AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
January ___, 1998
between
HAWKER PACIFIC AEROSPACE, a California corporation,
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. LINE OF CREDIT (FACILITY NO.1). . . . . . . . . . . . . . . . . . . . . 12
2.1 Line of Credit Amount . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Availability Period . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 Repayment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3. TERM LOAN (FACILITY NO. 2). . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Loan Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Availability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Repayment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. CAPITAL EXPENDITURE FACILITY (FACILITY NO.3). . . . . . . . . . . . . . 16
4.1 Capital Expenditure Loans . . . . . . . . . . . . . . . . . . . . . . . 16
5. OPTIONAL INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Optional Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Offshore Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. FEES, EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Reimbursement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Guarantees; Personal Property Supporting Guarantees. . . . . . . . . . 22
7.3 Future Subsidiaries and Collateral. . . . . . . . . . . . . . . . . . . 22
7.4 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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8. DISBURSEMENTS, PAYMENTS AND COSTS . . . . . . . . . . . . . . . . . . . 23
8.1 Requests for Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Disbursements and Payments. . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Telephone and Telefax Authorization . . . . . . . . . . . . . . . . . . 23
8.4 Direct Debit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 Direct Debit (Line of Credit) . . . . . . . . . . . . . . . . . . . . . 24
8.6 Banking Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.8 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.9 Interest Calculation. . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.10 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.11 Overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.12 Collections on Accounts Receivable. . . . . . . . . . . . . . . . . . . 26
9. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1 Authorizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Incumbency Certificates; Governing Documents. . . . . . . . . . . . . 27
9.3 Security Agreements, Etc. . . . . . . . . . . . . . . . . . . . . . . . 27
9.4 Evidence of Priority. . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.5 Consent to Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.7 Business Interruption Insurance . . . . . . . . . . . . . . . . . . . . 27
9.8 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.9 Subordination Agreement . . . . . . . . . . . . . . . . . . . . . . . . 27
9.10 Initial Public Offering . . . . . . . . . . . . . . . . . . . . . . . . 27
9.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.12 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.13 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.14 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.16 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.17 Certain Financial Information . . . . . . . . . . . . . . . . . . . . . 28
9.23 Other Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 29
10.1 Organization of Borrower and its Subsidiaries . . . . . . . . . . . . . 29
10.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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10.3 Enforceable Agreement . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.6 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7 Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9 Permits, Franchises. . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.10 Other Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11 Income Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12 No Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.13 Merchantable Inventory . . . . . . . . . . . . . . . . . . . . . . . . 31
10.14 ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.15 Location of Borrower and its Subsidiaries. . . . . . . . . . . . . . . 32
10.16 Certain Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.17 The Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.18 Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.19 Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . . . 33
10.20 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . 33
10.21 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.22 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 33
11. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.1 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.2 Use of Proceeds: Ineligible Securities. . . . . . . . . . . . . . . . 34
11.3 Financial and Other Information . . . . . . . . . . . . . . . . . . . 34
11.4 Senior Funded Debt to Adjusted EBITDA . . . . . . . . . . . . . . . . 37
11.5 Fixed Charge Coverage Ratio . .. . . . . . . . . . . . . . . . . . . . 37
11.6 Profitability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.7 Other Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.8 Other Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.9 Capital Expenditures for Rotable Gears . . . . . . . . . . . . . . . . 39
11.10 Capital Expenditures for Other Assets. . . . . . . . . . . . . . . . . 39
11.11 Dividends and Other Payments . . . . . . . . . . . . . . . . . . . . . 40
11.12 Loans to Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.13 Notices to Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.14 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.15 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.17 Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . . . 41
11.18 Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . . 41
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11.19 Perfection of Liens . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.20 Places of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.21 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Insurance Covering Collateral . . . . . . . . . . . . . . 42
(b) General Business Insurance. . . . . . . . . . . . . . . . 42
(c) Evidence of Insurance . . . . . . . . . . . . . . . . . . 42
11.23 Additional Negative Covenants . . . . . . . . . . . . . . . . . . . . 42
11.24 ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.25 Inspection of Property and Books and Records. . . . . . . . . . . . . 43
11.26 Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.27 Collection of Accounts. . . . . . . . . . . . . . . . . . . . . . . . 43
11.28 Amendment to the Environmental Indemnities. . . . . . . . . . . . . . 44
11.29 Capitalization of HP UK . . . . . . . . . . . . . . . . . . . . . . . 44
12. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.1 Failure to Pay. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.2 Lien Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.3 Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.4 False Informat. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.5 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.6 Receivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.7 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.8 Government Action . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.9 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 45
12.10 Cross-default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.11 Other Bank Agreements . . . . . . . . . . . . . . . . . . . . . . . . 46
12.12 ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.13 Environmental Indemnity Breach. . . . . . . . . . . . . . . . . . . . 46
12.14 Change in Control or Management . . . . . . . . . . . . . . . . . . . 46
12.15 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.16 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.17 Other Breach Under Agreement. . . . . . . . . . . . . . . . . . . . . 47
13. ENFORCING THIS AGREEMENT; MISCELLANEOUS. . . . . . . . . . . . . . . . 48
13.1 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.2 California Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 48
13.4 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.5 Severability; Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 50
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13.6 Administration Costs . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.7 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.8 One Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.9 Disposition of Schedules, Reports, Etc. Delivered by Borrower. . . . . 51
13.10 Returned Merchandise . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.11 Verification of Receivables. . . . . . . . . . . . . . . . . . . . . . 51
13.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
This Amended and Restated Business Loan Agreement (this
"Agreement") dated as January ___, 1998 is entered into between BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BANK") and HAWKER PACIFIC
AEROSPACE, a California corporation ("BORROWER"), and amends and restates in
its entirety the Business Loan Agreement (the "Existing Loan Agreement")
dated November 27, 1996 between the Bank and Borrower (acting under its
former name, Hawker Pacific, Inc.). 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 or HP UK in the ordinary course of
their business.
(b) There are no conditions which must be satisfied before
Borrower or HP UK 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 or its Subsidiaries. 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 or HP UK has sent an invoice to the debtor in the
amount of the account.
(f) The account is owned by Borrower or HP UK free of any title
defects or any liens or interests of others except the security interest in
favor of Bank.
1
(g) The debtor upon the account is not any of the following:
(i) an employee, affiliate, parent or Subsidiary of
Borrower or HP UK, or an entity which has common officers or directors
with Borrower or HP UK.
(ii) any government or any agency or department of any
nation other than an account of Borrower arising out of the Coast Guard
Contract (and then only to the extent that Borrower has 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 person or entity located in a foreign country
(other than accounts owed to Borrower from debtors located in 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, and in the case of accounts
receivable owed by account debtors located in the United Kingdom, debtors
whose accounts are owed to HP UK.
(iv) any person or entity to whom Borrower or any of its
Subsidiaries are obligated for goods purchased or services performed (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 or, in the case of accounts owed
by any Major Customer, the 120 day period starting on its original
invoice date (it being understood that the entire amount of such
accounts which is not paid within the foregoing periods shall be
excluded from Borrower's and HP UK's gross accounts receivable balance
without regard to any credit balances due to the account debtor with
respect to any such account);
2
(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 total accounts
upon which such debtor is obligated (or, in the case of any Major
Customer, 15% or more of the total accounts upon which such debtor is
obligated).
(j) The account does not arise from the sale of goods which
remain in Borrower's or HP UK's possession or 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 Borrower's and HP UK's consolidated gross
accounts receivable at that time, PROVIDED THAT (i) such concentration
limit for Federal Express will be 30%, and (ii) such concentration limit
for British Airways will be 40%, in each case unless and until 15% of the
gross accounts receivable of Borrower and HP UK from such account debtor
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 or HP UK free of
any title defects or any liens or interests of others except the security
interest in favor of Bank.
(b) In the case of inventory of Borrower, 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 is
otherwise acceptable to Bank. In the case of inventory of HP UK, the
inventory is permanently located at a location in England disclosed to
Bank,
3
and is subject to a first priority floating charge in favor of
Bank. In either case, 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 inventory in transit between locations of Borrower and its
Subsidiaries and any used exchange parts shipped from Borrower's or
HP UK's customer but which have not reached their respective locations
described above) 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 and HP UK'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 and HP UK have not sold inventory or
otherwise dealt in of that type within a 12 month period. Inventory shall
be considered "excess inventory" if Borrower's and HP UK'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 and HP UK's
historical sales information. Work-in-process shall not be considered
Acceptable Inventory except to the extent that the same consists of
purchased parts allocated to work orders but not yet in assembly which are
identified as such to the reasonable satisfaction of the Bank. 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 rotable
gears or Shipsets.
(h) The inventory is otherwise acceptable to Bank.
"ACQUISITION" means the acquisition by HP UK of the UK Business on the
Closing Date pursuant to the Acquisition Agreement.
"ACQUISITION AGREEMENT" means that certain Agreement relating to the Sale
and Purchase of part of the Business of British Airways Plc among Borrower,
HP UK and British Airways dated as of 20th December, 1997, as in effect on
the date of this Agreement.
4
"ADJUSTED EBITDA" means, as of each date of determination, EBITDA for the
four Fiscal Quarter period ending on that date, EXCEPT THAT (i) as of the
Fiscal Quarter ending March 31, 1998, Adjusted EBITDA shall be EBITDA for
that Fiscal Quarter plus $5,700,000, (ii) as of the Fiscal Quarter ending
June 30, 1998, Adjusted EBITDA shall be EBITDA for the two Fiscal Quarter
period then ending plus $4,300,000, and (iii) as of the Fiscal Quarter
ending September 30, 1998, Adjusted EBITDA shall be EBITDA for the three
Fiscal Quarter period then ending plus $2,400,000.
"AMR SHIPSET PAYABLE" means trade accounts payable net of deposits payable
to American Airlines in the amount of $2,854,373.
"XXXXXXX" means Xxxxxxx X. Xxxxxxx, an individual residing in Orem, Utah.
"BORROWER" means Hawker Pacific Aerospace, a California corporation
formerly known as Hawker Pacific, Inc., its successors and permitted
assigns.
"BORROWER DEBENTURE" means a Debenture of even date herewith executed by
Borrower providing for a floating charge upon all assets of Borrower which
may hereafter be located in the United Kingdom, the terms of which are
subject to and controlled by the Security Agreement.
"BORROWER SECURITY AGREEMENT" means that certain 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 the aggregate amount of the
Acceptable Receivables; and
(b) The lesser 50% of the value of Acceptable Inventory
or the Inventory Limit. In determining the value of Acceptable Inventory
to be included in the Borrowing Base, Bank will use the lowest of (i)
Borrower's or HP UK's cost, (ii) Borrower's or HP UK'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.
"BORROWING BASE CERTIFICATE" is defined in Section 11.3(e).
"BRITISH AIRWAYS" means British Airways Plc, an English company.
5
"BRITISH AIRWAYS ENVIRONMENTAL INDEMNITY" means the representations,
warranties, covenants and indemnities as to environmental matters made by
British Airways in favor of Borrower and HP UK in the Acquisition
Agreement, including without limitation those set forth in Section 2.2 of
Schedule 3 thereto.
"BTR ENVIRONMENTAL INDEMNITY" means that certain environmental indemnity
dated as of November 27, 1996 made in favor of Borrower by BTR Dunlop,
Inc., a Delaware corporation.
"CAPITAL EXPENDITURE LOANS" means loans to Borrower made pursuant to
Facility No. 3, as described in Section 4.
"CASH FLOW" means, for any period, EBITDA for that period, MINUS state and
federal income taxes payable in cash by Borrower and its Subsidiaries with
respect to income earned during that period, and net cash taxes payable in
the current period for fiscal years prior to that period.
"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.
"COMMITMENT FEE RATE" means (a) during the period from the Closing Date
through the day prior to the commencement of the initial Pricing Period,
0.50% per annum, and (b) during each Pricing Period, the percentage per
annum set forth below opposite the Leverage Ratio as of the last day of the
Fiscal Quarter ending 45 days prior to the start of that Pricing Period:
LEVERAGE RATIO COMMITMENT FEE RATE
Less than 2.00:1.00 0.25%
Equal to or greater than
2.00:1.00, but less than
2.50:1.00 0.35%
Equal to or greater than
6
2.50:1.00, but less than
3.00:1.00 0.375%
Equal to or greater than
3.00:1.00 0.50%
"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.
"EBITDA" means, for any period, the sum (without duplication) of (a) the
consolidated net income of Borrower and its Subsidiaries for that period,
PLUS (b) the amount of state and federal taxes paid or payable with respect
to such net income, PLUS (c) depreciation and amortization expense of
Borrower and its Subsidiaries, MINUS (d) gains (and PLUS losses) associated
with the sale of fixed assets to the extent included in such net income,
MINUS (e) extraordinary gains during that period, PLUS (f) interest expense
of Borrower and its Subsidiaries during that fiscal period, in each case
for that period, determined in accordance with generally accepted
accounting principles, consistently applied.
"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.
"FACILITY NO. 1 OUTSTANDING AMOUNT" has the meaning set forth in Section
2.1(b).
"FACILITY NO. 1 UNUSED AMOUNT" means, as of each date of determination, the
difference between (i) $15,000,000, and (ii) the Facility No. 1 Outstanding
Amount.
"FIXED CHARGES" for any period, means the sum of (a) gross interest expense
paid or payable by Borrower and its Subsidiaries in cash (including
interest on the Subordinated Note), plus (b) scheduled principal payments
on indebtedness of Borrower and its
7
Subsidiaries for borrowed money and capital leases, PLUS (c) for each
fiscal quarter during that period during which no scheduled payments are
required to be made with respect to the Facility No. 2, $750,000.
"HP UK" means Hawker Pacific Aerospace Limited, a company organized under
the laws of England and Wales (registered No. ____________________), its
successors and permitted assigns.
"HP UK GUARANTY" means the Composite Guarantee and Debenture of even date
herewith executed by HP UK in favor of the Bank, as at any time amended.
"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.
"INITIAL PUBLIC OFFERING" means the initial Public Offering of the common
stock of Borrower conducted prior to the Closing Date pursuant to the
Registration Statement on Form S-1 (Reg. No. 333-40295), as amended, filed
by Borrower with the Securities and Exchange Commission.
"INTERCOMPANY DEBENTURE" means a Debenture of even date herewith made by HP
UK in favor of Borrower in a form acceptable to the Bank, the lien of which
shall be subject to a Deed of Priorities of even date therewith among Bank,
Borrower and HP UK.
"INTERCOMPANY NOTE" means that certain $_________ promissory note of even
date herewith made by HP UK in favor of Borrower and pledged to the Bank.
"INVENTORY LIMIT" means, as of each date of determination of the Borrowing
Base, an amount equal to 75% of the revenues of Borrower and its
Subsidiaries for the then most recently ending three month period for which
Borrower has reported such revenues on its latest Borrowing Base
Certificate.
"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.
"LEVERAGE RATIO" means, as of the last day of each fiscal quarter of
Borrower, the ratio of (a) Senior Funded Debt as of that date to (b)
Adjusted EBITDA as of that date.
"LOAN DOCUMENTS" means this Agreement, the Borrower Security Agreement, the
Lockbox Agreements, the Intercompany Note, each Letter of Credit, the
Pledge
8
Agreement, the HP UK Guaranty, the Deed of Priorities among Borrower, HP
UK and the Bank, each interest and currency hedging agreement entered into
between the Bank and Borrower, and each other instrument, document and
agreement now or hereafter executed by Borrower, Xxxxxxx, or any of
their respective shareholders or affiliates in connection with this
Agreement.
"LOCKBOX" means post office boxes established by Borrower and HP UK
pursuant to the Lockbox Agreements.
"LOCKBOX ACCOUNTS" means the blocked bank deposit accounts established by
Borrower and HP UK with Bank 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 or Lockbox
Account, in any event providing for (i) the deposit of all remittances with
respect to accounts receivable of Borrower and HP UK to the Lockboxes, (ii)
the deposit of remittances received in the Lockboxes to a Lockbox Account,
and (iii) a first priority lien in favor of Bank with respect to the
contents of the Lockbox and each Lockbox Account.
"MAJOR CUSTOMER" means, collectively, American Airlines, United Airlines,
British Airways and Federal Express Corporation and their affiliated
business entities.
"NET PROCEEDS" means the amount received by Borrower by reason of any
Public Offering, after deduction of all actual and reasonably estimated
associated fees and transactional expenses.
"OFFSHORE RATE MARGIN" means (a) during the period from the Closing Date
through the day prior to the commencement of the initial Pricing Period,
1.75%, and (b) during each Pricing Period, the percentage set forth below
opposite the Leverage Ratio as of the last day of the Fiscal Quarter ending
45days prior to the start of that Pricing Period:
LEVERAGE RATIO OFFSHORE RATE MARGIN
Less than 2.00:1.00 1.00%
Equal to or greater than
2.00:1.00, but less than
2.50:1.00 1.25%
Equal to or greater than
9
2.50:1.00, but less than
3.00:1.00 1.50%
Equal to or greater than
3.00:1.00 1.75%
"PERMITTED MANAGEMENT FEES" means fees payable to Unique, in equal
installments and not less frequently than quarterly, in an annual amount
not to exceed (i) $300,000 during 1998 and (ii) $150,000 in each subsequent
year.
"PLEDGE AGREEMENT" means the Pledge Agreement of even date herewith made by
Borrower in favor of Bank to secure the obligations and indebtedness under
this Agreement, pursuant to which 100% of the capital stock of HP UK and
the Intercompany Note shall be pledged by Borrower to Bank, as at any time
amended.
"PRICING PERIOD" means the period beginning May 15, 1998 and ending on
August 14, 1998, and each of the subsequent and concurrent three month
periods beginning on August 15, November 15, February 14 and May 15 during
the term of this Agreement.
"PUBLIC OFFERING" means each offer and sale by Borrower of capital stock of
Borrower pursuant to a registration statement filed with the Securities and
Exchange Commission other than a registration on Form S-8, and includes the
Initial Public Offering.
"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.
"REFERENCE RATE MARGIN" means (a) during the period from the Closing Date
through the day prior to the commencement of the initial Pricing Period,
0.50%, and (b) during each Pricing Period, the percentage set forth below
opposite the Leverage Ratio as of the last day of the Fiscal Quarter ending
45 days prior to the start of that Pricing Period:
LEVERAGE RATIO REFERENCE RATE MARGIN
Less than 2.50:1.00 0%
10
Equal to or greater than
2.50:1.00, but less than
3.00:1.00 0.25%
Equal to or greater than
3.00:1.00 0.50%.
"SENIOR FUNDED DEBT" means, as of each date of determination, and without
duplication, the principal amount of (a) all indebtedness of Borrower and
its Subsidiaries for borrowed money, (b) all obligations of Borrower and
its Subsidiaries with respect to capital leases, (c) all obligations of
Borrower and its Subsidiaries with respect to standby letters of credit,
and (d) all guarantees and other contingent obligations with respect to any
of the foregoing items, OTHER than the Subordinated Note.
"SHIPSET" means a landing gear core set for a fixed wing or rotor equipped
aircraft.
"SUBORDINATED NOTE" means that certain $5,000,000 Amended and Restated
Subordinated Promissory Note dated as of the date hereof made by Borrower
in favor of Unique, as at any time amended.
"SUBORDINATION AGREEMENT" means that certain Amended and Restated
Subordination Agreement of even date herewith executed by Xxxxxxx, Unique,
Borrower, HP UK and Bank, as at any time amended, pursuant to which all
obligations of Borrower to Xxxxxxx and Unique have been subordinated to the
Intercompany Note and the Loan Documents.
"SUBSIDIARY" means, as of any date of determination and with respect to any
person, any corporation or partnership (whether or not, in either case,
characterized as such or as a "joint venture"), whether now existing or
hereafter organized or acquired: (a) in the case of a corporation, of which
a majority of the securities having ordinary voting power for the election
of directors or other governing body (other than securities having such
power only by reason of the happening of a contingency) are at the time
beneficially owned by such person or one or more Subsidiaries of such
person, or (b) in the case of a partnership, of which a majority of the
partnership or other ownership interests are at the time beneficially owned
by such person or one or more of its Subsidiaries.
"UK BUSINESS" means the landing gear repair and overhaul business purchased
from British Airways pursuant to the Acquisition Agreement.
11
"UK LOCKBOX AGREEMENT" means [[describe after consultation with UK
Counsel]]
"UNIQUE" means Unique Investment Corporation, a Utah corporation, 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) $15,000,000 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 (including without limitation, because of
any decrease in the Borrowing Base), 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 January 30, 2001 (the "FACILITY
NO. 1 EXPIRATION DATE"), provided that Bank will not be required to make
any advances or issue any Letters of 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 HP UK and
for the issuance of Letters of Credit thereafter.
12
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 January 31, 1998
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.
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
13
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.
(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) the then applicable
Offshore Rate Margin 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.
14
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 $24,500,000 on the Closing
Date, PROVIDED THAT in the event that the Initial Public Offering yields Net
Proceeds which are in excess of $22,000,000, then the amount of the Facility
No. 2 term loan will be reduced to an amount not less than $22,000,000 by the
amount of such excess.
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 (i) loaned by Borrower to HP UK via the Intercompany Note and shall be
used to partially finance the Acquisition and (ii) used by Borrower to
refinance certain obligations under the Existing Loan Agreement and to
refinance the AMR Shipset Payable.
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
January 31, 1998, 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, 2004.
(b) Borrower will repay principal in successive quarterly
installments beginning on March 31, 1999 and on the last calendar day
of each successive June,
15
September, December and March in the following amounts (or such lesser
amount as may then be outstanding):
YEAR DURING
WHICH DUE AMOUNT OF EACH INSTALLMENT
1999 $ 812,500
2000 812,500
2001 937,500
2002 1,062,500
2003 1,187,500
2004 1,312,500.
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:
(a) 100% of the net after-tax cash proceeds in excess of $200,000, in
the aggregate, received or receivable during each fiscal year from sales,
leases or other transfers by Borrower or its Subsidiaries of equipment or
other fixed assets unless, during the 180 day period following such sale,
lease or other transfer (or, if earlier, the date upon which any Event of
Default occurs), such cash proceeds are reinvested in similar equipment or
replacement fixed assets. Each such repayment shall be made on the 180th
day following the date upon which the sale is consummated, and shall be
applied to the outstanding installments of Facility No. 2 in inverse order
of their maturity, PROVIDED that if an Event of Default sooner occurs,
Borrower shall immediately repay the Facility No. 2 by the amount of the
unreinvested cash proceeds of such sale, transfer or other leases.
(b) concurrently with the consummation of the related Public Offering,
50% of the Net Proceeds from any offering, subsequent to the Initial Public
Offering, of the capital stock of Borrower.
If and to the extent that, as of the date of any prepayment required under
this Section, 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.
16
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 $6,000,000. The availability period for such loans is from the
date of this Agreement through January 30, 2001. 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 rotable gears or Shipsets for use in the
ordinary course of Borrower's business. All rotable gears and 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 rotable gear or 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 rotable gear or Shipset or
(y) 70% of:
(i) if Bank in its discretion requests an appraisal, the
appraised value of the related rotable gear or 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 or HP UK for the related rotable
gear or Shipset.
17
(d) As conditions precedent to each Capital Expenditure
Loan which is made in connection with any capital expenditure which is
in excess of $1,000,000 or which results in the aggregate principal
amount of capital expenditures made during the then current fiscal year
being in excess of $1,500,000:
(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 for the twelve month period
following the date thereof, 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 or HP UK
which requires the purchase or assembly of additional Shipsets or
rotable gears.
(e) As conditions precedent to the making of Capital Expenditure
Loans which are, in the aggregate, in excess of $3,000,000, Borrower shall
have delivered its audited consolidated financial statements to Bank
demonstrating compliance with the terms of this Agreement and the other
Loan Documents as of the date thereof, and EBITDA of not less than
$10,000,000 during Borrower's fiscal year 1998.
(f) 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, 2004. Each quarterly
installment payment due under this clause (f) with respect to each Capital
Expenditure Loan shall be equal to one eighty-fourth of the initial amount
of the related Capital Expenditure Loan.
18
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).
Borrower may select either the Cayman Islands eurodollar market or the
London Inter-bank eurodollar market as the market in which quotations
of Offshore Rates are obtained, provided that Borrower shall give the
Bank (i) not less than two business days' notice, by 11:00 a.m. on such
date, of its request for any loan to be made on the basis of an
interest rate quotation based upon the London Interbank eurodollar
market, and (ii) notice for loans based upon the Cayman Islands
eurodollar market not later than 11:00 a.m. on the relevant date. The
last day of the interest period will be determined by Bank using the
practices of the relevant offshore dollar inter-bank market.
(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.
19
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 = OFFSHORE BASE RATE + Offshore Rate Margin
---------------------------
(1.00 - Reserve Percentage)
Where:
(i) "OFFSHORE BASE RATE" means either (a) the interest rate
(rounded upward to the nearest 1/16th of one percent) at which the
Bank's office in London, England, would offer U.S. dollar deposits
for the applicable interest period to other prime banks in the London
Interbank eurodollar market, or (b) 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 prime banks in the offshore
dollar inter-bank 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.
(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. 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
20
(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 $100,000 to Bank (net of any credits then applicable
thereto).
(b) COMMITMENT FEES. Borrower agrees to pay to Bank a
commitment fee equal to (a) the sum of (i) Facility No. 1 Unused Amount,
and (ii) the undisbursed portion of Facility No. 3, TIMES (b) the then
applicable Commitment Fee Rate, quarterly in arrears on the last day of
each calendar quarter. The amount of the commitment fees payable
hereunder shall not be reduced if any portion of the Facility No. 1 or
Facility No. 3 is unavailable to Borrower because of borrowing base
limitations or otherwise.
(c) 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.
The Bank hereby confirms that no "Early Termination Fee" is payable under
the Existing
21
Loan Agreement by reason of the execution of this Agreement and the other
transactions contemplated to occur on
the Closing Date.
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 and Bank's domestic and English external 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.
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 HP UK pursuant to the HP UK Guaranty, which provides for fixed
and floating charges upon substantially all of the assets of HP UK. HP UK
has entered into the UK Lockbox Agreement to secure its obligations under the
UK Guaranty. Pursuant to the Pledge Agreement, Borrower has pledged 100% of
the capital stock of HP UK and the Intercompany Note to the Bank to secure
its obligations under this Agreement and the other Loan Documents. Borrower
has also executed the Borrower Security Agreement to secure its obligations
hereunder and under the other Loan Documents.
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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 $24,500,000 on the Closing
Date, PROVIDED THAT in the event that the Initial Public Offering yields Net
Proceeds which are in excess of $22,000,000, then the amount of the Facility
No. 2 term loan will be reduced to an amount not less than $22,000,000 by the
amount of such excess.
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 (i) loaned by Borrower to HP UK via the Intercompany Note and shall be
used to partially finance the Acquisition and (ii) used by Borrower to
refinance certain obligations under the Existing Loan Agreement and to
refinance the AMR Shipset Payable.
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
January 31, 1998, 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, 2004.
(b) Borrower will repay principal in successive quarterly
installments beginning on March 31, 1999 and on the last calendar day
of each successive June,
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September, December and March in the following amounts (or such lesser
amount as may then be outstanding):
YEAR DURING
WHICH DUE AMOUNT OF EACH INSTALLMENT
1999 $ 812,500
2000 812,500
2001 937,500
2002 1,062,500
2003 1,187,500
2004 1,312,500.
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:
(a) 100% of the net after-tax cash proceeds in excess of $200,000, in
the aggregate, received or receivable during each fiscal year from sales,
leases or other transfers by Borrower or its Subsidiaries of equipment or
other fixed assets unless, during the 180 day period following such sale,
lease or other transfer (or, if earlier, the date upon which any Event of
Default occurs), such cash proceeds are reinvested in similar equipment or
replacement fixed assets. Each such repayment shall be made on the 180th
day following the date upon which the sale is consummated, and shall be
applied to the outstanding installments of Facility No. 2 in inverse order
of their maturity, PROVIDED that if an Event of Default sooner occurs,
Borrower shall immediately repay the Facility No. 2 by the amount of the
unreinvested cash proceeds of such sale, transfer or other leases.
(b) concurrently with the consummation of the related Public Offering,
50% of the Net Proceeds from any offering, subsequent to the Initial Public
Offering, of the capital stock of Borrower.
If and to the extent that, as of the date of any prepayment required under
this Section, 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.
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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 $6,000,000. The availability period for such loans is from the
date of this Agreement through January 30, 2001. 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 rotable gears or Shipsets for use in the
ordinary course of Borrower's business. All rotable gears and 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 rotable gear or 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 rotable gear or Shipset or
(y) 70% of:
(i) if Bank in its discretion requests an appraisal, the
appraised value of the related rotable gear or 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 or HP UK for the related rotable
gear or Shipset.
17
(d) As conditions precedent to each Capital Expenditure
Loan which is made in connection with any capital expenditure which is
in excess of $1,000,000 or which results in the aggregate principal
amount of capital expenditures made during the then current fiscal year
being in excess of $1,500,000:
(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 for the twelve month period
following the date thereof, 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 or HP UK
which requires the purchase or assembly of additional Shipsets or
rotable gears.
(e) As conditions precedent to the making of Capital Expenditure
Loans which are, in the aggregate, in excess of $3,000,000, Borrower shall
have delivered its audited consolidated financial statements to Bank
demonstrating compliance with the terms of this Agreement and the other
Loan Documents as of the date thereof, and EBITDA of not less than
$10,000,000 during Borrower's fiscal year 1998.
(f) 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, 2004. Each quarterly
installment payment due under this clause (f) with respect to each Capital
Expenditure Loan shall be equal to one eighty-fourth of the initial amount
of the related Capital Expenditure Loan.
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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).
Borrower may select either the Cayman Islands eurodollar market or the
London Inter-bank eurodollar market as the market in which quotations
of Offshore Rates are obtained, provided that Borrower shall give the
Bank (i) not less than two business days' notice, by 11:00 a.m. on such
date, of its request for any loan to be made on the basis of an
interest rate quotation based upon the London Interbank eurodollar
market, and (ii) notice for loans based upon the Cayman Islands
eurodollar market not later than 11:00 a.m. on the relevant date. The
last day of the interest period will be determined by Bank using the
practices of the relevant offshore dollar inter-bank market.
(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.
19
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 = OFFSHORE BASE RATE + Offshore Rate Margin
---------------------------
(1.00 - Reserve Percentage)
Where:
(i) "OFFSHORE BASE RATE" means either (a) the interest rate
(rounded upward to the nearest 1/16th of one percent) at which the
Bank's office in London, England, would offer U.S. dollar deposits
for the applicable interest period to other prime banks in the London
Interbank eurodollar market, or (b) 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 prime banks in the offshore
dollar inter-bank 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.
(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. 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
20
(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 $100,000 to Bank (net of any credits then applicable
thereto).
(b) COMMITMENT FEES. Borrower agrees to pay to Bank a
commitment fee equal to (a) the sum of (i) Facility No. 1 Unused Amount,
and (ii) the undisbursed portion of Facility No. 3, TIMES (b) the then
applicable Commitment Fee Rate, quarterly in arrears on the last day of
each calendar quarter. The amount of the commitment fees payable
hereunder shall not be reduced if any portion of the Facility No. 1 or
Facility No. 3 is unavailable to Borrower because of borrowing base
limitations or otherwise.
(c) 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.
The Bank hereby confirms that no "Early Termination Fee" is payable under
the Existing
21
Loan Agreement by reason of the execution of this Agreement and the other
transactions contemplated to occur on
the Closing Date.
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 and Bank's domestic and English external 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.
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 HP UK pursuant to the HP UK Guaranty, which provides for fixed
and floating charges upon substantially all of the assets of HP UK. HP UK
has entered into the UK Lockbox Agreement to secure its obligations under the
UK Guaranty. Pursuant to the Pledge Agreement, Borrower has pledged 100% of
the capital stock of HP UK and the Intercompany Note to the Bank to secure
its obligations under this Agreement and the other Loan Documents. Borrower
has also executed the Borrower Security Agreement to secure its obligations
hereunder and under the other Loan Documents.
22
7.3 FUTURE SUBSIDIARIES AND COLLATERAL. In the event that Borrower
hereafter forms or acquires any new Subsidiaries, or Borrower or any of its
Subsidiaries hereafter moves any collateral for the obligations under the
Loan Documents or acquires any new property or assets which are not subject
to the lien of the Loan Documents, then Borrower shall, and shall cause each
such Subsidiary, concurrently with the occurrence of any such event:
(a) to deliver to the Bank a guaranty of the obligations of Borrower under
this Agreement executed by any such new Subsidiary, together with 100% of
the capital stock of such Subsidiary in pledge to secure the obligations
under this Agreement;
(b) deliver to the Bank such security agreements, mortgages, debentures,
financing statements or other similar collateral assignments as the Bank
may reasonably request to grant to the Bank a first priority perfected lien
in such property; and
(c) any and all landlord consents, opinions, certificates and other
assurances as the Bank may request.
7.4 SUBORDINATION. The obligations of Borrower to Xxxxxxx and Unique
shall be subordinate and junior in right of payment to the obligations of
Borrower 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.
8.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by Bank and each
payment by Borrower will be:
23
(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.
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.
24
(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 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.
25
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:
(a) Bank may make advances under this Agreement to prevent or
cover an overdraft on any account of Borrower or HP UK 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 or HP UK with Bank.
This Section shall not be deemed to authorize Borrower or HP UK to create
overdrafts on any of their 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
26
received in the Lockboxes shall be collected by Bank and deposited into a the
relevant Lockbox Account, and all proceeds of collections of HP UK's accounts
receivable shall be deposited directly into the relevant 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 or HP UK's checking
account or other deposit accounts maintained by Borrower or HP UK 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 and HP
UK.
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 HP UK of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
9.2 INCUMBENCY CERTIFICATES; GOVERNING DOCUMENTS. Incumbency
certificates for Borrower and HP UK, together with true, correct and complete
copy of Borrower's and HP UK's articles of incorporation and bylaws or other
organizational papers, certificates of good standing with respect to Borrower
issued by the California Secretary of State's office and the California
Franchise Tax Board, and evidence of the due formation and existence of HP UK
acceptable to the Bank.
9.3 SECURITY AGREEMENTS, ETC. The Borrower Security Agreement, the
Pledge Agreement, the Lockbox Agreements, the Intercompany Debenture and the
Borrower Debenture, each duly executed by Borrower or HP UK, as required,
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.
27
9.5 CONSENT TO REMOVAL. A Landlord's Consent from the owner of each
parcel of real property leased by Borrower or HP UK.
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 $4,000,000 with an insurer
acceptable to Bank, and with Bank named as an additional loss payee.
9.8 GUARANTY. The HP UK Guaranty.
9.9 SUBORDINATION AGREEMENT. The Subordination Agreement shall have
been executed by all parties thereto.
9.10 INITIAL PUBLIC OFFERING. Evidence acceptable to Bank of the
completion of the Initial Public Offering and the receipt by Borrower of Net
Proceeds thereof in an amount which is not less than $17,500,000.
9.11 ACQUISITION. A certificate executed by a senior officer of
Borrower certifying that the attached copies of the Acquisition Agreement,
the Landing Gear Overhaul Services Agreement with British Airways, and the
British Airways 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.
9.12 LEGAL OPINIONS. Written opinions from legal counsel for Borrower
and HP UK, covering such matters as Bank may require, including the
organization, authority and good standing of Borrower and HP UK, the due
execution and delivery of all Loan Documents, the valid, binding and
enforceable nature of the Loan Documents against Borrower and HP UK, and the
possession by Borrower and HP UK of all necessary certificates, permits and
licenses which are required to conduct its business as presently conducted,
including a valid certificate from the Civil Aviation Authority.
9.13 APPRAISAL. An appraisal (by an appraiser acceptable to Bank, and
in form and scope acceptable to Bank) of the fixed assets of the UK Business
with results satisfactory to Bank and in any event providing for an orderly
liquidation value (after liquidation costs) of rotable gear sets and eligible
machinery and equipment of not less than $12,000,000.
28
9.14 PAYMENT OF FEES. Payment of all accrued and unpaid expenses
incurred by Bank as required by Sections 6.2 and 6.3.
9.15 MATERIAL CONTRACTS. A Certificate of a senior officer of Borrower
certifying that there have been no material amendments to Borrower's
contracts with Federal Express, Inc., BTR Dunlop, Inc. and its affiliates and
the Coast Guard Contract since November 27, 1996, and that the attached copy
of Borrower's long term supply contract with American Airlines is true and
correct.
9.16 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 or any of its Subsidiaries is a party,
(b) each party to any material contract allowing termination upon any change
in control of Borrower or any of its Subsidiaries, and (c) which are
otherwise deemed necessary by Bank.
9.17 CERTAIN FINANCIAL INFORMATION.
(a) 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.
(b) Pro forma pre-closing and post-closing balance sheets
reflecting all adjustments necessary or desirable to reflect the effects of
the Acquisition.
(c) A final sources and uses statement with respect to the
Acquisition.
(d) the British Airways services schedule and agreement for 1998.
9.18 YEAR 2000 COMPLIANCE. Borrower shall have completed a Year 2000
questionnaire and a comprehensive action plan acceptable to Bank for dealing
with computer related problems associated with the year 2000.
9.19 BORROWING BASE. Borrower shall have delivered the initial
Borrowing Base Certificate hereunder as of December 31, 1997.
9.20 MIS PLAN. Borrower shall have developed and delivered to Bank an
acceptable plan in relation to the management information systems for HP UK.
29
9.21 TAX LETTER. Borrower shall have delivered a copy of a letter
addressed to Borrower by Ernst & Young LLP as to the availability and
limitations of certain net operating loss carry-forwards in existence prior
to the Initial Public Offering as deductions for inclusion in Borrower's
federal and state income tax returns, and such report shall be acceptable to
Bank.
9.22 ENVIRONMENTAL PERMITS. Copies of documents establishing, to the
satisfaction of the Bank, that all environmental permits necessary for HP UK
to operate the business acquired pursuant to the Acquisition Agreement at its
present Heathrow Airport location have been obtained, including without
limitation extensions of the following permits:
Environmental Agency Authorization (Cadmium Plating Process) No. A00130
Local Authority Authorization (Painting Process) EPA B3\26
Approval (Thames Water Utilities Consent) HS119A
9.23 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 as to itself and
its Subsidiaries. Each request for an extension of credit hereunder
constitutes a renewed representation and warranty to Bank:
10.1 ORGANIZATION OF BORROWER AND ITS SUBSIDIARIES. Borrower and each
of its Subsidiaries are corporations duly formed, existing and in good
standing under the laws of their respective jurisdictions of formation.
Schedule 1 hereto correctly details the ownership of Borrower as of the
Closing Date (separately listing each of the persons owning interests in
Borrower prior to the consummation of the Initial Public Offering). The form
of organization, number of shares of capital stock issued and outstanding,
and ownership of each Subsidiary of Borrower are properly described on
Schedule 1.
10.2 AUTHORIZATION. This Agreement, the Loan Documents and any
instrument or agreement required hereunder or thereunder, are within
Borrower's and it Subsidiaries respective 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
30
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 and its
Subsidiaries do business, they are properly licensed, in good standing, and,
where required, in compliance with fictitious name statutes. HP UK is
properly licensed and in good standing under the laws of England.
10.5 NO CONFLICTS. This Agreement and the other Loan Documents do not
conflict with any law, agreement, or obligation by which Borrower, its
Subsidiaries or any of their affiliates are bound.
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 and its Subsidiaries financial condition.
(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 November 30, 1997, there has been no material
adverse change in the assets, consolidated financial condition, business or
prospects of Borrower and its Subsidiaries. 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 its Subsidiaries which, if adversely
decided, would impair Borrower's consolidated financial condition or ability
to repay the obligations hereunder.
10.8 COLLATERAL. All collateral required in this Agreement is owned (or
is being concurrently acquired) 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 and its Subsidiaries possess all
permits, memberships, franchises, contracts and licenses required and all
trademark rights, trade name rights, patent rights and fictitious name rights
necessary to enable them to conduct the business in which they are now
engaged.
31
10.10 OTHER OBLIGATIONS. Borrower and its Subsidiaries are 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 the income tax payable by Borrower and its
Subsidiaries with respect to any year.
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 or Event of Default under this
Agreement or any of the other Loan Documents.
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 and each of its ERISA Affiliates have fulfilled their
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 or any of its ERISA Affiliates 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.
32
(ii) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
(iii) "ERISA AFFILIATE" means, with respect to any person, any
other person (or any trade or business, whether or not incorporated)
that is under common control with that person within the meaning of
Section 414 of the Code.
(iv) "PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
(v) "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 AND ITS SUBSIDIARIES. 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. HP UK's sole business location and the location of its chief
executive offices is located at Number 0 Xxxxxx Xxxx, Xxxxxxxxxxx X000 0XX
Xxxxxxx or at another location disclosed in writing to the Bank as such.
10.16 CERTAIN COLLATERAL.
(a) Each deposit account maintained by Borrower and its Subsidiaries
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 any
of its Subsidiaries following the Closing Date.
(b) Borrower and its Subsidiaries do not own any patents,
trademarks or other intellectual property which is not described on
Schedule 1 hereto.
(c) Each Shipset which Borrower or any of its Subsidiaries has
received in exchange from one of its customers is Borrower's or such
Subsidiary'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 and its Subsidiaries which whom such
Shipsets have been exchanged.
33
(d) Each of the assets described in the appraisal of the UK Business
delivered to Bank shall be purchased pursuant to the Acquisition
Agreement and, as of the Closing Date, has not suffered any material
deterioration in value since the date of such appraisal.
10.17 THE ACQUISITION. The Acquisition has been consummated
concurrently with the Closing Date in accordance with the Acquisition
Agreement and all applicable laws.
10.18 ENVIRONMENTAL. Borrower, its Subsidiaries and their operations
are in material compliance with all Environmental Laws. Borrower and its
Subsidiaries have no knowledge of any Environmental Claims that, either
individually or in the aggregate, could reasonably be expected to have a
material adverse effect upon their condition or their ability to repay the
obligations evidenced by this Agreement and the other Loan Documents.
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 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 and
its Subsidiaries own or are licensed or otherwise have 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 their business, without conflict with the
rights of any other person.
10.21 CONTRACTS. Borrower and its Subsidiaries have 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.
10.22 YEAR 2000 COMPLIANCE. Borrower and its Subsidiaries have
implemented a comprehensive program to address the "year 2000 problem" (that
is, the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) and expect to resolve on a
timely basis any material year 2000 problem. Borrower and its Subsidiaries
have also made inquiry of each supplier, vendor and customer of Borrower and
its Subsidiaries that is of material importance to the financial well-being
of Borrower and its Subsidiaries with respect to the "year 2000 problem". On
the basis of that inquiry, Borrower believes that each such supplier, vendor
and customer will resolve any material year 2000 problem on a timely basis.
34
10.23 LANDLORD CONSENTS. The landlord consents delivered to Bank with
respect to Borrower's premises in Sun Valley, California, have been delivered
from each lessor of the real property comprising that facility
[[[list exceptions, if any]]].
11. COVENANTS
Borrower agrees, so long as credit is available under this Agreement
and until Bank is repaid in full, unless Bank otherwise agrees in writing,
Borrower shall, and shall cause each of its Subsidiaries:
11.1 USE OF PROCEEDS. To use the proceeds of the credit provided
hereunder (a) on the Closing Date to (i) refinance the obligations under the
Existing Loan Agreement (including a repayment of the Facility No. 1
thereunder in an amount which is not less than $2,000,000), (ii) to repay a
$1,500,000 portion of the Subordinated Note (leaving a principal balance of
not less than $5,000,000), (iii) to repay in full the AMR Shipset Payable,
and (iv) to partially finance the Acquisition (by means of the loan to HP UK
evidenced by the Intercompany Note) and (b) thereafter for the working
capital needs of Borrower and HP UK, 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
(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 AND OTHER INFORMATION. To provide the following
financial information and statements and other information:
(a) Within 90 days following the end of each fiscal year of Borrower,
Borrower's consolidated annual financial statements. These financial
statements must be
35
audited (with an unqualified opinion) by Ernst & Young, LLP or another
nationally recognized firm of independent public accountants reasonably
acceptable to Bank and must be accompanied by a management letter prepared
by such auditors.
(b) Within 30 days following the end of each calendar month (including
the last calendar month in each fiscal year), Borrower's monthly
consolidated and consolidating financial statements showing results for
that month and for a year to date basis, PROVIDED THAT if no Default or
Event of Default has then occurred, following the delivery of Borrower's
audited financial statements for the fiscal year ending December 31, 1998,
Borrower shall instead, within 45 days following the end of each fiscal
quarter (including the last fiscal quarter in each fiscal year) deliver its
quarterly consolidated and consolidating financial statements showing
results for that fiscal quarter and on a year to date basis. In either
case, 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 period provided for in clause (a) (in relation to
Borrower's audited statements and giving effect to any adjustments from the
unaudited statements made therein) and promptly and in any event within
45 days following the last day of each fiscal quarter (in relation to the
unaudited statements and including the last fiscal quarter in each fiscal
year) a compliance certificate signed by an authorized financial officer of
Borrower setting forth 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 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 and HP UK'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.
36
(f) (Statements showing an aging and reconciliation of Borrower's
and HP UK'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.
(h) If Bank requires Borrower and its Subsidiaries to deliver the
proceeds of accounts receivable to Bank upon collection by Borrower and
its Subsidiaries, 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, telephone numbers and
principal contacts of all debtors obligated upon Borrower's and its
Subsidiaries 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 and its Subsidiaries through December 31, 2004,
and quarterly financial projections through the subsequent fiscal year.
(l) Within 90 days following the Closing Date, an audited opening
consolidated balance sheet of Borrower prepared by Ernst & Young LLP.
(m) 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.
(n) 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 non-compliance, types of environmental permits and
licenses required and held by 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.
37
(q) Promptly and in any event within 5 days following the filing
thereof, copies of Borrower's reports on Form 10-K and Form 10-Q and
all other material reports filed by Borrower with the Securities and
Exchange Commission.
(r) On a monthly basis until HPUK has vacated the Heathrow Airport
location leased from British Airways, not later than the 5th day of each
calendar month, (i) a copy of a receipt issued by British Airways for rent
paid with respect to that location for that calendar month and (ii) a
narrative description of the progress of Borrower's and HP UK's efforts to
relocate the operations of HP UK from Heathrow Airport, and an update of
the timetable for that relocation.
(s) Promptly upon Bank's request, such other information as
Bank may reasonably request.
11.4 SENIOR FUNDED DEBT TO ADJUSTED EBITDA. As of the last day of each
Fiscal Quarter described below, to maintain a ratio of (a) Senior Funded Debt
as of the last day of such Fiscal Quarter to (b) Adjusted EBITDA, which is
not greater than the ratio set forth opposite the period in which such Fiscal
Quarter ends:
FISCAL QUARTERS ENDED MAXIMUM RATIO
--------------------- -------------
March 31, 1998 and June 30, 1998 3.85:1.00
September 30, 1998 3.50:1.00
December 31, 1998 through September 30, 1999 3.25:1.00
December 31, 1999 through September 30, 2000 3.00:1.00
December 31, 2000 through September 30, 2001 2.75:1.00
Thereafter 2.50:1.00.
11.5 FIXED CHARGE COVERAGE RATIO. To maintain, as of the last day of
each Fiscal Quarter set forth below, a ratio of (a) Cash Flow to (b) Fixed
Charges which is not less
38
than the ratio set forth opposite the period in which such Fiscal Quarter
ends, calculated quarterly on a fiscal year to date basis through December
31, 1998 and on a rolling four quarter basis thereafter.
PERIOD MINIMUM RATIO
------ -------------
March 31, 1998 and June 30, 1998 1.20:1.00
September 30, 1998 and December 31, 1998 1.40:1.00
Thereafter 1.50:1.00
11.6 PROFITABILITY. To maintain a positive net income before taxes and
extraordinary income on a cumulative basis for each period of two consecutive
fiscal quarters following the Closing Date.
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 $750,000 at any one time outstanding.
(f) the unsecured subordinated debt evidenced by the Subordinated
Note on then Closing Date.
39
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).
11.9 CAPITAL EXPENDITURES FOR ROTABLE GEARS. Not to make or
commit to make capital expenditures (including any amount expended with
respect to capital leases) for the purchase or lease of rotable gears in any
fiscal year (net of the amount received from the sale of rotable gears) which
are in excess of the amount set forth below opposite that fiscal year:
FISCAL YEAR AMOUNT.
1998 3,000,000
1999 and each subsequent
fiscal year 3,500,000.
11.10 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 (other than expenditures for the
purchase or lease of rotable gears which are permitted by Section 11.9) in
any fiscal year which are in excess of the amount set forth below opposite
that fiscal year:
FISCAL YEAR AMOUNT.
1998 $4,500,000
1999 2,500,000
Each subsequent fiscal year 2,000,000;
40
PROVIDED that in the event that Borrower and its Subsidiaries expend less
than the amount allotted above during the 1998 fiscal year, the unexpended
amount, not to exceed $2,250,000, may be carried over to the 1999 fiscal year.
11.11 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 Unique, Xxxxxxx or their respective affiliates,
including without limitation management fees, except that Borrower may pay
Permitted Management Fees when no Default or Event of Default exists or would
result therefrom.
11.12 LOANS TO OFFICERS. Not to make any loans, advances or
other extensions of credit to Borrower's or its Subsidiaries' 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.
11.13 NOTICES TO BANK. To promptly notify Bank in writing of:
(a) any lawsuit over $100,000 against Borrower or any of
its Subsidiaries.
(b) any substantial dispute between Borrower and its
Subsidiaries and any government authority.
(c) any known failure to comply with this Agreement or
the other Loan Documents.
(d) any material adverse change in Borrower's and its
Subsidiaries financial condition or operations.
(e) any change in the name, legal structure, place of
business, or chief executive office of Borrower or any of its
Subsidiaries.
(f) any pending or threatened environmental investigation
or proceeding not previously disclosed to Bank in writing involving
Borrower, its Subsidiaries or any of the real property upon which their
operations are located.
11.14 BOOKS AND RECORDS. To maintain adequate books and records.
41
11.15 AUDITS. To allow Bank and its agents to inspect Borrower's
and its Subsidiaries 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
or its Subsidiaries properties, books or 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.
11.16 COMPLIANCE WITH LAWS. To comply with the laws (including
any fictitious name statute), regulations, and orders of any government body
with authority over the business of Borrower and its Subsidiaries.
11.17 PRESERVATION OF RIGHTS. To use commercially reasonable
efforts to maintain and preserve all rights, privileges, and franchises
Borrower and its Subsidiaries now have.
11.18 MAINTENANCE OF PROPERTIES. To make any repairs, renewals,
or replacements to the properties of Borrower and its Subsidiaries which are
necessary to keep the same in good working condition.
11.19 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.
11.20 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.
11.21 COOPERATION. To take any action reasonably requested by
Bank to carry out the intent of this Agreement.
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11.22 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 and
its Subsidiaries' properties, public liability insurance including
coverage for contractual liability, product liability and workers'
compensation, and any other insurance which is usual for Borrower's and
its Subsidiaries' 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.
11.23 ADDITIONAL NEGATIVE COVENANTS. Not to, without Bank's
written consent:
(a) engage in any business activities substantially
different from Borrower's and its Subsidiaries' present business.
(b) liquidate or dissolve Borrower's or any Subsidiary's
business or adopt a plan to take any such action.
(c) enter into any consolidation, merger, pool, joint
venture, syndicate, or other combination.
(d) without the prior written consent of Bank (no to be
unreasonably withheld or delayed), lease, or dispose of any assets of
Borrower or its Subsidiaries which have an aggregate value in excess of
$100,000 in any year, other than sales and leases of inventory in the
ordinary course of business.
(e) acquire or purchase a business or its assets.
43
(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.
11.24 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.
11.25 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 and its Subsidiaries. The
financial statements of Borrower and its Subsidiaries shall, in addition, be
in conformity with generally accepted accounting principles, consistently
applied. Borrower shall, and shall cause its Subsidiaries to, permit
representatives and independent contractors of Bank to visit and inspect any
of their properties, to examine their corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss their
affairs, finances and accounts with their respective directors, officers, and
independent public accountants, all without unreasonably interfering with the
normal operations of Borrower and its Subsidiaries, 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.
11.26 ENVIRONMENTAL LAWS. To conduct its operations and keep and
maintain its property in compliance with all Environmental Laws. Borrower
and its Subsidiaries will maintain all required records and procedures in
relation to its environmental compliance programs.
44
11.27 COLLECTION OF ACCOUNTS. To instruct all account debtors with
respect to accounts owed to Borrower and HP UK to remit their payments to the
appropriate Lockbox or directly to the appropriate Lockbox Account. 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 and HP
UK, whether in cash or otherwise, to be deposited by Borrower and HP UK as
and when received in kind (except for any endorsement necessary to vest
title to any instrument in Bank) into the appropriate Lockbox Accounts;
(b) unless otherwise agreed by Bank, either (i) maintain all of
Borrower's and its Subsidiaries' deposit account relationships with Bank,
or (ii) cause the granting to Bank of perfected first priority liens in all
depositary accounts maintained by Borrower and its Subsidiaries pursuant
to documents acceptable to Bank.
11.28 AMENDMENT TO THE ENVIRONMENTAL INDEMNITIES. Not to amend or modify
the BTR Environmental Indemnity or the British Airways Environmental Indemnity
in any respect without the prior written consent of Bank.
11.29 CAPITALIZATION OF HP UK. Use or permit the use of any funds loaned
by Bank to Borrower to be subscribed for shares of capital stock of HP UK or
otherwise used in a manner which could result in the HP Guaranty being
"financial assistance" within the meaning of the Companies Act under English
law, or permit HP UK to issue any preferred stock.
11.30 SWAP ARRANGEMENTS. To enter into contracts for interest rate
protection for Borrower with respect to not less than 60% of the projected
outstanding principal balance of Facility No. 2 for a period of not less than
four years, and with other terms, conditions and counterparties reasonably
acceptable to Bank within 30 days following the Closing Date.
11.31 INVESTMENTS IN SUBSIDIARIES. Not to make any investment in HP UK
following the Closing Date which is not evidenced by the Intercompany Note, or
make any investment in any new Subsidiary unless, concurrently therewith,
Borrower causes all of the issued and outstanding capital stock or other equity
securities of such Subsidiary to be pledged to the Bank and causes such
Subsidiary to issue a guarantee of the obligations under the Loan Documents
secured by all of its assets, in each case pursuant to agreements reasonably
acceptable to the Bank.
45
11.32 NEW PREMISES. Prior to entering into any lease of any real
property, deliver to Bank any landlord consents, estoppels and subordinations as
the Bank may reasonably request from the landlords of such premises, and from
any other person who, by reason of Borrower's or its Subsidiaries' tenancy, may
have claims against the assets of Borrower and its Subsidiaries located on such
premises.
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 12.5, occurs
with respect to Borrower or any of its Subsidiaries then the entire debt
outstanding under this Agreement will automatically be due immediately.
12.1 FAILURE TO PAY. Borrower or any of its Subsidiaries 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 Agreement or any
of the Loan Documents.
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, any of its Subsidiaries 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 BANKRUPTCY. Borrower or any of its Subsidiaries files a
bankruptcy petition, a bankruptcy petition is filed against Borrower or any
of its Subsidiaries, or Borrower or any of its Subsidiaries, any Subsidiary
of Borrower takes any corporate action or other stpes are taken or legal or
other proceedings are started for its winding up, dissolution or
reorganization, or for the appointment of a receiver, administrator,
administrative receiver, trustee or similar officer for its or any portion of
its assets, or Borrower or any of its Subsidiaries makes a general assignment
for the benefit of creditors. An Event of Default under this Section 12.5
will be deemed cured if any such bankruptcy petition filed is dismissed
within a period of 60 days after
46
the filing; PROVIDED, HOWEVER, that Bank will not be obligated to extend any
additional credit to Borrower during that period.
12.6 RECEIVERS. A receiver or similar official is appointed for
Borrower's or any of its Subsidiaries business, or the business is terminated.
12.7 JUDGMENTS. Any judgments or arbitration awards are entered
against Borrower or any of its Subsidiaries, or Borrower or any of its
Subsidiaries enters into any settlement agreements with respect to any
litigation or arbitration, 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.
12.8 GOVERNMENT ACTION. Any government authority takes action
that Bank believes materially adversely affects Borrower's and its
Subsidiaries consolidated financial condition or ability to repay the
obligations under this Agreement.
12.9 MATERIAL ADVERSE CHANGE. There occurs any material adverse
change occurs in the consolidated financial condition, properties or
prospects of Borrower and its Subsidiaries, or their ability to repay their
respective obligations. Borrower acknowledges that termination of Borrower
or any of its Subsidiaries contracts or relationships with any Major Customer
may be considered to be such material adverse effect depending on the factual
context then in existence.
12.10 CROSS-DEFAULT. Borrower or any of its Subsidiaries (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 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 $250,000 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 $250,000 to be demanded.
12.11 OTHER BANK AGREEMENTS. Borrower or any of its Subsidiaries
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.
47
12.12 ERISA PLANS. The occurrence of any one or more of the
following events with respect to Borrower or any of its ERISA Affiliates,
provided such event or events could reasonably be expected, in the judgment
of Bank, to subject Borrower or any of its ERISA Affiliates 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 and its Subsidiaries 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.
12.13 ENVIRONMENTAL INDEMNITY BREACH. British Airways or BTR
Dunlop, Inc. fails to honor within 15 days of written request therefor any
obligation payable by Borrower which is within the scope of the British
Airways Environmental Indemnity or the BTR Environmental Indemnity which
requires the immediate payment by Borrower of an amount in excess of $500,000.
12.14 CHANGE IN CONTROL OR MANAGEMENT. Any of the following occurs
(a) All or substantially all of the assets of Borrower or
any of its Subsidiaries are sold, leased or otherwise disposed of (in a
single transaction or in a series of related transactions);
(b) The persons owning equity interests in Borrower as of
the day to the Initial Public Offering as described as "prior
shareholders" in Schedule 1, or members of their immediate families or
trusts for the benefit of members of their immediate families, fail to
own, beneficially and of record, and control the power to vote, 35% of
the equity securities of Borrower entitled to ordinary voting power
during the three year period following the Closing Date, or 30%
thereafter; or
(c) Any person or entity or "affiliated group" (other than
existing shareholders described on Schedule 1) acquires more than 30% of
the equity securities of Borrower entitled to ordinary voting power;
(d) Less than a majority of those persons constituting the
board of directors of Borrower as of the Closing Date fail to remain as
members of the board of directors of Borrower; or
48
(e) Xxxxx Xxxxxx, Xxxxx Xxxx, Xxxxx Xxxx or Xxxxxxx Xxxxx ceases to
be actively involved on a full time basis in their current capacities as
executive level employees of Borrower at any time 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.
(f) Xxxxxxx Xxxx ceases to be actively involved on a full time basis
in his current capacity as managing director of HP UK 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.
12.15 SUBORDINATION. Xxxxxxx, Unique or Borrower asserts in writing
that the Subordinated Note (or the "Xxxxxxx Note" referred to in the
Subordination Agreement") is not subordinated in accordance with the terms of
the Subordination Agreement.
12.16 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.
12.17 OTHER BREACH UNDER AGREEMENT. Borrower, HP UK, Unique 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.
12.18 LICENCES, CERTIFICATES, PERMITS AND OTHER AUTHORIZATIONS.
Borrower and its Subsidiaries cease to hold any license, certificate, permit or
other authorization from any governmental or quasi-governmental authority which
is necessary for the effective conduct of their 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.
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 written consent, and that any purported
assignment by Borrower without that consent shall be VOID ab initio. BANK MAY
SELL PARTICIPATIONS IN OR ASSIGN THIS LOAN, PROVIDED that when no Default or
Event of Default exists, Bank will obtain Borrower's prior written consent to
49
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 Borrower and any of its Subsidiaries and the 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, its Subsidiaries and Bank, including
claims for injury to persons, property or business interests (torts);
PROVIDED that the Bank shall be entitled to resolve any controversies
or claims which arise under the HP UK Guaranty, and each other Loan
Document which states that it is governed by the laws of England,
Wales or the United Kingdom, without reference to arbitration and (in
the event that any controversy or claim under the Loan Documents
involves both arbitrable claims and claims subject to the laws of
England, Wales or the United Kingdom exempt from arbitration as
aforesaid), shall be entitled to sever from the arbitrable claims and
independently enforce pursuant to such laws the claims subject to the
laws of England, Wales and the United Kingdom.
(b) At the request of Borrower, any relevant Subsidiary 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.
50
(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.
(h) This provision does not limit the right of Borrower or Bank
to:
(i) exercise self-help remedies such as setoff;
51
(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, "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:
52
(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.
This Section shall not be construed to terminate or otherwise affect
the Landlord Consents, the Assignment of Monies Due and to Become Due dated
December 5, 1996 (regarding Contract DTGC-38-95-D-20018 with the United States
Coast Guard), the Authorization and Agreement for Account Management Services
dated November 27, 1996 between Borrower and Bank, each Landlord Consent and
Agreement, and any other instrument, document or agreement executed by Borrower
and AqHawk in connection with the Existing Loan Agreement (each of which shall
continue to be in full force and effect and accrue to the benefit of the Bank),
PROVIDED that it is expressly agreed and understood that the Limited Guaranty
dated as of November 27, 1996 executed by Xxxxxxx X. Xxxxxxx with respect to the
Existing Loan Agreement, and (ii) the Pledge Agreement dated as of November 27,
1996 made by the shareholders in Borrower in favor of the Bank, are each
terminated and deemed to be of no further force and effect as of the Closing
Date.
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 or HP UK.
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 and its Subsidiaries may continue its
present policies for returned merchandise and adjustments. Credit adjustments
with respect to returned merchandise shall be made immediately upon receipt of
the merchandise by Borrower or its Subsidiaries or upon such other disposition
of the merchandise by the debtor in accordance with Borrower's or its
Subsidiaries' 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.
53
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.
54
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 AEROSPACE, a
TRUST AND SAVINGS ASSOCIATION California corporation
By ____________________________ By _________________________
Title __________________________ Title _______________________
By ____________________________ By _________________________
Title __________________________ Title _______________________
Address where notices to Address where notices to
Bank are to be sent: Borrower are to be sent:
000 Xxxxx Xxxxxxxxx, Second Floor Hawker Pacific Aerospace
Xxxxx Xxxx, Xxxxxxxxxx 00000 00000 Xxxxxxx Xxx
Attention: Xxxxxxx Xxxxxx, Vice President Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
With a copy to:
Unique Investment Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
55
Schedule 1 to Business Loan Agreement
Deposit Accounts
BANK ACCOUNT NO.
Intellectual Property
PATENTS
TRADEMARKS
COPYRIGHTS
PERSONS OWNING INTERESTS IN BORROWER
NAME PERCENTAGE OWNERSHIP NO. OF SHARES
SUBSIDIARIES
Name Number of Shares Form of Organization
EXISTING DEBTS, CONTINGENT OBLIGATIONS AND LEASES.
EXISTING LIENS.
56
