EXHIBIT 99.1
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LOAN AGREEMENT
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PACIFIC AEROSPACE & ELECTRONICS, INC.
AEROMET AMERICA, INC.
BALO PRECISION PARTS, INC.
CASHMERE MANUFACTURING CO., INC.
CERAMIC DEVICES, INC.
ELECTRONIC SPECIALTY CORPORATION
NORTHWEST TECHNICAL INDUSTRIES, INC.
PACIFIC COAST TECHNOLOGIES, INC.
SEISMIC SAFETY PRODUCTS, INC.
SKAGIT ENGINEERING & MANUFACTURING, INC.
PA&E INTERNATIONAL, INC.
As Borrowers,
PACIFIC A&E LIMITED
PACIFIC AEROSPACE & ELECTRONICS (UK) LIMITED
AEROMET INTERNATIONAL PLC.,
Foreign Subsidiaries,
THE LENDERS PARTY THERETO
and
DDJ CAPITAL MANAGEMENT, LLC,
As Agent for the Lenders
Dated as of March 1, 2001
TABLE OF CONTENTS
Page
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1. THE TERM LOAN......................................................................................... 1
1.1 The Term Loans............................................................................... 1
1.2 Interest on the Term Loan.................................................................... 1
1.3 Commitment Fee............................................................................... 2
2. CLOSING............................................................................................... 2
3. CONDITIONS TO CLOSING................................................................................. 3
3.1 Representations and Warranties............................................................... 3
3.2 Performance; No Default...................................................................... 3
3.3 Documents Required........................................................................... 3
3.4 Purchase Permitted by Applicable Law, etc.................................................... 4
3.5 No Litigation or Other Proceedings........................................................... 4
3.6 No Material Adverse Change................................................................... 5
3.7 Fees and Expenses............................................................................ 5
3.8 Ancillary Documents and Perfection of Security Interest...................................... 5
3.9 Proceedings and Documents.................................................................... 5
3.10 Blocked Accounts Agreement................................................................... 5
3.11 Warrant Agreement and the Warrants........................................................... 6
3.12 Registration Rights Agreement................................................................ 6
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES....................................................... 6
4.1 Corporate Existence; Qualification; Power; Licenses and Permits.............................. 6
4.2 Corporate and Governmental Authorization; Contravention...................................... 6
4.3 Binding Effect............................................................................... 7
4.4 Information.................................................................................. 7
4.5 Litigation and Judgments..................................................................... 7
4.6 Compliance with ERISA........................................................................ 7
4.7 Taxes........................................................................................ 8
4.8 Subsidiaries................................................................................. 9
4.9 Not Investment Companies..................................................................... 9
4.10 No Conflicting Requirements.................................................................. 10
4.11 Debt......................................................................................... 10
4.12 Title to Properties and Assets............................................................... 10
4.13 Compliance with Law.......................................................................... 12
4.14 Compliance with Environmental Laws........................................................... 12
4.15 Security Interests and Liens; Inventory and Equipment........................................ 13
4.16 Labor Relations.............................................................................. 13
4.17 UCC Filing Information....................................................................... 14
4.18 Solvency..................................................................................... 14
4.19 Fictitious Business Names.................................................................... 15
4.20 Use of Proceeds.............................................................................. 15
(i)
4.21 Margin Stock................................................................................. 15
4.22 Survival of Representations.................................................................. 15
4.23 Affiliate Transactions....................................................................... 15
4.24 Accuracy and Completeness of Information..................................................... 15
4.25 Status of Accounts........................................................................... 16
4.26 Party in Interest............................................................................ 16
4.27 Stock........................................................................................ 16
5. REPRESENTATIONS AND WARRANTIES OF THE LENDERS......................................................... 16
5.1 Authorization................................................................................ 17
5.2 No Plan Assets............................................................................... 17
5.3 Accredited Investor.......................................................................... 17
6. PREPAYMENT OF THE TERM LOANS.......................................................................... 17
6.1 Voluntary Prepayments........................................................................ 17
6.2 Mandatory Prepayments........................................................................ 17
6.3 Method and Timing of Payments................................................................ 18
7. AFFIRMATIVE COVENANTS................................................................................. 18
7.1 Information.................................................................................. 19
7.2 Payment of Obligations....................................................................... 21
7.3 Maintenance of Property; Insurance........................................................... 21
7.4 Compliance with Laws......................................................................... 22
7.5 Inspection of Property, Books and Records; Change of Name, Principal Place of
Business, Location of Collateral, Etc........................................................ 23
7.6 Compliance with Transaction Documents........................................................ 23
7.7 Corporate Existence.......................................................................... 23
7.8 ERISA........................................................................................ 24
7.9 Environmental Matters........................................................................ 25
7.10 Collateral Records........................................................................... 26
7.11 Security Interests........................................................................... 26
7.12 Taxes........................................................................................ 27
7.13 Collection of Accounts....................................................................... 28
7.14 Change of Control............................................................................ 28
7.15 Trademarks................................................................................... 28
7.16 Patents...................................................................................... 28
8. NEGATIVE COVENANTS.................................................................................... 28
8.1 Debt and Guarantees.......................................................................... 29
8.2 Restricted Payments.......................................................................... 29
8.3 Investments.................................................................................. 30
8.4 Negative Pledge.............................................................................. 30
8.5 Consolidations, Mergers and Sales of Assets.................................................. 31
8.6 Capital Expenditures......................................................................... 31
8.7 Minimum EBITDA............................................................................... 32
8.8 EBITDA/Covenant Interest..................................................................... 33
8.9 Covenant Debt/EBITDA......................................................................... 33
(ii)
8.10 Minimum Accounts Receivable and Inventory.................................................... 34
8.11 Transactions with Affiliates................................................................. 34
8.12 Restrictions on Foreign Subsidiary Support................................................... 35
8.13 Environmental Matters........................................................................ 35
8.14 Amendments to Certificates of Incorporation and By-Laws...................................... 35
8.15 No Prohibited Transactions Under ERISA....................................................... 35
8.16 No Additional Bank Accounts.................................................................. 36
8.17 No Additional Subsidiaries................................................................... 36
9. EVENTS OF DEFAULT..................................................................................... 36
9.1 Events of Default............................................................................ 36
9.2 Acceleration................................................................................. 38
9.3 Remedies on Default.......................................................................... 39
10. SUCCESSORS AND ASSIGNS................................................................................ 40
10.1 General...................................................................................... 40
10.2 Assignments.................................................................................. 41
10.3 Assignment Procedures........................................................................ 41
10.4 Register..................................................................................... 41
10.5 Further Assurances........................................................................... 41
11. THE AGENT............................................................................................. 42
11.1 Authorization and Action..................................................................... 42
11.2 Agent's Reliance, Etc........................................................................ 42
11.3 Agent as a Lender............................................................................ 43
11.4 Lender Credit Decision....................................................................... 43
11.5 Indemnification of Agent..................................................................... 43
11.6 Successor Agent.............................................................................. 44
11.7 Amendment of Article 11...................................................................... 44
12. EXPENSES AND INDEMNIFICATION.......................................................................... 44
12.1 Transaction Expenses......................................................................... 44
12.2 Indemnification.............................................................................. 45
12.3 Survival..................................................................................... 46
13. ENTIRE AGREEMENT...................................................................................... 46
14. AMENDMENT AND WAIVER.................................................................................. 47
14.1 Actions by Lenders........................................................................... 47
14.2 Actions by Companies......................................................................... 47
(iii)
15. NOTICES............................................................................................... 48
16. REPRODUCTION OF DOCUMENTS............................................................................. 48
17. CONFIDENTIAL INFORMATION.............................................................................. 49
18. MISCELLANEOUS......................................................................................... 50
18.1 Payments Due on Non-Business Days............................................................ 50
18.2 Satisfaction Requirement..................................................................... 50
18.3 Severability................................................................................. 50
18.4 Construction................................................................................. 51
18.5 Counterparts................................................................................. 51
18.6 Governing Law................................................................................ 51
18.7 Consent to Jurisdiction...................................................................... 51
18.8 Waiver of Jury Trial......................................................................... 52
(iv)
SCHEDULES
Schedule I -- Information Relating to the Lenders
Schedule II -- Defined Terms
Schedule 4.5 -- Litigation and Judgments
Schedule 4.6 -- Compliance with ERISA
Schedule 4.7 -- Taxes
Schedule 4.8 -- Subsidiaries
Schedule 4.12(a) -- Real Property Owned and Leased
Schedule 4.12(b) -- Patents and Trademarks
Schedule 4.14 -- Compliance with Environmental Laws
Schedule 4.15 -- Security Interests and Liens; Inventory and Equipment
Schedule 4.17 -- UCC Filing Information
Schedule 4.19 -- Fictitious Business Names
Schedule 4.20 -- Use of Proceeds
Schedule 4.23 -- Affiliate Transactions
Schedule 4.27 -- Capital Stock
Schedule 5.2 Employee Benefit Plans
Schedule 8.1 -- Debt and Guarantees
Schedule 8.3 -- Investments
Schedule 8.17 -- Bank Accounts
EXHIBITS
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Exhibit A -- Form of Term Loan Note
Exhibit B -- Form of Security Agreement
Exhibit C -- Form of Intellectual Property Agreement
Exhibit D -- [Intentionally Omitted]
Exhibit E -- Form of Pledge Agreement
Exhibit F -- [Intentionally Omitted]
Exhibit G -- Form of Compliance Certificate
Exhibit H -- Form of Deeds of Trust
Exhibit I -- Form of Warrant Agreement
Exhibit J -- Form of Assignment and Acceptance Agreement
Exhibit K -- Form of Blocked Account Agreement
(v)
Pacific Aerospace & Electronics, Inc.
000 Xxxx Xxxxxxx Xxxx, 0/xx/ Xxxxx
Xxxxxxxxx, XX 00000
Loan Agreement
This loan agreement is entered into as of March 1, 2001 by and among
Pacific Aerospace & Electronics, Inc., a Washington corporation ("Pacific
Aerospace"), Aeromet America, Inc., Balo Precision Parts, Inc., Cashmere
Manufacturing Co., Inc., Ceramic Devices, Inc., Electronic Specialty
Corporation, Northwest Technical Industries, Inc., Pacific Coast Technologies,
Inc., Seismic Safety Products, Inc., Skagit Engineering & Manufacturing Inc.,
and PA&E International, Inc. (each a "Borrower" and together with Pacific
Aerospace, the "Borrowers"), and Pacific A&E Limited, Pacific Aerospace &
Electronics (UK) Limited and Aeromet International PLC (each a "Foreign
Subsidiary" and together with the Borrowers, the "Companies" or, individually, a
"Company") each of the lenders set forth on Schedule I hereto (each a "Lender"
and collectively, the "Lenders") and DDJ Capital Management, LLC, as agent for
the Lenders (the "Agent").
1. THE TERM LOAN.
1.1 The Term Loans.
(a) Subject to the terms and conditions of this Agreement, including
satisfaction of the conditions set forth in Section 3 on the Closing Date, each
Lender, severally and not jointly, shall make a Term Loan to the Borrowers in an
amount equal to such Lender's respective Commitment Percentage as set forth on
Schedule I attached hereto in an aggregate amount of $13,841,488 (the "Term
Loans"). On the Closing Date, the Borrowers shall execute and deliver to each
Lender a Term Loan Note to evidence the Term Loan made by such Lender to the
Borrowers hereunder.
(b) The Term Loans shall mature on the Term Loan Maturity Date and
shall be repaid on that date, together with all outstanding principal, accrued
interest and other fees and charges hereunder.
1.2 Interest on the Term Loan.
Interest shall accrue on the unpaid principal balance of the Term Loans at
a rate of 18% per annum (the "Interest Rate"), payable in arrears quarterly on
March 31, June 30, September 30 and December 31 of each year beginning on the
first such date after the date of this Agreement and on the Maturity Date (each
date on which payment of interest is due shall be referred to as an "Interest
Payment Date"), provided that so long as no Event of Default has occurred and is
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continuing, a portion of the interest totaling no more than 1.25% of the
aggregate principal amount outstanding under the Term Loans may be deferred on
any Interest Payment Date and paid on the earlier of (i) the first anniversary
date of the relevant Interest Payment Date upon which such interest was deferred
or (ii) the Term Loan Maturity Date, provided however that the amount of
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interest so deferred shall accrue interest at the Interest Rate on a compound
basis calculated quarterly and shall be payable at the same time as the interest
so deferred; and provided further that upon the occurrence and during the
continuance of any Event of Default, interest shall accrue on the unpaid
principal amount of the Term Loans, plus any interest (including deferred
interest), fees and other amounts due under the Term Loans at a rate equal to
the Interest Rate plus 3% per annum and shall be payable from time to time in
cash, on such quarterly dates or, at the option of the Agent, on demand.
Interest on the Term Loans shall be computed on the basis of a 360-day year for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Notwithstanding anything to the contrary set forth in this Section 1.2, if
a court of competent jurisdiction determines in a final order that the rate of
interest payable hereunder exceeds the highest rate of interest permissible
under law (the "Maximum Lawful Rate'), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate.
1.3 Commitment Fee.
The Borrowers shall pay to the Lenders on the Closing Date the Commitment
Fee which shall be $375,000; of which $150,000 (the "Initial Commitment Fee
Payment") has been paid to the Borrowers. Each Lenders shall be entitled to the
amount set forth opposite such Lender's name on the attached Schedule I. The
Commitment Fee shall be payable and fully earned as of the Closing Date. In the
event that: (i) the Closing does not occur as a result of the failure of the
Borrowers to satisfy the conditions set forth in Section 3 hereof, and any
Borrower determines to proceed, or takes any steps towards proceeding, with a
transaction of any kind as an alternative to the Term Loans by November 1, 2001
or (ii) the Closing does not occur and any Borrower has failed to proceed in
good faith with the closing of the Term Loans, then in any such case, the
Borrowers shall pay the Commitment Fee to the Lenders on demand. In the event
that all of the Borrowers conditions set forth in Section 3 have been satisfied
and the Closing does not occur as a result of the Lenders' determination not to
proceed with the Term Loans, the Agent shall return the Initial Commitment Fee
Payment previously paid to the Agent as part of the "Commitment Fee" set forth
in Exhibit A to the Commitment Letter (less any unreimbursed out-of-pocket,
legal or other expenses).
2. CLOSING.
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The closing of the Term Loans pursuant to this Agreement shall occur at the
offices of Xxxxxxx Procter LLP, Exchange Place, Xxxxxx, Xxxxxxxxxxxxx 00000 at
10:00 a.m., Boston time, at a closing (the "Closing") on March 1, 2001 or on
such other Business Day thereafter on or prior to February 28, 2001 as may be
agreed upon by the Borrowers and the Lenders (the "Closing Date"). If at the
Closing any of the conditions specified in Section 3 shall not have been
fulfilled to Lenders' satisfaction, Lenders shall, at Lenders' election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights Lenders may have by reason of such failure or such
nonfulfillment.
3. CONDITIONS TO CLOSING.
Lenders' obligations to make the Term Loans available to Borrowers is
subject to the fulfillment to Lenders' satisfaction, prior to or at the Closing,
of the following conditions, provided that any or all or the following
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conditions may be waived, in whole or in part, by the Lenders with respect to
this Agreement in their sole and absolute discretion:
3.1 Representations and Warranties.
The representations and warranties of the Companies contained in this
Agreement and in each of the other Transaction Documents shall be correct when
made and at the time of the Closing, except that any representations and
warranties that relate to a particular date or period shall be correct in all
material respects only as of such date or for such period.
3.2 Performance; No Default.
The Companies shall have performed and complied with all agreements and
conditions in this Agreement and the other Transaction Documents required to be
performed or complied with by it prior to or at the Closing.
3.3 Documents Required.
Lenders shall have received the following documents, each dated as of the
Closing Date (except as otherwise specified below) and in the form of the
respective Exhibit attached hereto, if any, or otherwise in form and substance
satisfactory to Lenders:
(a) Corporate Approvals. Certified copies of (i) the resolutions of
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the Board of Directors of each Borrower approving this Agreement and each other
Transaction Document to which it is or is to be a party and the transactions
contemplated hereby and thereby and (ii) all documents evidencing other
necessary corporate action with respect to this Agreement and each such other
document and the transactions contemplated hereby and thereby.
(b) Officers' Certificates. A certificate from each Borrower, signed
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on behalf of the Borrower by such corporation's president or a vice president
and the secretary or assistant secretary, certifying the following: (i) true and
complete copies of the charter and by-laws of each of the Borrowers as in effect
on the date the resolutions specified in clause (a) of this Section 3.3 were
adopted and the absence of any amendments to the charter or by-laws since
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such dates; (ii) the due formation and valid existence of each of the Borrowers
in such corporation's state of incorporation and the absence of any proceeding
for the dissolution or liquidation of any of the Borrowers; (iii) the accuracy
of the representations and warranties made by each Borrower in the Transaction
Documents; (iv) the absence of any event occurring and continuing, or resulting
from the consummation of the transactions contemplated hereby, that constitutes
a Default or an Event of Default; and (v) the satisfaction of all conditions
precedent by each of the Borrowers set forth in Section 3 hereof.
(c) Incumbency Certificates. A signed copy of a certificate of the
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secretary or an assistant secretary of each of the Companies certifying that
each Person who is an officer or director of the Companies was, at the
respective time of such execution and delivery, duly elected or appointed and
authorized to sign this Agreement and the Transaction Documents to which it is
or is to be a party, and the other documents to be delivered hereunder and
thereunder and the signatures of such Persons are their genuine signatures or
true facsimiles thereof.
(d) Solvency Certificate. A certificate from the chief financial
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officer of Pacific Aerospace attesting to the Solvency of the Companies on a
consolidated basis after giving effect to the transactions contemplated hereby.
(e) Opinion of Counsel. An opinion of Milbank, Tweed, Xxxxxx &
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XxXxxx, LLP, counsel to Pacific Aerospace, together with its Subsidiaries, and
Stoel Rives LLP as to matters of Washington State law, addressed to the Lenders,
dated the Closing Date and otherwise satisfactory to the Lenders.
3.4 Purchase Permitted by Applicable Law, etc.
(a) Legal Investment. On the date of the Closing, the Term Loans and
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the issuance of the Warrants pursuant to the Warrant Agreement (a) shall be
permitted by the laws and regulations of each jurisdiction to which Lenders are
subject, without recourse to provisions permitting limited investments by
insurance Borrowers without restriction as to the character of the particular
investment, (b) shall not violate any applicable law or regulation (including,
without limitation, Section 5 of the Securities Act and Regulations T, U or X of
the Board of Governors of the Federal Reserve System) and (c) shall not subject
any Lender to any tax, penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date hereof.
If requested by the Agent or any Lender, the Agent or such Lender shall have
received an Officer's Certificate certifying as to such matters of fact as
Lenders may reasonably specify to enable Lenders to determine whether such
purchase and payment are so permitted.
3.5 No Litigation or Other Proceedings.
There shall exist no action, suit, investigation, litigation or proceeding
pending or threatened before any Governmental Authority (i) challenging the
consummation of the transactions contemplated hereby or by the Transaction
Documents or (ii) seeking to obtain, or having resulted in the entry of, any
judgment, order or injunction that (A) would restrain, prohibit or impose
materially adverse conditions on Lenders' ability to make the Term Loans
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available to the Borrowers on the Closing Date, (B) could be reasonably expected
to have a Material Adverse Effect, or (C) purports to affect the legality,
validity or enforceability of any material provision of this Agreement, any
other Transaction Document, any related agreement or the consummation of the
transactions contemplated hereby.
3.6 No Material Adverse Change.
There shall not have occurred a Material Adverse Change (in Lenders' sole
opinion) in the businesses, assets, operations, conditions (financial or
otherwise) or prospects of the Companies since December 31, 2000; provided,
however that the failure of Pacific Aerospace to pay the regularly scheduled
interest payment to holders of the Subordinated Notes due on February 1, 2001
shall not be considered a Material Adverse Change.
3.7 Fees and Expenses.
Without limiting the generality of Section 11, the Borrowers shall have
paid, or caused to have been paid, all accrued fees and reasonable expenses
incurred in connection with the transactions contemplated by the Commitment
Letter, this Agreement and the other Transaction Documents as of the Closing,
including, without limitation, the Commitment Fee and the Due Diligence Fee.
3.8 Ancillary Documents and Perfection of Security Interest.
The Borrowers shall have executed and delivered the Security Agreement, the
Intellectual Property Security Agreement, the Pledge Agreement, and the Deeds of
Trust on the Borrowers' property located at 000 Xxxx Xxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxx (the "Olds Station Property") and the other Real Property owned by
the Borrowers (in the form satisfactory to Lenders), and shall have taken all
actions requested by the Lenders necessary or desirable to perfect the security
interests contemplated by each such agreement and instrument, including without
limitation the delivery to the Lenders or their counsel for filing of Uniform
Commercial Code financing statements and the appropriate filings with the United
States Patent and Trademark Office.
3.9 Proceedings and Documents.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to Lenders and Lenders' special counsel,
and Lenders and Lenders' special counsel shall have received all such
counterpart originals or certified or other copies of such documents as Lenders
or Lenders' special counsel may reasonably request.
3.10 Blocked Accounts Agreement.
The Borrowers shall have executed and delivered the Blocked Accounts
Agreement to the Lenders and such agreement shall be in full force and effect.
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3.11 Warrant Agreement and the Warrants.
Pacific Aerospace shall have executed and delivered the Warrant Agreement
and such agreement shall be in full force and effect.
3.12 Registration Rights Agreement
Pacific Aerospace shall have executed and delivered the Registration Rights
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.
The Companies represent and warrant to Lenders that as of the date hereof
and the Closing Date (before and after giving effect to the transactions
contemplated hereby):
4.1 Corporate Existence; Qualification; Power; Licenses and Permits.
Each of the Borrowers (i) is a corporation duly incorporated and validly
existing under the laws of the jurisdiction of its incorporation, (ii) is duly
qualified and is authorized to do business in every jurisdiction in which the
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect. Each of the Companies has all corporate power and authority
required to own its properties and assets and to carry on its business as now
conducted and has all licenses, authorizations, consents, approvals, franchises,
leases, permits, certificates, qualifications, easements, rights of way and
other rights required to carry on its business as now conducted which the
failure to so have could reasonably be expected to have a Material Adverse
Effect. The Companies are not in violation of the terms of any such license,
authorization, consent, approval, franchise, lease, permit, certificate,
qualification, easement, right of way or other right in any such case which
would have a Material Adverse Effect.
4.2 Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Companies of this Agreement
and the other Transaction Documents executed in connection herewith and
therewith and the consummation by Companies of the transactions contemplated
hereby and thereby, (i) are within each of the Companies' corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii) except as
provided herein or in the Ancillary Documents, require no action by or in
respect of, or filing with, any governmental body, agency or official, (iv) do
not contravene, or constitute a default under, any provision of any applicable
law, statute, ordinance, regulation, rule, order or other governmental
restriction or of the Articles of Incorporation or By-Laws or other
organizational documents of any of the Companies, (v) do not contravene, or
constitute a default under, any agreement, judgment, injunction, order, decree,
indenture, contract, lease, instrument or other commitment to which the any of
the Companies is a party or by which the Companies or any of their assets are
bound which could reasonably be expected to have a Material Adverse Effect, and
(vi) will not result in the creation or imposition of any material Lien upon any
asset of any of the Companies under any existing indenture, mortgage, deed of
trust, loan or credit agreement or other agreement or instrument to which any of
the Companies is a party or by which the or any of their assets may be bound or
affected (except as contemplated herein). In particular and without limiting the
representations set forth above, the
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Term Loans constitute "Senior Indebtedness" and "Bank Indebtedness" as such
terms are defined in the Subordinated Note Indenture and the incurrence of the
Term Loans pursuant to the terms of this Agreement and the granting of first
priority liens (or in the case of the Real Property located at 000 Xxxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxxxx and 00000 Xxxxxx Xxxxxx, Entiat, Washington and the
Olds Station Property only, the second priority liens) granted to the Lenders
pursuant to the Transaction Documents do not contravene or constitute a default
under the Subordinated Note Indenture.
4.3 Binding Effect.
This Agreement is and each of the other Transaction Documents has been duly
executed and delivered by each of the Companies and is a valid and binding
agreement of each of the Companies, and is or will be enforceable against each
of the Companies in accordance with their terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratium or similar laws affecting creditors' rights generally
and general principles of equity, and except to the extent that the
indemnification provisions of Sections 11 and 12 hereof may be limited by
federal and/or state securities laws and public policy considerations.
4.4 Information.
The Companies have furnished to Lenders as of the date of this Agreement
the following financial statements (the "Financials") of the Companies: (i)
consolidated balance sheets as of, and consolidated statements of earnings,
changes in consolidated shareholders' equity and changes in consolidated cash
flow for the fiscal year ended May 31, 2000 audited by independent certified
public accountants, and (ii) unaudited consolidated balance sheets as of the end
of the most recent fiscal quarter ending prior to the Closing Date and the
related unaudited consolidated statements of earnings, changes in shareholders'
equity and changes in consolidated cash flow for the three months then ended.
The Financials fairly present the financial condition of the Companies at the
dates thereof and the results of operations for the periods indicated (subject,
in the case of unaudited financial statements, to normal year-end adjustments),
and such financial statements have been and will be prepared in conformity with
GAAP consistently applied throughout the periods involved (except for omission
of notes to the unaudited financials).
4.5 Litigation and Judgments.
Except as set forth on Schedule 4.5, there is no (i) injunction, stay,
decree, judgment, writ or order issued and outstanding by any court or
arbitrator or any governmental body, agency or official against any of the
Companies or (ii) action, suit, proceeding, litigation, contested claim,
investigation or arbitration pending, or threatened, against or affecting any of
the Companies, in each case, which could reasonably be expected to have a
Material Adverse Effect, or which in any manner impairs the validity of this
Agreement or any of the other Transaction Documents.
4.6 Compliance with ERISA.
As of the date of this Agreement, and except as set forth on Schedule 4.6,
(i) none of the Companies nor any ERISA Affiliate maintains or contributes to
any Benefit Plan, (ii) each Plan
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is maintained and is funded in all material respects in accordance with its
terms and in compliance with all provisions of ERISA and the Code applicable
thereto, (iii) each of the Companies and each ERISA Affiliate has fulfilled in
all material respects its obligations related to the minimum funding standards
of ERISA and the Code for each Plan, is in compliance in all material respects
with the currently applicable provisions of ERISA and of the Code relating to
the qualification with respect to each Plan intended to be so qualified and has
not incurred any material liability (other than routine liability for premiums)
under Title IV of ERISA, (iv) no Termination Event has occurred which has
resulted in liability which either has not been satisfied or is not reflected on
the Companies financial statements nor has any other event occurred that is
likely to result in a Termination Event which could reasonably be expected to
have a Material Adverse Effect, (v) no event or events have occurred in
connection with which any of the Companies, any ERISA Affiliate, or any Plan,
directly or indirectly, is likely to be subject to any liability under ERISA,
the Code or any other law, regulation or governmental order or under any
agreement, instrument, statute, rule of law or regulation pursuant to or under
which any such entity has agreed to indemnify or is required to indemnify any
person against liability incurred under, or for a violation or failure to
satisfy the requirements of, any such statute, regulation or order which could
reasonably be expected to have a Material Adverse Effect, and (vi) true, correct
and complete copies of the following documents have been made available to
Lenders as of the date of this Agreement: each Plan and all amendments thereto,
all written interpretations thereof and written descriptions thereof that have
been distributed to employees or former employees of each of the Companies or
the ERISA Affiliates, the most recent determination letter issued by the
Internal Revenue Service with respect to each Plan, for the three most recent
plan years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Plan, all actuarial reports prepared for the last
three plan years for each Benefit Plan, a listing of all Multiemployer Plans,
with the aggregate amount of the most recent annual contributions required to be
made by any of the Companies or any ERISA Affiliate to each such plan and copies
of the collective bargaining agreements requiring such contributions, any
information that has been provided to any of the Companies or any ERISA
Affiliate regarding withdrawal liability under any Multiemployer Plan and (vii)
the aggregate amount of the most recent annual payments made to former employees
of any of the Companies or any ERISA Affiliate under any Retiree Health Plan.
4.7. Taxes.
(a) Except as set forth on Schedule 4.7, each of the Companies has
timely filed (inclusive of any permitted extensions) with the appropriate taxing
authorities all United States Federal income tax returns and except as set forth
on Schedule 4.7, all other material tax returns (including, without limitation,
information returns and other material information) in respect of Taxes required
to be filed through the date hereof. The information filed is complete and
accurate in all material respects. To the Companies' knowledge, all material
deductions taken by any of the Companies as reflected in such income tax returns
have been taken in accordance with applicable laws and regulations.
(b) Except as set forth on Schedule 4.7, all Taxes, in respect of
periods beginning prior to the date hereof, have been timely paid when due,
except where the same are being contested in good faith by appropriate
proceedings and appropriate reserves therefor have
8
been established and maintained in accordance with GAAP for the accrual thereof
as reflected on the audited financial statements for the Companies' fiscal year
ended May 31, 2000, and, to the extent such reserves are maintained for periods
after May 31, 2000, consistent with the Companies' past practice.
(c) Except as set forth in Schedule 4.7, (i) no material deficiencies
for Taxes have been claimed, proposed or assessed by any taxing or other
governmental authority against any of the Companies other than such deficiencies
of which Lenders have been notified in writing and which are being contested in
good faith by appropriate proceedings, and appropriate reserves therefor have
been established and maintained as reflected on the audited financial statements
for the Companies' fiscal year ended May 31, 2000 and in accordance with GAAP,
and, to the extent such reserves are maintained for periods after May 31, 2000,
consistent with the Companies' past practice and (ii) no material tax liens have
been filed against any of the Collateral. Except as set forth in Schedule 4.7 or
as otherwise disclosed to Lenders in writing, there are no pending or threatened
audits, investigations or claims for or relating to any material liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes which are likely to result in a
material additional liability for Taxes. Except as set forth on Schedule 4.7,
for all years up to and including the fiscal year ended May 31, 1997, either the
period during which any assessments may be made by the Internal Revenue Service
have expired without waiver or extension or the federal income tax returns of
each of the Companies has been audited by the Internal Revenue Service and such
audits have been closed.
4.8 Subsidiaries.
The only respective direct or indirect Subsidiaries of the Companies as of
the date of this Agreement are those listed on Schedule 4.8 attached hereto.
Except as set forth on such Schedule, Pacific Aerospace is the record and
beneficial owner, either directly or indirectly, of all of the shares of capital
stock of each of its Subsidiaries listed on such schedule as being owned by
Pacific Aerospace, there are no proxies, irrevocable or otherwise, with respect
to such shares, and no equity securities of any of the Subsidiaries are or may
become required to be issued by reason of any options, warrants, scripts, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of any
capital stock of any Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Subsidiary is or may become bound to
issue additional shares of its capital stock or securities convertible or
exchangeable for such shares. All of such respective shares so owned (whether
directly or indirectly) by Pacific Aerospace are owned by it free and clear of
any Liens, and all such shares are validly issued, fully paid and non-
assessable.
4.9 Not Investment Companies.
None of the Companies is (i) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, (ii) a "holding company" or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) subject to
9
any other law which purports to regulate or restrict its ability to borrow money
or to consummate the transactions contemplated by this Agreement or the other
Transaction Documents or to perform its obligations hereunder or thereunder.
4.10 No Conflicting Requirements.
Except as listed on Schedule 4.10 attached hereto, none of the Companies
are in default under any term or provision of any charter, by-law, mortgage,
indenture, agreement, instrument, statute, rule, regulation, judgment, decree,
order, writ, injunction, contract, lease or other commitment to which any of
them is a party or by which any of them is bound such that such violations or
defaults in the aggregate could reasonably be expected to have a Material
Adverse Effect. None of the Companies know of any dispute regarding any
indenture, contract, lease, agreement, instrument or other commitment which
would individually, or when aggregated with other such disputes, be reasonably
likely to have a Material Adverse Effect.
4.11 Debt.
Schedule 4.11 attached hereto sets forth as of the date of this Agreement
all of the Debt of the Companies and any Subsidiaries and a pro forma schedule
of such Debt following the application of the proceeds of the Term Loans. After
application of the proceeds of the Term Loans as set forth herein, the Companies
will have no Debt that is senior, pari passu or subordinated in right of payment
to their Obligations under the Term Loan or under this Agreement, except for
Debt permitted pursuant to Section 8.1 of this Agreement (including, without
limitation, the deeds of trust in favor of KeyBank.).
4.12 Title to Properties and Assets.
(a) After application of the proceeds of the Term Loans as set forth
herein, and except for (i) Liens permitted pursuant to Section 7.4 hereof or as
set forth on Schedule 4.12 to this Agreement and (ii) such imperfections of
title that represent imperfections of title or easements of record, if any,
which do not materially detract from the value or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations, the Companies have (a) good and marketable fee simple title
to the Owned Real Property material to their businesses and the Owned Real
Property on which a Lien has been granted to the Lenders and valid leasehold
interests in all of its Leased Real Property material to their businesses and
(b) good and marketable title to all of the other material property and assets
owned by the Companies at any time (including, without limitation, all of their
Accounts and Inventory), other than properties disposed of in any manner
permitted under this Agreement. Schedule 4.12(a) attached hereto sets forth as
of the date of this Agreement the Owned Real Property and the Leased Real
Property held by any Company. The Companies enjoy peaceful and undisturbed
possession of all their material Real Estate and there is no pending or
threatened condemnation proceeding relating to any Real Estate which could
reasonably be expected to have a Material Adverse Effect. The leases with
respect to the Leased Real Property, are referred to collectively as the
"Leases." No default exists under any Lease which could reasonably be expected
to have a Material Adverse Effect. All of the Structures and other tangible
assets owned, leased or used by the Companies in the conduct of their businesses
are (a) insured as required by the terms of this Agreement and the other
Transaction Documents, (b) sufficient for
10
the operation of the businesses of each of the Companies as presently conducted
and (c) in conformity with all applicable laws, ordinances, orders, regulations
and other requirements (including applicable zoning, environmental, motor
vehicle safety, occupational safety and health laws and regulations) relating
thereto, except where the failure to conform could not reasonably be expected to
have a Material Adverse Effect.
(b) The Companies possess adequate assets, licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications and
tradenames to continue to conduct their businesses as presently conducted.
Schedule 4.12(b) attached hereto sets forth as of the date of this Agreement (i)
all of the federal, state and foreign registrations of the registered trademarks
of the Companies and all pending applications for any such registrations and
(ii) all of the patents of the Companies and all pending applications therefor
(collectively, together with all service marks and other marks and all
applications therefor, tradenames and other trade rights of the Companies, the
"Proprietary Rights"). As of the date of this Agreement, the Companies are the
owners of each of the trademarks and patents listed on Schedule 4.12(b) as
indicated on such schedule and except as set forth on such Schedule and, except
pursuant to licenses granted in the ordinary course of business, no other Person
has the right to exploit such patents or use any of such marks in commerce
either in the identical form or in such near resemblance thereto as may be
likely to cause confusion or to cause mistake or to deceive. As of the date of
this Agreement each of the trademarks listed on Schedule 4.12(b) is a valid and
subsisting federally registered trademark of the Borrowers having the
registration number and issue date set forth on Schedule 4.12(b) and each of the
patents listed on Schedule 4.12(b) is a valid and subsisting patent of the
Companies having the patent number and issue date set forth on Schedule 4.12(b).
As of the date of this Agreement except as disclosed on Schedule 4.12(b), no
Person has a right to receive any material royalty or similar payment from the
Companies in respect of any such registered Propriety Rights. As of the date of
this Agreement the Companies have not granted any material license except as
disclosed on Schedule 4.12(b) hereto or such licenses as were granted in the
ordinary course of the Companies' businesses, or sold or otherwise transferred
any interest in any of the Proprietary Rights to any other person. The Companies
are not aware that the use of any of the material Proprietary Rights by the
Companies is infringing upon or otherwise violating the rights of any third
party in or to such Proprietary Rights which violation or infringement could
reasonably be expected to result in a material liability to the Companies, and
no proceeding has been instituted against or notice received by any of the
Companies that are presently outstanding alleging that the use of any of the
material Proprietary Rights infringes upon or otherwise violates the rights of
any third party in or to any of the material Proprietary Rights which, if
successful, could reasonably be expected to materially adversely affect the fair
market value of any such material Proprietary Rights or the rights granted
therein to Lenders including, without limitation, the validity, priority or
perfection of the security interest granted therein to Lenders under the
Ancillary Documents or Lenders' remedies therein or in this Agreement. All of
the material Proprietary Rights of the Companies are valid and enforceable
rights of the Companies and will not cease to be valid and in full force and
effect by reason of the execution and delivery of this Agreement or the
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby.
(c) The capital stock of each Subsidiary (including, without
limitation, each Foreign Subsidiary, provided that for any Foreign Subsidiary
which constitutes a "Controlled
11
Foreign Corporation" within the meaning of Section 951 of the Code, the
Companies shall not be required to pledge hereunder or under the other
Transaction Documents more than 65% of the combined voting power of all classes
of capital stock of such Foreign Subsidiary entitled to vote, in each case which
is owned directly or indirectly by the Companies), has been delivered and
pledged to the Lenders under the Pledge Agreements; excluding, however, the
capital stock of any Subsidiary owned directly or indirectly by a Subsidiary of
Pacific Aerospace one hundred percent (100%) of which is not owned directly or
indirectly by Pacific Aerospace. The owners of all such capital stock are
parties as pledgors under the Pledge Agreements.
4.13 Compliance with Law.
None of the Companies have violated or failed to comply with any
statute, law, ordinance, regulation, rule or order of any foreign, federal,
state or local government or any other governmental department or agency or any
self regulatory organization, or any judgment, decree or order of any court,
applicable to its business or operations except where the aggregate of all such
violations or failures to comply would not have a Material Adverse Effect. The
conduct of the businesses of each of the Companies is in conformity with all
securities, commodities, energy, public utility, zoning, building code, health,
OSHA and environmental requirements and all other foreign, federal, state and
local governmental and regulatory requirements and requirements of any self
regulatory organizations, except where the aggregate of all such non-
conformities could not reasonably be expected to have a Material Adverse Effect.
None of the Companies have received any notice to the effect that, or otherwise
been advised that, they are not in compliance with, and none of the Companies
have any reason to anticipate that any presently existing circumstances are
likely to result in the violation of, any such statute, law, ordinance,
regulation, rule, judgment, decree or order which failure or violation could
reasonably be expected to have a Material Adverse Effect.
4.14 Compliance with Environmental Laws.
(a) Each of the Companies has complied with and are currently in
compliance with any Environmental Laws, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect.
(b) No solid or hazardous or toxic wastes or hazardous
substances (as defined in the Comprehensive Environmental Response Compensation
and Liability Act, the Resources Conservation and Recovery Act and the Superfund
Amendments and Reauthorization Act of 1986, as amended or under any successor or
similar law or any applicable state or local law), are processed, discharged,
stored, treated, disposed of, or managed at any facility owned, leased or
operated by any of the Companies or, at the request or behest of any of the
Companies, at any adjoining site, so as to require a license, permit or
authorization of any type from any governmental authority, other than licenses,
permits and authorizations which have been obtained and are in full force and
effect or where the failure to obtain such a license, permit or authorization
could not reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 4.14 hereto, as of the date of this Agreement no
governmental or private actions to enforce environmental or pollution control
laws are pending against any of the Companies or against or with respect to any
facility owned, operated or leased by any of the Companies. Except as disclosed
on Schedule 4.14 and except where any of the following,
12
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect: (i) none of Companies have received any complaint,
notice of violation, alleged violation, investigation or advisory action or of
potential liability or of potential responsibility regarding environmental
protection matters or permit compliance, and (ii) none of the Companies have any
contingent liability of which the Companies has knowledge in connection with any
release of any hazardous or toxic waste, substance or constituent, or other
substance into the environment, nor have the Companies received any notice,
letter or other indication of potential liability arising from the disposal of
any hazardous or toxic waste, substance or constituent or other substance into
the environment.
(c) Except as disclosed on Schedule 4.14 and other than any
pending workers' compensation claims which individually and in the aggregate are
not significant to the Companies, no action, suit or proceeding brought by any
employee of any of the Borrowers or any other Person involving (i) a claim for
damages in excess of $100,000 or (ii) claims for damages under $100,000 and
which in the aggregate could reasonably be expected to have a Material Adverse
Effect, in each case based on alleged damage to health caused by any such
hazardous or toxic substance or by any waste or by-product thereof, is pending
before any court or arbitrator or any governmental body, agency or official.
4.15 Security Interests and Liens; Inventory and Equipment.
After the application of the proceeds of the Term Loans as set forth
herein, there will be no Liens in favor of third parties with respect to any of
the Collateral, including, without limitation, with respect to the Inventory,
wherever located, other than Liens permitted pursuant to Section 7.4 hereof or
disclosed on Schedule 4.15 hereof. No lessor, warehouseman, filler, processor or
packer of any of the Companies (other than Foreign Subsidiaries) has granted any
Lien with respect to the Inventory maintained by any of the Companies (other
than Foreign Subsidiaries) at the property of any such lessor, warehousemen,
filler, processor or packer. Upon the proper filing of financing statements and
the proper recordation of other applicable documents with the appropriate filing
or recordation offices in each of the necessary jurisdictions, the security
interests granted pursuant to the Transaction Documents on the Filing Assets and
the Real Estate with respect to which Deeds of Trust have been filed constitute
and shall at all times constitute the valid and enforceable perfected Liens on
such Collateral, subject only to prior Liens existing on the Closing Date and
set forth on Schedule 4.15 hereto and Liens permitted pursuant to Section 7.4
hereof. The Borrowers are or will be at the time additional Collateral is
acquired by them, the absolute owners of the Collateral with full right to
pledge, sell, consign, transfer and create a Lien therein, free and clear of any
and all Liens in favor of third parties, except for Liens permitted pursuant to
Section 7.4 hereof. No consents, filings or recordings are required in order to
perfect the security interests created by the Pledge Agreements.
4.16 Labor Relations.
None of the Companies are engaged in any material unfair labor practices
which could reasonably be expected to result in a material liability to any of
the Companies, materially increase the costs of operations or materially
decrease the revenue generated from any of the Companies' operations or which
could otherwise reasonably be expected to have a Material
13
Adverse Effect. There is (i) no unfair labor practice complaint pending against
any of the Borrowers or, to the best knowledge of the Companies, threatened
against, before the National Labor Relations Board, and no material grievance or
significant arbitration proceeding arising out of or under collective bargaining
agreements is so pending against the Companies or, threatened against them, (ii)
no strike, labor dispute, slowdown or stoppage pending against any of the
Companies threatened against it which, in the case of the items described in the
preceding clauses (i) and (ii) could reasonably be expected to result in a
material liability to the Companies, materially increase the costs of any of the
Companies' operations or materially decrease the revenue generated from any of
the Companies' operations or which could otherwise reasonably be expected to
have a Material Adverse Effect, and (iii) no union representation question with
respect to the employees of any of the Borrowers and to the knowledge of the
Borrowers no union organizing activities which representation question or
organizing activity could reasonably be expected to have a Material Adverse
Effect. There are no controversies pending or threatened between any of the
Companies and any of their employees, other than (i) employee grievances and
other controversies arising in the ordinary course of business which could not,
in the aggregate, be reasonably expected to have a Material Adverse Effect and
(ii) employee grievances and other controversies arising outside the ordinary
course of business of which Lenders have received written notice and could not
reasonably be expected to have a Material Adverse Effect.
4.17 UCC Filing Information.
As of the date of this Agreement the chief executive office and principal
place of business of each Borrower is as set forth on Schedule 4.17, which
office is the place where such Borrower is "located" for the purposes of Section
9-103(3)(d) of the UCC. As of the date of this Agreement the places where the
Borrowers keep their books, chattel paper and records concerning its respective
Accounts or regularly keeps any Inventory are also identified on Schedule 4.17.
As of the date of this Agreement there is no jurisdiction located in the United
States in which Pacific Aerospace or any of the other Borrowers have any assets,
equipment or Inventory (except for vehicles, Inventory in transit for processing
in the ordinary course of business, or immaterial items) other than those
jurisdictions listed on Schedule 4.17. Schedule 4.17 is a true, correct and
complete list as of the date of this Agreement of (i) the address of all offices
where records and books of account each Borrower is kept, and (ii) the legal
names and addresses of each warehouseman, filler, processor and packer at which
Inventory is stored as of the date of this Agreement. None of the receipts
received by the Borrowers from any warehouseman, filler, processor or packer
states that the goods covered thereby are to be delivered to bearer or to the
order of a named person or to a named person and such named person's assignees.
4.18 Solvency.
(a) The fair saleable value of the Companies' assets exceeds all
probable liabilities, including those to be incurred pursuant to this Agreement.
On and at all times after the Closing Date, the Companies, taken as a whole (i)
do not have unreasonably small capital in relation to the business in which they
are or propose to be engaged and (ii) have not incurred, and do not believe that
they will incur after giving effect to the transactions contemplated by this
Agreement, debts beyond their ability to pay such debts as they become due.
14
(b) The fair saleable value of the Borrowers assets exceeds all
probable liabilities, including those to be incurred pursuant to this Agreement.
On and at all times after the Closing Date, the Borrowers taken as a whole (i)
do not have unreasonably small capital in relation to the business in which they
are or propose to be engaged and (ii) have not incurred, and do not believe that
they will incur after giving effect to the transactions contemplated by this
Agreement, debts beyond their ability to pay such debts as they become due.
4.19 Fictitious Business Names.
None of the Companies have conducted any material amount of business on or
after August 1, 1993 under any corporate or fictitious name other than the
corporate name shown on any of the Companies' Articles or organizational
documents, as disclosed on Schedule 4.19 or as disclosed to Lenders in writing
from time to time.
4.20 Use of Proceeds.
The proceeds of the Term Loans will be used only to (i) repay the
outstanding borrowings under the KeyBank Loan Agreement (ii) make certain
required payments under the Subordinated Notes, (iii) to pay transaction costs
and fees associated with the Term Loans and (iv) for general corporate purposes,
all as more fully set forth on the attached Schedule 4.20.
4.21 Margin Stock.
No Borrower nor any Subsidiary owns any "margin stock" within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System, or any
regulations, interpretations or rulings thereunder, nor is any Borrower or any
Subsidiary engaged principally or as one of its important activities in
extending credit which is used for the purpose of purchasing or carrying margin
stock.
4.22 Survival of Representations.
All representations made by the Companies in this Agreement and in any
other Transaction Document executed and delivered in connection herewith shall
survive the execution and delivery hereof and thereof for so long as the Term
Loans have not been repaid in full.
4.23 Affiliate Transactions.
Except as set forth on Schedule 4.23 hereto, none of the Companies is a
party to or bound by any agreement or arrangement (whether oral or written) to
which any Affiliate of the Company or any Subsidiary is a party.
4.24 Accuracy and Completeness of Information.
All factual information heretofore, contemporaneously or hereafter
furnished by or on behalf of the Companies in writing to Lenders or the Auditors
for purposes of or in connection with this Agreement or any Transaction
Documents, or any transaction contemplated hereby or
15
thereby is or will be true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by omitting
to state any material fact necessary to make such information not misleading at
such time. There is no fact now known to any officer of the Companies which has,
or would have, a Material Adverse Effect, which fact has not been set forth
herein, in the Financial Statements, or some certificate, opinion or other
written statement made or furnished by the Companies to Lenders.
4.25 Status of Accounts.
The Companies confirm to the Lenders that any or all taxes or fees relating
to its business, its sales, the Accounts or the goods relating thereto as of the
date hereof, are their sole responsibilities and that all such material taxes
will be paid by the Companies when due (unless duly contested and adequately
reserved for) and that none of such taxes or fees (including any immaterial
taxes or fees) is or will become a Lien (other than a Permitted Lien) on or
claim against the Accounts. Each of the Companies' books and records is marked
to reflect the Lenders' interest in the Accounts.
4.26 Party in Interest.
None of the Companies is a "party in interest" as that term is defined in
ERISA, with respect to any employee benefit plan having an interest in the
General Motors Employees Domestic Group Pension Fund.
4.27 Stock.
There are presently issued by each Company and its Subsidiaries and
outstanding the shares of capital stock indicated on Schedule 4.27. All of the
issued and outstanding capital stock of each Subsidiary listed is owned of
record and beneficially by the entity set forth on such Schedule. The Companies
and their Subsidiaries have received at least the consideration for which such
stock was authorized to be issued and have otherwise complied in all material
respects with all legal requirements relating to the authorization and issuance
of shares of stock and all such shares are validly issued, fully paid and non-
assessable. The Companies and their Subsidiaries have no other capital stock of
any class outstanding other than as set forth on Schedule 4.27 hereto. Except as
set forth on Schedule 4.27, none of the Companies or any Subsidiary has
outstanding any securities convertible into or exchangeable for its Capital
Stock or any other equity interest nor does any Company or any Subsidiary have
outstanding any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreement providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its Capital Stock or other obligations or commitments of any kind whatsoever to
issue, sell or otherwise dispose of, any shares of or other equity interest in
any Company or any of their Subsidiaries. Except as contemplated by the
Transaction Documents, none of the Companies or any of their Subsidiaries are
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of their Capital Stock. There are no voting trusts or
other agreement or understandings to which any of the Companies or any of their
Subsidiaries is a party with respect to the voting of its Capital Stock.
5. REPRESENTATIONS AND WARRANTIES OF THE LENDERS
16
Each Lender hereby represents, warrants and covenants that as to itself
only that:
5.1 Authorization.
(a) Each Lender has full power and authority to enter into this Loan
Agreement and each of the Transaction Documents, and each such agreement
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms.
(b) The execution, delivery and performance by such Lender and the
other Transaction Documents executed in connection therewith and herewith and
the consummation by such Lender of the transactions contemplated hereby and
thereby do not contravene the organizational documents of such Lender.
5.2 No Plan Assets. Except as provided in Schedule 5.2, each Lender is
not and will not become an "employee benefit plan" as defined in Section 3(3) of
ERISA, whether or not subject to ERISA, a plan described in Section 4975(e)(1)
of the Code or an entity whose underlying assets include plan assets by reason
of an employee benefit plan's or plan's investment in the entity or otherwise.
5.3 Accredited Investor. Each Lender (i) is purchasing the Term Loans
and the Warrants for Lender's own account or for one or more separate accounts
maintained by Lender or for the account of one or more pension trust funds and
not with a view to the distribution thereof in violation of the securities laws
of the United States or any state thereof, provided that the disposition of the
Lender's property shall at all times be within Lenders' control and (ii) is an
"accredited investor" as defined in Rule 501(a) of the Securities Act and able
to evaluate the merits and risks of the investment. Lender understands that the
Warrants have not been registered under the Securities Act and may be resold
only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such exemption is required by law.
6. PREPAYMENT OF THE TERM LOANS.
6.1 Voluntary Prepayments.
The Borrowers may, upon not less than three (3) Business Days' notice to
the Agent, for the ratable benefit of the Lenders, prepay the Term Loans
outstanding, in whole or in part, together with accrued interest thereon to the
date of such prepayment on the principal amount prepaid; provided that each
partial prepayment shall be in an aggregate principal amount of not less than
$250,000.
6.2 Mandatory Prepayments.
(a) If the Aeromet Sale is consummated, the Borrowers shall repay
the Term Loans outstanding, for the ratable benefit of the Lenders, in an amount
equal to at least $7,500,000 principal amount of the Term Loans, plus all
accrued and unpaid interest thereon (including deferred interest), and all other
fees, expenses and other payments due to the Lenders under this Agreement and
the Transaction Documents, if any.
17
(b) In the event a Company has made an Asset Disposition, the
Borrowers shall apply 50% of the Net Cash Proceeds from such Asset Disposition
first to any accrued and unpaid interest (including any deferred interest) on
the Term Loans, secondly, to any other unpaid fees, expenses and obligations
(other than principal) outstanding on the Term Loans, if any, and third to the
principal amount outstanding on the Term Loans. Notwithstanding the foregoing,
in the event that a Company desires to use any or all of the Net Cash Proceeds
to purchase assets to replace the assets sold and the functionality of the
assets sold, Pacific Aerospace, on behalf of such Company shall promptly certify
to the Lenders as to such intention and such Company may within 45 days of the
asset sale use any or all of the Net Cash Proceeds to purchase replacement
assets (and shall certify to the Lender as to the purchase), provided that the
Company may use Net Cash Proceeds to purchase replacement assets as set forth
above only if the Net Proceeds from the asset sale was less than $250,000
individually and, less than $1,000,000 when added to the Net Proceeds from all
asset sales where replacement assets were purchased by any Company pursuant to
this provision. In the event that replacement assets are not purchased within 45
days, the Borrowers shall on the day following such forty-fifth day apply the
Net Cash Proceeds as provided in the first sentence of this clause (b). In the
event that some but not all of the Net Cash Proceeds are used to pay for
replacement assets then the Borrowers shall on the day following such forty-
fifth day apply an amount as provided in the first sentence of this clause (b)
equal to the lesser of (i) 50% of the Net Cash Proceeds and (ii) the remaining
Net Cash Proceeds after payment of replacement assets, as provided in the first
sentence above. "Net Proceeds" shall mean all cash and all other non-cash
consideration received by the Companies (including cash payments received in
respect of deferred payment pursuant to any note or installment receivable or
otherwise and state or federal income tax refunds attributable to such sale or
disposition, but in each case only as and when received) in respect of such sale
or disposition. All non-cash proceeds shall be valued by the Board of Directors
of the relevant Company in good faith.
6.3 Method and Timing of Payments
The Borrowers shall make each payment to be made by them hereunder not
later than 3:00 p.m. (Boston time) on the day when due in lawful money of the
United States to the Lenders in accordance with the wire transfer instructions
in immediately available funds. The Lenders will be entitled to receive their
ratable share of the payment of principal, interest or any other amounts in
accordance with their respective Commitment Percentages. Any payment made by the
Borrower to the Lenders under this Agreement or under the Term Loan Notes in the
manner provided in this Agreement shall be deemed to be a payment to each of the
respective Lenders, unless the provisions of this Agreement expressly provide
that any such payment shall be solely for the account of any specific Lender.
7. AFFIRMATIVE COVENANTS.
In order to induce the Agent and the Lenders to enter into this Agreement
and to induce the Lenders to make the Term Loans as contemplated hereby, the
Companies covenant and agree that the Companies shall, and shall cause all of
their Subsidiaries to, perform all covenants in this Section 6 until the payment
in full of all obligations under the Term Loans.
18
7.1 Information.
(a) The Companies will deliver to Lenders:
(i) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto unless the
securities covered thereby are held or distributed by Pacific Aerospace,
other than any registration statement on Form S-3 to the extent that it
relates to a secondary offering, and other than any registration statement
on Form S-8 or its equivalent) and reports on Form 10-K, 10-Q and 8-K (or
their equivalents) which Pacific Aerospace shall have filed with the SEC,
and promptly upon the mailing thereof to the shareholders of Pacific
Aerospace generally, copies of all financial statements, reports and proxy
statements so mailed;
(ii) no later than 45 days after the end of the first
three quarters of each fiscal year and no later than 90 days after the end
of each fiscal year, (A) a certificate of the chief financial officer or
client accounting officer of the Companies setting forth in reasonable
detail any calculations required to establish whether the Companies were in
compliance with the requirements of Sections 8.6, 8.7, 8.8, 8.9 and 8.10
hereof as of the end of such quarter or year, as the case may be, and (B) a
compliance certificate in the form of Exhibit G attached hereto (the
"Compliance Certificate");
(iii) within one Business Day of any executive officer of
any of the Companies obtaining knowledge of any Event of Default or any
Default, if such Default is then continuing, a certificate of the chief
financial officer or the chief accounting officer setting forth the details
thereof and the action which is being taken or being proposed with respect
thereto;
(iv) within one Business Day notice, in reasonable detail,
of any material change relating to the type, quality or quantity of any
material portion of the Collateral, or any event which could have a
material adverse effect on the value of the Collateral or any event
affecting the validity or priority of the security interests granted to the
Lenders in the Collateral; and
(v) within one Business Days of the chief executive
officer, chief financial officer, chief accounting officer, controller or
other senior financial officer of any of the Companies obtaining knowledge
of any Material Adverse Effect, a certificate of the chief financial
officer or accounting officer setting forth details thereof and the action
which is being taken or being proposed with respect thereto.
(b) In addition, at the written request of the Lenders, the
Companies will deliver:
(i) as soon as available and in any event within 90 days
after the end of each fiscal year of the Companies, consolidated and
consolidating balance sheets of the Companies as of the end of such fiscal
year and the related consolidated and consolidating statements of earnings,
changes in consolidated shareholders equity and
19
changes in consolidated cash flow for such fiscal year, setting forth
in the case of each consolidated financial statement in comparative
form the figures for the previous fiscal year, including the previous
fiscal year budget (if such budget was prepared); all (except for the
consolidating statements) accompanied by an opinion of the Auditors
unqualified as to scope of audit and stating that such financial
statements present fairly in all material respects the financial
position of the Companies and the results of their operations and cash
flows for such fiscal year in conformity with generally accepted
accounting principles and otherwise reported on in a manner acceptable
to the Securities and Exchange Commission;
(ii) as soon as available and in any event within 45
days after the end of each of the first three quarters of each fiscal
year of the Companies, consolidated and consolidating balance sheets of
the Companies as of the end of such quarter and the related
consolidated and consolidating statements of earnings, changes in
consolidated shareholders equity and changes in consolidated cash flow
for such quarter and for the portion of the Companies' fiscal year
ended at the end of such quarter, setting forth in the case of each
consolidated financial statement in comparative form the figures for
the corresponding quarter and the corresponding portion of the
Companies' previous fiscal year, including the previous fiscal year
budget (if such budget was prepared), all certified (subject to normal
year-end adjustments) as to fairness of presentation, GAAP and
consistency by the chief financial officer or the chief accounting
officer of the Companies;
(iii) as soon as available and in any event no later
than 60 days after the last day of each fiscal year of the Companies,
copies of annual budgets and other similar materials prepared by or for
the Companies, which budgets and other information shall be presented
on a monthly basis for the then current fiscal year and on an annual
basis for each subsequent fiscal year;
(c) as soon as available and in any event within 30 days after
the end of each of the first two months of each fiscal quarter (45 days in the
case of the last month of each fiscal year of the Companies), statements of
earnings and consolidated and consolidating balance sheets of the Borrowers as
of the end of such month, and related changes in consolidated cash flow for such
month and for the portion of the Companies' fiscal year ended at the end of such
month, all certified (subject to normal year-end adjustments) as to fairness of
presentation, GAAP and consistency by the chief financial officer or chief
accounting officer of the Companies;
(d) the Companies will deliver to the Lenders if and when any
ERISA Affiliate (i) gives or is required to give notice to the PBGC of any
Reportable Event with respect to any Benefit Plan which could reasonably be
expected to constitute grounds for a termination of such Benefit Plan under
Title IV of ERISA, or knows that the plan administrator of any Benefit Plan has
given or is required to give notice of any such Reportable Event, a copy of the
notice of such Reportable Event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title IV of
ERISA, a copy of such notice; or
20
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate or appoint a trustee to administer any Benefit Plan, a copy of such
notice;
(e) promptly following, and in no event more than three Business Days
of any executive officer of any of the Companies obtaining knowledge of (i) any
litigation or proceeding affecting any of the Companies or any Subsidiary in
which the amount involved is $250,000 or more and is not covered by insurance or
in which injunctive or similar relief is sought, or (ii) any order, judgment or
decree in excess of $250,000 which shall have been entered against any of the
Companies or any of their respective properties or assets, a certificate of the
chief financial officer or accounting officer setting forth details thereof and
the action which is being taken or being proposed with respect thereto;
(f) prompt notice of any notification of a violation of any law or
regulation received by any of the Companies from any local, state, federal or
foreign governmental authority or agency which violation could reasonably be
expected to have a Material Adverse Effect; and
(g) from time to time such additional information or analyses
regarding the financial position or business of any of the Companies and/or
their Subsidiaries as Lenders may reasonably request.
7.2 Payment of Obligations.
The Borrowers will pay and discharge at or before maturity, all of
their respective material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings, and will maintain, in accordance with GAAP,
appropriate reserves for the accrual of any of the same.
7.3 Maintenance of Property; Insurance.
(a) The Companies will keep, all material property useful and
necessary in their businesses in good working order and condition (ordinary wear
and tear, casualty and condemnation excepted) and not commit or suffer any
material waste with respect to any of their material properties.
(b) The Borrowers agree to maintain public liability insurance, third
party property damage and replacement cost insurance on the Collateral under
such policies of insurance, and the Companies agree to maintain insurance on
their material assets in such amounts and covering such risks as is customary
for similarly situated corporations. Such insurance may include levels of self
insurance comparable to those in place on the date of this Agreement or as shall
be customary for corporations similarly situated in the industry. All policies
covering the Collateral are to name the Lenders as additional insureds and loss
payees in case of loss, as their interests may appear, and are to contain such
other provisions as the Lenders may reasonably require to fully protect the
Lenders' interest in the Collateral and to any payments to be made under such
policies. Certificates of all insurance policies are to be delivered to the
Lenders (with true copies of such policies to be made available to Lenders) on
or within ten (10) days of the Closing Date, and such policies shall have all
premiums with respect thereto
21
currently paid and contain loss payable endorsements in the Lenders' favor, and
shall provide for not less than ten (10) days prior written notice to the
Lenders, of the exercise of any right of cancellation. In the event any of the
Borrowers fail to respond in a timely and appropriate manner (as determined by
the Agent in their reasonable discretion) with respect to collecting under any
insurance policies required to be maintained under this Section 7.3, the Lenders
shall have the right, in the name of any of the Borrowers, to file claims under
such insurance policies, to receive and give acquaintance for any payments that
may be payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may be necessary to
effect the collection, compromise or settlement of any claims under any such
insurance policies. The Borrowers shall provide written notice to the Lenders of
the occurrence of any of the following events within five (5) Business Days
after the occurrence of such event: any material asset or property owned or used
by any of the Borrowers (i) is damaged or destroyed, or suffers any other loss,
or (ii) is, or the Borrowers receive notice of the institution of any proceeding
pursuant to which any such asset or property could reasonably be expected to be,
condemned, confiscated or otherwise taken, in whole or in part, or the use
thereof is otherwise diminished so as to render impracticable or unreasonable
the use of such asset or property for the purposes to which such asset or
property were used immediately prior to such condemnation, confiscation or
taking, by exercise of the powers of condemnation or eminent domain or
otherwise, and in either case the amount of the damage, destruction, loss or
diminution in value is in excess of $250,000 (collectively, a "Casualty Loss").
The Borrowers shall diligently file and prosecute its claim or claims for any
award or payment in connection with a Casualty Loss. In the event of a Casualty
Loss with respect to any of the Collateral, if directed by the Agent, the
Borrowers shall pay to the Lenders, promptly upon receipt thereof, any and all
insurance proceeds and payments received by the Borrowers on account of damage,
destruction, loss, condemnation or eminent domain proceedings (excluding,
however, business interruption insurance and the proceeds thereof). So long as
no Default or Event of Default shall have occurred and be continuing, the
Borrowers may use such proceeds and payments to repair, replace or rebuild the
asset or property or portion thereof that was the subject of the Casualty Loss
or, if such asset or property is not material to the operations of Borrowers,
may use such proceeds and payments as otherwise permitted pursuant to the terms
of this Agreement. After the occurrence and during the continuance of any
Default or Event of Default the Agent may, at its election in its sole
discretion either (a) apply ratably the proceeds realized from Casualty Losses
to payment of accrued and unpaid interest or outstanding principal under the
Term Loans or (b) direct the insurance compan(ies) to pay such proceeds to the
Borrowers to be used to repair, replace or rebuild the asset or property or
portion thereof that was the subject of the Casualty Loss. After the occurrence
and during the continuance of an Event of Default, (i) no settlement on account
of any such Casualty Loss shall be made without the Lenders' consent and (ii)
the Lenders may participate in any such proceedings and the Borrowers shall
deliver to the Lenders such documents as may be requested by the Lenders to
permit such participation and shall consult with the Lenders, the Lenders'
attorneys and agents in the making and prosecution of such claim or claims.
7.4 Compliance with Laws.
The Companies will comply with all acts, regulations, orders, directions
and ordinances of any legislative, administrative or judicial body or official,
applicable to the Collateral or any part thereof, or to the operation of their
business (including, without limitation ERISA and the
22
rules and regulations thereunder) except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.
7.5 Inspection of Property, Books and Records; Change of Name,
Principal Place of Business, Location of Collateral, Etc.
The Companies will keep proper books of record and account in which
full, true and correct entries in conformity with GAAP shall be made of all
dealings and transactions in relation to their businesses and activities; the
Companies shall make no significant change in their accounting practices except
as permitted or required by GAAP. The Companies agree that each Lender or its
agents may enter upon the premises of the Companies at any time and from time to
time, during normal business hours and upon reasonable prior notice, and at any
time during normal business hours and without notice on and after the occurrence
and during the continuance of an Event of Default, for the purpose of (i)
inspecting the Collateral, (ii) inspecting and/or copying (at Companies'
expense) any and all records pertaining thereto, and (iii) discussing the
affairs, finances, business operations, properties and financial and other
conditions of the Borrowers with any officers, employees and directors of the
Companies or with the Auditors. Each Lender shall have the right to (A) discuss
the affairs, finances, business operations, properties and conditions of the
Companies with management and make suggestions to the Companies' management and
management will discuss such proposals or suggestions made by such Lender within
a reasonable period after such submission, (B) tour the Companies' business
premises and other properties, (C) receive financial statements, operating
reports, budgets or other financial reports, (D) request information at
reasonable times and intervals concerning the general status of the Companies'
financial conditions and operations. The Companies agree to afford the Lenders
ten (10) Business Days prior written notice of (a) any new or additional
location of any Collateral at which location Collateral having an aggregate
value in excess of $250,000 will be located, (b) any change in the location of
its chief executive office or any new or additional places of business from the
locations specified in Schedule 4.17, and (c) any change in any corporate name
and, in each such case, the Companies further agree to execute in advance of
such addition or change and cause to be filed and/or delivered to the Lenders or
counsel to the Lenders any financing statements or other documents required by
the Lenders.
7.6 Compliance with Transaction Documents.
The Companies will comply with the terms of each of the Transaction
Documents.
7.7 Corporate Existence.
The Companies (i) except as otherwise permitted pursuant to Section
8.5, shall maintain their corporate existence, shall maintain in full force and
effect all material licenses, bonds, franchise, leases, qualifications to do
business, trademarks, patents, contracts and other rights necessary for the
conduct of their businesses, (ii) shall continue in, and limit their operations
to, the same general lines of business as that presently conducted by them and
reasonable extensions thereof and (iii) shall comply with all applicable laws
and regulations of any federal, state or local governmental authority, except in
each case when noncompliance with the foregoing would not, in the aggregate,
have a Material Adverse Effect.
23
7.8 ERISA.
The Companies shall deliver to the Lenders, at the Companies' expense,
the following information at the times specified below:
(a) within twenty (20) Business Days after any of the Companies
or any ERISA Affiliate knows that a Termination Event has occurred which could
reasonably be expected to result in a liability to the Borrowers of $300,000 or
more, a written statement of the chief financial officer describing such
Termination Event and the action, if any, which the Companies or any other
entities have taken, are taking or propose to take with respect thereto, and
when known, any action taken or threatened by the Internal Revenue Service, DOL
or PBGC with respect thereto;
(b) within sixty (60) Business Days after any of the Companies
or any ERISA Affiliate knows that a prohibited transaction (as defined in
Sections 406 of ERISA and 4975 of the Code) has occurred which could reasonably
be expected to result in a liability to the Companies of $300,000 or more, a
statement of the chief financial officer describing such transaction and the
action which the Companies or other such entities have taken, are taking or
propose to take with respect thereto;
(c) at any time that the Lenders may reasonably request, copies
of each annual report (form 5500 series), including Schedule 8.9 thereto, filed
with respect to each Benefit Plan;
(d) at any time that the Lenders may reasonably request, copies
of each actuarial report for any Benefit Plan or Multiemployer Plan and each
annual report for any Multiemployer Plan;
(e) within three (3) Business Days after the filing thereof with
the Internal Revenue Service, a copy of each funding waiver request filed with
respect to any Benefit Plan with respect to any funding of $300,000 or more and
all communications received by any of the Companies or any ERISA Affiliate with
respect to such request;
(f) within twenty (20) Business Days upon the occurrence
thereof, notification of any increase in the benefits of any existing Plan or
the establishment of any new Benefit Plan or the commencement of contributions
to any Benefit Plan to which any of the Companies or any ERISA Affiliate was not
previously contributing, in either case, which could reasonably be expected to
result in an increase in the annual contributions necessary to satisfy the
minimum funding requirements of ERISA or the terms of such Benefit Plan to any
of the Companies of $300,000 or more;
(g) within three (3) Business Days after receipt by any of the
Companies or any ERISA Affiliate of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, in either case
which could reasonably be expected to result in a liability to the Companies of
$300,000 or more, copies of each such notice;
24
(h) within ten (10) Business Days after receipt by any of the
Companies or any ERISA Affiliate of any unfavorable determination letter from
the Internal Revenue Service regarding the qualification of a Benefit Plan under
Section 401(a) of the Code which could reasonably be expected to result in a
liability to the Companies of $300,000 or more, copies of each such letter;
(i) within ten (10) Business Days after receipt by any of the
Companies or any ERISA Affiliate of a notice regarding the imposition of
withdrawal liability of $300,000 or more under Section 4203, 4204 or 4205 of
ERISA, copies of each such notice;
(j) within ten (10) Business Days after any of the Companies or
any ERISA Affiliate fails to make a required installment or any other required
payment of $300,000 or more under Section 412 of the Code on or before the due
date for such installment or payment, a notification of such failure; and
(k) within ten (10) Business Days after any of the Companies or
any ERISA Affiliate knows (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan, in any such case,
which could reasonably be expected to result in a liability to the Companies of
$300,000 or more, a written statement setting forth any such event or
information.
For purposes of this Section 7.8, each of the Companies and any ERISA
Affiliate shall be deemed to know all facts known by the administrator of any
Benefit Plan of which such entity is the plan sponsor.
The Companies shall establish, maintain and operate all Plans to comply
with the applicable provisions of ERISA, Code, and all other applicable laws,
other than to the extent that the Companies are in good faith contesting by
appropriate proceedings the validity or application of any such provision or
law, except to the extent failure to so comply could not reasonably be expected
to result in the Companies incurring a liability, individually or in the
aggregate equal to or in excess of $500,000.
7.9 Environmental Matters.
(a) The Companies will use their best efforts to conduct their
businesses so as to comply with all Environmental Laws in all jurisdictions in
which any of them is or may at any time be doing business, except to the extent
that the Companies are contesting, in good faith by appropriate legal
proceedings, any such Environmental Law or interpretation thereof or application
thereof and except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect; provided, further, that the
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Companies shall comply with the order of any court or other governmental body or
applicable jurisdiction relating to such Environmental Laws unless the Companies
shall currently be prosecuting an appeal or proceedings for review and shall
have secured a stay of enforcement or execution or other arrangement postponing
enforcement or execution pending such appeal or proceedings for review. If the
Companies shall (a) receive notice that any material violation of any
25
Environmental Law may have been committed or is about to be committed by any of
the Companies or any such Subsidiary, (b) receive notice that any administrative
or judicial complaint or order has been filed or is about to be filed against
any of the Companies alleging material violations of any Environmental Law or
requiring any of the Companies to take any action in connection with the release
of Hazardous Substances into the environment or (c) receive any notice from a
federal, state, or local governmental agency or private party alleging that any
of the Companies may be liable or responsible for material costs associated with
a response to or cleanup of a release of a Hazardous Substance into the
environment or any damages caused thereby, the Companies shall provide the
Lenders with a copy of such notice within thirty (30) days after the receipt
thereof by any of the Companies. The Companies shall promptly take all actions
necessary to prevent the imposition of any Liens on any of their properties
arising out of or related to any environmental matters.
(b) In the event that any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature (the "Remedial Work") with respect to any real property owned, operated
or leased by the Companies is required to be performed by the Companies under
any applicable local, state or federal law or regulation, any judicial order, or
by any governmental or nongovernmental entity or Person because of, or in
connection with, the current or future presence, suspected presence, release or
suspected release of a Hazardous Substance in or into the air, soil,
groundwater, surface water or soil vapor on, about, under or within the property
(or any portion thereof), the Companies shall within 30 days after written
demand for performance thereof by Lenders (or such shorter period of time as may
be required under any applicable law, regulation, order or agreement), commence
during and after such 30-day period diligently prosecute to completion, all such
Remedial Work unless the requirement to perform such Remedial Work is being
contested in good faith by the Companies.
7.10 Collateral Records.
The Borrowers agree to promptly execute and deliver to the Lenders,
from time to time, solely for the Lenders' convenience in maintaining a record
of the Collateral, such written statements and schedules as the Lenders may
reasonably require, including without limitation those described in Section 7.1
of this Agreement, designating, identifying or describing the Collateral pledged
to the Lenders. If any of the Borrowers fail, however, to promptly give the
Lenders such statements or schedules, such failure shall not affect, diminish,
modify or otherwise limit the Lenders' security interests in the Collateral. In
addition, upon the Lenders' reasonable request, the Borrowers will make
available to the Lenders copies of agreements with, or purchase orders from, the
customers of the Borrowers, and copies of invoices to customers, proof of
shipment or delivery and such other documentation and information relating to
said Collateral as the Lenders may reasonably require. Failure to provide the
Lenders with any of the foregoing shall in no way affect, diminish, modify or
otherwise limit the security interests granted herein. The Borrowers hereby
authorizes the Lenders to regard their printed names or rubber stamps signatures
on assignment schedules or invoices as the equivalent of a manual signature by
such Person's authorized officers or agents.
7.11 Security Interests.
26
The Borrowers will defend the Collateral against all claims and demands
of all Persons at any time claiming the same or any interest therein which
claims or demands are in excess of $150,000 or otherwise affect a material
portion of the Collateral provided, however, that the failure to be successful
in such defense shall only be an Event of Default hereunder to the extent set
forth in Section 9.1(g) below). The Borrowers agree to comply with the
requirements of all state and federal laws in order to grant to the Lenders
valid and perfected security interests in the Collateral (other than Collateral
located outside the United States), subject only to prior Liens permitted
pursuant to Section 8.4 hereof and Permitted Liens prior to Lenders' security
interest by operation of law, and except to the extent the Lenders' Lien in cash
held by the Borrowers as xxxxx cash or till cash in the ordinary course of their
businesses consistent with past practices shall not remain perfected. Without
limiting the generality of the foregoing, the Borrowers shall promptly, upon the
request of the Lenders, at the Borrowers' expense, execute, acknowledge and
deliver, or cause the execution, acknowledgment and delivery of, and thereafter
register, file or record, or cause to be registered, filed or recorded, in an
appropriate governmental office, any document or instrument supplemental to or
confirmatory of the Ancillary Documents or otherwise deemed by the Lenders
necessary or reasonably desirable for the continued validity, perfection and
priority of the Liens on the Collateral covered thereby to the extent required
by the immediately preceding sentence. The Lenders are hereby authorized by the
Borrowers to file any financing statements covering the Collateral whether or
not the Borrowers' signatures appear thereon. The Borrowers agree to do whatever
the Lenders may reasonably request, from time to time, by way of: filing notices
of liens, financing statements, fixture filings and amendments, renewals and
continuations thereof; cooperating with the Lenders' custodians; keeping stock
records; using best efforts to obtain waivers from landlords and mortgagees and
from warehousemen, fillers, processors and packers and their respective
landlords and mortgagees; paying claims, which might if unpaid, become a Lien on
the Collateral; and performing such further acts as the Lenders may reasonably
require in order to effect the purposes of this Agreement and the other
Transaction Documents. Any and all fees, costs and expenses, of whatever kind
and nature (including any Taxes, attorneys' fees or costs for insurance of any
kind), which Lenders may incur with respect to the Collateral or the Obligations
under the Transaction Documents; in filing public notices; in preparing or
filing documents; making title examinations or rendering opinions; in
protecting, maintaining, or preserving the Collateral or its interest therein;
in enforcing or foreclosing the Liens hereunder, whether through judicial
procedures or otherwise; or in defending or prosecuting any actions or
proceedings arising out of or relating to its transactions with the Borrowers
under this Agreement or any other Transaction Document, shall be borne and paid
by the Borrowers. If same are not promptly paid by the Borrowers, the Lenders
may pay same on the Borrowers' behalf, and the amount thereof shall be an
Obligation secured under the Ancillary Documents and due to the Lenders on
demand.
The Borrowers will cause to be delivered to the Lenders title insurance
policies, in a form satisfactory to the Lenders, with respect to the Deeds of
Trust delivered hereunder at the Closing or as soon as practicable after the
Closing.
7.12 Taxes.
The Companies agree to pay, when due, all Taxes lawfully levied or
assessed against any of the Borrowers or any of the Collateral; provided,
--------
however, that, unless such Taxes have become a federal tax Lien or ERISA Lien on
-------
any of the assets of such Person, no such Tax need
27
be paid if the same is being contested, in good faith, by appropriate
proceedings promptly instituted and diligently conducted and if an adequate
reserve or other appropriate provision shall have been made therefor as
reflected on the audited financial statements for the relevant fiscal year in
accordance with GAAP, and, to the extent such reserves shall be taken
thereafter, consistent with the Companies' past practices.
7.13 Collection of Accounts.
Unless an Event of Default has occurred and shall not have been waived,
the Companies may and will enforce and collect in accordance with its credit and
collection policy, all amounts owing on the Accounts, for the Lenders' benefit
and on the Lenders' behalf, but at the Companies' expense in accordance with the
provisions of Section 12.1 hereof; such privilege shall terminate automatically,
however, upon the occurrence and during the continuance of any Event of Default
after notice from the Lenders. No checks, drafts or other instruments received
by the Lenders shall constitute final payment unless and until such instruments
have actually been collected.
7.14 Change of Control.
Upon the occurrence of a Change of Control (such date being the "Change
of Control Trigger Date"), each Lender will have the right to require the
Borrowers to immediately prepay, in whole or in part, the Term Loans, plus
accrued and unpaid interest to the date fixed for such prepayment (including,
without limitation, any deferred interest), together with any other fees, costs
or expenses accrued or incurred to such date.
7.15 Trademarks.
The Companies shall do and cause to be done all things necessary to
preserve and keep in full force and effect all registrations of trademarks,
service marks and other marks, trade names or other trade rights unless any of
the foregoing is no longer in use or is of immaterial value. Promptly after
obtaining any federal registration of any trademark, trade name or other trade
right or the filing of any application therefor, the Borrowers shall deliver to
the Lenders an undated Trademark Security Agreement, executed in blank, with
respect to each such registration and application.
7.16 Patents.
The Companies shall do and cause to be done all things necessary to
preserve and keep in full force and effect all patents and patent applications
unless any instrument evidencing any of the foregoing is no longer in use or of
immaterial value. Promptly after obtaining any federal registration of any
patent or the filing of any application therefor, the Borrowers shall deliver to
the Lenders an undated Patent Security Agreement, executed in blank, with
respect to each such registration or application.
8. NEGATIVE COVENANTS.
28
In order to induce the Agent and the Lenders to enter into this
Agreement and to induce Lender to make the Term Loan as contemplated hereby, the
Companies covenant and agree that the Companies shall perform all covenants in
this Section 8 and shall cause all its Subsidiaries to perform all covenants in
this Section 8.
8.1 Debt and Guarantees.
The Companies shall not create, incur, assume or permit to be
outstanding and shall not allow any Subsidiary to create, incur, assume or
permit to be outstanding, any Debt other than:
(a) Debt incurred pursuant to this Agreement;
(b) Debt outstanding on the Closing Date and identified on
Schedule 8.1;
(c) Debt incurred under the 11 1/4% Senior Subordinated
Notes;
(d) Refinancing of Debt with respect to Debt that was incurred
prior to the date hereof and identified on Schedule 8.1; provided, however, that
-------- -------
(i) the principal amount of the Debt refinanced (plus the amount of fees, costs,
and expenses incurred and the amount of any premium, penalties, breaking costs
and other similar amounts required to be paid, in connection with such
refinancing pursuant to the terms of the instrument governing the Debt being
refinanced) shall (i) not be greater than the amount of the Debt being
refinanced, (ii) not extend the maturity date of the Debt being refinanced,
(iii) have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Debt being refinanced (iv) rank no more
senior than the Debt being refinanced, and (v) contain terms and conditions at
least as favorable to the Companies as the terms and conditions of the Debt
being refinanced;
(e) Old Trade Payables provided that the amount of Old Trade
Payables outstanding at any time does not exceed $100,000.
(f) The New Intercompany Note permitted by Section 8.12 of this
Agreement.
Companies will not, and will not permit any Subsidiary to refinance, amend,
restructure, reconstitute, replace or otherwise alter any term, covenant,
condition or provision of any instrument evidencing any Debt outstanding on the
Closing Date (including, without limitation, any Intercompany Note) other than
to refinance such Debt as permitted pursuant to Section 8.1(d) above.
8.2 Restricted Payments.
The Companies will not, and will not permit any Subsidiary to, directly
or indirectly, (i) declare or pay any dividend or make any distribution on their
capital stock or to the holders of their capital stock (other than dividends or
distributions payable in their capital stock or dividends or distributions (or
series of dividends of distributions) made by a Company to a Borrower) or (ii)
redeem, repurchase or otherwise acquire or retire for value, or permit any
Subsidiary to, directly or indirectly, redeem, purchase or otherwise acquire or
retire for value, any such capital stock (except shares acquired upon the
conversion thereof into other shares of
29
capital stock or rights to acquire such capital stock, odd lot shares, and
except for the repurchase or acquisition of such capital stock held by
directors, officers or employees of any of the Borrowers upon death, disability,
retirement or termination of employment not to exceed $100,000 in the aggregate
in any fiscal year) or rights to acquire such capital stock, or (iii) directly
or indirectly redeem, repurchase, defease or otherwise acquire or retire for
value, prior to any scheduled or mandatory maturity, scheduled or mandatory
repayment or scheduled sinking fund payment (after giving effect to the exercise
of any and all unconditional (other than as to the giving of notice) options to
extend the maturity), Debt of the Companies (other than Term Loans pursuant to
this Agreement or as set forth in the Section 4.20 (Use of Proceeds) of this
Agreement and the schedule related thereto).
8.3 Investments.
The Companies will not make or acquire any Investment in any Person and
will not permit any Subsidiary to make or acquire any Investment in any Person
other than:
(a) Investments by one Borrower in another Borrower;
(b) Permitted Investments;
(c) Investments consisting of purchase money notes received in
connection with the sale or disposition of any asset, provided that such sale or
disposition was made in accordance with the terms of this Agreement; and
(d) Investments in Foreign Subsidiaries which Investments are
either existing on the Closing Date and disclosed on Schedule 8.3 or permitted
pursuant to Section 8.12 hereof and evidenced by the New Intercompany Note
(which New Intercompany Note shall be pledged to the Lenders under the
Transaction Documents).
8.4 Negative Pledge.
The Borrowers will not and will not permit any Subsidiary to create,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by it and will not permit any Subsidiary to create, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing on the Closing Date and listed in Schedule
4.15 hereto securing Debt outstanding on the Closing Date;
(b) any Lien arising pursuant to any order of attachment,
distain or similar legal process arising in connection with court proceedings so
long as the execution or other enforcement thereof is effectively stayed and the
claims secured thereby are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP have been set aside;
(c) Liens created by and existing under the Ancillary Documents;
(d) any Permitted Liens; and
30
(e) any extension, renewal or substitution of or for any of
the foregoing Liens described in clauses (a) and (d) above or this clause (e);
provided in each case that (i) the Debt or other obligation or liability secured
by the applicable Lien shall not exceed the Debt or other obligation or
liability existing immediately prior to such extension, renewal, or substitution
and (ii) the Lien securing such Debt or other obligation or liability shall be
limited to the property which, immediately prior to such extension, renewal or
substitution, secured such Debt or other obligation or liability, and
improvements on or additions to such property.
8.5 Consolidations, Mergers and Sales of Assets.
(a) The Companies may not and will not permit any Subsidiary to
complete (or agree to complete) an Asset Disposition unless (i) prior to such
Asset Disposition, Borrowers have received the written consent of the Agent and
(ii) Borrowers apply the Net Cash Proceeds from such Asset Disposition in
accordance with Section 6.2 of this Agreement.
(b) The Companies shall continue to maintain the operating
integrity of their businesses and shall continue to operate only in the same
general types of businesses as now conducted thereby and reasonable extensions
thereof, and shall continue to preserve, renew and keep in full force and
effect, their corporate existences and all material rights, privileges and
franchises necessary or desirable in the normal conduct of their businesses.
(c) The Companies will not and will not permit any Subsidiary to
merge with or into any other Person.
8.6 Capital Expenditures.
Consolidated Capital Expenditures shall not, for each of the periods
ending on the dates set forth below, exceed:
Prior to Aeromet Sale
Period Ended Capital Expenditure
------------ -------------------
3 months ended 8/31/01 $1,100,000
6 months ended 11/30/01 2,200,000
9 months ended 2/28/02 3,300,000
12 months ended 5/31/02 4,400,000
12 months ended 8/31/02 4,800,000
12 months ended 11/30/02 5,200,000
12 months ended 2/28/03 5,200,000
After the Aeromet Sale
Period Ended Capital Expenditure
------------ -------------------
3 months ended 8/31/01 $ 600,000
6 months ended 11/30/01 1,100,000
9 months ended 2/28/02 1,700,000
12 months ended 5/31/02 2,200,000
12 months ended 8/31/02 2,600,000
31
12 months ended 11/30/02 3,000,000
12 months ended 2/28/03 3,000,000
; provided, however, that to the extent the actual Consolidated Capital
-------- -------
Expenditures in any period are less than the maximum permitted amount of
Consolidated Capital Expenditures set forth above for such period (such
difference shall hereinafter be referred to as the "Unused Capital
Expenditures"), the Companies may make additional Consolidated Capital
Expenditures in the immediately succeeding period (the "Immediately Succeeding
Period") equal to the lesser of: (i) the Unused Capital Expenditures and (ii)
50% of the maximum permitted amount of Consolidated Capital Expenditures for the
period during which the excess occurred (such lesser amount referred to herein
as the "Additionally Permitted Expenditure"), provided that the Additionally
Permitted Expenditure may be made only if the Companies have made Consolidated
Capital Expenditures in the Immediately Succeeding Period equal to the maximum
amount of Consolidated Capital Expenditures permitted in such Immediately
Succeeding Period. In addition, five (5) days prior to the consummation of the
Aeromet Sale, the Companies shall certify to the Lenders that the Companies
(other than Aeromet) would have satisfied the Consolidated Capital Expenditures
test set forth in the "After Aeromet Sale" column, for the immediately preceding
period or if such sale occurs on or prior to August 31, 2001, shall satisfy the
Consolidated Capital Expenditures test for the 3 months ended 8/31/01.
8.7 Minimum EBITDA.
The Companies shall not permit EBITDA for each of the periods ending on
the dates set forth below to be less than the amount set forth for such period:
Prior to Aeromet Sale
Period Ended Minimum EBITDA
------------ --------------
3 months ended 8/31/01 $ 1,900,000
6 months ended 11/30/01 4,300,000
9 months ended 2/28/02 7,100,000
12 months ended 5/31/02 10,200,000
12 months ended 8/31/02 10,400,000
12 months ended 11/30/02 10,500,000
12 months ended 2/28/03 10,600,000
After Aeromet Sale
Period Ended Minimum EBITDA
------------ --------------
Any month ended on or prior to 5/31/01
$ 0
2 months ended 6/30/01 250,000
3 months ended 7/31/01 500,000
3 months ended 8/31/01 800,000
6 months ended 11/30/01 2,200,000
9 months ended 2/28/02 3,900,000
12 months ended 5/31/02 5,900,000
12 months ended 8/31/02 6,000,000
32
12 months ended 2/28/03 6,000,000
In addition, five (5) days prior to the consummation of the Aeromet Sale, the
Companies shall certify to the Lenders that the Companies (other than Aeromet)
would have satisfied the Minimum EBITDA Covenant set forth in the "After Aeromet
Sale" column, for the immediately preceding period.
8.8 EBITDA/Covenant Interest.
The Companies shall not permit the ratio of EBITDA to Covenant Interest
for each of the periods ending on the dates set forth below to be less then the
following:
Prior to Aeromet Sale
Period Ended EBITDA/Covenant Interest
------------ ------------------------
3 months ended 8/31/01 2.4:1
6 months ended 11/30/01 2.7:1
9 months ended 2/28/02 3.0:1
12 months ended 5/31/02 3.2:1
12 months ended 8/31/02 3.2:1
12 months ended 11/30/02 3.3:1
12 months ended 2/28/03 3.3:1
After the Aeromet Sale
Period Ended EBITDA/Covenant Interest
------------ ------------------------
3 months ended 8/31/01 1.0:1
6 months ended 11/30/01 1.4:1
9 months ended 2/28/02 1.6:1
12 months ended 5/31/02 1.9:1
12 months ended 8/31/02 1.9:1
12 months ended 11/30/02 1.9:1
12 months ended 2/28/03 1.9:1
In addition, five (5) days prior to the consummation of the Aeromet Sale, the
Companies shall certify to the Lenders that the Companies (other than Aeromet)
would have satisfied the EBITDA/Covenant Interest ratio set forth in the "After
Aeromet Sale" column, for the immediately preceding period or if the Aeromet
Sale occurs on or prior to August 31, 2001, shall satisfy the EBITDA/Covenant
Interest ratio for the 3 months ended August 31, 2001.
8.9 Covenant Debt/EBITDA.
The Borrowers shall not permit the ratio of Covenant Debt to EBITDA to
be less then the following:
33
Prior to Aeromet Sale
Period Ended Ratio
------------ -----
3 months ended 8/31/01 11.1:1
6 months ended 11/30/01 4.9:1
9 months ended 2/28/02 3.0:1
12 months ended 5/31/02 2.1:1
12 months ended 8/31/02 2.0:1
12 months ended 11/30/02 2.0:1
12 months ended 2/28/03 2.0:1
After Aeromet Sale
Period Ended Ratio
------------ -----
3 months ended 8/31/01 16.3:1
6 months ended 11/30/01 6.2:1
9 months ended 2/28/02 3.5:1
12 months ended 5/31/02 2.3:1
12 months ended 8/31/02 2.3:1
12 months ended 11/30/02 2.3:1
12 months ended 2/28/03 2.3:1
In addition, five (5) days prior to the consummation of the Aeromet Sale, the
Companies shall certify to the Lenders that the Companies (other than Aeromet)
would have satisfied the Covenant Debt/EBITDA ratio set forth in the "After
Aeromet Sale" column, for the immediately preceding period or if the Aeromet
Sale occurs on or prior to August 31, 2001, shall satisfy the Covenant
Debt/EBITDA ratio for the 3 months ended August 31, 2001.
8.10 Minimum Accounts Receivable and Inventory
The Companies shall not permit their Consolidated Working Assets to be
less than $36,700,000 at any time prior to the Aeromet Sale and after the
Aeromet Sale shall not permit Consolidated Working Assets to be less than
$20,000,000 at any time.
8.11 Transactions with Affiliates.
Other than the payments permitted pursuant to Section 8.12 and
transactions between or among Borrowers the Companies will not directly or
indirectly, and will not permit any Subsidiary, directly or indirectly to, pay
any funds to or for the account of, make any Investment (whether by acquisition
of stock or indebtedness, by contributions of capital, by loan, advance,
transfer of property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any other transaction with, or render to or receive any service from,
any Affiliate other than as set forth on Schedule 4.23 hereof.
The foregoing restrictions shall not apply to reasonable fees paid to
and indemnity provided on behalf of the Directors and officers of the Borrowers
in the ordinary course of business and consistent with past practices.
34
8.12 Restrictions on Foreign Subsidiary Support.
The Borrowers will not permit to exist any open account sales,
transfers by the Borrowers of goods of any kind, loans, capital contributions or
any other financial support, and will not permit any of their United States
Subsidiaries to do any of the foregoing, to any Foreign Subsidiary other than a
one-time payment of up to $2,300,000 to Aeromet International PLC, to be made
within 90 days of the Closing Date and evidenced by the New Intercompany Note
which shall be pledged to the Lenders.
8.13 Environmental Matters.
Except in the ordinary course and in material compliance with
applicable law, the Companies will not use, generate, manufacture, produce,
store, release, discharge or dispose of, on, under or about any real property
owned, operated or leased by the Companies or transport to or from any such
property, any Hazardous Substance, or (to the extent within the Companies'
control) permit any other person to do so, where such could reasonably be
expected to have a Material Adverse Effect.
8.14 Amendments to Certificates of Incorporation and By-Laws.
The Companies shall not alter or modify their respective Articles or
Certificate of Incorporation or By-Laws or other organizational documents in any
manner which could reasonably be expected to have a Material Adverse Effect. The
Companies shall not change any of their corporate names, mailing addresses,
principal places of business or structures, unless they shall have complied with
the requirements of Section 7.5 hereof.
8.15 No Prohibited Transactions Under ERISA.
The Companies shall not do any of the following if such action could
reasonably be expected to result in the Companies incurring a liability,
individually or in the aggregate equal to or in excess of $300,000:
(a) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction which could result in a civil penalty or excise tax
described in Sections 502(i) of ERISA or 4975 of the Code for which a statutory
or class exemption is not available or a private exemption has not been
previously obtained from the DOL;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the Code), whether or not waived;
(c) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(d) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan;
35
(e) fail, or permit any ERISA Affiliate to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any ERISA Affiliate to fail, to pay any
required installment or any other payment required under Section 412 of the Code
on or before the due date for such installment or other payment;
(g) amend, or permit any ERISA Affiliate to amend, a Benefit
Plan resulting in an increase in current liability for the plan year such that
any Borrowers or any ERISA Affiliate is required to provide security to such
Benefit Plan under Section 401(a)(29) of the Code; or
(h) withdraw, or permit any ERISA Affiliate to withdraw, from
any Multiemployer Plan.
8.16 No Additional Bank Accounts.
The Borrowers will not directly or indirectly, open, maintain or
otherwise have any checking, savings or other accounts at any bank or other
financial institution, or any other account where money is or may be deposited
or maintained with any Person, other than the accounts set forth on Schedule
8.16, except to the extent the Borrowers shall give Lenders prior written notice
thereof and such account is subject to a Blocked Account Agreement.
8.17 No Additional Subsidiaries.
The Companies will not, directly or indirectly, form or acquire any new
Subsidiaries or purchase or otherwise acquire all or substantially all of the
assets of any Person.
9. EVENTS OF DEFAULT.
9.1 Events of Default.
The occurrence of any of the following events shall constitute an
"Event of Default" hereunder:
(a) failure of the Borrowers to pay any principal when due,
whether at stated maturity, by acceleration or otherwise;
(b) failure of the Borrowers to pay any interest, fees or
expenses or other Obligations when due, whether at stated maturity, by
acceleration or otherwise and such failure shall continue for a period of five
(5) days;
(c)
(i) failure of the Companies to perform, comply with or
observe any term, covenant or agreement applicable to it contained in
Sections 4.20, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11,
8.12 and 8.16;
36
(ii) failure of the Companies to perform, comply
with or observe any term, covenant or agreement applicable to it in
Section 7.1(f) or (g) and the failure shall continue unremedied until
two (2) Business Days after a senior officer of any of the Companies
knowledgeable of the requirements of this Agreement (including, without
limitation, the chief financial officer or controller or chief
accounting officer of Pacific Aerospace) knows of such failure;
(iii) failure of the Companies to perform, comply
with or observe any term, covenant or agreement applicable to it in
Sections 7 or 8 hereof (other than a provision covered by subparagraphs
(i) or (ii) above) and the failure shall continue unremedied for five
(5) Business Days after the delivery by the Agent of notice to Pacific
Aerospace of such failure;
(d) breach by the Companies of any representation or
warranty contained in this Agreement (other than under a provision covered by
subsection (a) or (b) above), the other Transaction Documents or any other
agreement, document, instrument or certificate among the Companies and the
Lenders or executed by the Companies in favor of Lenders, which breach or
failure shall continue unremedied more than ten (10) Business Days after the
Agent' delivery of notice to Pacific Aerospace of such breach (such grace period
to apply only to the extent such breach or failure is curable within such ten
(10) Business Day period);
(e) (i) the Companies shall commence any case, proceeding
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets, or any of the Companies shall
make a general assignment for the benefit of creditors; or (ii) there shall be
commenced against any of the Companies any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for 60 days after the entry thereof; or
(iii) there shall be commenced against the Companies or any of its Subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distain or similar process against all or any substantial
part of its assets which results in the entry of an order for any such relief
which shall not have been vacated, discharged, or stayed or bonded pending
appeal for 60 days;
(f) a default shall have occurred under any Transaction
Document;
(g) the Companies shall (i) default in any payment of
principal of or interest on any Debt or in the payment of any Guarantee the
aggregate principal amount of the series of Debt under which such Debt is issued
and the aggregate principal amount of the obligation guaranteed by such
Guarantee equals or exceeds $200,000; or (ii) default in the observance or
performance of any other agreement or condition relating to any such Debt or
Guarantee or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other
37
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such Debt or
beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Debt to become due prior to its stated
maturity or such Guarantee to become due prior to its stated maturity or such
Guarantee to become payable;
(h) (i) any material covenant, agreement or obligation of any
party contained in or evidenced by any of the Transaction Documents shall cease
to be enforceable in accordance with its terms, or any of the Companies (other
than Lenders) shall deny or disaffirm its obligations under any of the
Transaction Documents, or Transaction Document shall be cancelled, terminated,
revoked or rescinded without the express prior written consent of Lenders, (ii)
any of the Transaction Documents shall cease for any reason to be in full force
and effect (other than in accordance with the terms hereof or thereof) or any
action or proceeding shall have been commenced by any Person (other than other
than Lenders) seeking to cancel, revoke, rescind or disaffirm the obligations of
any party to any Transaction Document, (iii) any court or other governmental
authority shall issue a final judgment, order, decree or ruling for the payment
of money (a "Judgment") and such Judgment is in an amount (determined after an
allowance for the application of any insurance proceeds to such Judgment) in
excess of $200,000 and enforcement proceedings shall have been commenced upon
any such Judgment or any such Judgment shall remain unpaid after a period of ten
(10) consecutive days during which a stay of such enforcement of any such
Judgment, including, without limitation, by reason of a pending appeal or
otherwise, shall not be in effect, or (iv) any security interest or lien
purported to be created by the Ancillary Documents shall cease to be valid and
(to the extent required by the Ancillary Documents) perfected or the Borrowers
shall so have asserted, except that the failure of any security interest or lien
purported to be created by the Ancillary Documents to be valid and perfected
shall not in itself constitute a default hereunder if the value of the
Collateral purported to be covered thereby is, in the aggregate, not in excess
of $200,000;
(i) Pacific Aerospace shall have failed to file with the SEC
the registration statement relating to the Underlying Common Stock within 30
days of the Closing Date, or such registration statement shall have failed to
have been declared effective by the SEC, in either case, on or prior to the
150/th/ day after the Closing Date; and
(j) the holders of all or any part of the Subordinated Debt
shall accelerate the maturity of all or any part of the Subordinated Debt or the
Subordinated Debt shall be prepaid, redeemed or repurchased in whole or part.
9.2 Acceleration.
Upon the occurrence of an Event of Default which has not been waived by
the Lenders, by delivery of written notice to the Borrowers, the Agent, may,
take any or all of the following actions, without prejudice to the rights of the
Lenders to enforce their claims against the Borrowers: declare all or any part
of the Obligations hereunder to be immediately due and payable (except with
respect to any Event of Default set forth in Section 9.1(d) hereof, in which
case all such Obligations shall automatically become immediately due and payable
without the
38
necessity of any notice or other demand) without presentment, demand, protest or
any other action or obligation of Majority Lenders or the Agent.
If at any time after acceleration of the Obligations hereunder, the
Borrowers shall pay all arrears of interest and all payments on account of
principal of such Term Loan Notes which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Defaults (other than nonpayment of principal of and accrued interest
on such Term Loan Notes and other Obligations hereunder due and payable solely
by virtue of acceleration) shall be remedied or waived, then by written notice
to the Borrowers, the Agent may elect, in its sole discretion, to rescind and
annul the acceleration and its consequences; but such action shall not affect
any subsequent Default or Event of Default or impair any right or remedy
consequent thereon. The provisions of the preceding sentence are not intended to
benefit the Borrowers and do not give the Borrowers the right to require the
Majority Lenders or the Agent to rescind or annul any acceleration hereunder,
even if the conditions set forth herein are met.
9.3 Remedies on Default.
Immediately upon the occurrence of any Event of Default which has not
been waived by the Majority Lenders, the Agent or any agent designated by the
Agent may:
(a) remove from any premises where same may be located any and
all documents, instruments, files and records (including the copying of any
computer records), and any receptacles or cabinets containing same, relating to
the Accounts, or the Agent may use (at the expense of the Borrowers) such of the
supplies or space of the Borrowers at the Borrowers' place of business or
otherwise, as may be necessary to properly administer and control the Accounts
or the handling of collections and realizations thereon;
(b) bring suit, in the name of the Borrowers or the Lenders
and generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Borrowers or Lenders;
(c) sell, assign and deliver the Accounts and any returned,
reclaimed or repossessed merchandise, with or without advertisement, at public
or private sale, for cash, on credit or otherwise, at the Agent's sole option
and discretion, and Agent may, on behalf of the Lenders bid at any such sale,
free from any right of redemption, which right is hereby expressly waived by the
Borrowers;
(d) foreclose the security interests created pursuant to the
Transaction Documents by any available judicial procedure, or to take possession
of any or all of the Inventory and equipment without judicial process and enter
any premises where any Inventory and equipment may be located for the purpose of
taking possession of or removing the same;
(e) revise, update, amend and otherwise complete the Trademark
Security Agreement as the Agent may determine to be necessary or desirable to,
and file, record and register any or all of the Trademark Security Agreement and
Patent Security Agreement with the
00
Xxxxxx Xxxxxx Patent and Trademark Office in order to assign and transfer the
trademarks and patents covered thereby to any Person, including, without
limitation, the Lenders; and
(f) direct the Borrowers not to make any payment to the
holders of the Subordinated Notes, whether such payment is in respect of
principal, premium or interest that would otherwise be due and payable to the
holders of the Subordinated Notes.
The Agent shall have the right, without notice of advertisement, to
sell, lease, or otherwise dispose of all or any part of the Inventory and
equipment, whether in its then condition or after further preparation or
processing, in the name of the Borrowers or Lenders, or in the name of such
other party as the Lenders may designate, either at public or private sale or at
any broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such other terms and conditions as the
Agent in its sole discretion may deem advisable, and Agent or any Lender shall
have the right to purchase at any such sale. If any Inventory and equipment
shall require rebuilding, repairing, maintenance or preparation, the Agent shall
have the right, at its option, to do such of the aforesaid as is necessary, for
the purpose of putting the Inventory and equipment in such saleable form as
Agent shall deem appropriate.
The Borrowers agree, at the request of the Agent, to assemble the
Inventory and equipment and to make it available to the Agent at places which
the Agent shall select, whether at the premises of the Borrowers or elsewhere,
and to make available to the Agent the premises and facilities of any of the
Borrowers for the purpose of the Agent taking possession of, removing or putting
the Inventory and equipment in saleable form. However, if notice of intended
disposition of any Collateral is required by law, it is agreed that five (5)
days notice shall constitute reasonable notification and full compliance with
the law. The Agent shall be entitled to use all Proprietary Rights and computer
software programs and databases used by the Borrowers in connection with their
respective businesses or in connection with the Collateral.
The net cash proceeds resulting from the Agent's exercise of any of the
foregoing rights (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied ratably to the payment of the
Lender Obligations, whether due or to become due, in such order as the Agent may
elect. The Borrowers shall remain liable to Lenders for any deficiencies, and
Lenders in turn agree to remit to the Borrowers or its successors or assigns,
any surplus resulting therefrom to the extent any such surplus is paid to the
Lenders and they have the legal right to retain it.
The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
10. SUCCESSORS AND ASSIGNS.
10.1 General.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors (which shall include in the
case of the Agent or any Lender any entity resulting from a merger or
consolidation) and assigns, except that (a) the Companies may
40
not assign their rights or obligations under this Agreement, and (b) each Lender
may assign its rights in this Agreement only as set forth below in this Article
10.
10.2 Assignments.
In compliance with applicable laws with respect to such assignment, a
Lender may assign to one or more Persons (each a "Successor Lender") a
proportionate part of its rights and obligations in connection with this
Agreement and its Term Loan Note and the related Transaction Documents and each
such Successor Lender shall assume such rights and obligations pursuant to an
Assignment and Acceptance Agreement ("Assignment and Acceptance Agreement") duly
executed by such Successor Lender and such assigning Lender substantially in the
form of Exhibit J attached hereto. In addition, any Lender may at any time grant
---------
or offer to grant to one or more Person ("Credit Participants") participating
interests in such Lender's rights and obligations in this Agreement, its Term
Loan Note and the related Transaction Documents. In the case of a participation,
Borrowers shall be entitled to only deal with the Lenders.
10.3 Assignment Procedures
In the event of an assignment in accordance with Section 10.2 such
Successor Lender shall become party to this Agreement as a signatory hereto and
shall have all the rights and obligations of a Lender under this Agreement and
the other Transaction Documents with an interest therein as set forth in such
assignment, and such assignor making such assignment shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any such
assignment, the assigning Lender, the Successor Lender and the Borrowers shall
make appropriate arrangements so that, if required, a new Term Loan Note is
issued to the Successor Lender and a replacement Term Loan Note is issued to the
assigning Lender in principal amounts reflecting their respective revised
interests.
10.4 Register.
The Agent shall maintain a register (the "Register") for the
recordation of (i) the names and addresses of all Successor Lenders that enter
into Assignment and Acceptance Agreements, (ii) the interests of each Lender,
and (iii) the amounts of the Term Loans owing to each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of manifest
error, and the Borrowers, the Agent and the Lenders may treat each Person whose
name is registered therein for all purposes as a party to this Agreement. The
Register shall be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
10.5 Further Assurances.
The Companies shall sign such documents and take such other actions
from time to time reasonably requested by the Agent or a Lender to enable any
Successor Lender to share in the benefits and rights created by the Lender
Agreements.
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11. THE AGENT.
11.1 Authorization and Action.
Each Lender hereby appoints and authorizes the Agent to take such
action on its behalf and to exercise such powers under this Agreement and the
other Transaction Documents as are delegated to the Agent by the terms hereof
and thereof, together with such powers as are reasonably incidental thereto. As
to any matters not expressly provided for by this Agreement and the other
Transaction Documents (including, without limitation, enforcement or collection
of the Term Loan Notes), the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Lenders, and such instructions shall be
binding upon all Lenders; provided, however, that the Agent shall not be
-------- -------
required to take any action which exposes the Agent to liability or which is
contrary to this Agreement or the other Transaction Documents or applicable law.
Subject to the foregoing provisions and to the other provisions of this Article
11, the Agent shall, on behalf of the Lenders: (a) execute any documents on
behalf of the Lenders providing collateral for or guarantees of the Lender
Obligations; (b) hold (or designate a custodian to hold) and apply any
collateral for the Lender Obligations, and the proceeds thereof, at any time
received by it, in accordance with the provisions of this Agreement and the
other Transaction Documents; (c) exercise any and all rights, powers and
remedies of the Lenders under this Agreement or any of the other Transaction
Documents, including the giving of any consent or waiver or the entering into of
any amendment, subject to the provisions of Section 14.1; (d) at the direction
of the Lenders, execute, deliver and file UCC financing statements, mortgages,
deeds of trust, lease assignments and such other agreements in respect of any
collateral for the Lender Obligations, and possess instruments included in the
collateral on behalf of the Lenders; and (e) in the event of acceleration of the
Borrowers' Indebtedness hereunder, act at the direction of the Majority Lenders
to exercise the rights of the Lenders hereunder and under the other Transaction
Documents.
11.2 Agent's Reliance, Etc.
Neither the Agent nor any of its directors, officers, agents, partners,
advisers or employees shall be liable to the Lenders for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Transaction Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Agent: (a) may treat the payee of any Term Loan Note as the holder thereof until
the Agent receives written notice of the assignment or transfer thereof signed
by such payee and in form required under Article 10 hereof; (b) may consult with
legal counsel, independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representations to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
in or in connection with this Agreement or the other Lender Agreements; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Lender Agreements on the part of the Borrowers or any other Person or to
inspect the property (including the books and records) of the Borrowers or any
other Person;
42
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Transaction Documents or any other instrument or document furnished
pursuant hereto or thereto; (f) shall incur no liability for its failure to
perfect or adequately protect the collateral granted to the Lenders pursuant to
this Agreement and the other Transaction Documents and (g) shall incur no
liability under or in respect of this Agreement or the other Transaction
Documents by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopy or telegram) believed by the Agent to be
genuine and signed or sent by the proper party or parties.
11.3 Agent as a Lender.
With respect to its interest in the Term Loans hereunder, if any, DDJ
Capital Management, LLC shall have the same rights and powers under this
Agreement and the other Transaction Documents as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lender(s)" shall, unless otherwise expressly indicated, include DDJ Capital
Management, LLC in its individual capacity. DDJ Capital Management, LLC and its
affiliates may lend money to, and generally engage in any kind of business with,
the Borrowers, any of the Borrowers' Affiliates and any Person who may do
business with or own securities of the Borrower or any such Affiliate of the
Borrowers, all as if DDJ Capital Management, LLC were not the Agent and without
any duty to account therefor to the Lenders.
11.4 Lender Credit Decision.
Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on the financial
statements referred to in Section 4.4 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.
11.5 Indemnification of Agent.
Each Lender agrees to indemnify the Agent and its directors, officers,
employees and agents (to the extent that the Agent is not reimbursed by the
Borrowers), ratably according to each Lender's Commitment Percentage, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent or its directors, officers, partners, members, advisers, employees or
agents in any way relating to or arising out of this Agreement or any other
Transaction Document or any action taken or omitted by the Agent in such
capacity under this Agreement; provided that no Lender shall be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender agrees to reimburse the Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including counsel fees) incurred by the
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
43
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Transaction Document, to
the extent that the Agent is not reimbursed for such expenses by the Borrowers.
11.6 Successor Agent.
Except as provided below, the Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrowers. Upon any such
resignation, the Lenders shall have the right to appoint a successor Agent which
shall be reasonably acceptable to the Borrowers. If no successor Agent shall
have been so appointed by the Lenders (other than the resigning Agent), and
shall have accepted such appointment, within thirty (30) days after the retiring
Agent's giving notice of resignation, then the retiring Agent may, on behalf of
the Lenders, appoint a successor Agent. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement and the other Lender Agreements.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Lender
Agreements.
11.7 Amendment of Article 11.
The Borrowers hereby agree that the foregoing provisions of this
Article 11 constitute an agreement among the Agent and the Lenders (and the
Agent and the Lenders acknowledge that except for the provisions of Section
11.6, the Borrowers are not a party to or bound by such foregoing provisions)
and that any and all of the provisions of this Article 11 may be amended at any
time by the Lenders without the consent or approval of, or notice to, the
Borrowers (other than the requirement of notice to the Borrower of the
resignation of the Agent and the appointment of a successor Agent).
12. EXPENSES AND INDEMNIFICATION.
12.1 Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the
Borrowers will pay all reasonable costs and expenses of Xxxxxxx Procter LLP,
special counsel to the Lenders, in connection with the preparation, execution
and delivery of the Transaction Documents and the perfection of the Liens under
the Ancillary Documents and all costs and expenses (including reasonable
attorney's fees of a special counsel and, if reasonably required, local or other
counsel) incurred by the Lenders or the Agent in connection with the
administration of the Transaction Documents and the Ancillary Documents,
including (a) the costs and expenses of any amendments, waivers or consents
under or in respect of this Agreement or the other Transaction Documents
(whether or not such amendment, waiver or consent becomes effective), (b) the
reasonable costs and expenses incurred in enforcing, exercising any remedies
against any Collateral or defending (or determining whether or how to enforce or
defend) any rights under this Agreement, or any of the other Transaction
Documents or in responding to any subpoena or other legal process or informal
investigative demand issued
44
in connection with this Agreement, or any of the other Transaction Documents,
and (c) the reasonable costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Borrowers or in
connection with any work-out, renegotiation or restructuring of the transactions
contemplated hereby, and by the other Transaction Documents. The Borrowers will
pay, and will save Lenders harmless from, all claims in respect of any fees,
costs or expenses if any, of brokers and finders (other than those retained by
Lenders).
12.2 Indemnification.
(a) In the event that the Agent or any Lender becomes involved in any
capacity in any action, proceeding or investigation in connection with any
matter contemplated by this Agreement or any other Transaction Document, the
Borrowers will reimburse Lenders and the Agent for legal and other expenses
(including the cost of any investigation and preparation) as they are incurred
by Lenders and the Agent whether or not such investigation, litigation, or
proceeding is brought by the Borrowers, its directors, shareholders or creditors
or an Indemnified Party (as defined below), or an Indemnified Party is otherwise
a party thereto. The Borrowers also agree to indemnify and hold harmless each
Lender and their respective affiliates and their respective directors, officers,
members, partners, advisers, members, employees and agents of such parties (the
"Indemnified Parties") from and against any and all losses, claims, damages and
liabilities, joint or several, related to or arising out of any matters
contemplated by this Agreement, unless and only to the extent that it shall be
finally judicially determined by a court of competent jurisdiction that such
losses, claims, damages or liabilities resulted primarily from Lenders' gross
negligence or willful misconduct and, in the event Lenders are found in any
action, proceeding or investigation to have acted with gross negligence or
willful misconduct, the Indemnified Parties shall repay to the Borrowers any
portion of the amounts paid by the Borrowers pursuant to this paragraph that is
attributable to such action which is the subject of such finding. The
Indemnified Parties will promptly notify the Borrowers upon receipt of written
notice of any claim or threat to institute a claim; provided that any failure by
the Indemnified Parties to give such notice shall not relieve the Borrowers from
the obligation to indemnify, the Indemnified Parties.
(b) If any action, claim, investigation or other proceeding is
instituted or threatened against any Indemnified Parties in respect of which
indemnity may be sought hereunder, the Borrowers shall be entitled to assume the
defense thereof with counsel selected by the Borrowers (which counsel shall be
reasonably satisfactory to such Indemnified Parties) and after notice from the
Borrowers to such Indemnified Parties of its election so to assume the defense
thereof, the Borrowers will not be liable to such Indemnified Parties hereunder
for any legal or other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof other than reasonable costs of
investigation; provided that (i) if counsel for such Indemnified Parties
determines in good faith that there is a conflict which requires separate
representation for the Borrowers and such Indemnified Parties, or (ii) the
Borrowers fail to assume or proceed in a timely and reasonable manner with the
defense of such action or fails to employ counsel reasonably satisfactory to
such Indemnified Parties in any such action, then in either such event such
Indemnified Parties shall be entitled to select one primary counsel and, if
necessary, one local counsel, of their own choice to represent such Indemnified
Parties and the Borrowers shall not, or no longer, be entitled to assume the
defense thereof on behalf of such
45
Indemnified Parties and such Indemnified Parties shall be entitled to
indemnification for the reasonable expenses (including reasonable fees and
expenses of such counsel) to the extent provided in the preceding paragraph.
Such counsel shall, to the fullest extent consistent with its professional
responsibilities, cooperate with the Borrowers and any counsel designated by the
Borrowers. Nothing contained herein shall preclude parties, at their own
expense, from retaining additional counsel to represent such Indemnified Parties
in any action with respect to which indemnity may be sought from the Borrowers
hereunder. The Borrowers shall not be liable under this agreement for any
settlement made by any Indemnified Parties without the Borrowers' prior written
consent, which consent shall not be unreasonably withheld, and the Borrowers
agree to indemnify and hold harmless any Indemnified Parties from and against
any loss or liability by reason of the settlement of any claim or action with
the consent of the Borrowers. The Borrowers shall not settle any such claim or
action without the prior written consent of the Indemnified Parties unless such
settlement provides for a full release of claims against the Indemnified
Parties.
(c) If the indemnification provided for herein is unavailable to an
Indemnified Party in respect of any losses, claims, damages, liabilities or
judgments referred to therein, then the Borrowers, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities and
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Borrowers on the one hand and Lenders on the other from
this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Borrowers on the one hand and Lenders on the other in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.
(d) Notwithstanding any of the other provisions of this Section 12,
the Borrowers shall not be required to indemnify any of the Indemnified Parties
with respect to any losses, claims, damages and/or liabilities, joint or
several, arising out of a breach by the Lenders (or by any Affiliate acting as a
substitute pursuant to Section 9 herein) of the representations and warranties
set forth in Section 5 herein.
12.3 Survival.
The obligations of the Borrowers under this Section 12 will survive the
payment or transfer of any Term Loan, the enforcement, amendment or waiver of
any provision of this Agreement, or any other Transaction Document, and the
termination of this Agreement.
13. ENTIRE AGREEMENT.
All statements contained in any certificate or other instrument delivered
by or on behalf of the Companies pursuant to this Agreement shall be deemed
representations and warranties of the Companies under this Agreement. Subject to
the preceding sentence, this Agreement, and the other Transaction Documents
embody the entire agreement and understanding between the Lenders and the
Companies and supersede all prior agreements and understandings relating to the
subject matter hereof.
46
14. AMENDMENT AND WAIVER.
14.1 Actions by Lenders.
Except as otherwise expressly set forth in any particular provision of this
Agreement, any consent or approval required or permitted by this Agreement to be
given by the Lenders, including without limitation under Section 14.2, may be
given, and any term of this Agreement or of any other instrument related hereto
or mentioned herein may be amended, and the performance or observance by the
Borrowers of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written consent of the Borrowers and the Majority Lenders; provided,
however, that without the written consent of all Lenders:
(a) no reduction in the interest rates on or any fees relating to the
Term Loans shall be made;
(b) no extension or postponement shall be made of the stated time of
payment of the principal amount of, interest on, or fees payable to the Lenders
relating to the Term Loans;
(c) no extension of the Term Loan Maturity Date shall be made;
(d) no release of all or substantially all of the collateral security
for, or any guarantor of, the Lender Obligations shall be made;
(e) no change in the definition of the term "Majority Lenders" shall
be made; and
(f) no change in the provisions of this Section 14.1 shall be made.
14.2 Actions by Companies.
No delay or omission on the Agent's or the Lenders' part in exercising
their rights and remedies against the Companies or any other interested party
shall constitute a waiver. A breach by the Companies of their obligations under
this Agreement may be waived only by a written waiver executed by the Agent and
the Lenders in accordance with Section 14.1. The Agent's and the Lenders' waiver
of the Companies' breach in one or more instances shall not constitute or
otherwise be an implicit waiver of subsequent breaches. To the extent permitted
by applicable law, the Companies hereby agree to waive, and do hereby absolutely
and irrevocably waive (a) all presentments, demands for performance, notices of
protest and notices of dishonor in connection with any of the Indebtedness
evidenced by the Term Notes, (b) any requirement of diligence or promptness on
the Agent's or the Lenders' part in the enforcement of its rights under the
provisions of this Agreement or any Transaction Document, and (c) any and all
notices of every kind and description which may be required to be given by any
statute or rule of law with respect to its liability (i) under this Agreement or
in respect of the Indebtedness evidenced by the Term Notes or any other Lender
Obligation or (ii) under any other Transaction Document. No course of dealing
between the Companies and the Agent or the Lenders shall operate as a waiver of
any of the Agent's or the Lenders' rights under this Agreement or any
Transaction Document
47
or with respect to any of the Lender Obligations. This Agreement shall be
amended only by a written instrument executed by the Agent and the Lenders in
accordance with Section 14.1 making explicit reference to this Agreement. The
Agent's and the Lenders' rights and remedies under this Agreement and under all
subsequent agreements between the Agent, the Lenders and the Companies shall be
cumulative and any rights and remedies expressly set forth herein shall be in
addition to, and not in limitation of, any other rights and remedies which may
be applicable to the Agent and the Lenders in law or at equity.
15. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by facsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to Agent, at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, XX, 00000,
Telecopier No. (000) 000-0000, Attention: Xxxxxx Xxxxxxx, Xxxxxxx Xxxxx and
Xxxxx Xxxxxxxxx Xxxxxxx, Esq., with a copy to Xxxxxxx Xxxxxxx XXX, Xxxxxxxx
Xxxxx, Xxxxxx, XX 00000, Telecopier No. (000) 000-0000, Attention Xxxxx
Xxxxxx Xxxxxx, P.C., or at such other address(es) or to the attention of
such other Person(s) as the Agent shall from time to time designate in
writing to the Borrowers and the Lenders,
(ii) if to any Lender, at the address set forth on Schedule I
hereto (or in the case of a Successor Lender, at the address specified in
the Assignment and Acceptance Agreement executed by such Success Lender) or
at such address(es) as such Lender shall have specified to the Agent and
Borrowers in writing, or
(iii) if to the Borrowers, to the Borrowers c/o Pacific
Aerospace & Electronics, Inc., at its address at 000 Xxxx Xxxxxxx Xxxx,
Xxxxxxxxx, XX 00000, Attention: President, Facsimile No. (000) 000-0000, or
at such other address as the Borrowers shall have specified to the Agent in
writing with a copy to: Xxxxxx X. Xxxxxxx, Pacific Aerospace & Electronics,
Inc., 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX 00000, Facsimile No. (425)
774-0103.
All notices and other communications provided for under this Section 14 will be
deemed given and effective only when actually received.
16. REPRODUCTION OF DOCUMENTS.
This Agreement, each of the other Transaction Documents and all documents
relating thereto, including, without limitation, (a) amendments, waivers and
consents of this Agreement that may hereafter be executed, (b) documents
received by Lenders at the Closing (except the Term Loan Notes themselves) and
(c) financial statements, certificates and other information previously or
hereafter furnished to Lenders, may be reproduced by Lenders by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and Lenders may destroy any original document so reproduced. The
Companies agree and stipulate that, to the extent permitted by applicable law,
any such reproduction shall be
48
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by Lenders in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 16 shall not prohibit the
Companies, the Agent or any Lender from contesting any such reproduction to the
same extent that it could contest the original, or from introducing evidence to
demonstrate the inaccuracy of any such reproduction.
17. CONFIDENTIAL INFORMATION.
For the purposes of this Section 17, "Confidential Information" means
materials, documents and other information delivered to Lenders by or on behalf
of the Companies in connection with the transactions contemplated by or
otherwise pursuant to this Agreement, whether before or after the Closing, that
is proprietary in nature and that was, prior to the Closing clearly marked or
orally represented, and, after the Closing, is clearly marked or labeled or
otherwise adequately identified when received by Lenders as being confidential
information of the Companies, provided that such term does not include
information that (a) was publicly known or otherwise known to Lenders prior to
the time of such disclosure, (b) subsequently becomes publicly known through no
act or omission by Lenders or any person acting on Lenders' behalf in violation
of this Section 17, (c) otherwise becomes known to Lenders other than through
disclosure by the Companies or (d) constitutes financial statements delivered to
Lenders under Section 4.4 that are otherwise publicly available. Lenders will
maintain the confidentiality of such Confidential Information in accordance with
procedures adopted by Lenders in good faith to protect confidential information
of third parties delivered to Lenders, provided that Lenders may deliver or
disclose Confidential Information to (i) Lenders' directors, officers, members,
partners, advisors, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by Lenders' Notes) who agree to keep such information confidential
or are otherwise bound by a duty of confidentiality with respect to the
disclosure of such information, (ii) Lenders' financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 17, (iii)
any other Lender, (iv) any Institutional Investor to which Lenders sells or
offers to sell such Term Loan Note or any part thereof or any participation
therein (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 17), (v)
any Person from which Lenders offer to purchase any security of the Companies
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 17), (vi) any federal
or state regulatory authority having jurisdiction over Lenders or their
advisors, (vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that requires
access to information about Lenders' investment portfolio or any other
regulatory authority, or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (A) to effect compliance with any
law, rule, regulation or order applicable to Lenders, (B) in response to any
subpoena or other legal process provided, however that the Lenders shall
cooperate with the Companies if the Companies seek to have such information
requested pursuant to such subpoena or other legal process subject to a
protective order, (C) in connection with any litigation to which Lenders are a
party or (D) if an Event of Default shall have occurred and be continuing, to
the extent Lenders may reasonably determine such delivery and disclosure to be
necessary or
49
appropriate in the enforcement or for the protection of the rights and remedies
under the Term Loan Notes, this Agreement and the other Transaction Documents.
Each Lender, by its acceptance of a Term Loan Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 17 as
though it were an original party to this Agreement. On the reasonable request of
the Companies in connection with the delivery to any Lender of information
required to be delivered to such Lender under this Agreement or requested by
such lender (other than a lender that is a party to this Agreement or its
nominee), such lender will enter into an agreement with the Companies embodying
the provisions of this Section 17.
The Companies hereby agree that in the event the Confidential Information
received prior to the Closing Date does not become generally available prior to
the date that is 90 days from the Closing Date (the "Release Date"), then, at
the request in writing signed by the Lender, the Companies agree to make, within
3 days of such request (but in no event prior to the Release Date) the required
public disclosure of the minimum amount of such Confidential Information
reasonably believed by the Companies to be necessary to entitle a Lender to
purchase and sell the Companies' debt and equity securities. Notwithstanding the
foregoing, the Companies shall not be obligated to publicly disclose (i) any
Confidential Information obtained by Lenders from a third person who is bound by
a confidentiality agreement with, or other obligation of secrecy to, the
Companies, or (ii) any information that is proprietary in nature. If the
Companies fail to make the public disclosure required by this paragraph, the
Lenders are authorized to publicly disclose the Confidential Information;
provided, however, that at least two business days prior to such public
disclosure, the Lenders' counsel shall submit a draft thereof to the Companies'
counsel and will accept any comments to the draft that the Companies' counsel
and financial advisors may reasonably believe are required within one business
day after receipt of the same, it being understood and agreed that such public
disclosure will contain the minimum amount of any such Confidential Information
reasonably believed by the Lenders' counsel to be necessary to entitle a Lender
to buy and sell the Companies' debt and equity securities and will not include
any information that is proprietary in nature.
18. MISCELLANEOUS
18.1 Payments Due on Non-Business Days.
Anything in this Agreement to the contrary notwithstanding, any payment of
principal of, or interest on, any that is due on a date other than a Business
Day shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.
18.2 Satisfaction Requirement.
Except as otherwise provided herein, if any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to Lenders or to the Agent, the determination of
such satisfaction shall be made by Lenders or the Agent, as the case may be, in
the sole and exclusive judgment (exercised reasonably and in good faith) of the
Person or Persons making such determination.
18.3 Severability.
50
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
18.4 Construction.
Each covenant contained herein shall be construed (absent express provision
to the contrary) as being independent of each other covenant contained herein,
so that compliance with any one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other covenant.
Where any provision herein refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
18.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument. Each counterpart may
consist of a number of copies hereof, each signed by less than all, but together
signed by all, of the parties hereto.
18.6 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
18.7 Consent to Jurisdiction.
(a) The Companies hereby irrevocably submit to the jurisdiction of
any Commonwealth of Massachusetts or Federal court sitting in Boston,
Massachusetts, Suffolk County, in any action or proceeding arising out of or
relating to this Agreement and the Companies hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such Commonwealth of Massachusetts court or such Federal court. The Companies
hereby irrevocably waive, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding. The Companies hereby irrevocably consent to the service of copies of
any summons and complaint and any other process which may be served in any such
action or proceeding by certified mail, return receipt requested, or by
delivering a copy of such process to the Companies, at its address specified in
Section 15 or by any other method permitted by law. The Companies agree that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or by any other manner
provided by law.
(b) Nothing in this Section 17.7 shall affect the right of any
Lenders to serve legal process in any other manner permitted by law or affect
the right of any such lender to bring any action or proceeding against the
Companies or its property in the courts of other jurisdictions.
51
18.8 Waiver of Jury Trial.
EACH OF THE COMPANIES, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE
TRANSACTION DOCUMENTS, ANY DOCUMENT DELIVERED UNDER THE TRANSACTION DOCUMENTS OR
THE ACTIONS OF ANY LENDER OR THE AGENT IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.
52
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders have caused
this Agreement to be duly executed by their duly authorized officers ad of the
date set forth above.
BORROWERS:
PACIFIC AEROSPACE &
ELECTRONICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
AEROMET AMERICA, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
BALO PRECISION PARTS, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
CASHMERE MANUFACTURING CO., INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
CERAMIC DEVICES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
ELECTRONIC SPECIALTY CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
NORTHWEST TECHNICAL INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
PACIFIC COAST TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
SEISMIC SAFETY PRODUCTS, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
SKAGIT ENGINEERING &
MANUFACTURING, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
PA&E INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
FOREIGN SUBSIDIARIES:
PACIFIC A&E LIMITED
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director
PACIFIC AEROSPACE & ELECTRONICS
(UK) LIMITED.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director
AEROMET INTERNATIONAL, PLC
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director
LENDERS:
B III CAPITAL PARTNERS, L.P.
By: DDJ Capital III, LLC, its General
Partner
By: DDJ Capital Management, LLC,
Manager
By: /s/ Xxxxx Xxxxxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------------- --------------------------------
Name: Xxxxx Xxxxxxxxx Xxxxxxx Name: Xxxxx Xxxxxx
Title: Authorized Signatory Title: Authorized Signatory
B IIIA CAPITAL PARTNERS, L.P.
By: GP III-A, LLC its General Partner
By: DDJ Capital Management, LLC,
Manager
By: /s/ Xxxxx Xxxxxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------------- --------------------------------
Name: Xxxxx Xxxxxxxxx Xxxxxxx Name: Xxxxx Xxxxxx
Title: Authorized Signatory Title: Authorized Signatory
DDJ CANADIAN HIGH YIELD FUND
By: DDJ Capital Management, LLC, its
attorney-in-fact
By: /s/ Xxxxx Xxxxxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------------- --------------------------------
Name: Xxxxx Xxxxxxxxx Xxxxxxx Name: Xxxxx Xxxxxx
Title: Authorized Signatory Title: Authorized Signatory
State Street Bank & Trust, solely in
its capacity as Custodian for General
Motors Employees Global Group Pension
Trust as directed by DDJ Capital
Management, LLC, and not in its
individual capacity
By: /s/ Xxxxxx Blood
--------------------------------
Name: Xxxxxx Blood
Title: Assistant Secretary
SCHEDULE I
COMMITMENT PERCENTAGES
----------------------
------------------------------------------------------------------------------------
Commitment Maximum Amount
---------- --------------
Lender Percentage of Term Loans
------ ---------- -------------
------------------------------------------------------------------------------------
BIII Capital Partners, L.P. 46.66% $6,459,361.00
------------------------------------------------------------------------------------
BIII A Capital Partners, L.P. 20.00% $2,768,298.00
------------------------------------------------------------------------------------
DDJ Canadian High Yield Fund 13.34% $1,845,531.00
------------------------------------------------------------------------------------
General Motors Employees Global Group Pension Trust 20.00% $2,768,298.00
------------------------------------------------------------------------------------
TOTALS 100.00% $13,841,488.00
------------------------------------------------------------------------------------
SCHEDULE II
-----------
DEFINED TERMS
-------------
As used in the Agreement, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:
"Account" or "Accounts" means all of the Borrowers' accounts, whether now
existing or existing in the future, including, without limitation, all (i)
accounts receivable (whether or not specifically listed on schedules furnished
to the Agent), including, without limitation, all accounts created by or arising
from all of the Borrowers' sales of goods or rendition of services made under
any of the Borrowers' trade names or styles, or through any of the Borrowers'
divisions; (ii) unpaid or unexercised seller's rights (including any right of
rescission, replevin, reclamation and stopping in transit) relating to the
foregoing or arising therefrom; (iii) rights to any goods represented by any of
the foregoing, including returned or repossessed goods; (iv) reserves and credit
balances held by the Borrowers with respect to any such accounts receivable or
account debtors; (v) guarantees or collateral for any of the foregoing; (vi)
insurance policies; or (vii) rights relating to any of the foregoing.
"Acknowledgment Agreement" means any acknowledgment agreement required to
be delivered by the Borrowers to the Lenders pursuant to which any mortgagee or
lessor of property on which Collateral is stored or otherwise located, or
pursuant to which any warehouseman, filler, processor or packer of any Inventory
acknowledges the Liens and security interests of the Lenders and, in the case of
any real property leased by the Borrowers or subject to a mortgage executed by
the Borrowers, provides the Agent access to such real property for a reasonable
period of time to assemble, complete and sell any Collateral located thereon.
"Aeromet Sale" means the sale, transfer or conveyance of all or
substantially all of the assets or stock of Aeromet International PLC, provided
that in respect of such transaction, Pacific Aerospace shall (i) receive a
written opinion from its Financial Advisor, to the effect that (x) the
transaction is fair from a financial point of view and (y) represents an arms
length transaction by Aeromet International PLC and such unrelated person and
(ii) receive no less that 75% of the purchase price in cash on the date of
closing of such transaction.
"Affiliate" or "Affiliates" means (i) a Controlling Person or any Person
which is controlled by or is under common control with a Controlling Person and
(ii) any other Person who is a director, officer or member of management of the
Borrowers, any of its Subsidiaries or any Controlling Person. For purposes of
the Agreement, control of a Person means the power, direct or indirect, (a) to
vote 20% or more of the outstanding stock or other ownership interests having
ordinary voting power for the election of directors of such Person or (b) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agent" means DDJ Capital Management, LLC, in its capacity as agent for the
Lenders, and its successors in that capacity.
"Agreement" means this Agreement, as the same may be amended, supplemented
or otherwise modified from time to time.
"Ancillary Documents" means any Proprietary Rights Collateral Documents,
any Security Agreements, any Pledge Agreements, and any.
"Asset Disposition" means any sale, transfer, lease, assignment or other
disposition of any asset by any of the Companies, excluding, however, (i) the
Aeromet Sale, (ii) any sale or disposition by the Companies of Inventory in the
ordinary course of business, and (iii) any sale or disposition of the Companies
of assets, not in the ordinary course of business in instances where the
proceeds of such dispositions do not exceed $50,000 for any individual
transaction or $250,000 in the aggregate following the Closing Date.
"Auditors" means a nationally-recognized firm of independent public
accountants selected by the Companies and satisfactory to the Lenders in its
reasonable discretion.
"Benefit Plan" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) that is subject to Title IV of ERISA and
in respect of which the Companies or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which commercial banks are required by law or authorized to close in Boston,
Massachusetts.
"Blocked Accounts Agreement" means the Blocked Accounts Agreement executed
by the Borrowers in favor of the Lenders in the form attached to this Agreement
as Exhibit K.
"Capital Lease" means any lease of property, real or personal, the
obligation of the lessee in respect of which is required in accordance with GAAP
to be capitalized on the balance sheet of the lessee.
"Cash Equivalents" means: (a) marketable obligations issued or
unconditionally guaranteed by the United States government, in each case
maturing within 360 days after the date of acquisition thereof; (b) marketable
direct obligations issued by any state of the Unites States of any political
subdivision of any such state or any public instrumentality thereof maturing
within 360 days after the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc.; (c) commercial paper maturing no
more than 360 days after the date of acquisition thereof, issued by a
corporation organized under the laws of any state of the United States or of the
District of Columbia and, at the time of acquisition having a rating in one of
the two highest rating categories obtainable from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc.; (d) money market funds whose
investments are made solely in securities described in clause (a) maturing
within 360 days after the date of acquisition thereof; (e) certificates of
deposit maturing within 360 days after the date of acquisition thereof, issued
by any commercial bank that is a member of the Federal Reserve System that has
capital, surplus and undivided profits (as shown on its most recent statement of
condition) aggregating not less than $100,000,000 and is rated A or better by
Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation; and (f)
repurchase agreements entered into with any commercial bank of the
mature referred to in clause (e), secured by a fully perfected Lien in any
obligation of the type described in any of clauses (a) through (e), having a
fair market value at the time such repurchases agreement is entered into of not
less than 100% of the repurchase obligation thereunder of such commercial bank.
"Casualty Loss" shall have the meaning given to such term in Section 6.3
hereof.
"Change of Control" means any transaction or series of transactions in
which any of the following occurs: (a) any Person or group (within the meaning
of Rule 13d-3 under the Exchange Act and Sections 13(d) and 14(d) of the
Exchange Act) becomes the direct or indirect "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of 30% or more of the issued and outstanding
shares of Capital Stock entitled to vote in the election of directors of the
Borrowers or the Surviving Person (if other than the Borrowers); or (b)
individuals who at the Closing constituted the Board of Directors of the
Borrowers (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Borrowers
was approved by a vote of at least a majority of the directors of the Borrowers
then still in office who were either directors at the Closing or whose election
or nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Borrowers then in office.
"Closing" has the meaning specified in Section 2.
"Closing Date" has the meaning specified in Section 2.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time,
and any successor statute.
"Collateral" means any and all assets and rights and interests in or to
property of the Borrowers pledged from time to time as security for the
Obligations pursuant to the Ancillary Documents whether now owned or hereafter
acquired, including, without limitation, all of the Accounts, Inventory,
Equipment, Intellectual Property, Intangibles and Real Estate of the Borrowers,
as defined in any Security Agreement, any Mortgage, any Pledge Agreement or any
Proprietary Rights Collateral Document.
"Commitment Fee" shall mean the fee payable to the Lenders as set forth in
Section 1.3 hereof.
"Commitment Letter" shall mean the letter agreement by and among the
Companies and the Agent, dated as of February 3, 2001.
"Commitment Percentage" shall mean as to each Lender, its percentage
interest in the Term Loans as set forth on Schedule I hereto.
"Common Stock" means the Common Stock, stated value $1.00 per share, of the
Companies and any other capital stock of the Borrowers into which such common
stock may be converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution of, such common stock by reason of any stock
splits, stock dividends, distributions, mergers, consolidations or other like
events.
"Compliance Certificate" shall have the meaning given to such term in
Section 7.1(c) hereof.
"Confidential Information" has the meaning specified in Section 17.
"Consolidated Capital Expenditures" means, for any period, the additions to
property, plant and equipment and other capital expenditures of the Companies
for such period, as the same are (or, in accordance with GAAP, would be) set
forth in the consolidated statement of cash flows of the Companies for such
period.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Companies for such period, excluding (i) gains or losses
from dispositions of assets, (ii) any extraordinary items, and (iii) other
non-recurring items not related to operations.
"Consolidated Subsidiary" of any Person means at any date any Subsidiary or
other entity the accounts of which in accordance with GAAP would be consolidated
with those of such Person in its consolidated financial statements as of such
date.
"Consolidated Working Assets" means (i) notes held by a Company relating to
the debt owed by an unaffiliated third party and accounts receivable, which
shall be included only if and to the extent the same are good and collectible as
determined by the Companies in accordance with established practice consistently
applied and, (A) with respect to such notes, only if payable on demand or within
one (1) year from the date as of which Consolidated Working Assets are to be
determined and if not directly or indirectly renewable or extendible at the
option of the debtors, by their terms, or by the terms of any instrument or
agreement relating thereto, beyond such year, and, (B) with respect to such
accounts receivable, only if prior to the Aeromet Sale such accounts are payable
and outstanding not more than one hundred and twenty days and after the Aeromet
Sale such accounts are payable and outstanding not more than ninety (90) days,
in each case, after the date of the shipment of goods or other transaction out
of which any such account receivable arose; and such notes and accounts
receivable shall be taken at their face value less reserves determined to be
sufficient in accordance with generally accepted accounting principles; (ii)
inventory, which shall be included only if and to the extent that the same shall
consist of (A) saleable finished goods ready and available for shipment to
customers thereof and (B) raw materials only if and to the extent that the same
shall be useable by the Borrowers and shall not be obsolete, defective or
otherwise not capable of being converted into Inventory of the nature described
in the immediately preceding clause of this definition within 90 days of receipt
of such raw materials and (C) work in process which shall be included only if
and to the extent the same shall be useable by the Borrowers and shall not be
obsolete, defective or otherwise not capable of being converted into Inventory
of the nature described in the immediately preceding clause of this definition
within 60 days of conversion of such materials into work in process, in each
case only to the extent that items (ii)(A), (ii)(B) and (ii)(C) are consistent
with GAAP.
"Contractual Obligation" means, with respect to any Person, any term or
provision of any securities issued by such Person, or any indenture, mortgage,
deed of trust, contract, undertaking, document, instrument or other agreement to
which such Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Controlling Person" means any Person that is in control of any of the
Companies (such control being the power to direct or cause the direction of the
management and policies of any of the Companies, whether through the ownership
of voting stock, by contract or otherwise).
"Covenant Debt" means all the Debt of the Companies other than the Debt
incurred pursuant to the Subordinated Notes.
"Covenant Interest" means the interest and expenses incurred by the
Companies on the Covenant Debt.
"Credit Participant" shall have the meaning given to such term in
Section 10.7.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangements.
"Debt" means of any Person at any date, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, (d) all obligations of such Person under Capital Leases, (e) all
contingent or non-contingent obligations of such Person to reimburse any Person
in respect of amounts paid or payable (currently or in the future, on a
contingent or non-contingent basis) under a letter of credit or similar
instrument, (f) all Debt of others secured by a Lien on any asset of such
Person, (g) all Debt of others Guaranteed by such Person and (h) all Old Trade
Payables owed by such Person.
"Default" means an event, condition or default which with the giving of
notice, the passage of time or both would be an Event of Default.
"Deeds of Trust" means the mortgages or deeds of trust, deeds to
secured debt, assignment or rent or other similar documents, as the case may be,
substantially in the form of Exhibit H.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Due Diligence Fee" means the fees payable to the Agent as set forth on
Exhibit A to the Commitment Letter.
"DOL" means the United States Department of Labor and any successor
department or agency.
"EBITDA" with respect to any period, means Consolidated Net Income for such
period before payment or provision of taxes measured by income plus, without
duplication, all interest charges (to the extent deducted in computing
Consolidated Net Income), all fees payable in connection with this Agreement,
amortization and depreciation expense (including any amortization and
depreciation associated with "fresh start accounting") and other non-cash items
reducing Consolidated Net Income for such period, in each case determined on a
consolidated basis for the Companies.
"Employee Benefit Plan" means an "employee benefit plan" as defined in
Section 3(3) of ERISA, maintained or contributed by the Companies or with
respect to which the Companies may incur liability.
"Environmental Law" means any federal, state or local law, statute,
ordinance, or regulation pertaining to health, industrial hygiene, or the
environmental conditions on, under or about any real property owned, operated or
leased by any of the Companies.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute thereto and all final or
temporary regulations promulgated thereunder, and all published, generally
applicable rulings entitled to precedential effect.
"ERISA Affiliate" means any (i) corporation which is or was at any time
during the immediately preceding six years a member of the same controlled group
of corporations (within the meaning of Section 414(b) of the Code) as the
Companies; (ii) partnership or other trade or business (whether or not
incorporated) at any time during the immediately preceding six years under
common control (within the meaning of Section 414(c) of the Code) with the
Companies; and (iii) member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as the Companies, any corporation
described in clause (i) above, or any partnership or trade or business described
in clause (ii) above.
"Event of Default" or "Events of Default" shall have the meaning provided
for in Section 9 of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Assets" means all property and assets comprising Collateral which
constitute Inventory, Accounts, equipment (excluding motor vehicles and other
equipment covered by a certificate of title or similar statute), general
intangibles or chattel paper other than any of the foregoing located outside of
the United States.
"Financial Statements" means the consolidated and consolidating balance
sheets, consolidated and consolidating statements of operations, consolidated
statements of changes in cash flows and consolidated statements of changes in
stockholders' equity of the Companies and its Consolidated Subsidiaries for the
period specified prepared in accordance with GAAP and consistent with prior
practices.
"Financial Advisor" means a reputable accounting appraisal or nationally
recognized investment banking firm that is, in the reasonable judgment of the
Board of Directors of Pacific Aerospace, qualified to perform the task for which
such firm has been engaged and is independent with respect to the Companies.
"Financials" has the meaning specified in Section 4.4 hereof.
"Foreign Subsidiary" means any Subsidiary of a Person not incorporated in
or having material assets or operations in the United States.
"GAAP" means generally accepted accounting principles in the United States
of America, as in effect from time to time and with respect to the Foreign
Subsidiaries, accounting principles used in the United Kingdom as in effect from
time to time.
"Governmental Authority" means any government or political subdivision or
any agency, authority, board, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Substance" means those substances included within the
definitions of "hazardous substances", "hazardous materials", "toxic
substances", or "solid waste" under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq.,
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. xx.xx. 6901 et
seq. And the Hazardous Materials Transportation Act, 49 U.S.C. xx.xx. 1801 et
seq., and in the regulations promulgated pursuant to said laws, and such other
substances, materials and wastes which are or become regulated under applicable
local, state or federal law, or which are classified as hazardous or toxic under
federal, state or local laws or regulations.
"Indemnified Parties" has the meaning specified in Section 12.2.
"Institutional Investor" means (a) any Lender or (b) any bank, trust
company, savings and loan association, investment account, investment fund, any
pension plan, any investment company, any insurance company, any broker or
dealer or any other similar financial institution or entity, regardless of legal
form.
"Insurance Proceeds" means the proceeds of any insurance or any judgments
or settlements made in lieu thereof resulting from a casualty with respect to
the Collateral or any part thereof.
"Intellectual Property" means the Intellectual Property Security Agreement
executed by the Borrowers in favor of the Lenders in the form attached as
Exhibit C to the Agreement.
"Intercompany Notes" means, collectively, the New Intercompany Note and the
PA&E Intercompany Note.
"Internal Revenue Service" means the Internal Revenue Service and any
successor agency.
"Inventory" means all of the Borrowers' inventory as defined by GAAP,
including without limitation: (i) all raw materials, work in process, parts,
components, assemblies, supplies and materials used or consumed in the
Borrowers' businesses; (ii) all goods, wares and merchandise, finished or
unfinished, held for sale or lease or leased or furnished or to be furnished
under contracts of service; and (iii) all goods returned or repossessed by the
Borrowers net of any reserves required by GAAP.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, advance, time deposit or otherwise.
"KeyBank Loan Agreement" means that certain Loan Agreement between Pacific
Aerospace & Electronics, Inc. and KeyBank National Association, dated as of
September 7, 1999.
"Leased Real Property" means all of the real property leased by the
Borrowers at any time, including, without limitation, all of the material real
property leased by the Borrowers as of the date of this Agreement as set forth
on Schedule 4.12 hereto.
"Leases" shall have the meaning given to such term in Section 4.12 hereof.
"Lender Obligations" shall mean all present and future Obligations and
indebtedness of the Borrowers or any Subsidiary owing to the Agent or the Lender
under this Agreement or any other Transaction Document, including, without
limitation, the obligation to pay the indebtedness from time to time evidenced
by the Term Loan Notes, and obligations to pay interest, commitment fees,
charges, expenses and indemnification from time to time owed under any
Transaction Document.
"Lenders" means the Lenders from time to time a party to this Agreement.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of the Agreement, each of the Borrowers shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to such asset.
"Majority Lenders" shall mean, at any time, the Lenders having more than
50% of the outstanding principal amount of the Term Loans hereunder, or if no
Term Loans are outstanding, the Lenders having aggregate Commitment Percentages
of more than 50%.
"Material Adverse Change" means a material adverse change (i) in the
business, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of the Companies taken as a whole, or (ii) in the value
of the Collateral taken as a whole or the amount
which the Lenders would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of such
Collateral.
"Material Adverse Effect" means a material adverse effect on (i) the
businesses, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of the Companies taken as a whole, (ii) the value of
the Collateral taken as a whole or the amount which the Lenders would be likely
to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, (iii) the Companies' ability
to perform its obligations under the Transaction Documents, or (iv) the rights
and remedies of the Lenders under the Transaction Documents.
"Maximum Lawful Rate" shall have the meaning given to such term in Section
1.2 hereof.
"Mortgage" means, with respect to real property owned by the Borrowers,
each mortgage or deed of trust executed and delivered on the date hereof or
hereafter delivered from time to time pursuant to the terms hereof, and with
respect to real property leased by the Borrowers, each leasehold mortgage or
leasehold deed of trust, if any, executed and delivered on the date hereof or
hereafter delivered from time to time pursuant to the terms hereof, as any of
the same may be amended, modified, supplemented, extended or renewed from time
to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA and (i) which is, or within the immediately preceding six
(6) years was, contributed to by the Borrowers or any ERISA Affiliate or (ii)
with respect to which the Borrowers or any ERISA Affiliate may incur any
liability.
"Net Cash Proceeds" means, with respect to the sale or disposition of any
asset, the aggregate amount of cash received by the Companies (including cash
payments received in respect of deferred payment pursuant to any note or
installment receivable or otherwise and state or federal income tax refunds
attributable to such sale or disposition, but in each case only as and when
received) in respect of such sale or disposition minus all fees, commissions,
expenses and taxes incurred in connection with such sale or disposition. For
purposes of this definition, if taxes or other expenses payable in connection
with the sale or disposition of any asset are not known as of the date of such
sale or disposition, then such fees, commissions, expenses or taxes shall be
estimated by the Companies, in good faith, and such estimated amounts shall be
deducted therefrom.
"Net Proceeds" shall have the meaning given to such term in Section 6.2
hereof.
"New Intercompany Note" means the note or series of notes evidencing the
obligations in favor of PA&E International, Inc. in an amount up to $2,300,000,
to be made within 90 days of the Closing Date, which shall be pledged to the
Lenders.
"Obligation" means, with respect to any Person, any obligation of such
Person of any kind, including, without limitation, any liability of such Person
on any claim, whether or not the right of any creditor to payment in respect of
such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured, and
whether or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 8.1(g). Without limiting the generality of the
foregoing, the Obligations of the Companies under the Transaction Documents
include the obligation to pay principal, interest, charges, expenses, fees,
attorneys' fees and disbursements, indemnities. And other amounts payable by the
Companies under this Agreement.
"Old Trade Payables" means Debt of the Companies incurred in the ordinary
course of business for raw materials, supplies and equipment, and services or
other accounts which would constitute Accounts Payable in accordance with GAAP
payment for which has been due and owing for more than 120 days prior to the
Aeromet Sale, and after the Aeromet Sale payment for which has been due and
owing for more than 90 days.
"OSHA" means the Occupational Safety and Health Act, as amended from time
to time, and any successor statute thereto and all final or temporary
regulations promulgated thereunder, and all published, generally applicable
rulings entitled to precedential effect.
"Owned Real Property" means the real property owned by the Borrowers at any
time, including, without limitation, all of the material real property owned by
the Borrowers as of the date of the Agreement as set forth on Schedule 4.12(a).
"PA&E Intercompany Note" means the note in the principal amount of (pound)
23,700,000 issued in favor of PA&E International, Inc., which note has been
pledged to the Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Permitted Investments" means (i) Cash Equivalents, (ii) interest-bearing
demand or time deposits (including certificates of deposit) which are insured by
the Federal Deposit Insurance Corporation ("FDIC") or a similar federal
insurance program; (iii) securities distributed in connection with the
confirmation of a plan of reorganization following the bankruptcy of any Person
indebted to the distributee at the time such bankruptcy is filed and (iv) such
other investments as the Agent may approve in its sole discretion.
"Permitted Liens" means, without duplication:
(a) Liens for taxes, assessments, governmental charges or levies not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Borrowers, as the case may be, in accordance with GAAP;
(b) statutory Liens of landlords and carriers', or other
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a period of
more than 60 days or which are being contested in good faith and by appropriate
proceedings in a manner which will not jeopardize or diminish the interest of
the Lenders in any of the Collateral subject to the Ancillary Documents or
interfere with the ordinary conduct of the businesses of the Borrowers;
(c) pledges or deposits and Liens (other than any Lien imposed by
ERISA) under bonds required in connection with workers compensation,
unemployment insurance and other social security legislation;
(d) Liens (other than any Lien imposed by ERISA or by Environmental
Laws) incurred on deposits to secure the performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, performance and return-of-money
bonds and other obligations of alike nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which do not
substantially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Borrowers or any
Subsidiary;
(f) Liens affecting assets existing at the time such assets are
acquired provided that such Liens are not created in contemplation of such
acquisition;
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and, as applicable, the successors, heirs and assigns of
each,
"Plan" means any "employee benefit plan" as defined in Section 3(3) of
ERISA, maintained or contributed to by the Companies or with respect to which
the Companies may incur liability.
"Pledge Agreement" means, collectively, the Pledge Agreements executed by
the Borrowers in favor of the Lenders, in the form attached to the Agreement as
Exhibit E.
"Proprietary Rights" shall have the meaning given to such term in Section
6.12 of this Agreement.
"Proprietary Rights Collateral Documents" means the Trademark Security
Agreement and the Patent Security Agreement.
"Real Estate" means, collectively, the Owned Real Property and the Leased
Real Property.
"Release Date" shall have the meaning given to such term in Section 17 of
this Agreement.
"Rentals" of any Person shall mean at any date, without duplication, (i)
all obligations of such Person under any lease (excluding any Capital Lease)
having, as of such date, an unexpired term (including any renewals at the option
of the lessor) of one year or more, plus (ii) all Rentals of others Guaranteed
by, or secured by a Lien on any asset of, such Person.
"Register" shall have the meaning given to such term in Section 10.4.
"Reportable Event" means any of the events described in Section 4043 of
ERISA and the regulations thereunder.
"Retiree Health Plan" means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides health care benefits to persons
after termination of employment, other than as required by Section 601 of ERISA.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" means the Security Agreement between the Lenders and
the Borrowers, in the form attached to the Agreement as Exhibit B.
"Securities Act" means the Securities Act of 1933, as amended.
"Solvent" and "Solvency" mean, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair saleable value of
the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not believe that it
will, incur debts and liabilities beyond such Person's ability to pay as such
debts and liabilities mature and (d) such Person is not engaged in a business or
a transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute an unreasonably small capital.
"Structures" means all plants, offices, manufacturing facilities,
warehouses, administration buildings and related facilities of the Borrowers
located at the Owned Real Property.
"Subordinated Note Indenture" means that certain Indenture dated July 30,
1998 by and between the Company and IBJ Xxxxxxxx Bank & Trust Companies, as
trustee, governing the issuance of the Subordinated Notes, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"Subordinated Notes" means those certain 11 1/4% Senior Subordinated Notes
in the aggregate principal amount of up to $75,000,000, due 2005, issued by the
Company pursuant to the Subordinated Note Indenture, the principal amount
outstanding as of the Closing Date shall be no more than $63,700,000.
"Subsidiary" means, with respect to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other persons performing similar functions are at
the time, directly or indirectly through one or more intermediaries, or both,
owned or controlled, by such Person. Unless otherwise expressly indicated to the
contrary herein, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to any direct or indirect Subsidiary or Subsidiaries of
any Borrower and shall include the Foreign Subsidiaries.
"Successor Lender" shall have the meaning given to such term in Section
9.2.
"Tax" or "Taxes" means all present and future taxes, surtaxes, duties,
levies, imposts, rates, fees assessments, withholdings and other charges of any
nature (including income, corporate capital, net worth, sales, consumption, use,
transfer, goods and service, value-added, stamp, registration, franchise,
withholding payroll, employment, health education, excise, business, school,
property, occupation, customs, anti-dumping and surtaxes, duties, levies,
imports, rates, fees, assessments, withholding and other charges) imposed by a
governmental entity, together with any fines, interest penalties or other
additions in lieu for non-collection of or in respect of those taxes, surtaxes,
duties, levies, imposts, rates, fees, assessments, withholding and other
charges.
"Termination Event" means (i) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan which is likely to constitute grounds for
termination of such Benefit Plan or Multiemployer Plan; (ii) the withdrawal
(within the meaning of Section 4063 of ERISA) of the Companies or any ERISA
Affiliate from a Benefit Plan during a plan year in which such entity was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041 (c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any
event or condition (a) described in Section 4042(a) of ERISA and which could
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan
or Multiemployer Plan, or (b) described in Section 4041A(a) of ERISA and that
could reasonably be expected to result in termination of a Multiemployer Plan
pursuant to Section 4041 A of ERISA; or (vi) the partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA, of any Companies or any
ERISA Affiliate from a Multiemployer Plan.
"Term Loan Maturity Date" shall mean March 1, 2003.
"Term Loan Notes" shall mean the Term Loan Notes, substantially in the form
of Exhibit A hereto executed by the Borrowers in favor of each Lender to
evidence the Term Loans made by the Lenders hereunder.
"Term Loans" shall mean, collectively, the Term Loans made by the Lenders
to the Borrowers under Section 1 hereof.
"Total Cash Proceeds" means, with respect to the sale or disposition of any
asset, the aggregate amount of cash received by the Companies (including cash
payments received in respect of deferred payment pursuant to any note or
installment receivable or otherwise and state or federal income tax refunds
attributable to such sale or disposition, but in each case only as and when
received) in respect of such sale or disposition.
"Transaction Documents" means this Agreement, the Term Loan Notes, the
Warrant Agreement, each of the Ancillary Documents and all other documents,
agreements, instruments, opinions and certificates executed in connection
therewith, as the same may be modified, amended, extended, restated or
supplemented from time to time.
"Underlying Common Stock" means the shares of Common Stock issuable or
issued upon the exercise of the Warrants.
"Voting Stock" means stock of a Companies of the class or classes having
general voting power under ordinary circumstances to elect at least a majority
of the board of directors of such Companies (irrespective of whether or not at
the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Warrant Agreement" means the Warrant Agreement, dated as of the date
hereof, between the Borrowers and the Lenders in the form attached as Exhibit I.
"Warrants" means the warrants to acquire shares of Common Stock issued
pursuant to the Warrant Agreement.
"Weighted Average Life to Maturity" means, when applied to any Debt at any
date, the number of years obtained by dividing (a) the sum of the products
obtained by multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity or other required scheduled payment of principal
including payment at final maturity in respect thereof, and (ii) the number of
years (calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment, by (b) the then outstanding aggregate principal
amount of such Indebtedness.
DISCLOSURE SCHEDULES
--------------------
[Omitted and available upon request to the Company]
EXHIBITS
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[Omitted and available upon request to the Company]
