NationsCredit Commercial Funding
Loan and Security Agreement
This Loan and Security Agreement (as it may be amended, this
"Agreement") is entered into on April 29, 1998 between NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION ("Lender"),
having an address at 1177 Avenue of the Americas, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ and FLIGHTWAYS MANUFACTURING, INC. ("Borrower"), whose chief executive
office is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Borrower's Address"). The Schedules to this Agreement are an integral part of
this Agreement and are incorporated herein by reference. Terms used, but not
defined elsewhere, in this Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 Amount. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) Revolving Loans and Credit Accommodations. From time to
time during the Term at Borrower's request, make revolving loans to Borrower
("Revolving Loans"), and make letters of credit, bankers acceptances and other
credit accommodations ("Credit Accommodations") available to Borrower, in each
case to the extent that there is sufficient Availability at the time of such
request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation; provided, that after giving effect to such Revolving Loan or
Credit Accommodation, (x) the outstanding balance of all monetary Obligations
(including the principal balance of any Term Loan and, solely for the purpose of
determining compliance with this provision, the Credit Accommodation Balance)
will not exceed the Maximum Flightways Facility Amount set forth in Section 1 of
Schedule A and (y) none of the other Loan Limits set forth in Section 1 of
Schedule A will be exceeded. For this purpose, "Availability" means:
(i) the aggregate amount of Eligible Accounts (less
maximum existing or asserted taxes, discounts, credits and allowances)
multiplied by the Accounts Advance Rate set forth in Section 1(b)(i) of
Schedule A but not to exceed the Accounts Sublimit set forth in Section
1(c) of Schedule A;
plus
(ii) the lower of cost or market value of Eligible
Inventory multiplied by the Inventory Advance Rate(s) set forth in
Section 1(b)(ii) of Schedule A, but not to exceed the Inventory
Sublimit(s) set forth in Section 1(d) of Schedule A;
minus
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(iii) all Reserves which Lender has established
pursuant to Section 1.2 (including those to be established in
connection with the requested Revolving Loan or Credit Accommodation);
and
minus
(iv) the outstanding balance of all of the monetary
Obligations (excluding the Credit Accommodation Balance and the
principal balance of the Term Loan). (b) Term Loan. On the date of this
Agreement, make a term loan to Borrower (the "Term Loan") in the
principal amount, if any, set forth in Section 2(a) of Schedule A.
1.2 Reserves. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("Reserves") to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests and other
rights of Lender in the Collateral or (B) the assets, business or prospects of
Borrower or any Obligor, (ii) Lender's good faith concern that any Collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, (iii) any fact or circumstance which Lender determines in
good faith constitutes, or could constitute, a Default or Event of Default or
(iv) any other events or circumstances which Lender determines in good faith
make the establishment or revision of a Reserve prudent. Without limiting the
foregoing, Lender shall (x) in the case of each Credit Accommodation issued for
the purchase of Inventory (a) which meets the criteria for Eligible Inventory
set forth in clauses (i), (ii), (iii), (v) and (vi) of Eligible Inventory, (b)
which is or will be in transit to one of the locations set forth in Section
10(d), (c) which is fully insured in a manner satisfactory to Lender and (d)
with respect to which Lender is in possession of all bills of lading and all
other documentation which Lender has requested, all in form and substance
satisfactory to Lender in its sole discretion, establish a Reserve equal to the
cost of such Inventory (plus all duties, freight, taxes, insurance, costs and
other charges and expenses relating to such Credit Accommodation or such
Eligible Inventory) multiplied by a percentage equal to 100% minus the Inventory
Advance Rate applicable to Eligible Inventory and (y) in the case of any other
Credit Accommodation issued for any purpose, establish a Reserve equal to the
full amount of such Credit Accommodation plus all costs and other charges and
expenses relating to such Credit Accommodation. In addition, (x) Lender shall
establish a permanent Reserve in the amount set forth in Section 1(f) of
Schedule A, and (y) if the outstanding principal balance of the Term Loan
advance with respect to Eligible Equipment exceeds the percentage of the
appraised value of such Eligible Equipment set forth in Section 2(a) of Schedule
A, Lender may establish an additional Reserve in the amount of such excess (and,
for this purpose, payments of principal of the Term Loan made by Borrower shall
be deemed to apply to the Term Loan advance with respect to Eligible Equipment
and Real Property, respectively, in proportion to the original principal amounts
of such advances). Lender may, in its discretion, establish and revise Reserves
by deducting them in determining Availability or by reclassifying Eligible
Accounts or Eligible Inventory as ineligible.
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1.3 Other Provisions Applicable to Credit Accommodations. Lender may,
in its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; provided, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
1.4 Repayment. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately pay to Lender such amounts
and/or provide cash collateral to Lender with respect to the Credit
Accommodation Balance in the manner set forth in Section 7.3, as shall cause
Borrower to be in full compliance with all of the Loan Limits. Notwithstanding
the foregoing, Lender may, in its sole discretion, make or permit Revolving
Loans, the Term Loan, any Credit Accommodations or any other monetary
Obligations to be in excess of any of the Loan Limits; provided, that Borrower
shall, upon Lender's demand, pay to Lender such amounts as shall cause Borrower
to be in full compliance with all of the Loan Limits. All unpaid monetary
Obligations shall be payable in full on the Maturity Date set forth in Section
7.1 or, if earlier, the date of any early termination pursuant to Section 7.2.
1.5 Minimum Borrowing. Subject to the terms and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so. However, Lender shall not be obligated to loan Borrower the Minimum Loan
Amount other than in accordance with all of the terms and conditions of this
Agreement.
2. INTEREST AND FEES.
2.1 Interest. All Loans and other monetary Obligations shall bear
interest at the Interest Rate(s) set forth in Section 3 of Schedule A, except
where expressly set forth to the contrary in this Agreement or another Loan
Document; provided, that after the occurrence of an Event of Default, all Loans
and other monetary Obligations shall, at Lender's option, bear interest at a
rate per annum equal to two percent (2%) in excess of the rate otherwise
applicable thereto (the "Default Rate") until paid in full (notwithstanding the
entry of any judgment against Borrower or the exercise of any other right or
remedy by Lender), and all such interest shall be payable on demand. Changes in
the Interest Rate shall be effective as of the date of any change in the Prime
Rate. Notwithstanding anything to the contrary contained in this Agreement, the
aggregate of all amounts deemed to be interest hereunder and charged
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or collected by Lender is not intended to exceed the highest rate permissible
under any applicable law, but if it should, such interest shall automatically be
reduced to the extent necessary to comply with applicable law and Lender will
refund to Borrower any such excess interest received by Lender.
2.2 Fees and Warrants. Borrower shall pay Lender the following fees,
and issue Lender the following warrants, which are in addition to all interest
and other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(a) Closing Fee. A closing fee in the amount set forth in
Section 6(a) of Schedule A.
(b) Facility Fees. A facility fee for the Initial Term in the
amount set forth in Section 6(b)(i) of Schedule A (which shall be fully earned
as of the date of this Agreement and shall be payable in equal installments due,
respectively, on each anniversary thereof during the Initial Term), and a
facility fee for each Renewal Term in the amount set forth in Section 6(b)(ii)
of Schedule A (which shall be fully earned as of the first day of such Renewal
Term and shall be payable in equal installments due, respectively, on the first
day of such Renewal Term and on each anniversary thereof during such Renewal
Term).
(c) Servicing Fee. A monthly servicing fee in the amount set
forth in Section 6(c) of Schedule A, in consideration of Lender's administration
and other services for each month (or part thereof), which shall be fully earned
as of, and payable in advance on, the date of this Agreement and on the first
day of each month thereafter so long as any of the Obligations are outstanding.
(d) Unused Line Fee. An unused line fee set forth in Section
6(d) of Schedule A.
(e) Minimum Borrowing Fee. A minimum borrowing fee equal to
the excess, if any, of (i) interest which would have been payable in respect of
each period set forth in Section 6(e) of Schedule A if, at all times during such
period, the principal balance of the Loans was equal to the Minimum Loan Amount
over (ii) the actual interest payable in respect of such period, which fee shall
be fully earned as of the first day of such period and payable on the date set
forth in Section 6(e)(ii) of Schedule A and on the Maturity Date.
(f) Success Fee. A success fee in the amount set forth in
Section 6(e)(i) of Schedule A, which shall be fully earned as of the date of
this Agreement and payable as set forth in Section 6(f) of Schedule A.
(g) Warrants. Warrants to acquire the capital stock of Spares,
as summarized in Section 6(g) of Schedule A and as more fully set forth in a
separate warrant agreement executed by Spares contemporaneously with this
Agreement.
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(h) Credit Accommodation Fees. All of the fees relating to
Credit Accommodations set forth in Section 6(i) and 6(j) of Schedule A.
2.3 Computation of Interest and Fees. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 Loan Account; Monthly Accountings. Lender shall maintain a loan
account for Borrower reflecting all advances, charges, expenses and payments
made pursuant to this Agreement (the "Loan Account"), and shall provide Borrower
with a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty days after such account is rendered,
describing the nature of any alleged errors or admissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the
Obligations when due, Borrower hereby grants to Lender a continuing security
interest in all of Borrower's property and interests in property, whether
tangible or intangible, now owned or in existence or hereafter acquired or
arising, wherever located, including Borrower's interest in all of the
following, whether or not eligible for lending purposes: (i) all Accounts,
Chattel Paper, Instruments, Documents, Goods (including Inventory, Equipment,
farm products and consumer goods), Investment Property, General Intangibles,
Deposit Accounts and money, (ii) all proceeds and products of all of the
foregoing (including proceeds of any insurance policies, proceeds of proceeds
and claims against third parties for loss or any destruction of any of the
foregoing) and (iii) all books and records relating to any of the foregoing.
4. ADMINISTRATION.
4.1 Lock Boxes and Blocked Accounts. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("Account Proceeds"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or in the name of Lender
(a "Lock
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Box") or (ii) depositing all Account Proceeds received by Borrower into one or
more bank accounts maintained in Lender's name (each, a "Blocked Account"),
under an arrangement acceptable to Lender with a depository bank acceptable to
Lender, pursuant to which all funds deposited into each Blocked Account are to
be transferred to Lender in such manner, and with such frequency, as Lender
shall specify or (iii) a combination of the foregoing. Borrower agrees to
execute, and to cause its depository banks to execute, such Lock Box and Blocked
Account agreements and other documentation as Lender shall require from time to
time in connection with the foregoing.
4.2 Remittance of Proceeds. Except as provided in Section 4.1, all
proceeds arising from the sale or other disposition of any Collateral shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the second Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 Application of Payments. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining Availability, such amounts will be credited to the Loan Account
and the Collateral balances to which they relate upon Lender's receipt of advice
from Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's account at Lender's Bank (or upon Lender's deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case subject to final payment and collection. However, for purposes of
computing interest on the Obligations, such items shall be deemed applied by
Lender one and one-half Business Days after Lender's receipt of advice of
deposit thereof at Lender's Bank.
4.4 Notification; Verification. Lender or its designee may, from time
to time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; (ii) notify Account Debtors that Lender has a security interest in
the Accounts and that payment thereof is to be made directly to Lender; and
(iii) demand, collect or enforce payment of any Accounts and Chattel Paper (but
without any duty to do so).
4.5 Power of Attorney. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of
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Borrower any documents that Lender may, in its sole discretion, deem advisable
in order to perfect and maintain Lender's security interests in the Collateral,
to exercise a right of Borrower or Lender, or to fully consummate all the
transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or lease (as lessor or lessee) any real or personal property which is part of
the Collateral or in which Lender has an interest; (iii) execute on behalf of
Borrower any invoices relating to any Accounts, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy,
any notice of Lien or claim, assignment or satisfaction of mechanic's,
materialman's or other Lien; (iv) receive and otherwise take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral; (v)
endorse Borrower's name on all checks and other forms of remittances received by
Lender; (vi) pay, contest or settle any Lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (vii)
after the occurrence of a Default or Event of Default, grant extensions of time
to pay, compromise claims relating to, and settle Accounts, Chattel Paper and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (viii) pay any sums required on account of
Borrower's taxes or to secure the release of any Liens therefor; (ix) pay any
amounts necessary to obtain, or maintain in effect, any of the insurance
described in Section 5.13; (x) settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (xi) instruct any third party having custody or control of any
Collateral or books or records belonging to, or relating to, Borrower to give
Lender the same rights of access and other rights with respect thereto as Lender
has under this Agreement; and (xii) after the occurrence of a Default or Event
of Default, change the address for delivery of Borrower's mail in respect of
payments from Account Debtors and receive and open all mail addressed to
Borrower; provided, that Lender shall promptly forward all other mail of
Borrower to Borrower at its address set forth in Section 9.1. Any and all sums
paid, and any and all costs, expenses, liabilities, obligations and reasonable
attorneys' fees incurred, by Lender with respect to the foregoing shall be added
to and become part of the Obligations, shall be payable on demand, and shall
bear interest at a rate equal to the highest interest rate applicable to any of
the Obligations. Borrower agrees that Lender's rights under the foregoing power
of attorney or any of Lender's other rights under this Agreement or the other
Loan Documents shall not be construed to indicate that Lender is in control of
the business, management or properties of Borrower.
4.6 Disputes. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper. Borrower will not, without
Lender's prior written consent, compromise or settle any Account or Chattel
Paper for less than the full amount thereof, grant any extension of time of
payment of any Account or Chattel Paper, release (in whole or in part) any
Account Debtor or other person liable for the payment of any Account or Chattel
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Paper or grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Account or Chattel Paper; except
that prior to an Event of Default Borrower may do such things in the ordinary
course of business. Borrower will promptly report any such permitted settlement
or forgiveness to Lender.
4.7 Invoices. At Lender's request, Borrower will cause all invoices and
statements which it sends to Account Debtors or other third parties to be
marked, in a manner satisfactory to Lender, to reflect Lender's security
interest therein.
4.8 Inventory.
(a) Returns. Provided that no Event of Default has occurred
and is continuing, if any Account Debtor returns any Inventory to Borrower in
the ordinary course of its business, Borrower will promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount (sending a copy to Lender). After the occurrence of an
Event of Default, Borrower will not accept any return without Lender's prior
written consent. Regardless of whether an Event of Default has occurred,
Borrower will, until such time as Borrower has issued a credit memorandum to the
Account Debtor, (i) hold the returned Inventory in trust for Lender; (ii)
segregate all returned Inventory from all of Borrower's other property; (iii)
conspicuously label the returned Inventory as Lender's property; and (iv)
immediately notify Lender of the return of such Inventory, specifying the reason
for such return, the location and condition of the returned Inventory and, at
Lender's request, deliver such returned Inventory to Lender at an address
specified by Lender.
(b) Other Covenants. Borrower will not, without Lender's prior
written consent, (i) store any Inventory or other Collateral with any
warehouseman or other third party other than as set forth in Section 9(d) of
Schedule A or (ii) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis. Borrower will produce Inventory only in
accordance with the Fair Labor Standards Act of 1938 as amended, and all rules,
regulations and orders promulgated thereunder.
4.9 Access to Collateral, Books and Records. At reasonable times, and
on one Business Day's notice, prior to the occurrence of a Default or an Event
of Default, and at any time and with or without notice after the occurrence of a
Default or an Event of Default, Lender or its agents shall have the right to
inspect the Collateral, and the right to examine and copy Borrower's books and
records. Lender shall take reasonable steps to keep confidential all information
obtained in any such inspection or examination, but Lender shall have the right
to disclose any such information to its auditors, regulatory agencies, attorneys
and participants, and pursuant to any subpoena or other legal process; provided,
however, that if Lender is required to disclose any such information pursuant to
any subpoena or other legal process, Lender shall notify Borrower of such
required disclosure and Lender shall refrain from making such disclosure until
the earlier of Borrower's consent thereto and the date immediately prior to the
expiration of the period in which Lender must comply with such subpoena or other
legal process, during which time Borrower shall be entitled to pursue all
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remedies available to Borrower to delay or prevent such disclosure; provided,
further, that Lender shall not be liable for any damages or other costs or
expenses resulting from any action of Borrower under this Section 4.9, and
Borrower agrees to indemnify Lender for any losses incurred by Lender as a
result of any such actions by Borrower under this Section 4.9. Borrower agrees
to give Lender access to any or all of Borrower's premises to enable Lender to
conduct such inspections and examinations. Such inspections and examinations
shall be at Borrower's expense and the charge therefor shall be $650 per person
per day (or such higher amount as shall represent Lender's then current standard
charge), plus reasonable out-of-pockets expenses. Lender may, at Borrower's
expense, use Borrower's personnel, computer and other equipment, programs,
printed output and computer readable media, supplies and premises for the
collection, sale or other disposition of Collateral to the extent Lender, in its
sole discretion, deems appropriate. Borrower hereby irrevocably authorizes all
accountants and third parties to disclose and deliver to Lender, at Borrower's
expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding Borrower and not
subject to professional privilege, such as attorney-client privilege. Borrower
will not enter into any agreement with any accounting firm, service bureau or
third party to store Borrower's books or records at any location other than
Borrower's Address without first obtaining Lender's written consent (which
consent may be conditioned upon such accounting firm, service bureau or other
third party agreeing to give Lender the same rights with respect to access to
books and records and related rights as Lender has under this Agreement).
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation by, Lender, and (ii) compliance with
each such covenant will be a condition to each Loan and Credit Accommodation:
5.1 Existence and Authority. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation. Borrower is qualified and licensed to do business in
all jurisdictions in which any failure to do so would have a material adverse
effect on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or other organizational documents, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property, do
not constitute grounds for acceleration of any indebtedness or obligation under
any agreement or instrument which is binding upon Borrower or its property, and
do not require the consent of any Person. This Agreement and such other Loan
Documents have been duly executed and delivered by, and are enforceable against,
Borrower, and all other Obligors who have signed them, in accordance with their
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respective terms. Sections 9(g) and 9(h) of Schedule A sets forth the ownership
of Borrower and its Subsidiaries as of the date of this Agreement.
5.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name. Listed in
Section 9 of Schedule A are all prior names of Borrower and all of Borrower's
present and prior trade names. Borrower shall give Lender at least 30 days'
prior written notice before changing its name or doing business under any other
name. Borrower has complied with all laws relating to the conduct of business
under a fictitious business name. Borrower represents and warrants that (i) to
the best of its knowledge, each trade name does not refer to another corporation
or other legal entity; (ii) all Accounts invoiced under any such trade names are
owned exclusively by Borrower and are subject to the security interest of Lender
and the other terms of this Agreement and (iii) all schedules of Accounts,
including any sales made or services rendered using the trade name shall show
Borrower's name as assignor.
5.3 Title to Collateral; Permitted Liens. Borrower has good and
marketable title to the Collateral. The Collateral now is and will remain free
and clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for Permitted Liens. Lender now has, and will continue to
have, a first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Lender and the Collateral against all claims of others. None of the
Collateral which is Equipment is or will be affixed to any real property in such
a manner, or with such intent, as to become a fixture. Borrower is not a lessee
under any real property lease pursuant to which the lessor may obtain any rights
in any of the Collateral, and no such lease now prohibits, restrains, impairs or
conditions, or will prohibit, restrain, impair or condition, Borrower's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Lender, cause each such third party to
execute and deliver to Lender, in form acceptable to Lender, such waivers and
subordinations as Lender shall specify, so as to ensure that Lender's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party. Borrower will keep in full force and effect, and will comply with
all the terms of, any lease of real property where any of the Collateral now or
in the future may be located.
5.4 Accounts and Chattel Paper. As of each date reported by Borrower,
all Accounts which Borrower has reported to Lender as being Eligible Accounts
comply in all respects with the criteria for eligibility established by Lender
and in effect at such time. Should an Account that has been reported in good
faith as an Eligible Account subsequently be determined to be ineligible,
Borrower will have 15 days to fix the error by providing a new report not
including that Account and no Event of Default shall have occurred provided that
the amount advanced to Borrower does not exceed Availability. All Accounts and
Chattel Paper are genuine and in all respects what they purport to be, arise out
of a completed, bona fide and unconditional and non-contingent sale and delivery
of goods or rendition of services
10
by Borrower in the ordinary course of its business and in accordance with the
terms and conditions of all purchase orders, contracts or other documents
relating thereto, each Account Debtor thereunder had the capacity to contract at
the time any contract or other document giving rise to such Accounts and Chattel
Paper were executed, and the transactions giving rise to such Accounts and
Chattel Paper comply with all applicable laws and governmental rules and
regulations.
5.5 Investment Property. Borrower will take any and all actions
required or requested by Lender, from time to time, to (i) cause Lender to
obtain exclusive control of any Investment Property in a manner acceptable to
Lender and (ii) obtain from any issuers of Investment Property and such other
Persons as Lender shall specify, for the benefit of Lender, written confirmation
of Lender's exclusive control over such Investment Property. For purposes of
this Section 5.5, Lender shall have exclusive control of Investment Property if
(A) such Investment Property consists of certificated securities and Borrower
delivers such certificated securities to Lender (with appropriate endorsements
if such certificated securities are in registered form); (B) such Investment
Property consists of uncertificated securities and either (x) Borrower delivers
such uncertificated securities to Lender or (y) the issuer thereof agrees,
pursuant to documentation in form and substance satisfactory to Lender, that it
will comply with instructions originated by Lender without further consent by
Borrower, and (C) such Investment Property consists of security entitlements and
either (x) Lender becomes the entitlement holder thereof or (y) the appropriate
securities intermediary agrees, pursuant to documentation in form and substance
satisfactory to Lender, that it will comply with entitlement orders originated
by Lender without further consent by Borrower.
5.6 Place of Business; Location of Collateral. Borrower's Address is
Borrower's chief executive office and the location of its books and records. In
addition, except as provided in the immediately following sentence, Borrower has
places of business and Collateral located only at the locations set forth on
Sections 9(d) and 9(e) of Schedule A. Borrower will give Lender at least 30
days' prior written notice before opening any additional place of business,
changing its chief executive office or the location of its books and records, or
moving any of the Collateral to a location other than Borrower's Address or one
of the locations set forth in Sections 9(d) and 9(e) of Schedule A, and will
execute and deliver all financing statements and other agreements, instruments
and documents which Lender shall require as a result thereof.
5.7 Financial Condition, Statements and Reports. All financial
statements delivered to Lender by or on behalf of Borrower have been prepared in
conformity with GAAP and completely and fairly reflect the financial condition
of Borrower in all material respects, at the times and for the periods therein
stated (subject to year-end adjustments). Between the last date covered by any
such financial statement provided to Lender and the date hereof, there has been
no material adverse change in the financial condition or business of Borrower.
Borrower is solvent and able to pay its debts as they come due, and has
sufficient capital to carry on its business as now conducted and as proposed to
be conducted. All schedules, reports and other information and documentation
delivered by Borrower to Lender
11
with respect to the Collateral are, or will be, when delivered, true, correct
and complete as of the date delivered or the date specified therein in all
material respects.
5.8 Tax Returns and Payments; Pension Contributions. Borrower has
timely filed all tax returns and reports required by applicable law, and
Borrower has timely paid all applicable taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes; provided, that Borrower (i) in good faith
contests Borrower's obligation to pay such taxes by appropriate proceedings
promptly and diligently instituted and conducted; (ii) notifies Lender in
writing of the commencement of, and any material development in, the
proceedings; (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a Lien upon any of the Collateral and (iv)
maintains adequate reserves therefor in conformity with GAAP. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay, all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
5.9 Compliance with Laws. Borrower has complied in all material
respects with all provisions of all applicable laws and regulations, including
those relating to Borrower's ownership of real or personal property, the conduct
and licensing of Borrower's business, the payment and withholding of taxes,
ERISA and other employee matters, safety and environmental matters.
5.10 Litigation. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower. There is no claim, suit, litigation,
proceeding or investigation pending or (to the best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which may result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Borrower, or in any material impairment in
the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Lender in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower.
5.11 Use of Proceeds. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 Insurance. Borrower will at all times carry property, liability
and other insurance, with insurers acceptable to Lender, in such form and
amounts, and with such deductibles
12
and other provisions, as Lender shall require, and Borrower will provide
evidence of such insurance to Lender, so that Lender is satisfied that such
insurance is, at all times, in full force and effect. Each property insurance
policy shall name Lender as loss payee and shall contain a lender's loss payable
endorsement in form acceptable to Lender, each liability insurance policy shall
name Lender as an additional insured, and each business interruption insurance
policy shall be collaterally assigned to Lender, all in form and substance
satisfactory to Lender. All policies of insurance shall provide that they may
not be cancelled or changed without at least thirty (30) days' prior written
notice to Lender, shall contain breach of warranty coverage, and shall otherwise
be in form and substance satisfactory to Lender. Upon receipt of the proceeds of
any such insurance, Lender shall apply such proceeds in reduction of the
Obligations as Lender shall determine in its sole discretion. Borrower will
promptly deliver to Lender copies of all reports made to insurance companies.
5.13 Financial and Collateral Reports. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender and is consistent with GAAP):
(a) Collateral Reports. On or before the fifteenth (15th) day
of each month, an aging of Borrower's Accounts, Chattel Paper and notes
receivable, and weekly inventory reports, if any, all in such form, and together
with such additional certificates, schedules and other information with respect
to the Collateral or the business of Borrower or any Obligor, as Lender shall
request, in each case, with respect to any items that exceed dollar limits
established by Lender either orally or in writing from time to time; provided,
that Borrower's failure to execute and deliver the same shall not affect or
limit Lender's security interests and other rights in any of the Accounts, nor
shall Lender's failure to advance or lend against a specific Account affect or
limit Lender's security interest and other rights therein. Together with each
such schedule, Borrower shall furnish Lender, upon its request, with copies (or,
at Lender's request, originals) of all contracts, orders, invoices, and other
similar documents, and all original shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts, and Borrower warrants the
genuineness of all of the foregoing. In addition, Borrower shall deliver to
Lender, upon its request, the originals of all Instruments, Chattel Paper,
security agreements, guaranties and other documents and property evidencing or
securing any Accounts, immediately upon receipt thereof and in the same form as
received, with all necessary endorsements. Lender may destroy or otherwise
dispose of all documents, schedules and other papers delivered to Lender
pursuant to this Agreement (other than originals of Instruments, Chattel Paper,
security agreements, guaranties and other documents and property evidencing or
securing any Accounts) six months after Lender receives them, unless Borrower
requests their return in writing in advance and arranges for their return to
Borrower at Borrower's expense.
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(b) Annual Statements. Not later than one hundred twenty (120)
days after the close of each fiscal year of Borrower, unqualified (except for a
qualification for a change in accounting principles with which the accountant
concurs) audited financial statements of Borrower and its Subsidiaries as of the
end of such year, on a consolidated and consolidating basis, certified by a firm
of independent certified public accountants of recognized standing selected by
Borrower but acceptable to Lender, together with a copy of any management letter
issued in connection therewith;
(c) Interim Statements. Not later than twenty-five (25) days
after the end of each month hereafter which is not the last month of a calendar
quarter, and forty-five (45) days after the last day of a calendar quarter,
including the last month of Borrower's fiscal year, unaudited interim financial
statements of Borrower and its Subsidiaries as of the end of such month and of
the portion of Borrower's fiscal year then elapsed, on a consolidated and
consolidating basis, certified by the principal financial officer of Borrower as
prepared in accordance with GAAP and fairly presenting the consolidated
financial position and results of operations of Borrower and its Subsidiaries
for such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(d) Projections. No later than the end of each fiscal year of
Borrower, such projections of the business of Borrower and its Subsidiaries as
Lender shall request from time to time;
(e) Shareholder Reports, Etc. Promptly after the sending or
filing thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(f) ERISA Reports. Upon request by Lender, copies of any
annual report to be filed pursuant to the requirements of ERISA in connection
with each plan subject thereto; and
(g) Other Information. Such other data and information
(financial and otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or Borrower's and each of its
Subsidiary's financial condition or results of operations.
Concurrently with the delivery of the financial statements described in
clause (b) above, Borrower shall forward to Lender a copy of the accountants'
letter to Borrower's management that is prepared in connection with such
financial statements.
5.14 Litigation Cooperation. Should any third-party suit or proceeding
be instituted by or against Lender with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Lender, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that
14
Lender may deem them reasonably necessary in order to prosecute or defend any
such suit or proceeding.
5.15 Maintenance of Collateral, Etc. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 Notification of Changes. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 Further Assurances. Borrower agrees, at its expense to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 Negative Covenants. Borrower will not, without Lender's prior
written consent which consent will not be unreasonably withheld or delayed, (i)
merge or consolidate with another Person, form any new Subsidiary or acquire any
interest in any Person; (ii) acquire any assets except in the ordinary course of
business and as otherwise permitted by this Agreement and the other Loan
Documents; (iii) enter into any transaction outside the ordinary course of
business; (iv) sell or transfer any Collateral or other assets, except that
Borrower may sell finished goods Inventory in the ordinary course of its
business; (v) make any loans to, or investments in, any other Person (including
without limitation any Other Borrower) in the form of money or other assets
except for the loan existing on the date hereof and set forth in Section 9(i) of
Schedule A; (vi) incur any debt outside the ordinary course of business except
the debt existing on the date hereof and set forth in Section 9(j) of Schedule
A; (vii) guaranty or otherwise become liable with respect to the obligations of
another party or entity; (viii) pay or declare any dividends or other
distributions on Borrower's stock, if Borrower is a corporation (except for
dividends payable solely in capital stock of Borrower) or with respect to any
equity interests, if Borrower is not a corporation; (ix) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's capital
stock or other equity interests; (x) make any change in Borrower's capital
structure (except for a transfer of the ownership of all of the capital stock of
Borrower from Spares to Aero Management pursuant to documentation acceptable to
Lender in its sole discretion); (xi) dissolve or elect to dissolve; (xii) pay
any principal or interest on any indebtedness owing to an Affiliate, (xiii)
enter into
15
any transaction with an Affiliate other than on arms-length terms; or (xiv)
agree to do any of the foregoing.
5.19 Financial Covenants.
(a) Capital Expenditures. Borrower will not expend or commit
to expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.
(b) Net Worth. Borrower will at all times maintain a net worth
of at least the amount set forth in Section 8(b) of Schedule A as the Minimum
Net Worth Requirement.
(c) Working Capital. Borrower will at all times maintain
working capital of at least the amount set forth in Section 8(c) of Schedule A
as the Minimum Working Capital Requirement.
(d) Other Financial Covenants. Borrower will comply with any
additional financial covenants set forth in Section 8(f) of Schedule A.
6. RELEASE AND INDEMNITY.
6.1 Release. Borrower hereby releases Lender and its Affiliates and
their respective directors, officers, employees, attorneys and agents and any
other Person affiliated with or representing Lender (the "Released Parties")
from any and all liability arising from acts or omissions under or pursuant to
this Agreement, whether based on errors of judgment or mistake of law or fact,
except for those arising from gross negligence or willful misconduct. However,
in no circumstance will any of the Released Parties be liable for lost profits
or other special or consequential damages. Such release is made on the date
hereof and remade upon each request for a Loan or Credit Accommodation by
Borrower. Without limiting the foregoing:
(a) Lender shall not be liable for (i) any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gave rise to an Account; (ii) any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account; (iii) settling any Account in good
faith for less than the full amount thereof; or (iv) any of Borrower's
obligations under any contract or agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have the full right
and
16
authority to clear and resolve any questions of non-compliance of documents, to
give any instructions as to acceptance or rejection of any documents or goods,
to execute for Borrower's account any and all applications for steamship or
airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
6.2 Indemnity. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
the Released Parties may sustain or incur based upon or arising out of any of
the transactions contemplated by this Agreement or the other Loan Documents or
any of the Obligations, including any transactions or occurrences relating to
the issuance of any Credit Accommodation, the Collateral relating thereto, any
drafts thereunder and any errors or omissions relating thereto (including any
loss or claim due to any action or inaction taken by the issuer of any Credit
Accommodation) (and for this purpose any charges to Lender by any issuer of
Credit Accommodations shall be conclusive as to their appropriateness and may be
charged to the Loan Account), or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the willful misconduct of the Released Parties). Notwithstanding any provision
in this Agreement to the contrary, the indemnity agreement set forth in this
Section shall survive any termination of this Agreement.
7. TERM.
7.1 Maturity Date. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement shall initially continue in effect
until the Initial Maturity Date set forth in Section 7 of Schedule A (the
"Initial Term"); provided, that such date shall automatically be extended (the
Initial Maturity Date, as it may be so extended, being referred to as the
"Maturity Date") for successive additional terms of three years each (each a
"Renewal Term"), unless one party gives written notice to the other, not less
than sixty (60) days prior to the Maturity Date, that such party elects not to
extend the Maturity Date. This Agreement and the other Loan Documents and
Lender's security interests in and Liens upon the Collateral, and all
representations, warranties and covenants of Borrower contained herein and
therein, shall remain in full force and effect after the Maturity Date until all
of the monetary Obligations are indefeasibly paid in full.
7.2 Early Termination. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty (30) business days
after written notice of termination is given to Lender or (ii) by Lender at any
time after the occurrence of an Event of Default, without notice, effective
immediately. Notwithstanding the foregoing, no such early
17
termination shall be effective unless each Other Borrower simultaneously
terminates the Additional Loan Agreement to which it is a party. If so
terminated by Borrower under this Section 7.2, Borrower shall pay to Lender (i)
an early termination fee (the "Early Termination Fee") in the amount set forth
in Section 6(h) of Schedule A plus (ii) any earned but unpaid Facility Fee. Such
fee shall be due and payable on the effective date of termination and thereafter
shall bear interest at a rate equal to the highest rate applicable to any of the
Obligations. In addition, if Borrower so terminates and repays the Obligations
without having provided Lender with at least thirty (30) days' prior written
notice thereof, an additional amount equal to thirty (30) days of interest at
the applicable Interest Rate(s), based on the average outstanding amount of the
Obligations for the six month period immediately preceding the date of
termination.
7.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether or not all or any part of such Obligations are otherwise
then due and payable. Without limiting the generality of the foregoing, if, on
the Maturity Date or on any earlier effective date of termination, there are any
outstanding Credit Accommodations, then on such date Borrower shall provide to
Lender cash collateral in an amount equal to 110% of the Credit Accommodation
Balance to secure all of the Obligations (including estimated attorneys' fees
and other expenses) relating to said Credit Accommodations or such greater
percentage or amount as Lender reasonably deems appropriate, pursuant to a cash
pledge agreement in form and substance satisfactory to Lender.
7.4 Effect of Termination. No termination shall affect or impair any
right or remedy of Lender or relieve Borrower of any of the Obligations until
all of the monetary Obligations have been indefeasibly paid in full. Upon
indefeasible payment and performance in full of all of the monetary Obligations
(or the provision of cash collateral with respect to the Credit Accommodation
Balance as set forth in Section 7.3) and termination of this Agreement, Lender
shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate Lender's security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Lender immediate written notice thereof: (i) if any warranty,
representation, statement, report or certificate made or delivered to Lender by
Borrower or any of Borrower's officers, employees or agents is untrue or
misleading; (ii) if Borrower fails to pay when due any principal or interest on
any Loan or any other monetary Obligation; (iii) if Borrower breaches any
covenant or obligation contained in this Agreement or any other Loan Document or
fails to perform any other non-monetary Obligation; (iv) if any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made or permitted to exist on all or any part of the Collateral; (v) if
one or more judgments aggregating in excess of $25,000, or any injunction or
attachment, is obtained against Borrower or any Obligor or which remains
unstayed for more
18
than ten (10) days or is enforced; (vi) the occurrence of any default under any
financing agreement, security agreement or other agreement, instrument or
document executed and delivered by (A) Borrower with, or in favor of, any Person
other than Lender or (B) Borrower or any Affiliate of Borrower with, or in favor
of, Lender or any Affiliate of Lender; (vii) the dissolution, death, termination
of existence in good standing, insolvency or business failure or suspension or
cessation of business as usual of Borrower or any Obligor (or of any general
partner of Borrower or any Obligor if it is a partnership) or the appointment of
a receiver, trustee or custodian for all or any part of the property of, or an
assignment for the benefit of creditors by Borrower or any Obligor, or the
commencement of any proceeding by Borrower or any Obligor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, or if Borrower makes or sends a notice of a bulk transfer or
calls a meeting of its creditors; (viii) the commencement of any proceeding
against Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; (ix) the actual or
attempted revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations or any security document by any Obligor;
(x) if Borrower makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations attempts to limit or terminate its subordination
agreement; (xi) if there is any actual or threatened indictment of Borrower or
any Obligor under any criminal statute or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any Obligor,
pursuant to which the potential penalties or remedies sought or available
include forfeiture of any property of Borrower or such Obligor; (xii) if there
is a change in the record or beneficial ownership of an aggregate of more than
20% of the outstanding shares of stock of Borrower (or partnership or membership
interests if it is a partnership or limited liability company), in one or more
transactions, compared to the ownership of outstanding shares of stock (or
partnership or membership interests) of Borrower as of the date hereof, without
the prior written consent of Lender; (xiii) if there is any change in the chief
executive officer, chairman or chief financial officer of Borrower; (xiv) if an
event of default occurs under any Additional Loan Agreement; or (xv) if Lender
determines in good faith that the Collateral is insufficient to fully secure the
Obligations or that the prospect of payment of performance of the Obligations is
impaired.
8.2 Remedies. Upon the occurrence of any Event of Default, and at any time
thereafter, Lender, at its option, and without notice or demand of any kind (all
of which are hereby expressly waived by Borrower), may do any one or more of the
following: (i) cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other Loan Document; (ii) accelerate and declare all
or any part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of
19
the Collateral, and remain (or cause a custodian to remain) on the premises in
exclusive control thereof, without charge for so long as Lender deems it
reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, that if Lender seeks to take
possession of any of the Collateral by court process, Borrower hereby
irrevocably waives (A) any bond and any surety or security relating thereto
required by law as an incident to such possession, (B) any demand for possession
prior to the commencement of any suit or action to recover possession thereof
and (C) any requirement that Lender retain possession of, and not dispose of,
any such Collateral until after trial or final judgment; (iv) require Borrower
to assemble any or all of the Collateral and make it available to Lender at one
or more places designated by Lender which are reasonably convenient to Lender
and Borrower, and to remove the Collateral to such locations as Lender may deem
advisable; (v) complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Lender shall have the right to use Borrower's premises,
vehicles and other Equipment and all other property without charge; (vi) sell,
lease or otherwise dispose of any of the Collateral, in its condition at the
time Lender obtains possession of it or after further manufacturing, processing
or repair, at one or more public or private sales, in lots or in bulk, for cash,
exchange or other property, or on credit (a "Sale"), and to adjourn any such
Sale from time to time without notice other than oral announcement at the time
scheduled for Sale (and, in connection therewith, (A) Lender shall have the
right to conduct such Sale on Borrower's premises without charge, for such times
as Lender deems reasonable, on Lender's premises, or elsewhere, and the
Collateral need not be located at the place of Sale; (B) Lender may directly or
through any of its Affiliates purchase or lease any of the Collateral at any
such public disposition, and if permissible under applicable law, at any private
disposition and (C) any Sale of Collateral shall not relieve Borrower of any
liability Borrower may have if any Collateral is defective as to title, physical
condition or otherwise at the time of sale); (vii) demand payment of and collect
any Accounts, Chattel Paper, Instruments and General Intangibles included in the
Collateral and, in connection therewith, Borrower irrevocably authorizes Lender
to endorse or sign Borrower's name on all collections, receipts, Instruments and
other documents, to take possession of and open mail addressed to Borrower and
remove therefrom payments made with respect to any item of Collateral or
proceeds thereof and, in Lender's sole discretion, to grant extensions of time
to pay, compromise claims and settle Accounts, General Intangibles and the like
for less than face value; and (viii) demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or relating thereto. In addition to the
rights and remedies set forth above, Lender shall have all the other rights and
remedies accorded a secured party after default under the UCC and under all
other applicable laws, and under any other Loan Document, and all of such rights
and remedies are cumulative and non-exclusive. Exercise or partial exercise by
Lender of one or more of its rights or remedies shall not be deemed an election
or bar Lender from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Lender to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed. If notice of any sale or other disposition of Collateral is
required by law, notice at least seven (7) days prior to the sale
20
designating the time and place of sale in the case of a public sale or the time
after which any private sale or other disposition is to be made shall be deemed
to be reasonable notice, and Borrower waives any other notice. If any Collateral
is sold or leased by Lender on credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment is collected
by Lender.
8.3 Application of Proceeds. Subject to any application required by
law, all proceeds realized as the result of any Sale shall be applied by Lender
to the Obligations in such order as Lender shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; but Borrower shall remain liable to Lender for any deficiency.
If Lender, in its sole discretion, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any Sale, Lender shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Lender of
the cash therefor.
9. GENERAL PROVISIONS.
9.1 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender at the address shown in the heading to this Agreement or
Borrower at ▇▇▇▇-▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or by facsimile
to the facsimile number shown in Section 9(k) of Schedule A, or at any other
address (or to any other facsimile number) designated in writing by one party to
the other party in the manner prescribed in this Section 9.1. All notices shall
be deemed to have been given when received or when delivery is refused by the
recipient.
9.2 Severability. If any provision of this Agreement, or the
application thereof to any party or circumstance, is held to be void or
unenforceable by any court of competent jurisdiction, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.3 Integration. This Agreement and the other Loan Documents represent
the final, entire and complete agreement between Borrower and Lender and
supersede all prior and contemporaneous negotiations, oral representations and
agreements, all of which are merged and integrated into this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 Waivers. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Documents shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of
21
Lender or its agents or employees, but only by a specific written waiver signed
by an authorized officer of Lender and delivered to Borrower. Borrower waives
demand, protest, notice of protest and notice of default or dishonor, notice of
payment and nonpayment, release, compromise, settlement, extension or renewal of
any commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 Amendment. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
9.6 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement and the other Loan
Documents.
9.7 Attorneys Fees and Costs. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to administer
this Agreement and the other Loan Documents (including the cost of periodic
financing statement, tax lien and other searches conducted by Lender); to
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; to commence, intervene in, or defend any
action or proceeding; to initiate any complaint to be relieved of the automatic
stay in bankruptcy; to file or prosecute any probate claim, bankruptcy claim,
third-party claim, or other claim; to examine, audit, copy, and inspect any of
the Collateral or any of Borrower's books and records; to protect, obtain
possession of, lease, dispose of, or otherwise enforce Lender's security
interests in, the Collateral; and to otherwise represent Lender in any
litigation relating to Borrower. If either Lender or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of, execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Lender may be entitled pursuant to this
Section shall immediately become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
9.8 Benefit of Agreement; Assignability. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of Borrower and
Lender; provided, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of Lender, and any
prohibited assignment shall be void. No consent by Lender to any assignment
shall release Borrower from its liability for any of the Obligations. Lender
shall have the right to
22
assign all or any of its rights and obligations under the Loan Documents, and to
sell participating interests therein, to one or more other Persons, and Borrower
agrees to execute all agreements, instruments and documents requested by Lender
in connection with each such assignment and participation.
9.9 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower or any other Obligor.
9.10 Headings; Construction. Section and subsection headings are used
in this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any rule of construction or
otherwise.
9.11 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL IS
LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND WAIVES ANY
OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT ANY CLAIM OR
DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL COURTS OF NEW
YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER AND SHALL BE
DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE EXTENT PERMITTED
BY LAW. NOTHING IN THIS
23
AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.
9.12 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
24
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as
of the date set forth in the heading.
Borrower: Lender:
FLIGHTWAYS MANUFACTURING, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------ -----------------------------
Its CFO Its Authorized Signatory
25
Schedule A
Description of Certain Terms
This Schedule is an integral part of the Loan and Security Agreement
between FLIGHTWAYS MANUFACTURING, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "Agreement").
1. Loan Limits for Revolving Loans:
(a) Maximum Facility
Amount: $10,000,000
(b) Advance Rates:
(i) Accounts 80%; provided, that if the
Advance Rate: Dilution Percent age exceeds
5%, such advance rate will
be reduced by the number of
full or partial percentage
points of such excess
(ii) Inventory
Advance
Rate(s):
(A) Finished
goods: not applicable
(B) Raw 40% against eligible raw
materials: material inventory
(C) Work in
process: not applicable
(c) Accounts Sublimit: At any time of determination,
the Maximum Flightways
Facility Amount less the
aggregate advances against
Inventory outstanding at
such time
(d) Inventory
Sublimit(s):
A-1
(i) Overall sublimit $5,000,000, minus the portion
on advances of the Other Borrower Loan
against Eligible Balance at such time that is
Inventory predicated on eligible
inventory of the Other
Borrowers
(ii) Sublimit on not applicable
advances
against finished
goods
(iii) Sublimit on
advances
against raw
materials $1,000,000
(iv) Sublimit on
advances
against work in
process not applicable
(e) Credit
Accommodation
Limit: not applicable
(f) Permanent Reserve
Amount: not applicable
(g) Maximum Flightways $10,000,000, minus the Other
Facility Amount Borrower Loan Balance at such
time
2. Loan Limits for Term
Loan:
(a) Principal Amount: not applicable
(b) Repayment Schedule: not applicable
3. Interest Rates:
(a) Revolving Loans: 3.00% per annum in excess of
the Prime Rate
(b) Term Loan: not applicable
A-2
4. Minimum Loan Amount: not applicable
5. Maximum days after
invoice date for Eligible
Accounts: 90
6. Fees:
(a) Closing Fee: not applicable
(b) Facility Fee:
(i) Initial Term: not applicable
(ii) Renewal
Term(s): not applicable
(c) Servicing Fee: not applicable
(d) Unused Line Fee: not applicable
(e) Minimum Borrowing
Fee: not applicable
(i) Applicable period: not applicable
(ii) Date payable: not applicable
(f) Success Fee: not applicable
(g) Warrants: not applicable
(h) Early Termination
Fee: not applicable
(i) Fees for letters of
credit (or guaranties
by Lender): not applicable
A-3
(j) Fees for other Credit
Accommodations: not applicable
7. Initial Maturity Date: April 17, 2000
8. Financial Covenants:
(a) Capital Expenditure
Limitation: not applicable
(b) Minimum Net Worth
Requirement: not applicable
(c) Minimum Working
Capital Requirement: not applicable
(d) Limitation on
Purchase Money
Security Interests: not applicable
(e) Limitation on
Equipment Leases: not applicable
(f) Additional Financial
Covenants: not applicable
9. Borrower Information:
(a) Prior Names of
Borrower: None
(b) Prior Trade Names of
Borrower: None
(c) Existing Trade
Names of Borrower: None
(d) Inventory Locations: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(e) Other Locations: None
A-4
(f) Litigation: ▇▇▇▇▇▇ ▇▇▇▇▇▇ versus
Flightways Manufacturing,
Inc.
(g) Ownership of Borrower: 100% owned by Spares
(h) Subsidiaries (and
ownership thereof): None
(i) Existing Loans: None
(j) Existing
Indebtedness: None
(k) Facsimile Numbers:
Borrower: (▇▇▇) ▇▇▇-▇▇▇▇
Lender: (▇▇▇) ▇▇▇-▇▇▇▇
10. Description of Real None
Property:
11. Lender's Bank: The First National Bank of
Chicago ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as
of the date set forth in the heading to the Agreement.
Borrower: Lender:
FLIGHTWAYS MANUFACTURING, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------- -------------------------------
Its CFO Its Authorized Signatory
A-5
Schedule B
Definitions
This Schedule is an integral part of the Loan and Security Agreement
between FLIGHTWAYS MANUFACTURING, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING (the "Agreement").
As used in the Agreement, the following terms have the following
meanings:
"Account" means any right to payment for Goods sold or leased
or for services rendered which is not evidenced by an Instrument or Chattel
Paper, whether or not it has been earned by performance.
"Account Debtor" means the obligor on an Account or Chattel
Paper.
"Account Proceeds" has the meaning set forth in Section 4.1.
"Additional Loan Agreement" means the Aero Management Loan
Agreement, the Fields Loan Agreement and all other Loan and Security Agreements
between Lender and any Affiliate of Borrower, Aero Management, Fields or Spares
that Borrower, all Other Borrowers at the time and Lender designate as an
Additional Loan Agreement.
"Aero Management" means Fields Aero Management, Inc., a
California corporation and an Affiliate of Borrower.
"Aero Management Loan Agreement" means the Loan and Security
Agreement dated as of April 18, 1997 between Aero Management and Lender, as it
may be amended from time to time.
"Aero Management Loan Balance" means the outstanding balance of all
monetary obligations (including without limitation the aggregate undrawn face
amount of all outstanding letters of credit, bankers acceptances and other
credit accommodations and all interest, fees and costs due or, in Lender's
estimation, likely to become due in connection therewith) of Aero Management
under the Aero Management Loan Agreement.
"Affiliate" means, with respect to any Person, a relative,
partner, shareholder, member, manager, director, officer, or employee of such
Person, any parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person or any other Person
affiliated, directly or indirectly, by virtue of family membership, ownership,
management or otherwise other than ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corporation or any of its
affiliates.
"Agreement" and "this Agreement" mean the Loan and Security
Agreement of which this Schedule B is a part and the Schedules thereto.
"Availability" has the meaning set forth in Section 1.1(a)
B-1
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et seq.).
"Blocked Account" has the meaning set forth in Section 4.1.
"Borrower" has the meaning set forth in the heading to the
Agreement.
"Borrower's Address" has the meaning set forth in the heading
to the Agreement.
"Borrower Guaranty" means the Guaranty dated as of January 2,
1997, as it may be amended or modified from time to time, executed by Borrower,
pursuant to which Borrower has guaranteed repayment in full of the Other
Borrower Loan Balance.
"Business Day" means a day other than a Saturday or Sunday or
any other day on which Lender or banks in New York are authorized to close.
"Chattel Paper" has the meaning set forth in the UCC.
"Collateral" means all property and interests in property in
or upon which a security interest or other Lien is granted pursuant to this
Agreement or the other Loan Documents.
"Credit Accommodation" has the meaning set forth in Section
1.1(a).
"Credit Accommodation Balance" means the sum of (i) the
aggregate undrawn face amount of all outstanding Credit Accommodations and (ii)
all interest, fees and costs due or, in Lender's estimation, likely to become
due in connection therewith.
"Default" means any event which with notice or passage of
time, or both, would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 2.1.
"Deposit Account" has the meaning set forth in the UCC.
"Dilution Percentage" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts as a percentage of Borrower's gross sales, calculated on a
ninety (90) day rolling average.
"Document" has the meaning set forth in the UCC.
"Early Termination Fee" has the meaning set forth in Section
7.2.
"Eligible Account" means, at any time of determination, an
Account which satisfies the general criteria set forth below and which is
otherwise acceptable to Lender (provided, that Lender may, in its sole
discretion, change the general criteria for acceptability of Eligible Accounts
upon at least fifteen (15) days' prior notice to Borrower). An Account shall be
deemed to meet the current general criteria if (i) neither the Account Debtor
nor any of its Affiliates is an Affiliate, creditor or supplier of Borrower
(provided, that Accounts deemed to be ineligible solely by reason
B-2
of this clause (i) because the Account Debtor is a creditor or supplier of
Borrower shall be considered Eligible Accounts to the extent the amount of such
Accounts exceeds the amount owing by Borrower to such Account Debtor); (ii) it
does not remain unpaid more than the number of days after the original invoice
date set forth in Section 5 of Schedule A; (iii) the Account Debtor or its
Affiliates are not past due on other Accounts owing to Borrower comprising more
than 50% of all of the Accounts owing to Borrower by such Account Debtor or its
Affiliates; (iv) all Accounts owing by the Account Debtor or its Affiliates do
not represent more than 25% of all otherwise Eligible Accounts unless otherwise
approved by Lender (provided, that Accounts which are deemed to be ineligible
solely by this clause (iv) shall be considered Eligible Accounts to the extent
of the amount thereof which does not exceed 20% of all otherwise Eligible
Accounts); (v) no covenant, representation or warranty contained in this
Agreement with respect to such Account (including any of the representations set
forth in Section 5.4) has been breached; (vi) the Account is not subject to any
contra relationship, counterclaim, dispute or set-off; (vii) the Account
Debtor's chief executive office or principal place of business is located in the
United States or Provinces of Canada which have adopted the Personal Property
Security Act or a similar act, unless (A) the sale is fully backed by a letter
of credit, guaranty or acceptance acceptable to Lender in its sole discretion,
and if backed by a letter of credit, such letter of credit has been issued or
confirmed by a bank satisfactory to Lender, is sufficient to cover such Account,
and if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (B) suc
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender; provided, that an aggregate
amount of up to $75,000 of foreign Accounts in excess of the existing credit
insurance limits shall be deemed to be subject to credit insurance so long as
Borrower has applied for acceptable credit insurance relating to such Accounts
or credit insurance in any amount is already in effect for such Account Debtor;
(viii) it is absolutely owing to Borrower and does not arise from a sale on a
▇▇▇▇-and-hold, guarantied sale, sale-or-return, sale-on-approval, consignment,
retainage or any other repurchase or return basis or consist of progress
▇▇▇▇▇▇▇▇; (ix) Lender shall have verified the Account in a manner satisfactory
to Lender; (x) the Account Debtor is not the United States of America or any
state or political subdivision (or any department, agency or instrumentality
thereof), unless Borrower has complied with the Assignment of Claims Act of 1940
(31 U.S.C. ss.203 et seq.) or other applicable similar state or local law in a
manner satisfactory to Lender; (xi) it is at all times subject to Lender's duly
perfected, first priority security interest and to no other Lien that is not a
Permitted Lien, and the goods giving rise to such Account (A) were not, at the
time of sale, subject to any Lien except Permitted Liens and (B) have been
delivered to and accepted by the Account Debtor, or the services giving rise to
such Account have been performed by Borrower and accepted by the Account Debtor;
(xii) the Account is not evidenced by Chattel Paper or an Instrument of any kind
and has not been reduced to judgment; (xiii) the Account Debtor's total
indebtedness to Borrower does not exceed the amount of any credit limit
established by Borrower or Lender and the Account Debtor is otherwise deemed to
be creditworthy by Lender (provided, that Accounts deemed to be ineligible
solely by reason of this clause (xiii) shall be considered Eligible Accounts to
the extent the amount of such Accounts does not exceed the lower of such credit
limits); (xiv) there are no facts or circumstances existing, or which could
reasonably be anticipated to occur, which might result in any adverse change in
the Account Debtor's financial condition or impair or delay
B-3
the collectibility of all or any portion of such Account; (xv) Lender has been
furnished with all documents and other information pertaining to such Account
which Lender has requested, or which Borrower is obligated to deliver to Lender,
pursuant to this Agreement; and (xvi) Borrower has not made an agreement with
the Account Debtor to extend the time of payment thereof beyond the time periods
set forth in clause (ii) above.
"Eligible Equipment" means, at any time of determination,
Equipment owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
"Eligible Inventory" means, at any time of determination,
Inventory (other than packaging materials and supplies) which satisfies the
general criteria set forth below and which is otherwise acceptable to Lender
(provided, that Lender may, in its sole discretion, change the general criteria
for acceptability of Eligible Inventory upon at least fifteen (15) days' prior
written notice to Borrower). Inventory shall be deemed to meet the current
general criteria if (i) it consists of finished goods; (ii) it is in good, new
and saleable condition; (iii) it is not slow-moving, obsolete, unmerchantable,
returned due to defects or repossessed; (iv) it is not in the possession of a
processor, consignee or bailee, or located on premises leased or subleased to
Borrower, or subject to a mortgage in favor of a Person other than Lender,
unless such processor, consignee, bailee or mortgagee or the lessor or sublessor
of such premises, as the case may be, has executed and delivered all
documentation which Lender shall require to evidence the subordination or other
limitation or extinguishment of such Person's rights with respect to such
Inventory and Lender's right to gain access thereto; (v) it meets all standards
imposed by any governmental agency or authority, and if required to be
registered with the Federal Aviation Administration, it has been so registered;
(vi) it conforms in all respects to any covenants, warranties and
representations set forth in the Agreement; (vii) it is at all times subject to
Lender's duly perfected, first priority security interest and no other Lien
except a Permitted Lien; (viii) it has not been consigned to Borrower; and (ix)
it is situated at an Inventory Location listed in Section 9(d) of Schedule A or
other location of which Lender has been notified as required by Section 5.6.
"Equipment" means all Goods which are used or bought for use
primarily in business (including farming or a profession) or by a Person who is
a non-profit organization or governmental subdivision or agency and which are
not Inventory, farm products or consumer goods, including all machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies and jigs, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to, or spare parts for, any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules, regulations and orders promulgated thereunder.
"Event of Default" has the meaning set forth in Section 8.1.
"Fields" means Fields Aircraft Spares Incorporated, a
California corporation and an Affiliate of Borrower.
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"Fields Loan Agreement" means the Loan and Security Agreement
dated as of April 18, 1997 between Fields and Lender, as it may be amended from
time to time.
"Fields Loan Balance" means the outstanding balance of all
monetary obligations (including without limitation the aggregate undrawn face
amount of all outstanding letters of credit, bankers acceptances and other
credit accommodations and all interest, fees and costs due or, in Lender's
estimation, likely to become due in connection therewith) of Fields under the
Fields Loan Agreement.
"GAAP" means generally accepted accounting principles as in
effect from time to time, consistently applied.
"General Intangibles" has the meaning set forth in the UCC,
and includes all books and records pertaining to the Collateral and other
business and financial records in the possession of Borrower or any other
Person, inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than
"intent to use" applications until a verified statement of use
is filed with respect to such applications) and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, causes of action and other rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, internet addresses, proprietary
information, purchase orders, and all insurance policies and claims (including
life insurance, key man insurance, credit insurance, liability insurance,
property insurance and other insurance), tax refunds and claims, letters of
credit, banker's acceptances and guaranties, computer programs, discs, tapes and
tape files in the possession of Borrower or any other Person, claims under
guaranties, security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of every kind
and nature.
"Goods" means all things which are movable at the time the
security interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"Initial Term" has the meaning set forth in Section 7.1.
"Instrument" has the meaning set forth in the UCC.
"Inventory" means all Goods held for sale or lease or
furnished or to be furnished under contracts of service, including all raw
materials, work in process, finished goods, goods in transit and materials and
supplies which are or might be used or consumed in a business or used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such Goods, and all products of the foregoing, and shall include
interests in goods represented by Accounts, returned, reclaimed or repossessed
goods and rights as an unpaid vendor.
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"Investment Property" shall mean all of Borrower's securities,
whether certificated or uncertificated, securities entitlements, securities
accounts, commodity contracts and commodity accounts.
"Lender" has the meaning set forth in the heading to the
Agreement.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purpose of this Agreement, Borrower shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"Loan Account" has the meaning set forth in Section 2.4.
"Loan Documents" means the Agreement and all notes, guaranties
(including without limitation the Borrower Guaranty), security agreements,
certificates, landlord's agreements, Lock Box and Blocked Account agreements and
all other agreements, documents and instruments now or hereafter executed or
delivered by Borrower or any Obligor in connection with, or to evidence the
transactions contemplated by, this Agreement.
"Loan Limits" means, collectively, the Availability limits and
all other limits on the amount of Loans and Credit Accommodations set forth in
this Agreement.
"Loans" means, collectively, the Revolving Loans and any Term
Loan.
"Lock Box" has the meaning set forth in Section 4.1.
"Maturity Date" has the meaning set forth in Section 7.1.
"Obligations" means all present and future Loans, advances,
debts, liabilities, obligations, guaranties (including without limitation the
Borrower Guaranty), covenants, duties and indebtedness at any time owing by
Borrower to Lender, whether evidenced by this Agreement or any note or other
instrument or document, whether arising from an extension of credit, opening of
a Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, loan fees, Early Termination Fees, minimum borrowing fees and any
other sums chargeable to Borrower under this Agreement or under any other Loan
Document.
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"Obligor" means any guarantor, endorser, acceptor, surety or
other person liable on, or with respect to, the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
"Other Borrower" means, collectively, Aero Management, Fields
and any other borrower under an Additional Loan Agreement.
"Other Borrower Loan Balance" means the Fields Loan Balance,
the Aero Management Loan Balance and the outstanding balance of any monetary
obligations (including without limitation the aggregate undrawn face amount of
all outstanding letters of credit, bankers acceptances and other credit
accommodations and all interest, fees and costs due or, in Lender's estimation,
likely to become due in connection therewith) of each Other Borrower under each
Additional Loan Agreement.
"Permitted Liens" means: (i) purchase money security interests
in specific items of Equipment in an aggregate amount not to exceed the limit
set forth in Section 8(d) of Schedule A; (ii) leases of specific items of
Equipment in an aggregate amount not to exceed the limit set forth in Section
8(e) of Schedule A; (iii) Liens for taxes not yet due and payable; (iv)
additional Liens which are fully subordinate to the security interests of Lender
and are consented to in writing by Lender; (v) security interests being
terminated concurrently with the execution of this Agreement; (vi) Liens of
materialmen, mechanics, warehousemen or carriers arising in the ordinary course
of business and securing obligations which are not delinquent; (vii) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clause (i) or (ii) above;
provided, that any extension, renewal or replacement Lien is limited to the
property encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; and (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Lender will have the
right to require, as a condition to its consent under clause (iv) above, that
the holder of the additional Lien sign an intercreditor agreement in form and
substance satisfactory to Lender, in its sole discretion, acknowledging that the
Lien is subordinate to the security interests of Lender, and agreeing not to
take any action to enforce its subordinate Lien so long as any Obligations
remain outstanding, and that Borrower agree that any uncured default in any
obligation secured by the subordinate Lien shall also constitute an Event of
Default under this Agreement.
"Person" means any individual, sole proprietorship,
partnership, joint venture, limited liability company, trust, unincorporated
organization, association, corporation, government or any agency or political
division thereof, or any other entity.
"Prime Rate" means, at any given time, the prime rate as
quoted in The Wall Street Journal as the base rate on corporate loans posted as
of such time by at least 75% of the nation's 30 largest banks (which rate is not
necessarily the lowest rate offered by such banks).
"Real Property" means the real property described in Section
10 of Schedule A.
"Released Parties" has the meaning set forth in Section 6.1.
B-7
"Renewal Term" has the meaning set forth in Section 7.1.
"Reserves" has the meaning set forth in Section 1.2.
"Revolving Loans" has the meaning set forth in Section 1.1(b).
"Sale" has the meaning set forth in Section 8.2.
"Spares" means Fields Aircraft Spares, Inc., a Utah
corporation and the parent of Borrower.
"Subsidiary" means any corporation or other entity of which a
Person owns, directly or indirectly, through one or more intermediaries, more
than 50% of the capital stock or other equity interest at the time of
determination.
"Term" means the period commencing on the date of this
Agreement and ending on the Maturity Date.
"Term Loan" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as
adopted and in effect at such time in the State of New York.
All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the UCC, to the extent such terms are defined
therein. The term "including," whenever used in this Agreement, shall mean
"including but not limited to." The singular form of any term shall include the
plural form, and vice versa, when the context so requires. References to
Sections, subsections and Schedules are to Sections and subsections of, and
Schedules to, this Agreement. All references to agreements and statutes shall
include all amendments thereto and successor statutes in the case of statutes.
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as
of the date set forth in the heading to the Agreement.
Borrower: Lender:
FLIGHTWAYS MANUFACTURING, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------- -------------------------------
Its CFO Its Authorized Signatory
B-8