PLEDGE AGREEMENT
This PLEDGE AGREEMENT ("Agreement"), dated as of January__, 1998, is
made by HAWKER PACIFIC AEROSPACE, a California corporation ("Grantor"), in favor
of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as lender under the
Loan Agreement referred to below ("Bank") with reference to the following
facts:
RECITALS
A. Pursuant to the Amended and Restated Business Loan Agreement of
even date herewith between Grantor, as borrower, and Bank (as such agreement may
from time to time be amended, extended, renewed, supplemented or otherwise
modified, the "Loan Agreement"), Bank has agreed to extend certain credit
facilities to Grantor.
B. The Loan Agreement provides, as a condition precedent to the
Bank's obligations to extend credit facilities to Grantor, that Grantor shall
enter into this Agreement, and shall pledge certain Pledged Collateral (as
defined herein) to Bank, all under the terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce the Bank to extend credit
facilities to the Grantor under the Loan Agreement, and for other good and
valuable consideration, the receipt and adequacy of which hereby is
acknowledged, Grantor hereby represents, warrants, covenants, agrees, and
pledges as follows:
1. DEFINITIONS. Terms defined in the Loan Agreement and not otherwise
defined in this Agreement shall have the meanings given those terms in the Loan
Agreement as though set forth herein in full. The following terms shall have
the meanings respectively set forth after each:
"CERTIFICATES" means all certificates, instruments or other documents
now or hereafter representing or evidencing any Pledged Securities.
"PLEDGED COLLATERAL" means (i) any and all property of Grantor now or
hereafter pledged and delivered to Bank, (ii) the Pledged Securities and
the Certificates representing or evidencing same, and (iii) the
Intercompany Note, and any and all proceeds and products of any of the
foregoing, and any and all
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collections, dividends, distributions, redemption payments or
liquidation payments with respect to any of the foregoing, EXCEPT
dividends or distributions actually paid to the Grantor as
permitted under the terms of the Loan Agreement.
"PLEDGED SECURITIES" means (i) all shares of capital stock of Hawker
Pacific Aerospace Limited, an English company ("HP UK"), owned by Grantor;
(ii) any and all securities now or hereafter issued in substitution,
exchange or replacement therefor, or with respect thereto; (iii) any and
all warrants, options or other rights to subscribe to or acquire any
additional capital stock of HP UK; and (iv) any and all additional capital
stock of HP UK.
2. REPRESENTATIONS AND WARRANTIES.
(a) INCORPORATION OF TERMS. This Agreement is one of the Loan
Documents referred to in the Loan Agreement. All provisions contained in the
Loan Agreement that are applicable to the Loan Documents generally are fully
applicable to this Agreement and are incorporated herein by this reference as
though set forth in full.
(b) REPRESENTATIONS AND WARRANTIES OF GRANTOR. Grantor represents,
warrants and agrees that: (i) it has good title to the Pledged Collateral, free
from any liens, leases, encumbrances, defenses or other claims or restrictions
whatsoever; (ii) the security interest in the Pledged Collateral created hereby
constitutes a first, prior, and indefeasible security interest with respect to
such collateral; (iii) it has the right to transfer the Pledged Collateral
pursuant to this Agreement without restriction, and such collateral has been
duly and validly pledged to Bank in accordance with law; (iv) it shall provide
such additional endorsements, forms and writings and execute all documents and
take such other action as Bank deems necessary to create and perfect a security
interest in the Pledged Collateral or as Bank may at any time reasonably request
in connection with the administration or enforcement of this Agreement or the
administration of the Pledged Collateral.
3. CREATION OF SECURITY INTEREST.
(a) PLEDGE OF PLEDGED COLLATERAL. Grantor hereby pledges to Bank and
grants to Bank a security interest in and to all Pledged Collateral, together
with all products, proceeds, dividends, redemption payments, liquidation
payments, cash, instruments and other property, and any and all rights, titles,
interests, privileges, benefits and preferences appertaining or incidental to
the Pledged Collateral. The security interest and pledge created by this
Agreement shall continue in effect so long as any obligation is owed to Bank by
Grantor under the Loan Agreement.
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(b) DELIVERY OF CERTAIN PLEDGED COLLATERAL. On or before the Closing
Date, Grantor shall pledge and deliver the Certificates representing 100% of the
issued and outstanding capital stock of HP UK, to Bank.
Following the Closing Date, additional Pledged Collateral may from
time to time be delivered to Bank as required pursuant to the Loan Agreement and
hereunder. All Certificates at any time delivered to Bank shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Bank. Bank shall hold all Certificates pledged hereunder
pursuant to this Agreement.
4. SECURITY FOR OBLIGATIONS. This Agreement and the pledge and security
interest granted herein secure the prompt payment, in full in cash, and full
performance of, all obligations of Grantor under the Loan Agreement and the
other Loan Documents.
5. FURTHER ASSURANCES. Grantor agrees that at any time, and from time to
time, at its own expense Grantor will promptly execute, deliver and file or
record all further financing statements, instruments and documents, and will
take all further actions that may be necessary or desirable, or that Bank
reasonably may request, in order to perfect and protect any pledge or security
interest granted hereby or to enable Bank to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral and to preserve,
protect and maintain the Pledged Collateral and the value thereof, including,
without limitation, payment of all taxes, assessments and other charges imposed
on or relating to the Pledged Collateral. Grantor hereby consents and agrees
that the issuers of, or obligors on, the Pledged Collateral, or any registrar or
transfer agent or trustee for any of the Pledged Collateral, shall be entitled
to accept the provisions of this Agreement as conclusive evidence of the right
of Bank to effect any transfer or exercise any right hereunder, notwithstanding
any other notice or direction to the contrary heretofore or hereafter given by
Grantor or any other Person to such issuers or such obligors or to any such
registrar or transfer agent or trustee.
6. VOTING RIGHTS; DIVIDENDS; ETC. So long as no Event of Default under
the Loan Agreement occurs and remains continuing:
(a) VOTING RIGHTS. Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Securities, or any
part thereof, for any purpose not inconsistent with the terms of this Agreement,
the Loan Agreement, or the other Loan Documents; PROVIDED, HOWEVER, that Grantor
shall not exercise, or shall refrain from exercising, any such right if it would
result in a default or an Event of Default under the Loan Agreement.
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(b) DIVIDEND AND DISTRIBUTION RIGHTS. Grantor shall be entitled to
receive and to retain and use only those dividends or distributions paid to
Grantor with respect to the Pledged Securities as permitted under the terms of
the Loan Agreement; PROVIDED, HOWEVER, that any and all such dividends or
distributions received in the form of capital stock shall be, and the
Certificates representing such capital stock forthwith shall be, delivered to
Bank to hold as Pledged Collateral and shall, if received by Grantor, be
received in trust for the benefit of Bank, be segregated from the other property
of Grantor, and forthwith be delivered to Bank as Pledged Collateral in the same
form as so received (with any necessary endorsements).
7. RIGHTS DURING EVENT OF DEFAULT. When an Event of Default under the
Loan Agreement or this Agreement has occurred and is continuing:
(a) VOTING, DIVIDEND, AND DISTRIBUTION RIGHTS. At the option of
Bank, all rights of Grantor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 6(a) above,
and to receive the dividends and distributions which it would otherwise be
authorized to receive and retain pursuant to Section 6(b) above, shall cease,
and all such rights shall thereupon become vested in Bank who shall thereupon
have the sole right to exercise such voting and other consensual rights and to
receive and to hold as Pledged Collateral such dividends and distributions.
Bank shall give notice thereof to Grantor; PROVIDED, HOWEVER, that (i) neither
the giving of such notice nor the receipt thereof by Grantor shall be a
condition to exercise of any rights of Bank hereunder, and (ii) Bank shall incur
no liability for failing to give such notice.
(b) DIVIDENDS AND DISTRIBUTIONS HELD IN TRUST. All dividends and
other distributions which are received by Grantor contrary to the provisions of
the Loan Agreement or this Agreement shall be received in trust for the benefit
of Bank, shall be segregated from other funds of Grantor, and forthwith shall be
paid over to Bank as Pledged Collateral in the same form as so received (with
any necessary endorsements).
(c) IRREVOCABLE PROXY. Grantor hereby revokes all previous proxies
with regard to the Pledged Securities and appoints Bank as its proxyholder to
attend and vote at any and all meetings of the shareholders of the corporations
which issued the Pledged Securities, and any adjournments thereof, held on or
after the date of the giving of this proxy and prior to the termination of this
proxy and to execute any and all written consents of shareholders of such
corporations executed on or after the date of the giving of this proxy and prior
to the termination of this proxy, with the same effect as if Grantor had
personally attended the meetings or had personally voted their shares or had
personally signed the written consents; PROVIDED, HOWEVER, that the proxyholder
shall have rights hereunder only upon the occurrence and during the
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continuance of an Event of Default under the Loan Agreement, and that Bank
shall have instructed the proxyholder to exercise voting rights with
respect to the Pledged Securities or any of them. Grantor hereby
authorizes Bank to substitute another person as the proxyholder and,
upon the occurrence or during the continuance of any Event of Default
under the Loan Agreement, hereby authorizes and directs the proxyholder
to file this proxy and the substitution instrument with the secretary of
the appropriate corporation. This proxy is coupled with an interest and
is irrevocable until such time as all Secured Obligations have been paid
and performed in full.
8. TRANSFERS AND OTHER LIENS. Grantor agrees that, except as not
prohibited under the Loan Documents, it will not (i) sell, assign, exchange,
transfer or otherwise dispose of, or contract to sell, assign, exchange,
transfer or otherwise dispose of, or grant any option with respect to, any of
the Pledged Collateral, (ii) create or permit to exist any lien upon or with
respect to any of the Pledged Collateral, except for liens in favor of Bank, or
(iii) take any action with respect to the Pledged Collateral which is
inconsistent with the provisions or purposes of this Agreement or any other Loan
Document.
9. BANK APPOINTED ATTORNEY-IN-FACT. After the occurrence and during the
continuance of an Event of Default under the Loan Agreement, Grantor hereby
irrevocably appoints Bank as Grantor's attorney-in-fact, with full authority in
the place and stead of Grantor, and in the name of Grantor, or otherwise, from
time to time, in Bank's sole and absolute discretion to do any of the following
acts or things: (a) to do all acts and things and to execute all documents
necessary or advisable to perfect and continue perfected the security interests
created by this Agreement and to preserve, maintain and protect the Pledged
Collateral; (b) to do any and every act which Grantor is obligated to do under
this Agreement; (c) to prepare, sign, file and record, in Grantor's name, any
financing statement covering the Pledged Collateral; and (d) to endorse and
transfer the Pledged Collateral upon foreclosure by Bank; PROVIDED, HOWEVER,
that Bank shall be under no obligation whatsoever to take any of the foregoing
actions, and Bank shall have no liability or responsibility for any act (other
than Bank's own gross negligence or willful misconduct) or omission taken with
respect thereto. Grantor hereby agrees to repay immediately upon demand all
reasonable costs and expenses incurred or expended by Bank in exercising any
right or taking any action under this Agreement, together with interest as
provided for in the Loan Agreement.
10. BANK MAY PERFORM OBLIGATIONS. If Grantor fails to perform any
obligation contained herein, Bank may, but without any obligation to do so and
without notice to or demand upon Grantor, perform the same and take such other
action as Bank may deem necessary or desirable to protect the Pledged Collateral
or Bank's security interests therein, Bank being hereby authorized (without
limiting the
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general nature of the authority hereinabove conferred) to pay, purchase,
contest and compromise any lien which in the reasonable judgment of Bank
appears to be prior or superior to Bank's security interests, and in
exercising any such powers and authority to pay necessary expense, employ
counsel and pay reasonable attorneys' fees. Grantor hereby agrees to repay
immediately upon demand all sums so expended by Bank, together with interest
from the date of expenditure at the rates provided for in the Loan Agreement.
Bank shall not be under any duty or obligation to (i) preserve, maintain or
protect the Pledged Collateral or any of any Grantor's rights or interest
therein, (ii) exercise any voting rights with respect to the Pledged
Collateral, whether or not an Event of Default under the Loan Agreement has
occurred or is continuing, or (iii) make or give any notices of default,
presentments, demands for performance, notices of nonperformance or dishonor,
protests, notices of protest or notice of any other nature whatsoever in
connection with the Pledged Collateral on behalf of Grantor or any other
Person having any interest therein; and Bank does not assume and shall not be
obligated to perform the obligations of Grantor, if any, with respect to the
Pledged Collateral.
11. REASONABLE CARE. Bank shall in all events be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially similar to that which Bank accords its own property, it being
understood that Bank shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether or not Bank has or
is deemed to have knowledge of such matters, or (ii) taking any necessary steps
to preserve rights against any Person with respect to any Pledged Collateral.
12. EVENTS OF DEFAULT AND REMEDIES.
(a) RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and during the
continuance of an Event of Default under the Loan Agreement, Grantor shall be in
default hereunder and Bank shall have in any jurisdiction where enforcement is
sought, in addition to all other rights and remedies that Bank may have under
this Agreement and under applicable law or in equity, all of its rights and
remedies as a secured party under the Uniform Commercial Code as enacted in any
such jurisdiction, and in addition the following rights and remedies, all of
which may be exercised with or without further notice to Grantor:
(1) to notify any issuer of any Pledged Securities, and any and
all other issuers of or obligors on any Pledged Collateral, that the same
has been pledged to Bank and that all dividends and other payments thereon
are to be made directly and exclusively to Bank; to renew, extend, modify,
amend,
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accelerate, accept partial payments on, make allowances and
adjustments and issue credits with respect to, release, settle,
compromise, compound, collect or otherwise liquidate, on terms
acceptable to Bank, in whole or in part, the Pledged Collateral and
any amounts owing thereon or any guaranty or security therefor; to
enter into any other agreement relating to or affecting the Pledged
Collateral; and to give all consents, waivers and ratification with
respect to the Pledged Collateral and exercise all other rights
(including voting rights), powers and remedies and otherwise act
with respect thereto as if Bank were the owner thereof;
(2) to enforce payment and prosecute any action or proceeding
with respect to any and all of the Pledged Collateral and take or bring, in
Bank's name or in the name of Grantor, all steps, actions, suits or
proceedings deemed by Bank necessary or desirable to effect collection of
or to realize upon the Pledged Collateral;
(3) in accordance with applicable law, to take possession of and
operate or control the Pledged Collateral with or without judicial process;
(4) to endorse, in the name of Grantor, all checks, notes,
drafts, money orders, instruments and other evidences of payment relating
to the Pledged Collateral;
(5) to transfer any or all of the Pledged Collateral into the
name of Bank or its nominee or nominees; and
(6) in accordance with applicable law, to foreclose the liens
and security interests created under this Agreement or under any other
agreement relating to the Pledged Collateral by any available judicial
procedure or without judicial process, and to sell, assign or otherwise
dispose of the Pledged Collateral or any part thereof, either at public or
private sale or at any broker's board or securities exchange, in lots or in
bulk, for cash, on credit or on future delivery, or otherwise, with or
without representations or warranties, and upon such terms as shall be
acceptable to Bank;
all at the sole option of and in the sole discretion of Bank.
(b) NOTICE OF SALE. Bank shall give Grantor at least five (5) days'
written notice of sale of all or any part of the Pledged Collateral. Any sale
of the Pledged Collateral shall be held at such time or times and at such place
or places as Bank may determine in the exercise of their sole and absolute
discretion. Bank may bid (which bid may be, in whole or in part, in the form of
cancellation of Secured Obli-
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gations) for and purchase for the account of Bank or any nominee of Bank the
whole or any part of the Pledged Collateral. Bank shall not be obligated to
make any sale of the Pledged Collateral if it shall determine not to do so
regardless of the fact that notice of sale of the Pledged Collateral may have
been given. Bank may, without notice or publication, adjourn the sale from
time to time by announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and place to which the
same was so adjourned.
(c) PRIVATE SALES. Whether or not any of the Pledged Collateral has
been effectively registered under the Securities Act of 1933 or other applicable
laws, Bank may, in its sole and absolute discretion, sell all or any part of the
Pledged Collateral at private sale in such manner and under such circumstances
as Bank may deem necessary or advisable. Without limiting the foregoing, Bank
may (i) approach and negotiate with a limited number of potential purchasers,
and (ii) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged Collateral for their
own account for investment and not with a view to the distribution or resale
thereof. In the event that any of the Pledged Collateral is sold at private
sale, Grantor agrees that if the Pledged Collateral is sold for a price which
Bank in good faith believe to be reasonable, then (A) the sale shall be deemed
to be commercially reasonable in all respects, (B) Grantor shall not be entitled
to a credit against the Secured Obligations in an amount in excess of the
purchase price, and (C) Bank shall not incur any liability or responsibility to
Grantor in connection therewith, notwithstanding the possibility that a
substantially higher price might have been realized at a public sale. Grantor
recognizes that a ready market may not exist for Pledged Collateral which is not
regularly traded on a recognized securities exchange, and that a sale by Bank of
any such Pledged Collateral for an amount substantially less than a pro rata
share of the fair market value of the issuer's assets minus liabilities may be
commercially reasonable in view of the difficulties that may be encountered in
attempting to sell a large amount of Pledged Collateral or Pledged Collateral
that is privately traded.
(d) TITLE OF PURCHASERS. Upon consummation of any sale of Pledged
Collateral pursuant to this Section 12, Bank shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Pledged
Collateral so sold. Each such purchaser at any such sale shall hold the Pledged
Collateral sold absolutely free from any claim or right on the part of Grantor,
and Grantor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay and appraisal which they now have or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
If the sale of all or any part of the Pledged Collateral is made on credit or
for future delivery, Bank shall not be required to apply any portion of the sale
price to the Secured Obligations until such amount actually is received by Bank,
and any Pledged Collateral so sold may be retained by Bank until
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the sale price is paid in full by the purchaser or purchasers thereof. Bank
shall not incur any liability in case any such purchaser or purchasers shall
fail to pay for the Pledged Collateral so sold, and, in case of any such
failure, the Pledged Collateral may be sold again upon like notice.
(e) DISPOSITION OF PROCEEDS OF SALE. The net cash proceeds resulting
from the collection, liquidation, sale or other disposition of the Pledged
Collateral shall be applied, FIRST, to the reasonable costs and expenses
(including reasonable attorneys: fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting and liquidating the Pledged
Collateral, and the like; SECOND, to the satisfaction of all Secured
Obligations, with application as to any particular Secured Obligations to be in
the order set forth in the Loan Agreement or other Loan Documents; and, THIRD,
to all other indebtedness secured hereby in such order and manner as Bank in its
sole and absolute discretion may determine.
13. OTHER AGREEMENTS. Nothing herein shall in any way modify or limit the
effect of terms or conditions set forth in any other security or other agreement
in connection with the Secured Obligations, whether or not executed by the
Grantor, but each and every term and condition hereof shall be in addition
thereto.
14. COVENANT NOT TO ISSUE UNCERTIFICATED SECURITIES. Grantor represents
and warrants to Bank that all of the capital stock of and each of its Affiliates
that is a corporation is in certificated form (as contemplated by Article 8 of
the Uniform Commercial Code as enacted in California), and covenants to Bank
that it will not cause or permit any Affiliate to issue any capital stock in
uncertificated form or seek to convert all or any part of its existing capital
stock into uncertificated form (as contemplated by Article 8 of the Uniform
Commercial Code as enacted in California).
15. COVENANT NOT TO DILUTE INTERESTS OF BANK IN PLEDGED SECURITIES.
Grantor represents, warrants and covenants to Bank that it will not at any time
cause or permit any corporation whose securities constitute Pledged Collateral
to issue any additional capital stock, or any warrants, options or other rights
to acquire any additional capital stock PROVIDED that Grantor may cause or
permit management of Grantor to receive capital stock of Grantor and options to
acquire the same provided that concurrently with the issuance thereof the same
are delivered in pledge to the Bank hereunder.
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IN WITNESS WHEREOF, Grantor has caused this Agreement to be duly
executed as of the date first above written.
"Grantor"
HAWKER PACIFIC AEROSPACE, a California
corporation
By:______________________________
______________________________
Printed Name and Title
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