SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "AGREEMENT"), dated as of January __,
1998, is entered into by and among HAWKER PACIFIC AEROSPACE, a California
corporation ("BORROWER"), HAWKER PACIFIC AEROSPACE LIMITED, an English company
("HP UK"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BANK"),
XXXXXXX X. XXXXXXX ("XXXXXXX"), and UNIQUE INVESTMENTS CORPORATION, a Utah
corporation ("UNIQUE").
RECITALS
A. Pursuant to the Amended and Restated Business Loan Agreement of
even date herewith between Borrower and Bank (as at any time amended, the
"SENIOR LOAN AGREEMENT"), Bank is providing certain credit facilities to
Borrower.
B. Using the proceeds of a $6,500,000 subordinated loan from Xxxxxxx
(the "Xxxxxxx Loan"), Unique has heretofore made a $6,500,000 subordinated
loan to Borrower (the "Unique Loan"). Concurrently herewith, Unique will
receive a $1,500,000 principal repayment with respect to the Unique Loan from
Borrower and shall use such funds to make a $1,500,000 principal payment to
Xxxxxxx.
C. The remaining balance of $5,000,000 under the Xxxxxxx Loan shall be
evidenced by an Amended and Restated Subordinated Promissory Note of even
date herewith made by Unique in favor of Xxxxxxx (as in effect on the date of
this Agreement, the "XXXXXXX NOTE"), a copy of which is attached hereto as
Exhibit A. The remaining balance of $5,000,000 under the Unique Loan shall
be evidenced by an Amended and Restated Subordinated Promissory Note of even
date herewith made by Borrower in favor of Unique (as in effect on the date
of this Agreement, the "UNIQUE NOTE"), a copy of which is attached hereto as
Exhibit B.
D. It is a condition precedent to the making of the loans under the
Senior Loan Agreement that Xxxxxxx and Unique enter into this Agreement, and
thereby subordinate the Xxxxxxx Loan, the Unique Loan and certain other
"Subordinated Debt" described herein to the obligations evidenced by the
Senior Loan Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTIONS. As used herein, the following terms shall
have the definitions set forth after each:
"ASSETS" means any interest of Borrower or HP UK in any kind of
property or asset, whether real, personal or mixed real and personal, or
whether tangible or intangible.
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"BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended from time to time, or any successor statute.
"BORROWER" shall include both Hawker Pacific Aerospace and any
other person at any time assuming or otherwise becoming primarily liable for
all or any part of the obligations of Borrower under the Senior Loan
Documents, including without limitation any trustee or debtor-in-possession
in any bankruptcy or similar proceeding involving Borrower or such survivor.
"CODE" means the Uniform Commercial Code as codified in the State
of California or as codified in any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the issue
of perfection of security interests, as such statutes are in effect during
the term hereof. All terms used in this Agreement which are defined in the
Code shall be construed and defined in accordance with the meaning and
definition ascribed to such terms under the Code, unless another meaning is
specifically provided herein.
"COLLATERAL" means Assets with respect to which any Senior Creditor
or any Subordinated Creditor has a Lien.
"DISTRIBUTION OF ASSETS" means any distribution of Assets of any
kind or character, whether in cash, property, or securities, and whether in
respect of repayment of indebtedness or otherwise, including, but not limited
to, adequate protection payments under the Bankruptcy Code.
"HP UK" shall include both Hawker Pacific Aerospace Limited and any
other person at any time assuming or otherwise becoming primarily liable for
all or any part of the obligations of HP UK under the Senior Loan Documents,
including without limitation any trustee or debtor-in-possession in any
bankruptcy or similar proceeding involving HP UK or such survivor.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, charge or
other encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to
give any security interest) and any agreement to give or refrain from giving
a lien, mortgage, pledge, hypothecation, assignment, deposit arrangement,
security interest, charge or other encumbrance of any kind.
"PERSON" means any natural person, sole proprietorship, general
partnership, limited partnership, joint venture, trust, unincorporated
organization, association, corporation, public authority, or any other
organization, irrespective of whether it is a legal entity.
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"SENIOR DEBT" means (i) all obligations of Borrower or any of its
Subsidiaries arising under or in connection with the Senior Loan Agreement or
any other Senior Loan Document; (ii) all obligations owed pursuant to any
interest rate or currency hedging arrangements or other derivative contracts
entered into with the Bank; (iii) all obligations of HP UK arising under or
in connection with the Intercompany Note referred to in the Loan Agreement,
and (iv) all renewals, extensions, refinancings, refundings, amendments,
restatements, supplements, and modifications of all of the foregoing
obligations.
"SENIOR DEFAULT" means any "Event of Default" as defined in the
Senior Loan Agreement.
"SENIOR LOAN DOCUMENTS" means the "Loan Documents" as defined in
the Senior Loan Agreement.
"SUBORDINATED CREDITORS" means Unique, Xxxxxxx, and any other
present or future holder of any Subordinated Debt.
"SUBORDINATED DEBT" means all indebtedness, claims, debts,
liabilities, or obligations (i) of Borrower arising under or in connection
with the Unique Note, (ii) of Unique arising under or in connection with the
Xxxxxxx Note, and (iii) of Borrower or HP UK otherwise owing to any
Subordinated Creditor of any kind whatsoever; in each case whatever nature,
character or description, and whether presently existing or arising
hereafter, including without limitation, all management and similar fees, all
contract and tort claims that a Subordinated Creditor may have in connection
therewith; together with interest and fees accruing thereon and costs and
expenses (including attorneys' fees and expenses) of collection thereof, and
all renewals, extensions, refinancings, refundings, amendments, restatements,
supplements, and modifications thereof.
2. SUBORDINATION.
2.1 DEBT. Each Subordinated Creditor covenants and agrees that all
payments of the Subordinated Debt shall be subordinated and junior in all
respects to the prior payment in full, in cash, of all Senior Debt except
that interest may be paid with respect to the Subordinated Debt and Permitted
Management Fees (as defined in the Loan Agreement) in accordance with Section
2.3 hereof. No Subordinated Creditor shall have or assert any claim with
respect to the Subordinated Debt until the payment in full and in cash of the
Senior Debt, except as explicitly permitted by Section 2.3 of this Agreement.
2.2 LIENS. Each Subordinated Creditor covenants and agrees that the
Subordinated Debt shall remain unsecured at all times; and that any lien or
security interest created in favor of such Subordinated Creditor
notwithstanding this Agreement
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shall be (a) held by such Subordinated Creditor in trust for the exclusive
benefit of Bank and the holders, from time to time, of the Senior Loan
Documents, and (b) terminated and released, or at Bank's election assigned to
Bank, immediately upon the demand of Bank and pursuant to documentation
satisfactory to Bank.
2.3 PERMITTED PAYMENTS. Notwithstanding the subordination of the
Subordinated Debt to the Senior Debt hereunder, (x) Unique may pay and
Xxxxxxx may accept scheduled payments of accrued interest coming due under
the Xxxxxxx Note, to the extent funded from payments to Unique permitted by
this Section 2.3; and (y) Borrower may pay and Unique may accept scheduled
monthly payments of accrued interest coming due under the Unique Note,
provided that:
(i) no such payment shall be made at any time after the occurrence
and during the pendency of any Senior Default or any of the other
prohibitions described in either Section 2.4.1 or Section 2.4.2;
(ii) the initial payment shall be made with respect to the calendar
month of March, 1998; and
(iii) Permitted Management Fees may be paid when no Senior Default
exists.
2.4 PRIORITY AND PAYMENT OVER OF PROCEEDS IN CERTAIN EVENTS.
2.4.1 SUBORDINATION ON DISSOLUTION, LIQUIDATION OR REORGANIZATION
OF BORROWER. Upon any Distribution of Assets in the event of any
dissolution or winding up or total or partial liquidation or
reorganization, whether voluntary or involuntary, or adjustment or
protection or relief or composition of Borrower or any of its Subsidiaries,
or of Borrower's or its Subsidiaries' debts, or in any bankruptcy,
insolvency, receivership, arrangement, reorganization, relief or other
proceeding of Borrower or its Subsidiaries, or upon an arrangement for the
benefit of creditors of Borrower or its Subsidiaries or any other
marshaling of the assets and liabilities of Borrower or its Subsidiaries:
(a) all amounts payable under or on account of the Senior Debt
shall first be paid in full, in cash or payment provided for in cash,
before the holders of Subordinated Debt shall be entitled to receive
any Distribution of Assets; and
(b) before any payment may be made on account of the
Subordinated Debt, any such Distribution of Assets to which Xxxxxxx
would be entitled, except for the provisions of this Section 2.4.1,
shall be made directly to Bank to the extent necessary to pay all
Senior Debt in full, in cash, after giving effect to any concurrent
payment or distribution
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to Bank. In the case of a non-cash Distribution of Assets with
respect to the Subordinated Debt which is delivered to Bank under
this Section 2.4.1, the Senior Debt shall be deemed satisfied in the
amount equal to the cash realized by Bank upon disposition of such
Distribution of Assets; until such disposition, the non-cash
Distribution of Assets shall be held as security for the Senior Debt.
Bank shall have no duty hereunder to sell or otherwise reduce to cash
any non-cash Distribution of Assets turned over by any Subordinated
Creditor in accordance with this Section 2.4.1 and shall have no
liability to any Subordinated Creditor with respect to any such sale
or other disposition, under the Code or otherwise, except for
liability arising from Bank's willful misconduct or gross negligence,
and such sale or other disposition shall not affect Bank's rights and
remedies hereunder.
Borrower and HP UK shall give prompt written notice to Bank and Xxxxxxx of
any Distribution of Assets of the nature described in this Section.
Bank is hereby irrevocably authorized and empowered (in its own
name or in the name of any or all Subordinated Creditors or otherwise), but
shall have no obligation, to demand, xxx for, collect and receive every
Distribution of Assets and give acquittance therefor and to file claims and
proofs of claim in respect of the Subordinated Debt and take such other
action (including, without limitation, voting the Subordinated Debt or
enforcing any Lien securing payment of the Subordinated Debt) on behalf of
any or all Subordinated Creditors as it may deem necessary or advisable for
the exercise or enforcement of any of its rights or interests hereunder.
Each Subordinated Creditor shall promptly take such action as Bank may
request (i) to collect the Subordinated Debt for the account of Bank and to
file appropriate claims or proofs of claim in respect of the Subordinated
Debt; (ii) to execute and deliver to Bank such powers of attorney,
assignments, or other instruments as it. may request in order to enable it
to enforce any and all claims with respect to, and any Liens securing
payment of, the Subordinated Debt, and (iii) to collect and receive any and
all Distribution of Assets which may be payable or deliverable upon or with
respect to the Subordinated Debt.
2.4.2 SUBORDINATION ON SENIOR DEFAULT. If a Senior Default has
occurred and is continuing, no Subordinated Creditor may receive payment
under or on account of the Subordinated Debt, directly or indirectly, in
cash or other property or by set-off or in any other manner, commencing
upon the date of receipt by such Subordinated Creditor from Bank of a
notice of the Senior Default or its actual notice thereof. The prohibition
on Subordinated Debt payments shall end on the earlier of (a) the waiver of
the Senior Default by Bank, or (b) the cure of the Senior Default to the
satisfaction of Bank. Immediately following the termination of any such
prohibition, all payments of
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Subordinated Debt which, but for such prohibition, each Subordinated
Creditor would have been entitled to receive, shall be immediately due
and payable, to the extent not otherwise prohibited or limited by the
terms hereof.
3. FORBEARANCE AND STANDSTILL.
3.1 Until the Senior Debt is paid in full, in cash and the Senior
Loan Agreement is terminated or expires, or unless requested by Bank, no
Subordinated Creditor shall, without Bank's prior written consent, such
consent to be given or withheld in Bank's sole and absolute discretion: (a)
assert, collect or enforce the Subordinated Debt or any of the amounts due
thereunder, or exercise any right of set-off; (b) exercise its right of
possession of any Collateral or attach, seize, or realize upon any Collateral
or enforce any Lien against the Assets; (c) exercise any right under the
Code, including, but not limited to, the right of strict foreclosure, but
excluding the right of redemption; or (d) commence, or cause to commence,
prosecute or participate in (other than participate in an action, once
commenced, to protect and pursue its rights and remedies as, for example,
exercising its rights in a bankruptcy proceeding as described in Section 8
hereof) any administrative, legal or equitable action against Borrower or HP
UK or any administrative, legal or equitable action that might adversely
affect Borrower or HP UK or their respective interests, including, but not
limited to, the entry of a decree or order for relief in respect of either
Borrower or HP UK under Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect or the appointment
of a receiver, liquidator, custodian, trustee, sequestrator or similar
official of either Borrower or HP UK or for any substantial part of the
Assets, the commencement by either Borrower or HP UK of a voluntary case
under Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by either company to
the entry of an order for relief in an involuntary case under any such law,
or the consent by either company to the appointment of, or taking possession
by, a receiver, liquidator, trustee, custodian, sequestrator (or similar
official) or any of them for any substantial part of the Assets, or either
company's admission in writing of its inability to pay its debts generally,
or the making of any general assignment for the benefit of creditors, or the
failure generally by either company to pay its debts as they become due, or
the taking by either company of any action in furtherance of any of the
foregoing.
3.2 If any Subordinated Creditor, other than in accordance with
this Section 3, commences, prosecutes or participates in any suit, action or
proceeding against Borrower or HP UK or takes any other action in violation
of this Section 3, either company may interpose as a defense or a dilatory
plea the making of this Agreement and Bank may intervene and interpose such
defense or plea in such company's name.
3.3 Each Subordinated Creditor jointly and severally agrees that
it shall reimburse Bank upon demand for all fees and expenses Bank incurs in
connection
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with any breach by any Subordinated Creditor of this Section 3, including,
but not limited to, the fees and expenses incurred in removing from a
Subordinated Creditor's possession any Collateral or other Assets held in
breach of this Section 3.
4. DISPOSITION OF COLLATERAL. Upon any foreclosure upon, or
realization or collection in respect of any Collateral, all Senior Debt shall
first be satisfied in full in cash before any Subordinated Creditor shall be
entitled to receive or retain any proceeds or assets from such foreclosure,
realization or collection.
5. PAYMENTS AND/OR PROPERTY HELD IN TRUST. If (a) any payment or any
cash or noncash distribution is made to any Subordinated Creditor in
violation of this Agreement or (b) any cash or other property is received by
any Subordinated Creditor upon any disposition or other action with respect
to any of the Collateral, including, but not limited to, converting accounts
receivable, instruments and chattel paper to cash, in violation of this
Agreement, before the Senior Debt is paid in full, in cash, then such
Subordinated Creditor shall receive the same in trust for Bank's benefit and
shall forthwith remit it to Bank in the form in which it was received,
together with such endorsements or documents as may be necessary to
effectively negotiate or transfer the same, to the extent necessary to pay in
full, in cash, the Senior Debt, after giving effect to any other payment or
distribution with respect to the Senior Debt.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Subordinated
Creditor represents and warrants that it has not entered into any
subordination agreement with respect to the Subordinated Debt prior to the
execution and delivery of this Agreement. Each Subordinated Creditor
covenants not to enter into any subordination agreement with respect to the
Subordinated Debt without Bank's prior written consent, to be given or
withheld in Bank's sole and absolute discretion. Any such subsequent
subordination shall be, and shall be expressed to be, subject and subordinate
to the terms of this Agreement. Each Subordinated Creditor represents and
warrants that it has not previously assigned any interest in the Subordinated
Debt, that no other Person (whether as a joint holder of the Subordinated
Debt, participant or otherwise) owns any interest in the Subordinated Debt.
7. RIGHTS OF BANK NOT TO BE IMPAIRED, ETC.
7.1 No right of Bank to enforce the subordination and other terms
and conditions provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act by Bank, or by any non-compliance by
Borrower with the terms and provisions and covenants herein, regardless of
any knowledge thereof Bank may have or with which Bank may otherwise be
charged. Bank shall not be prejudiced in its right to enforce the
subordination and other terms and conditions of the Subordinated Debt by any
act or failure to act by Borrower, any Subordinated Creditor or any other
Person in custody of any of the Assets.
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7.2 Without limiting the generality of the foregoing, each
Subordinated Creditor, for the benefit of Bank, waives any right it may have
to require Bank to (a) proceed against any Person, including Borrower and HP
UK; (b) proceed against or exhaust any security held from Borrower or HP UK,
or any other Person; or (c) pursue any other remedy in Bank's power.
7.3 Each Subordinated Creditor further waives, for the benefit of
Bank, any defense or cause of action based upon or arising by reason of (a)
any disability or other defense of Borrower or HP UK or any other Person; (b)
the cessation or limitation from any cause whatsoever, other than payment in
full, of the Senior Debt; (c) any lack of authority of any officer, director,
partner, agent or any other Person acting or purporting to act on behalf of
Borrower or HP UK; (d) any act or omission by Bank which directly or
indirectly results in or aids the discharge of Borrower or HP UK from any
Senior Debt by operation of-law or otherwise; (e) any failure by Bank or its
agents to use reasonable care in the custody and preservation of Collateral
in the possession of Bank or its agents which directly or indirectly impairs
or diminishes the value of the Liens securing the Subordinated Debt; (f) any
failure by Bank to give notice to any Subordinated Creditor of a proposed
sale of any of the Collateral or to conduct a commercially reasonable sale of
any of the collateral; or (g) any failure by Bank or its agents to fulfill
any duty which may be owed to or asserted by any Subordinated Creditor with
respect to any of the Collateral.
7.4 Each Subordinated Creditor agrees that Bank shall have the
right to apply the proceeds of any disposition of Collateral in the manner
Bank determines, in its sole and absolute discretion, including, but not
limited to, payment of obligations of Borrower to Persons other than Bank and
the Subordinated Creditors, prior to full satisfaction of the Senior Debt and
the Subordinated Debt.
7.5 Each Subordinated Creditor agrees that (a) Bank shall have no
obligation to marshal any Collateral in favor of any Person; and (b) Bank
shall not be liable to any Subordinated Creditor for any action or failure to
act in exercising its rights and remedies under this Agreement, the Senior
Loan Documents or against any of the Collateral. Each Subordinated Creditor
further agrees, for the benefit of Bank, not to commence or prosecute any
cause of action against Bank with respect to the Collateral, any duty of Bank
to such Subordinated Creditor or otherwise arising with respect to the
Subordinated Debt or this Agreement for which the waivers contained herein
are not effective unless and until Bank has sold or otherwise disposed of all
the Collateral, and each Subordinated Creditor waives any right to recover
punitive or consequential damages in any such action.
7.6 Each Subordinated Creditor (a) consents to any extension or
renewal of the Liens securing the Senior Debt, (b) waives any right to cure
any Senior Default, whether by payment of any portion of the Senior Debt or
otherwise, (c) waives any right to set aside or otherwise legally challenge
any foreclosure sale or
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other exercise of rights and remedies by Bank, and (d) waives any right to
redeem any Collateral foreclosed or otherwise disposed of by Bank.
7.7 Each Subordinated Creditor agrees that Bank shall not be a
fiduciary or an agent of such Subordinated Creditor, or otherwise owe any
duty thereto, by virtue of any provision of this Agreement or Bank's
exercise, or failure to exercise, any right hereunder.
8. CONDUCT OF BANKRUPTCY PROCEEDING.
8.1 In any bankruptcy, insolvency, receivership or other similar
proceeding of Borrower or HP UK, each Subordinated Creditor hereby
irrevocably constitutes and appoints Bank its true and lawful attorney to act
in its name and stead:
8.1.1 To file the appropriate claim or claims in respect of
the Subordinated Debt on behalf of that Subordinated Creditor if that
Subordinated Creditor does not do so prior to 30 days before the expiration
of the time to file claims in such proceeding and if Bank elects, in its
sole and absolute discretion, to file such claim or claims; and
8.1.2 To accept or reject any plan of reorganization or
arrangement on behalf of that Subordinated Creditor and to otherwise vote
that Subordinated Creditor's claims in respect of any Subordinated Debt now
or hereafter owing from Borrower or HP UK in any manner which Bank deems
appropriate for the enforcement of its rights hereunder.
8.2 Each Subordinated Creditor agrees that Bank may consent to the
use of cash collateral or provide financing to Borrower or HP UK on such
terms and conditions and in such amounts as Bank, in its sole and absolute
discretion, may decide and that, in connection with such cash collateral
usage or such financing, Borrower or HP UK (or a trustee appointed for the
estates thereof) may grant to Bank Liens upon all Assets, which Liens (a)
shall secure payment of all Senior Debt (whether such Senior Debt arose prior
to the filing of the petition for relief under Bankruptcy Code or arise
thereafter); and (b) shall be superior in priority to the Liens held by any
Subordinated Creditor on the Assets. All allocations of payments between
Bank and the Subordinated Creditors shall, subject to any court order,
continue to be made after the filing of a petition under Bankruptcy Code on
the same basis that the payments were to be allocated prior to the date of
such filing. Each Subordinated Creditor agrees that they will not object to
or oppose a sale or other disposition of any Assets securing the Senior Debt
(or any portion thereof) free and clear of Liens or other claims of the
Subordinated Creditors under Section 363 of Bankruptcy Code or any other
provision of Bankruptcy Code if Bank has consented to such sale or
disposition of such Assets. Each Subordinated Creditor agrees not to assert
any right it may have to "adequate protection" of its Liens with respect to
any of the Assets in any bankruptcy proceeding
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and agrees that it will not seek to have the automatic stay lifted with
respect to such Liens, without Bank's prior written consent, given in its
sole and absolute discretion. Each Subordinated Creditor agrees not to
initiate or prosecute or encourage any other Person to initiate or prosecute
any claim, action or other proceeding (i) challenging the enforceability of
Bank's claim, (ii) challenging the enforceability of any Liens in Assets
securing the Senior Debt, or (iii) asserting any claims which Borrower or HP
UK may hold with respect to Bank.
9. MODIFICATION OF SUBORDINATED DEBT. No amendment or modification of
the Xxxxxxx Note, the Unique note, or any other agreement or instrument in
favor of a Subordinated Creditor shall directly or indirectly modify the
provisions of this Agreement in any manner which might terminate or impair
the subordination of the Subordinated Debt or the subordination of any Liens
granted thereunder in accordance with the terms of this Agreement. By way of
example, the Subordinated Creditors may not amend any of the foregoing
agreements or instruments to (a) increase the rate of interest with respect
to the Subordinated Debt, (b) accelerate the payment of principal or interest
or any other portion of the Subordinated Debt, or (c) increase any payments
due to any Subordinated Creditor thereunder.
10. SUBORDINATED DEBT ACCELERATION. In the event of any acceleration
of all or any portion of the Subordinated Debt and so long as such
acceleration shall continue, all Senior Debt shall be paid in full, in cash,
before any payment is made on account of the Subordinated Debt.
11. SUBROGATION. Upon the payment in full, in cash, of the Senior Debt
and the termination or expiration of the Senior Loan Agreement by the
Subordinated Creditors, the Subordinated Creditors shall be subrogated to the
rights of Bank to receive any Distribution of Assets made on account of the
Senior Debt to the extent that distributions otherwise payable to the
Subordinated Creditors have been applied to payment of Senior Debt, until the
Subordinated Debt shall be paid in full; and for the purposes of such
subrogation, no Distribution of Assets to Bank of any cash, property, or
securities to which the holders of Subordinated Debt would be entitled except
for the provisions hereof, and no payment paid over pursuant to the
provisions of Section 5 to Bank by the Subordinated Creditors shall, as among
Borrower, HP UK, their respective creditors, and the Subordinated Creditors,
be deemed to be a payment by Borrower and HP UK on account of such Senior
Debt. Bank shall have no liability to the Subordinated Creditors, and the
subordination and other provisions of this Agreement shall not be affected
by, any act or omission by Bank, prior to payment in full of the Senior Debt
and the termination or expiration of the Senior Loan Agreement, which affect
in any way the Subordinated Creditors' subrogation rights hereunder.
12. OBLIGATIONS OF BORROWER AND HP UK UNCONDITIONAL. Nothing contained
in this Agreement is intended to or shall, as among Borrower, HP UK or their
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respective creditors (other than Bank and the Subordinated Creditors): (a)
impair the obligations of Borrower and HP UK, which obligations are absolute
and unconditional, to pay the Subordinated Debt as and when the same shall
become due and payable in accordance with its terms; or (b) affect the
relative rights of the Subordinated Creditors and other creditors of
Borrower and HP UK (other than between the Subordinated Creditors and Bank).
13. FURTHER ASSURANCES. Each Subordinated Creditor shall xxxx all
evidence of the Subordinated Debt with a legend "THIS INSTRUMENT IS SUBJECT
TO A DEBT SUBORDINATION AGREEMENT IN FAVOR OF BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION DATED AS OF JANUARY __, 1998." Each Subordinated
Creditor agrees to take such actions and execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such documents as are
reasonably requested by Bank to effectuate and carry out the purposes of this
Agreement and the subordination provisions hereunder, so long as any such
acts are consistent with and do not impose terms of subordination more
onerous than the terms hereof.
14. MODIFICATION AND EXPANSION OF SENIOR DEBT. Notwithstanding any
term of the Subordinated Debt to the contrary, Bank may (a) grant extensions
of time of payment or performance of any Senior Debt, (b) make compromises
and settlements with Borrower and other Persons regarding any Senior Debt,
and (c) increase, expand and/or modify any Senior Debt without the consent of
the Subordinated Creditor, and without affecting this Agreement and its
rights hereunder. No action that Bank may take, or refrain from taking, with
respect to the Senior Debt or any Collateral therefor or any agreements in
connection therewith, shall affect this Agreement or Bank's rights hereunder.
15. DISCONTINUATION OF CREDIT. If, at any time hereafter, Bank shall,
in Bank's sole and absolute judgment, determine to discontinue the extension
of credit to Borrower, Bank may do so in accordance with the terms and
provisions of the Senior Loan Agreement. Such discontinuation
notwithstanding, this Agreement shall continue in full force and effect until
the Senior Debt shall have been paid in full in cash and the Senior Loan
Agreement terminates or expires.
16. CONTINUED EFFECTIVENESS OF SUBORDINATION. If, at any time after
payment in full of the Senior Debt in cash and the termination or expiration
of the Senior Loan Agreement any such payments must be disgorged by Bank for
any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of Borrower or HP UK) this Agreement and the
relative rights and priorities provided herein shall be reinstated as to all
such disgorged payments as though such payments had not been made and each
Subordinated Creditor shall immediately pay over or deliver to Bank all
payments and distributions received by the Subordinated Creditors to the
extent necessary to pay in full, in cash, all amounts payable in connection
with
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the Senior Debt as if this Agreement had remained in full force and effect;
provided, however, that the Subordinated Creditors shall not be required to
turn over such payments to the extent that the Subordinated Creditors have
also been required to disgorge Subordinated Debt payments to Borrower or HP
UK. If, at any time prior to payment in full of the Senior Debt in cash and
the termination or expiration of the Senior Loan Agreement any such payments
must be disgorged by Bank for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower or HP
UK) the Subordinated Creditors shall immediately pay over or deliver to Bank
all payments and distributions received by the Subordinated Creditors to the
extent necessary to pay in full, in cash, the disgorged payments; provided,
however, that the Subordinated Creditors shall not be required to turn over
such payments to the extent that the Subordinated Creditors have also been
required to disgorged Subordinated Debt payments to Borrower or HP UK. The
obligations of Borrower, HP UK and the Subordinated Creditors hereunder
shall continue irrespective of, and Borrower, HP UK and the Subordinated
Creditors hereby waive, so far as the law permits, any existing or future
statutes of limitations applicable thereto or applicable to the enforcement
of indebtedness and liability of Borrower or HP UK, and any Collateral
therefor.
17. ACCELERATION. If Borrower, HP UK or any Subordinated Creditor
violates any of the provisions of this Agreement, Bank may elect, by notice
in writing delivered to the Borrower, HP UK or the Subordinated Creditors, to
declare a Senior Default and cause all Senior Debt to become immediately due
and payable.
18. IMPAIRMENT OF SENIOR DEBT OR LIEN. No court or other action which
has the effect of voiding, impairing, equitably subordinating or otherwise
adversely affecting the Senior Debt or the Lien securing the Senior Debt,
whether upon the insolvency, bankruptcy or reorganization of Borrower, HP UK
or otherwise, shall affect Bank's rights hereunder or any of the Subordinated
Creditors' waivers, covenants or obligations hereunder.
19. BREACH OF DUTY OR OBLIGATION TO THE SUBORDINATED CREDITORS. No
breach by Bank of any duty or obligation owed to any Subordinated Creditor
(should any such duty exist), whether under this Agreement or otherwise, nor
any determination that Bank has any liability to the Subordinated Creditors,
whether under this Agreement or otherwise, shall affect Bank's rights
hereunder or any of the Subordinated Creditors' waivers, covenants or
obligations hereunder.
20. WAIVER OF JURY TRIAL. EACH OF THE SUBORDINATED CREDITORS, BANK, HP
UK AND Borrower EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION HEREUNDER. EACH
PARTY HERETO HEREBY CONFIRMS THAT SUCH WAIVERS ARE INFORMED AND FREELY MADE.
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21. REMEDIES. Each Subordinating Creditor agrees and acknowledges that
any violation or threatened violation by the Subordinating Creditors of any
term of this Agreement will cause irreparable injury to Bank, that the remedy
at law of Bank for any such violation or threatened violation will be
inadequate and that Bank shall be entitled to obtain an injunction
prohibiting the continuance or reoccurrence of such violation or threatened
violation, and not in limitation of, any other rights or remedies available
at law or in equity. Each Subordinating Creditor hereby irrevocably waives
any defense based on the adequacy of a remedy at law which might be asserted
as a bar to such injunctive remedy.
22. AGREEMENT BY BORROWER. Borrower agrees that it will not, and it
will not permit any affiliate or subsidiary to, purchase, redeem or otherwise
acquire any of the Subordinated Debt or make any payment of any of the
Subordinated Debt, or take any other action, in contravention of the
provisions of this Agreement.
23. MISCELLANEOUS PROVISIONS.
23.1 NO THIRD PARTY BENEFICIARIES. All of the understandings,
covenants and agreements contained herein are solely for the benefit of Bank,
Unique Xxxxxxx (and their respective successors and assigns) and there are no
other persons which are intended to be benefitted in any way by this
Agreement.
23.2 NOTICES. All notices, demands and other communications which
a party may desire, or may be required, to give to another shall be in
writing, shall be delivered personally against receipt, or sent by recognized
overnight courier service, or mailed by registered or certified mail, return
receipt requested, postage prepaid, or sent by telex or telecopy, and shall
be addressed to the party to be notified as follows:
If to Bank: 000 Xxxxx Xxxxxxxxx, Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
If to c/o Unique Investment Corporation
Subordinated 0000 Xxxxxx Xxxxxx
Lenders: Xxxxxxx, Xxxxxxxxxx 00000
If to As set forth in the Senior Loan Agreement
Borrower
or HP UK:
Any such notice, demand, or communication shall be deemed given when received
if personally delivered or sent by overnight courier, or when deposited in
the United States mails, postage prepaid, if sent by registered or certified
mail, or when answer back received, if sent by telex or telecopier. The
address for a party may be changed by notice given in accordance with this
subsection.
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23.3 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without
reference to the choice of laws or conflicts of laws principles thereof.
23.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and shall inure to the benefit of, the participants, transferees,
successors, and permitted assigns of the parties hereto. Each Subordinating
Creditor further agrees that if Borrower or HP UK is in the process of
refinancing a portion of the Senior Debt with a new lender, and if Bank makes
a request of the Subordinating Creditors, the Subordinating Creditors shall
agree to enter into a new subordination agreement with the new lender on
substantially the terms and conditions of this Agreement.
23.5 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
23.6 WAIVERS. No failure on the part of Bank to exercise, no
delay in exercising and no course of dealing with respect to, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
23.7 ATTORNEYS' FEES. If it becomes necessary for Bank or the
Subordinating Creditors to commence any proceedings or actions to enforce the
provisions of this Agreement, the court or body before which the same shall
be brought shall award to the prevailing party therein all of its costs and
expenses in prosecuting such proceedings and actions, including attorneys'
fees, the usual and customary and lawfully recoverable court costs, and all
the expenses in connection therewith.
23.8 ENTIRE AGREEMENT; MODIFICATIONS. This Agreement contains all
of the terms and conditions agreed upon by the parties relating to its
subject matter and supersedes all prior and contemporaneous agreements,
negotiations, correspondence, understandings and communications of the
parties, whether oral or written, respecting that subject matter. No
modification, rescission, waiver, release, or amendment of any provision of
this Agreement shall be made, except by a written agreement signed by Bank
and the Subordinated Creditors.
23.9 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will constitute an original, and all of which,
taken together, shall constitute but one and the same agreement.
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23.10 AMENDMENTS TO NOTES. None of the parties to this Agreement
other than Bank shall enter into any amendment, modification or waiver with
respect to the Subordinated Debt without the express prior written consent of
the Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first set forth above.
_________________________________
XXXXXXX X. XXXXXXX, an individual
HAWKER PACIFIC AEROSPACE
By: _____________________________
Title: __________________________
HAWKER PACIFIC AEROSPACE LIMITED
By: _____________________________
Title:___________________________
UNIQUE INVESTMENTS CORPORATION
By: _____________________________
Title: __________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By: _____________________________
Title: __________________________
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[Attach Subordinated Notes]
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