent"), and NMB-XXXXXX LIMITED, an Affiliate
of Agent domiciled in the United Kingdom, as Funding Agent and Collateral Agent
("NMB-Xxxxxx").
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RECITALS;
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WHEREAS, Borrowers, Lenders, Agent and NMB-Xxxxxx are parties to a
Loan and Security Agreement dated as of December 22, 1998 (as heretofore, now,
or hereafter amended, supplemented, restated or otherwise modified, the "Loan
Agreement"); and
WHEREAS, the Events of Default described in Exhibit A hereto
(collectively, the "Existing Defaults") have occurred and are continuing under
the Loan Agreement (prior to giving effect to this Amendment);
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms
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used in this Amendment shall have the meanings ascribed to such terms in the
Loan Agreement.
2. Limited Waiver of Lenders. Lenders hereby waive the Existing
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Defaults.
3. Amendments to Loan Agreement and other Loan Documents. The
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parties agree to amend the Loan Agreement and other Loan Documents as set forth
in this Section 3.
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(a) Section 2.1(A)(1) of the Loan Agreement is hereby amended
by deleting such subsection in its entirety and replacing it with the
following:
(A)(1) Term Loan A. Each Lender, severally, agrees to
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lend to Borrowers, jointly and severally, on the Closing Date,
its Pro Rata Share of Term Loan A which is in the aggregate
amount of $4,280,000. Term Loan A shall be funded in one
drawing. Amounts borrowed under this subsection 2.1(A)(1) and
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repaid may not be reborrowed. Borrowers shall make principal
payments in the amount of the applicable Scheduled
Installment of Term Loan A (or such lesser principal amount as
shall then be outstanding) on the dates set forth below.
"Scheduled Installment" of Term Loan A means, for each
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date set forth below, the amount set forth opposite such date.
Date Scheduled Installment
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March 31, 1999 and the last day of $152,857
each March, June, September and
December thereafter through
September 30, 2003
December 31, 2003 $1,375,714.30 or the then
remaining principal
balance of Term Loan A
(b) Section 2.1(A)(2) of the Loan Agreement is hereby amended
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by deleting such subsection in its entirety and replacing it with the
following:
(A)(2) Term Loan B. Each Lender, severally, agrees to
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lend to Borrowers, jointly and severally, on the Closing Date,
its Pro Rata Share of Term Loan B which is in the aggregate
amount of $2,500,000. Term Loan B shall be funded in one
drawing. Amounts borrowed under this subsection 2.1(A)(2) and
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repaid may not be reborrowed. Borrowers shall pay the then
remaining principal balance of Term Loan B on December 31,
2003.
(c) Section 2.4(B)(2) of the Loan Agreement is hereby amended
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by deleting such subsection in its entirety and replacing it with the
following:
(2) Proceeds of Asset Dispositions. Immediately upon
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receipt by any Borrower or any Subsidiary thereof of proceeds
of any Asset Disposition (in one or a series of related
transactions), which proceeds exceed $10,000 (it being
understood that if the proceeds exceed $10,000, the entire
amount and not just the portion above $10,000 shall be subject
to this subsection 2.4(B)(2)), Borrowers shall prepay the
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Obligations in an amount equal to such proceeds. Such
prepayments shall be applied, first, to reduce Scheduled
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Installments of Term Loan A, in inverse order of maturity,
second, after Term Loan A shall have been repaid in full, to
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reduce the outstanding principal balance of the Revolving Loan
(and as a permanent reduction of the Revolving Loan Commitment)
and, third, after Term Loan A and the outstanding principal
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balance of the Revolving Loan shall have been repaid in full,
to reduce the outstanding principal balance of Term Loan B. If
Borrowers reasonably expect the proceeds of any Asset
Disposition to be reinvested within 60 days to repair or
replace such assets with like assets, Borrowers shall deliver
the proceeds to Agent (in the same Available Currency as
received by the applicable Loan Party) to
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be applied to the Revolving Loan and Agent shall establish a
reserve against available funds for borrowing purposes under
the Revolving Loan for such amount, until such time as such
proceeds have been reborrowed or applied to other Obligations
as set forth herein. Borrowers may, so long as no Default or
Event of Default shall have occurred and be continuing,
reborrow such proceeds only for such repair or replacement. If
Borrowers fail to reinvest such proceeds within 60 days,
Borrowers hereby authorize Lenders to make a Revolving Advance
to repay the Obligations in the manner set forth in this
subsection 2.4(B)(2).
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(d) Section 4.17 of the Loan Agreement is hereby amended by
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deleting the third sentence contained in such section in its entirety.
(e) Section 7.3(A)(ii) of the Loan Agreement is hereby amended
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by deleting clause (1) thereof and replacing it with the following:
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(1) Agent shall have delivered written approval of such
Asset Disposition to Borrower Representative prior to such
Asset Disposition;
(f) Section 8.1(C) of the Loan Agreement is hereby amended by
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deleting such subsection in its entirety and replacing it with the
following:
(C) Breach of Certain Provisions. Failure of any Loan
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Party to perform or comply with any term or condition contained
in paragraphs (A), (B) or (N) of the Reporting Rider or
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subsections 5.3, 5.5 or 5.6 or contained in Section 4, Section
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6, Section 7 or the Financial Covenants Rider; or
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(g) Section 10.3 of the Loan Agreement is hereby amended by
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amending and restating the address and telecopy reference to U.K. Borrower
as follows:
HAWKER PACIFIC AEROSPACE LIMITED
Xxxx 0, Xxxxxx Xxxx
Xxxxxxx Way
Xxxxx, Xxxxxxxxx XX0 0XX
Xxxxxx Xxxxxxx
Attn: Xxxxxx Xxxxx
Telecopy No.: 011-22-208-589-1901
(h) Section 11.1 of the Loan Agreement is hereby amended by
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deleting the parenthetical in clause (1) of the "EBITDA" definition and
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replacing it with the following:
(without deduction for professional fees in connection
with the sale of substantially all of the assets of the
Borrowers and their respective Subsidiaries, without deduction
for any fees or expenses incurred by any financial consultant
retained by Agent and without deduction for the
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$50,000 amendment fee charged by Agent in connection with
Waiver and Amendment No. 1 to this Agreement)
(i) The definition of "Fixed Charges" in Section 11.1 of the
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Loan Agreement is hereby amended by amending and restating clause (b) set
forth therein as follows:
(b) at all times from and after September 30, 1999,
scheduled payments of principal with respect to all
Indebtedness of Borrowers and their Subsidiaries (excluding
mandatory prepayments required under subsection 2.4 actually
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paid in cash and/or due to be paid in cash within such period
but including, without limitation, scheduled payments of
principal on Term Loan A made on March 31, 1999, June 30, 1999
and September 30, 1999, each in the amount of $153,000); plus
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(j) The Reporting Rider to the Loan Agreement is hereby
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amended by deleting paragraph (F) thereof and replacing it with the
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following:
(F) Borrowing Base Certificates, Registers and Journals.
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On or prior to Wednesday of each week and within 20 days after
the last day of each month (or more frequently if requested by
Agent at any time during which a Default or an Event of Default
shall have occurred and be continuing), Borrower Representative
shall deliver to Agent and to Funding Agent: (1) a Borrowing
Base Certificate as of the last Business Day of the preceding
week or month (or as of such other date as Agent may specify)
updated to reflect (a) all sales and collections of Borrowers
during such week or month (or such other period specified by
Agent) and an assignment schedule of all Accounts created by
Borrowers during such week or month (or such other period
specified by Agent), (b) all Revolving Advances made by Agent,
Funding Agent and Lenders during such week or month (or such
other period specified by Agent), (c) the most recently
delivered Periodic Inventory Appraisal, and (d) the aggregate
Dollar Equivalent amount of Borrowers' Inventory then subject
to any title retention arrangement or similar arrangement in
favor of the seller or vender of such Inventory (and, in
connection therewith, Borrower Representative shall also
deliver a separate certificate duly executed by its chief
financial officer certifying that no Inventory subject to any
such arrangement is included in the Borrowing Base); (2) a
schedule setting forth projected shipments to customers of
Exchange Inventory and Work in Process for the 12 month period
commencing as of the first day of the then current month, which
schedule shall identify the applicable Exchange Inventory and
Work in Process to be shipped, the estimated shipping dates and
customers and jurisdictions to which such Exchange Inventory
and Work in Process are projected to be shipped; and (3) each
or any of the following; if requested by Agent; (a) an invoice
register or sales journal describing all sales of Borrowers
during such week or month (or such other period specified by
Agent), in form and substance satisfactory to
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Agent, and, if Agent so requests, copies of invoices evidencing
such sales and proofs of delivery relating thereto; (b) a cash
receipts journal; (c) a credit memo journal; and (d) an
adjustment journal, setting forth all adjustments to each
Borrower's accounts receivable. The certificate and information
described in this paragraph (F) shall be delivered by Borrower
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Representative in a manner that is compatible with Agent's
"Stars" computer software program.
(k) The Reporting Rider to the Loan Agreement is hereby
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further amended by deleting paragraph (I)(2) thereof and replacing it with
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the following:
(2) Inventory Appraisals. Within 5 Business Days after
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the end of each month following the Closing Date, commencing
with the month ending September 30, 1999, Borrowers, at their
expense, shall deliver to the Appraiser (as hereinafter
defined), all information necessary for the Appraiser to
prepare a Periodic Inventory Appraisal for such month. Within
15 days after the end of each month following the Closing Date,
commencing with the month ending September 30, 1999, Borrowers,
at their expense, shall deliver to Agent desktop appraisals
(meaning appraisals prepared without an on-site inspection by
the Appraiser; based on information provided to the Appraiser
by Borrowers) (each, a "Periodic Inventory Appraisal") of the
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Exchange Inventory and Work in Process, Repair Parts and
Unserviceable Parts of Borrowers. Such Periodic Inventory
Appraisals shall be prepared by Sage Xxxxxxxx, Inc. (so long as
such appraiser is available and remains satisfactory to Agent
or, if such is not the case, by another independent appraiser
reasonably acceptable to Agent; Sage Xxxxxxxx or such other
appraiser shall be referred to herein as the "Appraiser"),
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shall be in form and scope acceptable to Agent, and shall set
forth the respective Orderly Liquidation Values and Fair Market
Values of Borrowers' Exchange Inventory and Work in Process,
Repair Parts and Unserviceable Parts as of the last day of the
most recently ended month. In addition, Borrowers shall work
with the Appraiser and the Agent to ensure that on November 30,
1999 and within 45 days after March 31 and September 30 of each
year following the Closing Date, Borrowers deliver to Agent
full, on-site appraisals (each, a "Semi-Annual Appraisal") of
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the Exchange Inventory and Work in Process, Repair Parts and
Unserviceable Parts of Borrowers. Such Semi-Annual Appraisals
shall be prepared by the Appraiser, shall be in form and scope
acceptable to Agent, and shall set forth the respective Orderly
Liquidation Values and Fair Market Values of Borrowers'
Exchange Inventory and Work in Process, Repair Parts and
Unserviceable Parts as of September 30, 1999 and March 31 and
September 30, as applicable, of the relevant year.
(l) The Reporting Rider to the Loan Agreement is hereby
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further amended by adding the following to the end thereof:
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(N) Weekly Cash Flow Reports. On or prior to Wednesday
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of each week, Borrower Representative will deliver to Agent, in
form and substance satisfactory to Agent, (i) a budget
forecasting cash receipts and cash disbursements for Borrowers
and their Subsidiaries on a consolidated basis for the four
immediately following weeks on a weekly basis and for the two
immediately following fiscal months on a monthly basis and (ii)
a report showing actual cash receipts and cash disbursements
for Borrowers and their Subsidiaries on a consolidated basis
for the prior week (i.e., Sunday through Saturday) and
comparing such amounts to the amounts forecasted in the most
recently delivered budget for such week.
(m) The Financial Covenants Rider to the Loan Agreement is
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hereby amended by deleting such Rider in its entirety and replacing it with
the Financial Covenants Rider attached hereto as Exhibit B.
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(n) Interest. The provisions set forth in numbered paragraph
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5 to that certain Second Forbearance Letter dated as of April 13, 1999
among Agent and the Borrowers is hereby incorporated herein by reference;
provided, that the language "Base Rate Margin shall equal one and one-half
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of one percent (1.50%)," contained therein is hereby amended as
incorporated herein to read "Base Rate Margin shall equal two and one-half
of one percent (2.50%),".
4. Covenants. Each Borrower covenants and agrees that (i) such
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Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 4, and (ii) failure of any Loan Party to perform or
comply with any term or condition in this Section 4 shall constitute an
immediate Event of Default under the Loan Agreement.
(a) Amendment Fee. Upon the effectiveness of this Amendment,
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Agent shall have fully earned an amendment fee in the amount of $50,000
(the "Amendment Fee"). Borrowers jointly and severally agree to pay to
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Agent the Amendment Fee on the earlier of (a) March 31, 2000 or (b) the
closing of a Company Sale. The Amendment Fee is nonrefundable.
(b) Business Consultant. Borrowers shall (i) work reasonably
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and cooperatively with Agent's representatives, including, without
limitation, any business or financial consultant retained by Agent, and
(ii) provide Agent's representatives, including, without limitation, any
business or financial consultant retained by Agent, with complete and
direct access to Borrower's investment banker, business consultant,
financial advisors, accountants and employees and all information regarding
Borrowers and their Subsidiaries.
(c) Junior Investment. On or prior to November 15, 1999,
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Borrowers shall obtain at least $4,000,000 or such greater amount not to
exceed $6,000,000 as deemed necessary by Agent (the "Junior Investment")
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from either (i) secured or unsecured loans subordinated to the Obligations
in a manner and form satisfactory to Agent as to right and time of payment,
lien priority and as to any other rights and remedies thereunder or (ii)
additional equity investments in Borrowers.
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(d) [This paragraph has been intentionally omitted.]
(e) Intercompany Loans. U.S. Borrower shall provide Agent
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with three (3) days advance written notice prior to making any intercompany
loan to U.K. Borrower.
(f) Blocked Accounts. Within five (5) Business Days after the
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date of this Amendment, U.S. Borrower shall have completed the necessary
action to establish the U.S. Blocked Accounts with such U.S. Collecting
Bank or Banks as acceptable to Agent and U.S. Borrower shall deliver or
cause to be delivered to Agent Blocked Account Agreements, containing the
provisions required pursuant to subsection 4.26(A) of the Loan Agreement
and otherwise in form and substance satisfactory to Agent, duly executed by
U.S. Borrower and the applicable Banks with respect to such U.S. Blocked
Accounts.
(g) Refunded Payments. Within two (2) Business Days after the
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date of this Amendment, Borrowers shall have caused Unique to deliver an
agreement ("Refund Agreement") in favor of Agent (on terms and conditions
satisfactory to Agent) pursuant to which Unique will undertake to pay to
Agent all amounts received by Unique since December 31, 1998 under the
Unique Management Agreement and the Subordinated Debt (collectively, the
"Refund Amount"). The Refund Agreement shall contain, among other things,
provisions to the effect that (i) if by November 15, 1999, Borrowers have
not obtained a Junior Investment in accordance with this Amendment, Unique
shall immediately pay to Agent the Refund Amount which shall be applied to
the outstanding Revolving Loans unless otherwise consented to in writing by
Agent and (ii) if Borrowers have obtained such Junior Investment by
November 15, 1999 and the Company Sale has not closed by March 31, 2000,
Unique shall pay to Agent the Refund Amount on March 31, 2000, which Refund
Amount shall be promptly returned to the Borrowers by Agent.
(h) EBITDA Treatment. The Borrowers agree that neither they
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nor their Subsidiaries have incurred nor will any of them incur any, non-
cash charges (including any occurring on an extraordinary or non-recurring
basis) or extraordinary or non-recurring "cash" losses resulting from any
action or omission on the part of any Borrower or its Subsidiaries from the
period beginning January 1, 1999 through and including September 30, 1999.
5. Conditions to Effectiveness. This Amendment shall become
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effective upon the prior or concurrent satisfaction of the following conditions,
all in a manner satisfactory to Agent:
(a) Agent shall have received a fully executed copy of this
Amendment, including all Exhibits hereto.
(b) Agent shall have received a fully executed Amended and
Restated Term Loan B Note in the form of Exhibit C hereto.
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(c) Agent shall have received a Reaffirmation of Guaranty in
the form of Exhibit D hereto.
(d) Agent shall have received certified copies of resolutions
of U.S. Borrower and U.K. Borrower approving the execution, delivery and
performance of this Amendment and the transactions contemplated hereby.
(e) Agent shall have received a memorandum in form and
substance satisfactory to Agent itemizing the Borrowers' actual and
proposed Capital Expenditures during Fiscal Year 1999 and the period from
January 1, 2000 through June 30, 2000, and showing the impact of such
Capital Expenditures on the Borrowing Base and cash flow.
(f) Agent shall have received a memorandum in form and
substance satisfactory to Agent itemizing any currently contemplated Asset
Dispositions and showing their impact on the Borrowing Base.
(g) Agent shall have received a listing of Borrowers' major
assets (i.e., assets with a cost price in excess of $500,000) and the
status of each such asset (i.e., in service, expected completion date, not
in service, expected use date, etc.)
(h) Agent shall have received Projections on a monthly basis
for each month ending during the period from October 31, 1999 through June
30, 2000 and on a quarterly basis for each quarter ending during the period
from September 30, 2000 through September 30, 2003, revised to reflect
Borrowers' forecasted consolidated and consolidating financial results if
no Junior Investment is obtained and no Asset Dispositions occur.
(i) Agent shall have received a schedule showing (i) all
locations at which Inventory owned by either Borrower is located on the
date hereof; (ii) all Inventory owned by either Borrower that is in-transit
on the date hereof, where it is in-transit from and where it is in-transit
to; and (iii) the aggregate amount of ineligible Inventory in each country
in which ineligible Inventory is located and the aggregate amount of
ineligible Inventory expected to be transferred to each such country from
the date hereof through and including June 30, 2000.
(j) Agent shall have received executed copies of all
documents, agreements and instruments executed in connection with the
Subordinated Debt and U.S. Borrower shall either provide Agent with a copy
of the Subordination Agreement or execute a Subordination Agreement
acceptable to Agent.
(k) Agent shall have received a certificate signed by the
Chief Financial Officer of the Borrowers setting forth a detailed
calculation of all the financial covenants required under the Loan
Agreement, as amended hereby, which calculations shall be based upon the
Projections delivered in accordance with Section 5(h) hereof and such
calculations shall be made for each period required by such financial
covenants, as applicable, through September 30, 2003.
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(l) Agent shall have received a satisfactory waiver from the
U.S. Borrower with respect to the services of the Scotland Group, Inc.
6. Representations and Warranties of Borrowers. Each Borrower
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represents and warrants to Agent and Lenders that:
6.1 Authority. Each Borrower has full power, authority and legal
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right to enter into this Amendment and the other agreements entered into in
connection herewith to which such Borrower is a party. The execution and
delivery by each Borrower of this Amendment and the other agreements entered
into in connection herewith to which such Borrower is a party: (i) have been
duly authorized by all necessary action on the party of such Borrower; (ii) are
not in contravention of the terms of such Borrower's organizational documents or
of any indenture, agreement or undertaking to which such Borrower is a party or
by which such Borrower or any of its property is bound; (iii) do not and will
not require any governmental consent, registration or approval; (iv) do not and
will not contravene any contractual or governmental restriction of which such
Borrower or any of its property may be subject; and (v) do not and will not,
except as contemplated herein, result in the imposition of any lien, charge,
security interest or encumbrance upon any property of such Borrower under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which such Borrower is a party or by which
such person or any of its property may be bound or affected.
6.2 Binding Effect. This Amendment and all of the other agreements
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entered into by each Borrower in connection herewith have been duly executed and
delivered by such Borrower, are the legal, valid and binding obligations of such
Borrower and are enforceable against such in accordance with their respective
terms.
6.3 No Default. No Default or Event of Default has occurred and is
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continuing or would result from the execution and delivery of this Agreement or
the other agreements executed and delivered by either Borrower hereunder or the
consummation of the transactions contemplated hereby.
7. Reference to and Effect Upon the Loan Documents.
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7.1 Except as specifically amended above, the Loan Agreement, as
amended, and each of the Loan Documents shall remain in full force and effect
and is hereby ratified and confirmed.
7.2 The execution, delivery and effectiveness of this Amendment shall
be limited precisely as written and shall not be deemed to (i) be a consent to
any waiver or modification of any other term or condition of the Loan Agreement
or any other Loan Document or (ii) prejudice any right, power or remedy which
Lender may now have or may have in the future under or in connection with the
Loan Agreement (after giving effect to this Amendment) or any other Loan
Document. Upon the effectiveness of this Amendment, each reference in the Loan
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of
similar import shall mean and be a reference to the Loan Agreement as amended
hereby.
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8. Counterparts; Facsimile Signatures. This Amendment may be
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executed in any number of counterparts, each of which when so executed shall be
deemed an original, but all such counterparts shall constitute one and the same
instrument. Transmission by facsimile of an executed counterpart of this
Amendment shall be deemed to constitute due and sufficient delivery of such
counterpart and an original for all purposes.
9. Costs, Expenses and Taxes. Borrowers jointly and severally agree
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to pay on demand all reasonable fees, costs and expenses incurred by Agent,
Lenders and NMB-Xxxxxx in connection with the preparation, execution and
delivery of this Amendment (including, without limitation, attorney's fees and
expenses).
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
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IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS (AS OPPOSED TO CONFLICT OF
LAWS PROVISIONS) OF THE STATE OF ILLINOIS.
11. Headings. Section headings in this Amendment are included herein
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for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the
day and year first above written.
HAWKER PACIFIC AEROSPACE, as Borrower and as
Borrower Representative
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
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Title: Executive Vice President
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HAWKER PACIFIC AEROSPACE LIMITED, as a Borrower
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
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Title: Director
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XXXXXX FINANCIAL, INC., as Agent and as a Lender
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
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Title: Vice President
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NMB-XXXXXX LIMITED, in its capacity as Funding
Agent and Collateral Agent
By: /s/ J.P. Onslow
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Name: J. P. Onslow
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Title: Director
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Exhibit A
Existing Defaults
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Section 4.26. Failure to comply with Section 4.26 of the Loan Agreement and
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paragraph (d) of the Post-Closing Matters and Waiver Agreement dated as of
December 22, 1998 between Borrower Representative and Agent prior to the date of
the attached Amendment.
Section 8.1(C). Failure to comply with paragraph A of the Financial Covenants
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Rider at the end of each month from December 1998 through August 1999.
Section 8.1(C). Failure to comply with paragraph B of the Financial Covenants
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Rider for the Fiscal Year ended December 31, 1998 and the six-months ended June
30, 1999.
Section 8.1(C). Failure to comply with paragraph C of the Financial Covenants
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Rider for Fiscal Year 1999.
Section 8.1(C). Failure to comply with paragraph D of the Financial Covenants
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Rider for the 12- month period ending on each month from December 31, 1998
through August 31, 1999.
Section 8.1(C). Failure to obtain Agent's consent under Sections 4.19 and 7.13
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of the Loan Agreement with respect to new bank accounts.
Section 8.1(C). Failure to obtain key man life insurance required under Section
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4.17 of the Loan Agreement.
Section 8.1(E). Failure to deliver a fully executed Subordination Agreement
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required by Section 3 of the Loan Agreement, the Conditions Rider and Schedules
3.1(A) to the Loan Agreement.
Section 8.1(C). Failure to comply with Section 7.5 of the Loan Agreement
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regarding Restricted Junior Payments under the Unique Management Agreement and
in respect of Subordinated Debt.
Exhibit B
Financial Covenants Rider
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FINANCIAL COVENANTS RIDER
This Financial Covenants Rider is attached and made a part of that certain
Loan and Security Agreement, dated as of December 22, 1998 and entered into
among Hawker Pacific Aerospace and Hawker Pacific Aerospace Limited, as
Borrowers, Agent, Funding Agent, Collateral Agent and Lenders. Borrowers shall,
in good faith, propose an amendment to paragraphs A, B and D of the Financial
Covenants Rider that is satisfactory to Agent in Agent's sole discretion on or
prior to July 1, 2000, setting forth monthly financial covenants for the month
ended October 31, 2000 and for each month ended thereafter. If paragraphs A, B
and D to the Financial Covenants Rider have not been amended in a manner
satisfactory to Agent in its sole discretion on or prior to September 30, 2000,
an Event of Default shall be deemed to have occurred under the Loan Agreement.
A. Tangible Net Worth. Borrowers shall at all times maintain
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Tangible Net Worth of at least the amounts set forth below for the corresponding
monthly periods set forth below, measured at the end of each month. For the
monthly periods ended October 31, 2000 and thereafter, Borrowers shall at all
times maintain Tangible Net Worth of at least the amounts for each such period
as shall be acceptable to Agent in its sole discretion.
Period Amount
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September, 1999 $8,033,000
October, 1999 $7,016,000
November, 1999 $6,946,000
December, 1999 $7,992,000
January, 2000 $8,238,000
February, 2000 $7,979,000
March, 2000 $8,219,000
April, 2000 $8,228,000
May, 2000 $8,407,000
June, 2000 $8,553,000
July, 2000 $8,500,000
August, 2000 $8,500,000
September, 2000 $8,500,000
B. Minimum EBITDA. Borrowers shall maintain EBITDA as of the last
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day of each month during the periods set forth below for the (i) rolling three
month period then ended for September 30, 1999 through December 31, 1999 and
(ii) rolling twelve month period then ended for January 31, 2000 through
September 30, 2000, in each case, of not less than the amount set forth below
for such corresponding period. For the months ended October 31, 2000 and
thereafter, Borrowers shall maintain EBITDA as of the last day of each such
month for the
rolling twelve month period then ended of not less than the amounts for each
such period as shall be acceptable to Agent in its sole discretion.
Period Amount
------ ------
September, 1999 $ 2,878,000
October, 1999 $ 2,098,000
November, 1999 $ 1,836,000
December, 1999 $ 1,879,000
January, 2000 $ 5,611,000
February, 2000 $ 5,648,000
March, 2000 $ 5,370,000
April, 2000 $ 6,090,000
May, 2000 $ 6,937,000
June, 2000 $10,048,000
July, 2000 $ 8,782,000
August, 2000 $ 7,794,000
September, 2000 $ 6,990,000
C. Capital Expenditure Limits. The aggregate amount of all Capital
--------------------------
Expenditures, Capital Leases with respect to fixed assets of Borrowers and their
Subsidiaries (which shall be considered to be expended in full on the date such
Capital Lease is entered into) and other contracts with respect to fixed assets
initially capitalized on any Borrower's or any Subsidiary's balance sheet
prepared in accordance with GAAP (which shall be considered to be expended in
full on the date such contract is entered into) (excluding, in each case,
expenditures for trade-ins and replacement or substitution of assets to the
extent funded with (i) casualty insurance proceeds or (ii) the proceeds of Asset
Dispositions approved by Agent under Section 7.3(A)(ii)(1) of the Loan
Agreement) will not exceed the amount set forth below for each period set forth
below; provided, however, that if Borrowers obtain a Junior Investment (as
defined in Waiver and Amendment No. 1 to Loan Agreement dated October 21, 1999
among Borrowers, Lenders, Agent and HMB-Xxxxxx) in excess of $4,000,000 on or
prior to November 15, 1999, the limit on Capital Expenditures for the period
from September 30, 1999 through December 31, 1999 shall be $3,700,000 instead of
$3,400,000.
Period Amount
------ ------
September 30, 1999 through $3,400,000
December 31, 1999
first fiscal quarter in Fiscal Year 2000 $ 650,000
each fiscal quarter thereafter $ 700,000
in Fiscal Year 2000
Fiscal Year 2001 and $3,000,000
each Fiscal Year thereafter
The Capital Expenditure Amounts set forth above for the periods of
September 30, 1999 through December 31, 1999 and for the first fiscal
quarter in Fiscal Year 2000 shall each be increased by thirty percent (30%)
of the amount by which the actual Junior Investment exceeds $6,000,000.
D. Fixed Charge Coverage. Borrowers shall not permit their Fixed
---------------------
Charge Coverage as of the last day of each month during the periods set forth
below (i) for the rolling three month period then ended for September 30, 1999
through and including December 31, 1999 and (ii) for the rolling twelve month
period then ended for January 31, 2000 through and including September 30, 2000,
in each case to be less than the corresponding ratios set forth below for such
period. For the months ended October 31, 2000 and thereafter, Borrowers shall
not permit their Fixed Charge Coverage for the rolling twelve month period then
ended to be less than the ratios for each such period as shall be acceptable to
Agent in its sole discretion.
Period Ratio
------ -----
September, 1999 <3.09>:1
October, 1999 0.39:1
November, 1999 0.56:1
December, 1999 <0.47>:1
January, 2000 <0.82>:1
February, 2000 <0.80>:1
Xxxxx, 0000 <0.86>:1
April, 2000 <0.72>:1
May, 2000 <0.56>:1
June, 2000 0.02:1
July, 2000 0.58:1
August, 2000 0.58.1
September, 2000 0.63:1
Exhibit C
Amended and Restated Term Loan B Note
-------------------------------------
AMENDED AND RESTATED TERM LOAN B NOTE
-------------------------------------
$2,500,000 Chicago, Illinois
October __, 1999
FOR VALUE RECEIVED, the undersigned, Hawker Pacific Aerospace, a
California corporation ("U.S. Borrower") and Hawker Pacific Aerospace Limited, a
-------------
company organized under the laws of England and Wales (registered number
3459428) (the "U.K. Borrower") (collectively with the U.S. Borrower, the
-------------
"Borrowers"), hereby jointly and severally unconditionally promise to pay to the
----------
order of XXXXXX FINANCIAL, INC., a Delaware corporation ("Lender"), at the
------
office of Agent (as defined below) at 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000, or at such other place as the holder of this Amended and Restated Term
Loan B Note may from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000).
This Amended and Restated Term Loan B Note is due and payable on
December 31, 2003.
This Amended and Restated Term Loan B Note is one of the Notes
referred to in, was executed and delivered pursuant to, and evidences
indebtedness of Borrowers incurred under, that certain Loan and Security
Agreement dated as of December 22, 1998 by and among Borrowers, each of the
Lenders party thereto from time to time, Xxxxxx Financial, Inc., in its capacity
as Agent for the Lenders, and NMB-Xxxxxx Limited, as Funding Agent and
Collateral Agent (as the same may be amended, restated, supplemented or
otherwise modified and in effect from time to time, the "Loan Agreement"), to
--------------
which reference is hereby made for a statement of the terms and conditions under
which the loan evidenced hereby was made and is to be repaid and for a statement
of Agent's and Lender's remedies upon the occurrence of an Event of Default.
Capitalized terms used herein but not otherwise specifically defined shall have
the meanings ascribed to such term in the Loan Agreement.
This Amended and Restated Term Loan B Note is issued in substitution
of the Term Loan B Note issued by Borrowers to Lender on December 22, 1998 (the
"Prior Note") and evidences an adjustment in the principal balance outstanding
under the Prior Note to reflect amounts paid in accordance with the terms of the
Loan Agreement prior to the date hereof. The principal balance outstanding
under the Prior Note shall continue in all respects to be outstanding hereunder,
and this Amended and Restated Term Loan B Note shall not be deemed to evidence a
novation or payment and refunding of that outstanding principal balance.
Borrowers further promise to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full at the rate
from time to time applicable to Term Loan B as determined in accordance with the
Loan Agreement; provided, however, that upon the occurrence and during the
-------- -------
continuance of an Event of Default, Borrowers shall pay interest on the
outstanding principal balance of this Amended and Restated Term Loan B Note at
the rate of interest applicable following the occurrence of an Event of Default
as determined in accordance with the Loan Agreement.
Interest on this Amended and Restated Term Loan B Note shall be
payable at the times and from the dates specified in the Loan Agreement, on the
date of any prepayment hereof, at maturity, whether due by acceleration or
otherwise, and as otherwise provided in the Loan Agreement. From and after the
date when the principal balance hereof becomes due and payable, whether by
acceleration or otherwise, interest hereon shall be payable on demand. In no
contingency or event whatsoever shall interest charged hereunder, however such
interest may be characterized or computed, exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
rate applicable hereto, such excess shall be applied in accordance with the
terms of the Loan Agreement.
The indebtedness evidenced by this Amended and Restated Term Loan B
Note is secured pursuant to the terms of the Loan Documents.
Borrowers hereby waive demand, presentment and protest and notice of
demand, presentment, protest and nonpayment.
Borrowers further agree, subject only to any limitation imposed by
applicable law, to pay all expenses, including attorneys' fees and legal
expenses, incurred by Lender in endeavoring to collect any amounts payable
hereunder which are not paid when due, whether by acceleration or otherwise.
THIS AMENDED AND RESTATED TERM LOAN B NOTE HAS BEEN DELIVERED AT
CHICAGO, ILLINOIS, AND SHALL BE GOVERNED BY, AND INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS)
AND DECISIONS OF THE STATE OF ILLINOIS. Whenever possible each provision of
this Amended and Restated Term Loan B Note shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Amended and Restated Term Loan B Note shall be prohibited by or invalid under
applicable law, but if any provision of this Amended and Restated Term Loan B
Note shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Amended and Restated Term Loan B Note. Whenever in this Term Loan B reference
is made to Agent, Lender or Borrowers, such reference shall be deemed to
include, as applicable, a reference to their respective permitted successors and
assigns, and in the case of Lender any financial institution to which it has
sold or assigned all or any part of its interest in Term Loan B or in its
commitment to make Term Loan B as permitted by the Loan Agreement. The
provisions of this Amended and Restated Term Loan B Note shall be binding
upon and shall inure to the benefit of such permitted successors and assigns.
Borrowers' successors and assigns shall include, without limitation, a receiver,
a trustee or debtor in possession of or for Borrowers.
HAWKER PACIFIC AEROSPACE, a California
corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------
Title: Executive Vice President
-------------------------------
HAWKER PACIFIC AEROSPACE LIMITED, a company
organized under the laws of England and
Wales (registered number 3459428)
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------
Title: Director
-------------------------------
Exhibit D
Reaffirmation of Guaranty
-------------------------
REAFFIRMATION OF GUARANTY
-------------------------
October __, 1999
Xxxxxx Financial, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxx
Please refer to (1) the Loan and Security Agreement dated as of
December 22, 1998 (as amended, supplemented, restated or otherwise modified from
time to time, the "Loan Agreement"), among HAWKER PACIFIC AEROSPACE, a
--------------
California corporation ("U.S. Borrower"), HAWKER PACIFIC AEROSPACE LIMITED, a
-------------
company organized under the laws of England and Wales ("U.K. Borrower" and,
-------------
collectively with U.S. Borrower, "Borrowers"), the financial institution(s)
---------
listed on the signature pages of the Loan Agreement and their respective
successors and assigns (each, individually, a "Lender" and, collectively,
------
"Lenders"), XXXXXX FINANCIAL, INC., a Delaware corporation, as a Lender and as
--------
Agent for Lenders ("Agent"), and NMB-XXXXXX LIMITED, an affiliate of Agent
domiciled in the United Kingdom, as Funding Agent and Collateral Agent ("NMB-
---
Xxxxxx"); and (2) the Agreement Regarding Guaranty and Letter of Credit dated
------
June 9, 1999 (as amended, the "Guaranty"), made by Xxxxxxx Xxxxxxx in favor of
--------
Agent on behalf of the Lenders under the Loan Agreement as security for Term
Loan B. Capitalized terms used herein and not otherwise defined have the
meanings assigned to such terms in the Loan Agreement.
Pursuant to Waiver and Amendment No. 1 to Loan Agreement, dated as of
even date herewith (the "Amendment"), among Agent, the Lenders, NMB-Xxxxxx and
---------
Borrowers, certain provisions in the Loan Agreement were amended. Xxxxxxx
Xxxxxxx has reviewed the Amendment and hereby (i) acknowledges and reaffirms all
of her obligations and undertakings under the Guaranty, and (ii) acknowledges
and agrees that subsequent to, and taking into account such Amendment, the
Guaranty is and shall remain in full force and effect.
XXXXXXX XXXXXXX
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Individually
