EXHIBIT 4.12
EXECUTION COPY
CREDIT AGREEMENT
DATED AS OF MAY 29, 2003
AMONG
AAR CORP., AAR DISTRIBUTION, INC.,
AAR PARTS TRADING, INC., AAR MANUFACTURING, INC.,
AAR ENGINE SERVICES, INC. AND AAR XXXXX SERVICES, INC.
AS BORROWERS,
XXXXXXX XXXXX CAPITAL,
A DIVISION OF XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES INC.,
AS AGENT AND AS A LENDER
AND
THE ADDITIONAL LENDERS
FROM TIME TO TIME PARTY HERETO
[XXXXXXX XXXXX LOGO]
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS................................................................................1
Section 1.1 Certain Defined Terms.............................................................1
Section 1.2 Accounting Terms and Determinations..............................................19
Section 1.3 Other Definitional Provisions....................................................20
ARTICLE 2 LOANS AND LETTERS OF CREDIT...............................................................20
Section 2.1 Revolving Loans..................................................................20
Section 2.2 Interest, Interest Calculations and Certain Fees.................................22
Section 2.3 Notes............................................................................26
Section 2.4 Letters of Credit and Letter of Credit Fees......................................26
Section 2.5 General Provisions Regarding Payment; Loan Account...............................28
Section 2.6 Maximum Interest.................................................................29
Section 2.7 Taxes............................................................................30
Section 2.8 Ancillary Services...............................................................31
ARTICLE 3 REPRESENTATIONS AND WARRANTIES............................................................31
Section 3.1 Existence and Power..............................................................31
Section 3.2 Organization and Governmental Authorization; No Contravention....................31
Section 3.3 Binding Effect...................................................................31
Section 3.4 Capitalization...................................................................32
Section 3.5 Financial Information............................................................32
Section 3.6 Litigation.......................................................................33
Section 3.7 Ownership of Property............................................................33
Section 3.8 No Default.......................................................................33
Section 3.9 Labor Matters....................................................................33
Section 3.10 Regulated Entities...............................................................33
Section 3.11 Margin Regulations...............................................................33
Section 3.12 Compliance With Laws.............................................................34
Section 3.13 Taxes............................................................................34
Section 3.14 Compliance with ERISA............................................................34
Section 3.15 Brokers..........................................................................35
Section 3.16 Compliance with Environmental Requirements; No Hazardous Materials...............35
Section 3.17 Intellectual Property............................................................36
Section 3.18 Real Property Interests..........................................................36
Section 3.19 Solvency.........................................................................36
Section 3.20 Borrowers and Each Other Credit Party............................................36
Section 3.21 Full Disclosure..................................................................37
Section 3.22 Representations and Warranties Incorporated from Other Operative Documents.......37
ARTICLE 4 AFFIRMATIVE COVENANTS.....................................................................37
Section 4.1 Financial Statements and Other Reports...........................................37
Section 4.2 Payment and Performance of Obligations...........................................41
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TABLE OF CONTENTS
(continued)
PAGE
Section 4.3 Conduct of Business and Maintenance of Existence.................................41
Section 4.4 Maintenance of Property; Insurance...............................................42
Section 4.5 Compliance with Laws.............................................................43
Section 4.6 Inspection of Property, Books and Records........................................43
Section 4.7 Use of Proceeds..................................................................43
Section 4.8 Lenders' Meetings................................................................43
Section 4.9 Hazardous Materials; Remediation.................................................43
Section 4.10 Further Assurances...............................................................44
ARTICLE 5 NEGATIVE COVENANTS........................................................................44
Section 5.1 Debt.............................................................................44
Section 5.2 Liens............................................................................46
Section 5.3 Restricted Distributions.........................................................47
Section 5.4 Restrictive Agreements...........................................................48
Section 5.5 Payments and Modifications of Other Debt.........................................48
Section 5.6 Consolidations, Mergers and Sales of Assets......................................49
Section 5.7 Purchase of Assets, Investments..................................................50
Section 5.8 Transactions with Affiliates.....................................................50
Section 5.9 Modification of Organizational Documents.........................................51
Section 5.10 Fiscal Year......................................................................51
Section 5.11 Conduct of Business..............................................................51
Section 5.12 Lease Payments...................................................................51
Section 5.13 Bank Accounts....................................................................51
ARTICLE 6 ACCOUNTS AND INVENTORY REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS..............52
Section 6.1 Accounts and Account Collections.................................................52
Section 6.2 Inventory........................................................................53
ARTICLE 7 FINANCIAL COVENANTS.......................................................................54
Section 7.1 Capital Expenditures.............................................................54
Section 7.2 Minimum EBITDA...................................................................55
Section 7.3 Interest Coverage Ratio..........................................................55
ARTICLE 8 CONDITIONS................................................................................55
Section 8.1 Conditions to Closing............................................................55
Section 8.2 Conditions to Each Loan and Support Agreement....................................56
ARTICLE 9 EVENTS OF DEFAULT.........................................................................56
Section 9.1 Events of Default................................................................56
Section 9.2 Acceleration and Suspension or Termination of Revolving Loan Commitment..........58
Section 9.3 Cash Collateral..................................................................59
Section 9.4 Default Rate of Interest and Suspension of LIBOR Rate Options....................59
Section 9.5 Setoff Rights....................................................................59
Section 9.6 Application of Proceeds..........................................................59
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TABLE OF CONTENTS
(continued)
PAGE
Section 9.7 Non-Recourse Guarantors..........................................................60
ARTICLE 10 EXPENSES, INDEMNITY, TAXES AND RIGHT TO PERFORM...........................................60
Section 10.1 Expenses.........................................................................60
Section 10.2 Indemnity........................................................................60
Section 10.3 Taxes............................................................................61
Section 10.4 Right to Perform.................................................................61
ARTICLE 11 AGENT.....................................................................................61
Section 11.1 Appointment and Authorization....................................................61
Section 11.2 Agent and Affiliates.............................................................62
Section 11.3 Action by Agent..................................................................62
Section 11.4 Consultation with Experts........................................................62
Section 11.5 Liability of Agent...............................................................62
Section 11.6 Indemnification..................................................................63
Section 11.7 Right to Request and Act on Instructions.........................................63
Section 11.8 Credit Decision..................................................................63
Section 11.9 Collateral Matters...............................................................63
Section 11.10 Agency for Perfection............................................................64
Section 11.11 Notice of Default................................................................64
Section 11.12 Successor Agent..................................................................64
Section 11.13 Disbursements of Revolving Loans; Payment........................................64
ARTICLE 12 MISCELLANEOUS.............................................................................67
Section 12.1 Survival.........................................................................67
Section 12.2 No Waivers.......................................................................67
Section 12.3 Notices..........................................................................67
Section 12.4 Severability.....................................................................67
Section 12.5 Amendments and Waivers...........................................................67
Section 12.6 Assignments; Participations......................................................68
Section 12.7 Headings.........................................................................69
Section 12.8 Confidentiality..................................................................69
Section 12.9 GOVERNING LAW; SUBMISSION TO JURISDICTION........................................70
Section 12.10 WAIVER OF JURY TRIAL.............................................................70
Section 12.11 Publication; Advertisement.......................................................70
Section 12.12 Counterparts; Integration........................................................71
Section 12.13 Reimbursement....................................................................71
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ANNEXES AND EXHIBITS
ANNEXES
Annex A - Commitment Annex
Annex B - Closing Checklist
EXHIBITS
Exhibit A - Assignment Agreement
Exhibit B - Compliance Certificate
Exhibit C - Borrowing Base Certificate
Exhibit D - Notice of Borrowing
SCHEDULES
Schedule 3.5 - Financial Statements
Schedule 4.4 - Insurance Coverage
Schedule 5.1(j)- Permitted Mortgage Debt Terms and Conditions
Schedule 5.5 - Terms and Conditions of Extension, Renewal, Replacement or
Refinancing of October, 2003 Principal Installments
Schedule 5.6 - Permitted Dispositions
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of May 29, 2003 among
AAR Corp., a Delaware
corporation ("AAR"), AAR Distribution, Inc., an
Illinois corporation
("DISTRIBUTION"), AAR Parts Trading, Inc., an
Illinois corporation ("PARTS
TRADING"), AAR Manufacturing, Inc., an
Illinois corporation ("MANUFACTURING"),
AAR Engine Services, Inc., an
Illinois corporation ("ENGINE SERVICES") and AAR
Xxxxx Services, Inc., an
Illinois corporation ("XXXXX SERVICES" and together
with AAR, Distribution, Parts Trading, Manufacturing, Engine Services and Xxxxx
Services, individually a "BORROWER" and collectively "BORROWERS"), the financial
institutions from time to time parties hereto, each as a Lender, and XXXXXXX
XXXXX CAPITAL, a division of Xxxxxxx Xxxxx Business Financial Services Inc.,
individually as a Lender and as Agent.
RECITALS:
WHEREAS, Borrowers desire that Lenders extend certain working capital
facilities to Borrowers to provide funds necessary to provide working capital
financing for Borrowers and certain of their Subsidiaries and to provide funds
for other general business purposes of Borrowers and certain of their
Subsidiaries; and
WHEREAS, Borrowers desire to secure all of their Obligations under the
Financing Documents by granting to Agent, for the benefit of Agent and Lenders,
a security interest in and lien upon certain of their personal and real
property;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrowers, Lenders and Agent agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. The following terms have the
following meanings:
"AAR" shall heave the meaning contained in the first paragraph of the
Agreement.
"ACCOUNTS" means "accounts" (as defined in Article 9 of the UCC) of
Borrowers, including without limitation any and all rights to payment for the
sale or lease of goods or rendition of services, whether or not they have been
earned by performance, in each case, for purposes of calculating the Borrowing
Base, net of any credits, rebates or offsets owed by any Borrower to the
respective customer.
"ACCOUNT DEBTOR" means "account debtor", as defined in Article 9 of the
UCC.
"AFFILIATE" means with respect to any Person (i) any Person that directly
or indirectly controls such Person, (ii) any Person which is controlled by or is
under common control with such controlling Person and (iii) in the case of an
individual, the parents, descendants, siblings and spouse of such individual. As
used in this definition, the term "CONTROL" of a Person means the possession,
directly or indirectly, of the power to vote ten percent (10%) or more of any
class
of voting securities of such Person or to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGENT" means Xxxxxxx Xxxxx in its capacity as agent for the Lenders
hereunder, as such capacity is established and subject to the provisions of
Article 11 and the successors of Xxxxxxx Xxxxx in such capacity.
"AGENT ADVANCES" has the meaning set forth in Section 2.1(a)(ii).
"AGREEMENT" means this
Credit Agreement, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
"AIRCRAFT LEASE DOCUMENTS" means:
(1) (a) Participation Agreement dated as of June 28, 2000 by and among
AAR, as guarantor, certain operating subsidiaries of AAR, as lessee, Bank
of America, National Association, as administrator, and the other Persons
named therein, (b) Master Aircraft and Engine Lease Agreement dated as of
June 28, 2000 among First Security Bank, National Association, as lessor,
AAR Aircraft & Engine Group, Inc. (n/k/a AAR Parts Trading, Inc. and herein
"A&E"), as lessee, and AAR International, Inc. ("AARI"), as lessee, (c)
Security Agreement dated as of June 28, 2000, among First Security Bank,
National Association, First Security Trust Company of Nevada, A&E and AARI,
and (d) Guaranty dated as of June 28, 2000, made by AAR in favor of First
Security Bank, National Association, First Security Trust Company of
Nevada, and certain other parties named therein, and all other documents,
instruments and certificates executed in connection therewith and all
amendments or modifications to, or replacements (whether effected upon
termination of any time thereafter) or refinancings of, any of the
foregoing (to the extent any such amendment, modification, replacement or
refinancing is permitted hereunder);
(2) (a) Second Amended and Restated Lease and Security Agreement dated
as of June 25, 2001 by and between AARI and Xxxxx Fargo Bank Northwest,
N.A., as owner trustee, and (b) Guaranty dated as of June 25, 2001 executed
by AAR, and all other documents, instruments and certificates executed in
connection therewith and all amendments or modifications to, or
replacements (whether effected upon termination or any time thereafter) or
refinancings of, any of the foregoing (to the extent any such amendment,
modification, replacement or refinancing is permitted hereunder);
(3) (a) the Master Engine Lease Agreement dated as of January 1, 1999
by and between A&E and Norlease, Inc., as lessor, and (b) Guaranty dated as
of January 1, 1999 executed by AAR, and all other documents, instruments
and certificates executed in connection therewith and all amendments or
modifications to, or replacements (whether effected upon termination or any
time thereafter) or refinancings of, any of the foregoing (to the extent
any such amendment, modification, replacement or refinancing is permitted
hereunder);
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(4) (a) Loan Agreement (24358) dated as of July 28, 2000 between
Transamerica Equipment Financial Services Corporation, as Lender,
("Transamerica"), and AAR/SSB I, LLC, as Borrower, ("AAR/SSB I"), (b) First
Amendment to Loan Agreement (24358) dated as of May 19, 2002 between
Transamerica and AAR/SSB I, (c) Amended and Restated Guaranty Agreement
(24358) dated as of May 19, 2002 from
AAR Corp. in favor of Transamerica,
and all other documents, instruments, and certificates executed in
connection therewith, and all amendments or modifications to, or
replacements (whether effected upon termination or any time thereafter) or
refinancings of, any of the foregoing (to the extent any such amendment,
modification, replacement or refinancing is permitted hereunder);
(5) (a) Secured Term Loan Agreement in relation to a loan of up to
$42,292,895 for the Purchase of One B767-300ER Aircraft MSN 24849 dated 28
February 2001 between AAR/SSB II, LLC, and BTM Capital Corporation, and the
Financial Institutions listed in Schedule 1 thereto, (b) the Guarantee of
AAR Corp., and State Street Bank & Trust Company, and all other documents,
instruments and certificates executed in connection therewith, and all
amendments or modifications to, or replacements (whether effected upon
termination or any time thereafter) or refinancings of, any of the
foregoing (to the extent any such amendment, modification, replacement or
refinancing is permitted hereunder);
(6) (a) Participation Agreement 609 dated as of May 1, 1994 among
Continental Airlines, Inc., as Lessee, AAR Financial Services Corp. (n/k/a
AAR Aircraft & Engine Sales & Leasing, Inc.), as Owner Participant, First
Security Bank, National Association as Owner Trustee, Wilmington Trust
Company, as Mortgagee (the "Participation Agreement"), (b) Amendment No. 1
to the Participation Agreement dated as of January 21, 2000, and all other
documents, instruments, and certificates executed in connection therewith,
and all amendments or modifications to, or replacements (whether effected
upon termination or any time thereafter) or refinancings of, any of the
foregoing (to the extent any such amendment, modification, replacement or
refinancing is permitted hereunder);
"AIR FRANCE PARTS LEASE" shall mean that certain B737NG Aircraft Parts
Lease between AAR International, Inc., as lessor, and Societe Air France, as
lessee, dated as of May 31, 2002.
"ANCILLARY SERVICES" means any service or facility (other than any Debt
and/or Letter of Credit facility) extended to any Borrower or any Domestic
Subsidiary by any Designated Lender Affiliate in reliance on the agreement of a
Lender to indemnify such Designated Lender Affiliate in respect of such service
or facility.
"ASSET DISPOSITION" means any sale, lease, license or other consensual
disposition by any Credit Party to a Person other than Borrower of any
Inventory, Equipment or Real Property, but excluding sales, leases, licenses or
other consensual dispositions of Inventory in the ordinary course of business.
"ASSIGNEE" has the meaning set forth in Section 12.6(a).
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"ASSIGNMENT AGREEMENT" means an agreement substantially in the form of
Exhibit A hereto.
"AVAILABILITY" means the amount of money which Borrowers are entitled to
borrow from time to time as Revolving Loans, such amount being the difference
derived when the amount of Revolving Loans Outstanding is subtracted from the
Revolving Loan Limit. If the amount outstanding is equal to or greater than the
Revolving Loan Limit, Availability is $0.
"BLOCKED ACCOUNT" has the meaning set forth in Section 6.1(d).
"BORROWER" and "BORROWERS" shall have the meanings contained in the first
paragraph of the Agreement.
"BORROWERS' ACCOUNT" means the account specified on the signature pages
hereof below AAR's name into which Loans (other than Agent Advances, which shall
be disbursed by Agent in a manner permitted by Section 2.1(a)(ii)) shall, absent
other written instructions, be made, or such other account as AAR, on its behalf
and on behalf of each other Borrower, may specify by written notice to Agent.
"BORROWING BASE" means, as of any date of calculation, a dollar amount
calculated pursuant to the Borrowing Base Certificate most recently delivered to
Agent in accordance with the terms hereof, equal to the lesser of (x) sixty
percent (60%) of (i) the Net Orderly Liquidation Value MULTIPLIED by (ii) the
value of Eligible Inventory calculated on the basis of the lower of cost or
market on a first-in, first-out basis MINUS the sum of $5,000,000 PLUS the
amount of any Reserves established by Agent or (y) ten percent (10%) of the
Consolidated Adjusted Net Worth MINUS $3,000,000.
"BORROWING BASE CERTIFICATE" means a certificate, duly executed by a
Responsible Officer, appropriately completed and substantially in the form of
Exhibit D hereto.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which either the New York Stock Exchange is closed, or on which commercial banks
in Chicago are authorized by law to close and, in the case of a Business Day
which relates to a LIBOR Loan, a day on which dealings are carried on in the
London interbank eurodollar market.
"CAPITAL EXPENDITURES" has the meaning provided in the Compliance
Certificate.
"CAPITAL LEASE" of any Person means any lease of any property by such
Person as lessee which would, in accordance with GAAP, be required to be
accounted for as a capital lease on the balance sheet of such Person.
"CASH EQUIVALENTS" means any Investment in (i) direct obligations of the
United States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof, (ii) commercial paper rated at least A-1 by
Standard & Poor's Ratings Service and P-1 by Xxxxx'x Investors Services, Inc.,
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized under the laws of the United States or any State thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000 and
which issues (or the parent of which issues)
4
certificates of deposit or commercial paper with a rating described in clause
(ii) above, (iv) repurchase agreements with respect to securities described in
clause (i) above entered into with an office of a bank or trust company meeting
the criteria specified in clause (iii) above, PROVIDED in each case that such
Investment matures within one year from the date of acquisition thereof by any
Credit Party, or (v) any money market or mutual fund which invests only in the
foregoing types of investments. Any of the foregoing, however, which is subject
to a Lien (other than Liens in favor of Agent) or is subject to any material
restriction on the use thereof shall not be included within the definition of
Cash Equivalents.
"CASUALTY PROCEEDS" means (i) the aggregate insurance proceeds received in
connection with one or more related events under any Property Insurance Policy
or (ii) any award or other compensation with respect to any condemnation of
property (or any transfer or disposition of property in lieu of condemnation).
"CHANGE IN CONTROL" means:
(i) any Person (as such term is used in Section 13(d) of the
Exchange Act) acquiring beneficial ownership (as that term is defined in
Rule 13d-3 under the Exchange Act), of more than 50% of the outstanding
capital stock of AAR entitled to vote for the election of directors;
(ii) the occurrence of either (x) a merger or consolidation or other
business combination of AAR with one or more other corporations as a result
of which the beneficial owners of the outstanding voting stock of AAR
immediately prior to such business combination beneficially own (either by
remaining outstanding or by being converted into voting securities of the
surviving or resulting corporation or any parent thereof) less than 60% of
the outstanding voting stock of AAR or the surviving or resulting
corporation or any parent thereof immediately after such merger or
consolidated or business combination, or (y) a transfer of substantially
all of the assets of AAR other than to an entity of which AAR owns at least
80% of the voting stock; or
(iii) the election, over any period of time, to the Board of
Directors of AAR without the recommendation or approval of the incumbent
Board of Directors of AAR, of the lesser of (x) three directors, or (y)
directors constituting a majority of the number of directors of AAR then in
office.
"CLOSING CHECKLIST" means Annex B to this Agreement.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Internal Revenue Code of 1986.
"COLLATERAL" means all property, now existing or hereafter acquired,
mortgaged or pledged to, or purported to be subjected to a Lien in favor of,
Agent, for the benefit of Agent and Lenders, pursuant to the Security Documents.
"COMMITMENT ANNEX" means Annex A to this Agreement.
5
"COMMITMENT EXPIRY DATE" means the earliest of (i) May 28, 2006, (ii) the
date on which a "Termination Event" shall have occurred under the Receivables
Purchase Agreement and (iii) as of any date, the remaining period between such
date and the "Facility Termination Date" (as defined in the Receivables Purchase
Agreement) is 60 days or less, unless as of any date referred to in clauses (ii)
or (iii), Borrowers have demonstrated to Required Lenders' reasonable
satisfaction that Borrowers shall, after such Termination Event or Facility
Termination Date, have adequate liquidity ($20,000,000 of projected Availability
and Cash Equivalents) to operate their business, that Borrowers have obtained
replacement financing for the Debt outstanding under the Securitization
Documents or that Borrowers have identified Person(s) who are reasonably likely
to provide such replacement financing, have presented to Agent a term sheet
outlining the terms and conditions of such replacement financing and that it is
commercially reasonable to expect such replacement financing to close.
"COMPANY NOTE" shall have the meaning contained in the Purchase and Sale
Agreement.
"COMPLIANCE CERTIFICATE" means a certificate, duly executed by a
Responsible Officer, appropriately completed and substantially in the form of
Exhibit B hereto.
"CONSOLIDATED ADJUSTED NET WORTH" means, at any time,
(a) the sum of (i) Consolidated Net Worth, PLUS (ii) Subordinated
Debt as of such time, MINUS
(b) the sum of (i) the amount by which the book value of all
Restricted Investments of AAR and its Restricted Subsidiaries exceeds 20%
of Consolidated Net Worth, PLUS (ii) Consolidated Intangible Assets as of
such time.
"CONSOLIDATED INTANGIBLE ASSETS" means, at any time, the sum of
(a) the net book value of all assets, after deducting any reserves
applicable thereto, which would be treated as intangible assets of AAR and
its Restricted Subsidiaries under GAAP, including, without limitation, good
will, trademarks, trade names, service marks, brand names, copyrights,
patents and unamortized debt discount and expense, organizational expenses
and the excess of the equity in any Restricted Subsidiary over the cost of
the investment in such Restricted Subsidiary, PLUS
(b) any increase in the amount of Consolidated Net Worth attributable
to a write-up in the book value of any assets on the books of AAR and its
Restricted Subsidiaries resulting from a revaluation thereof subsequent to
February 28, 2001 (other than write-ups resulting from foreign currency
translations and write-ups of assets of a going concern business made
within 12 months after the acquisition of such business).
"CONSOLIDATED NET TANGIBLE ASSETS" shall have the meaning contained in the
Indenture as of the Closing Date.
"CONSOLIDATED NET WORTH" means, at any time,
6
(a) the sum of (i) the par value (or value stated on the books of
AAR) of the capital stock (but excluding treasury stock and capital stock
subscribed and unissued) of AAR and its Restricted Subsidiaries PLUS (ii)
the amount of the paid-in capital and retained earnings of AAR and its
Restricted Subsidiaries, in each case as such amounts would be shown on a
consolidated balance sheet of AAR and its Restricted Subsidiaries as of
such time prepared in accordance with GAAP, MINUS
(b) to the extent included in clause (a), all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Restricted Subsidiaries.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other Person
the accounts of which would be consolidated with those of AAR in its
consolidated financial statements if such statements were prepared as of such
date.
"CONSOLIDATED TOTAL CAPITALIZATION" means, at any time, the sum of the
remainder of Consolidated Adjusted Net Worth and Consolidated Debt minus
Subordinated Debt at such time.
"CONTROLLED GROUP" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with AAR, are treated as a
single employer under Section 414 of the Code or Section 4001 of ERISA.
"CREDIT EXPOSURE" means any period of time during which the Revolving Loan
Commitment is outstanding or any Loan, Reimbursement Obligation or other
Obligation remains unpaid or any Letter of Credit or Support Agreement remains
outstanding; PROVIDED, that no Credit Exposure shall be deemed to exist solely
due to the existence of contingent indemnification liability, absent the
assertion of a claim with respect thereto.
"CREDIT PARTY" means AAR, each other Borrower and any other Subsidiary of
AAR which, after the Closing Date, becomes a Borrower or a guarantor of the
Obligations.
"DEBT" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money determined in accordance with
GAAP;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable and other accrued
liabilities arising in the ordinary course of business but including,
without limitation, all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any
such property);
(c) its Capital Lease Obligations;
(d) all liabilities for borrowed money (other than Nonrecourse Debt)
secured by any Lien with respect to any property owned by such Person
(whether or not it has assumed or otherwise becomes liable for such
liabilities); and
(e) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (d) hereof.
7
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (e) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP. For further certainty, obligations of AAR and its
Restricted Subsidiaries as lessee in respect of operating leases (including
"leveraged leases" and "synthetic leases" that are accounted for as operating
leases) under GAAP shall not constitute "Debt" and any lease (including
operating leases and synthetic leases) that as of the date such lease was
entered into was properly classified in accordance with GAAP as an operating
lease will, for purposes of this Agreement, always be treated as an operating
lease even if any such lease is later classified as a capital lease in
accordance with GAAP.
"DEFAULT" means any condition or event which with the giving of notice or
lapse of time or both would, unless cured or waived, become an Event of Default.
"DEFAULTED LENDER" means, so long as such failure shall remain in existence
and uncured, any Lender which shall have failed to make any Loan or other credit
accommodation, disbursement or reimbursement required pursuant to the terms of
any Financing Documents.
"DEPOSIT ACCOUNT" means a "deposit account" (as defined in Article 9 of the
UCC) of Borrower or any of its Subsidiaries.
"DEPOSIT ACCOUNT CONTROL AGREEMENT" means an agreement, in form and
substance satisfactory to Agent, among Agent, a Borrower maintaining a Deposit
Account into payments in respect of or proceeds of Non-Sold Assets are deposited
at any bank, and such bank, which agreement provides that (x) such bank shall
comply with instructions originated by Agent directing disposition of the funds
in such Deposit Account without further consent by such Borrower, and (y) such
bank shall agree that it shall have no Lien on, or right of setoff against, such
Deposit Account or the contents thereof, other than in respect of commercially
reasonable fees and other items expressly consented to by Agent, and containing
such other terms and conditions as Agent may require, including as to any such
agreement pertaining to any Blocked Account, providing that all items received
or deposited in such Blocked Account are the property of Agent, and that such
bank shall wire, or otherwise transfer, in immediately available funds, on a
daily basis to the Payment Account all funds received or deposited into such
Blocked Account.
"DESIGNATED LENDER AFFILIATES" means any Affiliate of Agent or any Lender
that (i) from time to time makes Ancillary Services available to any Borrower or
any Domestic Subsidiary and (ii) in the case of an Affiliate of a Lender other
xxxx Xxxxxxx Xxxxx, is expressly identified in writing by Agent, in its sole
discretion, as a Designated Lender Affiliate.
"DOMESTIC SUBSIDIARY" means any Subsidiary of AAR that is incorporated or
organized under the laws of any state of the United States of America or the
District of Columbia.
"EBITDA" has the meaning as defined pursuant to the terms of the Compliance
Certificate.
"ELIGIBLE INVENTORY" has the meaning provided in the Borrowing Base
Certificate. For purposes of this Agreement, the amount of Eligible Inventory
shall be determined on a first-in,
8
first-out, lower of cost or market basis in accordance with GAAP. Any Inventory
which is not Eligible Inventory shall nevertheless be part of the Collateral.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions, whether now or
hereafter in effect, relating to the environment or the effect of the
environment on human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Materials or wastes into the environment,
including ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous Materials
or wastes or the clean-up or other remediation thereof.
"EQUIPMENT" means, collectively, "equipment" and "fixtures" (as each term
is defined in Article 9 of the UCC) of each Credit Party.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"EVENT OF DEFAULT" has the meaning set forth in Section 9.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"FAA" means the United States Federal Aviation Administration or any
successor thereto administering the functions of the Federal Aviation
Administration under the Transportation Code.
"FEDERAL FUNDS RATE" means, for any day, the rate of interest per annum
(rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, PROVIDED that (i) if such day is
not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day and (ii) if no such rate is
so published on such next preceding Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to Agent on such day on such
transactions as determined by Agent.
"FINANCING DOCUMENTS" means this Agreement, the Notes, the Security
Documents, the Information Certificate, any fee letter between Xxxxxxx Xxxxx and
Borrower relating to the transactions contemplated hereby and all other
documents, instruments and agreements contemplated herein or thereby and
executed concurrently herewith or at any time and from time to time hereafter,
as any or all of the same may be amended, supplemented, restated or otherwise
modified from time to time.
"FISCAL YEAR" means a fiscal year of AAR, ending on May 31 of each calendar
year.
"FOREIGN SUBSIDIARY" means any Subsidiary of AAR that is not a Domestic
Subsidiary.
9
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
"GUARANTEE" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt, dividend or other obligation of any other Person in any manner, whether
directly or indirectly, including (without limitation) obligations incurred
through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Debt or obligation or any property constituting
security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such Debt or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement or condition of any other
Person or otherwise to advance or make available funds for the purchase or
payment of such Debt or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Debt or obligation
of the ability of any other Person to make payment of the Debt or
obligation; or
(d) otherwise to assure the owner of such Debt or obligation against
loss in respect thereof.
In any computation of the Debt or other liabilities of the obligor under any
Guaranty, the Debt or other obligations that are the subject of such Guaranty
shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIALS" means (i) any "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
(ii) asbestos, (iii) polychlorinated biphenyls, (iv) petroleum, its derivatives,
by-products and other hydrocarbons, and (v) any other toxic, radioactive,
caustic or otherwise hazardous substance regulated under Environmental Laws.
"HAZARDOUS MATERIALS CONTAMINATION" means contamination (whether now
existing or hereafter occurring) of the improvements, buildings, facilities,
personality, soil, groundwater, air or other elements on or of the relevant
property by Hazardous Materials, or any derivatives thereof, or on or of any
other property as a result of Hazardous Materials, or any derivatives thereof,
generated on, emanating from or disposed of in connection with the relevant
property.
"INDEMNITEES" has the meaning set forth in Section 10.2.
"INDENTURE" and "INDENTURE DOCUMENTS" shall mean that certain Indenture
(said Indenture as amended prior to the Closing Date, the "Indenture") of
AAR
Corp. to Continental
10
Bank, National Association, Trustee dated as of October 15, 1989, together with
all exhibits, schedules, instruments, notes and all other documents and
agreements executed and/or delivered in connection therewith and all amendments,
and modifications, replacements (whether effected upon termination or any time
thereafter) or refinancings to or of any of the foregoing (to the extent any
such amendment, modification, replacement or refinancing is permitted
hereunder).
"INFORMATION CERTIFICATE" means that certain Information Certificate of
even date herewith executed by Borrowers and delivered to Agent.
"INTELLECTUAL PROPERTY" means, with respect to any Person, all patents,
trademarks, trade names, copyrights, technology, know-how and processes, and all
applications therefor, used in or necessary for the conduct of business by such
Person.
"INTEREST COVERAGE RATIO" has the meaning provided in the Compliance
Certificate.
"INTEREST PERIOD" means, as to any LIBOR Loan, the period commencing on the
date such Loan is borrowed or continued as, or converted into, a LIBOR Loan and
ending on the date one (1), two (2), three (3) or six (6) months thereafter, as
selected by AAR, on its behalf and on behalf of each other Borrower, pursuant to
Section 2.3(f); PROVIDED, that: (a) if any Interest Period would otherwise end
on a day that is not a Business Day, such Interest Period shall be extended to
the following Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day; (b) any Interest Period that
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall end on the last Business
Day of the calendar month at the end of such Interest Period; and (c) Borrower
may not select any Interest Period for a Revolving Loan which would extend
beyond the Commitment Expiry Date.
"INVENTORY" means "inventory" (as defined in Article 9 of the UCC) of each
Credit Party.
"INVESTMENT" means any investment in any Person, whether by means of
acquiring or holding securities, capital contribution, loan, time deposit,
advance, Guarantee or otherwise.
"IRB DOCUMENTS" means (x) that certain Loan Agreement between AAR Engine
Services, Inc. and Connecticut Development Authority dated as of February 24,
1999 together with all exhibits, schedules, instruments, notes and all other
documents and/or agreements executed and/or delivered in connection therewith,
(y) that certain Loan Agreement between Pinellas County Industrial Council and
AIR International, Inc. (which has been merged into Manufacturing) dated as of
November 1, 1995, together with all exhibits, schedules, instruments, trust
indentures, notes and all other documents and/or agreements executed and/or
delivered in connection therewith and (z) all amendments and/or modifications to
any of the foregoing (to the extent any such amendment or modification is
permitted hereunder).
"LASALLE LETTER OF CREDIT REIMBURSEMENT DEBT" means any and all
reimbursement obligations of any Borrower to LaSalle Bank National Association
with respect to those letters of credit listed on Schedule VII to the
Information Certificate.
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"LC ISSUER" means Xxxxxxx Xxxxx or a bank or trust company acceptable to
Xxxxxxx Xxxxx, as issuer of one or more Letters of Credit outstanding at any
time under this Agreement.
"LENDER" means each of (i) Xxxxxxx Xxxxx, (ii) each other financial
institution party hereto, (iii) each other Person that becomes a holder of a
Note pursuant to Section 12.6, (iv) Agent, to the extent of any Agent Advances
and other Revolving Loans made by Agent which have not been settled among the
Lenders pursuant to Section 11.13, and (v) the respective successors of all of
the foregoing, and Lenders means all of the foregoing. In addition to the
foregoing, for the purpose of identifying the Persons entitled to share in the
Collateral and the proceeds thereof under, and in accordance with the provisions
of, this Agreement and the Security Documents, the term "Lender" shall include
Designated Lender Affiliates.
"LETTER OF CREDIT" means a standby letter of credit issued for the account
of Borrowers and each other Credit Party under this Agreement by an LC Issuer
which expires by its terms within one year after the date of issuance and in any
event at least thirty (30) days prior to the Commitment Expiry Date.
Notwithstanding the foregoing, a Letter of Credit may provide for automatic
extensions of its expiry date for one or more successive one (1) year periods
provided that the LC Issuer that issued such Letter of Credit has the right to
terminate such Letter of Credit on each such annual expiration date and no
renewal term may extend the term of the Letter of Credit to a date that is later
than the thirtieth (30th) day prior to the Commitment Expiry Date.
"LETTER OF CREDIT LIABILITIES" means, at any time of calculation, the sum
of (i) the amount then available for drawing under all outstanding Letters of
Credit (without regard to whether any conditions to drawing thereunder can then
be met), to the extent subject to a Support Agreement PLUS (ii) the aggregate
unpaid amount of all reimbursement obligations in respect of previous drawings
made under such Letters of Credit, to the extent subject to a Support Agreement.
"LIBOR" means, with respect to any LIBOR Loan for any Interest Period, a
rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) equal
to (i) the rate of interest which is identified and normally published by
Bloomberg Professional Service Page BBAM 1 as the offered rate for loans in U.S.
dollars for the applicable Interest Period under the caption British Bankers
Association LIBOR Rates as of 11:00 a.m. (London time), on the second full
Business Day next preceding the first day of such Interest Period (unless such
date is not a Business Day, in which event the next succeeding Business Day will
be used); divided by (ii) the sum of one minus the daily average during such
Interest Period of the aggregate maximum reserve requirement (expressed as a
decimal) then imposed under Regulation D of the Board of Governors of the
Federal Reserve System (or any successor thereto) for "Eurocurrency Liabilities"
(as defined therein). If Bloomberg Professional Service no longer reports the
LIBOR or Agent determines in good faith that the rate so reported no longer
accurately reflects the rate available to Agent in the London Interbank Market
or if such index no longer exists or if Page BBAM 1 no longer exists or
accurately reflects the rate available to Agent in the London Interbank Market,
Agent may select a replacement index or replacement page, as the case may be.
"LIBOR LOANS" means any Loans which accrue interest by reference to the
LIBOR, in accordance with the terms of this Agreement.
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"LIBOR MARGIN" means three percent (3%) per annum with respect to the
Revolving Loans and other Obligations.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement and the
other Financing Documents, each Borrower or any other Domestic Subsidiary shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, Capital Lease or other title retention agreement relating to such
asset.
"LOAN ACCOUNT" has the meaning set forth in Section 2.5(b).
"LOANS" means the Revolving Loans or any other credit accommodation
extended by Agent or any Lender to any Borrower or any other Credit Party, or
any combination of the foregoing, as the context may require.
"MARGIN STOCK" has the meaning assigned thereto in Regulation U of the
Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means, with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (i) the financial
condition, operations, business or properties of the Credit Parties, taken as a
whole, (ii) the rights and remedies of Agent or Lenders under any Financing
Document, or the ability of any Credit Party to perform any of its obligations
under any Financing Document to which it is a party, (iii) the legality,
validity or enforceability of any Financing Document, or (iv) the existence,
perfection or priority of any security interest granted in any Financing
Document with respect to any Collateral with a material value or the value of
any material Collateral.
"MAXIMUM LAWFUL RATE" has the meaning set forth in Section 2.6(b).
"XXXXXXX XXXXX" means Xxxxxxx Xxxxx Capital, a division of Xxxxxxx Xxxxx
Business Financial Services Inc., and its successors.
"MULTIEMPLOYER PENSION PLAN" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which Borrower or any member of the Controlled
Group may have any liability.
"NET BORROWING AVAILABILITY" has the meaning provided in the Borrowing Base
Certificate.
"NET CASH PROCEEDS" means, with respect to any transaction or event, an
amount equal to the cash proceeds received by the Credit Party from or in
respect of such transaction or event (including proceeds of any non-cash
proceeds of such transaction), less (i) any out-of-pocket expenses reasonably
incurred by such Person in connection therewith and (ii) in the case of an
13
Asset Disposition, the amount of any Debt secured by a Lien on the related asset
and discharged from the proceeds of such Asset Disposition and any taxes or
other usual and customarily pro-ratable amounts paid or payable by such Person
in respect of such Asset Disposition.
"NET ORDERLY LIQUIDATION VALUE" shall mean a percentage determined from
time to time dividing (x) the aggregate value of all Credit Parties' Inventory
that is estimated to be recoverable in the orderly liquidation of such Inventory
over up to a 9-month period net of liquidation expenses, such amounts to be
determined by the most recent appraisal of such Inventory conducted by a
qualified appraisal company selected by Agent in its reasonable discretion by
(y) the value of such Inventory as of the date of the appraisal shown on Credit
Parties' books and records and calculated on the lower of cost or market on a
first-in, first-out basis.
"NON-RECOURSE DEBT" means any Debt of any Person which, by the terms
thereof, does not represent a claim against any general assets or revenues of
such Person other than the specific assets that are subject to a Lien securing
such Debt.
"NON-RECOURSE GUARANTOR" shall mean AAR Aircraft & Engine Sales & Leasing,
Inc., an
Illinois corporation, AAR International, Inc., an
Illinois corporation,
their successors and assigns and each other guarantor of the Obligations, whose
guaranty of the Obligations is limited to the assets pledged as Collateral by
such guarantor.
"NON-SOLD ACCOUNTS" shall mean any and all Accounts of Borrowers not sold
by any Borrower pursuant to the Purchase and Sale Agreement.
"NOTES" means the Revolving Loan Notes.
"NOTE PURCHASE AGREEMENT" and "NOTE PURCHASE DOCUMENTS" shall mean that
certain Note Purchase Agreement ("NOTE PURCHASE Agreement") dated as of May 1,
2001 by and between
AAR Corp. and each of the purchasers listed in Schedule A
thereto together with all exhibits, schedules, instruments, notes and all other
documents and/or agreements executed and/or delivered in connection therewith
and all amendments and/or modifications or any replacements (whether effected
upon termination or any time thereafter) and/or refinancings to any of the
foregoing (to the extent any such amendment, modification, replacement or
refinancing is permitted hereunder).
"NOTICE OF BORROWING" means a written notice of a Responsible Officer,
appropriately completed and substantially in the form of Exhibit E hereto.
"NOTICE OF LC CREDIT EVENT" means a written notice from a Responsible
Officer to Agent with respect to any issuance, increase or extension of a Letter
of Credit specifying: (i) the date of issuance or increase of a Letter of
Credit; (ii) the expiry date of such Letter of Credit; (iii) the proposed terms
of such Letter of Credit, including the face amount; and (iv) the transactions
or additional transaction or transactions that are to be supported or financed
with such Letter of Credit or increase thereof.
"OBLIGATIONS" means all obligations, liabilities and indebtedness (monetary
(including post-petition interest, whether or not allowed) or otherwise) of each
Credit Party under this
14
Agreement or any other Financing Document, in each case howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due. The Obligations shall include,
without limitation, all obligations, liabilities and indebtedness arising from
or in connection with all Support Agreements and all Ancillary Services.
"OPERATIVE DOCUMENTS" means the Financing Documents.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability or members agreement).
"PARTICIPANT" has the meaning set forth in Section 12.6(b).
"PAYMENT ACCOUNT" means the account specified on the signature pages hereof
into which all payments by or on behalf of any Borrower to Agent under the
Financing Documents shall be made, or such other account as Agent shall from
time to time specify by notice to Borrowers.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means any "employee benefit pension plan", as such term is
defined in Section 3(1) of ERISA, and any "employee welfare benefit plan", as
such term is defined in Section 3(2) of ERISA, in each case which is subject to
Title IV of ERISA (other than a Multiemployer Pension Plan), and to which
Borrower or any member of the Controlled Group may have any liability, including
any liability by reason of having been a substantial employer within the meaning
of Section 4063 of ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.
"PERMITTED CONTEST" means a contest maintained in good faith by appropriate
proceedings promptly instituted and diligently conducted and with respect to
which such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; PROVIDED that compliance with the
obligation that is the subject of such contest is effectively stayed during such
challenge.
"PERMITTED LIENS" means Liens permitted pursuant to Section 5.2.
"PERMITTED MORTGAGE DEBT" shall have the meaning assigned such term in
Section 5.1(j).
"PERSON" means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any government or agency or political subdivision thereof.
15
"PRIME RATE" means a variable per annum rate, as of any date of
determination, equal to the greater of (i) the Federal Funds Rate PLUS one-half
of one percent (0.50%) per annum and (ii) the rate from time to time published
in the "Money Rates" section of THE WALL STREET JOURNAL as being the "Prime
Rate" (or, if more than one rate is published as the Prime Rate, then the
highest of such rates). The Prime Rate will change as of the date of publication
in THE WALL STREET JOURNAL of a Prime Rate that is different from that published
on the preceding Business Day. In the event that THE WALL STREET JOURNAL shall,
for any reason, fail or cease to publish the Prime Rate, Agent shall choose a
reasonably comparable index or source to use as the basis for the Prime Rate.
"PRIME RATE LOANS" means Loans which accrue interest by reference to the
Prime Rate, in accordance with the terms of this Agreement.
"PRIME RATE MARGIN" means one and one-half percent (1.5%) per annum with
respect to the Revolving Loans and other Obligations.
"PROPERTY INSURANCE POLICY" means any insurance policy maintained by any
Credit Party covering losses with respect to tangible real or personal property
or improvements or losses from business interruption.
"PRO RATA SHARE" means (i) with respect to a Lender's obligation to make
Revolving Loans, such Lender's right to receive payments of principal and
interest with respect thereto, such Lender's right to receive the unused line
fee described in Section 2.2(b), and such Lender's obligation to share in Letter
of Credit Liability and to receive the related Letter of Credit fee described in
Section 2.4(b), the Revolving Loan Commitment Percentage of such Lender and (ii)
for all other purposes (including without limitation the indemnification
obligations arising under Section 11.6) with respect to any Lender, the
percentage obtained by dividing (x) the sum of the Revolving Loan Commitment
Amount of such Lender (or, in the event the Revolving Loan Commitment shall have
been terminated, such Lender's then existing Revolving Loan Outstandings) by (y)
the sum of the Revolving Loan Commitment (or, in the event the Revolving Loan
Commitment shall have been terminated, the then existing Revolving Loan
Outstandings of all Lenders).
"PURCHASE AND SALE AGREEMENT" shall mean the Purchase and Sale Agreement
dated as of March 21, 2003 by and among AAR Distribution, Inc., AAR Parts
Trading, Inc., AAR Manufacturing, Inc., AAR Engine Services, Inc. and AAR Xxxxx
Services, Inc., as Originators,
AAR Corp., as initial Servicer and AAR
Receivables Corporation II, as the Company, as the same may be amended,
modified, replaced or refinanced from time to time (to the extent any such
amendment, modification, replacement or refinancing is permitted hereunder).
"REAL PROPERTY" means real property of each Borrower and each Domestic
Subsidiary, together with all buildings, structures and other improvements
thereon, and all licenses, easements and appurtenances related thereto.
"RECEIVABLES PURCHASE AGREEMENT" shall mean that certain Receivables
Purchase Agreement dated as of March 21, 2003 by and among the AAR Receivables
Corporation II, as Seller and
AAR Corp., Individually and as Initial Servicer
and the Financial Institutions from
16
time to time parties thereto and LaSalle Business Credit, LLC, as Agent, as the
same may be amended, modified, replaced or refinanced from time to time (to the
extent any such amendment, modification, replacement or refinancing is permitted
hereunder).
"REIMBURSEMENT OBLIGATIONS" means, at any date, the obligations of any
Borrower or any other Credit Party then outstanding to reimburse Xxxxxxx Xxxxx
for payments made by Xxxxxxx Xxxxx under a Support Agreement.
"REQUIRED LENDERS" means at any time Lenders holding (i) sixty-six and two
thirds percent (66 2/3%) or more of the sum of the Revolving Loan Commitment or
(ii) if the Revolving Loan Commitment has been terminated, sixty-six and two
thirds percent (66 2/3%) or more of the sum of (x) the aggregate outstanding
principal balance of the Loans PLUS (y) the aggregate amount of Reimbursement
Obligations; PROVIDED that if there are two or fewer Lenders, Required Lenders
shall mean all Lenders.
"RESERVES" means such amounts as Agent may from time to time establish and
revise, in each case in the exercise of its reasonable credit judgment, reducing
the amount of Revolving Loans and Support Agreements which would otherwise be
available to Borrowers under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by Agent
in the exercise of its reasonable credit judgment, adversely affect, or could
reasonably be expected to adversely affect, any of: (i) the Eligible Inventory
or its value, (ii) the business of any Credit Party or (iii) the Liens and other
rights of Agent or any Lender in the Eligible Inventory (including the
enforceability, perfection and priority thereof), (b) to reflect Agent's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Credit Party to Agent is or may have been incomplete,
inaccurate or misleading in any material respect, (c) to reflect accrued and
unpaid interest and fees or (d) to reflect such other matters, events or
contingencies as Agent from time to time in the reasonable exercise of its
credit judgment deems appropriate. To the extent Agent may, in accordance with
any other terms hereof, revise the lending formula(s) used to determine the
Borrowing Base or establish new criteria or revise existing criteria for
Eligible Inventory, Agent shall not also establish a Reserve for the same
purpose. The amount of any Reserve established by Agent shall have a reasonable
relationship to the event, condition or other matter which is the basis for such
Reserve as determined by Agent in good faith.
"RESPONSIBLE OFFICER" means any of the Chief Executive Officer, Chief
Financial Officer, President, Treasurer or Chief Accounting Officer of AAR.
"RESTRICTED DISTRIBUTION" means as to any Person (i) any dividend or other
distribution on any equity interest in such Person (except those payable solely
in its equity interests of the same class) or (ii) any payment on account of (a)
the purchase, redemption, retirement, defeasance, surrender or acquisition of
any equity interests in such Person or any claim respecting the purchase of sale
of any equity interest in such Person or (b) any option, warrant or other right
to acquire any equity interests in such Person.
"RESTRICTED SUBSIDIARY" means any Subsidiary which (i) at least a majority
of the voting securities of such Subsidiary are owned by AAR and/or one or more
Wholly-Owned Restricted Subsidiaries, and (ii) has not been designated as an
Unrestricted Subsidiary of AAR as reflected
17
in Schedule 5.4 of the Note Purchase Agreement or by written notice given to the
holders of all notes issued pursuant to the Note Purchase Agreement in
accordance with Section 10.9 of the Note Purchase Agreement.
"REVOLVING LOAN BORROWING" means a borrowing of a Revolving Loan.
"REVOLVING LOAN COMMITMENT" means the sum of each Lender's Revolving Loan
Commitment Amount.
"REVOLVING LOAN COMMITMENT AMOUNT" means, as to any Lender, the dollar
amount set forth opposite such Lender's name on the Commitment Annex under the
column "Revolving Loan Commitment Amount", or, if different, in the most recent
Assignment Agreement to which such Lender is a party.
"REVOLVING LOAN COMMITMENT PERCENTAGE" means, as to any Lender, the
percentage set forth opposite such Lender's name on the Commitment Annex under
the column "Revolving Loan Commitment Percentage", or, if different, in the most
recent Assignment Agreement to which such Lender is a party.
"REVOLVING LOAN LIMIT" means, at any time, the lesser of (i) the Borrowing
Base, PLUS any Agent Advances and (ii) the Revolving Loan Commitment.
"REVOLVING LOAN NOTE" has the meaning set forth in Section 2.4.
"REVOLVING LOAN OUTSTANDINGS" means at any time of calculation the sum of
the then existing aggregate outstanding principal amount of Revolving Loans and
the then existing Letter of Credit Liabilities.
"REVOLVING LOANS" has the meaning set forth in Section 2.2(a), and includes
all Agent Advances.
"SECURITIZATION DOCUMENTS" shall mean the Receivables Purchase Agreement,
together with all exhibits, schedules, instruments, notes and all other
documents and agreements executed and/or delivered in connection therewith, the
Purchase and Sale Agreement, together with all exhibits, schedules, instruments,
notes and all other documents and agreement executed and/or delivered in
connection therewith, and all amendments, modifications, replacements (whether
effected upon termination or any time thereafter) or refinancings to any of the
foregoing (to the extent any such amendment, modification, replacement or
refinancing is permitted hereunder).
"SECURITY DOCUMENTS" means any agreement, document or instrument executed
concurrently herewith or at any time hereafter pursuant to which one or more
Credit Parties or any other Person either (i) Guarantees payment or performance
of all or any portion of the Obligations and/or (ii) provides, as security for
all or any portion of the Obligations, a Lien on any of its assets in favor of
Agent for its own benefit and the benefit of the Lenders, as any or all of the
same may be amended, supplemented, restated or otherwise modified from time to
time.
"SETTLEMENT DATE" has the meaning set forth in Section 11.13(b).
18
"STATED RATE" has the meaning set forth in Section 2.6(b).
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, limited partnership or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person. Unless otherwise specified,
the term Subsidiary shall refer to a Subsidiary of AAR or any other Borrower.
"SUBORDINATED DEBT" means any Debt of any Borrower that (i) is junior and
subordinate in right of payment to the Obligations pursuant to subordination
provisions that have been approved in writing by all Lenders and (ii) provides
for no scheduled principal payments on any date prior to the Commitment Expiry
Date.
"SUPPORT AGREEMENT" has the meaning set forth in Section 2.4(a).
"TAXES" has the meaning set forth in Section 2.7.
"TERMINATION DATE" has the meaning set forth in Section 2.1(c).
"TOTAL DEBT" has the meaning provided in the Compliance Certificate.
"TRANSPORTATION CODE" means Title 49 of the United States Code, as amended
from time to time, or any similar legislation of the United States enacted to
supersede, amend or supplement such provision.
"UCC" means the Uniform Commercial Code of the State of
Illinois or of any
other state the laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.
"UNRESTRICTED SUBSIDIARY" means AAR Financial Services Corp., AAR
International Financial Services, LLC, AAR Aircraft & Engine Sales & Leasing,
Inc. and any other Subsidiary which is so designated pursuant to Section 10.9 of
the Note Purchase Agreement.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of AAR
all of the equity interests (except directors' qualifying shares) and voting
interests of which are owned by any one or more of AAR and AAR's other
Wholly-Owned Restricted Subsidiaries.
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder (including without limitation determinations
made pursuant to the exhibits hereto) shall be made, and all financial
statements required to be delivered hereunder shall be prepared on a
consolidated basis in accordance with GAAP applied on a basis consistent (except
for changes concurred with by AAR's independent public accountants) with the
most recent audited consolidated financial statements of AAR and its
Consolidated Subsidiaries delivered to Agent and each of the Lenders; PROVIDED
that if (a) Borrowers shall object to determining compliance with the provisions
of this Agreement on such basis by written notice delivered to Agent and the
Lenders at the time of delivery of required financial statements due to any
change in GAAP or
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the rules promulgated with respect thereto or (b) Agent or the Required Lenders
shall so object in writing by written notice delivered to Borrowers within sixty
(60) days after delivery of such financial statements, then such calculations
shall be made on a basis consistent with the most recent financial statements
delivered by Borrowers to the Lenders as to which no such objection shall have
been made. All amounts used for purposes of financial calculations required to
be made herein shall be without duplication.
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References in this Agreement
to "Articles", "Sections", "Annexes" or "Exhibits" shall be to Articles,
Sections, Annexes or Exhibits of or to this Agreement unless otherwise
specifically provided. Any term defined herein may be used in the singular or
plural. "Include", "includes" and "including" shall be deemed to be followed by
"without limitation". Except as otherwise specified herein, references to any
Person include the successors and assigns of such Person. References "from" or
"through" any date mean, unless otherwise specified, "from and including" or
"through and including", respectively. References to any statute or act shall
include all related current regulations and all amendments and any successor
statutes, acts and regulations.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
SECTION 2.1 REVOLVING LOANS.
(a) REVOLVING LOANS AND BORROWINGS.
(i) On the terms and subject to the conditions set forth
herein, each Lender severally agrees to make Loans to Borrowers from time
to time as set forth herein equal to such Lender's Revolving Loan
Commitment Percentage of revolving loans ("REVOLVING LOANS") requested by
AAR, on its own behalf and on behalf of each other Borrower hereunder,
provided that after giving effect thereto, the Revolving Loan Outstandings
shall not exceed the Revolving Loan Limit. Within the foregoing limits,
Borrowers may borrow under this Section 2.1(a)(i), prepay or repay
Revolving Loans as required or permitted under this Section 2.1 and
reborrow Revolving Loans pursuant to this Section 2.1(a)(i).
(ii) AGENT ADVANCES. Subject to the limitations set forth
in this Section 2.1(a)(ii), Agent is hereby authorized by Borrowers and
Lenders, from time to time in Agent's sole discretion, (A) after the
occurrence of a Default or an Event of Default, or (B) at any time that any
of the other applicable conditions precedent set forth in Section 8.2 have
not been satisfied (including without limitation the condition precedent
that the Revolving Loan Outstandings not exceed the Borrowing Base PLUS any
other then outstanding Agent Advances), to make Revolving Loans to
Borrowers on behalf of the Lenders which Agent, in its reasonable business
judgment, deems necessary or desirable (1) to preserve or protect the
business conducted by any Borrower, the Collateral, or any portion thereof,
(2) to enhance the likelihood of, or maximize the amount of, repayment of
the Loans and other Obligations, (3) to pay any amount chargeable to any
Borrower pursuant to the terms of this Agreement, including interest
payments and costs, fees and expenses as described in Section 10.1 and/or
Section 10.4
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or (4) to satisfy payment obligations under Support Agreements (any of the
advances described in this Section 2.1(a)(ii) being hereafter referred to
as "AGENT ADVANCES"); PROVIDED, that (i) Required Lenders may at any time
revoke Agent's authorization to make Agent Advances, except Agent Advances
applied in the manner described in the preceding clauses (3) and (4), any
such revocation to be in writing and to become effective prospectively upon
the Agent's receipt thereof, (ii) Agent Advances shall be made solely as
Prime Rate Loans, (iii) the aggregate amount of Agent Advances outstanding
at any time, exclusive of those made pursuant to the preceding clauses (3)
and (4), shall not exceed ten percent (10%) of the Revolving Loan
Commitment and (iv) Agent shall be prohibited from making Agent Advances to
the extent the making thereof would cause the Revolving Loan Outstandings
(inclusive of Agent Advances) to exceed the Revolving Loan Commitment.
(b) ADVANCING REVOLVING LOANS.
(i) AAR, on its own behalf and on behalf of each other
Borrower shall deliver to Agent a Notice of Borrowing with respect to each
proposed Revolving Loan Borrowing (other than Agent Advances), such Notice
of Borrowing to be delivered no later than noon (Chicago time) (i) on the
day of such proposed borrowing, in the case of Prime Rate Loans in an
aggregate principal amount equal to or less than $5,000,000, (ii) on the
Business Day prior to such proposed borrowing, in the case of Prime Rate
Loans in an aggregate principal amount greater than $5,000,000 and (iii) on
the third (3rd) Business Day prior to such proposed borrowing, in the case
of all LIBOR Loans. Once given, except as provided in Section 2.2(f)(ii), a
Notice of Borrowing shall be irrevocable and Borrowers shall be bound
thereby.
(ii) Each Borrower hereby authorizes Lenders and Agent to
make Revolving Loans (other than LIBOR Loans) based on telephonic notices
made by any Person which Agent, in good faith, believes to be acting on
behalf of Borrowers or any one of them. AAR, on its own behalf and on
behalf of each other Borrower, agrees to deliver to Agent a Notice of
Borrowing in respect of each Revolving Loan requested by telephone no later
than one Business Day following such request. If the Notice of Borrowing
differs in any respect from the action taken by Agent and Lenders, the
records of Agent and the Lenders shall govern absent manifest error. Each
Borrower further hereby authorizes Lenders and Agent to make Revolving
Loans based on electronic notices made by any Person which Agent, in good
faith, believes to be acting on behalf of Borrowers, but only after Agent
shall have established procedures acceptable to Agent for accepting
electronic Notices of Borrowing, as indicated by Agent's written
confirmation thereof.
(c) MANDATORY REVOLVING LOAN REPAYMENTS AND PREPAYMENTS.
(i) The Revolving Loan Commitment shall terminate upon the
earlier to occur of (i) the Commitment Expiry Date and (ii) the date on
which Agent or Required Lenders elect to terminate the Revolving Loan
Commitment pursuant to Section 9.2 (such earlier date being the
"TERMINATION DATE"), and there shall become due and Borrowers shall pay on
the Termination Date, the entire outstanding principal amount of
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each Revolving Loan, together with accrued and unpaid interest thereon to
but excluding the Termination Date.
(ii) If at any time the Revolving Loan Outstandings exceed
the Revolving Loan Limit, then, on the next succeeding Business Day,
Borrowers shall repay the Revolving Loans or cash collateralize Letter of
Credit Liabilities in the manner specified in Section 2.4(e) or cancel
outstanding Letters of Credit, or any combination of the foregoing, in an
aggregate amount equal to such excess.
(iii) Except with respect to Asset Disposition permitted by
Section 5.6(5), promptly upon receipt by any Credit Party of the proceeds
of any Asset Disposition, Borrowers shall either (1) repay Revolving Loans
and cash collateralize Letter of Credit Liabilities, in the manner
specified in Section 2.4(e) or cancel outstanding Letters of Credit, or any
combination of the foregoing, in an aggregate amount equal to one hundred
percent (100%) of the Net Cash Proceeds of such Asset Disposition,
PROVIDED, that if no Event of Default has occurred and is continuing, no
prepayment shall be required pursuant to this Section 2.1(c)(iii) unless
and until the aggregate Net Cash Proceeds received during any Fiscal Year
from Asset Dispositions of Equipment or Real Property exceeds $5,000,000
(in which case all Net Cash Proceeds in excess of such amount shall be used
to make prepayments pursuant to this Section 2.1(c)(iii)) or (2) promptly
deliver written notice to Agent signed and certified by a Responsible
Officer, that after giving effect to any such Asset Disposition, the
Revolving Loan Outstandings does not exceed the Revolving Loan Limit and no
Default or Event of Default exists and is continuing or will exist and be
continuing after giving effect to any such Asset Disposition. Any such
repayment may be reborrowed as new Revolving Loans subject to the terms and
provisions of this Agreement.
(iv) Promptly upon receipt by any Credit Party of any
Casualty Proceeds, Borrowers shall either (1) repay Revolving Loans or cash
collateralize Letter of Credit Liabilities in the manner specified in
Section 2.4(e) or cancel outstanding Letters of Credit, or any combination
of the foregoing, in an aggregate amount equal to such Casualty Proceeds
LESS (i) any out-of-pocket expenses reasonably incurred by any Credit Party
in connection with such event and (ii) the amount of any Debt secured by a
prior Lien on the related asset and discharged from such Casualty Proceeds.
Any such prepayment may be reborrowed as new Revolving Loans subject to the
provisions of this Agreement or (2) promptly deliver written notice to
Agent signed and certified by a Responsible Officer, that after giving
effect to the event giving rise to such Casualty Proceeds, the Revolving
Loan Outstandings does not exceed the Revolving Loan Limit and no Default
or Event of Default exists and is continuing or will exist and be
continuing after giving effect to any such Asset Disposition. Any such
repayment may be reborrowed as new Revolving Loans subject to the terms and
provisions of this Agreement.
SECTION 2.2 INTEREST, INTEREST CALCULATIONS AND CERTAIN FEES.
(a) INTEREST. From and following the Closing Date, depending
upon AAR's election, on its own behalf and on behalf of each other Borrower,
from time to time, subject to
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the terms hereof, to have portions of the Loans accrue interest determined by
reference to the Prime Rate or the LIBOR, the Loans and the other Obligations
shall bear interest at the applicable rates set forth below:
(i) If a Prime Rate Loan, or any other Obligation other
than a LIBOR Loan, then at the sum of the Prime Rate PLUS the applicable
Prime Rate Margin.
(ii) If a LIBOR Loan, then at the sum of the LIBOR PLUS the
applicable LIBOR Margin.
(b) UNUSED LINE FEE. From and following the Closing Date,
Borrowers shall pay Agent, for the benefit of all Lenders committed to make
Revolving Loans, in accordance with their respective Pro Rata Shares, a fee in
an amount equal to (1) (a) the Revolving Loan Commitment LESS (b) the average
daily balance of the Revolving Loan Outstandings during the preceding month,
MULTIPLIED BY (2) one-half percent (1/2%) per annum if the average daily balance
of the Revolving Loans Outstandings during the preceding month exceeds Ten
Million Dollars ($10,000,000) or one percent (1%) per annum if the average daily
balance of the Revolving Loans Outstandings during the preceding month is Ten
Million Dollars ($10,000,000) or less. Such fee is to be paid monthly in arrears
on the first day of each month.
(c) COLLATERAL MANAGEMENT FEE. On the Closing Date, and on each
anniversary thereof, Borrower shall pay Agent a fully earned and non-refundable
collateral management fee in the amount of Thirty-Five Thousand Dollars
($35,000).
(d) PREPAYMENT FEE. If Borrowers voluntarily prepay the
Obligations in full and this Agreement and all Revolving Loan Commitments are
terminated in accordance with the provisions hereof prior to the third
anniversary of the Closing Date, Borrowers shall pay to Agent, for the benefit
of Lenders, as compensation for the costs of Lenders being prepared to make
funds available to Borrowers under this Agreement, an amount determined by
MULTIPLYING the percentage set forth below by the Revolving Loan Commitment: two
percent (2.0%) for the first year following the Closing Date; one percent (1.0%)
for the second year following the Closing Date; and one-half of one percent
(1/2%) for the third year following the Closing Date. No amount will be payable
pursuant to this paragraph if Borrowers voluntarily prepay the Obligations in
full after the third anniversary of the Closing Date. The foregoing
notwithstanding, Agent and Lenders agree to waive any such prepayment fee if
such prepayment occurs after the provisions of clauses (ii), (iii) or (v) of
Section 2.2(f) have become applicable.
(e) COMPUTATION OF INTEREST AND RELATED FEES. All interest and
fees under each Financing Document shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. The date of funding of a Prime Rate
Loan and the first day of an Interest Period with respect to a LIBOR Loan shall
be included in the calculation of interest. The date of payment of a Prime Rate
Loan and the last day of an Interest Period with respect to a LIBOR Loan shall
be excluded from the calculation of interest. If a Loan is repaid on the same
day that it is made, one (1) days' interest shall be charged. Interest on all
Prime Rate Loans is payable in arrears on the first day of each month and on the
maturity of such Loans, whether by acceleration or otherwise. Interest on LIBOR
Loans shall be payable on the last day of the applicable Interest Period, unless
the Interest Period is greater than three (3) months, in which
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case interest will be payable on the last day of each three (3) month interval.
In addition, interest on LIBOR Loans is due on the maturity of such Loans,
whether by acceleration or otherwise.
(f) LIBOR PROVISIONS.
(i) LIBOR ELECTION. All Loans made on the Closing Date
shall be Prime Rate Loans and shall remain so until three (3) Business Days
after the Closing Date. Thereafter, AAR, on its own behalf and on behalf of
each other Borrower, may request that Revolving Loans to be made be LIBOR
Loans, that outstanding portions of Revolving Loans be converted to LIBOR
Loans and that all or any portion of a LIBOR Loan be continued as a LIBOR
Loan upon expiration of the applicable Interest Period. Any such request
will be made by submitting a Notice of Borrowing to Agent. Once given, and
except as provided in clause (ii) below, a Notice of Borrowing shall be
irrevocable and Borrowers shall be bound thereby. Upon the expiration of an
Interest Period, in the absence of a new Notice of Borrowing submitted to
Agent not less than three (3) Business Days prior to the end of such
Interest Period, the LIBOR Loan then maturing shall be automatically
converted to a Prime Rate Loan. There may be no more than four (4) LIBOR
Loans outstanding at any one time. Loans which are not requested as LIBOR
Loans in accordance with this Section 2.2(e)(i) shall be Prime Rate Loans.
Agent will notify Lenders, by telephonic or facsimile notice, of each
Notice of Borrowing received by Agent not less than two (2) Business Days
prior to the first day of the Interest Period of the LIBOR Loan requested
thereby.
(ii) INABILITY TO DETERMINE LIBOR. In the event, prior to
commencement of any Interest Period relating to a LIBOR Loan, Agent shall
determine or be notified in writing by Required Lenders that adequate and
reasonable methods do not exist for ascertaining LIBOR, Agent shall
promptly provide notice of such determination to Borrowers and Lenders
(which shall be conclusive and binding on Borrowers and Lenders). In such
event (1) any request for a LIBOR Loan or for a conversion to or
continuation of a LIBOR Loan shall be automatically withdrawn and shall be
deemed a request for a Prime Rate Loan, (2) each LIBOR Loan will
automatically, on the last day of the then current Interest Period relating
thereto, become a Prime Rate Loan and (3) the obligations of Lenders to
make LIBOR Loans shall be suspended until Agent or Required Lenders
determine that the circumstances giving rise to such suspension no longer
exist, in which event Agent shall so notify Borrowers and Lenders.
(iii) ILLEGALITY. Notwithstanding any other provisions
hereof, if any law, rule, regulation, treaty or directive or interpretation
or application thereof shall make it unlawful for any Lender to make, fund
or maintain LIBOR Loans, such Lender shall promptly give notice of such
circumstances to Agent, Borrower and the other Lenders. In such an event,
(1) the commitment of such Lender to make LIBOR Loans or convert Prime Rate
Loans to LIBOR Loans shall be immediately suspended and (2) such Lender's
outstanding LIBOR Loans shall be converted automatically to Prime Rate
Loans on the last day of the Interest Period thereof or at such earlier
time as may be required by law.
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(iv) LIBOR BREAKAGE FEE. Upon (i) any default by Borrowers
in making any borrowing of, conversion into or continuation of any LIBOR
Loan following Borrowers' delivery to Agent of any applicable Notice of
Borrowing or (ii) any payment of a LIBOR Loan on any day that is not the
last day of the Interest Period applicable thereto (regardless of the
source of such prepayment and whether voluntary, by acceleration or
otherwise), Borrowers shall pay Agent, for the benefit of all Lenders that
funded or were prepared to fund any such LIBOR Loan, an amount equal to the
amount of any losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) in connection with the
re-employment of such funds) that any Lender may sustain as a result of
such default or such payment. For purposes of calculating amounts payable
to a Lender under this paragraph, each Lender shall be deemed to have
actually funded its relevant LIBOR Loan through the purchase of a deposit
bearing interest at LIBOR in an amount equal to the amount of that LIBOR
Loan and having a maturity and repricing characteristics comparable to the
relevant Interest Period; PROVIDED, HOWEVER, that each Lender may fund each
of its LIBOR Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
subsection.
(v) INCREASED COSTS. If, after the Closing Date, the
adoption of, or any change in, any applicable law, rule or regulation, or
any change in the interpretation or administration of any applicable law,
rule or regulation by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender with any request or directive (whether
or not having the force of law) of any such authority, central bank or
comparable agency: (i) shall impose, modify or deem applicable any reserve
(including any reserve imposed by the Board of Governors of the Federal
Reserve System, or any successor thereto, but excluding any reserve
included in the determination of the LIBOR pursuant to the provisions of
this Agreement), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by any Lender; or
(ii) shall impose on any Lender any other condition affecting its LIBOR
Loans, its Notes or its obligation to make LIBOR Loans; and the result of
anything described in clauses (i) above and (ii) is to increase the cost to
(or to impose a cost on) such Lender of making or maintaining any LIBOR
Loan, or to reduce the amount of any sum received or receivable by such
Lender under this Agreement or under its Notes with respect thereto, then
upon demand by such Lender (which demand shall be accompanied by a
statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to
Agent), Borrowers shall pay directly to such Lender such additional amount
as will compensate such Lender for such increased cost or such reduction,
so long as such amounts have accrued on or after the day which is one
hundred eighty (180) days prior to the date on which such Lender first made
demand therefor.
(g) CAPITAL ADEQUACY. If any Lender shall reasonably determine
that any change in, or the adoption or phase-in of, any applicable law, rule or
regulation regarding capital adequacy, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or the
compliance by any Lender or any Person controlling such Lender with any request
25
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's or such controlling
Person's capital as a consequence of such Lender's obligations hereunder or
under any Support Agreement to a level below that which such Lender or such
controlling Person could have achieved but for such change, adoption, phase-in
or compliance (taking into consideration such Lender's or such controlling
Person's policies with respect to capital adequacy) by an amount deemed by such
Lender or such controlling Person to be material, then from time to time, upon
demand by such Lender (which demand shall be accompanied by a statement setting
forth the basis for such demand and a calculation of the amount thereof in
reasonable detail, a copy of which shall be furnished to Agent), Borrowers shall
pay to such Lender such additional amount as will compensate such Lender or such
controlling Person for such reduction, so long as such amounts have accrued on
or after the day which is one hundred eighty (180) days prior to the date on
which such Lender first made demand therefor.
SECTION 2.3 NOTES. The portion of the Revolving Loans made by each
Lender shall be evidenced by a promissory note executed by Borrowers (a
"REVOLVING LOAN NOTE") in an original principal amount equal to such Lender's
Pro Rata Share of the Revolving Loan Commitment.
SECTION 2.4 LETTERS OF CREDIT AND LETTER OF CREDIT FEES.
(a) LETTER OF CREDIT. On the terms and subject to the conditions
set forth herein, Agent will prior to the Termination Date issue letters of
credit or guarantees (each, a "SUPPORT AGREEMENT") to induce an LC Issuer to
issue or increase the amount of, or extend the expiry date of, a Letter of
Credit so long as:
(i) Agent shall have received a Notice of LC Credit Event
at least two (2) Business days before the relevant date of issuance or
increase; and
(ii) After giving effect to such issuance or increase (x)
the aggregate Letter of Credit Liabilities under all Letters of Credit do
not exceed Five Million Dollars ($5,000,000) and (y) the Revolving Loan
Outstandings do not exceed the Revolving Loan Limit.
(b) LETTER OF CREDIT FEE. Borrowers shall pay to Agent, for the
benefit of the Lenders which have committed to make Revolving Loans, a letter of
credit fee with respect to the Letter of Credit Liabilities for each Letter of
Credit, computed for each day from the date of issuance of such Letter of Credit
to the date that is the last day a drawing is available under such Letter of
Credit, at a rate per annum equal to the LIBOR Margin then applicable to
Revolving Loans. Such fee shall be payable in arrears on the first Business Day
of each calendar month prior to the Termination Date and on such date. In
addition, Borrower agrees to pay promptly to the LC Issuer any fronting or other
fees that it may charge in connection with any Letter of Credit.
(c) REIMBURSEMENT OBLIGATIONS OF BORROWER. If Agent shall make a
payment to an LC Issuer pursuant to a Support Agreement, Borrowers shall
promptly reimburse Agent for
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the amount of such payment and, to the extent that so doing would not, to
Agent's knowledge, cause the Revolving Loan Outstandings to exceed the Revolving
Loan Limit, Borrowers shall be deemed to have requested a Revolving Loan, the
proceeds of which will be used to satisfy such Reimbursement Obligations.
Borrowers shall pay interest, on demand, on all amounts so paid by Agent for
each day until Borrower reimburses Agent therefor at a rate per annum equal to
the sum of two percent (2%) PLUS the interest rate applicable to Revolving Loans
(which are Prime Rate Loans) for such day.
(d) REIMBURSEMENT AND OTHER PAYMENTS BY BORROWER. The
obligations of Borrowers to reimburse Agent pursuant to Section 2.4(c) shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including the following:
(i) any lack of validity or enforceability of, or any
amendment or waiver of or any consent to departure from, any Letter of
Credit or any related document;
(ii) the existence of any claim, set-off, defense or other
right which any Borrower may have at any time against the beneficiary of
any Letter of Credit, the LC Issuer (including any claim for improper
payment), Agent, any Lender or any other Person, whether in connection with
any Financing Document or any unrelated transaction, provided that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(iii) any statement or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(iv) any affiliation between the LC Issuer and Agent; or
(v) to the extent permitted under applicable law, any
other circumstance or happening whatsoever, whether or not similar to any
of the foregoing.
(e) DEPOSIT OBLIGATIONS OF BORROWERS. In the event any Letters
of Credit are outstanding at the time that Borrowers prepay or are required to
repay the Obligations or the Revolving Loan Commitment is terminated, Borrowers
shall (1) deposit with Agent for the benefit of all Lenders with a portion of
the Revolving Loan Commitment cash in an amount equal to one hundred and five
percent (105%) of the aggregate outstanding Letter of Credit Liability to be
available to Agent to reimburse payments of drafts drawn under such Letters of
Credit and pay any fees and expenses related thereto and (2) prepay the fee
payable under Section 2.4(b) with respect to such Letters of Credit for the full
remaining terms of such Letters of Credit. Upon termination of any such Letter
of Credit, the unearned portion of such prepaid fee attributable to such Letter
of Credit shall be refunded to Borrowers, together with the deposit described in
the preceding clause (1) to the extent not previously applied by Agent in the
manner described herein.
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(f) PARTICIPATIONS IN SUPPORT AGREEMENTS.
(i) Concurrently with the issuance of each Letter of
Credit, Agent shall be deemed to have sold and transferred to each Lender,
and each Lender shall be deemed irrevocably and unconditionally to have
purchased and received from Agent, without recourse or warranty, an
undivided interest and participation in, to the extent of such Lender's Pro
Rata Share of the Revolving Loan Commitment, Agent's Support Agreement
liabilities and obligations in respect of such Letters of Credit and
Borrower's Reimbursement Obligations with respect thereto. If Borrowers do
not pay any Reimbursement Obligation when due, then Borrowers shall be
deemed to have immediately requested that Lenders make a Revolving Loan
which is a Prime Rate Loan in a principal amount equal to such
Reimbursement Obligation. Agent shall promptly notify Lenders of such
deemed request and each Lender shall make available to Agent its Pro Rata
Share of such Loan. The proceeds of such Loan shall be paid over by Agent
to the LC Issuer for the account of Borrowers in satisfaction of
reimbursement obligations then owing by Borrower to such LC Issuer in
respect of outstanding Letters of Credit.
(ii) If Agent makes any payment or disbursement under any
Support Agreement and (x) Borrowers have not reimbursed Agent in full for
such payment or disbursement in accordance with Section 2.4(c), (y) a
Revolving Loan may not be made pursuant to the immediately preceding clause
(i) or (z) any reimbursement received by Agent from Borrowers is or must be
returned or rescinded upon or during any bankruptcy or reorganization of
any Credit Party or otherwise, each Lender shall be irrevocably and
unconditionally obligated to pay to Agent its Pro Rata Share of such
payment or disbursement (but no such payment shall diminish the Obligations
of Borrowers under Section 2.4(c)). To the extent any Lender shall not have
made such amount available to Agent by noon (Chicago time) on the Business
Day on which such Lender receives notice from Agent of such payment or
disbursement, such Lender agrees to pay interest on such amount to Agent
forthwith on demand accruing daily at the Federal Funds Rate, for the first
three (3) days following such Lender's receipt of such notice, and
thereafter at the Prime Rate PLUS the Prime Rate Margin in respect of
Revolving Loans. Any Lender's failure to make available to Agent its Pro
Rata Share of any such payment or disbursement shall not relieve any other
Lender of its obligation hereunder to make available to Agent such other
Lender's Pro Rata Share of such payment, but no Lender shall be responsible
for the failure of any other Lender to make available to Agent such other
Lender's Pro Rata Share of any such payment or disbursement.
SECTION 2.5 GENERAL PROVISIONS REGARDING PAYMENT; LOAN ACCOUNT.
(a) All payments to be made by Borrowers under any Financing
Document, including payments of principal and interest on the Notes, and all
fees, expenses, indemnities and reimbursements, shall be made without set-off or
counterclaim, in lawful money of the United States of America and in immediately
available funds. If any payment hereunder becomes due and payable on a day other
than a Business Day, such payment shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension. Borrower shall
make all payments in immediately available funds to the Payment Account before
noon (Chicago time) on the date
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when due. Notwithstanding anything to the contrary set forth in this Section
2.5(a), Agent shall be permitted, in its sole discretion, but subject to the
limitations set forth in Section 2.1(a)(ii), to satisfy any of the payment
obligations described in this Section 2.5(a) through the making of Agent
Advances.
(b) Agent shall maintain a loan account (the "LOAN ACCOUNT") on
its books to record Loans and other extensions of credit made by the Lenders
hereunder or under any other Financing Document, and all payments thereon made
by Borrowers. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall be conclusive and binding evidence of the amounts
due and owing to Agent by Borrowers absent clear and convincing evidence to the
contrary; PROVIDED that any failure to so record or any error in so recording
shall not limit or otherwise affect any Borrower's duty to pay all amounts owing
hereunder or under any other Financing Document. Unless AAR, on its own behalf
and on behalf of each other Borrower, notifies Agent in writing of any objection
to any such printout or statement (specifically describing the basis for such
objection) within thirty (30) days after the date of receipt thereof, it shall
be deemed final, binding and conclusive upon Borrowers in all respects as to all
matters reflected therein.
SECTION 2.6 MAXIMUM INTEREST.
(a) In no event shall the interest charged with respect to the
Notes or any other obligations of Borrowers under any Financing Document exceed
the maximum amount permitted under the laws of the State of
Illinois or of any
other applicable jurisdiction.
(b) Notwithstanding anything to the contrary herein or
elsewhere, if at any time the rate of interest payable hereunder or under any
Note or other Financing Document (the "STATED RATE") would exceed the highest
rate of interest permitted under any applicable law to be charged (the "MAXIMUM
LAWFUL RATE"), then for so long as the Maximum Lawful Rate would be so exceeded,
the rate of interest payable shall be equal to the Maximum Lawful Rate;
PROVIDED, that if at any time thereafter the Stated Rate is less than the
Maximum Lawful Rate, Borrowers shall, to the extent permitted by law, continue
to pay interest at the Maximum Lawful Rate until such time as the total interest
received is equal to the total interest which would have received had the Stated
Rate been (but for the operation of this provision) the interest rate payable.
Thereafter, the interest rate payable shall be the Stated Rate unless and until
the Stated Rate again would exceed the Maximum Lawful Rate, in which event this
provision shall again apply.
(c) In no event shall the total interest received by any Lender
exceed the amount which it could lawfully have received had the interest been
calculated for the full term hereof at the Maximum Lawful Rate. If,
notwithstanding the prior sentence, any Lender has received interest hereunder
in excess of the Maximum Lawful Rate, such excess amount shall be applied to the
reduction of the principal balance of the Loans or to other amounts (other than
interest) payable hereunder, and if no such principal or other amounts are then
outstanding, such excess or part thereof remaining shall be paid to Borrowers.
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(d) In computing interest payable with reference to the Maximum
Lawful Rate applicable to any Lender, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made.
SECTION 2.7 TAXES.
(a) All payments of principal and interest on the Loans and all
other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp, documentary, excise,
property or franchise taxes and other taxes, fees, duties, levies, withholdings
or other charges of any nature whatsoever imposed by any taxing authority,
excluding taxes imposed on or measured by Agent's or any Lender's net income by
the jurisdiction under which Agent or such Lender is organized or conducts
business (all non-excluded items being called "TAXES"). If any withholding or
deduction from any payment to be made by any Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation, then
Borrowers will: (a) pay directly to the relevant authority the full amount
required to be so withheld or deducted; (b) promptly forward to Agent an
official receipt or other documentation satisfactory to Agent evidencing such
payment to such authority; and (c) pay to Agent for the account of Agent and
Lenders such additional amount or amounts as is necessary to ensure that the net
amount actually received by Agent and each Lender will equal the full amount
Agent and such Lender would have received had no such withholding or deduction
been required. If any Taxes are directly asserted against Agent or any Lender
with respect to any payment received by Agent or such Lender hereunder, Agent or
such Lender may pay such Taxes and Borrowers will promptly pay such additional
amounts (including any penalty, interest or expense) as is necessary in order
that the net amount received by such Person after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount such
Person would have received had such Taxes not been asserted so long as such
amounts have accrued on or after the day which is one hundred eighty (180) days
prior to the date on which Agent or such Lender first made demand therefor.
(b) If any Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to Agent, for the account of
Agent and the respective Lenders, the required receipts or other required
documentary evidence, Borrowers shall indemnify Agent and Lenders for any
incremental Taxes, interest or penalties that may become payable by Agent or any
Lender as a result of any such failure.
(c) Each Lender that (i) is organized under the laws of a
jurisdiction other than the United States of America and (ii)(A) is a party
hereto on the Closing Date or (B) becomes an assignee of an interest under this
Agreement under Section 12.6(a) after the Closing Date (unless such Lender was
already a Lender hereunder immediately prior to such assignment) shall execute
and deliver to Borrowers and Agent one or more (as Borrowers or Agent may
reasonably request) Forms W-8ECI, W-8BEN, W-8IMY (as applicable) or other
applicable form, certificate or document prescribed by the United States
Internal Revenue Service certifying as to such Lender's entitlement to exemption
from withholding or deduction of Taxes. Borrowers shall not be required to pay
additional amounts to any Lender pursuant to this Section 2.7 to the extent that
the obligation to pay such additional amounts would not have arisen but for the
failure of such Lender to comply with this paragraph.
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SECTION 2.8 ANCILLARY SERVICES. Borrowers may from time to time request,
and Agent or any Lender that is an Affiliate of a Designated Lender Affiliate
may, in its sole discretion, from time to time arrange for Borrowers, any one or
more of them or any other Credit Party to obtain from Agent or any Designated
Lender Affiliate, Ancillary Services although Borrowers or any such Credit Party
are or is not required to do so. To the extent Ancillary Services are provided,
Borrowers agree to indemnify and hold Agent and Lenders harmless from any and
all costs and obligations now or hereafter incurred by Agent or any Lenders
which arise from the indemnity given by Agent or any Lender to any Designated
Lender Affiliates related to such Ancillary Services. The agreement contained in
this Section 2.8 shall survive termination of this Agreement. Borrowers
acknowledge and agree that the obtaining of Ancillary Services (a) is in the
sole and absolute discretion of Agent and each Designated Lender Affiliate, and
(b) is subject to all rules and regulations of Agent and each applicable
Designated Lender Affiliate.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement and to make the
Loans and other credit accommodations contemplated hereby, each Borrower hereby
represents and warrants, on a joint and several basis, to Agent and each Lender
that:
SECTION 3.1 EXISTENCE AND POWER. Each Credit Party is an entity as
specified on the Information Certificate, duly organized, validly existing and
in good standing under the laws of the jurisdiction specified on the Information
Certificate, has an organizational identification number (if any) as specified
on the Information Certificate, and has all powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except where the failure to have such licenses,
authorizations, consents and approvals could not reasonably be expected to have
a Material Adverse Effect. Each Credit Party is qualified to do business as a
foreign entity in each jurisdiction in which it is required to be so qualified,
which jurisdictions as of the Closing Date are specified on the Information
Certificate, except where the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.2 ORGANIZATION AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by each Credit Party of
the Operative Documents to which it is a party are within its powers, have been
duly authorized by all necessary action pursuant to its Organizational
Documents, require no further action by or in respect of, or filing with, any
governmental body, agency or official and do not violate, conflict with or cause
a breach or a default under any provision of applicable law or regulation or of
the Organizational Documents of any Credit Party or of any agreement, judgment,
injunction, order, decree or other instrument binding upon it, except for such
violations, conflicts, breaches or defaults as could not reasonably be expected
to have a Material Adverse Effect.
SECTION 3.3 BINDING EFFECT. Each of the Operative Documents to which any
Credit Party is a party constitutes a valid and binding agreement or instrument
of such Credit Party, enforceable against such Credit Party in accordance with
its respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws relating to the enforcement of
creditors' rights generally and by general equitable principles.
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SECTION 3.4 CAPITALIZATION. The authorized equity securities of each of
the Credit Parties as of the Closing Date is as set forth on the Information
Certificate. All issued and outstanding equity securities of each of the Credit
Parties are duly authorized and validly issued, fully paid, nonassessable, free
and clear of all Liens other than Liens, if any, on any capital stock of AAR,
and such equity securities were issued in compliance with all applicable state,
federal and foreign laws concerning the issuance of securities. The identity of
the holders of the equity securities of each of the Credit Parties (other than
AAR) and the percentage of their fully-diluted ownership of the equity
securities of each of the Credit Parties (other than AAR) as of the Closing Date
is set forth on the Information Certificate. No shares of the capital stock or
other equity securities of any Credit Party, other than those described above,
are issued and outstanding. Except as set forth on the Information Certificate,
as of the Closing Date there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Credit Party of any equity securities of
any such entity.
SECTION 3.5 FINANCIAL INFORMATION.
(a) The consolidated and consolidating balance sheet of AAR and
its Consolidated Subsidiaries as of May 31, 2002 and the related consolidated
and consolidating statements of operations, stockholders' equity (or comparable
calculation, if such Person is not a corporation) and cash flows for the fiscal
year then ended, reported on by KPMG LLP, copies of which have been delivered to
Agent, fairly present, in conformity with GAAP (with respect to consolidated
financial statements only), the consolidated and consolidating financial
position of AAR and its Consolidated Subsidiaries as of such date and their
consolidated and consolidating results of operations, changes in stockholders'
equity (or comparable calculation) and cash flows for such period. Borrowers
represent and warrant to Agent and Lenders that all consolidating financial
statements delivered to Agent and Lenders pursuant to this Agreement (including,
without limitation, those delivered pursuant to this Section 3.5 and Section
4.1) have been or will be prepared in a manner consistent with the financial
statements attached hereto in Schedule 3.5 and in a manner so as to permit the
consolidated financial statements of AAR and its Subsidiaries to be prepared in
accordance with GAAP.
(b) The unaudited consolidated and consolidating balance sheet
of AAR and its Consolidated Subsidiaries as of March 31, 2003 and the related
unaudited consolidated and consolidating statements of operations and cash flows
for the ten (10) months then ended, copies of which have been delivered to
Agent, fairly present, in conformity with GAAP applied on a basis consistent
with the financial statements referred to in Section 3.5(a), the consolidated
and consolidating financial position of AAR and its Consolidated Subsidiaries as
of such date and their consolidated and consolidating results of operations and
cash flows for the ten (10) months then ended (subject to normal year-end
adjustments and the absence of footnote disclosures).
(c) The information contained in the most recently delivered
Borrowing Base Certificate is complete and correct and the amounts shown therein
as "Eligible Inventory" have been determined as provided in the Financing
Documents.
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(d) Since March 31, 2003, there has been no material adverse
change in the business, operations, properties or financial condition of AAR and
its Consolidated Subsidiaries, taken as a whole.
SECTION 3.6 LITIGATION. Except as set forth in the Information
Certificate, as of the Closing Date there is no action, suit or proceeding
pending against, or to any Borrower's knowledge threatened against or affecting,
any Credit Party or, to any Borrower's knowledge, any party to any Operative
Document other than a Credit Party, before any court or arbitrator or any
governmental body, agency or official in which an adverse decision could
reasonably be expected to have a Material Adverse Effect or which in any manner
draws into question the validity of any of the Operative Documents.
SECTION 3.7 OWNERSHIP OF PROPERTY. Each Borrower is the lawful owner of,
has good and marketable title to and is in lawful possession of, or has valid
leasehold interests in, all properties and other assets (real or personal,
tangible, intangible or mixed) purported to be owned or leased (as the case may
be) by such Person on the balance sheet referred to in Section 3.5(b), except as
disposed of in the ordinary course of business.
SECTION 3.8 NO DEFAULT. No Default or Event of Default has occurred and
is continuing and no Credit Party is in breach or default under or with respect
to any contract, agreement, lease or other instrument to which it is a party or
by which its property is bound or affected, which breach or default could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.9 LABOR MATTERS. As of the Closing Date, there are no strikes
or other labor disputes pending or, to any Borrower's knowledge, threatened
against any Credit Party. Hours worked and payments made to the employees of the
Credit Parties have not been in violation of the Fair Labor Standards Act or any
other applicable law dealing with such matters. All payments due from the Credit
Parties, or for which any claim may be made against any of them, on account of
wages and employee and retiree health and welfare insurance and other benefits
have been paid or accrued as a liability on their books, as the case may be. The
consummation of the transactions contemplated by the Financing Documents and the
other Operative Documents will not give rise to a right of termination or right
of renegotiation on the part of any union under any collective bargaining
agreement to which it is a party or by which it is bound.
SECTION 3.10 REGULATED ENTITIES. No Credit Party is an "investment
company" or a company "controlled" by an "investment company" or a "subsidiary"
of an "investment company," all within the meaning of the Investment Company Act
of 1940. No Credit Party is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935.
SECTION 3.11 MARGIN REGULATIONS. None of the proceeds from the Loans have
been or will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any Margin Stock
or for any other purpose which might cause any of the Loans
33
to be considered a "purpose credit" within the meaning of Regulation T, U or X
of the Federal Reserve Board.
SECTION 3.12 COMPLIANCE WITH LAWS. As of the Closing Date, each Borrower
and each Subsidiary is in compliance with the requirements of all applicable
laws, ordinances, rules, regulations and requests of governmental authorities,
except for such laws, ordinances, rules, regulations and requirements the
noncompliance with which could not reasonably be expected to have a Material
Adverse Effect.
SECTION 3.13 TAXES. Except to the extent subject to a Permitted Contest
or where the failure to file any such Tax return or pay any such Tax could not
reasonably be expected to have or evidence a Material Adverse Effect,, all
Federal, state and local tax returns, reports and statements required to be
filed by or on behalf of each Credit Party have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns, reports and
statements are required to be filed, and all Taxes (including real property
Taxes) and other charges shown to be due and payable in respect thereof have
been timely paid prior to the date on which any fine, penalty, interest, late
charge or loss may be added thereto for nonpayment thereof. Except to the extent
subject to a Permitted Contest or where the failure to pay any such Tax could
not reasonably be expected to have a Material Adverse Effect, all state and
local sales and use Taxes required to be paid by each Credit Party have been
paid. Except to the extent subject to a Permitted Contest or where the failure
to file any such return or pay any such Tax could not reasonably be expected to
have a Material Adverse Effect., all Federal and state returns have been filed
by each Credit Party for all periods for which returns were due with respect to
employee income tax withholding, social security and unemployment taxes, and the
amounts shown thereon to be due and payable have been paid in full or adequate
provisions therefor have been made.
SECTION 3.14 COMPLIANCE WITH ERISA.
(a) All required reports and documents with respect to any
Pension Plan have been properly filed with the appropriate governmental
agencies. All Pension Plans (and related trusts and insurance contracts) comply
in form and in operation in all material respects with the current applications
of ERISA and the Code. With respect to each Pension Plan, there have been no
prohibited transactions as defined in Section 406 of ERISA or Section 4975 of
the Code that have not been reported and corrected.
(b) During the twelve (12) month period prior to the Closing
Date or the making of any Loan or the issuance of any Letter of Credit, (i) no
steps have been taken to terminate any Pension Plan and (ii) no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise to
a Lien under Section 302(f) of ERISA or Regulation 2510.3 - 102(b)(1) of ERISA.
No condition exists or event or transaction has occurred with respect to any
Pension Plan which could result in the incurrence by any Credit Party of any
material liability, fine or penalty. No Credit Party has incurred liability to
the PBGC (other than for current premiums) with respect to any employee Pension
Plan. All contributions (if any) have been made to any Multiemployer Pension
Plan that are required to be made by any Credit Party or any other member of the
Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; no Credit Party nor any member of the
34
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any withdrawal liability with respect to any such plan or
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, could result in a withdrawal or partial withdrawal from any such
plan, and no Credit Party nor any member of the Controlled Group has received
any notice that any Multiemployer Pension Plan is in reorganization, that
increased contributions may be required to avoid a reduction in plan benefits or
the imposition of any excise tax, that any such plan is or has been funded at a
rate less than that required under Section 412 of the Code, that any such plan
is or may be terminated, or that any such plan is or may become insolvent.
SECTION 3.15 BROKERS. Except as set forth in the Information Certificate,
no broker, finder or other intermediary has brought about the obtaining, making
or closing of the transactions contemplated by the Operative Documents, and no
Credit Party has or will have any obligation to any Person in respect of any
finder's or brokerage fees in connection herewith or therewith.
SECTION 3.16 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS; NO HAZARDOUS
MATERIALS. Except in each case as set forth on the Information Certificate:
(a) No Hazardous Materials are located on any properties now or
previously owned, leased or operated by any Credit Party or have been released
into the environment, or deposited, discharged, placed or disposed of at, on,
under or near any of such properties in a manner that would require the taking
of any action under any Environmental Law or which could reasonably be expected
to have a Material Adverse Effect. No portion of any such property is being
used, or has been used at any previous time, for the disposal, storage,
treatment, processing or other handling of Hazardous Materials in violation of
any Environmental Law nor is any such property affected by any Hazardous
Materials Contamination.
(b) No underground storage tanks are located on any properties
now or previously owned, leased or operated by any Credit Party, or were located
on any such property and subsequently removed or filled.
(c) No notice, notification, demand, request for information,
complaint, citation, summons, investigation, administrative order, consent order
and agreement, litigation or settlement with respect to Hazardous Materials or
Hazardous Materials Contamination is in existence or, to any Borrower's
knowledge, proposed, threatened or anticipated with respect to or in connection
with the operation of any properties now or previously owned, leased or operated
by any Credit Party, except where any of the foregoing could not be reasonably
expected to have or evidence a Material Adverse Effect. All such properties and
their existing and prior uses, and any disposal of Hazardous Materials from any
thereof, comply and at all times have complied with all Environmental Laws,
except where any such non-compliance could not reasonably be expected to have or
evidence a Material Adverse Effect. There is no condition on any of such
properties which is in violation of any Environmental Laws and no Credit Party
has received any communication from or on behalf of any governmental authority
that any such condition exists, except where any such condition could not
reasonably be expected to have or evidence a Material Adverse Effect.
35
(d) AAR has delivered to Agent a true and complete copy of each
Phase I (and Phase II, if applicable) environmental assessment performed with
respect to any property of any Borrower or their Subsidiaries in the last three
(3) years.
(e) For purposes of this Section 3.16, each Credit Party shall
be deemed to include any business or business entity (including a corporation)
which is, in whole or in part, a predecessor of such Credit Party.
SECTION 3.17 INTELLECTUAL PROPERTY. Each Credit Party owns, is licensed
to use or otherwise has the right to use, all Intellectual Property that is
material to the condition (financial or other), business or operations of such
Credit Party, except to the extent that such Credit Party's use of the
Intellectual Property in breach of the foregoing could not be reasonably
expected to result in a Material Adverse Effect. All Intellectual Property of
each Credit Party is fully protected and/or duly and properly registered, filed
or issued in the appropriate office and jurisdictions for such registrations,
filings or issuances, except where the failure to be so protected, registered,
filed or issued could not reasonably be expected to have a Material Adverse
Effect. To each Borrower's knowledge, each Credit Party conducts its business
without infringement or claim of infringement of any Intellectual Property
rights of others and there is no infringement or claim of infringement by others
of any Intellectual Property rights of any Credit Party, which infringement or
claim of infringement could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.18 REAL PROPERTY INTERESTS. Except for the ownership, leasehold
or other interests set forth in the Information Certificate, no Borrower has, as
of the Closing Date, any ownership, leasehold or other interest in real
property.
SECTION 3.19 SOLVENCY. After giving effect to all intercompany
reimbursement obligations, each Borrower: (a) owns and will own assets the fair
saleable value of which are (i) greater than the total amount of its liabilities
(including contingent liabilities) and (ii) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured considering all financing alternatives and potential
asset sales reasonably available to it; (b) has capital that is not unreasonably
small in relation to its business as presently conducted or after giving effect
to any contemplated transaction; and (c) does not intend to incur and does not
believe that it will incur debts beyond its ability to pay such debts as they
become due.
SECTION 3.20 BORROWERS AND EACH OTHER CREDIT PARTY. As of the Closing
Date, Borrowers and the other Credit Parties are engaged in the businesses of
the purchase and sale of a wide variety of new, overhauled and repaired aircraft
engine parts and components and airframe parts and components for the aviation
aftermarket, the overhaul, repair and exchange of a wide variety of airframe and
engine parts and components for the aviation aftermarket, the design manufacture
and installation of in-plane cargo loading and handling systems for commercial
and military aircraft and helicopters and the sale or lease of used commercial
jet aircraft and the sale or lease of a wide variety of new, overhauled and
repaired commercial jet engines, as well as in certain other businesses. These
operations require financing on a basis such that the credit supplied can be
made available from time to time to Borrowers and the other Credit Parties, as
required for the continued successful operation of Borrowers and the other
36
Credit Parties taken as a whole. Borrowers and the other Credit Parties have
requested the Lenders to make credit available hereunder primarily for the
purposes provided for herein and generally for the purposes of financing the
operations of Borrowers and the other Credit Parties. Borrowers and other Credit
Party expect to derive benefit (and the Board of Directors of each Borrower and
each other Credit Party has determined that each Borrower or such other Credit
Party may reasonably be expected to derive benefit), directly or indirectly,
from a portion of the credit extended by Lenders hereunder, both in its separate
capacity and as a member of the group of companies, since the successful
operation and condition of Borrowers and each other Credit Party is dependent on
the continued successful performance of the functions of the group as a whole.
Borrowers acknowledge that, but for the agreement of each Borrower to execute
and deliver this Agreement and/or the Loan Documents, Agent and Lenders would
not have made available the credit facilities established hereby on the terms
set forth herein.
SECTION 3.21 FULL DISCLOSURE. None of the information (financial or
otherwise) furnished by or on behalf of any Credit Party to Agent or any Lender
in connection with the consummation of the transactions contemplated by the
Operative Documents, including without limitation the information set forth in
the Information Certificate, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading in the light of the circumstances under which such
statements were made at the time such statements were made. All financial
projections (including, without limitation, projections of Availability)
delivered to Agent and the Lenders have been or will be prepared on the basis of
the assumptions stated therein. Such projections represented or will represent
Borrowers' best estimate of Borrowers' future financial performance as of the
date such projections were prepared and such assumptions were or will be
believed by Borrowers to be fair in light of current business conditions;
provided that Borrowers can give no assurance that such projections will be
attained.
SECTION 3.22 REPRESENTATIONS AND WARRANTIES INCORPORATED FROM OTHER
OPERATIVE DOCUMENTS. As of the Closing Date, each of the representations and
warranties made in the Operative Documents by each of the parties thereto is
true and correct in all material respects, and such representations and
warranties are hereby incorporated herein by reference with the same effect as
though set forth in their entirety herein, as qualified therein, except to the
extent that such representation or warranty relates to a specific earlier date,
in which case such representation and warranty shall be true as of such earlier
date.
ARTICLE 4
AFFIRMATIVE COVENANTS
Each Borrower agrees, on a joint and several basis, that, so long as any
Credit Exposure exists:
SECTION 4.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Borrowers will
maintain a system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated financial
statements in accordance with GAAP and to provide the information required to be
delivered to the Lenders hereunder, and will deliver to Agent, and, in the case
of the deliveries required by paragraphs (a) through (f) and (l) through (r),
each Lender:
37
(a) as soon as practicable and in any event within thirty (30)
days after the end of each month (including the last month of AAR's Fiscal
Year), a consolidated and consolidating balance sheet of AAR and its
Consolidated Subsidiaries as at the end of such month and the related
consolidated statements of operations and cash flows for such month, and for the
portion of the Fiscal Year ended at the end of such month setting forth in each
case in comparative form the figures for the corresponding periods of the
previous Fiscal Year and the figures for such month and for such portion of the
Fiscal Year ended at the end of such month set forth in the annual operating and
capital expenditure budgets and cash flow forecast delivered pursuant to Section
4.1(l), all in reasonable detail and certified by a Responsible Officer as
fairly presenting the financial condition and results of operations of AAR and
its Consolidated Subsidiaries and as having been prepared in accordance with
GAAP (with respect to consolidated financial statements only) applied on a basis
consistent with the audited financial statements of AAR, subject to changes
resulting from audit and normal year-end adjustments and the absence of footnote
disclosures;
(b) as soon as available and in any event within ninety (90)
days after the end of each Fiscal Year, a consolidated and consolidating balance
sheet of AAR and its Consolidated Subsidiaries as of the end of such Fiscal Year
and the related consolidated and consolidating statements of operations,
stockholders' equity and cash flows for such Fiscal Year, setting forth in each
case in comparative form the figures for the previous Fiscal Year and the
figures for such Fiscal Year set forth in the annual operating and capital
expenditure budgets and cash flow forecast delivered pursuant to Section 4.1(l),
certified (solely with respect to such consolidated statements) without
qualification by KPMG LLP or such other independent public accountants
acceptable to Agent of nationally recognized standing;
(c) together with each delivery of financial statements pursuant
to Sections 4.1(a) and 4.1(b), a Compliance Certificate;
(d) together with each delivery of financial statements pursuant
to 4.1(b) above, a written statement by the independent public accountants
giving the report thereon stating that their audit examination has included a
review of the terms of this Agreement as it relates to accounting matters;
(e) promptly upon receipt thereof, copies of all reports
submitted to any Credit Party by independent public accountants in connection
with each annual, interim or special audit of the financial statements of any
Credit Party made by such accountants, including the comment letter submitted by
such accountants to management in connection with their annual audit;
(f) promptly upon their becoming available, copies of (i) all
financial statements, reports, notices and proxy statements sent or made
available generally by AAR to its security holders, (ii) all regular and
periodic reports and all registration statements and prospectuses filed by AAR
with any securities exchange or with the Securities and Exchange Commission or
any successor and (iii) all press releases and other statements made available
generally by AAR concerning material developments in the business of Borrowers;
38
(g) promptly upon any officer of any Credit Party obtaining
knowledge (i) of the existence of any Event of Default or Default, or becoming
aware that the holder of any Debt of any Credit Party has given any notice or
taken any other action with respect to a claimed default thereunder, (ii) of any
change in any Credit Party's certified accountant or any resignation, or
decision not to stand for re-election, by any member of any Credit Party's board
of directors (or comparable body), (iii) that any Person has given any notice to
any Credit Party or taken any other action with respect to a claimed default
under any agreement or instrument (other than the Financing Documents) to which
any Credit Party is a party or by which any of its assets is bound involving
potential liability, loss of revenue or other damages to Borrowers, taken as a
whole, in an amount of $3,000,000 or more or (iv) of the institution of any
litigation or arbitration involving an alleged liability of any Borrower equal
to or greater than $3,000,000 or any adverse determination in any litigation or
arbitration involving a potential liability of any Borrower equal to or greater
than $3,000,000, a certificate of a Responsible Officer specifying the nature
and period of existence of any such condition or event, or specifying the notice
given or action taken by such holder or Person and the nature of such claimed
default (including any Event of Default or Default), event or condition, and
what action the applicable Credit Party has taken, is taking or proposes to take
with respect thereto;
(h) promptly upon any officer of any Credit Party obtaining
knowledge of (i) the institution of any steps by any member of the Controlled
Group or any other Person to terminate any Pension Plan, (ii) the failure of any
member of the Controlled Group to make a required contribution to any Pension
Plan (if such failure is sufficient to give rise to a Lien under Section 302(f)
of ERISA) or to any Multiemployer Pension Plan, (iii) the taking of any action
with respect to a Pension Plan which could result in the requirement that any
Borrower or any Domestic Subsidiary furnish a bond or other security to the PBGC
or such Pension Plan, (iv) the occurrence of any event with respect to any
Pension Plan or Multiemployer Pension Plan which could result in the incurrence
by any member of the Controlled Group of any material liability, fine or penalty
(including any claim or demand for withdrawal liability or partial withdrawal
from any Multiemployer Pension Plan), (v) any material increase in the
contingent liability of any Borrower or any Domestic Subsidiary with respect to
any post-retirement welfare plan benefit or (vi) any notice that any
Multiemployer Pension Plan is in reorganization, that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of an
excise tax, that any such plan is or has been funded at a rate less than that
required under Section 412 of the Code, that any such plan is or may be
terminated, or that any such plan is or may become insolvent, a certificate of a
Responsible Officer specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person, and what action the applicable Credit Party has taken, is
taking or proposed to take with respect thereto;
(i) promptly upon any officer of any Credit Party obtaining
knowledge of any complaint, order, citation, notice or other written
communication from any Person delivered to any Credit Party with respect to, or
if any officer of any Credit Party becomes aware of (x) the existence or alleged
existence of a violation of any Environmental Law or the incurrence of any
liability, obligation, loss, damage, cost, expense, fine, penalty or sanction or
the requirement to commence any remedial action resulting from or in connection
with any air emission, water discharge, noise emission, Hazardous Material or
any other environmental, health or safety matter at, upon, under or within any
of the properties now or previously owned, leased or
39
operated by any Credit Party, or due to the operations or activities of any
Credit Party or any other Person on or in connection with any such property or
any part thereof in any case which event could reasonably be expected to have a
Material Adverse Effect or (y) any release on any of such properties of
Hazardous Materials in a quantity that is reportable under any applicable
Environmental Law which release could reasonably be expected to have a Material
Adverse Effect, a certificate of a Responsible Officer specifying the nature and
period of existence of any such condition or event, or specifying the notice
given or action taken by such holder or Person, and what action the applicable
Credit Party has taken, is taking or proposes to take with respect thereto;
(j) promptly upon any officer of any Borrower obtaining
knowledge that any Borrower has acquired any interest in real property
(including leasehold interests (other than leasehold interests for sales offices
or locations where less than $25,000 of Inventory is stored) in real property),
a certificate of a Responsible Officer describing such real property in such
detail as Agent shall reasonably require;
(k) copies of any reports or notices of claimed tax liens or tax
disputes related to any material taxes and any other material reports or notices
relating to any such dispute or claimed tax lien received by any Credit Party
from, or filed by any Credit Party with, any Federal, state or local
governmental agency or body;
(l) within thirty (30) days prior to the conclusion of each
Fiscal Year, AAR's annual operating plans, operating and capital expenditure
budgets, and financial forecasts on a consolidated and consolidating basis,
including cash flow projections covering proposed fundings, repayments,
additional advances, investments and other cash receipts and disbursements, each
for the following three (3) Fiscal Years presented on a monthly basis for the
next Fiscal Year and annually for the two (2) subsequent Fiscal Years, all of
which shall be in a format reasonably consistent with projections, budgets and
forecasts theretofore provided to the Lenders, and promptly following the
approval by AAR's Board of Directors or Chief Executive Officer, updates to
AAR's annual operating plan from time to time prepared by management of AAR;
(m) as soon as available after the end of each month but within
fourteen (14) Business Days (no later than noon Chicago time) after the month
end thereof (for monthly reporting requirements) or at another time and in any
event no later than noon (Chicago Time) as designated from time to time by
Agent, and from time to time upon the request of Agent (which request may be
made as frequently as weekly), a Borrowing Base Certificate as of the last day
of the month most recently ended (or, in the case of Borrowing Base Certificates
requested more frequently than monthly, as of a day each week designated from
time to time by Agent);
(n) as soon as available (but in any event on or prior to the
delivery dates specified in Section 4.4 of the Receivables Purchase Agreement),
each "Settlement Statement" and "Information Package" (as such terms are defined
in the Receivables Purchase Agreement) required to be delivered by AAR or AAR
Receivables Corporation II pursuant to Section 4.4 of the Receivables Purchase
Agreement.
40
(o) as soon as available after the end of each month (but in any
event not later than the 25th day of the next month), on a monthly basis or more
frequently as Agent may reasonably request, (i) Inventory summary reports
showing the inventory distribution by condition, (ii) Inventory reports by
location and category (and including the amounts of Inventory and the value
thereof at, any leased locations and at premises of warehouses, consignees,
processors or other third parties), (iii) Inventory reconciliation from the
perpetual listings to the general ledger to the financial statements, (iv) "home
office" accounts receivable agings (in form consistent with that prepared on the
Closing Date (Report 449)), (v) a copy of the monthly reporting package required
by the Securitization Documents, (vi) such reconciliation reports and other
source documents from time to time reasonably requested by Agent with respect to
the Borrowing Base Certificate most recently delivered to Agent, the financial
statements of Borrowers delivered to Agent, Borrowers' general ledger and/or the
reports required pursuant to this paragraph, each in form and substance, and
with such supporting detail and documentation, as may be reasonably requested by
Agent;
(p) upon Agent's reasonable request, (i) copies of customer
statements and credit memos, remittance advices and reports and copies of
deposit slips and bank statements, (ii) copies of shipping and delivery
documents, and (iii) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by any Borrower;
(q) within two (2) Business Days after any request therefor,
such additional information in such detail concerning the amount, composition
and manner of calculation of the Borrowing Base as Agent or any Lender may
reasonably request;
(r) from time to time, if Agent or any Lender determines that
obtaining appraisals is necessary in order for Agent or such Lender to comply
with applicable laws or regulations or if an Event of Default has occurred and
is continuing, appraisal reports in form and substance and from appraisers
satisfactory to Agent stating the then current fair market values of all or any
portion of the Real Property or Equipment (other than Equipment included within
the Collateral consisting of aircraft and aircraft engines) owned by any
Borrower; and
(s) with reasonable promptness, such other information and data
with respect to any Credit Party as from time to time may be reasonably
requested by Agent or any Lender.
SECTION 4.2 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Each Borrower (i)
will pay and discharge, at or before maturity, all of their respective
obligations and liabilities, including tax liabilities, except (x) where the
same may be the subject of a Permitted Contest and (y) for such obligations
and/or liabilities the nonpayment or nondischarge of which could not reasonably
be expected to have a Material Adverse Effect, (ii) will maintain, in accordance
with GAAP, appropriate reserves for the accrual of all of their respective
obligations and liabilities and (iii) will not breach, or permit to exist any
default under, the terms of any lease, commitment, contract, instrument or
obligation to which it is a party, or by which its properties or assets are
bound, except for such breaches or defaults which could not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Each
Borrower will continue, to engage in business of the same general type as they
now conduct and will
41
preserve, renew and keep in full force and effect their respective existence and
their respective rights, privileges and franchises necessary or desirable in the
normal conduct of business.
SECTION 4.4 MAINTENANCE OF PROPERTY; INSURANCE.
(a) Each Borrower will keep, and will cause each Subsidiary to
keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted.
(b) Each Borrower will maintain, and will cause each Subsidiary
to maintain, (i) physical damage insurance on all real and personal property on
an all risks basis (including the perils of flood and quake), covering the
repair and replacement cost of all such property and consequential loss coverage
for business interruption and public liability insurance (including
products/completed operations liability coverage) in each case of the kinds
customarily carried or maintained by Persons of established reputation engaged
in similar businesses and in amounts acceptable to Agent and (ii) such other
insurance coverage in such amounts and with respect to such risks as Agent may
reasonably request. All such insurance shall be provided by insurers having an
A.M. Best policyholders rating reasonably acceptable to Agent. Agent
acknowledges that the insurance coverage described on Schedule 4.4 meets the
requirements of this Section 4.4 subject to Agent's future right to review such
insurance in light of changing economic and business conditions.
(c) On or prior to the Closing Date, Borrowers will cause Agent
to be named as an additional insured, assignee and, only with respect to the
Collateral, mortgagee or loss payee, as applicable, on each insurance policy
required to be maintained pursuant to this Section 4.4 pursuant to endorsements
in form and content acceptable to Agent. Borrowers will deliver to Agent and the
Lenders (i) on the Closing Date, a certificate from Borrowers' insurance broker
dated such date showing the amount of coverage as of such date, and that such
policies will include effective waivers (whether under the terms of any such
policy or otherwise) by the insurer of all claims for insurance premiums against
all mortgagee or loss payees and additional insureds and all rights of
subrogation against all loss payees and additional insureds, and that if all or
any part of such policy is canceled, terminated or expires, the insurer will
forthwith give notice thereof to each additional insured mortgagee and loss
payee and that no cancellation, reduction in amount or material change in
coverage thereof shall be effective until at least thirty (30) days after
receipt by each additional insured mortgagee and loss payee of written notice
thereof, (ii) on an annual basis, and upon the request of any Lender through
Agent from time to time, full information as to the insurance carried, (iii)
within five (5) days of receipt of notice from any insurer, a copy of any notice
of cancellation, nonrenewal or material change in coverage from that existing on
the date of this Agreement and (iv) forthwith, notice of any cancellation or
nonrenewal of coverage by any Borrower.
(d) In the event Borrowers fail to provide Agent with evidence
of the insurance coverage required by this Agreement, Agent may purchase
insurance at Borrowers' expense to protect Agent's interests in the Collateral.
This insurance may, but need not, protect any Borrower's interests. The coverage
purchased by Agent may not pay any claim made by any Borrower or any claim that
is made against any Borrower in connection with the Collateral. Borrowers may
later cancel any insurance purchased by Agent, but only after providing Agent
42
with evidence that Borrowers have obtained insurance as required by this
Agreement. If Agent purchases insurance for the Collateral, Borrowers will be
responsible for the costs of that insurance, including interest and other
charges imposed by Agent in connection with the placement of the insurance,
until the effective date of the cancellation or expiration of the insurance. The
costs of the insurance may be added to the Obligations. The costs of the
insurance may be more than the cost of insurance Borrowers are able to obtain on
their own.
SECTION 4.5 COMPLIANCE WITH LAWS. Each Borrower will comply, and cause
each Subsidiary to comply, with the requirements of all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including Environmental Laws and ERISA and the rules and regulations
thereunder), except for such laws, ordinances, rules, regulations and
requirements the noncompliance with which could not reasonably be expected to
have a Material Adverse Effect.
SECTION 4.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS. Each Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in accordance with GAAP in which full, true and correct entries shall be
made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to permit, at the
sole cost of Borrowers or any applicable Subsidiary, representatives of Agent
and of any Lender (but at such Lender's expense unless such visit or inspection
is made concurrently with Agent) to visit and inspect any of their respective
properties, to examine and make abstracts or copies from any of their respective
books and records, to conduct a collateral audit and analysis of their
respective Inventory and Accounts and to discuss their respective affairs,
finances and accounts with their respective officers, employees and independent
public accountants as often as may reasonably be desired. Unless an Event of
Default has occurred and is continuing, all such visits and inspections shall be
during normal business hours with reasonable advance notice.
SECTION 4.7 USE OF PROCEEDS. Borrowers will use the proceeds of the
Revolving Loans solely for transaction fees incurred in connection with the
Operative Documents, the refinancing on the Closing Date of Debt owing to a
Person not an Affiliate of any Credit Party and for working capital needs of
Borrowers and the Subsidiaries.
SECTION 4.8 LENDERS' MEETINGS. At the request of Agent, within
forty-five (45) days after the end of each fiscal quarter, Borrowers will
conduct a meeting of Agent and the Lenders to discuss such fiscal quarter's
results and the financial condition of Borrowers and the Subsidiaries at which
shall be present a Responsible Officer and such officers of the Credit Parties
as may be reasonably requested to attend by Agent or any Lender, such request or
requests to be made within a reasonable time prior to the scheduled date of such
meeting. Such meetings shall be held at a time and place convenient to the
Lenders and to Borrowers.
SECTION 4.9 HAZARDOUS MATERIALS; REMEDIATION. Borrowers will provide
Agent within thirty (30) days after demand therefor with a bond, letter of
credit or similar financial assurance evidencing to the satisfaction of Agent
that sufficient funds are available to pay the cost of removing, treating and
disposing of any Hazardous Materials or Hazardous Materials Contamination and
discharging any assessment which may be established on any Real Property as a
result thereof, such demand to be made, if at all, upon Agent's reasonable
business
43
determination that the failure to remove, treat or dispose of any Hazardous
Materials or Hazardous Materials Contamination, or the failure to discharge any
such assessment could reasonably be expected to have a Material Adverse Effect.
At Agent's option, in lieu of any such bond, letter of credit or similar
financial assurance, Agent may create a Reserve to insure the payment of any
such cost or assessment.
SECTION 4.10 FURTHER ASSURANCES. Each Borrower will, at its own cost and
expense, cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may from time to
time be necessary or as Agent or the Required Lenders may from time to time
reasonably request in order to carry out the intent and purposes of the
Financing Documents and the transactions contemplated thereby, including all
such actions to establish, preserve, protect and perfect a first priority Lien
(subject only to Permitted Liens) in favor of Agent for the benefit of the
Lenders on the Collateral (including Collateral acquired after the date hereof),
including on any and all assets of each Borrower, whether now owned or hereafter
acquired. In addition, upon request by Agent, Borrowers shall deliver or shall
cause a Subsidiary to deliver to Agent mortgages or deeds of trust and mortgagee
title insurance policies, all in form and substance reasonably acceptable to
Agent, for Borrowers' Real Property in Wood Dale,
Illinois or Garden City, New
York, if any Permitted Mortgage Debt is not closed with respect to either
facility by the date which is four months after the Closing Date.
ARTICLE 5
NEGATIVE COVENANTS
Each Borrower agrees on a joint and several basis, that, so long as any
Credit Exposure exists:
SECTION 5.1 DEBT. Borrowers will not, directly or indirectly, create,
incur, assume, guarantee or otherwise become or remain directly or indirectly
liable with respect to, any Debt, or any contingent obligations which would be
Debt hereunder if they were non-contingent, except for:
(a) Debt and Letter of Credit Liabilities under the Financing
Documents;
(b) Debt or such contingent obligations outstanding on the date
of this Agreement as set forth in the Information Certificate; (c) Debt incurred
or assumed for the purpose of financing all or any part of the cost of acquiring
any fixed asset (including through Capital Leases), in an aggregate principal
amount at any time outstanding not greater than $5,000,000;
(c) Debt incurred or assumed for the purpose of financing all
or any part of the cost of acquiring any fixed asset (including through
Capital Leases), in an aggregate principal amount at any time outstanding not
greater than $5,000,000;
(d) intercompany Debt (which shall not include intercompany
corporate charges) arising from loans made by (i) a Borrower to another Borrower
or (ii) by a Borrower to a Subsidiary (not a Borrower) to fund capital
requirements of such Subsidiaries in the ordinary course of business in an
aggregate net amount not to exceed Five Million Dollars ($5,000,000) at any time
outstanding; PROVIDED, HOWEVER, that upon the request of Agent at any time, such
Debt shall be evidenced by promissory notes having terms reasonably satisfactory
to Agent, the sole
44
originally executed counterparts of which shall be pledged and delivered to
Agent, for the benefit of Agent and Lenders, as security for the Obligations;
and
(e) Debt of AAR Receivables Corporation II outstanding pursuant
to the Securitization Documents;
(f) Debt outstanding pursuant to the Note Purchase Documents;
(g) Debt outstanding pursuant to the Indenture Documents;
(h) Debt outstanding pursuant to Aircraft Lease Documents;
(i) Any extension, renewal, replacement (whether effected upon
termination or any time thereafter) or refinancing of Debt outstanding pursuant
to the Securitization Documents, the Note Purchase Documents, the Indenture
Documents or the Aircraft Lease Documents PROVIDED; that (i) after giving effect
to any such extension, renewal, replacement or refinancing no Event of Default
has occurred and is continuing and (ii) Agent shall have determined in the
reasonable exercise of its discretion, that the terms and conditions of any such
extension, renewal, replacement or refinancing will not materially and adversely
affect Borrowers' ability to repay the Obligations or Agent's Lien on the
Collateral. Agent acknowledges that the extension, renewal, replacement or
refinancing of the principal installments of Debt outstanding pursuant to the
Indenture Documents due in October, 2003, to be effected pursuant to the terms
and conditions outlined in Schedule 5.5, does not materially and adversely
affect Borrowers' ability to repay the Debt or Agent's Lien on the Collateral;
(j) Debt incurred after the Closing Date secured by a first
priority mortgage on Borrowers' Real Property located in Wood Dale, Illinois
and/or Garden City, New York or incurred in connection with a sale or leaseback
transaction PROVIDED that the terms and conditions of such Debt, including
without limitation, interest rates and principal amortizations schedules are
reasonably acceptable to Agent ("Permitted Mortgage Debt"); for purposes of the
foregoing, Agent acknowledges and agrees that any Debt any of the Borrowers
proposes to incur or any sale or leaseback any of the Borrowers proposes to
enter into that is consistent with the proposed terms and conditions for such
Permitted Mortgage Debt set forth on Schedule 5.1(j) attached hereto shall be
considered Permitted Mortgage Debt and for purposes of this Section 5.1(j) and
shall not require the consent of Agent;
(k) Debt outstanding pursuant to the IRB Documents;
(l) Non-Recourse Debt secured by a Lien permitted by
Section 5.2(j);
(m) LaSalle Letter of Credit Reimbursement Debt;
(n) Unsecured Debt not to exceed Ten Million Dollars
($10,000,000) in the aggregate at any time outstanding; and
(o) Unsecured Debt not to exceed, when aggregated with all
outstanding Debt permitted pursuant to Section 5.1(n) above, Seventy-Five
Million Dollars ($75,000,000) in the aggregate outstanding, if the proceeds are
used to finance capital requirements of a Credit Party.
45
SECTION 5.2 LIENS. Borrower will not, directly or indirectly, create,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by it, except:
(a) Liens created by the Security Documents;
(b) Liens existing on the date of this Agreement as set forth in
the Information Certificate or securing any Debt extending, renewing, replacing
(whether effected upon termination or any time thereafter) or refinancing the
Debt secured thereby to the extent the replacement or refinancing is permitted
pursuant to the terms hereof including, without limitation, Liens on AAR
Receivables Corporation II's (or any other single purpose Subsidiary of AAR
formed to facilitate a securitization transaction) Accounts granted pursuant to
the Securitization Documents;
(c) any Lien on any asset (including all replacements and
accessions thereto and proceeds thereof) securing Debt permitted under Section
5.1(c) incurred or assumed for the purpose of financing all or any part of the
cost of acquiring such asset, PROVIDED that such Lien attaches to such asset
concurrently with or within ninety (90) days after the acquisition thereof;
(d) Liens for taxes or other governmental charges not at the
time delinquent or thereafter payable without penalty or the subject of a
Permitted Contest;
(e) statutory Liens of landlords, processors and bailees, to the
extent not waived, Liens arising in the ordinary course of business (i) in favor
of carriers, warehousemen, mechanics and materialmen, and other similar Liens
imposed by law and (ii) in connection with worker's compensation, unemployment
compensation and other types of social security (excluding Liens arising under
ERISA) or in connection with surety bonds, bids, performance bonds and similar
obligations) for sums not overdue or the subject of a Permitted Contest and not
involving any deposits or advances or borrowed money or the deferred purchase
price of property or services and, in each case, for which it maintains adequate
reserves;
(f) attachments, appeal bonds, judgments and other similar Liens
arising in connection with court proceedings; provided that the execution or
other enforcement of such Liens is effectively stayed and the claims secured
thereby are the subject of a Permitted Contest;
(g) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any material
respect with the ordinary conduct of the business of Borrower or any Subsidiary;
(h) Liens on aircraft and aircraft engines securing Debt and
other obligations outstanding under the Aircraft Lease Documents;
(i) Liens on Borrowers' Real Property, fixtures and other
property customarily pledged to secure mortgage Debt located in Wood Dale,
Illinois and/or Garden City, New York securing Permitted Mortgage Debt;
(j) Liens securing Nonrecourse Debt incurred by AAR or any
Restricted Subsidiary (or any Person in which AAR or any Restricted Subsidiary
shall be the beneficial
46
owner), PROVIDED that such Lien is restricted to aircraft and engines acquired
after the Closing Date and the lease thereof to a Person other than AAR or a
Restricted Subsidiary;
(k) Liens on property or assets of AAR or any of its Restricted
Subsidiaries securing Debt owing to AAR or to another Restricted Subsidiary;
(l) Leases or subleases (including aircraft or engine leases)
granted to others, easements, rights-of-way, restrictions and other similar
charges, encumbrances or survey exceptions, in each case incidental to, and not
interfering with, the ordinary conduct of the business of AAR or any of its
Restricted Subsidiaries, PROVIDED that such Liens do not, in the aggregate,
materially detract from the value of such property;
(m) any Liens on cash collateral pledged to secure LaSalle
Letter of Credit Reimbursement Debt; and
(n) any Lien existing on property of a Person immediately prior
to its being consolidated with or merged into AAR or a Restricted Subsidiary or
its becoming a Restricted Subsidiary, or any Lien existing on any property
acquired by AAR or any Restricted Subsidiary at the time such property is so
acquired (whether or not the Debt secured thereby shall have been assumed),
PROVIDED that (i) no such Lien shall have been created or assumed in
contemplation of such consolidation or merger or such Person's becoming a
Restricted Subsidiary or such acquisition of property, and (ii) each such Lien
shall extend solely to the item or items of property so acquired and, if
required by the terms of the instrument originally creating such Lien, other
property which is an improvement to or is acquired for specific use in
connection with such acquired property.
SECTION 5.3 RESTRICTED DISTRIBUTIONS. Borrowers will not, and will not
permit any Subsidiary to, directly or indirectly, declare, order, pay, make or
set apart any sum for any Restricted Distribution; PROVIDED that the foregoing
shall not restrict or prohibit any Subsidiary from making dividends or
distributions and shall not restrict or prohibit dividends or distributions to
AAR or purchases of shares of (or options to purchase shares of) equity
interests in AAR or options therefor (a) on the open market for use in its
employee incentive equity program, (b) from employees of any Borrower or any
Subsidiary upon their death, termination or retirement or (c) on the open market
pursuant to a stock buy-back program approved by AAR's Board of Directors so
long as (x) before and after giving effect to any such dividend or distribution
for such purpose, (i) no Event of Default shall have occurred and be continuing
and (ii) Borrowers are in compliance on a pro forma basis with the covenants set
forth in Article 7 recomputed for the most recently ended quarter for which
information is available and are in compliance with all other terms and
conditions of this Agreement, (y) such purchases or payments described in clause
(a) above after the date hereof do not exceed $2,000,000 in any Fiscal Year and
do not exceed $6,000,000 in the aggregate, (z) such purchases or payments
described in clause (b) above after the date hereof do not exceed $1,000,000 in
any Fiscal Year and do not exceed $3,000,000 in the aggregate, (aa) such
purchases or payments described in clause (c) above after the date hereof are
made or effected after Borrowers have made all principal payments due under the
Indenture Documents in October, 2003, (bb) such purchases or payments described
in clause (c) above after the date hereof do not exceed $5,000,000 in any Fiscal
Year and do not exceed $15,000,000 in the aggregate and (cc) after giving effect
to any
47
such purchase or payment described in clause (c) above, the sum of average
Availability and Cash Equivalents, computed on a proforma or projected basis
after giving effect to any such purchase or payment for the 60 days immediately
prior to the date of any such purchase or payment and for the 180 days
immediately after the date of any such purchase or payment, equals or exceeds
$30,000,000.
SECTION 5.4 RESTRICTIVE AGREEMENTS. Borrowers will not, and will not
permit any Subsidiary to, directly or indirectly (i) enter into or assume any
agreement (other than the Financing Documents and, as in effect on the Closing
Date, the Indenture Documents, the Note Purchase Documents and the
Securitization Documents) prohibiting the creation or assumption of any Lien
upon the Collateral, whether now owned or hereafter acquired or (ii) create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary to: (1)
pay or make Restricted Distributions to any Borrower or any other Wholly-Owned
Restricted Subsidiary; (2) pay any Debt owed to any Borrower or any other
Wholly-Owned Restricted Subsidiary; (3) make loans or advances to Borrower or
any other Wholly-Owned Restricted Subsidiary; or (4) transfer any of its
property or assets to any Borrower or any other Wholly-Owned Restricted
Subsidiary; PROVIDED that the provisions of this clause (ii) shall not apply to
(a) restrictions and conditions imposed by law, the Financing Documents, the
Indenture Documents, the Note Purchase Documents, the Securitization Documents,
the IRB Documents, the Aircraft Lease Documents and any agreement, instrument or
document evidencing (A) Permitted Mortgage Debt, (B) the transactions
contemplated on Schedule 5.5 and (C) the sale, factoring or other financing of
the Air France Parts Lease, (b) customary restrictions and conditions contained
in agreements relating to the sale of a Subsidiary or line of business
(including without limitation those transactions listed on Schedule 5.6) pending
such sale, PROVIDED such restrictions and conditions apply only to the
Subsidiary or line of business that is to be sold and such sale is permitted
hereunder, and (c) customary provisions in leases and other contracts
restricting the assignment thereof.
SECTION 5.5 PAYMENTS AND MODIFICATIONS OF OTHER DEBT. Borrower will, and
will not permit any Subsidiary to, directly or indirectly (i) declare, pay, make
or set aside any amount for payment in respect of any Permitted Mortgage Debt,
any Debt outstanding under the Indenture Documents, the Aircraft Lease
Documents, the IRB Documents, the Note Purchase Documents or the Securitization
Documents, except for regularly scheduled payments of principal and interest
(but no voluntary prepayments) or other amounts in respect of such Debt; and
(ii) amend or otherwise modify the terms of the documents or agreements
evidencing the Permitted Mortgage Debt or the Indenture Documents, the Aircraft
Lease Documents, the IRB Documents, the Note Purchase Documents or the
Securitization Documents if Agent has determined in the reasonable exercise of
its discretion that the effect of such amendment or modification is to affect
materially and adversely Borrower's ability to repay the Obligations or Agent's
Lien on the Collateral, except for instruments, amendments, modifications or
other documents entered into to effect the transactions described in Schedule
5.5. The foregoing notwithstanding, Borrowers may prepay or repurchase any Debt
outstanding under the Indenture Documents or the Note Purchase Documents and up
to $2,300,000 of Debt outstanding under the Aircraft Lease Documents owing to
SMBC Leasing and Finance, Inc. or an Affiliate thereof, if, after giving effect
to any such repurchase, (i) no Default or Event of Default has occurred and is
continuing; (ii) Borrowers are in compliance on a proforma basis with the
covenants set forth in
48
Article 7 recomputed for the most recently ended quarter for which information
is available and are in compliance with all other terms and conditions of this
Agreement; (iii) the amount of such prepayments or repurchases does not exceed
$25,000,000 in any Fiscal Year or $75,000,000 in the aggregate and (iv) prior to
the date of any such repurchase or prepayment, a Responsible Officer shall have
delivered to Agent a written certificate in reasonable detail with supporting
calculations evidencing or stating that (a) average Availability PLUS Cash
Equivalents, computed on a pro forma basis after giving effect to any such
prepayment or repurchase, for the 60 days immediately prior to the date of any
such prepayment or repurchase equals or exceeds (1) $10,000,000 with respect to
prepayments or repurchases of principal payments of Debt outstanding under the
Indenture Documents due in October, 2003, up to $1,000,000 per annum of all
other such prepayments or repurchases or permitted repayments or repurchases of
Debt outstanding under the Aircraft Lease Documents owed to SMBC Leasing and
Finance, Inc. or an Affiliate thereof, or (2) $30,000,000 with respect to all
other such prepayments or repurchases, (b) average projected Availability PLUS
Cash Equivalents, computed on a pro forma basis after giving effect to any such
prepayment or repurchase for the 180 days immediately after the date of such
prepayment or repurchase equals or exceeds (1) $10,000,000 with respect to
prepayments or repurchases of Debt outstanding under the Indenture Documents due
in October, 2003, up to $1,000,000 per annum of all other such prepayments or
repurchases or permitted repayments or repurchases of Debt outstanding under the
Aircraft Lease Documents owed to SMBC Leasing and Finance, Inc. or an Affiliate
thereof, or (2) $30,000,000 with respect to all other such prepayments or
repurchases, and (c) such projected pro forma average Availability PLUS Cash
Equivalents represents Borrowers' best estimate of Borrowers' future financial
performance as of the date of such projections were made, based on assumption,
believed by Borrowers on the applicable date to be fair in light of current
business conditions.
SECTION 5.6 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. No Borrower
will, and no Borrower will permit any Subsidiary to, directly or indirectly (i)
consolidate or merge with or into any other Person or (ii) sell, lease, license
or otherwise transfer, directly or indirectly, any of its or their assets, other
than (1) sales, leases, licenses or transfers of Inventory in the ordinary
course of their respective businesses, (2) dispositions of Cash Equivalents, (3)
so long as no Event of Default exists and is continuing, or if an Event of
Default exists and is continuing, all of the proceeds of any such sale of
Accounts are applied to the Obligations, sales of Accounts by Borrowers to AAR
Receivables Corporation II (or any other sole purpose Subsidiary formed to
facilitate a securitization) and sales of Accounts by AAR Receivables
Corporation II (or any other sole purpose Subsidiary formed to facilitate a
securitization), in each case pursuant to the Securitization Documents, (4)
dispositions (including, without limitations, sales and leasebacks) of Equipment
and Real Property for cash, or other consideration reasonably acceptable to
Agent, and fair value that the board of directors (or comparable body) of the
applicable Borrower determines in good faith is no longer used or useful in the
business of such Borrower and its Subsidiaries if all of the following
conditions are met: (a) the market value of assets sold or otherwise disposed of
in any single transaction or series of related transactions does not exceed
$10,000,000 and the aggregate market value of assets sold or otherwise disposed
of in any Fiscal Year of AAR does not exceed $25,000,000; (b) the Net Cash
Proceeds of such Asset Disposition are applied as required by 2.1(c); (c) after
giving effect to the Asset Disposition and the repayment of Debt with the
proceeds thereof, Borrowers are in compliance on a pro forma basis with the
covenants set forth in Article 7 recomputed for the most recently ended quarter
for which information is available and is in compliance with all other terms and
conditions of this
49
Agreement; (d) no Default or Event of Default then exists or would result from
such Asset Disposition; (5) such dispositions as are set forth on Schedule 5.6
to the Agreement for cash or other consideration reasonably acceptable to Agent
and fair value if all of the following conditions precedent are met: (a)
simultaneously with the closing of any such sale or other disposition, Borrowers
prepay the Revolving Loans in an amount equal to the amount the Borrowing Base
is reduced as a result of such sale or disposition; (b) after giving effect to
such sale or disposition and the repayment of Debt with the proceeds thereof,
Borrowers are in compliance on a pro forma basis with the covenants set forth in
Article 7 recomputed for the most recently ended quarter for which information
is available and is in compliance with all other terms and conditions of this
Agreement; and (c) no Default or Event of Default then exists or would result
from such sale or disposition; (6) the sale, factoring or other financing of the
Air France Parts Lease; and (7) transfers to any sole purpose Subsidiary formed
to facilitate a transaction in which such Subsidiary will incur Permitted
Mortgage Debt. Borrowers agree to give Agent fourteen (14) Business Days written
notice of any disposition of the assets set forth on Schedule 5.6, which notice
shall in reasonable detail describe the proposed disposition.
SECTION 5.7 PURCHASE OF ASSETS, INVESTMENTS. No Borrower will, and no
Borrower will permit any Subsidiary to, directly or indirectly acquire any
assets other than (x) in the ordinary course of business, (y) with respect to
intercompany Debt permitted hereunder or (z) to facilitate a transaction in
which such Borrower or Subsidiary will incur Permitted Mortgage Debt. No
Borrower will and no Borrower will not permit any Subsidiary to, directly or
indirectly make, acquire or own any Investment in any Person other than (a)
Investments set forth on the Information Certificate; (b) Cash Equivalents; (c)
Investments in Domestic Subsidiaries, so long as any such Domestic Subsidiary
has Guaranteed the Obligations and secured such Guarantee by granting in favor
of Agent, for its benefit and the benefit of the Lenders, a Lien on all or
substantially all of that portion of such Domestic Subsidiary's assets which, if
owed by a Borrower, would constitute Collateral; (d) bank deposits established
in accordance with Section 5.14; (e) Investments in securities of Account
Debtors received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such Account Debtors; (f) loans to officers
and employees in an aggregate principal amount not to exceed $1,000,000 at any
time outstanding; (g) Investments in Subsidiaries formed after the Closing in
order to facilitate any refinancing or replacement of Debt outstanding under the
Securitization Documents; (h) Investments in Subsidiaries formed to facilitate
the incurrence of the Permitted Mortgage Debt, which Investments consist of
Borrowers' Real Property in Wood Dale, Illinois or Garden City, New Jersey; (i)
intercompany Debt permitted pursuant to Section 5.1; and (j) other Investments
not exceeding $3,000,000 in any Fiscal Year and $9,000,000 in the aggregate so
long as at the time of any such Investment, no Event of Default exists and is
continuing. Without limiting the generality of the foregoing, no Borrower will,
and no Borrower will permit any Subsidiary (except to facilitate a transaction
in which such Subsidiary will incur Permitted Mortgage Debt) to, (i) acquire or
create any Subsidiary or (ii) engage, outside of the ordinary course of
business, in any joint venture or partnership with any other Person.
SECTION 5.8 TRANSACTIONS WITH AFFILIATES. Except (i) for transactions
among Borrowers, (ii) as permitted by Section 5.12 or in connection with
Permitted Mortgage Debt, (iii) as otherwise disclosed in the Information
Certificate, and (iv) for transactions that are disclosed to Agent in writing in
advance of being entered into and which contain terms that are no less favorable
to any Borrower or any Subsidiary, as the case may be, than those which might
50
be obtained from a third party, no Borrower will, and no Borrower will permit
any Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of any Borrower.
SECTION 5.9 MODIFICATION OF ORGANIZATIONAL DOCUMENTS. No Borrower will,
directly or indirectly amend or otherwise change its state of incorporation,
type of organization or organization I.D. Number, nor change its legal name.
SECTION 5.10 FISCAL YEAR. No Borrower will, and no Borrower will permit
any Subsidiary to, change its Fiscal Year.
SECTION 5.11 CONDUCT OF BUSINESS. No Borrower will, and no Borrower will
permit any Subsidiary to, directly or indirectly, engage in any line of business
other than those businesses engaged in on the Closing Date and businesses
reasonably related thereto (including creation of sole purpose Subsidiaries to
facilitate a securitization or to facilitate a transaction in which such
Subsidiary will incur Permitted Mortgage Debt).
SECTION 5.12 LEASE PAYMENTS. No Borrower will, and no Borrower will
permit any Subsidiary to, directly or indirectly, incur or assume (whether
pursuant to a Guarantee or otherwise) any liability for rental payments under a
lease (excluding leases in effect on the Closing Date or replacements thereof
and excluding lease payments made with respect to Borrowers' Garden City, New
York and/or Wood Dale, Illinois facility pursuant to a sale and leaseback
transaction permitted by Section 5.1(j)) with a lease term of one year or more
if, after giving effect thereto, the aggregate amount of minimum lease payments
under such lease that AAR and its Consolidated Subsidiaries have so incurred or
assumed will exceed, on a consolidated basis, $500,000 for any Fiscal Year under
all such leases (excluding Capital Leases), except for lease-in, lease-out
transactions in the ordinary course of business.
SECTION 5.13 BANK ACCOUNTS. Without limiting the provisions of Section
6.1(a), except as otherwise provided by or in the Securitization Documents, no
Borrower will, directly or indirectly, establish any new bank account into which
Account Debtors are instructed to make payments or Borrowers deposit payments on
Non-Sold Accounts without prior written notice to Agent and unless Agent, the
applicable Borrower, and the bank at which the account is to be opened enter
into a control agreement regarding such bank account pursuant to which such bank
acknowledges the security interest of Agent in such bank account, agrees to
comply with instructions originated by Agent directing disposition of the funds
in the bank account without further consent from the applicable Borrower, and
agrees to subordinate and limit any security interest the bank may have in the
bank account on terms satisfactory to Agent. The foregoing notwithstanding,
Borrowers shall not be required to put into effect any control agreement with
respect to any disbursement account formed by AAR or another Credit Party from
sources other than direct proceeds of Collateral.
51
ARTICLE 6
ACCOUNTS AND INVENTORY REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
To induce Agent and Lenders to enter into this Agreement and to make the
Loans and other credit accommodations contemplated hereby, each Borrower hereby,
on a joint and several basis, represents and warrants to Agent and each Lender,
and further agrees with Agent and each Lender, that:
SECTION 6.1 ACCOUNTS AND ACCOUNT COLLECTIONS.
(a) Upon request by Agent, after an Event of Default has
occurred and is continuing, each Borrower shall establish and maintain, at its
sole expense, and shall cause each Domestic Subsidiary to establish and
maintain, at its sole expense blocked accounts or lockboxes and related blocked
accounts (in either case, "BLOCKED ACCOUNTS"), as Agent may specify, with such
banks as are acceptable to Agent into which each Borrower and its Domestic
Subsidiaries shall promptly deposit and direct their respective Account Debtors
to directly remit all payments on Accounts (other than Accounts sold by AAR
Receivables Corporation II pursuant to the Securitization Documents to the
extent such Accounts have not been reconveyed to the applicable Borrower
pursuant to Section 3.4 of the Purchase and Sale Agreement) or the Company Note
and all payments constituting proceeds of Inventory or other Collateral in the
identical form in which such payments are made, whether by cash, check or other
manner; PROVIDED, HOWEVER, that any payments which constitute proceeds of
property not included in the Collateral shall be excluded from the Blocked
Accounts and the requirements of this Section. Each Borrower shall deliver, or
cause to be delivered, to Agent a Deposit Account Control Agreement duly
authorized, executed and delivered by each bank where a Blocked Account for the
benefit of such Borrower or any of its Domestic Subsidiaries is maintained, and
by each bank where any other Deposit Account is from time to time maintained.
Each Borrower shall further execute and deliver, and shall cause each of its
Domestic Subsidiaries to execute and deliver, such agreements and documents as
Agent may require in connection with such Blocked Accounts, Deposit Accounts and
such Deposit Account Control Agreements. Without limiting the provisions of
Section 5.13, after the occurrence and during the continuance of an Event of
Default, no Borrower shall establish, and each Borrower shall cause each of its
Domestic Subsidiaries not to establish, any Deposit Accounts not existing as of
the Closing Date, unless such Borrower or its Domestic Subsidiaries (as
applicable) have complied in full with the provisions of this Section 6.1 with
respect to such Deposit Accounts. Each Borrower agrees that all payments made to
such Blocked Accounts or other funds received and collected by Agent or any
Lender, whether in respect of the Accounts, as proceeds of Inventory or other
Collateral or otherwise shall be treated as payments to Agent and Lenders in
respect of the Obligations and therefore shall constitute the property of Agent
and Lenders to the extent of the then outstanding Obligations.
(b) For purposes of calculating the amount of the Loans
available to Borrower, payments made to a Blocked Account will be applied
(conditional upon final collection) to the Obligations on the Business Day of
receipt by Agent of immediately available funds in the Payment Account provided
such payments and notice thereof are received in accordance with Agent's usual
and customary practices as in effect from time to time and with
52
sufficient time to credit the Loan Account on such day, and if not, then on the
next Business Day. For the purposes of calculating interest on the Obligations,
such payments or other funds received shall be deemed applied (conditional upon
final collection) to the Obligations following the date of receipt of
immediately available funds by Agent in the Payment Account provided such
payments or other funds and notice thereof are received in accordance with
Agent's usual and customary practices as in effect from time to time and with
sufficient time to credit the Loan Account on such day, and if not, then on the
next Business Day.
(c) After an Event of Default has occurred and is continuing,
each Borrower and its directors, employees, agents, Subsidiaries and other
Affiliates shall, acting as trustee for Agent, receive, as the property of
Agent, any monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts (other than Accounts sold by AAR Receivables Corporation II
pursuant to the Securitization Documents), Inventory or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to Agent.
In no event shall the same be commingled with any Borrower's own funds. Each
Borrower agrees to reimburse Agent on demand for any amounts owed or paid to any
bank at which a Blocked Account is established or any other bank or Person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Agent's payments to or indemnification of such bank or Person.
(d) No Borrower or other Credit Party shall commingle any
proceeds of any of its Accounts with the proceeds of any Account sold to AAR
Receivables Corporation II (or any other single purpose Subsidiary formed for
the purpose of facilitating a securitization), except temporary commingling as
permitted by the Receivables Purchase Agreement, unless any such sold Account is
subsequently reconveyed to a Borrower or other Credit Party pursuant to Section
3.4 of the Purchase and Sale Agreement. Each Borrower and each other Credit
Party shall diligently maintain for its Accounts Deposit Accounts and books,
records and accounts thereof for its Accounts separate from the Accounts, the
Deposit Accounts and books and records and accounts therefor of AAR Receivables
Corporation II.
SECTION 6.2 INVENTORY. (a) With respect to the Inventory: (i) each
Borrower shall at all times maintain, and cause each of its Subsidiaries to
maintain, records of Inventory reasonably satisfactory to Agent, keeping correct
and accurate records itemizing and describing the kind, type, quality and
quantity of Inventory, the cost therefor and daily withdrawals therefrom and
additions thereto; (ii) each Borrower shall conduct, and cause each of its
Subsidiaries to conduct, a physical count of the Inventory at least once each
year but at any time or times as Agent may request on or after an Event of
Default, and promptly following such physical inventory shall supply Agent with
a report in the form and with such specificity as may be satisfactory to Agent
concerning such physical count; (iii) except as otherwise provided on a
Borrowing Base Certificate, no Borrower shall sell, and no Borrower shall permit
any of its Subsidiaries to sell, Inventory to any customer on approval, or any
other basis which entitles the customer to return (except for the right of
customers for Inventory which is defective or non-conforming) or may obligate
any Credit Party to repurchase such Inventory; (iv) except as otherwise provided
on a Borrowing Base Certificate, each Borrower shall keep, and shall cause each
of its Subsidiaries to keep, the Inventory in good and marketable condition; and
(v) except as otherwise provided on a Borrowing Base Certificate, no Borrower
shall acquire or accept, and
53
no Borrower shall permit any of its Subsidiaries to acquire or accept, without
prior written notice to Agent, any Inventory on consignment or approval. Each
Borrower shall and shall cause each of its Subsidiaries to maintain all of its
Inventory, in all material respects, in compliance with such Borrower's or
Subsidiary's FAA approved maintenance program and all other applicable FAA and
other governmental laws, rules and regulations. Without limiting the generality
of the foregoing, all FAA Airworthiness Directives and amendments or changes to
the Federal Aviation Regulations applicable to any such Inventory and Equipment,
as well as all mandatory service bulletins applicable to any such Inventory and
Equipment, shall have been accomplished, in all material respects, by
terminating action in compliance with the issuing agency's or the manufacturer's
specific instructions. No Inventory shall be included in Eligible Inventory if
any such Inventory has become an accession to any airplane, airplane engine or
other personal property other than Inventory that is subject to first priority
Liens in favor of Agent for its benefit and the ratable benefit of Lenders.
(b) Borrowers acknowledge and agree that Agent shall from time
to time obtain, at Borrowers' expense, appraisals from appraisers (who may be
personnel of an Agent), stating the then current Net Orderly Liquidation Value
of Inventory or the value of Equipment included within the Collateral consisting
of aircraft and aircraft engines. Such appraisals shall be in form, scope and
methodology acceptable to Agent. Each Borrower shall, and shall cause each of
its Domestic Subsidiaries to assist Agent or any such appraiser in the
preparation of any such appraisals.
(c) None of the inventory or equipment subject to the Air France
Parts Lease shall be included as Eligible Inventory or was included in the SH&E
appraisal delivered to Agent prior to the Closing Date.
ARTICLE 7
FINANCIAL COVENANTS
Each Borrower agrees, on a joint and several basis, that, so long as any
Credit Exposure exists:
SECTION 7.1 CAPITAL EXPENDITURES. Borrowers will not permit the
aggregate amount of Capital Expenditures for any period set forth below to
exceed the amount set forth below for such period:
Period Amount
------ ------
June 1, 2003 to May 31, 2004 and each $ 12,000,000
Fiscal Year thereafter
If Borrowers do not utilize the entire amount of Capital Expenditures permitted
in any period set forth above, Borrowers may carry forward to the immediately
succeeding period only
54
seventy-five percent (75%) of such unutilized amount (with Capital Expenditures
made by Borrowers in such succeeding period applied last to such carried forward
amount).
SECTION 7.2 MINIMUM EBITDA. Borrowers will not permit EBITDA for the
twelve (12) month period ending on any date set forth below to be less than the
amount set forth below for such date:
Period Amount
------ ------
Twelve month period ending August 31, $ 33,000,000
2003 and each November 30, February 28
(or 29 as applicable), May 31 and
August 31 thereafter
SECTION 7.3 INTEREST COVERAGE RATIO. Borrowers will not permit the
Interest Coverage Ratio for the twelve (12) month period ending on any date set
forth below to be less than the ratio set forth below for such date.
Period Amount
------ ------
Twelve month period ending August 31, 1.4 to 1
2003 and each November 30, February 28
(or 29 as applicable), May 31 and
August 31 thereafter
ARTICLE 8
CONDITIONS
SECTION 8.1 CONDITIONS TO CLOSING. The obligation of each Lender to make
the initial Loans and of Agent to issue any Support Agreements on the Closing
Date shall be subject to the receipt by Agent of each agreement, document and
instrument set forth on the Closing Checklist, each in form and substance
satisfactory to Agent, and to the consummation of the following conditions
precedent, each to the satisfaction of Agent and Lenders in their sole
discretion:
(a) the payment of all fees, expenses and other amounts due and
payable under each Financing Document;
(b) the satisfaction of Agent as to the absence, since May 31,
2002, of any material adverse change in any aspect of the business, operations,
properties or financial
55
condition of AAR and its Subsidiaries, or any event or condition which could
reasonably be expected to result in such a material adverse change; and
(c) receipt by Agent of such other documents, instruments and/or
agreements as Agent may reasonably request.
SECTION 8.2 CONDITIONS TO EACH LOAN AND SUPPORT AGREEMENT. The
obligation of the Lenders to make a Loan or of Agent to issue any Support
Agreement (including on the Closing Date) is subject to the satisfaction of the
following additional conditions:
(a) in the case of a Revolving Loan Borrowing, receipt by Agent
of a Notice of Borrowing in accordance with Section 2.2(b);
(b) the fact that, immediately after such borrowing and after
application of the proceeds thereof or after such issuance, the Revolving Loan
Outstandings will not exceed the Revolving Loan Limit;
(c) the fact that, immediately before and after such borrowing
or issuance, no Default or Event of Default shall have occurred and be
continuing;
(d) the fact that the representations and warranties of each
Credit Party contained in the Financing Documents shall be true and correct on
and as of the date of such borrowing or issuance, except to the extent that any
such representation or warranty relates to a specific date in which case such
representation or warranty shall be true and correct as of such earlier date;
and
(e) the fact that, immediately after such borrowing and after
the application of the proceeds thereof or after such issuance, AAR's "Debt" (as
defined in the Indenture), other than secured "Debt" referenced in Section 1007
of the Indenture is less than the limitations (15% of Consolidated Net Tangible
Assets) contained in Section 1011 of the Indenture (or any equivalent section of
any replacement for the Indenture) by $3,000,000 or more.
Each borrowing, each giving of a Notice of LC Credit Event hereunder
and each giving of a Notice of Borrowing hereunder shall be deemed to be a
representation and warranty by Borrower on the date of such borrowing or notice
as to the facts specified in Sections 8.2(b), 8.2(c) and 8.2(d).
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.1 EVENTS OF DEFAULT. For purposes of the Financing Documents,
the occurrence of any of the following conditions and/or events, whether
voluntary or involuntary, by operation of law or otherwise, shall constitute an
"EVENT OF DEFAULT":
(a) Borrowers shall fail to pay when due any principal,
interest, premium or fee under any Financing Document or any other amount
payable under any Financing Document;
56
(b) Borrowers shall fail to observe or perform any covenant
contained in Section 4.1 (Financial Statements and Other Reports), Section 4.4
(Maintenance of Property; Insurance), Section 4.7 (Use of Proceeds), Section 4.9
(Hazardous Materials; Remediation), Article 5, Article 6 or Article 7; PROVIDED
with respect to the covenants contained in Section 4.1, Borrowers shall be
entitled to one five (5)-day grace period per Fiscal Year;
(c) any Credit Party defaults in the performance of or
compliance with any term contained in this Agreement, in any other Financing
Document or in any document, agreement or instrument entered into in connection
with Ancillary Services (other than occurrences described in other provisions of
this Section 9.1 for which a different grace or cure period is specified or
which constitute immediate Events of Default) and such default is not remedied
or waived within fifteen (15) days after the earlier of (1) receipt by Borrowers
of notice from Agent or Required Lenders of such default or (2) actual knowledge
of any Borrower or any other Credit Party of such default;
(d) any representation, warranty, certification or statement
made by any Credit Party or any other Person in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to any
Financing Document is incorrect in any respect (or in any material respect if
such representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);
(e) (1) failure of any Borrower to pay when due or within any
applicable grace period any principal, interest or other amount on Debt (other
than the Loans), or the occurrence of any breach, default, condition or event
with respect to any Debt (other than the Loans), if the effect of such failure
or occurrence is to cause or to permit the holder or holders thereof to cause,
Debt having an individual principal amount in excess of $3,000,000 or having an
aggregate principal amount in excess of $3,000,000 to become or be declared due
prior to its stated maturity or (2) the occurrence of any breach or default
under any terms or provisions of any of the Indenture Documents, the Note
Purchase Documents or the Securitization Documents;
(f) any Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(g) an involuntary case or other proceeding shall be commenced
against any Borrower seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or an order for relief
shall be entered against any Credit Party under the federal bankruptcy laws as
now or hereafter in effect;
57
(h) (1) institution of any steps by any Person to terminate a
Pension Plan if as a result of such termination any Credit Party or any member
of the Controlled Group could be required to make a contribution to such Pension
Plan, or could incur a liability or obligation to such Pension Plan, in excess
of $3,000,000, (2) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA, or (3)
there shall occur any withdrawal or partial withdrawal from a Multiemployer
Pension Plan and the withdrawal liability (without unaccrued interest) to
Multiemployer Pension Plans as a result of such withdrawal (including any
outstanding withdrawal liability that any Credit Party or any member of the
Controlled Group have incurred on the date of such withdrawal) exceeds
$3,000,000;
(i) one or more judgments or orders for the payment of money
aggregating in excess of $1,000,000 shall be rendered against any or all
Borrowers and such judgments or orders shall continue unsatisfied and unstayed
for a period of thirty (30) days;
(j) (i) a Change of Control shall have occurred or (ii) except
in connection with a disposition permitted pursuant to Section 5.6, AAR shall
cease to, directly or indirectly, own and control one hundred percent (100%) of
each class of the outstanding equity interests of each of its Subsidiaries;
(k) the accountant's report or reports on the audited statements
delivered pursuant to Section 4.1(b) shall include any material qualification
(including with respect to the scope of audit) or exception;
(l) any Lien on Collateral with a value of $1,000,00 or more
created by any of the Security Documents shall at any time fail to constitute a
valid and perfected Lien, subject to no prior or equal Lien except Permitted
Liens, or any Credit Party shall so assert in writing; or
(m) Borrowers shall be prohibited or otherwise restrained, in
any manner evidencing or having a Material Adverse Effect, from conducting the
business theretofore conducted by them by virtue of any casualty, any labor
strike, any determination, ruling, decision, decree or order of any court or
regulatory authority of competent jurisdiction or any other event, such
casualty, labor strike, determination, ruling, decision, decree, order or other
event remains unstayed and in effect for any period of ten (10) days.
SECTION 9.2 ACCELERATION AND SUSPENSION OR TERMINATION OF REVOLVING LOAN
COMMITMENT. Upon the occurrence and during the continuance of an Event of
Default, Agent may, and shall if requested by Required Lenders, (i) by notice to
Borrowers suspend or terminate the Revolving Loan Commitment, in whole or in
part (and, if in part, such reduction shall be pro rata among the Lenders having
a Revolving Loan Commitment Percentage) and/or (ii) by notice to Borrowers
declare the Obligations to be, and the Obligations shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by Borrowers and Borrowers will pay
the same; provided that in the case of any of the Events of Default specified in
Section 9.1(f) or 9.1(g) above, without any notice to Borrowers or any other act
by Agent or the Lenders, the Revolving Loan Commitment shall thereupon terminate
and all of the Obligations shall become immediately due and payable
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without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by Borrowers and Borrowers will pay the same.
SECTION 9.3 CASH COLLATERAL. If (i) any Event of Default specified in
Section 9.1(f) or 9.1(g) shall occur, (ii) the Obligations shall have otherwise
been accelerated pursuant to Section 9.2 or (iii) the Revolving Loan Commitment
shall have been terminated pursuant to Section 9.2, then without any request or
the taking of any other action by Agent or the Lenders, Borrowers shall
immediately comply with the provisions of Section 2.4(e) with respect to the
deposit of cash collateral to secure the existing Letter of Credit Liability and
future payment of related fees.
SECTION 9.4 DEFAULT RATE OF INTEREST AND SUSPENSION OF LIBOR RATE
OPTIONS. At the election of Agent or Required Lenders, after the occurrence of
an Event of Default and for so long as it continues, the Loans and other
Obligations shall bear interest at rates that are two percent (2.0%) in excess
of the rates otherwise payable under this Agreement. Furthermore, at the
election of Agent or Required Lenders during any period in which any Event of
Default is continuing (x) as the Interest Periods for LIBOR Loans then in effect
expire, such Loans shall be converted into Prime Rate Loans and (y) the LIBOR
election will not be available to Borrowers.
SECTION 9.5 SETOFF RIGHTS. During the continuance of any Event of
Default, each Lender is hereby authorized by each Borrower at any time or from
time to time, with reasonably prompt subsequent notice to Borrowers (any prior
or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (A) balances held by such Lender at any of
its offices for the account of any Borrower or any of its Subsidiaries
(regardless of whether such balances are then due to any Borrower or its
Subsidiaries), and (B) other property (unless such property secures Debt (other
than the Obligations) permitted hereby) at any time held or owing by such Lender
to or for the credit or for the account of any Borrower or any of its
Subsidiaries, against and on account of any of the Obligations; except that no
Lender shall exercise any such right without the prior written consent of Agent.
Any Lender exercising a right to set off shall purchase for cash (and the other
Lenders shall sell) interests in each of such other Lender's Pro Rata Share of
the Obligations as would be necessary to cause all Lenders to share the amount
so set off with each other Lender in accordance with their respective Pro Rata
Share of the Obligations. Each Borrower agrees, to the fullest extent permitted
by law, that any Lender may exercise its right to set off with respect to the
Obligations as provided in this Section 9.5.
SECTION 9.6 APPLICATION OF PROCEEDS. Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) each Borrower irrevocably waives the
right to direct the application of any and all payments at any time or times
thereafter received by Agent from or on behalf of any Borrower or any guarantor
of all or any part of the Obligations, and Agent shall have the continuing and
exclusive right to apply and to reapply any and all payments received at any
time or times after the occurrence and during the continuance of an Event of
Default against the Obligations in such manner as Agent may deem advisable
notwithstanding any previous application by Agent and (b) in the absence of a
specific determination by Agent with respect thereto, the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied: FIRST, to all fees, costs, indemnities and expenses incurred by or
owing to Agent and any Designated Lender
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Affiliate that is an Affiliate of Agent, with respect to this Agreement, the
other Financing Documents, any Ancillary Services or the Collateral; SECOND, to
all fees, costs, indemnities and expenses incurred by or owing to any Lender and
any Designated Lender Affiliate that is an Affiliate of any Lender, with respect
to this Agreement, the other Financing Documents, any Ancillary Services or the
Collateral; THIRD, to accrued and unpaid interest on the Obligations (including
any interest which but for the provisions of the U.S. Bankruptcy Code, would
have accrued on such amounts); FOURTH, to the principal amount of the
Obligations outstanding; and FIFTH to any other indebtedness or obligations of
any Borrower owing to Agent, any Lender or any Designated Lender Affiliate under
the Financing Documents or with respect to Ancillary Services. Any balance
remaining shall be delivered to Borrowers or to whomever may be lawfully
entitled to receive such balance or as a court of competent jurisdiction may
direct.
SECTION 9.7 NON-RECOURSE GUARANTORS. Notwithstanding any other provision
of this Agreement or any of the other Financing Documents, Lenders' and Agent's
sole right to recover from each Non-Recourse Guarantor shall be limited to the
Collateral pledged by such Non-Recourse Guarantor and no Lender or Agent, acting
on behalf of Lenders, shall have any right of recourse against any other asset
of such Non-Recourse Guarantor nor against such Non-Recourse Guarantor
individually.
ARTICLE 10
EXPENSES, INDEMNITY, TAXES AND RIGHT TO PERFORM
SECTION 10.1 EXPENSES. Borrowers hereby agree to promptly pay (i) all
reasonable costs and expenses of Agent (including without limitation the fees,
costs and expenses of counsel to, and independent appraisers and consultants
retained by Agent) in connection with the examination, review, due diligence
investigation, documentation, negotiation and closing of the transactions
contemplated by the Financing Documents, in connection with the performance by
Agent of its rights and remedies under the Financing Documents and in connection
with the continued administration of the Financing Documents including any
amendments, modifications, consents and waivers to and/or under any and all
Financing Documents, (ii) without limitation of the preceding clause (i), all
reasonable costs and expenses of Agent in connection with the creation,
perfection and maintenance of Liens pursuant to the Financing Documents,
including title investigations, (iii) without limitation of the preceding clause
(i), expenses of Agent in connection with protecting, storing, insuring,
handling, maintaining or selling any Collateral and in connection with any
workout, collection, bankruptcy, insolvency and other enforcement proceedings
under any and all of the Financing Documents, and (iv) all costs and expenses
incurred by Lenders in connection with any workout, collection, bankruptcy,
insolvency and other enforcement proceedings under any and all Financing
Documents, provided, that to the extent that the costs and expenses referred to
in this clause (iv) consist of fees, costs and expenses of counsel, Borrowers
shall be obligated to pay such reasonable fees, costs and expenses for only one
counsel acting for all Lenders (including Agent).
SECTION 10.2 INDEMNITY. Borrowers hereby agree to indemnify, pay and hold
harmless Agent and Lenders and the officers, directors, employees and counsel of
Agent and Lenders (collectively called the "INDEMNITEES") from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the fees and disbursements of counsel for such
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Indemnitee) in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitee shall be designated a party thereto
and including any such proceeding initiated by or on behalf of a Borrower, and
the reasonable expenses of investigation by engineers, environmental consultants
and similar technical personnel and any commission, fee or compensation claimed
by any broker (other than any broker retained by Agent or Lenders) asserting any
right to payment for the transactions contemplated hereby, which may be imposed
on, incurred by or asserted against such Indemnitee as a result of or in
connection with the transactions contemplated hereby or by the other Operative
Documents (including (i)(A) as a direct or indirect result of the presence on or
under, or escape, seepage, leakage, spillage, discharge, emission or release
from, any Real Property now or previously owned, leased or operated by any
Borrower, any Subsidiary or any other Person of any Hazardous Materials or any
Hazardous Materials Contamination, (B) arising out of or relating to the offsite
disposal of any materials generated or present on any such Real Property or (C)
arising out of or resulting from the environmental condition of any such Real
Property or the applicability of any governmental requirements relating to
Hazardous Materials, whether or not occasioned wholly or in part by any
condition, accident or event caused by any act or omission of any Borrower or
any Subsidiary, and (ii) proposed and actual extensions of credit under this
Agreement) and the use or intended use of the proceeds of the Notes and Letters
of Credit, except that Borrowers shall have no obligation hereunder to an
Indemnitee with respect to any liability resulting from the gross negligence or
willful misconduct of such Indemnitee, as determined by a court of competent
jurisdiction. To the extent that the undertaking set forth in the immediately
preceding sentence may be unenforceable, Borrowers shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all such indemnified liabilities incurred by the
Indemnitees or any of them.
SECTION 10.3 TAXES. Borrowers agree to pay all governmental assessments,
charges or taxes (except income or other similar taxes imposed on Agent or
Lenders), including any interest or penalties thereon, at any time payable or
ruled to be payable in respect of the existence, execution or delivery of this
Agreement or the other Financing Documents or the issuance of the Notes or
Letters of Credit and to indemnify and hold Agent and Lenders harmless against
liability in connection with any such assessments, charges or taxes.
SECTION 10.4 RIGHT TO PERFORM. If any Credit Party fails to perform any
obligation hereunder or under any other Financing Document, Agent itself may,
but shall not be obligated to, cause such obligation to be performed at
Borrowers' expense and Borrowers agree to reimburse Agent therefor on demand.
All amounts owing hereunder or under any other Financing Document may be
satisfied in full, subject to the provisions of Section 2.2(a)(ii), through the
making of Agent Advances.
ARTICLE 11
AGENT
SECTION 11.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby
irrevocably appoints and authorizes Agent to enter into each of the Security
Documents on its behalf and to take such actions as Agent on its behalf and to
exercise such powers under the Financing Documents as are delegated to Agent by
the terms thereof, together with all such powers as are reasonably incidental
thereto. Except as otherwise expressly provided in Section 12.5 or by the
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terms of the Financing Documents, Agent is authorized and empowered to amend,
modify, or waive any provisions of this Agreement or the other Financing
Documents on behalf of Lenders. The provisions of this Article 11 are solely for
the benefit of Agent and Lenders and neither any Borrower nor any other Credit
Party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
Agent shall act solely as agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Borrower or any other Credit Party. Agent may perform any of its
duties hereunder, or under the Financing Documents, by or through its agents or
employees.
SECTION 11.2 AGENT AND AFFILIATES. Agent shall have the same rights and
powers under the Financing Documents as any other Lender and may exercise or
refrain from exercising the same as though it were not Agent, and Agent and its
Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Credit Party as if it were
not Agent hereunder.
SECTION 11.3 ACTION BY AGENT. The duties of Agent shall be mechanical and
administrative in nature. Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Financing Documents, express or implied, is intended to or shall be
construed to impose upon Agent any obligations in respect of this Agreement or
any of the Financing Documents except as expressly set forth herein or therein.
SECTION 11.4 CONSULTATION WITH EXPERTS. Agent may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
SECTION 11.5 LIABILITY OF AGENT. Neither Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action taken
or not taken by it in connection with the Financing Documents, except that Agent
shall be liable to the extent of its own gross negligence or willful misconduct
as determined by a court of competent jurisdiction. Neither Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements specified in any Financing Agreement; (iii) the satisfaction of any
condition specified in any Financing Document, except receipt of items required
to be delivered to Agent; (iv) the validity, effectiveness, sufficiency or
genuineness of any Financing Document, any Lien purported to be created or
perfected thereby or any other instrument or writing furnished in connection
therewith; (v) the existence or non-existence of any Default or Event of
Default; or (vi) the financial condition of any Credit Party. Agent shall not
incur any liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile or
electronic transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties. Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith and if any
such apportionment or distribution is subsequently determined to have been made
in error the sole recourse of any Lender to whom payment was due but not made,
shall be to recover
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from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them).
SECTION 11.6 INDEMNIFICATION. Each Lender shall, in accordance with its
Pro Rata Share, indemnify Agent (to the extent not reimbursed by Borrowers)
against any cost, expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from Agent's gross
negligence or willful misconduct as determined by a court of competent
jurisdiction) that Agent may suffer or incur in connection with the Financing
Documents or any action taken or omitted by Agent hereunder or thereunder. If
any indemnity furnished to Agent for any purpose shall, in the opinion of Agent,
be insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against even if so directed
by Required Lenders until such additional indemnity is furnished. The
obligations of Lenders under this Section 11.6 shall survive the payment in full
of the Obligations and the termination of this Agreement.
SECTION 11.7 RIGHT TO REQUEST AND ACT ON INSTRUCTIONS. Agent may at any
time request instructions from Lenders with respect to any actions or approvals
which by the terms of this Agreement or of any of the Financing Documents Agent
is permitted or desires to take or to grant, and if such instructions are
promptly requested, Agent shall be absolutely entitled to refrain from taking
any action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Financing Documents until it shall have received such
instructions from Required Lenders or all or such other portion of the Lenders
as shall be prescribed by this Agreement. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting under this Agreement or any of the other
Financing Documents in accordance with the instructions of Required Lenders and,
notwithstanding the instructions of Required Lenders, Agent shall have no
obligation to take any action if it believes, in good faith, that such action
exposes Agent to any liability for which it has not received satisfactory
indemnification in accordance with the provisions of Section 11.6.
SECTION 11.8 CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.
SECTION 11.9 COLLATERAL MATTERS. Lenders irrevocably authorize Agent, at
its option and in its discretion, to release any Lien granted to or held by
Agent under any Security Document (i) upon termination of the Revolving Loan
Commitment and payment in full of all Obligations and the expiration,
termination or cash collateralization (to the satisfaction of Agent) of all
Letters of Credit; or (ii) constituting property sold or to be sold or disposed
of as part of or in connection with any disposition permitted under any
Financing Document (it being understood and agreed that Agent may conclusively
rely without further inquiry on a certificate of a Responsible Officer as to the
sale or other disposition of property being made in full
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compliance with the provisions of the Financing Documents). Upon request by
Agent at any time, Lenders will confirm in writing Agent's authority to release
particular types or items of Collateral pursuant to this Section 11.9.
SECTION 11.10 AGENCY FOR PERFECTION. Agent and each Lender hereby appoint
each other Lender as agent for the purpose of perfecting Agent's security
interest in assets which, in accordance with the Uniform Commercial Code in any
applicable jurisdiction, can be perfected by possession or control. Should any
Lender (other than Agent) obtain possession or control of any such assets, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefore,
shall deliver such assets to Agent or in accordance with Agent's instructions or
transfer control to Agent in accordance with Agent's instructions. Each Lender
agrees that it will not have any right individually to enforce or seek to
enforce any Security Document or to realize upon any Collateral for the Loans
unless instructed to do so by Agent, it being understood and agreed that such
rights and remedies may be exercised only by Agent.
SECTION 11.11 NOTICE OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default except
with respect to defaults in the payment of principal, interest and fees required
to be paid to Agent for the account of Lenders, unless Agent shall have received
written notice from a Lender or Borrowers referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". Agent will notify each Lender of its receipt of any such
notice. Agent shall take such action with respect to such Default or Event of
Default as may be requested by Required Lenders in accordance with the terms
hereof. Unless and until Agent has received any such request, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable or
in the best interests of Lenders.
SECTION 11.12 SUCCESSOR AGENT. Agent may resign at any time by giving
written notice thereof to the Lenders and Borrowers. Upon any such resignation,
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by Required Lenders, and shall have
accepted such appointment, within thirty (30) days after the retiring Agent
gives notice of resignation, then the retiring Agent may, on behalf of Lenders,
appoint a successor Agent, which shall be an institution organized or licensed
under the laws of the United States of America or of any State thereof. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
SECTION 11.13 DISBURSEMENTS OF REVOLVING LOANS; PAYMENT.
(a) REVOLVING LOAN ADVANCES, PAYMENTS AND SETTLEMENTS; INTEREST
AND FEE PAYMENTS.
(i) Agent shall have the right, on behalf of Lenders, to
disburse funds to Borrowers for all Revolving Loans requested by AAR, on
its own behalf and on behalf
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of each other Borrower pursuant to the terms of this Agreement. Absent the
prior receipt by Agent of a written notice from any Lender pursuant to
which such Lender notifies Agent that such Lender shall cease making
Revolving Loans (whether due to the existence of a Default or Event of
Default or otherwise), Agent shall be conclusively entitled to assume, for
purposes of the preceding sentence, that each Lender will fund its Pro Rata
Share of all Revolving Loans requested by Borrower. Each Lender shall
reimburse Agent on demand, in accordance with the provisions of the
immediately following paragraph, for all funds disbursed on its behalf by
Agent pursuant to the preceding sentence, or if Agent so requests, each
Lender will remit to Agent its Pro Rata Share of any Revolving Loan before
Agent disburses the same to Borrowers. If Agent elects to require that each
Lender make funds available to Agent, prior to a disbursement by Agent to
Borrowers, Agent shall advise each Lender by telephone, facsimile or e-mail
of the amount of such Lender's Pro Rata Share of the Revolving Loan
requested by AAR on its own behalf and on behalf of each other Borrower no
later than noon (Chicago time) on the date of funding of such Revolving
Loan, and each such Lender shall pay Agent on such date such Lender's Pro
Rata Share of such requested Revolving Loan, in same day funds, by wire
transfer to the Payment Account, or such other account as may be identified
in writing by Agent to Lenders from time to time. If any Lender fails to
pay the amount of its Pro Rata Share within one (1) Business Day after
Agent's demand, Agent shall promptly notify Borrowers, and Borrowers shall
immediately repay such amount to Agent. Any repayment required pursuant to
this Section 11.13 shall be without premium or penalty. Nothing in this
Section 11.13 or elsewhere in this Agreement or the other Financing
Documents shall be deemed to require Agent to advance funds on behalf of
any Lender or to relieve any Lender from its obligation to fulfill its
commitments hereunder or to prejudice any rights that Agent or Borrowers
may have against any Lender as a result of any default by such Lender
hereunder.
(ii) On a Business Day of each week as selected from time
to time by Agent, or more frequently (including daily), if Agent so elects
(each such day being a "SETTLEMENT DATE"), Agent will advise each Lender by
telephone, facsimile or e-mail of the amount of each such Lender's Pro Rata
Share of the Revolving Loan balance (including any Agent Advances) as of
the close of business of the Business Day immediately preceding the
Settlement Date. In the event that payments are necessary to adjust the
amount of such Lender's actual Pro Rata Share of the Revolving Loan balance
to such Lender's required Pro Rata Share of the Revolving Loan balance as
of any Settlement Date, the party from which such payment is due (i) shall
be deemed, irrevocably and unconditionally, to have purchased, without
recourse or warranty, an undivided interest and participation in the
Revolving Loans sufficient to equate such Lender's actual Pro Rata Share of
the Revolving Loan balance as of such Settlement Date with such Lender's
required Pro Rata Share of the Revolving Loans as of such date and (ii)
shall pay Agent, without setoff or discount, in same day funds, by wire
transfer to the Payment Account not later than noon (Chicago time) on the
Business Day following the Settlement Date the full purchase price for such
interest and participation, equal to one hundred percent (100%) of the
principal amount of the Revolving Loans being purchased and sold. In the
event settlement shall not have occurred by the date and time specified in
the immediately preceding sentence, interest shall accrue on the unsettled
amount at the
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Federal Funds Rate, for the first three (3) days following the scheduled
date of settlement, and thereafter at the Prime Rate PLUS the Prime Rate
Margin.
(iii) On each Settlement Date, Agent shall advise each
Lender by telephone, facsimile or e-mail of the amount of such Lender's Pro
Rata Share of principal, interest and fees paid for the benefit of Lenders
with respect to each applicable Loan, to the extent of such Lender's credit
exposure with respect thereto, and shall make payment to such Lender not
later than noon (Chicago time) on the Business Day following the Settlement
Date of such amounts in accordance with wire instructions delivered by such
Lender to Agent, as the same may be modified from time to time by written
notice to Agent; provided, that, in the case such Lender is a Defaulted
Lender, Agent shall be entitled to set off the funding short-fall against
that Defaulted Lender's respective share of all payments received from
Borrowers.
(iv) The provisions of this Section 11.13(a) shall be
deemed to be binding upon Agent and Lenders notwithstanding the occurrence
of any Default or Event of Default, or any insolvency or bankruptcy
proceeding pertaining to any Borrower or any other Credit Party.
(b) RETURN OF PAYMENTS.
(i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or
will be received by Agent from any Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from
such Lender on demand without setoff, counterclaim or deduction of any
kind, together with interest accruing on a daily basis at the Federal Funds
Rate.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to any Borrower or
paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other
Financing Document, Agent will not be required to distribute any portion
thereof to any Lender. In addition, each Lender will repay to Agent on
demand any portion of such amount that Agent has distributed to such
Lender, together with interest at such rate, if any, as Agent is required
to pay to such Borrower or such other Person, without setoff, counterclaim
or deduction of any kind.
(c) DEFAULTED LENDERS. The failure of any Defaulted Lender to
make any Revolving Loan or any payment required by it hereunder shall not
relieve any other Lender of its obligations to make such Revolving Loan or
payment, but neither any Lender nor Agent shall be responsible for the failure
of any Defaulted Lender to make a Revolving Loan or make any other payment
required hereunder. Notwithstanding anything set forth herein to the contrary, a
Defaulted Lender shall not have any voting or consent rights under or with
respect to any Financing Document or constitute a "Lender" (or be included in
the calculation of "Required Lenders" hereunder) for any voting or consent
rights under or with respect to any Financing Document. At Borrowers' request,
Agent or a Person reasonably acceptable to Agent shall have the right with
Agent's consent and in Agent's sole discretion (but shall have no obligation) to
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purchase from any Defaulted Lender, and each Defaulted Lender agrees that it
shall, at Agent's request, sell and assign to Agent or such Person, all of the
lending commitments and commitment interests of that Defaulted Lender for an
amount equal to the principal balance of all Loans held by such Defaulted Lender
and all accrued interest and fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 SURVIVAL. All agreements, representations and warranties
made herein and in every other Financing Document shall survive the execution
and delivery of this Agreement and the other Financing Documents and the other
Operative Documents and the execution, sale and delivery of the Notes. The
indemnities and agreements set forth in Article 6 and Article 10 shall survive
the payment of the Obligations and any termination of this Agreement.
SECTION 12.2 NO WAIVERS. No failure or delay by Agent or any Lender in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and therein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 12.3 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including hand delivery, prepaid
overnight courier, facsimile transmission, e-mail or similar writing) and shall
be given to such party at its address, facsimile number or e-mail address set
forth on the signature pages hereof (or, in the case of any such Lender who
becomes a Lender after the date hereof, in an Assignment Agreement or in a
notice delivered to Borrowers and Agent by the assignee Lender forthwith upon
such assignment) or at such other address, facsimile number or e-mail address as
such party may hereafter specify for the purpose by notice to Agent and
Borrowers; PROVIDED, that notices, requests or other communications shall be
permitted by e-mail only where expressly provided in the Financing Documents.
Each such notice, request or other communication shall be effective (i) if given
by facsimile or e-mail, when such notice is transmitted to the facsimile number
or e-mail address specified by this Section or (ii) if given by mail, e-mail,
hand delivery, prepaid overnight courier or any other means, when received at
the applicable address specified by this Section.
SECTION 12.4 SEVERABILITY. In case any provision of or obligation under
this Agreement or the Notes or any other Financing Document shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 12.5 AMENDMENTS AND WAIVERS. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by Borrowers and the Required Lenders (and, if (x) any
amendment would increase either such Lender's Revolving Loan Commitment Amount
by such Lender and (y) the rights or duties of Agent or LC Issuer are affected
thereby, by Agent or the LC Issuer, as the case may be);
67
provided that no such amendment or waiver shall, unless signed by all the
Lenders; (i) reduce the principal of, rate of interest on or any fees with
respect to any Loan or Reimbursement Obligation; (ii) postpone the date fixed
for any payment (other than a payment pursuant to Section 2.1(c)) of principal
of any Loan, or of any Reimbursement Obligation or of interest on any Loan or
any Reimbursement Obligation or any fees hereunder or for any termination of any
commitment; (iii) change the definition of the term Required Lenders or the
percentage of Lenders which shall be required for Lenders to take any action
hereunder; (iv) amend or waive this Section 11.5 or the definitions of the terms
used in this Section 11.5 insofar as the definitions affect the substance of
this Section 11.5; (v) consent to the assignment, delegation or other transfer
by any Credit Party of any of its rights and obligations under any Financing
Document; or (vi) increase any of the advance rates by more than five (5)
percentage points each in the aggregate or decrease the dollar amounts set forth
in the definition of Borrowing Base by more than $1,000,000 set forth in the
Borrowing Base Certificate.
SECTION 12.6 ASSIGNMENTS; PARTICIPATIONS.
(a) ASSIGNMENTS.
(i) Any Lender may at any time assign to one or more
Persons (any such Person, an "ASSIGNEE") all or any portion of such
Lender's Loans and interest in the Revolving Loan Commitment, with the
prior written consent of Agent and, so long as no Event of Default exists,
Borrowers (which consent shall not be unreasonably withheld or delayed and
shall not be required for an assignment by a Lender to a Lender or to an
Affiliate of a Lender). Except as Agent may otherwise agree, any such
assignment shall be in a minimum aggregate amount equal to $5,000,000 or,
if less, the assignor's entire interests in the Revolving Loan Commitment
and outstanding Loans. Borrowers and Agent shall be entitled to continue to
deal solely and directly with such Lender in connection with the interests
so assigned to an Assignee until Agent shall have received and accepted an
effective Assignment Agreement executed, delivered and fully completed by
the applicable parties thereto and a processing fee of $3,500. Any
attempted assignment not made in accordance with this Section 12.6(a) shall
be treated as the sale of a participation under Section 12.6(b). Borrowers
shall be deemed to have granted its consent to any assignment requiring its
consent hereunder unless Borrowers have expressly objected to such
assignment within three (3) Business Days after notice thereof.
(ii) From and after the date on which the conditions
described above have been met, (i) such Assignee shall be deemed
automatically to have become a party hereto and, to the extent that rights
and obligations hereunder have been assigned to such Assignee pursuant to
such Assignment Agreement, shall have the rights and obligations of a
Lender hereunder and (ii) the assigning Lender, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, shall be released from its rights (other than its
indemnification rights) and obligations hereunder. Upon the request of the
Assignee (and, as applicable, the assigning Lender) pursuant to an
effective Assignment Agreement, Borrowers shall execute and deliver to
Agent for delivery to the Assignee (and, as applicable, the assigning
Lender) Notes in the aggregate principal amount of the Assignee's
percentage interest in the Revolving Loan
68
Commitment (and, as applicable, Notes in the principal amount of that
portion of the Revolving Loan Commitment retained by the assigning Lender).
Upon receipt by the assigning Lender of such Note, the assigning Lender
shall return to Borrowers any prior Note held by it.
(iii) Agent shall maintain at one of its offices a copy of
each Assignment Agreement delivered to it and a register for the
recordation of the names and addresses of each Lender, and the commitments
of, and principal amount of the Loans owing to, such Lender pursuant to the
terms hereof. The entries in such register shall be conclusive, and
Borrowers, Agent and Lenders may treat each Person whose name is recorded
therein pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. Such register
shall be available for inspection by Borrowers and any Lender, at any
reasonable time upon reasonable prior notice to Agent.
(iv) Notwithstanding the foregoing provisions of this
Section 12.6(a) or any other provision of this Agreement, any Lender may at
any time assign all or any portion of its Loans and its Note as collateral
security to a Federal Reserve Bank or, as applicable, to such Lender's
trustee for the benefit of its investors (but no such assignment shall
release any Lender from any of its obligations hereunder).
(b) PARTICIPATIONS. Any Lender may at any time sell to one or
more Persons participating interests in its Loans, commitments or other
interests hereunder (any such Person, a "PARTICIPANT"). In the event of a sale
by a Lender of a participating interest to a Participant, (a) such Lender's
obligations hereunder shall remain unchanged for all purposes, (b) Borrowers and
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations hereunder and (c) all amounts payable
by Borrowers shall be determined as if such Lender had not sold such
participation and shall be paid directly to such Lender. No Participant shall
have any direct or indirect voting rights hereunder except with respect to any
event described in Section 12.5 expressly requiring the unanimous vote of all
Lenders or, as applicable, all affected Lenders. Each Lender agrees to
incorporate the requirements of the preceding sentence into each participation
agreement which such Lender enters into with any Participant. Borrowers agree
that if amounts outstanding under this Agreement are due and payable (as a
result of acceleration or otherwise), each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement and with respect to any Letter of Credit to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement; provided that such right of set-off shall be
subject to the obligation of each Participant to share with Lenders, and Lenders
agree to share with each Participant, as provided in Section 9.5.
SECTION 12.7 HEADINGS. Headings and captions used in the Financing
Documents (including the Exhibits, Schedules and Annexes hereto and thereto) are
included for convenience of reference only and shall not be given any
substantive effect.
SECTION 12.8 CONFIDENTIALITY. In handling any confidential information of
any Credit Party, Agent and each Lender shall exercise the same degree of care
that it exercises with respect to its own proprietary information of the same
types to maintain the confidentiality of any non-public
69
information thereby received or received pursuant to this Agreement, except that
disclosure of such information may be made (i) to agents, employees,
Subsidiaries, Affiliates, attorneys and advisors of such Person in connection
with its present or prospective business relations with the Credit Parties
arising out of the Financing Documents, (ii) to prospective transferees or
purchasers of any interest in the Loans, provided that they have agreed to be
bound by the provision of this Section 12.8, (iii) as required by law,
regulation, rule, request or order, subpoena, judicial order or similar order
and in connection with any litigation and (iv) as may be required in connection
with the examination, audit or similar investigation of such Person.
Confidential information shall include only such information identified as such
at the time provided to Agent and shall not include information that either: (i)
is in the public domain, or becomes part of the public domain after disclosure
to such Person through no fault of such Person, or (ii) is disclosed to such
Person by a third party, provided Agent does not have actual knowledge that such
third party is prohibited from disclosing such information.
SECTION 12.9 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT,
EACH NOTE AND EACH OTHER FINANCING DOCUMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. EACH BORROWER HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF
XXXX, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH BORROWER
HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET
FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS
AFTER THE SAME HAS BEEN POSTED.
SECTION 12.10 WAIVER OF JURY TRIAL. EACH OF EACH BORROWER, AGENT AND THE
LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 12.11 PUBLICATION; ADVERTISEMENT.
(a) PUBLICATION. No Credit Party will directly or indirectly
publish, disclose or otherwise use in any public disclosure, advertising
material, promotional material, press release or interview, any reference to the
name, logo or any trademark of Xxxxxxx Xxxxx or any of its
70
Affiliates or any reference to this Agreement or the financing evidenced hereby,
in any case without Xxxxxxx Xxxxx'x prior written consent.
(b) ADVERTISEMENT. Each Credit Party hereby authorizes Xxxxxxx
Xxxxx to publish the name of such Credit Party and the amount of the financing
evidenced hereby in any "tombstone" or comparable advertisement which Xxxxxxx
Xxxxx elects to publish. In addition, each Credit Party agrees that Xxxxxxx
Xxxxx may provide lending industry trade organizations with information
necessary and customary for inclusion in league table measurements after the
Closing Date. With respect to any of the foregoing, Xxxxxxx Xxxxx shall provide
Borrowers with an opportunity to review and confer with Xxxxxxx Xxxxx regarding
the contents of any such tombstone, advertisement or information, as applicable,
prior to its publication.
SECTION 12.12 COUNTERPARTS; INTEGRATION. This Agreement and the other
Financing Documents may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement and the other Financing
Documents constitute the entire agreement and understanding among the parties
hereto and supersede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
SECTION 12.13 REIMBURSEMENT. The undertaking by Borrowers to repay the
Obligations and each representation, warranty or covenant of each Borrower are
and shall be joint and several. To the extent that any Borrower shall be
required to pay a portion of the Obligations which shall exceed the amount of
loans, advances or other extensions of credit received by any such Borrower and
all interest, costs, fees and expenses attributable to such loans, advances or
other extensions of credit, then such Borrower shall be reimbursed by the other
Borrower for the amount of such excess. This Section 12.13 is intended only to
define the relative rights of Borrowers, and nothing set forth in Section 12.13
is intended or shall impair the obligations of each Borrower, jointly and
severally, to pay to Agent and Lenders the Obligations as and when the same
shall become due and payable in accordance with the terms hereof.
(SIGNATURE PAGE FOLLOWS)
71
(SIGNATURE PAGE TO
CREDIT AGREEMENT)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
AAR CORP.
By:/s/ XXXXXXX X. XXXXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
Address: c/o
AAR Corp.
One AAR Place
0000 X. Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile number: 000-000-0000
AAR DISTRIBUTION, INC.
By:/s/ XXXXXXX X. XXXXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
Address: c/o AAR Corp.
One AAR Place
0000 X. Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile number: 000-000-0000
72
AAR PARTS TRADING, INC.
By:/s/ XXXXXXX X. XXXXXXXXX
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
Address: c/o AAR Corp.
One AAR Place
0000 X. Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile number: 000-000-0000
AAR MANUFACTURING, INC.
By:/s/ XXXXXXX X. XXXXXXXXX
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
Address: c/o AAR Corp.
One AAR Place
0000 X. Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile number: 000-000-0000
AAR ENGINE SERVICES, INC.
By:/s/ XXXXXXX X. XXXXXXXXX
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
Address: c/o AAR Corp.
One AAR Place
0000 X. Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile number: 000-000-0000
73
AAR XXXXX SERVICES, INC.
By:/s/ XXXXXXX X. XXXXXXXXX
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
Address: c/o AAR Corp.
One AAR Place
0000 X. Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile number: 000-000-0000
BORROWER'S ACCOUNT DESIGNATION:
LASALLE BANK NATIONAL ASSOCIATION
Chicago, Illinois
ABA No.: 000000000
Account No.: 5800415597
Account Name: AAR Corp. Concentration
Account
Reference: AAR Corp.
ACH Telephone number: 000-000-0000
Bank Official: Xxxxx Carbon
Telephone number: 000-000-0000
XXXXXXX XXXXX CAPITAL, a division of
Xxxxxxx Xxxxx Business Financial Services Inc., as
Agent and a Lender
By:/s/ XXXX X. XXXXXXX
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Director
Address:222 Xxxxx XxXxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Legal Department
Facsimile number: 000-000-0000
E-Mail Address: xxxxxxxxxx@xxxxxxxx.xx.xxx
74
PAYMENT ACCOUNT DESIGNATION:
LASALLE BANK NATIONAL ASSOCIATION
Chicago, Illinois
ABA No.: 000000000
Account No.: 5800393182
Account Name: MLBFS - Corporate Finance
Reference: AAR Corp.
75
ANNEX A
COMMITMENT ANNEX
Revolving Loan Revolving Loan
Commitment Commitment
Lender Amount Percentage
-----------------------------------------------------
Xxxxxxx Xxxxx
Capital $ 30,000,000 100%
TOTALS $ 30,000,000 100%
ANNEX B
CLOSING CHECKLIST
[XXXXXXX XXXXX LOGO] Exhibit A to
Credit Agreement (Assignment Agreement)
This Assignment Agreement (this "ASSIGNMENT AGREEMENT") is entered into as
of __________ by and between the Assignor named on the signature page hereto
("ASSIGNOR") and the Assignee named on the signature page hereto ("ASSIGNEE").
Reference is made to the
Credit Agreement dated as of May 29, 2003 (as amended
or otherwise modified from time to time, the "
CREDIT AGREEMENT") among AAR
Corp., AAR Distribution, Inc., AAR Parts Trading, Inc., AAR Manufacturing, Inc.,
AAR Engine Services, Inc. and AAR Xxxxx Services, Inc. (individually, a
"BORROWER" and collectively "BORROWERS"), the financial institutions party
thereto from time to time, as Lenders, and Xxxxxxx Xxxxx Capital, a division of
Xxxxxxx Xxxxx Business Financial Services Inc., as Agent. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in the
Credit Agreement.
Assignor and Assignee hereby agree as follows:
1. Assignor hereby sells and assigns to Assignee, and Assignee hereby
purchases and assumes from Assignor the interests set forth on the schedule
attached hereto (the "SCHEDULE"), in and to Assignor's rights and obligations
under the
Credit Agreement as of the effective date set forth on the Schedule
(the "EFFECTIVE DATE"). Such purchase and sale is made without recourse,
representation or warranty except as expressly set forth herein. On the
Effective Date, Assignee shall pay to Assignor an amount equal to the aggregate
amounts assigned pursuant to the Schedule (exclusive of unfunded portions of the
Revolving Loan Commitment) and Assignor shall pay to Assignee a closing fee in
respect of the transactions contemplated hereby in the amount specified on the
Schedule.
2. Assignor (i) represents that as of the Effective Date, that it is the
legal and beneficial owner of the interests assigned hereunder free and clear of
any adverse claim, (ii) makes no other representation or warranty and assumes no
responsibility with respect to any statement, warranties or representations made
in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Financing Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any other
Credit Party or any other Person or the performance or observance by any Credit
Party of its Obligations under the Credit Agreement or any other Financing
Documents or any other instrument or document furnished pursuant thereto.
3. Assignee (i) confirms that it has received a copy of the Credit
Agreement and the other Financing Documents, together with copies of the most
recent financial statements delivered pursuant thereto and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (ii) agrees that it will,
independently and without reliance upon Agent, Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement and the other Financing Documents as are
Exhibit A - Page 1
delegated to Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (iv) agrees that it will perform in accordance
with their terms all obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender; (v) represents that on the date of
this Assignment Agreement it is not presently aware of any facts that would
cause it to make a claim under the Credit Agreement; (vi) represents and
warrants that Assignee is not a foreign person (i.e., a person other than a
United States person for United States Federal income tax purposes) or, if it is
a foreign person, that it has delivered to Agent the documentation required to
be delivered to Agent by Section 13 below; and (vii) represents and warrants
that it has experience and expertise in the making or the purchasing of loans
such as the Loans, and that it has acquired the interests described herein for
its own account and without any present intention of selling all or any portion
of such interests.
4. Each of Assignor and Assignee represents and warrants to the other
party hereto that it has full power and authority to enter into this Assignment
Agreement and to perform its obligations hereunder in accordance with the
provisions hereof, that this Assignment Agreement has been duly authorized,
executed and delivered by such party and that this Assignment Agreement
constitutes a legal, valid and binding obligation of such party, enforceable
against such party in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity.
5. Upon the effectiveness of this Assignment Agreement pursuant to Section
13 below, (i) Agent shall register Assignee as a Lender, pursuant to the terms
of the Credit Agreement, (ii) Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment Agreement, have the rights and
obligations of a Lender thereunder, (iii) Assignor shall, to the extent provided
in this Assignment Agreement, relinquish its rights and be released from its
obligations under the Credit Agreement and (iv) Agent shall thereafter make all
payments in respect of the interest assigned hereby (including payments of
principal, interest, fees and other amounts) to Assignee. Assignor and Assignee
shall make all appropriate adjustments in payments for periods prior to the
Effective Date by Agent or with respect to the making of this assignment
directly between themselves.
6. Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Assignment Agreement.
7. Neither this Assignment Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party (including, if applicable, any party required to evidence its consent
to or acceptance of this Assignment Agreement) against whom enforcement of such
change, waiver, discharge or termination is sought.
8. For the purposes hereof and for purposes of the Credit Agreement, the
notice address of Assignee shall be as set forth on the Schedule. Any notice or
other communication herein required or permitted to be given shall be in writing
and delivered in accordance with the notice provisions of the Credit Agreement.
Exhibit A - Page 2
9. In case any provision in or obligation under this Assignment Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
11. This Assignment Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
12. This Assignment Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
hereto were upon the same agreement.
13. This Assignment Agreement shall become effective as of the Effective
Date upon the satisfaction of each of the following conditions: (i) the
execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
execution of a counterpart hereof by each of Agent and Borrowers as evidence of
its consent hereto to the extent required pursuant to Section 12.6(a) of the
Credit Agreement, (iii) the receipt by Agent of the administrative fee referred
to in Section 12.6(a) of the Credit Agreement, (iv) in the event Assignee is a
foreign person (i.e., a person other than a United States person for United
States Federal income tax purposes), the receipt by Agent of Internal Revenue
Service Form W-8BEN or Form W-8ECI or such other forms, certificates or other
evidence with respect to United States Federal income tax withholding matters
that are required under the Internal Revenue Code to establish that Assignee
shall be entitled to receive payments of principal, interest and fees under the
Credit Agreement free from or at a reduced rate of withholding of United States
Federal income tax properly completed and executed by Assignee, and (v) the
receipt by Agent of originals or telecopies of the counterparts described above.
Exhibit A - Page 3
The parties hereto have caused this Assignment Agreement to be executed and
delivered as of the date first written above.
ASSIGNOR:
-----------------------------------
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
ASSIGNEE:
-----------------------------------
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Consented to:
Xxxxxxx Xxxxx Capital, a division of Xxxxxxx
Xxxxx Business Financial Services Inc., as Agent
By:
------------------------------------------
Title:
---------------------------------------
AAR CORP.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
AAR DISTRIBUTION, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
AAR PARTS TRADING, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Exhibit A - Page 4
AAR MANUFACTURING, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
AAR ENGINE SERVICES, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
AAR XXXXX SERVICES, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Exhibit A - Page 5
SCHEDULE TO ASSIGNMENT AGREEMENT
Assignor: ________________
Assignee: ________________
Effective Date: ________________
Credit Agreement dated as of May 29, 2003 among AAR Corp.,
AAR Distribution, Inc., AAR Parts Trading, Inc., AAR
Manufacturing, Inc., AAR Engine Services, Inc. and AAR Xxxxx
Services, Inc., as Borrowers, the financial institutions
party thereto from time to time, as Lenders, and Xxxxxxx
Xxxxx Capital, a division of Xxxxxxx Xxxxx Business
Financial Services Inc., as Agent
Interests Assigned:
Revolving Loan
Commitment/Loan Commitment
--------------------------------------------------------
Assignor Amounts $__________________
Amounts Assigned $__________________
Assignor Amounts
(post-assignment) $__________________
Closing Fee: $__________________
Assignee Information:
Address for Notices: Address for Payments:
___________________________
___________________________ Bank: _____________________
Attention: _______________ ABA #: _________________________
Telephone: _______________ Account #: _____________________
Facsimile: _______________ Reference: _____________________
Exhibit A - Page 6
[XXXXXXX XXXXX LOGO] Exhibit B to Credit Agreement (Compliance Certificate)
COMPLIANCE CERTIFICATE
AAR CORP.
DATE: __________, _____
This certificate is given by _____________________, a Responsible Officer
of AAR Corp. ("AAR"), pursuant to Section 4.1(c) of that certain Credit
Agreement dated as of May 29, 2003 among AAR, AAR Distribution, Inc., AAR Parts
Trading, Inc., AAR Manufacturing, Inc., AAR Engine Services, Inc. and AAR Xxxxx
Services, Inc. (individually a "BORROWER" and collectively, "BORROWERS"), the
Lenders from time to time party thereto and Xxxxxxx Xxxxx Capital, a division of
Xxxxxxx Xxxxx Business Financial Services Inc., as Agent for Lenders (as such
agreement may have been amended, restated, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT"). Capitalized terms used herein
without definition shall have the meanings set forth in the Credit Agreement.
The undersigned Responsible Officer hereby certifies to Agent and Lenders
that:
(a) the financial statements delivered with this certificate in
accordance with Section 4.1(a) and/or 4.1(b) of the Credit Agreement fairly
present in all material respects the results of operations and financial
condition of AAR and its Consolidated Subsidiaries as of the dates of such
financial statements;
(b) I have reviewed the terms of the Credit Agreement and have made,
or caused to be made under my supervision, a review in reasonable detail of the
transactions and conditions of AAR and its Consolidated Subsidiaries during the
accounting period covered by such financial statements;
(c) such review has not disclosed the existence during or at the end
of such accounting period, and I have no knowledge of the existence as of the
date hereof, of any condition or event that constitutes a Default or an Event of
Default, except as set forth in Schedule 1 hereto, which includes a description
of the nature and period of existence of such Default or an Event of Default and
what action Borrower has taken, is undertaking and proposes to take with respect
thereto; and
(d) Borrowers are in compliance with the covenants contained in
Article 7 of the Credit Agreement, as demonstrated by the calculation of such
covenants below, except as set forth in Schedule 1 hereto.
Exhibit B - Page 1
IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this ____ day of ___________, ____.
By
-----------------------------------------
Name
---------------------------------------
Title of AAR Corp.
---------------------------
Exhibit B - Page 2
CAPITAL EXPENDITURES
(SECTION 7.1)
Capital Expenditures for the applicable measurement period (the "DEFINED
PERIOD") are defined as follows:
Amount capitalized during the Defined Period by AAR Corp. and its Consolidated
Subsidiaries as capital expenditures for property, plant, and equipment or
similar fixed asset accounts, including any such expenditures by way of
acquisition of a Person or by way of assumption of Debt or other obligations, to
the extent reflected as plant, property and equipment $
-----------
Plus: deposits made in the Defined Period in connection with property, plant,
and equipment; less deposits of a prior period included above
------------
Less: Net Cash Proceeds of Asset Dispositions received during the Defined
Period which (i) Borrowers or a Subsidiary is or are permitted to
reinvest pursuant to the terms of the Credit Agreement and (ii) are
included in capital expenditures above
------------
Proceeds of Property Insurance Policies received during the Defined
Period which (i) Borrower or a Subsidiary is permitted to reinvest
pursuant to the terms of the Credit Agreement and (ii) are included in
capital expenditures above
------------
Capital Expenditures $
===========
Less: Portion of Capital Expenditures financed during the Defined Period under
Capital Leases or other Debt (Debt, for this purpose, does not include
drawings under the Revolving Loan Commitment)
------------
Unfinanced Capital Expenditures $
===========
Permitted Capital Expenditures (including carry forward of $____________ from prior
fiscal year) $
===========
In Compliance Yes/No
Exhibit B - Page 3
EBITDA
(SECTION 7.2)
EBITDA for the applicable measurement period (the "DEFINED PERIOD") is defined
as follows:
Net income (or loss) for the Defined Period of AAR Corp. and its Consolidated
Subsidiaries, but excluding: (a) the income (or loss) of any Person (other than
Subsidiaries of AAR Corp.) in which AAR Corp. or any of its Subsidiaries has an
ownership interest unless received by AAR Corp. or its Subsidiary in a cash
distribution; and (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of AAR Corp. or is merged into or consolidated with AAR Corp. $
-----------
Plus: Any provision for (or less any benefit from) income and franchise taxes ------------
included in the determination of net income for the Defined Period
Interest expense, net of interest income, deducted in the determination
of net income for the Defined Period ------------
Amortization and depreciation deducted in the determination of net income
for the Defined Period ------------
Losses (or less gains) from Asset Dispositions included in the
determination of net income for the Defined Period (excluding sales,
expenses or losses related to current assets) ------------
Other non-cash losses (or less gains) included in the determination of
net income for the Defined Period and for which no cash outlay (or cash
receipt) is foreseeable ------------
Expenses and fees included in the determination of net income and
incurred during the Defined Period to consummate the transactions
contemplated by the Operative Documents ------------
Non-Cash special (extraordinary) losses included in the determination of
net income during the Defined Period, net of related tax effects ------------
Less: Cash and Non-Cash special (extraordinary) gains included in the
determination of net income during the defined period, net of related tax
effects ------------
Exhibit B - Page 4
EBITDA for the Defined Period $
-----------
Required EBITDA for the Defined Period $ 33,000,000
In Compliance Yes/No
Exhibit B - Page 5
INTEREST COVERAGE RATIO
(SECTION 7.3)
Total Interest Expense for the applicable measurement period (the "Defined
Period") is defined as follows:
Interest expense ($_______), net of interest income ($_____), interest paid in
kind ($_____) and amortization of capitalized fees and expenses incurred to
consummate the transactions contemplated by the Operative Documents and included
in interest expense ($_____), included in the determination of net income of AAR
and its Consolidated Subsidiaries for the Defined Period ------------
Plus: Any "off balance" sheet interest expense ($_____) of AAR or any of its
Subsidiaries for the Defined Period not included in interest expense in
the Defined Period or otherwise deducted in the computation of EBITDA for
the Defined Period ------------
Interest Expense: ------------
Operating Cash Flow:
EBITDA for the Defined Period (calculated in the manner required by Section 7.2 of
the Compliance Certificate) ------------
Operating Cash Flow ------------
Interest Coverage Ratio (Ratio of Operating Cash Flow to Interest Expense) for the
Defined Period ___ to 1.0
Minimum Required Interest Coverage Ratio for the Defined Period 1.4 to 1.0
In Compliance Yes/No
Exhibit B - Page 6
[XXXXXXX XXXXX LOGO] Exhibit C to Credit Agreement (Borrowing Base Certificate)
[BORROWER]
DATE: ___________, ______
This certificate is given by ____________________, a Responsible Officer of
AAR Corp. ("AAR"), pursuant to Section 4.1(m) of that certain Credit Agreement
dated as of May 29, 2003 among AAR Corp., AAR Distribution, Inc., AAR Parts
Trading, Inc., AAR Manufacturing, Inc., AAR Engine Services, Inc. and AAR Xxxxx
Services, Inc. and the Lenders from time to time party thereto and Xxxxxxx Xxxxx
Capital, a division of Xxxxxxx Xxxxx Business Financial Services Inc., as Agent
for Lenders (as such agreement may have been amended, restated, supplemented or
otherwise modified from time to time the "CREDIT AGREEMENT"). Capitalized terms
used herein without definition shall have the meanings set forth in the Credit
Agreement.
The undersigned Responsible Officer hereby certifies to Agent and Lenders
that:
(a) Attached hereto as Schedule 1 is a calculation of the Borrowing
Base for Borrower as of the above date;
(b) based on such schedule, the Borrowing Base as the above date is:
$__________________
(c) based on such schedule, Net Borrowing Availability as of the above
date is:
$__________________
IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this ____ day of ___________, ____.
By
-----------------------------------------
Name
---------------------------------------
Title
---------------------------of AAR Corp.
Exhibit C - Page 1
BORROWING BASE CALCULATION
AAR CORP. CONSOLIDATED
1. INVENTORY OF BORROWERS AND OTHER CREDIT PARTIES $
-----------
2. LESS ANY INVENTORY: $
-----------
that is not owned by any Borrower or any other Credit Party free and clear ------------
of all Liens and rights of any other Person (including the rights of a
purchaser that has made progress payments and the rights of a surety that
has issued a bond to assure performance with respect to that Inventory),
except the Liens in favor of Agent, on behalf of itself and Lenders
adjustments where the inventory general ledger balance is lower than the ------------
inventory perpetual balance
adjustments that represent timing differences, system errors, unreconciled ------------
differences, physical count adjustments, misc. accruals, etc.
that is not of a type held for sale in the ordinary course of a Borrower's ------------
or other Credit Party's business
that consists of work-in-process ------------
that is placed on consignment or is in transit ------------
that in Agent's reasonable determination or in the determination of ------------
Borrowers' management is excess, obsolete, unsaleable, shopworn, seconds,
damaged or unfit for sale
that consists of consumable parts (nuts, screws, bolts, etc.), display ------------
items, samples or packing or shipping materials or manufacturing supplies
that consists of goods which have been returned by the buyer ------------
that consists of goods which requires repair/re-work (condition codes ------------
S,B,A,R.X)
value that represents Inter-company profits ------------
Exhibit C - Page 2
that is not covered by casualty insurance meeting the requirements of ------------
Section 4.4(b) of the Credit Agreement
that is xxxx and hold Inventory ------------
that is located outside the U.S. ------------
that is (a) not located on premises owned by a Borrower or a Credit Party ------------
or (b) is located on premises leased by Borrower or a Credit Party, or
stored with a bailee, warehouseman, processor or similar Person, unless
Agent has given its prior consent thereto and unless (i) a Lien waiver and
collateral access agreement, in form and substance satisfactory to Agent
has been delivered to Agent, together, with respect to consignments, with
any and all duly authorized UCC financing statements required by Agent
naming such Person as debtor, the applicable Borrower or other Credit Party
as secured creditor and Agent as assignee or (ii) Reserves satisfactory to
Agent have been established with respect thereto
as to which Agent's Lien therein, on behalf of itself and Lenders, is not a ------------
first priority perfected Lien
as to which any of the representations or warranties pertaining to such ------------
Inventory set forth in any Financing Document is untrue
that consists of Hazardous Materials or goods that can be transported or ------------
sold only with licenses that are not readily available
that is covered by a negotiable document of title, unless such document has ------------
been delivered to Agent
that is otherwise unacceptable to Agent in its reasonable credit judgment ------------
3. TOTAL ELIGIBLE INVENTORY BEFORE APPRAISAL COMPANY AND MLC ADVANCE RATES ------------
(Line 1 less Line 2)
Exhibit C - Page 3
4. NET FORCED PARTS LIQUIDATION PERCENTAGE PER APPRAISAL (To be ------------
updated quarterly by SH&E or appraisal firm acceptable Agent)
5. TOTAL ELIGIBLE PARTS INVENTORY AFTER LIQUIDATION PERCENTAGE (Line 3 ------------
multiplied by Line 4)
6. SIXTY PERCENT OF LINE 5 ------------
7. TOTAL ELIGIBLE AIRCRAFT AND ENGINE INVENTORY (FLV) BEFORE MAXIMUM CAP (To ------------
be updated quarterly by SH&E or appraisal firm acceptable to Agent)
8. MAXIMUM CAP - TOTAL ELIGIBLE AIRCRAFT AND ENGINE INVENTORY (FLV - To be ------------
updated quarterly by SH&E or appraisal firm acceptable to Agent)
9. SIXTY PERCENT OF THE LESSER OF LINE 7 OR LINE 8 ------------
10. TOTAL AVAILABLE PARTS INVENTORY AND AIRCRAFT AND ENGINES INVENTORY PRIOR TO ------------
APPLICATION OF EXCLUSIONS AND RESERVES ESTABLISHED BY AGENT PURSUANT TO THE
CREDIT AGREEMENT (LINES 6 PLUS LINE 9)
11. LESS: AT ALL TIMES COLLATERAL AVAILABILITY RESERVE ($5,000,000) ------------
12. LESS: RENT RESERVES (IF APPLICABLE) ------------
13. COLLATERAL PORTION OF BORROWING BASE (Line 10 less Line 11 and Line 12) ------------
14. CONSOLIDATED NET WORTH COVENANT (AS CALCULATED BELOW) MINUS $3,000,000 ------------
15. REVOLVING LOAN COMMITMENT ------------
16. OUTSTANDING REVOLVING LOANS ------------
Exhibit C - Page 4
17. OUTSTANDING LETTER OF CREDIT LIABILITIES ------------
18. REVOLVING LOAN OUTSTANDINGS (sum of Lines 16 and 17) ------------
19. NET BORROWING AVAILABILITY (the least of (a) Line 13 less Line 18, (b) Line ------------
14 less Line 18, (c) Line 15 less Line 18
CONSOLIDATED NET WORTH COVENANT CALCULATION:*
$75MM BANK OF AMERICA PRIVATE PLACEMENT
"LIMITATIONS ON DEBT" COVENANT TEST (SEC. 10.3)
MAINTENANCE OF CONSOLIDATED DEBT (SEC. B)
CONSOLIDATED NET WORTH TO TOTAL SENIOR DEBT COVENANT CALCULATION:
CONSOLIDATED NET WORTH:
TOTAL SENIOR DEBT CALCULATION:
1. Senior Bank Debt
2. Plus: Senior Other
3. Equals: Total Senior Debt
Requirement: Total Senior Debt less than or equal to 10% of Consolidated Net
Worth
----------
* Any or all of the following computations shall be appropriately modified to
reflect any amendment, modification, replacement or refinancing of the Note
Purchase Documents.
Exhibit C - Page 5
[XXXXXXX XXXXX LOGO] Exhibit D to Credit Agreement (Notice of Borrowing)
[BORROWER]
DATE: ___________, ______
This certificate is given by ____________________, a Responsible Officer of
___________, pursuant to Section 2.1(b) of that certain Credit Agreement dated
as of May 29, 2003 among AAR Corp., AAR Distribution, Inc., AAR Parts Trading,
Inc., AAR Manufacturing, Inc., AAR Engines Services, Inc., AAR Xxxxx Services,
Inc., AAR Aircraft & Engine Sales & Leasing, Inc. and AAR Powerboss, Inc.
(individually a "BORROWER" and collectively "BORROWERS"), the Lenders from time
to time party thereto and Xxxxxxx Xxxxx Capital, a division of Xxxxxxx Xxxxx
Business Financial Services Inc., as Agent for Lenders (as such agreement may
have been amended, restated, supplemented or otherwise modified from time to
time the "CREDIT AGREEMENT"). Capitalized terms used herein without definition
shall have the meanings set forth in the Credit Agreement.
The undersigned Responsible Officer hereby gives notice to Agent of AAR's
request, on its own behalf and on behalf of each other Borrower, to: [COMPLETE
AS APPROPRIATE]
(a) on [ DATE ] borrow $[__________] of Revolving Loans, which
Revolving Loans shall be [PRIME RATE LOANS/LIBOR LOANS HAVING AN INTEREST PERIOD
OF ______ MONTH(s)];
(b) on [ DATE ] convert $[________]of the aggregate outstanding
principal amount of the [_______] Loan, bearing interest at the [________] Rate,
into a(n) [________] Loan [AND, IN THE CASE OF A LIBOR LOAN, HAVING AN INTEREST
PERIOD OF [_____] MONTH(s)];
(c) on [ DATE ] continue $[________]of the aggregate outstanding
principal amount of the [_______] Loan, bearing interest at the LIBOR, as a
LIBOR Loan having an Interest Period of [_____] month(s).
The undersigned officer hereby certifies that, both before and after giving
effect to the request above (i) each of the conditions precedent set forth in
Section 8.2(b), 8.2(c), 8.2(d) and 8.2(e) have been satisfied, (ii) all of the
representations and warranties contained in the Credit Agreement and the other
Financing Documents are true, correct and complete in all material respects as
of the date hereof, and (iii) no Default or Event of Default has occurred and is
continuing on the date hereof.
Exhibit D - Page 1
IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this ____ day of ___________, ____.
By
-----------------------------------------
Name
---------------------------------------
Title
---------------------------of AAR Corp.
Exhibit D - Page 2
