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BUSINESS LOAN AGREEMENT
November 27, 1996
between
HAWKER PACIFIC, INC., a California corporation,
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
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TABLE OF CONTENTS
1. DEFINITIONS............................................................1
2. LINE OF CREDIT (FACILITY NO. 1).......................................10
2.1 Line of Credit Amount.....................................................10
2.2 Availability Period.......................................................10
2.3 Purpose...................................................................11
2.4 Interest Rate.............................................................11
2.5 Repayment Terms...........................................................11
2.6 Letters of Credit.........................................................12
3. TERM LOAN (FACILITY NO. 2)............................................13
3.1 Loan Amount...............................................................13
3.2 Availability..............................................................13
3.3 Purpose ..................................................................13
3.4 Interest Rate.............................................................14
3.5 Repayment Terms...........................................................14
3.6 Mandatory Prepayments.....................................................15
4. CAPITAL EXPENDITURE FACILITY (FACILITY NO. 3).........................15
4.1 Capital Expenditure Loans.................................................15
5. OPTIONAL INTEREST RATE................................................17
5.1 Optional Rate.............................................................17
5.2 Offshore Rate.............................................................17
6. FEES, EXPENSES........................................................19
6.l Fees......................................................................19
6.2 Expenses..................................................................20
6.3 Reimbursement Costs.......................................................20
7. COLLATERAL............................................................21
7.1 Personal Property.........................................................21
7.2 Guarantees; Personal Property Supporting Guarantees.......................21
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7.3 Subordination.............................................................21
8. DISBURSEMENTS, PAYMENTS AND COSTS.....................................21
8.1 Requests for Credit.......................................................21
8.2 Disbursements and Payments................................................22
8.3 Telephone and Telefax Authorization.......................................22
8.4 Direct Debit..............................................................23
8.5 Direct Debit (Line of Credit).............................................23
8.6 Banking Days..............................................................23
8.7 Taxes.....................................................................24
8.8 Additional Costs..........................................................24
8.9 Interest Calculation......................................................24
8.10 Default Rate.............................................................24
8.11 Overdrafts...............................................................24
8.12 Collections on Accounts Receivable.......................................25
9. CONDITIONS............................................................25
9.1 Authorizations............................................................25
9.2 Incumbency Certificates; Governing Documents..............................26
9.3 Security Agreements, Etc..................................................26
9.4 Evidence of Priority......................................................26
9.5 Consent to Removal........................................................26
9.6 Insurance.................................................................26
9.7 Business Interruption Insurance...........................................26
9.8 Guaranties................................................................26
9.9 Subordination Agreement...................................................26
9.10 Equity Infusion..........................................................26
9.11 Subordinated Debt........................................................27
9.12 Acquisition..............................................................27
9.13 Legal Opinion............................................................27
9.14 Solvency Certificate.....................................................27
9.15 Payment of Fees..........................................................27
9.16 Superfund Letter.........................................................27
9.17 Employment Agreements and Material Contracts.............................28
9.18 Consents.................................................................28
9.19 Certain Financial Information............................................28
9.20 Liquidity................................................................29
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9.21 Other Items.............................................................29
10. REPRESENTATIONS AND WARRANT...........................................29
10.1 Organization of Borrower and AqHawk.....................................29
10.2 Authorization...........................................................29
10.3 Enforceable Agreement...................................................29
10.4 Good Standing...........................................................29
10.5 No Conflicts............................................................29
10.6 Financial Information...................................................30
10.7 Lawsuits................................................................30
10.8 Collateral..............................................................30
10.9 Permits, Franchises.....................................................30
10.10 Other Obligations.......................................................30
10.11 Income Tax Returns......................................................30
10.12 No Event of Default.....................................................31
10.13 Merchantable Inventory..................................................31
10.14 ERISA Plans.............................................................31
10.15 Location of Borrower....................................................32
10.16 Certain Collateral......................................................32
10.17 The Acquisition.........................................................32
10.18 Environmental...........................................................32
10.19 Governmental Regulation.................................................32
10.20 Copyrights, Patents, Trademarks and Licenses, etc.......................33
10.21 Subsidiaries............................................................33
10.22 Contracts...............................................................33
11. COVENANTS.............................................................33
11.1 Use of Proceeds..........................................................33
11.2 Use of Proceeds: Ineligible Securities...................................33
11.3 Financial Information....................................................34
11.4 Quick Ratio..............................................................37
11.5 Fixed Charge Coverage Ratio..............................................37
11.6 Profitability............................................................37
11.7 Other Debts..............................................................38
11.8 Other Liens..............................................................38
11.9 Capital Expenditures for Shipsets........................................39
11.10 Capital Expenditures for 1996...........................................39
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11.11 Capital Expenditures for Other Assets...................................39
11.12 Leases..................................................................39
11.13 Dividends and Other Payments............................................39
11.14 Loans to Officers.......................................................40
11.15 Notices to Bank.........................................................40
11.16 Books and Records.......................................................40
11.17 Audits..................................................................40
11.18 Compliance with Laws....................................................41
11.19 Preservation of Rights..................................................41
11.20 Maintenance of Properties...............................................41
11.21 Perfection of Liens.....................................................41
11.22 Places of Business......................................................41
11.23 Cooperation.............................................................41
11.24 Insurance...............................................................42
(a) Insurance Covering Collateral........................................42
(b) General Business Insurance...........................................42
(c) Evidence of Insurance................................................42
11.25 Additional Negative Covenants...........................................42
11.26 ERISA Plans.............................................................43
11.27 Inspection of Property and Books and Records............................43
11.28 Environmental Laws......................................................44
11.29 Sabena Shipset..........................................................44
11.30 Swap Agreements.........................................................44
11.31 Collection of Accounts..................................................44
11.32 AqHawk..................................................................44
11.33 Liquidity...............................................................44
11.34 Amendment to the BTR Environmental Indemnity............................45
12. DEFAULT...............................................................45
12.1 Failure to Pay...........................................................45
12.2 Lien Priority............................................................45
12.3 Loan Documents...........................................................45
12.4 False Information........................................................45
12.5 Death....................................................................45
12.6 Bankruptcy...............................................................45
12.7 Receivers................................................................46
12.8 Judgments................................................................46
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12.9 Government Action........................................................46
12.10 Material Adverse Change.................................................46
12.11 Cross-default...........................................................46
12.12 Other Bank Agreements...................................................47
12.13 ERISA Plans.............................................................47
12.14 Environmental Indemnnity Breach.........................................47
12.15 Change in Control or Management.........................................47
12.16 Subordination...........................................................48
12.17 Balance Sheet...........................................................48
12.18 Other Breach Under Agreement............................................48
13. ENFORCING THIS AGREEMENT; MISCELLANEOUS...............................48
13.1 GAAP.....................................................................48
13.2 California Law...........................................................48
13.3 Successors and Assigns...................................................49
13.4 Arbitration..............................................................49
13.5 Severability; Waivers....................................................51
13.6 Administration Costs.....................................................51
13.7 Attorneys' Fees..........................................................51
13.8 One Agreement............................................................52
13.9 Disposition of Schedules, Reports, Etc. Delivered by Borrower............52
13.10 Returned Merchandise....................................................52
13.11 Verification of Receivables.............................................53
13.12 Indemnification.........................................................53
13.13 Notices.................................................................53
13.14 Headings................................................................53
13.15 Counterparts............................................................54
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BUSINESS LOAN AGREEMENT
This Business Loan Agreement (this "Agreement") dated as of November
27, 1996 is made between BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("BANK") and HAWKER PACIFIC, INC., a California corporation ("BORROWER").
Borrower and Bank hereby agree as follows:
1. DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the following
terms have the meanings indicated for the purposes of this Agreement:
"ACCEPTABLE RECEIVABLE" means an account receivable which satisfies the
following requirements:
(a) The account has resulted from the sale of goods or the
performance of services by Borrower in the ordinary course of Borrower's
business.
(b) There are no conditions which must be satisfied before
Borrower is entitled to receive payment of the account. Accounts arising
from COD sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to
payment and has not asserted any counterclaims or offsets against Borrower.
To the extent any credit balances exist in favor of the debtor, such credit
balances shall be deducted from the account balance.
(d) The account represents a genuine obligation of the debtor
for goods sold and accepted by the debtor, or for services performed for
and accepted by the debtor.
(e) Borrower has sent an invoice to the debtor in the amount of
the account.
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(f) The account is owned by Borrower free of any title defects
or any liens or interests of others except the security interest in favor
of Bank.
(g) The debtor upon the account is not any of the following:
(i) an employee, affiliate, parent or subsidiary of
Borrower, or an entity which has common officers or directors with
Borrower.
(ii) the U.S. government or any agency or department of
the U.S. government other than the Coast Guard Contract (and then only
to the extent that Borrower has, prior to January 31, 1997, caused an
effective assignment of the Coast Guard Contract to occur under the
Federal Assignment of Claims Act assigning the interest of Bank in the
Coast Guard Contract, to the satisfaction of Bank), and any other
contract with the United States of America or its agencies and
instrumentalities which is reasonably acceptable to Bank and as to
which such a filing has been completed.
(iii) any state, county, city, town or municipality.
(iv) any person or entity located in a foreign country
(other than the Canadian provinces of Quebec, Ontario, British
Columbia, Saskatchewan and Manitoba) unless the account is
supported by a letter of credit issued by a bank acceptable to Bank or
by FCIA insurance or other credit insurance acceptable to Bank in its
sole discretion.
(v) any person or entity to whom Borrower is obligated
for goods purchased by Borrower for services performed for Borrower
(but only to the extent of such obligation).
(h) The account is not in default. An account will be considered in
default if any of the following occur:
(i) The account is not paid within the 90 day period
starting on its original invoice date (it being understood that the
entire amount of such accounts which is 90 days overdue shall be
excluded from
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Borrower's gross accounts receivable balance without regard to any
credit balances due to the account debtor with respect to any such
account);
(ii) The debtor obligated upon the account suspends
business, makes a general assignment for the benefit of creditors, or
fails to pay its debts generally as they come due; or
(iii) Any petition is filed by or against the debtor
obligated upon the account under any bankruptcy law or any other law
or laws for the relief of debtors;
(i) The account is not the obligation of a debtor who is in default
(as defined in (h) above) on 25% or more of the accounts upon which
such debtor is obligated.
(j) The account does not arise from the sale of goods which remain in
Borrower's possession or under Borrower's control.
(k) The account is not evidenced by a promissory note or chattel
paper.
(l) The account is otherwise acceptable to Bank.
In addition to the foregoing limitations, the dollar amount of accounts
included as Acceptable Receivables which are the obligations of a single
debtor shall not exceed 20% of the total amount of Borrower's gross
accounts receivable at that time, provided that such concentration limit
for Federal Express will be 40% unless and until 15% of the gross accounts
receivable of Borrower from Federal Express remain unpaid for 90 days past
their respective original invoice dates. To the extent the total accounts
owed by any debtor exceeds that debtor's concentration limit pursuant to
this paragraph, the amount of any such excess shall be excluded.
"ACCEPTABLE INVENTORY" means inventory which satisfies the following
requirements:
(a) The inventory is owned by Borrower free of any title defects
or any liens or interests of others except the security interest in favor
of Bank.
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(b) The inventory is permanently located at United States
domestic locations of Borrower which Borrower has disclosed to Bank, as to
which Bank has an appropriate Uniform Commercial Code financing statement
on file, and which are otherwise acceptable to Bank. If the inventory is
covered by a negotiable document of title (such as a warehouse receipt) that
document must be delivered to Bank. Inventory which is in transit
(including but not limited to any used exchange parts shipped from
Borrower's customer but which have not reached the United States domestic
locations of Borrower) is not acceptable unless it is covered by a
commercial Letter of Credit issued by Bank and the seller of the inventory
is required to present shipping or title documents to Bank as a condition
to obtaining payment.
(c) The inventory is held for sale in the ordinary course of
Borrower's business and is of good and merchantable quality. Inventory
which is obsolete, unsalable, damaged, defective, discontinued, slow-moving
or excess inventory, or which has been returned by the buyer, is not
acceptable. For purposes of this clause (c), inventory shall be considered
slow moving if Borrower has not sold inventory or otherwise dealt in of
that type within a 12 month period. Inventory shall be considered "excess
inventory" if Borrower's supply of inventory of that type is in excess of
the amount which is salable within a 24 month period, as determined by Bank
given Borrower's historical sales information. Work-in-process, display
items, and packing and shipping materials and supplies are not acceptable
inventory and are excluded.
(d) The inventory is not placed on consignment or otherwise
placed with the customer or on the customer's premises.
(f) The inventory does not consist of freight or duty.
(g) The inventory consists of property other than Shipsets.
(h) The inventory is otherwise acceptable to Bank.
"ACQUISITION" means the acquisition by AqHawk of Borrower on the Closing
Date pursuant to the Acquisition Agreement.
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"ACQUISITION AGREEMENT" means that certain Agreement of Purchase and Sale
of Stock by and among BTR Dunlop, Inc., a Delaware corporation, BTR, Inc.,
a Delaware corporation, Borrower and AqHawk, of even date herewith and
effective as of November 1, 1996, as in effect on the date of this
Agreement.
"AQHAWK" means AqHawk, Inc., a California corporation, which, concurrently
with the execution of this Agreement, will acquire Borrower pursuant to the
Acquisition Agreement.
"AQHAWK GUARANTY" means the unlimited continuing guaranty of the
obligations of Borrower under this Agreement and the other Loan Documents
issued by AqHawk on the Closing Date, as at any time amended.
"XXXXXXX" means Xxxxxxx X. Xxxxxxx, an individual residing in Orem, Utah.
"XXXXXXX LIMITED GUARANTY" means the limited continuing guaranty of the
obligations of Borrower under this Agreement and the other Loan Documents
issued by Xxxxxxx on the Closing Date, as at any time amended.
"BORROWER" means Hawker Pacific, Inc., and its successors and assigns,
including Hawker Pacific, Inc., as survivor of the proposed merger of
Hawker Pacific, Inc. and AqHawk.
"BORROWER SECURITY AGREEMENT" means that certain Borrower Security
Agreement of even date herewith made by Borrower in favor of Bank, as at
any time amended.
"BORROWING BASE" means the sum of:
(a) 85% of the balance due on Acceptable Receivables; and
(b) The lesser of Six Million Dollars ($6,000,000) or 50% of the
value of Acceptable Inventory. In determining the value of Acceptable
Inventory to be included in the Borrowing Base, Bank will use the lowest of
(i) Borrower's cost, (ii) Borrower's estimated market value, or (iii) Bank's
independent determination of the resale value of such inventory in such
quantities and on such terms as Bank deems appropriate.
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"CAPITAL EXPENDITURE LOAN UNUSED AMOUNT" means, as of each date of
determination, the excess, if any, as of that date of $3,000,000 over the
aggregate amount of Capital Expenditure Loans made through and including
such date.
"CAPITAL EXPENDITURE LOANS" means loans to Borrower made pursuant to
Facility No. 3, as described in Section 4.
"CASH FLOW" means, for any fiscal period, the sum, without duplication, of
Borrower's net income, plus income tax expense, plus gross interest
expense, plus depreciation and amortization, minus extraordinary income and
gains, minus gains (or plus losses) on sales of fixed assets, minus
capital expenditures (net of purchase money financing, which shall include
the amount of Capital Expenditure Loans made during that period), minus
cash taxes paid or payable, plus the amount of any EPA Payments to the
extent that such EPA Payments reduce net income, in each case for that
period, determined in accordance with generally accepted accounting
principles, consistently applied.
"CLOSING DATE" means the date upon which each of the conditions precedent
set forth in Section 9 of this Agreement are satisfied or waived in writing
by Bank and the initial loans under this Agreement are funded.
"COAST GUARD CONTRACT" means that certain Xxxxxxxx Xx. XXXX00-00-X-00000
dated September 20, 1995, between Borrower and the United States Coast
Guard Aircraft Repair and Supply Center, as amended from time to time.
"DEFAULT" means any event or circumstance which, with the giving of notice
or the passage of time, or both, would constitute an Event of Default.
"EPA PAYMENTS" means payments in an aggregate amount not to exceed $658,000
made by Borrower pursuant to (i) the Settlement Agreement and Limited
Release dated as of November 21, 1994 among Borrower, Xxxxxx X. Xxxxxx,
Xxxxx X. Xxxxxx, The Xxxxxx Living Trust, Xxxxxx X. Xxxxxxxx and Xxxxx
Xxxxxxxx, and the Addendum thereto and (ii) the proposed Agreement and
Limited Release to be entered into among Borrower, Xxxxxx X. Xxxxxx, Xxxxx
X. Xxxxxx, The Xxxxxx Living Trust, Xxxxxx X. Xxxxxxxx, Xxxxx Xxxxxxxx,
Xxxxxx Hannefin Corporation, and Inchcape, Inc. (which remains unexecuted
by the parties thereto), and (iii) the
6
proposed Consent Decree among the United States of America, the State of
California, Allied Signal, Inc. et al (which is currently approved by the
litigants but not yet by the court).
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any governmental
authorities, in each case relating to environmental, health, safety and
land use matters.
"EVENT OF DEFAULT" means any of the circumstances or events constituting
defaults hereunder and listed in Section 12.
"EXCESS CASH FLOW" means, for any fiscal period of Borrower, the sum,
without duplication during that fiscal period, of Borrower's net income,
plus income tax expense, plus interest expense, plus amortization and
depreciation expense, minus gains (or plus losses) on sales of fixed
assets, plus non-cash extraordinary losses, minus non-cash extraordinary
income minus capital expenditures (net of the amount of any associated
purchase money financing) minus 75% of the increase (or plus 75% of the
decrease) in working capital, minus cash income taxes paid or payable,
minus interest payments (including that portion of capital lease payments
construed as interest), minus scheduled payments of principal with respect
to indebtedness for borrowed money and capital leases, and minus voluntary
prepayments of Facility No. 2 and Facility No. 3.
"FACILITY NO. 1 UNUSED AMOUNT" means, as of each date of determination, the
difference between (i) the Facility No. 1 Commitment, and (ii) the Facility
No.1 Outstanding Amount.
"FIXED CHARGES" is defined as the sum of gross interest expense paid or
payable by Borrower in cash (but excluding interest on the Subordinated
Note), plus scheduled principal payments on indebtedness for borrowed money
and capital leases.
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"INELIGIBLE SECURITIES" means securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
"INTERCOMPANY NOTE" means the $19,178,841 promissory note of even date
herewith made by AqHawk in favor of Borrower and pledged to Bank.
"LETTER OF CREDIT" means any of the standby or commercial letters of credit
issued by Bank for the account of Borrower pursuant to Section 2.6.
"LIQUIDITY" means, as of each date of determination, the sum of the
Facility No. 1 Unused Amount as of that date, PLUS Borrower's cash balances
on that date.
"LOAN DOCUMENTS" means this Agreement, the Borrower Security Agreement, the
AqHawk Guaranty, the Xxxxxxx Limited Guaranty, the Lockbox Agreement, the
Intercompany Note, each Letter of Credit, the Pledge Agreement - Borrower,
the Pledge Agreement - AqHawk, and each other instrument, document and
agreement now or hereafter executed by Borrower, AqHawk, Xxxxxxx, or any of
their respective shareholders or affiliates in connection with this
Agreement.
"LOCKBOX" means a post office box established by Borrower pursuant to the
Lockbox Agreement.
"LOCKBOX ACCOUNT" means a blocked bank deposit account subject to the first
priority lien of Bank into which remittances to a Lockbox are deposited on
a daily basis.
"LOCKBOX AGREEMENT" means each agreement establishing a Lockbox and Lockbox
Account, in any event providing for (i) the deposit of all remittances with
respect to accounts receivable of Borrower to the Lockbox, (ii) the deposit
of remittances received in the Lockbox to a Lockbox Account, and (iii) a
first priority lien in favor of Bank with respect to the contents of the
Lockbox and Lockbox Account.
"PERMITTED MANAGEMENT FEES" means fees payable to Unique, in equal
installments and not less frequently than quarterly, in an annual amount
not to exceed $300,000.
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"PLEDGE AGREEMENT - AqHAWK" means the Pledge Agreement of even date
herewith made by the shareholders in AqHawk in favor of Bank to secure the
obligations of Borrower hereunder (on a non-recourse basis), pursuant to
which such shareholders have pledged 100% of the capital stock of AqHawk to
Bank, as at any time amended.
"PLEDGE AGREEMENT - BORROWER" means the Pledge Agreement of even date
herewith made by AqHawk in favor of Bank to secure the AqHawk Guaranty,
pursuant to which AqHawk has pledged 100% of the capital stock of Borrower
to Bank, as at any time amended.
"QUICK ASSETS" means cash, cash balances, short-term cash investments (but
only to the extent that the foregoing exceed the then outstanding balance
under Facility No. 1), net trade receivables and marketable securities not
classified as long-term investments.
"REFERENCE RATE" is the rate of interest publicly announced from time to
time by Bank in San Francisco, California, as its Reference Rate. The
Reference Rate is set by Bank based on various factors, including Bank's
costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans. Bank may price
loans to its customers at, above, or below the Reference Rate. Any change
in the Reference Rate shall take effect at the opening of business on the
day specified in the public announcement of a change in Bank's Reference
Rate.
"SABENA SHIPSET" means a Shipset for a Boeing 747-400 owned by Borrower as
of the Closing Date and further described on Schedule 2.
"SHIPSET" means a landing gear core set for a fixed wing or xxxxx equipped
aircraft.
"SUBORDINATED NOTE" means that certain $6,500,000 Subordinated Promissory
Note of even date herewith made by AqHawk in favor of Unique, as at any
time amended.
"SUBORDINATION AGREEMENT" means that certain Subordination Agreement of
even date herewith executed by Xxxxxxx, Unique, AqHawk, Borrower and Bank,
9
pursuant to which all obligations of AqHawk and Borrower to Xxxxxxx and
Unique have been subordinated to the Intercompany Note and the Loan
Documents.
"UNIQUE" means Unique Investment Corporation, a Utah, its successors and
assigns.
2. LINE OF CREDIT (FACILITY NO. 1)
2.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, Bank will
provide a line of credit ("FACILITY NO. 1") to Borrower. The maximum amount
of the line of credit (the "FACILITY NO. 1 COMMITMENT") is equal to the
lesser of (i) $10,000,000 or (ii) the Borrowing Base.
(b) This is a revolving line of credit for advances with a
within-line facility for Letters of Credit (the maximum effective amount of
which shall not exceed $2,000,000 at any time). During the availability
period, Borrower may repay principal amounts and reborrow them, to the
extent of the excess from time to time of (i) the Facility No. 1 Commitment
over (ii) the outstanding principal balance of the line of credit under
Facility No. 1 Plus the outstanding amounts of any Letters of Credit,
including amounts drawn on Letters of Credit and not yet reimbursed (such
aggregate amount being the "FACILITY NO. 1 OUTSTANDING AMOUNT").
(c) Each advance must be for at least $100,000 or, if less, for
the Facility No. 1 Unused Amount.
(d) Borrower agrees not to permit the Facility No. 1 Outstanding
Amount to at any time exceed the Facility No. 1 Commitment. If Borrower
exceeds this limit, Borrower will immediately pay the excess to Bank upon
Bank's demand.
2.2 AVAILABILITY PERIOD. The line of credit is available between the
date of this Agreement and November 30, 1999 (the "FACILITY NO. 1 EXPIRATION
DATE"), provided that Bank will not be required to make any advances or issue
any Letters of
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Credit under Facility No. 1 if any Default or Event of Default exists under this
Agreement.
2.3 PURPOSE. The line of credit shall be used to partially finance the
Acquisition (by means of an advance under the Intercompany Note), and for
working capital for operations of Borrower and for the issuance of Letters of
Credit thereafter.
2.4 INTEREST RATE
(a) Unless Borrower elects an optional interest rate in the
manner described in Section 5, loans under Facility No. 1 shall bear
interest at Bank's Reference Rate.
(b) Borrower may prepay the loans under Facility No. 1 in full
or in part at any time in an amount not less than $10,000 (or the remaining
principal balance under Facility No. 1), subject to the limits set forth in
Section 5.
2.5 REPAYMENT TERMS
(a) Borrower will pay all accrued unpaid interest on the last
business day of each calendar month commencing on December 31, 1996 and
upon the termination of the Facility No. 1 Commitment.
(b) Borrower will repay in full all principal and any unpaid
interest or other charges outstanding under this line of credit no later
than the Facility No. 1 Expiration Date. Interest on any amount bearing
interest at an Offshore Rate (as defined in Section 5) shall be paid on the
earliest of the last day of each calendar month, at the end of the
applicable interest period, and in any event on the Facility No. 1
Expiration Date.
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2.6 LETTERS OF CREDIT. The Facility No. 1 line of credit may be used
for the issuance of Letters of Credit, provided that the aggregate effective
face amount of all outstanding Letters of Credit PLUS the amount of any unpaid
reimbursement obligations of Borrower thereunder shall not exceed $2,000,000 at
any time. The within line amount for Letters of Credit shall be used for the
issuance of:
(i) commercial Letters of Credit in a form and having
beneficiaries acceptable to Bank. Each such Letter of Credit shall have a
maximum maturity of 180 days but in any event shall not extend beyond the
Facility No. 1 Expiration Date. Each commercial Letter of Credit will
require drafts payable at sight;
(ii) standby Letters of Credit having beneficiaries and terms
acceptable to Bank with a maximum maturity of 365 days but not to extend
beyond the Facility No. 1 Expiration Date, PROVIDED that standby Letters of
Credit in support of workers compensation obligations shall not exceed
$750,000 at any time. Standby Letters of Credit may contain provisions
allowing for their automatic extension unless Bank is notified, within
thirty days of their scheduled expiration, of their non-renewal, provided
that they shall in no event extend beyond the Facility No. 1 Expiration
Date.
Borrower agrees:
(a) any sum drawn under a Letter of Credit may, at the option of
Bank, be added to the principal amount outstanding under Facility No. 1.
The amount will bear interest at the Reference Rate and shall be payable
upon demand.
(b) if an Event of Default exists, to pay to Bank an amount
equal to the aggregate effective face amount of all outstanding Letters of
Credit, and all amounts which remain unreimbursed with respect to Letters
of Credit to be applied to such unreimbursed amounts or held as cash
collateral for the obligations of Borrower under such Letters of Credit.
(c) the issuance of any Letter of Credit and any amendment to a
Letter of Credit is subject to Bank's written approval and must be in form
and substance acceptable to Bank and in favor of a beneficiary acceptable
to Bank.
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(d) to sign Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement for Standby Letter of Credit,
as applicable.
(e) to pay a letter of credit fee with respect to each standby
Letter of Credit in an amount equal to the greater of (i) $1000 per annum
(or, if higher, then Bank's generally applicable minimum issuance fee for
standby letters of credit), or (ii) 1.50% per annum calculated on the face
amount thereof, in each case payable upon issuance and thereafter quarterly
in advance, provided that, if there is a Default or Event of Default exists
under this Agreement, at Bank's option, the amount of the fee shall be
increased to 4.5% per annum.
(f) to pay any issuance fees with respect to commercial Letters
of Credit, and any amendment and/or other fees with respect to commercial
Letters of Credit and/or standby Letters of Credit that Bank notifies
Borrower will be charged for issuing and processing Letters of Credit for
Borrower, in accordance with Bank's typical schedule of fees.
(g) to allow Bank to automatically charge its checking account
or other deposit accounts for applicable fees, discounts, and other
charges.
3. TERM LOAN (FACILITY NO. 2).
3.1 LOAN AMOUNT. Subject to the fulfillment of the conditions
precedent set forth in Section 9, Bank agrees to provide a term loan ("FACILITY
NO. 2") to Borrower in the amount of Thirteen Million Five Hundred Thousand
Dollars ($13,500,000) on the Closing Date.
3.2 AVAILABILITY. The Facility No. 2 term loan will be made in a
single disbursement on the Closing Date.
3.3 PURPOSE. The proceeds of the Facility No. 2 term loan shall be
loaned by Borrower to AqHawk via the Intercompany Note and shall be used to
partially finance the Acquisition.
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3.4 INTEREST RATE
(a) Unless Borrower elects an optional interest rate in the
manner described in Section 5, loans under Facility No. 2 shall bear
interest rate at Bank's Reference Rate.
(b) Borrower may voluntarily prepay the loan in full or in part
at any time in amounts which are not less than $100,000 (subject to its
concurrent payment of applicable termination fees described in Section 5).
Each such prepayment will be applied to the most remote installment of
principal outstanding under Facility No. 2.
3.5 REPAYMENT TERMS
(a) Borrower will pay all accrued unpaid interest on December
31, 1996, and then monthly on the last business day of each calendar month
thereafter and upon any payment of all or part of the principal of the loan
with respect to the amount being paid. Interest on any amount bearing
interest with respect to an Offshore Rate shall be paid on the earlier of
the last day of each calendar month, at the end of the applicable interest
period, and in any event on the December 31, 2003.
(b) Borrower will repay principal in successive quarterly
installments beginning on March 31, 1997 and on the last calendar day of
each successive June, September, December and March in the following
amounts:
Year during
which due Amount of each installment
----------- ---------------------------
1997 $ 212,500
1998 362,500
1999 425,000
2000 562,500
2001 562,500
2002 625,000
2003 625,000
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On December 31, 2003 Borrower will repay all principal and any unpaid
interest or other charges then remaining outstanding under Facility No. 2.
3.6 MANDATORY PREPAYMENTS. In addition to the other scheduled
payments of principal required hereunder, Borrower shall repay an amount of
principal outstanding under Facility No. 2 equal to 100% of the net after-tax
cash proceeds received or receivable from any sale of equipment or other fixed
assets of Borrower, on the date of receipt thereof, which amount shall be
applied to the outstanding installments of Facility No. 2 in inverse order of
their maturity; PROVIDED THAT, if no Default or Event of Default exists, only
the first $2,500,000 of such net after tax proceeds from the sale of Sabena
Shipset pursuant to Section 11.31 shall be subject to the prepayment requirement
of this Section if such sale takes place prior to January 1, 1998. To the extent
that Facility No. 2 has been repaid in full, Borrower shall instead make like
prepayments of any outstanding obligations under Facility No. 3, to be applied
to installments due under Facility No. 3 in the inverse order of their maturity.
4. CAPITAL EXPENDITURE FACILITY (FACILITY NO.3).
4.1 CAPITAL EXPENDITURE LOANS.
(a) In addition to the other credit provided under this
Agreement, during the availability period set forth below, unless a Default
or Event of Default exists under this Agreement, Borrower may request
Capital Expenditure Loans from Bank in an aggregate principal amount not to
exceed Three Million Dollars ($3,000,000). The availability period for such
loans is from the date of this Agreement through November 30, 1998. Any
amount repaid with respect to Capital Expenditure Loans may not be
reborrowed.
(b) Unless Borrower elects an optional interest rate for Capital
Expenditure Loans in the manner described in Section 5, Capital Expenditure
Loans shall bear interest at Bank's Reference Rate. Interest on Capital
Expenditure Loans will be paid at the times set forth herein as applicable
to interest due in respect of Facility No. 2.
(c) Each Capital Expenditure Loan shall be used to finance a
portion of the purchase price for Shipsets for use in the ordinary course
of
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Borrower's business. All Shipsets acquired with the proceeds of Capital
Expenditure Loans shall be free and clear of any security interests, liens,
encumbrances or rights of others except the security interests of Bank
under any security agreements required under this Agreement. Each request
for a Capital Expenditure Loan shall be accompanied by either (i) a copy of
the purchase order or invoice for the equipment to be purchased with the
proceeds of the advance, or (ii) a detailed cost schedule for the Shipset
constructed and such other information as Bank may reasonably require. The
amount of each Capital Expenditure Loan shall not exceed the lesser of (x)
the cash purchase price or cost to construct the Shipset or (y) 70% of:
(i) if Bank in its discretion requests an appraisal, the
appraised value of the related Shipset (as determined by a qualified
independent appraiser approved by Bank); or
(ii) if Bank waives the requirement of such an appraisal,
the purchase price paid by Borrower for the related Shipset.
(d) As conditions precedent to each Capital Expenditure Loan:
(i) Borrower will deliver to Bank evidence acceptable to
Bank of its compliance with all of the terms of this Agreement.
(ii) Borrower shall have delivered to Bank (and Bank shall
have completed its review of, and shall have approved) each of the
following:
(x) pro forma financial statements in form and substance
acceptable to Bank demonstrating the pro forma effect of the
proposed capital expenditure, the proposed Capital Expenditure
Loan and other projected new financings, projected revenues and
working capital requirements related thereto demonstrating
projected compliance with all terms of this Agreement; and
(y) the contract entered into by Borrower which requires the
purchase or assembly of additional Shipsets.
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(e) Borrower will repay principal of each Capital Expenditure
Loan made hereunder in successive equal quarterly installments beginning on
the March 31, June 30, September 30 or December 31 next following the
making of such loan, with all remaining principal and any unpaid interest
and charges then remaining outstanding under Facility No. 3 in any event
being due and payable on December 31, 2003. Each quarterly installment
payment due under this clause (e) with respect to each Capital Expenditure
Loan shall be equal to one eighty-fourth of the initial amount of the
related Capital Expenditure Loan.
5. OPTIONAL INTEREST RATE
5.1 OPTIONAL RATE. Provided that no Default or Event of Default
exists, Borrower may elect that Portions (as defined in Section 5.2(b)) of
the loans hereunder will bear interest at the Offshore Rate in accordance with
this Section 5. The Offshore Rate is a rate per annum based upon a year of 360
days and the actual number of days elapsed. Interest will be paid on the last
day of each interest period, and, if the interest period is longer than one
month, then on the last business day of each calendar month during the interest
period. At the end of any interest period, the interest rate will revert to the
Reference Rate, unless Borrower has designated another optional interest rate
for the Portion. Subject to Section 8.10, no Portion will be converted to a
different interest rate during the applicable interest period. Upon the
occurrence of a Default or Event of Default under this Agreement, Bank may
terminate the availability of optional interest rates for interest periods
commencing after a Default or Event of Default occurs.
5.2 OFFSHORE RATE. The election of the Offshore Rate shall be subject
to the following terms and requirements:
(a) Borrower may select interest periods for Offshore Rate loans
which have durations of 1, 2, 3, 6, 9 or 12 months, provided that no such
interest period may be selected which would extend beyond the maturity of
the related facility or which would result in Borrower being unable to make
a scheduled payment of principal required hereunder without prepayment of
the related Portion (as defined below). The last day of the interest period
will be determined by Bank using the practices of the offshore dollar
inter-bank market.
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(b) Any principal amount bearing interest at an optional rate
under this Agreement is referred to as a "PORTION". Each Offshore Rate
Portion will be for an amount not less than $500,000.
The "OFFSHORE RATE" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts
in the calculation will be determined by Bank as of the first day of the
interest period.)
Offshore Rate = 0ffshore Base Rate + Margin
-------------------------
(1.00 - Reserve Percentage)
Where:
(i) "OFFSHORE BASE RATE" means the interest rate (rounded
upward to the nearest 1/16th of one percent) at which Bank's Grand
Cayman Branch, Grand Cayman, British West Indies or another branch
office of Bank selected by Bank, would offer U.S. dollar deposits for
the applicable interest period to other major banks in the offshore
dollar interbank market.
(ii) "RESERVE PERCENTAGE" means the total of the maximum
reserve percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D, rounded
upward to the nearest 1/100 of one percent. The percentage will be
expressed as a decimal, and will include, but not be limited to,
marginal, emergency, supplemental, special, and other reserve
percentages.
(iii) "MARGIN" means (x) for any amount under Facility No.
1, 1.5% per annum, and (y) for any amount outstanding under Facility
No. 2 or any Facility No. 3 Capital Expenditure Loan, 1.875% per
annum.
(c) Subject to Section 5, Borrower may voluntarily prepay any
Offshore Rate Portion upon three banking days' advance written notice
delivered to Bank. Each prepayment of an Offshore Rate Portion, whether
voluntary, by reason of acceleration or otherwise, must be accompanied by
the amount of accrued interest on the amount prepaid, and a prepayment fee
as described below.
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A "PREPAYMENT" is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this Agreement. The
prepayment fee shall be equal to the amount (if any) by which:
(i) the additional interest which would have been payable
during the interest period on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by Bank
by placing the amount prepaid on deposit in the offshore dollar market
for a period starting on the date on which it was prepaid and ending
on the last day of the interest period for such Portion (or the
scheduled payment date for the amount prepaid, if earlier).
(d) Bank will have no obligation to accept an election for an
Offshore Rate Portion if any of the following described events has occurred
and is continuing:
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of an Offshore Rate Portion are
not available in the offshore Dollar inter-bank market; or
(ii) the Offshore Rate does not accurately reflect the cost
of an Offshore Rate Portion.
6. FEES, EXPENSES
6.1 FEES
(a) FACILITY FEE. On the Closing Date, Borrower shall pay a
facility fee of $185,500 to Bank (net of any credits then applicable
thereto).
(b) FACILITY NO. 1 UNUSED FEE. Borrower agrees to pay to Bank
0.50% per annum of the average daily difference between $10,000,000 and the
Facility No. 1 Outstanding Amount, quarterly in arrears on the last day of
each calendar quarter.
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(c) CAPITAL EXPENDITURE LOAN UNUSED FEE. Borrower agrees to pay
to Bank 0.50% per annum of the Capital Expenditure Loan Unused Amount,
quarterly in arrears on the last day of each calendar quarter.
(d) EARLY TERMINATION FEE. In the event that Borrower prepays
any portion of the principal outstanding under the Facility No. 2 term
loan, or terminates Facility No. 1 or Facility No. 3 prior to the date when
due or their termination dates (other than as a result of mandatory
prepayments of Facility No. 2 and Facility No. 3 made in accordance with
Section 3.6 or voluntarily prepayments made out of Borrower's operating
cash flow), then Borrower will concurrently pay to Bank an early
termination fee in an amount equal to (i) until the first anniversary of
the Closing Date, 0.75% of the amount of the Facilities so repaid or
terminated, and (ii) thereafter through the second anniversary of the
Closing Date, 0.50% of the Facilities so repaid or terminated.
6.2 EXPENSES.
Borrower agrees to immediately repay Bank for expenses that
include, but are not limited to, filing, recording and search fees,
appraisal fees, title report fees, documentation fees, environmental review
and audit expenses.
6.3 REIMBURSEMENT COSTS.
(a) Borrower agrees to reimburse Bank for any expenses it incurs
in the preparation, closing and enforcement of this Agreement and any
agreement or instrument required by this Agreement, and by reason of the
due diligence conducted by Bank and its agents and experts in connection
herewith or therewith, and any proposed amendment or waiver of the terms
hereof or thereof. Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of Bank's in-house counsel.
(b) Borrower agrees to reimburse Bank for the cost of periodic
audits and appraisals of the property collateral securing this Agreement,
at such intervals as Bank may reasonably require. These audits and
appraisals may be performed by employees of Bank or by independent
appraisers.
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7. COLLATERAL
7.1 PERSONAL PROPERTY. Borrower's obligations to Bank under this
Agreement will be secured by all personal property Borrower now owns or will own
in the future. The collateral is further defined in Borrower Security
Agreement. All personal property collateral securing any other present or future
obligations of Borrower to Bank shall also secure this Agreement.
7.2 GUARANTEES: PERSONAL PROPERTY SUPPORTING GUARANTEES. The
obligations of Borrower under this Agreement and the Loan Documents are
guaranteed by AqHawk pursuant to the AqHawk Guaranty and by Xxxxxxx pursuant to
the Xxxxxxx Limited Guaranty. The obligations of AqHawk under the AqHawk
Guaranty are secured by a pledge of 100% of the issued and outstanding capital
stock of Borrower, together with all proceeds thereof and rights relating
thereto, pursuant to the Pledge Agreement - Borrower. In addition to the
foregoing, the obligations evidenced hereby are secured by a pledge of the stock
of AqHawk entered into by each of the owners of capital stock of AqHawk shall
pursuant to the Pledge Agreement - AqHawk.
7.3 SUBORDINATION. The obligations of Borrower and AqHawk to Xxxxxxx
and Unique shall be subordinate and junior in right of payment to the
obligations of Borrower and AqHawk to Bank, in the manner and to the extent set
forth in the Subordination Agreement.
8. DISBURSEMENTS, PAYMENTS AND COSTS
8.1 REQUESTS FOR CREDIT. Each request for an extension of credit will
be made in writing in a manner acceptable to Bank, or by another means
acceptable to Bank. By requesting any extension of credit under this Agreement,
Borrower shall be deemed to have reaffirmed that each representation and
warranty set forth in this Agreement and the other Loan Documents (other than
those which expressly relate only to a specific date) is true and correct as of
the date of the making of the requested loan or the issuance of the requested
Letter of Credit, and that no Default or Event of Default exists, in each case
after giving effect to the making or issuance thereof. If requested by Bank,
Borrower will provide written assurances to Bank of the accuracy of each such
representation and warranty prior to the making of any requested Loan or the
issuance of any requested Letter of Credit.
21
8.2 DISBURSEMENTS AND PAYMENTS.. Each disbursement by Bank and each
payment by Borrower will be:
(a) made through Bank's South Orange County Regional Commercial
Banking Office in Costa Mesa, California or other branch location selected
by Bank from time to time;
(b) made for the account of Bank's branch selected by Bank from
time to time;
(c) evidenced by records kept by Bank. In addition, Bank may, at
its discretion, require Borrower to sign one or more promissory notes.
8.3 TELEPHONE AND TELEFAX AUTHORIZATION
(a) Bank may honor telephone or telefax instructions for
advances or repayments or for the designation of optional interest rates or
the issuance of Letters of Credit given by any one of the individual
signers of this Agreement or a person or persons authorized by any one of
the individuals signing this Agreement on behalf of Borrower.
(b) Advances will be deposited in and repayments will be
withdrawn from Borrower's account number 1458126057, or such other accounts
of Borrower with Bank as designated in writing by Borrower.
(c) Borrower will provide written confirmation to Bank of any
telephone or telefax instructions within one business day. If there is a
discrepancy and Bank has already acted on the instructions, the telephone
or telefax instructions will prevail over the written confirmation.
(d) Borrower indemnifies and excuses Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone or telefax instructions it
reasonably believes are made by any individual authorized by Borrower to
give such instructions. This indemnity and excuse will survive the
termination of this Agreement.
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8.4 DIRECT DEBIT
(a) Borrower agrees that interest and principal payments and
fees will be deducted automatically on the due date from Borrower's account
number 1458126057, or such other of Borrower's accounts with Bank as
designated in writing by Borrower.
(b) Bank will debit the account on the dates the payments become
due. If a due date does not fall on a banking day, Bank will debit the
account on the first banking day following the due date.
(c) Borrower will maintain sufficient funds in the account on
the dates Bank enters debits authorized by this Agreement. If there are
insufficient funds in the account on the date Bank enters any debit
authorized by this Agreement, the debit will be reversed.
8.5 DIRECT DEBIT (LINE OF CREDIT)
(a) Borrower agrees that Bank may create advances under the line
of credit to pay interest, principal payments, and any fees that are due
under this Agreement.
(b) Bank will create any such advances on the dates the payments
become due. If a due date does not fall on a banking day, Bank will create
the advance on the first banking day following the due date.
(c) If the creation of an advance under the line of credit
causes the total amount of credit outstanding under the line to exceed the
limitations set forth in this Agreement, Borrower will immediately pay the
excess to Bank upon Bank's demand.
8.6 BANKING DAYS. Unless otherwise provided in this Agreement, a
banking day is a day other than a Saturday or a Sunday on which Bank is open for
business in California. For amounts bearing interest at the Offshore Rate
described in Section 5, a banking day is a day other than a Saturday or a Sunday
on which Bank is open for business in California and dealing in offshore
dollars. All payments and disbursements which would be due on a day which is not
a banking day will be due on
23
the next banking day. All payments received on a day which is not a banking day
will be applied to the credit on the next banking day.
8.7 TAXES. If any payments to Bank under this Agreement are made from
outside the United States, Borrower will not deduct any foreign taxes from any
payments it makes to Bank. If any such taxes are imposed on any payments made by
Borrower (including payments under this Section), Borrower will pay the taxes
and will also pay to Bank, at the time interest is paid, any additional amount
which Bank specifies as necessary to preserve the after-tax yield Bank would
have received if such taxes had not been imposed. Borrower will confirm that it
has paid the taxes by giving Bank official tax receipts (or notarized copies)
within 30 days after the due date.
8.8 ADDITIONAL COSTS. Borrower will pay Bank, on demand, for Bank's
costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to Bank's assets and
commitments for credit.
8.9 INTEREST CALCULATION. All interest and fees under this Agreement
will be computed on the basis of a 360-day year and the actual number of days
elapsed. This results in more interest or a higher fee than if a 365-day year is
used.
8.10 DEFAULT RATE. Upon the occurrence and during the continuation of
any Default or Event of Default under this Agreement, advances under this
Agreement will at the sole option of Bank bear interest at a rate (the "DEFAULT
RATE") which is 3.0 percentage points per annum higher than the rate of interest
otherwise provided under this Agreement. The Default Rate shall apply not only
to principal but to payments of interest and fees which are not paid when due.
This may result in a compounding of interest. The imposition of the Default Rate
by Bank will not constitute a waiver of any default.
8.11 OVERDRAFTS. At Bank's sole option in each instance, Bank may do
one of the following:
24
(a) Bank may make advances under this Agreement to prevent or
cover an overdraft on any account of Borrower with Bank. Each such advance
will accrue interest from the date of the advance or the date on which the
account is overdrawn, whichever occurs first, at the interest rate
described in this Agreement.
(b) Bank may reduce the amount of credit otherwise available
under this Agreement by the amount of any overdraft on any account of
Borrower with Bank.
This Section shall not be deemed to authorize Borrower to create overdrafts on
any of Borrower's accounts with Bank.
8.12 COLLECTIONS ON ACCOUNTS RECEIVABLE. Prior to the occurrence of any
Default or Event of Default, all proceeds of collections of Borrower's accounts
receivable received in the Lockbox shall be collected by Bank and deposited into
a the Lockbox Account. Prior to the occurrence of any Default or Event of
Default, Bank shall remit any funds collected in the Lockbox Account to
Borrower's checking account or other deposit accounts maintained by Borrower in
accordance with the terms of the Lockbox Agreement. Upon the occurrence and
during the continuance of any Default or Event of Default, collections in the
Lockbox Account shall be credited to interest, principal, and other sums owed to
Bank under this Agreement in the order and proportion determined by Bank in its
sole discretion. All such credits will be conditioned upon collection and any
returned items may, at Bank's option, be charged to Borrower.
9. CONDITIONS
Bank must receive the following items, in form and substance
acceptable to Bank, before it is required to make the initial loans or issue the
initial Letters of Credit under this Agreement:
9.1 AUTHORIZATIONS. Evidence that the execution, delivery and
performance by Borrower and AqHawk of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
25
9.2 INCUMBENCY CERTIFICATES; GOVERNING DOCUMENTS. Incumbency
certificates for Borrower and for AqHawk, together with true, correct and
complete copy of Borrower's and AqHawk's articles of incorporation and bylaws,
and certificates of good standing with respect to Borrower and AqHawk issued by
the California Secretary of State's office and the California Franchise Tax
Board.
9.3 SECURITY AGREEMENTS, ETC. Borrower Security Agreement, the
Pledge Agreement - Borrower and the Pledge Agreement - AqHawk, and the Lockbox
Agreement, each duly executed by Borrower, AqHawk and the shareholders in AqHawk
as appropriate, together with the collateral pledged thereunder and such other
assignments, instruments, financing statements and fixture filings as Bank
requires.
9.4 EVIDENCE OF PRIORITY. Evidence that all security interests and
liens to be established in favor of Bank pursuant hereto are valid, enforceable,
and prior to all others' rights and interests (other than the purchase money
liens disclosed on the UCC search provided to Bank), except those to which Bank
explicitly consents in writing.
9.5 CONSENT TO REMOVAL. A Landlord's Consent from the owner of each
parcel of real property leased by Borrower.
9.6 INSURANCE. Evidence of insurance coverage, as required in
Section 11.24 of this Agreement.
9.7 BUSINESS INTERRUPTION INSURANCE. Evidence of a business
interruption insurance policy for at least Two Million Five Hundred Thousand
Dollars ($2,500,000) with an insurer acceptable to Bank, and with Bank named as
an additional loss payee.
9.8 GUARANTIES. The AqHawk Guaranty and the Xxxxxxx Limited
Guaranty.
9.9 SUBORDINATION AGREEMENT. The Subordination Agreement shall have
been executed by all parties thereto.
9.10 EQUITY INFUSION. Evidence acceptable to Bank of the completion
of a cash equity contribution to AqHawk by Xxxxxxx in the form of common stock
and\or paid-in-kind preferred stock in a minimum amount of $2,000,000, on terms
and conditions acceptable to Bank, together with correct and complete copies of
all
26
subscription agreements, share certificates, statements of rights and
preferences if any, and all other documentation thereof, certified as correct
and complete by an officer of Borrower.
9.11 SUBORDINATED DEBT. Evidence acceptable to Bank of the completion
and funding of a subordinated term loan to AqHawk by Xxxxxxx in a minimum amount
of $6,500,000, on terms and conditions acceptable to Bank and in compliance with
the terms of this Agreement, together with copies of all credit agreements,
notes and other documentation thereof, certified as correct and complete by an
officer of Borrower.
9.12 ACQUISITION. A certificate executed by a senior officer of
Borrower certifying that the attached copies of the Acquisition Agreement and
the BTR Environmental Indemnity are true, correct and complete, together with
evidence that the Acquisition is in a position to concurrently close in
accordance with the Acquisition Agreement and all applicable laws and in a
manner acceptable to Bank.
9.13 LEGAL OPINION. A written opinion from Borrower's legal counsel,
covering such matters as Bank may require, including the organization, authority
and good standing of Borrower and AqHawk, the due execution and delivery of all
Loan Documents, the valid, binding and enforceable nature of the Loan Documents
against Borrower, AqHawk and Xxxxxxx, and the possession by Borrower of all
necessary certificates, permits and licenses which are required to conduct its
business as presently conducted.
9.14 SOLVENCY CERTIFICATE. Borrower's chief financial officer shall
have issued a solvency certificate to Bank certifying as to the solvency and
continued solvency of Borrower (after giving effect to the transactions
contemplated by this Agreement) and its continued ability to meet its
obligations as they come due.
9.15 PAYMENT OF FEES. Payment of all accrued and unpaid expenses
incurred by Bank as required by Sections 6.2 and 6.3.
27
9.16 SUPERFUND LETTER. A letter prepared by an accounting firm
acceptable to Bank validating to the satisfaction of Bank, the tax treatment of
the EPA Payments.
9.17 EMPLOYMENT AGREEMENTS AND MATERIAL CONTRACTS. A Certificate of a
senior officer of Borrower certifying that the attached copies of management
agreements entered into with senior management, Borrower's contracts with
Federal Express, Inc. and BTR Dunlop, Inc. and its affiliates and the Coast
Guard Contract are true, correct and complete.
9.18 CONSENTS. Executed consents and agreements in form and substance
acceptable to Bank from (a) each party whose agreement or consent to the
Acquisition or any other transaction contemplated hereby is required by any
material agreement to which Borrower is a party, (b) each party to any material
contract allowing termination upon any change in control of Borrower, and (c)
which are otherwise deemed necessary by Bank.
9.19 CERTAIN FINANCIAL INFORMATION.
(a) Consolidated financial statements of Borrower for the
current fiscal year through October 31, 1996.
(b) Audited financial statements of Borrower with an "Agreed
Upon Procedures" report in form and substance acceptable to Bank, for the
fiscal year of Borrower ending in 1995 prepared by Ernst & Young.
(c) A certificate of an officer of Borrower setting forth all
revisions (if any) that have been made to the five year annual financial
projections for Borrower previously delivered to Bank.
(d) Pro forma pre-closing and post-closing balance sheets
reflecting all adjustments necessary or desirable to reflect the effects of
the Acquisition.
(e) A final sources and uses statement with respect to the
Acquisition.
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9.20 LIQUIDITY. After giving effect to the initial advances under
Facility No. 1 and the consummation of the Acquisition, on the Closing Date,
Liquidity shall not be less than $1,000,000.
9.21 OTHER ITEMS. Any other items that Bank reasonably requires.
10. REPRESENTATIONS AND WARRANTIES
When Borrower signs this Agreement, and until Bank is repaid in full,
Borrower makes the following representations and warranties. Each request for an
extension of credit hereunder constitutes a renewed representation:
10.1 ORGANIZATION OF BORROWER AND AQHAWK. Borrower and AqHawk are
corporations duly formed, existing and in good standing under the laws of the
State of California. Each of the persons owning interests in Borrower and AqHawk
as of the Closing Date (and after giving effect to the transactions contemplated
by the Acquisition Agreement) are correctly detailed on Schedule 1 hereto.
10.2 AUTHORIZATION. This Agreement, the Loan Documents and any
instrument or agreement required hereunder or thereunder, are within Borrower's
and AqHawk's powers, have been duly authorized, and do not conflict with any of
their respective organizational papers.
10.3 ENFORCEABLE AGREEMENT. This Agreement and the other Loan
Documents are the legal, valid and binding agreements of Borrower and each other
party thereto, enforceable against Borrower and each such other party in
accordance with their respective terms, and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable.
10.4 GOOD STANDING In each state in which Borrower does business, it
is properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
10.5 NO CONFLICTS. This Agreement and the other Loan Documents do not
conflict with any law, agreement, or obligation by which Borrower, AqHawk or any
of their affiliates are bound.
29
10.6 FINANCIAL INFORMATION. All financial and other information that
has been or will be supplied to Bank, including pursuant to Section 9 of this
Agreement, is:
(a) sufficiently complete to give Bank accurate knowledge of
Borrower's, AqHawk's and Xxxxxxx'x respective financial conditions.
(b) in compliance with all government regulations that apply.
Since the date of the financial statements of Borrower delivered pursuant
hereto for the period ending October 31, 1996, there has been no material
adverse change in the assets, financial condition, business or prospects of
Borrower. Each of the projections delivered by Borrower to Bank are, to the best
knowledge of Borrower, based upon assumptions which are reasonable and
internally consistent, and are consistent with all facts known to Borrower
(subject to the uncertainties inherent in all projections).
10.7 LAWSUITS. There is no lawsuit, tax claim or other dispute
pending or threatened against Borrower or AqHawk which, if adversely decided,
would impair Borrower's or AqHawk's financial condition or ability to repay the
loan.
10.8 COLLATERAL. All collateral required in this Agreement is owned
by the grantor of the security interest free of any title defects or any liens
or interests of others, except those which have been explicitly approved by Bank
in writing.
10.9 PERMITS, FRANCHISES. Borrower possesses all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary to
enable it to conduct the business in which it is now engaged.
10.10 OTHER OBLIGATIONS. Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
10.11 INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year, except as have been
disclosed in writing to Bank.
30
10.12 NO EVENT OF DEFAULT. There is no event which is, or with notice
or lapse of time or both would be, a Default under this Agreement.
10.13 MERCHANTABLE INVENTORY. All inventory which is included in the
Borrowing Base is of good and merchantable quality and free from material
defects.
10 14 ERISA PLANS.
(a) Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
(c) No action by Borrower to terminate or withdraw from any
Plan has been taken and no notice of intent to terminate a Plan has been
filed under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan
under Section 4042 of ERISA, and no event has occurred or condition exists
which might constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for
purposes of this Agreement:
(i) "CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
(ii) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
31
(iv) "PLAN" means any employee pension benefit plan
maintained or contributed to by any Borrower and insured by the
Pension Benefit Guaranty Corporation under Title IV of ERISA.
10.15 LOCATION OF BORROWER. Borrower's only place of business (other
than its location in the Netherlands) and chief executive office is located at
the address listed under Borrower's signature on this Agreement.
10.16 CERTAIN COLLATERAL.
(a) Each deposit account maintained by Borrower or AqHawk as of
the Closing Date is described on Schedule 1 hereto. Borrower has notified
Bank in writing of each deposit account opening by Borrower or AqHawk
following the Closing Date.
(b) Borrower does not own any patents, trademarks or other
intellectual property which is not described on Schedule 1 hereto.
(c) Each Shipset which Borrower has received in exchange from
one of its customers is Borrower's sole property, free and clear of all
liens and rights of others, including without limitation any and all liens
and other rights of lenders to customers of Borrower which whom such
Shipsets have been exchanged.
10.17 THE ACQUISITION. The Acquisition has been consummated in
accordance with the Acquisition Agreement and all applicable laws.
10.18 ENVIRONMENTAL. Borrower and its operations are in material
compliance with all Environmental Laws. Borrower has no knowledge of any
Environmental Claims that, either individually or in the aggregate, could
reasonably be expected to have a material adverse effect upon its condition or
its ability to repay the obligations evidenced by this Agreement and the other
Loan Documents. Since August 1, 1996, there has been no material or adverse
development in the negotiations relating to the proposed settlements referred to
in the definition of "EPA Payments."
10.19 GOVERNMENTAL REGULATION. Neither Borrower nor any person
controlling Borrower is an "Investment Company" within the meaning of the
Investment Company Act of 1940. Borrower is not subject to regulation under the
Public Utility
32
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
any state public utilities code, or any other Federal or state statute or
regulation limiting its ability to incur indebtedness.
10.20 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. Borrower owns
or is licensed or otherwise has the right to use all of the patents, trademarks,
service marks, trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation of its
business, without conflict with the rights of any other person.
10.21 SUBSIDIARIES. Borrower has no subsidiaries.
10.22 CONTRACTS. Borrower has not entered into any material contracts
during the three month period immediately preceding the Closing Date which have
not been disclosed to Bank in writing.
11. COVENANTS
Borrower agrees, so long as credit is available under this Agreement
and is repaid in full, unless Bank otherwise agrees in writing:
11.1 USE OF PROCEEDS. To use the proceeds of the credit only for the
financing of the Acquisition (by means of the loan to AqHawk evidenced by the
Intercompany Note) and thereafter for the working capital needs of Borrower, for
Letters of Credit, and, in the case of the Capital Expenditure Loans, only for
the purposes approved in connection with each such loan.
11.2 USE OF PROCEEDS: INELIGIBLE SECURITIES. Not to use, directly or
indirectly, any portion of the proceeds of the credit (including any Letters of
Credit) for any of the following purposes:
(a) knowingly to purchase Ineligible Securities from BA
Securities, Inc. (the "ARRANGER") during any period in which the Arranger
makes a market in such Ineligible Securities; or
33
(b) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately placed by the
Arranger; or
(c) to make payments of principal, interest or dividends on
Ineligible Securities underwritten or privately placed by the Arranger and
issued by or for the benefit of any Borrower or any affiliate of any
Borrower.
11.3 FINANCIAL INFORMATION. To provide the following financial
information and statements and other information:
(a) Within 120 days of Borrower's fiscal year end, Borrower's
consolidated annual financial statements. These financial statements must
be audited (with an unqualified opinion) by McGladrey & Xxxxxx or another
firm of independent public accountants reasonably acceptable to Bank and
must be accompanied by a management letter prepared by such auditors,
provided that the audited financial statements with respect to Borrower's
fiscal year ending December 31, 1996 and the related management letter must
be prepared by Ernst & Young LLP, together with unaudited consolidating
annual financial statements for Borrower.
(b) Within 30 days of the period's end (including the last
calendar month in any fiscal year), Borrower's monthly consolidated and
consolidating financial statements showing results for that month and for a
year to date basis. These financial statements may be Borrower prepared,
and shall include a comparison to plan and prior year on a monthly and year
to date basis.
(c) If requested by Bank, copies of Borrower's federal income
tax return, promptly and in any event within 15 days of filing, and copies
of any extensions of the filing date.
(d) Within the periods provided in (a) and (b) above and for
each such period, a compliance certificate signed by an authorized
financial officer of Borrower (i) setting forth Borrower's calculation of
year to date Excess Cash Flow as of the end of such period, and (ii) the
information and computations (in sufficient detail) to establish (x) that
Borrower is in compliance with all financial covenants at the end of the
period covered by the financial statements then being
34
furnished, and (y) whether there existed as of the date of such financial
statements and whether there exists as of the date of the certificate, any
Default or Event of Default under this Agreement and, (iii) if any such
Default or Event of Default exists, specifying the nature thereof and the
action Borrower is taking and propose to take with respect thereto.
(e) A borrowing base certificate ("Borrowing Base Certificate")
setting forth the respective amounts of Acceptable Receivables and
Acceptable Inventory and a calculation of the Borrowing Base as of the last
day of each month within 20 days after month end and, if requested by Bank
copies of the invoices or the record of invoices from each Borrower's sales
journal for such Acceptable Receivables, copies of the delivery receipts,
purchase orders, shipping instructions, bills of lading and other
documentation pertaining to such Acceptable Receivables. Alternatively,
Borrower may submit to Bank a collateral certificate (a "Collateral
Certificate") summarizing Borrower's accounts receivable and inventory as
of the last day of each month within 10 days after month end, together with
copies of the invoices or the record of invoices from Borrower's sales
journal for such accounts and a listing of the names and addresses of the
debtors obligated thereunder, and copies of the delivery receipts, purchase
orders, shipping instructions, bills of lading and other documentation
pertaining to such accounts. If Borrower elects to submit a Collateral
Certificate in lieu of a Borrowing Base Certificate, then (i) the Borrowing
Base will be calculated by Bank upon receipt of the Collateral Certificate
and all supporting documentation required under this Agreement, (ii) Bank
will provide a Borrowing Base Certificate to Borrower setting forth its
determination of the Borrowing Base, which certificate will be conclusive
and binding in the absence of manifest error, and (iii) the Borrowing Base
as determined by Bank will become effective upon calculation by Bank and
will remain in effect until a new Borrowing Base is calculated by Bank in
accordance with this Agreement.
(f) Statements showing an aging and reconciliation of
Borrower's receivables within 20 days after the end of each month.
(g) A statement showing an aging of accounts payable within 20
days after the end of each month.
35
(h) If Bank requires Borrower to deliver the proceeds of
accounts receivable to Bank upon collection by Borrower, a schedule of the
amounts so collected and delivered to Bank.
(i) An inventory summary report and listing within 20 days
after the end of each month, including a description of the inventory, its
location and cost, and such other information and collateral reports as
Bank may require.
(j) A listing of the names and addresses of all debtors
obligated upon Borrower's accounts receivable semi-annually within 20 days
following the last day of the second and fourth fiscal quarters in each of
Borrower's fiscal years.
(k) 30 days prior to each fiscal year end, updated annual
financial projections for Borrower through December 31, 2003, and monthly
financial projections through the subsequent fiscal year.
(l) While the Xxxxxxx Limited Guaranty is in effect, (i)
Xxxxxxx'x annual financial statements in form acceptable to Bank, as soon
as available after the preparation hereof and in any case no later than 120
days after the end of each calendar year and (ii) Xxxxxxx'x federal income
tax return, together with any associated schedules and Forms K-1 requested
by Bank, within 15 days of filing, provided that the materials required by
this clause (l) shall not be required for so long as Xxxxxxx remains a
borrower in good standing with Bank's private banking group.
(m) Within 60 days following the Closing Date, an audited
opening balance sheet of Borrower prepared by Ernst & Young LLP.
(n) Promptly upon Bank's request, such other statements, lists
of property and accounts, budgets, forecasts or reports as to Borrower as
Bank may reasonably request.
(o) Annually and in any event not later than January 1 of each
year, commencing with January 1, 1998, an environmental compliance audit
prepared by consultants acceptable to Bank, which audit shall (i) be
prepared at the sole cost and expense of Borrower and (ii) detail areas of
environmental noncompliance, types of environmental permits and licenses
required and held by
36
Borrower, and upgrades to programs, permits and licenses required or to be
considered by Borrower due to changes in environmental regulations. The
environmental compliance audit shall identify, to a degree of certainty
"more likely than not" any conditions or operations that meet the foregoing
criteria.
(p) Promptly upon Bank's request, such other information as
Bank may reasonably request.
11.4 QUICK RATIO. As of the last day of each calendar month ending
during a period described below, to maintain a ratio of (a) Quick Assets to (b)
current liabilities (excluding the current portion of long term debt, and
capital leases, but including advances and commercial Letters of Credit
outstanding under Facility No. 1 to the extent that the same exceed Borrower's
aggregate cash, cash balances, and short term cash investments) which is not
less than the ratio set forth opposite that calendar month:
Period Ratio
------ -----
Closing Date through
November 30, 1997 .45 to 1.00
December 1, 1997 through
November 30, 1999 .50 to 1.00
December 1, 1999 and
Thereafter .55 to 1.00.
11.5 FIXED CHARGE COVERAGE RATIO. As of the last day of each calendar
month during the term of this Agreement, to maintain a ratio of (a) Cash Flow to
(b) Fixed Charges of at least 1.20 to 1.00, calculated monthly on a year to date
basis during the first twelve months following the Closing Date and on a rolling
twelve month basis thereafter.
11.6 PROFITABILITY. To maintain a positive net income before taxes
and extraordinary income (excluding however, the effects of any EPA Payments) on
a cumulative basis for each period of six calendar months ending on the last day
of each calendar month following the Closing Date.
37
11.7 OTHER DEBTS. Not to have outstanding or incur any direct or
contingent liabilities of any kind or lease obligations or swap or similar hedge
agreement obligations (other than to Bank), or become liable for the liabilities
of others, without Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade
credit.
(b) Endorsing negotiable instruments received in the usual
course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and leases in existence on the date of this Agreement
disclosed in writing to Bank on Schedule 1.
(e) Additional debts and lease obligations for the acquisition
of fixed or capital assets in the ordinary course of Borrower's business,
in an aggregate amount not to exceed $500,000 at any one time outstanding.
(f) the unsecured subordinated debt of $6,500,000 to Xxxxxxx
evidenced by the Subordinated Note, as in effect on the date of this
Agreement.
11.8 OTHER LIENS. Not to create, assume, or allow any security
interest, encumbrance or judicial or other lien (each a "LIEN") on property
Borrower now or later owns, except:
(a) Liens in favor of Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement and
disclosed in writing to Bank on Schedule 1.
(d) Additional purchase money security interests in personal
property acquired using indebtedness of the type described in Section
11.7(e).
38
11.9 CAPITAL EXPENDITURES FOR SHIPSETS. Not to make or commit to make
capital expenditures (including any amount expended with respect to capital
leases) for the purchase or lease of Shipsets during 1997 or any subsequent
fiscal year which are in excess of $2,000,000, during any such period.
11.10 CAPITAL EXPENDITURES FOR 1996. Not to make or commit to make
capital expenditures (for assets of any type) in excess of $2,900,000 during
Borrower's fiscal year ending December 31, 1996.
11.11 CAPITAL EXPENDITURES FOR OTHER ASSETS. Not to make or commit to
make capital expenditures (including any amount expended with respect to capital
leases) for any assets which are not Shipsets which are in an amount, during any
fiscal year, which exceeds the limitation set forth below opposite that fiscal
year:
Fiscal Year Amount
----------- ------
1997 1,200,000
1998 and each subsequent
fiscal year 1,000,000.
11.12 LEASES. Not to permit the aggregate payments due in any fiscal
year under all leases (including capital and operating leases for real or
personal property) to exceed $1,000,000.
11.13 DIVIDENDS AND OTHER PAYMENTS. Not to declare or pay any
dividends or other distributions on any of Borrower's shares, or make any loan
or investment having the effect of making any such dividend or distribution, and
not to purchase, redeem or otherwise acquire for value any of Borrower's shares,
or create any sinking fund in relation thereto, and not to make other payments
to AqHawk, Unique, Xxxxxxx or their respective affiliates, including without
limitation management fees, except that:
(a) prior to the merger of Borrower and AqHawk Borrower may
make the loan to AqHawk evidenced by the Intercompany Note;
(b) Borrower may pay Permitted Management Fees when no Default
or Event of Default exists or would result therefrom; and
39
(c) Following the proposed merger of Borrower and AqHawk,
Borrower may pay interest with respect to the Subordinated Note out of its
Excess Cash Flow in accordance with the terms of the Subordination
Agreement.
11.14 LOANS TO OFFICERS. Not to make any loans, advances or other
extensions of credit to Borrower's executives, officers, or directors or
shareholders (or any relatives of any of the foregoing), other than amounts
which do not exceed $10,000, in the aggregate, at any time.
11.15 NOTICES TO BANK. To promptly notify Bank in writing of:
(a) any lawsuit over $100,000 against Borrower or AqHawk.
(b) any substantial dispute between Borrower or AqHawk and any
government authority.
(c) any known failure to comply with this Agreement.
(d) any material adverse change in Borrower's or AqHawk's
financial condition or operations.
(e) any change in Borrower's name, legal structure, place of
business, or chief executive office if Borrower has more than one place of
business.
(f) any pending or threatened environmental investigation or
proceeding not previously disclosed to Bank in writing involving Borrower
or the real property upon which Borrower's operations are located.
11.16 BOOKS AND RECORDS. To maintain adequate books and records.
11.17 AUDITS. To allow Bank and its agents to inspect Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time, provided that if no Default or Event of Default exists, Bank
will provide prior verbal or written notice of its intention to exercise its
rights under this Section not later than the business day prior to its exercise
and, if requested by Borrower, will provide written confirmation of any such
verbal notice. If any of Borrower's properties, books or
40
records are in the possession of a third party, Borrower authorizes that third
party to permit Bank or its agents to have access to perform inspections or
audits and to respond to Bank's requests for information concerning such
properties, books and records. Bank has no duty to inspect Borrower's properties
or to examine, audit or copy books and records and Bank shall not incur any
obligation or liability by reason of not making any such inspection or inquiry.
In the event that Bank inspects Borrower's properties or examines, audits or
copies books and records, Bank will be acting solely for the purposes of
protecting Bank's security and preserving Bank's rights under this Agreement.
Neither Borrower nor any other party is entitled to rely on any inspection or
other inquiry by Bank. Bank owes no duty of care to protect Borrower or any
other party against, or to inform Borrower or any other party of, any adverse
condition that may be observed as affecting Borrower's properties or premises,
or Borrower's business. Bank may in its discretion disclose to Borrower or any
other party any findings made as a result of, or in connection with, any
inspection of Borrower's properties.
11.18 COMPLIANCE WITH LAWS. To comply with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over Borrower's business.
11.19 PRESERVATION OF RIGHTS. To use commercially reasonable efforts
to maintain and preserve all rights, privileges, and franchises Borrower now
has.
11.20 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or
replacements to Borrower's properties which are necessary to keep the same in
good working condition.
11.21 PERFECTION OF LIENS. To help Bank perfect and protect its
security interests and liens, and reimburse it for related costs it incurs to
protect its security interests and liens.
11.22 PLACES OF BUSINESS. Not to open additional business locations or
store property having a value in excess of $10,000 at any location not disclosed
to Bank in writing.
11.23 COOPERATION. To take any action reasonably requested by Bank to
carry out the intent of this Agreement.
41
11.24 INSURANCE.
(a) INSURANCE COVERING COLLATERAL. To maintain all risk
property damage insurance policies covering the tangible property
comprising the collateral. Each insurance policy must be for the full
replacement cost of the collateral and include a replacement cost
endorsement. The insurance must be issued by an insurance company
acceptable to Bank and must include a lender's loss payable endorsement in
favor of Bank in a form acceptable to Bank.
(b) GENERAL BUSINESS INSURANCE. To maintain insurance
acceptable to Bank as to amount, nature and carrier covering property
damage (including loss of use and occupancy) to any of Borrower's
properties, public liability insurance including coverage for contractual
liability, product liability and workers' compensation, and any other
insurance which is usual for Borrower's business.
(c) EVIDENCE OF INSURANCE. Upon the request of Bank, to
deliver to Bank a copy of each insurance policy, or, if permitted by Bank,
a certificate of insurance listing all insurance in force.
11.25 ADDITIONAL NEGATIVE COVENANTS. Not to, without Bank's written
consent:
(a) engage in any business activities substantially different
from Borrower's present business.
(b) liquidate or dissolve Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination (except for the proposed merger with
AqHawk, with Borrower to be the survivor).
(d) lease, or dispose of any assets of Borrower which have an
aggregate value in excess of $100,000 in any year (other than the sale of
the Sabena Shipset in accordance Section 11.29), other than sales and
leases of inventory in the ordinary course of business.
42
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair
market value or enter into any sale and leaseback agreement covering any of
Borrower's fixed or capital assets.
(g) voluntarily suspend Borrower's business for any period.
11.26 ERISA PLANS. To give prompt written notice to Bank of:
(a) The occurrence of any reportable event under Section
4043(b) of ERISA for which the PBGC requires 30 day notice.
(b) Any action by Borrower to terminate or withdraw from a
Plan or the filing of any notice of intent to terminate under Section 4041
of ERISA.
(c) Any notice of noncompliance made with respect to a Plan
under Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA.
11.27 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. To maintain proper
books of record and account, in which full, true and correct entries
consistently applied shall be made of all financial transactions and matters
involving the assets and business of Borrower. The financial statements of
Borrower shall, in addition, be in conformity with generally accepted accounting
principles, consistently applied. Borrower shall permit representatives and
independent contractors of Bank to visit and inspect any of its properties, to
examine its corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss its affairs, finances and accounts with
its respective directors, officers, and independent public accountants, all
without unreasonably interfering with the normal operations of Borrower, and all
at such times during normal business hours and as often as may be reasonably
desired, provided that if no Default or Event of Default exists, Bank will
provide prior verbal or written notice of its intention to exercise its rights
under this Section not later than the business day prior to its exercise and, if
requested by Borrower, will provide written confirmation of any such verbal
notice.
43
11.28 ENVIRONMENTAL LAWS. To conduct its operations and keep and maintain
its property in compliance with all Environmental Laws. Borrower will maintain
all required records and procedures in relation to its environmental compliance
programs.
11.29 SABENA SHIPSET. Without Bank's prior written consent, not to sell,
lease (outside the ordinary course of business) or otherwise dispose of the
Sabena Shipset after December 31, 1997 or in any transaction which yields a net
after tax cash price to Borrower of less than $2,500,000.
11.30 SWAP AGREEMENTS. Prior to January 15, 1997, to enter into contracts
for interest rate protection for Borrower with respect to not less than 50% of
the projected outstanding principal balance of Facility No. 2 for a period of
not less than five years, and with other terms, conditions and counterparties
reasonably acceptable to Bank.
11.31 COLLECTION OF ACCOUNTS. To instruct all account debtors with respect
to accounts owed to Borrower to remit their payments to the Lockbox. All amounts
remitted to the Lockbox shall be credited to the Lockbox Account after allowing
for the number of clearance days specified by the agreements establishing the
Lockbox. Borrower shall also:
(a) Cause all collections which are received by Borrower,
whether in cash or otherwise, to be deposited by Borrower as and when
received in kind (except for any endorsement necessary to vest title to any
instrument in Bank) into the Lockbox Account;
(b) unless otherwise agreed by Bank, either (i) maintain all
of Borrower's deposit account relationships with Bank, or (ii) cause the
granting of perfected first priority liens in all depositary accounts
maintained by Borrowers pursuant to documents acceptable to Bank.
11.32 AQHAWK. Borrower will cause AqHawk to be a pure holding company,
11.33 LIQUIDITY. To insure that, as of December 31, 1996, Liquidity shall
not be less than $1,200,000.
44
11.34 AMENDMENT TO THE BTR ENVIRONMENTAL INDEMNITY. Not to amend or
modify the BTR Environmental Indemnity in any respect without the prior written
consent of Bank.
12. DEFAULT
If any of the following events occur, Bank may declare Borrower in
default, stop making any additional credit available to Borrower, require
Borrower to repay their entire debt immediately and without prior notice, or any
combination of the foregoing. If an event described in Section 12.6, occurs with
respect to Borrower or AqHawk, then the entire debt outstanding under this
Agreement will automatically be due immediately.
12.1 FAILURE TO PAY. Borrower, AqHawk or Xxxxxxx fails to make a
payment under this Agreement or the other Loan Documents when due.
12.2 LIEN PRIORITY. Bank fails to have an enforceable first lien
(except for any prior liens to which Bank has consented in writing) on or
security interest in any property given as security for this loan.
12.3 LOAN DOCUMENTS. Any party to any Loan Document seeks to
terminate, revoke or rescind its liability thereunder, or asserts in writing
that its liability is terminated, revoked or rescinded, or any Loan Document
ceases to be in full force and effect (except in accordance with its express
terms) or is declared by a court of competent jurisdiction to be null and void,
invalid or unenforceable in any respect.
12.4 FALSE INFORMATION. Borrower, AqHawk, Xxxxxxx or Unique has
furnished to Bank false, materially incorrect or misleading information or
representations, including any information which omits any fact which is
required to make the information not materially misleading.
12.5 DEATH. Xxxxxxx dies and her estate fails to reaffirm in writing
the Xxxxxxx Limited Guaranty (to the extent in effect immediately prior to her
death) and the Subordination Agreement within 30 days.
12.6 BANKRUPTCY. Borrower, AqHawk or (for so long as the Xxxxxxx
Limited Guaranty is in effect) Xxxxxxx files a bankruptcy petition, a bankruptcy
petition is filed against Borrower, AqHawk or Xxxxxxx (with the same limitation
as to Xxxxxxx), or
45
Borrower, AqHawk or Xxxxxxx (with the same limitation as to Xxxxxxx) makes a
general assignment for the benefit of creditors. An Event of Default under this
Section 12.6 will be deemed cured if any such bankruptcy petition filed is
dismissed within a period of 60 days after the filing; PROVIDED. HOWEVER, that
Bank will not be obligated to extend any additional credit to Borrower during
that period.
12.7 RECEIVERS. A receiver or similar official is appointed for
Borrower's or AqHawk's business, or the business is terminated.
12.8 JUDGMENTS. Any judgments or arbitration awards are entered
against Borrower or AqHawk, or Borrower or AqHawk enters into any settlement
agreements with respect to any litigation or arbitration (other than the
proposed settlements of environmental disputes described in the definition of
EPA Payments), which are either (i) in an aggregate amount of $500,000 or more
in excess of any insurance coverage, or (ii) absent procurement of a stay of
execution, such judgments or arbitration awards remain unsatisfied for thirty
calendar days after the date of the entry thereof, or in any event later than
five days prior to the date of any proposed sale thereunder.
12.9 GOVERNMENT ACTION. Any government authority takes action that
Bank believes materially adversely affects Borrower's or AqHawk's financial
condition or ability to repay its obligations.
12.10 MATERIAL ADVERSE CHANGE. There occurs any material adverse
change occurs in Borrower's or AqHawk's financial condition, properties or
prospects, or ability to repay its obligations. Borrower acknowledges that
termination of Borrower's contracts or relationships with Federal Express, the
United States Coast Guard, Xxxxxxx, American Airlines or Dunlop Aviation may be
considered to be such material adverse effect depending on the factual context
then in existence.
12.11 CROSS-DEFAULT. Borrower or AqHawk (a) fails to make any payment
in respect of any indebtedness, capital lease or contingent obligation when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise); or (b) fails to perform or observe any other condition or covenant,
or any other event shall occur or condition exist, under any agreement or
instrument relating to any indebtedness, capital lease or contingent obligation,
in each case if the effect of such failure, event or condition is to cause, or
to permit the holder or holders of any
46
indebtedness, capital lease or contingent obligation (or a trustee or agent on
behalf of such holder or holders) to cause indebtedness or capital leases in an
amount which exceeds $100,000 to be declared to be due and payable prior to
their stated maturity, or any such contingent obligation to become payable or
cash collateral in respect thereof in an amount in excess of $100,000 to be
demanded.
12.12 OTHER BANK AGREEMENTS. Borrower, AqHawk or Xxxxxxx fails to meet
the conditions of, or fails to perform any obligation under any other agreement
it has with Bank or any affiliate of Bank in any material respect.
12.13 ERISA PLANS. The occurrence of any one or more of the following
events with respect to Borrower, provided such event or events could reasonably
be expected, in the judgment of Bank, to subject Borrower to any tax, penalty or
liability (or any combination of the foregoing) which, in the aggregate, could
have a material adverse effect on the financial condition of Borrower with
respect to a Plan:
(a) A reportable event shall occur with respect to a Plan
which is, in the reasonable judgment of Bank likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings to
terminate a Plan) or Borrower's full or partial withdrawal from a Plan.
12.14 ENVIRONMENTAL INDEMNITY BREACH. BTR Dunlop, Inc. fails to honor
within 15 days of written request therefor received by BTR Dunlop, Inc. any
obligation payable by Borrower which is within the scope of the Environmental
Indemnity Agreement and which requires the immediate payment by Borrower of an
amount in excess of $500,000.
12.15 CHANGE IN CONTROL OR MANAGEMENT. Any of the following occurs
(a) Xxxxxxx fails to own, beneficially and of record directly or
indirectly, and control the power to vote, at least 40% of the equity
interests in Borrower; or
(b) At any time prior to the merger of Borrower and AqHawk, AqHawk
fails to own 100% of the equity interests in Borrower; or
47
(c) The individuals owning equity interests in AqHawk, as described
in Schedule 1 (or, after the merger of Borrower and AqHawk, owning equity
interests in Borrower) collectively sell, assign or otherwise transfer,
either beneficially or of record, more than 10% of the total equity
interests in AqHawk (and/or Borrower), other than to members of their
immediate families or trusts for the benefit of members of their immediate
families; or
(d) Xxxxx Xxxxxx ceases to be actively involved on a full time
basis as an executive level employee of Borrower at any time during the two
year period following the Closing Date and a replacement acceptable to Bank
is not appointed (or another plan for replacement which is acceptable to
the Bank is not in place) within 90 days.
12.16 SUBORDINATION. Xxxxxxx, AqHawk or Borrower asserts in
writing that the Subordinated Note is not subordinated in accordance with the
terms of the Subordination Agreement.
12.17 BALANCE SHEET. The audited opening balance sheet prepared by
Ernst & Young and delivered pursuant to Section 11.3(m) varies, in any material
respect, from the unaudited opening balance sheet submitted to Bank prior to the
Closing Date.
12.18 OTHER BREACH UNDER AGREEMENT. Borrower, AqHawk or Xxxxxxx fail
to meet the conditions of, or fails to perform any obligation under, any term of
this Agreement or the other Loan Documents not specifically referred to in this
Article.
12.19 LICENCES. CERTIFICATES, PERMITS AND OTHER AUTHORIZATIONS.
Borrower ceases to hold any license, certificate, permit or other authorization
from any governmental or quasi-governmental authority which is necessary for the
effective conduct of its business as presently or properly conducted.
13. ENFORCING THIS AGREEMENT; MISCELLANEOUS
13.1 GAAP. Except as otherwise stated in this Agreement, all
financial information provided to Bank and all financial covenants will be made
under generally accepted accounting principles, consistently applied.
13.2 CALIFORNIA LAW. This Agreement is governed by California law.
48
13.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on Borrower's
and Bank's successors and assignees. Borrower agrees that it may not assign this
Agreement without Bank's prior consent. Bank may sell participations in or
assign this loan, PROVIDED that when no Default or Event of Default exists, Bank
will obtain the Borrower's prior written consent to any such assignment or
participation, not to be unreasonably withheld. In furtherance of its rights
under this Section, Bank may exchange financial information about Borrower with
actual or potential participants or assignees. If a participation is sold or the
loan is assigned, the purchaser will have the right of set-off against Borrower.
13.4 ARBITRATION.
(a) This Section concerns the resolution of any controversies
or claims between the one or more of Borrower and Bank, including but not
limited to those that arise from:
(i) This Agreement (including any renewals, extensions
or modifications of this Agreement);
(ii) Any document, agreement or procedure related to or
delivered in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business
conducted between Borrower and Bank, including claims for injury to
persons, property or business interests (torts).
(b) At the request of Borrower or Bank, any such controversies
or claims will be settled by arbitration in accordance with the United
States Arbitration Act. The United States Arbitration Act will apply even
though this Agreement provides that it is governed by California law.
(c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial
rules of arbitration and will be conducted within Los Angeles County,
California.
49
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this Section is the
equivalent of the filing of a lawsuit, and any claim or controversy which
may be arbitrated under this Section is subject to any applicable statute
of limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations and,
if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is
arbitrable, the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration proceeding
may be submitted to any authorized court of law to be confirmed and
enforced.
(g) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission to
arbitration, arises from or relates to an obligation to Bank secured by
real property located in California. In this case, both Borrower and Bank
must consent to submission of the claim or controversy to arbitration. If
all parties do not consent to arbitration, the controversy or claim will be
settled as follows:
(i) Borrower and Bank will designate a referee (or a
panel of referees) selected under the auspices of the American
Arbitration Association in the same manner as arbitrators are selected
in Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees)
will be appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the panel)
will be an active attorney or a retired judge; and
(iv) The award that results from the decision of the
referee (or the panel) will be entered as a judgment in the court that
appointed the referee, in accordance with the provisions of California
Code of Civil Procedure Sections 644 and 645.
50
(h) This provision does not limit the right of Borrower or
Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal
property collateral; or
(iii) act in a court of law, before, during or after the
arbitration proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(iv) The pursuit of or a successful action for interim,
additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of Borrower or Bank,
including the suing party, to submit the controversy or claim to
arbitration if the other party contests the lawsuit. However, if the
controversy or claim arises from or relates to an obligation to Bank
which is secured by real property located in California at the time of
the proposed submission to arbitration, this right is limited
according to the provision above requiring the consent of both
Borrower and Bank to seek resolution through arbitration.
13.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. Bank retains all rights,
even if it makes a loan after Default or Event of Default. If Bank waives a
Default or event of Default, it may enforce a later Default or Event of Default.
Any consent or waiver under this Agreement must be in writing.
13.6 ADMINISTRATION COSTS. Borrower shall pay Bank for all
reasonable costs incurred by Bank in connection with administering this
Agreement.
13.7 ATTORNEYS' FEES. Borrower shall reimburse Bank for any
reasonable costs and attorneys' fees incurred by Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver,
51
"workout" or restructuring under this Agreement. In the event of a lawsuit or
arbitration proceeding, the prevailing party is entitled to recover costs and
reasonable attorneys' fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator. As used in
this Section, "attorneys' fees" includes the allocated costs of Bank's in-house
counsel.
13.8 ONE AGREEMENT. This Agreement and any security or other
agreements referred to in this Agreement, collectively:
(a) represent the sum of the understandings and agreements
between Bank and Borrower concerning this credit;
(b) replace any prior oral or written agreements between Bank
and Borrower concerning this credit; and
(c) are intended by Bank and Borrower as the final, complete
and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
13.9 DISPOSITION OF SCHEDULES, REPORTS, ETC. DELIVERED BY BORROWER.
Bank will not be obligated to return any schedules, invoices, statements,
budgets, forecasts, reports or other papers delivered by Borrower. Bank will
destroy or otherwise dispose of such materials at such time as Bank, in its
discretion, deems appropriate.
13.10 RETURNED MERCHANDISE. Until Bank exercises its rights to
collect the accounts receivable as provided under any security agreement
required under this Agreement, Borrower may continue its present policies for
resumed merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by
Borrower or upon such other disposition of the merchandise by the debtor in
accordance with Borrower's instructions. If a credit adjustment is made with
respect to any Acceptable Receivable, the amount of such adjustment shall no
longer be included in the amount of such Acceptable Receivable in computing the
Borrowing Base.
52
13.11 VERIFICATION OF RECEIVABLES. Bank may at any time, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated.
13.12 INDEMNIFICATION. Borrower shall defend and indemnify the Bank
and its officers, directors, employees and agents (each, an "Indemnified
Person"), against all claims, damages, liabilities and expenses which may be
incurred by or asserted against any of them (except by Borrower) in connection
with this Agreement, the other Loan Documents and the transactions contemplated
herein, in the other Loan Documents and in the Acquisition Agreement, or which
are related thereto, and for any reasonable legal or other expenses incurred in
connection with investigating, defending or participating in any such loss,
claim, damage, liability or action or other proceeding, whether commenced or
threatened (including without limitation the allocated cost of in-house
attorneys and staff), or in any way relating to the extension of the financing
contemplated by this Agreement or from any use or intended use of any of the
proceeds thereof except, in the case of any Indemnified Person, to the extent
any such loss, claim, damage or liability results from the gross negligence or
willful misconduct of such Indemnified Person. Without limitation on the
foregoing, Borrower will indemnify and hold harmless Bank and each other
Indemnified Person from any loss, or liability directly or indirectly arising
out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of any materials which
described as "hazardous" or "toxic" under or which are governed by any
Environmental Laws, irrespective of whether such materials are on, under or
about Borrower's premises. The indemnities under this Section will survive the
termination of this Agreement and the repayment of all obligations of Borrower
hereunder.
13.13 NOTICES. All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses as
Bank and Borrower may specify from time to time in writing.
13.14 HEADINGS. Article and Section headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
53
13.15 COUNTERPARTS. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
This Agreement is executed as of the date stated at the top of the first page
hereof.
BANK OF AMERICA NATIONAL HAWKER PACIFIC, INC., a
TRUST AND SAVINGS ASSOCIATION California corporation
By [ILLEGIBLE] By /s/ XXXXX X. XXXXXX
----------------------------- -------------------------
Title Vice President Title President/CEO
------------------------- -------------------------
By [ILLEGIBLE] By /s/ XXXXX XXXX
----------------------------- -------------------------
Title Vice President Title Vice President & CFO
------------------------- -------------------------
Address where notices to Address where notices to
Bank are to be sent: Borrower is to be sent:
3233 Park Centre Drive Hawker Pacific, Inc.
Xxxxx Xxxx, Xxxxxxxxxx 00000 00000 Xxxxxxx Xxx
Attention: Xxxxxxx Xxxxxx, Vice Xxx Xxxxxx, Xxxxxxxxxx 00000
President Attention: Xxxxx Xxxxxx
With copy to:
Unique Investment
Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
54
Schedule 1 to Business Loan Agreement
Deposit Accounts
BANK ACCOUNT NO.
Intellectual Property
PATENTS
TRADEMARKS
COPYRIGHTS
Persons owning interests in Borrower and AqHawk
NAME PERCENTAGE OWNERSHIP NO. OF SHARES
EXISTING DEBTS, CONTINGENT OBLIGATIONS AND LEASES.
EXISTING LIENS.
55
Schedule 2 - Sabena Shipset Description
56
Hawker Pacific, Inc.
Lease Property and Assets
REAL PROPERTY
Xxx Xxxxxx Xxxxxxxxxx 00000
Building # 1, 2, & 3 00000 Xxxxxxx Xxx Annual Rent: $209,388
Xxxxxxxx # 0 00000 Xxxxxxx Xxx Annual Rent: $ 55,476
Building # 5 11260 Xxxxxxx Way, Back Annual Rent: $ 55,476
Building # 6 00000 Xxxxxxx Xxx, Xxxxx Annual Rent: $ 55,476
Xxxxxxxx # 0 00000 Xxxxxxx Xxx Annual Rent: $113,700
Xxxxxxxx # 0 0000 Xxxx Xxxxxx Annual Rent: $192,000
Miami Inv. Location Sun Valley Storage Annual Rent: $ 3,600
00000 Xxxxxx Xxxx.
Xxxxxxx, Xxxxxxxxxx 00000
CEO's Apartment 000 Xxxxxxx Xx. #000 Annual Rent: $ 12,600
Holland
Nooderfreef 80, 2153 LL Nieuw-Vennep Annual Rent: $ 9,000
The Netherlands
PERSONAL PROPERTY
Vehicles Annual Lease: $15,660
Office Equipment Annual Lease: $25,710
Hawker Pacific, Inc.
Listing of HPI Bank Accounts
US Operations:
Bank of America 00000-00000 Receipts Account Sun Valley, California
Bank of America 09497-08611 Disbursements Account Sun Valley, California
Bank of America 09499-4650 Payroll Account Sun Valley, California
Bank of America 09495-08877 Training Reimb. Acct. Sun Valley, California
All of the above accounts require any two signatures from the following four
individuals for withdraw.
Xxxxx Xxxxxx, Xxxxx Xxxx, Xxxxx Xxxx, Xxxxxx Xxxxx
Xxxxxxx Operations:
ABNB 56254.37.089 General Expense Acct. Holland
ABNB 00.00.00.000 Dutch Guilders Acct. Holland
ABNB 00.00.00.000 US Dollar Account Holland
All of the above require signature from one of the following individuals for
transfer or withdraw.
Xxxxx Xxxxxx, Xxxxx Xxxx, Ed Lepelaar
Hawker Pacific, Inc.
Contingent Liabilities
Currently Hawker Pacific, Inc. is aware of one contingent liability. It is for
the vendor demanded upgrade of our MFG/PRO software license such that our
license properly represents our current hardware platform and number of software
system users. The vendor is QAD, Inc. of Cupertino, California. There initial
request to upgrade our system was an expense of $188,000. They have recently
amended their demand downward to approximately $125,000.
Hawker Pacific, Inc.
"Sabena" Shipset Description
For purpose of identifying the referenced "Sabena" shipset utilize the
following:
The "Sabena" shipset is a Boeing 747-400 Landing Gear Rotable Asset received
from Sabena Airline of Belgium in September 1996 on an exchange contract. The
shipset includes two main landing gears, two body landing gears and one nose
landing gear.
INTELLECTUAL PROPERTY
None
OWNERSHIP
Hawker Pacific is 100% owned by AqHawk with 5000 common shares
outstanding
AqHawk is owned by the following:
Xxxxxxx Xxxxxxx - 4150 Common Shares
Xxxxxxx Xxxxxxx - 400 Preferred Shares
Xxxx X. Xxxxxx- 1550 Common Shares
Xxxxxx X. Xxxxxx - 1150 Common Shares
Xxxxx X. Xxxxxxx - 1150 Common Shares
Xxxxxx X. Xxxxxx- 1000 Common Shares
Xxxxx X. Xxxxxx - 500 Common Shares
Xxx Xxxxx - 100 Common Shares
Air Resources, Inc. - 100 Common Shares
Xxxxx X. Xxxx - 100 Common Shares
Xxxxx Xxxx- 100 Common Shares
Xxxxxxx Xxxxx - 100 Common Shares
EXISTING LIENS
Lease assets only
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement"), dated as of November _, 1996,
is made by HAWKER PACIFIC, INC., a California corporation ("Grantor"), in favor
of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as the Bank under the
Loan Agreement referred to below ("Secured Party"). Terms defined in the Loan
Agreement (as hereinafter defined) and not otherwise defined in this Agreement
are used herein with the same meanings.
RECITALS
A. Pursuant to the Business Loan Agreement dated as of November __,
1996 by and among Grantor, as Borrower, and Secured Party, as Bank (as such
agreement may from time to time be amended, extended, renewed, supplemented
or otherwise modified, the "Loan Agreement"), Secured Party has agreed to
extend certain credit facilities to Grantor.
B. The Loan Agreement provides, as a condition of the availability of
such credit facilities on the Closing Date, that Grantor shall enter into this
Agreement and shall grant security interests to Secured Party as herein
provided.
AGREEMENT
NOW, THEREFORE, in order to induce Bank to extend the aforementioned
credit facilities, and for other good and valuable consideration, the receipt
and adequacy of which hereby is acknowledged, Grantor hereby represents,
warrants, covenants, agrees, assigns and grants as follows:
1. DEFINITIONS. This Agreement is the Security Agreement referred to
in the Loan Agreement. This Agreement is one of the Loan Documents referred to
in the Loan Agreement. Terms defined in the California Uniform Commercial Code
and not otherwise defined in this Agreement or in the Loan Agreement shall have
the meanings defined for those terms in the California Uniform Commercial Code.
As used in this Agreement, the following terms shall have the meanings
respectively set forth after each:
-1-
"ADVANCE" means any advance made or to be made by Bank to Grantor as
provided in ARTICLE 2, and INCLUDES advances made under Facility Xx. 0, Xxxxxxxx
Xx. 0, and any Capital Loan.
"AFFILIATE" means, as to any Person, any other Person which indirectly
controls, or is under common control with, or is controlled by, such Person. As
used in this definition, "control" (and the correlative terms, "controlled by"
and "under common control with") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise); PROVIDED that, in any event, any Person that owns,
directly or indirectly, 10% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation
that has more than 100 record holders of such securities, or 10% or more of the
partnership or other ownership interests of any other Person that has more than
100 record holders of such interests, will be deemed to control such corporation
or other Person.
"COLLATERAL" means and includes all present and future right, title
and interest of Grantor, in or to any Property or assets whatsoever, and all
rights and powers of Grantor to transfer any interest in or to any Property or
assets whatsoever, INCLUDING, without limitation, any and all of the following
property:
(a) All present and future accounts, accounts receivable,
agreements, contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements, guaranties,
letters of credit, undertakings, surety bonds, insurance policies (whether
or not required by the terms of the Loan Documents), notes and drafts, and
all forms of obligations owing to Grantor or in which Grantor may have any
interest, however created or arising and whether or not earned by
performance;
(b) All present and future general intangibles, all tax refunds
of every kind and nature to which Grantor now or hereafter may become
entitled, however arising, all other refunds, and all deposits, reserves,
loans, royalties, cost savings, deferred payments, goodwill, choses in
action, liquidated damages, rights to indemnification, trade secrets,
computer programs, software, customer lists, trademarks, trade names,
patents, licenses, copyrights, technology, processes, proprietary
information and insurance proceeds of which Grantor is a beneficiary;
(c) All present and future deposit accounts of Grantor,
INCLUDING, without limitation, any demand, time, savings, passbook or like
-2-
account maintained by Grantor with any bank, savings and loan association,
credit union or like organization, and all cash and cash equivalents of
Grantor, whether or not deposited in any such deposit account;
(d) All present and future books and records, INCLUDING, without
limitation, books of account and ledgers of every kind and nature, all
electronically recorded data relating to Grantor or the business thereof,
all receptacles and containers for such records, and all files and
correspondence;
(e) All present and future goods, INCLUDING, without limitation,
all consumer goods, farm products, inventory, equipment, gaming devices and
associated equipment, machinery, tools, molds, dies, furniture,
furnishings, fixtures, trade fixtures, motor vehicles and all other goods
used in connection with or in the conduct of Grantor's business;
(f) All present and future inventory and merchandise, INCLUDING.
without limitation, all present and future goods held for sale or lease or
to be furnished under a contract of service, all raw materials, work in
process and finished goods, all packing materials, supplies and containers
relating to or used in connection with any of the foregoing, and all bills
of lading, warehouse receipts or documents of title relating to any of the
foregoing;
(g) All present and future stocks, bonds, debentures,
securities, subscription rights, options, warrants, puts, calls,
certificates, partnership interests, limited liability company interests,
joint venture interests, investments and/or brokerage accounts and all
rights, preferences, privileges, dividends, distributions, redemption
payments, or liquidation payments with respect thereto;
(h) All present and future accessions, appurtenances,
components, repairs, repair parts, spare parts, replacements,
substitutions, additions, issue and/or improvements to or of or with
respect to any of the foregoing;
(i) All other tangible and intangible property of Grantor;
(j) All rights, remedies, powers and/or privileges of Grantor
with respect to any of the foregoing; and
(k) Any and all proceeds and products of any of the foregoing,
INCLUDING, without limitation, all money, accounts, general intangibles,
deposit
-3-
accounts, documents, instruments, chattel paper, goods, insurance proceeds,
and any other tangible or intangible property received upon the sale or
disposition of any of the foregoing;
PROVIDED that the term "COLLATERAL", as used in this Agreement, shall NOT
include the following: (i) interests pledged pursuant to the Pledge Agreement;
or (ii) real property or any interest therein.
"GOVERNMENTAL AGENCY" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, or (c) any court or administrative
tribunal.
"LAWS" means, collectively, all international, foreign, federal, state
and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial precedents.
"LOAN" means the aggregate of the Advances made at any one time by
Bank pursuant to ARTICLE 2.
"PERSON" means any entity, whether an individual, trustee,
corporation, general partnership, limited partnership, joint stock company,
trust, estate, unincorporated organization, business association, firm, joint
venture, Governmental Agency, or otherwise.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"SECURED OBLIGATIONS" means any and all present and future obligations
of any type or nature of Grantor to Secured Party arising under or relating to
(a) the Loan Agreement and the other Loan Documents including all obligations
with respect to Loans or Letters of Credit made under the Loan Agreement and
obligations under the Loan Documents executed in connection therewith, (b)
interest rate swaps and other hedging arrangements entered into by Bank and
Grantor, (c) the documents governing each other credit facility hereafter made
available to Grantor or guarantied by Grantor, whether due or to become due,
matured or unmatured, liquidated or unliquidated, or contingent or
noncontingent, INCLUDING obligations of performance as well as obligations of
payment, and INCLUDING interest that accrues after the commencement of any
bankruptcy or insolvency proceeding by or against Grantor.
-4-
2. FURTHER ASSURANCES. At any time and from time to time at the
request of Secured Party, Grantor shall execute and deliver to Secured Party all
such financing statements and other instruments and documents in form and
substance satisfactory to Secured Party as shall be necessary or desirable to
fully perfect, when filed and/or recorded, Secured Party's security interests
granted pursuant to SECTION 3 of this Agreement. At any time and from time to
time, Secured Party shall be entitled to file and/or record any or all such
financing statements, instruments and documents held by it, and any or all such
further financing statements, documents and instruments, and to take all such
other actions, as Secured Party may deem appropriate to perfect and to maintain
perfected the security interests granted in SECTION 3 of this Agreement. Before
and after the occurrence of any Event of Default, at Secured Party's request,
Grantor shall execute all such further financing statements, instruments and
documents, and shall do all such further acts and things, as may be deemed
necessary or desirable by Secured Party to create and perfect, and to continue
and preserve, an indefeasible security interest in the Collateral in favor of
Secured Party, or the priority thereof. With respect to any Collateral
consisting of certificated securities, instruments, documents, certificates of
title or the like, as to which Secured Party's security interest need be
perfected by, or the priority thereof need be assured by, possession of such
Collateral, Grantor will upon demand of Secured Party deliver possession of same
in pledge to Secured Party. With respect to any Collateral consisting of
securities, instruments, partnership, joint venture or limited liability company
interests or the like, Grantor hereby consents and agrees that the issuers of,
or obligors on, any such Collateral, or any registrar or transfer agent or
trustee for any such Collateral, shall be entitled to accept the provisions of
this Agreement as conclusive evidence of the right of Secured Party to effect
any transfer or exercise any right hereunder or with respect to any such
Collateral, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by Grantor or any other Person to such issuers or
such obligors or to any such registrar or transfer agent or trustee.
3. SECURITY AGREEMENT. For valuable consideration, Grantor hereby
assigns and pledges to Secured Party, and grants to Secured Party a security
interest in, all presently existing and hereafter acquired Collateral, as
security for the timely payment and performance of the Secured Obligations, and
each of them. This Agreement is a continuing and irrevocable agreement and all
the rights, powers, privileges and remedies hereunder shall apply to any and all
Secured Obligations, including those arising under successive transactions which
shall either continue the Secured Obligations, increase or decrease them and
notwithstanding the bankruptcy of any Grantor or any other Person or any other
event or proceeding affecting any Person.
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4. GRANTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS. EXCEPT as
otherwise disclosed to Secured Party in writing concurrently herewith, Grantor
represents, warrants and agrees that: (a) Grantor will pay, prior to
delinquency, all taxes, charges, Liens and assessments against the Collateral,
EXCEPT such as are timely contested in good faith, and upon its failure to pay
or so contest such taxes, charges, Liens and assessments, Secured Party, after
an Event of Default, at its option may pay any of them, and Secured Party shall
be the sole judge of the legality or validity thereof and the amount necessary
to discharge the same; (b) the Collateral will not be used for any unlawful
purpose or in violation of any Laws in any material respect, nor used in any way
that will void or impair any insurance required to be carried in connection
therewith; (c) Grantor will, to the extent consistent with good business
practice, keep the portion of the Collateral owned by it in reasonably good
repair, working order and condition, and from time to time make all needful and
proper repairs, renewals, replacements, additions and improvements thereto and,
as appropriate and applicable, will otherwise deal with such portion of the
Collateral in all such ways as are considered good practice by owners of like
Property; (d) Grantor will take all reasonable steps to preserve and protect the
Collateral; (e) Grantor will maintain, with responsible insurance companies,
insurance covering the Collateral against such insurable losses as is required
by the Loan Agreement, and will cause Secured Party to be designated as an
additional insured and loss payee with respect to all insurance (whether or not
required by the Loan Agreement), will obtain the written agreement of the
insurers that such insurance shall not be canceled, terminated or materially
modified to the detriment of Secured Party without at least 30 days prior
written notice to Secured Party, and will furnish copies of such insurance
policies or certificates to Secured Party promptly upon request therefor; (f)
Grantor will promptly notify Secured Party in writing in the event of any
substantial or material damage to the Collateral (considered as a whole) from
any source whatsoever, and, EXCEPT for the disposition of collections and other
proceeds of the Collateral permitted by SECTION 7 hereof, Grantor will not
remove or permit to be removed any part of the Collateral from its places of
business without the prior written consent of Secured Party, EXCEPT for such
items of the Collateral as are removed in the ordinary course of business or in
connection with any transaction or disposition otherwise permitted by the Loan
Documents; and (g) in the event Grantor changes its name or its address as
either are set forth herein or in the Loan Agreement, Grantor will notify
Secured Party of such name and/or address change promptly, but in any event,
within five (5) days.
5. SECURED PARTY'S RIGHTS RE COLLATERAL. At any time (whether or not
an Event of Default has occurred), without notice or demand and at the expense
of Grantor with regard to the portion of the Collateral owned by it, Secured
Party may, to the extent it may be necessary or desirable to protect the
security hereunder, but Secured Party shall not be obligated to: (a) at all
reasonable times on reasonable
-6-
notice, provided that if no Default or Event of Default exists, Bank will
provide one (1) business day prior written or verbal notice of its intention to
exercise its rights, and, if requested by Borrower, will provide written
confirmation of any such verbal notice, enter upon any premises on which
Collateral is situated and examine the same or (b) perform any obligation of
Grantor under this Agreement or any obligation of any other Person under the
Loan Documents. At any time and from time to time, at the expense of Grantor,
Secured Party may, to the extent it may be necessary or desirable to protect the
security hereunder, but Secured Party shall not be obligated to: (i) after an
Event of Default, notify obligor on the Collateral that the Collateral has been
assigned to Secured Party; and (ii) at any time and from time to time request
from obligors on the Collateral, in the name of Grantor or in the name of
Secured Party, information concerning the Collateral and the amounts owing
thereon, PROVIDED, HOWEVER, that any such action which involves communicating
with customers of Grantor shall be carried out by Secured Party through such
Grantor's independent auditors unless Secured Party shall then have the right
directly to notify obligors on the Collateral as provided in SECTION 9. Grantor
shall maintain books and records pertaining to the Collateral in such detail,
form and scope as Secured Party shall reasonably require consistent with Secured
Party's interests hereunder. Grantor shall at any time at Secured Party's
request xxxx the Collateral and/or Grantor's ledger cards, books of account and
other records relating to the Collateral with appropriate notations reasonably
satisfactory to Secured Party disclosing that they are subject to Secured
Party's security interests. Secured Party shall be under no duty or obligation
whatsoever to take any action to preserve any rights of or against any prior or
other parties in connection with the Collateral, to exercise any voting rights
or managerial rights with respect to any Collateral, whether or not an Event of
Default shall have occurred, or to make or give any presentments, demands for
performance, notices of non-performance, protests, notices of protests, notices
of dishonor or notices of any other nature whatsoever in connection with the
Collateral or the Secured Obligations. Secured Party shall be under no duty or
obligation whatsoever to take any action to protect or preserve the Collateral
or any rights of Grantor therein, or to make collections or enforce payment
thereon, or to participate in any foreclosure or other proceeding in connection
therewith.
6. COLLECTIONS ON THE COLLATERAL. EXCEPT as otherwise provided in
any Loan Document, Grantor shall have the right to use and to continue to make
collections on and receive dividends and other proceeds of all of the Collateral
in the ordinary course of business so long as no Event of Default shall have
occurred and be continuing. Upon the occurrence and during the continuance of an
Event of Default, at the option of Secured Party, Grantor's right to make
collections on and receive dividends and other proceeds of the Collateral and to
use or dispose of such collections and proceeds shall terminate, and any and all
dividends, proceeds and collections,
-7-
including all partial or total prepayments, then held or thereafter received on
or on account of the Collateral will be held or received by Grantor in trust for
Secured Party and immediately delivered in kind to Secured Party. Any remittance
received by Grantor from any Person shall be presumed to relate to the
Collateral and to be subject to Secured Party's security interests. Upon the
occurrence and during the continuance of an Event of Default, Secured Party
shall have the right at all times to receive, receipt for, endorse, assign, and
deliver, in the name of Secured Party or in the name of Grantor, any and all
checks, notes, drafts and other instruments for the payment of money
constituting proceeds of or otherwise relating to the Collateral; and Grantor
hereby authorizes Secured Party to affix, by facsimile signature or otherwise,
the general or special endorsement of it, in such manner as Secured Party shall
deem advisable, to any such instrument in the event the same has been delivered
to or obtained by Secured Party without appropriate endorsement, and Secured
Party and any collecting bank are hereby authorized to consider such endorsement
to be a sufficient, valid and effective endorsement by Grantor, to the same
extent as though it were manually executed by the duly authorized officer of
Grantor, regardless of by whom or under what circumstances or by what authority
such facsimile signature or other endorsement actually is affixed, without duty
of inquiry or responsibility as to such matters, and Grantor hereby expressly
waives demand, presentment, protest and notice of protest or dishonor and all
other notices of every kind and nature with respect to any such instrument.
7. POSSESSION OF COLLATERAL BY SECURED PARTY. All the Collateral
now, heretofore or hereafter delivered to Secured Party shall be held by Secured
Party in its possession, custody and control. Any or all of the Collateral
delivered to Secured Party shall be held in an interest-bearing account, which
is in the form of cash or cash equivalent, and Secured Party shall apply any
such interest to payment of the Secured Obligations. Nothing herein shall
obligate Secured Party to obtain any particular return on the Collateral. Upon
the occurrence and during the continuance of an Event of Default, whenever any
of the Collateral is in Secured Party's possession, custody or control, Secured
Party may use, operate and consume the Collateral, whether for the purpose of
preserving and/or protecting the Collateral, or for the purpose of performing
any of Grantor's obligations with respect thereto, or otherwise. Secured Party
may at any time deliver or redeliver the Collateral or any part thereof to
Grantor, and the receipt of any of the same by Grantor shall be complete and
full acquittance for the Collateral so delivered, and Secured Party thereafter
shall be discharged from any liability or responsibility therefor. So long as
Secured Party exercises reasonable care with respect to any Collateral in its
possession, custody or control, Secured Party shall have no liability for any
loss of or damage to such Collateral, and in no event shall Secured Party have
liability for any diminution in value of Collateral occasioned by economic or
market conditions or events. Secured
-8-
Party shall be deemed to have exercised reasonable care within the meaning of
the preceding sentence if the Collateral in the possession, custody or control
of Secured Party is accorded treatment substantially equal to that which Secured
Party accords its own property, it being understood that Secured Party shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relating to
any Collateral, whether or not Secured Party has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
any Person with respect to any Collateral.
8. EVENTS OF DEFAULT. There shall be an Event of Default hereunder
upon the occurrence and during the continuance of an Event of Default under the
Loan Agreement.
9. RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Secured Party shall have, in any
jurisdiction where enforcement hereof is sought, in addition to all other rights
and remedies that Secured Party may have under applicable Law or in equity or
under this Agreement (INCLUDING, without limitation, all rights set forth in
SECTION 5 hereof) or under any other Loan Document, all rights and remedies of a
secured party under the Uniform Commercial Code as enacted in California and, in
addition, the following rights and remedies, all of which may be exercised with
or without notice to Grantor and without affecting the Secured Obligations of
Grantor hereunder or under any other Loan Document, or the enforceability of the
Liens created hereby: (a) to foreclose the Liens created hereunder or under any
other agreement relating to any Collateral by any available judicial procedure
or without judicial process; (b) to enter any premises where any Collateral may
be located for the purpose of securing, protecting, inventorying, appraising,
inspecting, repairing, preserving, storing, preparing, processing, taking
possession of or removing the same; (c) to sell, assign, lease or otherwise
dispose of any Collateral or any part thereof, either at public or private sale
or at any broker's board, in lot or in bulk, for cash, on credit or otherwise,
with or without representations or warranties and upon such terms as shall be
acceptable to Secured Party; (d) to notify obligors on the Collateral that the
Collateral has been assigned to Secured Party and that all payments thereon are
to be made directly and exclusively to Secured Party; (e) to collect by legal
proceedings or otherwise all dividends, distributions, interest, principal or
other sums now or hereafter payable upon or on account of the Collateral; (f) to
cause the Collateral to be registered in the name of Secured Party, as legal
owner; (g) to enter into any extension, reorganization, deposit, merger or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith Secured Party may deposit or surrender
control of the Collateral and/or accept other Property in exchange for the
Collateral; (h) to settle, compromise or release, on terms acceptable to Secured
Party,
-9-
in whole or in part, any amounts owing on the Collateral and/or any disputes
with respect thereto; (i) to extend the time of payment, make allowances and
adjustments and issue credits in connection with the Collateral in the name of
Secured Party or in the name of Grantor; (j) to enforce payment and prosecute
any action or proceeding with respect to any or all of the Collateral and take
or bring, in the name of Secured Party or in the name of Grantor, any and all
steps, actions, suits or proceedings deemed by Secured Party necessary or
desirable to effect collection of or to realize upon the Collateral, INCLUDING
any judicial or nonjudicial foreclosure thereof or thereon, and Grantor
specifically consents to any nonjudicial foreclosure of any or all of the
Collateral or any other action taken by Secured Party which may release any
obligor from personal liability on any of the Collateral, and Grantor waives any
right not expressly provided for in this Agreement to receive notice of any
public or private judicial or nonjudicial sale or foreclosure of any security or
any of the Collateral; and any money or other Property received by Secured Party
in exchange for or on account of the Collateral, whether representing
collections or proceeds of Collateral, and whether resulting from voluntary
payments or foreclosure proceedings or other legal action taken by Secured Party
or Grantor may be applied by Secured Party without notice to Grantor to the
Secured Obligations in such order and manner as Secured Party in its sole
discretion shall determine; (k) to insure, process and preserve the Collateral;
(l) to exercise all rights, remedies, powers or privileges provided under any of
the Loan Documents; (m) to remove, from any premises where the same may be
located, the Collateral and any and all documents, instruments, files and
records, and any receptacles and cabinets containing the same, relating to the
Collateral, and Secured Party may, at the cost and expense of Grantor, use such
of its supplies, equipment, facilities and space at its places of business as
may be necessary or appropriate to properly administer, process, store, control,
prepare for sale or disposition and/or sell or dispose of the Collateral or to
properly administer and control the handling of collections and realizations
thereon, and Secured Party shall be deemed to have a rent-free tenancy of any
premises of Grantor for such purposes and for such periods of time as reasonably
required by Secured Party; (n) to receive, open and dispose of all mail
addressed to Grantor and notify postal authorities to change the address for
delivery thereof to such address as Secured Party may designate; PROVIDED that
Secured Party agrees that it will promptly deliver over to Grantor such opened
mail as does not relate to the Collateral; and (o) to exercise all other rights,
powers, privileges and remedies of an owner of the Collateral; all at Secured
Party's sole option and as Secured Party in its sole discretion may deem
advisable. Grantor will, at Secured Party's request, assemble the Collateral and
make it available to Secured Party at places which Secured Party may reasonably
designate, whether at the premises of Grantor or elsewhere, and will make
available to Secured Party, free of cost, all premises, equipment and facilities
of Grantor for the purpose of Secured Party's taking
-10-
possession of the Collateral or storing same or removing or putting the
Collateral in salable form or selling or disposing of same.
Upon the occurrence and during the continuance of an Event of Default,
Secured Party also shall have the right, without notice or demand, either in
person, by agent or by a receiver to be appointed by a court (and Grantor hereby
expressly consents upon the occurrence and during continuance of an Event of
Default to the appointment of such a receiver), and without regard to the
adequacy of any security for the Secured Obligations, to take possession of the
Collateral or any part thereof and to collect and receive the rents, issues,
profits, income and proceeds thereof. Taking possession of the Collateral shall
not cure or waive any Event of Default or notice thereof or invalidate any act
done pursuant to such notice. The rights, remedies and powers of any receiver
appointed by a court shall be as ordered by said court.
Any public or private sale or other disposition of the Collateral may
be held at any office of Secured Party, or at Grantor's place of business, or at
any other place permitted by applicable Law, and without the necessity of the
Collateral's being within the view of prospective purchasers. Secured Party may
direct the order and manner of sale of the Collateral, or portions thereof, as
it in its sole and absolute discretion may determine, and Grantor expressly
waives any right to direct the order and manner of sale of any Collateral.
Secured Party or any Person on Secured Party's behalf may bid and purchase at
any such sale or other disposition. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the Collateral
shall be applied, first, to the expenses (including reasonable attorneys' fees
and disbursements) of retaking, holding, storing, processing and preparing for
sale or lease, selling, leasing, collecting, liquidating and the like, and then
to the satisfaction of the Secured Obligations in such order as shall be
determined by Secured Party in its sole and absolute discretion. Grantor and any
other Person then obligated therefor shall pay to Secured Party on demand any
deficiency with regard thereto which may remain after such sale, disposition,
collection or liquidation of the Collateral.
Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
will send or otherwise make available to Grantor reasonable notice of the time
and place of any public sale thereof or of the time on or after which any
private sale thereof is to be made. The requirement of sending reasonable notice
conclusively shall be met if such notice is mailed, first class mail, postage
prepaid, to Grantor at its address set forth in the Loan Agreement, or delivered
or otherwise sent to Grantor, at least five (5) days before the date of the
sale.
-11-
With respect to any Collateral consisting of securities, partnership
interests, joint venture interests, limited liability company interests,
Investments or the like, and whether or not any of such Collateral has been
effectively registered under the Securities Act of 1933, as amended, or other
applicable Laws, Secured Party may, in its sole and absolute discretion, sell
all or any part of such Collateral at private sale in such manner and under such
circumstances as Secured Party may deem necessary or advisable in order that the
sale may be lawfully conducted. Without limiting the foregoing, Secured Party
may (i) approach and negotiate with a limited number of potential purchasers,
and (ii) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing such Collateral for their own
account for investment and not with a view to the distribution or resale
thereof. In the event that any such Collateral is sold at private sale, Grantor
agrees that if such Collateral is sold for a price which Secured Party in good
faith believes to be reasonable under the circumstances then existing, then (a)
the sale shall be not be deemed to be commercially unreasonable by reason of
price, (b) Grantor shall not be entitled to a credit against the Secured
Obligations in an amount in excess of the purchase price, and (c) Secured Party
shall not incur any liability or responsibility to Grantor in connection
therewith, notwithstanding the possibility that a substantially higher price
might have been realized at a public sale. Grantor recognizes that a ready
market may not exist for such Collateral if it is not regularly traded on a
recognized securities exchange, and that a sale by Secured Party of any such
Collateral for an amount substantially less than a pro rata share of the fair
market value of the issuer's assets minus liabilities may be commercially
reasonable in view of the difficulties that may be encountered in attempting to
sell a large amount of such Collateral or Collateral that is privately traded.
Upon consummation of any sale of Collateral hereunder, Secured Party
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the Collateral so sold absolutely free from any claim or right upon
the part of Grantor or any other Person, and Grantor hereby waives (to the
extent permitted by applicable Laws) all rights of redemption, stay and
appraisal which it now has or may at any time in the future have under any rule
of Law or statute now existing or hereafter enacted.
10. ATTORNEY-IN-FACT. Grantor hereby irrevocably nominates and
appoints Secured Party as their attorney-in-fact for the following purposes: (a)
to do all acts and things which Secured Party may deem necessary or advisable to
perfect and continue perfected the security interests created by this Agreement
and, upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of Default, to do any and
every act which Grantor is obligated
-12-
to do under this Agreement, at the expense of the Grantor and without any
obligation to do so; (c) to prepare, sign, file and/or record, for Grantor, in
the name of Grantor, any financing statement, application for registration, or
like paper, and to take any other action deemed by Secured Party necessary or
desirable in order to perfect or maintain perfected the security interests
granted hereby; and (d) upon the occurrence and during the continuance of an
Event of Default, to execute any and all papers and instruments and do all other
things necessary or desirable to preserve and protect the Collateral and to
protect Secured Party's security interests therein; PROVIDED, HOWEVER, that
Secured Party shall be under no obligation whatsoever to take any of the
foregoing actions, and, absent bad faith or actual malice, Secured Party shall
have no liability or responsibility for any act taken or omission with respect
thereto (other than Secured Party's own gross negligence or willful misconduct).
11. COSTS AND EXPENSES. Grantor agrees to pay to Secured Party all
costs and expenses (INCLUDING, without limitation, reasonable attorneys' fees
and disbursements, including allocated costs of in-house counsel), incurred
by Secured Party in the enforcement or attempted enforcement of this
Agreement, whether or not an action is filed in connection therewith, and in
connection with any waiver or amendment of any term or provision hereof. All
advances, charges, costs and expenses, INCLUDING reasonable attorneys' fees
and disbursements, incurred or paid by Secured Party in exercising any right,
privilege, power or remedy conferred by this Agreement (INCLUDING, without
limitation, the right to perform any Secured Obligation of Grantor under the
Loan Documents), or in the enforcement or attempted enforcement thereof,
shall be secured hereby and shall become a part of the Secured Obligations
and shall be paid to Secured Party by Grantor, immediately upon demand,
together with interest thereon at the Default Rate.
12. STATUTE OF LIMITATIONS AND OTHER LAWS. Until the Secured
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to Secured Party
hereunder shall continue to exist and may be exercised by Secured Party at any
time and from time to time irrespective of the fact that any of the Secured
Obligations may have become barred by any statute of limitations. Grantor
expressly waives the benefit of any and all statutes of limitation, and any and
all Laws providing for exemption of property from execution or for valuation and
appraisal upon foreclosure, to the maximum extent permitted by applicable Law.
13. OTHER AGREEMENTS. Nothing herein shall in any way modify or limit
the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or in connection with the Secured Obligations, but
each and every term and condition hereof shall be in addition thereto. All
provisions contained in the
-13-
Loan Agreement or any other Loan Document that apply to Loan Documents generally
are fully applicable to this Agreement and are incorporated herein by this
reference.
14. CONTINUING EFFECT. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's assets.
15. RELEASE OF GRANTOR. This Agreement and all Secured Obligations of
Grantor hereunder shall be released when all Secured Obligations have been paid
in full in cash or otherwise performed in full and when no portion of the
Commitments remain outstanding. Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return any pledged Collateral to
Grantor, or to the Person or Persons legally entitled thereto, and shall
endorse, execute, deliver, record and file all instruments and documents, and do
all other acts and things, reasonably required for the return of the Collateral
to Grantor, or to the Person or Persons legally entitled thereto, and to
evidence or document the release of Secured Party's interests arising under this
Agreement, all as reasonably requested by, and at the sole expense of, Grantor.
16. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the local laws of the State of California.
17. ATTORNEY'S FEES. In any action to enforce this Agreement, the
prevailing party shall be entitled to receive, in addition to any other relief
awarded by the tribunal, its attorney's fees and costs (including the allocated
fees and costs of internal counsel).
-14-
IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized offer as of the date first written above.
"Grantor"
HAWKER PACIFIC, INC., a California corporation
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx, President & CEO
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[Name and Title]
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:
"Secured Party"
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Secured Party
By: [illegible]
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Title:
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