10-K405

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               SECURITIES AND EXCHANGE COMMISSION
                    WASHINGTON, D.C.  20549

                           FORM 10-K

(MARK ONE)
     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
          THE SECURITIES EXCHANGE ACT OF 1934

          FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                               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)


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE

  SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                   COMMON STOCK, NO PAR VALUE
                     (Title of each class)

     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              NO  X
                                                 ---             ---

     The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of March 12, 1998, was approximately
$26,503,460.  The number of shares of common stock outstanding on March 12,
1998 was 5,822,222 shares.

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.   /X/

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ITEM 1.   BUSINESS

GENERAL

     Hawker Pacific Aerospace ("Hawker Pacific" or the "Company") repairs and 
overhauls aircraft and helicopter landing gear, hydromechanical components 
and wheels, brakes and braking system components for a diverse international 
customer base, including commercial airlines, air cargo operators, domestic 
government agencies, aircraft leasing companies, aircraft parts distributors 
and original equipment manufacturers ("OEMs").  In addition, the Company 
distributes and sells new and overhauled spare parts and components for both 
fixed wing aircraft and helicopters.  During the year ended December 31, 
1997, the Company had in excess of 440 customers, several of which have 
entered into long-term service contracts with the Company, including Federal 
Express Corporation ("FedEx"), American Airlines, Inc. ("American Airlines"), 
the United States Coast Guard (the "USCG"), and US Airways, Inc. ("US 
Airways"). On February 4, 1998, the Company completed its acquisition (the 
"BA Acquisition") of substantially all of the assets of the landing gear 
repair and overhaul operations (the "BA Assets") of British Airways plc 
("British Airways").  The Company believes the BA Acquisition will provide it 
with a base in the United Kingdom from which to expand its international 
repair and overhaul operations significantly and position itself to become 
the global leader in its markets.  See "--Recent Developments."

     The Company believes it is well positioned to benefit from the following 
aviation industry trends that are driving increased demand for third-party 
repair, overhaul and spare parts inventory management services: (i) the 
increase in worldwide air traffic associated with the addition of new 
aircraft and more frequent use of existing aircraft; (ii) the outsourcing by 
aircraft operators of services previously handled internally; (iii) the 
break-up of monopolistic aircraft maintenance consortiums; and (iv) an 
increase in regulatory pressure and consumer emphasis on the traceability of 
aircraft parts.

     Hawker Pacific was incorporated in 1980 in California as a distributor 
of aircraft parts and certain other consumer products and began providing 
aircraft repair and overhaul services in 1987.  In November 1996, BTR Dunlop, 
Inc. sold all of the outstanding capital stock of the Company to certain of 
the Company's current shareholders. See "Certain Relationships and Related 
Transactions." Unless the context otherwise requires, all references 
henceforth to the "Company" or "Hawker Pacific" shall also include Hawker 
Pacific Aerospace Limited, a wholly-owned United Kingdom subsidiary formed in 
November 1997.  The Company's principal executive offices are located at 
11240 Sherman Way, Sun Valley, California 91352, and its telephone number is 
(818) 765-6201.

RECENT DEVELOPMENTS

     INITIAL PUBLIC OFFERING.  On February 3, 1998, the Company completed an 
initial public offering (the "Offering") of 2,766,667 shares of the Company's 
common stock ("Common Stock") through several underwriters represented by 
EVEREN Securities, Inc. and The Seidler Companies Incorporated.  Of the 
2,766,667 shares of Common Stock sold in the Offering, 2,600,000 shares were 
sold by the Company and 166,667 shares were sold by a principal shareholder 
of the Company.  The principal shareholder sold 415,000 additional shares of 
Common Stock pursuant to the exercise of an over-allotment option granted to 
the underwriters by the principal shareholder.  The Registration Statement 
for the Offering (Registration No. 333-40295) was declared effective by the 
Securities and Exchange Commission (the "SEC") on January 29, 1998.  The 
Company received net proceeds of approximately $17.8 million net of expenses 
of approximately $3.0 million.  The Company used approximately $9.2 million 
of the net proceeds to fund a portion of the purchase price for the BA Assets 
and approximately $7.6 million to repay a portion of the revolving and term 
debt previously outstanding under the Company's credit facility.  The Company 
intends to use the remaining net proceeds for working capital and general 
corporate purposes.


                                     2.



     In November 1997, the Company effected a 579.48618 for one stock split 
of its outstanding Common Stock and in January 1998, effected a one for 
 .9907406 reverse stock split of its outstanding Common Stock.  Immediately 
before the closing of the Offering, all of the outstanding shares of the 
Company's Series A Preferred Stock were converted into an aggregate of 
250,000 shares of Common Stock.  Unless otherwise indicated, the information 
set forth in this Annual Report reflects such stock split and reverse stock 
split of the Common Stock and the conversion of the Series A Preferred Stock.

     ACQUISITION OF CERTAIN ASSETS OF BRITISH AIRWAYS.  On February 4, 1998 
(the "Acquisition Date"), the Company completed its acquisition of the BA 
Assets.  The BA Assets represent the assets of British Airways Engineering 
used to service landing gear primarily on British Airways' aircraft.  The 
purchase price for the BA Assets was approximately L11.3 million 
(approximately $18.5 million at the Acquisition Date), subject to adjustment 
to reflect certain changes to the quantity and condition of the assets 
purchased and the potential purchase of one landing gear shipset priced at 
L1.8 million ($2.9 million at the Acquisition Date.)  As part of the BA 
Acquisition, the Company and British Airways entered into a seven-year 
exclusive service agreement on February 4, 1998 for the Company to provide 
landing gear and related repair and overhaul services to substantially all of 
the aircraft currently operated by British Airways.

MARKET AND INDUSTRY OVERVIEW

     The aviation aftermarket consists of the servicing and support of 
aircraft after delivery of aircraft to operators by OEMs.  The Company 
provides aftermarket landing gear repair and overhaul services and related 
spare parts to a variety of customers in the aviation industry.  In March 
1997, Dillon Read & Co., Inc. ("Dillon Read") estimated the current global 
aviation aftermarket to be $47 billion annually and projected that it would 
grow to $60 billion by the year 2000.

     INCREASED AVIATION ACTIVITY.  Boeing's 1997 Current Market Outlook (the 
"Boeing Outlook") projects that global air travel will increase by 75% 
through the year 2006.  Average passenger seat miles flown are also expected 
to increase significantly over the next few years.  Further, many new 
airlines are expected to commence operations in the United States and abroad, 
especially in China and other Asian nations where only a small percentage of 
the population has flown to date.  In order to accommodate growing demand, 
aircraft operators will be required to increase the size of their aircraft 
fleets.  The Boeing Outlook projects that the global fleet of aircraft will 
grow from 11,500 aircraft at the end of 1996 to over 16,000 aircraft in 2006 
and 23,000 aircraft in 2016.  Increases in passenger travel, air cargo 
services and the number of aircraft in service increase the demand for repair 
and overhaul services.  In addition, the Federal Aviation Administration (the 
"FAA") requires aircraft landing gear to be overhauled every seven to ten 
years.  As a result, the growth in the number of aircraft over the past 15 
years is expected to create immediate and consistent demand for landing gear 
repair and overhaul services, which will most likely continue as the number 
of new aircraft in service grows. Further, because start-up airlines 
generally do not invest in the infrastructure necessary to service their 
aircraft, such airlines outsource all or most of their repair and overhaul 
services.

     OUTSOURCING OF REPAIR AND OVERHAUL SERVICES.  While the overall air 
transportation industry has grown significantly over the past decade, 
commercial airlines have not experienced consistent earnings growth over the 
same period.  As a result, many aircraft operators have recognized 
outsourcing as an opportunity to reduce operating costs, working capital 
investment and turnaround time.  In March 1997, Dillon Read estimated the 
outsourced military and government market to  be $9 billion and the third 
party market to be $12 billion.  Outsourcing allows aircraft operators to 
benefit from the expertise of service providers such as the Company who have 
developed specialized repair techniques and achieved economies of scale 
unavailable to individual operators. Additionally, outsourcing allows 
aircraft operators to limit their capital investment in infrastructure and 
personnel by eliminating the need for the equipment, sophisticated 
information systems technology and inventory required to repair and overhaul 
landing gear and hydromechanical components effectively. Dillon Read also 
estimated in March 1997 that approximately 40%, 35% and 95%, respectively, of 
commercial, military and general aviation functions are currently outsourced. 
Having recently awarded 


                                     3.



to the Company large contracts for outsourcing of repair and overhaul 
services, American Airlines and British Airways exemplify this growing trend. 
As aircraft operators continue to become more cost and value conscious, the 
Company expects the trend toward outsourcing to continue.

     BREAK-UP OF MONOPOLISTIC AIRCRAFT MAINTENANCE CONSORTIUMS.  Until 
recently, European aircraft operators attempted to realize cost savings by 
forming repair consortiums to provide maintenance, repair and overhaul 
services for their aircraft.  Within these repair consortiums, each member 
was responsible for providing the consortium's other members with 
maintenance, repair and overhaul services for certain specified aircraft 
components.  Over time, these members have begun subcontracting their 
maintenance, repair and overhaul services to independent service providers 
whom they subject to a competitive bidding process to obtain the work.  The 
Company believes that this trend will provide it with opportunities to expand 
substantially its European customer base.

     GREATER EMPHASIS ON TRACEABILITY.  Due to concerns regarding unapproved 
aircraft spare parts, regulatory authorities have focused on the level of 
documentation which must be maintained on aircraft spare parts.  As a result, 
aircraft operators increasingly demand that third party service providers 
provide complete traceability of all parts used in the repair and overhaul 
process.  The sophistication required to track the parts histories of an 
inventory consisting of thousands of aircraft spare parts is considerable.  
For example, an overhaul of a 747 aircraft shipset requires the handling and 
tracking of over 2,500 parts.  This has required companies to invest heavily 
in information systems technology.  The Company has developed and maintains a 
proprietary management information system that enables it to comply with its 
customer's contract specifications and enables its customers to comply with 
governmental regulations concerning traceability of spare parts.

COMPANY OPERATIONS

REPAIR AND OVERHAUL

     The primary reasons for removing landing gear or hydromechanical 
components from an aircraft for servicing are: (i) the number of takeoffs and 
landings or years since a landing gear's last overhaul have reached the time 
between overhaul limit and it must be overhauled or (ii) the landing gear or 
hydromechanical component has been damaged or is not performing optimally.  
The cost of servicing landing gear or hydromechanical components that have 
been removed varies depending upon the age and type of aircraft and the 
extent of the repairs being performed.

     Each overhaul of landing gear can involve numerous separate parts and 
work orders.  For example, the Boeing 737 nose landing gear calls for over 
290 parts and related work orders while the Boeing 747-200 nose gear calls 
for over 650 parts and related work orders.  Generally, the Company performs 
these overhauls in approximately six to eight weeks.  Hydromechanical 
component overhauls can involve 200 or more parts and over 25 separate work 
orders and are performed in approximately two to four weeks.  In order to 
achieve this throughput, the Company must perform many parallel processes and 
integrate numerous components just before final assembly.  Completing this 
complex overhaul work within the time constraints set by aircraft operators 
has led the Company to develop a highly managed systems-driven process, which 
is facilitated by its highly specialized management information systems 
described in more detail below.  The stages of the overhaul process include 
the following:

     DISASSEMBLY, CLEANING AND INSPECTION.  Upon receiving a landing gear 
shipset or a hydromechanical component, the Company's technicians disassemble 
the unit into its parts, a process which requires special tooling and 
expertise.  Each part is completely cleaned to allow for comprehensive 
inspection, testing and evaluation of part size, structural integrity and 
material tolerances.  The Company uses a detailed checklist and reporting 
procedure to create a work order documenting the state of each part inspected 
and indicating the extent of repair or overhaul to be performed.  Technicians 
tag all parts which need to be replaced or 


                                     4.



reworked and electronically prepare bills of material and requisitions to the 
Company's parts and production departments for inventory and scheduling 
purposes.  An internal sales order is created concurrently with the work 
order for shipping, pricing, billing and delivery purposes.  The Company 
utilizes its management information system throughout this process to reduce 
the amount of detailed inspection time required.  See "--Management 
Information Systems and Quality Assurance."

     The work completed in the disassembly and inspection process enables the 
Company to obtain detailed information concerning which parts can be reused 
or repaired and which must be replaced, as well as the approximate labor 
needed to complete the job.  The Company's computer system identifies and 
tracks the parts and associated work orders from each landing gear or 
hydromechanical component throughout the overhaul process in order to 
maintain the integrity of the landing gear or hydromechanical component the 
Company services.  Shop travelers provide a complete, detailed listing of all 
repair and overhaul work steps and processes.  Once disassembled, the 
individual parts are washed, visually inspected for obvious damage and 
permanently identified using the internal work order number assigned to that 
delivery order.  Major and minor parts are then processed for engineering 
evaluation and disposition of required repair work steps.

     PARTS REWORK, REPLACEMENT AND REASSEMBLY.  The next phase of an overhaul 
involves reworking existing parts to specifications set by the Company's 
customers.  This entails a combination of machining, plating, heat treatment, 
metal reshaping, surface finishing and restoration of organic finish.  At 
this phase, each part is accompanied by the customized bar-coded traveler 
which facilitates the computerized prioritization and tracking of a part 
through the rework phase.  Tight control is maintained over scheduling for 
each part, enabling the Company to remain within its required turnaround 
time.  The Company performs the majority of the repair and overhaul 
procedures in its facilities using proprietary or specialized repair 
techniques.  In addition, the Company utilizes in-house manufacturing 
capabilities to fabricate certain parts used in the overhaul process that are 
otherwise difficult to obtain.  If a part cannot be reclaimed, the Company 
may install either a new part or a previously-reworked part from inventory.  
The Company maintains an inventory of serviceable parts that it has reworked 
for this purpose.  Overhauling parts or using serviceable parts from 
inventory in lieu of new parts generally lowers customer costs and increases 
the Company's margins in comparison to an overhaul that consists of 
exclusively new spare parts.  In addition, these manufacturing and service 
capabilities are integral to the Company's competitive position because they 
enable the Company to maintain or increase the quality of work performed and 
significantly reduce cost and turnaround time relative to its competitors.

     INSPECTION AND SHIPPING.  After completing the rework phase of the 
overhaul/repair process, each part is delivered to the assembly area where 
the end unit is assembled, tested and final inspection is completed.  Once 
the end unit assembly has been accepted through final inspection it is moved 
to shipping, where it is packaged and prepared for dispatch.

     PRICING.  The Company offers its customers different pricing 
arrangements for its repair and overhaul services.  Pricing generally depends 
on the volume and complexity of the work performed, the kind and number of 
new or remanufactured spare parts used in the repair or overhaul and the 
required turnaround time.  For many of its customers, the Company exchanges a 
previously overhauled shipset from its inventory for an as-removed shipset 
from customer's aircraft upon which the Company charges the customer a fixed 
overhaul fee. Upon completing the overhaul of the as-removed shipset, the 
Company charges the customer an additional fee for spare parts or extra 
services required to overhaul the landing gear to the customer's 
specifications.  The Company typically bills a substantial portion of the 
repair and overhaul fee to the customer up-front upon receiving its 
as-removed shipset and generally receives payment for this portion of the 
overhaul fee before completing the overhaul. When the Company overhauls a 
shipset without exchanging an overhauled gear assembly from its inventory, 
the Company charges one fee, which includes all parts and labor charges, upon 
delivering the overhauled shipset to the operator.  Pursuant to the Company's 
standard payment terms, invoices are due within 30 days after receipt.  The 
Company typically offers a discount of up to 1.5% on payment made within 13 
days of receipt of an invoice.


                                     5.



     With certain of its customers for whom the Company regularly provides 
parts and services on entire fleets or large numbers of aircraft, the Company 
utilizes a flat fee fixed price arrangement which it typically sets forth in 
long-term service agreements.  Pursuant to the Company's service agreements, 
the Company performs repair and overhaul services on a scheduled or as-needed 
basis.  Pricing depends on the volume and type of aircraft landing gear or 
hydromechanical component to be serviced and the required turnaround time. 
Under its long-term service agreements, the Company is able to plan in 
advance for equipment and inventory requirements and can achieve efficiencies 
in labor hours and materials usage relative to the estimate on which the 
contract price was based.

PARTS DISTRIBUTION

     GENERAL.  Aircraft spare parts are classified within the industry as (i) 
factory new, (ii) new surplus, (iii) overhauled, (iv) serviceable, and (v) 
as-removed.  A factory new or new surplus part is one that has never been 
installed or used.  Factory new parts are purchased from manufacturers or 
their authorized distributors.  New surplus parts are purchased from excess 
stock of airlines, repair facilities or other distributors.  An overhauled 
part has been disassembled, inspected, repaired, reassembled and tested by a 
licensed repair facility.  An aircraft spare part is classified serviceable 
if it is repaired by a licensed repair facility rather than completely 
disassembled as in an overhaul.  A part may also be classified serviceable if 
it is removed by the operator from an aircraft or engine while operating 
under an approved maintenance program and is functional and meets any 
manufacturer or time and cycle restrictions applicable to the part.  A 
factory new, new surplus, overhauled or serviceable part designation 
indicates that the part can be immediately utilized on an aircraft.  A part 
in as-removed condition requires functional testing, repair or overhaul by a 
licensed facility prior to being returned to service in an aircraft.

     PARTS SALES.  The Company sells factory new, FAA-approved parts 
manufactured by approximately 80 OEMs, including Societe D'Application Des 
Machines Motrices ("SAMM"), Dunlop Equipment Division, Parker Hannifin 
Corporation ("Parker Hannifin") and Messier-Bugatti and overhauled aircraft 
spare parts to a diverse base of customers in the aviation industry.  The 
Company believes that it provides customers with value added parts 
distribution services by offering immediate availability, broad product 
lines, technical assistance and additional services.

CUSTOMERS

     COMMERCIAL.  During the year ended December 31, 1997, the Company served 
a broad base of over 440 domestic and international customers in the aviation 
industry.  The Company's customers include FedEx, American Airlines, US 
Airways, United Air Lines, Inc., Continental Airlines, Inc., Continental 
Express, Inc. and Westair Commuter Airlines, Inc.  The Company's largest 
customer, FedEx, accounted for approximately 18.4% of its sales for the year 
ended December 31, 1996 and 19.3% for the year ended December 31, 1997.  In 
1994, the Company entered into an agreement with FedEx, which has been 
amended to extend the term to 2007 and to expand the Company's services to 
include additional types of aircraft, to provide spare parts and repair and 
overhaul services at a fixed price for most aircraft in FedEx's fleet.  The 
Company also has a seven-year exclusive agreement with American Airlines 
expiring in June 30, 2005 to service landing gear on all Boeing 757 aircraft 
within its fleet on a flat-fee basis.  The Company believes that the 
long-term relationships that it has developed with many of its customers 
provide the Company with an ongoing base of business and an excellent source 
of new business opportunities.

     GOVERNMENT CONTRACTS.  Sales to the United States government and its 
agencies  were approximately $4,491,000 (11.5% of revenues) and $2,714,000 
(6.6% of revenues) in the years ended December 31, 1996 and December 31, 
1997, respectively.  The Company's largest government customer has been the 
USCG with which the Company has an agreement to provide repair and overhaul 
services and spare parts on an as-needed, fixed price basis for the USCG's 
Dauphin II helicopters.  The agreement is for a one-year term which the USCG 
may renew for additional one-year terms through the year 2000.  For the years 
ended December 31, 


                                     6.



1996 and December 31, 1997, sales to the USCG accounted for approximately 
11.2% and 6.5%, respectively, of the Company's revenues.  Because government 
sales are subject to competitive bidding and government funding, there can be 
no assurance that such sales will continue at previous levels.  Although the 
Company's government contracts are subject to termination at the election of 
the government, in the event of such a termination, the Company would be 
entitled to recover from the government all allowable costs incurred by the 
Company through the date of termination.

     MATERIAL CUSTOMERS.  FedEx and the USCG were the only customers who 
accounted for 10% or more of the Company's total revenues for the year ended 
December 31, 1996 (pro forma), and FedEx was the only customer who accounted 
for 10% or more of the Company's total revenues for the year ended December 
31, 1997.  See "--Risk Factors--Customer Concentration; Concentration of 
Credit Risks."

     The Company does not consider backlog meaningful to its business.

MANAGEMENT INFORMATION SYSTEMS AND QUALITY ASSURANCE

     The Company utilizes its management information systems to shorten 
turnaround times for customer orders, increase output, improve inventory 
management and reduce costs by eliminating duplication of work and reducing 
errors in ordering of parts.  The system consists of an automated inspection 
and routing system, a material resources planning module, a bar-coded shop 
floor control module, an inventory control and parts tracing module, a 
tooling calibration module and a general accounting module.

     The system enables the Company to shorten lead times, increase output 
and improve inventory management by allowing the Company to manage and 
control the process of detailed parts inspection, materials requisitioning 
and work order scheduling and release.  The system's database contains much 
of the information required to perform landing gear inspection activities, 
including illustrated parts catalogues, parts specifications and other 
technical data.  This has largely eliminated the need to update parts 
catalogues manually and allows an inspector using a personal computer located 
at his workstation to (i) refer to computer based parts manuals and 
catalogues to identify needed parts, (ii) access inventory to check on the 
availability of needed parts, (iii) requisition needed parts from inventory 
and (iv) create and record an audit trail for all inspected parts and 
processes.  These features of the system have substantially reduced total 
detailed inspection time required in the overhaul process.

     Using the system, all materials utilized and labor performed in 
connection with a work order are recorded using bar code scanners located 
throughout the Company's facility.  Work order travelers are generated upon 
commencement of a repair or overhaul and accompany the separate parts of each 
landing gear or hydromechanical component throughout the overhaul process.  
After each stage of the process is completed, the employee who performed the 
work records, using the bar code system, the date of completion, his or her 
employee identification number, critical dimensions and the quantity 
processed, accepted or rejected. For each repair or overhaul that it 
performs, the Company records all essential operations and tests conducted, 
inspection data on all components repaired, overhauled or exchanged for new 
components and the sources of all materials issued during the course of the 
work.  This function allows the company to provide more accurate cost and 
timing estimates to customers, facilitates faster and more accurate 
preparation of customer invoices and forms the basis of the Company's 
comprehensive quality assurance program.  In addition, shoploading and 
material requisition personnel receive more accurate planning data.  Using 
the system, management can plan for material requirements in advance so that 
required materials for a specific unit are on hand in time to facilitate 
on-time delivery and based upon sales forecasts and actual orders can 
optimize daily manpower and materials utilization.

EQUIPMENT MAINTENANCE AND TOOLING


                                     7.



     The Company performs all of the maintenance and repair on the equipment 
used in the repair and overhaul process.  The Company's maintenance personnel 
perform various regularly scheduled maintenance procedures on the Company's 
equipment on a weekly, monthly and annual basis, and shift operators perform 
daily preventive maintenance.  Precision measurement accessories installed on 
certain machines, which require periodic calibration, are maintained and 
serviced by approved vendors and closely monitored by the Company.

     The Company invests significant material and resources to design and 
construct tooling and fixtures to support its current product line and 
improve the efficiency of the repair and overhaul process.  
Manufacturer-designed tooling is typically limited to specialized tools to 
aid in the disassembly, assembly and testing of a landing gear assembly, such 
as spanner wrenches and seal installation tools.  From time to time, the 
Company's employees may develop modifications to existing tooling or ideas 
for new tooling and fixtures in order to accomplish a specific machining or 
testing operation or to improve the performance of the overhaul process.  
Tooling and fixtures used in machining and plating operations are conceived, 
designed and fabricated in-house by the technical personnel involved in the 
Company's daily operations to improve the labor efficiency of a process and 
reduce the cost of performing a repetitive process.  The Company believes 
that its ability to design and fabricate tooling used in its operations 
allows it to maximize efficiencies and enables its customers to realize cost 
savings and improved turnaround time.

SUPPLIERS AND PROCUREMENT PRACTICES

     The primary sources of parts and components for the Company's overhaul 
operations and parts distribution business are domestic and foreign airlines, 
OEMs and aircraft leasing companies.  The supply of parts and components for 
the Company's aftermarket sales is affected by the availability of excess 
inventories that typically become available for purchase as a result of new 
aircraft purchases by commercial airlines, which reduce the airline's need 
for spares supporting the aircraft that have been replaced.  Aftermarket 
supply is also affected by the availability of new parts from OEMs and the 
availability of older, surplus aircraft that can be purchased for the value 
of the major parts and components.  Although the Company does not have fixed 
agreements with the majority of its suppliers, it is frequently able to 
obtain significant price discounts from many of its suppliers because of the 
volume and regularity of its purchases.  The Company has ten-year agreements 
with Dunlop Limited, Aviation Division and Dunlop Equipment Division 
(collectively, "Dunlop") that enable it to purchase Dunlop parts at a 
discount from list price for resale and for use in the repair and overhaul of 
a variety of fixed wing aircraft and helicopters.  For the years ended 
December 31, 1996 and December 31, 1997, Dunlop accounted for approximately 
27% and 19.3%, respectively, of the total dollar amount of parts purchased by 
the Company.  The Company also has agreements with Messier-Bugatti, SAMM and 
Eurocopter France that enable the Company to purchase new aircraft parts at 
discounts from list price.

     Although the Company does not have agreements with many of its suppliers 
and competes with other parts distributors for production capacity, the 
Company believes that its sources of supply and its relationships with its 
suppliers are satisfactory.  While the loss of any one supplier could have a 
material adverse effect on the Company until alternative suppliers are 
located and have commenced providing products, alternative suppliers exist 
for substantially all of the parts purchased by the Company.  See "--Risk 
Factors--Dependence on Key Suppliers."

     The Company has developed procurement practices to ensure that all 
supplies received conform to contract specifications.  For cost, quality 
control and efficiency reasons, the Company generally purchases supplies only 
from vendors with whom the Company has on-going relationships and/or whom the 
Company's customers have previously approved.  The Company has qualified 
second sources or has identified alternate sources for all of its supplies.  
However, the inability or delay in obtaining needed parts on a timely basis 
could have a material adverse effect on the Company.  The Company chooses it 
vendors primarily based on the quality of the parts supplied and record for 
on-time performance.  The Company regularly evaluates and audits its approved 
vendors based on their performance.  Repeated failures to comply with the 
Company's 



                                     8.



quality and delivery requirements may ultimately cause the Company to remove 
a vendor from its approved vendor list.

SALES AND MARKETING

     The Company's sales and marketing strategy is designed to target 
commercial and government customers with large fleets of aircraft that 
require regular repair and overhaul of landing gear parts and components.  In 
recent years, the Company has significantly expanded its direct sales efforts 
toward the goal of increasing its sales from its existing customer base as 
well as attracting new customers.  In particular, the Company focuses its 
sales efforts on encouraging its existing and prospective customers to enter 
into long-term agreements with the Company for the repair and overhaul of 
landing gear on all aircraft within a fleet, or alternatively, to engage the 
Company to perform repair and overhaul services on several aircraft at once.  
In its sales and marketing efforts, the Company emphasizes its competitive 
strengths, including its superior quality of service, competitive pricing, 
rapid turnaround time and extensive industry experience.

     The Company markets and sells its products and services worldwide both 
directly through an in-house sales staff and indirectly through a network of 
independent sales representatives which at December 31, 1997 consisted of 
approximately 11 employees and 11 sales representatives, respectively.  Air 
Resources, Inc., an aviation sales representative agency ("Air Resources"), 
markets and sells the Company's products and services to a number of domestic 
airlines in return for a commission on sales made through Air Resources' 
efforts.  The Company's domestic sales are conducted primarily by Air 
Resources, which focuses its efforts on major domestic commercial carriers, 
as well as the Company's in-house sales force.  The Company conducts its 
international sales and marketing through a number of independent agencies 
based worldwide in such countries as France, Sweden, Mexico and India. 
Additionally, senior management plays an active role in marketing several of 
the Company's product lines.  The Company's President and Chief Executive 
Officer, David L. Lokken oversees its sales activities, while the Company's 
indirect and direct sales representatives report directly to Brian S. Carr, 
Managing Director of Sun Valley Operations, for landing gear sales and 
Michael A. Riley, Vice President-Hydromechanical Business Unit, for 
hydromechanical component sales.  The Company's sales staff works closely 
with engineering and customer support personnel to provide cost effective 
solutions to maintaining landing gear, stressing the Company's repair and 
overhaul engineering expertise, turnaround times and component overhauling 
capabilities.

     In addition, the Company actively participates in many of the major 
aviation industry gatherings and air shows and hosts groups of aircraft 
operators at technical and other meetings.  In certain instances, the Company 
bids on government contracts for certain lines through its government 
contracts department, which coordinates with the Company's sales and 
marketing team.

GROWTH STRATEGY

     The key elements of the Company's growth strategy include the following:

     PURSUE ADDITIONAL INTERNATIONAL GROWTH OPPORTUNITIES.  The Company 
believes that the international aviation aftermarket presents the greatest 
potential for substantial growth.  With the hydromechanical repair and 
overhaul services that it performs from its Netherlands facility and the 
large air transport repair and overhaul operations that it has established 
through the recent BA Acquisition, the Company believes it will be able to 
provide customers with a full range of repair and overhaul services in 
Europe.  In addition, the Company believes that the break-up of aircraft 
maintenance consortiums will create opportunities for the Company to expand 
its European, Middle Eastern and Asian customer bases.  With facilities 
located in the United Kingdom and California, the Company believes that it 
will be geographically positioned to pursue additional growth opportunities 
in both the European and Asian aviation aftermarkets.


                                     9.



     FOCUS ON LONG-TERM SERVICE AGREEMENTS.  Through increased sales and 
marketing efforts, the Company is actively seeking to enter into long-term 
service agreements with its existing and potential customers to provide its 
services for all of their respective aircraft.  A recent example of the 
Company's success in this area includes the Company's September 1997 
seven-year exclusive agreement with American Airlines to service landing gear 
on all Boeing 757 aircraft within its fleet.  While long-term agreements are 
often terminable on short notice, the Company believes that securing 
long-term service agreements with customers will provide it with a more 
predictable and consistent flow of business and enable it to improve its 
profit margins from fixed wing operations.

     EXPAND EXISTING OPERATIONS.  Hawker Pacific seeks to increase sales and 
operating income by marketing its landing gear repair and overhaul services 
to new and existing customers and expanding its hydromechanical component 
product lines.  Boeing projects that the global fleet of aircraft will grow 
from 11,500 aircraft at the end of 1996 to over 16,000 aircraft in 2006 and 
23,000 aircraft in 2016.  The Company plans to expand its landing gear repair 
and overhaul operations in order to capitalize on this growth trend.  Because 
the Company believes that improved profit margins in fixed wing operations 
are primarily a function of increased volume, it plans to expand its capacity 
to perform fixed wing landing gear repair and overhaul services.  The Company 
also intends to expand its hydromechanical component service offerings 
particularly through increased capabilities resulting from the BA 
Acquisition.  The Company recently began to offer repair and overhaul of 
constant speed drive-integrated drive generators after having expended 
minimal funds to initiate these operations.

     ACCELERATE GROWTH THROUGH ACQUISITION.  The Company intends to evaluate 
and pursue strategically located companies with technology, equipment and 
inventory that complement or expand the Company's existing operations and 
that may enable it to expand into new geographic or product markets.  In 
particular, the Company seeks to acquire companies that will enable it to 
expand its international operations or to increase its product offerings.

COMPETITION

     Numerous companies compete with the Company in the aviation services 
industry.  The Company primarily competes with various repair and overhaul 
organizations, which include the service arms of OEMs, the maintenance 
departments or divisions of large air carriers (some of which also offer 
maintenance services to third parties) and independent organizations such as 
the Aerospace Division of B.F. Goodrich Company, the Landing Gear Division of 
AAR Corporation ("AAR"), Revima, a company organized and operating under the 
laws of France, and Dowty Aerospace Aviation Services.  The Company's major 
competitors in its hydromechanical components business include AAR and OEMs 
such as Sunstrand, Aeroquip Vickers, Inc., Parker-Hannifin Corporation, 
Messier-Bugatti and Lucas.  The Company expects that competition in its 
industry will increase substantially as a result of industry consolidations 
and alliances in response to the trend in the aviation industry toward 
outsourcing of repair and overhaul services.  In addition, as the Company 
moves into new geographic or product markets it will encounter new 
competition.

     The Company believes that the primary competitive factors in its 
marketplace are quality, price, the ability to perform repairs and overhauls 
within a rapid and reliable turnaround time and industry experience.  Certain 
of the Company's competitors have substantially greater financial, technical, 
marketing and other resources than the Company.  These competitors may have 
the ability to adapt more quickly to changes in customer requirements, may 
have stronger customer relationships and greater name recognition and may 
devote greater resources to the development, promotion and sale of their 
products than the Company.  There can be no assurance that competitive 
pressures will not materially and adversely affect the Company's business, 
financial condition or results of operations.  See "--Risk 
Factors--Substantial Competition."

GOVERNMENT REGULATION


                                     10.




     The Company is highly regulated worldwide by the FAA, the Joint 
Airworthiness Authority, a consortium of European regulatory authorities (the 
"JAA"), and various other foreign regulatory authorities, including the Dutch 
Air Agency, which regulates the Company's Netherlands' operations, and the 
Civil Aviation Authority, which regulates the Company's United Kingdom 
operations.  These regulatory authorities require all aircraft to be 
maintained under continuous condition monitoring programs and periodically to 
undergo thorough inspection.  In addition, all parts must be certified by the 
FAA and equivalent regulatory agencies in foreign countries and conformed to 
regulatory standards before they are installed on an aircraft.  The Company 
is a certified FAA and JAA approved repair station and has been granted Parts 
Manufacturer Approvals by the FAA Manufacturing Inspectors District Office.  
In addition, the Company's operations are regularly audited and accredited by 
the Coordinating Agency for Supplier Evaluation, formed by commercial 
airlines to approve FAA approved repair stations and aviation parts 
suppliers.  If material authorizations or approvals were revoked or 
suspended, the Company's operations would be materially and adversely 
affected.  As the Company attempts to commence operations in countries in 
which it has not previously operated, it will need to obtain new 
certifications and approvals, and any delay or failure in attaining such 
certifications or approvals could have a material adverse effect on the 
Company's business, financial conditions and results of operations.  In 
addition, if new and more stringent regulations are adopted by foreign or 
domestic regulatory agencies or oversight of the aviation industry is 
increased in the future the Company's business may be materially and 
adversely affected.  See "--Risk Factors--Government Regulation."

ENVIRONMENTAL MATTERS AND PROCEEDINGS

     The Company's operations are subject to extensive and frequently 
changing federal, state and local environmental laws and substantial related 
regulation by government agencies, including the United States Environmental 
Protection Agency (the "EPA"), the California Environmental Protection Agency 
and the United States Occupational Safety and Health Administration.  Among 
other matters, these regulatory authorities impose requirements that regulate 
the operation, handling, transportation and disposal of hazardous materials 
generated by the Company during the normal course of its operations, govern 
the health and safety of the Company's employees and require the Company to 
obtain and maintain permits in connection with its operations.  This 
extensive regulatory framework imposes significant compliance burdens and 
risks on the Company and, as a result, substantially affects its operational 
costs.  In addition, the Company may become liable for the costs of removal 
or remediation of certain hazardous substances released on or in its 
facilities without regard to whether or not the Company knew of, or caused, 
the release of such substances.  The Company believes that it currently is in 
material compliance with applicable laws and regulations and is not aware of 
any material environmental problem at any of its current or former 
facilities.  There can be no assurance, however, that its prior activities 
did not create a material problem for which the Company could be responsible 
or that future uses or conditions (including, without limitation, changes in 
applicable environmental laws and regulations, or an increase in the amount 
of hazardous substances generated by the Company's operations) will not 
result in any material environmental liability to the Company and materially 
and adversely affect the Company's financial condition and results of 
operations.  The Company's plating operations, which use a number of 
hazardous materials and generate significant hazardous waste, increase the 
Company's regulatory compliance burden and compound the risk that the Company 
may encounter a material environmental problem in the future.  Furthermore, 
compliance with laws and regulations in foreign countries in which the 
Company locates its operations may cause future increases in the Company's 
operating costs or otherwise adversely affect the Company's results of 
operations or financial condition.  See "--Risk Factors--Environmental 
Regulations."

     In October 1993, the United States of America and the State of 
California each filed lawsuits in the United States District Court for the 
Central District of California, against the Company and the owners (the 
"Owners") of one of the Company's facilities (the "Site").  The lawsuits (the 
"SFVB Actions") alleged that the groundwater in the San Fernando Valley Basin 
("SFVB") had been contaminated with volatile organic compounds and other 
hazardous substances released from the Site, requiring costly investigation, 
evaluation and remediation efforts for which the Company and the Owners were 
liable.  In February 1997, the Company 


                                     11.



entered into settlements with the United States of America and State of 
California pursuant to which the Company paid the EPA $382,500 and the State 
of California $40,950 in June 1997.  The Company believes that it will not be 
liable to the United States government or the State of California for any 
future costs related to this matter, and the California Regional Water 
Quality Control Board recently notified the Company of its conclusion that 
soil contamination at the Site does not represent a significant threat to 
groundwater quality and cannot be determined with certainty.  BTR Dunlop, 
Inc., the former owner of the Company ("BTR"), has agreed to indemnify the 
Company against any future amounts for which the Company may be responsible 
in connection with the SFVB Actions.  See "Certain Transactions--Acquisition 
of the Company from BTR."

     In August 1997 and January 1998, two separate lawsuits were filed by 
various individuals against Lockheed Martin Corporation and various other 
parties, including the Company, in the Los Angeles Superior Court pleading 
various causes of action in connection with certain alleged injuries caused 
by toxic and carcinogenic chemicals allegedly released by the defendants in 
the Burbank and Glendale area of Los Angeles County, California.  The 
individual plaintiffs seek unspecified compensatory and punitive damages.  
The Company does not believe that it caused the release of toxic and 
carcinogenic chemicals alleged in the complaints and believes that it shall 
be entitled to indemnification from BTR in the event the Company is held 
responsible for any damages in connection therewith.  See "Legal Proceedings."

EMPLOYEES AND EMPLOYEE TRAINING

     As of December 31, 1997, the Company had 239 employees of whom 
approximately 15 are in management, 54 are engineering and technical 
personnel, 132 are direct labor personnel, 11 are in sales and marketing and 
27 are administrative personnel.  The Company is not currently a party to any 
collective bargaining agreements.  In connection with the BA Acquisition, 
however, the Company is required to enter into collective bargaining 
agreements in the United Kingdom.  The Company believes that its 
relationships with its employees are generally good.

     Each of the Company's technical employees receives specific training in 
the individual repair and overhaul functions that he or she performs, in 
addition to comprehensive general training in total quality management 
procedures, statistical process control and material resource planning.  The 
Company also regularly conducts in-house training programs, which the 
Company's management designs using standard industry practice manuals, for 
its technical and engineering employees on a number of subjects, including 
materials handling, corrosion prevention and control, surface tension etch 
inspection and shot peening.

                          RISK FACTORS

     SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT 
OF 1995.

     THIS ANNUAL 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 SECTION 
ENTITLED "RISK FACTORS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS ANNUAL 
REPORT.  IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS ANNUAL 
REPORT, PERSONS WHO MAY OWN OR INTEND TO OWN SECURITIES OF THE COMPANY SHOULD 
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS:

AVIATION INDUSTRY RISKS

     The Company derives all of its sales and operating income from the 
services and parts that it provides to its customers in the aviation 
industry. Therefore, the Company's business is directly affected by economic 
factors and other trends that affect its customers in the aviation industry, 
including a possible decrease in 


                                     12.



aviation activity, a decrease in outsourcing by aircraft operators or the 
failure of projected market growth to materialize or continue. When such 
economic and other factors adversely affect the aviation industry, they tend 
to reduce the overall demand for the Company's products and services, thereby 
decreasing the Company's sales and operating income.  There can be no 
assurance that economic and other factors that might affect the aviation 
industry will not adversely affect the Company's results of operations.  See 
"Business--Market and Industry Overview."

FLUCTUATIONS IN RESULTS OF OPERATIONS

     The Company's operating results are affected by a number of factors, 
including the timing of orders for the repair and overhaul of landing gear 
and fulfillment of such contracts, the timing of expenditures to manufacture 
parts and purchase inventory in anticipation of future services and sales, 
parts shortages that delay work in progress, general economic conditions and 
other factors.  Although the Company has secured several long-term agreements 
to service multiple aircraft, the Company receives sales under these 
agreements only when it actually performs a repair or overhaul.  Because the 
average time between landing gear overhauls is seven years, the work orders 
that the Company receives and the number of repairs or overhauls that the 
Company performs in particular periods may vary significantly causing the 
Company's quarterly sales and results of operations to fluctuate 
substantially.  The Company is unable to predict the timing of the actual 
receipt of such orders and, as a result, significant variations between 
forecasts and actual orders will often occur. In addition, the Company's need 
to make significant expenditures to support new aircraft in advance of 
generating revenues from repairing or overhauling such aircraft may cause the 
Company's quarterly operating results to fluctuate. Furthermore, the 
rescheduling of the shipment of any large order, or portion thereof, or any 
production difficulties or delays by the Company, could have a material 
adverse effect on the Company's quarterly operating results.

RISKS RELATING TO ACQUISITION STRATEGY; ESTABLISHMENT OF UNITED KINGDOM 
OPERATIONS

     In February 1998, the Company acquired the BA Assets using approximately 
$9.2 million of the proceeds from the Offering.  See "Business--Recent 
Developments--Acquisition of Certain Assets of British Airways" and 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations-Liquidity and Capital Resources."  In the future, the Company may 
attempt to grow by acquiring other service and parts providers whose 
operations or inventories complement or expand the Company's existing repair 
and overhaul businesses or whose strategic locations enable the Company to 
expand into new geographic markets.  The Company's ability to grow by 
acquisition depends upon, and may be limited by, the availability of suitable 
acquisition candidates and the Company's capital resources.  Acquisitions 
involve risks that could adversely affect the Company's operating results, 
including the assimilation of the operations and personnel of acquired 
companies, the potential amortization of acquired intangible assets and the 
potential loss of key employees of acquired companies.  Although the Company 
investigates the operations and assets that it acquires, there may be 
liabilities that the Company fails or is unable to discover, and for which 
the Company as a successor owner or operator may be liable.  In addition, 
costs and charges, including legal and accounting fees and reserves and 
write-downs relating to an acquisition, may be incurred by the Company or may 
be reported in connection with any such acquisition, including the BA 
Acquisition.  The Company evaluates acquisition opportunities from time to 
time, but the Company has not entered into any commitments or binding 
agreements to date, except with respect to the BA Acquisition.  There can be 
no assurance that the Company will be able to consummate acquisitions on 
satisfactory terms, or at all, or that it will be successful in integrating 
any such acquisitions, including the BA Acquisition, into its operations.  
The Company has no history or experience operating in the United Kingdom. 
Accordingly, establishing operations in the United Kingdom will subject the 
Company to all of the risks inherent in the establishment of a new business 
enterprise.  The likelihood of the success of the Company's United Kingdom 
operations must be considered in light of the problems, expenses, 
difficulties, complications and delays frequently encountered in connection 
with a new business.  These include, without limitation, the need to 
establish manufacturing, marketing and administrative capabilities, the need 
to implement the Company's management information systems in its new 


                                     13.



location, the need to locate and move into a new facility, unanticipated 
marketing problems, new competitive pressures and expenses.

RISKS ASSOCIATED WITH EXPANSION OF INTERNATIONAL OPERATIONS

     The Company's growth strategy is based in large part on the Company's 
ability to expand its international operations, which will require 
significant management attention and financial resources.  The Company 
currently has a division in the Netherlands, and through the BA Acquisition, 
the Company plans to expand further its international customer base.  There 
can be no assurance that the Company's efforts to expand operations 
internationally will be successful.  Failure to increase revenue in 
international markets could have a material adverse effect on the Company's 
business, operating results and financial condition.  In addition, 
international operations are subject to a number of risks, including longer 
receivable collection periods and greater difficulty in accounts receivable 
collections, unexpected changes in regulatory requirements, foreign currency 
fluctuations, import and export restrictions and tariffs, difficulties and 
costs of staffing and managing foreign operations, potentially adverse tax 
consequences, political instability, the burdens of complying with multiple, 
potentially conflicting laws and the impact of business cycles and economic 
instability outside the United States.  Moreover, the Company's operating 
results could also be adversely affected by seasonality of international 
sales, which are typically lower in Asia in the first calendar quarter and in 
Europe in the third calendar quarter.  In addition, inflation in such 
countries could increase the Company's expenses.  These international factors 
could have a material adverse effect on future sales of the Company's 
products to intentional end-users and, consequently, the Company's business, 
operating results and financial condition.

     The Company's sales are principally denominated in United States dollars 
and to some extent in Dutch guilders, and the Company expects to make 
material sales in British pounds as a result of the BA Acquisition.  The 
Company makes substantial inventory purchases in French francs from such 
suppliers as Messier-Bugatti, Societe D'Applications Des Machines Motrices 
and Eurocopter France.  The Company's Netherlands facility's inventory 
purchases are primarily United States dollar denominated, while sales and 
operating expenses are partially denominated in Dutch guilders.  To date, the 
Company's business has not been significantly affected by currency 
fluctuations or inflation. However, the Company conducts business in the 
Netherlands and expects to conduct business in the United Kingdom, and thus 
fluctuations in currency exchange rates could cause the Company's products to 
become relatively more expensive in particular countries, leading to a 
reduction in sales in that country.  As a result of the BA Acquisition, the 
Company may engage in additional foreign currency denominated sales or pay 
material amounts of expenses in foreign currencies that may generate gains 
and losses due to currency fluctuations.  The Company's operating results 
could be adversely affected by such fluctuations or as result of inflation in 
particular countries where material expenses are incurred.

SUBSTANTIAL COMPETITION

     Numerous companies compete with the Company in the aviation services 
industry.  The Company primarily competes with various repair and overhaul 
organizations, which include the service arms of OEMs, the maintenance 
departments or divisions of large commercial airlines (some of which also 
offer maintenance services to third parties) and independent organizations 
such as the Aerospace Division of B.F. Goodrich Company, the Landing Gear 
Division of AAR Corporation, Revima, a company organized and operating under 
the laws of France, and Dowty Aerospace Aviation Services.  The Company's 
major competitors in its hydromechanical components business include AAR and 
OEMs such as Sunstrand, Aeroquip Vickers, Inc.. Parker-Hannifin Corporation, 
Messier-Bugatti and Lucas.  The Company expects that competition in its 
industry will increase substantially as a result of industry consolidations 
and alliances in response to the trend in the aviation industry toward 
outsourcing of repair and overhaul services.  In addition, as the Company 
moves into new geographic or product markets it will encounter new 
competition.


                                     14.



     The Company believes that the primary competitive factors in its 
marketplace are quality, price, rapid turnaround time and industry 
experience. Certain of the Company's competitors have substantially greater 
financial, technical, marketing and other resources than the Company.  These 
competitors may have the ability to adapt more quickly to changes in customer 
requirements, may have stronger customer relationships and greater name 
recognition and may devote greater resources to the development, promotion 
and sale of their products than the Company.  There can be no assurance that 
competitive pressures will not materially and adversely affect the Company's 
business, financial condition or results of operations.  See 
"Business--Competition."

GOVERNMENT REGULATION

     The Company is highly regulated worldwide by the Federal Aviation 
Administration, the Joint Airworthiness Authority, a consortium of European 
regulatory authorities, and various other foreign regulatory authorities, 
including the Dutch Air Agency, which regulates the Company's Netherlands' 
operations and the Civil Aviation Authority, which regulates the Company's 
United Kingdom operations.  These regulatory authorities require aircraft to 
be maintained under continuous condition monitoring programs and to 
periodically undergo thorough inspection.  In addition, all parts must be 
certified by the FAA and equivalent regulatory agencies in foreign countries 
and conformed to regulatory standards before they are installed on an 
aircraft.  The Company is a certified FAA and JAA approved repair station and 
has been granted Parts Manufacturer Approvals by the FAA Manufacturing 
Inspectors District Office.  In addition, the Company's operations are 
regularly audited and accredited by the Coordinating Agency for Supplier 
Evaluation, formed by commercial airlines to approve FAA approved repair 
stations and aviation parts suppliers.  If material authorizations or 
approvals were revoked or suspended, the Company's operations would be 
materially and adversely affected.  As the Company attempts to commence 
operations in countries in which it has not previously operated, it will need 
to obtain new certifications and approvals, and any delay or failure in 
attaining such certifications or approvals could have a material adverse 
effect on the Company's business, financial conditions and results of 
operations.  In addition, if in the future new and more stringent regulations 
are adopted by foreign or domestic regulatory agencies, the Company's 
business may be materially and adversely affected.

DEPENDENCE ON KEY SUPPLIERS

     The Company purchases landing gear spare parts and components for a 
variety of fixed wing aircraft and helicopters.  The Company has separate 
10-year agreements that each expire in October 2006 with (i) Dunlop Limited, 
Aviation Division, (ii) Dunlop Limited, Precision Rubber and (iii) Dunlop 
Equipment Division.  Under two of these agreements, the Company is entitled 
to purchase at a discount from list price Dunlop parts for resale and for use 
in the repair and overhaul of a variety of fixed wing aircraft and 
helicopters. For the years ended December 31, 1996 and 1997, the Company's 
single largest supplier was Dunlop, accounting for approximately $5,634,000 
(27%) and $4,301,000 (19.3%), respectively, of the spare parts and components 
that the Company purchased in such periods.  Failure by any one of these 
divisions of Dunlop to renew its agreement on similar terms when it expires 
could have a material adverse affect on the Company's business, financial 
condition and results of operations.  In addition, the Company has agreements 
with Messier-Bugatti, SAMM and Eurocopter France that enable the Company to 
purchase new aircraft parts at discounts from list price.  Many of the 
Company's supplier agreements, other than its agreements with Dunlop, are 
short-term and can be terminated by the suppliers upon providing 90 days 
prior written notice. A decision by any one of these suppliers to terminate 
their agreements would eliminate the competitive advantage the Company 
derives therefrom and could have a material adverse effect on the Company's 
business, financial condition and results of operations.


                                     15.



SHORTAGES OF SUPPLY; INVENTORY OBSOLESCENCE

     The Company's inventory consists principally of new, overhauled, 
serviceable and repairable aircraft landing gear parts and components that it 
purchases primarily from OEMs, parts resellers and customers.  The Company 
believes it maintains a sufficient supply of inventory to meet its current 
and immediately foreseeable production schedule.  However, the Company may 
fail to order sufficient parts in advance to meet its work requirements, a 
particular part may be unavailable when the Company needs it from its 
suppliers or the Company unexpectedly may receive one or more large orders 
simultaneously for repair and overhaul services.  As a result, the Company 
may on occasion face parts shortages that delay its production schedule and 
prevent it from meeting required turnaround times.  Delays or failure to meet 
turnaround times could have a material adverse effect on the Company's 
business, financial condition and results of operations.  In addition, 
regulatory standards may change in the future, causing parts which are 
currently included in the Company's inventory to be scrapped or modified.  
Aircraft manufacturers may also develop new parts to be used in lieu of parts 
already contained in the Company's inventory.  In all such cases, to the 
extent that the Company has such parts or excess parts in its inventory, 
their value will be reduced, which would adversely affect the Company's 
financial condition.

CUSTOMER CONCENTRATION; CONCENTRATION OF CREDIT RISKS

     A small number of customers have historically accounted for a 
substantial part of the Company's revenue in any given fiscal period.  Sales 
derived from FedEx and the USCG accounted for 18.4%, and 11.2%, respectively, 
of product sales for the year ended December 31, 1996 and 19.3% and 6.5%, 
respectively, of product sales for the year ended December 31, 1997.  Some of 
the Company's long-term service agreements may be terminated by the customers 
upon providing the Company with 90 days prior written notice, and the 
Company's agreement with the USCG is subject to termination at any time at 
the convenience of the government.  In addition, the Company's sales are made 
primarily on the basis of purchase orders rather than long-term agreements.  
The Company expects that a small number of customers will continue to account 
for a substantial portion of its sales for the foreseeable future.  As a 
result, the Company's business, financial condition and results of operations 
could be materially adversely affected by the decision of a single customer 
to cease using the Company's products.  In addition, there can be no 
assurance that sales from customers that have accounted for significant sales 
in past periods, individually or as a group, will continue, or if continued, 
will reach or exceed historical levels in any future period.  See 
"Business--Customers."

     At December 31, 1997, 18.9% and 6.1%, respectively of the Company's 
total accounts receivable were associated with two customers, FedEx and 
British Airways.  At December 31, 1996, 7.4% and 9.3%, respectively of the 
Company's total accounts receivable were associated with FedEx and the USCG.  
As a result of the BA Acquisition, British Airways accounts for a significant 
percentage of both the Company's products sales and accounts receivable.  
Although the Company has not had any material difficulties in collecting its 
accounts receivable during the past three years, the Company cannot ensure 
that it will not have difficulty collecting receivables in the future.  Any 
inability by the Company to collect material amounts of receivables under its 
service agreements could have a material adverse effect on the Company's 
business, financial condition and results of operations.

ENVIRONMENTAL REGULATIONS

     The Company's operations are subject to extensive and frequently 
changing federal, state and local environmental laws and substantial related 
regulation by government agencies, including the EPA, the California 
Environmental Protection Agency and the United States Occupational Safety and 
Health Administration.  Among other matters, these regulatory authorities 
impose requirements that regulate the operation, handling, transportation and 
disposal of hazardous materials generated by the Company during the normal 
course of its operations, govern the health and safety of the Company's 
employees and require the 


                                     16.



Company to obtain and maintain permits in connection with its operations. 
This extensive regulatory framework imposes significant compliance burdens 
and risks on the Company and, as a result, substantially affects its 
operational costs.  In addition, the Company may become liable for the costs 
of removal or remediation of certain hazardous substances released on or in 
its facilities without regard to whether or not the Company knew of, or 
caused, the release of such substances.  The Company believes that it 
currently is in material compliance with applicable laws and regulations and 
is not aware of any material environmental problem at any of its current or 
former facilities. There can be no assurance, however, that its prior 
activities did not create a material problem for which the Company could be 
responsible or that future uses or conditions (including, without limitation, 
changes in applicable environmental laws and regulation, or an increase in 
the amount of hazardous substances generated by the Company's operations) 
will not result in any material environmental liability to the Company and 
materially and adversely affect the Company's financial condition and results 
of operations.  The Company's plating operations, which use a number of 
hazardous materials and generate a significant volume of hazardous waste, 
increase the Company's regulatory compliance burden and compound the risk 
that the Company may encounter a material environmental problem in the 
future.  Furthermore, compliance with laws and regulations in foreign 
countries in which the Company locates its operations may cause future 
increases in the Company's operating costs or otherwise adversely affect the 
Company's results of operations or financial condition.  See 
"Business--Environmental Matters and Proceedings" and "Legal Proceedings."

PRODUCT LIABILITY RISKS

     The Company's business exposes it to possible claims for personal 
injury, death or property damage which may result from the failure or 
malfunction of landing gear, hydromechanical components or aircraft spare 
parts repaired or overhauled by the Company.  Many factors beyond the 
Company's control could lead to liability claims, including the failure of 
the aircraft on which landing gear or hydromechanical components overhauled 
by the Company is installed, the reliability of the customer's operators of 
the aircraft and the maintenance of the aircraft by the customers.  The 
Company currently has in force aviation products liability and premises 
insurance, which the Company believes provides coverage in amounts and on 
terms that are generally consistent with industry practice.  The Company has 
not experienced any material product liability claims related to its 
products.  However, the Company may be subject to a material loss to the 
extent that a claim is made against the Company that is not covered in whole 
or in part by insurance and for which any third-party indemnification is not 
available.  There can be no assurance that the amount of product liability 
insurance that the Company carries at the time a product liability claim may 
be made will be sufficient to protect the Company.  A product liability claim 
in excess of the amount of insurance carried by the Company could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.  In addition, there can be no assurance that insurance 
coverages can be maintained in the future at an acceptable cost.

DEPENDENCE ON KEY PERSONNEL

     The continued success of the Company depends to a large degree upon the 
services of certain of its executive officers and upon the Company's ability 
to attract and retain qualified managerial and technical personnel 
experienced in the various operations of the Company's business.  Loss of the 
services of such employees, particularly David Lokken, President and Chief 
Executive Officer, Brian Aune, Vice President and Chief Financial Officer, 
Brian Carr, Managing Director of Sun Valley Operations, or Michael Riley, 
Vice President-Hydromechanical Business Unit, could adversely affect the 
operations of the Company.  The Company has entered into an employment 
agreement expiring October 31, 2001 with Mr. Lokken and into employment 
agreements expiring October 31, 1999 with Messrs. Aune, Carr and Riley.  The 
Company has obtained key person insurance on the life of Mr. Lokken in the 
amount of $1,000,000. There can be no assurance that the proceeds of such 
insurance will be sufficient to compensate the Company in the event that Mr. 
Lokken dies. Competition for qualified technical personnel is intense and 
from time to time, the Company has experienced difficulty in attracting and 
retaining personnel skilled in its repair and overhaul 


                                     17.



operations.  There can be no assurance that these individuals will continue 
employment with the Company.  The loss of certain key personnel could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.  See "Business--Employees and Employee Training" and 
"Directors and Executive Officers of the Registrant."

CURRENT DEPENDENCE ON PRIMARY FACILITIES; RISK ASSOCIATED WITH FACILITIES 
REORGANIZATION

     The Company's ability to manufacture repair parts and components and to 
perform its repair and overhaul operations depends upon the use of the 
Company's machinery and equipment at its Sun Valley, California, facility. 
Accordingly, any material disruption in the operations of its Sun Valley, 
California facility would have a material adverse effect on the Company's 
business, financial condition and results of operations.  Such interruption 
or disruption could occur due to malfunctions in machinery or equipment, or 
to natural disasters, such as earthquakes or fires.

     The Company is in the process of expanding its plating operations at its 
Sun Valley facilities, which is not expected to be completed until the end of 
1998.  Any failure or delay in the expansion of its plating operations as 
currently planned, however, could significantly impair the Company's ability 
to manage its rapid growth and could have a material adverse affect on the 
Company's business, financial condition and results of operations.  See 
"Management's Discussion and Analysis of Financial Conditions and Results of 
Operations--Liquidity and Capital Resources" and "Properties."

CONTROL BY EXISTING SHAREHOLDERS AND ANTI-TAKEOVER PROVISIONS

     As of March 12, 1998, the five shareholders (the "Unique Shareholders") 
of Unique Investment Corporation ("Unique") beneficially owned in the 
aggregate approximately 40.4% of the Company's outstanding Common Stock, and 
by virtue of such ownership, have effective control over all matters 
requiring a vote of shareholders, including the election of a majority of 
directors.  The ownership positions of the existing shareholders, together 
with the authorization of blank check preferred stock and the implementation, 
if certain conditions are met, of a staggered board and elimination of 
cumulative voting in the Company's Amended and Restated Articles of 
Incorporation and Amended and Restated Bylaws, may have the effect of 
delaying, deferring or preventing a change in control of the Company, may 
discourage bids for the Company's Common Stock at a premium over the market 
price of the Common Stock and may adversely affect the market price of the 
Common Stock.  See "Security Ownership of Certain Beneficial Owners and 
Management."

STOCK PRICE VOLATILITY

     In recent years, the stock market has experienced significant price and 
volume fluctuations.  These fluctuations, which are often unrelated to the 
operating performances of specific companies, have had a substantial effect 
on the market price of stocks, particularly for many small capitalization 
companies.  Accordingly, the factors described in this Risk Factors section 
or market conditions in general may cause the market price of the Company's 
Common Stock to fluctuate, perhaps substantially.

ITEM 2.   PROPERTIES

     The Company's principal executive offices and production facilities are 
located in Sun Valley, California.  The Company occupies the premises, 
comprising approximately 193,000 square feet and nine buildings pursuant to 
various long-term leases that expire on dates ranging between 2004 and 2010 
and require the Company to make monthly rent payments ranging from $4,727 to 
$38,200.

     The Company also leases a facility comprising approximately 8,000 square 
feet near Amsterdam, Netherlands from which it performs, hydraulic repairs on 
rotor and fixed wing aircraft.  The lease expires 


                                     18.



in 1998 after which the Company plans to move to new and larger facilities.  
The Company believes that a facility will be available on terms acceptable to 
the Company.

     The Company believes that its facilities satisfy its current needs.  As 
part of its internal growth strategy, however, the Company in early 1998 
reorganized and reconfigured its Sun Valley, California location to meet its 
growth needs and increase the efficiency of its operations.  Beginning in 
1998, the Company also plans to expand its plating operations at its Sun 
Valley facility.  In addition, the Company is currently looking for a 
facility in the United Kingdom to house its new United Kingdom operations.  
Any failure or delay in completing the expansion of plating operations as 
currently planned, or locating and organizing a facility in the United 
Kingdom, however, could significantly impair the Company's ability to manage 
its growth and could have a material adverse affect on the Company's 
business, financial condition and results of operations.  See "--Risk 
Factors--Risk Associated With Facilities Reorganization" and "Management's 
Discussion and Analysis of Financial Conditions and Results of 
Operations--Liquidity and Capital Resources."

ITEM 3.   LEGAL PROCEEDINGS

     In August 1997 and January 1998, two separate lawsuits were filed by 
various individuals against Lockheed Martin Corporation and various other 
parties, including the Company, in the Los Angeles Superior Court pleading 
various causes of action in connection with certain alleged injuries caused 
by toxic and carcinogenic chemicals allegedly released by the defendants in 
the Burbank and Glendale area of Los Angeles County, California.  The 
individual plaintiffs seek unspecified compensatory and punitive damages.  
The Company does not believe that it caused the release of toxic and 
carcinogenic chemicals alleged in the complaints and believes that it shall 
be entitled to indemnification from BTR in the event the Company is held 
responsible for any damages in connection therewith.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the fourth quarter of the fiscal year ended December 31, 1997, 
the shareholders of the Company approved the following matters: (i) the 
implementation of the Company's 1997 Stock Option Plan; (ii) the grant of 
Management Stock Options to the Company's executive officers; (iii) the 
adoption of the Company's Amended and Restated Bylaws; (iv) the conversion of 
Melanie L. Bastian's shares of Series A Preferred Stock into shares of Common 
Stock; and (v) the adoption of the Amended and Restated Articles of 
Incorporation of the Company which, among other things, provided for the 
change in the Company's name, increased the number of authorized shares of 
the Company's common and preferred stock and effectuated a 579.481618 for one 
stock split of the outstanding Common Stock.  Each of these matters was 
approved by all of the Company's shareholders by unanimous written consent.   


                                     19.



                          PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "HPAC."  The high and low bid prices as reported by The Nasdaq Stock
Market during the period from January 29, 1998, the date public trading of the
Company's Common Stock commenced, to March 12, 1998 were $11.125 and $8.00,
respectively.  Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.  Before January 29, 1998, there was no
established public trading market for the Company's Common Stock.

     As of March 12, 1998, there were 15 holders of record of the Company's
Common Stock, which management believes held beneficially for over 400 holders.

     The Company has not paid cash dividends on its Common Stock since its 
inception and has no current plans to pay dividends on its Common Stock in 
the foreseeable future.  The Company intends to reinvest future earnings, if 
any, in the development and expansion of its business.  The Company's current 
bank credit facility prohibits the payment of dividends.  Any future 
determination to pay dividends will depend upon the Company's combined 
results of operations, financial condition and capital requirements and such 
other factors deemed relevant by the Company's Board of Directors.

RECENT SALES OF UNREGISTERED SECURITIES

     The following is a table of recent option grants and sales of unregistered
securities:




EFFECTIVE DATE
OF ISSUANCE          ISSUED TO                    NUMBER AND TYPE OF SECURITY   CONSIDERATION
- - --------------       ---------                    ---------------------------   -------------
                                                                       
November 1997        Four executive officers      Options to Purchase 115,365   Services Rendered
                                                  shares at $8 

February 1998        A principal shareholder      250,000 shares of             Conversion of 400 shares          
                                                  Common Stock                  of Series A Preferred Stock       
                                                                                issued in connection with         
                                                                                the BTR Transaction, for          
                                                                                which Ms. Bastian paid $2,000,000 

November 1997        Employee Stock Options       Options to purchase           Services rendered
                     to employees, including      259,572 shares at $8 
                     four executive officers     

September 30, 1997   A principal shareholder      49,948 shares of              $500,000
                                                  Common Stock 

October 10, 1997     A principal shareholder      51,671 shares of              $500,000
                                                  Common Stock


     The Company believes that the issuances of securities pursuant to the
foregoing transactions were exempt from registration under the Securities Act
of 1933, as amended, by virtue of Section 4(2) thereof as transactions not
involving public offerings.  No underwriters were engaged in connection with
any of the foregoing offers or sales of securities and no commissions were paid
in connection with such sales.


                                     20.



USE OF PROCEEDS

     On January 29, 1998, the Company commenced the initial public offering 
of 2,766,667 shares of its Common Stock, pursuant to the Company's 
Registration Statement on Form S-1, as amended (the "Registration Statement") 
(Registration No. 333-40295), which was declared effective under the 
Securities Act of 1933, as amended, by the Securities and Exchange Commission 
on January 29, 1998.  The underwriters of the Offering were represented by 
EVEREN Securities, Inc. and The Seidler Companies Incorporated, acting as 
managing underwriters.  All 2,600,000 shares of Common Stock registered under 
the Registration Statement for the account of the Company (consisting of an 
aggregate offering price of $20,800,000) and all 166,667 shares registered 
for the account of the selling shareholder (consisting of an aggregate 
offering price of $1,333,336) were sold in the Offering.  In addition, on 
February 24, 1998 the underwriters exercised their option to purchase 415,000 
additional shares of Common Stock to cover over-allotments in connection with 
the Offering.  All of the 415,000 shares of Common Stock sold pursuant to the 
over-allotment option were registered for the account of the selling 
shareholder of the Company (consisting of an aggregate offering price of 
$3,320,000).  The Offering has terminated.

     The Company incurred the following expenses in connection with the 
Offering (excluding expenses incurred by the selling shareholder):




Category of Expense                            Amount of Expense
- - -------------------                            -----------------
                                            
Underwriting discounts
  and commissions                                     $1,456,000
Finders' fees                                                -0-
Expenses paid to or for
  underwriters                                           221,000
Other expenses                                         1,323,000
                                                      ----------
     Total expenses                                   $3,000,000
                                                      ----------
                                                      ----------


None of the expenses incurred by the Company in connection with the Offering 
was paid to directors, officers, ten percent shareholders or affiliates of 
the Company.

     Of the total net proceeds in the amount of approximately $17.8 million 
received by the Company from its sale of 2,600,000 shares of Common Stock in 
the Offering, the following amounts were used from the date of the Offering 
through March 12, 1998:




Category of Use                                    Amount of Use
- - ---------------                                    -------------
                                                
Acquisition of other businesses                    $9.2 million
Repayment of Indebtedness                          $7.6 million
Working capital                                    $1.0 million



None of the net proceeds to the Company of the Offering was paid to 
directors, officers, ten percent shareholders or affiliates of the Company. 
Other than the use of $9.2 million and $7.6 million of the net proceeds from 
the Offering for the BA Acquisition and the repayment of indebtedness, 
respectively, instead of $11 million and $6 million as described in the 
Registration Statement, the foregoing use of proceeds does not represent a 
material change from the use of proceeds as described in the Registration 
Statement. 

                                     21.



ITEM 6.   SELECTED FINANCIAL DATA

     The following table sets forth for the periods and the dates indicated 
certain financial data which should be read in conjunction with "Management's 
Discussion and Analysis of Financial Condition and Results of Operations" and 
the financial statements and notes thereto included elsewhere herein.  For 
the years ended December 31, 1993, 1994, 1995 and the ten months ended 
October 31, 1996 the Company was a wholly owned subsidiary of BTR Dunlop 
Holdings, Inc. and is presented below as the "Predecessor" financial data.  
Effective November 1, 1996, the Company was acquired by the Unique 
Shareholders and the Company's executive officers.  All financial data 
subsequent to October 31, 1996 is presented below as the "Successor" 
financial data.

     The balance sheet data as of December 31, 1995, 1996 and 1997 and the 
statement of operations data for the fiscal year ended December 31, 1995, the 
ten months ended October 31, 1996, two months ended December 31, 1996 and 
year ended December 31, 1997 are derived from the financial statements of the 
Company which have been audited by Ernest & Young LLP, independent 
accountants, and are included elsewhere herein.  The balance sheet data as of 
December 31, 1993 and 1994 and the statement of operations for the year ended 
December 31, 1993 and 1994 are derived from unaudited financial statements, 
which are not presented elsewhere herein.  The pro forma statements of 
operations data for the year ended December 31, 1996 are derived from the 
unaudited pro forma statement of operations included elsewhere herein.  The 
unaudited financial statements have been prepared by the Company on a basis 
consistent with the Company's audited financial statements and, in the 
opinion of management, include all adjustments, consisting only of normal 
recurring accruals, necessary for a fair presentation of the Company's 
results of operations for the period.




                                                          Predecessor(1)                                 Successor(1)
                                          ------------------------------------------------ ---------------------------------------
                                                                               Ten Months   Two Months   
                                               Year Ended December 31,          Ended         Ended       Year Ended December 31,
                                          ----------------------------------   October 31,  December 31, -------------------------
                                          1993(2)       1994(2)      1995(3)     1996(4)       1996         1996           1997
                                          -------      --------     --------   ----------- ------------- ----------    -----------
                                                                                                      (Pro forma)(4)(5) 
                                                                                                  
STATEMENTS OF OPERATION DATA:                                     (In thousands, except share and per share data)
  Revenues..............................  $29,757      $31,743      $35,012     $32,299    $    6,705    $   39,004     $   40,042 
  Cost of revenues......................   25,055       24,825       28,993      27,027         4,599        31,799         31,430 
                                          -------      --------     --------   ----------- ------------- ----------    -----------
  Gross profit..........................    4,702        6,918        6,019       5,272         2,106         7,205          9,612 
  Selling, general and                                                                                                             
   administrative(6)....................    3,861        5,332        4,837       5,044         1,059         6,161          5,897 
  Restructuring charges(4)..............      -            -            -         1,196           -           1,196            -   
                                          -------      --------     --------   ----------- ------------- ----------    -----------
  Income (loss) from operations.........      842        1,586        1,182        (968)        1,047          (152)         3,715 
  Interest expense, net.................   (1,033)        (507)      (1,598)     (1,609)         (196)       (2,305)        (2,428)
  Miscellaneous (net)...................      -            -            -           -             -             -              (32)
                                          -------      --------     --------   ----------- ------------- ----------    -----------
                                             (192)       1,079         (416)     (2,577)          851        (2,457)         1,255 
  Income tax expense (benefit)(7).......      (24)          29         (680)       (971)          382          (934)           467 
                                          -------      --------     --------   ----------- ------------- ----------    -----------
  Net income (loss).....................  $   168      $ 1,050       $  264     $(1,606)   $      469    $   (1,523)    $      788 
                                          -------      --------     --------   ----------- ------------- ----------    -----------
                                          -------      --------     --------   ----------- ------------- ----------    -----------
  Pro forma net income (loss) per                                                                                                  
   share................................                                                         0.15    $    (0.48)    $     0.25 
                                                                                           ------------- ----------    -----------
                                                                                           ------------- ----------    -----------
  Weighted average shares outstanding...                                                    3,170,551     3,170,551      3,145,079 



                                                   Predecessor (1)                                                 Successor (1)
                                          ---------------------------------                                  ---------------------
                                                     December 31,                                                   December 31
                                          ---------------------------------                                  ---------------------
                                            1993         1994         1995                                    1996           1997 
                                          -------       ------      -------                                  ------         ------
                                                                                                             
BALANCE SHEET DATA:                                                                                                          
  Working capital.......................    4,070        9,966      $13,289                                   7,225          3,744 
  Total assets..........................   22,802       25,865       35,455                                  35,178         40,898 
  Total long-term debt (excluding                                                                                            
   current portion......................   13,754       21,404       27,310                                  19,150         17,700 
  Total shareholders' equity............      266       (1,182)        (917)                                  2,509          4,297 



                                     22.



- - ----------------------
(1)  Predecessor information represents the historical financial data of the
     Company when it was owned by BTR.  Successor information represents the
     historical financial data after the BTR Transaction.  See "Certain
     Transactions -- Acquisition of the Company from BTR" and Note 1 of Notes
     to Financial Statements.
(2)  Effective January 1, 1994 certain assets, liabilities and operations of
     Dunlop Aviation were merged into the Company.  The merger was treated
     similarly to a pooling of interest for accounting purposes and,
     accordingly, the financial data as of and for the year ended December 31,
     1993 includes those assets, liabilities and operations as if the merger
     occurred on January 1, 1993.  Included in selling, general and
     administrative expenses for the year ended December 31, 1994 are
     approximately $501,000 of merger related expenses.
(3)  Fiscal 1995 includes a non-recurring charge to cost of revenues of
     $927,000 for disposal of inventory related to the Dunlop Merger which had
     operations in Chatsworth, CA and Miami, FL.  Fiscal 1995 also includes a
     net gain of approximately $300,000 included in selling, general and
     administrative expenses, which represents an operating expense of $700,000
     offset by an insurance reimbursement of $1,000,000 related to the EPA
     Claim for which the Company has been fully indemnified by BTR.  The
     estimated total net cost of the EPA Claim recorded in fiscal 1995 was
     based on the information available at that time.  See "Business --
     Environmental Matters and Proceedings" and Notes 1 and 6 of Notes to
     Financial Statements.
(4)  Restructuring charges during the ten months ended October 31, 1996 relate
     to costs incurred to shut down discontinued operations of Dunlop Miami.
     See Note 10 of Notes to Financial Statements.  In addition, the ten months
     ended October 31, 1996 and the pro forma year ended December 31, 1996
     include a non-recurring charge of $489,000 to cost of revenues for the
     disposal of inventory related to the shutdown of Dunlop Miami and a non-
     recurring charge to cost of revenues of $574,000 for non-productive
     inventory of the Company.
(5)  The pro forma presentation gives effect to the BTR Transaction as though
     it had occurred on January 1, 1996.
(6)  Included in selling, general and administrative expenses for the ten
     months ended October 31, 1996 and the pro forma year ended December 31,
     1996 are expenditures related to the EPA Claim of approximately $947,000.
     For the years ended December 31, 1993 and 1994 selling, general and
     administrative expenses included $122,000 and $410,000, respectively, for
     expenditures related to the EPA Claim.  No such costs were incurred during
     the two months ended December 31, 1996 or the year ended December 31,
     1997.  See "Management's Discussion and Analysis of Financial Condition
     and Results of Operations -- Results of Operations."
(7)  Income tax expenses for the two months ended December 31, 1996 and the
     year ended December 31, 1997 include provisions of $382,000 and $467,000,
     respectively, primarily due to changes in deferred tax assets.  No tax is
     actually payable for such provisions.  See Note 4 of Notes to Financial
     Statements.




                                     23.



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATION

    THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S 
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO AND THE OTHER FINANCIAL 
INFORMATION INCLUDED ELSEWHERE IN THIS ANNUAL REPORT.  WHEN USED IN THE 
FOLLOWING DISCUSSIONS, THE WORDS "BELIEVES", "ANTICIPATES", "INTENDS", 
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING 
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, 
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED, 
INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "BUSINESS--RISK FACTORS." 
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING 
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.

OVERVIEW

    CORPORATE HISTORY.  The Company commenced operations in August 1980 as a 
California "C" corporation to provide aircraft parts sales to the aviation 
industry and began providing repair and overhaul services in 1987.  In 1991, 
BTR, a United Kingdom company, acquired the Company, and in January 1994, BTR 
merged the Company with the operations of another wholly owned subsidiary of 
BTR, Dunlop Aviation, Inc., which had operations in Chatsworth, California 
and Miami, Florida.  The more profitable operations of Dunlop were absorbed 
into the Company's Sun Valley, California operation to achieve economies of 
scale and full service capability.  The Company closed Dunlop Chatsworth in 
February 1994 and, as a result, incurred significant integration expenses 
during that year.  The Company incurred inventory obsolescence costs during 
1995 and closed Dunlop Miami in 1996 and, as a result, incurred restructuring 
expenses and inventory valuation charges during 1996.  These charges 
adversely impacted financial results for 1994, 1995 and 1996.  In November 
1996, BTR sold the Company for $29.8 million to Aqhawk, Inc., an entity 
wholly-owned by the shareholders of Unique Investment Corporation and the 
Company's executive officers.

    RECENT EVENTS.  On February 3, 1998, the Company completed an initial 
public offering of 2,766,667 shares of Common Stock at an offering price of 
$8 per share.  The Company received net proceeds from the offering of $18.3 
million.  $9.2 million of this amount, together with proceeds from the 
Company's amended loan agreement with Bank of America National Trust and 
Savings Association, were used to acquire British Airways' landing gear 
operation in the United Kingdom for approximately $18.5 million.  This 
acquisition will be accounted for as a purchase of assets.  The balance of 
the net offering proceeds was used to pay down existing indebtedness and for 
working capital.  See "Liquidity and Capital Resources."

    EXPANSION INTO WIDE-BODY COMMERCIAL AIRCRAFT.  The Company's operating 
strategy has been to increase higher margin wide-body landing gear repair and 
overhaul services. In that regard, revenues for the years ended December 31, 
1997, December 31, 1996 (pro forma) and December 31, 1995 increased 20.2%, 
51.5% and 30.7%, respectively, over their respective prior years.  The 
increases resulted from the Company's $6.3 million capital investment program 
in 1994 and 1995 to expand landing gear repair capabilities for wide-body 
aircraft, such as the Boeing 747, 757, 767, DC10, MD10 and MD11, and Airbus 
models A310 and A320.  These expenditures included expenses for facility 
improvements, purchase of machinery to handle larger landing gear and the 
purchase of rotable assets (i.e., landing gear shipsets exchanged with 
customers for an exchange fee).

    The Company's efforts to increase its wide-body business led to a number 
of key new contracts. On September 9, 1997, the Company signed a seven-year 
exclusive contract to provide wide-body landing gear repair and overhaul 
services to American Airlines, Inc. to service landing gear on all Boeing 757 
aircraft within its fleet. Performance under this new contract began in 
February 1998. In December 1997, the Company entered into an amendment to its 
existing contract with FedEx to extend the term of the contract to 2007.  
This amendment includes service of FedEx's fleet of Airbus A310 aircraft and 
FedEx's program to convert DC10 passenger aircraft to MD10 cargo carriers.


                                     24.



    In February 1998, in connection with the purchase of the British Airways 
landing gear operations, the Company entered into an exclusive seven-year 
service agreement to provide landing gear, flap track and flap carriage 
repair and overhaul services to substantially all of the aircraft operated by 
British Airways.

RESULTS OF OPERATIONS

    The following table sets forth certain statement of operations data for 
the periods indicated.



                                                          1995                  1996                    1997
                                                   ------------------    ------------------     -------------------
                                                      $           %         $           %          $            %
                                                   -------     ------    -------     ------     -------      ------
                                                                       (Dollars in thousands)
                                                                                           

Revenues                                           $35,012     100.0%    $39,004     100.0%     $41,042      100.0% 
Cost of revenues                                    28,993      82.8%     31,799      81.5%      31,430       76.6% 
                                                   -------     ------    -------     ------     -------      ------
Gross profit                                         6,019      17.2%      7,205      18.5%       9,612       23.4% 
                                                                                                                    
Selling general and administrative expenses          4,837      13.8%      6,161      15.8%       5,897       14.4% 
Restructuring charges related to closure of                                                                         
 Dunlop Miami operations                               -         -         1,196       3.1%         -          -    
                                                   -------     ------    -------     ------     -------      ------

Operating income (loss)                              1,182       3.4%       (152)     -0.4%       3,715        9.0% 
                                                                                                                    
Interest expense, net                               (1,598)     -4.6%     (2,305)     -5.9%      (2,428)      -5.8% 
Other expense, net                                     -         -           -         -            (32)      -0.1% 
                                                   -------     ------    -------     ------     -------      ------
                                                                                                                    
Income (loss) before income taxes                     (416)     -1.2%     (2,457)     -6.3%       1,255        3.1% 
Income tax expense (benefit)                          (680)     -1.9%       (934)     -2.4%         467        1.1% 
                                                   -------     ------    -------     ------     -------      ------
                                                                                                                    
Net income (loss)                                   $  264       0.7%    $(1,523)     -3.9%     $   788        2.0% 
                                                   -------     ------    -------     ------     -------      ------
                                                   -------     ------    -------     ------     -------      ------



YEAR ENDED DECEMBER 31, 1997 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31, 
1996

    REVENUES.  Revenues for the year ended December 31, 1997 increased 
$2,038,000 or 5.2% to $41,042,000 from $39,004,000 for the year ended 
December 31, 1996.  The increase was a result of a 20.2% increase in landing 
gear repair and overhaul services offset by reductions resulting from the 
Company's closure of the Dunlop Miami operations and rationalization of 
unprofitable product lines.  Landing gear repair and overhaul revenues 
increased to $18,927,000 and accounted for 46.1% of total revenues for 1997, 
as compared to $15,745,000 or 40.4% of total revenues for 1996. The increase 
in landing gear repair and overhaul revenues was attributable to increases in 
business from FedEx's MD10 freighter conversion program and new wide-body 
repair and overhaul business from British Airways and American Airlines.

    Fixed wing aircraft and helicopter repair and overhaul declined 0.9% to 
$13,195,000 or 32.1% of total revenues for 1997 from $13,310,000 or 34.1% of 
total revenues for 1996. This decline was attributable to a reduction in 
helicopter repair and overhaul business from the USCG, in part due to the 
modifications performed by the Company in 1996 and 1997 to extend the time 
between overhauls for the USCG fleet of Dauphin II helicopters. Wheels, 
brakes and braking system component repair and overhaul increased 9.8% to 
$5,393,000 or 13.1% of total revenues for 1997 from $4,913,000 or 12.6% of 
total revenues for 1996.

    For the year ended December 31, 1997, repair and overhaul services 
accounted for 92.5% of total revenues, as compared to 90.2% for 1996. 
Revenues from spare parts distribution and sales accounted for 7.5% of total 
revenues for 1997, as compared to 8.6% for 1996.  This decline was a result 
of the Company's decision to close the Dunlop Miami operations and 
discontinue the low margin Dunlop aircraft tire distribution business, which 
contributed to improvements in operating profits.

                                     25.



    GROSS PROFIT.  Gross profit for the year ended December 31, 1997 
increased 33.4% to $9,612,000 from $7,205,000 for 1996.  Gross profit as a 
percent of revenues increased to 23.4% for the year ended December 31, 1997 
compared to 18.5% for 1996.  This increase was primarily due to (i) improved 
throughput and economies of scale achieved from increased revenues in 
wide-body landing gear repair and overhaul services, (ii) development of the 
Company's higher margin fixed wing aircraft and helicopter hydromechanics 
products and (iii) discontinuing the unprofitable Dunlop Miami operations, 
which adversely impacted gross profit in 1996 as a result of charges to cost 
of revenues for non-productive inventory.

    Gross profit for the year ended December 31, 1996 included a nonrecurring 
charge of $489,000 to dispose of certain obsolete and non-productive 
inventory related to closing Dunlop Miami and a charge of $574,000 primarily 
related to other non-productive inventory at the Company's Sun Valley 
operations, including inventory related to Dunlop Aviation.  Excluding these 
charges, gross profit would have been $8,268,000 or 21.2% of revenues for the 
year ended December 31, 1996.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and 
administrative expenses for the year ended December 31, 1997 decreased 
$264,000 or 4.3% to $5,897,000 from $6,161,000 for the year ended December 
31, 1996.  Selling, general and administrative expense decreased as a percent 
of revenues to 14.4% from 15.8% for the prior year.  This decrease was due to 
$947,000 of costs related to the EPA Claim in 1996 that were not incurred in 
1997.  BTR indemnified the Company for costs incurred in connection with the 
EPA Claim.  This decrease was offset by additional costs incurred in 1997 
resulting from (i) the Company's efforts to expand its international market 
presence through sales representatives located in Europe, the Middle East and 
China, (ii) management fees paid to Unique Investment Corporation and (iii) 
expenses incurred in connection with developing the Company's relationship 
with British Airways.  Excluding the $947,000 charge, selling, general and 
administrative expenses would have been $5,214,000 or 13.4% of revenues for 
the year ended December 31, 1996.

    OPERATING INCOME.  Operating income for the year ended December 31, 1997 
increased $3,867,000 to $3,715,000 or 9.1% of total revenues compared to an 
operating loss of $152,000 for 1996.  Operating income for the year ended 
December 31, 1996 was negatively impacted by nonrecurring restructuring 
charges of $1,196,000 and charges to cost of revenues of $1,063,000 related 
to the closure of the Dunlop Miami and $947,000 in costs related to the EPA 
claim. Excluding these charges, pro forma operating income for the year ended 
December 31, 1996 would have been $3,054,000 or 7.8% of revenues.

    INCOME TAXES.  Income taxes for the year ended December 31, 1997 were 
$467,000 compared to an income tax benefit of $934,000 for the year ended 
December 31, 1996.  The effective tax rate for the year ended December 31, 
1997 was 37.2% compared to 38.0% for 1996.  The effective tax rate for 
the periods differs from the federal statutory rate of 34.0% due to certain 
nondeductible expenses.  At December 31, 1997, the Company had net operating 
loss carryforwards of $7,892,000.  The utilization of these operating loss 
carryforwards is limited due to changes in the Company's ownership in 
November 1996.  At December 31, 1997, the Company had a valuation reserve of 
$659,000 for the deferred tax assets.  To the extent the Company generates 
sufficient income, the Company anticipates that this reserve will be reversed 
in 1998 as a reduction to the tax expense, thereby reducing the effective tax 
rate in 1998.

    NET INCOME. As a result of the factors described above, net income for 
the year ended December 31, 1997 of $788,000 represents an increase of 
$2,311,000 from the net loss of $1,523,000 for the year ended December 31, 
1996.

PRO FORMA YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 
1995

    REVENUES.  Revenues for the year ended December 31, 1996 increased 11.4% 
to $39,004,000 from $35,012,000 for 1995.  Repair and overhaul service 
revenues for 1996 accounted 


                                     26.



for 90.2% of revenues, as compared to 84.0% of revenues for 1995.  Revenues 
for spare parts distribution and sales accounted for 8.6% of total revenues 
for 1996, as compared to 13.8% for 1995. The increase in repair revenue as a 
percentage of total revenue was a result of the Company's decision to 
discontinue the low margin Dunlop Miami aircraft tire spare parts 
distribution business in May 1996.

    Revenues from landing gear repair and overhaul increased 51.5% to 
$15,745,000 or 40.4% of total revenues in 1996, compared to $10,394,000 or 
29.7% of total revenues for 1995.  This increase in revenues for landing gear 
repair and overhaul was attributable to increased volume from the Company's 
largest customer, FedEx, and to new wide-body repair and overhaul business 
from other customers including US Airways, Inc., Air Canada, Trans World 
Airlines and American Airlines.

    Fixed wing aircraft and helicopter hydromechanics repair and overhaul 
increased 12.7% to $13,310,000 or 34.1% of total revenues for 1996, as 
compared to $11,811,000 or 33.7% of 1995 revenues. This increase in revenues 
was attributable to increases in helicopter repair and overhaul business from 
the U.S. Coast Guard for 1996. The Dunlop Miami operation, which operated at 
a loss was closed in May 1996 and contributed $2,048,000 or 5.3% of total 
revenues for 1996 compared to $7,404,000 or 21.1% of revenues for 1995.

    GROSS PROFIT.  Gross profit for 1996 increased 19.7% to $7,205,000 for 
1996 from $6,019,000 for 1995.  Gross profit increased as a percent of 
revenues to 18.5% for 1996 compared to 17.2% for 1995.  This increase was 
primarily due to (i) a 51.5% increase in revenues from landing gear repair 
and overhaul services, (ii) further development of higher margin fixed wing 
aircraft and helicopter hydromechanics products and (iii) discontinuing the 
unprofitable Dunlop Miami operations.

    Gross profit for 1996 included a nonrecurring charge of $489,000 to 
dispose of certain obsolete and non-productive inventory related to closing 
the Dunlop Miami operations and a charge of $574,000 primarily related to 
other obsolete and non-productive inventory related to Dunlop Aviation at the 
Company's Sun Valley operations. Excluding these charges, gross profit would 
have been $8,268,000 or 21.2% of revenue for 1996.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and 
administrative expenses for 1996 increased $1,324,000 or 27.4% to $6,161,000 
from $4,837,000 for 1995. This was a result of the Company's efforts to 
expand its international market presence through overseas representatives in 
Europe, the Middle East and China.  In addition, 1996 included $947,000 of 
costs related to the EPA Claim, and 1995 included a net gain of approximately 
$300,000 due to an insurance reimbursement of $1,000,000 for legal defense 
costs related to the EPA Claim, for which the Company has been fully 
indemnified by BTR.  Selling, general and administrative expense increased as 
a percent of revenues to 15.8% for 1996 from 13.8% for 1995 as a result of 
the above items offset by increased revenues in 1996 over 1995.

    OPERATING INCOME.  Operating income for 1996 declined $1,334,000 to a 
loss of $152,000 or 0.4% of revenues, as compared to an operating income of 
$1,182,000 for 1995.  Operating income for 1996 was negatively impacted by 
nonrecurring restructuring charges of $1,196,000 and charges to cost of 
revenues of $1,063,000 related to closing the Dunlop Miami operation and 
$947,000 in costs related to the EPA Claim. Excluding these charges, pro 
forma operating income for 1996 would have been $3,054,000 or 7.8% of 
revenues.

    NET INTEREST EXPENSES. Net interest expense for 1996 increased by 44.2% 
to $2,305,000 from $1,598,000 for 1995.  Interest expense for 1996 has been 
adjusted, on a pro forma basis, to give effect to the BTR Transaction as if 
it happened on January 1, 1996.  As a result of this pro forma adjustment, 
interest expense was increased to give effect to the Company's existing 
credit facilities, which are at higher interest rates than charged by BTR for 
inter-company advances.  Interest income was not significant in either period.


                                     27.



    INCOME TAXES. The income tax benefit for 1996 was $934,000 compared to an 
income tax benefit of $680,000 for 1995.  The effective tax rate for 1996 was 
38.0% compared to 163.5% for 1995.  The effective tax rate for 1995 includes 
a benefit of $525,000 from the reduction of a deferred tax valuation 
allowance that was no longer required since the Company was part of a 
consolidated group, and the deferred tax assets became recoverable.

    NET INCOME. As a result of the factors described above, the net loss for 
1996 of $1,523,000 represented a decrease of $1,787,000 from net income of 
$264,000 for 1995.

LIQUIDITY AND CAPITAL RESOURCES

    Since the BTR Transaction, the Company's working capital and funds for 
capital expenditures have been provided by cash generated from operations, 
borrowings under the Company's working capital credit facilities and cash 
received from the sale of Common Stock.  In November 1996, the Company 
entered into a loan agreement with Bank of America National Trust and Savings 
Association ("Bank of America") for a $10.0 million revolving line of credit, 
a $13.5 million term loan and a $3.0 million capital expenditures facility.  
A portion of the credit facility and the entire term loan were used to 
finance partially the acquisition of the Company from BTR. At the Company's 
election, each of the facilities under the agreement bears interest at a 
fixed bank reference rate or variable rate above IBOR. As of December 31, 
1997, $8.5 million was outstanding under the revolving credit facility, and 
$12.7 million was outstanding under the term loan.

    On January 23, 1998, the Company and Bank of America entered into the 
Amended and Restated Business Loan Agreement (the "Amended Loan Agreement"), 
which agreement increased the maximum amount of credit available to the 
Company from $26.5 million to $45.5 million.  The credit facilities of the 
Amended Loan Agreement became available upon the completion of the Company's 
initial public offering and consummation of the BA Acquisition.  The Company 
used approximately $9.2 million of the proceeds available under the Amended 
Loan Agreement to fund a portion of the purchase price of the BA Assets.  The 
Amended Loan Agreement provides the Company with a $15.0 million revolving 
line of credit, a $24.5 million term loan, and a $6.0 million capital 
expenditure facility.  The revolving line of credit matures in three years, 
and the term loan and capital expenditure facilities mature in seven years.  
The Amended Loan Agreement is secured by a lien on all of the assets of the 
Company, including the BA Assets.  At the Company's election, the rate of 
interest on each of the three facilities available under the Amended Loan 
Agreement is either Bank of America's reference rate or the inter-bank 
eurodollar rates on either, at the Company's option, the London market or the 
Cayman Islands market.

    In connection with the BA Acquisition, the Company and British Airways 
have agreed to enter into the exclusive seven-year Services Agreement, which 
the Company anticipates will result in substantial revenue from the repair 
and overhaul services and related spare parts sales to support the aircraft 
operated by British Airways. The Company also expects to incur additional 
operating and interest costs as a result of the BA Acquisition. Such 
increases in operating costs will include additional depreciation expense 
associated with the allocation of the purchase price to the assets acquired, 
additional rent expense associated with leasing facilities in the United 
Kingdom and additional salary and overhead costs associated with establishing 
operations to support British Airways utilizing the BA Assets. In addition, 
interest expense will increase due to the initial borrowing to fund the 
acquisition of the BA Assets and subsequent borrowings for working capital 
and to fund capital expenditures.

    Cash provided (used) by the Company for operating activities amounted to 
$(4,223,000), $(230,000) and $322,000 for the year ended December 31, 1995, 
the ten months ended October 31, 1996 and the year ended December 31, 1997, 
respectively. Cash used by the Company for investing activities amounted to 
$4,114,000, $1,199,000 and $3,464,000 for the year ended December 31, 1995, 
the ten months ended October 31, 1996 and the year ended December 31, 1997, 
respectively. These activities were for the purchase of machinery, leasehold 
improvements and landing gear rotable assets, net of proceeds received for 
disposal of equipment and rotable 

                                     28.



assets. In September 1997, the Company acquired $3.2 million in Boeing 757 
rotable assets and inventory from American Airlines in connection with the 
seven-year exclusive contract to support American Airlines' fleet.  A deposit 
of 10% of the $3.2 million was made to American Airlines in September 1997.  
The balance payable of $2.9 million was included in accounts payable and is 
due to American Airlines when work under the contract commences in February 
1998. The Company plans to pay this balance from additional borrowings under 
the Company's Amended Loan Agreement. The Company also plans to use $1.5 
million from funds provided under its Amended Loan Agreement to repay a 
portion of the $6.5 million subordinated debt owed to a principal shareholder 
of the Company.

    Cash provided by the Company for financing activities in 1995 primarily 
related to additional borrowings from the Company's parent, BTR, for 
investments in wide-body Boeing 747 and DC10 landing gear shipsets and 
working capital. Cash generated for financing activities in the two months 
ended December 31, 1996 primarily related to the borrowings under the current 
credit facilities and the issuance of preferred stock for $2.0 million to 
fund the acquisition of the Company from BTR.  Cash provided from financing 
activities for the year ended December 31, 1997 related to borrowings to fund 
leasehold improvements at a new facility, expenditures to increase landing 
gear repair and overhaul capacity and the acquisition of landing gear rotable 
assets.

    In April 1997, the Company entered into a 13-year lease for a 77,800 
square foot facility adjacent to its existing location in Sun Valley, 
California. Occupancy costs under the Company's existing facilities in Sun 
Valley and in the Netherlands amount to approximately $1.1 million per year.  
See Note 7 of Notes to Financial Statements.  The Company is seeking to lease 
a newly constructed facility in the United Kingdom in connection with the BA 
Acquisition, and has identified two possible construction sites.  The 
Services Agreement with British Airways permits the Company to occupy 
temporarily the premises in which the BA Assets are currently housed through 
December 31, 1999. Rent payments aggregating L1.8 million ($2.9 million at 
December 31, 1997) for the period from June 1, 1998 through June 30 1999, 
will be paid to British Airways on a monthly basis, whether or not the 
Company continues to occupy the premises during such period. Beginning July 
1, 1999, rental amounts will increase to L8,500 ($13,900 at December 31, 
1997) per day, which amount will be proportionately reduced as the Company 
returns space to British Airways. Assuming the Company can enter into a lease 
or begin construction of a new facility by April 1998, the Company believes 
it will be able to relocate a substantial portion of the facilities during 
the first half of 1999, but that plating operations as well as certain other 
areas will remain at the British airways location through at least the third 
quarter of 1999.  The Company has budgeted approximately $1.4 million in 
occupancy expenses for the remainder of 1998 following the BA Acquisition, 
although there can be no assurance that this estimate will not be exceeded.

    The Company anticipates making capital expenditures of approximately $3.2 
million during fiscal 1998 at its Sun Valley operations for plating shop 
expansion, rotable assets, landing gear handling equipment and leasehold 
improvements to expand the Company's repair and overhaul capacity.  This 
expansion is a continuation of the Company's 1997 facilities expansion, which 
included a significant increase in square footage primarily devoted to 
landing gear repair and overhaul in addition to expansion of its Constant 
Speed Drive and Integrated Drive Generator Shop. The majority of the 
expenditure in 1998 and 1999 will be to expand the electro-plating shop 
capacity at the Sun Valley operations. This expenditure will be financed from 
cash flow from operations and borrowings under new credit facilities.

    In connection with the BA Acquisition, the Company anticipates making 
capital expenditures of approximately $1.3 million in 1998 for the purchase 
of rotable assets and $3 million in 1999 to relocate the British Airways' 
landing gear operations to a new facility, which include expenditures for 
leasehold improvements, handling equipment and machinery and an 
electro-plating shop. Capital expenditures related to the new facility in the 
United Kingdom will be financed from cash flow from operations and borrowings 
under new credit facilities.  In connection with the BA Acquisition, the 
Company anticipates it will capitalize 


                                     29.



approximately $1.0 million of manufacturing expenses incurred at its new 
United Kingdom operations to overhaul and make serviceable the landing gear 
rotable assets it acquired from British Airways in 1998.

    The Company believes that funds generated from operations, the net 
proceeds of the Offering and available borrowings under new credit facilities 
will be sufficient to meet operating needs and other capital equipment 
requirements of the Company for the year ending December 31, 1998.

FOREIGN EXCHANGE

    To date, the Company's business has not been significantly affected by 
currency fluctuations. However, the Company conducts business in the 
Netherlands and will conduct business in the United Kingdom and thus 
fluctuations in currency exchange rate could cause the Company's products to 
become relatively more expensive in particular countries, leading to a 
reduction in revenues in that country.

    The Company makes substantial inventory purchases in French francs from 
such suppliers as Messier-Dowty, SAMM and Eurocopter France. During 1996 and 
1997, the United States dollar has strengthened against the French franc, 
creating a favorable exchange rate variance for the Company.  The Company's 
Netherlands facility's transactions are primarily United States dollar 
denominated for inventory purchases while revenues and operating expenses are 
partially in Dutch guilder. The Company's revenues are primarily denominated 
in United States dollars and to some extent in Dutch guilders, and the 
Company expects to make material sales in British pounds sterling following 
the BA Acquisition.

    The Company's payment of the purchase price for the BA Acquisition was 
denominated in pounds. To hedge against the fluctuation of pounds to dollars, 
the Company had entered into a transaction, which permitted it to purchase 
approximately $17 million of pounds at a rate of 1.6373 dollars per pound. 
The balance of the purchase price was not hedged, although the spot rate when 
the BA Acquisition was completed was similar to the forward hedge rate.  The 
Company will continue to evaluate hedging options in the future. Upon 
completion of the BA Acquisition, the Company may engage in additional 
foreign currency denominated sales or pay material amounts of expenses in 
foreign currencies that may generate gains and losses due to currency 
fluctuations.

QUARTERLY REVENUES FLUCTUATIONS

    The Company's operating results are affected by a number of factors, 
including the timing of orders for the repair and overhaul of landing gear 
and fulfillment of such contracts, the timing of expenditures to manufacture 
parts and purchase inventory in anticipation of future services and sales, 
parts shortages that delay work in progress, general economic conditions and 
other factors.  Although the Company has secured several long-term agreements 
to service multiple aircraft, the Company receives revenues under those 
agreements only when it actually performs a repair or overhaul. Because the 
average time between landing gear overhauls is seven years, the work orders 
that the Company receives and the number of repairs or overhauls that the 
Company performs in particular periods may vary significantly causing the 
Company's quarterly revenues and results of operations to fluctuate 
substantially. The Company is unable to predict the timing of the actual 
receipt of such orders and, as a result, significant variations between 
forecasts and actual orders will often occur.  Furthermore, the rescheduling 
of the shipment of any large orders, or portion thereof, or any production 
difficulties or delays by the Company, could impact the Company's quarterly 
operating results.

INFLATION

    Although the Company cannot accurately anticipate the effect of inflation 
on its operations, the Company does not believe that inflation has had, or is 
likely in the foreseeable future to have, a material effect on its results of 
operations or financial condition.


                                     30.



YEAR 2000

    The Company is currently working to resolve the potential impact of the 
year 2000 on the processing of date-sensitve information by the Company's 
computerized information systems. The year 2000 problem is the result of 
computer programs being written using two digits (rather than four) to define 
the applicable year. Any of the Company's programs that have time-sensitive 
software may recognize a date using "00" as the year 1900 rather than the 
year 2000, which could result in miscalculation or system failures. Based on 
preliminary information, costs of addressing potential problems are currently 
not expected to have a material adverse impact on the Company's financial 
position, results of operations or cash flows in future periods. However, if 
the Company, its customers or vendors are unable to resolve such processing 
issues in a timely manner, it could result in a material financial risk. 
Accordingly, the Company plans to devote the necessary resources to resolve 
all significant year 2000 issues in a timely manner.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Reference is made to Part IV, Item 14 of this Form 10-K for the 
information required by Item 8.

ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

    None. 



                                     31.



                                   PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

    The following sets forth certain information regarding the Company's
executive officers and directors:



 NAME                                        AGE                     POSITION
 ----                                        ---                     --------
                                                
 Scott W. Hartman...........................  34      Chairman of the Board(1)(2)(4)
 David L. Lokken............................  51      President, Chief Executive Officer and Director(2)(4)
 Brian S. Aune..............................  42      Vice President and Chief Financial Officer
 Brian S. Carr..............................  40      Managing Director of Sun Valley Operations
 Richard Adey...............................  39      Managing Director of United Kingdom Operations
 Michael A. Riley...........................  51      Vice President--Hydromechanical Business Unit
 Daniel J. Lubeck...........................  35      Secretary and Director(2)
 John G. Makoff.............................  34      Director
 Joel F. McIntyre...........................  59      Director(1)(3)
 Daniel C. Toomey, Jr.......................  34      Director(1)(3)
 Mellon C. Baird............................  67      Director(3)(4)



- - --------------------
(1)  Member of Compensation Committee
(2)  Member of Nominating Committee
(3)  Member of Audit Committee
(4)  Member of Executive Committee

     SCOTT W. HARTMAN became a director of the Company in December 1996 and 
became Chairman of the Board of the Company in March 1997.  Since March 1995, 
Mr. Hartman has served as Chief Operating Officer of Unique.  From December 
1993 until he joined Unique, Mr. Hartman served as Chief Executive Officer of 
Nucor World Industries, a private holding company.  From December 1991 until 
December 1993, Mr. Hartman served as a Vice President of Business Development 
for City National Bank, and from May 1983 until he joined City National Bank, 
he held various management positions with Emerson Electric Company.  Mr. 
Hartman earned a B.S. from Indiana University.

     DAVID L. LOKKEN joined the Company in May 1989 as Executive Vice 
President and Chief Operating Officer and has served as President and Chief 
Executive Officer of the Company since June 1993.  From November 1985 until 
he joined the Company, Mr. Lokken served a Vice President and General Manager 
of Cleveland Pneumatic's Product Service Division.  Mr. Lokken holds a B.S. 
in Electrical Engineering from North Dakota State University and an M.B.A. 
from Arizona State University.

     BRIAN S. AUNE joined the Company as Vice President of Finance and 
Administration in 1992 and has served as Vice President and Chief Financial 
Officer of the Company since August 1994.  Before joining the Company, Mr. 
Aune held various finance and management positions with Dunlop Aviation, BEI 
Motion Systems Electronics and Eastman Kodak.  Mr. Aune has a B.A. in 
Accounting from Eastern Washington University and an M.B.A. from the 
University of San Diego.

     BRIAN S. CARR became Managing Director of Sun Valley Operations in 
November 1997 after having served as Vice President-Landing Gear Business 
Unit since he joined the Company in January 1993.  From 1980 until he joined 
the Company, Mr. Carr held various engineering, technical sales and 
management 


                                     32.



positions with Cleveland Pneumatic's Product Service Division and Dowty 
Aerospace.  Mr. Carr holds a B.S. in Aerospace Engineering Technology from 
Kent State University.

     RICHARD ADEY became the Company's Managing Director of United Kingdom 
Operations following the BA Acquisition.  Since March 1996, Mr. Adey has been 
a Senior Manager for British Airways Engineering, in charge of overhauling 
landing gear, flap tracks and flap carriages on British Airways' aircraft. 
From 1994 until he joined British Airways Engineering, Mr. Adey served as 
Operations Director for Woodhead Manufacturing Ltd.  From 1984 through 1993, 
Mr. Adey served as a Senior Consultant with Coopers & Lybrand, specializing 
in operations management and process improvement within commercial 
organizations. Mr. Adey holds a BSc in Production Engineering and Engineering 
Management from the University of Nottingham and an MSc in Manufacturing 
Technology and Business Management from Cranfield Institute.

     MICHAEL A. RILEY joined the Company's predecessor as Vice President of 
Marketing in October 1989 and has served as Vice President-Hydromechanical 
Business Unit since January 1994.  From 1982 until he joined the Company, Mr. 
Riley held various positions in the aerospace/aircraft industry with Abex 
Aerospace and Dunlop Aviation.  Mr. Riley served as a helicopter pilot in the 
United States Navy and received a B.S. in Engineering from the United States 
Naval Academy, Annapolis, Maryland.

     DANIEL J. LUBECK joined the Company as Secretary and a director in 
December 1996.  Since July 1996, Mr. Lubeck has served as President of 
Unique. From March 1993 until he joined Unique, Mr. Lubeck was an attorney 
with McIntyre, Borgess & Burns, a multi-service law firm, after having worked 
as an attorney with Paul, Hastings, Janofsky & Walker from 1987 until 1992 
and with Manatt, Phelps & Philips, LLP from 1992 until 1993.  Mr. Lubeck 
earned a J.D. from University of Southern California and holds a B.A. from 
University of California San Diego.

     JOHN G. MAKOFF became a director of the Company in December 1996. Mr. 
Makoff founded Unique in June 1993 and currently serves as its Chief 
Executive Officer.  From June 1991 until he founded Unique, Mr. Makoff served 
as Manager for Computerland of Pasadena, Inc., a computer reseller.  Mr. 
Makoff holds a B.A. from Lewis & Clark University.

     JOEL F. MCINTYRE became a director of the Company in February 1998.  
From 1963 through 1993, Mr. McIntyre was an attorney with the law firm of 
Paul, Hastings, Janofsky and Walker.  In 1993, Mr. McIntyre founded the law 
firm of McIntyre, Borges & Burns LLP and currently serves as its Managing 
Partner.  Mr. McIntyre currently serves on the Board of Directors of 
International Aluminum Corporation, a publicly-held company.  Mr. McIntyre 
received a B.A. from Stanford University in 1960 and J.D. from University of 
California, Los Angeles in 1963.

     DANIEL C. TOOMEY, JR. became a director of the Company in February 1998. 
Since January 1998, Mr. Toomey has served as the President and Chief 
Executive Officer of Nomadix, LLC.  Mr. Toomey served as Vice President and 
Chief Financial Officer of Eltron International, Inc., a publicly-held 
company ("Eltron"), from October 1992 until December 1997.  From 1987 until 
he joined Eltron, Mr. Toomey was employed with Arthur Andersen LLP, where he 
served as Manager in the Enterprise Division of its Woodland Hills, 
California office. Mr. Toomey received a B.A. from the University of 
California, Los Angeles in 1986.

     MELLON C. BAIRD became a director of the Company in March 1998.  Mr. 
Baird has served as Chairman, President and Chief Executive Officer of Delfin 
Systems since 1990.  From 1987 to 1989, Mr. Baird served as President and 
Chief Executive Officer of Tracor, Inc., a privately-held company ("Tracor"). 
From 1986 until 1987, Mr. Baird served as President, Chief Operating Officer 
and a director of Tracor, a publicly-held company.  Mr. Baird currently 
serves on the Board of Directors of Software Spectrum, Inc. and 


                                     33.



EDO Corporation, which are both publicly-held companies.  Mr. Baird received 
a B.B.A. and an M.B.A. from University of North Texas in 1956 and 1961, 
respectively.

BOARD COMMITTEES

     In November 1997, the Board of Directors established an Audit Committee 
and a Compensation Committee.  The Audit Committee is composed of Messrs. 
McIntyre, Toomey and Baird.  The functions of the Audit Committee include 
recommending to the Board the selection and retention of independent 
auditors, reviewing the scope of the annual audit undertaken by the Company's 
independent auditors and the progress and results of their work and reviewing 
the financial statements of the Company and its internal accounting and 
auditing procedures. The Compensation Committee is composed of Messrs. 
Hartman, McIntyre and Toomey. The functions of the Compensation Committee 
include establishing the compensation of the Chief Executive Officer, 
reviewing and approving executive compensation policies and practices, 
reviewing salaries and bonuses for certain executive officers of the Company, 
administering the Company's employee stock option plans and considering such 
other matters as may from time to time be delegated to the Compensation 
Committee by the Board of Directors.  The function of the Nominating 
Committee, which consists of Messrs. Hartman, Lokken and Lubeck, is to select 
the slate of directors to be presented to the shareholders for election at 
the annual meeting of the shareholders of the Company.  The Board of 
Directors has also established an Executive Committee to advise the Company 
on strategic planning matters.  The Executive Committee is composed of 
Messrs. Hartman, Lokken and Baird.

     The Company's executive officers are appointed by, and serve at the 
discretion of, the Board of Directors of the Company.  See "Executive 
Compensation--Employment Arrangements."  The Company's Directors serve until 
the next annual meeting of shareholders or until successors are elected and 
qualified.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the 
Company's directors and executive officers, as well as persons who own more 
than ten percent of the Company's Common Stock, to file with the SEC initial 
reports of beneficial ownership and reports of changes in beneficial 
ownership of the Common Stock.  Directors, executive officers and 
greater-than-ten-percent shareholders are required by SEC regulations to 
furnish the Company with copies of all Section 16(a) forms they file.

     Based solely on a review of copies of reports filed with the SEC and 
submitted to the Company, the Company believes that all of the Company's 
directors, executive officers and greater-than-ten-percent shareholders filed 
all required reports on a timely basis upon and after the consummation of the 
Offering. 


                                     34.



ITEM 11.       EXECUTIVE COMPENSATION

     The following table sets forth certain compensation earned or accrued
during the years ended December 31, 1995, 1996 and 1997 by the Company's Chief
Executive Officer and the Company's three other most highly compensated
executive officers whose total salary and bonus during such year exceeded
$100,000 (collectively, the "Named Executive Officers"):

                     SUMMARY COMPENSATION TABLE


                                                                   ANNUAL COMPENSATION
                                                     --------------------------------------------------
 NAME AND PRINCIPAL POSITION                         YEAR        SALARY         BONUS(1)       OTHER
 ---------------------------                         ----       --------        --------    -----------
                                                                                
 David L. Lokken...................................  1997       $233,147        $44,358
 Chief Executive Officer                             1996        192,566         67,125     $173,220(2)
                                                     1995        184,256            - 
 Brian S. Aune.....................................  1997       $117,302        $21,097
 Chief Financial Officer                             1996         98,440         28,763
                                                     1995        100,509            -
 Brian S. Carr.....................................  1997       $125,156        $21,097
 Managing Director of Sun Valley Operations          1996        111,258         26,910
                                                     1995        104,785            -
 Michael A. Riley..................................  1997       $113,430        $18,663
 Vice President-Hydromechanical Business Unit        1996         95,584         23,550
                                                     1995         93,335            -

- - -----------------------

(1)  Bonus amounts are shown in the year accrued.
(2)  Nonrecurring payment made for services rendered in connection with BTR's
     sale of the Company, of which 31% was paid in 1996 and 69% was paid in 
     1997.

EMPLOYMENT ARRANGEMENTS

     In November 1996, the Company entered into an employment agreement with 
David L. Lokken pursuant to which Mr. Lokken agreed to serve as the Company's 
President and Chief Executive Officer.  The employment agreement is for an 
initial term of five years and as amended in 1997 provides for an annual base 
salary of $205,000, a performance bonus to be awarded in accordance with the 
terms and conditions of a separate Management Incentive Compensation Plan, 
and a monthly automobile allowance of $1,500.  Pursuant to the employment 
agreement, the Company may terminate Mr. Lokken's employment with or without 
cause at any time before its term expires upon providing written notice.  In 
the event the Company terminates Mr. Lokken's employment without cause, Mr. 
Lokken would be entitled to receive a severance amount equal to his annual 
base salary for the greater of two years or the balance of the term of his 
employment agreement and a bonus for the year of termination.  In the event 
of a termination by reason of Mr. Lokken's death or permanent disability, his 
legal representative will be entitled to receive his annual base salary for 
the remaining term of his employment agreement.

     In November 1996, the Company also entered into employment agreements 
with each of Brian S. Aune, the Company's Vice President and Chief Financial 
Officer, Brian S. Carr, the Company's Managing Director of Sun Valley 
Operations, and Michael A. Riley, the Company's Vice 
President-Hydromechanical Business Unit.  The employment agreements are each 
for an initial term of three years and as amended in 1997 provide for annual 
base salaries of $130,000, $130,000 and $115,000, respectively, performance 
bonuses to be awarded in accordance with the terms and conditions of a 
separate Management Incentive Compensation Plan, and monthly automobile 
allowances of $750.  In the event the Company terminates their employment 
without cause, Messrs. Aune, Carr and Riley would each be entitled to receive 
a severance amount equal to 

                                     35.



his respective annual base salary for the greater of one year or the balance 
of the term of his employment agreement and a bonus for the year of 
termination.  In the event of a termination by reason of Messrs. Aune's, 
Carr's or Riley's death or permanent disability, his legal representative 
will be entitled to receive his annual base salary for the remaining term of 
his employment agreement.

     In addition, pursuant to each of their amended employment agreements, in 
the event of, or termination following, a change in control of the Company, 
as defined in the agreements, Mr. Lokken and each of Messrs. Aune, Carr and 
Riley would be entitled to receive 18 and 12 months' salary, respectively, 
based on the total annual salary then in effect paid according to a schedule 
to be determined at the time such event occurs.

DIRECTOR COMPENSATION

     Each non-employee director receives a cash fee of $1,500 per regular and 
special Board meeting attended in person and $1,000 per telephonic Board 
meeting and an additional $500 per month for being a member of one or more 
committees of the Board.  Each non-employee director is expected to receive, 
as additional director compensation, such number of options as determined by 
the Board to purchase shares of Common Stock per year at an exercise price 
equal to the fair market value of the Common Stock on the date of grant.  In 
January 1998, Daniel C. Toomey, Jr. and Joel F. McIntyre were each granted 
five-year options to purchase up to 14,861 shares, exercisable at the initial 
public offering price per share, vesting 33 1/3% per year beginning on the 
first anniversary of the effective date of the Offering.  In March 1998, the 
Company granted Mellon C. Baird five-year options to purchase up to 14,861 
shares, exercisable at the then market price, vesting 33 1/3% per year 
beginning on the first anniversary of the date of grant.  The directors are 
also reimbursed for expenses incurred in connection with the performance of 
services as directors.


                                     36.



STOCK OPTIONS

     The following table sets forth certain information with respect to stock
options granted by the Company to the Named Executive Officers during the
fiscal year ended December 31, 1997:


 OPTION GRANT TABLE

    OPTION GRANTS DURING THE FISCAL YEAR ENDED DECEMBER 31, 1997



                                                                                                               POTENTIAL REALIZABLE
                                                                                                                 VALUE AT ASSUMED
                                                                                                              ANNUAL RATES OF STOCK
                                                                                                              PRICE APPRECIATION FOR
                                                     INDIVIDUAL GRANTS                                               OPTION TERM
                             --------------------------------------------------------------------------       ----------------------
                              NUMBER OF
                              SHARES OF        % OF TOTAL   
                             COMMON STOCK        OPTIONS      
                              UNDERLYING        GRANTED TO      EXERCISE 
                               OPTIONS         EMPLOYEES IN      PRICE    
     NAME                      GRANTED         FISCAL YEAR     ($/SH)(3)        EXPIRATION  DATE                 5%            10%
     ----                    ------------      ------------    ---------   ----------------------------       -------      ---------
                                                                                                         
David L. Lokken               187,471(1)          50.0%          $8.00     72,105 on November 14, 2002        605,682        634,524
                                                                           115,366 on November 14, 2003       969,074      1,015,220
Brian S. Aune                  43,261(2)          11.5%          $8.00     14,420 on November 14, 2002        121,128        126,896
                                                                           28,841 on November 14, 2003        242,264        253,800
Brian S. Carr                  43,261(2)          11.5%          $8.00     14,420 on November 14, 2002        121,128        126,896
                                                                           28,841 on November 14, 2003        242,264        253,800
Michael A. Riley               43,261(2)          11.5%          $8.00     14,420 on November 14, 2002        121,128        126,896
                                                                           28,841 on November 14, 2003        242,264        253,800

- - --------------------

(1)  72,105 of these options were fully vested and exercisable on the date of 
     grant and are for a term of five years.  115,536 of these options are 
     for a term of six years, subject to earlier termination in certain 
     events related to termination of employment, and vest at the rate of 5% 
     every three months after the grant date so that all of the options will 
     be fully vested and exercisable on the fifth anniversary of the grant 
     date.

(2)  14,420 of these options were fully vested and exercisable on the date of 
     grant and are for a term of five years.  28,861 of these options are for 
     a term of six years, subject to earlier termination in certain events 
     related to termination of employment, and vest at the rate of 5% every 
     three months after the grant date so that all of the options will be 
     fully vested and exercisable on the fifth anniversary of the grant date.

(3)  The exercise price and tax withholding related to exercise may be paid 
     by delivery of already owned shares or by offset of the underlying 
     shares, subject to certain conditions.  With respect to options granted 
     under the Company's 1997 Stock Option Plan, the stock option committee 
     retains discretion, subject to plan limits, to modify the terms of 
     outstanding options and to reprice the options.


                                     37.



    The following table sets forth certain information with respect to stock 
option exercises by the Named Executive Officers during fiscal year 1997 and 
held by them as of December 31, 1997:

                   OPTION EXERCISES AND YEAR-END VALUE TABLE

               AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND YEAR-END OPTION VALUES



                                                      NUMBER OF   
                                                      SHARES OF   
                                                    COMMON STOCK             VALUE OF       
                                                     UNDERLYING            UNEXERCISED    
                                                    UNEXERCISED            IN-THE-MONEY   
                                                      OPTIONS                 OPTIONS        
                          SHARES                    AT YEAR-END            AT YEAR-END(1) 
                         ACQUIRED                  --------------          --------------
                            ON           VALUE      EXERCISABLE/            EXERCISABLE/  
     NAME                EXERCISE       REALIZED   UNEXERCISABLE           UNEXERCISABLE 
     ----                --------       --------   --------------          --------------
                                                               
David L. Lokken             -              -       72,105/115,366                0/0
Brian S. Aune               -              -        14,420/28,841                0/0
Brian S. Carr               -              -        14,420/28,841                0/0
Michael A. Riley            -              -        14,420/28,841                0/0


- - ------------------------

(1)  Amounts are shown as the positive spread between the exercise price and
     the fair market value (based on the initial public offering price of $8.00
     per share).  At year-end the Company's Common Stock was not traded on an
     established public trading market.

MANAGEMENT STOCK OPTIONS

     In November 1997, the Board of Directors granted five-year management
stock options to purchase an aggregate of 115,365 shares of Common Stock to
David L. Lokken, Brian S. Aune, Brian S. Carr, and Michael A. Riley. These
options are in addition to those granted under the 1997 Stock Option Plan
described below.  All of these options are vested and are exercisable at $8.00
per share.

STOCK OPTION PLAN

     In November 1997, the Board of Directors adopted the Company's 1997 
Stock Option Plan (the "1997 Plan"). The 1997 Plan, which was approved by the 
Company's shareholders in November 1997, provides for the grant of options to 
directors, officers, other employees and consultants of the Company to 
purchase up to an aggregate of 634,514 shares of Common Stock. The purpose of 
the 1997 Plan is to provide participants with incentives that will encourage 
them to acquire a proprietary interest in, and continue to provide services 
to, the Company. The 1997 Plan is to be administered by the Board of 
Directors, or a committee of the Board, which has discretion to select 
optionees and to establish the terms and conditions of each option, subject 
to the provisions of the 1997 Plan. Options granted under the 1997 Plan may 
be "incentive stock options" as defined in Section 422 of the Internal 
Revenue Code of 1986, as amended (the "Code"), or nonqualified options.

     The exercise price of incentive stock options may not be less than the 
fair market value of Common Stock as of the date of grant (110% of the fair 
market value if the grant is to an employee who owns more than 10% of the 
total combined voting power of all classes of capital stock of the Company). 
The Code currently limits to $100,000 the aggregate value of Common Stock 
that may be acquired in any one year pursuant to incentive stock options 
under the 1997 Plan or any other option plan adopted by the Company. 
Nonqualified options may be granted under the 1997 Plan at an exercise price 
of not less than 85% of the fair market value of the Common Stock on the date 
of grant. Nonqualified options may be granted without regard 


                                     38.



to any restriction on the amount of Common Stock that may be acquired 
pursuant to such options in any one year. Options may not be exercised more 
than ten years after the date of grant (five years after the date of grant if 
the grant is an incentive stock option to an employee who owns more than 10% 
of the total combined voting power of all classes of capital stock of the 
Company). Options granted under the 1997 Plan generally are nontransferable, 
but transfers may be permitted under certain circumstances in the discretion 
of the administrator. Shares subject to options that expire unexercised under 
the 1997 Plan will once again become available for future grant under the 
1997 Plan. The number of options outstanding and the exercise price thereof 
are subject to adjustment in the case of certain transactions such as 
mergers, recapitalizations, stock splits or stock dividends. The 1997 Plan is 
effective for ten years, unless sooner terminated or suspended.

     In November 1997, the Board of Directors of the Company granted six-year 
options to purchase an aggregate of 259,572 shares of Common Stock under the 
1997 Plan, of which 230,730 were granted to David L. Lokken, Brian S. Aune, 
Brian S. Carr, Michael A. Riley and Richard Adey. All of these options are 
exercisable at the initial public offering price per share. The options 
generally will be subject to vesting and will become exercisable at a rate of 
5% per quarter from the date of grant, subject to the optionee's continuing 
employment with the Company. Each of the option agreements for Messrs. 
Lokken, Aune, Carr, Riley and Adey provides that all options will become 
fully vested and exercisable upon a change in control of the Company, as 
defined in the agreements.

     In general, upon termination of employment of an optionee, all options 
granted to such person which are not exercisable on the date of such 
termination will immediately terminate, and any options that are exercisable 
will terminate not less than three months (six months in the case of 
termination by reason of death or disability) following termination of 
employment.

     To the extent nonqualified options are granted under the 1997 Plan, the 
Company intends to issue such options with an exercise price of not less than 
the market price of the Common Stock on the date of grant.

EMPLOYEE DEFINED BENEFIT PLAN

     GENERAL.  On January 1, 1997 the Board of Directors adopted the Employee 
Defined Benefit Pension Plan (the "Pension Plan") for the benefit of the 
eligible employees of the Company. The primary purpose of the Pension Plan is 
to provide a retirement benefit for participating employees. All employees of 
the Company are eligible to participate in the Pension Plan on the January 
1st next following their date of hire. Employees who are covered by 
collective bargaining units and whose retirement benefits are the subject of 
good faith bargaining, however, are not eligible to participate in the 
Pension Plan.

     ADMINISTRATION.  The Pension Plan is administered by a committee (the 
"Plan Committee") whose members are appointed by the Board of Directors of 
the Company. The Plan Committee oversees the day-to-day administration of the 
Pension Plan and has the authority to take action and make rules and 
regulations necessary to carry out the purposes of the Pension Plan.

     NORMAL RETIREMENT BENEFITS AND VESTING.   The Pension Plan provides for 
employer contributions only. Each year, the Company makes a contribution to 
the pension plan equal to the minimum funding requirement sufficient to fund 
for the benefits being accrued under the Pension Plan for the year. The 
Pension Plan provides for a normal retirement benefit payable on a monthly 
basis for the lifetime of the participant. The normal retirement benefit is 
equal to the participant's credited benefit service (up to a maximum of 35 
years) times the sum of 0.75% of the participant's final average monthly 
compensation plus 0.65% of such compensation in excess of the participant's 
average monthly wage. However, the benefit actually payable from the Pension 
Plan will be reduced for any benefits payable (or paid) with respect to 
service credited from the Defined Benefit Pension Plan of the Company's 
predecessor.


                                     39.



     For purposes of calculating a participant's normal retirement benefits,
average monthly compensation is defined in the Pension Plan as average monthly
compensation during the five consecutive plan years of the participant's
employment which yields the highest average compensation.

     No maximum monthly benefit payable under the Pension Plan is to exceed the
applicable Internal Revenue Code Section 415 limit ($10,416.67 for 1997)
adjusted actuarially to reflect a participant's retirement age if the
retirement age is other than the social security retirement age. The monthly
retirement benefit payable by the Pension Plan is a benefit payable in the form
of a straight life annuity with no ancillary benefits. For a participant who is
to receive benefits other than in the form of a straight life annuity, the
monthly retirement benefit will be adjusted to an equivalent benefit in the
form of a straight life annuity on an actuarial equivalent basis.

     A participant becomes fully vested in his accrued benefits under the
Pension Plan upon attainment of normal retirement age (age 65), permanent
disability, death or the termination of the Pension Plan. If a participant
terminates employment with the Company prior to retirement, death or
disability, the vested interest he has in accrued benefits under the Pension
Plan is based on years of service, with 0% vesting for less than five years of
service and 100% vesting after five or more years of service.

     PENSION PLAN INVESTMENTS.  The Committee selects vehicles for the
investment of plan assets. The Committee then directs the trustee to invest
employer contributions in the investment option selected by the Committee under
the Pension Plan.

     PENSION PLAN AMENDMENT OR TERMINATION.  Under the terms of the Pension
Plan, the Company reserves the right to amend or terminate the Pension Plan at
any time and in any manner. No amendment or termination, however, may deprive a
participant of any benefit accrued under the Pension Plan prior to the
effective date of the amendment or termination.

     ESTIMATED MONTHLY BENEFITS.  The following table sets forth the estimated
monthly benefits under the Pension Plan, without regard to any offsetting
benefit which may be payable from the Defined Benefit Pension Plans of the
Company's predecessors for service prior to January 1, 1997, based on the
current benefit structure and assuming the participant's current age is 50.

                       PENSION PLAN TABLE




REMUNERATION      15             20             25             30             35
- - ------------    ------         ------         ------         ------         ------
                                         YEARS OF SERVICE
                                         ----------------
                                                             
$125,000......  $1,743         $2,323         $2,904         $3,485         $4,066
 150,000......   2,180          2,907          3,633          4,360          5,087
 175,000......   2,355          3,140          3,925          4,710          5,495
 200,000......   2,355          3,140          3,925          4,710          5,495
 225,000......   2,355          3,140          3,925          4,710          5,495
 250,000......   2,355          3,140          3,925          4,710          5,495
 300,000......   2,355          3,140          3,925          4,710          5,495
 400,000......   2,355          3,140          3,925          4,710          5,495
 450,000......   2,355          3,140          3,925          4,710          5,495
 500,000......   2,355          3,140          3,925          4,710          5,495



     The compensation covered by the Pension Plan includes basic salary or
wages, overtime payments, bonuses, commissions and all other direct current
compensation but does not include contributions by the Company to Social
Security, benefits from stock options (whether qualified or not), contributions
to this or any other retirement plans or programs or the value of any other
fringe benefits provided at the expense of the Company. For benefit calculation
purposes, a "highest five-year" average of compensation is used. 


                                     40.



Benefits are paid as straight-life annuities with no subsidies or effects. 
The compensation covered by the Pension Plan for all of the Named Executives 
was limited to $160,000 in accordance with Section 401(a)(17) of the Code.

     The years of credited service for each Named Executive Officer who
participates in the Pension Plan are as follows:



NAME                                                     YEARS
- - ----                                                    -------
                                                     
Dave Lokken..........................................   9 years
Brian Aune...........................................   6 years
Brian Carr...........................................   5 years
Michael Riley........................................   8 years



COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     In November 1997, Joel McIntyre, Scott Hartman and Daniel Toomey were
appointed to serve on the Compensation Committee of the Company's Board of
Directors.  Mr. McIntyre, who is a Director of the Company and also a member of
its Audit Committee is a member of the law firm of McIntyre, Borges & Burns LLP
("McIntyre, Borges & Burns").  During the 12 months ended December 31, 1997,
the Company paid McIntyre, Borges & Burns approximately $4,700 for legal
services rendered.  Mr. Hartman, who is Chairman of the Company's Board of
Directors is a principal of Unique.  During the 12 months ended December 31,
1997, the Company paid Unique $330,000 in management fees and reimbursable
expenses.


                                     41.



ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth the beneficial ownership of Common Stock as
of March 12, 1998 by: (i) each person known by the Company to beneficially own
5% or more of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each Named Executive Officer of the Company, and (iv) all
directors and executive officers of the Company as a group.



                                            Number of Shares of      Percentage of 
          Name and Address(1)                 Common Stock(2)        Outstanding(2) 
- - ------------------------------------------- -------------------      --------------
                                                                           
Melanie L. Bastian.........................       961,252                16.5%
John G. Makoff.............................       444,943                 7.6
Daniel J. Lubeck...........................       330,120                 5.7
Scott W. Hartman...........................       330,120                 5.7
David L. Lokken(3).........................       221,403                 3.8
Brian S. Aune(4)...........................        44,568                  *
Brian S. Carr(4)...........................        44,568                  *
Michael A. Riley(4)........................        44,568                  *
Daniel C. Toomey, Jr.......................         2,000                  *
Joel F. McIntyre...........................             0                  --
Mellon C. Baird............................             0                  --
All directors and executive officers                                    
  as a group (11 persons)..................     1,463,732                24.6

- - ----------------------

 *   Less than 1%.
(1)  The address for all persons is c/o the Company at 11240 Sherman Way, Sun
     Valley, California 91352.
(2)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to the securities.  Shares of Common Stock
     subject to options currently exercisable, or exercisable within 60 days of
     March 12, 1998, are deemed outstanding for computing the percentage of the
     person holding such options but are not deemed outstanding for computing
     the percentage of any other person.  Except as indicated by footnote and
     subject to community property laws where applicable, the persons named in
     the table have sole voting and investment power with respect to all shares
     of Common Stock shown as beneficially owned by them.
(3)  Includes 77,873 shares issuable upon exercise of vested options to
     purchase common stock.
(4)  Includes 15,862 shares issuable upon exercise of vested options to
     purchase common stock.


                                     42.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Effective November 1, 1996, Aqhawk, an entity wholly-owned by the
shareholders of Unique and the Company's executive officers ("Aqhawk"),
purchased all of the outstanding capital stock of the Company from BTR (the
"BTR Transaction").  The purchase price Aqhawk paid was $29,802,861, consisting
of (i) $18,828,841 obtained through debt financing provided by Bank of America
to the Company (the "Bank of America Loan"), which then loaned such amount to
Aqhawk, (ii) $6,500,000 obtained through a subordinated note (the "Subordinated
Note") provided by Melanie Bastian, a principal shareholder and the former
Chairman of the Company, to Unique which then loaned such amount to Aqhawk,
(iii) $2,000,000 obtained in return for the issuance to Ms. Bastian of
400 shares of Preferred Stock of Aqhawk, and (iv) the remaining amount obtained
through cash provided by the Company.  In December 1996, Aqhawk was merged with
the Company.  In the merger, each two shares of common stock of Aqhawk were
converted into one share of common stock of the Company, and each share of
preferred stock was converted into one share of preferred stock of the Company.

     In connection with the BTR Transaction, BTR entered into an Environmental
Indemnity Agreement pursuant to which it agreed to indemnify Aqhawk and the
Company against losses arising from any finding that the Company or Aqhawk is
liable for the handling, storage and disposal of hazardous substances on,
around or originating from the Company's facilities that existed on or before
November 1, 1996, including any future amounts for which the Company may be
responsible in connection with the SFVB Actions.  See "Business--Environmental
Matters and Proceedings."  BTR and its subsidiary also agreed not to compete
against the Company in the repair and overhaul of aircraft landing gear for a
period of three years following the BTR Transaction.  In addition, BTR granted
the Company an exclusive, worldwide, royalty-free license to use the Hawker
Pacific logo and name, for as long as the Company continues to use such marks,
in connection with the repair and overhaul of aircraft landing gear and a
non-exclusive right to use the logo and name for the same period in connection
with all other operations of the Company.

     To obtain a portion of the purchase price paid for the Company in
connection with the BTR Transaction, in November 1996, the Company issued the
Subordinated Note in the aggregate principal amount of $6.5 million.  The
Subordinated Note bears interest at the rate of 11.8% per annum paid monthly
and matures January 1, 2001.  The Company has agreed to use $1.5 million of the
funds provided by the Amended Loan Agreement to repay a portion of the
$6.5 million Subordinated Note.  The remaining balance of the Subordinated Note
has been replaced by a new $5 million promissory note.  The new note bears
interest at a fixed rate of 11.8% per annum, requires the Company to make
monthly payments of interest only, and matures on the earlier of June 30, 2005
or 180 days after the termination of the Amended Loan Agreement.

     Pursuant to a Limited Guaranty dated as of November 27, 1996 by Melanie L.
Bastian in favor of Bank of America, in connection with the Bank of America
Loan, Ms. Bastian guaranteed the Company's payment obligations, and the
shareholders of the Company pledged as collateral for the loan all of their
capital stock of the Company.  Ms. Bastian's guarantee and the pledges were
released upon the consummation of the Offering.

     As of September 30, 1997, all of the Company's issued and outstanding
shares of preferred stock were held by Ms. Bastian.  Upon the closing of the
Offering all of the outstanding shares of preferred stock were converted into
250,000 shares of Common Stock.

     In September and October 1997, Ms. Bastian purchased an aggregate of
101,619 shares of Common Stock for $1,000,000 ($9.84 per share).

     The Company and Unique entered into a management agreement dated March 1,
1997 (the "Old Management Agreement"), pursuant to which the Company paid
Unique management fees and reimbursable expenses totalling approximately
$330,000 during the year ended December 31, 1997.  In November 1997, 


                                     43.



the Company and Unique entered into a new management services agreement (the 
"Management Services Agreement") pursuant to which, upon the consummation of 
the Offering, the Old Management Agreement was terminated, and Unique became 
entitled to receive $150,000 per year payable monthly commencing in January 
1999 for certain management services to be rendered to the Company. The 
Management Services Agreement will terminate upon the Company's completing an 
additional underwritten public offering in which selling shareholders offer 
25% or more in such offering.

     The Company also entered into a mergers and acquisitions agreement dated
as of September 2, 1997 with Unique pursuant to which Unique received $300,000
upon the closing of the BA Acquisition for services provided in connection with
the acquisition.  Amounts paid under the Old Management Agreement during 1998
were credited against this $300,000.

     During the 12 months ended December 31, 1997, the Company paid McIntyre,
Borges & Burns approximately $4,700 for legal services rendered.  Joel F.
McIntyre is a director of the Company and is a member of the law firm of
McIntyre, Borges & Burns.


                                 PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)(1) AND (2) FINANCIAL STATEMENTS AND SCHEDULES:

     The following financial statements of Hawker Pacific Aerospace are 
included in this Report:

     Balance Sheets--December 31, 1995, 1996 and 1997

     Statements of Operations--Year ended December 31, 1995, ten months ended 
     October 31, 1996, two months ended December 31, 1996 and the year ended 
     December 31, 1997

     Statements of Changes in Stockholders' Equity--Years ended December 31, 
     1996 and 1997

     Statements of Cash Flows--Year ended December 31, 1995, ten months ended 
     October 31, 1996, two months ended December 31, 1996 and the year ended 
     December 31, 1997

     Notes to Financial Statements--December 31, 1997


     The following financial statement schedule of Hawker Pacific Aerospace is 
included in Item 14(d):

     Schedule II  Valuation and qualifying accounts

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

     (b)  FORM 8-K

     No reports on Form 8-K were filed by the registrant during the fourth
quarter of fiscal 1997.

     (c) EXHIBITS



                                     44.






EXHIBIT 
  NO.                              EXHIBIT DESCRIPTION
- - ------- -----------------------------------------------------------------------
     
   2.1  Agreement relating to the Sale and Purchase of part of the
        Business of British Airways plc dated December 20, 1997 by and
        among the Company, Hawker Pacific Aerospace Limited and British
        Airways plc., and related Landing Gear Overhaul Services
        Agreement.(1)+
        
   3.1  Amended and Restated Articles of Incorporation of the
        Company.(1)
        
   3.2  Amended and Restated Bylaws of the Company.(1)
        
   3.3  Certificate of Amendment to the Amended and Restated Articles of
        Incorporation of the Company.(1)
        
   4.1  Specimen Common Stock Certificate.(1)
        
  10.1  1997 Stock Option Plan and forms of Stock Option Agreements.(1)
        
 10.1A  Amendment No. 1 to 1997 Stock Option Plan.(1)
        
  10.2  Employment Agreement dated November 1, 1996 between the Company
        and David L. Lokken.(1)
        
 10.2A  First Amendment to Employment Agreement for David L. Lokken.(1)
        
  10.3  Employment Agreement dated November 1, 1996 between the Company
        and Brian S. Aune.(1)
        
 10.3A  First Amendment to Employment Agreement for Brian S. Aune.(1)
        
  10.4  Employment Agreement dated November 1, 1996 between the Company
        and Brian S. Carr.(1)
        
 10.4A  First Amendment to Employment Agreement for Brian S. Carr.(1)
        
  10.5  Employment Agreement dated November 1, 1996 between the Company
        and Michael A. Riley.(1)
        
 10.5A  First Amendment to Employment Agreement for Michael A. Riley.(1)
        
  10.6  Form of Indemnity Agreement for directors and executive officers
        of the Company.(1)
        
  10.7  Business Loan Agreement dated November 27, 1996 between the
        Company and Bank of America National Trust and Savings
        Association.(1)
        
 10.7A  Amendment No. 1 to Business Loan Agreement between the Company
        and Bank of America National Trust and Savings Association.(1)
        
  10.8  Agreement of Purchase and Sale of Stock effective as of
        November 1, 1996 by and among BTR Dunlop, Inc., BTR, Inc., the
        Company and Aqhawk, Inc.(1)
        
  10.9  Repair, Overhaul, Exchange, Warranty and Distribution Agreement
        dated November 1, 1996 between the Company and Dunlop Limited,
        Aviation Division.(1)+
        
 10.10  Distribution Agreement dated November 1, 1996 between the
        Company and Dunlop Limited, Precision Rubber.(1)


                                     45.



 10.11  Repair, Overhaul, Exchange, Warranty and Distribution Agreement
        dated November 1, 1996 between the Company and Dunlop Equipment
        Division.(1)+
        
 10.12  Repair Services Agreement dated September 9, 1997 between the
        Company and American Airlines, Inc.(1)+
        
 10.13  Award/Contract dated September 20, 1995 issued by USCG Aircraft
        Repair and Supply Center to the Company.(1)+
        
 10.14  Maintenance Services Agreement dated August 19, 1994 between the
        Company and Federal Express Corporation.(1)+
        
 10.15  Lease Agreement dated March 31, 1997 by and between the Company
        and Industrial Centers Corp.(1)
        
10.15A  First Amendment to Lease Agreement dated March 31, 1997 by and
        between the Company and Industrial Centers Corp.
        
 10.16  Management Services Agreement dated November 14, 1997 between
        the Company and Unique Investment Corp.(1)
        
 10.17  Mergers and Acquisitions Agreement dated September 2, 1997
        between the Company and Unique Investment Corp.(1)
        
10.17A  Form of First Amendment to Mergers and Acquisitions Agreement
        between the Company and Unique Investment Corp.(1)
        
 10.18  Subordinated Note for $6,500,000 in favor of Unique Investment
        Corp.(1)
        
 10.19  Amended and Restated Subordinated Promissory Note dated February
        3, 1998 in favor of Unique Investment Corp.
        
 10.20  Certified Translation of Rental Agreement between Mr. C. G.
        Kortenoever and Flight Accessory Services.(1)
        
 10.21  Lease Agreement dated July 28, 1994 by and between the Company
        and Industrial Bowling Corp.(1)
        
10.21A  First Amendment to Lease Agreement dated July 28, 1994 by and
        between the Company and Industrial Bowling Corp.
        
 10.22  Lease Agreement dated July 28, 1994 by and between the Company
        and Industrial Bowling Corp.(1)
        
 10.23  Lease Agreement dated July 28, 1994 by and between the Company
        and Industrial Bowling Corp.(1)
        
 10.24  Lease Agreement dated July 28, 1994 by and between the Company
        and Industrial Bowling Corp.(1)
        
 10.25  Lease Agreement dated June 24, 1997 by and between the Company
        and Allstate Insurance Company.(1)

10.25A  First Amendment to Lease Agreement between the Company and
        Allstate Insurance Company.
     

                                     46.



 10.26  Lease Agreement dated November 21, 1994 by and between the
        Company and Gordon N. Wagner and Peggy M. Wagner, and Joseph W.
        Basinger and Viola Marie Basinger.(1)
        
 10.27  Amended and Restated Business Loan Agreement dated January 23,
        1998 between the Company and Bank of America National Trust and
        Savings Association.
        
 10.28  Security Agreement dated January 23, 1998 by the Company in
        favor of Bank of America National Trust and Savings Association.
        
 10.29  Pledge Agreement dated January 23, 1998 by the Company in favor
        of Bank of America National Trust and Savings Association.
        
 10.30  Subordination Agreement dated January 23, 1998 by and among the
        Company, Hawker Pacific Aerospace Limited, Bank of America
        National Trust and Savings Association, Melanie L. Bastian and
        Unique Investment Corporation.
        
  21.1  Subsidiaries of the Company.(1)
        
  27.1  Financial Data Schedule


- - ---------------------

+   Portions of exhibits deleted and filed separately with the Securities and
    Exchange Commission pursuant to a request for confidentiality.
(1) Previously filed as exhibits to the Company's Registration Statement on
    Form S-1, as amended (Registration No. 333-40295), and incorporated herein
    by reference.


     (d)  FINANCIAL STATEMENT SCHEDULES

                           HAWKER PACIFIC AEROSPACE
                  SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS



             Column A                        Column B                Column C                 Column D         Column E
- - ----------------------------------          ----------     ----------------------------    -------------      ----------
                                            Balance at     Charged to        Charged to                       Balance at 
                                            Beginning      Costs and          Other                           the End of 
            Description                     of Period      Expenses          Accounts        Deductions         Period   
- - ----------------------------------          ----------     ----------        ----------    -------------      ----------
                                                                                               
        PREDECESSOR                                                                       
Year Ended December 31, 1995                 $111,000      $  50,000             --        $(122,000)(a)      $  39,000
Ten Months Ended October 31, 1996              39,000        345,000             --         (188,000)(a)        196,000
        SUCCESSOR                                                                         
Two Months Ended December 31, 1996            196,000             --             --         (129,000)(a)         67,000
Year Ended December 31, 1997                   67,000        167,000             --          (87,000)(a)        147,000



- - --------------------------
(a)  Represents amounts written-off against the allowance for doubtful
     accounts, list of recoveries and reversals.


                                     47.




                   Hawker Pacific Aerospace

                 INDEX TO FINANCIAL STATEMENTS




                           CONTENTS

Report of Independent Auditors . . . . . . . . . . . . . F-2

Audited Financial Statements

Balance Sheets . . . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations . . . . . . . . . . . . . . . . F-5
Statements of Changes in Stockholders' Equity. . . . . . F-6
Statements of Cash Flows . . . . . . . . . . . . . . . . F-7
Notes to Financial Statements. . . . . . . . . . . . . . F-9



                              F-1


                        Report of Independent Auditors

The Board of Directors
Hawker Pacific Aerospace

We have audited the accompanying balance sheet of Hawker Pacific Aerospace a 
wholly-owned subsidiary of BTR Dunlop Holdings, Inc. (the "Predecessor") as 
of December 31, 1995, and the related statements of operations, and cash 
flows for the year ended December 31, 1995 and the ten months ended October 
31, 1996. We have also audited the accompanying balance sheets of Hawker 
Pacific Aerospace (the "Successor") as of December 31, 1996 and 1997, and the 
related statements of operations, changes in stockholders' equity and cash 
flows for the two months ended December 31, 1996 and the year ended December 
31, 1997. Our audits also included the financial statement schedule listed in 
the index at Item 14(a). These financial statements and schedule are the 
responsibility of the Predecessor's and Successor's management. Our 
responsibility is to express an opinion on these financial statements and 
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Hawker Pacific Aerospace as 
the Predecessor and Successor companies, at December 31, 1995, 1996 and 1997, 
and the results of their operations and their cash flows for the year ended 
December 31, 1995, the ten months ended October 31, 1996, the two months 
ended December 31, 1996, and the year ended December 31, 1997, in conformity 
with generally accepted accounting principles. Also, in our opinion, the 
related financial statement schedule, when considered in relation to the 
basic financial statements taken as a whole, presents fairly in all material 
respects the information set forth therein.

Woodland Hills, California
February 13, 1998

                                     F-2



                                Hawker Pacific Aerospace

                                     Balance Sheets

                                         ASSETS




                                                  PREDECESSOR              SUCCESSOR
                                                ---------------   ----------------------------
                                                  DECEMBER 31              DECEMBER 31
                                                     1995             1996             1997
                                                ---------------   ----------------------------
                                                                        
Current assets:
  Cash                                           $   399,000       $ 1,055,000    $   160,000

  Accounts receivable, less allowance for 
    doubtful accounts of $39,000, $67,000 and 
    $147,000 at December 31, 1995, 1996 and 
    1997, respectively                             6,392,000         6,336,000      7,351,000

  Accounts receivable from affiliates                624,000                 -              -
  Other receivables                                1,086,000            59,000         80,000

Inventories                                       13,446,000        12,950,000     14,814,000

Prepaid expenses and other current assets            404,000           344,000        240,000
                                                ---------------   -------------   -----------
Total current assets                              22,351,000        20,744,000     22,645,000

Equipment and leasehold improvements, net          4,871,000         4,719,000      5,083,000

Landing gear exchange, less accumulated 
  amortization of $422,000, $61,000 and 
  $375,000 at December 31, 1995, 1996 
  and 1997, respectively                           7,479,000         8,654,000     11,067,000

Goodwill, less accumulated amortization of 
  $17,000 and $25,000 at December 31, 1996 
  and 1997, respectively                                   -           620,000        145,000

Deferred taxes                                       680,000                 -              -


Deferred financing costs                                   -           325,000        262,000
Deferred offering costs                                    -                 -        766,000
Other assets                                          74,000           116,000        930,000
                                                ---------------   -------------   -----------
                                                $ 35,455,000       $35,178,000    $40,898,000
                                                ---------------   -------------   -----------
                                                ---------------   -------------   -----------


SEE ACCOMPANYING NOTES.

                                                 F-3


                                       Hawker Pacific Aerospace

                                       Balance Sheets (continued)

                                   LIABILITIES AND STOCKHOLDERS' EQUITY




                                                  PREDECESSOR              SUCCESSOR
                                                ---------------   ----------------------------
                                                  DECEMBER 31              DECEMBER 31
                                                     1995             1996             1997
                                                ---------------   ----------------------------
                                                                        

Current liabilities:
  Accounts payable                              $  2,536,000       $ 3,806,000    $ 6,946,000
  Accounts payable to affiliates                   1,365,000                 -              -
  Line of credit                                           -         5,329,000      8,529,000
  Deferred revenue                                 1,299,000         1,593,000        848,000
  Accrued payroll and employee benefits              511,000           809,000        812,000
  Environmental remediation                          234,000           657,000              -
  Accrued expenses and other liabilities           1,012,000           475,000        316,000
  Current portion of notes payable                 2,105,000           850,000      1,450,000
                                                ------------       -----------    -----------
Total current liabilities                          9,062,000        13,519,000     18,901,000

Due to parent and affiliates                      27,310,000                 -              -

Notes payable:
  Bank note                                                -        12,650,000     11,200,000
  Related party                                            -         6,500,000      6,500,000
                                                ------------       -----------    -----------
                                                           -        19,150,000     17,700,000


Commitments and contingencies



Stockholders' equity:
  Preferred stock - Series A, $5,000 per share 
   liquidation preference, non-voting, 400 
   shares authorized, issued and outstanding               -         2,000,000      2,000,000
  Common stock - 20,000,000 shares authorized, 
   2,870,603 and 2,972,222 shares issued and 
   outstanding at December 31, 1996 and 1997, 
   respectively                                      500,000            40,000      1,040,000
  Additional paid-in capital                       4,126,000                 -              -
  Retained earnings (deficit)                     (5,543,000)          469,000      1,257,000
                                                ------------       -----------    -----------
Total stockholders' equity (deficiency)             (917,000)        2,509,000      4,297,000
                                                ------------       -----------    -----------
Total liabilities and stockholders' equity 
  (deficiency)                                   $35,455,000       $35,178,000    $40,898,000
                                                ------------       -----------    -----------
                                                ------------       -----------    -----------


SEE ACCOMPANYING NOTES.

                                                 F-4


                                       Hawker Pacific Aerospace

                                       Statements of Operations



                                                          PREDECESSOR                                SUCCESSOR
                                               ---------------------------------        ----------------------------------        
                                                     YEAR           TEN MONTHS              TWO MONTHS        YEAR        
                                                     ENDED             ENDED                   ENDED          ENDED       
                                                  DECEMBER 31       OCTOBER 31              DECEMBER 31     DECEMBER 31 
                                                     1995              1996                    1996           1997
                                               ---------------   ---------------        ----------------   ---------------
                                                                                               

Revenues                                         $35,012,000       $32,299,000             $6,705,000       $41,042,000
Cost of revenues                                  28,993,000        27,027,000              4,599,000        31,430,000
                                                 -----------       -----------             ----------       -----------
Gross profit                                       6,019,000         5,272,000              2,106,000         9,612,000
                                                 -----------       -----------             ----------       -----------
                                                                                                           
Operating expenses:                                                                                        
  Selling expenses                                 2,858,000         2,248,000                525,000         3,191,000
  General and administrative expenses              1,979,000         2,796,000                534,000         2,706,000
  Restructuring charges                                    -         1,196,000                      -                 -
                                                 -----------       -----------             ----------       -----------
Total operating expenses                           4,837,000         6,240,000              1,059,000         5,897,000
                                                 -----------       -----------             ----------       -----------
Income (loss) from operations                      1,182,000          (968,000)             1,047,000         3,715,000

Other (expense) income:                                                                                    
  Interest expense                                (1,598,000)       (1,609,000)              (203,000)       (2,431,000)
  Interest income                                          -                 -                  7,000             3,000
  Other expense, net                                       -                 -                      -           (32,000)
                                                 -----------       -----------             ----------       -----------
Total other (expense) income                      (1,598,000)       (1,609,000)              (196,000)       (2,460,000)
                                                 -----------       -----------             ----------       -----------
Income (loss) before income                                                                                
  tax provision (benefit)                           (416,000)       (2,577,000)               851,000         1,255,000
Income tax provision (benefit)                      (680,000)         (971,000)               382,000           467,000
                                                 -----------       -----------             ----------       -----------
  Net income (loss)                               $  264,000       $(1,606,000)            $  469,000        $  788,000
                                                 -----------       -----------             ----------       -----------
                                                 -----------       -----------             ----------       -----------
Earnings per common share -                                                                                
  basic and diluted                                                                        $     0.15           $  0.25
                                                                                           ----------       -----------
Weighted average common                                                                    ----------       -----------
  and common equivalent                                                                                    
  shares outstanding                                                                        3,170,551         3,145,079
                                                                                           ----------       -----------
                                                                                           ----------       -----------


SEE ACCOMPANYING NOTES.

                                                    F-5



                                           Hawker Pacific Aerospace

                                 Statements of Changes in Stockholders' Equity





                                          Preferred Stock                 Common Stock           
                                      -------------------------     -----------------------       Retained
                                        Shares         Amount         Shares       Amount         Earnings        Total
                                      -----------    ----------     ----------  -----------      -----------   -----------
                                                                                            
                        
Balance at November 1, 1996                 -       $        -               -   $        -       $        -    $        -
Issuance of Preferred Stock               400        2,000,000               -            -                -     2,000,000
Issuance of Common Stock to                    
  founders                                  -                -       2,640,955            -                -             -
Issuance of Common Stock to                      
  management                                -                -         229,648       40,000                -        40,000
Net income for the period                   -                -               -            -          469,000       469,000
                                         ----       ----------       ---------   ----------       ----------    ----------
Balance at December 31, 1996              400        2,000,000       2,870,603       40,000          469,000     2,509,000
Issuance of Common Stock                    -                -         101,619    1,000,000                -     1,000,000
Net income for the year                     -                -               -            -          788,000       788,000
                                         ----       ----------       ---------   ----------       ----------    ----------
Balance at December 31, 1997              400       $2,000,000       2,972,222   $1,040,000       $1,257,000    $4,297,000
                                         ----       ----------       ---------   ----------       ----------    ----------
                                         ----       ----------       ---------   ----------       ----------    ----------


SEE ACCOMPANYING NOTES.

                                                     F-6


                                           Hawker Pacific Aerospace

                                           Statements of Cash Flows




                                                          PREDECESSOR                                SUCCESSOR
                                               ---------------------------------        ----------------------------------        
                                                     YEAR           TEN MONTHS              TWO MONTHS        YEAR        
                                                     ENDED             ENDED                   ENDED          ENDED       
                                                  DECEMBER 31       OCTOBER 31              DECEMBER 31     DECEMBER 31 
                                                     1995              1996                    1996           1997
                                               ---------------   ---------------        ----------------   ---------------
                                                                                               

OPERATING ACTIVITIES
Net income (loss)                                $   264,000       $(1,606,000)              $  469,000       $   788,000
Adjustments to reconcile net income (loss)                                                                   
  to net cash provided by (used in)                                                                          
  operating activities:                                                                                      
     Deferred income taxes                          (680,000)         (971,000)                 382,000           466,000
     Depreciation                                    680,000           525,000                  183,000           741,000
     Amortization                                    174,000           294,000                   17,000           463,000
     Non cash restructuring charge                         -           561,000                        -                 -
     Stock compensation                                    -                 -                   40,000                 -
     (Gain) loss on the sale of machinery,                                                                   
        equipment and landing gear                   332,000                 -                        -           (78,000)
     Changes in operating assets and liabilities:




       Accounts receivable                        (1,773,000)        1,771,000                 (103,000)       (1,036,000)
       Inventory                                  (4,433,000)        1,156,000                 (901,000)         (185,000)
       Prepaid expenses and other                                                                            
          current assets                            (101,000)          (72,000)                  21,000           104,000
       Accounts payable                             (397,000)       (2,681,000)               2,195,000           622,000
       Deferred revenue                            1,029,000           532,000                  115,000          (745,000)
       Accrued liabilities                           682,000           261,000                 (139,000)         (818,000)
                                                 -----------       -----------               ----------       -----------
       Cash provided by (used in) operating                                                                  
          activities                              (4,223,000)         (230,000)               2,279,000           322,000
                                                                                                             
INVESTING ACTIVITIES                                                                                         
Purchase of equipment, leasehold                                                                             
  improvements and landing gear                   (4,479,000)       (1,173,000)                (155,000)       (2,890,000)
Proceeds from disposals of equipment,                                                                        
  leasehold improvements and landing gear            350,000                 -                        -           250,000
Other assets                                          15,000           (26,000)                       -          (824,000)
Acquisition of Predecessor                                 -                 -              (28,398,000)                -
                                                 -----------       -----------               ----------       -----------
Cash used in investing activities                 (4,114,000)       (1,199,000)             (28,553,000)       (3,464,000)



                                                    F-7


                                         Hawker Pacific Aerospace
                                                                    
                                    Statements of Cash Flows (continued)
                                                                     
                                                                     


                                                          PREDECESSOR                                SUCCESSOR
                                               ---------------------------------        ----------------------------------        
                                                     YEAR           TEN MONTHS              TWO MONTHS        YEAR        
                                                     ENDED             ENDED                   ENDED          ENDED       
                                                  DECEMBER 31       OCTOBER 31              DECEMBER 31     DECEMBER 31 
                                                     1995              1996                    1996           1997
                                               ---------------   ---------------        ----------------   ---------------
                                                                                               
FINANCING ACTIVITIES
Borrowing under bank note                        $        -         $        -              $13,500,000     $        -
Principal payments on bank note                           -                  -                        -       (850,000)
Borrowing on note payable to related party                -                  -                6,500,000              -
Borrowings/payments on line of credit, net                -                  -               (1,287,000)     3,200,000
Initial borrowing under line of credit                    -                  -                6,616,000              -
Borrowings/payments on due to Parent and          8,010,000          2,193,000                        -              -
 affiliates (net)                                                                        
Deferred offering costs                                   -                  -                        -       (766,000)
Deferred financing cost                                   -                  -                        -       (337,000)
Issuance of preferred stock                               -                  -                2,000,000              -
Contributions to capital                                  -            242,000                        -      1,000,000
                                                -----------        -----------              -----------     ----------
Cash provided by financing activities             8,010,000          2,435,000               27,329,000      2,247,000
                                                                                         
Increase (decrease) in cash                        (327,000)         1,006,000                1,055,000       (895,000)
Cash, beginning of period                           726,000            399,000                        -      1,055,000
                                                -----------        -----------              -----------     ----------
Cash, end of period                              $  399,000         $1,405,000              $ 1,055,000     $  160,000
                                                -----------        -----------              -----------     ----------
                                                -----------        -----------              -----------     ----------

Supplemental disclosure of cash flow
 information:
  Cash paid during the period for:
    Interest                                     $1,574,000       $  1,279,000              $   193,000     $2,261,000
                                                -----------        -----------              -----------     ----------
                                                -----------        -----------              -----------     ----------
    Income taxes                                 $   44,000       $     20,000              $         -     $    3,000
                                                -----------        -----------              -----------     ----------
                                                -----------        -----------              -----------     ----------

Noncash investing and financing activities
Acquisition of Predecessor:
  Fair market value of assets acquired           $        -        $         -              $34,973,000     $        -
  Fair market value of liabilities assumed                -                  -               (5,170,000)             -
  Less cash received                                      -                  -               (1,405,000)             -
                                                -----------        -----------              -----------     ----------
Net cash paid                                    $        -        $         -              $28,398,000     $        -
                                                -----------        -----------              -----------     ----------
                                                -----------        -----------              -----------     ----------


SEE ACCOMPANYING NOTES.
                                                  F-8


                            Hawker Pacific Aerospace

                          Notes to Financial Statements

                               December 31, 1997 



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Hawker Pacific Aerospace, formerly known as Hawker Pacific, Inc. (the 
"Company") is a California Corporation with headquarters in Sun Valley, 
California, with satellite facilities in the Netherlands and, through May 31, 
1996, Miami, Florida. The Company repairs and overhauls aircraft and 
helicopter landing gear, hydromechanical components, and wheels, brakes and 
braking system components for a diverse international customer base, 
including commercial airlines, air cargo operators, domestic government 
agencies, aircraft leasing companies, aircraft parts distributors, and 
original equipment manufacturers. In addition, the Company distributes and 
sells new and overhauled spare parts and components for both fixed wing and 
helicopters. 

ORGANIZATION AND BASIS OF PRESENTATION

The Company operated as a subsidiary of BTR Dunlop Holdings, Inc., a Delaware 
Corporation, from December 21, 1994 to October 31, 1996. BTR Dunlop Holdings, 
Inc. was a subsidiary of BTR plc, a United Kingdom company (collectively, the 
"Parent").

Effective January 1, 1994, the Company merged its operations with certain 
operations of Dunlop Aviation, Inc., a subsidiary of the Parent. The merger 
was a combination of companies under common control and was accounted for 
similar to the pooling of interests method of accounting. 

Pursuant to an Agreement of Purchase and Sale of Stock, AqHawk, Inc. 
purchased all of the Company's outstanding stock from BTR plc effective as of 
November 1, 1996 (the "Acquisition"). AqHawk, Inc. was formed as a holding 
company for the sole purpose of acquiring the stock of the Company and was 
subsequently merged into the Company. The acquisition has been accounted for 
under the purchase accounting method. The aggregate purchase price was 
approximately $29,800,000, which includes the cost of the acquisition. The 
aggregate purchase price was allocated to the assets of the Company, based 
upon estimates of their respective fair market values. The excess of purchase 
price over the fair values of the net assets acquired was $1,019,000 and was 
recorded as goodwill. Goodwill has been subsequently reduced for the 
reduction of certain allowances on deferred taxes and amortization.

                                     F-9


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

The financial statements as of December 31, 1995 and for the year ended 
December 31, and 1995 and the ten months ended October 31, 1996 are presented 
under the historical cost basis of the Company, as a wholly owned subsidiary 
of BTR Dunlop Holdings, Inc., the predecessor Company (the "Predecessor"). 
The financial statements as of December 31, 1996 and 1997, and for the two 
months ended December 31, 1996 and the year ended December 31, 1997 are 
presented under the new basis of the successor company (the "Successor") 
established in the Acquisition.

On February 3, 1998, the Company completed an initial public offering (the 
"Offering") of 2,766,667 shares of the Company's common stock ("Common 
Stock"). Of the 2,766,667 shares of Common Stock sold in the Offering, 
2,600,000 shares were sold by the Company and 166,667 shares were sold by a 
principal shareholder of the Company. The principal shareholder sold 415,000 
additional shares of Common Stock pursuant to the exercise of an over 
allotment option granted to the underwriters by the principal shareholder. 
The Company received net proceeds of approximately $17.8 million net of 
expenses of approximately $3.0 million. The Company used approximately $9.2 
million of the net proceeds to fund a portion of the purchase price for 
certain assets of British Airways as discussed in Note 13, and approximately 
$7.6 million to repay a portion of the revolving and term debt previously 
outstanding under the Company's credit facility. 

In connection with the initial public offering, the Company effected a 
579.48618 for one stock split of the Company's Common Stock in November 1997 
and a one for .9907406 reverse stock split in January 1998. All references in 
the accompanying financial statements to the number of shares of Common 
Stock, per common share amounts have been retroactively adjusted to reflect 
the stock splits. All of the Company's Series A Preferred Stock were 
converted into an aggregate of 250,000 shares of common stock. In addition, 
the Company's capital structure was changed to reflect 20,000,000 shares of 
Common Stock and 5,000,000 shares of preferred stock authorized. The Board of 
Directors has authority to fix the rights, preferences, privileges and 
restrictions, including voting rights, of those shares without any future 
vote or action by the shareholders.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma information combines the results of 
operations of the Successor and Predecessor as if the Acquisition had 
occurred on January 1, 1996 and includes certain pro forma adjustments to the 
historical operating results for amortization of goodwill, depreciation and 
amortization of fixed assets and interest expense. The pro forma information 
is presented for illustrative purposes only, and is not necessarily 
indicative of what the actual results of operations would have been during 
such periods or representative of future operations.




                                                TWELVE MONTHS
                                                    ENDED
                                                 DECEMBER 31
                                                    1996
                                                -------------
                                                 (Unaudited)
                                             
                    Revenues                     $39,004,000
                    Net loss                      (1,523,000)
                    Net loss per share                 (0.48)



                                     F-10

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LANDING GEAR EXCHANGE

Landing gear and other rotable assets are accounted for as fixed assets at 
cost and are depreciated over their estimated useful lives to their 
respective salvage values. These assets include various airplane, wing, body 
and nose landing gear shipsets. Landing gear and other rotable assets are 
held for purposes of exchanging the assets for a customer's landing gear or 
other part needing repair or overhaul. As the landing gear is exchanged and 
the customer is billed for the cost of the repair, the landing gear or other 
parts are typically repaired and overhauled and maintained as property of the 
Company for future exchanges. The estimated useful lives range from 10 to 15 
years depending on the age of the aircraft and projected marketability of the 
exchange gear over time. Amortization expense is recorded as a component of 
cost of revenues using the straight-line amortization method.

RECOGNITION OF REVENUE

The Company generates revenue primarily from repair and overhaul services. In 
some cases repair and overhaul services include exchange fees for the 
exchange of the Company's landing gear or other parts for the customer's 
landing gear or other parts needing repair or overhaul services. The Company 
also generates revenues from the sale and distribution of spare parts.

Spare parts sales and exchange fee revenues are each individually less than 
10% of total revenues.

Revenues for repair and overhaul services not involving an exchange 
transaction are recognized when the job is complete. Deferred revenue is 
principally comprised of customer prepayments and progress billings related 
to the overhaul and repair of landing gear and other services which are in 
process. Revenues from spare parts sales are recognized at the time of 
shipment. Landing gear exchange fees are recognized on shipment of the 
exchanged gear to the customer. Revenues for repair and overhaul service 
involving an exchange are recognized when the cost of repairing the part 
received from the customer are known and billable. 

                                    F-11

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CONCENTRATIONS OF RISK

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK - The Company performs 
credit evaluations and analysis of amounts due from its customers; however, 
the Company generally does not require collateral. Credit losses have been 
within management's expectations and an estimate of uncollectible accounts 
has been provided for in the financial statements.

One customer accounted for 19.3% of the Company's total revenues for the year 
ended December 31, 1997 and represented 18.9% of the accounts receivable 
balance at December 31, 1997.

One customer accounted for 13.1% of the Company's total revenues for the two 
month period ended December 31, 1996 and represented 7.4% of the accounts 
receivable balance at December 31, 1996.

Revenues from two customers, who individually accounted for greater than 10% 
of total revenues, were 19.6% and 11.7%, respectively, of the Company's total 
revenues for the ten month period ended October 31, 1996.

Revenues from two customers, who individually accounted for greater than 10% 
of total revenues, were 17.1% and 10.0%, respectively, of the Company's total 
revenues for the year ended December 31, 1995 and accounted for 9.9% and 
11.3%, respectively, of the accounts receivable balance at December 31, 1995.

MAJOR VENDORS - Three vendors accounted for $9,283,000 of the Company's total 
purchases during the year ended December 31, 1997. 

Three vendors accounted for $1,901,000 of the Company's total purchases for 
the two month period ended December 31, 1996. 

Two vendors accounted for $7,030,000 of the Company's total purchases during 
the ten month period ended October 31, 1996.

One vendor accounted for $5,005,000 of the Company's total purchases for the 
year ended December 31, 1995.

                                     F-12

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost or market. Purchased parts and 
assemblies are valued based on the weighted average cost. Work-in-process 
inventories include purchased parts, direct labor and factory overhead. 
Provisions for potentially obsolete or slow moving inventory are made based 
on management's analysis of inventory levels, turnover and future revenue 
forecasts.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are recorded at cost. Depreciation 
expense is being provided using the straight-line method based on the 
following estimated useful lives:




                                         PREDECESSOR             SUCCESSOR
                                     ------------------     -------------------
                                                      
Leasehold improvements                Lesser of life of       Lesser of life of
                                       lease or asset           lease or asset
Machinery and equipment                  13.3 years                 8 years
Tooling                                  13.3 years                 5 years
Furniture and fixtures                      7 years                 5 years
Vehicles                                    5 years                 3 years
Computer equipment                          5 years                 3 years



Expenditures for repairs are expensed as incurred and additions, renewals and 
betterments are capitalized.

GOODWILL

In connection with the purchase of the Company by AqHawk, Inc. as previously 
described, the Company recorded goodwill which represents the excess of the 
purchase price over the estimated fair value of the net assets acquired. The 
Company is amortizing goodwill using the straight-line method over a period 
of 15 years. The Company assesses the recoverability of its goodwill whenever 
adverse events or changes in circumstances or business climate indicate that 
expected future cash flows for the business may not be sufficient to support 
recorded goodwill.

                                    F-13

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL (CONTINUED)

At December 31, 1996 and 1997, goodwill was reduced by $382,000 and $466,000, 
respectively, due to the realization of certain deferred tax assets and the 
corresponding reduction of the valuation allowance established in the 
allocation of the purchase price of the Acquisition.

FOREIGN REVENUES

The Company generated revenues from customers located outside of the United 
States of $5,616,000, $4,493,000, $1,517,000 and $11,856,000, of which 
$3,368,000, $2,887,000, $1,191,000 and $9,901,000 were revenues generated 
from the Company's United States location for the year ended December 31, 
1995, the ten months ended October 31, 1996, and the two months ended 
December 31, 1996 and the year ended December 31, 1997, respectively.

Realized and unrealized foreign exchange gains (losses) amounted to $161,000, 
$33,000, ($3,000) and $298,000 for the year ended December 31, 1995, the ten 
months ended October 31, 1996, the two months ended December 31, 1996 and the 
year ended December 31, 1997.

ENVIRONMENTAL EXPENSE AND INCOME RECOVERY

Included in general and administrative expense for the year ended December 
31, 1995, and the ten months ended October 31, 1996, is $717,000 and 
$947,000, respectively, of legal fees and settlement cost associated with 
investigating, defending and settling the environmental remediation matter 
discussed in Note 7. In addition, for the year ended December 31, 1995, 
general and administrative expense has been reduced by insurance recoveries 
of $1,000,000. There were no corresponding costs incurred in the two months 
ended December 31, 1996 or the year ended December 31, 1997.

EARNINGS PER SHARE

Earnings per common share are computed based on the weighted average number 
of shares outstanding during each period. The weighted average number of 
shares outstanding give effect to the stock split and conversion of preferred 
stock discussed in Note 1 as if they had occurred on November 1, 1996.

                                    F-14

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EARNINGS (LOSS) PER SHARE (CONTINUED)

During 1997, the Company adopted Statement of Financial Accounting Standards 
No. 128, "Earnings Per Share" ("SFAS No. 128"). Pursuant to SFAS No. 128, 
basic earnings (loss) per common share are computed based upon the weighted 
average number of common shares outstanding for the period. Diluted earnings 
per common share reflects the potential dilution that could occur if certain 
securities were exercised or converted into common stock. The adoption of 
SFAS No. 128 did not result in a restatement of earnings (loss) per common 
share for the periods presented in the financial statements. Basic earnings 
(loss) per share under SFAS No. 128 is the same as diluted earnings (loss) 
per share for all periods presented and includes 250,000 shares issued upon 
the conversion of the preferred stock discussed in Note 1, as if converted at 
the beginning of the period. The number of shares used in the calculation of 
basic and diluted earnings per share was 3,170,551 and 3,145,079 for the two 
months ended December 31, 1996 and the year ended December 31, 1997, 
respectively.

Options to purchase 374,937 shares of common stock at $8 per share (the 
initial public offering price) were outstanding during 1997 but were not 
included in the compulation of diluted earnings per share because the 
exercise price was greater than the average market price of the common shares 
and, therefore, the effect would be antidilutive.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments principally consist of accounts 
receivable, accounts payable, line of credit, note payable to a bank, and 
notes payable to a related party as defined by Statement of Financial 
Accounting Standards No. 107, "Disclosures About Fair Value of Financial 
Instruments." The carrying value of accounts receivable and accounts payable 
approximate of their fair value due to the short-term nature of these 
instruments. The carrying value of the line of credit and note payable to a 
bank approximates its fair market value since these financial instruments 
carry a floating interest rate. The fair market value of the note payable to 
a related party approximated its carrying value based on current market rates 
for such debt.

MANAGEMENT'S USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and disclosure of 
contingent assets and liabilities at the date of the financial statements. 
Actual results may differ from those estimates. 

                                    F-15

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


2. INVENTORIES 

Inventories are comprised of the following:





                                   PREDECESSOR             SUCCESSOR
                                  -------------    --------------------------
                                   DECEMBER 31             DECEMBER 31
                                      1995             1996          1997
                                  -------------    ------------  ------------
                                                        
Purchased parts and assemblies     $10,658,000      $ 9,722,000   $11,961,000
Work-in-process                      2,788,000        3,228,000     2,853,000
                                   -----------      -----------   -----------
                                   $13,446,000      $12,950,000   $14,814,000
                                   -----------      -----------   -----------
                                   -----------      -----------   -----------


3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements, at cost, consist of the following:



                                   PREDECESSOR             SUCCESSOR
                                  -------------    --------------------------
                                   DECEMBER 31             DECEMBER 31
                                      1995             1996          1997
                                  -------------    ------------  ------------
                                                        
Leasehold improvements              $1,331,000       $1,009,000    $1,575,000
Machinery and equipment              5,354,000        3,202,000     3,394,000
Tooling                                641,000          308,000       356,000
Furniture and fixtures                 342,000           72,000       199,000
Vehicles                                31,000           30,000        30,000
Computer equipment                   1,301,000          209,000       384,000
                                    ----------       ----------    ----------
                                     9,000,000        4,830,000     5,938,000
   Less: Accumulated depreciation    4,129,000          111,000       855,000
                                    ----------       ----------    ----------
                                    $4,871,000       $4,719,000    $5,083,000
                                    ----------       ----------    ----------
                                    ----------       ----------    ----------


4. INCOME TAXES

The tax provision of the Predecessor has been computed as if the Predecessor
filed a separate income tax return. For the period ending December 31, 1995, the
taxable income of the Predecessor was included in the consolidated Federal and
State tax returns of its Parent. Under a tax sharing arrangement with its
Parent, the Predecessor's deferred tax assets were expected to be recoverable
against the current or future earnings of the

                                    F-16

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


4. INCOME TAXES (CONTINUED)

Predecessor or its Parent. Accordingly, the deferred tax valuation allowance 
for certain deferred taxes recoverable through the consolidated tax return of 
the Parent was reduced resulting in a net deferred tax benefit for the year 
ended December 31, 1995.

For the two months ended December 31, 1996, and the year ended December 31, 
1997, the tax provision has been computed on a stand-alone basis. A full 
valuation allowance for the Successor's net deferred tax assets was provided 
at the Acquisition date as an adjustment to goodwill due to future 
uncertainty concerning the ultimate realization of the net deferred tax 
asset. To the extent the deferred tax assets of the Successor are realized 
the related reduction in the valuation allowance will be recorded as a 
reduction to goodwill until goodwill is eliminated and then as a reduction of 
income tax expense.

Deferred income taxes reflect the net tax effects of temporary differences 
between the carrying amounts of assets and liabilities for financial 
reporting purposes and the amounts used for income tax purposes. Significant 
components of the Company's deferred tax assets and liabilities are as 
follows:



                                             PREDECESSOR             SUCCESSOR
                                            -------------    --------------------------
                                             DECEMBER 31             DECEMBER 31
                                                1995             1996          1997
                                            -------------    ------------  ------------
                                                                  
Deferred tax assets:
  Net operating loss carryforwards            $ 3,026,000     $ 1,953,000   $3,013,000
  Inventory valuation accruals                    942,000       1,449,000      439,000
  Accounts receivable valuation accruals           17,000         131,000       64,000
  Environmental remediation accruals              102,000         285,000            -
  Employee benefits and compensation              135,000         195,000      169,000
  Product and service warranties                  109,000          82,000       70,000
  State tax credits                                     -               -      127,000
  Other items, net                                335,000         351,000       76,000
                                              -----------     -----------   ----------
Total deferred tax assets                       4,666,000       4,446,000    3,958,000
Less valuation allowance                       (1,824,000)     (1,427,000)    (659,000)
                                              -----------     -----------   ----------
Net deferred tax asset                          2,842,000       3,019,000    3,299,000


                                        F-17

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


4. INCOME TAXES (CONTINUED)



                                             PREDECESSOR             SUCCESSOR
                                            -------------    --------------------------
                                             DECEMBER 31             DECEMBER 31
                                                1995             1996          1997
                                            -------------    ------------  ------------
                                                                  
Deferred tax liabilities:
  Depreciation and amortization 
    methods                                    $1,977,000      $2,474,000   $2,789,000
  Property, equipment and landing gear
    exchange asset basis adjustments                    -         445,000      445,000
  Other items, net                                185,000         100,000       65,000
                                               ----------      ----------   ----------
Total deferred tax liabilities                  2,162,000       3,019,000    3,299,000
                                               ----------      ----------   ----------
Net deferred tax asset after allowance         $  680,000      $        -   $        -
                                               ----------      ----------   ----------
                                               ----------      ----------   ----------


Significant components of the provision for taxes based on income are
as follows:



                                            PREDECESSOR                                SUCCESSOR
                                 ---------------------------------    ----------------------------------        
                                       YEAR           TEN MONTHS          TWO MONTHS          YEAR 
                                       ENDED             ENDED               ENDED            ENDED 
                                    DECEMBER 31       OCTOBER 31          DECEMBER 31      DECEMBER 31 
                                       1995              1996                1996             1997
                                 ---------------   ---------------    ----------------   --------------
                                                                             
Current:
  Federal                            $       -         $                    $      -        $       -
  State                                      -                 -                   -            1,000
                                     ---------         ---------            --------        ---------
                                             -                 -                   -            1,000
Deferred:
  Federal                             (504,000)         (746,000)            277,000          466,000
  State                               (176,000)         (225,000)            105,000                -
                                     ---------         ---------            --------        ---------
                                      (680,000)         (971,000)            382,000          466,000
                                     ---------         ---------            --------        ---------
(Benefit) provision for taxes        $(680,000)        $(971,000)           $382,000         $467,000
                                     ---------         ---------            --------        ---------
                                     ---------         ---------            --------        ---------


The tax provision (benefit) for the year ended December 31, 1995, includes a 
benefit of $525,000, resulting from the reduction of the deferred tax 
valuation allowance.

For the two months ended December 31, 1996 and the year ended December 31, 
1997, reductions of the valuation reserve of approximately $382,000 and 
$466,000, respectively, resulted in equivalent reductions of goodwill. For 
the year ended December 31, 1997 deferred tax assets of $302,000, were 
determined not to be realizable and were charged directly against the 
valuation allowance.

                                    F-18

                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


4. INCOME TAXES (CONTINUED)

A reconciliation of the statutory federal income tax rate to the effective tax
rate, as a percentage of income before tax, is as follows:



                                                    PREDECESSOR                                SUCCESSOR
                                         ---------------------------------    ----------------------------------        
                                               YEAR           TEN MONTHS          TWO MONTHS          YEAR 
                                               ENDED             ENDED               ENDED            ENDED 
                                            DECEMBER 31       OCTOBER 31          DECEMBER 31      DECEMBER 31 
                                               1995              1996                1996             1997
                                         ---------------   ---------------    ----------------   --------------
                                                                                    
Statutory federal income tax rate              (34)%             (34)%                34%               34%
Nondeductible expenses                          13                 2                    3                3
State income taxes, net of                                                          
  federal benefit                               (4)               (6)                   8                -
Decrease in valuation reserve                 (139)                -                    -                -
                                           -------            ------                 ----              ----
Effective tax rate                            (164)%             (38)%                 45%               37%
                                           -------            ------                 ----              ----
                                           -------            ------                 ----              ----



The Company has net operating loss carryforwards for federal tax purposes of 
$7,892,000 which expire in the years 2007 to 2012. The Company also has state 
net operating loss carryforwards of $3,548,000 which expire in the years 1999 
to 2002. Utilization of the net operating losses may be limited as a result 
of limitations due to changes in ownership.

5. SUCCESSOR LINES OF CREDIT AND NOTES PAYABLE

The Company has a revolving line of credit agreement with a bank which 
permits borrowings up to the lesser of $10,000,000 or a borrowing base of 85% 
of accounts receivable plus the lesser of $6,000,000 or 50% of the value of 
acceptable inventory. The line of credit agreement also includes a facility 
for up to $2,000,000 in letters of credit. The line of credit expires 
November 30, 1999, and bears interest at either the "offshore rate" plus 1.5% 
or the bank's reference rate, at the option of the Company. The weighted 
average interest rate on borrowing outstanding under the line of credit was 
7.56% at December 31, 1997. The Company had available borrowings of $427,000 
at December 31, 1997 under this agreement. 

The line of credit agreement contains certain covenants which include, but 
are not limited to, quick ratio, fixed charge coverage ratio, profitability, 
and dividend and capital investment limitations. The line of credit is 
collateralized by all personal property of the Company and guaranteed by a 
Shareholder of the Company. 

                                    F-19


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


5. SUCCESSOR LINES OF CREDIT AND NOTES PAYABLE (CONTINUED)

The Company also has a shipset purchase line of credit from a bank up to 
$3,000,000 to finance a portion of the purchase price for landing gear used 
in the ordinary course of business. This line is payable in monthly 
installments equal to one eighty fourth of the initial amount of the loan 
plus interest at either the offshore rate plus 1.875% or at the bank's 
reference rate, subject to the same terms and conditions as the bank line of 
credit. The shipset purchase line of credit matures November 30, 1998. At 
December 31, 1996 and 1997, there were no amounts outstanding under the 
shipset purchase line of credit. 

On February 3, 1998, the Company completed its Amended Loan Agreement with 
Bank of America. This agreement increases the credit available to the Company 
from $26.5 million to $45.5 million. The Amended Loan Agreement provides the 
Company with a $15 million revolving line of credit, subject to limitations 
based on collateral, a $24.5 million dollar term loan and a $6 million 
capital expenditure facility. The revolving line of credit matures in three 
years, and the term loan and capital expenditure facilities mature in seven 
years. At the Company's election, the rate of interest on each of the three 
facilities is either Bank of America's reference rate or the interbank 
eurodollar rates on either the London market or the Cayman Islands market.

The Company's note payable balance consists of the following:




                                                           DECEMBER 31
                                                       1996            1997
                                                  --------------  --------------
                                                            
Note payable to a bank, payable in quarterly
 installments increasing from $212,500 in 1997
 to $625,000 in 2002, plus interest at either
 the offshore rate plus 1.875% or the bank's
 reference rate, subject to the same terms and 
 conditions as the line of credit, maturing
 December 31, 2003. The interest rate in effect
 at December 31, 1997 was 7.6%                      $13,500,000      $12,650,000

Note payable to related party, interest accrues
 monthly at 11.8% per annum, interest payments
 due monthly equal to the lesser of the accrued
 interest or excess cash flow as defined, 
 subordinated to the line of credit, term loan
 and capital expenditure loan, quarterly
 principal payments of $700,000 scheduled to begin
 in January 2004, through December 2006.              6,500,000        6,500,000
                                                    -----------      -----------
                                                     20,000,000       19,150,000
Less current portion                                    850,000        1,450,000
                                                    -----------      -----------
                                                    $19,150,000      $17,700,000
                                                    -----------      -----------
                                                    -----------      -----------


                                     F-20


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


5. SUCCESSOR LINES OF CREDIT AND NOTES PAYABLE (CONTINUED)

Maturity of notes payable as of December 31, 1997, is summarized as follows:

                        
                1998                       $1,450,000
                1999                        1,700,000
                2000                        2,250,000
                2001                        2,250,000
                2002                        2,500,000
                2003 and thereafter         9,000,000
                                          -----------
                                          $19,150,000
                                          -----------
                                          -----------



                

The Company entered into an interest rate swap agreement (the "Swap 
Agreement") to reduce the impact of changes in interest rates in its floating 
rate long term debt. The Swap Agreement dated January 13, 1997 has an initial 
notional amount of $6,750,000 reducing to $2,781,000 through the expiration 
date of December 31, 2001. The Company is required to pay interest on the 
notional amount at the rate of 6.65% and receives from the bank a percentage 
of the notional amount based on a floating interest rate. The Swap Agreement 
effectively reduces its interest rate exposure to a fixed rate of 6.65% on 
the notional amount. The notional amount at December 31, 1997 was $6,325,000. 
The floating interest rate in effect under the Swap Agreement at December 31, 
1997 was 5.87%. The Swap Agreement had a negative fair market value of 
$128,000 at December 31, 1997.

With the Amended Loan Agreement the Company entered into another interest 
rate swap agreement (the "Swap Agreement") to reduce the impact of changes in 
interest rates in its floating-rate long-term debt. The Swap Agreement dated 
February 19, 1998 has an initial notional amount of $14,700,000 reducing to 
$8,550,000 through the expiration date of March 28, 2002. The Company is 
required to pay interest on the notional amount at the rate of 6.39% and 
receives from the bank a percentage of the notional amount based on a 
floating interest rate. The Swap Agreement effectively reduces its interest 
rate exposure to a fixed rate of 6.39% of the notional amount. The floating 
interest rate in effect under the Swap Agreement is 5.625%.

6. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases its facilities, certain office equipment and a vehicle 
under operating lease agreements, which expire through May 2010 and contain 
certain escalation clauses based on various inflation indexes. Future minimum 
rental payments as of December 31, 1997, are summarized as follows:

                                    F-21


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


6. COMMITMENTS AND CONTINGENCIES (CONTINUED)

OPERATING LEASES (CONTINUED)

                         
                1998                        $ 1,165,000
                1999                          1,158,000
                2000                          1,158,000
                2001                          1,165,000
                2002                          1,120,000
                2003 and thereafter           5,621,000
                                            -----------
                                            $11,387,000
                                            -----------
                                            -----------



                

The Company entered into a 13-year operating lease for additional office 
space and warehouse facilities during July 1997. In addition, significant 
leasehold improvement costs were incurred during the year ended December 31, 
1997.

The Company incurred rent expense of approximately $980,000, $586,000, 
$109,000 and $795,000 for the year ended December 31, 1995, the ten months 
ended October 31, 1996, the two months ended December 31, 1996, and the year 
ended December 31, 1997, respectively.

EMPLOYMENT AGREEMENTS

The Company is obligated under certain management employment contracts 
through October 31, 2001. Future minimum salary expense related to these 
contracts are summarized as follows:

               
                        1998              $  575,000
                        1999                 575,000
                        2000                 200,000
                        2001                 200,000
                                          ----------
                                          $1,550,000
                                          ----------
                                          ----------



                        

ENVIRONMENTAL REMEDIATION
                    
During 1993, the Company and other parties became defendants in a United 
States Environmental Protection Agency and State of California lawsuit (the 
"Plaintiffs") alleging violations of certain environmental regulations 
related to the contamination of ground water in the San Fernando Valley Basin 
that resulted from the release of

                                    F-22



                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


hazardous substances. During 1996, the Company recorded additional reserves 
related to this matter 



                                    F-23


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


6. COMMITMENTS AND CONTINGENCIES (CONTINUED)

ENVIRONMENTAL REMEDIATION (CONTINUED)

for total reserves of $657,000 at October 31, 1996 and December 31, 1996. The 
Company has been indemnified by BTR plc for any claims related to this matter 
in excess of the amount recorded. The amount recorded at December 31, 1996 
represented the Company's portion of a settlement that was reached with the 
Plaintiffs during 1997.

LITIGATION

The Company is involved in various lawsuits, claims and inquiries, which the 
Company believes are routine to the nature of the business. In the opinion of 
management, the resolution of these matters will not have a material adverse 
effect on the financial position, results of operations or cash flows of the 
Company.

7. RELATED PARTY TRANSACTIONS

SALES AND PURCHASES

The Predecessor Company generated revenue and purchased goods and services 
from its Parent and various subsidiaries of its Parent (collectively the 
Affiliates). Certain long term purchase agreements with the Affiliates have 
continued under the Successor company.

Total revenues for the year ended December 31, 1995 and the ten months ended 
October 31, 1996 from the Affiliates were approximately $552,000 and 
$331,000, respectively.

Total purchases for the year ended December 31, 1995 and the ten months ended 
October 31, 1996 from the affiliates were approximately $6,820,000 and 
$5,437,000, respectively.

In the ordinary course of business, the Successor pays sales commissions to a 
company which is also a shareholder of the Successor. During the period from 
January 1, 1997 through December 31, 1997, the Successor paid $556,000 of 
commissions and reimbursed expenses to this related party.

                                    F-24


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


7. RELATED PARTY TRANSACTIONS (CONTINUED)

NOTES PAYABLE TO RELATED PARTY

As more fully described in Note 5, the Successor is subject to a note payable 
to a company controlled by shareholders of the Successor for $6,500,000 which 
is included in notes payable on the balance sheets. Interest expense on this 
note payable for the two months ended December 31, 1996 and the year ended 
December 31, 1997 amounted to $74,000 and $767,000, respectively.

DUE TO PARENT AND AFFILIATES

The Predecessor generally funded its operations through borrowings from the 
Parent through October 31, 1996. The Predecessor made payments against such 
borrowings based on cash availability although there were no contractual 
payment terms. Amounts classified as current in the balance sheet at December 
31, 1995 represent the estimated amount of the borrowing paid from working 
capital as of December 31, 1995. During the year ended December 31, 1995 and 
the ten months ended October 31, 1996, the weighted average interest rate was 
5.6% and 4.9%, respectively. During the year ended December 31, 1995 and the 
ten months ended October 31, 1996, the average borrowings outstanding on the 
due to Parent and affiliates were approximately $28,624,000 and $32,978,000, 
respectively, and Company recognized interest expense on borrowings from its 
Parent and affiliates of $1,598,000, and $1,609,000, respectively. All 
borrowing amounts due to Parent and affiliates were settled in connection 
with the November 1, 1996 acquisition of the Company.

MANAGEMENT FEE

The Company has an agreement (the "Old Management Agreement") with Unique 
Investment Corporation ("UIC") to pay a management fee of $25,000 per month. 
Certain shareholders of the Company are related parties to UIC. The Company 
paid $50,000 to UIC during the period from November 1, 1996 through December 
31, 1996, and $300,000 during the period from January 1, 1997 through 
December 31, 1997.

In September 1997, the Company and Unique entered into a new management 
services agreement (the "New Management Services Agreement") pursuant to 
which, upon the consummation of the anticipated Offering, the Old Management 
Agreement will be terminated, and Unique will be entitled to receive $150,000 
per year payable monthly commencing in January 1999 for certain management 
services rendered to the Company. 

                                    F-25



                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


7. RELATED PARTY TRANSACTIONS (CONTINUED)

MANAGEMENT FEE (CONTINUED)

The New Management Services Agreement will terminate upon the Company 
completing an underwritten public offering in which selling shareholders 
offer 25% or more of the Common Stock sold in such offering.

In September 1997, the Company also entered into a mergers and acquisitions 
agreement with Unique pursuant to which Unique is entitled to receive 
$300,000 upon the closing of the BA Acquisition for services provided in 
connection with the acquisition.

PARENT COMPANY ALLOCATION OF EXPENSES

The Predecessor received a charge from its Parent for certain insurance 
(i.e., workers' compensation, product liability, group medical, etc.) and 
employee benefit program expenses that were contracted and paid by the Parent 
and allocated to the various subsidiaries. Management believes these 
allocations approximate the amounts that would have been incurred had the 
Predecessor operated on a stand-alone basis. Included in general and 
administrative expense and cost of revenues is $436,000 and $1,504,000 for 
the year ended December 31, 1995 and the ten months ended October 31, 1996, 
respectively, of costs charged to the Predecessor by the Parent for these 
programs.

WARRANTY REIMBURSEMENT FROM PARENT

The Predecessor had an arrangement with the Parent whereby certain warranty 
costs incurred by the Predecessor for the failure of parts purchased from the 
Parent or its affiliates were reimbursed to the Predecessor. For the year 
ended December 31, 1995, the Predecessor received $184,000 for reimbursement 
of warranty costs incurred by the Predecessor.

8. STOCK OPTION PLAN

In November 1997, the Board of Directors adopted the Company's 1997 Stock 
Option Plan (the "1997 Plan"). The 1997 Plan, provides for the grant of 
options to directors, officers, other employees and consultants of the 
Company to purchase up to an aggregate of 634,514 shares of Common Stock. The 
purpose of the 1997 Plan is to provide participants with incentives that will 
encourage them to acquire a proprietary interest in, 

                                    F-26


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


8. STOCK OPTION PLAN (CONTINUED)

and continue to provide services to, the Company. Options granted under the 
1997 Plan may be "incentive stock options" as defined in Section 422 of the 
Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified 
options.

The exercise price of any incentive stock options granted may not be less 
than 100% of the fair market value of Common Stock as of the date of grant 
(110% of the fair market value if the grant is to an employee who owns more 
than 10% of the total combined voting power of all classes of capital stock 
of the Company). Nonqualified options may be granted under the 1997 Plan at 
an exercise price of not less than 85% of the fair market value of the Common 
Stock on the date of grant. Options may not be exercised more than ten years 
after the date of grant (five years after the date of grant if the grant is 
an incentive stock option to an employee who owns more than 10% of the 
total combined voting power of all classes of capital stock of the Company). 
The number of options outstanding and the exercise price thereof are subject 
to adjustments in the case of certain transactions such as mergers, 
recapitalizations, stock splits or stock dividends.

In November 1997, the Board of Directors of the Company granted six-year 
options to purchase 259,572 shares of Common Stock under the 1997 Plan. All 
of these options are exercisable at the initial public offering price per 
share. The options generally will be subject to vesting and will become 
exercisable at a rate of 5% per quarter from the date of grant, subject to 
the optionee's continuing employment with the Company. Certain options become 
fully vested and exercisable upon a change in control as defined.

In addition, in November 1997, the Board of Directors granted five-year 
management stock options to purchase an aggregate of 115,365 shares of Common 
Stock. All of these options are vested and are exercisable at the initial 
public offering price per share.

9. EMPLOYEE BENEFIT PLANS

Effective January 1, 1997, the Company adopted a defined benefit pension plan 
(the 1997 Plan) to provide retirement benefits to its employees. This 
non-contributory plan covers substantially all employees of the Company as of 
the effective date of the plan. Pursuant to plan provisions, normal monthly 
retirement benefits are equal to the participant's credited benefit service 
(up to a maximum of 35 years) times the sum of 0.75% of the participant's 
final average monthly compensation plus 0.65% of such compensation in excess 
of the participant's covered average monthly wage. The plan also provides for 
early retirement and certain death and disability benefits. The Company's 
funding policy

                                    F-27


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


9. EMPLOYEE BENEFIT PLANS (CONTINUED)

for the plans is to contribute amounts sufficient to meet the minimum funding 
requirements of the Employee Retirement Income Security Act of 1974, plus any 
additional amounts which the Company may determine to be appropriate.

For the year ended December 31, 1995 the Company recorded net periodic 
pension expense of $166,000 and during the ten months ended October 31, 1996 
the Company recorded a net periodic pension expense of $234,000 as part of 
the allocated charges from the Parent.

The net pension cost for Company-sponsored defined benefit pension plan for 
the year ended December 31, 1997 included the following components:



        
                                                  SUCCESSOR
                                                -------------
                                                  YEAR ENDED
                                                  DECEMBER 31
                                                     1997
                                                -------------
                                              
                Service cost                       $ 94,000
                Interest cost                        54,000
                Net amortization and deferral        34,000
                                                   --------
                Net pension cost                   $182,000
                                                   --------


                                    F-28


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)


9. EMPLOYEE BENEFIT PLANS (CONTINUED)

The reconciliation of the funded status of the defined benefit pension plan 
is as follows:



                                                              SUCCESSOR
                                                            -------------
                                                              YEAR ENDED
                                                              DECEMBER 31
                                                                 1997
                                                            -------------
                                                         
    Actuarial present value of benefits:
    Vested benefits                                          $  (159,000)
    Nonvested benefits                                          (101,000)
                                                             -----------
    Accumulated benefit obligation                              (260,000)
    Effect of projected future compensation increases           (780,000)
                                                             -----------
    Projected benefit obligation                              (1,040,000)
    Fair value of plan assets                                          -
                                                             -----------
    Projected benefit obligation in excess of plan assets     (1,040,000)
    Unrecognized prior service cost                              745,000
    Unrecognized net losses                                      113,000
    Minimum pension liability                                    (78,000)
                                                             -----------
    Pension liability                                         $ (260,000)
                                                             -----------
                                                             -----------


The Company made no contributions to the Plans during the year ended December 
31, 1997.

The assumptions used in the determination of the net pension cost for the 
defined benefit pension plan were as follows:



                                                        1997
                                                        ----
                                                     
          Discount rate                                   7%
          Rate of increase in compensation levels         3%
          Expected long-term rate of return on assets     7%


Effective January 1, 1997, the Company also adopted a defined contribution 
401(k) retirement savings plan which covers substantially all employees of 
the Company. Plan participants are allowed to contribute up to 15% of their 
base annual compensation and are entitled to receive a company match equal to 
50% of the participant's contribution up to a maximum of 6% of the 
participant's annual base compensation. Participant contributions to the plan 
are immediately fully vested while company matching contributions are subject 
to a five-year vesting period. All contributions to the plan are 

                                    F-29



                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)

9. EMPLOYEE BENEFIT PLANS (CONTINUED)

held in a separate trust account. During the year ended December 31, 1997, 
the Company's matching contribution amounted to $137,000. This amount was 
expensed during the period and is included in the statement of operations.

10. RESTRUCTURING CHARGES

The Predecessor closed its facility in Miami, Florida during May 1996. This 
closure and the transfer of certain fixed assets and inventory to the Sun 
Valley, California facility resulted in a nonrecurring restructuring charge 
of $1,196,000 in the statement of operations for the ten months ended October 
31, 1996. The nonrecurring charge primarily includes costs incurred related 
to fixed and other asset write-offs of approximately $600,000, payroll and 
severance of approximately $190,000, moving and integration costs of 
approximately $243,000 and the balance for facility and other charges. 
Additionally, the Company recorded Miami related inventory write-offs of 
approximately $489,000, which were charged to cost of sales during the ten 
months ended October 31, 1996. Revenues and operating income of Miami, 
Florida operations which will not be continued were approximately as follows 
for the year ended December 31, 1995 and the ten months ended October 31, 
1996:



                                             1995            1996
                                          ----------      ----------
                                                    
           Revenue                        $7,404,000      $2,049,000
           Operating income (loss)           (74,000)        (40,000)



11. STOCKHOLDERS EQUITY

Aqhawk, Inc., was formed on November 1, 1996 with the issuance of 400 shares 
of Series A Preferred Stock to an individual for $2,000,000 and the issuance 
of 5,741,206 shares of Common Stock to the same individual, certain 
shareholders of UIC and management of the Company. Effective November 1, 1996 
Aqhawk, Inc., merged with the Company through the issuance of 2,870,603 
shares of Common Stock of the Company in exchange for the 5,741,206 shares of 
Common Stock of Aqhawk, Inc., and the issuance of 400 shares of Series A 
Preferred Stock of the Company for 400 shares of Preferred Stock of Aqhawk, 
Inc. A value of $40,000 was assigned to 229,648 shares of Common Stock issued 
to management and such amount was expensed as compensation expense in the two 
months ended December 31, 1996. 

In 1997 the Company received $1,000,000 for the issuance of 101,619 shares of

                                    F-30


                           Hawker Pacific Aerospace

                    Notes to Financial Statements (continued)

11. STOCKHOLDERS EQUITY (CONTINUED)

the Company's Common Stock. The capital infusion was made pursuant to an 
agreement under which the majority shareholder had agreed to provide to the 
Company up to $1,000,000 in return for Common Stock. The Series A Preferred 
Stock was converted into 250,000 shares of Common Stock in connection with 
the Company's initial public offering.

12. NON-MONETARY EXCHANGE TRANSACTION

During the year ended December 31, 1997, the Company sold certain landing 
gear with a book value of $1,240,000 for a different landing gear valued at 
$1,800,000 and cash of $250,000. In connection with the exchange transaction 
the Company recognized profit of $78,000 during the year ended December 31, 
1997, representing the pro rata portion of the gain associated with the cash 
received. The landing gear received in the exchange was recorded in the 
amount of $1,068,000.

13. SUBSEQUENT EVENTS

ACQUISITION OF CERTAIN ASSETS OF BRITISH AIRWAYS

On February 4, 1998 (the "Acquisition Date"), the Company completed its 
acquisition of certain assets of British Airways ("BA Assets"). The BA Assets 
represent the assets of British Airways Engineering used to service landing 
gear primarily on British Airways' aircraft. The purchase price for the BA 
Assets was approximately $18.5 million subject to adjustment to reflect 
certain changes to the quantity and condition of the assets purchased and the 
potential purchase of one landing gear shipset priced at approximately $2.9 
million. As part of the BA Acquisition, the Company and British Airways 
entered into a seven-year exclusive service agreement on February 4, 1998 for 
the Company to provide landing gear and related repair and overhaul services 
to substantially all of the aircraft currently operated by British Airways.

                                    F-31


                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                     HAWKER PACIFIC AEROSPACE



                                     By  /s/ Scott W. Hartman
                                        ---------------------------
                                        Scott W. Hartman
                                        CHAIRMAN OF THE BOARD
Date:  March 25, 1998


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

                                                              
     SIGNATURE                  TITLE                              DATE
     ---------                  -----                              ----
/s/Scott W. Hartman
- - ---------------------------     Chairman of the Board         March 25, 1998
Scott W. Hartman

/s/David L. Lokken
- - ---------------------------     President, Chief Executive    March 25, 1998
David L. Lokken                 Officer and Director
                                (Principal Executive
                                Officer)

/s/Brian S. Aune
- - ---------------------------     Vice President and Chief      March 25, 1998
Brian S. Aune                   Financial Officer (Principal
                                Financial and Accounting
                                Officer)

/s/Daniel J. Lubeck
- - ---------------------------     Secretary and Director        March 25, 1998
Daniel J. Lubeck

/s/John G. Makoff
- - ---------------------------     Director                      March 25, 1998
John G. Makoff

/s/Joel F. McIntyre
- - ---------------------------     Director                      March 25, 1998
Joel F. McIntyre

/s/Daniel C. Toomey, Jr.
- - ---------------------------     Director                      March 25, 1998
Daniel C. Toomey, Jr.

/s/Mellon C. Baird
- - ---------------------------     Director                      March 25, 1998
Mellon C. Baird

EX-10.15A

                                                                  Exhibit 10.15A

                      FIRST AMENDMENT TO LEASE AGREEMENT


     This First Amendment (this "Amendment") is entered into as of 
December 15, 1997 by and between Industrial Centers Corp. ("Lessor") and 
Hawker Pacific Aerospace (formerly Hawker Pacific, Inc.), a California 
corporation ("Lessee"), in order to amend that certain Lease Agreement, dated 
March 31, 1997 (the "Lease"), between Lessor and Lessee as herein set forth:

     12. ASSIGNMENT AND SUBLETTING. Section 12.1(b) is hereby amended to read 
in its entirety as follows:

     "(b) A change in control of Lessee shall constitute an assignment 
requiring consent. The transfer, on a cumulative basis of twenty-five percent 
(25%) or more of the voting control of Lessee, other than any bona-fide 
underwritten public offering of Lessee's securities registered under the 
Securities Act of 1933, as amended, or any securities issued pursuant to 
Lessee's employee stock option plans, shall constitute a change in control 
for this purpose."

     IN WITNESS WHEREOF, this Amendment is executed as of the date first 
above written.

                                       LESSOR:
                                       Industrial Centers Corp.


                                       By: /s/ Bradley D. Howard
                                          ----------------------------------

                                       Name:   Bradley D. Howard
                                            --------------------------------

                                       Title:  President
                                             -------------------------------


                                       LESSEE:
                                       HAWKER PACIFIC AEROSPACE


                                       By: /s/ Brian S. Aune
                                          ----------------------------------
                                           Brian S. Aune
                                           Chief Financial Officer

EX-10.19

                  AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE


            THIS INSTRUMENT IS SUBJECT TO A DEBT SUBORDINATION AGREEMENT
               IN FAVOR OF BANK OF AMERICA NATIONAL TRUST AND SAVINGS
                         ASSOCIATION DATED JANUARY 23, 1998.



$5,000,000                                             Orange County, California
                                                                February 3, 1998


     FOR VALUE RECEIVED, the undersigned, Hawker Pacific Aerospace, a
California corporation ("Borrower"), promises to pay to Unique Investment
Corporation, a California corporation ("Lender"), or order, at such place as
Lender from time to time may designate, the principal sum of Five Million
Dollars ($5,000,000), together with interest on the unpaid principal balance as
set forth herein, with principal and interest payable at the times and in the
manner set forth in this Note.  Reference is made to the Amended and Restated
Business Loan Agreement, dated January 23, 1998 (the "Loan Agreement"), between
Borrower and Bank of America National Trust and Savings Association ("Bank").
This Amended and Restated Subordinated Promissory Note is the Subordinated Note
referred to in the Loan Agreement.

     1.   MATURITY.  The entire unpaid principal balance of this Note shall be
due and payable on the earlier of (i) 180 days after the termination of the Loan
Agreement or (ii) June 30, 2005 (the "Maturity Date").

     2.   INTEREST.  Interest on the unpaid balance of this Note shall accrue at
the rate of 11.8% per annum from the date hereof through the Maturity Date, and
shall accrue on the basis of actual days based on a 365-day year.  Interest
shall be payable monthly in arrears on the tenth day of each calendar month;
provided, however, the first such payment shall be for the period commencing as
of the date hereof and ending on February 28, 1998.

     3.   NO PREPAYMENT PENALTY.

     At no time shall Borrower be charged a prepayment penalty or yield
maintenance fee of any kind.

     4.   BLOCKING RIGHTS.

     During the period commencing on the date hereof and ending upon the
Maturity Date, should an Event of Default (as defined in the Loan Agreement)
occur under the Loan Agreement, Bank shall have the right by delivering written
notice thereof to Borrower and




Lender to (i) block all payments hereunder and (ii) to prevent Lender from
exercising any of its rights and remedies hereunder in the event of such
blockage of payments all as set forth in the Subordination Agreement, dated as
of the date hereof, between Borrower, Lender, Bank, Melanie L. Bastian, and
Hawker Pacific Aerospace Limited.

     5.   DEFAULT.

     In the event of any default in the performance or observance of any
covenant or obligation of Borrower under this Note, Lender may elect, without
notice or demand to Borrower, to declare all principal and accrued and unpaid
interest under this Note immediately due and payable.  Any failure of Lender to
make such election following a default or defaults shall not constitute a waiver
of Lender's right to make the election in the event of any subsequent default.

     6.   LATE PAYMENT CHARGE.

     If any payment under this Note (whether of principal or interest or both,
and including the payment due on the Maturity Date or upon any acceleration of
this Note) is not paid within ten (10) days after the date on which it is due,
Borrower shall pay to Lender, in addition to the delinquent payment and without
any requirement of notice or demand by Lender, a late payment charge equal to
two percent (2%) of the amount of the delinquent payment.  Borrower expressly
acknowledges and agrees that the foregoing late payment charge is reasonable
under the circumstances existing on the date of this Note, that it would be
extremely difficult and impractical to fix Lender's actual damages arising out
of any late payment and that the foregoing late payment charge shall be presumed
to be the actual amount of such damages incurred by Lender.  No provision in
this Note (including without limitation the provisions for a late payment
charge) shall be construed as in any way excusing Borrower from its obligation
to make each payment under this Note promptly when due.  All payments made
hereunder shall be applied first to late payment charges and accrued but unpaid
interest until all such charges and interest are paid, and then to principal.

     7.   COSTS OF COLLECTION.

     Borrower agrees to pay all costs and expenses incurred by Lender, including
without limitation attorneys' fees and costs, in the event (i) this Note or any
portion of this Note is placed for collection; (ii) suit is instituted to
collect this Note or any portion of this Note; (iii) any bankruptcy, insolvency,
reorganization proceeding or receivership involving Borrower or any affiliate of
Borrower occurs in which Lender is required to appear, or from which Lender is
required to seek relief; and/or (iv) Lender


                                          2.



is required to engage an attorney to cause Borrower to comply with any of the
provisions hereof.

     8.   CERTAIN WAIVERS.

     Borrower and all endorsers jointly and severally waive diligence, grace,
demand, presentment for payment, exhibition of this Note, protest, notice of
protest, notice of dishonor, notice of demand, notice of nonpayment, and any and
all exemption rights against the indebtedness evidenced by this Note, and agree
to any and all extensions or renewals from time to time without notice and to
any partial payments of this Note made before or after maturity and that no such
extension, renewal or partial payment shall release any one or all of them from
the obligation of payment of this Note or any installment of this Note, and
consent to offsets of any sums owed to any one or all of them by Lender at any
time.

     9.   CONSTRUCTION OF NOTE.

     Headings in this Note are solely for convenience and are not to be referred
to in construing this Note.  All references to paragraphs are to paragraphs in
this Note.  This Note shall be governed by, interpreted and enforced under and
according to the laws of the State of California.  If a law which applies to
this Note and sets maximum interest rates and loan charges is finally
interpreted so that the interest or other loan charges collected or to be
collected in connection with this Note exceed the lawful limits, then (i) such
interest or loan charge shall thereafter be reduced to the permitted limit and
(ii) any sums already collected from Borrower which exceed the permitted limit
will be refunded to Borrower.  Lender may choose to make this refund by reducing
the principal owed under this Note or by making a direct payment to Borrower.

     10.  LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE.

     In the event of the loss, theft or destruction of this Note, upon
Borrower's receipt of a reasonably satisfactory indemnification agreement
executed in favor of Borrower by the party who held this Note immediately prior
to its loss, theft or destruction, or in the event of the mutilation of this
Note, upon surrender to the Borrower of the mutilated Note, Borrower shall
execute and deliver to the holder a new promissory note in form and content
identical to this Note in lieu of the lost, stolen, destroyed or mutilated Note.

     11.  NOTICES.

     All notices and other communications pertaining hereto shall be in writing
and shall be deemed to have been duly given when delivered personally, or two
days after being sent via overnight


                                          3.



courier, postage prepaid, to the following addresses or to such other address or
addresses as Borrower or Lender may from to time designate in writing:

               To Borrower:

               11240 Sherman Way
               Sun Valley, California 91352
               Attention: David L. Lokken


               To Lender:

               1831 South Ritchey Street
               Santa Ana, California 92705
               Attention: Daniel J. Lubeck


     IN WITNESS WHEREOF, this Note has been duly executed and delivered by
Borrower on and as of the date first above written.



                                       BORROWER:

                                       Hawker Pacific Aerospace,
                                       a California corporation


                                       By:  /s/ David L. Lokken
                                            ----------------------------------
                                            David L. Lokken,
                                            President


                                       4.

EX-10.21A

                                                                   Exhibit 10.21

                      FIRST AMENDMENT TO LEASE AGREEMENT

     This First Amendment (this "Amendment") is entered into as of 
December 15, 1997 by and between Industrial Centers Corp. (formerly Industrial 
Bowling Corp.) ("Lessor") and Hawker Pacific Aerospace (formerly Hawker 
Pacific, Inc.), a California corporation ("Lessee"), in order to amend that 
certain Lease Agreement, dated July 28, 1994 (the "Lease"), between Lessor and 
Lessee as herein set forth:

     1. ASSIGNMENT AND SUBLETTING. Section 12.1(b) is hereby amended to read 
in its entirety as follows:

     "(b) A change in control of Lessee shall constitute an assignment 
requiring consent. The transfer, on a cumulative basis of twenty-five percent 
(25%) or more of the voting control of Lessee, other than any bona fide 
underwritten public offering of Lessee's securities registered under the 
Securities Act of 1933, as amended, or any securities issued pursuant to 
Lessee's employee stock option plans, shall constitute a change in control 
for this purpose."

     2. FULL FORCE AND EFFECT. By its execution of this Amendment, Lessor 
confirms that the Lease is in full force in effect and that no default 
occurred thereunder in connection with the purchase by Aqhawk, Inc. of all of 
the outstanding capital stock of Hawker from BTR Dunlop, Inc. in November 
1996.

     IN WITNESS WHEREOF, this Amendment is executed as of the date first 
above written.

                                       LESSOR:
                                       Industrial Centers Corp.


                                       By: /s/ Bradley D. Howard
                                          ---------------------------------

                                       Name:   Bradley D. Howard
                                            -------------------------------

                                       Title:  President
                                             ------------------------------

                                       LESSEE:
                                       HAWKER PACIFIC AEROSPACE


                                       By: /s/ Brian S. Aune
                                          ---------------------------------
                                           Brian S. Aune
                                           Chief Financial Officer

EX-10.25A

                                                                 Exhibit 10.25A

                      FIRST AMENDMENT TO LEASE AGREEMENT


     This First Amendment (this "Amendment") is entered into as of January __, 
1997 by and between Allstate Insurance Company, an Illinois Insurance 
Corporation ("Lessor"), and Hawker Pacific Aerospace (formerly Hawker 
Pacific, Inc.), a California corporation ("Lessee"), in order to amend that 
certain Lease Agreement, dated June 24, 1997 (the "Lease"), between Lessor 
and Lessee as herein set forth:

     12. ASSIGNMENT AND SUBLETTING. Section 12.1(b) is hereby amended to read 
in its entirety as follows:

     "(b) A change in control of Lessee shall constitute an assignment 
requiring consent. The transfer, on a cumulative basis of twenty-five percent 
(25%) or more of the voting control of Lessee, other than any bona fide 
underwritten public offering of Lessee's securities registered under the 
Securities Act of 1933, as amended, or any securities issued pursuant to 
Lessee's employee benefit plans, shall constitute a change in control for this 
purpose."

     IN WITNESS WHEREOF, this Amendment is executed as of the date first 
above written.

                                       LESSOR:
                                       ALLSTATE INSURANCE COMPANY


                                       By: /s/ George A. Pandoleon
                                          ----------------------------------

                                       Name:   George A. Pandoleon
                                            --------------------------------

                                       Title:  Authorized Signatory
                                             -------------------------------


                                       LESSEE:
                                       HAWKER PACIFIC AEROSPACE


                                       By: /s/ Brian S. Aune
                                          ----------------------------------
                                           Brian S. Aune
                                           Chief Financial Officer

EX-10.27

                 AMENDED AND RESTATED BUSINESS LOAN AGREEMENT

                              January 23, 1998


                                   between


             HAWKER PACIFIC AEROSPACE, a California corporation,

                                      and

                        BANK OF AMERICA NATIONAL TRUST
                           AND SAVINGS ASSOCIATION





                              TABLE OF CONTENTS

                                                                           PAGE
1.   DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

2.   LINE OF CREDIT (FACILITY NO.1). . . . . . . . . . . . . . . . . . . . . 12
2.1  Line of Credit Amount . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2  Availability Period . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3  Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4  Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5  Repayment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6  Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3.   TERM LOAN (FACILITY NO. 2). . . . . . . . . . . . . . . . . . . . . . . 15
3.1  Loan Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2  Availability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3  Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4  Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5  Repayment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6  Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 16

4.   CAPITAL EXPENDITURE FACILITY (FACILITY NO.3). . . . . . . . . . . . . . 16
4.1  Capital Expenditure Loans . . . . . . . . . . . . . . . . . . . . . . . 16

5.   OPTIONAL INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1  Optional Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2  Offshore Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

6.   FEES, EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1  Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2  Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3  Reimbursement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 21

7.   COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1  Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2  Guarantees;  Personal Property Supporting Guarantees. . . . . . . . . . 22
7.3  Future Subsidiaries and Collateral. . . . . . . . . . . . . . . . . . . 22
7.4  Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

                                      i



8.   DISBURSEMENTS, PAYMENTS AND COSTS . . . . . . . . . . . . . . . . . . . 23
8.1  Requests for Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2  Disbursements and Payments. . . . . . . . . . . . . . . . . . . . . . . 23
8.3  Telephone and Telefax Authorization . . . . . . . . . . . . . . . . . . 23
8.4  Direct Debit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5  Direct Debit (Line of Credit) . . . . . . . . . . . . . . . . . . . . . 24
8.6  Banking Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7  Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.8  Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.9  Interest Calculation. . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.10 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.11 Overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.12 Collections on Accounts Receivable. . . . . . . . . . . . . . . . . . . 26

9.   CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1  Authorizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2  Incumbency Certificates; Governing Documents. . . . . . .   . . . . . . 27
9.3  Security Agreements, Etc. . . . . . . . . . . . . . . . . . . . . . . . 27
9.4  Evidence of Priority. . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.5  Consent to Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6  Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.7  Business Interruption Insurance . . . . . . . . . . . . . . . . . . . . 27
9.8  Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.9  Subordination Agreement . . . . . . . . . . . . . . . . . . . . . . . . 27
9.10 Initial Public Offering . . . . . . . . . . . . . . . . . . . . . . . . 27
9.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.12 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.13 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.14 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.16 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.17 Certain Financial Information . . . . . . . . . . . . . . . . . . . . . 28
9.23 Other Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

10.  REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 29
10.1 Organization of Borrower and its Subsidiaries . . . . . . . . . . . . . 29
10.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

                                      ii



10.3   Enforceable Agreement  . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4   Good Standing  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5   No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.6   Financial Information  . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7   Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8   Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9   Permits, Franchises. . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.10  Other Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11  Income Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12  No Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.13  Merchantable Inventory . . . . . . . . . . . . . . . . . . . . . . . . 31
10.14  ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.15  Location of Borrower and its Subsidiaries. . . . . . . . . . . . . . . 32
10.16  Certain Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.17  The Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.18  Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.19  Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . . . 33
10.20  Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . 33
10.21  Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.22  Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 33

11.    COVENANTS . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . 34
11.1   Use of Proceeds . . . . . . . . . . . . . . .  . . . . . . . . . . . . 34
11.2   Use of Proceeds: Ineligible Securities. . . .  . . . . . . . . . . . . 34
11.3   Financial and Other Information . . . . . . .  . . . . . . . . . . . . 34
11.4   Senior Funded Debt to Adjusted EBITDA . . . .  . . . . . . . . . . . . 37
11.5   Fixed Charge Coverage Ratio . .. . . . . . . . . . . . . . . . . . . . 37
11.6   Profitability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.7   Other Debts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.8   Other Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.9   Capital Expenditures for Rotable Gears . . . . . . . . . . . . . . . . 39
11.10  Capital Expenditures for Other Assets. . . . . . . . . . . . . . . . . 39
11.11  Dividends and Other Payments . . . . . . . . . . . . . . . . . . . . . 40
11.12  Loans to Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.13  Notices to Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.14  Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.15  Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.16  Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.17  Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . . . 41
11.18  Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . . 41

                                     iii



11.19  Perfection of Liens . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.20  Places of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.21  Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.22  Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
              (a)  Insurance Covering Collateral . . . . . . . . . . . . . . 42
              (b)  General Business Insurance. . . . . . . . . . . . . . . . 42
              (c)  Evidence of Insurance . . . . . . . . . . . . . . . . . . 42
11.23  Additional Negative Covenants . . . . . . . . . . . . . . . . . . . . 42
11.24  ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.25  Inspection of Property and Books and Records. . . . . . . . . . . . . 43
11.26  Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.27  Collection of Accounts. . . . . . . . . . . . . . . . . . . . . . . . 43
11.28  Amendment to the Environmental Indemnities. . . . . . . . . . . . . . 44
11.29  Capitalization of HP UK . . . . . . . . . . . . . . . . . . . . . . . 44

12.    DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.1   Failure to Pay. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.2   Lien Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.3   Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.4   False Informat. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.5   Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.6   Receivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.7   Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.8   Government Action . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.9   Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 45
12.10  Cross-default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.11  Other Bank Agreements . . . . . . . . . . . . . . . . . . . . . . . . 46
12.12  ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.13  Environmental Indemnity Breach. . . . . . . . . . . . . . . . . . . . 46
12.14  Change in Control or Management . . . . . . . . . . . . . . . . . . . 46
12.15  Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.16  Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.17  Other Breach Under Agreement. . . . . . . . . . . . . . . . . . . . . 47

13.   ENFORCING THIS AGREEMENT; MISCELLANEOUS. . . . . . . . . . . . . . . . 48
13.1  GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.2  California Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.3  Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 48
13.4  Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.5  Severability; Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 50

                                     iv



13.6   Administration Costs . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.7   Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.8   One Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.9   Disposition of Schedules, Reports, Etc. Delivered by Borrower. . . . . 51
13.10  Returned Merchandise . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.11  Verification of Receivables. . . . . . . . . . . . . . . . . . . . . . 51
13.12  Indemnification  . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.13  Notices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.14  Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13.15  Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53


                                      v



                 AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
                                           
          This Amended and Restated Business Loan Agreement (this 
"Agreement") dated as January 23, 1998 is entered into between BANK OF 
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BANK") and HAWKER PACIFIC 
AEROSPACE, a California corporation ("BORROWER"), and amends and restates in 
its entirety the Business Loan Agreement (the "Existing Loan Agreement") 
dated November 27, 1996 between the Bank and Borrower (acting under its 
former name, Hawker Pacific, Inc.).  Borrower and Bank hereby agree as 
follows:

1.   DEFINITIONS

In addition to the terms defined elsewhere in this Agreement, the following
terms have the meanings indicated for the purposes of this Agreement:

     "ACCEPTABLE RECEIVABLE" means an account receivable which satisfies the
     following requirements:

               (a)  The account has resulted from the sale of goods or the
     performance of services by Borrower or HP UK in the ordinary course of
     their business.

               (b)  There are no conditions which must be satisfied before
     Borrower or HP UK is entitled to receive payment of the account.  Accounts
     arising from COD sales, consignments or guaranteed sales are not
     acceptable.

               (c)  The debtor upon the account does not claim any defense
     to payment and has not asserted any counterclaims or offsets against
     Borrower or its Subsidiaries.  To the extent any credit balances exist in
     favor of the debtor, such credit balances shall be deducted from the
     account balance. 

               (d)  The account represents a genuine obligation of the debtor
     for goods sold and accepted by the debtor, or for services performed for
     and accepted by the debtor.

               (e)  Borrower or HP UK has sent an invoice to the debtor in the
     amount of the account.

               (f)  The account is owned by Borrower or HP UK free of any title
     defects or any liens or interests of others except the security interest in
     favor of Bank.

                                      1



               (g)  The debtor upon the account is not any of the following:

                    (i) an employee, affiliate, parent or Subsidiary of 
     Borrower or HP UK, or an entity which has common officers or directors 
     with Borrower or HP UK.

                    (ii) any government or any agency or department of any 
     nation other than an account of Borrower arising out of  the Coast Guard 
     Contract (and then only to the extent that Borrower has caused an 
     effective assignment of the Coast Guard Contract to occur under the 
     Federal Assignment of Claims Act assigning the interest of Bank in the 
     Coast Guard Contract, to the satisfaction of Bank), and any other contract 
     with the United States of America or its agencies and instrumentalities 
     which is reasonably acceptable to Bank and as to which such a filing has 
     been completed.

                    (iii) any person or entity located in a foreign country 
     (other than accounts owed to Borrower from debtors located in the Canadian 
     provinces of Quebec, Ontario, British Columbia, Saskatchewan and Manitoba) 
     unless the account is supported by a letter of credit issued by a bank 
     acceptable to Bank or by FCIA insurance or other credit insurance 
     acceptable to Bank in its sole discretion, and in the case of accounts 
     receivable owed by account debtors located in the United Kingdom, debtors 
     whose accounts are owed to HP UK.

                    (iv) any person or entity to whom Borrower or any of its 
     Subsidiaries are obligated for goods purchased or services performed (but 
     only to the extent of such obligation). 

               (h)  The account is not in default.  An account will be 
     considered  in default if any of the following occur:

                    (i)  The account is not paid within the 90 day period 
     starting on its original invoice date or, in the case of accounts owed 
     by any Major Customer, the 120 day period starting on its original 
     invoice date (it being understood that the entire amount of such 
     accounts which is not paid within the foregoing periods shall be 
     excluded from Borrower's and HP UK's gross accounts receivable balance 
     without regard to any credit balances due to the account debtor with 
     respect to any such account);

                                      2



                    (ii)   The debtor obligated upon the account suspends
      business, makes a general assignment for the benefit of creditors, or
      fails to pay its debts generally as they come due; or

                    (iii)  Any petition is filed by or against the debtor
      obligated upon the account under any bankruptcy law or any other law
      or laws for the relief of debtors;

               (i)  The account is not the obligation of a debtor who is in 
      default (as defined in (h) above) on 25% or more of the total accounts 
      upon which such debtor is obligated (or, in the case of any Major 
      Customer, 15% or more of the total accounts upon which such debtor is 
      obligated).

               (j)  The account does not arise from the sale of goods which 
      remain in Borrower's or HP UK's possession or control. 

               (k)  The account is not evidenced by a promissory note or 
      chattel paper. 

               (l)  The account is otherwise acceptable to Bank.

      In addition to the foregoing limitations, the dollar amount of accounts 
      included as Acceptable Receivables which are the obligations of a single 
      debtor shall not exceed 20% of  Borrower's and HP UK's consolidated gross 
      accounts receivable at that time, PROVIDED THAT (i) such concentration 
      limit for Federal Express will be 30%, and (ii) such concentration limit 
      for British Airways will be 40%, in each case unless and until 15% of the 
      gross accounts receivable of Borrower and HP UK from such account debtor 
      remain unpaid for 90 days past their respective original invoice dates. 
      To the extent the total accounts owed by any debtor exceeds that debtor's 
      concentration limit pursuant to this paragraph, the amount of any such 
      excess shall be excluded. 

      "ACCEPTABLE INVENTORY" means inventory which satisfies the following 
      requirements:

               (a)  The inventory is owned by Borrower or HP UK free of 
      any title defects or any liens or interests of others except the security 
      interest in favor of Bank. 

               (b)  In the case of inventory of Borrower, the inventory is 
      permanently located at United States domestic locations of Borrower which 
      Borrower has disclosed to Bank, as to which Bank has an appropriate 
      Uniform Commercial Code financing statement on file, and which is 
      otherwise acceptable to Bank.  In the case of inventory of HP UK, the 
      inventory is permanently located at a location in England disclosed to 
      Bank, 

                                      3



      and is subject to a first priority floating charge in favor of 
      Bank.  In either case, if the inventory is covered by a negotiable 
      document of title (such as a warehouse receipt) that document must be 
      delivered to Bank.  Inventory which is in transit (including but not 
      limited to inventory in transit between locations of Borrower and its 
      Subsidiaries and any used exchange parts shipped from Borrower's or 
      HP UK's customer but which have not reached their respective locations 
      described above) is not acceptable  unless it is covered by a commercial 
      Letter of Credit issued by Bank and the seller of the inventory is 
      required to present shipping or title documents to Bank as a condition 
      to obtaining payment.

               (c)  The inventory is held for sale in the ordinary course of
     Borrower's and HP UK's business and is of good and merchantable quality.
     Inventory which is obsolete, unsalable, damaged, defective, discontinued,
     slow-moving or excess inventory, or which has been returned by the buyer,
     is not acceptable.  For purposes of this clause (c), inventory shall be
     considered slow moving if Borrower and HP UK have not sold inventory or
     otherwise dealt in of that type within a 12 month period.  Inventory shall
     be considered "excess inventory" if Borrower's and HP UK's supply of
     inventory of that type is in excess of the amount which is salable within a
     24 month period, as determined by Bank given Borrower's and HP UK's
     historical sales information.  Work-in-process shall not be considered
     Acceptable Inventory except to the extent that the same consists of
     purchased parts allocated to work orders but not yet in assembly which are
     identified as such to the reasonable satisfaction of the Bank.  Display
     items, and packing and shipping materials and supplies are not acceptable
     inventory and are excluded.

               (d)  The inventory is not placed on consignment or otherwise
     placed with the customer or on the customer's premises.

               (f)  The inventory does not consist of freight or duty.

               (g)  The inventory consists of property other than rotable 
     gears or Shipsets.

               (h)  The inventory is otherwise acceptable to Bank.

     "ACQUISITION" means the acquisition by HP UK of the UK Business on the
     Closing Date pursuant to the Acquisition Agreement.

     "ACQUISITION AGREEMENT" means that certain Agreement relating to the Sale
     and Purchase of part of the Business of British Airways Plc among Borrower,
     HP UK and British Airways dated as of 20th December, 1997, as in effect on
     the date of this Agreement. 

                                      4



     "ADJUSTED EBITDA" means, as of each date of determination, EBITDA for the
     four Fiscal Quarter period ending on that date, EXCEPT THAT (i) as of the
     Fiscal Quarter ending March 31, 1998, Adjusted EBITDA shall be EBITDA for
     that Fiscal Quarter plus $5,700,000, (ii) as of the Fiscal Quarter ending
     June 30, 1998, Adjusted EBITDA shall be EBITDA for the two Fiscal Quarter
     period then ending plus $4,300,000, and (iii) as of the Fiscal Quarter
     ending September 30, 1998, Adjusted EBITDA shall be EBITDA for the three
     Fiscal Quarter period then ending plus $2,400,000.

     "AMR SHIPSET PAYABLE" means trade accounts payable net of deposits payable
     to American Airlines in the amount of $2,854,373.

     "BASTIAN" means Melanie L. Bastian, an individual residing in Orem, Utah.

     "BORROWER" means Hawker Pacific Aerospace, a California corporation
     formerly known as Hawker Pacific, Inc., its successors and permitted
     assigns.

     "BORROWER DEBENTURE" means a Debenture of even date herewith executed by
     Borrower providing for a floating charge upon all assets of Borrower which
     may hereafter be located in the United Kingdom, the terms of which are
     subject to and controlled by the Security Agreement.

     "BORROWER SECURITY AGREEMENT" means that certain Security Agreement of even
     date herewith made by Borrower in favor of Bank, as at any time amended.

     "BORROWING BASE" means the sum of:

               (a)  85% of the balance due on the aggregate amount of the 
     Acceptable Receivables; and

               (b)  The lesser 50% of the value of Acceptable Inventory 
     or the Inventory Limit.  In determining the value of Acceptable Inventory 
     to be included in the Borrowing Base, Bank will use the lowest of (i) 
     Borrower's or HP UK's cost, (ii) Borrower's or HP UK's estimated market 
     value, or (iii) Bank's independent determination of the resale value of 
     such inventory in such quantities and on such terms as Bank deems 
     appropriate.

     "BORROWING BASE CERTIFICATE" is defined in Section 11.3(e).

     "BRITISH AIRWAYS" means British Airways Plc, an English company.

                                     5



     "BRITISH AIRWAYS ENVIRONMENTAL INDEMNITY"  means the representations,
     warranties, covenants and indemnities as to environmental matters made by
     British Airways in favor of Borrower and HP UK in the Acquisition
     Agreement, including without limitation those set forth in Section 2.2 of
     Schedule 3 thereto.

     "BTR ENVIRONMENTAL INDEMNITY" means that certain environmental indemnity
     dated as of November 27, 1996 made in favor of Borrower by BTR Dunlop,
     Inc., a Delaware corporation.
     
     "CAPITAL EXPENDITURE LOANS" means loans to Borrower made pursuant to
     Facility No. 3, as described in Section 4.

     "CASH FLOW" means, for any period, EBITDA for that period, MINUS state and
     federal income taxes payable in cash by Borrower and its Subsidiaries with
     respect to income earned during that period, and net cash taxes payable in
     the current period for fiscal years prior to that period.

     "CLOSING DATE" means the date upon which each of the conditions precedent
     set forth in Section 9 of this Agreement are satisfied or waived in writing
     by Bank and the initial loans under this Agreement are funded.

     "COAST GUARD CONTRACT" means that certain Contract No. DTCG38-95-D-20018
     dated September 20, 1995, between Borrower and the United States Coast
     Guard Aircraft Repair and Supply Center, as amended from time to time.

     "COMMITMENT FEE RATE" means (a) during the period from the Closing Date
     through the day prior to the commencement of the initial Pricing Period,
     0.50% per annum, and (b) during each Pricing Period, the percentage per
     annum set forth below opposite the Leverage Ratio as of the last day of the
     Fiscal Quarter ending 45 days prior to the start of that Pricing Period:

          LEVERAGE RATIO                 COMMITMENT FEE RATE

          Less than 2.00:1.00            0.25%

          Equal to or greater than
          2.00:1.00, but less than
          2.50:1.00                      0.35%

          Equal to or greater than

                                      6



          2.50:1.00, but less than
          3.00:1.00                      0.375%

          Equal to or greater than
          3.00:1.00                      0.50%


     "DEFAULT" means any event or circumstance which, with the giving of notice
     or the passage of time, or both, would constitute an Event of Default.

     "EBITDA" means, for any period, the sum (without duplication) of (a) the
     consolidated net income of Borrower and its Subsidiaries for that period,
     PLUS (b) the amount of state and federal taxes paid or payable with respect
     to such net income, PLUS (c) depreciation and amortization expense of
     Borrower and its Subsidiaries, MINUS (d) gains (and PLUS losses) associated
     with the sale of fixed assets to the extent included in such net income,
     MINUS (e) extraordinary gains during that period, PLUS (f) interest expense
     of Borrower and its Subsidiaries during that fiscal period, in each case
     for that period, determined in accordance with generally accepted
     accounting principles, consistently applied.

     "ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any
     governmental authority or other person alleging potential liability or
     responsibility for violation of any Environmental Law, or for release or
     injury to the environment.

     "ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
     common law duties, rules, regulations, ordinances and codes, together with
     all administrative orders, directed duties, requests, licenses,
     authorizations and permits of, and agreements with, any governmental
     authorities, in each case relating to environmental, health, safety and
     land use matters.

     "EVENT OF DEFAULT" means any of the circumstances or events constituting
     defaults hereunder and listed in Section 12.

     "FACILITY NO. 1 OUTSTANDING AMOUNT" has the meaning set forth in Section
     2.1(b).

     "FACILITY NO. 1 UNUSED AMOUNT" means, as of each date of determination, the
     difference between (i) $15,000,000, and (ii) the Facility No. 1 Outstanding
     Amount.

     "FIXED CHARGES" for any period, means the sum of (a) gross interest expense
     paid or payable by Borrower and its Subsidiaries in cash (including
     interest on the Subordinated Note), plus (b) scheduled principal payments
     on indebtedness of Borrower and its 

                                      7



     Subsidiaries for borrowed money and capital leases, PLUS (c) for each 
     fiscal quarter during that period during which no scheduled payments are 
     required to be made with respect to the Facility No. 2, $750,000. 

     "HP UK" means Hawker Pacific Aerospace Limited, a company organized under
     the laws of England and Wales (registered No. 3459428), its successors 
     and permitted assigns.

     "HP UK GUARANTY" means the Composite Guarantee and Debenture of even date
     herewith executed by HP UK in favor of the Bank, as at any time amended.

     "INELIGIBLE SECURITIES" means securities which may not be underwritten or
     dealt in by member banks of the Federal Reserve System under Section 16 of
     Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

     "INITIAL PUBLIC OFFERING" means the initial Public Offering of the common
     stock of Borrower conducted prior to the Closing Date pursuant to the
     Registration Statement on Form S-1 (Reg. No. 333-40295), as amended, filed
     by Borrower with the Securities and Exchange Commission.

     "INTERCOMPANY DEBENTURE" means a Debenture of even date herewith made by HP
     UK in favor of Borrower in a form acceptable to the Bank, the lien of which
     shall be subject to a Deed of Priorities of even date therewith among Bank,
     Borrower and HP UK.

     "INTERCOMPANY NOTE" means that certain $20,000,000 promissory note of even
     date herewith made by HP UK in favor of Borrower and pledged to the Bank.

     "INVENTORY LIMIT" means, as of each date of determination of the Borrowing
     Base, an amount equal to 75% of the revenues of Borrower and its
     Subsidiaries for the then most recently ending three month period for which
     Borrower has reported such revenues on its latest Borrowing Base
     Certificate.

     "LETTER OF CREDIT" means any of the standby or commercial letters of credit
     issued by Bank for the account of Borrower pursuant to Section 2.6.

     "LEVERAGE RATIO" means, as of the last day of each fiscal quarter of
     Borrower, the ratio of (a) Senior Funded Debt as of that date to (b)
     Adjusted EBITDA as of that date.

     "LOAN DOCUMENTS" means this Agreement, the Borrower Security Agreement, the
     Lockbox Agreements, the Intercompany Note, each Letter of Credit, the
     Pledge 

                                      8



     Agreement, the HP UK Guaranty, the Deed of Priorities among Borrower, HP 
     UK and the Bank, each interest and currency hedging agreement entered into
     between the Bank and Borrower, and each other instrument, document and 
     agreement now or hereafter executed by Borrower, Bastian, or any of 
     their respective shareholders or affiliates in connection with this 
     Agreement.

     "LOCKBOX" means post office boxes established by Borrower and HP UK
     pursuant to the Lockbox Agreements.

     "LOCKBOX ACCOUNTS" means the blocked bank deposit accounts established by
     Borrower and HP UK with Bank subject to the first priority lien of Bank
     into which remittances to a Lockbox are deposited on a daily basis.

     "LOCKBOX AGREEMENT" means each agreement establishing a Lockbox or Lockbox
     Account, in any event providing for (i) the deposit of all remittances with
     respect to accounts receivable of Borrower and HP UK to the Lockboxes, (ii)
     the deposit of remittances received in the Lockboxes to a Lockbox Account,
     and (iii) a first priority lien in favor of Bank with respect to the
     contents of the Lockbox and each Lockbox Account.

     "MAJOR CUSTOMER" means, collectively, American Airlines, United Airlines,
     British Airways and Federal Express Corporation and their affiliated
     business entities.

     "NET PROCEEDS" means the amount received by Borrower by reason of any
     Public Offering, after deduction of all actual and reasonably estimated
     associated fees and transactional expenses.

     "OFFSHORE RATE MARGIN" means (a) during the period from the Closing Date
     through the day prior to the commencement of the initial Pricing Period,
     1.75%, and (b) during each Pricing Period, the percentage set forth below
     opposite the Leverage Ratio as of the last day of the Fiscal Quarter ending
     45days prior to the start of that Pricing Period:

          LEVERAGE RATIO                 OFFSHORE RATE MARGIN

          Less than 2.00:1.00            1.00%

          Equal to or greater than
          2.00:1.00, but less than
          2.50:1.00                      1.25%

          Equal to or greater than


                                      9



          2.50:1.00, but less than
          3.00:1.00                      1.50%

          Equal to or greater than
          3.00:1.00                      1.75%


     "PERMITTED MANAGEMENT FEES" means fees payable to Unique, in equal
     installments and not less frequently than quarterly, in an annual amount
     not to exceed (i) $300,000 during 1998 and (ii) $150,000 in each subsequent
     year.

     "PLEDGE AGREEMENT" means the Pledge Agreement of even date herewith made by
     Borrower in favor of Bank to secure the obligations and indebtedness under
     this Agreement, pursuant to which 100% of the capital stock of HP UK and
     the Intercompany Note shall be pledged by Borrower to Bank, as at any time
     amended.

     "PRICING PERIOD" means the period beginning May 15, 1998 and ending on
     August 14, 1998, and each of the subsequent and concurrent three month
     periods beginning on August 15, November 15, February 14 and May 15 during
     the term of this Agreement. 

     "PUBLIC OFFERING" means each offer and sale by Borrower of capital stock of
     Borrower pursuant to a registration statement filed with the Securities and
     Exchange Commission other than a registration on Form S-8, and includes the
     Initial Public Offering.

     "REFERENCE RATE" is the rate of interest publicly announced from time to
     time by Bank in San Francisco, California, as its Reference Rate.  The
     Reference Rate is set by Bank based on various factors, including Bank's
     costs and desired return, general economic conditions and other factors,
     and is used as a reference point for pricing some loans.  Bank may price
     loans to its customers at, above, or below the Reference Rate.  Any change
     in the Reference Rate shall take effect at the opening of business on the
     day specified in the public announcement of a change in Bank's Reference
     Rate.

     "REFERENCE RATE MARGIN" means (a) during the period from the Closing Date
     through the day prior to the commencement of the initial Pricing Period,
     0.50%, and (b) during each Pricing Period, the percentage set forth below
     opposite the Leverage Ratio as of the last day of the Fiscal Quarter ending
     45 days prior to the start of that Pricing Period:

          LEVERAGE RATIO                 REFERENCE RATE MARGIN

          Less than 2.50:1.00            0%


                                      10



          Equal to or greater than
          2.50:1.00, but less than
          3.00:1.00                      0.25%

          Equal to or greater than
          3.00:1.00                      0.50%.

     "SENIOR FUNDED DEBT" means, as of each date of determination, and without
     duplication, the principal amount of (a) all indebtedness of Borrower and
     its Subsidiaries for borrowed money, (b) all obligations of Borrower and
     its Subsidiaries with respect to capital leases, (c) all obligations of
     Borrower and its Subsidiaries with respect to standby letters of credit,
     and (d) all guarantees and other contingent obligations with respect to any
     of the foregoing items, OTHER than the Subordinated Note.

     "SHIPSET" means a landing gear core set for a fixed wing or rotor equipped
     aircraft.

     "SUBORDINATED NOTE" means that certain $5,000,000 Amended and Restated
     Subordinated Promissory Note dated as of the date hereof made by Borrower
     in favor of Unique, as at any time amended.

     "SUBORDINATION AGREEMENT" means that certain Amended and Restated
     Subordination Agreement of even date herewith executed by Bastian, Unique,
     Borrower, HP UK and Bank, as at any time amended, pursuant to which all
     obligations of Borrower to Bastian and Unique have been subordinated to the
     Intercompany Note and the Loan Documents.

     "SUBSIDIARY" means, as of any date of determination and with respect to any
     person, any corporation or partnership (whether or not, in either case,
     characterized as such or as a "joint venture"), whether now existing or
     hereafter organized or acquired: (a) in the case of a corporation, of which
     a majority of the securities having ordinary voting power for the election
     of directors or other governing body (other than securities having such
     power only by reason of the happening of a contingency) are at the time
     beneficially owned by such person or one or more Subsidiaries of such
     person, or (b) in the case of a partnership, of which a majority of the
     partnership or other ownership interests are at the time beneficially owned
     by such person or one or more of its Subsidiaries.

     "UK BUSINESS" means the landing gear repair and overhaul business purchased
     from British Airways pursuant to the Acquisition Agreement.


                                      11



     "UK LOCKBOX AGREEMENT" means [[describe after consultation with UK
     Counsel]]

     "UNIQUE" means Unique Investment Corporation, a Utah corporation, its
     successors and assigns.

2.   LINE OF CREDIT (FACILITY NO.1).

           2.1   LINE OF CREDIT AMOUNT.

                 (a)    During the availability period described below, Bank 
     will provide a line of credit ("FACILITY NO. 1") to Borrower.  The 
     maximum amount of the line of credit (the "FACILITY NO. 1 COMMITMENT") 
     is equal to the lesser of (i) $15,000,000 or (ii) the Borrowing Base.

                 (b)    This is a revolving line of credit for advances with 
     a within-line facility for Letters of Credit (the maximum effective 
     amount of which shall not exceed $2,000,000 at any time).  During the 
     availability period, Borrower may repay principal amounts and reborrow 
     them, to the extent of the excess from time to time of (i) the Facility 
     No. 1 Commitment over (ii) the outstanding principal balance of the line 
     of credit under Facility No. 1 PLUS the outstanding amounts of any 
     Letters of Credit, including amounts drawn on Letters of Credit and not 
     yet reimbursed (such aggregate amount being the "FACILITY NO. 1 
     OUTSTANDING AMOUNT").

                 (c)    Each advance must be for at least $100,000 or, if 
     less, for the Facility No. 1 Unused Amount.

                 (d)    Borrower agrees not to permit the Facility No. 1 
     Outstanding Amount to at any time exceed the Facility No. 1 Commitment.  
     If Borrower exceeds this limit (including without limitation, because of 
     any decrease in the Borrowing Base), Borrower will immediately pay the 
     excess to Bank upon Bank's demand.

           2.2   AVAILABILITY PERIOD.  The line of credit is available 
     between the date of this Agreement and January 30, 2001 (the "FACILITY 
     NO. 1 EXPIRATION DATE"), provided that Bank will not be required to make 
     any advances or issue any Letters of Credit under Facility No. 1 if any 
     Default or Event of Default exists under this Agreement.

           2.3   PURPOSE.  The line of credit shall be used to partially 
     finance the Acquisition (by means of an advance under the Intercompany 
     Note), and for working capital for operations of Borrower and HP UK and 
     for the issuance of Letters of Credit thereafter.


                                      12



           2.4   INTEREST RATE.

                 (a)    Unless Borrower elects an optional interest rate in 
     the manner described in Section 5, loans under Facility No. 1 shall bear 
     interest at Bank's Reference Rate.  

                 (b)    Borrower may prepay the loans under Facility No. 1 in 
     full or in part at any time in an amount not less than $10,000 (or the 
     remaining principal balance under Facility No. 1), subject to the limits 
     set forth in Section 5. 

           2.5   REPAYMENT TERMS

                 (a)    Borrower will pay all accrued unpaid interest on the 
     last business day of each calendar month commencing on January 31, 1998 
     and upon the termination of the Facility No. 1 Commitment.

                 (b)    Borrower will repay in full all principal and any 
     unpaid interest or other charges outstanding under this line of credit 
     no later than the Facility No. 1 Expiration Date. Interest on any amount 
     bearing interest at an Offshore Rate (as defined in Section 5) shall be 
     paid on the earliest of the last day of each calendar month, at the end 
     of the applicable interest period, and in any event on the Facility No. 
     1 Expiration Date.

           2.6   LETTERS OF CREDIT.  The Facility No. 1 line of credit may be 
     used for the issuance of Letters of Credit, provided that the aggregate 
     effective face amount of all outstanding Letters of Credit PLUS the 
     amount of any unpaid reimbursement obligations of Borrower thereunder 
     shall not exceed $2,000,000 at any time.  The within line amount for 
     Letters of Credit shall be used for the issuance of:

                 (i)    commercial Letters of Credit in a form and having 
      beneficiaries acceptable to Bank.  Each such Letter of Credit shall 
      have a maximum maturity of 180 days but in any event shall not 
     extend beyond the Facility No. 1 Expiration Date.  Each commercial 
     Letter of Credit will require drafts payable at sight;

                 (ii)   standby Letters of Credit having beneficiaries and
     terms acceptable to Bank with a maximum maturity of 365 days but not to
     extend beyond the Facility No. 1 Expiration Date, PROVIDED that standby
     Letters of Credit in support of workers compensation obligations shall not
     exceed $750,000 at any time.  Standby Letters of Credit may contain
     provisions allowing for their automatic extension unless Bank is 


                                      13



     notified, within thirty days of their scheduled expiration, of their 
     non-renewal, provided that they shall in no event extend beyond the 
     Facility No. 1 Expiration Date.

Borrower agrees:

                 (a)    any sum drawn under a Letter of Credit may, at the 
     option of Bank, be added to the principal amount outstanding under 
     Facility No. 1.  The amount will bear interest at the Reference Rate and 
     shall be payable upon demand.

                  (b)    if  an Event of Default exists, to pay to Bank an 
     amount equal to the aggregate effective face amount of all outstanding 
     Letters of Credit, and all amounts which remain unreimbursed with 
     respect to Letters of Credit to be applied to such unreimbursed amounts 
     or held as cash collateral for the obligations of Borrower under such 
     Letters of Credit.

                 (c)    the issuance of any Letter of Credit and any 
     amendment to a Letter of Credit is subject to Bank's written approval 
     and must be in form and substance acceptable to Bank and in favor of a 
     beneficiary acceptable to Bank.

                 (d)    to sign Bank's form Application and Agreement for 
     Commercial Letter of Credit or Application and Agreement for Standby 
     Letter of Credit, as applicable.

                 (e)    to pay a letter of credit fee with respect to each 
     standby Letter of Credit in an amount equal to the greater of (i) $1000 
     per annum (or, if higher, then Bank's generally applicable minimum 
     issuance fee for standby letters of credit), or (ii) the then applicable 
     Offshore Rate Margin per annum calculated on the face amount thereof , 
     in each case payable upon issuance and thereafter quarterly in advance, 
     provided that, if there is a Default or Event of Default exists under 
     this Agreement, at Bank's option, the amount of the fee shall be 
     increased to 4.5% per annum.

                 (f)    to pay any issuance fees with respect to commercial 
     Letters of Credit, and any amendment and/or other fees with respect to 
     commercial Letters of Credit and/or standby Letters of Credit  that Bank 
     notifies Borrower will be charged for issuing and processing Letters of 
     Credit for Borrower, in accordance with Bank's typical schedule of fees.

                 (g)    to allow Bank to automatically charge its checking
     account or other deposit accounts for applicable fees, discounts, and other
     charges.


                                      14




3.    TERM LOAN (FACILITY NO. 2).

           3.1   LOAN AMOUNT.  Subject to the fulfillment of the conditions 
precedent set forth in Section 9, Bank agrees to provide a term loan 
("FACILITY NO. 2") to Borrower in the amount of $24,500,000 on the Closing 
Date, PROVIDED THAT in the event that the Initial Public Offering yields Net 
Proceeds which are in excess of $22,000,000, then the amount of the Facility 
No. 2 term loan will be reduced to an amount not less than $22,000,000 by the 
amount of such excess. 

           3.2   AVAILABILITY.  The Facility No. 2 term loan will be made in 
a single disbursement on the Closing Date.

           3.3   PURPOSE.  The proceeds of the Facility No. 2 term loan shall 
be (i) loaned by Borrower to HP UK via the Intercompany Note and shall be 
used to partially finance the Acquisition and (ii) used by Borrower to 
refinance certain obligations under the Existing Loan Agreement and to 
refinance the AMR Shipset Payable.

           3.4   INTEREST RATE

                 (a)   Unless Borrower elects an optional interest rate in the 
      manner described in Section 5, loans under Facility No. 2 shall bear 
      interest rate at Bank's Reference Rate.

                 (b)   Borrower may voluntarily prepay the loan in full or in 
      part at any time in amounts which are  not less than $100,000 (subject 
      to its concurrent payment of applicable termination fees described in 
      Section 5).  Each such prepayment will be applied to the most remote 
      installment of principal outstanding under Facility No. 2.

           3.5   REPAYMENT TERMS

                 (a)   Borrower will pay all accrued unpaid interest on 
      January 31, 1998, and then monthly on the last business day of each 
      calendar month thereafter and upon any payment of all or part of the 
      principal of the loan with respect to the amount being paid. Interest 
      on any amount bearing interest with respect to an Offshore Rate shall 
      be paid on the earlier of the last day of each calendar month, at the 
      end of the applicable interest period, and in any event on the December 
      31, 2004.

                 (b)   Borrower will repay principal in successive quarterly 
      installments beginning on March 31, 1999 and on the last calendar day 
      of each successive June, 

                                      15



      September, December and March in the following amounts (or such lesser 
      amount as may then be outstanding): 

               YEAR DURING
               WHICH DUE                AMOUNT OF EACH INSTALLMENT

                 1999                       $ 812,500
                 2000                         812,500
                 2001                         937,500
                 2002                       1,062,500
                 2003                       1,187,500
                 2004                       1,312,500.

           3.6   MANDATORY PREPAYMENTS.  In addition to the other scheduled  
payments of principal required hereunder, Borrower shall repay an amount of 
principal outstanding under Facility No. 2 equal to:

     (a)   100% of the net after-tax cash proceeds in excess of $200,000, in
     the aggregate, received or receivable during each fiscal year from sales,
     leases or other transfers by Borrower or its Subsidiaries of equipment or
     other fixed assets unless, during the 180 day period following such sale,
     lease or other transfer (or, if earlier, the date upon which any Event of
     Default occurs), such cash proceeds are reinvested in similar equipment or
     replacement fixed assets.  Each such repayment shall be made on the 180th
     day following the date upon which the sale is consummated, and shall be
     applied to the outstanding installments of Facility No. 2 in inverse order
     of their maturity, PROVIDED that if an Event of Default sooner occurs,
     Borrower shall immediately repay the Facility No. 2 by the amount of the
     unreinvested cash proceeds of such sale, transfer or other leases.

     (b)   concurrently with the consummation of the related Public Offering,
     50% of the Net Proceeds from any offering, subsequent to the Initial Public
     Offering, of the capital stock of Borrower.  

If and to the extent that, as of the date of any prepayment required under 
this Section, Facility No. 2 has been repaid in full, Borrower shall instead 
make like prepayments of any outstanding obligations under Facility No. 3, to 
be applied to installments due under Facility No. 3 in the inverse order of 
their maturity.

                                      16



4.   CAPITAL EXPENDITURE FACILITY (FACILITY NO.3).

           4.1   CAPITAL EXPENDITURE LOANS.

                 (a)   In addition to the other credit provided under this 
    Agreement, during the availability period set forth below, unless a Default 
    or Event of Default exists under this Agreement, Borrower may request 
    Capital Expenditure Loans from Bank in an aggregate principal amount not 
    to exceed $6,000,000.  The availability period for such loans is from the 
    date of this Agreement through January 30, 2001.  Any amount repaid with 
    respect to Capital Expenditure Loans may not be reborrowed.

                 (b)   Unless Borrower elects an optional interest rate for 
    Capital Expenditure Loans in the manner described in Section 5, Capital 
    Expenditure Loans shall bear interest at Bank's Reference Rate.  Interest 
    on Capital Expenditure Loans will be paid at the times set forth herein as 
    applicable to interest due in respect of Facility No. 2.

                 (c)  Each Capital Expenditure Loan shall be used to finance a 
    portion of the purchase price for rotable gears or Shipsets for use in the 
    ordinary course of Borrower's business.  All rotable gears and Shipsets 
    acquired with the proceeds of Capital Expenditure Loans shall be free and 
    clear of any security interests, liens, encumbrances or rights of others 
    except the security interests of Bank under any security agreements 
    required under this Agreement.  Each request for a Capital Expenditure 
    Loan shall be accompanied by either (i) a copy of the purchase order or 
    invoice for the equipment  to be purchased with the proceeds of the 
    advance, or (ii) a detailed cost schedule for the rotable gear or Shipset 
    constructed and such other information as Bank may reasonably require. The 
    amount of each Capital Expenditure Loan shall not exceed the lesser of (x) 
    the cash purchase price or cost to construct the rotable gear or Shipset or 
    (y) 70% of:

                     (i)  if Bank in its discretion requests an appraisal, the 
           appraised value of the related rotable gear or Shipset (as 
           determined by a qualified independent appraiser approved by Bank); or

                     (ii) if Bank waives the requirement of such an appraisal, 
           the purchase price paid by Borrower or HP UK for the related rotable 
           gear or Shipset.

                                     17



                 (d)   As conditions precedent to each Capital Expenditure 
     Loan which is made in connection with any capital expenditure which  is 
     in excess of $1,000,000 or which results in the aggregate principal 
     amount of capital expenditures made during the then current fiscal year 
     being in excess of $1,500,000:

                    (i)  Borrower will deliver to Bank evidence acceptable to
           Bank of  its compliance with all of the terms of this Agreement.

                    (ii)  Borrower shall have delivered to Bank (and Bank shall
           have completed its review of, and shall have approved ) each of the
           following:

                    (x)  pro forma financial statements in form and substance
               acceptable to Bank demonstrating the pro forma effect of the
               proposed capital expenditure for the twelve month period
               following the date thereof, the proposed Capital Expenditure Loan
               and other projected new financings, projected revenues and
               working capital requirements related thereto demonstrating
               projected compliance with all terms of this Agreement; and

                    (y)   the contract entered into by Borrower or HP UK
               which requires the purchase or assembly of additional Shipsets or
               rotable gears.

               (e)  As conditions precedent to the making of Capital Expenditure
     Loans which are, in the aggregate, in excess of $3,000,000, Borrower shall
     have delivered its audited consolidated financial statements to Bank
     demonstrating compliance with the terms of this Agreement and the other
     Loan Documents as of the date thereof, and EBITDA of not less than
     $10,000,000 during Borrower's fiscal year 1998.

               (f)  Borrower will repay principal of each Capital Expenditure 
     Loan made hereunder in successive equal quarterly installments
     beginning on the March 31, June 30, September 30 or December 31 next
     following the making of such loan, with all remaining principal and any
     unpaid interest and charges then remaining outstanding under Facility No. 3
     in any event being due and payable on December 31, 2004.  Each quarterly
     installment payment due under this clause (f) with respect to each Capital
     Expenditure Loan shall be equal to one eighty-fourth of the initial amount
     of the related Capital Expenditure Loan.

                                     18



5.   OPTIONAL INTEREST RATE

           5.1   OPTIONAL RATE.  Provided that no Default or Event of Default 
exists, Borrower may elect that Portions (as defined in Section 5.2(b)) of 
the loans hereunder will bear interest at the Offshore Rate in accordance 
with this Section 5.  The Offshore Rate is a rate per annum based upon a year 
of 360 days and the actual number of days elapsed.  Interest will be paid on 
the last day of each interest period, and, if the interest period is longer 
than one month, then on the last business day of each calendar month during 
the interest period.  At the end of any interest period, the interest rate 
will revert to the Reference Rate, unless Borrower has designated another 
optional interest rate for the Portion.  Subject to Section 8.10, no Portion 
will be converted to a different interest rate during the applicable interest 
period.  Upon the occurrence of a Default or Event of Default under this 
Agreement, Bank may terminate the availability of optional interest rates for 
interest periods commencing after a Default or Event of Default occurs.

           5.2   OFFSHORE RATE.  The election of the Offshore Rate shall be 
subject to the following terms and requirements:

                 (a)   Borrower may select interest periods for Offshore Rate 
      loans which have durations of 1, 2, 3, 6, 9 or 12 months, provided that 
      no such interest period may be selected which would extend beyond the 
      maturity of the related facility or which would result in Borrower 
      being unable to make a scheduled payment of principal required 
      hereunder without prepayment of the related Portion (as defined below). 
      Borrower may select either the Cayman Islands eurodollar market or the 
      London Inter-bank eurodollar market as the market in which quotations 
      of Offshore Rates are obtained, provided that Borrower shall give the 
      Bank (i) not less than two business days' notice, by 11:00 a.m. on such 
      date, of its request for any loan to be made on the basis of an 
      interest rate quotation based upon the London Interbank eurodollar 
      market, and (ii) notice for loans based upon the Cayman Islands 
      eurodollar market not later than 11:00 a.m. on the relevant date. The 
      last day of the interest period will be determined by Bank using the 
      practices of the relevant offshore dollar inter-bank market.

                 (b)  Any principal amount bearing interest at an optional 
      rate under this Agreement is referred to as a "PORTION".  Each Offshore 
      Rate Portion will be for an amount not less than $500,000.

                                      19



     The "OFFSHORE RATE" means the interest rate determined by the following
     formula, rounded upward to the nearest 1/100 of one percent.  (All amounts
     in the calculation will be determined by Bank as of the first day of the
     interest period.)

          Offshore Rate =        OFFSHORE BASE RATE       + Offshore Rate Margin
                            ---------------------------
                            (1.00 - Reserve Percentage)

          Where:

                     (i) "OFFSHORE BASE RATE" means either (a) the interest rate
          (rounded upward to the nearest 1/16th of one percent) at which the 
          Bank's office in London, England, would offer U.S. dollar deposits 
          for the applicable interest period to other prime banks in the London 
          Interbank eurodollar market, or (b) the interest rate (rounded upward 
          to the nearest 1/16th of one percent) at which Bank's Grand Cayman 
          Branch, Grand Cayman, British West Indies or another branch office 
          of Bank selected by Bank, would offer U.S. dollar deposits for the 
          applicable interest period to other prime banks in the offshore 
          dollar inter-bank market. 

                     (ii) "RESERVE PERCENTAGE" means the total of the maximum 
          reserve percentages for determining the reserves to be maintained 
          by member banks of the Federal Reserve System for Eurocurrency 
          Liabilities, as defined in Federal Reserve Board Regulation D, 
          rounded upward to the nearest 1/100 of one percent.  The percentage 
          will be expressed as a decimal, and will include, but not be 
          limited  to, marginal, emergency, supplemental, special, and other 
          reserve percentages.

                 (c)   Subject to Section 5, Borrower may voluntarily prepay 
     any Offshore Rate Portion upon three banking days' advance written 
     notice delivered to Bank.  Each prepayment of an Offshore Rate Portion, 
     whether voluntary, by reason of acceleration or otherwise, must be 
     accompanied by the amount of accrued interest on the amount prepaid, and 
     a prepayment fee as described below.  A "PREPAYMENT" is a payment of an 
     amount on a date earlier than the scheduled payment date for such amount 
     as required by this Agreement.  The prepayment fee shall be equal to the 
     amount (if any) by which:

                         (i) the additional interest which would have been 
          payable during the interest period on the amount prepaid had it not 
          been prepaid, EXCEEDS 

                                      20



                      (ii) the interest which would have  been recoverable by 
              Bank by placing the amount prepaid on deposit in the offshore 
              dollar market for a period starting  on the date on which it was 
              prepaid and ending on the last day of the interest period for 
              such Portion (or the scheduled payment date for the amount 
              prepaid, if earlier).

                 (d)   Bank will have no obligation to accept an election for 
      an Offshore Rate Portion if any of the following described events has 
      occurred and is continuing: 

                      (i)  Dollar deposits in the principal amount, and for 
              periods equal to the interest period, of an Offshore Rate Portion
              are not available in the offshore Dollar inter-bank market; or

                      (ii)  the Offshore Rate does not accurately reflect the 
              cost of an Offshore Rate Portion.

6.  FEES, EXPENSES

         6.1  FEES

              (a)   FACILITY FEE.  On the Closing Date, Borrower shall pay a 
    facility fee of $100,000 to Bank (net of any credits then applicable 
    thereto).

              (b)  COMMITMENT FEES.  Borrower agrees to pay to Bank a 
    commitment fee equal to (a) the sum of (i) Facility No. 1 Unused Amount, 
    and (ii) the undisbursed portion of Facility No. 3, TIMES (b) the then 
    applicable Commitment Fee Rate, quarterly in arrears on the last day of 
    each calendar quarter.  The amount of the commitment fees payable 
    hereunder shall not be reduced if any portion of the Facility No. 1 or 
    Facility No. 3 is unavailable to Borrower because of borrowing base 
    limitations or otherwise.

               (c)   EARLY TERMINATION FEE.   In the event that Borrower 
    prepays any portion of the principal outstanding under the Facility No. 
    2 term loan, or terminates Facility No. 1 or Facility No. 3 prior to the 
    date when due or their termination dates (other than as a result of 
    mandatory prepayments of Facility No. 2 and Facility No. 3 made in 
    accordance with Section 3.6 or voluntarily prepayments made out of 
    Borrower's operating cash flow), then Borrower will concurrently pay to 
    Bank an early termination fee in an amount equal to (i) until the first 
    anniversary of the Closing Date, 0.75% of the amount of the Facilities so 
    repaid or terminated, and (ii) thereafter through the second anniversary 
    of the Closing Date, 0.50% of the Facilities so repaid or terminated.  
    The Bank hereby confirms that no "Early Termination Fee" is payable under 
    the Existing 

                                      21



     Loan Agreement by reason of the execution of this Agreement and the other 
     transactions contemplated to occur on
     the Closing Date.

           6.2   EXPENSES.

                 Borrower agrees to immediately repay Bank for expenses that
     include, but are not limited to, filing, recording and search fees,
     appraisal fees, title report fees, documentation fees, environmental review
     and audit expenses.

           6.3   REIMBURSEMENT COSTS.

                 (a)   Borrower agrees to reimburse Bank for any expenses it 
     incurs in the preparation, closing and enforcement of this Agreement 
     and any agreement or instrument required by this Agreement, and by 
     reason of the due diligence conducted by Bank and its agents and experts 
     in connection herewith or therewith, and any proposed amendment or waiver 
     of the terms hereof or thereof.  Expenses include, but are not limited to, 
     reasonable attorneys' fees, including any allocated costs of Bank's 
     in-house counsel and Bank's domestic and English external counsel.

                 (b)  Borrower agrees to reimburse Bank for the cost of periodic
     audits and appraisals of the property collateral securing this Agreement,
     at such intervals as Bank may reasonably require.   These audits and
     appraisals may be performed by employees of Bank or by independent
     appraisers.

7.   COLLATERAL

           7.1   PERSONAL PROPERTY.  Borrower's obligations to Bank under 
this Agreement will be secured by all personal property Borrower now owns or 
will own in the future. The collateral is further defined in Borrower 
Security Agreement.  All personal property collateral securing any other 
present or future obligations of Borrower to Bank shall also secure this 
Agreement.

            7.2   GUARANTEES;  PERSONAL PROPERTY SUPPORTING GUARANTEES.  The 
obligations of Borrower under this Agreement and the Loan Documents are 
guaranteed by HP UK pursuant to the HP UK Guaranty, which provides for fixed 
and floating charges upon substantially all of the assets of HP UK.  HP UK 
has entered into the UK Lockbox Agreement to secure its obligations under the 
UK Guaranty.  Pursuant to the Pledge Agreement, Borrower has pledged 100% of 
the capital stock of HP UK and the Intercompany Note to the Bank to secure 
its obligations under this Agreement and the other Loan Documents.   Borrower 
has also executed the Borrower Security Agreement to secure its obligations 
hereunder and under the other Loan Documents. 

                                      22



     7.3  FUTURE SUBSIDIARIES AND COLLATERAL.  In the event that Borrower 
hereafter forms or acquires any new Subsidiaries, or Borrower or any of its 
Subsidiaries hereafter moves any collateral for the obligations under the 
Loan Documents or acquires any new property or assets which are not subject 
to the lien of the Loan Documents, then Borrower shall, and shall cause each 
such Subsidiary, concurrently with the occurrence of any such event:

     (a) to deliver to the Bank a guaranty of the obligations of Borrower under
     this Agreement executed by any such new Subsidiary, together with 100% of
     the capital stock of such Subsidiary in  pledge to secure the obligations
     under this Agreement;

     (b) deliver to the Bank such security agreements, mortgages, debentures,
     financing statements or other similar collateral assignments as the Bank
     may reasonably request to grant to the Bank a first priority perfected lien
     in such property; and

     (c) any and all landlord consents, opinions, certificates and other
     assurances as the Bank may request.

     7.4  SUBORDINATION.  The obligations of Borrower to Bastian and Unique 
shall be subordinate and junior in right of payment to the obligations of 
Borrower to Bank, in the manner and to the extent set forth in the 
Subordination Agreement.

8. DISBURSEMENTS, PAYMENTS AND COSTS

     8.1 REQUESTS FOR CREDIT.  Each request for an extension of credit will 
be made in writing in a manner acceptable to Bank, or by another means 
acceptable to Bank. By requesting any extension of credit under this 
Agreement, Borrower shall be deemed to have reaffirmed that each 
representation and warranty set forth in this Agreement and the other Loan 
Documents (other than those which expressly relate only to a specific date) 
is true and correct as of the date of the making of the requested loan or the 
issuance of the requested Letter of Credit, and that no Default or Event of 
Default exists, in each case after giving effect to the making or issuance 
thereof.  If requested by Bank, Borrower will provide written assurances to 
Bank of the accuracy of each such representation and warranty prior to the 
making of any requested Loan or the issuance of any requested Letter of 
Credit.

     8.2 DISBURSEMENTS AND PAYMENTS.  Each disbursement by Bank and each 
payment by Borrower will be:


                                      23




          (a) made through Bank's South Orange County Regional Commercial
      Banking Office in Costa Mesa, California or other branch location 
      selected by Bank from time to time;

          (b) made for the account of Bank's branch selected by Bank from time 
     to time;

          (c) evidenced by records kept by Bank.  In addition, Bank may, at 
     its discretion, require Borrower to sign one or more promissory notes.

     8.3 TELEPHONE AND TELEFAX AUTHORIZATION

          (a) Bank may honor telephone or telefax instructions for advances or 
     repayments or for the designation of optional interest rates or the 
     issuance of Letters of Credit given by any one of the individual signers 
     of this Agreement or a person or persons authorized by any one of the 
     individuals signing this Agreement on behalf of Borrower.

          (b) Advances will be deposited in and repayments will be withdrawn 
     from Borrower's account number 1458126057, or such other accounts of 
     Borrower with Bank as designated in writing by Borrower.

          (c) Borrower will provide written confirmation to Bank of any 
     telephone or telefax instructions within one business day.  If there is 
     a discrepancy and Bank has already acted on the instructions, the 
     telephone or telefax instructions will prevail over the written 
     confirmation.

          (d) Borrower indemnifies and excuses Bank (including its officers, 
     employees, and agents) from all liability, loss, and costs in connection 
     with any act resulting from telephone or telefax instructions it 
     reasonably believes are made by any individual authorized by Borrower to 
     give such instructions.  This indemnity and excuse will survive the 
     termination of this Agreement.

     8.4 DIRECT DEBIT

          (a) Borrower agrees that interest and principal payments and fees 
     will be deducted automatically on the due date from Borrower's account 
     number 1458126057, or such other of Borrower's accounts with Bank as 
     designated in writing by Borrower.


                                      24



          (b) Bank will debit the account on the dates the payments become 
     due.  If a due date does not fall on a banking day, Bank will debit the 
     account on the first banking day following the due date.

          (c) Borrower will maintain sufficient funds in the account on the 
     dates Bank enters debits authorized by this Agreement.  If there are 
     insufficient funds in the account on the date Bank enters any debit 
     authorized by this Agreement, the debit will be reversed.

     8.5 DIRECT DEBIT (LINE OF CREDIT)

          (a) Borrower agrees that Bank may create advances under the line of 
     credit to pay interest, principal payments, and any fees that are due 
     under this Agreement.

          (b) Bank will create any such advances on the dates the payments 
     become due.  If a due date does not fall on a banking day, Bank will 
     create the advance on the first banking day following the due date.

          (c) If the creation of an advance under the line of credit causes 
     the total amount of credit outstanding under the line to exceed the 
     limitations set forth in this Agreement, Borrower will immediately pay 
     the excess to Bank upon Bank's demand.

     8.6 BANKING DAYS.  Unless otherwise provided in this Agreement, a 
banking day is a day other than a Saturday or a Sunday on which Bank is open 
for business in California.  For amounts bearing interest at the Offshore 
Rate described in Section 5, a banking day is a day other than a Saturday or 
a Sunday on which Bank is open for business in California and dealing in 
offshore dollars.  All payments and disbursements which would be due on a day 
which is not a banking day will be due on the next banking day.  All payments 
received on a day which is not a banking day will be applied to the credit on 
the next banking day.

    8.7 TAXES.  If any payments to Bank under this Agreement are made from 
outside the United States, Borrower will not deduct any foreign taxes from 
any payments it makes to Bank.  If any such taxes are imposed on any payments 
made by Borrower (including payments under this Section), Borrower will pay 
the taxes and will also pay to Bank, at the time interest is paid, any 
additional amount which Bank specifies as necessary to preserve the after-tax 
yield Bank would have received if such taxes had not been imposed.  Borrower 
will confirm that it has paid the taxes by giving Bank official tax receipts 
(or notarized copies) within 30 days after the due date.


                                      25



     8.8 ADDITIONAL COSTS.  Borrower will pay Bank, on demand, for Bank's 
costs or losses arising from any statute or regulation, or any request or 
requirement of a regulatory agency which is applicable to all national banks 
or a class of all national banks.  The costs and losses will be allocated to 
the loan in a manner determined by Bank, using any reasonable method.  The 
costs include the following:

          (a) any reserve or deposit requirements; and

          (b) any capital requirements relating to Bank's assets and 
     commitments for credit.

     8.9 INTEREST CALCULATION.  All interest and fees under this Agreement 
will be computed on the basis of a 360-day year and the actual number of days 
elapsed. This results in more interest or a higher fee than if a 365-day year 
is used.
 
     8.10 DEFAULT RATE.  Upon the occurrence and during the continuation of 
any Default or Event of Default under this Agreement, advances under this 
Agreement will at the sole option of Bank bear interest at a rate (the 
"DEFAULT RATE") which is 3.0 percentage points per annum higher than the rate 
of interest otherwise provided under this Agreement.  The Default Rate shall 
apply not only to principal but to payments of interest and fees which are 
not paid when due. This may result in a compounding of interest. The 
imposition of the Default Rate by Bank will not constitute a waiver of any 
default.

     8.11 OVERDRAFTS.  At Bank's sole option in each instance, Bank may do 
one of the following:

               (a)  Bank may make advances under this Agreement to prevent or
     cover an overdraft on any account of Borrower or HP UK with Bank.  Each
     such advance will accrue interest from the date of the advance or the date
     on which the account is overdrawn, whichever occurs first, at the interest
     rate described in this Agreement.

               (b)  Bank may reduce the amount of credit otherwise available
     under this Agreement by the amount of any overdraft on any account of
     Borrower or HP UK with Bank.

This Section shall not be deemed to authorize Borrower or HP UK to create
overdrafts on any of their accounts with Bank.

     8.12 COLLECTIONS ON ACCOUNTS RECEIVABLE.   Prior to the occurrence of 
any Default or Event of Default, all proceeds of collections of Borrower's 
accounts receivable 


                                      26



received in the Lockboxes shall be collected by Bank and deposited into a the 
relevant Lockbox Account, and all proceeds of collections of HP UK's accounts 
receivable shall be deposited directly into the relevant Lockbox Account.  
Prior to the occurrence of any Default or Event of Default,  Bank shall remit 
any funds collected in the Lockbox Account to Borrower's or HP UK's checking 
account or other deposit accounts maintained by Borrower or HP UK in 
accordance with the terms of the Lockbox Agreement.  Upon the occurrence and 
during the continuance of any Default or Event of Default, collections in the 
Lockbox Account shall be credited to interest, principal, and other sums owed 
to Bank under this Agreement in the order and proportion determined by Bank 
in its sole discretion. All such credits will be conditioned upon collection 
and any returned items may, at Bank's option, be charged to Borrower and HP 
UK.

9. CONDITIONS

     Bank must receive the following items, in form and substance acceptable 
to Bank, before it is required to make the initial loans or issue the initial 
Letters of Credit under this Agreement:

     9.1 AUTHORIZATIONS.  Evidence that the execution, delivery and 
performance by Borrower and HP UK of this Agreement and any instrument or 
agreement required under this Agreement have been duly authorized.

     9.2 INCUMBENCY CERTIFICATES; GOVERNING DOCUMENTS.  Incumbency 
certificates for Borrower and HP UK, together with true, correct and complete 
copy of Borrower's and HP UK's articles of incorporation and bylaws or other 
organizational papers, certificates of good standing with respect to Borrower 
issued by the California Secretary of State's office and the California 
Franchise Tax Board, and evidence of the due formation and existence of HP UK 
acceptable to the Bank.

     9.3 SECURITY AGREEMENTS, ETC.  The Borrower Security Agreement, the 
Pledge Agreement, the Lockbox Agreements, the Intercompany Debenture and the 
Borrower Debenture, each duly executed by Borrower or HP UK, as required, 
together with the collateral pledged thereunder and such other assignments, 
instruments, financing statements and fixture filings as Bank requires.

     9.4 EVIDENCE OF PRIORITY.  Evidence that all security interests and 
liens to be established in favor of Bank pursuant hereto are valid, 
enforceable, and prior to all others' rights and interests (other than the 
purchase money liens disclosed on the UCC search provided to Bank), except 
those to which Bank explicitly consents in writing.  


                                      27



     9.5 CONSENT TO REMOVAL.  A Landlord's Consent from the owner of each 
parcel of real property leased by Borrower or HP UK.

     9.6 INSURANCE.  Evidence of insurance coverage, as required in Section 
11.24 of this Agreement.

     9.7 BUSINESS INTERRUPTION INSURANCE.  Evidence of a business 
interruption insurance policy for at least $4,000,000 with an insurer 
acceptable to Bank, and with Bank named as an additional loss payee.

     9.8 GUARANTY.  The HP UK Guaranty.

     9.9 SUBORDINATION AGREEMENT.  The Subordination Agreement shall have 
been executed by all parties thereto.

     9.10 INITIAL PUBLIC OFFERING.  Evidence acceptable to Bank of the 
completion of the Initial Public Offering and the receipt by Borrower of Net 
Proceeds thereof in an amount which is not less than $17,500,000.

     9.11 ACQUISITION.  A certificate executed by a senior officer of 
Borrower certifying that the attached copies of the Acquisition Agreement, 
the Landing Gear Overhaul Services Agreement with British Airways, and the 
British Airways Environmental Indemnity are true, correct and complete, 
together with evidence that the Acquisition is in a position to concurrently 
close in accordance with the Acquisition Agreement and all applicable laws 
and in a manner acceptable to Bank.

     9.12 LEGAL OPINIONS.  Written opinions from legal counsel for Borrower 
and HP UK, covering such matters as Bank may require, including the 
organization, authority and good standing of Borrower and HP UK, the due 
execution and delivery of all Loan Documents, the valid, binding and 
enforceable nature of the Loan Documents against Borrower and HP UK, and the 
possession by Borrower and HP UK of all necessary certificates, permits and 
licenses which are required to conduct its business as presently conducted, 
including a valid certificate from the Civil Aviation Authority.

     9.13 APPRAISAL.   An appraisal (by an appraiser acceptable to Bank, and 
in form and scope acceptable to Bank) of the fixed assets of the UK Business 
with results satisfactory to Bank and in any event providing for an orderly 
liquidation value (after liquidation costs) of rotable gear sets and eligible 
machinery and equipment of not less than $12,000,000.


                                      28



     9.14 PAYMENT OF FEES.  Payment of all accrued and unpaid expenses 
incurred by Bank as required by Sections 6.2 and 6.3.

     9.15 MATERIAL CONTRACTS.  A Certificate of a senior officer of Borrower 
certifying that there have been no material amendments to Borrower's 
contracts with Federal Express, Inc., BTR Dunlop, Inc. and its affiliates and 
the Coast Guard Contract since November 27, 1996, and that the attached copy 
of  Borrower's long term supply contract with American Airlines is true and 
correct.

     9.16 CONSENTS.  Executed consents and agreements in form and substance 
acceptable to Bank from (a) each party whose agreement or consent to the 
Acquisition or any other transaction contemplated hereby is required by any 
material agreement to which Borrower or any of its Subsidiaries is a party, 
(b) each party to any material contract allowing termination upon any change 
in control of Borrower or any of its Subsidiaries, and (c) which are 
otherwise deemed necessary by Bank.

     9.17 CERTAIN FINANCIAL INFORMATION.

          (a) A certificate of an officer of Borrower setting forth all
     revisions (if any) that have been made to the five year annual financial
     projections for Borrower previously delivered to Bank.

          (b) Pro forma pre-closing and post-closing balance sheets
     reflecting all adjustments necessary or desirable to reflect the effects of
     the Acquisition.

          (c) A final sources and uses statement with respect to the
     Acquisition.

          (d) the British Airways services schedule and agreement for 1998.

     9.18 YEAR 2000 COMPLIANCE.  Borrower shall have completed a Year 2000 
questionnaire and a comprehensive action plan acceptable to Bank for dealing 
with computer related problems associated with the year 2000.

     9.19 BORROWING BASE.  Borrower shall have delivered the initial 
Borrowing Base Certificate hereunder as of December 31, 1997.

     9.20 MIS PLAN.  Borrower shall have developed and delivered to Bank an 
acceptable plan in relation to the management information systems for HP UK.


                                      29



     9.21 TAX LETTER.  Borrower shall have delivered a copy  of a letter 
addressed to Borrower by Ernst & Young LLP as to the availability and 
limitations of certain net operating loss carry-forwards in existence prior 
to the Initial Public Offering as deductions for inclusion in Borrower's 
federal and state income tax returns, and such report shall be acceptable to 
Bank.

     9.22 ENVIRONMENTAL PERMITS.  Copies of documents establishing, to the 
satisfaction of the Bank, that all environmental permits necessary for HP UK 
to operate the business acquired pursuant to the Acquisition Agreement at its 
present Heathrow Airport location have been obtained, including without 
limitation extensions of the following permits:

   Environmental Agency Authorization (Cadmium Plating Process) No. A00130
   Local Authority Authorization (Painting Process) EPA B3\26
   Approval (Thames Water Utilities Consent) HS119A

     9.23 CIVIL AIR PERMIT.  Evidence acceptable to to the Bank that HP UK 
has received all necessary permits from the United Kingdom's Civil Aviation 
Authority.

     9.24 OTHER ITEMS.  Any other items that Bank reasonably requires.

10. REPRESENTATIONS AND WARRANTIES

     When Borrower signs this Agreement, and until Bank is repaid in full, 
Borrower makes the following representations and warranties as to itself and 
its Subsidiaries.  Each request for an extension of credit hereunder 
constitutes a renewed representation and warranty to Bank:

     10.1 ORGANIZATION OF BORROWER AND ITS SUBSIDIARIES.  Borrower and each 
of its Subsidiaries are corporations duly formed, existing and in good 
standing under the laws of their respective jurisdictions of formation.  
Schedule 1 hereto correctly details the ownership of Borrower as of the 
Closing Date (separately listing each of the persons owning interests in 
Borrower prior to the consummation of the Initial Public Offering).  The form 
of organization, number of shares of capital stock issued and outstanding, 
and ownership of each Subsidiary of Borrower are properly described on 
Schedule 1.

     10.2 AUTHORIZATION.  This Agreement, the Loan Documents and any 
instrument or agreement required hereunder or thereunder, are within 
Borrower's and it Subsidiaries respective powers, have been duly authorized, 
and do not conflict with any of their respective organizational papers.

     10.3 ENFORCEABLE AGREEMENT.  This Agreement and the other Loan Documents 
are the legal, valid and binding agreements of Borrower and each other party 
thereto, enforceable against Borrower and each such other party in accordance 
with their respective terms, and any


                                      30



instrument or agreement required hereunder, when executed and delivered, will 
be similarly legal, valid, binding and enforceable.

     10.4 GOOD STANDING.  In each state in which Borrower and its 
Subsidiaries do business, they are properly licensed, in good standing, and, 
where required, in compliance with fictitious name statutes.  HP UK is 
properly licensed and in good standing under the laws of England.

     10.5 NO CONFLICTS.  This Agreement and the other Loan Documents do not 
conflict with any law, agreement, or obligation by which Borrower, its 
Subsidiaries or any of their affiliates are bound.

     10.6 FINANCIAL INFORMATION.  All financial and other information that 
has been or will be supplied to Bank, including pursuant to Section 9 of this 
Agreement, is:

          (a) sufficiently complete to give Bank accurate knowledge of 
     Borrower's and its Subsidiaries financial condition.

          (b) in compliance with all government regulations that apply.

Since the date of the financial statements of Borrower delivered pursuant 
hereto for the period ending November 30, 1997, there has been no material 
adverse change in the assets, consolidated financial condition, business or 
prospects of Borrower and its Subsidiaries.  Each of  the projections 
delivered by Borrower to Bank are, to the best knowledge of Borrower, based 
upon assumptions which are reasonable and internally consistent, and are 
consistent with all facts known to Borrower (subject to the uncertainties 
inherent in all projections). 

     10.7 LAWSUITS.  There is no lawsuit, tax claim or other dispute pending 
or threatened against Borrower or its Subsidiaries which, if adversely 
decided, would impair Borrower's  consolidated financial condition or ability 
to repay the obligations hereunder.

     10.8 COLLATERAL.  All collateral required in this Agreement is owned (or 
is being concurrently acquired) by the grantor of the security interest free 
of any title defects or any liens or interests of others, except those which 
have been explicitly approved by Bank in writing.

     10.9 PERMITS, FRANCHISES.  Borrower and its Subsidiaries possess all 
permits, memberships, franchises, contracts and licenses required and all 
trademark rights, trade name rights, patent rights and fictitious name rights 
necessary to enable them to conduct the business in which they are now 
engaged.


                                     31


     10.10 OTHER OBLIGATIONS.  Borrower and its Subsidiaries are not in 
default on any obligation for borrowed money, any purchase money obligation 
or any other material lease, commitment, contract, instrument or obligation.

     10.11 INCOME TAX RETURNS.  Borrower has no knowledge of any pending 
assessments or adjustments of the income tax payable by Borrower and its 
Subsidiaries with respect to any year.

     10.12 NO EVENT OF DEFAULT.  There is no event which is, or with notice 
or lapse of time or both would be, a Default or Event of Default under this 
Agreement or any of the other Loan Documents.

     10.13 MERCHANTABLE INVENTORY.  All inventory which is included in the 
Borrowing Base is of good and merchantable quality and free from material 
defects.

     10.14 ERISA PLANS.

          (a) Borrower and each of its ERISA Affiliates have fulfilled their
     obligations, if any, under the minimum funding standards of ERISA and the 
     Code with respect to each Plan and is in compliance in all material 
     respects with the presently applicable provisions of ERISA and the Code,
     and has not incurred any liability with respect to any Plan under Title 
     IV of ERISA.

          (b) No reportable event has occurred under Section 4043(b) of ERISA
     for which the PBGC requires 30 day notice.

          (c) No action by Borrower or any of its ERISA Affiliates to terminate
     or withdraw from any Plan has been taken and no notice of intent to 
     terminate a Plan has been filed under Section 4041 of ERISA.

          (d) No proceeding has been commenced with respect to a Plan under 
     Section 4042 of ERISA, and no event has occurred or condition exists which
     might constitute grounds for the commencement of such a proceeding.

          (e) The following terms have the meanings indicated for purposes of 
     this Agreement:

               (i) "CODE" means the Internal Revenue Code of 1986, as amended 
          from time to time.


                                       32




               (ii) "ERISA" means the Employee Retirement Income Security
           Act of 1974, as amended from time to time.

               (iii) "ERISA AFFILIATE" means, with respect to any person, any
           other person (or any trade or business, whether or not incorporated)
           that is under common control with that person within the meaning of 
           Section 414 of the Code.

              (iv)  "PBGC" means the Pension Benefit Guaranty Corporation
           established pursuant to Subtitle A of Title IV of ERISA.  

              (v)    "PLAN" means any employee pension benefit plan
           maintained or contributed to by any Borrower and insured by the
           Pension Benefit Guaranty Corporation under Title IV of ERISA.

     10.15 LOCATION OF BORROWER AND ITS SUBSIDIARIES.  Borrower's only place 
of business (other than its location in the Netherlands) and chief executive 
office is located at the address listed under Borrower's signature on this 
Agreement. HP UK's sole business location and the location of its chief 
executive offices is located at Number 1 London Road, Southampton S015 2AE 
England or at another location disclosed in writing to the Bank as such.

     10.16 CERTAIN COLLATERAL.

          (a) Each deposit account maintained by Borrower and its Subsidiaries
     as of the Closing Date is described on Schedule 1 hereto.  Borrower has
     notified Bank in writing of each deposit account opening by Borrower or any
     of its Subsidiaries following the Closing Date.

          (b) Borrower and its Subsidiaries do not own any patents,
     trademarks or other intellectual property which is not described on
     Schedule 1 hereto.

          (c) Each Shipset which Borrower or any of its Subsidiaries has
     received in exchange from one of its customers is Borrower's or such
     Subsidiary's sole property, free and clear of all liens and rights of
     others, including without limitation any and all liens and other rights of
     lenders to customers of Borrower and its Subsidiaries which whom such
     Shipsets have been exchanged.


                                       33




          (d)  Each of the assets described in the appraisal of the UK Business
      delivered to Bank shall be purchased pursuant to the Acquisition 
      Agreement and, as of the Closing Date, has not suffered any material
      deterioration in value since the date of such appraisal.

     10.17 THE ACQUISITION.  The Acquisition has been consummated 
concurrently with the Closing Date in accordance with the Acquisition 
Agreement and all applicable laws.

     10.18 ENVIRONMENTAL.  Borrower, its Subsidiaries and their operations 
are in material compliance with all Environmental Laws.  Borrower and its 
Subsidiaries have no knowledge of any Environmental Claims that, either 
individually or in the aggregate, could reasonably be expected to have a 
material adverse effect upon their condition or their ability to repay the 
obligations evidenced by this Agreement and the other Loan Documents.

     10.19 GOVERNMENTAL REGULATION.  Neither Borrower nor any person 
controlling Borrower is an "Investment Company" within the meaning of the 
Investment Company Act of 1940.  Borrower is not subject to regulation under 
the Public Utility Holding Company Act of 1935, the Federal Power Act, the 
Interstate Commerce Act, any state public utilities code, or any other 
Federal or state statute or regulation limiting its ability to incur 
indebtedness.

     10.20 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. Borrower and 
its Subsidiaries own or are licensed or otherwise have the right to use all 
of the patents, trademarks, service marks, trade names, copyrights, 
contractual franchises, authorizations and other rights that are reasonably 
necessary for the operation of their business, without conflict with the 
rights of any other person.

     10.21 CONTRACTS. Borrower and its Subsidiaries have not entered into any 
material contracts during the three month period immediately preceding the 
Closing Date which have not been disclosed to Bank in writing.

     10.22 YEAR 2000 COMPLIANCE. Borrower and its Subsidiaries have 
implemented a comprehensive program to address the "year 2000 problem" (that 
is, the risk that computer applications may not be able to properly perform 
date-sensitive functions after December 31, 1999) and expect to resolve on a 
timely basis any material year 2000 problem. Borrower and its Subsidiaries 
have also made inquiry of each supplier, vendor and customer of Borrower and 
its Subsidiaries that is of material importance to the financial well-being 
of Borrower and its Subsidiaries with respect to the "year 2000 problem".  On 
the basis of that inquiry, Borrower believes that each such supplier, vendor 
and customer will resolve any material year 2000 problem on a timely basis.


                                       34




     10.23 LANDLORD CONSENTS.   The landlord consents delivered to Bank with 
respect to Borrower's premises in Sun Valley, California, have been delivered 
from each lessor of the real property comprising that facility.

11.   COVENANTS 

      Borrower agrees, so long as credit is available under this Agreement 
and until Bank is repaid in full, unless Bank otherwise agrees in writing, 
Borrower shall, and shall cause each of its Subsidiaries:

      11.1 USE OF PROCEEDS.  To use the proceeds of the credit provided 
hereunder (a) on the Closing Date to (i) refinance the obligations under the 
Existing Loan Agreement (including a repayment of the Facility No. 1 
thereunder in an amount which is not less than $2,000,000), (ii) to repay a 
$1,500,000 portion of the Subordinated Note (leaving a principal balance of 
not less than $5,000,000), (iii) to repay in full the AMR Shipset Payable, 
and (iv) to partially finance the Acquisition (by means of the loan to HP UK 
evidenced by the Intercompany Note) and (b) thereafter for the working 
capital needs of Borrower and HP UK, for Letters of Credit, and, in the case 
of the Capital Expenditure Loans, only for the purposes approved in 
connection with each such loan.

     11.2 USE OF PROCEEDS: INELIGIBLE SECURITIES.   Not to use, directly or 
indirectly, any portion of the proceeds of the credit (including any Letters 
of Credit) for any of the following purposes:

          (a) knowingly to purchase Ineligible Securities from BA Securities,
     Inc. (the "ARRANGER") during any period in which the Arranger makes a 
     market in such Ineligible Securities; or

          (b) knowingly to purchase during the underwriting or placement period
     Ineligible Securities being underwritten or privately placed by the 
     Arranger; or

          (c) to make payments of principal, interest or dividends on Ineligible
     Securities underwritten or privately placed by the Arranger and issued by 
     or for the benefit of any Borrower or any affiliate of any Borrower.
     
     11.3 FINANCIAL AND OTHER INFORMATION.  To provide the following 
financial information and statements and other information:

          (a) Within 90 days following the end of each fiscal year of Borrower,
      Borrower's consolidated annual financial statements.  These financial 
      statements must be


                                       35




     audited (with an unqualified opinion) by Ernst & Young, LLP or another
     nationally recognized firm of independent public accountants reasonably
     acceptable to Bank and must be accompanied by a management letter prepared
     by such auditors.

          (b) Within 30 days following the end of each calendar month (including
     the last calendar month in each fiscal year), Borrower's monthly 
     consolidated and consolidating financial statements showing results for 
     that month and for a year to date basis, PROVIDED THAT if no Default or 
     Event of Default has then occurred, following the delivery of Borrower's 
     audited financial statements for the fiscal year ending December 31, 1998, 
     Borrower shall instead, within 45 days following the end of each fiscal 
     quarter (including the last fiscal quarter in each fiscal year) deliver its
     quarterly consolidated and consolidating financial statements showing 
     results for that fiscal quarter and on a year to date basis. In either 
     case, these financial statements may be Borrower prepared, and shall 
     include a comparison to plan and prior year on a monthly and year to date 
     basis.

          (c) If requested by Bank, copies of Borrower's federal income tax 
     return, promptly and in any event within 15 days of filing, and copies of
     any extensions of the filing date.

          (d) Within the period provided for in clause (a) (in relation to 
     Borrower's audited statements and giving effect to any adjustments from the
     unaudited statements made therein) and promptly and in any event within 
     45 days following the last day of each fiscal quarter (in relation to the 
     unaudited statements and including the last fiscal quarter in each fiscal 
     year) a compliance certificate signed by an authorized financial officer of
     Borrower setting forth information and computations (in sufficient detail)
     to establish (x) that Borrower is in compliance with all financial 
     covenants at the end of the period covered by the financial statements then
     being furnished, and (y) whether there existed as of the date of such 
     financial statements and whether there exists as of the date of the 
     certificate, any Default or Event of Default under this Agreement and, 
     (iii) if any such Default or Event of Default exists, specifying the 
     nature thereof and the action Borrower is taking and propose to take with
     respect thereto.

          (e) A borrowing base certificate ("Borrowing Base Certificate") 
     setting forth the respective amounts of Acceptable Receivables and 
     Acceptable Inventory and a calculation of the Borrowing Base as of the 
     last day of each month within 20 days after month end and, if requested 
     by Bank copies of the invoices or the record of invoices from each 
     Borrower's and HP UK's sales journal for such Acceptable Receivables, 
     copies of the delivery receipts, purchase orders, shipping instructions,
     bills of lading and other documentation pertaining to such Acceptable 
     Receivables.


                                       36




          (f) (Statements showing an aging and reconciliation of Borrower's
     and HP UK's receivables within 20 days after the end of each month.

          (g) A statement showing an aging of accounts payable within 20 days
     after the end of each month.

          (h) If Bank requires Borrower and its Subsidiaries to deliver the 
     proceeds of accounts receivable to Bank upon collection by Borrower and
     its Subsidiaries, a schedule of the amounts so collected and delivered 
     to Bank.

          (i) An inventory summary report and listing within 20 days after 
     the end of each month, including a description of the inventory, its 
     location and cost, and such other information and collateral reports as
     Bank may require.

          (j) A listing of the names and addresses, telephone numbers and 
     principal contacts of all debtors obligated upon Borrower's and its 
     Subsidiaries accounts receivable semi-annually within 20 days following
     the last day of the second and fourth fiscal quarters in each of 
     Borrower's fiscal years.

          (k) 30 days prior to each fiscal year end, updated annual financial
     projections for Borrower and its Subsidiaries through December 31, 2004,
     and quarterly financial projections through the subsequent fiscal year.

          (l) Within 90 days following the Closing Date, an audited opening 
     consolidated balance sheet of Borrower prepared by Ernst & Young LLP.

          (m) Promptly upon Bank's request, such other statements, lists of 
     property and accounts, budgets, forecasts or reports as to Borrower as 
     Bank may reasonably request.

          (n) Annually and in any event not later than January 1 of each 
     year, commencing with January 1, 1998, an environmental compliance audit 
     prepared by consultants acceptable to Bank, which audit shall (i) be 
     prepared at the sole cost and expense of Borrower and (ii) detail areas 
     of environmental non-compliance, types of environmental permits and 
     licenses required and held by Borrower, and upgrades to programs, permits 
     and licenses required or to be considered by Borrower due to changes in 
     environmental regulations. The environmental compliance audit shall 
     identify, to a degree of certainty "more likely than not" any conditions
     or operations that meet the foregoing criteria.


                                       37




          (q) Promptly and in any event within 5 days following the filing
     thereof, copies of Borrower's reports on Form 10-K and Form 10-Q and
     all other material reports filed by Borrower with the Securities and
     Exchange Commission.

          (r) On a monthly basis until HPUK has vacated the Heathrow  Airport
     location leased from British Airways, not later than the 5th day of each 
     calendar month, (i) a copy of a receipt issued by British Airways for rent
     paid with respect to that location for that calendar month and (ii) a 
     narrative description of the progress of Borrower's and HP UK's efforts to
     relocate the operations of HP UK from Heathrow Airport, and an update of
     the timetable for that relocation.

          (s) Promptly upon Bank's request, such other information as
     Bank may reasonably request.

     11.4  SENIOR FUNDED DEBT TO ADJUSTED EBITDA.  As of the last day of each 
Fiscal Quarter described below, to maintain a ratio of (a) Senior Funded Debt 
as of the last day of such Fiscal Quarter to (b) Adjusted EBITDA, which is 
not greater than the ratio set forth opposite the period in which such Fiscal 
Quarter ends:

     FISCAL QUARTERS ENDED                               MAXIMUM RATIO
     ---------------------                               -------------
     March 31, 1998 and June 30, 1998                      3.85:1.00

     September 30, 1998                                    3.50:1.00

     December 31, 1998 through September 30, 1999          3.25:1.00

     December 31, 1999 through September 30, 2000          3.00:1.00

     December 31, 2000 through September 30, 2001          2.75:1.00

     Thereafter                                            2.50:1.00.

     11.5 FIXED CHARGE COVERAGE RATIO.  To maintain, as of the last day of 
each Fiscal Quarter set forth below, a ratio of (a) Cash Flow to (b) Fixed 
Charges which is not less


                                       38




than the ratio set forth opposite the period in which such Fiscal Quarter 
ends, calculated quarterly on a fiscal year to date basis through December 
31, 1998 and on a rolling four quarter basis thereafter. 


     PERIOD                                              MINIMUM RATIO
     ------                                              -------------
     March 31, 1998 and June 30, 1998                      1.20:1.00

     September 30, 1998 and December 31, 1998              1.40:1.00

     Thereafter                                            1.50:1.00


     11.6 PROFITABILITY.  To maintain a positive net income before taxes and
extraordinary income on a cumulative basis for each period of two consecutive
fiscal quarters following the Closing Date.

     11.7 OTHER DEBTS.  Not to have outstanding or incur any direct or 
contingent liabilities of any kind or lease obligations or swap or similar 
hedge agreement obligations (other than to Bank), or become liable for the 
liabilities of others, without Bank's written consent.  This does not prohibit:

          (a) Acquiring goods, supplies, or merchandise on normal trade credit.

          (b) Endorsing negotiable instruments received in the usual course of
      business.

          (c) Obtaining surety bonds in the usual course of business.

          (d) Debts and leases in existence on the date of this Agreement 
     disclosed in writing to Bank on Schedule 1.

          (e) Additional debts and lease obligations for the acquisition of
     fixed or capital assets in the ordinary course of Borrower's business, in
     an aggregate amount not to exceed $750,000 at any one time outstanding.

          (f) the unsecured subordinated debt evidenced by the Subordinated 
     Note on then Closing Date.


                                       39


           11.8   OTHER LIENS.  Not to create, assume, or allow any security 
interest, encumbrance or judicial or other lien (each a "LIEN") on property 
Borrower now or later owns, except:

                  (a)  Liens in favor of Bank.

                  (b)  Liens for taxes not yet due.

                  (c)  Liens outstanding on the date of this Agreement and 
     disclosed in writing to Bank on Schedule 1.

                  (d)  Additional purchase money security interests in personal 
     property acquired using indebtedness of the type described in Section 
     11.7(e).

           11.9   CAPITAL EXPENDITURES FOR ROTABLE GEARS.  Not to make or 
commit to make capital expenditures (including any amount expended with 
respect to capital leases) for the purchase or lease of rotable gears in any 
fiscal year (net of the amount received from the sale of rotable gears) which 
are in excess of the amount set forth below opposite that fiscal year:

                   FISCAL YEAR                     AMOUNT.

                   1998                            3,000,000
                   1999 and each subsequent
                   fiscal year                     3,500,000.

           11.10  CAPITAL EXPENDITURES FOR OTHER ASSETS.  Not to make or 
commit to make capital expenditures (including any amount expended with 
respect to capital leases) for any assets (other than expenditures for the 
purchase or lease of rotable gears which are permitted by Section 11.9) in 
any fiscal year which are in excess of the amount set forth below opposite 
that fiscal year:

                   FISCAL YEAR                     AMOUNT.

                   1998                            $4,500,000
                   1999                             2,500,000
                   Each subsequent fiscal year      2,000,000;


                                      40



PROVIDED that in the event that Borrower and its Subsidiaries expend less 
than the amount allotted above during the 1998 fiscal year, the unexpended 
amount, not to exceed $2,250,000, may be carried over to the 1999 fiscal year.

           11.11  DIVIDENDS AND OTHER PAYMENTS.  Not to declare or pay any 
dividends or other distributions on any of Borrower's shares, or make any 
loan or investment having the effect of making any such dividend or 
distribution, and not to purchase, redeem or otherwise acquire for value any 
of Borrower's shares, or create any sinking fund in relation thereto, and not 
to make other payments to Unique, Bastian or their respective affiliates, 
including without limitation management fees, except that Borrower may pay 
Permitted Management Fees when no Default or Event of Default exists or would 
result therefrom.

           11.12  LOANS TO OFFICERS.  Not to make any loans, advances or 
other extensions of credit to Borrower's or its Subsidiaries' executives, 
officers, or directors or shareholders (or any relatives of any of the 
foregoing), other than amounts which do not exceed $10,000, in the aggregate, 
at any time.

           11.13  NOTICES TO BANK.  To promptly notify Bank in writing of:

                  (a)   any lawsuit over $100,000 against Borrower or any of 
     its Subsidiaries.

                  (b)   any substantial dispute between Borrower and its 
     Subsidiaries and any government authority.

                  (c)   any known failure to comply with this Agreement or 
     the other Loan Documents.

                  (d)   any material adverse change in Borrower's and its 
     Subsidiaries financial condition or operations.

                  (e)   any change in the name, legal structure, place of 
     business, or chief executive office of Borrower or any of its 
     Subsidiaries.

                  (f)   any pending or threatened environmental investigation 
     or proceeding not previously disclosed to Bank in writing involving 
     Borrower, its Subsidiaries or any of the real property upon which their 
     operations are located.

           11.14  BOOKS AND RECORDS.  To maintain adequate books and records.


                                      41



           11.15  AUDITS.  To allow Bank and its agents to inspect Borrower's 
and its Subsidiaries properties and examine, audit and make copies of books 
and records at any reasonable time, provided that if no Default or Event of 
Default exists, Bank will provide prior verbal or written notice of its 
intention to exercise its rights under this Section not later than the 
business day prior to its exercise and, if requested by Borrower, will 
provide written confirmation of any such verbal notice.  If any of Borrower's 
or its Subsidiaries properties, books or records are in the possession of a 
third party, Borrower authorizes that third party to permit Bank or its 
agents to have access to perform inspections or audits and to respond to 
Bank's requests for information concerning such properties, books and 
records.  Bank has no duty to inspect Borrower's properties or to examine, 
audit or copy books and records and Bank shall not incur any obligation or 
liability by reason of not making any such inspection or inquiry.  In the 
event that Bank inspects Borrower's properties or examines, audits or copies 
books and records, Bank will be acting solely for the purposes of protecting 
Bank's security and preserving Bank's rights under this Agreement. Neither 
Borrower nor any other party is entitled to rely on any inspection or other 
inquiry by Bank.  Bank owes no duty of care to protect Borrower or any other 
party against, or to inform Borrower or any other party of, any adverse 
condition that may be observed as affecting Borrower's properties or 
premises, or Borrower's business.  Bank may in its discretion disclose to 
Borrower or any other party any findings made as a result of, or in 
connection with, any inspection of Borrower's properties.

           11.16  COMPLIANCE WITH LAWS.  To comply with the laws (including 
any fictitious name statute), regulations, and orders of any government body 
with authority over the business of Borrower and its Subsidiaries.

           11.17  PRESERVATION OF RIGHTS.  To use commercially reasonable 
efforts to maintain and preserve all rights, privileges, and franchises 
Borrower and its Subsidiaries now have.

           11.18  MAINTENANCE OF PROPERTIES.  To make any repairs, renewals, 
or replacements to the properties of Borrower and its Subsidiaries which are 
necessary to keep the same in good working condition.

           11.19  PERFECTION OF LIENS.  To help Bank perfect and protect its 
security interests and liens, and reimburse it for related costs it incurs to 
protect its security interests and liens.

          11.20 PLACES OF BUSINESS.  Not to open additional business locations
or store property having a value in excess of $10,000 at any location not
disclosed to Bank in writing.

           11.21  COOPERATION.  To take any action reasonably requested by 
Bank to carry out the intent of this Agreement.


                                      42



           11.22  INSURANCE.

                  (a)  INSURANCE COVERING COLLATERAL.  To maintain all risk 
     property damage insurance policies covering the tangible property 
     comprising the collateral.  Each insurance policy must be for the full 
     replacement cost of the collateral and include a replacement cost 
     endorsement. The insurance must be issued by an insurance company 
     acceptable to Bank and must include a lender's loss payable endorsement 
     in favor of Bank in a form acceptable to Bank.

                   (b)  GENERAL BUSINESS INSURANCE.  To maintain insurance 
     acceptable to Bank as to amount, nature and carrier covering property 
     damage (including loss of use and occupancy) to any of Borrower's and 
     its Subsidiaries' properties, public liability insurance including 
     coverage for contractual liability, product liability and workers' 
     compensation, and any other insurance which is usual for Borrower's and 
     its Subsidiaries' business.

                  (c)  EVIDENCE OF INSURANCE.  Upon the request of Bank, to 
     deliver to Bank a copy of each insurance policy, or, if permitted by 
     Bank, a certificate of insurance listing all insurance in force.

           11.23  ADDITIONAL NEGATIVE COVENANTS.  Not to, without Bank's 
     written consent:

                  (a)  engage in any business activities substantially 
     different from Borrower's and its Subsidiaries' present business.

                  (b)  liquidate or dissolve Borrower's or any Subsidiary's 
     business or adopt a plan to take any such action.

                  (c)  enter into any consolidation, merger, pool, joint 
     venture, syndicate, or other combination.

                  (d)  without the prior written consent of Bank (no to be 
     unreasonably withheld or delayed), lease, or dispose of any assets of 
     Borrower or its Subsidiaries which have an aggregate value in excess of 
     $100,000 in any year, other than sales and leases of inventory in the 
     ordinary course of business.

                   (e)  acquire or purchase a business or its assets.


                                      43


 
                   (f)  sell or otherwise dispose of any assets for less than 
     fair market value or enter into any sale and leaseback agreement 
     covering any of Borrower's fixed or capital assets.

                   (g)  voluntarily suspend Borrower's business for any 
     period.

           11.24  ERISA PLANS.  To give prompt written notice to Bank of:

                   (a)  The occurrence of any reportable event under Section 
     4043(b) of ERISA for which the PBGC requires 30 day notice. 

                   (b)  Any action by Borrower to terminate or withdraw from 
     a Plan or the filing of any notice of intent to terminate under Section 
     4041 of ERISA.

                   (c)  Any notice of noncompliance made with respect to a 
     Plan under Section 4041(b) of ERISA.

                   (d)  The commencement of any proceeding with respect to a 
     Plan under Section 4042 of ERISA.

     11.25  INSPECTION OF PROPERTY AND BOOKS AND RECORDS.  To maintain proper 
books of record and account, in which full, true and correct entries 
consistently applied shall be made of all financial transactions and matters 
involving the assets and business of Borrower and its Subsidiaries.  The 
financial statements of Borrower and its Subsidiaries shall, in addition, be 
in conformity with generally accepted accounting principles, consistently 
applied. Borrower shall, and shall cause its Subsidiaries to, permit 
representatives and independent contractors of Bank to visit and inspect any 
of their properties, to examine their corporate, financial and operating 
records, and make copies thereof or abstracts therefrom, and to discuss their 
affairs, finances and accounts with their respective directors, officers, and 
independent public accountants, all without unreasonably interfering with the 
normal operations of Borrower and its Subsidiaries, and all at such times 
during normal business hours and as often as may be reasonably desired, 
provided that if no Default or Event of Default exists, Bank will provide 
prior verbal or written notice of its intention to exercise its rights under 
this Section not later than the business day prior to its exercise and, if 
requested by Borrower, will provide written confirmation of any such verbal 
notice.  

     11.26  ENVIRONMENTAL LAWS.  To conduct its operations and keep and 
maintain its property in compliance with all Environmental Laws.  Borrower 
and its Subsidiaries will maintain all required records and procedures in 
relation to its environmental compliance programs. 

 
                                      44



     11.27  COLLECTION OF ACCOUNTS.  To instruct all account debtors with 
respect to accounts owed to Borrower and HP UK to remit their payments to the 
appropriate Lockbox or directly to the appropriate Lockbox Account.  All 
amounts remitted to the Lockbox shall be credited to the Lockbox Account 
after allowing for the number of clearance days specified by the agreements 
establishing the Lockbox.  Borrower shall also:

               (a)  Cause all collections which are received by Borrower and HP
     UK, whether in cash or otherwise, to be deposited by Borrower and HP UK as
     and when received in kind (except for any endorsement necessary to vest
     title to any instrument in Bank) into the appropriate Lockbox Accounts;

               (b)  unless otherwise agreed by Bank, either (i) maintain all of 
     Borrower's and its Subsidiaries' deposit account relationships with Bank,
     or (ii) cause the granting to Bank of perfected first priority liens in all
     depositary accounts maintained by Borrower and its Subsidiaries  pursuant
     to documents acceptable to Bank.

     11.28 AMENDMENT TO THE ENVIRONMENTAL INDEMNITIES.   Not to amend or modify
the BTR Environmental Indemnity or the British Airways Environmental Indemnity
in any respect without the prior written consent of Bank.

     11.29 CAPITALIZATION OF HP UK.   Use or permit the use of any funds loaned
by Bank to Borrower to be subscribed for shares of capital stock of HP UK or
otherwise used in a manner which could result in the HP Guaranty being
"financial assistance" within the meaning of the Companies Act under English
law, or permit HP UK to issue any preferred stock.

     11.30 SWAP ARRANGEMENTS.   To enter into contracts for interest rate
protection for Borrower with respect to not less than 60% of the projected
outstanding principal balance of Facility No. 2 for a period of not less than
four years, and with other terms, conditions and counterparties reasonably
acceptable to Bank within 30 days following the Closing Date. 

     11.31 INVESTMENTS IN SUBSIDIARIES.    Not to make any investment in HP UK
following the Closing Date which is not evidenced by the Intercompany Note, or
make any investment in any new Subsidiary unless, concurrently therewith,
Borrower causes all of the issued and outstanding capital stock or other equity
securities of such Subsidiary to be pledged to the Bank and causes such
Subsidiary to issue a guarantee of the obligations under the Loan Documents
secured by all of its assets, in each case pursuant to agreements reasonably
acceptable to the Bank.


                                      45



     11.32 NEW PREMISES.   Prior to entering into any lease of any real
property, deliver to Bank any landlord consents, estoppels and subordinations as
the Bank may reasonably request from the landlords of such premises, and from
any other person who, by reason of Borrower's or its Subsidiaries' tenancy, may
have claims against the assets of Borrower and its Subsidiaries located on such
premises.

12.  DEFAULT

          If any of the following events occur, Bank may declare Borrower in
default, stop making any additional credit available to Borrower,  require
Borrower to repay their entire debt immediately and without prior notice, or any
combination of the foregoing.  If an event described in Section 12.5, occurs
with respect to Borrower or any of its Subsidiaries then the entire debt
outstanding under this Agreement will automatically be due immediately.

           12.1  FAILURE TO PAY.  Borrower or any of its Subsidiaries fails 
to make a payment under this Agreement or the other Loan Documents when due.

           12.2  LIEN PRIORITY.  Bank fails to have an enforceable first lien 
(except for any prior liens to which Bank has consented in writing) on or 
security interest in any property given as security for this Agreement or any 
of the Loan Documents.

           12.3  LOAN DOCUMENTS.  Any party to any Loan Document seeks to 
terminate, revoke or rescind its liability thereunder, or asserts in writing 
that its liability is terminated, revoked or rescinded, or any Loan Document 
ceases to be in full force and effect (except in accordance with its express 
terms) or is declared by a court of competent jurisdiction to be null and 
void, invalid or unenforceable in any respect.

           12.4  FALSE INFORMATION.  Borrower, any of its Subsidiaries or 
Unique has furnished to Bank false, materially incorrect or misleading 
information or representations, including any information which omits any 
fact which is required to make the information not materially misleading.

           12.5  BANKRUPTCY.  Borrower or any of its Subsidiaries files a 
bankruptcy petition, a bankruptcy petition is filed against Borrower or any 
of its Subsidiaries, or Borrower or any of its Subsidiaries, any Subsidiary 
of Borrower takes any corporate action or other stpes are taken or legal or 
other proceedings are started for its winding up, dissolution or 
reorganization, or for the appointment of a receiver, administrator, 
administrative receiver, trustee or similar officer for its or any portion of 
its assets, or Borrower or any of its Subsidiaries makes a general assignment 
for the benefit of creditors.  An Event of Default under this Section 12.5 
will be deemed cured if any such bankruptcy petition filed is dismissed 
within a period of 60 days after 


                                      46



the filing; PROVIDED, HOWEVER, that Bank will not be obligated to extend any 
additional credit to Borrower during that period.

           12.6  RECEIVERS.  A receiver or similar official is appointed for 
Borrower's or any of its Subsidiaries business, or the business is terminated.

           12.7  JUDGMENTS.  Any judgments or arbitration awards are entered 
against Borrower or any of its Subsidiaries, or Borrower or any of its 
Subsidiaries enters into any settlement agreements with respect to any 
litigation or arbitration, which are either (i) in an aggregate amount of 
$500,000 or more in excess of any insurance coverage, or (ii) absent 
procurement of a stay of execution, such judgments or arbitration awards 
remain unsatisfied for thirty calendar days after the date of the entry 
thereof, or in any event later than five days prior to the date of any 
proposed sale thereunder.

           12.8  GOVERNMENT ACTION.  Any government authority takes action 
that Bank believes materially adversely affects Borrower's and its 
Subsidiaries consolidated financial condition or ability to repay the 
obligations under this Agreement.

           12.9  MATERIAL ADVERSE CHANGE.  There occurs any material adverse 
change occurs in the consolidated financial condition, properties or 
prospects of Borrower and its Subsidiaries, or their ability to repay their 
respective obligations.  Borrower acknowledges that termination of Borrower 
or any of its Subsidiaries contracts or relationships with any Major Customer 
may be considered to be such material adverse effect depending on the factual 
context then in existence. 

           12.10  CROSS-DEFAULT.   Borrower or any of its Subsidiaries (a) 
fails to make any payment in respect of any indebtedness, capital lease or 
contingent obligation when due (whether by scheduled maturity, required 
prepayment, acceleration, demand, or otherwise); or (b) fails to perform or 
observe any other condition or covenant, or any other event shall occur or 
condition exist, under any agreement or instrument relating to any 
indebtedness, capital lease or contingent obligation, in each case if the 
effect of such failure, event or condition is to cause, or to permit the 
holder or holders of any indebtedness, capital lease or contingent obligation 
(or a trustee or agent on behalf of such holder or holders) to cause 
indebtedness or capital leases in an amount which exceeds $250,000 to be 
declared to be due and payable prior to their stated maturity, or any such 
contingent obligation to become payable or cash collateral in respect thereof 
in an amount in excess of $250,000 to be demanded.

           12.11  OTHER BANK AGREEMENTS.  Borrower or any of its Subsidiaries 
fails to meet the conditions of, or fails to perform any obligation under any 
other agreement it has with Bank or any affiliate of Bank in any material 
respect.


                                      47



           12.12  ERISA PLANS.  The occurrence of any one or more of the 
following events with respect to Borrower or any of its ERISA Affiliates, 
provided such event or events could reasonably be expected, in the judgment 
of Bank, to subject Borrower or any of its ERISA Affiliates to any tax, 
penalty or liability (or any combination of the foregoing) which, in the 
aggregate, could have a material adverse effect on the financial condition of 
Borrower and its Subsidiaries with respect to a Plan:

                  (a)  A reportable event shall occur with respect to a Plan 
     which is, in the reasonable judgment of Bank likely to result in the 
     termination of such Plan for purposes of Title IV of ERISA. 

                  (b)  Any Plan termination (or commencement of proceedings to
     terminate a Plan) or Borrower's full or partial withdrawal from a Plan.

           12.13  ENVIRONMENTAL INDEMNITY BREACH.   British Airways or BTR 
Dunlop, Inc. fails to honor within 15 days of written request therefor any 
obligation payable by Borrower which is within the scope of the British 
Airways Environmental Indemnity or the BTR Environmental Indemnity which 
requires the immediate payment by Borrower of an amount in excess of $500,000.

           12.14  CHANGE IN CONTROL OR MANAGEMENT.  Any of the following occurs

                  (a)  All or substantially all of the assets of Borrower or 
     any of its Subsidiaries are sold, leased or otherwise disposed of (in a 
     single transaction or in a series of related transactions);

                  (b)  The persons owning equity interests in Borrower as of 
     the day to the Initial Public Offering as described as "prior 
     shareholders" in Schedule 1, or members of their immediate families or 
     trusts for the benefit of members of their immediate families, fail to 
     own, beneficially and of record, and control the power to vote, 35% of 
     the equity securities of Borrower entitled to ordinary voting power 
     during the three year period following the Closing Date, or 30% 
     thereafter; or

                 (c)  Any person or entity or "affiliated group" (other than 
     existing shareholders described on Schedule 1) acquires more than 30% of 
     the equity securities of Borrower entitled to ordinary voting power; 

                 (d)  Less than a majority of those persons constituting the 
     board of directors of Borrower as of the Closing Date fail to remain as 
     members of the board of directors of Borrower; or 


                                      48



          (e)  David Lokken, Brian Aune, Brian Carr or Michael Riley ceases to
     be actively involved on a full time basis in their current capacities as
     executive level employees of Borrower at any time and a replacement
     acceptable to Bank is not appointed (or another plan for replacement which
     is acceptable to the Bank is not in place) within 90 days.

          (f)  Richard Adey ceases to be actively involved on a full time basis
     in his current capacity as managing director of HP UK at any time during
     the two year period following the Closing Date and a replacement acceptable
     to Bank is not appointed (or another plan for replacement which is
     acceptable to the Bank is not in place) within 90 days.

          12.15 SUBORDINATION.  Bastian, Unique or Borrower asserts in writing
that the Subordinated Note (or the "Bastian Note" referred to in the
Subordination Agreement") is not subordinated in accordance with the terms of
the Subordination Agreement.

          12.16 BALANCE SHEET.  The audited opening balance sheet prepared by
Ernst & Young and delivered pursuant to Section 11.3(m) varies, in any material
respect, from the unaudited opening balance sheet submitted to Bank prior to the
Closing Date.

          12.17 OTHER BREACH UNDER AGREEMENT.  Borrower, HP UK, Unique or
Bastian fail to meet the conditions of, or fails to perform any obligation
under, any term of this Agreement or the other Loan Documents not specifically
referred to in this Article.
 
          12.18 LICENCES, CERTIFICATES, PERMITS AND OTHER AUTHORIZATIONS. 
Borrower and its Subsidiaries cease to hold any license, certificate, permit or
other authorization from any governmental or quasi-governmental authority which
is necessary for the effective conduct of their business as presently or
properly conducted.

13.  ENFORCING THIS AGREEMENT; MISCELLANEOUS

          13.1 GAAP.  Except as otherwise stated in this Agreement, all
financial information provided to Bank and all financial covenants will be made
under generally accepted accounting principles, consistently applied.

          13.2 CALIFORNIA LAW.  This Agreement is governed by California law.

          13.3 SUCCESSORS AND ASSIGNS.  This Agreement is binding on Borrower's
and Bank's successors and assignees.  Borrower agrees that it may not assign
this Agreement without Bank's prior written consent, and that any purported
assignment by Borrower without that consent shall be VOID ab initio.  BANK MAY
SELL PARTICIPATIONS IN OR ASSIGN THIS LOAN, PROVIDED that when no Default or
Event of Default exists, Bank will obtain Borrower's prior written consent to


                                      49



any such assignment or participation, not to be unreasonably withheld.  In
furtherance of its rights under this Section, Bank may exchange financial
information about Borrower with actual or potential participants or assignees. 
If a participation is sold or the loan is assigned, the purchaser will have the
right of set-off against Borrower.

           13.4  ARBITRATION.

                 (a)  This Section concerns the resolution of any controversies 
     or claims between Borrower and any of its Subsidiaries and the Bank, 
     including but not limited to those that arise from:

                        (i)   This Agreement (including any renewals, extensions
           or modifications of this Agreement);

                        (ii)  Any document, agreement or procedure related to or
           delivered in connection with this Agreement;

                        (iii) Any violation of this Agreement; or

                        (iv)  Any claims for damages resulting from any business
          conducted between Borrower, its Subsidiaries and Bank, including
          claims for injury to persons, property or business interests (torts);
          PROVIDED that the Bank shall be entitled to resolve any controversies
          or claims which arise under the HP UK Guaranty, and each other Loan
          Document which states that it is governed by the laws of England,
          Wales or the United Kingdom, without reference to arbitration and (in
          the event that any controversy or claim under the Loan Documents
          involves both arbitrable claims and claims subject to the laws of
          England, Wales or the United Kingdom exempt from arbitration as
          aforesaid), shall be entitled to sever from the arbitrable claims and
          independently enforce pursuant to such laws the claims subject to the
          laws of England, Wales and the United Kingdom.

               (b) At the request of Borrower, any relevant Subsidiary or Bank,
     any such controversies or claims will be settled by arbitration in
     accordance with the United States Arbitration Act.  The United States
     Arbitration Act will apply even though this Agreement provides that it is
     governed by California law.

               (c) Arbitration proceedings will be administered by the American
     Arbitration Association and will be subject to its commercial rules of
     arbitration and will be conducted within Los Angeles County, California.


                                      50



               (d) For purposes of the application of the statute of
     limitations, the filing of an arbitration pursuant to this Section is the
     equivalent of the filing of a lawsuit, and any claim or controversy which
     may be arbitrated under this Section is subject to any applicable statute
     of limitations.  The arbitrators will have the authority to decide whether
     any such claim or controversy is barred by the statute of limitations and,
     if so, to dismiss the arbitration on that basis.

               (e) If there is a dispute as to whether an issue is arbitrable,
     the arbitrators will have the authority to resolve any such dispute.

               (f) The decision that results from an arbitration proceeding may
     be submitted to any authorized court of law to be confirmed and enforced.

               (g) The procedure described above will not apply if the
     controversy or claim, at the time of the proposed submission to
     arbitration, arises from or relates to an obligation to Bank secured by
     real property located in California.  In this case, both Borrower and Bank
     must consent to submission of the claim or controversy to arbitration.  If
     all parties do not consent to arbitration, the controversy or claim will be
     settled as follows:

                       (i)  Borrower and Bank will designate a referee (or a 
          panel of referees) selected under the auspices of the American 
          Arbitration Association in the same manner as arbitrators are 
          selected in Association-sponsored proceedings;

                      (ii)  The designated referee (or the panel of referees) 
          will be appointed by a court as provided in California Code of Civil
          Procedure Section 638 and the following related sections;

                      (iii) The referee (or the presiding referee of the panel)
          will be an active attorney or a retired judge; and

                      (iv)  The award that results from the decision of the 
          referee (or the panel) will be entered as a judgment in the court that
          appointed the referee, in accordance with the provisions of California
          Code of Civil Procedure Sections 644 and 645.

               (h) This provision does not limit the right of Borrower or Bank
     to:

                       (i)  exercise self-help remedies such as setoff;


                                      51



                       (ii)  foreclose against or sell any real or personal 
          property collateral; or

                       (iii) act in a court of law, before, during or after the
          arbitration proceeding to obtain:

                               (A) an interim remedy; and/or

                               (B) additional or supplementary remedies.

                        (iv)  The pursuit of or a successful action for interim,
          additional or supplementary remedies, or the filing of a court action,
          does not constitute a waiver of the right of Borrower or Bank,
          including the suing party, to submit the controversy or claim to
          arbitration if the other party contests the lawsuit.  However, if the
          controversy or claim arises from or relates to an obligation to Bank
          which is secured by real property located in California at the time of
          the proposed submission to arbitration, this right is limited
          according to the provision above requiring the consent of both
          Borrower and Bank to seek resolution through arbitration.

          13.5  SEVERABILITY; WAIVERS.  If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced.  Bank retains all
rights, even if it makes a loan after Default or Event of Default.  If Bank
waives a Default or event of Default, it may enforce a later Default or Event of
Default.  Any consent or waiver under this Agreement must be in writing.

          13.6  ADMINISTRATION COSTS.  Borrower shall pay Bank for all 
reasonable costs incurred by Bank in connection with administering this 
Agreement.

          13.7  ATTORNEYS' FEES.  Borrower shall reimburse Bank for any
reasonable costs and attorneys' fees incurred by Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement.  In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator.  As
used in this Section, "attorneys' fees" includes the allocated costs of Bank's
in-house counsel.

          13.8  ONE AGREEMENT.  This Agreement and any security or other
agreements referred to in this Agreement, collectively:


                                      52



                 (a)  represent the sum of the understandings and agreements
     between Bank and Borrower concerning this credit;

                 (b)  replace any prior oral or written agreements between Bank
     and Borrower concerning this credit; and

                 (c)  are intended by Bank and Borrower as the final, complete 
     and exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.

          This Section shall not be construed to terminate or otherwise affect
the Landlord Consents, the Assignment of Monies Due and to Become Due dated
December 5, 1996 (regarding Contract DTGC-38-95-D-20018 with the United States
Coast Guard), the Authorization and Agreement for Account Management Services
dated November 27, 1996 between Borrower and Bank, each Landlord Consent and
Agreement, and any other instrument, document or agreement executed by Borrower
and AqHawk in connection with the Existing Loan Agreement (each of which shall
continue to be in full force and effect and accrue to the benefit of the Bank),
PROVIDED that it is expressly agreed and understood that the Limited Guaranty
dated as of November 27, 1996 executed by Melanie L. Bastian with respect to the
Existing Loan Agreement, and (ii) the Pledge Agreement dated as of November 27,
1996 made by the shareholders in Borrower in favor of the Bank, are each
terminated and deemed to be of no further force and effect as of the Closing
Date.

          13.9  DISPOSITION OF SCHEDULES, REPORTS, ETC. DELIVERED BY BORROWER. 
Bank will not be obligated to return any schedules, invoices, statements,
budgets, forecasts, reports or other papers delivered by Borrower or HP UK. 
Bank will destroy or otherwise dispose of such materials at such time as Bank,
in its discretion, deems appropriate.

          13.10  RETURNED MERCHANDISE.  Until Bank exercises its rights to
collect the accounts receivable as provided under any security agreement
required under this Agreement, Borrower and its Subsidiaries may continue its
present policies for returned merchandise and adjustments.  Credit adjustments
with respect to returned merchandise shall be made immediately upon receipt of
the merchandise by Borrower or its Subsidiaries or upon such other disposition
of the merchandise by the debtor in accordance with Borrower's or its
Subsidiaries' instructions.  If a credit adjustment is made with respect to any
Acceptable Receivable, the amount of such adjustment shall no longer be included
in the amount of such Acceptable Receivable in computing the Borrowing Base.


                                      53



          13.11  VERIFICATION OF RECEIVABLES.  Bank may at any time, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated.

          13.12  INDEMNIFICATION.  Borrower shall defend and indemnify the Bank
and its officers, directors, employees and agents (each, an "Indemnified
Person"), against all claims, damages, liabilities and expenses which may be
incurred by or asserted against any of them (except by Borrower) in connection
with this Agreement, the other Loan Documents and the transactions contemplated
herein, in the other Loan Documents and in the Acquisition Agreement, or which
are related thereto, and for any reasonable legal or other expenses incurred in
connection with investigating, defending or participating in any such loss,
claim, damage, liability or action or other proceeding, whether commenced or
threatened (including without limitation the allocated cost of in-house
attorneys and staff), or in any way relating to the extension of the financing
contemplated by this Agreement or from any use or intended use of any of the
proceeds thereof except, in the case of any Indemnified Person, to the extent
any such loss, claim, damage or liability results from the gross negligence or
willful misconduct of such Indemnified Person.  Without limitation on the
foregoing, Borrower will indemnify and hold harmless Bank and each other
Indemnified Person from any loss, or liability directly or indirectly arising
out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of any materials which
described as "hazardous" or "toxic" under or which are governed by any
Environmental Laws, irrespective of whether such materials are on, under or
about Borrower's premises.  The indemnities under this Section will survive the
termination of this Agreement and the repayment of all obligations of Borrower
hereunder.

          13.13  NOTICES.  All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses as
Bank and Borrower may specify from time to time in writing.

          13.14  HEADINGS.  Article and Section headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement.


                                      54



          13.15  COUNTERPARTS.  This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.

This Agreement is executed as of the date stated at the top of the first page
hereof.

BANK OF AMERICA NATIONAL                           HAWKER PACIFIC AEROSPACE, a
TRUST AND SAVINGS ASSOCIATION                      California corporation


By /s/ [ILLEGIBLE]                                 By /s/ Scott Hartman
  ------------------------------                     ---------------------------

Title  Vice President                              Title  Chairman
     ---------------------------                        ------------------------

By /s/ [ILLEGIBLE]                                 By /s/ Brian Aune
  ------------------------------                     ---------------------------

Title  Vice President & Manager                    Title  CFO
     ---------------------------                        ------------------------


Address where notices to                           Address where notices to
Bank are to be sent:                               Borrower are to be sent:

675 Anton Boulevard, Second Floor                  Hawker Pacific Aerospace
Costa Mesa, California 92626                       11240 Sherman Way
Attention: Deborah Miller, Vice President          Sun Valley, California  91352
                                                   Attention: David Lokken

                                                   With a copy to:

                                                   Unique Investment Corporation
                                                   1380 Vernon Street
                                                   Anaheim, California  92805
                                                   Attention: Daniel J. Lubeck
   

                                      55



Schedule 1 to Business Loan Agreement


Deposit Accounts

BANK    ACCOUNT NO.


Intellectual Property

PATENTS


TRADEMARKS


COPYRIGHTS


PERSONS OWNING INTERESTS IN BORROWER

NAME    PERCENTAGE OWNERSHIP     NO. OF  SHARES


SUBSIDIARIES

Name    Number of Shares         Form of Organization

EXISTING DEBTS, CONTINGENT OBLIGATIONS AND LEASES.



EXISTING LIENS.


                                     56

EX-10.28

                               SECURITY AGREEMENT


          This SECURITY AGREEMENT ("Agreement"), dated as of January 23, 
1998, is made by HAWKER PACIFIC AEROSPACE, a California corporation 
("Grantor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS 
ASSOCIATION, as the Bank under the Loan Agreement referred to below ("Secured 
Party").  Terms defined in the Loan Agreement (as hereinafter defined) and 
not otherwise defined in this Agreement are used herein with the same 
meanings.

                                     RECITALS

          A.   Pursuant to the Amended and Restated Business Loan Agreement 
of even date herewith by and among Grantor, as Borrower, and Secured Party, 
as Bank (as such agreement may from time to time be amended, extended, 
renewed, supplemented or otherwise modified, the "Loan Agreement"), Secured 
Party has agreed to extend certain credit facilities to Grantor.

          B.   The Loan Agreement provides, as a condition of the 
availability of such credit facilities on the Closing Date, that Grantor 
shall enter into this Agreement and shall grant security interests to Secured 
Party as herein provided.

                                    AGREEMENT

          NOW, THEREFORE, in order to induce Bank to extend the 
aforementioned credit facilities, and for other good and valuable 
consideration, the receipt and adequacy of which hereby is acknowledged, 
Grantor hereby represents, warrants, covenants, agrees, assigns and grants as 
follows:

          1.   DEFINITIONS.  This Agreement is the Borrower Security 
Agreement referred to in the Loan Agreement.  This Agreement is one of the 
Loan Documents referred to in the Loan Agreement.  Terms defined in the 
California Uniform Commercial Code and not otherwise defined in this 
Agreement or in the Loan Agreement shall have the meanings defined for those 
terms in the California Uniform Commercial Code.  As used in this Agreement, 
the following terms shall have the meanings respectively set forth after each:

          "ADVANCE" means any advance made or to be made by Bank to Grantor 
as provided in ARTICLE 2, and INCLUDES advances made under Facility No. 1, 
Facility No.


                                      -1-



2, any Capital Expenditure Loan made pursuant to Facility No. 3 and all 
Letters of Credit issued by Bank for the account of Grantor.

          "AFFILIATE" means, as to any Person, any other Person which 
indirectly controls, or is under common control with, or is controlled by, 
such Person.  As used in this definition, "control" (and the correlative 
terms, "controlled by" and "under common control with") shall mean 
possession, directly or indirectly, of power to direct or cause the direction 
of management or policies (whether through ownership of securities or 
partnership or other ownership interests, by contract or otherwise); PROVIDED 
that, in any event, any Person that owns, directly or indirectly, 10% or more 
of the securities having ordinary voting power for the election of directors 
or other governing body of a corporation that has more than 100 record 
holders of such securities, or 10% or more of the partnership or other 
ownership interests of any other Person that has more than 100 record holders 
of such interests, will be deemed to control such corporation or other Person.

          "COLLATERAL" means and includes all present and future right, title 
and interest of Grantor, in or to any Property or assets whatsoever, and all 
rights and powers of Grantor to transfer any interest in or to any Property 
or assets whatsoever, INCLUDING, without limitation, any and all of the 
following property:

               (a)  All present and future accounts, accounts receivable,
     agreements, contracts, leases, contract rights, rights to payment,
     instruments, documents, chattel paper, security agreements, guaranties,
     letters of credit, undertakings, surety bonds, insurance policies (whether
     or not required by the terms of the Loan Documents), notes and drafts, and
     all forms of obligations owing to Grantor or in which Grantor may have any
     interest, however created or arising and whether or not earned by
     performance;

               (b)  All present and future general intangibles, all tax refunds
     of every kind and nature to which Grantor now or hereafter may become
     entitled, however arising, all other refunds, and all deposits, reserves,
     loans, royalties, cost savings, deferred payments, goodwill, choses in
     action, liquidated damages, rights to indemnification, trade secrets,
     computer programs, software, customer lists, trademarks, trade names,
     patents, licenses, copyrights, technology, processes, proprietary
     information and insurance proceeds of which Grantor is a beneficiary;

               (c)  All present and future deposit accounts of Grantor,
     INCLUDING, without limitation, any demand, time, savings, passbook or like
     account maintained by Grantor with any bank, savings and loan association,


                                      -2-



     credit union or like organization, and all cash and cash equivalents of
     Grantor, whether or not deposited in any such deposit account;

               (d)  All present and future books and records, INCLUDING, without
     limitation, books of account and ledgers of every kind and nature, all
     electronically recorded data relating to Grantor or the business thereof,
     all receptacles and containers for such records, and all files and
     correspondence;

               (e)  All present and future goods, INCLUDING, without limitation,
     all consumer goods, farm products, inventory, equipment, gaming devices and
     associated equipment, machinery, tools, molds, dies, furniture,
     furnishings, fixtures, trade fixtures, motor vehicles and all other goods
     used in connection with or in the conduct of Grantor's business;

               (f)  All present and future inventory and merchandise, INCLUDING,
     without limitation, all present and future goods held for sale or lease or
     to be furnished under a contract of service, all raw materials, work in
     process and finished goods, all packing materials, supplies and containers
     relating to or used in connection with any of the foregoing, and all bills
     of lading, warehouse receipts or documents of title relating to any of the
     foregoing;

               (g)  All present and future stocks, bonds, debentures,
     securities, subscription rights, options, warrants, puts, calls,
     certificates, partnership interests, limited liability company interests,
     joint venture interests, investments and/or brokerage accounts and all
     rights, preferences, privileges, dividends, distributions, redemption
     payments, or liquidation payments with respect thereto;

               (h)  All present and future accessions, appurtenances,
     components, repairs, repair parts, spare parts, replacements,
     substitutions, additions, issue and/or improvements to or of or with
     respect to any of the foregoing;

               (i)  All other tangible and intangible property of Grantor;

               (j)  All rights, remedies, powers and/or privileges of Grantor
     with respect to any of the foregoing; and

               (k)  Any and all proceeds and products of any of the foregoing,
     INCLUDING, without limitation, all money, accounts, general intangibles,
     deposit accounts, documents, instruments, chattel paper, goods, insurance
     proceeds, and


                                      -3-



     any other tangible or intangible property received upon the
     sale or disposition of any of the foregoing;

PROVIDED that the term "COLLATERAL", as used in this Agreement, shall NOT 
include the following:  (i) interests pledged pursuant to the Pledge 
Agreement; or (ii) real property or any interest therein.

          "GOVERNMENTAL AGENCY" means (a) any international, foreign, 
federal, state, county or municipal government, or political subdivision 
thereof, (b) any governmental or quasi-governmental agency, authority, board, 
bureau, commission, department, instrumentality or public body, or (c) any 
court or administrative tribunal.

          "LAWS" means, collectively, all international, foreign, federal, 
state and local statutes, treaties, rules, regulations, ordinances, codes and 
administrative or judicial precedents.

          "LOAN" means the aggregate of the Advances made at any one time by 
Bank pursuant to ARTICLE 2.

          "PERSON" means any entity, whether an individual, trustee, 
corporation, general partnership, limited partnership, joint stock company, 
trust, estate, unincorporated organization, business association, firm, joint 
venture, Governmental Agency, or otherwise.

          "PROPERTY" means any interest in any kind of property or asset, 
whether real, personal or mixed, or tangible or intangible.

          "SECURED OBLIGATIONS" means any and all present and future 
obligations of any type or nature of Grantor to Secured Party arising under 
or relating to (a) the Loan Agreement and the other Loan Documents including 
all obligations with respect to Loans or Letters of Credit made under the 
Loan Agreement and obligations under the Loan Documents executed in 
connection therewith, (b) interest rate swaps and other hedging arrangements 
entered into by Bank and Grantor, (c) the documents governing each other 
credit facility hereafter made available to Grantor or guarantied by Grantor, 
whether due or to become due, matured or unmatured, liquidated or 
unliquidated, or contingent or noncontingent, INCLUDING obligations of 
performance as well as obligations of payment, and INCLUDING interest that 
accrues after the commencement of any bankruptcy or insolvency proceeding by 
or against Grantor.

          2.   FURTHER ASSURANCES.  At any time and from time to time at the 
request of Secured Party, Grantor shall execute and deliver to Secured Party 
all such financing statements and other instruments and documents in form and 
substance 


                                      -4-



satisfactory to Secured Party as shall be necessary or desirable to fully 
perfect, when filed and/or recorded, Secured Party's security interests 
granted pursuant to SECTION 3 of this Agreement.  At any time and from time 
to time, Secured Party shall be entitled to file and/or record any or all 
such financing statements, instruments and documents held by it, and any or 
all such further financing statements, documents and instruments, and to take 
all such other actions, as Secured Party may deem appropriate to perfect and 
to maintain perfected the security interests granted in SECTION 3 of this 
Agreement.  Before and after the occurrence of any Event of Default, at 
Secured Party's request, Grantor shall execute all such further financing 
statements, instruments and documents, and shall do all such further acts and 
things, as may be deemed necessary or desirable by Secured Party to create 
and perfect, and to continue and preserve, an indefeasible security interest 
in the Collateral in favor of Secured Party, or the priority thereof.  With 
respect to any Collateral consisting of certificated securities, instruments, 
documents, certificates of title or the like, as to which Secured Party's 
security interest need be perfected by, or the priority thereof need be 
assured by, possession of such Collateral, Grantor will upon demand of 
Secured Party deliver possession of same in pledge to Secured Party.  With 
respect to any Collateral consisting of securities, instruments, partnership, 
joint venture or limited liability company interests or the like, Grantor 
hereby consents and agrees that the issuers of, or obligors on, any such 
Collateral, or any registrar or transfer agent or trustee for any such 
Collateral, shall be entitled to accept the provisions of this Agreement as 
conclusive evidence of the right of Secured Party to effect any transfer or 
exercise any right hereunder or with respect to any such Collateral, 
notwithstanding any other notice or direction to the contrary heretofore or 
hereafter given by Grantor or any other Person to such issuers or such 
obligors or to any such registrar or transfer agent or trustee.

          3.   SECURITY AGREEMENT.  For valuable consideration, Grantor 
hereby assigns and pledges to Secured Party, and grants to Secured Party a 
security interest in, all presently existing and hereafter acquired 
Collateral, as security for the timely payment and performance of the Secured 
Obligations, and each of them.  This Agreement is a continuing and 
irrevocable agreement and all the rights, powers, privileges and remedies 
hereunder shall apply to any and all Secured Obligations, including those 
arising under successive transactions which shall either continue the Secured 
Obligations, increase or decrease them and notwithstanding the bankruptcy of 
any Grantor or any other Person or any other event or proceeding affecting 
any Person.

          4.   GRANTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  EXCEPT 
as otherwise disclosed to Secured Party in writing concurrently herewith, 
Grantor represents, warrants and agrees that: (a) Grantor will pay, prior to 
delinquency, all taxes, charges, Liens and assessments against the 
Collateral, EXCEPT such as are timely contested in good faith, and upon its 
failure to pay or so contest such taxes, charges, 


                                      -5-



Liens and assessments, Secured Party, after an Event of Default, at its 
option may pay any of them, and Secured Party shall be the sole judge of the 
legality or validity thereof and the amount necessary to discharge the same; 
(b) the Collateral will not be used for any unlawful purpose or in violation 
of any Laws in any material respect, nor used in any way that will void or 
impair any insurance required to be carried in connection therewith; (c) 
Grantor will, to the extent consistent with good business practice, keep the 
portion of the Collateral owned by it in reasonably good repair, working 
order and condition, and from time to time make all needful and proper 
repairs, renewals, replacements, additions and improvements thereto and, as 
appropriate and applicable, will otherwise deal with such portion of the 
Collateral in all such ways as are considered good practice by owners of like 
Property; (d) Grantor will take all reasonable steps to preserve and protect 
the Collateral; (e) Grantor will maintain, with responsible insurance 
companies, insurance covering the Collateral against such insurable losses as 
is required by the Loan Agreement, and will cause Secured Party to be 
designated as an additional insured and loss payee with respect to all 
insurance (whether or not required by the Loan Agreement), will obtain the 
written agreement of the insurers that such insurance shall not be canceled, 
terminated or materially modified to the detriment of Secured Party without 
at least 30 days prior written notice to Secured Party, and will furnish 
copies of such insurance policies or certificates to Secured Party promptly 
upon request therefor; (f) Grantor will promptly notify Secured Party in 
writing in the event of any substantial or material damage to the Collateral 
(considered as a whole) from any source whatsoever, and, EXCEPT for the 
disposition of collections and other proceeds of the Collateral permitted by 
SECTION 7 hereof, Grantor will not remove or permit to be removed any part of 
the Collateral from its places of business without the prior written consent 
of Secured Party, EXCEPT for such items of the Collateral as are removed in 
the ordinary course of business or in connection with any transaction or 
disposition otherwise permitted by the Loan Documents; and (g) in the event 
Grantor changes its name or its address as either are set forth herein or in 
the Loan Agreement, Grantor will notify Secured Party of such name and/or 
address change promptly, but in any event, within five (5) days.

          5.   SECURED PARTY'S RIGHTS RE COLLATERAL.  At any time (whether or 
not an Event of Default has occurred), without notice or demand and at the 
expense of Grantor with regard to the portion of the Collateral owned by it, 
Secured Party may, to the extent it may be necessary or desirable to protect 
the security hereunder, but Secured Party shall not be obligated to: (a) at 
all reasonable times on reasonable notice, provided that if no Default or 
Event of Default exists, Bank will provide one (1) business day prior written 
or verbal notice of its intention to exercise its rights, and, if requested 
by Borrower, will provide written confirmation of any such verbal notice, 
enter upon any premises on which Collateral is situated and examine the same 
or (b) perform any obligation of Grantor under this Agreement or any 
obligation of any other Person under the Loan Documents.  At any time and 
from time to time, at the


                                      -6-



expense of Grantor, Secured Party may, to the extent it may be necessary or 
desirable to protect the security hereunder, but Secured Party shall not be 
obligated to: (i) after an Event of Default, notify obligor on the Collateral 
that the Collateral has been assigned to Secured Party; and (ii) at any time 
and from time to time request from obligors on the Collateral, in the name of 
Grantor or in the name of Secured Party, information concerning the 
Collateral and the amounts owing thereon, PROVIDED, HOWEVER, that any such 
action which involves communicating with customers of Grantor shall be 
carried out by Secured Party through such Grantor's independent auditors 
unless Secured Party shall then have the right directly to notify obligors on 
the Collateral as provided in SECTION 9.  Grantor shall maintain books and 
records pertaining to the Collateral in such detail, form and scope as 
Secured Party shall reasonably require consistent with Secured Party's 
interests hereunder.  Grantor shall at any time at Secured Party's request 
mark the Collateral and/or Grantor's ledger cards, books of account and other 
records relating to the Collateral with appropriate notations reasonably 
satisfactory to Secured Party disclosing that they are subject to Secured 
Party's security interests.  Secured Party shall be under no duty or 
obligation whatsoever to take any action to preserve any rights of or against 
any prior or other parties in connection with the Collateral, to exercise any 
voting rights or managerial rights with respect to any Collateral, whether or 
not an Event of Default shall have occurred, or to make or give any 
presentments, demands for performance, notices of non-performance, protests, 
notices of protests, notices of dishonor or notices of any other nature 
whatsoever in connection with the Collateral or the Secured Obligations. 
Secured Party shall be under no duty or obligation whatsoever to take any 
action to protect or preserve the Collateral or any rights of Grantor 
therein, or to make collections or enforce payment thereon, or to participate 
in any foreclosure or other proceeding in connection therewith.

          6.   COLLECTIONS ON THE COLLATERAL.  EXCEPT as otherwise provided 
in any Loan Document, Grantor shall have the right to use and to continue to 
make collections on and receive dividends and other proceeds of all of the 
Collateral in the ordinary course of business so long as no Event of Default 
shall have occurred and be continuing.  Upon the occurrence and during the 
continuance of an Event of Default, at the option of Secured Party, Grantor's 
right to make collections on and receive dividends and other proceeds of the 
Collateral and to use or dispose of such collections and proceeds shall 
terminate, and any and all dividends, proceeds and collections, including all 
partial or total prepayments, then held or thereafter received on or on 
account of the Collateral will be held or received by Grantor in trust for 
Secured Party and immediately delivered in kind to Secured Party.  Any 
remittance received by Grantor from any Person shall be presumed to relate to 
the Collateral and to be subject to Secured Party's security interests.  Upon 
the occurrence and during the continuance of an Event of Default, Secured 
Party shall have the right at all times to receive, receipt for, endorse, 
assign, deposit and deliver, in the name of Secured Party or in the name


                                      -7-



of Grantor, any and all checks, notes, drafts and other instruments for the 
payment of money constituting proceeds of or otherwise relating to the 
Collateral; and Grantor hereby authorizes Secured Party to affix, by 
facsimile signature or otherwise, the general or special endorsement of it, 
in such manner as Secured Party shall deem advisable, to any such instrument 
in the event the same has been delivered to or obtained by Secured Party 
without appropriate endorsement, and Secured Party and any collecting bank 
are hereby authorized to consider such endorsement to be a sufficient, valid 
and effective endorsement by Grantor, to the same extent as though it were 
manually executed by the duly authorized officer of Grantor, regardless of by 
whom or under what circumstances or by what authority such facsimile 
signature or other endorsement actually is affixed, without duty of inquiry 
or responsibility as to such matters, and Grantor hereby expressly waives 
demand, presentment, protest and notice of protest or dishonor and all other 
notices of every kind and nature with respect to any such instrument.

          7.   POSSESSION OF COLLATERAL BY SECURED PARTY.  All the Collateral 
now, heretofore or hereafter delivered to Secured Party shall be held by 
Secured Party in its possession, custody and control.  Any or all of the 
Collateral delivered to Secured Party shall be held in an interest-bearing 
account, which is in the form of cash or cash equivalent, and Secured Party 
shall apply any such interest to payment of the Secured Obligations.  Nothing 
herein shall obligate Secured Party to obtain any particular return on the 
Collateral.  Upon the occurrence and during the continuance of an Event of 
Default, whenever any of the Collateral is in Secured Party's possession, 
custody or control, Secured Party may use, operate and consume the 
Collateral, whether for the purpose of preserving and/or protecting the 
Collateral, or for the purpose of performing any of Grantor's obligations 
with respect thereto, or otherwise.  Secured Party may at any time deliver or 
redeliver the Collateral or any part thereof to Grantor, and the receipt of 
any of the same by Grantor shall be complete and full acquittance for the 
Collateral so delivered, and Secured Party thereafter shall be discharged 
from any liability or responsibility therefor.  So long as Secured Party 
exercises reasonable care with respect to any Collateral in its possession, 
custody or control, Secured Party shall have no liability for any loss of or 
damage to such Collateral, and in no event shall Secured Party have liability 
for any diminution in value of Collateral occasioned by economic or market 
conditions or events.  Secured Party shall be deemed to have exercised 
reasonable care within the meaning of the preceding sentence if the 
Collateral in the possession, custody or control of Secured Party is accorded 
treatment substantially equal to that which Secured Party accords its own 
property, it being understood that Secured Party shall not have any 
responsibility for (a) ascertaining or taking action with respect to calls, 
conversions, exchanges, maturities, tenders or other matters relating to any 
Collateral, whether or not Secured Party has or is deemed to have knowledge 
of such matters, or (b) taking any necessary steps to preserve rights against 
any Person with respect to any Collateral.


                                      -8-


          8.   EVENTS OF DEFAULT.  There shall be an Event of Default 
hereunder upon the occurrence and during the continuance of an Event of 
Default under the Loan Agreement.

          9.   RIGHTS UPON EVENT OF DEFAULT.  Upon the occurrence and during 
the continuance of an Event of Default, Secured Party shall have, in any 
jurisdiction where enforcement hereof is sought, in addition to all other 
rights and remedies that Secured Party may have under applicable Law or in 
equity or under this Agreement (INCLUDING, without limitation, all rights set 
forth in SECTION 5 hereof) or under any other Loan Document, all rights and 
remedies of a secured party under the Uniform Commercial Code as enacted in 
California and, in addition, the following rights and remedies, all of which 
may be exercised with or without notice to Grantor and without affecting the 
Secured Obligations of Grantor hereunder or under any other Loan Document, or 
the enforceability of the Liens created hereby: (a) to foreclose the Liens 
created hereunder or under any other agreement relating to any Collateral by 
any available judicial procedure or without judicial process; (b) to enter 
any premises where any Collateral may be located for the purpose of securing, 
protecting, inventorying, appraising, inspecting, repairing, preserving, 
storing, preparing, processing, taking possession of or removing the same; 
(c) to sell, assign, lease or otherwise dispose of any Collateral or any part 
thereof, either at public or private sale or at any broker's board, in lot or 
in bulk, for cash, on credit or otherwise, with or without representations or 
warranties and upon such terms as shall be acceptable to Secured Party; (d) 
to notify obligors on the Collateral that the Collateral has been assigned to 
Secured Party and that all payments thereon are to be made directly and 
exclusively to Secured Party; (e) to collect by legal proceedings or 
otherwise all dividends, distributions, interest, principal or other sums now 
or hereafter payable upon or on account of the Collateral; (f) to cause the 
Collateral to be registered in the name of Secured Party, as legal owner; (g) 
to enter into any extension, reorganization, deposit, merger or consolidation 
agreement, or any other agreement relating to or affecting the Collateral, 
and in connection therewith Secured Party may deposit or surrender control of 
the Collateral and/or accept other Property in exchange for the Collateral; 
(h) to settle, compromise or release, on terms acceptable to Secured Party, 
in whole or in part, any amounts owing on the Collateral and/or any disputes 
with respect thereto; (i) to extend the time of payment, make allowances and 
adjustments and issue credits in connection with the Collateral in the name 
of Secured Party or in the name of Grantor; (j) to enforce payment and 
prosecute any action or proceeding with respect to any or all of the 
Collateral and take or bring, in the name of Secured Party or in the name of 
Grantor, any and all steps, actions, suits or proceedings deemed by Secured 
Party necessary or desirable to effect collection of or to realize upon the 
Collateral, INCLUDING any judicial or nonjudicial foreclosure thereof or 
thereon, and Grantor specifically consents to any nonjudicial foreclosure of 
any or all of the Collateral or any other action taken by Secured Party which 
may release any obligor 


                                     -9-



from personal liability on any of the Collateral, and Grantor waives any 
right not expressly provided for in this Agreement to receive notice of any 
public or private judicial or nonjudicial sale or foreclosure of any security 
or any of the Collateral; and any money or other Property received by Secured 
Party in exchange for or on account of the Collateral, whether representing 
collections or proceeds of Collateral, and whether resulting from voluntary 
payments or foreclosure proceedings or other legal action taken by Secured 
Party or Grantor may be applied by Secured Party without notice to Grantor to 
the Secured Obligations in such order and manner as Secured Party in its sole 
discretion shall determine; (k) to insure, process and preserve the 
Collateral; (l) to  exercise all rights, remedies, powers or privileges 
provided under any of the Loan Documents; (m) to remove, from any premises 
where the same may be located, the Collateral and any and all documents, 
instruments, files and records, and any receptacles and cabinets containing 
the same, relating to the Collateral, and Secured Party may, at the cost and 
expense of Grantor, use such of its supplies, equipment, facilities and space 
at its places of business as may be necessary or appropriate to properly 
administer, process, store, control, prepare for sale or disposition and/or 
sell or dispose of the Collateral or to properly administer and control the 
handling of collections and realizations thereon, and Secured Party shall be 
deemed to have a rent-free tenancy of any premises of Grantor for such 
purposes and for such periods of time as reasonably required by Secured 
Party; (n) to receive, open and dispose of all mail addressed to Grantor and 
notify postal authorities to change the address for delivery thereof to such 
address as Secured Party may designate; PROVIDED that Secured Party agrees 
that it will promptly deliver over to Grantor such opened mail as does not 
relate to the Collateral; and (o) to exercise all other rights, powers, 
privileges and remedies of an owner of the Collateral; all at Secured Party's 
sole option and as Secured Party in its sole discretion may deem advisable.  
Grantor will, at Secured Party's request, assemble the Collateral and make it 
available to Secured Party at places which Secured Party may reasonably 
designate, whether at the premises of Grantor or elsewhere, and will make 
available to Secured Party, free of cost, all premises, equipment and 
facilities of Grantor for the purpose of Secured Party's taking possession of 
the Collateral or storing same or removing or putting the Collateral in 
salable form or selling or disposing of same.

          Upon the occurrence and during the continuance of an Event of 
Default, Secured Party also shall have the right, without notice or demand, 
either in person, by agent or by a receiver to be appointed by a court (and 
Grantor hereby expressly consents upon the occurrence and during the 
continuance of an Event of Default to the appointment of such a receiver), 
and without regard to the adequacy of any security for the Secured 
Obligations, to take possession of the Collateral or any part thereof and to 
collect and receive the rents, issues, profits, income and proceeds thereof.  
Taking possession of the Collateral shall not cure or waive any Event of 
Default or notice 


                                     -10-



thereof or invalidate any act done pursuant to such notice.  The rights, 
remedies and powers of any receiver appointed by a court shall be as ordered 
by said court.

          Any public or private sale or other disposition of the Collateral 
may be held at any office of Secured Party, or at Grantor's place of 
business, or at any other place permitted by applicable Law, and without the 
necessity of the Collateral's being within the view of prospective 
purchasers.  Secured Party may direct the order and manner of sale of the 
Collateral, or portions thereof, as it in its sole and absolute discretion 
may determine, and Grantor expressly waives any right to direct the order and 
manner of sale of any Collateral. Secured Party or any Person on Secured 
Party's behalf may bid and purchase at any such sale or other disposition.  
The net cash proceeds resulting from the collection, liquidation, sale, lease 
or other disposition of the Collateral shall be applied, first, to the 
expenses (including reasonable attorneys' fees and disbursements) of 
retaking, holding, storing, processing and preparing for sale or lease, 
selling, leasing, collecting, liquidating and the like, and then to the 
satisfaction of the Secured Obligations in such order as shall be determined 
by Secured Party in its sole and absolute discretion.  Grantor and any other 
Person then obligated therefor shall pay to Secured Party on demand any 
deficiency with regard thereto which may remain after such sale, disposition, 
collection or liquidation of the Collateral.

          Unless the Collateral is perishable or threatens to decline 
speedily in value or is of a type customarily sold on a recognized market, 
Secured Party will send or otherwise make available to Grantor reasonable 
notice of the time and place of any public sale thereof or of the time on or 
after which any private sale thereof is to be made.  The requirement of 
sending reasonable notice conclusively shall be met if such notice is mailed, 
first class mail, postage prepaid, to Grantor at its address set forth in the 
Loan Agreement, or delivered or otherwise sent to Grantor, at least five (5) 
days before the date of the sale.

          With respect to any Collateral consisting of securities, 
partnership interests, joint venture interests, limited liability company 
interests, Investments or the like, and whether or not any of such Collateral 
has been effectively registered under the Securities Act of 1933, as amended, 
or other applicable Laws, Secured Party may, in its sole and absolute 
discretion, sell all or any part of such Collateral at private sale in such 
manner and under such circumstances as Secured Party may deem necessary or 
advisable in order that the sale may be lawfully conducted.  Without limiting 
the foregoing, Secured Party may (i) approach and negotiate with a limited 
number of potential purchasers, and (ii) restrict the prospective bidders or 
purchasers to persons who will represent and agree that they are purchasing 
such Collateral for their own account for investment and not with a view to 
the distribution or resale thereof.  In the event that any such Collateral is 
sold at private sale, Grantor agrees that if such Collateral is sold for a 
price which Secured Party in good faith believes to be 


                                      -11-



reasonable under the circumstances then existing, then (a) the sale shall be 
not be deemed to be commercially unreasonable by reason of price, (b) Grantor 
shall not be entitled to a credit against the Secured Obligations in an 
amount in excess of the purchase price, and (c) Secured Party shall not incur 
any liability or responsibility to Grantor in connection therewith, 
notwithstanding the possibility that a substantially higher price might have 
been realized at a public sale.  Grantor recognizes that a ready market may 
not exist for such Collateral if it is not regularly traded on a recognized 
securities exchange, and that a sale by Secured Party of any such Collateral 
for an amount substantially less than a pro rata share of the fair market 
value of the issuer's assets minus liabilities may be commercially reasonable 
in view of the difficulties that may be encountered in attempting to sell a 
large amount of such Collateral or Collateral that is privately traded.

          Upon consummation of any sale of Collateral hereunder, Secured 
Party shall have the right to assign, transfer and deliver to the purchaser 
or purchasers thereof the Collateral so sold.  Each such purchaser at any 
such sale shall hold the Collateral so sold absolutely free from any claim or 
right upon the part of Grantor or any other Person, and Grantor hereby waives 
(to the extent permitted by applicable Laws) all rights of redemption, stay 
and appraisal which it now has or may at any time in the future have under 
any rule of Law or statute now existing or hereafter enacted.

          10.  ATTORNEY-IN-FACT.  Grantor hereby irrevocably nominates and 
appoints Secured Party as their attorney-in-fact for the following purposes: 
(a) to do all acts and things which Secured Party may deem necessary or 
advisable to perfect and continue perfected the security interests created by 
this Agreement and, upon the occurrence and during the continuance of an 
Event of Default, to preserve, process, develop, maintain and protect the 
Collateral; (b) upon the occurrence and during the continuance of an Event of 
Default, to do any and every act which Grantor is obligated to do under this 
Agreement, at the expense of the Grantor and without any obligation to do so; 
(c) to prepare, sign, file and/or record, for Grantor, in the name of 
Grantor, any financing statement, application for registration, or like 
paper, and to take any other action deemed by Secured Party necessary or 
desirable in order to perfect or maintain perfected the security interests 
granted hereby; and (d) upon the occurrence and during the continuance of an 
Event of Default, to execute any and all papers and instruments and do all 
other things necessary or desirable to preserve and protect the Collateral 
and to protect Secured Party's security interests therein; PROVIDED, HOWEVER, 
that Secured Party shall be under no obligation whatsoever to take any of the 
foregoing actions, and, absent bad faith or actual malice, Secured Party 
shall have no liability or responsibility for any act taken or omission with 
respect thereto (other than Secured Party's own gross negligence or wilful 
misconduct).


                                      -12-



          11.  COSTS AND EXPENSES.  Grantor agrees to pay to Secured Party 
all costs and expenses (INCLUDING, without limitation, reasonable attorneys' 
fees and disbursements, including allocated costs of in-house counsel), 
incurred by Secured Party in the enforcement or attempted enforcement of this 
Agreement, whether or not an action is filed in connection therewith, and in 
connection with any waiver or amendment of any term or provision hereof.  All 
advances, charges, costs and expenses, INCLUDING reasonable attorneys' fees 
and disbursements, incurred or paid by Secured Party in exercising any right, 
privilege, power or remedy conferred by this Agreement (INCLUDING, without 
limitation, the right to perform any Secured Obligation of Grantor under the 
Loan Documents), or in the enforcement or attempted enforcement thereof, 
shall be secured hereby and shall become a part of the Secured Obligations 
and shall be paid to Secured Party by Grantor, immediately upon demand, 
together with interest thereon at the Default Rate.

          12.  STATUTE OF LIMITATIONS AND OTHER LAWS.  Until the Secured 
Obligations shall have been paid and performed in full, the power of sale and 
all other rights, privileges, powers and remedies granted to Secured Party 
hereunder shall continue to exist and may be exercised by Secured Party at 
any time and from time to time irrespective of the fact that any of the 
Secured Obligations may have become barred by any statute of limitations.  
Grantor expressly waives the benefit of any and all statutes of limitation, 
and any and all Laws providing for exemption of property from execution or 
for valuation and appraisal upon foreclosure, to the maximum extent permitted 
by applicable Law.

          13.  OTHER AGREEMENTS.  Nothing herein shall in any way modify or 
limit the effect of terms or conditions set forth in any other security or 
other agreement executed by Grantor or in connection with the Secured 
Obligations, but each and every term and condition hereof shall be in 
addition thereto.  All provisions contained in the Loan Agreement or any 
other Loan Document that apply to Loan Documents generally are fully 
applicable to this Agreement and are incorporated herein by this reference.

          14.  CONTINUING EFFECT.  This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's assets.

          15.  RELEASE OF GRANTOR.  This Agreement and all Secured Obligations
of Grantor hereunder shall be released when all Secured Obligations have been
paid in full in cash or otherwise performed in full and when no portion of the
Commitments remain outstanding.  Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return any pledged Collateral to
Grantor, or to the Person or 


                                      -13-



Persons legally entitled thereto, and shall endorse, execute, deliver, record 
and file all instruments and documents, and do all other acts and things, 
reasonably required for the return of the Collateral to Grantor, or to the 
Person or Persons legally entitled thereto, and to evidence or document the 
release of Secured Party's interests arising under this Agreement, all as 
reasonably requested by, and at the sole expense of, Grantor.

          16.  GOVERNING LAW.  This Agreement shall be construed and enforced 
in accordance with and governed by the local laws of the State of California.

          17.  ATTORNEY'S FEES.  In any action to enforce this Agreement, the 
prevailing party shall be entitled to receive, in addition to any other 
relief awarded by the tribunal, its attorney's fees and costs (including the 
allocated fees and costs of internal counsel).

          IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly 
authorized officer as of the date first written above.

                                       "Grantor"

                                        HAWKER PACIFIC AEROSPACE, a California
                                        corporation


                                        By: /s/ Brian Aune
                                           ------------------------------

                                                CFO
                                           ------------------------------
                                             [Name and Title]  


                                      -14-



ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:

"Secured Party"

BANK OF AMERICA NATIONAL 
TRUST AND SAVINGS ASSOCIATION,
as Secured Party


By: /s/ [ILLEGIBLE]
   ---------------------------

Title: Vice President
      ------------------------


                    

EX-10.29

                                       
                                PLEDGE AGREEMENT


          This PLEDGE AGREEMENT ("Agreement"), dated as of January 23, 1998, is
made by HAWKER PACIFIC AEROSPACE, a California corporation ("Grantor"), in favor
of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as lender under the
Loan Agreement referred to below ("Bank") with reference to the following
facts: 


                                   RECITALS

          A.   Pursuant to the Amended and Restated Business Loan Agreement of
even date herewith between Grantor, as borrower, and Bank (as such agreement may
from time to time be amended, extended, renewed, supplemented or otherwise
modified, the "Loan Agreement"), Bank has agreed to extend certain credit
facilities to Grantor.

          B.   The Loan Agreement provides, as a condition precedent to the
Bank's obligations to extend credit facilities to Grantor, that Grantor shall
enter into this Agreement, and shall pledge certain Pledged Collateral (as
defined herein) to Bank, all under the terms and conditions set forth in this
Agreement.

                                   AGREEMENT

          NOW, THEREFORE, in order to induce the Bank to extend credit
facilities to the Grantor under the Loan Agreement, and for other good and
valuable consideration, the receipt and adequacy of which hereby is
acknowledged, Grantor hereby represents, warrants, covenants, agrees, and
pledges as follows:

     1.   DEFINITIONS.  Terms defined in the Loan Agreement and not otherwise
defined in this Agreement shall have the meanings given those terms in the Loan
Agreement as though set forth herein in full.  The following terms shall have
the meanings respectively set forth after each:

          "CERTIFICATES" means all certificates, instruments or other documents
     now or hereafter representing or evidencing any Pledged Securities.

          "PLEDGED COLLATERAL" means (i) any and all property of Grantor now or
     hereafter pledged and delivered to Bank, (ii) the Pledged Securities and
     the Certificates representing or evidencing same, and (iii) the
     Intercompany Note, and any and all proceeds and products of any of the
     foregoing, and any and all
     


                                    - 1 -



     collections, dividends, distributions, redemption payments or 
     liquidation payments with respect to any of the foregoing, EXCEPT 
     dividends or distributions actually paid to the Grantor as 
     permitted under the terms of the Loan Agreement.

          "PLEDGED SECURITIES" means (i) all shares of capital stock of Hawker
     Pacific Aerospace Limited, an English company ("HP UK"), owned by Grantor;
     (ii) any and all securities now or hereafter issued in substitution,
     exchange or replacement therefor, or with respect thereto; (iii) any and
     all warrants, options or other rights to subscribe to or acquire any
     additional capital stock of HP UK; and (iv) any and all additional capital
     stock of HP UK.

     2.   REPRESENTATIONS AND WARRANTIES.

          (a)  INCORPORATION OF TERMS.  This Agreement is one of the Loan
Documents referred to in the Loan Agreement.  All provisions contained in the
Loan Agreement that are applicable to the Loan Documents generally are fully
applicable to this Agreement and are incorporated herein by this reference as
though set forth in full.

          (b)  REPRESENTATIONS AND WARRANTIES OF GRANTOR.  Grantor represents,
warrants and agrees that:  (i) it has good title to the Pledged Collateral, free
from any liens, leases, encumbrances, defenses or other claims or restrictions
whatsoever; (ii) the security interest in the Pledged Collateral created hereby
constitutes a first, prior, and indefeasible security interest with respect to
such collateral; (iii) it has the right to transfer the Pledged Collateral
pursuant to this Agreement without restriction, and such collateral has been
duly and validly pledged to Bank in accordance with law; (iv) it shall provide
such additional endorsements, forms and writings and execute all documents and
take such other action as Bank deems necessary to create and perfect a security
interest in the Pledged Collateral or as Bank may at any time reasonably request
in connection with the administration or enforcement of this Agreement or the
administration of the Pledged Collateral.

     3.   CREATION OF SECURITY INTEREST.

          (a)  PLEDGE OF PLEDGED COLLATERAL.  Grantor hereby pledges to Bank and
grants to Bank a security interest in and to all Pledged Collateral, together
with all products, proceeds, dividends, redemption payments, liquidation
payments, cash, instruments and other property, and any and all rights, titles,
interests, privileges, benefits and preferences appertaining or incidental to
the Pledged Collateral.  The security interest and pledge created by this
Agreement shall continue in effect so long as any obligation is owed to Bank by
Grantor under the Loan Agreement.


                                    - 2 -



          (b)  DELIVERY OF CERTAIN PLEDGED COLLATERAL.  On or before the Closing
Date, Grantor shall pledge and deliver the Certificates representing 100% of the
issued and outstanding capital stock of HP UK, to Bank.

          Following the Closing Date, additional Pledged Collateral may from
time to time be delivered to Bank as required pursuant to the Loan Agreement and
hereunder.  All Certificates at any time delivered to Bank shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Bank.  Bank shall hold all Certificates pledged hereunder
pursuant to this Agreement.

     4.   SECURITY FOR OBLIGATIONS.  This Agreement and the pledge and security
interest granted herein secure the prompt payment, in full in cash, and full
performance of, all obligations of Grantor under the Loan Agreement and the
other Loan Documents.

     5.   FURTHER ASSURANCES.  Grantor agrees that at any time, and from time to
time, at its own expense Grantor will promptly execute, deliver and file or
record all further financing statements, instruments and documents, and will
take all further actions that may be necessary or desirable, or that Bank
reasonably may request, in order to perfect and protect any pledge or security
interest granted hereby or to enable Bank to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral and to preserve,
protect and maintain the Pledged Collateral and the value thereof, including,
without limitation, payment of all taxes, assessments and other charges imposed
on or relating to the Pledged Collateral.  Grantor hereby consents and agrees
that the issuers of, or obligors on, the Pledged Collateral, or any registrar or
transfer agent or trustee for any of the Pledged Collateral, shall be entitled
to accept the provisions of this Agreement as conclusive evidence of the right
of Bank to effect any transfer or exercise any right hereunder, notwithstanding
any other notice or direction to the contrary heretofore or hereafter given by
Grantor or any other Person to such issuers or such obligors or to any such
registrar or transfer agent or trustee.

     6.   VOTING RIGHTS; DIVIDENDS; ETC.  So long as no Event of Default under
the Loan Agreement occurs and remains continuing:

          (a)  VOTING RIGHTS.  Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Securities, or any
part thereof, for any purpose not inconsistent with the terms of this Agreement,
the Loan Agreement, or the other Loan Documents; PROVIDED, HOWEVER, that Grantor
shall not exercise, or shall refrain from exercising, any such right if it would
result in a default or an Event of Default under the Loan Agreement.


                                    - 3 -



          (b)  DIVIDEND AND DISTRIBUTION RIGHTS.  Grantor shall be entitled to
receive and to retain and use only those dividends or distributions paid to
Grantor with respect to the Pledged Securities as permitted under the terms of
the Loan Agreement; PROVIDED, HOWEVER, that any and all such dividends or
distributions received in the form of capital stock shall be, and the
Certificates representing such capital stock forthwith shall be, delivered to
Bank to hold as Pledged Collateral and shall, if received by Grantor, be
received in trust for the benefit of Bank, be segregated from the other property
of Grantor, and forthwith be delivered to Bank as Pledged Collateral in the same
form as so received (with any necessary endorsements).  

     7.   RIGHTS DURING EVENT OF DEFAULT.  When an Event of Default under the
Loan Agreement or this Agreement has occurred and is continuing:

          (a)  VOTING, DIVIDEND, AND DISTRIBUTION RIGHTS.  At the option of
Bank, all rights of Grantor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 6(a) above,
and to receive the dividends and distributions which it would otherwise be
authorized to receive and retain pursuant to Section 6(b) above, shall cease,
and all such rights shall thereupon become vested in Bank who shall thereupon
have the sole right to exercise such voting and other consensual rights and to
receive and to hold as Pledged Collateral such dividends and distributions. 
Bank shall give notice thereof to Grantor; PROVIDED, HOWEVER, that (i) neither
the giving of such notice nor the receipt thereof by Grantor shall be a
condition to exercise of any rights of Bank hereunder, and (ii) Bank shall incur
no liability for failing to give such notice.

          (b)  DIVIDENDS AND DISTRIBUTIONS HELD IN TRUST.  All dividends and
other distributions which are received by Grantor contrary to the provisions of
the Loan Agreement or this Agreement shall be received in trust for the benefit
of Bank, shall be segregated from other funds of Grantor, and forthwith shall be
paid over to Bank as Pledged Collateral in the same form as so received (with
any necessary endorsements).

          (c)  IRREVOCABLE PROXY.  Grantor hereby revokes all previous proxies
with regard to the Pledged Securities and appoints Bank as its proxyholder to
attend and vote at any and all meetings of the shareholders of the corporations
which issued the Pledged Securities, and any adjournments thereof, held on or
after the date of the giving of this proxy and prior to the termination of this
proxy and to execute any and all written consents of shareholders of such
corporations executed on or after the date of the giving of this proxy and prior
to the termination of this proxy, with the same effect as if Grantor had
personally attended the meetings or had personally voted their shares or had
personally signed the written consents; PROVIDED, HOWEVER, that the proxyholder
shall have rights hereunder only upon the occurrence and during the 


                                    - 4 -



continuance of an Event of Default under the Loan Agreement, and that Bank 
shall have instructed the proxyholder to exercise voting rights with  
respect to the Pledged Securities or any of them.  Grantor hereby 
authorizes Bank to substitute another person as the proxyholder and, 
upon the occurrence or during the continuance of any Event of Default 
under the Loan Agreement, hereby authorizes and directs the proxyholder 
to file this proxy and the substitution instrument with the secretary of 
the appropriate corporation.  This proxy is coupled with an interest and 
is irrevocable until such time as all Secured Obligations have been paid 
and performed in full.

     8.   TRANSFERS AND OTHER LIENS.  Grantor agrees that, except as not
prohibited under the Loan Documents, it will not (i) sell, assign, exchange,
transfer or otherwise dispose of, or contract to sell, assign, exchange,
transfer or otherwise dispose of, or grant any option with respect to, any of
the Pledged Collateral, (ii) create or permit to exist any lien upon or with
respect to any of the Pledged Collateral, except for liens in favor of Bank, or
(iii) take any action with respect to the Pledged Collateral which is
inconsistent with the provisions or purposes of this Agreement or any other Loan
Document.

     9.   BANK APPOINTED ATTORNEY-IN-FACT.  After the occurrence and during the
continuance of an Event of Default under the Loan Agreement, Grantor hereby
irrevocably appoints Bank as Grantor's attorney-in-fact, with full authority in
the place and stead of Grantor, and in the name of Grantor, or otherwise, from
time to time, in Bank's sole and absolute discretion to do any of the following
acts or things:  (a) to do all acts and things and to execute all documents
necessary or advisable to perfect and continue perfected the security interests
created by this Agreement and to preserve, maintain and protect the Pledged
Collateral; (b) to do any and every act which Grantor is obligated to do under
this Agreement; (c) to prepare, sign, file and record, in Grantor's name, any
financing statement covering the Pledged Collateral; and (d) to endorse and
transfer the Pledged Collateral upon foreclosure by Bank; PROVIDED, HOWEVER,
that Bank shall be under no obligation whatsoever to take any of the foregoing
actions, and Bank shall have no liability or responsibility for any act (other
than Bank's own gross negligence or willful misconduct) or omission taken with
respect thereto.  Grantor hereby agrees to repay immediately upon demand all
reasonable costs and expenses incurred or expended by Bank in exercising any
right or taking any action under this Agreement, together with interest as
provided for in the Loan Agreement.

     10.  BANK MAY PERFORM OBLIGATIONS.  If Grantor fails to perform any
obligation contained herein, Bank may, but without any obligation to do so and
without notice to or demand upon Grantor, perform the same and take such other
action as Bank may deem necessary or desirable to protect the Pledged Collateral
or Bank's security interests therein, Bank being hereby authorized (without
limiting the 


                                    - 5 -



general nature of the authority hereinabove conferred) to pay, purchase, 
contest and compromise any lien which in the reasonable judgment of Bank 
appears to be prior or superior to Bank's security interests, and in 
exercising any such powers and authority to pay necessary expense, employ 
counsel and pay reasonable attorneys' fees.  Grantor hereby agrees to repay 
immediately upon demand all sums so expended by Bank, together with interest 
from the date of expenditure at the rates provided for in the Loan Agreement. 
Bank shall not be under any duty or obligation to (i) preserve, maintain or 
protect the Pledged Collateral or any of any Grantor's rights or interest 
therein, (ii) exercise any voting rights with respect to the Pledged 
Collateral, whether or not an Event of Default under the Loan Agreement has 
occurred or is continuing, or (iii) make or give any notices of default, 
presentments, demands for performance, notices of nonperformance or dishonor, 
protests, notices of protest or notice of any other nature whatsoever in 
connection with the Pledged Collateral on behalf of Grantor or any other 
Person having any interest therein; and Bank does not assume and shall not be 
obligated to perform the obligations of Grantor, if any, with respect to the 
Pledged Collateral.

     11.  REASONABLE CARE.  Bank shall in all events be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially similar to that which Bank accords its own property, it being
understood that Bank shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether or not Bank has or
is deemed to have knowledge of such matters, or (ii) taking any necessary steps
to preserve rights against any Person with respect to any Pledged Collateral.

     12.  EVENTS OF DEFAULT AND REMEDIES.

          (a)  RIGHTS UPON EVENT OF DEFAULT.  Upon the occurrence and during the
continuance of an Event of Default under the Loan Agreement, Grantor shall be in
default hereunder and Bank shall have in any jurisdiction where enforcement is
sought, in addition to all other rights and remedies that Bank may have under
this Agreement and under applicable law or in equity, all of its rights and
remedies as a secured party under the Uniform Commercial Code as enacted in any
such jurisdiction, and in addition the following rights and remedies, all of
which may be exercised with or without further notice to Grantor:

               (1)  to notify any issuer of any Pledged Securities, and any and
     all other issuers of or obligors on any Pledged Collateral, that the same
     has been pledged to Bank and that all dividends and other payments thereon
     are to be made directly and exclusively to Bank; to renew, extend, modify,
     amend, 


                                    - 6 -



     accelerate, accept partial payments on, make allowances and      
     adjustments and issue credits with respect to, release, settle, 
     compromise, compound, collect or otherwise liquidate, on terms 
     acceptable to Bank, in whole or in part, the Pledged Collateral and 
     any amounts owing thereon or any guaranty or security therefor; to 
     enter into any other agreement relating to or affecting the Pledged 
     Collateral; and to give all consents, waivers and ratification with 
     respect to the Pledged Collateral and exercise all other rights 
     (including voting rights), powers and remedies and otherwise act 
     with respect thereto as if Bank were the owner thereof;

               (2)  to enforce payment and prosecute any action or proceeding
     with respect to any and all of the Pledged Collateral and take or bring, in
     Bank's name or in the name of Grantor, all steps, actions, suits or
     proceedings deemed by Bank necessary or desirable to effect collection of
     or to realize upon the Pledged Collateral;

               (3)  in accordance with applicable law, to take possession of and
     operate or control the Pledged Collateral with or without judicial process;

               (4)  to endorse, in the name of Grantor, all checks, notes,
     drafts, money orders, instruments and other evidences of payment relating
     to the Pledged Collateral;

               (5)  to transfer any or all of the Pledged Collateral into the
     name of Bank or its nominee or nominees; and

               (6)  in accordance with applicable law, to foreclose the liens
     and security interests created under this Agreement or under any other
     agreement relating to the Pledged Collateral by any available judicial
     procedure or without judicial process, and to sell, assign or otherwise
     dispose of the Pledged Collateral or any part thereof, either at public or
     private sale or at any broker's board or securities exchange, in lots or in
     bulk, for cash, on credit or on future delivery, or otherwise, with or
     without representations or warranties, and upon such terms as shall be
     acceptable to Bank;

all at the sole option of and in the sole discretion of Bank.

          (b)  NOTICE OF SALE.  Bank shall give Grantor at least five (5) days'
written notice of sale of all or any part of the Pledged Collateral.  Any sale
of the Pledged Collateral shall be held at such time or times and at such place
or places as Bank may determine in the exercise of their sole and absolute
discretion.  Bank may bid (which bid may be, in whole or in part, in the form of
cancellation of Secured Obli-


                                    - 7 -



gations) for and purchase for the account of Bank or any nominee of Bank the 
whole or any part of the Pledged Collateral.  Bank shall not be obligated to 
make any sale of the Pledged Collateral if it shall determine not to do so 
regardless of the fact that notice of sale of the Pledged Collateral may have 
been given.  Bank may, without notice or publication, adjourn the sale from 
time to time by announcement at the time and place fixed for sale, and such 
sale may, without further notice, be made at the time and place to which the 
same was so adjourned.

          (c)  PRIVATE SALES.  Whether or not any of the Pledged Collateral has
been effectively registered under the Securities Act of 1933 or other applicable
laws, Bank may, in its sole and absolute discretion, sell all or any part of the
Pledged Collateral at private sale in such manner and under such circumstances
as Bank may deem necessary or advisable.  Without limiting the foregoing, Bank
may (i) approach and negotiate with a limited number of potential purchasers,
and (ii) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged Collateral for their
own account for investment and not with a view to the distribution or resale
thereof.  In the event that any of the Pledged Collateral is sold at private
sale, Grantor agrees that if the Pledged Collateral is sold for a price which
Bank in good faith believe to be reasonable, then (A) the sale shall be deemed
to be commercially reasonable in all respects, (B) Grantor shall not be entitled
to a credit against the Secured Obligations in an amount in excess of the
purchase price, and (C) Bank shall not incur any liability or responsibility to
Grantor in connection therewith, notwithstanding the possibility that a
substantially higher price might have been realized at a public sale.  Grantor
recognizes that a ready market may not exist for Pledged Collateral which is not
regularly traded on a recognized securities exchange, and that a sale by Bank of
any such Pledged Collateral for an amount substantially less than a pro rata
share of the fair market value of the issuer's assets minus liabilities may be
commercially reasonable in view of the difficulties that may be encountered in
attempting to sell a large amount of Pledged Collateral or Pledged Collateral
that is privately traded.

          (d)  TITLE OF PURCHASERS.  Upon consummation of any sale of Pledged
Collateral pursuant to this Section 12, Bank shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Pledged
Collateral so sold.  Each such purchaser at any such sale shall hold the Pledged
Collateral sold absolutely free from any claim or right on the part of Grantor,
and Grantor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay and appraisal which they now have or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted. 
If the sale of all or any part of the Pledged Collateral is made on credit or
for future delivery, Bank shall not be required to apply any portion of the sale
price to the Secured Obligations until such amount actually is received by Bank,
and any Pledged Collateral so sold may be retained by Bank until


                                    - 8 -



the sale price is paid in full by the purchaser or purchasers thereof.  Bank 
shall not incur any liability in case any such purchaser or purchasers shall 
fail to pay for the Pledged Collateral so sold, and, in case of any such 
failure, the Pledged Collateral may be sold again upon like notice.

          (e)  DISPOSITION OF PROCEEDS OF SALE.  The net cash proceeds resulting
from the collection, liquidation, sale or other disposition of the Pledged
Collateral shall be applied, FIRST, to the reasonable costs and expenses
(including reasonable attorneys: fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting and liquidating the Pledged
Collateral, and the like; SECOND, to the satisfaction of all Secured
Obligations, with application as to any particular Secured Obligations to be in
the order set forth in the Loan Agreement or other Loan Documents; and, THIRD,
to all other indebtedness secured hereby in such order and manner as Bank in its
sole and absolute discretion may determine.

     13.  OTHER AGREEMENTS.  Nothing herein shall in any way modify or limit the
effect of terms or conditions set forth in any other security or other agreement
in connection with the Secured Obligations, whether or not executed by the
Grantor, but each and every term and condition hereof shall be in addition
thereto.

     14.  COVENANT NOT TO ISSUE UNCERTIFICATED SECURITIES.  Grantor represents
and warrants to Bank that all of the capital stock of and each of its Affiliates
that is a corporation is in certificated form (as contemplated by Article 8 of
the Uniform Commercial Code as enacted in California), and covenants to Bank
that it will not cause or permit any Affiliate to issue any capital stock in
uncertificated form or seek to convert all or any part of its existing capital
stock into uncertificated form (as contemplated by Article 8 of the Uniform
Commercial Code as enacted in California).

     15.  COVENANT NOT TO DILUTE INTERESTS OF BANK IN PLEDGED SECURITIES. 
Grantor represents, warrants and covenants to Bank that it will not at any time
cause or permit any corporation whose securities constitute Pledged Collateral
to issue any additional capital stock, or any warrants, options or other rights
to acquire any additional capital stock PROVIDED that Grantor may cause or
permit management of Grantor to receive capital stock of Grantor and options to
acquire the same provided that concurrently with the issuance thereof the same
are delivered in pledge to the Bank hereunder.


                                    - 9 -
          


          IN WITNESS WHEREOF, Grantor has caused this Agreement to be duly
executed as of the date first above written.

                                       "Grantor"

                                       HAWKER PACIFIC AEROSPACE, a California 
                                       corporation


                                       By: /s/ Brian Aune
                                          ---------------------------------

                                           Brian Aune  CFO
                                          ---------------------------------
                                              Printed Name and Title


                                   - 10 -

EX-10.30

                           SUBORDINATION AGREEMENT

     THIS SUBORDINATION AGREEMENT (the "AGREEMENT"), dated as of January 23,
1998, is entered into by and among HAWKER PACIFIC AEROSPACE, a California
corporation ("BORROWER"), HAWKER PACIFIC AEROSPACE LIMITED, an English company
("HP UK"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BANK"),
MELANIE L. BASTIAN ("BASTIAN"), and UNIQUE INVESTMENTS CORPORATION, a Utah
corporation ("UNIQUE").

                                   RECITALS

     A.   Pursuant to the Amended and Restated Business Loan Agreement of 
even date herewith between Borrower and Bank (as at any time amended, the 
"SENIOR LOAN AGREEMENT"), Bank is providing certain credit facilities to 
Borrower.

     B.   Using the proceeds of a $6,500,000 subordinated loan from Bastian 
(the "Bastian Loan"), Unique has heretofore made a $6,500,000 subordinated 
loan to Borrower (the "Unique Loan").  Concurrently herewith, Unique will 
receive a $1,500,000 principal repayment with respect to the Unique Loan from 
Borrower and shall use such funds to make a $1,500,000 principal payment to 
Bastian.

     C.   The remaining balance of $5,000,000 under the Bastian Loan shall be 
evidenced by an Amended and Restated Subordinated Promissory Note of even 
date herewith made by Unique in favor of Bastian (as in effect on the date of 
this Agreement, the "BASTIAN NOTE"), a copy of which is attached hereto as 
Exhibit A.  The remaining balance of $5,000,000 under the Unique Loan shall 
be evidenced by an Amended and Restated Subordinated Promissory Note of even 
date herewith made by Borrower in favor of Unique (as in effect on the date 
of this Agreement, the "UNIQUE NOTE"), a copy of which is attached hereto as 
Exhibit B.

     D.   It is a condition precedent to the making of the loans under the 
Senior Loan Agreement that Bastian and Unique enter into this Agreement, and 
thereby subordinate the Bastian Loan, the Unique Loan and certain other 
"Subordinated Debt" described herein to the obligations evidenced by the 
Senior Loan Agreement.

             NOW, THEREFORE, the parties hereto agree as follows:

1.   DEFINITIONS AND CONSTRUCTIONS. As used herein, the following terms shall 
have the definitions set forth after each:

          "ASSETS" means any interest of Borrower or HP UK in any kind of 
property or asset, whether real, personal or mixed real and personal, or 
whether tangible or intangible.

                                      -1-



          "BANKRUPTCY CODE" means Title 11 of the United States Code, as 
amended from time to time, or any successor statute.

          "BORROWER" shall include both Hawker Pacific Aerospace and any 
other person at any time assuming or otherwise becoming primarily liable for 
all or any part of the obligations of Borrower under the Senior Loan 
Documents, including without limitation any trustee or debtor-in-possession 
in any bankruptcy or similar proceeding involving Borrower or such survivor.

          "CODE" means the Uniform Commercial Code as codified in the State 
of California or as codified in any other state the laws of which are 
required by Section 9-103 thereof to be applied in connection with the issue 
of perfection of security interests, as such statutes are in effect during 
the term hereof. All terms used in this Agreement which are defined in the 
Code shall be construed and defined in accordance with the meaning and 
definition ascribed to such terms under the Code, unless another meaning is 
specifically provided herein. 

          "COLLATERAL" means Assets with respect to which any Senior Creditor 
or any Subordinated Creditor has a Lien.

          "DISTRIBUTION OF ASSETS" means any distribution of Assets of any 
kind or character, whether in cash, property, or securities, and whether in 
respect of repayment of indebtedness or otherwise, including, but not limited 
to, adequate protection payments under the Bankruptcy Code.

          "HP UK" shall include both Hawker Pacific Aerospace Limited and any 
other person at any time assuming or otherwise becoming primarily liable for 
all or any part of the obligations of HP UK under the Senior Loan Documents, 
including without limitation any trustee or debtor-in-possession in any 
bankruptcy or similar proceeding involving HP UK or such survivor.

          "LIEN" means any lien (statutory or other), mortgage, pledge, 
hypothecation, assignment, deposit arrangement, security interest, charge or 
other encumbrance of any kind (including any conditional sale or other title 
retention agreement, any lease in the nature thereof, and any agreement to 
give any security interest) and any agreement to give or refrain from giving 
a lien, mortgage, pledge, hypothecation, assignment, deposit arrangement, 
security interest, charge or other encumbrance of any kind.

          "PERSON" means any natural person, sole proprietorship, general 
partnership, limited partnership, joint venture, trust, unincorporated 
organization, association, corporation, public authority, or any other 
organization, irrespective of whether it is a legal entity.

                                      -2-



          "SENIOR DEBT" means (i) all obligations of Borrower or any of its 
Subsidiaries arising under or in connection with the Senior Loan Agreement or 
any other Senior Loan Document;  (ii) all obligations owed pursuant to any 
interest rate or currency hedging arrangements or other derivative contracts 
entered into with the Bank; (iii) all obligations of HP UK arising under or 
in connection with the Intercompany Note referred to in the Loan Agreement, 
and (iv) all renewals, extensions, refinancings, refundings, amendments, 
restatements, supplements, and modifications of all of the foregoing 
obligations.

          "SENIOR DEFAULT" means any "Event of Default" as defined in the 
Senior Loan Agreement.

          "SENIOR LOAN DOCUMENTS" means the "Loan Documents" as defined in 
the Senior Loan Agreement.

          "SUBORDINATED CREDITORS" means Unique, Bastian, and any other 
present or future holder of any Subordinated Debt. 

          "SUBORDINATED DEBT" means all indebtedness, claims, debts, 
liabilities, or obligations (i) of Borrower arising under or in connection 
with the Unique Note, (ii) of Unique arising under or in connection with the 
Bastian Note, and (iii) of Borrower or HP UK otherwise owing to any 
Subordinated Creditor of any kind whatsoever; in each case whatever nature, 
character or description, and whether presently existing or arising 
hereafter, including without limitation, all management and similar fees, all 
contract and tort claims that a Subordinated Creditor may have in connection 
therewith; together with interest and fees accruing thereon and costs and 
expenses (including attorneys' fees and expenses) of collection thereof, and 
all renewals, extensions, refinancings, refundings, amendments, restatements, 
supplements, and modifications thereof.

2.   SUBORDINATION.

     2.1  DEBT.  Each Subordinated Creditor covenants and agrees that all 
payments of the Subordinated Debt shall be subordinated and junior in all 
respects to the prior payment in full, in cash, of all Senior Debt except 
that interest may be paid with respect to the Subordinated Debt and Permitted 
Management Fees (as defined in the Loan Agreement) in accordance with Section 
2.3 hereof.  No Subordinated Creditor shall have or assert any claim with 
respect to the Subordinated Debt until the payment in full and in cash of the 
Senior Debt, except as explicitly permitted by Section 2.3 of this Agreement.

     2.2  LIENS.  Each Subordinated Creditor covenants and agrees that the 
Subordinated Debt shall remain unsecured at all times; and that any lien or 
security interest created in favor of such Subordinated Creditor 
notwithstanding this Agreement 

                                      -3-



shall be (a) held by such Subordinated Creditor in trust for the exclusive 
benefit of Bank and the holders, from time to time, of  the Senior Loan 
Documents, and (b) terminated and released, or at Bank's election assigned to 
Bank, immediately upon the demand of Bank and pursuant to documentation 
satisfactory to Bank.

     2.3  PERMITTED PAYMENTS.  Notwithstanding the subordination of the 
Subordinated Debt to the Senior Debt hereunder, (x) Unique may pay and 
Bastian may accept scheduled payments of accrued interest coming due under 
the Bastian Note, to the extent funded from payments to Unique permitted by 
this Section 2.3;  and (y) Borrower may pay and Unique may accept scheduled 
monthly payments of accrued interest coming due under the Unique Note, 
provided that:

          (i)    no such payment shall be made at any time after the occurrence
     and during the pendency of any Senior Default or any of the other
     prohibitions described in either Section 2.4.1 or Section 2.4.2;

          (ii)  the initial payment shall be made with respect to the calendar
     month of March, 1998; and

          (iii)  Permitted Management Fees may be paid when no Senior Default
     exists. 

     2.4  PRIORITY AND PAYMENT OVER OF PROCEEDS IN CERTAIN EVENTS.

          2.4.1    SUBORDINATION ON DISSOLUTION, LIQUIDATION OR REORGANIZATION
     OF BORROWER.  Upon any Distribution of Assets in the event of any
     dissolution or winding up or total or partial liquidation or
     reorganization, whether voluntary or involuntary, or adjustment or
     protection or relief or composition of Borrower or any of its Subsidiaries,
     or of Borrower's or its Subsidiaries' debts, or in any bankruptcy,
     insolvency, receivership, arrangement, reorganization, relief or other
     proceeding of Borrower or its Subsidiaries, or upon an arrangement for the
     benefit of creditors of Borrower or its Subsidiaries or any other
     marshaling of the assets and liabilities of Borrower or its Subsidiaries: 

               (a)  all amounts payable under or on account of the Senior Debt
          shall first be paid in full, in cash or payment provided for in cash,
          before the holders of Subordinated Debt shall be entitled to receive
          any Distribution of Assets; and

               (b)  before any payment may be made on account of the
          Subordinated Debt, any such Distribution of Assets to which Bastian
          would be entitled, except for the provisions of this Section 2.4.1,
          shall be made directly to Bank to the extent necessary to pay all
          Senior Debt in full, in cash, after giving effect to any concurrent
          payment or distribution 

                                      -4-



          to Bank.  In the case of a non-cash Distribution of Assets with 
          respect to the Subordinated Debt which is delivered to Bank under 
          this Section 2.4.1, the Senior Debt shall be deemed satisfied in the 
          amount equal to the cash realized by Bank upon disposition of such 
          Distribution of Assets; until such disposition, the non-cash 
          Distribution of Assets shall be held as security for the Senior Debt. 
          Bank shall have no duty hereunder to sell or otherwise reduce to cash 
          any non-cash Distribution of Assets turned over by any Subordinated 
          Creditor in accordance with this Section 2.4.1 and shall have no 
          liability to any Subordinated Creditor with respect to any such sale 
          or other disposition, under the Code or otherwise, except for 
          liability arising from Bank's willful misconduct or gross negligence, 
          and such sale or other disposition shall not affect Bank's rights and 
          remedies hereunder. 

     Borrower and HP UK shall give prompt written notice to Bank and Bastian of
     any Distribution of Assets of the nature described in this Section.

               Bank is hereby irrevocably authorized and empowered (in its own
     name or in the name of any or all Subordinated Creditors or otherwise), but
     shall have no obligation, to demand, sue for, collect and receive every
     Distribution of Assets and give acquittance therefor and to file claims and
     proofs of claim in respect of the Subordinated Debt and take such other
     action (including, without limitation, voting the Subordinated Debt or
     enforcing any Lien securing payment of the Subordinated Debt) on behalf of
     any or all Subordinated Creditors as it may deem necessary or advisable for
     the exercise or enforcement of any of its rights or interests hereunder. 
     Each Subordinated Creditor shall promptly take such action as Bank may
     request (i) to collect the Subordinated Debt for the account of Bank and to
     file appropriate claims or proofs of claim in respect of the Subordinated
     Debt; (ii) to execute and deliver to Bank such powers of attorney,
     assignments, or other instruments as it. may request in order to enable it
     to enforce any and all claims with respect to, and any Liens securing
     payment of, the Subordinated Debt, and (iii) to collect and receive any and
     all Distribution of Assets which may be payable or deliverable upon or with
     respect to the Subordinated Debt.

          2.4.2    SUBORDINATION ON SENIOR DEFAULT.  If a Senior Default has
     occurred and is continuing, no Subordinated Creditor may receive payment
     under or on account of the Subordinated Debt, directly or indirectly, in
     cash or other property or by set-off or in any other manner, commencing
     upon the date of receipt by such Subordinated Creditor from Bank of a
     notice of the Senior Default or its actual notice thereof.  The prohibition
     on Subordinated Debt payments shall end on the earlier of (a) the waiver of
     the Senior Default by Bank, or (b) the cure of the Senior Default to the
     satisfaction of Bank.  Immediately following the termination of any such
     prohibition, all payments of 

                                      -5-



     Subordinated Debt which, but for such prohibition, each Subordinated 
     Creditor would have been entitled to receive, shall be immediately due 
     and payable, to the extent not otherwise prohibited or limited by the 
     terms hereof.

     3.    FORBEARANCE AND STANDSTILL.

          3.1  Until the Senior Debt is paid in full, in cash and the Senior 
Loan Agreement is terminated or expires, or unless requested by Bank, no 
Subordinated Creditor shall, without Bank's prior written consent, such 
consent to be given or withheld in Bank's sole and absolute discretion:  (a) 
assert, collect or enforce the Subordinated Debt or any of the amounts due 
thereunder, or exercise any right of set-off; (b) exercise its right of 
possession of any Collateral or attach, seize, or realize upon any Collateral 
or enforce any Lien against the Assets; (c) exercise any right under the 
Code, including, but not limited to, the right of strict foreclosure, but 
excluding the right of redemption; or (d) commence, or cause to commence, 
prosecute or participate in (other than participate in an action, once 
commenced, to protect and pursue its rights and remedies as, for example, 
exercising its rights in a bankruptcy proceeding as described in Section 8 
hereof) any administrative, legal or equitable action against Borrower or HP 
UK or any administrative, legal or equitable action that might adversely 
affect Borrower or HP UK or their respective interests, including, but not 
limited to, the entry of a decree or order for relief in respect of either 
Borrower or HP UK under Bankruptcy Code or any applicable bankruptcy, 
insolvency or other similar law now or hereafter in effect or the appointment 
of a receiver, liquidator, custodian, trustee, sequestrator or similar 
official of either Borrower or HP UK or for any substantial part of the 
Assets, the commencement by either Borrower or HP UK of a voluntary case 
under Bankruptcy Code or any applicable bankruptcy, insolvency or other 
similar law now or hereafter in effect, or the consent by either company to 
the entry of an order for relief in an involuntary case under any such law, 
or the consent by either company to the appointment of, or taking possession 
by, a receiver, liquidator, trustee, custodian, sequestrator (or similar 
official) or any of them for any substantial part of the Assets, or either 
company's admission in writing of its inability to pay its debts generally, 
or the making of any general assignment for the benefit of creditors, or the 
failure generally by either company to pay its debts as they become due, or 
the taking by either company of any action in furtherance of any of the 
foregoing.

          3.2  If any Subordinated Creditor, other than in accordance with 
this Section 3, commences, prosecutes or participates in any suit, action or 
proceeding against Borrower or HP UK or takes any other action in violation 
of this Section 3, either company may interpose as a defense or a dilatory 
plea the making of this Agreement and Bank may intervene and interpose such 
defense or plea in such company's name. 

          3.3  Each Subordinated Creditor jointly and severally agrees that 
it shall reimburse Bank upon demand for all fees and expenses Bank incurs in 
connection 

                                      -6-



with any breach by any Subordinated Creditor of this Section 3, including, 
but not limited to, the fees and expenses incurred in removing from a 
Subordinated Creditor's possession any Collateral or other Assets held in 
breach of this Section 3.

     4.   DISPOSITION OF COLLATERAL.  Upon any foreclosure upon, or 
realization or collection in respect of any Collateral, all Senior Debt shall 
first be satisfied in full in cash before any Subordinated Creditor shall be 
entitled to receive or retain any proceeds or assets from such foreclosure, 
realization or collection.

     5.   PAYMENTS AND/OR PROPERTY HELD IN TRUST.  If (a) any payment or any 
cash or noncash distribution is made to any Subordinated Creditor in 
violation of this Agreement or (b) any cash or other property is received by 
any Subordinated Creditor upon any disposition or other action with respect 
to any of the Collateral, including, but not limited to, converting accounts 
receivable, instruments and chattel paper to cash, in violation of this 
Agreement, before the Senior Debt is paid in full, in cash, then such 
Subordinated Creditor shall receive the same in trust for Bank's benefit and 
shall forthwith remit it to Bank in the form in which it was received, 
together with such endorsements or documents as may be necessary to 
effectively negotiate or transfer the same, to the extent necessary to pay in 
full, in cash, the Senior Debt, after giving effect to any other payment or 
distribution with respect to the Senior Debt.

     6.   REPRESENTATIONS, WARRANTIES AND COVENANTS.  Each Subordinated 
Creditor represents and warrants that it has not entered into any 
subordination agreement with respect to the Subordinated Debt prior to the 
execution and delivery of this Agreement.  Each Subordinated Creditor 
covenants not to enter into any subordination agreement with respect to the 
Subordinated Debt without Bank's prior written consent, to be given or 
withheld in Bank's sole and absolute discretion.  Any such subsequent 
subordination shall be, and shall be expressed to be, subject and subordinate 
to the terms of this Agreement.   Each Subordinated Creditor represents and 
warrants that it has not previously assigned any interest in the Subordinated 
Debt, that no other Person (whether as a joint holder of the Subordinated 
Debt, participant or otherwise) owns any interest in the Subordinated Debt.

     7.   RIGHTS OF BANK NOT TO BE IMPAIRED, ETC.

          7.1  No right of Bank to enforce the subordination and other terms 
and conditions provided herein shall at any time in any way be prejudiced or 
impaired by any act or failure to act by Bank, or by any non-compliance by 
Borrower with the terms and provisions and covenants herein, regardless of 
any knowledge thereof Bank may have or with which Bank may otherwise be 
charged. Bank shall not be prejudiced in its right to enforce the 
subordination and other terms and conditions of the Subordinated Debt by any 
act or failure to act by Borrower, any Subordinated Creditor or any other 
Person in custody of any of the Assets.

                                      -7-



          7.2  Without limiting the generality of the foregoing, each 
Subordinated Creditor, for the benefit of Bank, waives any right it may have 
to require Bank to (a) proceed against any Person, including Borrower and HP 
UK; (b) proceed against or exhaust any security held from Borrower or HP UK, 
or any other Person; or (c) pursue any other remedy in Bank's power.

          7.3  Each Subordinated Creditor further waives, for the benefit of 
Bank, any defense or cause of action based upon or arising by reason of (a) 
any disability or other defense of Borrower or HP UK or any other Person; (b) 
the cessation or limitation from any cause whatsoever, other than payment in 
full, of the Senior Debt; (c) any lack of authority of any officer, director, 
partner, agent or any other Person acting or purporting to act on behalf of 
Borrower or HP UK; (d) any act or omission by Bank which directly or 
indirectly results in or aids the discharge of Borrower or HP UK from any 
Senior Debt by operation of-law or otherwise; (e) any failure by Bank or its 
agents to use reasonable care in the custody and preservation of Collateral 
in the possession of Bank or its agents which directly or indirectly impairs 
or diminishes the value of the Liens securing the Subordinated Debt; (f) any 
failure by Bank to give notice to any Subordinated Creditor of a proposed 
sale of any of the Collateral or to conduct a commercially reasonable sale of 
any of the collateral; or (g) any failure by Bank or its agents to fulfill 
any duty which may be owed to or asserted by any Subordinated Creditor with 
respect to any of the Collateral.

          7.4  Each Subordinated Creditor agrees that Bank shall have the 
right to apply the proceeds of any disposition of Collateral in the manner 
Bank determines, in its sole and absolute discretion, including, but not 
limited to, payment of obligations of Borrower to Persons other than Bank and 
the Subordinated Creditors, prior to full satisfaction of the Senior Debt and 
the Subordinated Debt.

          7.5  Each Subordinated Creditor agrees that (a) Bank shall have no 
obligation to marshal any Collateral in favor of any Person; and (b) Bank 
shall not be liable to any Subordinated Creditor for any action or failure to 
act in exercising its rights and remedies under this Agreement, the Senior 
Loan Documents or against any of the Collateral.  Each Subordinated Creditor 
further agrees, for the benefit of Bank, not to commence or prosecute any 
cause of action against Bank with respect to the Collateral, any duty of Bank 
to such Subordinated Creditor or otherwise arising with respect to the 
Subordinated Debt or this Agreement for which the waivers contained herein 
are not effective unless and until Bank has sold or otherwise disposed of all 
the Collateral, and each Subordinated Creditor waives any right to recover 
punitive or consequential damages in any such action.

          7.6  Each Subordinated Creditor (a) consents to any extension or 
renewal of the Liens securing the Senior Debt, (b) waives any right to cure 
any Senior Default, whether by payment of any portion of the Senior Debt or 
otherwise, (c) waives any right to set aside or otherwise legally challenge 
any foreclosure sale or 


                                      -8-



other exercise of rights and remedies by Bank, and (d) waives any right to 
redeem any Collateral foreclosed or otherwise disposed of by Bank.

          7.7  Each Subordinated Creditor agrees that Bank shall not be a 
fiduciary or an agent of such Subordinated Creditor, or otherwise owe any 
duty thereto, by virtue of any provision of this Agreement or Bank's 
exercise, or failure to exercise, any right hereunder.

     8.   CONDUCT OF BANKRUPTCY PROCEEDING.

          8.1  In any bankruptcy, insolvency, receivership or other similar 
proceeding of Borrower or HP UK, each Subordinated Creditor hereby 
irrevocably constitutes and appoints Bank its true and lawful attorney to act 
in its name and stead:

               8.1.1     To file the appropriate claim or claims in respect of
     the Subordinated Debt on behalf of that Subordinated Creditor if that
     Subordinated Creditor does not do so prior to 30 days before the expiration
     of the time to file claims in such proceeding and if Bank elects, in its
     sole and absolute discretion, to file such claim or claims; and

               8.1.2     To accept or reject any plan of reorganization or
     arrangement on behalf of that Subordinated Creditor and to otherwise vote
     that Subordinated Creditor's claims in respect of any Subordinated Debt now
     or hereafter owing from Borrower or HP UK in any manner which Bank deems
     appropriate for the enforcement of its rights hereunder.

          8.2  Each Subordinated Creditor agrees that Bank may consent to the 
use of cash collateral or provide financing to Borrower or HP UK on such 
terms and conditions and in such amounts as Bank, in its sole and absolute 
discretion, may decide and that, in connection with such cash collateral 
usage or such financing, Borrower or HP UK (or a trustee appointed for the 
estates thereof) may grant to Bank Liens upon all Assets, which Liens (a) 
shall secure payment of all Senior Debt (whether such Senior Debt arose prior 
to the filing of the petition for relief under Bankruptcy Code or arise 
thereafter); and (b) shall be superior in priority to the Liens held by any 
Subordinated Creditor on the Assets.  All allocations of payments between 
Bank and the Subordinated Creditors shall, subject to any court order, 
continue to be made after the filing of a petition under Bankruptcy Code on 
the same basis that the payments were to be allocated prior to the date of 
such filing. Each Subordinated Creditor agrees that they will not object to 
or oppose a sale or other disposition of any Assets securing the Senior Debt 
(or any portion thereof) free and clear of Liens or other claims of the 
Subordinated Creditors under Section 363 of Bankruptcy Code or any other 
provision of Bankruptcy Code if Bank has consented to such sale or 
disposition of such Assets. Each Subordinated Creditor agrees not to assert 
any right it may have to "adequate protection" of its Liens with respect to 
any of the Assets in any bankruptcy proceeding 


                                     -9-



and agrees that it will not seek to have the automatic stay lifted with 
respect to such Liens, without Bank's prior written consent, given in its 
sole and absolute discretion. Each Subordinated Creditor agrees not to 
initiate or prosecute or encourage any other Person to initiate or prosecute 
any claim, action or other proceeding (i) challenging the enforceability of 
Bank's claim, (ii) challenging the enforceability of any Liens in Assets 
securing the Senior Debt, or (iii) asserting any claims which Borrower or HP 
UK may hold with respect to Bank.

     9.   MODIFICATION OF SUBORDINATED DEBT.  No amendment or modification of 
the Bastian Note, the Unique note, or any other agreement or instrument in 
favor of a Subordinated Creditor shall directly or indirectly modify the 
provisions of this Agreement in any manner which might terminate or impair 
the subordination of the Subordinated Debt or the subordination of any Liens 
granted thereunder in accordance with the terms of this Agreement.  By way of 
example, the Subordinated Creditors may not amend any of the foregoing 
agreements or instruments to (a) increase the rate of interest with respect 
to the Subordinated Debt, (b) accelerate the payment of principal or interest 
or any other portion of the Subordinated Debt, or (c) increase any payments 
due to any Subordinated Creditor thereunder.

     10.  SUBORDINATED DEBT ACCELERATION.  In the event of any acceleration 
of all or any portion of the Subordinated Debt and so long as such 
acceleration shall continue, all Senior Debt shall be paid in full, in cash, 
before any payment is made on account of the Subordinated Debt.

     11.  SUBROGATION.  Upon the payment in full, in cash, of the Senior Debt 
and the termination or expiration of the Senior Loan Agreement by the 
Subordinated Creditors, the Subordinated Creditors shall be subrogated to the 
rights of Bank to receive any Distribution of Assets made on account of the 
Senior Debt to the extent that distributions otherwise payable to the 
Subordinated Creditors have been applied to payment of Senior Debt, until the 
Subordinated Debt shall be paid in full; and for the purposes of such 
subrogation, no Distribution of Assets to Bank of any cash, property, or 
securities to which the holders of Subordinated Debt would be entitled except 
for the provisions hereof, and no payment paid over pursuant to the 
provisions of Section 5 to Bank by the Subordinated Creditors shall, as among 
Borrower, HP UK, their respective creditors, and the Subordinated Creditors, 
be deemed to be a payment by Borrower and HP UK on account of such Senior 
Debt.  Bank shall have no liability to the Subordinated Creditors, and the 
subordination and other provisions of this Agreement shall not be affected 
by, any act or omission by Bank, prior to payment in full of the Senior Debt 
and the termination or expiration of the Senior Loan Agreement, which affect 
in any way the Subordinated Creditors' subrogation rights hereunder.

     12.  OBLIGATIONS OF BORROWER AND HP UK UNCONDITIONAL.  Nothing contained 
in this Agreement is intended to or shall, as among Borrower, HP UK or their 


                                     -10-



respective creditors (other than Bank and the Subordinated Creditors): (a) 
impair the obligations of Borrower and HP UK, which obligations are absolute 
and unconditional, to pay the Subordinated Debt as and when the same shall 
become due and payable in accordance with its terms; or (b) affect the 
relative rights of the Subordinated Creditors and other creditors of  
Borrower and HP UK (other than between the Subordinated Creditors and Bank).

     13.  FURTHER ASSURANCES.  Each Subordinated Creditor shall mark all 
evidence of the Subordinated Debt with a legend "THIS INSTRUMENT IS SUBJECT 
TO A DEBT SUBORDINATION AGREEMENT IN FAVOR OF BANK OF AMERICA NATIONAL TRUST 
AND SAVINGS ASSOCIATION DATED AS OF JANUARY __, 1998."  Each Subordinated 
Creditor agrees to take such actions and execute, acknowledge and deliver, or 
cause to be executed, acknowledged and delivered, such documents as are 
reasonably requested by Bank to effectuate and carry out the purposes of this 
Agreement and the subordination provisions hereunder, so long as any such 
acts are consistent with and do not impose terms of subordination more 
onerous than the terms hereof.

     14.  MODIFICATION AND EXPANSION OF SENIOR DEBT.  Notwithstanding any 
term of the Subordinated Debt to the contrary, Bank may (a) grant extensions 
of time of payment or performance of any Senior Debt, (b) make compromises 
and settlements with Borrower and other Persons regarding any Senior Debt, 
and (c) increase, expand and/or modify any Senior Debt without the consent of 
the Subordinated Creditor, and without affecting this Agreement and its 
rights hereunder.  No action that Bank may take, or refrain from taking, with 
respect to the Senior Debt or any Collateral therefor or any agreements in 
connection therewith, shall affect this Agreement or Bank's rights hereunder.

     15.  DISCONTINUATION OF CREDIT.  If, at any time hereafter, Bank shall, 
in Bank's sole and absolute judgment, determine to discontinue the extension 
of credit to Borrower, Bank may do so in accordance with the terms and 
provisions of the Senior Loan Agreement.  Such discontinuation 
notwithstanding, this Agreement shall continue in full force and effect until 
the Senior Debt shall have been paid in full in cash and the Senior Loan 
Agreement terminates or expires.

     16.  CONTINUED EFFECTIVENESS OF SUBORDINATION.  If, at any time after 
payment in full of the Senior Debt in cash and the termination or expiration 
of the Senior Loan Agreement any such payments must be disgorged by Bank for 
any reason whatsoever (including, without limitation, the insolvency, 
bankruptcy or reorganization of Borrower or HP UK) this Agreement and the 
relative rights and priorities provided herein shall be reinstated as to all 
such disgorged payments as though such payments had not been made and each 
Subordinated Creditor shall immediately pay over or deliver to Bank all 
payments and distributions received by the Subordinated Creditors to the 
extent necessary to pay in full, in cash, all amounts payable in connection 
with


                                     -11-



the Senior Debt as if this Agreement had remained in full force and effect; 
provided, however, that the Subordinated Creditors shall not be required to 
turn over such payments to the extent that the Subordinated Creditors have 
also been required to disgorge Subordinated Debt payments to Borrower or HP 
UK.  If, at any time prior to payment in full of the Senior Debt in cash and 
the termination or expiration of the Senior Loan Agreement any such payments 
must be disgorged by Bank for any reason whatsoever (including, without 
limitation, the insolvency, bankruptcy or reorganization of Borrower or HP 
UK) the Subordinated Creditors shall immediately pay over or deliver to Bank 
all payments and distributions received by the Subordinated Creditors to the 
extent necessary to pay in full, in cash, the disgorged payments; provided, 
however, that the Subordinated Creditors shall not be required to turn over 
such payments to the extent that the Subordinated Creditors have also been 
required to disgorged Subordinated Debt payments to Borrower or HP UK.  The 
obligations of  Borrower, HP UK and the Subordinated Creditors hereunder 
shall continue irrespective of, and Borrower, HP UK and the Subordinated 
Creditors hereby waive, so far as the law permits, any existing or future 
statutes of limitations applicable thereto or applicable to the enforcement 
of indebtedness and liability of  Borrower or HP UK, and any Collateral 
therefor.

     17.  ACCELERATION.  If Borrower, HP UK or any Subordinated Creditor 
violates any of the provisions of this Agreement, Bank may elect, by notice 
in writing delivered to the Borrower, HP UK or the Subordinated Creditors, to 
declare a Senior Default and cause all Senior Debt to become immediately due 
and payable.

     18.  IMPAIRMENT OF SENIOR DEBT OR LIEN.  No court or other action which 
has the effect of voiding, impairing, equitably subordinating or otherwise 
adversely affecting the Senior Debt or the Lien securing the Senior Debt, 
whether upon the insolvency, bankruptcy or reorganization of Borrower, HP UK 
or otherwise, shall affect Bank's rights hereunder or any of the Subordinated 
Creditors' waivers, covenants or obligations hereunder.

     19.  BREACH OF DUTY OR OBLIGATION TO THE SUBORDINATED CREDITORS.  No 
breach by Bank of any duty or obligation owed to any Subordinated Creditor 
(should any such duty exist), whether under this Agreement or otherwise, nor 
any determination that Bank has any liability to the Subordinated Creditors, 
whether under this Agreement or otherwise, shall affect Bank's rights 
hereunder or any of the Subordinated Creditors' waivers, covenants or 
obligations hereunder.

     20.  WAIVER OF JURY TRIAL.  EACH OF THE SUBORDINATED CREDITORS, BANK, HP 
UK AND Borrower EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR 
PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION HEREUNDER.   EACH 
PARTY HERETO HEREBY CONFIRMS THAT SUCH WAIVERS ARE INFORMED AND FREELY MADE.


                                      -12-



     21.  REMEDIES. Each Subordinating Creditor agrees and acknowledges that 
any violation or threatened violation by the Subordinating Creditors of any 
term of this Agreement will cause irreparable injury to Bank, that the remedy 
at law of Bank for any such violation or threatened violation will be 
inadequate and that Bank shall be entitled to obtain an injunction 
prohibiting the continuance or reoccurrence of such violation or threatened 
violation, and not in limitation of, any other rights or remedies available 
at law or in equity. Each Subordinating Creditor hereby irrevocably waives 
any defense based on the adequacy of a remedy at law which might be asserted 
as a bar to such injunctive remedy.

     22.  AGREEMENT BY BORROWER.  Borrower agrees that it will not, and it 
will not permit any affiliate or subsidiary to, purchase, redeem or otherwise 
acquire any of the Subordinated Debt or make any payment of any of the 
Subordinated Debt, or take any other action, in contravention of the 
provisions of this Agreement.

     23.  MISCELLANEOUS PROVISIONS.

          23.1  NO THIRD PARTY BENEFICIARIES.  All of the understandings, 
covenants and agreements contained herein are solely for the benefit of Bank, 
Unique Bastian (and their respective successors and assigns) and there are no 
other persons which are intended to be benefitted in any way by this 
Agreement.

          23.2  NOTICES.  All notices, demands and other communications which 
a party may desire, or may be required, to give to another shall be in 
writing, shall be delivered personally against receipt, or sent by recognized 
overnight courier service, or mailed by registered or certified mail, return 
receipt requested, postage prepaid, or sent by telex or telecopy, and shall 
be addressed to the party to be notified as follows:

     If to Bank:         675 Anton Boulevard, Second Floor
                         Costa Mesa, California  92626
                                        
     If to               c/o Unique Investment Corporation
     Subordinated        1380 Vernon Street
     Lenders:            Anaheim, California  92805

     If to               As set forth in the Senior Loan Agreement
     Borrower
     or HP UK:

Any such notice, demand, or communication shall be deemed given when received 
if personally delivered or sent by overnight courier, or when deposited in 
the United States mails, postage prepaid, if sent by registered or certified 
mail, or when answer back received, if sent by telex or telecopier.  The 
address for a party may be changed by notice given in accordance with this 
subsection.


                                     -13-



          23.3  CHOICE OF LAW.  This Agreement shall be governed by and 
construed in accordance with the laws of the State of California without 
reference to the choice of laws or conflicts of laws principles thereof.

          23.4  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding 
upon, and shall inure to the benefit of, the participants, transferees, 
successors, and permitted assigns of the parties hereto. Each Subordinating 
Creditor further agrees that if Borrower or HP UK is in the process of 
refinancing a portion of the Senior Debt with a new lender, and if Bank makes 
a request of the Subordinating Creditors, the Subordinating Creditors shall 
agree to enter into a new subordination agreement with the new lender on 
substantially the terms and conditions of this Agreement.

          23.5  SEVERABILITY.  Wherever possible, each provision of this 
Agreement shall be interpreted in such manner as to be effective and valid 
under applicable law, but if any provision of this Agreement shall be 
prohibited by or invalid under applicable law, such provision shall be 
ineffective to the extent of such prohibition or invalidity, without 
invalidating the remainder of such provision or the remaining provisions of 
this Agreement.

          23.6  WAIVERS.  No failure on the part of Bank to exercise, no 
delay in exercising and no course of dealing with respect to, any right 
hereunder shall operate as a waiver thereof; nor shall any single or partial 
exercise of any right hereunder preclude any other or further exercise 
thereof or the exercise of any other right.

          23.7  ATTORNEYS' FEES.  If it becomes necessary for Bank or the 
Subordinating Creditors to commence any proceedings or actions to enforce the 
provisions of this Agreement, the court or body before which the same shall 
be brought shall award to the prevailing party therein all of its costs and 
expenses in prosecuting such proceedings and actions, including attorneys' 
fees, the usual and customary and lawfully recoverable court costs, and all 
the expenses in connection therewith.

          23.8  ENTIRE AGREEMENT; MODIFICATIONS.  This Agreement contains all 
of the terms and conditions agreed upon by the parties relating to its 
subject matter and supersedes all prior and contemporaneous agreements, 
negotiations, correspondence, understandings and communications of the 
parties, whether oral or written, respecting that subject matter.  No 
modification, rescission, waiver, release, or amendment of any provision of 
this Agreement shall be made, except by a written agreement signed by Bank 
and the Subordinated Creditors.

          23.9  COUNTERPARTS.  This Agreement may be signed in any number of 
counterparts, each of which will constitute an original, and all of which, 
taken together, shall constitute but one and the same agreement.


                                     -14-



          23.10  AMENDMENTS TO NOTES.  None of the parties to this Agreement 
other than Bank shall enter into any amendment, modification or waiver with 
respect to the Subordinated Debt without the express prior written consent of 
the Bank.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement 
to be duly executed as of the date first set forth above.

/s/ Melanie L. Bastian
- - ---------------------------------
MELANIE L. BASTIAN, an individual

HAWKER PACIFIC AEROSPACE

By: /s/ Brian Aune
   ------------------------------

Title:  CFO
      ---------------------------


HAWKER PACIFIC AEROSPACE LIMITED

By: /s/ David L. Lokken
   ------------------------------

Title: 
      ---------------------------


UNIQUE INVESTMENTS CORPORATION

By: /s/ [ILLEGIBLE]
   ------------------------------

Title:  CFO
      ---------------------------


BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION

By: /s/ [ILLEGIBLE]
   ------------------------------

Title:  Vice President
      ---------------------------


                                        -15-



[Attach Subordinated Notes]


                                       -16-

EX-27

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF HAWKER PACIFIC AEROSPACE FOR THE YEAR ENDED DECEMBER 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

       
                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                         160,000
<SECURITIES>                                         0
<RECEIVABLES>                                7,498,000
<ALLOWANCES>                                   147,000
<INVENTORY>                                 14,814,000
<CURRENT-ASSETS>                            22,645,000
<PP&E>                                      17,380,000
<DEPRECIATION>                               1,230,000
<TOTAL-ASSETS>                              40,898,000
<CURRENT-LIABILITIES>                       18,901,000
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                  2,000,000
<COMMON>                                     1,040,000
<OTHER-SE>                                   1,257,000
<TOTAL-LIABILITY-AND-EQUITY>                40,898,000
<SALES>                                     41,042,000
<TOTAL-REVENUES>                            41,042,000
<CGS>                                       31,430,000
<TOTAL-COSTS>                               31,430,000
<OTHER-EXPENSES>                                32,000
<LOSS-PROVISION>                               147,000
<INTEREST-EXPENSE>                           2,431,000
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