<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
Commission File Number: 0-29490
HAWKER PACIFIC AEROSPACE
(Exact name of registrant as specified in its charter)
California 95-3528840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11240 Sherman Way, Sun Valley, California 91352
(Address of principal executive offices) (Zip Code)
(818) 765-6201
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
The number of shares of the registrant's common stock outstanding on May 12,
2000, was 5,822,722 shares.
<PAGE>
HAWKER PACIFIC AEROSPACE
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
Current assets
Cash $ 2,052,000 $ 2,227,000
Trade accounts receivable, net 14,923,000 18,246,000
Other receivables 208,000 260,000
Inventories 28,253,000 24,680,000
Prepaid expenses 1,208,000 550,000
------------ ------------
Total current assets 46,644,000 45,963,000
Equipment and leasehold improvements, net 16,100,000 13,822,000
Exchange assets, net 36,605,000 37,613,000
------------ ------------
Total fixed assets 52,705,000 51,435,000
Deferred taxes 2,636,000 2,412,000
Other assets 2,057,000 3,353,000
------------ ------------
Total assets $104,042,000 $103,163,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Line of credit 53,785,000 $ 52,617,000
Accounts payable $ 13,098,000 13,402,000
Accrued liabilities 4,979,000 3,397,000
Accrued payroll and employee benefits 1,949,000 1,495,000
Accrued expenses and other liabilities 4,267,000 4,186,000
Current portion of notes payable 621,000 623,000
Preferred stock dividends payable 74,000 --
------------ ------------
Total current liabilities 78,773,000 75,720,000
Long-term debt
Bank note 4,082,000 5,617,000
Related party 2,500,000 2,500,000
------------ ------------
Total long term debt 6,582,000 8,117,000
Redeemable convertible preferred stock:
5,000,000 shares authorized; issued and outstanding:
300 shares; $3,750,000 redemption amount 2,920,000 1,792,000
Shareholders' equity
Common stock: 20,000,000 shares authorized;
issued and outstanding: 5,822,722 and 5,822,222 at
March 31, 2000, and December 31, 1999, respectively 22,386,000 22,384,000
Retained earnings (deficit) (5,026,000) (3,474,000)
Accumulated other comprehensive income (1,593,000) (1,376,000)
------------ ------------
Total shareholders' equity 15,767,000 17,534,000
Total liabilities and shareholders' equity $104,042,000 $103,163,000
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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<PAGE>
HAWKER PACIFIC AEROSPACE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
--------
2000 1999
------------- -----------
<S> <C> <C>
Revenue $ 21,488,000 $16,195,000
Cost of revenue 17,422,000 12,796,000
------------- -----------
Gross margin 4,066,000 3,399,000
Selling, general and administrative expense 2,883,000 2,193,000
------------- -----------
Income from operations 1,183,000 1,206,000
Interest income (expense), net (1,702,000) (1,142,000)
Miscellaneous expense (66,000) --
------------- -----------
Income (loss) before income taxes (585,000) 64,000
Provision (benefit) for income taxes (234,000) 24,000
------------- -----------
Net income (loss) (351,000) 40,000
Accretion of discount and redemption premium
on preferred stock (1,127,000) --
Preferred stock dividend (74,000) --
------------- -----------
Net income (loss) available to common
shareholders ($ 1,552,000) $ 40,000
============= ===========
Earnings (loss) common share: basic and diluted ($ 0.27) $ 0.01
Number of shares - basic 5,822,392 5,822,222
Number of shares - diluted 5,822,392 5,829,728
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
-3-
<PAGE>
HAWKER PACIFIC AEROSPACE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
--------
2000 1999
----------- -----------
<S> <C> <C>
Operating Activities
Net income ($ 351,000) $ 40,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred income taxes (244,000) 42,000
Depreciation 470,000 408,000
Amortization 649,000 633,000
Changes in operating assets and liabilities:
Accounts receivable and other receivables 3,235,000 (202,000)
Inventory (3,703,000) (7,043,000)
Other assets (59,000) (378,000)
Prepaid expenses 660,000 (111,000)
Accounts payable 131,000 4,528,000
Deferred revenue 1,581,000 1,077,000
Accrued liabilities 682,000 (1,131,000)
----------- -----------
Cash provided by (used in) operating activities 3,051,000 (2,137,000)
Investing Activities
Purchase of equipment, leasehold improvements and landing gear (2,863,000) (2,384,000)
----------- -----------
Cash used in investing activities (2,863,000) (2,384,000)
Financing Activities
Principal payments on bank notes (1,533,000) (503,000)
Borrowings on line of credit 1,168,000 6,582,000
Payments on line of credit -- (582,000)
Issuance of common stock 2,000 --
----------- -----------
Cash provided by (used in) financing activities (363,000) 5,497,000
----------- -----------
Increase in cash (175,000) 976,000
Cash, beginning of period 2,227,000 560,000
----------- -----------
Cash, end of period $ 2,052,000 $ 1,536,000
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 1,645,000 $ 1,143,000
Income taxes 10,000 3,000
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
-4-
<PAGE>
HAWKER PACIFIC AEROSPACE
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Other
Common Stock Retained Comprehensive
# of Shares Amount Earnings Income Total
------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1999 5,822,222 $22,384,000 ($3,474,000) ($1,376,000) $17,534,000
Net income (loss) (351,000) (351,000)
Foreign currency
translation (217,000) (217,000)
-----------
Comprehensive loss (568,000)
Issuance of common stock 500 2,000 2,000
Preferred stock dividend (74,000) (74,000)
Accretion of discount and
redemption premium on
preferred stock (1,127,000) (1,127,000)
- ---------------------------- ---------- ----------- ----------- ----------- -----------
Balances at
March 31, 2000 5,822,722 $22,386,000 ($5,026,000) ($1,593,000) $15,767,000
========== =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
-5-
<PAGE>
HAWKER PACIFIC AEROSPACE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Interim Condensed Financial Statements
During interim periods, Hawker Pacific Aerospace (the "Company") follows
the accounting policies set forth in its Annual Report to Shareholders and
applies appropriate interim financial reporting standards, as indicated below.
Users of financial information produced for interim periods are encouraged to
refer to the notes contained in the Annual Report to Shareholders when reviewing
interim financial results.
Interim financial reporting standards require management to make estimates that
are based on assumptions regarding the outcome of future events and
circumstances not known at the present time, including the use of estimated
effective tax rates. Inevitably, some assumptions may not materialize and
unanticipated events and circumstances may occur which vary from those estimates
and such variations may significantly affect the Company's future results.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with the
Securities and Exchange Commission's requirements of Form 10-Q and contain all
adjustments of a normal and recurring nature which are necessary to present
fairly the financial position of the Company as of March 31, 2000, and December
31, 1999, and the results of its operations and cash flows for the three month
periods ended March 31, 2000 and 1999.
Contingencies
The Company is party to various legal and environmental proceedings incidental
to its business. Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against the Company. Based on
facts now known to the Company, management believes all such matters are
adequately provided for, covered by insurance or, if not so covered or provided
for, are without merit, or involve such amounts that would not materially
adversely affect the consolidated results of operations and cash flows or
financial position of the Company.
Earnings per Share
Basic and diluted earnings (loss) per common share is computed based upon the
weighted average number of common shares outstanding for the period. Diluted
earnings (loss) per common share reflects the potential dilution that could
occur if certain securities were exercised or converted into common stock.
Basic earnings (loss) per share is the same as diluted earnings (loss) per share
for all periods presented. The number of shares used in the calculation of basic
and diluted earnings per share for the three months ended March 31, 2000, is
5,822,392. The number of shares used in the calculation of basic and diluted
earnings per share for the three months ended March 31, 1999, is 5,822,222
and 5,829,728, respectively. Net income (loss) used in the calculation of basic
and diluted earnings (loss) per share has been adjusted for the accretion of the
discount and redemption premium on the preferred stock in order to derive net
income (loss) available for common shareholders.
Options to purchase 658,107 shares of common stock at exercise prices between
$2.85 and $9.88 were outstanding during the first quarter of 2000. None of
these were included in the computation of diluted earnings (loss) per share
because the exercise price was greater than the average market price of the
common shares and/or the Company incurred a loss for the period, therefore, the
effect would be antidilutive.
<TABLE>
<CAPTION>
Inventories
Inventories are comprised of the following:
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Purchased parts and assemblies $20,216,000 $20,246,000
Work in process 8,037,000 4,434,000
----------- -----------
$28,253,000 $24,680,000
=========== ===========
</TABLE>
-6-
<PAGE>
2. LINE OF CREDIT AND NOTES PAYABLE
On December 22, 1998, the Company secured a $66.3 million senior credit facility
from Heller Financial, Inc., and NMB-Heller Limited (collectively, "Heller").
The Loan and Security Agreement (the "Heller Agreement") provides a $55 million
revolving line of credit, a Term Loan A in the amount of $4.3 million, and a
Term Loan B in the amount of $7.0 million. The revolver and both term loans
expire in five years. At April 30, 2000, the interest rate for all three loans
was 11.5%.
Availability for the $55 million revolving line of credit may be limited by
borrowing base criteria related to levels of accounts receivable, inventory and
exchange assets. At April 30, 2000, the Company's borrowing base was $55
million, of which $53.9 million had been advanced, leaving remaining
availability of $1.1 million.
On April 5, 2000, the Company and Heller executed an amendment to the Heller
Agreement. This amendment extends certain covenant provisions of the Heller
Agreement until August 31, 2000, and provides for an escalation of certain fees
to Heller. The Company is actively working to secure a new senior credit
facility, and upon doing so, these additional fees to Heller will cease
accruing. The Company believes the additional fees to Heller will be
approximately $0.4 million, but they may amount to as much as $1.6 million by
August 31, 2000.
3. REDEEMABLE PREFERRED STOCK
In December 1999, the Company issued 300 shares of 8% Series C Convertible
Preferred Stock ("Series C") for $3,000,000. In connection with the issuance of
preferred stock, the Company issued a warrant to the broker to purchase 50,000
shares of common stock at $2.85 per share. The warrant was valued at $240,000
and is included in the costs associated with the issuance. The Company incurred
an additional $205,000 in costs associated with the issuance of preferred stock.
In connection with the issuance of preferred stock, the Company issued a warrant
to the preferred stock holder to purchase 125,000 shares of common stock at
$7.37 per share. The warrant was valued at $286,000. Series C also contains a
redemption feature that calls for the preferred stock to be redeemed, under
certain circumstances, for 125% of the stated value ($3,750,000) and as such the
preferred stock is being accreted to $3,750,000 over a 180 day period which
extends from December 1999 until June 2000. This accretion is charged to
retained earnings, similar to a preferred dividend, as a reduction of earnings
(loss) to common shares.
Series C provides for a multiple-step beneficial conversion feature, which has
been valued for financial statement purposes at $750,000. The resulting
discount on the Series C will be amortized over a 180 day period which extends
from December 1999 until June 2000, and charged to retained earnings, similar to
a preferred dividend, as a reduction of earnings (loss) to common shares. The
amount of accretion related to the redemption premium, conversion discount,
associated warrants, and costs of issuance which are included in the calculation
of the loss per share for the three months ended March 31, was $1,127,000. The
Company also accrued $74,000 of dividends payable on Series C during the first
quarter.
4. SEGMENT INFORMATION
On December 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information". The new rules establish revised standards for public companies
relating to the reporting of financial and descriptive information about
business segments and enterprise-wide operations. The Company operates in one
segment. The following table sets forth certain geographic information related
to the Company's operations.
<TABLE>
<CAPTION>
United States United Kingdom Consolidated
As of March 31 2000 1999 2000 1999 2000 1999
- -------------- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Total assets $53,383,000 $52,733,000 $50,659,000 $43,829,000 $104,042,000 $96,562,000
Total long-lived assets (net of
depreciation and amortization) 19,347,000 18,953,000 33,358,000 29,442,000 52,705,000 48,395,000
For the quarter ended March 31
- ------------------------------
Revenue by location of operations 15,362,000 10,595,000 6,126,000 5,600,000 21,488,000 16,195,000
Income before income tax expense 274,000 847,000 (859,000) (783,000) (585,000) 64,000
</TABLE>
The Company generated revenue from customers located outside of the United
States of $8,418,000 and $7,726,000 for the quarters ended March 31, 2000 and
1999, respectively.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following analysis compares the Company's results of operations for the
quarter ended March 31, 2000, with the quarter ended March 31, 1999.
Revenue for the quarter increased by 33% to $21,488,000 from $16,195,000 for the
comparable period in 1999. Most of the revenue growth occurred in landing gear
sales.
Cost of revenue increased by 36% to $17,422,000 from $12,796,000 in the first
quarter of 1999. The UK unit recorded its highest level of unadjusted gross
margin since inception. The Sun Valley division had lower than normal gross
margin principally as a result of extra costs incurred to lease or acquire
additional landing gear shipsets to meet tight customer schedules. Certain of
these additional lease costs will run through the end of the second quarter.
Selling, general and administrative expense for the first quarter increased by
$690,000 from $2,193,000 in 1999 to $2,883,000 in 2000. This increase was
primarily attributable to higher legal and professional fees, additional costs
related to the Company's senior credit facility, and increased sales
commissions.
Interest expense for the quarter increased by $560,000 as a result of increased
borrowings on the line of credit, and an increased rate of interest. The Company
estimates it is currently paying interest at a rate 1.25% higher than market.
The Company is currently in negotiations to secure a new senior credit facility,
and expects to reduce these excess interest charges and administrative costs
within the next few months.
The Company recorded a net loss for the quarter of ($351,000), as compared with
net income of $40,000 in the first quarter of 1999. In addition, the Company
posted a $0.21 per share charge to record accretion of a discount and redemption
premium on preferred stock issued in December 1999, along with the issue's
quarterly dividend. The accretion charge represents a pro rata share of the
maximum possible benefit that the preferred shareholders might receive through
both conversion and redemption, as well as other costs and discounts associated
with the issue of the preferred stock. With the exception of $205,000 of costs
recorded at the time of issuance, the remaining $2,025,000 to be accreted
remains a non-cash charge (until such time as the preferred shares are converted
or redeemed).
The total amount to be accreted, $2,230,000, will be charged over the 180-day
period commencing December 10, 1999. $273,000 ($0.05 per share) of this amount
was recorded in December, $1,127,000 ($0.19 per share) was accreted in the first
quarter, and the remaining balance of $830,000 ($0.14 per share) will be
accreted in the second quarter. In addition to these amounts, 8% cumulative
preferred stock dividends ($0.01 per share) will be recorded in each period.
The accretion and dividend amounts are recorded on the Company's Statement of
Operations below net income (loss). The total of net income (loss), less these
additional amounts, represents net income (loss) available to common
shareholders. The net income (loss) available to common shareholders decreased
to ($1,552,000), or ($0.27) per basic and diluted share, as compared with
$40,000, or $0.01 per basic and diluted share.
Liquidity and Capital Resources
The following analysis compares material changes in the Company's financial
position from December 31, 1999, to March 31, 2000.
Accounts receivable decreased by $3.3 million from the end of 1999 as a result
of the $4.2 Qantas receivable from the sale of a landing gear shipset. This
amount was collected in January 2000.
Inventories increased by $3.6 million during the first quarter of 1999. This
increase resulted primarily from increased purchasing to meet a higher sales
volume, and a higher level of work in process at the end of the quarter.
During 2000 the Company has been providing cash from operations, and it is
expected that the Company will continue to generate surplus cash flow throughout
2000 and beyond. The Company remains, however, cash tight currently because the
UK subsidiary is still paying off large capital expenditures incurred during
1999. The monthly surplus cash flow from operations is expected to reduce this
tightness gradually during the next few months.
-8-
<PAGE>
On April 5, 2000, the Company and Heller executed an amendment to the Heller
Agreement. This amendment extends certain covenant provisions of the Heller
Agreement until August 31, 2000, and provides for an escalation of certain fees
to Heller. The Company is actively working to secure a new senior credit
facility, and upon doing so, these additional fees to Heller will cease
accruing. The Company believes the additional fees to Heller will be
approximately $0.4 million, but they may amount to as much as $1.6 million by
August 31, 2000.
The Company believes that cash provided from operations, along with savings from
deferring discretionary capital expenditures, will continue to provide
sufficient liquidity to meet the Company's cash requirements for the next twelve
months.
Forward Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of
the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995, such as statements of the Company's plans, objectives, expectations and
intentions, that involve risks and uncertainties that could cause actual results
to differ materially from those discussed in such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this Quarterly Report and in the Company's
various filings with the Securities and Exchange Commission, including without
limitation the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1999.
This discussion and analysis should be read in conjunction with the Company's
financial statements and related notes thereto included herein, and with the
information set forth under Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form 10-
K/A for the year ended December 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk refers to the potential effects of unfavorable changes in certain
prices and rates on the Company's financial results and condition, primarily
foreign currency exchange rates and interest rates on borrowings. The Company
does not utilize derivative instruments in managing its exposure to such
changes.
Foreign Currency Risk. The Company has operations in the United Kingdom and the
Netherlands. The currencies of these two countries have been relatively stable
as compared with the U.S. dollar. The Company manages foreign currency risk, in
part, by generally requiring that customers pay for the services of the
Company's foreign operating units in the currency of the country where the
operating unit is located. The Company also does not routinely exchange material
sums of money between the operating units. The Company has not to date seen the
need for currency hedging transactions in the ordinary course of business.
Interest Rate Risk. The Company's senior credit facility is comprised of two
notes payable and a revolving line of credit, each of which currently carries an
interest rate which varies in accordance with a Base Rate equal to the higher of
the Federal Reserve prime rate, or the Federal Funds Effective Rate. The Company
is presently subject to potentially material fluctuations in its debt service as
the Base Rate changes.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.46 Management Incentive Program Agreements, dated February 4, 2000
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Form 8-K
No reports were filed on Form 8-K during the quarter ended March 31, 2000.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HAWKER PACIFIC AEROSPACE
Date: May 15, 2000 By /s/ Philip M. Panzera
-----------------------------
Philip M. Panzera
Executive Vice President
(Principal Financial and Accounting Officer)
-10-
<PAGE>
Exhibit 10.46
Management Incentive Program Agreements, dated February 4, 2000,
for the following individuals:
Biety, Dennis
Carr, Brian
Clark, David
Fuller, Peter
Hanley, Mary
Kameen, Lawrence
Lokken, David
Mulvihill, Brad
Panzera, Philip
Riley, Michael
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Dennis M. Biety (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes any contract of
--------------------
employment or stock option agreement the Employee may have with the Company. In
the event of a conflict with any provision of such contracts, this Agreement
shall control. However, nothing in this Agreement is intended to remove any
right or benefit in such contracts where no conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any contract of employment with the Company, in the
event of a Change of Control, Employee shall receive an Incentive Payment based
on the Purchase Price of the Company.
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount of
proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing
<PAGE>
Date"). For this purpose, the number of fully diluted shares shall be calculated
after any automatic vesting of shares (as provided in Section 5), but without
the dilutive effect of any shares which may have been issued with regard to the
private placement equity transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $37,500.
(b) Purchase Price of $7.00 or over: $75,000, plus $25,000 for every dollar,
or pro rata portion thereof, over $7.00. For example, a Purchase Price of $8.20
would yield an Incentive Payment of $105,000.
4. Change of Control Payment. For the purpose of determining the Change of
-------------------------
Control Payment only (as provided for in Section 8 of Employee's Employment
Agreement), "Total Compensation Package" shall be defined to include only the
base salary then in effect, plus the annual cost of insurance benefits and an
automobile allowance. The financial cost of other fringe benefits, including
bonus, housing costs, vacations, holidays, sick leave and pension plans, shall
not be included. As of the date of this Agreement, Employee's annual Total
Compensation Package amounts to $184,089.
5. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
6. Time and Form of Payment. The Change of Control Payment required under
------------------------
Employee's Employment Agreement, plus the payments required under Sections 3 and
5 of this Agreement, shall be paid in full, by certified or cashier's check in
U.S. dollars, on the Closing Date. Any termination payments required under
Section 5.3 of Employee's Employment Agreement shall be paid in full, by
certified or cashier's check in U.S. dollars, on the date of termination.
7. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
8. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payments required under
Sections 3, 4 or 5 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Dennis Biety
---------------------
Dennis M. Biety
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Brian S. Carr (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes any contract of
--------------------
employment or stock option agreement the Employee may have with the Company. In
the event of a conflict with any provision of such contracts, this Agreement
shall control. However, nothing in this Agreement is intended to remove any
right or benefit in such contracts where no conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any contract of employment with the Company, in the
event of a Change of Control, Employee shall receive an Incentive Payment based
on the Purchase Price of the Company.
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing
<PAGE>
Date"). For this purpose, the number of fully diluted shares shall be calculated
after any automatic vesting of shares (as provided in Section 5), but without
the dilutive effect of any shares which may have been issued with regard to the
private placement equity transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $37,500.
(b) Purchase Price of $7.00 or over: $75,000, plus $25,000 for every dollar,
or pro rata portion thereof, over $7.00. For example, a Purchase Price of $8.20
would yield an Incentive Payment of $105,000.
4. Change of Control Payment. For the purpose of determining the Change of
-------------------------
Control Payment only (as provided for in Section 8 of Employee's Employment
Agreement), "Total Compensation Package" shall be defined to include only the
base salary then in effect, plus the annual cost of insurance benefits and an
automobile allowance. The financial cost of other fringe benefits, including
bonus, housing costs, vacations, holidays, sick leave and pension plans, shall
not be included. As of the date of this Agreement, Employee's annual Total
Compensation Package amounts to $177,537.
5. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
6. Time and Form of Payment. The Change of Control Payment required under
------------------------
Employee's Employment Agreement, plus the payments required under Sections 3 and
5 of this Agreement, shall be paid in full, by certified or cashier's check in
U.S. dollars, on the Closing Date. Any termination payments required under
Section 5.3 of Employee's Employment Agreement shall be paid in full, by
certified or cashier's check in U.S. dollars, on the date of termination.
7. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
8. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payments required under
Sections 3, 4 or 5 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Brian S. Carr
-------------------
Brian S. Carr
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and David E. Clark (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes Employee's stock
--------------------
option agreement with the Company. In the event of a conflict with any provision
of such contract, this Agreement shall control. However, nothing in this
Agreement is intended to remove any right or benefit in such contract where no
conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any stock option with the Company, in the event of a
Change of Control, Employee shall receive an Incentive Payment based on the
Purchase Price of the Company.
<PAGE>
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing Date"). For this purpose, the
number of fully diluted shares shall be calculated after any automatic vesting
of shares (as provided in Section 5), but without the dilutive effect of any
shares which may have been issued with regard to the private placement equity
transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $25,000.
(b) Purchase Price of $7.00 or over: $50,000, plus $10,000 for every dollar,
or pro rata portion thereof, over $7.00. For example, a Purchase Price of $8.20
would yield an Incentive Payment of $62,000.
4. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
5. Time and Form of Payment. The payments required under Sections 3 and 4 of
------------------------
this Agreement, shall be paid in full, by certified or cashier's check in U.S.
dollars, on the Closing Date.
6. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
7. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payments required under
Sections 3 or 4 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ David E. Clark
---------------------
David E. Clark
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Peter Fuller (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes Employee's stock
--------------------
option agreement with the Company. In the event of a conflict with any provision
of such contract, this Agreement shall control. However, nothing in this
Agreement is intended to remove any right or benefit in such contract where no
conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any stock option with the Company, in the event of a
Change of Control, Employee shall receive an Incentive Payment based on the
Purchase Price of the Company.
<PAGE>
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing Date"). For this purpose, the
number of fully diluted shares shall be calculated after any automatic vesting
of shares (as provided in Section 5), but without the dilutive effect of any
shares which may have been issued with regard to the private placement equity
transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $25,000.
(b) Purchase Price of $7.00 or over: $50,000, plus $10,000 for every dollar,
or pro rata portion thereof, over $7.00. For example, a Purchase Price of $8.20
would yield an Incentive Payment of $62,000.
4. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
5. Time and Form of Payment. The payments required under Sections 3 and 4 of
------------------------
this Agreement, shall be paid in full, by certified or cashier's check in U.S.
dollars, on the Closing Date.
6. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
7. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payments required under
Sections 3 or 4 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Peter Fuller
-------------------
Peter Fuller
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Mary L. Hanley (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes Employee's stock
--------------------
option agreement with the Company. In the event of a conflict with any provision
of such contract, this Agreement shall control. However, nothing in this
Agreement is intended to remove any right or benefit in such contract where no
conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any stock option with the Company, in the event of a
Change of Control, Employee shall receive a stock option payment based on the
Purchase Price of the Company.
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing
<PAGE>
Date"). For this purpose, the number of fully diluted shares shall be calculated
after any automatic vesting of shares (as provided in Section 5), but without
the dilutive effect of any shares which may have been issued with regard to the
private placement equity transaction executed by the Company in December 1999.
3.2. Any unvested stock options of the Company which have been issued to the
Employee shall automatically vest on the Closing Date. All vested options of
the Employee for which the Purchase Price is greater than the option price shall
be referred to as the "Exercisable Options". The Employee shall be paid a net
amount equal to (i) the product of the Purchase Price times the number of all
Exercisable Options, less (ii) the product of the option price and the number of
all Exercisable Options, less (iii) any applicable transaction costs or fees
payable to an entity other than the Company.
4. Time and Form of Payment. The payment required under this Agreement, shall
------------------------
be paid in full, by certified or cashier's check in U.S. dollars, on the Closing
Date.
5. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
6. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payment required under this
Agreement.
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Mary L. Hanley
---------------------
Mary L. Hanley
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Lawrence A. Kameen, Jr. (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes Employee's stock
--------------------
option agreement with the Company. In the event of a conflict with any provision
of such contract, this Agreement shall control. However, nothing in this
Agreement is intended to remove any right or benefit in such contract where no
conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any stock option with the Company, in the event of a
Change of Control, Employee shall receive a stock option payment based on the
Purchase Price of the Company.
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing
<PAGE>
Date"). For this purpose, the number of fully diluted shares shall be calculated
after any automatic vesting of shares (as provided in Section 5), but without
the dilutive effect of any shares which may have been issued with regard to the
private placement equity transaction executed by the Company in December 1999.
3.2. Any unvested stock options of the Company which have been issued to the
Employee shall automatically vest on the Closing Date. All vested options of
the Employee for which the Purchase Price is greater than the option price shall
be referred to as the "Exercisable Options". The Employee shall be paid a net
amount equal to (i) the product of the Purchase Price times the number of all
Exercisable Options, less (ii) the product of the option price and the number of
all Exercisable Options, less (iii) any applicable transaction costs or fees
payable to an entity other than the Company.
4. Time and Form of Payment. The payment required under this Agreement, shall
------------------------
be paid in full, by certified or cashier's check in U.S. dollars, on the Closing
Date.
5. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
6. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payment required under this
Agreement.
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Lawrence A. Kameen, Jr.
-----------------------------
Lawrence A. Kameen, Jr.
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and David L. Lokken (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes any contract of
--------------------
employment or stock option agreement the Employee may have with the Company. In
the event of a conflict with any provision of such contracts, this Agreement
shall control. However, nothing in this Agreement is intended to remove any
right or benefit in such contracts where no conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any contract of employment with the Company, in the
event of a Change of Control, Employee shall receive an Incentive Payment based
on the Purchase Price of the Company.
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing
<PAGE>
Date"). For this purpose, the number of fully diluted shares shall be calculated
after any automatic vesting of shares (as provided in Section 5), but without
the dilutive effect of any shares which may have been issued with regard to the
private placement equity transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $25,000.
(b) Purchase Price of $7.00 or over: $50,000, plus $25,000 for every dollar,
or pro rata portion thereof, over $7.00. For example, a Purchase Price of $8.20
would yield an Incentive Payment of $80,000.
4. Change of Control Payment. For the purpose of determining the Change of
-------------------------
Control Payment only (as provided for in Section 8 of Employee's Employment
Agreement), "Total Compensation Package" shall be defined to include only the
base salary then in effect, plus the annual cost of insurance benefits and an
automobile allowance. The financial cost of other fringe benefits, including
bonus, housing costs, vacations, holidays, sick leave and pension plans, shall
not be included. As of the date of this Agreement, Employee's annual Total
Compensation Package amounts to $229,918.
5. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
6. Time and Form of Payment. The Change of Control Payment required under
------------------------
Employee's Employment Agreement, plus the payments required under Sections 3 and
5 of this Agreement, shall be paid in full, by certified or cashier's check in
U.S. dollars, on the Closing Date. Any termination payments required under
Section 5.3 of Employee's Employment Agreement shall be paid in full, by
certified or cashier's check in U.S. dollars, on the date of termination.
7. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
8. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payments required under
Sections 3, 4 or 5 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ Daniel J. Lubeck
-----------------------
Daniel J. Lubeck
Chairman
EMPLOYEE
By: /s/ David L. Lokken
----------------------
David L. Lokken
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Brad A. Mulvihill (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes Employee's stock
--------------------
option agreement with the Company. In the event of a conflict with any provision
of such contract, this Agreement shall control. However, nothing in this
Agreement is intended to remove any right or benefit in such contract where no
conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any stock option with the Company, in the event of a
Change of Control, Employee shall receive an Incentive Payment based on the
Purchase Price of the Company.
<PAGE>
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing Date"). For this purpose, the
number of fully diluted shares shall be calculated after any automatic vesting
of shares (as provided in Section 5), but without the dilutive effect of any
shares which may have been issued with regard to the private placement equity
transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $25,000.
(b) Purchase Price of $7.00 or over: $50,000, plus $10,000 for every dollar,
or pro rata portion thereof, over $7.00. For example, a Purchase Price of $8.20
would yield an Incentive Payment of $62,000.
4. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
5. Time and Form of Payment. The payments required under Sections 3 and 4 of
------------------------
this Agreement, shall be paid in full, by certified or cashier's check in U.S.
dollars, on the Closing Date.
6. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
7. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payments required under
Sections 3 or 4 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Brad A. Mulvihill
------------------------
Brad A. Mulvihill
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Philip M. Panzera (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes any contract of
--------------------
employment or stock option agreement the Employee may have with the Company. In
the event of a conflict with any provision of such contracts, this Agreement
shall control. However, nothing in this Agreement is intended to remove any
right or benefit in such contracts where no conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any contract of employment with the Company, in the
event of a Change of Control, Employee shall receive an Incentive Payment based
on the Purchase Price of the Company.
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing
<PAGE>
Date"). For this purpose, the number of fully diluted shares shall be calculated
after any automatic vesting of shares (as provided in Section 5), but without
the dilutive effect of any shares which may have been issued with regard to the
private placement equity transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $50,000.
(b) Purchase Price from $7.00 up to $8.00: $100,000, plus $50,000 per dollar
for any pro rata portion over $7.00.
(c) Purchase Price of $8.00 or over: $150,000, plus $100,000 for every
dollar, or pro rata portion thereof, over $8.00. For example, a Purchase Price
of $8.20 would yield an Incentive Payment of $170,000.
4. Change of Control Payment. For the purpose of determining the Change of
-------------------------
Control Payment only (as provided for in Section 8 of Employee's Employment
Agreement), "Total Compensation Package" shall be defined to include only the
base salary then in effect, plus the annual cost of insurance benefits and an
automobile allowance. The financial cost of other fringe benefits, including
bonus, housing costs, vacations, holidays, sick leave and pension plans, shall
not be included. As of the date of this Agreement, Employee's annual Total
Compensation Package amounts to $177,537.
5. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
6. Cash Management Payment. If Employee shall manage the cash and working
-----------------------
capital of the Company so that no additional external financing is raised prior
to the Closing Date, then Employee shall receive an additional payment of
$25,000.
7. Time and Form of Payment. The Change of Control Payment required under
------------------------
Employee's Employment Agreement, plus the payments required under Sections 3, 5
and 6 of this Agreement, shall be paid in full, by certified or cashier's check
in U.S. dollars, on the Closing Date. Any termination payments required under
Section 5.3 of Employee's Employment Agreement shall be paid in full, by
certified or cashier's check in U.S. dollars, on the date of termination.
8. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
9. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of
<PAGE>
the American Arbitration Association. The arbitration shall be held in Los
Angeles, California. The award of the arbitrator shall be final and binding upon
the parties, and judgment may be entered upon it in any court having
jurisdiction. If any arbitration or other action is commenced to enforce any of
the provisions of this Agreement, the unsuccessful party shall pay all costs
incurred by the prevailing party, including reasonable attorneys' fees and
costs, arbitration fees and costs, court costs and reimbursements for any other
expenses, plus interest in the amount of 12% per annum from the Closing Date on
any payments required under Sections 3, 4, 5 or 6 of this Agreement.
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Philip M. Panzera
------------------------
Philip M. Panzera
<PAGE>
MANAGEMENT INCENTIVE PROGRAM AGREEMENT
This Management Incentive Program Agreement ("the Agreement") is executed as of
February 4, 2000, by and between Hawker Pacific Aerospace, a California
corporation (the "Company") and Michael A. Riley (the "Employee").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") is currently
in the process of exploring strategic combinations with other organizations, and
is actively seeking to sell the Company;
WHEREAS, the Board has concluded that providing incentives to certain
members of management with regard to the sale of the Company will serve to
enhance shareholder value;
WHEREAS, the Board has resolved on October 27, 1999, to implement a
Management Incentive Program to provide such incentives; and
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged; the parties hereby agree as follows:
1. Employment Agreement. This Agreement amends and supersedes any contract of
--------------------
employment or stock option agreement the Employee may have with the Company. In
the event of a conflict with any provision of such contracts, this Agreement
shall control. However, nothing in this Agreement is intended to remove any
right or benefit in such contracts where no conflict exists.
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall be defined as (i) the sale, transfer, conveyance or disposition,
whether direct or indirect, of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any entity
in which the Company is not the surviving entity, (iii) a consolidation or
merger of the Company with or into any other entity in which the Company is the
surviving entity, if immediately after such transaction the shareholders of the
Company as of November 1, 1996 (i.e., the shareholders of Unique Investment
Corporation ("Unique") and management only) own less than 35% of the voting
power of the capital stock of the surviving entity that is normally entitled to
vote in the election of directors, or (iv) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not applicable), other than the
shareholders or affiliates of Unique, becomes the beneficial owner or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act) in
excess of 30% of the Company's voting power of the capital stock normally
entitled to vote in the election of directors of the Company. The provisions of
this Agreement shall also apply if Employee is terminated for any reason within
ninety days of any Change in Control.
3. Incentive Payment. In addition to any compensation, benefits or rights
-----------------
Employee may have under any contract of employment with the Company, in the
event of a Change of Control, Employee shall receive an Incentive Payment based
on the Purchase Price of the Company.
3.1. The "Purchase Price" per share shall be defined as (i) the gross amount
of proceeds (before any deductions for commissions, fees or other transaction
costs) paid or payable, directly or indirectly, to or for the benefit of the
Company and/or its security holders in cash or any other form of consideration
(excluding the assumption or retirement of any of the Company's debt), divided
by (ii) the number of fully diluted common shares of the Company on the date
that the Change in Control occurs (the "Closing
<PAGE>
Date"). For this purpose, the number of fully diluted shares shall be calculated
after any automatic vesting of shares (as provided in Section 5), but without
the dilutive effect of any shares which may have been issued with regard to the
private placement equity transaction executed by the Company in December 1999.
3.2. Upon the occurrence of a Change in Control, if the Purchase Price is at
least $6.00 per share, then the Company shall make an Incentive Payment to the
Employee as follows.
(a) Purchase Price from $6.00 up to $7.00: a fixed amount of $37,500.
(b) Purchase Price of $7.00 or over: $75,000, plus $10,000 for every dollar,
or pro rata portion thereof, over $7.00. For example, a Purchase Price of $8.20
would yield an Incentive Payment of $87,000.
4. Change of Control Payment. For the purpose of determining the Change of
-------------------------
Control Payment only (as provided for in Section 8 of Employee's Employment
Agreement), "Total Compensation Package" shall be defined to include only the
base salary then in effect, plus the annual cost of insurance benefits and an
automobile allowance. The financial cost of other fringe benefits, including
bonus, housing costs, vacations, holidays, sick leave and pension plans, shall
not be included. As of the date of this Agreement, Employee's annual Total
Compensation Package amounts to $145,918.
5. Stock Options Payment. Any unvested stock options of the Company which have
---------------------
been issued to the Employee shall automatically vest on the Closing Date. All
vested options of the Employee for which the Purchase Price is greater than the
option price shall be referred to as the "Exercisable Options". The Employee
shall be paid a net amount equal to (i) the product of the Purchase Price times
the number of all Exercisable Options, less (ii) the product of the option price
and the number of all Exercisable Options, less (iii) any applicable transaction
costs or fees payable to an entity other than the Company.
6. Time and Form of Payment. The Change of Control Payment required under
------------------------
Employee's Employment Agreement, plus the payments required under Sections 3 and
5 of this Agreement, shall be paid in full, by certified or cashier's check in
U.S. dollars, on the Closing Date. Any termination payments required under
Section 5.3 of Employee's Employment Agreement shall be paid in full, by
certified or cashier's check in U.S. dollars, on the date of termination.
7. Miscellaneous. This Agreement constitutes the entire agreement with regard
-------------
to the subject matter hereof. This Agreement may not be assigned, and shall not
be modified or amended except in writing signed by both parties. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document. Photocopies of
this Agreement shall be given the same effect as the original. This Agreement
shall be governed by and interpreted under the laws of the State of California.
The resolution of ambiguities against the drafting party shall not apply in the
enforcement and interpretation of this Agreement.
8. Arbitration. All claims, disputes or other matters in question arising out
-----------
of or relating to this Agreement shall be decided in accordance with the
California Employment Resolution Dispute Rules of the American Arbitration
Association. The arbitration shall be held in Los Angeles, California. The award
of the arbitrator shall be final and binding upon the parties, and judgment may
be entered upon it in any court having jurisdiction. If any arbitration or other
action is commenced to enforce any of the provisions of this Agreement, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees and costs, arbitration fees and costs,
court costs and reimbursements for any other expenses, plus interest in the
amount of 12% per annum from the Closing Date on any payments required under
Sections 3, 4 or 5 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized and
empowered, have executed and delivered this Agreement as of the date first set
forth above.
HAWKER PACIFIC AEROSPACE
By: /s/ David L. Lokken
----------------------
David L. Lokken
President & CEO
EMPLOYEE
By: /s/ Michael A. Riley
-----------------------
Michael A. Riley
<PAGE>
WEIGHTED AVERAGE SHARES - Q1 2000
FISCAL 2000
<TABLE>
<CAPTION>
No. Days in Cumulative Days No. Shares Weighted Ave.
Month in Year Weighting Outstanding Shares Out
----------- --------------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
January 31 31 34.07% 5,822,222 1,983,394
February 29 60 31.87% 5,822,222 1,855,433
March 31 91 34.07% 5,822,722 1,983,565
April 91 0.00% - -
May 91 0.00% - -
June 91 0.00% - -
July 91 0.00% - -
August 91 0.00% - -
September 91 0.00% - -
October 91 0.00% - -
November 91 0.00% - -
December 91 0.00% - -
----------- ------- ---------
91 100.00% 5,822,392
Add: fully diluted from Employee Stock Options - Year to Date - anti dilutive
Add: fully diluted from conversion of preferred stock impact due to
- loss position
Diluted shares outstanding at month end - year to date ---------
5,822,392
=========
<CAPTION>
First Quarter
<S> <C> <C> <C> <C> <C>
January 31 31 34.07% 5,822,222 1,983,394
February 29 60 31.87% 5,822,222 1,855,433
March 31 91 34.07% 5,822,722 1,983,565
---------
5,822,392
Add: fully diluted from Employee stock Options - 1st quarter - anti dilutive
Add: fully diluted from conversion of preferred stock impact due to
- loss position
---------
Diluted shares outstanding at month end - 1st quarter 5,822,392
=========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF HAWKER PACIFIC AEROSPACE FOR THE QUARTER ENDED MARCH 31, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,052,000
<SECURITIES> 0
<RECEIVABLES> 15,260,000
<ALLOWANCES> 337,000
<INVENTORY> 28,253,000
<CURRENT-ASSETS> 46,644,000
<PP&E> 61,847,000
<DEPRECIATION> 9,142,000
<TOTAL-ASSETS> 104,042,000
<CURRENT-LIABILITIES> 78,773,000
<BONDS> 0
2,920,000
0
<COMMON> 22,386,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 104,042,000
<SALES> 0
<TOTAL-REVENUES> 21,488,000
<CGS> 0
<TOTAL-COSTS> 17,422,000
<OTHER-EXPENSES> 2,949,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,702,000
<INCOME-PRETAX> (585,000)
<INCOME-TAX> (234,000)
<INCOME-CONTINUING> (351,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (351,000)
<EPS-BASIC> (.27)
<EPS-DILUTED> (.27)
</TABLE>
