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LOAN AND SECURITY AGREEMENT
by and between
GREAT LAKES AVIATION, LTD.,
an Iowa corporation
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank,
a California corporation
Dated as of December 31, 1999
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Coast Business Credit Loan and Security Agreement
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TABLE OF CONTENTS
Page
1. DEFINITIONS...................................1
Account Debtor................................1
ACH...........................................1
Affiliate.....................................1
Audit.........................................1
Billed Receivables............................1
Borrower......................................1
Borrower's Address............................1
Business Day..................................1
Change of Control.............................1
Clearinghouse Agreement.......................1
Closing Date..................................2
Coast.........................................2
Code..........................................2
Collateral....................................2
Credit Limit..................................2
Default.......................................2
Deposit Account...............................2
Dollars or $..................................2
Early Termination Fee.........................2
Eligible Foreign Receivables..................2
Eligible Billed Receivables...................2
Eligible Receivables..........................2
Eligible Unbilled Receivables.................3
Equipment.....................................3
Event of Default..............................3
GAAP..........................................3
General Intangibles...........................3
Inventory.....................................4
Investment Property...........................4
Loan Documents................................4
Loans.........................................4
Material Adverse Effect.......................4
Maturity Date.................................4
Maximum Dollar Amount.........................4
Minimum Availability..........................4
Minimum Initial Availability..................4
Minimum Monthly Interest......................4
Obligations...................................4
Permitted Liens...............................4
Person........................................5
Prime Rate....................................5
Receivable Loans..............................6
Receivables...................................6
Renewal Date..................................6
Renewal Fee...................................6
Solvent.......................................6
Slots.........................................6
Spare Parts...................................6
Tangible Net Worth............................6
Unbilled Receivables..........................6
Solvent.......................................6
Solvent.......................................6
Year 2000 Problem.............................6
Other Terms...................................6
2. CREDIT FACILITIES.............................7
2.1 Loans................................7
3. INTEREST AND FEES.............................7
3.1 Interest.............................7
3.2 Fees.................................7
4. SECURITY INTEREST.............................7
5. CONDITIONS PRECEDENT..........................7
5.1 Status of Accounts at Closing........7
5.2 Minimum Availability.................8
5.3 Landlord Waiver......................8
5.4 Executed Agreement...................8
5.5 Opinion of Borrower's Counsel........8
5.6 Priority of Coast's Liens............8
5.7 Insurance............................8
5.8 Borrower's Existence.................8
5.9 Organizational Documents.............8
5.10 Taxes................................8
5.11 Year 2000 Problem Assessment
Certificate..........................8
5.12 Due Diligence........................8
5.13 Other Documents and Agreements.......8
5.14 Intercreditor Agreement - Raytheon...9
5.15 Payment Instructions Regarding
Collections..........................9
5.16 Cash Advances from United............9
5.17 Compliance with Directives/
Regulations and United Agreement.....9
5.18 Air Operator Certificate.............9
5.19 D&O Policy...........................9
5.20 United Agreement.....................9
5.21 Clearinghouse Agreement..............9
5.22 Management Background Checks.........9
5.23 Raytheon Repurchase of Inventory.....9
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE BORROWER.................................10
6.1 Existence and Authority.............10
6.2 Name; Trade Names and Styles........10
6.3 Place of Business; Location of
Collateral..........................10
6.4 Title to Collateral; Permitted
Liens...............................10
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6.5 Maintenance of Collateral...........11
6.6 Books and Records...................11
6.7 Financial Condition, Statements
and Reports.........................11
6.8 Tax Returns and Payments; Pension
Contributions.......................11
6.9 Compliance with Law.................11
6.10 Litigation..........................11
6.11 Use of Proceeds.....................12
6.12 Year 2000 Compliance................12
6.13 Compliance with Directives/Regulations
and United Agreement................12
6.14 Air Operator Certificate............12
6.15 United Agreement....................12
6.16 Borrower Ownership/Control..........12
6.17 Third Party Payroll Service.........12
6.18 ACH Deductions......................12
7. RECEIVABLES..................................13
7.1 Representations Relating to
Receivables.........................13
7.2 Representations Relating to Documents
and Legal Compliance................13
7.3 Schedules and Documents relating to
Receivables.........................13
7.4 Collection of Receivables...........13
7.5 Remittance of Proceeds..............13
7.6 Disputes............................14
7.7 Intentionally Deleted...............14
7.8 Verification........................14
7.9 No Liability........................14
8. ADDITIONAL DUTIES OF THE BORROWER............14
8.1 Financial and Other Covenants.......14
8.2 Insurance...........................14
8.3 Reports.............................14
8.4 Access to Collateral, Books and
Records.............................15
8.5 Negative Covenants..................15
8.6 Litigation Cooperation..............16
8.7 Further Assurances..................16
9. TERM.........................................16
9.1 Maturity Date.......................16
9.2 Early Termination...................16
9.3 Payment of Obligations..............16
10. EVENTS OF DEFAULT AND REMEDIES...............17
10.1 Events of Default...................17
10.2 Remedies ...........................18
10.3 Standards for Determining
Commercial Reasonableness...........19
10.4 Power of Attorney...................19
10.5 Application of Proceeds.............21
10.6 Remedies Cumulative.................21
11. GENERAL PROVISIONS...........................21
11.1 Interest Computation................21
11.2 Application of Payments.............21
11.3 Charges to Accounts.................21
11.4 Monthly Accountings.................21
11.5 Notices.............................21
11.6 Severability........................22
11.7 Integration.........................22
11.8 Waivers.............................22
11.9 No Liability for Ordinary
Negligence..........................22
11.10 Amendment...........................22
11.11 Time of Essence.....................22
11.12 Attorneys Fees, Costs and Charges...22
11.13 Benefit of Agreement................23
11.14 Publicity...........................23
11.15 Paragraph Headings Construction.....23
11.16 Governing Law; Jurisdiction; Venue..23
11.17 Mutual Waiver of Jury Trial.........23
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COAST
LOAN AND SECURITY AGREEMENT
BORROWER: GREAT LAKES AVIATION, LTD.,
AN IOWA CORPORATION
ADDRESS: 0000 000XX XXXXXX
XXXXXXX, XXXX 00000
DATE: DECEMBER _, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"), a California
corporation, with offices at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, and the borrower named above (the "Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") shall for all purposes be deemed to
be a part of this Agreement, and the same is an integral part of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section 1
below.)
1. DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable or General
Intangible.
"ACH" means the Airlines Clearing House, Inc., a Delaware corporation.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"APPROVED ACH DEDUCTION" means those deductions from the amounts
otherwise payable to Borrower from the ACH, which have been mutually agreed upon
by Borrower and Coast and which are listed on the attached Schedule 6.19.
"AUDIT" means to inspect, audit and copy Borrower's books and
records and the Collateral.
"BILLED RECEIVABLES" means Receivables for services performed which
have been sent to ACH for collection.
"BORROWER" has the meaning set forth in the introduction to this
Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the introduction
to this Agreement.
"BUSINESS DAY" means a day on which Coast is open for business.
"CHANGE OF CONTROL" shall be deemed to have occurred at such time that
Xxxxxxx X. Xxxx beneficially owns (as defined in Rule 13d-3 the Securities
Exchange Act of 1934) and/or controls less than 51% of the total voting power of
all classes of stock or other ownership interests then outstanding of Borrower,
normally entitled to vote in the election of directors or analogous governing
body.
"CLEARINGHOUSE AGREEMENT" means that certain Agreement Relating to the
Settlement of
1
Interline Accounts through Airlines Clearing House, Inc., dated as
of February 1, 1948, as amended, by and between Borrower and Airlines Clearing
House, Inc., a Delaware corporation.
"CLOSING DATE" date of the initial funding under this Agreement.
"COAST" has the meaning set forth in the introduction to this Agreement.
"CODE" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"COLLATERAL" has the meaning set forth in Section 4 hereof.
"CREDIT LIMIT" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.
"DOLLARS OR $" means United States dollars.
"EARLY TERMINATION FEE" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"ELIGIBLE FOREIGN RECEIVABLES" means Receivables arising from
Borrower's customers located outside the United States which Coast otherwise
approves for borrowing in its sole and absolute discretion. Without limiting the
foregoing, Coast will consider the following in determining the eligibility of
such Receivables: (i) whether the Receivables are backed by an irrevocable
letter of credit satisfactory to Coast (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Coast and is directly
drawable by Coast, or (ii) whether the Borrower's customer is a large or rated
company having a verifiable credit history, or (iii) whether the Borrower's
customer has a twelve (12) month credit history with Borrower, or (iv) whether
Borrower's customer is a foreign subsidiary of a customer of Borrower that is a
company that was formed and has its primary place of business within the United
States, or (v) whether Borrower's customer is a foreign company with a Dun &
Bradstreet rating, or (vi) whether the Receivable is covered by credit insurance
in form and amount, and by insurer, satisfactory to Coast.
"ELIGIBLE BILLED RECEIVABLES" means Eligible Receivables for services
performed which have been sent to ACH for collection.
"ELIGIBLE RECEIVABLES" means Receivables and Eligible Foreign
Receivables arising in the ordinary course of Borrower's business from the sale
of goods or rendition of services, which Coast, in its good faith credit
judgment, shall deem eligible for borrowing, based on such considerations as
Coast may from time to time deem appropriate. Eligible Receivables shall not
include the following:
(a) Billed Receivables that: the Account Debtor has failed to
pay within the earlier to occur of: (i) 60 days past invoice date, or (ii) 30
days from the date the Receivable is sent to ACH;
(b) Unbilled Receivables that: the Account Debtor has failed
to pay within 30 days of invoice date;
(c) Receivables owed by an Account Debtor or its Affiliates
where twenty-five percent (25%) or more of all Receivables owed by that
Account Debtor (or its Affiliates) are deemed ineligible under clauses (a) or
(b) above;
(d) Receivables with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower, it being understood that United
shall not be deemed an Affiliate or agent of Borrower for purposes of this
paragraph;
(e) Receivables with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and
hold, or other terms by reason of which the payment by the Account Debtor may
be conditional;
(f) Receivables, other than Eligible Foreign Receivables, that
are not payable in Dollars or with respect to which the Account Debtor: (i)
does not maintain its chief executive office in the United States, or (ii) is
not organized under the laws of the United States or any State thereof, or
(iii) is the government of any foreign country or sovereign state, or of any
state, province, municipality, or other political
2
subdivision thereof, or of any department, agency, public corporation, or
other instrumentality thereof, unless (y) the Receivable is supported by an
irrevocable letter of credit satisfactory to Coast (as to form, substance,
and issuer or domestic confirming bank) that has been delivered to Coast and
is directly drawable by Coast, or (z) the Receivable is covered by credit
insurance in form and amount, and by an insurer, satisfactory to Coast;
(g) Receivables with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Coast, with the Assignment of
Claims Act, 31 U.S.C. Section 3727 or which are deemed eligible by Coast in
its sole and absolute discretion), or (ii) any State of the United States
(exclusive, however, of Receivables owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(h) Receivables with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Receivables;
(i) Receivables with respect to an Account Debtor (other than
United, its parent, subsidiaries and affiliates) whose total obligations
owing to Borrower exceed ten percent (10%) of all Eligible Receivables, to
the extent of the obligations owing by such Account Debtor in excess of such
percentage, except in the case of Receivables with respect to which the
Account Debtor is the Department of Transportation where such percentage will
be twenty percent (20%);
(j) Receivables with respect to which the Account Debtor is
subject to any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation proceeding, or becomes
insolvent, or goes out of business;
(k) Intentionally Omitted;
(l) Receivables with respect to which the goods giving rise to
such Receivable have not been shipped and billed to the Account Debtor, the
services giving rise to such Receivable have not been performed and accepted
by the Account Debtor, or the Receivable otherwise does not represent a final
sale;
(m) Receivables with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report
or similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a
Notice of Business Activities Report with the applicable division of
taxation, the department of revenue, or with such other state offices, as
appropriate, for the then-current year, or is exempt from such filing
requirement; and
(n) Receivables that represent progress payments or other
advance xxxxxxxx that are due prior to the completion of performance by
Borrower of the subject contract for goods or services.
"ELIGIBLE UNBILLED RECEIVABLES" means Eligible Receivables for services
performed which have not been sent to ACH for collection.
"EQUIPMENT" means, other than Spare Parts, all of Borrower's present
and hereafter acquired machinery, molds, machine tools, motors, furniture,
equipment, furnishings, fixtures, trade fixtures, motor vehicles, tools, parts,
dies, jigs, goods and other goods (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"EVENT OF DEFAULT" means any of the events set forth in Section 10.1
of this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, investment property, inventions, designs,
drawings, blueprints, patents, patent applications, trademarks and the goodwill
3
of the business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located (including
without limitation all Spare Parts, raw materials, work in process, finished
goods and goods in transit, and including without limitation all farm products),
and all materials and supplies of every kind, nature and description which are
or might be used or consumed in Borrower's business or used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
"INVESTMENT PROPERTY" has the meaning set forth in Section 9115
of the Code as in effect as of the date hereof.
"LOAN DOCUMENTS" means this Agreement, the agreements and documents
listed on Section 5 of the Schedule, and any other agreement, instrument or
document executed in connection herewith or therewith.
"LOANS" has the meaning set forth in Section 2.1 hereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
Borrower or any subsidiary of Borrower or any guarantor of any of the
Obligations, (ii) the ability of Borrower or any guarantor of any of the
Obligations to perform its obligations under this Agreement (including, without
limitation, repayment of the Obligations as they come due) or (iii) the validity
or enforceability of this Agreement or any other agreement or document entered
into by any party in connection herewith, or the rights or remedies of Coast
hereunder or thereunder.
"MATURITY DATE" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"MAXIMUM DOLLAR AMOUNT" has the meaning set forth in Section 2 of
the Schedule.
"MINIMUM AVAILABILITY" means, as of any date of determination, (i) all
cash of Borrower; PLUS (ii) the applicable Credit Limit; LESS (iii) the
Obligations then outstanding.
"MINIMUM INITIAL AVAILABILITY" means, as of the Closing Date, (i) the
applicable Credit Limit, LESS (ii) the Obligation then outstanding.
"MINIMUM MONTHLY INTEREST" has the meaning set forth in Section 3 of
the Schedule.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Coast, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
"PERMITTED LIENS" means the following:
(a) liens in favor of Coast;
4
(b) purchase money security interests in specific items of Equipment
or Inventory;
(c) leases of specific items of Equipment;
(d) liens for taxes, assessments, charges or other governmental
levies not yet delinquent or as to which the period of grace, if any, related
thereto has not expired or which are being contested in good faith by
appropriate proceedings, provided that adequate reserves with respect thereto
are being maintained on the books of the Borrower in substantial conformity
with GAAP;
(e) additional security interests and liens consented to in writing
by Coast, which consent shall not be unreasonably withheld;
(f) security interests being terminated substantially concurrently
with this Agreement;
(g) liens of material-men, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent except for those delinquent obligations
being contested in good faith by appropriate proceedings so long as such
delinquent obligations and liens being contested do not have a Material
Adverse Effect upon Coast's rights in the Collateral or Coast's prospects for
repayment;
(h) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above
in clauses (b) or (c) above, provided that any extension, renewal or
replacement lien is limited to the property encumbered by the existing lien
and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;
(i) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods;
(j) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(k) 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 incurred in the ordinary course of
business; or
(l) liens in favor of third parties who provide materials and/or
services to Borrower involving the overhaul or enhancement of Borrower's
aircraft, airframes and engines or who finance the providing of such overhaul
or enhancement materials and/or services. Such liens will be limited to a
lien against the aircraft receiving the overhaul or enhancement work and the
lien will be limited to an amount equal to the cost of the overhaul or
enhancement services and materials provided. So long as an Event of Default
has not occurred and is continuing, Coast agrees that it will subordinate its
lien against such overhauled or enhanced aircraft in favor of the respective
third party.
Coast will have the right to require, as a condition to its consent under clause
(e) above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, general
partnership, limited partnership, limited liability partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, government, or any agency or political division
thereof, or any other entity.
"PRIME RATE" means the actual "Reference Rate" or the substitute
therefor of the Bank of America NT & SA whether or not that rate is the lowest
interest rate charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published in
the Wall Street Journal on the first business day of the applicable month, as
the base rate on corporate loans at large U.S. money center commercial banks.
5
"RAYTHEON INTERCREDITOR AGREEMENT" means that certain intercreditor
agreement set forth in Section 5.14 hereof.
"RECEIVABLE LOANS" means the Loans described in Section 2.1 of the
Schedule.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.
"RENEWAL DATE" shall mean the Maturity Date if this Agreement is
renewed pursuant to Section 9.1 hereof, and each anniversary thereafter that
this Agreement is renewed pursuant to Section 9.1 hereof.
"RENEWAL FEE" means the fee that Borrower must pay Coast upon renewal
of this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"SOLVENT" means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"SLOTS" means an interval within a daily time period at a particular
airport during which Borrower may execute either an airplane take off or
landing.
"SPARE PARTS" means all of Borrower's now owned and hereafter acquired
aircraft engines, propellers, appliances, spare parts, avionics, accessories,
instruments, rotables, equipment (including ground support equipment),
subassemblies, tools, kits, consumables, components and related items for
installation in or use in connection with Borrower's aircraft.
"TANGIBLE NET WORTH" means consolidated Owner's equity, PLUS
subordinated debt otherwise permitted hereunder, LESS, goodwill, patents,
trademarks, copyrights, franchises, formulas, leasehold interests, leasehold
improvements, non-compete agreements, engineering plans, deferred tax benefits,
organization costs, prepaid items, and any other assets of Borrower that would
be treated as intangible assets on Borrower's balance sheet prepared in
accordance with GAAP.
"UNBILLED RECEIVABLES" means Receivables for services performed which
have not been sent to ACH for collection.
"UNITED" means United Airlines, Inc., a Delaware corporation.
"UNITED AGREEMENT" means the code sharing agreement between Borrower
and United which entitles Borrower, among other things, to be a United Express
carrier.
"YEAR 2000 PROBLEM" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
"OTHER TERMS." All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by
6
the Code, to the extent such terms are defined therein.
2. CREDIT FACILITIES.
2.1 LOANS. Coast will make loans to Borrower (the "Loans"), in
amounts and in percentages to be determined by Coast in its good faith credit
judgment, up to the Credit Limit, provided no Default or Event of Default has
occurred and is continuing. In addition, Coast may create reserves against
the Loans which otherwise would be available under this Agreement including,
without limitation, creating reserves for (a) accounts payable which have
become past due pursuant to Sections 5.1 and 6.20 and (b) a Two Hundred
Thousand Dollar ($200,000) reserve for prospective payments due to Raytheon
under the Term Out as described as in Section 5.23 hereof (the "Term Out
Reserve"), with such Term Out Reserve to be released at Coast's sole and
absolute discretion. Lastly, Coast may reduce its advance rates based upon
Eligible Receivables without declaring a Default or an Event of Default if it
determines that there has occurred a Material Adverse Effect.
3. INTEREST AND FEES
3.1 INTEREST. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement. Interest shall be payable monthly,
on the last day of the month. Interest may, in Coast's discretion, be charged
to Borrower's loan account, and the same shall thereafter bear interest at
the same rate as the other Loans. Regardless of the amount of Obligations
that may be outstanding from time to time, Borrower shall pay Coast Minimum
Monthly Interest during the term of this Agreement with respect to the
Receivable Loans in the amount set forth on the Schedule.
3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Coast and are
deemed fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when
due, Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Receivables, Equipment, Investment Property, and General
Intangibles, including, without limitation, all of Borrower's Deposit Accounts,
and all money, and all property now or at any time in the future in Coast's
possession (including claims and credit balances), and all proceeds of any of
the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing; and all
Spare Parts with respect only to Borrower's Beechcraft Model 1900 type aircraft,
and all proceeds of any of the foregoing (the "Beechcraft 1900 Inventory"). All
of the foregoing, together with all other property in which Coast may now or in
the future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral". As more specifically set forth in the
Raytheon Intercreditor Agreement, Coast's security interest in the Beechcraft
1900 Inventory will continue until the full satisfaction of the Raytheon
Obligations and the termination of Raytheon's security interests in the assets
of Borrower, at which time Coast will terminate its security interest.
Notwithstanding the foregoing, Coast will not obtain a security interest in: (a)
any of Borrower's Slots, and (ii) any of Borrower's Brasilia aircraft, engines,
propellers or Spare Parts which are subject to lease or finance arrangements.
Concurrently with the Closing Date, Coast will perfect its security interest in
Borrower's Deposit Accounts consisting of Borrower's payroll account,
disbursement account and a concentration account maintained with Bank of America
in Spencer, Iowa. Coast does not intend to take further action to perfect its
lien on Borrower's other Deposit Accounts although Coast reserves the right to
do so at any time.
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the
satisfaction, in the sole discretion of Coast, at or prior to the first advance
of funds hereunder, of each, every and all of the following conditions:
5.1 STATUS OF ACCOUNTS. On the Closing Date, no accounts payable
shall be due and unpaid sixty (60) days past its due date or ninety (90) days
past its invoice date except for such accounts payable being contested in
good faith in appropriate proceedings and for which documentation has been
provided acceptable to Coast in its sole and absolute discretion.
Notwithstanding the foregoing, Borrower's accounts payable owing to Raytheon
and Xxxxx &
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Whitney may exceed the above time limitations provided that
Borrower provides Coast with documentation or other assurances, as requested
by Coast in its sole and absolute discretion, that exceeding such time
limitations is in the ordinary course of dealing and trade practice with
these respective creditors provided, however, that any enforcement step taken
by either of these creditors will immediately negate the effectiveness of
this provision. Borrower reaffirms that if such documentation or assurances
are not provided, Coast is entitled to establish reserves as set forth in
Section 2.1 of the Agreement.
5.2 MINIMUM INITIAL AVAILABILITY. Borrower shall have Minimum
Initial Availability immediately following the initial funding in the amount
set forth on the Schedule.
5.3 LANDLORD WAIVER. Coast shall have received duly executed
landlord waivers and access agreements in form and substance satisfactory to
Coast, in Coast's sole and absolute discretion, and, when deemed appropriate
by Coast, in form for recording in the appropriate recording office, with
respect to the leased locations listed on Schedule 5.3.
5.4 EXECUTED AGREEMENT. Coast shall have received this Agreement
duly executed and in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.5 OPINION OF BORROWER'S COUNSEL. Coast shall have received an
opinion of Borrower's counsel, which opines, among other things, that the
expenses (including legal expenses) and claims arising from that certain
aircraft collision involving Borrower, which occurred in Quincy, Illinois on
November 19, 1996, are covered by Borrower's insurance. Said opinion shall be
in form and substance satisfactory to Coast in its sole and absolute
discretion.
5.6 PRIORITY OF COAST'S LIENS. Coast shall have received the results
of "of record" searches satisfactory to Coast in its sole and absolute
discretion, reflecting its Uniform Commercial Code filings against Borrower
indicating that Coast has a perfected, first priority lien in and upon all of
the Collateral, subject only to Permitted Liens.
5.7 INSURANCE. Counsel to Coast shall have reviewed all necessary
insurance requirements imposed upon Borrower by, among others, the Federal
Aviation Administration, the Department of Transportation, any other
governmental entity and United and shall have determined that Borrower is in
compliance with said requirements. Coast shall have received copies of the
insurance binders or certificates evidencing Borrower's compliance with
Section 8.2 hereof, including lender's loss payee endorsements.
5.8 BORROWER'S EXISTENCE. Coast shall have received copies of
Borrower's articles or certificate of incorporation and all amendments
thereto, and a Certificate of Good Standing, each certified by the Secretary
of State of the state of Borrower's organization, and dated a recent date
prior to the Closing Date, and Coast shall have received Certificates of
Foreign Qualification for Borrower from the Secretary of State of each state
wherein the failure to be so qualified could have a Material Adverse Effect.
5.9 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of Borrower, authorizing
the execution and delivery of this Agreement and the other documents
contemplated hereby, and authorizing the transactions contemplated hereunder
and thereunder, and authorizing specific officers of Borrower to execute the
same on behalf of Borrower, in each case certified by the Secretary or other
acceptable officer of Borrower as of the Closing Date.
5.10 TAXES. Coast shall have received evidence from Borrower that
Borrower has complied with all tax withholding and Internal Revenue Service
regulations, in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.11 YEAR 2000 PROBLEM ASSESSMENT CERTIFICATE. Coast shall have
received a certificate from the relevant officer of Borrower to the effect
that, after due inquiry made to Borrower's material suppliers, vendors and
customers, Borrower knows of no facts that would cause Borrower to reasonably
believe that the Year 2000 Problem will cause a Material Adverse Effect.
5.12 DUE DILIGENCE. Coast shall have completed its due
diligence with respect to Borrower.
5.13 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such
8
other agreements, instruments and documents as Coast may require in
connection with the transactions contemplated hereby, all in form and
substance satisfactory to Coast in Coast's sole and absolute discretion, and
in form for filing in the appropriate filing office, including, but not
limited to, those documents listed in Section 5 of the Schedule.
5.14 INTERCREDITOR AGREEMENT - RAYTHEON. Coast shall have received
an executed intercreditor agreement from Raytheon Aircraft Corporation and
its financing affiliate Raytheon Aircraft Credit Corporation (collectively,
"Raytheon") wherein, among other things, Raytheon agrees to release its liens
against Borrower's Accounts and Inventory as more specifically set forth in
said intercreditor agreement. The form and substance of said intercreditor
agreement shall be acceptable to Coast in its sole and absolute discretion.
5.15 PAYMENT INSTRUCTIONS REGARDING COLLECTIONS. Coast, Borrower and
Chase Manhattan Bank as the "Clearing Bank", shall have established payment
instructions which provide that proceeds of payments on Receivables under the
Clearinghouse Agreement will be remitted directly to Coast, with the form and
content of said payment instructions to be in form and substance satisfactory
to Coast in its sole and absolute discretion.
5.16 CASH ADVANCES FROM UNITED. Coast shall have received an
agreement from United wherein United agrees not to make cash advances to
Borrower under any circumstances including, without limitation, advances
against tickets generated by Borrower's airline operations, with the form and
content of said agreement to be acceptable to Coast in its sole and absolute
discretion.
5.17 COMPLIANCE WITH DIRECTIVES/ REGULATIONS AND UNITED AGREEMENT.
Coast shall have received satisfactory evidence that Borrower is in
compliance with: (1) all directives/regulations of the Federal Aviation
Administration, the Department of Transportation and any other governmental
entities, and (2) all provisions of the United Agreement, where the failure
to comply with same could result in a Material Adverse Effect.
5.18 AIR OPERATOR CERTIFICATE. Coast shall have completed its review
of Borrower's Air Operator Certificate, with the results of said review to be
acceptable to Coast in its sole and absolute discretion.
5.19 D&O POLICY. Coast shall received and reviewed Borrower's
Directors and Officers Liability Policy ("D&O Policy"), with the results of
said review to be acceptable to Coast in its sole and absolute discretion.
5.20 UNITED AGREEMENT. Coast shall have received and Coast's counsel
shall have reviewed the existing United Agreement and any and all other
agreements with United, with the results of said review to be acceptable to
Coast in its sole and absolute discretion. In addition, Borrower shall have
caused United to deliver a letter addressed to Coast confirming the existing
relationship between Borrower and United (the "Letter of Understanding"),
with the form and content of the Letter of Understanding to be acceptable to
Coast in its sole and absolute discretion.
5.21 CLEARINGHOUSE AGREEMENT. Coast shall have received and Coast's
counsel shall have reviewed the Clearinghouse Agreement and associated
documents, with the results of said review to be acceptable to Coast in its
sole and absolute discretion.
5.22 MANAGEMENT BACKGROUND CHECKS. Coast shall have received the
results of a management background check, including without limitation, a
TRW, a tax lien and litigation search, LEXIS/NEXIS search and such other due
diligence as Coast my deem necessary on Xxxxxxx X. Xxxx, with said background
check to be satisfactory to Coast in its sole and absolute discretion.
5.23 RAYTHEON REPURCHASE OF INVENTORY. Borrower and Raytheon shall
have entered into an agreement for the repurchase by Raytheon of Borrower's
Inventory (the "Inventory Return") in an amount sufficient to repay all
indebtedness owing from Borrower to Raytheon under that certain
[Agreement Pertaining to Loans and Leases (Great Lakes)] dated as of
[July 11, 1997] (together with all other instruments entered into in
connection with the transactions contemplated therein (the "Raytheon Loan
Agreement")), with such Inventory Return to be completed by March 31, 2000.
Borrower's repayment of all indebtedness owing under the Raytheon Loan
Agreement will be accomplished through a combination of a Five Million Dollar
($5,000,000) cash payment to Raytheon from the initial advance of funds
hereunder together with
9
such Inventory Return. Such agreement between Borrower and Raytheon shall
also provide, that in the event that there does not exist sufficient
Inventory for repurchase to satisfy the indebtedness owing to Raytheon in
full, Raytheon agrees to term out the then remaining Raytheon indebtedness
over a twenty-four month (24) month period (the "Term Out") commencing April
30, 2000 and ending on March 31, 2002. Coast is to be provided with
documentation and other assurances, as required by Coast in its sole and
absolute discretion, evidencing the consummation of such Inventory Repurchase
and Term Out, if any, and the release by Raytheon of its security interest
in, among other things, Borrower's Accounts and Inventory pursuant to the
terms of the Raytheon Intercreditor Agreement. Notwithstanding the foregoing,
Raytheon will retain their lien rights on any aircraft of Borrower which they
are leasing or financing.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make
Loans, Borrower represents and warrants to Coast as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a Material Adverse Effect. The execution,
delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (a) have been duly and validly authorized, (b)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (c) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement
or instrument which is binding upon Borrower or its property, and (d) do not
constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give Coast thirty (30) days' prior written notice
before changing its name or doing business under any other name. Borrower has
complied, and will in the future comply, with all laws relating to the
conduct of business under a fictitious business name where the failure to
comply could result in a Material Adverse Effect.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The Borrower's chief
executive office is, as of the date hereof, located at 0000 000xx Xxxxxx,
Xxxxxxx, Xxxx 00000; which chief executive office the Borrower plans to move,
beginning on or about January 1, 2000, to Cheyenne, Wyoming. As of the date
hereof, the Borrower has places of business at the locations set forth on
Schedule 6.3. The Borrower will give Coast at least thirty (30) days' prior
written notice before opening any additional place of business or changing
its chief executive office. As of the date hereof, the Collateral, other than
(i) mobile Equipment, such as aircraft and engines, currently in use in the
ordinary course of business; (ii) Deposit Accounts, Investment Property,
chattel paper, instruments and similar property maintained or held by or on
behalf of the Borrower at other locations in the ordinary course of business;
(iii) Equipment maintained or stored off-site for repair, refurbishment,
maintenance or similar purposes in the ordinary course of business; (iv)
Equipment at other locations with a fair market value of not more than
$1,000,000 in the aggregate, is located only at the Borrower's chief
executive office and at the locations set forth on Schedule 6.3, and the
Borrower will give Coast at least thirty (30) days' prior written notice
before moving any such Collateral to a location other than the Borrower's
chief executive office or the locations set forth on Schedule 6.3.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except
for items of Equipment which are leased by Borrower. The Collateral now is
and will remain free and clear of any and all liens, charges, security
interests, encumbrances and adverse claims, except for Permitted Liens.
Borrower has disclosed the extent of any and all of the Collateral. Borrower
agrees that at all times Coast is to have a first priority and enforceable
security interest in all of the
10
Collateral, subject only to the Permitted Liens. Borrower agrees that at all
times it will keep Coast advised as to the extent of the Collateral, will
defend Coast and the Collateral against all claims of others, and will take
any other action necessary, from time to time, that Coast requests to cause
Coast to have such a first priority-perfected and enforceable security
interest. No material part of the Collateral now is or will be affixed to any
real property in such a manner, or with such intent, as to become a fixture.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral
and no such lease now prohibits, restrains, impairs or will prohibit,
restrain or impair Borrower's right to remove any Collateral from the leased
premises. Whenever any Collateral is located upon premises in which any third
party has an interest (whether as owner, mortgagee, beneficiary under a deed
of trust, lien or otherwise), Borrower shall, whenever requested by Coast,
use its best efforts to cause such third party to execute and deliver to
Coast, in form acceptable to Coast, such waivers and subordinations as Coast
shall specify, so as to ensure that Coast's rights in the Collateral are, and
will continue to be, superior to the rights of any such third party. Borrower
will comply with all the terms of, any lease of real property where any of
the Collateral now or in the future may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
in good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
6.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Coast have been, and will be,
prepared in conformity with GAAP (except, in the case of unaudited financial
statements, for the absence of footnotes and subject to normal year-end
adjustments) and now and in the future will fairly reflect the financial
condition of Borrower, at the times and for the periods therein stated.
Between the last date covered by any such statement provided to Coast and the
date hereof, there has been no Material Adverse Effect. Borrower is now and
will continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by Borrower where the
failure to file or pay could result in a Material Adverse Effect. Borrower
may, however, defer payment of any contested taxes, provided that Borrower
(i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Coast in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other
steps required to keep the contested taxes from becoming a lien upon any of
the Collateral. As of the date hereof, Borrower is unaware of any claims or
adjustments proposed for any of Borrower's prior tax years which could result
in additional taxes becoming due and payable by Borrower. Borrower has paid,
and shall continue to pay all amounts necessary to fund all present and
future pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not and will not withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could
result in any liability of Borrower where such liability could result in a
Material Adverse, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental agency. Borrower
shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
6.9 COMPLIANCE WITH LAW. Borrower is presently in compliance, and
will comply, in all material respects, with all provisions of all material
foreign, federal, state and local laws and regulations relating to Borrower,
including, but not limited to, the Fair Labor Standards Act, and those
relating to Borrower's ownership of real or personal property, the conduct
and licensing of Borrower's business, and environmental matters in each case
where to failure to comply could have a Material Adverse Effect.
6.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation,
11
proceeding or investigation pending or (to best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in a Material Adverse Effect.
Any and all such presently existing claims, suits, litigation, proceedings or
investigations, set forth in Section 6.10 of the Schedule, are covered by
Borrower's insurance. Borrower will promptly inform Coast in writing of any
claim, proceeding, litigation or investigation in the future threatened or
instituted by or against Borrower involving an amount set forth on the
Schedule.
6.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes. Borrower is not purchasing or carrying any
"margin stock" (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used
to purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
6.12 YEAR 2000 COMPLIANCE. Upon the earlier to occur of: (1)
December 1, 1999, or (2) when required by United, Borrower shall be Year 2000
compliant and Borrower shall deliver to Coast a Year 2000 Problem Assessment
Certificate which states, among other things, that as the result of a
comprehensive review and assessment undertaken by Borrower of Borrower's
computer systems, software and applications and after due inquiry made of
Borrower's material suppliers, vendors and customers Borrower represents and
warrants that the Year 2000 problem will not result in a Material Adverse
Effect.
6.13 INTENTIONALLY OMITTED.
6.14 COMPLIANCE WITH DIRECTIVES/ REGULATIONS AND UNITED AGREEMENT.
Borrower at all times shall be in compliance with: (1) all
directives/regulations of the Federal Aviation Administration, the Department
of Transportation and any other governmental entities, and (2) all provisions
of the United Agreement, in each case where the failure to comply with same
could result in a Material Adverse Effect.
6.15 AIR OPERATOR CERTIFICATE. Borrower shall at all times maintain
a valid and effective Air Operator Certificate.
6.16 UNITED AGREEMENT. Borrower shall use its good faith best
efforts to renew the existing United Agreement or enter into a new code
sharing agreement with United, with the form and content of either to be
acceptable to Coast in its sole and absolute discretion. Borrower also agrees
that it will provide Coast with any notice of termination of the existing
United Agreement immediately upon its occurrence.
6.17 BORROWER OWNERSHIP/CONTROL. At all times, Xxxxxxx X. Xxxx
("Xxxx") must beneficially own and/or control at least 51% of Borrower's
voting stock. Notwithstanding the foregoing, a transfer of any ownership
interest of Xxxx which would result in Xxxx owning less than 51% of
Borrower's voting stock will be permitted so long as: (a) the transfer is for
bona-fide estate planning purposes, (b) Xxxx retains control of such
transferred stock including, without limitation the right to vote such stock,
(c) the ultimate ownership, management and control of Borrower remains with
Xxxx and Xxxx continues to remain as the active Chairman and Chief Executive
Officer of Borrower, and (d) an Event of Default has not occurred and is
continuing. Borrower agrees that it will provide all documentation and
information requested by Coast so that Coast can determine Borrower's
compliance with the foregoing terms.
6.18 THIRD PARTY PAYROLL SERVICE. At all times, Borrower must
maintain a third party payroll service acceptable to Coast in its sole and
absolute discretion.
6.19 ACH DEDUCTIONS. Borrower agrees that it will make no changes in
the "Approved ACH Deductions" with the ACH without Coast's prior written
approval.
6.20 ONGOING STATUS OF ACCOUNTS. At all times, none of Borrower's
accounts payable shall be due and unpaid sixty (60) days past its due date or
ninety (90) days past its invoice date except for such accounts being
contested in good faith in appropriate proceedings and for which
documentation has been provided acceptable to Coast in its sole and absolute
discretion. Notwithstanding the foregoing, Borrower's accounts payable owing
to Raytheon and Xxxxx & Whitney may exceed the above time limitations
provided that Borrower provides Coast with documentation or other assurances,
as requested by Coast in its sole and absolute discretion, that exceeding
such time limitations is in the ordinary course of dealing and trade practice
with these
12
respective creditors provided, however, that any enforcement step taken by
either of these creditors will immediately negate the effectiveness of this
provision. Borrower reaffirms that if such documentation or assurances are
not provided, Coast is entitled to establish reserves as set forth in Section
2.1 of the Agreement.
6.21 FUTURE ENCUMBRANCE OF BEECHCRAFT 1900 INVENTORY. In the event
that Borrower at any time grants a lien on its Beechcraft 1900 Inventory
(other than the currently existing liens that exist in favor of Coast and
Raytheon as of the Closing Date) for any purpose including, without
limitation, in conjunction with obtaining Inventory financing or in order to
obtain extended payment terms on its obligations, Borrower will concurrently
grant a second priority security interest in favor of Coast in any and all of
its Beechcraft 1900 Inventory.
7. RECEIVABLES
7.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to Coast as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Receivables are and shall be true and correct and
all such invoices, instruments and other documents and all of Borrower's
books and records are and shall be genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Receivable shall fully comply with all applicable laws and governmental
rules and regulations. All signatures and indorsements on all documents,
instruments, and agreements relating to all Receivables are and shall be
genuine, and all such documents, instruments and agreements are and shall be
legally enforceable in accordance with their terms.
7.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to Coast via facsimile, unless otherwise directed by Coast, at such
locations and at such intervals as Coast may request, transaction reports and
loan requests, schedules of Receivables, and schedules of collections, all on
Coast's standard forms; PROVIDED, HOWEVER, that Borrower's failure to execute
and deliver the same shall not affect or limit Coast's security interest and
other rights in all of Borrower's Receivables, nor shall Coast's failure to
advance or lend against a specific Receivable affect or limit Coast's
security interest and other rights therein. Loan requests received after
10:30 A.M. Los Angeles, California time, will not be considered by Coast
until the next Business Day. Borrower shall, from time to time as requested
by Coast, furnish Coast with copies (or, at Coast's request, originals) of
all contracts, orders, invoices, and other similar documents, and all
original shipping instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of which gave
rise to such Receivables, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Coast an aged accounts receivable
trial balance in such form and at such intervals as Coast shall request. In
addition, Borrower shall deliver to Coast the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and
property evidencing or securing any Receivables, upon receipt thereof and in
the same form as received, with all necessary indorsements, all of which
shall be with recourse. Borrower shall also provide Coast with copies of all
credit memos as and when requested by Coast.
7.4 COLLECTION OF RECEIVABLES. All payments on, and proceeds of,
Receivables shall be remitted directly to Coast from the ACH pursuant to an
agreement between Borrower, Coast and ACH which is acceptable to Coast in its
sole discretion, or shall be deposited by Borrower into a lockbox or blocked
account as Coast may specify. Coast or its designee may, at any time, notify
Account Debtors that Coast has been granted a security interest in the
Receivables. Coast shall promptly apply all payments on, and proceeds of,
Receivables to the Obligations in such order as Coast shall determine, and,
if all Obligations have been repaid in full, Coast agrees to promptly remit
any excess collections on Receivables to Borrower.
7.5 REMITTANCE OF PROCEEDS. All proceeds arising from the
disposition of any Collateral shall be delivered to Coast within one (1)
Business Day after receipt by Borrower, in their original form, duly endorsed
to Coast, to be applied to the Obligations in such order as Coast
13
shall determine. Borrower agrees that it will not commingle proceeds of
Collateral with any of Borrower's other funds or property, but will hold such
proceeds separate and apart from such other funds and property and in an
express trust for Coast. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.
7.6 DISPUTES. During the occurrence and continuance of an Event of
Default, Borrower shall notify Coast promptly of all disputes or claims
relating to Receivables. Absent the occurrence and continuance of an Event of
Default, Borrower will notify Coast of a dispute or claim relating to a
single Receivable in excess of $50,000, or more, or involving Receivables in
an aggregate amount of $200,000 or more. Borrower shall not forgive
(completely or partially), compromise or settle any Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower
may do so, provided that: (a) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business, and in
arm's length transactions, which are reported to Coast on the regular reports
provided to Coast; (b) no Default or Event of Default has occurred and is
continuing; and (c) taking into account all such discounts settlements and
forgiveness, the total outstanding Loans will not exceed the Credit Limit.
Coast may, at any time after the occurrence of an Event of Default, settle or
adjust disputes or claims directly with Account Debtors for amounts and upon
terms which Coast considers advisable in its reasonable credit judgment and,
in all cases, Coast shall credit Borrower's Loan account with only the net
amounts received by Coast in payment of any Receivables.
7.7 INTENTIONALLY DELETED
7.8 VERIFICATION. Coast may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters
relating to the Receivables, by means of mail, telephone or otherwise, either
in the name of Borrower or Coast or such other name as Coast may choose.
7.9 NO LIABILITY. Coast shall not under any circumstances be
responsible for any error, act, omission or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith in a commercially
reasonable manner for less than the full amount thereof, nor shall Coast be
deemed to be responsible for any of Borrower's obligations under any contract
or agreement giving rise to a Receivable. Nothing herein shall, however,
relieve Coast from liability for its own gross negligence or willful
misconduct.
8. ADDITIONAL DUTIES OF THE BORROWER
8.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times
comply with the financial and other covenants set forth in the Schedule.
8.2 INSURANCE. Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business
insurance, with insurers reasonably acceptable to Coast, in such form and
amounts as Coast may reasonably require and as required by the Federal
Aviation Administration, the Department of Transportation, any other
governmental entity, and United, and Borrower shall provide evidence of such
insurance to Coast, so that Coast is satisfied that such insurance is, at all
times, in full force and effect. All liability insurance policies of Borrower
shall name Coast as an additional insured, and all property casualty and
related insurance policies of Borrower covering Collateral shall name Coast
as a loss payee thereon and Borrower shall cause a lender's loss payee
endorsement in form reasonably acceptable to Coast. Upon receipt of the
proceeds of any such insurance, Coast shall apply such proceeds in reduction
of the Obligations as Coast shall determine in its sole discretion, except
that, provided no Default or Event of Default has occurred and is continuing,
Coast shall release to Borrower insurance proceeds with respect to Equipment
totaling less than the amount set forth in Section 8 of the Schedule, which
shall be utilized by Borrower for the replacement of the Equipment with
respect to which the insurance proceeds were paid. Coast may require
reasonable assurance that the insurance proceeds so released will be so used.
If Borrower fails to provide or pay for any insurance, Coast may, but is not
obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Coast copies of all reports made to insurance companies.
8.3 REPORTS. Borrower, at its expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other
written reports with respect to Borrower (including budgets, sales
projections,
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operating plans and other financial documentation), as Coast shall from time
to time reasonably specify.
8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but
not less frequently than quarterly and on one (1) Business Day's notice,
Coast, or its agents, shall have the right to perform Audits. Coast shall
take reasonable steps to keep confidential all confidential information
obtained in any Audit, but Coast shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant
to any subpoena or other legal process. The Audits shall be at Borrower's
expense and the charge for the Audits shall be Seven Hundred Fifty Dollars
($750) per person per day (or such higher amount as shall represent Coast's
then current standard charge for the same), plus reasonable out-of-pocket
expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at
any location other than Borrower's Address, without first notifying Coast of
the same and obtaining the written agreement from such accounting firm,
service bureau or other third party to give Coast the same rights with
respect to access to books and records and related rights as Coast has under
this Loan Agreement. Borrower shall also take all necessary steps to assure
that its material accounting and software, systems and applications, and
those of its accounting firm, service bureau or any other third party vendor
or supplier, will, on a timely basis, adequately and completely address the
Year 2000 Problem in all material respects.
8.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's
prior written consent, do any of the following:
(a) merge or consolidate with another entity, except in a
transaction in which (i) the owners of the Borrower hold at least fifty
percent (50%) of the ownership interest in the surviving entity immediately
after such merger or consolidation, and (ii) the Borrower is the surviving
entity;
(b) acquire any assets, except (i) in the ordinary course of
business, which for purposes of this paragraph shall be deemed to include
aircraft, engines, propellers, Spare Parts and Equipment related thereto,
acquired for use by Borrower in connection with Borrower's business as
presently conducted, or (ii) in a transaction or a series of transactions not
involving the payment of an aggregate amount in excess of the amount set
forth in Section 8 of the Schedule;
(c) except as provided in (n) below; enter into any other
transaction outside the ordinary course of business;
(d) sell or transfer any Collateral, except for: (i) the sale,
in the ordinary course of business, of obsolete or unneeded Equipment and
Spare Parts Inventory (which Borrower will no longer consume and which is
outside Borrower's rotation schedule of Spare Parts used in its aircraft),
and (ii) the sale or transfer of other Collateral with the prior written
consent of Coast.
(e) store any Collateral with any warehouseman or other third
party unless Coast has been provided with a warehouseman/bailee letter,
substantially in the form as the warehouseman/bailee letters attached to this
Agreement as Schedules 8.5(e)1 and 8.5(e)2 , respectively. The acceptability
of such warehouseman/bailee letters will be determined by Coast in its sole
and absolute discretion. Notwithstanding the foregoing, the following will be
excepted from the provisions of this subparagraph: (i) Borrower's Equipment
maintained or stored off-site for repair, refurbishment, maintenance or
similar purposes in the ordinary course of business, and (ii) Equipment with
a fair market value of not more than One Million Dollars ($1,000,000) in the
aggregate.
(f) sell any Collateral on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i)
advances to customers or suppliers in the ordinary course of business, (ii)
travel advances, employee relocation loans and other employee loans and
advances in the ordinary course of business, and (iii) loans to employees,
officers and directors for the purpose of purchasing equity securities of the
Borrower;
(h) except as provided in (n) below; incur any debts, outside
the ordinary course of business, which would have a Material Adverse Effect;
(i) incur any debts with United outside of the ordinary course
of business
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between Borrower and United including, without limitation, obtaining advances
from United against tickets generated by Borrower's airline operations.
(j) guarantee or otherwise become liable with respect to the
obligations of another party or entity;
(k) pay or declare any dividends or distributions on the
ownership interests in Borrower (except for dividends or distributions
payable solely in stock form of ownership interests in Borrower);
(l) make any change in Borrower's capital structure which would
have a Material Adverse Effect; or
(m) dissolve or elect to dissolve; or
(n) xxxxx x xxxx on or security interest in Inventory; except
in connection with and limited to Borrower's obtaining new financing on
Inventory or to secure the extension by an inventory supplier of extended
payment terms, and then, in either case, only upon the granting by Borrower
of a second lien on and security interest in Inventory to Coast, subject to
terms, conditions and documentation acceptable to Coast, in its reasonable
discretion.
Transactions permitted by the foregoing provisions of this Section are
only permitted if no Default or Event of Default is continuing or would occur as
a result of such transaction.
8.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against Coast with respect to any Collateral
or relating to Borrower, Borrower shall, without expense to Coast, make
available Borrower and its officers, employees and agents and Borrower's
books and records, to the extent that Coast may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
8.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request
by Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully
consummate the transactions contemplated by this Agreement.
9. TERM
9.1 MATURITY DATE. This Agreement shall continue in effect until the
Maturity Date; provided that the Maturity Date shall automatically be
extended, and this Agreement shall automatically and continuously renew, for
successive additional terms of one year each, unless one party gives written
notice to the other, not less than ninety (90) days prior to the Maturity
Date or the next Renewal Date, that such party elects to terminate this
Agreement effective on the Maturity Date or such next Renewal Date. In the
event that such ninety (90) day notice is given, the Early Termination Fee
provision set forth in Section 9.2 will not be applicable. If this Agreement
is renewed under this Section 9.1, Borrower shall pay to Coast a Renewal Fee
in the amount shown in Section 3 of the Schedule. The Renewal Fee shall be
due and payable on the Renewal Date and thereafter shall bear interest at a
rate equal to the rate applicable to the Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective three (3) Business Days
after written notice of termination is given to Coast; or (b) by Coast at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under
this Section 9.2, Borrower shall pay to Coast an Early Termination Fee in the
amount shown in Section 3 of the Schedule. The Early Termination Fee shall be
due and payable on the effective date of termination and thereafter shall
bear interest at a rate equal to the rate applicable to the Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether
or not all or any part of such Obligations are otherwise then due and
payable. Notwithstanding any termination of this Agreement, all of Coast's
security interests in all of the Collateral and all of the terms and
provisions of this Agreement shall continue in full force and effect until
all Obligations have been paid and performed in full; provided that, without
limiting the fact that Loans are subject to the discretion of Coast, Coast
may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations
16
have been paid and performed in full. Upon payment and performance in full of
all the Obligations and termination of this Agreement, Coast shall promptly
deliver to Borrower termination statements, requests for reconveyances and
such other documents as may be required to fully terminate Coast's security
interests.
10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and
Borrower shall give Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or
certificate made or delivered to Coast by Borrower or any of Borrower's
officers, employees or agents, now or in the future, shall be untrue or
misleading and results in a Material Adverse Effect; or
(b) Borrower shall fail to pay when due any Loan or any
interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any
time shall exceed the Credit Limit and Borrower shall fail to cause the
Credit Limit to equal or exceed the total Obligations outstanding within two
(2) days of such imbalance; or
(d) Borrower shall fail to deliver the proceeds of Collateral
to Coast as provided in Section 7.5 above, or shall fail to give Coast access
to its books and records or Collateral as provided in Section 8.4 above, or
shall breach any negative covenant set forth in Section 8.5 above; or
(e) Borrower shall fail to comply with the financial covenants
(if any) set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within five (5) Business Days after
written notice from Coast to Borrower pursuant to the provisions of Section
11.5; or
(g) Any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of the
Collateral which is not cured within ten (10) days after the occurrence of
the same; or
(h) any default or event of default, resulting in acceleration
of the underlying obligation, occurs under any obligation secured by a
Permitted Lien, which: (i) is not cured within any applicable cure period;
(ii) is not waived in writing by the holder of the Permitted Lien; or (iii)
is not being contested in good faith by appropriate proceedings; provided,
however, that any such default or Event of Default being contested does not
constitute a Material Adverse Effect on Coast's prospects for repayment and
Coast's rights in the Collateral; or
(i) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a Material Adverse Effect.
For the purposes of this paragraph any contract with or obligation owing to
Raytheon will be deemed material; or
(j) Dissolution, termination of existence, insolvency or
business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit
of creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or
(k) the commencement of any proceeding against Borrower under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, now or
in the future in effect, which is (i) not timely controverted, or (ii) not
cured by the dismissal thereof within forty-five (45) days after the date
commenced; or
(l) Intentionally Omitted.
(m) Intentionally Omitted.
(n) Borrower makes any payment on account of indebtedness or
obligations which has been subordinated to the Obligations, other than as
permitted in an applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement. Coast agrees that, as
17
of the Closing Date, there is no subordinated indebtedness or obligations; or
(o) Except as permitted under Section 8.5(a), Borrower shall
suffer or experience any Change of Control without Coast's prior written
consent, which consent shall be in the discretion of Coast in the exercise of
its reasonable business judgment; or
(p) Borrower shall generally not pay its debts as they become
due, or Borrower shall conceal, remove or transfer any part of its property,
with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or
(q) there shall be any Material Adverse Effect.
Coast may cease making any Loans or extending any credit hereunder during any of
the above cure periods.
10.2 REMEDIES. Upon the occurrence, and during the continuance, of
any Event of Default, Coast, at its option, and without notice or demand of
any kind (all of which are hereby expressly waived by Borrower), may do any
one or more of the following:
(a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations
to be immediately due, payable and performable, notwithstanding any deferred
or installment payments allowed by any instrument evidencing or relating to
any Obligation;
(c) Take possession of any or all of the Collateral wherever it
may be found, and for that purpose Borrower hereby authorizes Coast without
judicial process to enter onto any of Borrower's premises without
interference to search for, take possession of, keep, store or remove any of
the Collateral, and remain on the premises or cause a custodian to remain on
the premises in exclusive control thereof, without charge for so long as
Coast deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; PROVIDED, HOWEVER,
that should Coast seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives:
(i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession;
(ii) any demand for possession prior to the commencement
of any suit or action to recover possession thereof;
(iii) and any requirement that Coast retain possession of,
and not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral
and make it available to Coast at places designated by Coast which are
reasonably convenient to Coast and Borrower, and to remove the Collateral to
such locations as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge. Coast is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling
any Collateral and Borrower's rights under all licenses and all franchise
agreements shall inure to Coast's benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other
than oral announcement at the time scheduled for sale. Coast shall have the
right to conduct such disposition on Borrower's premises without charge, for
such time or times as Coast deems reasonable, or on Coast's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Coast may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and
18
if permissible under applicable law, at any private disposition. Any sale or
other disposition of Collateral shall not relieve Borrower of any liability
Borrower may have if any Collateral is defective as to title or physical
condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's
sole discretion, to grant extensions of time to pay, compromise claims
subject to the provisions of Section 7.9, and settle Receivables and the like
for less than face value; and
(h) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto.
All attorneys' fees, expenses, costs, liabilities and obligations
incurred by Coast (including attorneys' fees and expenses incurred in connection
with bankruptcy) with respect to the foregoing shall be due from the Borrower to
Coast on demand. Coast may charge the same to Borrower's loan account, and the
same shall thereafter bear interest at the same rate as is applicable to the
Loans. Without limiting any of Coast's rights and remedies, from and after the
occurrence and during the continuance of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional three percent
per annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower
and Coast agree that a sale or other disposition (collectively, "sale") of
any Collateral which complies with the following standards will conclusively
be deemed to be commercially reasonable:
(a) Notice of the sale is given to Borrower at least seven (7)
days prior to the sale, and, in the case of a public sale, notice of the sale
is published at least seven (7) days before the sale in a newspaper of
general circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with
or without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00
p.m. Los Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's check
or wire transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast
may (but is not obligated to) direct any prospective purchaser to ascertain
directly from Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
10.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable
power of attorney coupled with an interest, authorizing and permitting Coast
(acting through any of its employees, attorneys or agents) at any time, at
its option, but without obligation, with or without notice to Borrower, and
at Borrower's expense, to do any or all of the following, in Borrower's name
or otherwise, but Coast agrees to exercise the following powers in a
commercially reasonable manner:
(a) Execute on behalf of Borrower any documents that Coast may,
in its sole discretion, deem advisable in order to perfect and maintain
Coast's security interest in the Collateral, or in order to exercise a right
of Borrower or Coast, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future
agreements;
(b) After and during the continuance of an Event of Default,
execute on behalf of Borrower any document exercising, transferring or
assigning any option to purchase, sell or otherwise dispose of or to lease
(as lessor or lessee) any real or personal property which is part of Coast's
Collateral or in which Coast has an interest;
19
(c) After and during the continuance of an Event of Default,
execute on behalf of Borrower, any invoices relating to any Receivable, any
draft against any Account Debtor and any notice to any Account Debtor, any
proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's,
materialman's or other lien, or assignment or satisfaction of mechanic's,
materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come
into Coast's possession;
(e) Endorse all checks and other forms of remittances received
by Coast;
(f) After and during the continuance of an Event of Default,
pay, contest or settle any lien, charge, encumbrance, security interest and
adverse claim in or to any of the Collateral, or any judgment based thereon,
or otherwise take any action to terminate or discharge the same;
(g) After and during the continuance of an Event of Default,
grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and
other documents in connection therewith;
(h) After and during the continuance of an Event of Default,
pay any sums required on account of Borrower's taxes or to secure the release
of any liens therefor, or both;
(i) After and during the continuance of an Event of Default,
settle and adjust, and give releases of, any insurance claim that relates to
any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast the
same rights of access and other rights with respect thereto as Coast has
under this Agreement; and
(k) After and during the continuance of an Event of Default,
take any action or pay any sum required of Borrower pursuant to this
Agreement and any other present or future agreements.
Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by Coast (including attorneys' fees
and expenses incurred pursuant to bankruptcy) with respect to the foregoing
shall be added to and become part of the Obligations, and shall be payable on
demand. Coast may charge the foregoing to Borrower's loan account and the
foregoing shall thereafter bear interest at the same rate applicable to the
Loans. In no event shall Coast's rights under the foregoing power of attorney
or any of Coast's other rights under this Agreement be deemed to indicate
that Coast is in control of the business, management or properties of
Borrower. Borrower shall pay, indemnify, defend, and hold Coast and each of
its officers, directors, employees, counsel, agents, and attorneys-in-fact
(each, an "Indemnified Person") harmless (to the fullest extent permitted by
law) from and against any and all claims, demands, suits, actions,
investigations, proceedings, and damages, and all attorneys fees and
disbursements and other costs and expenses actually incurred in connection
therewith (as and when they are incurred and irrespective of whether suit is
brought), at any time asserted against, imposed upon, or incurred by any of
them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and
any other Loan Documents or the transactions contemplated herein, and with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person hereunder with
respect to any Indemnified Liability that: (i) a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person; (ii) relates to claims,
demands, suits, actions, investigations, proceedings, litigation or damages
instituted or asserted by or on behalf of any governmental or supervisory
authority that does not involve misconduct on the part of the Borrower; or
(iii) relates to disputes between or among Coast and its assignees,
participants, syndication lenders or any other Person that does not involve
misconduct on the part of the Borrower. This provision shall survive the
termination of this Agreement and the repayment of the Obligations.
20
10.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale of the Collateral shall be applied by Coast first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by Coast in
the exercise of its rights under this Agreement, second to the interest due
upon any of the Obligations, and third to the principal of the Obligations,
in such order as Coast shall determine in its sole discretion. Any surplus
shall be paid to Borrower or other persons legally entitled thereto; Borrower
shall remain liable to Coast for any deficiency. If, Coast, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Coast shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Coast
of the cash therefor.
10.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Coast shall have all the other rights and remedies
accorded a secured party in equity, under the Code, and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise
by Coast of one or more of its rights or remedies shall not be deemed an
election, nor bar Coast from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Coast to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been indefeasibly paid and performed.
11. GENERAL PROVISIONS
11.1 INTEREST COMPUTATION. In computing interest on the Obligations,
all checks, wire transfers and other items of payment received by Coast
(including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by Coast on account of the Obligations two (2)
Business Days after receipt by Coast of immediately available funds, and, for
purposes of the foregoing, any such funds received after 10:30 AM Los
Angeles, California time, on any day shall be deemed received on the next
Business Day. Coast shall be entitled to charge Borrower's account for such
two (2) Business Days of "clearance" or "float" at the rate(s) set forth in
Section 3 of the Schedule on all checks, wire transfers and other items
received by Coast, regardless of whether such two (2) Business Days of
"clearance" or "float" actually occur, and shall be deemed to be the
equivalent of charging two (2) Business Days of interest on such collections.
This across-the-board two (2) Business Day clearance or float charge on all
collections is acknowledged by the parties to constitute an integral aspect
of the pricing of Coast's financing of Borrower. Coast shall not, however, be
required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to Coast in its sole discretion, and Coast may charge
Borrower's loan account for the amount of any item of payment which is
returned to Coast unpaid.
11.2 APPLICATION OF PAYMENTS. Subject to Section 7.5 hereof, all
payments with respect to the obligations may be applied, and in Coast's sole
discretion reversed and re-applied, to the Obligations, in such order and
manner as Coast shall determine in its sole discretion.
11.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to
Borrower's Loan account, in which event they will bear interest from the date
due to the date paid at the same rate applicable to the Loans.
11.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with
an account of advances, charges, expenses and payments made pursuant to this
Agreement. Absent manifest error, such account shall be deemed correct,
accurate and binding on Borrower and an account stated (except for reverses
and reapplications of payments made and corrections of errors discovered by
Coast), unless Borrower notifies Coast in writing to the contrary within
thirty (30) days after each account is rendered, describing the nature of any
alleged errors or omissions.
11.5 NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private
delivery service or by regular first-class mail, facsimile or certified mail
return receipt requested, addressed to Coast or Borrower at the addresses
shown in the heading to this Agreement, or at any other address designated in
writing by one party to the other party. Notices to Coast shall be directed
to the Commercial Finance Division, to the attention of the Division Manager
or the
21
Division Credit Manager. All notices shall be deemed to have been
given upon delivery in the case of notices personally delivered, faxed (at
time of confirmation of transmission), or at the expiration of one (1)
Business Day following delivery to the private delivery service, or three (3)
Business Days following the deposit thereof in the United States mail, with
postage prepaid, or the date of delivery as shown on the return receipt,
whichever is later.
11.6 SEVERABILITY. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in
full force and effect.
11.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS
SIGNED BY THE PARTIES IN CONNECTION HEREWITH.
11.8 WAIVERS. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or
any other present or future agreement between Borrower and Coast shall not
waive or diminish any right of Coast later to demand and receive strict
compliance therewith. Any waiver of any Default shall not waive or affect any
other Default, whether prior or subsequent, and whether or not similar. None
of the provisions of this Agreement or any other agreement now or in the
future executed by Borrower and delivered to Coast shall be deemed to have
been waived by any act or knowledge of Coast or its agents or employees, but
only by a specific written waiver signed by an authorized officer of Coast
and delivered to Borrower. Borrower waives demand, protest, notice of protest
and notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time
held by Coast on which Borrower is or may in any way be liable, and notice of
any action taken by Coast, unless expressly required by this Agreement.
11.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred
or suffered by Borrower or any other party through the ordinary negligence of
Coast, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Coast, but nothing herein shall
relieve Coast from liability for its own gross negligence or willful
misconduct.
11.10 AMENDMENT. The terms and provisions of this Agreement may not
be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
11.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
11.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse
Coast for all attorneys' fees (including attorneys' fees and expenses
incurred pursuant to bankruptcy) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Coast, pursuant to,
or in connection with, or relating to this Agreement (whether or not a
lawsuit is filed), including, but not limited to, any attorneys' fees and
costs (including attorneys' fees and expenses incurred pursuant to
bankruptcy) Coast incurs in order to do the following: prepare and negotiate
this Agreement and the documents relating to this Agreement; obtain legal
advice in connection with this Agreement or Borrower; enforce, or seek to
enforce, any of its rights; prosecute actions against, or defend actions by,
Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy;
file or prosecute any probate claim, bankruptcy claim, third-party claim, or
other claim; examine, audit, copy, and inspect any of the Collateral or any
of Borrower's books and records; protect, obtain possession of, lease,
dispose of, or otherwise enforce Coast's security interest in, the
Collateral; and otherwise represent Coast in any litigation relating to
Borrower. If either Coast or Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its costs and attorneys' fees (including
attorneys' fees and expenses incurred pursuant to bankruptcy), including (but
not limited to) attorneys' fees and
22
costs incurred in the enforcement of, execution upon or defense of any order,
decree, award or judgment. Borrower shall also pay Coast's standard charges
for returned checks and for wire transfers, in effect from time to time. All
attorneys' fees, costs and charges (including attorneys' fees and expenses
incurred pursuant to bankruptcy) and other fees, costs and charges to which
Coast may be entitled pursuant to this Agreement may be charged by Coast to
Borrower's loan account and shall thereafter bear interest at the same rate
as the Loans. Coast agrees that it will provide Great Lakes with reasonable
documentation of expenses for which reimbursement is sought provided that
Coast will not be required to provide any documentation which would result in
the waiver of Coast's attorney-client privilege.
11.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Coast;
provided, however, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of Coast, and any
prohibited assignment shall be void. No consent by Coast to any assignment
shall release Borrower from its liability for the Obligations. Coast may
assign its rights and delegate its duties hereunder without the consent of
Borrower provided that any successor to Coast must be a commercial financial
institution. Coast reserves the right to syndicate all or a portion of the
transaction created herein or sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Coast's rights and
benefits hereunder. In connection with any such syndication, assignment or
participation, Coast may, subject to the confidentiality provisions of
Section 11.18, disclose all documents and information which Coast now or
hereafter may have relating to Borrower or Borrower's business. To the extent
that Coast assigns its rights and obligations hereunder to a third Person and
such third person assumes Coast's obligations, Coast thereafter shall be
released from such assigned obligations to Borrower.
11.14 PUBLICITY. Coast is hereby authorized, at its expense, to
issue appropriate press releases and to cause a tombstone to be published
announcing the consummation of this transaction and the aggregate amount
thereof.
11.15 PARAGRAPH HEADINGS CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and Coast acknowledge that
the headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe,
limit, define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between
the parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Coast or Borrower under any
rule of construction or otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all
acts and transactions hereunder and all rights and obligations of Coast and
Borrower shall be governed by the internal laws of the State of California,
without regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California,
and that the exclusive venue therefor shall be Los Angeles County; (b)
consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or
any other method permitted by law; and (c) waives any and all rights Borrower
may have to object to the jurisdiction of any such court, or to transfer or
change the venue of any such action or proceeding.
11.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
COAST OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
11.18 CONFIDENTIALITY. Coast will maintain the confidentiality of
any non-public information marked as confidential and relating to the
business operations and methodology of
23
Borrower and financial performance of Borrower ("Borrower Information")
provided to Coast solely by the Borrower as required under the terms of this
Agreement, and will not disclose Borrower Information to any person, other
than employees, agents, attorneys or accountants of Coast. Coast will not
disclose Borrower information to any other party unless, prior to such
disclosure, Coast obtains an executed acknowledgment binding such party to
maintain the confidentiality of the information, prohibiting its disclosure
except for the purposes permitted under this Agreement, and agreeing that the
information may not be used to complete with the Borrower in any way. In the
event Coast receives a subpoena or other process for any Borrower
Information, it will immediately give notice in writing of the subpoena or
other process, including a copy thereof, to Borrower.
BORROWER:
GREAT LAKES AVIATION, LTD.,
AN IOWA CORPORATION
By /s/ Xxxx X. Xxxx
------------------------
President or Vice President
By
------------------------
Secretary or Ass't Secretary
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By /s/ Xxxx X. Xxxxxxx
------------------------------
Title: VP
-----------------------------
24
COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: GREAT LAKES AVIATION, LTD.,
AN IOWA CORPORATION
ADDRESS: 0000 000XX XXXXXX
XXXXXXX, XXXX 00000
DATE: DECEMBER 31, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Bank, a California
corporation and the above-borrower of even date.
--------------------------------------------------------------------------------
SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - CREDIT LIMIT: Loans in a total amount at any time
outstanding not to exceed the lesser
of Twenty Million Dollars ($20,000,000) at
any one time outstanding (the "Maximum
Dollar Amount"), or an amount not to
exceed 85% of the amount of Borrower's
Eligible Billed Receivables and Eligible
Unbilled Receivables (as defined in
Section 1 of the Agreement).
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST RATE: A rate equal to the Prime Rate plus
one-half of one percent (.50%) per annum,
calculated on the basis of a 360-day year
for the actual number of days elapsed. The
interest rate applicable to all Loans shall
be adjusted monthly as of the first day of
each month, and the interest to be charged
for each month shall be based on the
highest Prime Rate in effect during the
prior month, but in no event shall the
rate of interest charged on any Loans in
any month be less than 8% per annum.
25
--------------------------------------------------------------------------------
SECTION 3.1 - MINIMUM MONTHLY
INTEREST: An amount equal to the interest that would
have accrued had the daily aggregate
outstanding balance of all Loans been
equal to forty percent (40%) of all the
Maximum Dollar Amount.
SECTION 3.2 - LOAN FEE: One percent (1%) of the Maximum Dollar
Amount, such amount being fully earned
on the Closing Date, and payable one
half-percent (.50%) on the Closing Date,
and one-quarter of one percent (.25%) on
the first and second anniversaries of
the Closing Date. The fees payable
pursuant to this provision will survive
notwithstanding an Early Termination of
this Agreement pursuant to Section 9.2 of
the Agreement and will be payable on the
effective date of such Early Termination.
SECTION 3.2 - FACILITY FEE: $3,500, per quarter, payable on the
Closing Date (prorated for any partial
quarter at the beginning of the term of
this Agreement).
SECTION 9.1 - RENEWAL FEE: One-half of one percent (.50%) of the
Maximum Dollar Amount per year.
SECTION 9.2 - EARLY TERMINATION
FEE:
An amount equal to three percent (3%) of
the Maximum Dollar Amount (as defined in
the Schedule), if termination occurs
on or before the first anniversary of
the effective date of this Agreement;
two percent (2%) of the Maximum Dollar
Amount, if termination occurs after
the first anniversary and on or before
the second anniversary of the effective
date of this Agreement; and one percent
(1%) of the Maximum Dollar Amount, if
termination occurs after the second
anniversary and before the Maturity Date.
================================================================================
SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM
AVAILABILITY: $1,000,000
SECTION 5.13- OTHER DOCUMENTS
AND AGREEMENTS: 1. UCC-1 financing statements, fixture
filings and termination statements;
2. Security Agreements (including those
covering: (a) copyrights, patents and
trademarks, and (b) the Beechcraft
1900 Inventory);
3. Intercreditor Agreement with Raytheon;
4. Lockbox/TriParty/Blocked Account
Agreements;
26
--------------------------------------------------------------------------------
5. Payment Instructions re: Collections
under the Clearinghouse Agreement;
6. Agreement with United Airlines re:
no further cash advances to Borrower;
7. Opinion of Borrower's Counsel;
8. Landlord Waivers and Access Agreements
with respect to the locations set
forth on Schedule 5.3;
9. Year 2000 Problem Assessment
Certificate; and
10. Letter of Understanding from United.
================================================================================
SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF
BORROWER: None.
SECTION 6.2 - PRIOR TRADE NAMES
OF BORROWER: RDU, Inc.
SECTION 6.2 - EXISTING TRADE NAMES
OF BORROWER: Great Lakes Airlines
Great Lakes Aviation d/b/a United
Express
SECTION 6.3 - OTHER LOCATIONS AND
ADDRESSES: See attached Schedule 6.3.
SECTION 6.10 - MATERIAL ADVERSE
LITIGATION: None.
SECTION 6.10 - FUTURE CLAIMS AND
LITIGATION: Borrower will promptly inform
Coast in writing of any claim,
proceeding, litigation or
investigation in the future
threatened or instituted by or
against Borrower involving (i) any
single claim of Two Hundred and
Fifty Thousand Dollars ($250,000)
or more, or involving Five Hundred
Thousand Dollar ($500,000) or more
in the aggregate, whether or not
any such claim(s) are insured or
uninsured, and (ii) with respect
to any claims not covered
insurance, any single claim of One
Hundred Thousand Dollars
($100,000) or more, or involving
Two Hundred and Fifty Thousand
Dollars ($250,000) or more in the
aggregate.
================================================================================
27
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
SECTION 8.1 - OTHER PROVISIONS: 1) Borrower shall have an ongoing
Tangible Net Worth of Seven Million
Dollars ($7,000,000) on the Closing
Date with said amount to be
maintained until the first
anniversary of the Closing Date, at
which time said amount will be
increased to Eight Million Dollars
($8,000,000), with said Tangible Net
Worth to be increased by One Million
Dollars ($1,000,000) on each and
every subsequent anniversary of the
Closing Date. If, as a direct result
of weather problems, verified by
Coast to its sole and absolute
satisfaction, Borrower's available
seat miles decline leading to a
decrease in Borrower's Tangible Net
Worth such that at any time Borrower
fails to maintain the required
Tangible Net Worth, the Interest
Rate applicable to all Loans shall
increase to the Default Rate of
Interest (set forth in Section
10.2 hereof), notwithstanding the
fact that an Event of Default will
not be deemed to have occurred, and
such Default Rate of Interest will
continue until such time as Borrower
is in compliance with the Tangible
Net Worth covenant. Notwithstanding
the foregoing, an Event of Default
shall be deemed to have occurred if
at any time Borrower's Tangible Net
Worth falls below Five Million
Dollars ($5,000,000).
2) Borrower's accounts payable
shall be maintained as required
under Section 6.20 of the Agreement.
SECTION 8.2 - INSURANCE: Subject to the limitations set forth
in Section 8.2 of the Agreement,
Coast shall release to Borrower
insurance proceeds with respect to
Equipment totaling less than Five
Hundred Thousand Dollars ($500,000).
SECTION 8.3 - REPORTING: Borrower shall provide Coast with
the following:
1. Monthly Receivable agings,
aged by invoice date, including
reconciliation to the General
Ledger, within fifteen (15) days
after the end of each month.
2. Monthly accounts payable
agings, aged by invoice date,
including reconciliation to the
General Ledger, and outstanding or
held check registers within fifteen
(15) days after the end of each
month.
3. Monthly internally prepared
financial statements, as soon
as available, and in any event
within thirty (30) days after
the end of each month.
28
--------------------------------------------------------------------------------
4. Quarterly internally prepared
financial statements, as soon
as available, and in any event
within forty-five (45) days
after the end of each fiscal
quarter of Borrower.
5. Annual financial statements,
as soon as available, and in
any event within ninety (90)
days following the end of
Borrower's fiscal year,
certified by, an independent
certified public accountant
acceptable to Coast.
6. A copy of Borrower's Form 10Q,
as soon as available, and in
any event within 45 days
following the end of each
fiscal year.
7. A copy of Borrower's Form 10K,
as soon as available, and in
any event within 90 days
following the end of each
fiscal year.
8. Monthly, a copy of the ACH
"recap/settlement sheet" for
the previous month, as soon as
available.
9. Borrower's cooperation in
obtaining third party
confirmation of Borrower's
passenger revenues from the
Airline Tariff Publishing
Company, with said information
to be obtained as requested by
Coast.
SECTION 8.5 - NEGATIVE COVENANTS
(ACQUIRED ASSETS): Two Hundred and Fifty Thousand
Dollars ($250,000) during any
calendar year, with such amount to
be prorated for any partial calendar
year periods during the term of this
Agreement .
================================================================================
SECTION 9 - TERM
SECTION 9.1 - MATURITY DATE: The last Business Day of the month
three (3) years from the Closing
Date, subject to automatic renewal
as provided in Section 9.1 of the
Agreement, and early termination as
provided in Section 9.2 of the
Agreement.
29
SCHEDULE 5.3
[Locations for Landlord Waivers]
1) 0000 000xx Xxxxxx
Xxxxxxx, Xxxx 00000
2) ________________________________
Chicago, Illinois ______________
3) ________________________________
Denver, Colorado _______________
4) ________________________________
Grand Island, North Dakota _____
5) ________________________________
Cheyenne, Wyoming ______________
6) ________________________________
Huron, South Dakota ____________
30
SCHEDULE 6.3
[Borrower's Locations]
-----------------------------------------------------------------------------------------------
LOC NAME FED EX ADDRESS
---------- ----------------
-----------------------------------------------------------------------------------------------
Alliance, NE 0000 Xxxxx Xx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Waterloo, IA 0000 Xxxxxxx Xxxx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Almosa, CO 0000 Xxxxx Xx., Xxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Amarillo, TX
-------------------------------------------------------------------------------------------------
Xxxxxxxxxxx, XX 000000 Airport Terminal, Xxxxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Bismarck, ND 0000 Xxxxxxxxxx Xx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Brookings, SD 000 0xx Xx. XX., Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Burlington, IA 0000 Xxxxxx Xx., Xxxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Chadron, NE 00 Xxxxxxx Xx., Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Cortez, CO Montezoma County Airport, Xxxxxx Xx. X, X.X. Xxx 0000, Xxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Chicago (Meigs), IL 0000 X. Xxxx Xxxxx Xx., Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Cheyenne, WY 000 X. 0xx Xx. Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Dubuque, IA 00000 Xxxxxxx Xx., Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Dodge City, KS 000 Xxxxxxx Xx., Xxxxx Xxxx, XX 00000
-------------------------------------------------------------------------------------------------
Decatur, IL 000 Xxxxxxx Xx., Xxxxxxx, XX
-------------------------------------------------------------------------------------------------
Denver, CO DIA 0000 Xxxx Xxxx., X-00, Xxxxxx, XX 00000-0000
-------------------------------------------------------------------------------------------------
Denver, CO ***
-------------------------------------------------------------------------------------------------
Denver, CO ***
-------------------------------------------------------------------------------------------------
Dickinson, ND XX 0, Xxx 000X, Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Durango, CO 000 Xxxxxxx Xx., Xxx 0, Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Devils Lake, ND Devils Xxxx Xxxxxxx, Xxxxxx Xxxx, XX 00000
-------------------------------------------------------------------------------------------------
Kearney, NE 0000 Xxxxxxx Xx., Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Eagle/Vale, CO
-------------------------------------------------------------------------------------------------
Farmington, NM 0000 X. Xxxxxx, Xxxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Fairmont, MN Fairmont Municipal Airport, Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Sioux Falls, SD 0000 Xxxxxx Xx., Xxxxx Xxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Great Bend, KS Xx. 0, Xxx 000X, Xxxxx Xxxx, XX 00000
-------------------------------------------------------------------------------------------------
Page 1 of 3
[Borrower's Locations]
-------------------------------------------------------------------------------------------------
LOC NAME FED EX ADDRESS
---------- ----------------
-------------------------------------------------------------------------------------------------
Gillette, WY 0000 Xxxxxxx Xx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Garden City, KS 0000 Xxx Xxxxxxx Xx., Xxxxxx Xxxx, XX 00000
-------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxx, XX
-------------------------------------------------------------------------------------------------
Xxxxxxxx, XX Xxxxxx Field, 000 X. Xxxxxxx Xx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Grand Island, NE 0000 X. Xxxxxxx, Xxxxx 0, Xxxxx Xxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Gunnison, CO
-------------------------------------------------------------------------------------------------
Hayden, CO
-------------------------------------------------------------------------------------------------
Huron, SD 0000 Xxxxxxxx Xxx. XX., Xxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Xxxx, XX X. Xxx. 00, Xxxx, XX 00000
-------------------------------------------------------------------------------------------------
Iron Mountain, MI 000 Xxxxxxx Xx., Xxxx Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Williston, ND Xxx. 0 & Xxx. 00 X., Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Ironwood, MI 0000 Xxxxxxx Xx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Jamestown, ND 0000 00xx Xxx. XX, Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Lamar, CO Lamar Mnn Airport. 0000 Xxxxxx Xx. XX0, Xxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Lafayette, IN Term Xxxx #000, Xxxxxxx Xx. X., Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Lansing, MI 0000 Xxxxxxx Xxxx Xxxx., Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Laramie, WY 000 Xxxxxxx Xxxxx Xx., Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
North Platte, NE 0000 X. Xxxxxxx Xx., Xxxxx #0, Xxxxx Xxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Liberal, KS 000 Xxxxxxxx Xxx., X.X. Xxx 000, Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Manistee, MI 0000 Xxxxxxx Xx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
XxXxxx, XX Xxxxxxx Xx., XxXxxx, XX 00000
-------------------------------------------------------------------------------------------------
Muskegon, MI 000 Xxxxxxx Xx., Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Minneapolis, MN 0000 Xxxxx Xx. Xx., Xx. Xxxx, XX 00000
-------------------------------------------------------------------------------------------------
Minneapolis, MN ***
-------------------------------------------------------------------------------------------------
Montrose, CO 0000 Xxxxxxx Xxxx, Xxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Mattoon, IL M Xxxxxxx Xx. XXX 00, Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Mt. Xxxxxx, IL Outland Airport, Xx. x Xxx 000, Xx. Xxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Norfolk, NE Xxxx Xxxxxx Memorial Airport, Xx. 0 Xxx 000X, Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------
Page 2 of 3
[Borrower's Locations]
-------------------------------------------------------------------------------------------------
LOC NAME FED EX ADDRESS
---------- ----------------
--------------------------------------------------------------------------------------------------
Chicago, IL X'Xxxx Int'l Airport, X.X. Xxx 00000, Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
ORDDZK ***
--------------------------------------------------------------------------------------------------
Oshkosh, WI 000 X. 00xx Xxx., Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Ottumwa, IA 00000 Xxxxxxxx Xx., Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Pierre, SD 0000 Xxxxxxx Xx., Xxxxxx, XX 00000-0000
--------------------------------------------------------------------------------------------------
Pueblo, CO 00000 Xxxxx Xxxxxx, Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Rhinelander, WI 0000 Xxxxxxx Xx., Xxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Riverton, WY 0000 Xxxxxxx Xx., X.X. Xxx 000, Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Rock Springs, WY Rock Springs Sweetwater Xxxxxx Xxxxxxx, Xxx. 000, Xxxx Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Santa Fe, NM 000 X Xxxxxxx Xx., Xxxxx Xx, XX 00000
--------------------------------------------------------------------------------------------------
Sheridan, WY 000 X. Xxxxxxxx, Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Salina, KS 0000 Xxxxxx Xxx., Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Springfield, IL Xx. 00 XX Xxxxx Xxxx., Xxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Spencer, IA 0000 000xx Xx., Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Telluride, CO X.X. Xxx 0000, 0000 Xxxx Xxxxxx Xx., Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Traverse City, MI 0000 Xxxxxxx Xxxxxx Xx., Xxxxxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------------------------
Quincy, IL Xx. 0 Xxxxxxx Xxxxx, Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Worland, WY 0000 Xxxxxxx Xx., Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Yankton, SD 000 X. 00xx, Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------
Page 3 of 3
SCHEDULE 6.19
[Approved ACH Deductions]
32
GREAT LAKES AVIATION, LTD.
Allowed Offsets to Clearinghouse Funds
COMPANIES AVERAGE MONTHLY
BILLING*
GROUND HANDLING
-----------------
AIR WISCONSIN 22,677
MESA 2,391
NORTHWEST 2,946
TRANSTATE 1,467
RESERVATION FEES
------------------
THE SABRE GROUP INC 83,171
GALILEO INTERNATION 110,994
RADIO COMMUNICATIONS
----------------------
AERONAUTICAL RADIO INC 17,517
FARE PUBLISHING
-----------------
AIRLINES TARIFF PUBLISHING 2,306
PASSENGER SERVICES
--------------------
UNITED AIRLINES 723,987
(program fees, baggage claims, baggage deliveries
security, ground services)
SPACE RENTALS
---------------
UNITED AIRLINES 204,510
CONTINENTAL AIRLINES 1,220
*BASED ON THE LAST TWELVE MONTHS BILLED
SCHEDULE 8.5(e)(1)
[Form of Warehouseman's Letter]
COAST BUSINESS CREDIT
_______________________________ _____, 199__
_____________________________
_____________________________
_____________________________
_____________________________
Re: __________________________
Ladies and Gentlemen:
We understand that you now or from time to time may hold on deposit
for hire certain property (the "Warehoused Property") of ______________, a
___________ corporation (hereinafter "__________"). Coast Business Credit, a
division of Southern Pacific Bank ("Coast") has extended and continues to
extend to ________________ significant loans and other financial
accommodations, the repayment of which is secured by substantially all of
_______________'s assets, specifically including the Warehoused Property.
This letter shall serve to confirm the following agreements among
you, ______________, and Coast:
1. You shall, promptly upon receipt of request from Coast,
provide to Coast such information regarding the Warehoused
Property (including, but not limited to, information regarding
storage and other warehouse related charges) as Coast may
request.
2. You are authorized to release and deliver the Warehoused
Property per the instructions of ______________, until such
time as you have been notified to the contrary by Coast.
3. Upon receipt of a written notice from Coast, you shall no
longer deliver any of the Warehoused Property to _____________
or to any other party pursuant to instructions from
_____________. After receipt of such notice from Coast, the
Warehoused Property may only be delivered by you pursuant to
instructions from Coast.
4. You shall, upon Coast's request, deliver to Coast any and
all of the Warehoused Property.
5. Any notice hereby permitted to be given shall be in writing
and may be personally delivered to the respective recipient at
its address set forth herein or sent via facsimile to such
recipient's facsimile number set forth below. Notice properly
transmitted shall be effective upon dispatch.
33
_______________________
_____________ ___, 199_ Page ___
Please acknowledge your agreement to the foregoing by executing this
letter where appropriate below and returning the original copy of this letter
to Coast at its address set forth below.
COAST BUSINESS CREDIT, a division of
Southern Pacific Bank
By______________________________________
Title:__________________________________
Address for notices:
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
____________________________________,
a ______________________ corporation
By:______________________________________
Title:___________________________________
Address for notices:
_________________________________________
_________________________________________
_________________________________________
Facsimile No. (______) _______-__________
ACKNOWLEDGED AND AGREED
ON THIS ____ DAY OF ____________, 199___
[Warehouse]
By__________________________________________
Title:______________________________________
Address for notices:
____________________________________________
____________________________________________
____________________________________________
Facsimile No. (____) ____-_______
34
SCHEDULE 8.5(e)(2)
[Form of Bailee Letter]
COAST BUSINESS CREDIT
____________________________ __________________ _____, 199__
____________________________
____________________________
____________________________
Re:______________________________("BORROWER")
Ladies and Gentlemen:
We understand that you now or from time to time may be in
possession of certain property ("Property") of Borrower, as a result of your
rendition of services to Borrower.
Coast Business Credit, a division of Southern Pacific Bank
("Coast") has extended and continues to extend to Borrower significant loans
and other financial accommodations, the repayment of which is secured by
substantially all of Borrower's assets, specifically including the Property.
This letter shall serve to confirm the following agreements among
you, Borrower and Coast:
1. You shall, promptly upon receipt from Coast, provide to Coast
such information regarding the Property (including, but not
limited to, information regarding fees, charges, advances, and
other expenses) as Coast my request.
2. You are authorized to release and deliver the Property per
the instructions of Borrower, until such time as you have been
notified to the contrary by Coast.
3. Upon receipt of a written notice from Coast, you shall no
longer deliver any of the Property to Borrower or to any other
parties pursuant to instructions from Borrower. After receipt of
such notice from Coast, the Property may only be delivered by you
pursuant to instructions from Coast.
4. You shall, upon Coast's request, deliver to Coast any and all
of the Property.
5. Any notice hereby permitted to be given shall be in writing
and may be personally delivered to the respective recipient at
its address set forth herein or sent via facsimile to such
recipient's facsimile number set forth below. Notice properly
transmitted shall be effective upon dispatch.
35
_________________________
___________ ____, 199___ Page ____
Please acknowledge your agreement to the foregoing by executing
this letter where appropriate below and returning the original copy of this
letter to Coast at its address set forth below.
COAST BUSINESS CREDIT, a division of
Southern Pacific Bank
By_________________________________
Title:_____________________________
Address for notices:
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
___________________________,
a ______________ corporation
By:________________________________
Title:_____________________________
Address for notices:
___________________________________
___________________________________
___________________________________
Facsimile No. (____) _____-________
ACKNOWLEDGED AND AGREED
ON THIS ____ DAY OF ____________, 199___
________________________
By_____________________________________
Title:_________________________________
Address for notices:
_______________________________________
_______________________________________
_______________________________________
Facsimile No. (______) ______-_________
36
