Exhibit 10.14
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of July
12, 2002, is executed by and among AEROCELL STRUCTURES, INC., an Arkansas
corporation ("Aerocell"), TRIAD INTERNATIONAL MAINTENANCE CORPORATION, a
Delaware corporation ("TIMCO"), AIRCRAFT INTERIOR DESIGN, INC., a Florida
corporation ("Design"), TIMCO ENGINE CENTER, INC., a Delaware corporation
("TIMCO Engine") (Aerocell, TIMCO, Design, and TIMCO Engine being collectively
referred to as the "Borrowers" and each, individually, a "Borrower"), AVIATION
SALES DISTRIBUTION SERVICES COMPANY, a Delaware corporation ("Distribution"),
AVS/M-2, INC., a Delaware corporation ("▇▇▇▇▇-▇▇▇▇▇") WHITEHALL CORPORATION, a
Delaware corporation ("Whitehall"), AVS/M-3, INC., an Arizona corporation
("Apex"), AVS/CAI, INC., a Florida corporation ("Caribe"), AVIATION SALES
LEASING COMPANY, a Delaware corporation ("Leasing"), AVS/M-1, INC., A Delaware
corporation ("Manufacturing"), AVSRE, L.P., a Delaware limited partnership
("AVSRE"), AVIATION SALES PROPERTY MANAGEMENT CORP., a Delaware corporation
("Property Management"), HYDROSCIENCE, INC., a Texas corporation
("Hydroscience"), TIMCO ENGINEERED SYSTEMS, INC., a Delaware corporation
("Engineered Systems"), and TIMCO AVIATION SERVICES, INC., a Delaware
corporation ("Parent") (Distribution, ▇▇▇▇▇-▇▇▇▇▇, Whitehall, Apex, Caribe,
Leasing, Manufacturing, AVSRE, Property Management, Hydroscience, Engineered
Systems and Parent being collectively referred to as the "Guarantors"), each
having its chief executive office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, his wife (collectively,
"▇▇▇▇▇▇▇"), ▇▇▇▇▇ INVESTMENTS, INC., a Texas corporation ("JII"), LJH, Ltd., a
Texas limited partnership ("LJH"), and ▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") (▇▇▇▇▇▇▇, JII,
LJH and ▇▇▇▇▇▇▇ being collectively referred to as the `Secured Parties" and
each, individually, a "Secured Party"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in that certain Fifth
Amended and Restated Credit Agreement of even date herewith (the "Credit
Agreement") among the Parent, certain subsidiaries of the Parent, as borrowers,
the institutions from time to time party thereto, as lenders, the institutions
from time to time party thereto, as lenders, and Citicorp USA, Inc., as Agent
(the "Agent").
W I T N E S S E T H:
WHEREAS, Bank of America, N.A. ("BofA") has heretofore made a
certain loan to, inter alia, the Borrowers and the outstanding principal balance
of such loan has been re-evidenced by (i) that certain Replacement Term Loan
Note in the principal amount of $5,000,000 of even date herewith and (ii) that
certain Replacement Term Loan Note in the principal amount of $2,500,000 of even
date herewith (such Replacement Term Loan Notes being collectively referred to
as the "BofA Note"); and
WHEREAS, the Borrowers have executed that certain Term Loan
Note of even date herewith in favor of ▇▇▇▇▇▇▇ in the principal amount of
$1,000,000 (the "▇▇▇▇▇▇▇ Note")
and the Guarantors have executed that certain Guaranty of even date herewith in
respect of the ▇▇▇▇▇▇▇ Note (the "▇▇▇▇▇▇▇ Guaranty");
WHEREAS, ▇▇▇▇▇▇▇, LJH and JII have guaranteed the payment and
performance of certain of the indebtedness evidenced by the BofA Note pursuant
to those certain Limited Guarantees identified on Exhibit A attached hereto and
made a part hereof (the "Shareholder Guarantees");
WHEREAS, the Secured Parties have required in connection with
the ▇▇▇▇▇▇▇ Note and the Shareholder Guarantees that the Borrowers and the
Guarantors (collectively, the "Grantors") grant security interests in favor of
each of the Secured Parties in order to secure the indebtedness of the Grantors
under and with respect to (i) the ▇▇▇▇▇▇▇ Note, and (ii) in the event ▇▇▇▇▇▇▇,
LJH and/or JII are subrogated to the rights of BofA with respect to the
indebtedness evidenced by the BofA Note by virtue of the performance of their
obligations under the Shareholder Guarantees, their resultant claims against the
Grantors; and
WHEREAS, the Grantors have agreed to grant such security
interests in favor of the Secured Parties in accordance with the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the premises set forth
herein and in order to induce (i) ▇▇▇▇▇▇▇ to ▇▇▇▇▇ the loan evidenced by the
▇▇▇▇▇▇▇ Note, and (ii) ▇▇▇▇▇▇▇, LJH and JII to enter into the Shareholder
Guarantees, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby conclusively acknowledged, each Grantor hereby
agrees with the Secured Parties, for each of their benefit, as follows:
SECTION 1. Grant of Security. Each Grantor hereby grants to
each of the Secured Parties, as security for (i) the indebtedness of the
Borrowers under the ▇▇▇▇▇▇▇ Note, and (ii) in the event ▇▇▇▇▇▇▇, LJH and/or JII
are subrogated to the rights of BofA with respect to the indebtedness evidenced
by the BofA Note by virtue of the performance of their obligations under the
Shareholder Guarantees, their resultant claims against the Grantors
(collectively, the "Obligations"), a third priority security interest
(subordinate to the the first priority security interest granted to the Agent
for the benefit of the Holders and Citicorp USA, Inc. and to the second priority
security interest granted to the Agent for the benefit of BofA) in all of such
Grantor's right, title and interest in and to the following, in each case
whether now owned or existing or hereafter acquired by it or arising and however
and wherever arising or located (the "Collateral"):
(a) Equipment;
(b) Inventory;
(c) Receivables;
(d) General Intangibles;
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(e) all chattel paper, all instruments, including, without
limitation, all notes evidencing intercompany loans, and all bills of lading,
warehouse receipts and other documents of title;
(f) all Property and interests in property of such Grantor
which may now be in or may hereafter come into the possession, custody or
control of any of the Secured Parties, or any agent or affiliate of any of the
Secured Parties, in any way or for any purpose (whether for safekeeping,
deposit, custody, pledge, transmission, collection or otherwise), and all rights
and interests of such Grantor in respect of any and all (i) drafts, letters of
credit, stocks, bonds, and debt and equity Securities and investment property,
whether or not certificated, and warrants, options, puts and calls and other
rights to acquire or otherwise relating to the same, (ii) interest rate,
currency exchange, and hedging contract agreements, including, without
limitation, cap, collar, floor, forward and similar agreements and interest rate
protection agreements, (iii) cash and cash equivalents, and (iv) proceeds of
loans, advances and other financial accommodations, including, without
limitation, the loan represented by the ▇▇▇▇▇▇▇ Note, and all other personal
property and interests in personal property of such Grantor not specifically
included in Sections 1(a) through 1(e) above; and
(g) all accessions and additions to, substitutions and
documents for, and replacements, proceeds and products of any of the foregoing
Collateral, and all payments under insurance (whether or not any Secured Party
is the loss payee thereof), and any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral, to the extent not otherwise included.
Without limiting the generality of the foregoing, the Liens
and security interests granted in this Agreement secure, without limitation, the
payment of all amounts which constitute part of the Obligations and would be
owed by any Grantor to any Secured Party, but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Grantor.
Notwithstanding anything herein to the contrary, it is
expressly understood and agreed that nothing herein or in any other agreement
between the parties shall be deemed to grant the Secured Parties a security
interest in and to any collateral subject to a lien under the TROL Documents,
including but not limited to any fixtures, or any personal property that may be
deemed fixtures, situated at the premises located at ▇▇▇▇/▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
SECTION 2. Grantor Remains Liable. Anything herein to the
contrary notwithstanding, (a) each Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by any
Secured Party of any of the rights hereunder shall not release any Grantor from
any of its duties or obligations under the contracts and agreements included in
the Collateral, and (c) none of the Secured Parties shall have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall any of the Secured Parties be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment in which a security
interest is granted hereunder.
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SECTION 3. Representations and Warranties. Each Grantor
represents and warrants as follows with respect to itself and the Collateral
pledged hereunder:
(a) All of its Inventory and Equipment is located at the
places specified on Exhibit B attached hereto and made a part hereof, except for
Inventory in transit and Inventory and Equipment at other locations for repair,
overhaul or modification, provided that Inventory and Equipment may be moved to
other locations in accordance with Section 5(a). All of its Inventory which is
imported from a location outside the United States arrives at one of the ports
or other locations identified on Exhibit B, if any. If any location of its
Inventory or Equipment is subject to a lease or license, or any sublease,
mortgage or similar instrument, the name and address of each licensor, lessor,
sublessor, mortgagor, lessee, licensee, sublessee and/or mortgagee (other than
such Grantor) is set forth on Exhibit B below the address of such location or on
a notice delivered to the Secured Parties pursuant to Section 5(a). The name and
address of each bailee, processor, warehouseman, consignee or other Person in
possession of any of the Inventory or Equipment (each such Person being a
"Bailee") on the date hereof, other than carriers and shippers of Inventory in
transit and Inventory and Equipment at other locations for repair, overhaul or
modification, is set forth on Exhibit B, together with the address of the
location where such Inventory or Equipment is or may be held. Except as
otherwise indicated on Exhibit B, no Bailee (other than a Bailee identified on
Exhibit B as being a consignee or a Bailee in possession of its Inventory or
Equipment for purposes of repair, overhaul or modification) in possession of any
of the Inventory or Equipment conducts a business at the location of such
Inventory or Equipment other than a business in the nature of warehousing or
transporting goods for others. In the event that any of its Inventory is in the
possession of a Bailee, such Inventory shall not be evidenced by a negotiable
instrument or document.
(b) The principal place of business and chief executive office
of each Grantor are located at the address first specified above for each
Grantor or at such other address as a respective Grantor may designate in
accordance with Section 6, and all records concerning its Receivables are
located at the addresses specified on Exhibit C attached hereto and made a part
hereof or at such other addresses as any Grantor may designate in accordance
with Section 6. Each Grantor will hold and preserve such records and will permit
representatives of the Secured Parties at any time to inspect, copy and make
abstracts of such records. The originals of all chattel paper that evidence
Receivables have been delivered to the Secured Parties.
(c) Each Grantor has good, indefeasible and merchantable title
to its respective Collateral. Each Grantor is the legal and beneficial owner of
its respective Collateral free and clear of any Lien, except for the security
interest created by this Agreement and Liens permitted under Section 10.03 of
the Credit Agreement. Except as identified on Exhibit D attached hereto and made
a part hereof, no financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording office on
the date hereof, except such as may have been filed in favor of the Agent
relating to the Credit Agreement or in favor of the Secured Parties relating to
this Agreement.
(d) The correct name of each Grantor on the date hereof is
that set forth on the signature pages hereof and no Grantor has any other
corporate or fictitious name and has not, during the five (5) years immediately
preceding the date of this Agreement, (i) except as set forth on Exhibit E
attached hereto and made a part hereof, been known by or used any other
corporate
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or fictitious name in the ordinary course of its business; (ii) merged or
consolidated with any other Person which is or was known by or uses or used any
other corporate, partnership or fictitious name in the ordinary course of its
business; or (iii) except as set forth on Exhibit E, acquired assets from any
other Person or operating division thereof which is or was known by or uses or
used any other corporate, partnership or fictitious name to the extent that the
transfer of such assets by such Person or operating division is outside of the
ordinary course of such Person's or operating division's business. No Grantor
will change its name, identity or corporate structure in any manner unless it
shall have given the Secured Parties the same notice required to be given to the
Agent as described in Section 10.14 of the Credit Agreement and certified to the
Secured Parties that all filings reflecting such new name, identity or corporate
structure have been made which are necessary or appropriate to preserve the
perfection of the security interests described herein.
(e) This Agreement, together with the financing statements
listed on Exhibit F attached hereto and made a part hereof filed in the
jurisdictions identified on Exhibit F, upon the giving of value for the benefit
of the Grantors by the Secured Parties, creates a valid and perfected third
priority security interest in the Collateral (except for Collateral held by a
Bailee for purposes of repair, overhaul or modification), securing the payment
and performance of the Obligations, and all such filings and other actions
necessary or desirable to perfect and protect such security interest have been
duly made or taken.
(f) No consent of any other Person and no authorization,
approval or other action by, and no notice to or filing with, any Governmental
Authority is required (i) for the grant by any Grantor of the security interest
granted hereby or for the execution, delivery or performance of this Agreement
by any Grantor, (ii) for the perfection or, except for the filing of the
appropriate continuation statements with respect to the financing statements
listed on Exhibit F, maintenance of the security interest created hereby
(including the maintenance of the first priority nature of such security
interest) or (iii) for the exercise by the Secured Parties of their respective
rights and remedies hereunder.
SECTION 4. Further Assurances.
(a) Each Grantor agrees that from time to time, at the expense
of such Grantor, such Grantor will promptly execute and deliver all further
instruments and documents (including, without limitation, control agreements in
form and substance reasonably satisfactory to a majority of the Secured Parties
with respect to all letter of credit rights, electronic chattel paper, deposit
accounts, and accounts with securities intermediaries), and take all further
action which may be necessary or desirable in the opinion of a majority of the
Secured Parties or their respective counsel, or that a majority of the Secured
Parties may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby and enable the Secured
Parties to exercise and enforce their respective rights and remedies hereunder
with respect to any Collateral, and such Grantor shall in any event take such
action as may be required to maintain the truthfulness and accuracy of the
representations and warranties contained in Section 3. Without limiting the
generality of the foregoing: (i) each Grantor shall ▇▇▇▇ conspicuously each
"document," as defined in Section 9-102(a)(30) of the Uniform Commercial Code of
the state in which the collateral is located or deemed located, included in the
Inventory and each chattel paper included in the Receivables and, at the request
of a majority of the
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Secured Parties, each of its records pertaining to the Collateral with a legend,
in form and substance satisfactory to a majority of the Secured Parties,
indicating that such document, chattel paper or other Collateral is subject to
the security interest granted hereby; (ii) in the event any Grantor acquires any
Collateral with respect to which a lien may be recorded with the Federal
Aviation Administration or any successor or replacement agency, such Grantor
shall immediately notify the Secured Parties and such Grantor shall, at the
request of a majority of the Secured Parties, promptly execute and deliver to
the Secured Parties, such notices, security agreements and other documents as
may be required (as determined by a majority of the Secured Parties in their
sole discretion) to evidence, record and perfect the Secured Parties' Lien with
respect to such Collateral; (iv) in the event that any Grantor has accounts with
respect to which the account debtor is the United States of America or any
department, agency or instrumentality thereof (all such accounts being
hereinafter referred to as "Government Receivables"), such Grantor shall, at the
request of a majority of the Secured Parties, with respect to such Government
Receivables, promptly comply with the Assignment of Claims Act of 1940, as
amended (31 U.S.C. ss. 3727 et seq.), and shall promptly deliver to the Secured
Parties evidence of such compliance, which evidence shall be in form and
substance satisfactory to a majority of the Secured Parties in their sole
discretion; (v) each Grantor shall execute and file such financing and
continuation statements, and amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as a majority of the Secured
Parties may request, in order to perfect and preserve the security interest
granted or purported to be granted hereby; and (vi) each Grantor shall obtain
and deliver to the Secured Parties notices, agreements (including, without
limitation, subordination agreements) and other documents reasonably requested
by a majority of the Secured Parties for the purpose of giving advice of and
perfecting the Liens granted to the Secured Parties for their respective benefit
and establishing the senior priority, if any, of the Secured Parties' respective
security interest over such other parties' rights and interests in respect of
Equipment, Inventory or other Collateral held in the possession of, Bailees,
licensors, lessors, mortgagees or other third parties, and shall use its best
efforts to cause such third parties (collectively, "Third Parties") to
acknowledge or consent to such notices, agreements and other documents.
(b) Each Grantor hereby authorizes the Secured Parties to file
one or more financing and continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of such
Grantor. Each Grantor hereby agrees that a photocopy or other reproduction of
this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(c) Each Grantor hereby agrees that, upon the occurrence and
during the continuation of an Event of Default, the Grantor will not, without
the prior written consent of a majority of the Secured Parties, except in the
ordinary course of business and for amounts which are not material to such
Grantor in the aggregate, (i) grant any extension of the time of payment of any
of the Collateral or compromise, compound or settle the same for less than the
full amount thereof; (ii) release, wholly or partly, any Person liable for the
payment thereof; or (iii) allow any credit or discount whatsoever thereon other
than trade discounts granted in the ordinary course of business.
(d) Each Grantor hereby agrees to advise the Secured Parties
promptly, in reasonable detail, of (i) all material Liens and claims made by or
asserted against any or all of the
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Collateral (other than Liens listed on Exhibit D hereto), and (ii) the
occurrence of any other event which would have a material adverse effect on the
Secured Parties' Liens on, or interest in, the Collateral or would otherwise
have a Material Adverse Effect.
SECTION 5. Covenants Regarding Equipment and Inventory.
(a) Each Grantor shall keep its Equipment and Inventory,
except for Inventory in transit and Inventory and Equipment at other locations
for repair, overhaul or modification, at the locations specified on Exhibit B
or, provided that ten (10) Business Days' prior written notice has been
delivered to the Secured Parties, at such other places in jurisdictions where
all actions required by Section 4 shall have been taken with respect to such
Equipment and Inventory.
(b) If any Equipment or Inventory is in the possession or
control of any Third Party or any of agent of a Grantor, such Grantor shall
notify such Third Party or agent of the Secured Parties' security interest in
such Equipment or Inventory and, upon the request of a majority of the Secured
Parties following the occurrence and during the continuation of an Event of
Default, direct such Third Party or agent to hold all such Equipment or
Inventory for the Secured Parties' account and subject to the Secured Parties'
instructions.
SECTION 6. Covenants Regarding Receivables and General
Intangibles. Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables and the General Intangibles at the location(s) specified on Exhibit
C or, provided that thirty (30) days' prior written notice has been delivered to
the Secured Parties, at any other locations in a jurisdiction where all actions
required by Section 4 shall have been taken with respect to its Receivables and
General Intangibles.
SECTION 7. Secured Parties Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Secured Parties as its attorney-in-fact,
with full authority in the place and stead of such Grantor and in the name of
such Grantor or otherwise, from time to time in the discretion of a majority of
the Secured Parties, to take any action and to execute any instrument which a
majority of the Secured Parties may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, upon the
occurrence and during the continuation of an Event of Default:
(a) to ask, demand, collect, ▇▇▇ for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in connection with any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) above;
(c) to file any claims or take any action or institute any
proceedings which a majority of the Secured Parties may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Secured Parties with respect to any of the Collateral;
(d) to receive, open and dispose of all mail addressed to such
Grantor; and
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(e) to take any other action necessary to operate such
Grantor's business.
Each Grantor hereby ratifies all that such attorney-in-fact shall lawfully do or
cause to be done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable.
SECTION 8. Secured Parties May Perform. If any Grantor fails
to perform any agreement contained herein, the Secured Parties may themselves
perform, or cause performance of, such agreement, and the expenses of the
Secured Parties incurred in connection therewith shall be payable by such
Grantor to the relevant Secured Party upon demand by such Secured Party.
SECTION 9. The Secured Parties' Rights and Duties. The powers
conferred on the Secured Parties hereunder are solely to protect their interest
in the Collateral and shall not impose any duty upon any of them to exercise any
such powers. Except for the safe custody of any Collateral in their possession
and the accounting for moneys actually received by them hereunder, none of the
Secured Parties shall have any duty as to any Collateral. Any action taken or
omitted to be taken by the Secured Parties or any one of them in connection with
any of the Collateral shall not result in any liability of any Secured Party to
any Grantor unless such action or omission shall be determined by a court of
competent jurisdiction to have arisen solely out of the gross negligence or
willful misconduct of such Secured Party. The Secured Parties may exercise any
of their respective rights and execute any of their respective duties hereunder
by or through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its rights and duties hereunder.
SECTION 10. Insurance and Insurance Proceeds.
(a) Each Grantor shall maintain in full force and effect the
insurance policies and programs listed on Schedule 1 hereto or substantially
similar policies and programs or other policies and programs as are acceptable
to a majority of the Secured Parties. All such policies and programs shall be
maintained with insurers acceptable to a majority of the Secured Parties. Each
certificate and policy relating to Property damage, boiler and machinery and/or
business interruption coverage shall contain an endorsement, in form and
substance acceptable to the Secured Parties, showing loss payable as their
interests may appear to the Secured Parties, and naming the Secured Parties as
additional insureds under such policy. Each certificate and policy relating to
coverage other than the foregoing shall, if required by a majority of the
Secured Parties, contain an endorsement naming the Secured Parties as additional
insureds under such policy. Such endorsement or an independent instrument
furnished to the Secured Parties shall provide that the insurance companies will
give the Secured Parties at least thirty (30) days' written notice before any
such policy or policies of insurance shall be altered adversely to the interests
of the Secured Parties or canceled and that no act, whether willful or
negligent, or default of any Grantor or any other Person shall affect the right
of the Secured Parties to recover under such policy or policies of insurance in
case of loss or damage. In the event any Grantor at any time or times hereafter
shall fail to obtain or maintain any of the policies or insurance required
herein or to pay any premium in whole or in part relating thereto, then the
Secured Parties, without waiving or releasing any of the Obligations, or
resulting Event of Default, may at any time or times thereafter (but shall be
under no obligation to do so) obtain and maintain such policies of insurance and
pay such premiums and take any other action with respect thereto
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which a majority of the Secured Parties deems advisable. All sums so disbursed
by the Secured Parties shall be part of the Obligations, secured by the terms of
this Agreement.
(b) Each Grantor hereby directs all insurers under policies of
Property damage, boiler and machinery and business interruption insurance
relating to the Property to pay all proceeds payable under such policies
directly to the Secured Parties. In no case shall such proceeds be payable to
any Grantor or any Grantor and the Secured Parties. The Secured Parties shall,
upon receipt of such proceeds, apply all of the proceeds so received in
repayment of the Obligations in the manner set forth in that certain Agreement
of even date herewith amongst the Secured Parties. Notwithstanding the
foregoing, in the event proceeds of insurance received by the Secured Parties
under property damage, boiler and machinery policies or business interruption
insurance policies (i) are less than $500,000 or (ii) constitutes Replacement
Proceeds, Secured Parties shall, provided that no Potential Event of Default or
Event of Default shall have occurred and be continuing unwaived, upon receipt of
such proceeds, remit the amount so received to the applicable Grantor.
SECTION 11. Inspection of Property; Books and Records;
Discussions. Each Grantor shall permit any authorized representative(s)
designated by the Secured Parties to visit and inspect, whether by access to
such Grantor's MIS or otherwise, any of the Property, to examine, audit, check
and make copies of such Grantor's financial and accounting records, books,
journals, orders, receipts and any correspondence (other than privileged
correspondence with legal counsel) and other data relating to its business or
the transactions contemplated or referenced in the Credit Agreement (including,
without limitation, in connection with environmental compliance, hazard or
liability) and to discuss its affairs, finances and accounts with its management
personnel and independent certified public accountants, all upon reasonable
written notice and at such reasonable times during normal business hours, as
often as may be reasonably requested by a majority of the Secured Parties. Each
such visitation and inspection shall be at such Grantor's expense. Each Grantor
shall keep and maintain in all material respects on its MIS and otherwise proper
books of record and account in which entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its business and
activities, including, without limitation, transactions and other dealings with
respect to the Collateral. If an Event of Default has occurred and is continuing
and the Obligations have been accelerated pursuant to Section 12.02(a) of the
Credit Agreement, each Grantor, upon request by a majority of the Secured
Parties in connection with efforts to enforce the rights and remedies of the
Secured Parties in respect of the Obligations shall turn over any such records
to the Secured Parties or its representatives; provided, however, that the
Grantors may, in their discretion, retain copies of such records.
SECTION 12. Remedies. Subject to the terms of the
Intercreditor Agreement (as defined below), if any Event of Default shall have
occurred and be continuing:
(a) The Secured Parties may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party upon
default under the Uniform Commercial Code in effect in the State of Florida at
that time (the "Uniform Commercial Code") (whether or not the Uniform Commercial
Code applies to the affected Collateral). The Secured Parties also may (i)
without notice, demand or legal process of any kind, all of which each Grantor
hereby waives to the
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extent permitted by applicable law, at any time or times enter such Grantor's
premises and either (x) take physical possession of the Collateral and maintain
such possession on such Grantor's premises and continue the operation of such
Grantor's business at such premises, at no cost to the Secured Parties, or (y)
remove the Collateral or any part thereof, to such other places as the Secured
Parties may desire, (ii) require the Grantors to, and each Grantor hereby agrees
that it will at its own expense and upon request of a majority of the Secured
Parties forthwith, assemble all or part of the Collateral as directed by the
Secured Parties and make it available to the Secured Parties at a place to be
designated by the Secured Parties which is reasonably convenient to both
parties, and (iii) without notice, except as specified below, sell, lease,
assign, grant an option or options to purchase or otherwise dispose of the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Secured Parties' offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Secured Parties may deem
commercially reasonable. The Secured Parties agree that they will notify the
applicable Grantor of the intended disposition of any of the Collateral owned by
it within a commercially reasonable time prior to such intended disposition, the
time of delivery of which notice the parties agree shall in no event be required
to be greater than five (5) Business Days. The Secured Parties shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Secured Parties may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The Secured Parties are hereby granted a license or other right to
use, without charge, the Grantors' trademarks, registered trademarks, trademark
applications, service marks, registered service marks, service ▇▇▇▇
applications, patents, patent applications, trade names, rights of use of any
name, labels, fictitious names, inventions, designs, trade secrets, computer
programs, software, printouts and other computer materials, goodwill,
registrations, copyrights, copyright applications, permits, licenses,
franchises, customer lists, credit files, correspondence, and advertising
materials, and any Property of a similar nature, as it pertains to the
Collateral, or any rights to any of the foregoing, in completing production of,
advertising for sale, and selling any Collateral or in operating any Grantor's
business, and any Grantor's rights under all leases, licenses, consignment, and
franchise agreements shall inure to the Secured Parties' benefit.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GRANTOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE BY THE SECURED PARTIES OF THEIR RIGHTS TO (I) REPOSSESS THE
COLLATERAL WITHOUT JUDICIAL PROCESS OR (II) REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Any cash held by the Secured Parties as Collateral and all
cash proceeds received by the Secured Parties in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Secured Parties, be held by the Secured Parties as
Cash Collateral for, and/or then or at any time thereafter be applied in whole
or in part by the Secured Parties for their benefit, all or any part of the
Obligations, subject to the provisions of the Credit Agreement and the
Intercreditor Agreement governing such cash, proceeds, or other realization upon
the Collateral and the application thereof.
10
(d) The Secured Parties shall have the right, upon notice to
the applicable Grantor of its intention to do so, to notify the account debtors
or obligors under any Receivables of the assignment of such Receivables to the
Secured Parties and to direct such account debtors or obligors to make payment
of all amounts due or to become due to such Grantor thereunder directly to the
Secured Parties and, upon such notification and at the expense of such Grantor,
to enforce collection of any such Receivables, and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by any Grantor of the
notice from the Secured Parties referred to in the preceding sentence, (i) all
amounts and proceeds (including instruments) received by such Grantor in respect
of such Receivables shall be received in trust for the benefit of the Secured
Parties hereunder, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Secured Parties in the same form as so
received (with any necessary endorsement) to be held as Cash Collateral and
shall be applied as provided by Section 12(c) above, and (ii) no Grantor shall
adjust, settle or compromise the amount or payment of any Receivable, release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon. In any suit, proceeding or action brought by the Secured
Parties under any account comprising part of the Collateral, each Grantor will
save, indemnify and keep the Secured Parties harmless from and against all
expense, loss or damages suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by any Grantor of any obligation or arising
out of any other agreement, Indebtedness or liability at any time owing to or in
favor of such obligor or its successors from any Grantor, and all such
obligations of the Grantors shall be and shall remain enforceable against and
only against the Grantors and shall not be enforceable against the Secured
Parties.
SECTION 13. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by parties hereto, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 14. Notices, Etc. All notices and other communications
provided for hereunder shall be given in the manner set forth in the Credit
Agreement to the addresses provided by the parties to one another from time to
time, except that any notice provided by a Grantor to a Secured Party hereunder
shall be effective only upon receipt thereof by such Secured Party.
SECTION 15. Continuing Security Interest; Termination;
Payments Set Aside. This Agreement shall create a continuing security interest
in the Collateral and shall (i) remain in full force and effect until
indefeasible payment in full in cash of the Obligations and the Grantors'
obligations with respect to the ▇▇▇▇▇▇▇ Note and the Shareholder Guarantees or
otherwise terminated, in writing, by the Secured Parties, (ii) be binding upon
the Grantors and the Secured Parties, and their respective successors and
assigns, and (iii) inure to the benefit of, and be enforceable by, the Grantors,
the Secured Parties, and their respective successors, transferees and assigns.
Upon the indefeasible payment in full in cash of the Obligations, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to such Grantor. To the extent that any Grantor makes a payment or
payments to the Secured Parties or any of them or the Secured Parties or any of
them enforces its security interests or exercises its
11
rights of set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or set-off had not occurred.
SECTION 16. Intercreditor Agreement; Subordination. This
Agreement is expressly subject and subordinate to the rights of the Agent and
the Lenders under the Credit Agreement and the security interests arising
therefrom. Notwithstanding anything in this Agreement to the contrary, each of
the Secured Parties acknowledges and agrees that all of their respective rights
and remedies in and to the Collateral shall be subject in all respects to that
certain Intercreditor Agreement of even date herewith between the Secured
Parties, the Agent, Citicorp USA, Inc., and BofA (the "Intercreditor
Agreement"), and none of the Secured Parties shall take any actions against the
Collateral or any part thereof in contravention of the terms of the
Intercreditor Agreement.
SECTION 17. Survival of Representations and Warranties. Each
Grantor covenants, warrants, and represents to the Secured Parties that all
representations and warranties of the Grantors contained in this Agreement are
true at the time of the Grantors' execution of this Agreement, shall survive the
execution, delivery and acceptance hereof by the parties hereto and shall
continue in effect until all of the Obligations have been paid in full in cash
or otherwise terminated or cancelled.
SECTION 18. Governing Law; Terms; Severability.
(a) This Agreement shall be interpreted, and the rights and liabilities
of the parties hereto, determined in accordance with, the laws of the State of
Florida, except as required by mandatory provisions of law and except to the
extent that the validity or perfection of the security interest hereunder, or
any of the remedies hereunder, in respect of any particular Collateral, may be
governed by the laws of a jurisdiction other than the State of Florida.
(b) Unless otherwise defined herein or in the Credit Agreement, terms
used in Article 9 of the Uniform Commercial Code are used herein as therein
defined.
(c) If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 19. No Waiver; Remedies. No failure on the part of the
Secured Parties to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
12
SECTION 20. Marshalling; Recourse to Security. None of the
Secured Parties shall be under any obligation to ▇▇▇▇▇▇▇▇ any assets in favor of
any Grantor or any other party or against or in payment of any or all of the
Obligations. Recourse to security shall not be required at any time.
SECTION 21. Construction.
(a) The works "hereof", "herein" and "hereunder" and words of
like import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement and section references are
to this Agreement unless otherwise specified.
(b) All terms defined in this Agreement in the singular shall
have comparable meanings when used in the plural, and vice versa, unless
otherwise specified.
(c) Except as otherwise explicitly provided in this Agreement,
to the extent a conflict or inconsistency exists between the terms and
provisions of this Agreement and the terms and provisions of the Intercreditor
Agreement, the terms and provisions of the Intercreditor Agreement shall govern.
(d) Except as provided in subsection (c) above, this Agreement
represents the final agreement of the Grantors and the Secured Parties with
respect to the matters contained herein, subject to the terms of the
Intercreditor Agreement, and may not be contradicted by evidence of prior or
contemporaneous agreements, or subsequent oral agreements, between any Grantor
and any of the Secured Parties.
SECTION 22. Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
SECTION 23. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute one
and the same agreement.
{Signature Pages to follow}
13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
AEROCELL STRUCTURES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AIRCRAFT INTERIOR DESIGN, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
TRIAD INTERNATIONAL MAINTENANCE
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
TIMCO ENGINE CENTER, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AVIATION SALES DISTRIBUTION SERVICES
COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AVS/M-1, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AVS/M-2, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AVS/M-3, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AVS/CAI, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
2
AVIATION SALES LEASING COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
WHITEHALL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AVIATION SALES PROPERTY
MANAGEMENT CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
AVSRE, L.P.
by Aviation Sales Property Management Corp.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
HYDROSCIENCE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
3
TIMCO ENGINEERED SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
TIMCO AVIATION SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
▇▇▇▇▇ INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Title: President
------------------------------
LJH, LTD.
By: DLH Management, LLC, its general
partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Title: President
-------------------------
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇, Individually
4