CREDIT AND SECURITY AGREEMENT
Dated as of November 2, 2000
PEMCO AVIATION GROUP, INC., a Delaware corporation doing business as Pemco
Engineers, Inc., both for itself and as Agent for the other Borrowers;
PEMCO AEROPLEX, INC., an Alabama corporation doing business as Pemco World
Air Services; SPACE VECTOR CORPORATION, a Delaware corporation; and PEMCO
AIR SERVICES SYSTEM, INC., a Colorado corporation doing business as Pemco
Air Support Services, Inc. (as more particularly defined below, each, a
"Borrower" and collectively, the "Borrowers"), and ▇▇▇▇▇ FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree as
follows:
ARTICLE I
Definitions
Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP; and
(3) the word "consolidated" with reference to financial data shall mean
the combined financial data of all entities for which such financial data
would be consolidated in accordance with GAAP, whether or not such
entities are Borrowers under this Agreement.
"Accounts" for a Borrower means all of such Borrower's accounts, as such
term is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to such Borrower
arising out of the sale or lease of goods or rendition of services by such
Borrower on an open account or deferred payment basis. In addition to the
foregoing, the following shall be considered "Accounts" for purposes of
this Agreement: (a) all unbilled amounts that are fully earned by a
Borrower for the sale of goods or rendition of services to any unit of the
United States government and are immediately billable by such Borrower
(but for the fact that such Borrower has not yet received a Form 30 or a
Form DD-250 from such governmental unit), net of any credits, and (b) all
unbilled amounts that are fully earned by a Borrower for the sale of goods
or rendition of services under any commercial contract and are immediately
billable by such Borrower, net of any credits, provided that such amounts
are secured by a perfected possessory mechanics lien in the aircraft,
equipment, or parts for which such goods or services are being provided in
an amount equal to the amount immediately billable, net of any credits.
"Advance" means a Revolving Advance, a Term A Advance, a CapEx Advance, a
Term B Advance, or a Discretionary Advance.
"Affiliate" or "Affiliates" for any Borrower means any Person controlled
by, controlling or under common control with such Borrower, including
(without limitation) any Subsidiary of such Borrower. For purposes of this
definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"After-Tax Net Income" for a Borrower means such Borrower's after-tax net
income less extraordinary gains, as determined in accordance with GAAP.
"Aggregate Availability" means the difference of (i) the Aggregate
Borrowing Base and (ii) the sum of (A) the outstanding principal balance
of the Revolving Note and (B) the Aggregate L/C Amount.
"Aggregate Borrowing Base" means the lesser of (a) the Maximum Line or (b)
the sum of the Borrowing Bases of each Borrower.
"Aggregate L/C Amount" means the sum of the L/C Amounts of each Borrower.
"Agreement" means this Credit and Security Agreement, as amended,
supplemented or restated from time to time.
"Availability" for a Borrower means the difference of (i) such Borrower's
Borrowing Base and (ii) the sum of (A) the outstanding and unpaid
Revolving Advances made to such Borrower and (B) such Borrower's L/C
Amount.
"Banking Day" means a day other than a Saturday, Sunday or other day on
which banks are generally not open for business in Minneapolis, Minnesota
and Denver, Colorado.
"Book Net Worth" for a Borrower means the aggregate of the common and
preferred stockholders' equity in such Borrower, determined in accordance
with GAAP.
"Borrowing Agent" means Pemco Aviation Group, Inc., a Delaware
corporation.
"Borrowers" means each of Pemco Aviation Group, Inc., a Delaware
corporation; Pemco Aeroplex, Inc., an Alabama corporation; Space Vector
Corporation, a Delaware corporation; and Pemco Air Services System, Inc.,
a Colorado corporation; provided, however, that for all purposes under
this Agreement other than the representations and warranties of Sections
5.1, 5.2, 5.3, 5.4, 5.6, 5.8, 5.9, 5.10, 5.14, 5.16, 5.17, and 6.8, the
Dothan and Birmingham divisions of Pemco Aeroplex, Inc. shall be treated
as separate Borrowers.
"Borrowing Base" for a Borrower means, at any time the lesser of:
(1) the Maximum Line; or
(2) subject to change from time to time in the Lender's sole discretion,
the sum of:
(1) 85% of such Borrower's Eligible Accounts other than Reduced Rate
Unbilled Accounts, plus
(2) 50% of such Borrower's Eligible Accounts consisting of Reduced
Rate Unbilled Accounts, plus
(3) 50% of such Borrower's Eligible Inventory.
"CapEx Advance" has the meaning given in Section 2.6(b).
"CapEx Maximum Line" initially means $3,100,000, which amount may be
increased or decreased in accordance with Section 2.19, in which event it
means the amount to which said amount is changed.
"CapEx Note" means the promissory note of the Borrowers, payable to the
order of the Lender in substantially the form of Exhibit C hereto, and any
note or notes issued in substitution therefor, as the same may hereafter
be amended, supplemented or restated from time to time.
"CapEx Note Consolidation Date" means the earliest to occur of the
following: (a) the first date on which the outstanding principal balance
of the CapEx Note is equal to the CapEx Maximum Line, or (b) October 31,
2001.
"Capital" means Book Net Worth plus Subordinated Debt.
"Capital Expenditures" for any Borrower for a period means any expenditure
of money by such Borrower for the lease, purchase or other acquisition of
any capital asset, whether payable currently or in the future, to the
extent such expenditure is required by GAAP to be capitalized on such
Borrower's balance sheet.
"Change in Control" shall mean (a) any Person or "group" (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange
Act of 1934, as amended), other than Existing Investors, shall at any time
have acquired direct or indirect beneficial ownership of 50% or more of
the outstanding Voting Stock of Parent; (b) occupation of a majority of
the seats (other than vacant seats) on the board of directors of Parent by
Persons who were neither (i) nominated by the current board of directors
of Parent nor (ii) appointed by directors so nominated; (c) a merger or
consolidation involving Parent; or (d) Parent shall cease to own, directly
or indirectly, 100% of the outstanding capital stock of any Borrower,
except as a result of a transaction permitted under Section 7.6 or 7.7.
For purposes of this definition, "Voting Stock" shall mean, with respect
to any Person, shares of capital stock of any class or kind of that Person
ordinarily (without regard to the occurrence of any contingency) having
the power to vote for the election of directors (or Persons performing
similar functions) of that Person.
"Change of Ownership" shall mean (a) any Person or "group" (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange
Act of 1934, as amended), other than Existing Investors, shall at any time
have acquired direct or indirect beneficial ownership of 50% or more of
the outstanding common stock of Parent on a fully-diluted basis.
"Collateral" for a Borrower means all of such Borrower's Equipment,
General Intangibles, Inventory, Receivables, Investment Property, all sums
on deposit in any Collateral Account, and any items in any Lockbox;
together with (i) all substitutions and replacements for and products of
any of the foregoing; (ii) proceeds of any and all of the foregoing; (iii)
in the case of all tangible goods, all accessions; (iv) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or
affixed to or used in connection with any tangible goods; (v) all
warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods; and (vi) all sums on deposit in the Special
Account.
"Collateral Account" for any Borrower means the Lender Account, as such
term is defined in such Borrower's Lockbox Agreement.
"Commitment" means the Lender's commitment to make Advances and to cause
the Issuer to issue Letters of Credit to or for the Borrowers' account
pursuant to Article II.
"Credit Facility" means the credit facility being made available to the
Borrowers by the Lender pursuant to Article II.
"Current Maturities of Long Term Debt" for a Borrower for a given period
means the amount of such Borrower's long-term debt and capitalized leases
which became due during the such period.
"Data License" means a license agreement between any Borrower and an
aircraft manufacturer or other Person whereby such manufacturer or Person
licenses the use of data and technical specifications to such Borrower.
"Debt" of any Person means all items of indebtedness or liability which in
accordance with GAAP would be included in determining total liabilities as
shown on the liabilities side of a balance sheet of that Person as at the
date as of which Debt is to be determined. For purposes of determining a
Person's aggregate Debt at any time, "Debt" shall also include the
aggregate payments required to be made by such Person at any time under
any lease that is considered a capitalized lease under GAAP.
"Debt Service Coverage Ratio" for a Borrower means the ratio of (i) the
sum of such Borrower's (A) Funds from Operations and (B) Interest Expense
minus (C) Unfinanced Capital Expenditures to (ii) the sum of such
Borrower's (A) Current Maturities of Long Term Debt and (B) Interest
Expense.
"Default" means an event that, with giving of notice or passage of time or
both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day of
any month during which an Event of Default has occurred and ending on the
date the Lender notifies the Borrowers in writing that such Event of
Default has been cured or waived.
"Default Rate" means, with respect to any Advances, an annual rate equal
to two percent (2%) over the rate otherwise applicable to such Advances,
which rate shall change when and as the otherwise-applicable rate changes.
"Discretionary Advance" has the meaning given in Section 2.6(d).
"Discretionary Advance Limit" means $1,900,000.
"Discretionary Advance Note" means the promissory note of the Borrowers,
payable to the order of the Lender in substantially the form of Exhibit E
hereto, and any note or notes issued in substitution therefor, as the same
may hereafter be amended, supplemented or restated from time to time.
"Discretionary Advance Period" means the period beginning on the later of
(a) April 30, 2001 or (b) the date that all of the Subordinated Debt owed
by the Borrower to Special Value Bond Fund is paid in full; and ending on
the Termination Date.
"Discretionary Reduction" means any of the following that is unilaterally
adopted by the Lender through the exercise of its sole discretion at any
time except during a Default Period: (A) a reduction (in accordance with
subsection (b) of the definition of Borrowing Base) in any advance rate
under any Borrower's Borrowing Base; (B) a disqualification (in accordance
with subsection (xiii) of the definition of Eligible Accounts) of any
Account that would otherwise have been an Eligible Account; or (C)
disqualification (in accordance with subsection (ix) of the definition of
Eligible Inventory) of any Inventory that would otherwise have been
Eligible Inventory. Notwithstanding the foregoing, neither of the
following shall be considered a Discretionary Reduction: (1) a reduction
in any advance rate solely with respect to a New Borrower which reduction
is enacted by written notice to the Borrowers within six months of the
Permitted Acquisition that resulted in the creation of such New Borrower,
or (2) any disqualification of Accounts or Inventory of any New Borrower
in accordance with categories established by the Lender by written notice
to the Borrowers within six months of the Permitted Acquisition that
resulted in the creation of such New Borrower.
"Discretionary Reduction Date" means any date on which the Aggregate
Borrowing Base is at least $2,000,000 less than it would have been had no
Discretionary Reductions been adopted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Accounts" for a Borrower means all unpaid Accounts of such
Borrower, net of any credits, except the following shall not in any event
be deemed Eligible Accounts:
(1) That portion of billed Accounts unpaid more than 90 days after the
invoice date, and that portion of unbilled Accounts that remains unbilled
for 60 days or longer;
(2) That portion of Accounts that is disputed or subject to a claim of
offset or a contra account;
(3) That portion of Accounts not yet earned by the delivery of goods or
rendition of services, as applicable, by such Borrower to the customer;
(4) Accounts owed by any unit of government, whether foreign or domestic
(provided, however, that there shall be included in Eligible Accounts that
portion of Accounts owed by such units of government for which such
Borrower has provided evidence satisfactory to the Lender that (A) the
Lender has a first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such unit of
government under all applicable laws);
(5) Accounts owed by an account debtor located outside the United States
which are not (A) backed by a bank letter of credit naming the Lender as
beneficiary or assigned to the Lender, in the Lender's possession and
acceptable to the Lender in all respects, in its sole discretion, (B)
covered by a foreign receivables insurance policy acceptable to the Lender
in its sole discretion, or (C) secured by a perfected possessory mechanics
lien in the aircraft, equipment, or parts for which the goods or services
on which such Account is based are being provided by a Borrower;
(6) Accounts owed by an account debtor that is insolvent, the subject of
bankruptcy proceedings or has gone out of business;
(7) Accounts owed by a shareholder, Subsidiary, Affiliate, officer or
employee of such Borrower;
(8) Accounts not subject to a duly perfected security interest in the
Lender's favor or which are subject to any lien, security interest or
claim in favor of any Person other than the Lender including without
limitation any payment or performance bond, except for any security
interest or lien that is expressly subordinated to the Security Interest
by means of a Subordination Agreement;
(9) That portion of Accounts that has been restructured, extended,
amended or modified;
(10) That portion of Accounts that constitutes advertising, finance
charges, service charges or sales or excise taxes;
(11) Accounts owed by an account debtor, regardless of whether otherwise
eligible, if 50% or more of the total amount due under Accounts from such
debtor is ineligible under clauses (i), (ii) or (ix) above;
(12) That portion of the aggregate Accounts of a single customer that
exceeds 15% of all Accounts of such Borrower; provided, however, that such
limitation (a) shall not apply to any customer that is a unit of the
United States government and (b) shall, for each of the customers listed
in the table below, mean the amount listed opposite such customer; and
CUSTOMER CONCENTRATION LIMIT
Southwest Airlines, Inc. 20%
United Air Lines, Inc. 20%
American Airlines, Inc. 20%
Continental Airlines, Inc. 20%
Northwest Airlines, Inc. 20%
America West Airlines, Inc. 20%
TWA-Trans World Airlines, Inc. 20%
Delta Air Lines, Inc. 20%
U S Airways, Inc. 20%
United Parcel Service of America, Inc. 20%
DHL International Inc. 20%
▇▇▇▇▇ Worldwide, a subsidiary of CNF, Inc. 20%
Federal Express Corporation 20%
(13) Accounts, or portions thereof, otherwise deemed ineligible by the
Lender in its sole discretion.
"Eligible Inventory" for a Borrower means all Inventory of such Borrower,
at the lower of cost or market value as determined in accordance with
GAAP; provided, however, that the following shall not in any event be
deemed Eligible Inventory:
(1) Inventory that is: in-transit; located at any warehouse, job site or
other premises not approved by the Lender in writing; located outside of
the states, or localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security interest in such
Inventory; covered by any negotiable or non-negotiable warehouse receipt,
▇▇▇▇ of lading or other document of title; on consignment from any Person;
on consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender;
(2) Supplies, packaging, maintenance parts or sample Inventory;
(3) That portion of work-in-process Inventory that is subject to offset
by progress payments or commercial deposits;
(4) Inventory that is damaged, obsolete, slow moving or not currently
saleable in the normal course of such Borrower's operations;
(5) Inventory that such Borrower has returned, has attempted to return,
is in the process of returning or intends to return to the vendor
thereof;
(6) Inventory that is perishable or live
(7) Inventory manufactured by such Borrower pursuant to a license (other
than a Data License) unless the applicable licensor has agreed in writing
to permit the Lender to exercise its rights and remedies against such
Inventory;
(8) Inventory that is subject to a security interest in favor of any
Person other than the Lender, except for any security interest or lien
that is expressly subordinated to the Security Interest by means of a
Subordination Agreement; and
(9) Inventory otherwise deemed ineligible by the Lender in its sole
discretion.
"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" of a Borrower means all of such Borrower's equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery, vehicles,
furniture, fixtures, manufacturing equipment, shop equipment, office and
recordkeeping equipment, parts, tools, supplies, and including
specifically (without limitation) the goods described in any equipment
schedule or list herewith or hereafter furnished to the Lender by such
Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Existing Investors" means (a) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇; (b) ▇▇▇▇▇▇▇ ▇. Gold;
(c) the parents, siblings and direct or indirect lineal descendants
(natural or adopted) of the Persons named in clauses (a) and (b) and the
spouses of such Persons; (d) the estates or legal representatives of the
Persons named in clauses (a) and (b); (e) trusts, partnerships, and
limited liability companies, in each case for the benefit of any of the
Persons named or described in clauses (a), (b), and (c); (f) Bank of
America, N.A.; (g) TMCT Ventures, L.P.; (h) MassMutual Life Insurance
Company; (i) MassMutual High Yield Partners II, LLC; (j) ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇; (k) ▇▇▇▇ ▇. ▇▇▇; (l) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇; (m) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇; and
(n) any Affiliate of any of the foregoing (including without limitation,
TCO/PSI, LLC, ▇▇▇▇▇▇▇▇▇▇ & Co., LLC, and Special Value Bond Fund).
"Funding Date" has the meaning given in Section 2.1.
"Funds From Operations" for a Borrower for a given period means the sum of
such Borrower's (i) After-Tax Net Income, (ii) depreciation and
amortization, (iii) deferred income taxes, and (iv) other non-cash items,
each as determined for such period in accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied on a basis
consistent with the accounting practices applied in the financial
statements described in Section 5.5. "General Intangibles" of a Borrower
means all of such Borrower's general intangibles, as such term is defined
in the UCC, whether now owned or hereafter acquired, including (without
limitation) all present and future patents, patent applications,
copyrights, trademarks, trade names, trade secrets, customer or supplier
lists and contracts, manuals, operating instructions, permits, franchises,
the right to use such Borrower's name, and the goodwill of such Borrower's
business.
"Guarantors" means Pemco Nacelle Services, Inc., a Colorado corporation;
Pemco World Air Services, Inc., a Colorado corporation; Pemco Capital
Corporation, a Colorado corporation; Precision Standard Corp., a Delaware
corporation; ▇▇▇▇▇ Holdings I Inc., a Delaware corporation; ▇▇▇▇▇ Holdings
II Inc., a Delaware corporation; and Air International Incorporated, a
Delaware corporation.
"Hazardous Substance" has the meaning given in Section 5.12.
"Interest Expense" for a Borrower means, for a given period, such
Borrower's total gross interest expense during such period (excluding
interest income), and shall in any event include, without limitation, (i)
interest expensed (whether or not paid) on all Debt, and (ii) the portion
of any capitalized lease obligation allocable to interest expense.
"Inventory" of a Borrower means all of such Borrower's inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, raw
materials, work in process, supplies or materials, whether acquired, held
or furnished for sale, for lease or under service contracts or for
manufacture or processing, and wherever located.
"Inventory Component Advances" means the difference between (a) the
Aggregate Borrowing Base and (b) all outstanding and unpaid Revolving
Advances existing in reliance on any Borrower's Eligible Accounts.
"Inventory Sublimit" means $12,000,000.
"Investment Property" of a Borrower means all of such Borrower's
investment property, as such term is defined in the UCC, whether now owned
or hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts, commodity
accounts, stocks, bonds, mutual fund shares, money market shares and U.S.
Government securities.
"Issuer" means the issuer of any Letter of Credit.
"L/C Amount" for a Borrower means the sum of (i) the aggregate face amount
of any issued and outstanding Letters of Credit issued to such Borrower
and (ii) the unpaid amount of the Obligation of Reimbursement of such
Borrower.
"L/C Application" for a Borrower means an application and agreement for
letters of credit in a form acceptable to the Issuer and the Lender.
"Letter of Credit" has the meaning specified in Section 2.2.
"Loan Documents" means this Agreement, the Notes and the Security
Documents.
"Lockbox" for a Borrower has the meaning given in such Borrower's Lockbox
Agreement.
"Lockbox Agreement" for a Borrower means the Lockbox and Collection
Agreement by and among such Borrower; ▇▇▇▇▇ Fargo Bank; Regulus West, LLC;
and the Lender, of even date herewith.
"Loss Covenant Month" shall mean January, February, April, May, July,
August, October, and November of each year.
"Maturity Date" means October 31, 2003; provided, however, that such date
may be extended by up to two additional one-year periods by mutual written
agreement of the Lender and the Borrowers.
"Maximum Line" means $20,000,000, unless said amount is reduced pursuant
to Section 2.12 or changed pursuant to Section 2.19, in which event it
means the amount to which said amount is reduced or changed.
"Minimum Interest Charge" has the meaning given in Section 2.8.
"New Borrower" means (a) a Borrower the equity interest of which was
acquired in a Permitted Acquisition and (b) an existing Borrower that
purchases assets in a Permitted Acquisition (but such a Borrower shall be
considered a New Borrower only with respect to such newly acquired
assets).
"New Unencumbered Equipment" of a Borrower means all Equipment of such
Borrower that (a) was purchased after January 1, 2000, (b) was not
included on the appraisal prepared by AccuVal Associates Incorporated of
Mequon, Wisconsin, which appraisal was transmitted to GMAC Commercial
Credit, LLC under cover of a letter dated April 24, 2000, and (c) is not
subject to any lien other than (i) the Security Interest and (ii) any
other security interest that is expressly subordinated to the Security
Interest by means of a Subordination Agreement.
"Note" means the Revolving Note, the Term A Note, the CapEx Note, the Term
B Note, and the Discretionary Advance Note, and "Notes" means all such
notes collectively.
"Obligations" means the Notes and each and every other debt, liability and
obligation of every type and description which any Borrower may now or at
any time hereafter owe to the Lender, whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it
arises in a transaction involving the Lender alone or in a transaction
involving other creditors of any such Borrower, and whether it is direct
or indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or sole, joint, several or joint
and several, and including specifically, but not limited to, the
Obligation of Reimbursement and all indebtedness of any Borrower arising
under this Agreement, the Notes, any L/C Application completed by any
Borrower, or any other loan or credit agreement or guaranty between any
Borrower and the Lender, whether now in effect or hereafter entered into.
"Obligation of Reimbursement" has the meaning given in Section 2.3(a).
"Parent" means Pemco Aviation Group, Inc., a Delaware corporation.
"Past-Due Payables" for a Borrower means accounts payable of such Borrower
that are 90 days or more past due.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for any
Borrower's employees and covered by Title IV of ERISA.
"Pre-Tax Net Income" of a Borrower means such Borrower's before-tax net
income less extraordinary gains, as determined in accordance with GAAP.
"Premises" means all premises where any Borrower conducts its business and
has any rights of possession, including (without limitation) the premises
described in Exhibit G attached hereto.
"Prime Rate" means the rate of interest publicly announced from time to
time by ▇▇▇▇▇ Fargo Bank, N.A.-San Francisco as its "prime rate" or, if
such bank ceases to announce a rate so designated, any similar successor
rate designated by the Lender.
"Receivables" for a Borrower means each and every right of such Borrower
to the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a rendering
of services, out of a loan, out of the overpayment of taxes or other
liabilities, or otherwise arises under any contract or agreement, whether
such right to payment is created, generated or earned by such Borrower or
by some other person who subsequently transfers such person's interest to
such Borrower, whether such right to payment is or is not already earned
by performance, and howsoever such right to payment may be evidenced,
together with all other rights and interests (including all liens and
security interests) which such Borrower may at any time have by law or
agreement against any account debtor or other obligor obligated to make
any such payment or against any property of such account debtor or other
obligor; all including but not limited to all present and future accounts,
contract rights, loans and obligations receivable, chattel papers, bonds,
notes and other debt instruments, tax refunds and rights to payment in the
nature of general intangibles.
"Reduced Rate Unbilled Accounts" means (a) all unbilled Accounts of Space
Vector Corporation and (b) all unbilled Accounts of the Dothan division of
Pemco Aeroplex, Inc. arising under its H3 helicopter contract with the
United States Navy.
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations thereunder, other than an event as to
which the notice requirement has been waived by regulation.
"Responsible Officers" of any Borrower means such Borrower's Chairman,
Chief Executive Officer, President, Secretary, Senior Vice President,
Chief Financial Officer, or Vice President of Finance (or any positions
that are replacements of any of the foregoing).
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Floating Rate" means an annual rate equal to the sum of the
Prime Rate plus one-half of one percent (0.5%), which annual rate shall
change when and as the Prime Rate changes.
"Revolving Note" means the revolving promissory note of the Borrowers,
payable to the order of the Lender in substantially the form of Exhibit A
hereto and any note or notes issued in substitution therefor, as the same
may hereafter be amended, supplemented or restated from time to time.
"Security Documents" means this Agreement, each Lockbox Agreement, each
Trademark Security Agreement, and any other document delivered to the
Lender from time to time to secure the Obligations, as the same may
hereafter be amended, supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Special Account" means a specified cash collateral account maintained by
a financial institution acceptable to the Lender in connection with
Letters of Credit, as contemplated by Section 2.4.
"Special Value Bond Fund" means Special Value Bond Fund, LLC, a Delaware
limited liability company.
"Special Value Loan Agreement" means the Second Amended and Restated
Senior Subordinated Loan Agreement dated as of December 31, 1996 between
Pemco Aviation Group, Inc. (successor to Precision Standard, Inc.) and
Bank of America, N.A., fka Bank of America, NT & SA, (as predecessor in
interest to Special Value Bond Fund (and/or its nominee, The Bank of New
York, as securities intermediary)), as such agreement may now exist or may
hereafter be amended, modified, supplemented, renewed or extended.
"Subordination Agreement" means the Subordination Agreement of even date
herewith, executed by Special Value Bond Fund and by Bank of New York, as
securities intermediary, in the Lender's favor and acknowledged by the
applicable Borrower, and any other subordination agreement accepted by the
Lender from time to time, as the same may hereafter be amended,
supplemented or restated from time to time.
"Subordinated Debt" of any Borrower means indebtedness of such Borrower
that is subject to the terms of a Subordination Agreement.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of
such corporation, irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of
the happening of any contingency, is at the time directly or indirectly
owned by any Borrower, by any Borrower and one or more other Subsidiaries,
or by one or more other Subsidiaries.
"Term A Advance" has the meaning specified in Section 2.6(a).
"Term A Floating Rate" means an annual rate equal to the sum of the Prime
Rate plus one-half of one percent (0.5%), which annual rate shall change
when and as the Prime Rate changes.
"Term A Note" means the promissory note of the Borrowers, payable to the
order of the Lender in substantially the form of Exhibit B hereto and any
note or notes issued in substitution therefor, as the same may hereafter
be amended, supplemented or restated from time to time.
"Term B Advance" has the meaning given in Section 2.6(c).
"Term B Floating Rate" means an annual rate equal to the sum of the Prime
Rate plus three-quarters of one percent (0.75%), which annual rate shall
change when and as the Prime Rate changes.
"Term B Note" means the promissory note of the Borrowers, payable to the
order of the Lender in substantially the form of Exhibit D hereto and any
note or notes issued in substitution therefor, as the same may hereafter
be amended, supplemented or restated from time to time.
"Termination Date" means the earliest of (i) the Maturity Date, (ii) the
date the Borrowers terminate the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default
pursuant to Section 8.2.
"Trademark Security Agreement" means the Trademark Security Agreement of
even date herewith by the Borrowers in favor of the Lender.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the state designated in Section 9.13 as the state whose laws shall govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
"Unfinanced Capital Expenditures" for a Borrower means that portion of
Capital Expenditures of such Borrower that are not leased and that are not
paid for using proceeds of indebtedness.
"▇▇▇▇▇ Fargo Bank" means ▇▇▇▇▇ Fargo Bank West, National Association.
Section 1.2 CROSS REFERENCES. All references in this Agreement to
Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 1.3 REVOLVING ADVANCES. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make advances to each
Borrower from time to time from the date all of the conditions set forth
in Section 4.1 are satisfied or waived in writing by the Lender (the
"Funding Date") to the Termination Date (the "Revolving Advances"). The
Lender shall have no obligation to make a Revolving Advance to a Borrower
if, after giving effect to such requested Revolving Advance, (a) such
Borrower's Availability would be less than zero, (b) Aggregate
Availability would be less than zero, or (c) Inventory Component Advances
would exceed the Inventory Sublimit. Each Borrower's obligation to pay
the Revolving Advances shall be evidenced by such Borrower's Revolving
Note and shall be secured by the Collateral as provided in Article III.
Within the limits set forth in this Section 2.1, each Borrower may borrow,
prepay pursuant to Section 2.12 and reborrow. Each Borrower agrees to
comply with the following procedures in requesting Revolving Advances
under this Section 2.1:
(1) Each request for a Revolving Advance to the Lender before 11:00 a.m.
(Denver time) of the day of the requested Revolving Advance. Requests may
be made in writing or by telephone, specifying the date of the requested
Revolving Advance and the amount thereof. Each request by a Borrower shall
be by (i) any officer of such Borrower; or (ii) any person designated as
such Borrower's agent by any officer of such Borrower in a writing
delivered to the Lender; or (iii) any person whom the Lender reasonably
believes to be an officer of such Borrower or such a designated agent.
(2) Upon fulfillment of the applicable conditions set forth in Article
IV, the Lender shall disburse the proceeds of the requested Revolving
Advance by crediting the same to such Borrower's demand deposit account
maintained with ▇▇▇▇▇ Fargo Bank unless the Lender and such Borrower shall
agree in writing to another manner of disbursement. Upon the Lender's
request, such Borrower shall promptly confirm each telephonic request for
an Advance by executing and delivering an appropriate confirmation
certificate to the Lender. Such Borrower shall be obligated to repay all
Revolving Advances even if the Lender does not receive such confirmation
and even if the person requesting a Revolving Advance was not in fact
authorized to do so. Any request for a Revolving Advance, whether written
or telephonic, shall be deemed to be a representation by such Borrower
that the conditions set forth in Section 4.2 have been satisfied as of the
time of the request.
Section 1.4 LETTERS OF CREDIT.
(1) The Lender agrees, on the terms and subject to the conditions herein
set forth, to cause an Issuer to issue, from the Funding Date to the
Termination Date, one or more irrevocable standby or documentary letters
of credit (each, a "Letter of Credit") for the account of any Borrower.
The Lender shall have no obligation to cause an Issuer to issue any Letter
of Credit if the face amount of the Letter of Credit to be issued would
exceed the lesser of:
(1) $1,000,000 less the Aggregate L/C Amount, or
(2) such Borrower's Availability.
Each Letter of Credit, if any, shall be issued pursuant to a separate L/C
Application entered into by such Borrower and the Lender for the benefit
of the Issuer, completed in a manner satisfactory to the Lender and the
Issuer. The terms and conditions set forth in each such L/C Application
shall supplement the terms and conditions hereof, but if the terms of any
such L/C Application and the terms of this Agreement are inconsistent, the
terms hereof shall control.
(2) No Letter of Credit shall be issued with an expiry date later than
the Termination Date in effect as of the date of issuance.
(3) Any request to cause an Issuer to issue a Letter of Credit under this
Section 2.2 shall be deemed to be a representation by such Borrower that
the conditions set forth in Section 4.2 have been satisfied as of the date
of the request.
Section 1.5 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT;
OBLIGATION OF REIMBURSEMENT.
Each Borrower acknowledges that the Lender, as co-applicant, will be
liable to the Issuer for reimbursement of any and all draws under Letters
of Credit and for all other amounts required to be paid under the
applicable L/C Application. Accordingly, such Borrower agrees to pay to
the Lender any and all amounts required to be paid under the applicable
L/C Application, when and as required to be paid thereby, and the amounts
designated below, when and as designated:
(1) Each Borrower hereby agrees to pay the Lender on the day a draft is
honored under any Letter of Credit a sum equal to all amounts drawn under
such Letter of Credit plus any and all reasonable charges and expenses
that the Issuer or the Lender may pay or incur relative to such draw and
the applicable L/C Application, plus interest on all such amounts, charges
and expenses as set forth below (each such Borrower's obligation to pay
all such amounts is herein referred to as the "Obligation of
Reimbursement").
(2) Whenever a draft is submitted under a Letter of Credit on behalf of
any Borrower, the Lender shall make a Revolving Advance against the
account of such Borrower in the amount of the Obligation of Reimbursement
and shall apply the proceeds of such Revolving Advance thereto. Such
Revolving Advance shall be repayable in accordance with and be treated in
all other respects as a Revolving Advance hereunder.
(3) If a draft is submitted under a Letter of Credit when such Borrower
is unable, because a Default Period then exists or for any other reason,
to obtain a Revolving Advance to pay the Obligation of Reimbursement, such
Borrower shall pay to the Lender on demand and in immediately available
funds, the amount of the Obligation of Reimbursement together with
interest, accrued from the date of the draft until payment in full at the
Default Rate. Notwithstanding such Borrower's inability to obtain a
Revolving Advance for any reason, the Lender is irrevocably authorized, in
its sole discretion, to make a Revolving Advance in an amount sufficient
to discharge the Obligation of Reimbursement and all accrued but unpaid
interest thereon.
(4) Each Borrower's obligation to pay any Revolving Advance made under
this Section 2.3, shall be evidenced by such Borrower's Revolving Note and
shall bear interest as provided in Section 2.8.
Section 1.6 SPECIAL ACCOUNT. If the Credit Facility is terminated for
any reason whatsoever while any Letter of Credit is outstanding, the
Borrowers shall thereupon pay the Lender in immediately available funds
for deposit in the Special Account an amount equal to the Aggregate L/C
Amount. The Special Account shall be an interest bearing account
maintained for the Lender by any financial institution acceptable to the
Lender. Any interest earned on amounts deposited in the Special Account
shall be credited to the Special Account. Amounts on deposit in the
Special Account may be applied by the Lender at any time or from time to
time to the Obligations of the Borrowers in the Lender's sole discretion,
and shall not be subject to withdrawal by any Borrower so long as the
Lender maintains a security interest therein. The Lender agrees to
transfer any balance in the Special Account to the Borrowers in proportion
to the amounts each Borrower paid into such Special Account at such time
as the Lender is required to release its security interest in the Special
Account under applicable law.
Section 1.7 OBLIGATIONS ABSOLUTE. Each Borrower's obligations arising
under Section 2.3 shall be absolute, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of Section 2.3, under
all circumstances whatsoever, including (without limitation) the following
circumstances:
(1) any lack of validity or enforceability of any Letter of Credit or any
other agreement or instrument relating to any Letter of Credit
(collectively the "Related Documents");
(2) any amendment or waiver of or any consent to departure from all or
any of the Related Documents;
(3) the existence of any claim, setoff, defense or other right which such
Borrower may have at any time, against any beneficiary or any transferee
of any Letter of Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting), or other person or
entity, whether in connection with this Agreement, the transactions
contemplated herein or in the Related Documents or any unrelated
transactions;
(4) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(5) payment by or on behalf of the Issuer or the Lender under any Letter
of Credit against presentation of a draft or certificate which does not
strictly comply with the terms of such Letter of Credit; or
(6) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Section 1.8 Non-Revolving Advances.
(1) Term A Advance. The Lender agrees, on the terms and subject to the
conditions herein set forth, to make a single advance in the amount of
$2,900,000 to the Borrowers on the Funding Date (the "Term A Advance").
The Term A Advance shall be allocated among the Borrowers in the manner
set forth in Schedule 2.6. Each Borrower's obligation to pay the Term A
Advance shall be evidenced by the Term A Note and shall be secured by the
Collateral as provided in Article III. Upon fulfillment of the applicable
conditions set forth in Article IV, the Lender shall deposit the proceeds
of the requested Term A Advance by crediting the same to the applicable
Borrower's demand deposit account specified in Section 2.1(b) unless the
Lender and such Borrower shall agree in writing to another manner of
disbursement.
(2) CapEx Advances. The Lender agrees, on the terms and subject to the
conditions herein set forth, to make advances to any Borrower from time to
time from the Funding Date to the CapEx Note Consolidation Date (the
"CapEx Advances"). The Lender shall have no obligation to make a CapEx
Advance to a Borrower if, after giving effect to such requested CapEx
Advance, (a) the sum of the CapEx Advances made to such Borrower would
exceed the lesser of (i) the CapEx Maximum Line or (ii) 80% of the cost
(excluding taxes, shipment costs, and similar charges) of such Borrower's
New Unencumbered Equipment, or (b) the sum of the CapEx Advances made to
all Borrowers would exceed the lesser of (i) the CapEx Maximum Line or
(ii) 80% of the cost (excluding taxes, shipment costs, and similar
charges) of all of the Borrowers' New Unencumbered Equipment. Each
Borrower's obligation to pay the CapEx Advances shall be evidenced by the
CapEx Note and shall be secured by the Collateral as provided in Article
III. Each Borrower agrees to comply with the following procedures in
requesting CapEx Advances:
(1) Such Borrower shall make each request for a CapEx Advance to the
Lender before 11:00 a.m. (Denver time) two Banking Days before the day of
the requested CapEx Advance. Requests may be made in writing or by
telephone, specifying the date of the requested CapEx Advance and the
amount thereof.
(2) Each CapEx Advance shall be in a minimum amount of $250,000.
(3) Each request shall be by an individual authorized pursuant to Section
2.1(a).
Upon fulfillment of the applicable conditions set forth in Article IV, the
Lender shall deposit the proceeds of the requested CapEx Advance by
crediting the same to such Borrower's demand deposit account specified in
Section 2.1(b) unless the Lender and such Borrower shall agree in writing
to another manner of disbursement. Upon the Lender's request, such
Borrower shall promptly confirm each telephonic request for a CapEx
Advance by executing and delivering an appropriate confirmation
certificate to the Lender. The Borrowers shall be obligated to repay all
CapEx Advances notwithstanding the Lender's failure to receive such
confirmation and notwithstanding the fact that the person requesting the
same was not in fact authorized to do so. Any request for a CapEx Advance,
whether written or telephonic, shall be deemed to be a representation by
such Borrower that the conditions set forth in Section 4.2 have been
satisfied as of the time of the request.
(3) Term B Advance. The Lender agrees, on the terms and subject to the
conditions herein set forth, to make a single advance (the "Term B
Advance") in the amount of $2,100,000 to the Borrowers on the Funding
Date. The Term B Advance shall be allocated among the Borrowers in the
manner set forth in Schedule 2.6. Each Borrower's obligation to pay the
Term B Advance shall be evidenced by the Term B Note and shall be secured
by the Collateral as provided in Article III. Upon fulfillment of the
applicable conditions set forth in Article IV, the Lender shall deposit
the proceeds of the requested Term B Advance by crediting the same to the
applicable Borrowers' demand deposit accounts specified in Section 2.1(b)
unless the Lender and the applicable Borrowers shall agree in writing to
another manner of disbursement.
(4) Discretionary Advances. The Lender may, in its discretion, make one
or more advances (the "Discretionary Advances") to a Borrower at the
written request of such Borrower. Each such request shall be made (if at
all) during the Discretionary Advance Period. The Lender will not consider
any request for a Discretionary Advance if, after giving effect to such
Discretionary Advance, the sum of all Discretionary Advances made to the
Borrowers would exceed the Discretionary Advance Limit. The Lender's
agreement to make any Discretionary Advance is subject to approval by
Lender's management at the time of such request, which approval shall not
be unreasonably withheld so long as (i) the Borrowers are meeting or
exceeding financial projections acceptable to the Lender delivered by the
Borrowers pursuant to Section 6.1(e), and (ii) no Default Period exists or
would exist as a result of or immediately after such advance. Each
Borrower's obligation to pay the Discretionary Advances shall be evidenced
by the Discretionary Advance Note and shall be secured by the Collateral
as provided in Article III. Each Borrower agrees to comply with the
following procedures in requesting Discretionary Advances:
(1) Such Borrower shall make each request for a Discretionary Advance to
the Lender before 11:00 a.m. (Denver time) two Banking Days before the day
of the requested Discretionary Advance. Requests may be made in writing or
by telephone, specifying the date of the requested Discretionary Advance
and the amount thereof.
(2) Each Discretionary Advance shall be in a minimum amount of $500,000.
(3) Each request shall be by an individual authorized pursuant to Section
2.1(a).
Upon fulfillment of the applicable conditions set forth in Article IV, the
Lender shall deposit the proceeds of the requested Discretionary Advance
by crediting the same to such Borrower's demand deposit account specified
in Section 2.1(b) unless the Lender and such Borrower shall agree in
writing to another manner of disbursement. Upon the Lender's request, such
Borrower shall promptly confirm each telephonic request for a
Discretionary Advance by executing and delivering an appropriate
confirmation certificate to the Lender. The Borrowers shall be obligated
to repay all Discretionary Advances notwithstanding the Lender's failure
to receive such confirmation and notwithstanding the fact that the person
requesting the same was not in fact authorized to do so. Any request for a
Discretionary Advance, whether written or telephonic, shall be deemed to
be a representation by such Borrower that the conditions set forth in
Section 4.2 have been satisfied as of the time of the request.
Section 1.9 PAYMENT OF NON-REVOLVING NOTES.
(1) Term A Note. The outstanding principal balance of the Term A Note
shall be due and payable as follows:
(1) Beginning on June 1, 2002, and on the first day of each month
thereafter, in monthly installments of $48,333.
(2) On the Maturity Date, the entire unpaid principal balance of the Term
A Note, and all unpaid interest accrued thereon, shall in any event be due
and payable.
(2) CapEx Note. The outstanding principal balance of the CapEx Note shall
be due and payable as follows:
(1) Beginning on the first day of the month following the CapEx Note
Consolidation Date and on the first day of each month thereafter, in
substantially equal monthly installments in an amount equal to one-
sixtieth (1/60) of the principal balance of the CapEx Note on the CapEx
Note Consolidation Date; and
(2) On the Maturity Date, the entire unpaid principal balance of the
CapEx Note, and all unpaid interest accrued thereon, shall in any event be
due and payable.
(3) Term B Note. The outstanding principal balance of the Term B Note
shall be due and payable as follows:
(1) Beginning on December 1, 2000 and on the first day of each month
thereafter, in monthly installments of $87,500.
(2) On the Maturity Date, the entire unpaid principal balance of the Term
B Note, and all unpaid interest accrued thereon, shall in any event be due
and payable.
(4) Discretionary Advance Note. The outstanding principal balance (if
any) of the Discretionary Advance Note shall be due and payable as
follows:
(1) Beginning on the first day of the month following the initial
Discretionary Advance, and on the first day of each month thereafter, in
substantially equal monthly installments in an amount sufficient to fully
amortize the principal balance of the Discretionary Advance Note over an
assumed term ending on the date that is 23 months after the date of such
first payment (the "Assumed Maturity Date"). If the Lender makes
Discretionary Advances after the initial Discretionary Advance, the amount
of each installment will be increased so that the remaining payments would
fully amortize the outstanding principal balance of the Discretionary
Advance Note in substantially equal amounts by the Assumed Maturity Date;
and
(2) On the Maturity Date, the entire unpaid principal balance of the
Discretionary Advance Note, and all unpaid interest accrued thereon, shall
in any event be due and payable.
Section 1.10 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST; USURY.
(1) Revolving Notes. Except as set forth in Sections 2.8(e) and 2.8(g),
the outstanding principal balance of the Revolving Note shall bear
interest at the Revolving Floating Rate. Interest accruing on the
Revolving Note shall be due and payable in arrears on the first day of
each month.
(2) Term A Note and CapEx Note. Except as set forth in Sections 2.8(e)
and 2.8(g), the outstanding principal balance of the Term A Note and the
CapEx Note shall bear interest at the Term A Floating Rate. Interest
accruing on the Term A Note and the CapEx Note shall be due and payable in
arrears on the first day of each month.
(3) Term B Note and Discretionary Advance Note. Except as set forth in
Sections 2.8(e) and 2.8(g), the outstanding principal balance of the Term
B Note and the Discretionary Advance Note shall bear interest at the Term
B Floating Rate. Interest accruing on the Term B Note and the
Discretionary Advance Note shall be due and payable in arrears on the
first day of each month.
(4) Minimum Interest Charge. Notwithstanding the interest payable
pursuant to Sections 2.8(a), 2.8(b), and 2.8(c), the Borrowers, jointly
and severally, shall pay to the Lender interest of not less than $100,000
per calendar quarter (the "Minimum Interest Charge") during the term of
this Agreement (which amount shall be prorated for periods shorter than
one quarter), and the Borrowers shall pay any deficiency between the
Minimum Interest Charge and the amount of interest otherwise calculated
under Sections 2.8(a), 2.8(b), 2.8(c), and 2.8(e) quarterly in arrears in
the manner provided in Section 2.10.
(5) Default Interest Rate. At any time during any Default Period, in the
Lender's sole discretion and without waiving any of its other rights and
remedies, the principal of the Advances outstanding from time to time
shall bear interest at the Default Rate, effective for any periods
designated by the Lender from time to time during that Default Period.
(6) Participations. If any Person shall acquire a participation in the
Advances under this Agreement, the Borrowers shall be obligated to the
Lender to pay the full amount of all interest calculated under this
Agreement, along with all other fees, charges and other amounts due under
this Agreement, regardless if such Person elects to accept interest with
respect to its participation at a lower rate than the Revolving Floating
Rate, the Term A Floating Rate, or the Term B Floating Rate, or otherwise
elects to accept less than its prorata share of such fees, charges and
other amounts due under this Agreement.
(7) Usury. In any event no rate change shall be put into effect which
would result in a rate greater than the highest rate permitted by law.
Notwithstanding anything to the contrary contained in any Loan Document,
all agreements which either now are or which shall become agreements
between any Borrower and the Lender are hereby limited so that in no
contingency or event whatsoever shall the total liability for payments in
the nature of interest, additional interest and other charges exceed the
applicable limits imposed by any applicable usury laws. If any payments in
the nature of interest, additional interest and other charges made under
any Loan Document are held to be in excess of the limits imposed by any
applicable usury laws, it is agreed that any such amount held to be in
excess shall be considered payment of principal hereunder, and the
indebtedness evidenced hereby shall be reduced by such amount so that the
total liability for payments in the nature of interest, additional
interest and other charges shall not exceed the applicable limits imposed
by any applicable usury laws, in compliance with the desires of such
Borrower and the Lender. This provision shall never be superseded or
waived and shall control every other provision of the Loan Documents and
all agreements between any Borrower and the Lender, or their successors
and assigns.
Section 1.11 FEES.
(1) Origination Fee. The Borrowers, jointly and severally, hereby agree
to pay the Lender a fully earned and non-refundable origination fee of
$70,250, due and payable upon the execution of this Agreement. The Lender
acknowledges receipt of $90,000 toward payment of this fee and the fees,
costs and expenses described in Sections 2.9(e) and 9.7.
(2) Unused Line Fee. For the purposes of this Section 2.9(b), "Unused
Amount" means the Maximum Line reduced by (1) outstanding Revolving
Advances made to all Borrowers and (2) the Aggregate L/C Amount. The
Borrowers, jointly and severally, agree to pay to the Lender an unused
line fee at the rate of one-quarter of one percent (0.25%) per annum on
the average daily Unused Amount from the date of this Agreement to and
including the Termination Date, due and payable monthly in arrears on the
first day of the month and on the Termination Date.
(3) Letter of Credit Fees. The Borrowers, jointly and severally, agree
to pay the Lender a fee with respect to each Letter of Credit, if any,
accruing on a daily basis and computed at the annual rate of two and one-
half percent (2.5%) of the aggregate amount that may then be drawn on all
issued and outstanding Letters of Credit assuming compliance with all
conditions for drawing thereunder (the "Aggregate Face Amount"), from and
including the date of issuance of such Letter of Credit until such date as
such Letter of Credit shall terminate by its terms or be returned to the
Lender, due and payable monthly in arrears on the first day of each month
and on the Termination Date; provided, however that during Default
Periods, in the Lender's sole discretion and without waiving any of its
other rights and remedies, such fee shall increase to four and one-half
percent (4.5%) of the Aggregate Face Amount. The foregoing fee shall be in
addition to any and all fees, commissions and charges of any Issuer of a
Letter of Credit with respect to or in connection with such Letter of
Credit.
(4) Letter of Credit Administrative Fees. The Borrowers, jointly and
severally, agree to pay the Lender, on written demand, the administrative
fees charged by the Issuer in connection with the honoring of drafts under
any Letter of Credit, amendments thereto, transfers thereof and all other
activity with respect to the Letters of Credit at the then-current rates
published by the Issuer for such services rendered on behalf of customers
of the Issuer generally.
(5) Audit Fees. The Borrowers, jointly and severally, hereby agree to
pay the Lender, on demand, audit fees in connection with any audits or
inspections conducted by the Lender of any Collateral or any Borrower's
operations or business at the rates established from time to time by the
Lender as its audit fees (which fees are currently $80 per hour per
auditor), together with all actual out-of-pocket costs and expenses
incurred in conducting any such audit or inspection; provided, however,
that except during Default Periods, the Borrower shall not have to
reimburse the Lender for such fees, costs and expenses to the extent the
Lender performs more than four audits during any twelve-month period.
Section 1.12 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND
PAYABLE. Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be
computed on the basis of actual number of days elapsed in a year of 360
days. Interest shall be payable in arrears on the first day of each month
and on the Termination Date.
Section 1.13 CAPITAL ADEQUACY, INCREASED COSTS AND REDUCED RETURN. If
any Related Lender determines at any time that its Return has been reduced
as a result of any Rule Change, such Related Lender may require the
Borrowers to pay it the amount necessary to restore its Return to what it
would have been had there been no Rule Change. For purposes of this
Section 2.11:
(1) "Capital Adequacy Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding capital adequacy, or the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not having the
force of law, that applies to any Related Lender. Such rules include rules
requiring financial institutions to maintain total capital in amounts
based upon percentages of outstanding loans, binding loan commitments and
letters of credit.
(2) "L/C Rule" means any law, rule, regulation, guideline, directive,
requirement or request regarding letters of credit, or the interpretation
or administration thereof by any governmental or regulatory authority,
central bank or comparable agency, whether or not having the force of law,
that applies to any Related Lender. Such rules include rules imposing
taxes, duties or other similar charges, or mandating reserves, special
deposits or similar requirements against assets of, deposits with or for
the account of, or credit extended by any Related Lender, on letters of
credit.
(3) "Return", for any period, means the return as determined by such
Related Lender on the Advances and Letters of Credit based upon its total
capital requirements and a reasonable attribution formula that takes
account of the Capital Adequacy Rules then in effect and costs of issuing
or maintaining any Letter of Credit. Return may be calculated for each
calendar quarter and for the shorter period between the end of a calendar
quarter and the date of termination in whole of this Agreement.
(4) "Rule Change" means any change in any Capital Adequacy Rule or L/C
Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the date of this
Agreement are scheduled to take place under the existing Capital Adequacy
Rules or L/C Rules or any increases in the capital that any Related Lender
is required to maintain to the extent that the increases are required due
to a regulatory authority's assessment of the financial condition of such
Related Lender.
(5) "Related Lender" includes (but is not limited to) the Lender, the
Issuer, any parent corporation of the Lender or the Issuer and any
assignee of any interest of the Lender hereunder and any participant in
the loans made hereunder.
Certificates of any Related Lender sent to any Borrower from time to time
claiming compensation under this Section 2.11, stating the reason therefor
and setting forth in reasonable detail the calculation of the additional
amount or amounts to be paid to the Related Lender hereunder to restore
its Return shall be conclusive absent manifest error. In determining such
amounts, the Related Lender may use any reasonable averaging and
attribution methods.
Section 1.14 VOLUNTARY PREPAYMENT; REDUCTION OF THE MAXIMUM LINE;
TERMINATION OF THE CREDIT FACILITY BY THE BORROWERS. Except as otherwise
provided herein, any Borrower may prepay that portion of Revolving
Advances made to such Borrower in whole at any time or from time to time
in part. Any Borrower may prepay that portion of Term A Advances, CapEx
Advances, Term B Advances, or Discretionary Advances (other than in
accordance with Section 2.7) made to such Borrower, and the Borrowing
Agent may terminate the Credit Facility or reduce the Maximum Line at any
time if such Borrower or Borrowing Agent (i) gives the Lender at least 30
days' prior written notice and (ii) pays the Lender the prepayment,
termination or line reduction fees in accordance with Section 2.13. Any
prepayment of the Term A Advances, CapEx Advances, Term B Advances, or
Discretionary Advances (other than in accordance with Section 2.7) or
reduction in the Maximum Line must be in an amount not less than $500,000
or an integral multiple thereof. If the Borrowing Agent reduces the
Maximum Line to zero, all Obligations shall be immediately due and
payable. Any partial prepayments of the Term A Note, CapEx Note, Term B
Note, or Discretionary Advance Note (other than in accordance with Section
2.7) shall be applied to principal payments due and owing in inverse order
of their maturities. Upon termination of the Credit Facility and payment
and performance of all Obligations, the Lender shall release or terminate
the Security Interest and the Security Documents to which the Borrowers
are entitled by law, including Article 9 of the UCC. In addition to the
foregoing, the Lender agrees that it shall release or terminate any
collateral filings it now has or may in the future make with the U.S.
Patent and Trademark Office at the same time it releases the Security
Interest.
Section 1.15 TERMINATION, LINE REDUCTION AND PREPAYMENT FEES; WAIVER OF
TERMINATION, PREPAYMENT AND LINE REDUCTION FEES.
(1) Termination and Line Reduction Fees. If the Credit Facility is
terminated for any reason as of a date other than the Maturity Date, or
the Borrowing Agent reduces the Maximum Line other than in accordance with
Section 2.19, the Borrowers shall, jointly and severally, pay to the
Lender a fee in an amount equal to a percentage of the Maximum Line (or
the reduction, as the case may be) as follows: (i) two percent (2.0%) if
the termination or reduction occurs on or before the first anniversary of
the Funding Date; and (ii) one percent (1.0%) if the termination or
reduction occurs after the first anniversary of the Funding Date.
(2) Prepayment Fees. If any Note other than the Revolving Note is
prepaid for any reason except in accordance with Section 2.7, the
Borrowers shall, jointly and severally, pay to the Lender a fee in an
amount equal to a percentage of the amount prepaid as follows: (i) two
percent (2.0%) if prepayment occurs on or before the first anniversary of
the Funding Date; and (ii) one percent (1.0%) if prepayment occurs after
the first anniversary of the Funding Date.
(3) Waiver of Termination, Line Reduction and Prepayment Fees.
(1) The Borrowers will not be required to pay the termination, line
reduction and prepayment fees otherwise due under this Section 2.13 if
such termination, line reduction or prepayment is made because of
refinancing of the Borrowers by an affiliate of the Lender.
(2) The Borrowers will not be required to pay the termination, line
reduction and prepayment fees otherwise due under this Section 2.13 if
such termination, line reduction or prepayment is made within 140 days of
notice by the Borrowing Agent to the Lender that a Discretionary Reduction
Date has occurred (which notice must be given no more than 10 days
following such Discretionary Reduction Date), provided that (A) such
Discretionary Reduction Date has in fact occurred and (B) the Lender has
not within 10 days of such notice taken action to cure the occurrence
(which cure shall be implemented on an ongoing basis in good faith) of
such Discretionary Reduction Date.
(3) The Borrowers will not be required to pay the prepayment fees
otherwise due under Section 2.13(b) if such prepayment is made using
proceeds from the operations of the Borrowers. A prepayment will be deemed
made using proceeds from the operations of the Borrowers only if (i) such
amount is not refinanced from any source during the 90 days following such
prepayment; (ii) average daily Aggregate Availability for the 90 days
prior to such prepayment is greater than or equal to the sum of (A) the
amount of such prepayment plus (B) $1,000,000; (iii) Aggregate
Availability on the date of such prepayment is greater than or equal to
the sum of (A) the amount of such prepayment plus (B) $1,000,000; and (iv)
no Default Period exists at the time of such prepayment or would exist
immediately after or as a result of such prepayment.
Section 1.16 MANDATORY PREPAYMENT. Without notice or demand, if the sum
of the outstanding principal balance of the Revolving Advances made to any
Borrower plus such Borrower's L/C Amount shall at any time exceed such
Borrower's Borrowing Base, such Borrower shall (i) first, immediately
prepay the Revolving Advances made to such Borrower to the extent
necessary to eliminate such excess, and (ii) if prepayment in full of the
Revolving Advances made to such Borrower is insufficient to eliminate such
excess, pay to the Lender in immediately available funds for deposit in
the Special Account an amount equal to the remaining excess. Furthermore,
without notice or demand, if the sum of the outstanding principal balance
of the Revolving Advances made to all Borrowers plus the Aggregate L/C
Amount shall at any time exceed the Aggregate Borrowing Base, the
Borrowers shall (x) first, immediately prepay the Revolving Advances made
to the Borrowers to the extent necessary to eliminate such excess, and
(ii) if prepayment in full of the Revolving Advances is insufficient to
eliminate such excess, pay to the Lender in immediately available funds
for deposit in the Special Account an amount equal to the remaining
excess. Any payment received by the Lender under this Section 2.14 or
under Section 2.12 may be applied to the Obligations, in such order and in
such amounts as the Lender, in its discretion, may from time to time
determine; provided that any prepayment under Section 2.12 which such
Borrower designates as a partial prepayment of the Term A Note, the CapEx
Note, the Term B Note, or the Discretionary Advance Note shall be applied
to principal installments of such note in inverse order of maturity.
Section 1.17 PAYMENT. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations upon
receipt by the Lender. The Lender may hold all payments not constituting
immediately available funds for two (2) Banking Days before applying them
to the Obligations. Notwithstanding anything in Section 2.1, each Borrower
hereby authorizes the Lender, in its discretion at any time or from time
to time without any Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, to make a Revolving Advance
in an amount equal to the portion of the Obligations from time to time due
and payable.
Section 1.18 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of
interest on the Advances or the fees hereunder, as the case may be.
Section 1.19 USE OF PROCEEDS. The Borrowers shall use the proceeds of
Advances; and each Letter of Credit, if any, for general corporate
purposes, including without limitation, for working capital, capital
improvements and Permitted Acquisitions.
Section 1.20 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the
Borrowers establish the contrary. Upon the Lender's demand, each Borrower
will admit and certify in writing the exact principal balance of the
Obligations that such Borrower then asserts to be outstanding. Any billing
statement or accounting rendered by the Lender shall be conclusive and
fully binding on the Borrowers unless the Borrowers give the Lender
specific written notice of exception within 60 days after receipt.
Section 1.21 MODIFICATION OF MAXIMUM LINE AND CAPEX MAXIMUM LINE. At any
time on or before December 31, 2001, the Borrowing Agent may, by giving
written notice to the Lender, adjust the Maximum Line and the CapEx
Maximum Line; provided, however, that the following shall apply to any
such adjustments: (a) any increase in the Maximum Line shall require a
decrease in an identical amount in the CapEx Maximum Line; (b) any
decrease in the Maximum Line shall require an increase in an identical
amount in the CapEx Maximum Line; (c) the CapEx Maximum Line shall not be
increased to an amount greater than $5,000,000; (d) no adjustment shall be
allowed if the resulting Availability of any Borrower would be less than
zero or if the resulting CapEx Maximum Line would be less than the
aggregate amount of CapEx Advances made prior to such adjustment; and (e)
such adjustments shall be allowed no more than once per fiscal quarter.
Any adjustment permitted under this Section 2.19 shall be effective two
Banking Days following the Lender's receipt of written notice of such
adjustment.
ARTICLE IIII
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 1.22 GRANT OF SECURITY INTEREST. Each Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for
the payment and performance of the Obligations.
Section 1.23 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time during a Default Period notify any account debtor
or other person obligated to pay the amount due that such right to payment
has been assigned or transferred to the Lender for security and shall be
paid directly to the Lender. The Borrower whose account debtor is to be
notified will join in giving such notice if the Lender so requests. At any
time after such Borrower or the Lender gives such notice to an account
debtor or other obligor and so long as a Default Period exists, the Lender
may, but need not, in the Lender's name or in such Borrower's name, (a)
demand, ▇▇▇ for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to
payment, or grant any extension to, make any compromise or settlement with
or otherwise agree to waive, modify, amend or change the obligations
(including collateral obligations) of any such account debtor or other
obligor; and (b) as such Borrower's agent and attorney-in-fact, notify the
United States Postal Service to change the address for delivery of such
Borrower's mail to any address designated by the Lender, otherwise
intercept such Borrower's mail, and receive, open and dispose of such
Borrower's mail, applying all Collateral as permitted under this Agreement
and holding all other mail for such Borrower's account or forwarding such
mail to such Borrower's last known address.
Section 1.24 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, each Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds
of insurance and refunds of unearned premiums) due or to become due under,
and all other rights of such Borrower with respect to, any and all
policies of insurance now or at any time hereafter covering the Collateral
or any evidence thereof or any business records or valuable papers
pertaining thereto, and such Borrower hereby directs the issuer of any
such policy to pay all such monies directly to the Lender. At any time,
whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in such Borrower's name, execute and deliver
proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies. At any time during a
Default Period, the Lender may (but need not), in the Lender's name or in
such Borrower's name, adjust, litigate, compromise or release any claim
against the issuer of any such policy; and if no Default Period then
exists, the Lender's prior written consent shall be required for any
Borrower to adjust, litigate, compromise or release any claim against the
issuer of any such policy (except for adjustments, litigation,
compromises, or releases of claims aggregating not more than $100,000
during any fiscal year of the Borrower).
Section 1.25 OCCUPANCY.
(1) Each Borrower hereby irrevocably grants to the Lender the right to
take possession of the Premises at any time during a Default Period.
(2) The Lender may use the Premises only to hold, process, manufacture,
sell, use, store, liquidate, realize upon or otherwise dispose of goods
that are Collateral and for other purposes that the Lender may in good
▇▇▇▇▇ ▇▇▇▇ to be related or incidental purposes.
(3) The Lender's right to hold the Premises shall cease and terminate
upon the earliest of (i) payment in full and discharge of all Obligations
and termination of the Commitment, (ii) final sale or disposition of all
goods constituting Collateral and delivery of all such goods to
purchasers, and (iii) the end of the Default Period.
(4) The Lender shall not be obligated to pay or account for any rent or
other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for
any rent or other compensation for the possession, occupancy or use of any
of the Premises of Borrower, such Borrower shall reimburse the Lender
promptly for the full amount thereof. In addition, such Borrower will pay,
or reimburse the Lender for, all taxes (excluding taxes based on the
Lender's incremental net income and the Lender's incremental franchise
taxes, if any), fees, duties, imposts, charges and expenses at any time
incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.4.
Section 1.26 LICENSE. Without limiting the generality of the Trademark
Security Agreement, each Borrower hereby grants to the Lender a non-
exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of such
Borrower for the purpose of selling, leasing or otherwise disposing of any
or all Collateral of such Borrower during any Default Period.
Section 1.27 FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by
any Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby in the assets of such Borrower. For this purpose, the following
information is set forth:
Pemco Aviation Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Pemco Aeroplex, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Space Vector Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Pemco Air Services System, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Name and address of Secured Party:
▇▇▇▇▇ Fargo Business Credit, Inc.
MAC C7300-300
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Section 1.28 SETOFF. Each Borrower agrees that the Lender may at any
time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to any Borrower by the
Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any
Obligations shall have the right to appropriate or setoff any deposit or
other liability then owed by such Person to any Borrower, whether or not
due, and apply the same to the payment of said participating interest, as
fully as if such Person had lent directly to such Borrower the amount of
such participating interest.
ARTICLE IIIIII
CONDITIONS OF LENDING
Section 1.29 CONDITIONS PRECEDENT TO THE INITIAL REVOLVING AND TERM
ADVANCES AND THE INITIAL LETTER OF CREDIT. The Lender's obligation to make
the initial Revolving Advance, Term A Advance, and Term B Advance, or to
cause to be issued the initial Letter of Credit hereunder, shall be
subject to the condition precedent that the Lender shall have received all
of the following, each in form and substance satisfactory to the Lender:
(1) This Agreement, properly executed by each Borrower.
(2) The Notes, properly executed by each Borrower.
(3) A true and correct copy of any and all leases pursuant to which any
Borrower is leasing the Premises, together with a landlord's disclaimer
and consent with respect to each such lease.
(4) Separate Lockbox Agreements, properly executed by each Borrower,
▇▇▇▇▇ Fargo Bank, and Regulus West, LLC.
(5) The Trademark Security Agreement, properly executed by each Borrower.
(6) The Subordination Agreement, properly executed by Special Value Bond
Fund and by Bank of New York as securities intermediary, and acknowledged
by each Borrower.
(7) Current searches of appropriate filing offices showing that (i) no
state or federal tax liens have been filed and remain in effect against
any Borrower, (ii) no financing statements or assignments of patents,
trademarks or copyrights have been filed and remain in effect against any
Borrower except those financing statements and assignments of patents,
trademarks or copyrights relating to Permitted Liens or to liens held by
Persons who have agreed in writing that upon receipt of proceeds of the
Advances, they will deliver UCC releases and/or terminations and releases
of such assignments of patents, trademarks or copyrights satisfactory to
the Lender, and (iii) the Lender has duly filed all financing statements
necessary to perfect the Security Interest and the security interests
granted by the Guarantors, to the extent the Security Interest and such
other security interests are capable of being perfected by filing.
(8) A certificate of each Borrower's Secretary or Assistant Secretary
certifying as to (i) the resolutions of such Borrower's directors and, if
required, shareholders, authorizing the execution, delivery and
performance of the Loan Documents, (ii) such Borrower's articles of
incorporation and bylaws, and (iii) the signatures of such Borrower's
officers or agents authorized to execute and deliver the Loan Documents
and other instruments, agreements and certificates, including Advance
requests, on such Borrower's behalf.
(9) Current certificates issued by the Secretaries of State of the
Borrowers' states of incorporation, certifying that each Borrower is in
compliance with all applicable organizational requirements of such state.
(10) Evidence that each Borrower is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing
or qualification necessary.
(11) A certificate of an officer of each Borrower confirming in his or her
official capacity the representations and warranties set forth in Article
V.
(12) An opinion or opinions of one or more counsel to the Borrowers and
the Guarantors, addressed to the Lender.
(13) Certificates of the insurance required hereunder, with all hazard
insurance containing a lender's loss payable endorsement in the Lender's
favor and with all liability insurance naming the Lender as an additional
insured.
(14) A separate guaranty, properly executed by each Guarantor, pursuant to
which each Guarantor unconditionally guarantees the full and prompt
payment of all Obligations.
(15) A separate security agreement, properly executed by each Guarantor,
pursuant to which each Guarantor grants a security interest in all of its
personal property to the Lender.
(16) Evidence that the Borrowers will have Aggregate Availability in an
amount not less than $2,000,000 after the initial Revolving Advance (but
prior to any other Advance), which Revolving Advance shall be sufficient
to retire the Borrowers' indebtedness to GMAC Commercial Credit LLC and to
pay all of the Borrowers' accounts payable that are 90 days or more past
due.
(17) Payment of the fees and commissions due through the date of the
initial Advance or Letter of Credit under Section 2.9 and expenses
incurred by the Lender through such date and required to be paid by the
Borrowers under Section 9.7, including all legal expenses incurred through
the date of this Agreement.
(18) Such other documents as the Lender may reasonably require.
Section 1.30 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT.
The Lender's obligation to make each Advance or to cause the Issuer to
issue any Letter of Credit shall be subject to the further conditions
precedent that on such date:
(1) the representations and warranties contained in Article V are correct
on and as of the date of such Advance or issuance of Letter of Credit as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(2) no event has occurred and is continuing, or would result from such
Advance or the issuance of such Letter of Credit, as the case may be,
which constitutes a Default or an Event of Default.
ARTICLE IVIV
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lender as follows:
Section 1.31 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE
OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER.
Each Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and is
duly licensed or qualified to transact business in all jurisdictions where
the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary.
Each Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute
and deliver, and to perform all of its obligations under, the Loan
Documents. During its existence, each Borrower has done business solely
under the names set forth in Schedule 5.1 hereto. Except as changed in
accordance with Section 7.15, each Borrower's chief executive office and
principal place of business is located at the address set forth in
Schedule 5.1 hereto, and all the records of each Borrower relating to its
respective business or the Collateral are kept at that location. Except as
changed in accordance with Section 7.15, all Inventory and Equipment is
located at that location or at one of the other locations set forth in
Schedule 5.1 hereto. Each Borrower's tax identification number is
correctly set forth in Section 3.6 hereto.
Section 1.32 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by each Borrower of
the Loan Documents and the borrowings from time to time hereunder have
been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of such Borrower's stockholders;
(ii) require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained,
accomplished or given prior to the date hereof; (iii) violate any
provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or
of any order, writ, injunction or decree presently in effect having
applicability to such Borrower or of such Borrower's articles of
incorporation or bylaws; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other
material agreement, lease or instrument to which such Borrower is a party
or by which it or its properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any
nature (other than the Security Interest) upon or with respect to any of
the properties now owned or hereafter acquired by such Borrower.
Section 1.33 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by each Borrower, the other Loan Documents will constitute the
legal, valid and binding obligations of each Borrower, enforceable against
each Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors' rights generally.
Section 1.34 SUBSIDIARIES. Except as set forth in Schedule 5.4 hereto,
or as created or acquired in accordance with Section 7.4(b), no Borrower
has any Subsidiaries.
Section 1.35 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrowers have
heretofore furnished to the Lender their consolidated audited financial
statements for the fiscal year ended December 31, 1999 and their unaudited
financial statements for the fiscal year-to-date period ended August 31,
2000 and those statements fairly present each Borrower's financial
condition on the dates thereof and the results of its operations and cash
flows for the periods then ended and were prepared in accordance with
generally accepted accounting principles (subject in the case of the
unaudited financial statements to year-end audit adjustments). Since the
date of the most recent financial statements, there has been no material
adverse change in any Borrower's business, properties or condition
(financial or otherwise).
Section 1.36 LITIGATION. Except as set forth in Schedule 5.6, there are
no actions, suits or proceedings pending or, to any Borrower's knowledge,
threatened against or affecting any Borrower or any Subsidiary or the
properties of any Borrower or any of its Subsidiaries before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which, if determined adversely to
such Borrower or any of its Subsidiaries, would have a material adverse
effect on the financial condition, properties or operations of any
Borrower or a material adverse effect on all Borrowers and their
Subsidiaries, taken as a whole.
Section 1.37 REGULATION U. No Borrower is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will
be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
Section 1.38 TAXES. Each Borrower and its respective Subsidiaries have
paid or caused to be paid to the proper authorities when due all federal,
state and local taxes required to be withheld by each of them, except to
the extent such payment is the subject of a protest by such Borrower or
Subsidiary and a reserve with respect to the obligation is established in
such amount as required by GAAP and the protest is prosecuted diligently.
Each Borrower and its Subsidiaries have filed all federal, state and local
tax returns which to the knowledge of the officers of such Borrower or any
Subsidiary, as the case may be, are required to be filed, and such
Borrower and its Subsidiaries have paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become
due, except to the extent such payment is the subject of a protest by such
Borrower or Subsidiary and a reserve with respect to the obligation is
established in such amount as required by GAAP and the protest is
prosecuted diligently.
Section 1.39 TITLES AND LIENS. Each Borrower has good and absolute
title to all Collateral described in the collateral reports provided to
the Lender and all other Collateral, properties and assets reflected in
the latest financial statements referred to in Section 5.5 and all
proceeds thereof, free and clear of all mortgages, security interests,
liens and encumbrances, except for Permitted Liens. No financing statement
naming any Borrower as debtor is on file in any office except to perfect
only Permitted Liens.
Section 1.40 PLANS. Except as disclosed to the Lender in writing prior
to the date hereof, no Borrower and no Affiliate maintains or has
maintained any Plan. No Borrower and no Affiliate has received any notice
or has any knowledge to the effect that it is not in substantial
compliance with any of the requirements of ERISA. No Reportable Event or
other fact or circumstance which could reasonably be expected to have an
adverse effect on the Plan's tax qualified status exists in connection
with any Plan. No Borrower and no Affiliate has:
(1) Any accumulated funding deficiency (within the meaning of ERISA) with
respect to any Plan; or
(2) Any liability or knows of any fact or circumstances which could
result in any liability in excess of $100,000 to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department of
Labor or any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 1.41 DEFAULT. Each Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it
is a party or by which it or its property is bound or affected, the breach
or default of which provisions could have a material adverse effect on
such Borrower's financial condition, properties or operations.
Section 1.42 ENVIRONMENTAL MATTERS.
(1) Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(1) "Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
(2) "Hazardous Substances" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and all
other chemicals, wastes, substances and materials listed in, regulated by
or identified in any Environmental Law.
(2) To the best of each Borrower's knowledge, except as reflected in the
Consent Agreement and Consent Order In the Matter of Pemco Aeroplex, Inc.,
U.S. EPA, Region IV, Docket No. 98-01-R (with which the Borrowers are in
full compliance), there are not present in, on or under the Premises any
Hazardous Substances in such form or quantity as to create any liability
or obligation for either any Borrower or the Lender under common law of
any jurisdiction or under any Environmental Law that could reasonably be
expected to result in a material adverse effect on the financial
condition, properties, or operations of any Borrower, and no Hazardous
Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to
create any such liability that could reasonably be expected to result in a
material adverse effect on the financial condition, properties, or
operations of any Borrower.
(3) To the best of each Borrower's knowledge, no Borrower has disposed of
Hazardous Substances in such a manner as to create any liability under any
Environmental Law.
(4) Except as set forth in Subsection (b) of this Section 5.12, there are
no unresolved requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation, relating in any way to
the Premises or any Borrower, alleging liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto that could reasonably be expected to
result in a material adverse effect on the financial condition,
properties, or operations of any Borrower. To the best of each Borrower's
knowledge, no such matter is threatened or impending.
(5) To the best of each Borrower's knowledge, each Borrower's businesses
are and have in the past always been conducted in accordance with all
Environmental Laws and all licenses, permits and other authorizations
required pursuant to any Environmental Law and necessary for the lawful
and efficient operation of such businesses are in such Borrower's
possession and are in full force and effect, except where the failure to
so conduct its businesses or the failure to possess such licenses could
not reasonably be expected to result in a material adverse effect on the
financial condition, properties, or operations of any Borrower. No permit
required under any Environmental Law is scheduled to expire within 6
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(6) To the best of each Borrower's knowledge, except as identified in
Subsection (b) of this Section 5.12, the Premises are not and never have
been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
Section 1.43 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of any Borrower in connection with
such Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections,
valuations or proforma financial statements, present a good faith estimate
as to such projections, valuations and proforma condition and results.
Section 1.44 FINANCING STATEMENTS. Each Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in
all Collateral and all other collateral described in the Security
Documents which is capable of being perfected by filing financing
statements. None of the Collateral or other collateral covered by the
Security Documents is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.
Section 1.45 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security
Documents is (or, in the case of all future Collateral or such other
collateral, will be when arising or issued) the valid, genuine and legally
enforceable obligation, subject to no defense, setoff or counterclaim, of
the account debtor or other obligor named therein or in the Borrower's
records pertaining thereto as being obligated to pay such obligation
except as disclosed in the financial statements, borrowing base
certificates, collateral reports, or other written communications from the
Borrowers to the Lender.
Section 1.46 FINANCIAL SOLVENCY. Both before and after giving effect to
the transactions contemplated in the Loan Documents:
(1) no Borrower has unreasonably small capital or is engaged or about to
engage in a business or a transaction for which any remaining assets of
such Borrower are unreasonably small;
(2) no Borrower by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or by
taking any action with respect thereto, intends to, nor believes that it
will, incur debts beyond its ability to pay them as they mature;
(3) no Borrower and no Subsidiary by executing, delivering or performing
its obligations under the Loan Documents or other documents to which it is
a party or by taking any action with respect thereto, intends to hinder,
delay or defraud either its present or future creditors; and
(4) no Borrower and no Subsidiary at this time contemplates filing a
petition in bankruptcy or for an arrangement or reorganization or similar
proceeding under any law of any jurisdiction, or, to the best of each
Borrower's knowledge, is the subject of any actual, pending or threatened
bankruptcy, insolvency or similar proceedings under any law of any
jurisdiction.
Section 1.47 No Labor Disputes. Except as set forth on Schedule 5.17, no
Borrower is involved in any labor dispute, there are no strikes or
walkouts involving more than 50 of the Borrowers' employees or union
organization of any number of any Borrower's employees threatened or in
existence, there are no labor-related grievances that claim an amount in
excess of $250,000 individually or $500,000 in the aggregate, and no labor
contract is scheduled to expire prior to the Maturity Date.
ARTICLE VV
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, each Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 1.48 REPORTING REQUIREMENTS. The Borrowers will deliver, or
cause to be delivered, to the Lender each of the following, which shall be
in form and detail acceptable to the Lender:
(1) as soon as available, and in any event within 120 days after the end
of each fiscal year of each Borrower, such Borrower's audited financial
statements with the unqualified opinion of independent certified public
accountants selected by such Borrower and acceptable to the Lender, which
annual financial statements shall include such Borrower's balance sheet as
at the end of such fiscal year and the related statements of such
Borrower's income, retained earnings and cash flows for the fiscal year
then ended, prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, all in reasonable detail and
prepared in accordance with GAAP, together with (i) copies of all
management letters prepared by such accountants; (ii) a report signed by
such accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge, except as specifically stated, of
any Default or Event of Default hereunder and all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not
such Borrower is in compliance with the requirements set forth in Sections
6.12, 6.13, 6.14, 6.15, 6.16 and 7.10; and (iii) a certificate of such
Borrower's chief financial officer or vice president--finance stating that
such financial statements have been prepared in accordance with GAAP and
whether or not such officer has knowledge of the occurrence of any Default
or Event of Default hereunder and, if so, stating in reasonable detail the
facts with respect thereto;
(2) as soon as available and in any event within 30 days after the end of
each month, an unaudited/internal balance sheet and statements of income
and retained earnings of each Borrower as at the end of and for such month
and for the year to date period then ended, prepared, if the Lender so
requests, on a consolidating and consolidated basis to include any
Affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments;
and accompanied by a certificate of such Borrower's chief financial
officer or vice president--finance, substantially in the form of Exhibit F
hereto stating (i) that such financial statements have been prepared in
accordance with GAAP, subject to year-end audit adjustments, (ii) whether
or not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder not theretofore reported and remedied and, if
so, stating in reasonable detail the facts with respect thereto, and (iii)
all relevant facts in reasonable detail to evidence, and the computations
as to, whether or not such Borrower is in compliance with the requirements
set forth in Sections 6.12, 6.13, 6.14, 6.15, 6.16 and 7.10;
(3) within 15 days after the end of each month or more frequently if the
Lender so requires, agings of each Borrower's accounts receivable and its
accounts payable, and a calculation of such Borrower's Accounts, Eligible
Accounts, Inventory and Eligible Inventory as at the end of such month or
shorter time period;
(4) daily, receivables schedules, collection reports, an inventory
certification report, and a calculation of such Borrower's Accounts and
Inventory;
(5) before the beginning of each fiscal year of each Borrower, the
projected balance sheets and income statements for each month of such
year, each in reasonable detail, representing such Borrower's good faith
projections and certified by such Borrower's chief financial officer or
vice president--finance as being the most accurate projections available
and identical to the projections used by such Borrower for internal
planning purposes, together with such supporting schedules and information
as the Lender may in its discretion require;
(6) promptly after the commencement thereof, notice in writing of all
litigation and of all proceedings before any governmental or regulatory
agency affecting any Borrower of the type described in Section 5.12 or
which could reasonably be expected to result in a material adverse effect
on any Borrower; and monthly, notice in writing of all litigation and of
all proceedings before any governmental or regulatory agency affecting any
Borrower (except those previously disclosed to the Lender in writing) that
seek a monetary recovery against any Borrower in excess of $500,000 or
could reasonably be expected to result in a claim against any Borrower in
excess of $500,000;
(7) as promptly as practicable (but in any event not later than five
business days) after an officer of any Borrower obtains knowledge of the
occurrence of any breach, default or event of default under any Security
Document or after any Responsible Officer obtains knowledge of any event
which constitutes a Default or Event of Default hereunder, notice of such
occurrence, together with a detailed statement by a responsible officer of
such Borrower of the steps being taken by such Borrower to cure the effect
of such breach, default or event;
(8) as soon as possible and in any event within 30 days after any
Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of such Borrower's chief
financial officer or vice president--finance setting forth details as to
such Reportable Event and the action which such Borrower proposes to take
with respect thereto, together with a copy of the notice of such
Reportable Event to the Pension Benefit Guaranty Corporation;
(9) as soon as possible, and in any event within 10 days after any
Borrower fails to make any quarterly contribution required with respect to
any Plan under Section 412(m) of the Internal Revenue Code of 1986, as
amended, the statement of such Borrower's chief financial officer or vice
president--finance setting forth details as to such failure and the action
which such Borrower proposes to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the Pension
Benefit Guaranty Corporation;
(10) promptly upon knowledge thereof, notice of (i) any disputes or claims
by any Borrower's customers exceeding $150,000 individually or $300,000 in
the aggregate during any fiscal year; (ii) credit memos; (iii) any goods
returned to or recovered by such Borrower; and (iv) any change in the
persons constituting such Borrower's Responsible Officers;
(11) promptly upon knowledge thereof, notice of any loss of or material
damage to any Collateral or other collateral covered by the Security
Documents or of any substantial adverse change in any Collateral or such
other collateral or the prospect of payment thereof;
(12) promptly upon their distribution, copies of all financial statements,
reports and proxy statements which any Borrower shall have sent to its
stockholders generally;
(13) promptly after the sending or filing thereof, copies of all regular
and periodic reports which any Borrower shall file with the Securities and
Exchange Commission or any national securities exchange;
(14) promptly upon filing, copies of the state and federal tax returns and
all schedules thereto for each Borrower and each Guarantor;
(15) promptly upon knowledge thereof, notice of any Borrower's violation
of any law, rule or regulation, the non-compliance with which could
reasonably be expected to materially and adversely affect any Borrower's
business or its financial condition; and
(16) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents and
delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request related to any Borrower's
Collateral, business, or financial condition.
Section 1.49 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. Each
Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to such Borrower's business
and financial condition and such other matters as the Lender may from time
to time request in which true and complete entries will be made in
accordance with GAAP and, upon the Lender's request, will permit any
officer, employee, attorney or accountant for the Lender to audit, review,
make extracts from or copy any and all corporate and financial books and
records of such Borrower at all times during ordinary business hours, to
send and discuss with account debtors and other obligors requests for
verification of amounts owed to such Borrower, and to discuss such
Borrower's affairs with any of its, officers, employees or agents (and,
after discussing such affairs with such Borrower's officers, (a) with
consent of such officers, to discuss any such affairs with any of such
Borrower's directors, and (b) without consent, to discuss any such affairs
with any of such Borrower's directors to the extent the Lender believes in
good faith that such affairs are material to the ongoing credit
relationship between the Lender and the Borrowers). Each Borrower will
permit the Lender, or its employees, accountants, attorneys or agents, to
examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of such Borrower at any time
during ordinary business hours.
Section 1.50 ACCOUNT VERIFICATION. The Lender may at any time and from
time to time send or require any Borrower to send requests for
verification of accounts or notices of assignment to account debtors and
other obligors. The Lender may also at any time and from time to time
telephone account debtors and other obligors to verify accounts.
Section 1.51 COMPLIANCE WITH LAWS.
(1) Each Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and
keep the Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without material violation of any federal, state
or local law, statute or ordinance.
(2) Without limiting the foregoing undertakings, each Borrower
specifically agrees that it will comply in all material respects with all
applicable Environmental Laws and obtain and comply with all permits,
licenses and similar approvals required by any Environmental Laws, and
will not generate, use, transport, treat, store or dispose of any
Hazardous Substances in such a manner as to create any material liability
or obligation under the common law of any jurisdiction or any
Environmental Law.
Section 1.52 PAYMENT OF TAXES AND OTHER CLAIMS. Each Borrower will pay,
withhold, collect, remit or discharge, when assessed or due, (a) all
taxes, tax deficiencies, assessments and governmental charges levied or
imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest,
prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by it, and (c) all lawful
claims for labor, materials and supplies which, if unpaid, might by law
become a lien or charge upon any properties of such Borrower; provided
that such Borrower shall not be required to pay any such tax, tax
deficiency, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and
for which proper reserves have been made.
Section 1.53 MAINTENANCE OF PROPERTIES.
(1) Each Borrower will keep and maintain the Collateral, the other
collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition, repair
and working order (normal wear and tear excepted) and will from time to
time replace or repair any worn, defective or broken parts; provided,
however, that nothing in this Section 6.6 shall prevent such Borrower from
discontinuing the operation and maintenance of any of its properties if
such discontinuance is, in the Lender's judgment, desirable in the conduct
of such Borrower's business and not disadvantageous in any material
respect to the Lender.
(2) Each Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender) claiming the Collateral or
any interest therein.
(3) Each Borrower will keep all Collateral and other collateral covered
by the Security Documents free and clear of all security interests, liens
and encumbrances except Permitted Liens.
Section 1.54 INSURANCE. Each Borrower will obtain and at all times
maintain insurance with insurers believed by such Borrower to be
responsible and reputable, in such amounts and against such risks as may
from time to time be required by the Lender, but in all events in such
amounts and against such risks as is usually carried by companies engaged
in similar business and owning similar properties in the same general
areas in which such Borrower operates. Without limiting the generality of
the foregoing, each Borrower will at all times maintain business
interruption insurance including coverage for force majeure and keep all
tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as the Lender may
reasonably request, with any loss payable to the Lender to the extent of
its interest, and all policies of such insurance shall contain a lender's
loss payable endorsement for the Lender's benefit acceptable to the
Lender. All policies of liability insurance required hereunder shall name
the Lender as an additional insured.
Section 1.55 PRESERVATION OF EXISTENCE. Except as permitted under
Section 7.6 or 7.7, each Borrower will preserve and maintain its existence
and all of its rights, privileges and franchises necessary or desirable in
the normal conduct of its business and shall conduct its business in an
orderly, efficient and regular manner.
Section 1.56 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender,
each Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly
endorsed or assigned by such Borrower.
Section 1.57 LOCKBOX; COLLATERAL ACCOUNT.
(1) Each Borrower shall irrevocably direct all present and future Account
debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to such Borrower's Lockbox. All
of each Borrower's invoices, account statements and other written or oral
communications directing, instructing, demanding or requesting payment of
any Account or any other amount constituting Collateral shall
conspicuously direct that all payments be made to such Borrower's Lockbox
and shall include such Borrower's Lockbox address. All payments received
in the Lockbox shall be processed to such Borrower's Collateral Account.
(2) Each Borrower agrees to deposit in its Collateral Account or, at the
Lender's option, to deliver to the Lender all collections on Accounts,
contract rights, chattel paper and other rights to payment constituting
Collateral, and all other cash proceeds of Collateral, which such Borrower
may receive directly notwithstanding its direction to Account debtors and
other obligors to make payments to the Lockbox, immediately upon receipt
thereof, in the form received, except for such Borrower's endorsement when
deemed necessary. Until delivered to the Lender or deposited in a
Collateral Account, all proceeds or collections of a Borrower's Collateral
shall be held in trust by such Borrower for and as the property of the
Lender and shall not be commingled with any funds or property of any
Borrower.
(3) Amounts deposited in any Collateral Account shall not bear interest
and shall not be subject to withdrawal by any Borrower, except after full
payment and discharge of all Obligations.
(4) All deposits in any Collateral Account shall constitute proceeds of
Collateral and shall not constitute payment of the Obligations. The Lender
from time to time at its discretion may (or, upon request by such
Borrower, will), after allowing one Banking Day for collection and one
Banking Day for processing, apply deposited funds in the Collateral
Account to the payment of the Obligations, in any order or manner of
application satisfactory to the Lender, by transferring such funds to the
Lender's general account.
(5) All items deposited in any Borrower's Collateral Account shall be
subject to final payment. If any such item is returned uncollected, such
Borrower will promptly pay the Lender, or, for items deposited in the
Collateral Account, the bank maintaining such account, the amount of that
item, or such bank at its discretion may charge any uncollected item to
such Borrower's commercial account or other account. Each Borrower shall
be liable as an endorser on all items deposited in such Borrower's
Collateral Account, whether or not in fact endorsed by such Borrower.
Section 1.58 PERFORMANCE BY THE LENDER. If any Borrower at any time
fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue
for a period of ten calendar days after the Lender gives such Borrower
written notice thereof (or in the case of the agreements contained in
Sections 6.5, 6.7 and 6.10, immediately upon the occurrence of such
failure, without notice or lapse of time), the Lender may, but need not,
perform or observe such covenant on behalf and in the name, place and
stead of such Borrower (or, at the Lender's option, in the Lender's name)
and may, but need not, take any and all other actions which the Lender may
reasonably deem necessary to cure or correct such failure (including,
without limitation, the payment of taxes, the satisfaction of security
interests, liens or encumbrances, the performance of obligations owed to
account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrowers shall
thereupon pay to the Lender on demand the amount of all monies expended
and all costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action
by the Lender, together with interest thereon from the date expended or
incurred at the Revolving Floating Rate. To facilitate the Lender's
performance or observance of such covenants of each Borrower, each
Borrower hereby irrevocably appoints the Lender, or the Lender's delegate,
acting alone, as such Borrower's attorney in fact (which appointment is
coupled with an interest) with the right (but not the duty) from time to
time to create, prepare, complete, execute, deliver, endorse or file in
the name and on behalf of such Borrower any and all instruments,
documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to
be obtained, executed, delivered or endorsed by such Borrower under this
Section 6.12.
Section 1.59 MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrowers will
achieve, for the fiscal year ending December 31, 2000, a Debt Service
Coverage Ratio, determined on a consolidated basis, of not less than 0.5
to 1. On or before December 31, 2000, the Borrowers and the Lender shall
agree on the required minimum Debt Service Coverage Ratio levels for
periods after such date, which levels shall be set in the Lender's
discretion based on the business plan of the Borrowers for the fiscal year
ending December 31, 2001.
Section 1.60 MINIMUM CAPITAL. The Borrowers will maintain, as of each
date described below, their Capital, determined on a consolidated basis,
at an amount not less than the amount set forth opposite such date:
DATE MINIMUM CAPITAL
September 30, 2000 $9,000,000
December 31, 2000 $9,000,000
On or before December 31, 2000, the Borrowers and the Lender shall agree
on the required minimum Capital levels for periods after such date. If the
Borrowers and the Lender do not agree, the required minimum quarterly
Capital levels for the Borrowers as of the last day of each fiscal quarter
shall be equal to the difference of (a) the sum of (i) $9,000,000, plus
(ii) 50% of positive Pre-Tax Net Income for the Determination Period, plus
(iii) 50% of all equity contributions received by any Borrower and 50% of
all Subordinated Debt incurred by any Borrower during the Determination
Period, less (b) scheduled principal payments on Subordinated Debt
actually paid by the Borrower during the Determination Period. The
"Determination Period" for a given date shall mean the period beginning on
January 1, 2001 and ending on such date.
Section 1.61 MINIMUM YEAR-TO-DATE PRE-TAX NET INCOME. The Borrowers will
achieve, during each period described below, Pre-Tax Net Income,
determined on a consolidated basis, of not less than the amount set forth
opposite such period:
PERIOD MINIMUM PRE-TAX NET INCOME
Nine months ending September 30, 2000 $5,000,000
Fiscal year ending December 31, 2000 $6,700,000
On or before December 31, 2000, the Borrowers and the Lender shall agree
on the required minimum Pre-Tax Net Income levels for periods after such
date, which levels shall be set in the Lender's discretion based on the
business plan of the Borrowers for the fiscal year ending December 31,
2001.
Section 1.62 MINIMUM MONTHLY PRE-TAX NET INCOME. For each Loss Covenant
Month, the Borrowers shall achieve Pre-Tax Net Income, determined on a
consolidated basis, of not less than <$750,000>. For each period
encompassing two Loss Covenant Months during the same fiscal quarter, the
Borrowers will achieve Pre-Tax Net Income, determined on a consolidated
basis, of not less than <$1,000,000>. Amounts shown in brackets ("<>")
indicate negative numbers.
Section 1.63 MAXIMUM PAST-DUE PAYABLES. Each Borrower individually shall
maintain its Past-Due Payables, determined as of the last day of each
fiscal quarter, at an amount that is less than or equal to 25% of such
Borrower's total accounts payable on such date. The Borrowers shall
maintain their Past-Due Payables, determined on a consolidated basis as of
the last day of each fiscal quarter, at an amount that is less than or
equal to 25% of the amount of all Borrowers' accounts payable, determined
on a consolidated basis on such date.
ARTICLE VIVI
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, each Borrower agrees that, without the Lender's
prior written consent:
Section 1.64 LIENS. No Borrower will create, incur or suffer to exist
any mortgage, deed of trust, pledge, lien, security interest, collateral
assignment or transfer upon or of any of its assets, now owned or
hereafter acquired, to secure any indebtedness; excluding, however, from
the operation of the foregoing, the following (collectively, "Permitted
Liens"):
(1) in the case of any of the property of any Borrower which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with such Borrower's business or
operations as presently conducted;
(2) mortgages, deeds of trust, pledges, liens, security interests and
assignments in existence on the date hereof and listed in Schedule 7.1
hereto, securing indebtedness for borrowed money permitted under Section
7.2;
(3) the Security Interest and liens and security interests created by the
Security Documents;
(4) purchase money security interests (including capital leases) relating
to the acquisition of machinery and equipment of any Borrower not
exceeding the lesser of cost or fair market value thereof and so long as
no Default Period is then in existence and none would exist immediately
after such acquisition;
(5) so long as no Default Period exists or would exist immediately after
or as a result of the incurrence of indebtedness related thereto, Pemco
Aeroplex, Inc. may grant leasehold mortgages to a financial institution or
other lender with respect to its facilities located at Dothan, Alabama and
Birmingham, Alabama, to secure loans in an aggregate principal amount not
to exceed $5,000,000. Pemco Aeroplex, Inc. may incur indebtedness in
excess of $5,000,000 secured by such leasehold mortgages upon the Lender's
prior written consent, which shall not be unreasonably withheld so long as
(i) no Default Period exists or would exist immediately after or as a
result of the incurrence of such indebtedness and (ii) the Borrowers have
delivered to the Lender pro-forma financial statements acceptable to the
Lender showing the Borrowers' ability to service such debt for a period of
twelve months from the date of such incurrence of indebtedness;
(6) judgment liens not exceeding $50,000 in the aggregate at any one time
outstanding, liens for taxes, assessments or other governmental charges
not delinquent or being contested in good faith and by appropriate
proceedings and with respect to which proper reserves have been taken by
Borrowers, provided that (i) the lien has no effect on the priority of the
Security Interest or the value of the Collateral and (ii) a stay of
enforcement of any such lien is in effect;
(7) deposits or pledges of cash to secure obligations under worker's
compensation, social security or similar laws, or under unemployment
insurance;
(8) deposits or pledges of cash to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in
the ordinary course of any Borrower's business;
(9) mechanics', workers', materialmen's, landlords', or other like liens
arising in the ordinary course of any Borrower's business with respect to
obligations which are not due or which are being contested in good faith
by the applicable Borrower;
(10) present or future zoning laws and ordinances or other laws and
ordinances restricting the occupancy, use or enjoyment of any real
property;
(11) UCC-1 financing statements filed for information purposes regarding
operating leases entered into by any Borrower; and
(12) security interests or liens in favor of GMAC Commercial Credit, LLC
to the extent such lender has executed a payoff letter promising to
release such security interests or liens upon receipt of a sum certain,
which letter shall be acceptable to the Lender in its sole discretion.
Section 1.65 INDEBTEDNESS. No Borrower will incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit
issued on such Borrower's behalf, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(1) indebtedness arising hereunder;
(2) indebtedness of such Borrower in existence on the date hereof and
listed in Schedule 7.2 hereto;
(3) indebtedness relating to liens permitted in accordance with Section
7.1; and
(4) indebtedness to of one Borrower to another Borrower permitted in
accordance with Section 7.4.
Section 1.66 GUARANTIES. No Borrower will assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
(1) the endorsement of negotiable instruments by such Borrower for
deposit or collection or similar transactions in the ordinary course of
business;
(2) guaranties, endorsements and other direct or contingent liabilities
in connection with the obligations of other Persons, in existence on the
date hereof and listed in Schedule 7.2 hereto; and
(3) guaranties by any Borrower of any other Borrower's obligations.
Section 1.67 INVESTMENTS AND SUBSIDIARIES.
(1) Except by means of a Permitted Acquisition in accordance with Section
7.7, no Borrower will purchase or hold beneficially any stock or other
securities or evidences of indebtedness of, make or permit to exist any
loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including specifically but without
limitation any partnership or joint venture, except:
(1) investments in direct obligations of the United States of America or
any agency or instrumentality thereof whose obligations constitute full
faith and credit obligations of the United States of America having a
maturity of one year or less, commercial paper issued by U.S. corporations
rated "A-1" or "A-2" by Standard & Poors Corporation or "P-1" or "P-2" by
▇▇▇▇▇'▇ Investors Service or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(2) travel advances or loans to such Borrower's officers and employees
not exceeding at any one time an aggregate of $50,000;
(3) loans, advances, or capital contributions from one Borrower to any
other Borrower;
(4) loans to Guarantors not exceeding $250,000 in the aggregate to all
Guarantors at any one time; and
(5) advances in the form of progress payments, prepaid rent not exceeding
two months or security deposits.
(2) No Borrower will create or permit to exist any Subsidiary, other than
any Subsidiary in existence on the date hereof and listed in Schedule 5.4
or any Subsidiary acquired in a Permitted Acquisition or formed for the
sole purpose of effecting a Permitted Acquisition.
Section 1.68 DIVIDENDS. No Borrower will declare or pay any dividends
(other than dividends payable solely in stock of such Borrower) on any
class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 1.69 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. No Borrower will sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary (except that Pemco Aeroplex,
Inc. may sell all (but not less than all) of the stock of Space Vector
Corporation provided the proceeds of such sale (A) are sufficient to repay
in full all Advances made by the Lender to Space Vector Corporation and
(B) in accordance with Section 6.10, are directed to a Collateral Account
for such purpose, and the Lender shall release Space Vector Corporation
from the Obligations at the time of receipt of such proceeds), (ii) all or
a substantial part of its assets (except that Space Vector Corporation may
sell substantially all (but not less than substantially all) of its assets
provided the proceeds of such sale meet the requirements of clauses (i)(A)
and (i)(B) of this Section 7.6), or (iii) any Collateral or any interest
therein (whether in one transaction or in a series of transactions) to any
other Person other than the sale of Inventory in the ordinary course of
business or liquidate, dissolve or suspend business operations. In the
case of a sale of the assets or stock of Space Vector Corporation in
accordance with this Section 7.6, the Lender will release or terminate the
Security Interest with respect to the assets of Space Vector Corporation.
Notwithstanding the foregoing, except during any Default Period, any
Borrower may transfer its property to any other Borrower provided that
prior to such transfer (x) the Borrower Agent gives written notice to the
Lender of the proposed transfer, (y) Borrowers provide any financing
statements and/or fixture filings necessary to perfect and continue
perfected the Security Interest, and (z) simultaneous with such transfer,
the Borrowers make any mandatory prepayment that may be required in
accordance with Section 2.14 as a result of such transfer. In addition,
any Borrower may sell obsolete or worn-out Equipment without the Lender's
consent so long as the proceeds from the sale of obsolete or worn-out
Equipment pursuant to this sentence do not exceed $250,000 in any fiscal
year for all of the Borrowers in the aggregate. No Borrower will in any
manner transfer any property without prior or present receipt of cash or
property that is equal to or greater than the fair market value of any
such transferred property.
Section 1.70 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS; PERMITTED
ACQUISITIONS. Except as set forth below, no Borrower will consolidate
with or merge into any Person, or permit any other Person to merge into
it, or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all the assets of any other
Person. Notwithstanding the foregoing, a Borrower may do any of the
following:
(1) so long as no Default Period exists or would result from the
consummation of any merger or consolidation described in this subsection
(a), (i) any Borrower may be merged or consolidated with or into any other
Borrower; and (ii) any Borrower may be merged or consolidated with any one
or more other Subsidiaries of any Borrower, provided in either case that
(A) a Borrower is the surviving corporation, (B) the Lender retains a
valid and perfected first priority security interest in all assets of such
Borrower, (C) no capital stock or other equity interest or assets acquired
in connection with such acquisition shall be subject to any lien or
encumbrance other than Permitted Liens, and (D) each holder of
Subordinated Debt shall execute such documents as may be requested by the
Lender to affirm that all indebtedness of such resulting Borrower to such
holder of Subordinated Debt shall be subordinated to all indebtedness of
such resulting Borrower to the Lender, on substantially the same terms and
conditions as the pre-existing Subordinated Debt of such holder is
subordinated;
(2) any Borrower may acquire the assets or capital stock or other equity
interest in a Person (including by means of a merger of such Person with
or into a Borrower or a newly formed subsidiary of a Borrower, the effect
of which is substantially the same as a purchase of the assets or stock of
such Person) provided that the Person is a domestic corporation, limited
liability company, or partnership (any such acquisition pursuant to this
subsection (b), a "Permitted Acquisition"), so long as (i) such
acquisition and all transactions related thereto shall be consummated in
accordance with applicable law; (ii) such acquisition shall result in the
acquired entity becoming a Borrower; (iii) no capital stock or other
equity interest or assets acquired in connection with such acquisition
shall be subject to any lien or encumbrance other than Permitted Liens;
(iv) neither the Borrower nor any of its Subsidiaries shall assume or
incur, directly or indirectly, any indebtedness or other liability in
connection with such acquisition (other than permitted in accordance with
Section 7.2); (v) no Default Period shall exist either before or after
giving effect to such acquisition or as a result thereof; (vi) the
aggregate value of the cash or other non-stock consideration for all
acquisitions permitted under this subsection (b) does not exceed
$5,000,000 in any fiscal year; (vii) after giving effect to such
acquisition, Aggregate Availability shall not be less than $2,000,000; and
(viii) each holder of Subordinated Debt shall execute such documents as
may be requested by the Lender to affirm that all indebtedness of such
resulting Borrower to such holder of Subordinated Debt shall be
subordinated to all indebtedness of such resulting Borrower to the Lender,
on substantially the same terms and conditions as the pre-existing
Subordinated Debt of such holder is subordinated; and
(3) in addition to the foregoing, and notwithstanding the provisions of
Subsection 7.7(b), any Borrower may, after obtaining the prior written
consent of the Lender, acquire the assets or capital stock or other equity
interest in a non-domestic Person or a domestic Person. Such consent by
the Lender shall be exercised in its sole discretion, exercised in good
faith.
Section 1.71 SALE AND LEASEBACK. No Borrower will enter into any
arrangement, directly or indirectly, with any other Person whereby such
Borrower shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as
lessee such property or any part thereof or any other property which such
Borrower intends to use for substantially the same purpose or purposes as
the property being sold or transferred.
Section 1.72 RESTRICTIONS ON NATURE OF BUSINESS. No Borrower will
engage in any line of business materially different from that presently
engaged in by such Borrower and will not purchase, lease or otherwise
acquire assets not related or incidental to its business.
Section 1.73 CAPITAL EXPENDITURES. The Borrowers will not, during any
period described below, incur or contract to incur Unfinanced Capital
Expenditures, determined on a consolidated basis, of more than the amount
set forth opposite such period:
MAXIMUM UNFINANCED
PERIOD CAPITAL EXPENDITURES
Nine months ending September 30, 2000 $9,500,000
Ten months ending October 31, 2000 $8,500,000
Eleven months ending November 30, 2000 $8,500,000
Fiscal year ending December 31, 2000 $8,500,000
On or before December 31, 2000, the Borrowers and the Lender shall agree
on the maximum Unfinanced Capital Expenditure levels for periods after
such date, which levels shall be set in the Lender's discretion based on
the business plan of the Borrowers for the fiscal year ending December 31,
2001.
Section 1.74 ACCOUNTING. No Borrower will adopt any material change in
accounting principles other than as required by GAAP. No Borrower will
adopt, permit or consent to any change in its fiscal year.
Section 1.75 DISCOUNTS, ETC. No Borrower will, after notice from the
Lender (which notice shall be given and shall remain effective only during
a Default Period), grant any discount, credit or allowance to any customer
of such Borrower or accept any return of goods sold, or at any time
(whether before or after notice from the Lender) modify, amend,
subordinate, cancel or terminate the obligation of any account debtor or
other obligor of such Borrower.
Section 1.76 DEFINED BENEFIT PENSION PLANS. No Borrower will adopt,
create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 1.77 OTHER DEFAULTS. No Borrower will permit any breach,
default, or event of default (and the expiration of the applicable period
of grace, if any, specified in the applicable instrument, agreement,
contract, or lease) to occur (a) under any note, loan agreement, or
indenture binding upon such Borrower in the amount of $250,000 or greater
or (b) under any lease, mortgage, contract for deed, security agreement,
or other contractual obligation binding upon such Borrower if such breach,
default, or event of default would materially adversely affect the
business or financial condition of any Borrower.
Section 1.78 PLACE OF BUSINESS; NAME. No Borrower will transfer its
chief executive office or principal place of business, or move, relocate,
close or sell any business location unless Lender receives 30 days prior
written notice and prior to expiration of such 30 days, Borrowers provide
any financing statements and/or fixture filings necessary to perfect and
continue perfected the Security Interest. No Borrower will permit any
tangible Collateral (except for Collateral in transit in the ordinary
course of business) or any records pertaining to the Collateral to be
located in any state or area in which, in the event of such location, a
financing statement covering such Collateral would be required to be, but
has not in fact been, filed in order to perfect the Security Interest. No
Borrower will change its name unless Lender receives 30 days prior written
notice and prior to expiration of such 30 days, Borrowers provide any
financing statements and/or fixture filings necessary to perfect and
continue perfected the Security Interest.
Section 1.79 ORGANIZATIONAL DOCUMENTS; S CORPORATION STATUS. No
Borrower will amend its certificate of incorporation, articles of
incorporation or bylaws in any manner adverse to the Lender. No Borrower
will become an S Corporation within the meaning of the Internal Revenue
Code of 1986, as amended.
Section 1.80 SUBORDINATED DEBT PAYMENTS. No Borrower will make any
payment (whether of principal, interest, or otherwise) on any Subordinated
Debt; provided, however, that Borrowers may pay the regularly scheduled
installments of interest and principal due under the Special Value Loan
Agreement so long as (a) no Default Period then exists or would exist
immediately after or as a result of such payment, (b) Aggregate
Availability on the date of such payment is not less than the sum of the
amount of such payment plus $1,000,000, and (c) average daily Aggregate
Availability for the 90 days prior to the date of such payment (or, if the
Funding Date was fewer than 90 days prior to such payment, for the entire
period since the Funding Date) is not less than the sum of the amount of
such payment plus $1,000,000.
ARTICLE VIIVII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 1.81 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(1) Default in the payment of the Obligations within two Banking Days of
the date they become due and payable (except that on the Maturity Date,
all of the Obligations shall be due and payable immediately without any
such grace period);
(2) Failure to pay when due any amount specified in Section 2.3 relating
to the Borrowers' Obligation of Reimbursement, or failure to pay
immediately when due or upon termination of the Credit Facility any
amounts required to be paid for deposit in the Special Account under
Section 2.4 or;
(3) Default in the performance, or breach, of the covenants contained in
Sections 6.1(f), 6.1(o), 6.4(a), or 6.6(a) of this Agreement if such
Default remains unremedied 10 calendar days after its occurrence; or
default in the performance, or breach, of any other covenant or agreement
of any Borrower contained in this Agreement or any other Loan Document.
(4) Any Borrower or any Guarantor shall be or become insolvent, or admit
in writing its or his inability to pay its or his debts as they mature, or
make an assignment for the benefit of creditors; or any Borrower or any
Guarantor shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or him or for all or any substantial
part of its or his property; or such receiver, trustee or similar officer
shall be appointed without the application or consent of such Borrower or
such Guarantor, as the case may be; or any Borrower or any Guarantor shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him under
the laws of any jurisdiction; or any such proceeding shall be instituted
(by petition, application or otherwise) against any such Borrower; or any
judgment, writ, warrant of attachment or execution or similar process
shall be issued or levied against a substantial part of the property of
any Borrower or any Guarantor; or a petition shall be filed by any
Borrower or any Guarantor under the United States Bankruptcy Code naming
such Borrower or such Guarantor as debtor;
(5) Any bankruptcy, insolvency, reorganization, arrangement, readjustment
of debt, dissolution, liquidation or similar proceeding relating to a
Guarantor shall be instituted (by petition, application, or otherwise)
against any such Guarantor, or a petition shall be filed against any
Guarantor under the United States Bankruptcy Code naming such Guarantor as
debtor, and in either case such proceeding or petition is not dismissed
within 30 days of institution;
(6) Any representation or warranty made by any Borrower in this
Agreement, by any Guarantor in any guaranty delivered to the Lender, or by
any Borrower (or any of its officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with
this Agreement or any such guaranty shall prove to have been incorrect in
any material respect when deemed to be effective;
(7) The rendering against any Borrower of a final judgment, decree or
order for the payment of money in excess of $250,000 and the continuance
of such judgment, decree or order unsatisfied and in effect for any period
of 45 consecutive days without a stay of execution;
(8) Any Reportable Event, which the Lender determines in good faith might
constitute grounds for the termination of any Plan or for the appointment
by the appropriate United States District Court of a trustee to administer
any Plan, shall have occurred and be continuing 30 days after written
notice to such effect shall have been given to any Borrower by the Lender;
or a trustee shall have been appointed by an appropriate United States
District Court to administer any Plan; or the Pension Benefit Guaranty
Corporation shall have instituted proceedings to terminate any Plan or to
appoint a trustee to administer any Plan; or any Borrower shall have filed
for a distress termination of any Plan under Title IV of ERISA; or any
Borrower shall have failed to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, which the Lender determines in good faith may by
itself, or in combination with any such failures that the Lender may
determine in good faith are likely to occur in the future, result in the
imposition of a lien on any Borrower's assets in favor of the Plan;
(9) An event of default shall occur under any Security Document or under
any other security agreement, mortgage, deed of trust, assignment or other
instrument or agreement securing any obligations of any Borrower hereunder
or under any note;
(10) Any Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the
ordinary course, without the Lender's prior written consent;
(11) Any Guarantor shall repudiate, purport to revoke or fail to perform
any such Guarantor's obligations under such Guarantor's guaranty in favor
of the Lender, or any Guarantor shall cease to exist except by means of a
transaction permitted under Section 7.7(a);
(12) Any Borrower shall take or participate in any action which would be
prohibited under the provisions of any Subordination Agreement or make any
payment on the Subordinated Indebtedness (as defined in the Subordination
Agreement) that any Person was not entitled to receive under the
provisions of the Subordination Agreement;
(13) Any Change of Ownership or Change in Control shall occur; or
(14) There shall occur any breach, default or event of default by or
attributable to any Subsidiary under any agreement between such Subsidiary
and the Lender (other than under the Loan Documents).
Section 1.82 RIGHTS AND REMEDIES. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(1) the Lender may, by notice to the Borrowers, declare the Commitment to
be terminated, whereupon the same shall forthwith terminate;
(2) the Lender may, by notice to the Borrowers, declare the Obligations
to be forthwith due and payable, whereupon all Obligations shall become
and be forthwith due and payable, without presentment, notice of dishonor,
protest or further notice of any kind, all of which each Borrower hereby
expressly waives;
(3) the Lender may, without notice to the Borrowers and without further
action, apply any and all money owing by the Lender to any such Borrower
to the payment of the Obligations;
(4) the Lender may make demand upon any Borrower and, forthwith upon such
demand, the Borrowers will pay to the Lender in immediately available
funds for deposit in the Special Account pursuant to Section 2.14 an
amount equal to the aggregate maximum amount available to be drawn under
all Letters of Credit then outstanding, assuming compliance with all
conditions for drawing thereunder;
(5) the Lender may exercise and enforce any and all rights and remedies
available upon default to a secured party under the UCC, including,
without limitation, the right to take possession of Collateral, or any
evidence thereof, proceeding without judicial process or by judicial
process (without a prior hearing or notice thereof, which each Borrower
hereby expressly waives) and the right to sell, lease or otherwise dispose
of any or all of the Collateral, and, in connection therewith, each
Borrower will on demand assemble the Collateral and make it available to
the Lender at a place to be designated by the Lender which is reasonably
convenient to both parties;
(6) the Lender may exercise and enforce its rights and remedies under the
Loan Documents; and
(7) the Lender may exercise any other rights and remedies available to it
by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsection (d) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand,
protest or notice of any kind.
Section 1.83 CERTAIN NOTICES. If notice to any Borrower of any intended
disposition of Collateral or any other intended action is required by law
in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten
calendar days before the date of intended disposition or other action.
ARTICLE VIII
MISCELLANEOUS
Section 1.84 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under
the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
Section 1.85 AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure
by any Borrower therefrom or any release of a Security Interest shall be
effective unless the same shall be in writing and signed by the Lender,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No notice to or
demand on any Borrower in any case shall entitle any Borrower to any other
or further notice or demand in similar or other circumstances.
Section 1.86 ADDRESSES FOR NOTICES, ETC. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent
by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice
is being given at its address or telecopier number as set forth below:
If to the Borrowers:
Pemco Aviation Group, Inc., as Borrowers' Agent
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
If to the Lender:
▇▇▇▇▇ Fargo Business Credit, Inc.
MAC C7300-300
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section. All such
notices, requests, demands and other communications shall be deemed to
have been given on (a) the date received if personally delivered, (b) when
deposited in the mail if delivered by mail, (c) the date sent if sent by
overnight courier, or (d) the date of transmission if delivered by
telecopy, except that notices or requests to the Lender pursuant to any of
the provisions of Article II shall not be effective until received by the
Lender.
Section 1.87 FURTHER DOCUMENTS. Each Borrower will from time to time
execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and
other agreements and writings that the Lender may reasonably request in
order to secure, protect, perfect or enforce the Security Interest or the
Lender's rights under the Loan Documents (but any failure to request or
assure that such Borrower executes, delivers or endorses any such item
shall not affect or impair the validity, sufficiency or enforceability of
the Loan Documents and the Security Interest, regardless of whether any
such item was or was not executed, delivered or endorsed in a similar
context or on a prior occasion).
Section 1.88 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, each
Borrower is entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third
person, and the Lender need not otherwise preserve, protect, insure or
care for any Collateral. The Lender shall not be obligated to preserve any
rights any Borrower may have against prior parties, to realize on the
Collateral at all or in any particular manner or order or to apply any
cash proceeds of the Collateral in any particular order of application.
Section 1.89 COSTS AND EXPENSES. Each Borrower, jointly and severally,
agrees to pay on demand all costs and expenses, including (without
limitation) reasonable attorneys' fees, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents, any
Letters of Credit, and any other document or agreement related hereto or
thereto, and the transactions contemplated hereby, including without
limitation all such costs, expenses and fees incurred in connection with
the negotiation, preparation, execution, amendment, administration,
performance, collection and enforcement of the Obligations and all such
documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 1.90 INDEMNITY. In addition to the payment of expenses pursuant
to Section 9.6, each Borrower agrees, jointly and severally, to indemnify,
defend and hold harmless the Lender, and any of its participants, parent
corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees,
attorneys and agents of the foregoing (the "Indemnitees") from and against
any of the following (collectively, "Indemnified Liabilities"):
(1) any and all transfer taxes, documentary taxes, assessments or charges
made by any governmental authority by reason of the execution and delivery
of the Loan Documents or the making of the Advances;
(2) any claims, loss or damage to which any Indemnitee may be subjected
if any representation or warranty contained in Section 5.12 proves to be
incorrect in any respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(3) any and all other liabilities, losses, damages, penalties, judgments,
suits, claims, costs and expenses of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee
shall be designated a party thereto, which may be imposed on, incurred by
or asserted against any such Indemnitee, in any manner related to or
arising out of or in connection with the making of the Advances and the
Loan Documents or the use or intended use of the proceeds of the Advances;
provided that Borrowers shall not be responsible for any loss, cost or
expense of any kind resulting from an Indemnitee's gross negligence or
willful misconduct.
If any investigative, judicial or administrative proceeding arising from
any of the foregoing is brought against any Indemnitee, upon such
Indemnitee's request, each Borrower, or counsel designated by each such
Borrower and satisfactory to the Indemnitee, will resist and defend such
action, suit or proceeding to the extent and in the manner directed by the
Indemnitee, at the Borrowers' sole cost and expense. Each Indemnitee will
use its best efforts to cooperate in the defense of any such action, suit
or proceeding. If the foregoing undertaking to indemnify, defend and hold
harmless may be held to be unenforceable because it violates any law or
public policy, each Borrower shall nevertheless make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Each Borrower's
obligation under this Section 9.7 shall survive the termination of this
Agreement and the discharge of any Borrower's other obligations hereunder.
Section 1.91 PARTICIPANTS. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of
its participants. All rights and powers specifically conferred upon the
Lender may be transferred or delegated to any of the Lender's
participants, successors or assigns.
Section 1.92 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the
same instrument.
Section 1.93 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT; EXCHANGING
INFORMATION. The Loan Documents shall be binding upon and inure to the
benefit of the Borrowers and the Lender and their respective successors
and assigns, except that no Borrower shall have the right to assign its
rights thereunder or any interest therein without the Lender's prior
written consent. This Agreement, together with the Loan Documents,
comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or
oral, on the subject matter hereof. Without limiting the Lender's right to
share information regarding the Borrowers and their Subsidiaries with the
Lender's participants, accountants, lawyers and other advisors, but
subject to Section 9.14, the Lender, ▇▇▇▇▇ Fargo & Company, and all direct
and indirect subsidiaries of ▇▇▇▇▇ Fargo & Company, may exchange any and
all information they may have in their possession regarding each Borrower
and its Subsidiaries, and each Borrower waives any right of
confidentiality it may have with respect to such exchange of such
information.
Section 1.94 SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof.
Section 1.95 HEADINGS. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 1.96 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL.
The Loan Documents shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Colorado.
This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the
state and federal courts located in the State of Colorado in connection
with any controversy related to this Agreement; (ii) waive any argument
that venue in any such forum is not convenient, (iii) agree that any
litigation initiated by the Lender or any Borrower in connection with this
Agreement or the other Loan Documents shall be venued in either the
District Court for the City and County of Denver, Colorado, or the United
States District Court, District of Colorado; and (iv) agree that a final
judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
Section 1.97 CONFIDENTIALITY. The Lender agrees that material, non-
public information regarding the Borrowers and their Subsidiaries, their
operations, assets, and existing and contemplated business plans shall be
treated by the Lender in a confidential manner, and shall not be disclosed
by it to Persons who are not parties to this Agreement, except that the
Lender may disclose such information (a) to counsel for, and other
advisors, accountants, and auditors to, the Lender, (b) as may be required
by statute, decision, or judicial or administrative order, rule, or
regulation, (c) as may be agreed to in advance by any Borrower, (d) as to
any such information that is or becomes generally available to the public
(other than as a result of prohibited disclosure by the Lender), (e) to
▇▇▇▇▇ Fargo & Company and all direct and indirect subsidiaries of ▇▇▇▇▇
Fargo & Company, in either case to the extent that the Lender believes in
good faith that such disclosure is necessary for the efficient
administration of its loans to any Borrower, (f) in connection with any
assignment, prospective assignment, sale, prospective sale, participation
or prospective participation, or pledge or prospective pledge of the
Lender's interests under this Agreement; provided that any such counsel,
advisor, accountants, auditors and any such assignee, prospective
assignee, purchaser, prospective purchaser, participant, prospective
participant, pledgee, or prospective pledgee shall have agreed in writing
to take its interest hereunder subject to the terms hereof, or (g) to the
extent that the Lender in good faith believes that such disclosure is
necessary for the enforcement of the Loan Documents, collection of the
Obligations, or realization on the Collateral.
Section 1.98 BORROWING AGENCY.
(1) Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower
or Borrowers, and hereby authorizes the Lender to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
(2) The handling of this credit facility as a co-borrowing facility with
a borrowing agent in the manner set forth in this Agreement is solely as
an accommodation to Borrowers and at their request. Lender shall not
incur liability to any Borrower as a result thereof. To induce Lender to
do so and in consideration thereof, each Borrower hereby indemnifies
Lender and holds Lender harmless from and against any and all liabilities,
expenses, losses, damages and claims of damage or injury asserted against
Lender by any Person arising from or incurred by reason of the handling of
the financing arrangements of Borrowers as provided herein, reliance by
Lender on any request or instruction from Borrowing Agent or any other
action taken by Lender with respect to this Section 9.15 except due to
willful misconduct or gross (not mere) negligence by the indemnified
party.
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.
▇▇▇▇▇ FARGO BUSINESS CREDIT, INC. PEMCO AVIATION GROUP, INC.,
for itself and as Agent
By /s/▇▇▇ ▇▇▇▇▇▇ By /s/▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, Vice President Its Senior Vice President & CFO
PEMCO AEROPLEX, INC. SPACE VECTOR CORPORATION
By /s/▇▇▇▇ ▇▇▇ By /s/▇▇▇▇ ▇▇▇
Its Senior Vice President & CFO Its Senior Vice President & CFO
PEMCO WORLD AIR SERVICES, INC.
By /s/▇▇▇▇ ▇▇▇
Its Senior Vice President & CFO
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Form of Term A Note
Exhibit C Form of CapEx Note
Exhibit D Form of Term B Note
Exhibit E Form of Discretionary Advance Note
Exhibit F Compliance Certificate
Exhibit G Premises
Schedule 2.6 Allocation of Term A Advance and Initial Term B Advance
Schedule 5.1 Trade Names, Chief Executive Office, Principal Place of
Business, and Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 5.6 Litigation
Schedule 5.17 Labor Matters
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
Exhibit A to Credit and Security Agreement
REVOLVING NOTE
$23,100,000 Denver, Colorado
November ____, 2000
For value received, the undersigned, PEMCO AVIATION GROUP, INC., a
Delaware corporation; PEMCO AEROPLEX, INC., an Alabama corporation; SPACE
VECTOR CORPORATION, a Delaware corporation; and PEMCO AIR SERVICES SYSTEM,
INC., a Colorado corporation (collectively the "Borrowers"), hereby
jointly and severally promise to pay on the Termination Date under the
Credit Agreement (defined below), to the order of ▇▇▇▇▇ FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office
in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Twenty-Three Million One
Hundred Thousand Dollars ($23,100,000) or, if less, the aggregate unpaid
principal amount of all Revolving Advances made by the Lender to the
Borrowers under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a 360-
day year, from the date hereof until this Note is fully paid at the rate
from time to time in effect under the Credit and Security Agreement of
even date herewith (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") by and between the
Lender and the Borrowers. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement. This
Note may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is
the Revolving Note referred to in the Credit Agreement. This Note is
secured, among other things, pursuant to the Credit Agreement and the
Security Documents as therein defined, and may now or hereafter be secured
by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
PEMCO AVIATION GROUP, INC. PEMCO AEROPLEX, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
SPACE VECTOR CORPORATION PEMCO AIR SERVICES SYSTEM, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
Exhibit B to Credit and Security Agreement
TERM A NOTE
$2,900,000 Denver, Colorado
November ____, 2000
For value received, the undersigned, PEMCO AVIATION GROUP, INC., a
Delaware corporation; PEMCO AEROPLEX, INC., an Alabama corporation; SPACE
VECTOR CORPORATION, a Delaware corporation; and PEMCO AIR SERVICES SYSTEM,
INC., a Colorado corporation (collectively, the "Borrowers"), hereby
jointly and severally promise to pay on the Termination Date under the
Credit Agreement (defined below), to the order of ▇▇▇▇▇ FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office
in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Million Nine Hundred
Thousand Dollars ($2,900,000) or, if less, the aggregate unpaid principal
amount of all Term A Advances made by the Lender to the Borrowers under
the Credit Agreement (defined below) together with interest on the
principal amount hereunder remaining unpaid from time to time, computed on
the basis of the actual number of days elapsed and a 360-day year, from
the date hereof until this Note is fully paid at the rate from time to
time in effect under the Credit and Security Agreement of even date
herewith (as the same may hereafter be amended, supplemented or restated
from time to time, the "Credit Agreement") by and between the Lender and
the Borrowers. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is
the Term A Note referred to in the Credit Agreement. This Note is secured,
among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one
or more other security agreements, mortgages, deeds of trust, assignments
or other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
PEMCO AVIATION GROUP, INC. PEMCO AEROPLEX, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
SPACE VECTOR CORPORATION PEMCO AIR SERVICES SYSTEM, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
Exhibit C to Credit and Security Agreement
CAPEX NOTE
$5,000,000 Denver, Colorado
November ____, 2000
For value received, the undersigned, PEMCO AVIATION GROUP, INC., a
Delaware corporation; PEMCO AEROPLEX, INC., an Alabama corporation; SPACE
VECTOR CORPORATION, a Delaware corporation; and PEMCO AIR SERVICES SYSTEM,
INC., a Colorado corporation (collectively, the "Borrowers"), hereby
jointly and severally promise to pay on the Termination Date under the
Credit Agreement (defined below), to the order of ▇▇▇▇▇ FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office
in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Five Million Dollars
($5,000,000) or, if less, the aggregate unpaid principal amount of all
CapEx Advances made by the Lender to the Borrowers under the Credit
Agreement (defined below) together with interest on the principal amount
hereunder remaining unpaid from time to time, computed on the basis of the
actual number of days elapsed and a 360-day year, from the date hereof
until this Note is fully paid at the rate from time to time in effect
under the Credit and Security Agreement of even date herewith (as the same
may hereafter be amended, supplemented or restated from time to time, the
"Credit Agreement") by and between the Lender and the Borrowers. The
principal hereof and interest accruing thereon shall be due and payable as
provided in the Credit Agreement. This Note may be prepaid only in
accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is
the CapEx Note referred to in the Credit Agreement. This Note is secured,
among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one
or more other security agreements, mortgages, deeds of trust, assignments
or other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
PEMCO AVIATION GROUP, INC. PEMCO AEROPLEX, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
SPACE VECTOR CORPORATION PEMCO AIR SERVICES SYSTEM, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
Exhibit D to Credit and Security Agreement
TERM B NOTE
$2,100,000 Denver, Colorado
November ____, 2000
For value received, the undersigned, PEMCO AVIATION GROUP, INC., a
Delaware corporation; PEMCO AEROPLEX, INC., an Alabama corporation; SPACE
VECTOR CORPORATION, a Delaware corporation; and PEMCO AIR SERVICES SYSTEM,
INC., a Colorado corporation (collectively, the "Borrowers"), hereby
jointly and severally promise to pay on the Termination Date under the
Credit Agreement (defined below), to the order of ▇▇▇▇▇ FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office
in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Million One Hundred
Thousand Dollars ($2,100,000) or, if less, the aggregate unpaid principal
amount of the Term B Advance made by the Lender to the Borrowers under the
Credit Agreement (defined below) together with interest on the principal
amount hereunder remaining unpaid from time to time, computed on the basis
of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in
effect under the Credit and Security Agreement of even date herewith (as
the same may hereafter be amended, supplemented or restated from time to
time, the "Credit Agreement") by and between the Lender and the Borrowers.
The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only
in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is
the Term B Note referred to in the Credit Agreement. This Note is secured,
among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one
or more other security agreements, mortgages, deeds of trust, assignments
or other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
PEMCO AVIATION GROUP, INC. PEMCO AEROPLEX, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
SPACE VECTOR CORPORATION PEMCO AIR SERVICES SYSTEM, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
Exhibit E to Credit and Security Agreement
DISCRETIONARY ADVANCE NOTE
$1,900,000 Denver, Colorado
November ____, 2000
For value received, the undersigned, PEMCO AVIATION GROUP, INC., a
Delaware corporation; PEMCO AEROPLEX, INC., an Alabama corporation; SPACE
VECTOR CORPORATION, a Delaware corporation; and PEMCO AIR SERVICES SYSTEM,
INC., a Colorado corporation (collectively, the "Borrowers"), hereby
jointly and severally promise to pay on the Termination Date under the
Credit Agreement (defined below), to the order of ▇▇▇▇▇ FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office
in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of One Million Nine Hundred
Thousand Dollars ($1,900,000) or, if less, the aggregate unpaid principal
amount of the Discretionary Advances made by the Lender to the Borrowers
under the Credit Agreement (defined below) together with interest on the
principal amount hereunder remaining unpaid from time to time, computed on
the basis of the actual number of days elapsed and a 360-day year, from
the date hereof until this Note is fully paid at the rate from time to
time in effect under the Credit and Security Agreement of even date
herewith (as the same may hereafter be amended, supplemented or restated
from time to time, the "Credit Agreement") by and between the Lender and
the Borrowers. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is
the Discretionary Advance Note referred to in the Credit Agreement. This
Note is secured, among other things, pursuant to the Credit Agreement and
the Security Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of
trust, assignments or other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
PEMCO AVIATION GROUP, INC. PEMCO AEROPLEX, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
SPACE VECTOR CORPORATION PEMCO AIR SERVICES SYSTEM, INC.
By ------------------------------ By ------------------------------
Its ------------------------ Its ------------------------
Exhibit F to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To: ---------------------------------
▇▇▇▇▇ Fargo Business Credit, Inc.
Date: ------------------, -----
Subject: Pemco Aviation Group, Inc. Financial Statements
In accordance with our Credit and Security Agreement dated as of November
____, 2000 (the "Credit Agreement"), attached are the financial statements
of the Borrowers as of and for ________________, _____ (the "Reporting
Date") and the year-to-date period then ended (the "Current Financials").
All terms used in this certificate have the meanings given in the Credit
Agreement.
I certify in my capacity as [Chief Financial Officer] [Vice President--
Finance] of the Borrowers that the Current Financials have been prepared
in accordance with GAAP, subject to year-end audit adjustments, and fairly
present the Borrowers' financial condition and the results of its
operations as of the date thereof.
Events of Default. (Check one):
o The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
o The undersigned has knowledge of the occurrence of a Default or Event
of Default under the Credit Agreement and attached hereto is a statement
of the facts with respect to thereto.
Financial Covenants. I further hereby certify as follows (complete only
those sections applicable for the Reporting Date):
1. MINIMUM DEBT SERVICE COVERAGE RATIO. Pursuant to Section 6.12 of the
Credit Agreement, as of the Reporting Date, the Borrowers' consolidated
Debt Service Coverage Ratio was _____ to 1.00 which (__) satisfies (__)
does not satisfy the requirement that such ratio be no less than ______ to
1.00 on the Reporting Date.
2. MINIMUM CAPITAL. Pursuant to Section 6.13 of the Credit Agreement, as
of the Reporting Date, the Borrowers' consolidated Capital was
$____________ which (__) satisfies (__) does not satisfy the requirement
that such amount be not less than $_____________ on the Reporting Date.
3. MINIMUM YEAR-TO-DATE PRE-TAX NET INCOME. Pursuant to Section 6.14 of
the Credit Agreement, the Borrowers' consolidated Pre-Tax Net Income for
the fiscal year-to-date period ending on the Reporting Date, was
$____________, which (__) satisfies (__) does not satisfy the requirement
that such amount be not less than $_____________ during such period.
4. MINIMUM MONTHLY PRE-TAX NET INCOME. Pursuant to Section 6.15 of the
Credit Agreement, the Borrowers' consolidated Pre-Tax Net Income for the
month ending on the Reporting Date, was $______________, which (__)
satisfies (__) does not satisfy the requirement that such amount be not
less than <$750,000> during such month.
5. MINIMUM TWO-MONTHS' PRE-TAX NET INCOME. Pursuant to Section 6.15 of
the Credit Agreement, the Borrowers' consolidated Pre-Tax Net Income for
the two months ending on the Reporting Date was $______________, which
(__) satisfies (__) does not satisfy the requirement that such amount be
not less than <$1,000,000> during such two-month period.
6. MAXIMUM PAST-DUE PAYABLES. As of the Reporting Date, each Borrower
(__) is (__) is not, and the Borrowers as a group (__) are (__) are not,
in compliance with Section 6.16 of the Credit Agreement concerning Past-
Due Payables.
7. CAPITAL EXPENDITURES. Pursuant to Section 7.10 of the Credit
Agreement, for the fiscal year-to-date period ending on the Reporting
Date, the Borrowers have expended or contracted to expend, for Unfinanced
Capital Expenditures, $__________________, which (__) satisfies (__) does
not satisfy the requirement that such expenditures not exceed
$______________ during such period.
8. LITIGATION. Pursuant to Section 6.1(f) of the Credit Agreement, all
litigation affecting any Borrower that meets the thresholds set forth in
Section 6.1(f) is described in the attachment hereto.
Attached hereto are all relevant facts in reasonable detail to evidence,
and the computations of the financial covenants referred to above. These
computations were made in accordance with GAAP.
PEMCO AVIATION GROUP, INC.
By: ---------------------------------
Its [Chief Financial Officer] [Vice
President--Finance]
Exhibit G to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are
described as follows:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Schedule 2.6 to Credit and Security Agreement
Allocation of Term A Advance and Initial Term B Advance
Principal Allocations:
----------------------
PEMCO
PEMCO WORLD
AEROPLEX, AIR
INC. SERVICES PEMCO
(BIRMINGHAM) (DOTHAN) ENGINEERS TOTALS
Term Loan A $1,508,000 $783,000 $609,000 $2,900,000
Term Loan B $1,092,000 $567,000 $441,000 $2,100,000
Monthly Principal Payment Allocations:
--------------------------------------
Pemco
Pemco World
Aeroplex, Air
Inc. Services Pemco
(Birmingham) (Dothan) Engineers Totals
Term Loan A $25,133 $13,050 $10,150 $48,333
Term Loan B $45,500 $23,625 $18,375 $87,500