Exhibit 10.6
TERM LOAN
AND
SECURITY AGREEMENT
STEEL CITY CAPITAL FUNDING LLC
(AS TERM B LENDER)
WITH
AIR INDUSTRIES MACHINING, CORP.,
SIGMA METALS, INC., and
WELDING METALLURGY, INC.
(COLLECTIVELY, THE BORROWER)
August 24, 2007
TABLE OF CONTENTS
PAGE
I. DEFINITIONS............................................................1
1.1. Accounting Terms.............................................1
1.2. General Terms................................................1
1.3. Uniform Commercial Code Terms...............................17
1.4. Certain Matters of Construction.............................18
II. TERM LOAN, PAYMENTS...................................................18
2.1. Term Loan...................................................19
2.2. Procedure for Eurodollar Rate Loan Election.................19
2.3. Disbursement of Term Loan Proceeds..........................21
2.4. Repayment of Term Loan......................................21
2.5. Statement of Account........................................21
2.6. Additional Payments.........................................21
2.7. Mandatory Prepayments.......................................21
2.8. Use of Proceeds.............................................22
III. INTEREST AND FEES.....................................................22
3.1. Interest....................................................22
3.2. Closing Fee.................................................22
3.3. Computation of Interest and Fees............................22
3.4. Maximum Charges.............................................22
3.5. Increased Costs.............................................23
3.6. Basis For Determining Interest Rate Inadequate or Unfair....23
3.7. Capital Adequacy............................................24
3.8. Gross Up for Taxes..........................................25
3.9. Withholding Tax Exemption...................................25
IV. COLLATERAL: GENERAL TERMS............................................26
4.1. Security Interest in the Collateral.........................26
4.2. Perfection of Security Interest.............................26
4.3. Disposition of Collateral...................................27
4.4. Preservation of Collateral..................................27
4.5. Ownership of Collateral.....................................27
4.6. Defense of Term B Lender's Interests........................28
4.7. Books and Records...........................................28
4.8. Financial Disclosure........................................28
4.9. Compliance with Laws........................................29
4.10. Inspection of Premises......................................29
4.11. Insurance...................................................29
4.12. Failure to Pay Insurance....................................30
4.13. Payment of Taxes............................................30
4.14. Payment of Leasehold Obligations............................31
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4.15. Receivables.................................................31
4.16. Inventory...................................................33
4.17. Maintenance of Equipment....................................33
4.18. Exculpation of Liability....................................33
4.19. Environmental Matters.......................................34
4.20. Financing Statements........................................36
V. REPRESENTATIONS AND WARRANTIES........................................36
5.1. Authority...................................................36
5.2. Formation and Qualification.................................36
5.3. Survival of Representations and Warranties..................37
5.4. Tax Returns.................................................37
5.5. Financial Statements........................................37
5.6. Entity Name.................................................37
5.7. O.S.H.A. and Environmental Compliance.......................37
5.8. Solvency; No Litigation, Violation, Indebtedness or
Default.....................................................38
5.9. Patents, Trademarks, Copyrights and Licenses................39
5.10. Licenses and Permits........................................40
5.11. Default of Indebtedness.....................................40
5.12. No Default..................................................40
5.13. No Burdensome Restrictions..................................40
5.14. No Labor Disputes...........................................40
5.15. Margin Regulations..........................................40
5.16. Investment Company Act......................................41
5.17. Disclosure..................................................41
5.18. Delivery of Acquisition Agreement and Subordinated Loan
Documentation...............................................41
5.19. Swaps.......................................................41
5.20. Conflicting Agreements......................................41
5.21. Application of Certain Laws and Regulations.................41
5.22. Business and Property of Borrower...........................41
5.23. Anti-Terrorism Laws.........................................42
5.24. Trading with the Enemy......................................42
5.25. Federal Securities Laws.....................................42
VI. AFFIRMATIVE COVENANTS.................................................43
6.1. Payment of Fees.............................................43
6.2. Conduct of Business and Maintenance of Existence and
Assets......................................................43
6.3. Violations..................................................43
6.4. Government Receivables......................................43
6.5. Financial Covenants.........................................43
6.6. Execution of Supplemental Instruments.......................44
6.7. Payment of Indebtedness.....................................44
6.8. Standards of Financial Statements...........................44
6.9. Federal Securities Laws.....................................44
6.10. Exercise of Rights..........................................45
6.11. Inventory Audits............................................45
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VII. NEGATIVE COVENANTS....................................................45
7.1. Merger, Consolidation, Acquisition and Sale of Assets.......45
7.2. Creation of Liens...........................................45
7.3. Guarantees..................................................45
7.4. Investments.................................................45
7.5. Loans.......................................................45
7.6. Capital Expenditures........................................46
7.7. Dividends...................................................46
7.8. Indebtedness................................................46
7.9. Nature of Business..........................................46
7.10. Transactions with Affiliates................................46
7.11. Leases......................................................46
7.12. Subsidiaries................................................46
7.13. Fiscal Year and Accounting Changes..........................47
7.14. Pledge of Credit............................................47
7.15. Amendment of Articles of Incorporation, By-Laws.............47
7.16. Compliance with ERISA.......................................47
7.17. Prepayment of Indebtedness..................................47
7.18. Anti-Terrorism Laws.........................................47
7.19. Membership/Partnership Interests............................48
7.20. Trading with the Enemy Act..................................48
7.21. Subordinated Note...........................................48
7.22. Other Agreements............................................48
7.23. Progress Payments...........................................48
VIII. CONDITIONS PRECEDENT..................................................48
8.1. Conditions to Term Loan.....................................48
IX. INFORMATION AS TO BORROWERS...........................................53
9.1. Disclosure of Material Matters..............................54
9.2. Schedules...................................................54
9.3. Environmental Reports.......................................54
9.4. Litigation..................................................54
9.5. Material Occurrences........................................54
9.6. Government Receivables......................................55
9.7. Annual Financial Statements.................................55
9.8. Quarterly Financial Statements..............................55
9.9. Monthly Financial Statements................................55
9.10. Other Reports...............................................56
9.11. Additional Information......................................56
9.12. Projected Operating Budget..................................56
9.13. Variances From Operating Budget.............................56
9.14. Notice of Suits, Adverse Events.............................56
9.15. ERISA Notices and Requests..................................56
9.16. Additional Documents........................................57
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X. EVENTS OF DEFAULT.....................................................57
10.1. Nonpayment..................................................57
10.2. Breach of Representation....................................57
10.3. Financial Information.......................................58
10.4. Judicial Actions............................................58
10.5. Noncompliance...............................................58
10.6. Judgments...................................................58
10.7. Bankruptcy..................................................58
10.8. Inability to Play...........................................58
10.9. Affiliate Bankruptcy........................................58
10.10. Material Adverse Effect.....................................59
10.11. Lien Priority...............................................59
10.12. Subordinated Loan Default...................................59
10.13. Senior Loan Default.........................................59
10.14. Cross Default...............................................59
10.15. Change of Ownership.........................................59
10.16. Invalidity..................................................59
10.17. Licenses....................................................59
10.18. Seizures....................................................59
10.19. Operations..................................................60
10.20. Pension Plans...............................................60
XI. TERM B LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.....................60
11.1. Rights and Remedies.........................................60
11.2. Term B Lender's Discretion..................................62
11.3. Setoff......................................................62
11.4. Rights and Remedies not Exclusive...........................62
11.5. Allocation of Payments After Event of Default...............62
XII. WAIVERS AND JUDICIAL PROCEEDINGS......................................62
12.1. Waiver of Notice............................................63
12.2. Delay.......................................................63
12.3. Jury Waiver.................................................63
XIII. EFFECTIVE DATE AND TERMINATION........................................63
13.1. Term........................................................63
13.2. Termination.................................................64
XIV. BORROWING AGENCY......................................................64
14.1. Borrowing Agency Provisions.................................64
14.2. Waiver of Subrogation.......................................65
XV. MISCELLANEOUS.........................................................65
15.1. Governing Law...............................................65
15.2. Entire Understanding........................................65
15.3. Successors and Assigns; Participations; New Lenders.........66
15.4. Application of Payments.....................................68
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15.5. Indemnity...................................................68
15.6. Notice......................................................69
15.7. Survival....................................................70
15.8. Severability................................................70
15.9. Expenses....................................................70
15.10. Injunctive Relief...........................................71
15.11. Damages.....................................................71
15.12. Captions....................................................71
15.13. Counterparts; Facsimile Signatures..........................71
15.14. Construction................................................71
15.15. Confidentiality; Sharing Information........................71
15.16. Publicity...................................................72
15.17. Certifications From Banks and Participants;
US PATRIOT Act..............................................72
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List of Exhibits and Schedules
Exhibits
Exhibit 2.1 Term Note
Exhibit 8.1(k) Financial Condition Certificate
Exhibit 15.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 1.2(a) Leasehold Interests
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(h) Deposit and Investment Accounts
Schedule 4.19 Real Property
Schedule 5.1 Consents
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7(b) Environmental Licenses, Certificates and Permits
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
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TERM LOAN
AND
SECURITY AGREEMENT
Term Loan and Security Agreement dated as of August 24, 2007 among AIR
INDUSTRIES MACHINING, CORP., a corporation organized under the laws of the State
of New York ("Air"); SIGMA METALS, INC., a corporation organized under the laws
of the State of New York ("Sigma"); WELDING METALLURGY, INC. (as successor by
merger with WMS Merger Corp.), a corporation organized under the laws of the
State of New York ("WMI"; and together with Air and Sigma, individually and
collectively, and jointly and severally, the "Borrower"), and STEEL CITY CAPITAL
FUNDING LLC, a limited liability company organized under the laws of the State
of Delaware ("Term B Lender").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower and Term B Lender hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Other Documents or
any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrower for the fiscal year ended December 31,
2006.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"2005 Phase 1" shall mean that certain Phase 1 Environmental Site
Assessment dated October 12, 2005 prepared by CA Rich Consultants, Inc.
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Acquisition Agreement" shall mean the Stock Purchase Agreement
including all exhibits and schedules thereto dated as of March 9, 2007 by and
among Air Group, as buyer (WMI, as assignee of all of Air Group's rights under
such Stock Purchase Agreement, herein referred to as the "Buyer"), and Xxxx
Xxxxx, and Xxxxxxx Xxxxx, as sellers (collectively, the "Seller"), as amended,
restated, modified and/or replaced from time to time.
"Affiliate" of any Person shall mean (a) any Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote 33% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.
"Agreement" shall mean this Term Loan and Security Agreement, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
"Air Group" shall mean Air Industries Group, Inc. (f/k/a Xxxxx
Industries Incorporated), a Delaware corporation and its successors and assigns.
"Alternate Base Rate" shall mean, for any day, a rate per annum
equal to the higher of (i) the Base Rate in effect on such day and (ii) the
Federal Funds Open Rate in effect on such day plus 1/2 of 1%.
"Anti-Terrorism Laws" shall mean any Applicable Laws relating to
terrorism or money laundering, including Executive Order No. 13224, the USA
PATRIOT Act, the Applicable Laws comprising or implementing the Bank Secrecy
Act, and the Applicable Laws administered by the United States Treasury
Department's Office of Foreign Asset Control (as any of the foregoing Applicable
Laws may from time to time be amended, renewed, extended, or replaced).
"Applicable Law" shall mean all laws, rules and regulations
applicable to the Person, conduct, transaction, covenant, Other Document or
contract in question, including all applicable common law and equitable
principles; all provisions of all applicable state, federal and foreign
constitutions, statutes, rules, regulations and orders of any Governmental Body,
and all orders, judgments and decrees of all courts and arbitrators.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Blocked Account Bank" shall have the meaning set forth in Section
4.15(h).
"Blocked Person" shall have the meaning set forth in Section 5.23(b)
hereof.
"Borrower" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all permitted successors and assigns of such
Person.
"Borrowing Agent" shall mean Air.
"Business Day" shall mean any day other than Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required by law to be
closed for business in East Brunswick, New Jersey and, if the applicable
Business Day relates to any Eurodollar Rate Loans, such day must also be a day
on which dealings are carried on in the London interbank market.
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"Capital Expenditures" shall mean expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations,
which, in accordance with GAAP, would be classified as capital expenditures.
"Capitalized Lease Obligation" shall mean any Indebtedness of
Borrower represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in a transfer of control of
Borrower to a Person who is not an Original Owner or (b) any merger or
consolidation of or with Borrower or sale of all or substantially all of the
property or assets of Borrower. For purposes of this definition, "control of
Borrower" shall mean the power, direct or indirect (x) to vote 50% or more of
the Equity Interests having ordinary voting power for the election of directors
(or the individuals performing similar functions) of Borrower or (y) to direct
or cause the direction of the management and policies of Borrower by contract or
otherwise.
"Change of Ownership" shall mean (a) 50% or more of the Equity
Interests of Borrower is no longer owned or controlled by (including for the
purposes of the calculation of percentage ownership, any Equity Interests into
which any Equity Interests of Borrower held by any of the Original Owners are
convertible or for which any such Equity Interests of Borrower or of any other
Person may be exchanged and any Equity Interests issuable to such Original
Owners upon exercise of any warrants, options or similar rights which may at the
time of calculation be held by such Original Owners) a Person who is an Original
Owner or (b) any merger, consolidation or sale of substantially all of the
property or assets of Borrower.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including all net income, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, inventory,
capital stock, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation and property taxes, custom
duties, fees, assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts, imposed by any taxing or other authority, domestic or foreign
(including the Pension Benefit Guaranty Corporation or any environmental agency
or superfund), upon the Collateral, Borrower or any of its Affiliates.
"Closing Date" shall mean August 24, 2007 or such other date as may
be agreed to by the parties hereto.
3
"Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended or supplemented from time to time, and any successor statute of
similar import, and the rules and regulations thereunder, as from time to time
in effect.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property;
(f) all Real Property;
(g) all Subsidiary Stock;
(h) the Leasehold Interests;
(i) all of Borrower's right, title and interest in and to,
whether now owned or hereafter acquired and wherever located, (i) its respective
goods and other property including, but not limited to, all merchandise returned
or rejected by Customers, relating to or securing any of the Receivables; (ii)
all of Borrower's rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in transit, setoff,
detinue, replevin, reclamation and repurchase; (iii) all additional amounts due
to Borrower from any Customer relating to the Receivables; (iv) other property,
including warranty claims, relating to any goods securing the Obligations; (v)
all of Borrower's contract rights, rights of payment which have been earned
under a contract right, instruments (including promissory notes), documents,
chattel paper (including electronic chattel paper), warehouse receipts, deposit
accounts, letters of credit and money; (vi) all commercial tort claims (whether
now existing or hereafter arising); (vii) if and when obtained by Borrower, all
real and personal property of third parties in which Borrower has been granted a
lien or security interest as security for the payment or enforcement of
Receivables; (viii) all letter of credit rights (whether or not the respective
letter of credit is evidenced by a writing); (ix) all supporting obligations;
and (x) any other goods, personal property or real property now owned or
hereafter acquired in which Borrower has expressly granted a security interest
or may in the future grant a security interest to Term B Lender hereunder, or in
any amendment or supplement hereto or thereto, or under any other agreement
between Term B Lender and Borrower;
(j) all of Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by Borrower or in which it has an interest), computer programs,
tapes, disks and documents relating to (a), (b), (c), (d), (e), (f), (g), (h) or
(i) of this Paragraph; and
4
(k) all proceeds and products of (a), (b), (c), (d), (e), (f),
(g), (h), (i) and (j) in whatever form, including, but not limited to: cash,
deposit accounts (whether or not comprised solely of proceeds), certificates of
deposit, insurance proceeds (including hazard, flood and credit insurance),
negotiable instruments and other instruments for the payment of money, chattel
paper, security agreements, documents, eminent domain proceeds, condemnation
proceeds and tort claim proceeds.
"Commitment Percentage" of Term B Lender shall mean one hundred
percent (100%) of the Term Loan as same may be adjusted upon any assignment by a
Lender pursuant to Section 15.3(c) or (d) hereof.
"Commitment Transfer Supplement" shall mean a document in the form
of Exhibit 15.3 hereto, properly completed and otherwise in form and substance
satisfactory to Term B Lender by which the Purchasing Lender purchases and
assumes a portion of the Term Loan under this Agreement.
"Compliance Certificate" shall mean a compliance certificate to be
signed by the Chief Financial Officer or Controller of Borrower, which shall
state that, based on an examination sufficient to permit such officer to make an
informed statement, no Default or Event of Default exists, or if such is not the
case, specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrower with respect to
such default and, such certificate shall have appended thereto calculations
which set forth Borrower's compliance with the requirements or restrictions
imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.11.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Bodies and other third parties, domestic or foreign, necessary to carry on
Borrower's business or necessary (including to avoid a conflict or breach under
any agreement, instrument, other document, license, permit or other
authorization) for the execution, delivery or performance of this Agreement, the
Other Documents, the Subordinated Loan Documentation, or the Acquisition
Agreement, including any Consents required under all applicable federal, state
or other Applicable Law.
"Consigned Inventory" shall mean Inventory of Borrower that is in
the possession of another Person on a consignment, sale or return, or other
basis that does not constitute a final sale and acceptance of such Inventory.
"Controlled Group" shall mean, at any time, the Borrower and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other entities which,
together with Borrower, are treated as a single employer under Section 414 of
the Code.
"Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.
5
"Default" shall mean an event, circumstance or condition which, with
the giving of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Rate Loan" shall mean any portion of the Term Loan that
bears interest based upon the Alternate Base Rate.
"Early Termination Date" shall have the meaning set forth in Section
13.1 hereof.
"Earnings Before Interest and Taxes" shall mean for any period the
sum of (i) net income (or loss) of Borrower for such period (excluding
extraordinary gains and losses), plus (ii) all interest expense of Borrower for
such period, plus (iii) all charges against income of Borrower for such period
for federal, state and local taxes actually paid; provided, however, that there
shall be excluded from the computation of net income (or loss) of:
(a) Air:
(i) non-recurring charges for non-cash compensation in
accordance with FASB 123 (R) in the aggregate amount of
$150,000 for the six months ended June 30, 2007; and
(ii) customer credits issued between January 1, 2007
through June 30, 2007, which amount shall not exceed
$650,000..
(b) WMI:
(i) compensation (salaries, bonus and other remunerative
payments) prior to the Closing Date to Xxxx, Xxxxxxx and
Xxxxxxx Xxxxx; and
(ii) transaction costs relating to the acquisition of
WMI.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses for such
period, plus (iii) amortization expenses for such period.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
6
"Equipment" shall mean and include all of Borrower's goods (other
than Inventory) whether now owned or hereafter acquired and wherever located
including all equipment, machinery, apparatus, motor vehicles, fittings,
furniture, furnishings, fixtures, parts, accessories and all replacements and
substitutions therefor or accessions thereto.
"Equity Interests" of any Person shall mean any and all shares,
rights to purchase, options, warrants, general, limited or limited liability
partnership interests, member interests, participation or other equivalents of
or interest in (regardless of how designated) equity of such Person, whether
voting or nonvoting, including common stock, preferred stock, convertible
securities or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the
then current Interest Period relating thereto the interest rate per annum
determined by Term B Lender by dividing (i) the rate which appears on the
Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays
rates at which US dollar deposits are offered by leading banks in the London
interbank deposit market), or the rate which is quoted by another source
selected by Term B Lender which has been approved by the British Bankers'
Association as an authorized information vendor for the purpose of displaying
rates at which US dollar deposits are offered by leading banks in the London
interbank deposit market (an "Alternative Source"), at approximately 11:00 a.m.,
London time two (2) Business Days prior to the first day of such Interest Period
(or if there shall at any time, for any reason, no longer exist a Bloomberg Page
BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement
rate determined by Term B Lender at such time (which determination shall be
conclusive absent manifest error)) for an amount comparable to such Eurodollar
Rate Loan and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number equal to 1.00 minus the Reserve Percentage.
The Eurodollar Rate shall be adjusted with respect to any Eurodollar
Rate Loan that is outstanding on the effective date of any change in the Reserve
Percentage as of such effective date. Term B Lender shall give prompt notice to
the Borrower of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.
"Eurodollar Rate Deadline" shall have the meaning set forth in
Section 2.2(b) hereof.
"Eurodollar Rate Loan" shall mean any portion of the Term Loan at
any time that bears interest based on the Eurodollar Rate.
7
"Eurodollar Rate Option" shall have the meaning set forth in Section
2.2(a) hereof.
"Event of Default" shall have the meaning set forth in Article X
hereof.
"Exchange Act" shall have the mean the Securities Exchange Act of
1934, as amended.
"Executive Order No. 13224" shall mean the Executive Order No. 13224
on Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.
"Existing Environmental Due Diligence" shall mean, collectively, (i)
the 2005 Phase 1 and (ii) that certain letter from the County of Suffolk, New
York with regard to Project No. 000-00-00 dated January 8, 1998.
"Federal Funds Effective Rate" for any day shall mean the rate per
annum (based on a year of 360 days and actual days elapsed and rounded upward to
the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or
any successor) on such day as being the weighted average of the rates on
overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
"Federal Funds Open Rate" shall mean the rate per annum determined
by Term B Lender in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the "open" rate for federal
funds transactions as of the opening of business for federal funds transactions
among members of the Federal Reserve System arranged by federal funds brokers on
such day, as quoted by Xxxxxx Guybutler Corporation, any successor entity
thereto, or any other broker selected by Term B Lender, as set forth on the
applicable Bloomberg display page; provided, however; that if such day is not a
Business Day, the Federal Funds Open Rate for such day shall be the "open" rate
on the immediately preceding Business Day, or if no such rate shall be quoted by
a Federal funds broker at such time, such other rate as determined by Term B
Lender in accordance with its usual procedures.
"Fixed Charge Coverage Ratio" shall mean and include, with respect
to any fiscal period, the ratio of (a) EBITDA, minus the aggregate amount of
unfunded capitalized expenditures made during such period, minus the aggregate
amount of distributions made during such period, minus the aggregate amount of
cash taxes paid during such period to (b) the aggregate amount of principal
and/or interest payments made on Funded Debt during such period.
"Foreign Subsidiary" of any Person, shall mean any Subsidiary of
such Person that is not organized or incorporated in the United States or any
State or territory thereof.
8
"Funded Debt" shall mean, with respect to any Person, without
duplication, all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness that by its terms matures more
than one year from, or is directly or indirectly renewable or extendible at such
Person's option under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year from the
date of creation thereof, and specifically including Capitalized Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor, and also
including, in the case of Borrower, the Obligations and, without duplication,
Indebtedness consisting of guaranties of Funded Debt of other Persons.
"Funded Senior Debt" shall mean and include Borrower's Funded Debt,
but shall specifically exclude all of Borrower's Indebtedness for borrowed money
that has been subordinated to any Indebtedness owing by Borrower to Term B
Lender.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include all of Borrower's
general intangibles, whether now owned or hereafter acquired, including all
payment intangibles, all choses in action, causes of action, corporate or other
business records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
trademark applications, service marks, trade secrets, goodwill, copyrights,
design rights, software, computer information, source codes, codes, records and
updates, registrations, licenses, franchises, customer lists, tax refunds, tax
refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to Borrower to secure payment of
any of the Receivables by a Customer (other than to the extent covered by
Receivables) all rights of indemnification and all other intangible property of
every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity, authority, agency,
division or department exercising the legislative, judicial, regulatory or
administrative functions of or pertaining to a government.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
9
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Ineligible Security" shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
"Intellectual Property" shall mean property constituting under any
Applicable Law a patent, patent application, copyright, trademark, service xxxx,
trade name, mask work, trade secret or license or other right to use any of the
foregoing.
"Intellectual Property Claim" shall mean the assertion by any Person
of a claim (whether asserted in writing, by action, suit or proceeding or
otherwise) that Borrower's ownership, use, marketing, sale or distribution of
any Inventory, Equipment, Intellectual Property or other property or asset is
violative of any ownership of or right to use any Intellectual Property of such
Person.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated as of the date hereof among Term B Lender and PNC Bank, National
Association, as agent, and the other financial institutions signatory thereto.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean and include all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any consignment arrangement, contract of service
or held for sale or lease, all raw materials, work in process, finished goods
and materials and supplies of any kind, nature or description which are or might
be used or consumed in Borrower's business or used in selling or furnishing such
goods, merchandise and other personal property, and all documents of title or
other documents representing them.
"Investment Property" shall mean and include all of Borrower's now
owned or hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts and
commodities accounts.
"Leasehold Interests" shall mean all of Borrower's right, title and
interest in and to the premises set forth on Schedule 1.2(a) attached hereto.
10
"License Agreement" shall mean any agreement between Borrower and a
Licensor pursuant to which Borrower is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of Borrower or otherwise in connection with
Borrower's business operations.
"Licensor" shall mean any Person from whom Borrower obtains the
right to use (whether on an exclusive or non-exclusive basis) any Intellectual
Property in connection with Borrower's manufacture, marketing, sale or other
distribution of any Inventory or otherwise in connection with Borrower's
business operations.
"Licensor/ Term B Lender Agreement" shall mean an agreement between
Term B Lender and a Licensor, in form and content satisfactory to Term B Lender,
by which Term B Lender is given the unqualified right, vis-a-vis such Licensor,
to enforce Term B Lender's Liens with respect to and to dispose of Borrower's
Inventory with the benefit of any Intellectual Property applicable thereto,
irrespective of Borrower's default under any License Agreement with such
Licensor.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including any conditional sale or
other title retention agreement, any lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction.
"Lien Waiver Agreement" shall mean an agreement which is executed in
favor of Term B Lender by a Person who owns or occupies premises at which any
Collateral may be located from time to time and by which such Person shall waive
any Lien that such Person may ever have with respect to any of the Collateral
and shall authorize Term B Lender from time to time to enter upon the premises
to inspect or remove the Collateral from such premises or to use such premises
to store or dispose of such Inventory.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the condition (financial or otherwise), results of operations, assets,
business, properties or prospects of Borrower or any guarantor, (b) Borrower's
ability to duly and punctually pay or perform the Obligations in accordance with
the terms thereof, (c) the value of the Collateral, or Term B Lender's Liens on
the Collateral or the priority of any such Lien or (d) the practical realization
of the benefits of Term B Lender's rights and remedies under this Agreement and
the Other Documents.
"Maximum Loan Amount" shall mean $4,500,000.
"Modified Commitment Transfer Supplement" shall have the meaning set
forth in Section 15.3(d).
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
11
"Multiple Employer Plan" shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the Controlled
Group) at least two of whom are not under common control, as such a plan is
described in Section 4064 of ERISA.
"Note" shall mean the Term Note.
"Obligations" shall mean and include any and all loans, advances,
debts, liabilities, obligations, covenants and duties owing by the Borrower to
Term B Lender or to any other direct or indirect subsidiary or affiliate of Term
B Lender of any kind or nature, present or future (including any interest
accruing thereon after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, (including this Agreement and the Other Documents)
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or other similar
agreement, or in any other manner, whether arising out of overdrafts or deposit
or other accounts or electronic funds transfers (whether through automated
clearing houses or otherwise) or out of Term B Lender's non-receipt of or
inability to collect funds or otherwise not being made whole in connection with
depository transfer check or other similar arrangements, whether direct or
indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of Borrower's Indebtedness and/or liabilities
under this Agreement, the Other Documents or under any other agreement between
Term B Lender and Borrower and any amendments, extensions, renewals or increases
and all costs and expenses of Term B Lender incurred in the documentation,
negotiation, modification, enforcement, collection or otherwise in connection
with any of the foregoing, including but not limited to reasonable attorneys'
fees and expenses and all obligations of Borrower to Term B Lender to perform
acts or refrain from taking any action.
"Ordinary Course of Business" shall mean the ordinary course of
Borrower's business as conducted on the Closing Date.
"Original Owners" shall mean, (a) with respect to Air and Sigma, Air
Group, and (b) with respect to WMI, Air and Sigma.
"Other Documents" shall mean the Note, the Pledge Agreements, the
Subordination Agreement, the Intercreditor Agreement and any and all other
agreements, instruments and documents, including guaranties, pledges, powers of
attorney, consents, warrants and all other writings heretofore, now or hereafter
executed by Borrower or any guarantor and/or delivered to Term B Lender in
respect of the transactions contemplated by this Agreement.
12
"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
"Participant" shall mean each Person who shall be granted the right
by Term B Lender to participate in any portion of the Term Loan and who shall
have entered into a participation agreement in form and substance satisfactory
to Term B Lender.
"Payment Office" shall mean initially Xxx Xxxxx Xxxxxx Xxxxxxxxx,
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000; thereafter, such other office of Term B
Lender, if any, which it may designate by notice to Borrower to be the Payment
Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
"Pension Benefit Plan" shall mean at any time any employee pension
benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan)
which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Code and either (i) is maintained by any
member of the Controlled Group for employees of any member of the Controlled
Group; or (ii) has at any time within the preceding five years been maintained
by any entity which was at such time a member of the Controlled Group for
employees of any entity which was at such time a member of the Controlled Group.
"Permitted Encumbrances" shall mean (a) Liens in favor of Term B
Lender; (b) Liens in favor of PNC, as agent; (c) Liens for taxes, assessments or
other governmental charges not delinquent or being contested in good faith and
by appropriate proceedings and with respect to which proper reserves have been
taken by Borrower; provided, that, the Lien shall have no effect on the priority
of the Liens in favor of Term B Lender or the value of the assets in which Term
B Lender has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (d) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Term B Lender has consented to in writing; (e)
deposits or pledges to secure obligations under worker's compensation, social
security or similar laws, or under unemployment insurance; (f) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the payment
of money), leases, statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the Ordinary Course of Business; (g) Liens
arising by virtue of the rendition, entry or issuance against Borrower or any
Subsidiary, or any property of Borrower or any Subsidiary, of any judgment,
writ, order, or decree for so long as each such Lien (i) is in existence for
less than 20 consecutive days after it first arises or is being Properly
Contested and (ii) is at all times junior in priority to any Liens in favor of
Term B Lender; (h) mechanics', workers', materialmen's or other like Liens
arising in the Ordinary Course of Business with respect to obligations which are
not due or which are being contested in good faith by Borrower; (i) Liens placed
upon fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other property
of Borrower and (y) the aggregate amount of Indebtedness secured by such Liens
incurred as a result of such purchases during any fiscal year shall not exceed
the amount provided for in Section 7.6; (j) other Liens incidental to the
conduct of Borrower's business or the ownership of its property and assets which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit, and which do not in the aggregate materially detract from
Term B Lender's rights in and to the Collateral or the value of Borrower's
property or assets or which do not materially impair the use thereof in the
operation of Borrower's business; and (k) Liens disclosed on Schedule 1.2.
13
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company, limited
liability partnership, institution, public benefit corporation, joint venture,
entity or Governmental Body (whether federal, state, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or department
thereof).
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA (including a Pension Benefit Plan), maintained for
employees of Borrower or any member of the Controlled Group or any such Plan to
which Borrower or any member of the Controlled Group is required to contribute
on behalf of any of its employees.
"Pledge Agreements" shall mean, collectively, (i) that certain
Pledge Agreement dated as of the date hereof between Term B Lender and Air
Group, with respect to the capital stock of Air and Sigma, and (ii) that certain
Pledge Agreement dated as of the date hereof among Term B Lender, Air and Sigma,
with respect to the capital stock of WMI.
"PNC" shall mean PNC Bank, National Association, and its successors
and assigns.
"Properly Contested" shall mean, in the case of any Indebtedness of
any Person (including any taxes) that is not paid as and when due or payable by
reason of such Person's bona fide dispute concerning its liability to pay same
or concerning the amount thereof, (i) such Indebtedness is being properly
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted; (ii) such Person has established appropriate reserves as
shall be required in conformity with GAAP; (iii) the non-payment of such
Indebtedness will not have a Material Adverse Effect and will not result in the
forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of
such Person's assets with respect to such Indebtedness unless such Lien is at
all times junior and subordinate in priority to the Liens in favor of Term B
Lender (except only with respect to property taxes that have priority as a
matter of applicable state law) and enforcement of such Lien is stayed during
the period prior to the final resolution or disposition of such dispute; (v) if
such Indebtedness results from, or is determined by the entry, rendition or
issuance against a Person or any of its assets of a judgment, writ, order or
decree, enforcement of such judgment, writ, order or decree is stayed pending a
timely appeal or other judicial review; and (vi) if such contest is abandoned,
settled or determined adversely (in whole or in part) to such Person, such
Person forthwith pays such Indebtedness and all penalties, interest and other
amounts due in connection therewith.
"Purchasing CLO" shall have the meaning set forth in Section 15.3(d)
hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. xx.xx. 6901 et seq., as same may be amended from time to time.
14
"Real Property" shall mean all of Borrower's right, title and
interest in and to the owned and leased premises identified on Schedule 4.19
hereto.
"Receivables" shall mean and include, as to Borrower, all of
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness owed to Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables and all other forms of
obligations owing to Borrower arising out of or in connection with the sale or
lease of Inventory or the rendition of services, all supporting obligations,
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Term B Lender hereunder.
"Register" shall have the meaning set forth in Section 15.3(e)
hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(c) of ERISA or the regulations promulgated thereunder.
"Reserve Percentage" shall mean as of any day the maximum percentage
in effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities".
"Sale and Lease-Back Premises" shall mean, collectively, the real
property located at (i) 0000 Xxxxx Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx, (xx)
0000 Xxxxx Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx and (iii) 0000 Xxxxx Xxxxx
Xxxxxx, Xxx Xxxxx, Xxx Xxxx.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Lender" shall mean PNC, as agent, and its successors and
assigns.
"Senior Loan Agreement" shall mean that certain Revolving Credit,
Term Loan, Equipment Line of Credit and Security Agreement dated November 30,
2005 among Air, Sigma, Senior Lender and the financial institutions which are
now or which hereafter become a party thereto.
"Senior Loan Documents" shall mean the Senior Loan Agreement and any
and all other notes, agreements, instruments and documents, including
guaranties, pledges, powers of attorney, consents, interest or currency swap
agreements or other similar agreements executed in connection therewith.
"Subordinated Debt Payments" shall mean and include all cash
actually expended to make payments of principal and interest on the Subordinated
Note.
15
"Subordinated Lender" shall mean, collectively, Xxxx Xxxxx and
Xxxxxxx Xxxxx.
"Subordinated Loan" shall mean the loan evidenced by the
Subordinated Note.
"Subordinated Loan Documentation" shall mean, collectively, the
Subordinated Note, the Pledge Agreement as of the date hereof among Air, Sigma
and Subordinated Lender and any and all other agreements, instruments and
documents, and all other writings heretofore, now or hereafter executed by
Borrower in favor of Subordinated Lender.
"Subordinated Note" shall mean the subordinated promissory note
issued by Air Group in favor of Subordinated Lender dated March 9, 2007 in the
principal sum of $2,000,000.
"Subordination Agreement" shall mean that certain Reliance and
Intercreditor Agreement dated as of the date hereof among Term B Lender,
Borrower, Air Group and Subordinated Lender.
"Subsidiary" of any Person shall mean a corporation or other entity
of whose Equity Interests having ordinary voting power (other than Equity
Interests having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other Persons
performing similar functions for such entity, are owned, directly or indirectly,
by such Person.
"Subsidiary Stock" shall mean all of the issued and outstanding
Equity Interests of any Subsidiary owned by the Borrower (not to exceed 65% of
the Equity Interests of any Foreign Subsidiary).
"Tangible Net Worth" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrower as may be properly classified as such
in accordance with GAAP consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of Borrower.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean the advances made pursuant to Section 2.1
hereof.
"Term Loan Rate" shall mean an interest rate per annum equal to (a)
the sum of the Alternate Base Rate plus six percent (6.00%) with respect to
Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus eight and
one-half of one percent (8.50%) with respect to Eurodollar Rate Loans.
"Term Note" shall mean the promissory note described in Section 2.1
hereof.
"Termination Date" shall mean the earlier to occur of: (a) August
24, 2010 or such other date as Term B Lender may agree in writing to extend the
Termination Date until, without there being any obligation on the part of Term B
Lender to extend the Termination Date, or (b) the date upon which the Senior
Loan Agreement is terminated.
16
"Termination Event" shall mean (i) a Reportable Event with respect
to any Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any member
of the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. xx.xx. 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic Substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Trading with the Enemy Act" shall mean the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any enabling legislation or executive order relating
thereto.
"Transaction" shall mean the transaction evidenced by this Agreement
and the Other Documents.
"Transferee" shall have the meaning set forth in Section 15.3(d)
hereof.
"Uniform Commercial Code" shall have the meaning set forth in
Section 1.3 hereof.
"USA PATRIOT Act" shall mean the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001, Public Law 107-56, as the same has been, or shall hereafter be,
renewed, extended, amended or replaced.
"Week" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New York from time to
time (the "Uniform Commercial Code") shall have the meaning given therein unless
otherwise defined herein. Without limiting the foregoing, the terms "accounts",
"chattel paper", "instruments", "general intangibles", "payment intangibles",
"supporting obligations", "securities", "investment property", "documents",
"deposit accounts", "software", "letter of credit rights", "inventory",
"equipment" and "fixtures", as and when used in the description of Collateral
shall have the meanings given to such terms in Articles 8 or 9 of the Uniform
Commercial Code. To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the Uniform
Commercial Code, such expanded definition will apply automatically as of the
date of such amendment, modification or revision.
17
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Term B Lender
is a party, including references to any of the Other Documents, shall include
any and all modifications or amendments thereto and any and all extensions or
renewals thereof. All references herein to the time of day shall mean the time
in New York, New York. Unless otherwise provided, all financial calculations
shall be performed with Inventory valued on a first-in, first-out basis.
Whenever the words "including" or "include" shall be used, such words shall be
understood to mean "including, without limitation" or "include, without
limitation". A Default or Event of Default shall be deemed to exist at all times
during the period commencing on the date that such Default or Event of Default
occurs to the date on which such Default or Event of Default is waived in
writing pursuant to this Agreement or, in the case of a Default, is cured within
any period of cure expressly provided for in this Agreement; and an Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by Term B Lender. Any Lien referred to in this Agreement or
any of the Other Documents as having been created in favor of Term B Lender, any
agreement entered into by Term B Lender pursuant to this Agreement or any of the
Other Documents, any payment made by or to or funds received by Term B Lender
pursuant to or as contemplated by this Agreement or any of the Other Documents,
or any act taken or omitted to be taken by Term B Lender, shall, unless
otherwise expressly provided, be created, entered into, made or received, or
taken or omitted, for the benefit or account of Term B Lender. Wherever the
phrase "to the best of Borrower's knowledge" or words of similar import relating
to the knowledge or the awareness of Borrower are used in this Agreement or
Other Documents, such phrase shall mean and refer to (i) the actual knowledge of
a senior officer of Borrower or (ii) the knowledge that a senior officer would
have obtained if he had engaged in good faith and diligent performance of his
duties, including the making of such reasonably specific inquiries as may be
necessary of the employees or agents of Borrower and a good faith attempt to
ascertain the existence or accuracy of the matter to which such phrase relates.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or otherwise within the
limitations of, another covenant shall not avoid the occurrence of a default if
such action is taken or condition exists. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder.
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II. TERM LOAN, PAYMENTS.
2.1. Term Loan. Subject to the terms and conditions of this Agreement,
Term B Lender will make a Term Loan to Borrower in the sum equal to $4,500,000.
The Term Loan shall be advanced on the Closing Date and shall be payable on the
Termination Date, subject to (i) acceleration upon the occurrence of an Event of
Default under this Agreement, (ii) termination of this Agreement pursuant to the
terms hereof, or (iii) mandatory prepayment. The Term Loan shall be evidenced by
one or more secured promissory notes (collectively, the "Term Note") in
substantially the form attached hereto as Exhibit 2.1.
2.2. Procedure for Eurodollar Rate Loan Election.
(a) In lieu of having interest charged at the rate based upon the
Alternate Base Rate, the Borrower shall have the option (the "Eurodollar Rate
Option") to have interest on all or a portion of the Term Loan be charged at a
rate of interest based upon the Eurodollar Rate. On the last day of each
applicable Interest Period, unless the Borrower properly has exercised the
Eurodollar Rate Option with respect thereto, the interest rate applicable to
such Eurodollar Rate Loan automatically shall convert to the rate of interest
then applicable to Domestic Rate Loans hereunder. At any time that an Event of
Default has occurred and is continuing, the Borrower no longer shall have the
option to request that any portion of the Term Loan bear interest at the
Eurodollar Rate and Term B Lender shall have the right to convert the interest
rate on all outstanding Eurodollar Rate Loans to the rate then applicable to
Domestic Rate Loans hereunder.
(b) In the event Borrower elects to have a portion of the Term Loan
be charged at a rate of interest based upon the Eurodollar Rate, Borrower shall
give Term B Lender written notice by no later than 10:00 a.m. on the day which
is three (3) Business Days prior to the commencement of the proposed Interest
Period ("Eurodollar Rate Deadline"), specifying (i) the portion of the Term Loan
to be charged at a rate of interest based upon the Eurodollar Rate, which amount
shall be in integral multiples of $250,000, and (ii) the duration of the
Interest Period therefor. Notice of the Borrower's election of the Eurodollar
Rate Option for a permitted portion of the Term Loan and an Interest Period
pursuant to this Section shall be made by delivery to Term B Lender of a
Eurodollar Rate notice received by Term B Lender on or before the Eurodollar
Rate Deadline. Interest Periods for Eurodollar Rate Loans shall be for one, two
or three months; provided, if an Interest Period would end on a day that is not
a Business Day, it shall end on the next succeeding Business Day unless such day
falls in the next succeeding calendar month in which case the Interest Period
shall end on the next preceding Business Day. No Eurodollar Rate Loan shall be
made available to Borrower during the continuance of a Default or an Event of
Default. After giving effect to each requested Eurodollar Rate Loan, including
those which are converted from a Domestic Rate Loan under Section 2.2(d), there
shall not be outstanding more than four (4) Eurodollar Rate Loans, in the
aggregate.
(c) Each Interest Period of a Eurodollar Rate Loan shall end on such
date as Borrower may elect as set forth in subsection (b) above provided that
the exact length of each Interest Period shall be determined in accordance with
the practice of the interbank market for offshore Dollar deposits and no
Interest Period shall end after the last day of the Term.
(d) Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its Eurodollar Rate notice given to Term B Lender
pursuant to Section 2.2(b) or by its notice of conversion given to Term B Lender
pursuant to Section 2.2(d), as the case may be. Borrower shall elect the
duration of each succeeding Interest Period by giving irrevocable written notice
to Term B Lender of such duration not later than 10:00 a.m. on the day which is
three (3) Business Days prior to the last day of the then current Interest
Period applicable to such Eurodollar Rate Loan. If Term B Lender does not
receive timely notice of the Interest Period elected by Borrower, Borrower shall
be deemed to have elected to convert to a Domestic Rate Loan.
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(e) At its option and upon written notice given prior to 10:00 a.m.
(New York time) at least three (3) Business Days' prior to the date of such
prepayment, Borrower may prepay the Eurodollar Rate Loans in whole at any time
or in part from time to time with accrued interest on the principal being
prepaid to the date of such repayment. Borrower shall specify the date of
prepayment of that portion of the Term Loan which are Eurodollar Rate Loans and
the amount of such prepayment. In the event that any prepayment of a Eurodollar
Rate Loan is required or permitted on a date other than the last Business Day of
the then current Interest Period with respect thereto, Borrower shall indemnify
Term B Lender therefor in accordance with Section 2.2(f) hereof.
(f) Borrower shall indemnify Term B Lender and hold Term B Lender
harmless from and against any and all losses or expenses that Term B Lender may
sustain or incur as a consequence of any prepayment, conversion of or any
default by Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including, but not limited to, any interest payable by Term B
Lender to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Term B Lender to
Borrower shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any Applicable
Law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for Term B Lender
(for purposes of this subsection (g), the term "Term B Lender" shall include
Term B Lender and the office or branch where Term B Lender or any corporation or
bank controlling Term B Lender makes or maintains any Eurodollar Rate Loans) to
make or maintain its Eurodollar Rate Loans, the obligation of Term B Lender to
make Eurodollar Rate Loans hereunder shall forthwith be cancelled and Borrower
shall, if any affected Eurodollar Rate Loans are then outstanding, promptly upon
request from Term B Lender, either pay all such affected Eurodollar Rate Loans
or convert such affected Eurodollar Rate Loans into loans of another type. If
any such payment or conversion of any Eurodollar Rate Loan is made on a day that
is not the last day of the Interest Period applicable to such Eurodollar Rate
Loan, Borrower shall pay Term B Lender, upon Term B Lender's request, such
amount or amounts as may be necessary to compensate Term B Lender for any loss
or expense sustained or incurred by Term B Lender in respect of such Eurodollar
Rate Loan as a result of such payment or conversion, including (but not limited
to) any interest or other amounts payable by Term B Lender to lenders of funds
obtained by Term B Lender in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Term B Lender to Borrower shall be conclusive
absent manifest error.
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2.3. Disbursement of Term Loan Proceeds. The Term Loan shall be disbursed
from whichever office or other place Term B Lender may designate.
2.4. Repayment of Term Loan.
(a) The Term Loan shall be due and payable as provided in Section
2.1 hereof and in the Term Note, subject to mandatory prepayments as herein set
forth provided, however, notwithstanding anything to the contrary herein or in
any Other Document, all outstanding principal and interest with regard to the
Term Note shall be due and payable on the Termination Date.
(b) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Term B Lender at
the Payment Office not later than 1:00 P.M. (New York time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Term B Lender.
(c) Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.5. Statement of Account.(a) Term B Lender shall maintain, in accordance
with its customary procedures, a loan account ("Borrower's Account") in the name
of Borrower in which shall be recorded the date and amount of the Term Loan made
by Term B Lender and the date and amount of each payment in respect thereof.
Each month, Term B Lender shall send to Borrower a statement showing the
accounting for the Term Loan, payments made or credited in respect thereof, and
other transactions between Term B Lender and Borrower during such month. The
monthly statements shall be deemed correct and binding upon Borrower in the
absence of manifest error and shall constitute an account stated between Term B
Lender and Borrower unless Term B Lender receives a written statement of
Borrower's specific exceptions thereto within thirty (30) days after such
statement is received by Borrower. The records of Term B Lender with respect to
the loan account shall be conclusive evidence absent manifest error of the
amounts of the Term Loan and other charges thereto and of payments applicable
thereto.
2.6. Additional Payments. Any sums expended by Term B Lender due to
Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including Borrower's obligations under Sections
4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be added to the Obligations, or,
at Term B Lender's option, shall be paid to Term B Lender immediately upon
demand.
2.7. Mandatory Prepayments. Subject to the terms and provisions of the
Intercreditor Agreement and to Section 4.3 hereof, when Borrower sells or
otherwise disposes of any Collateral other than Inventory in the Ordinary Course
of Business, Borrower shall repay the Term Loan in an amount equal to (i) the
net proceeds of such sale (i.e., gross proceeds less the reasonable costs of
such sales or other dispositions), plus (ii) all accrued and unpaid interest on
the amount of such repayment and, in the case of repayment of a Eurodollar Rate
Loan, all amounts due pursuant to Section 2.2(f) hereof, such repayments to be
made promptly but in no event more than one (1) Business Day following receipt
of such net proceeds, and until the date of payment, such proceeds shall be held
in trust for Term B Lender. The foregoing shall not be deemed to be implied
consent to any such sale otherwise prohibited by the terms and conditions
hereof. Such repayments shall be applied to the Term Loan in the inverse order
of the maturities thereof.
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2.8. Use of Proceeds. Borrower shall apply the proceeds of the Term Loan
to (i) capitalize WMS Merger Corp. prior to the consummation of the acquisition
by WMS Merger Corp. of all of the outstanding capital stock of Welding
Metallurgy, Inc., and (ii) pay fees and expenses relating to this transaction.
Without limiting the generality of Section 2.8 above, neither the
Borrower nor any other Person which may in the future become party to this
Agreement or the Other Documents as Borrower, intends to use nor shall they use
any portion of the proceeds of the Term Loan, directly or indirectly, for any
purpose in violation of the Trading with the Enemy Act.
III. INTEREST AND FEES.
3.1. Interest. Interest on the Term Loan shall be payable in arrears on
the first Business Day of each calendar month with respect to Domestic Rate
Loans and, with respect to Eurodollar Rate Loans, at the end of each Interest
Period, subject to (i) acceleration upon the occurrence of an Event of Default
under this Agreement, (ii) termination of this Agreement pursuant to the terms
hereof, or (iii) mandatory prepayment. Interest charges shall be computed on the
actual principal amount of the Term Loan outstanding during the applicable
period at a rate per annum equal to the applicable Term Loan Rate. Whenever,
subsequent to the date of this Agreement, the Alternate Base Rate is increased
or decreased, the applicable Term Loan Rate for Domestic Rate Loans shall be
similarly changed without notice or demand of any kind by an amount equal to the
amount of such change in the Alternate Base Rate during the time such change or
changes remain in effect. The Eurodollar Rate shall be adjusted with respect to
Eurodollar Rate Loans without notice or demand of any kind on the effective date
of any change in the Reserve Percentage as of such effective date. Upon and
after the occurrence of an Event of Default, and during the continuation
thereof, at the option of Term B Lender, the Obligations shall bear interest at
the applicable Term Loan Rate plus four percent (4.0%) per annum (the "Default
Rate").
3.2. Closing Fee. Upon the execution of this Agreement, Borrower shall pay
to Term B Lender a closing fee of $145,000 less that portion of the good faith
deposit and commitment fee of $95,000, in the aggregate, heretofore paid by
Borrower to Term B Lender remaining after application of such fee to out of
pocket expenses.
3.3. Computation of Interest and Fees. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Term Loan
Rate for Domestic Rate Loans during such extension.
3.4. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrower, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Term B
Lender shall promptly refund such excess amount to Borrower and the provisions
hereof shall be deemed amended to provide for such permissible rate.
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3.5. Increased Costs. In the event that any Applicable Law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by Term B Lender (for purposes of this
Section 3.5, the term "Term B Lender" shall include Term B Lender and any
corporation or bank controlling Term B Lender) and the office or branch where
Term B Lender (as so defined) makes or maintains any Eurodollar Rate Loans with
any request or directive (whether or not having the force of law) from any
central bank or other financial, monetary or other authority, shall:
(a) subject Term B Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Term B Lender of principal, fees, interest or any other amount
payable hereunder or under any Other Documents (except for changes in the rate
of tax on the overall net income of Term B Lender by the jurisdiction in which
it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Term B Lender, including pursuant to Regulation D of the Board of Governors of
the Federal Reserve System; or
(c) impose on Term B Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Term B Lender
of making, renewing or maintaining its Term Loan hereunder by an amount that
Term B Lender deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any of the Term Loan
by an amount that Term B Lender deems to be material, then, in any case Borrower
shall promptly pay Term B Lender, upon its demand, such additional amount as
will compensate Term B Lender for such additional cost or such reduction, as the
case may be, provided that the foregoing shall not apply to increased costs
which are reflected in the Eurodollar Rate, as the case may be. Term B Lender
shall certify the amount of such additional cost or reduced amount to Borrower,
and such certification shall be conclusive absent manifest error.
3.6. Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Term B Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the Eurodollar
Rate applicable pursuant to Section 2.2 hereof for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
23
then Term B Lender shall give Borrower prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Term B Lender no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrower shall notify Term B
Lender, no later than 10:00 a.m. (New York City time) two (2) Business Days
prior to the proposed conversion, shall be maintained as an unaffected type of
Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans
shall be converted into a Domestic Rate Loan, or, if Borrower shall notify Term
B Lender, no later than 10:00 a.m. (New York City time) two (2) Business Days
prior to the last Business Day of the then current Interest Period applicable to
such affected Eurodollar Rate Loan, shall be converted into an unaffected type
of Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Term B Lender shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
Borrower shall not have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
3.7. Capital Adequacy.
(a) In the event that Term B Lender shall have determined that any
Applicable Law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any Governmental Body, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Term B Lender (for
purposes of this Section 3.7, the term "Term B Lender" shall include Term B
Lender and any corporation or bank controlling Term B Lender) and the office or
branch where Term B Lender (as so defined) makes or maintains any Eurodollar
Rate Loans with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on Term B
Lender's capital as a consequence of its obligations hereunder to a level below
that which Term B Lender could have achieved but for such adoption, change or
compliance (taking into consideration Term B Lender's policies with respect to
capital adequacy) by an amount deemed by Term B Lender to be material, then,
from time to time, Borrower shall pay upon demand to Term B Lender such
additional amount or amounts as will compensate Term B Lender for such
reduction. In determining such amount or amounts, Term B Lender may use any
reasonable averaging or attribution methods. The protection of this Section 3.7
shall be available to Term B Lender regardless of any possible contention of
invalidity or inapplicability with respect to the Applicable Law, regulation or
condition.
(b) A certificate of Term B Lender setting forth such amount or
amounts as shall be necessary to compensate Term B Lender with respect to
Section 3.7(a) hereof when delivered to Borrower shall be conclusive absent
manifest error.
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3.8. Gross Up for Taxes. Subject to Section 3.5(a) herein, if Borrower
shall be required by Applicable Law to withhold or deduct any taxes from or in
respect of any sum payable under this Agreement or any of the Other Documents to
Term B Lender, assignee of any Term B Lender, or Participant (each,
individually, a "Payee" and collectively, the "Payees"), (a) the sum payable to
such Payee or Payees, as the case may be, shall be increased as may be necessary
so that, after making all required withholding or deductions, the applicable
Payee or Payees receives an amount equal to the sum it would have received had
no such withholding or deductions been made (the "Gross-Up Payment"), (b)
Borrower shall make such withholding or deductions, and (c) Borrower shall pay
the full amount withheld or deducted to the relevant taxation authority or other
authority in accordance with Applicable Law. Notwithstanding the foregoing,
Borrower shall not be obligated to make any portion of the Gross-Up Payment that
is attributable to any withholding or deductions that would not have been paid
or claimed had the applicable Payee or Payees properly claimed a complete
exemption with respect thereto pursuant to Section 3.9 hereof.
3.9. Withholding Tax Exemption.
(a) Each Payee that is not incorporated under the Laws of the United
States of America or a state thereof (and, upon the written request of Term B
Lender, each other Payee) agrees that it will deliver to Borrower and Term B
Lender two (2) duly completed appropriate valid Withholding Certificates (as
defined under ss.1.1441-1(c)(16) of the Income Tax Regulations ("Regulations"))
certifying its status (i.e., U.S. or foreign person) and, if appropriate, making
a claim of reduced, or exemption from, U.S. withholding tax on the basis of an
income tax treaty or an exemption provided by the Code. The term "Withholding
Certificate" means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and
the related statements and certifications as required under ss.1.1441-1(e)(2)
and/or (3) of the Regulations; a statement described in ss.1.871-14(c)(2)(v) of
the Regulations; or any other certificates under the Code or Regulations that
certify or establish the status of a payee or beneficial owner as a U.S. or
foreign person.
(b) Each Payee required to deliver to Borrower and Term B Lender a
valid Withholding Certificate pursuant to Section 3.9(a) hereof shall deliver
such valid Withholding Certificate as follows: (A) each Payee which is a party
hereto on the Closing Date shall deliver such valid Withholding Certificate at
least five (5) Business Days prior to the first date on which any interest or
fees are payable by Borrower hereunder for the account of such Payee; (B) each
Payee shall deliver such valid Withholding Certificate at least five (5)
Business Days before the effective date of such assignment or participation
(unless Term B Lender in its sole discretion shall permit such Payee to deliver
such Withholding Certificate less than five (5) Business Days before such date
in which case it shall be due on the date specified by Term B Lender). Each
Payee which so delivers a valid Withholding Certificate further undertakes to
deliver to Borrower and Term B Lender two (2) additional copies of such
Withholding Certificate (or a successor form) on or before the date that such
Withholding Certificate expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent Withholding Certificate so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by Borrower or Term B Lender.
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(c) Notwithstanding the submission of a Withholding Certificate
claiming a reduced rate of or exemption from U.S. withholding tax required under
Section 3.9(b) hereof, Term B Lender shall be entitled to withhold United States
federal income taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed
upon a withholding agent under ss.1.1441-7(b) of the Regulations. Further, Term
B Lender is indemnified under ss.1.1461-1(e) of the Regulations against any
claims and demands of any Payee for the amount of any tax it deducts and
withholds in accordance with regulations under ss.1441 of the Code.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. Subject to the terms and
provisions of the Intercreditor Agreement, to secure the prompt payment and
performance to Term B Lender of the Obligations, Borrower hereby assigns,
pledges and grants to Term B Lender a continuing security interest in and to and
Lien on all of its Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located. Borrower shall xxxx its books and
records as may be necessary or appropriate to evidence, protect and perfect Term
B Lender's security interest and shall cause its financial statements to reflect
such security interest. Borrower shall promptly provide Term B Lender with
written notice of all commercial tort claims, such notice to contain the case
title together with the applicable court and a brief description of the
claim(s). Upon delivery of each such notice, Borrower shall be deemed to hereby
grant to Term B Lender a security interest and lien in and to such commercial
tort claims and all proceeds thereof.
4.2. Perfection of Security Interest. Borrower shall take all action that
may be necessary or desirable, or that Term B Lender may request, so as at all
times to maintain the validity, perfection, enforceability and priority of Term
B Lender's security interest in and Lien on the Collateral or to enable Term B
Lender to protect, exercise or enforce its rights hereunder and in the
Collateral, including, but not limited to, (i) immediately discharging all Liens
other than Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii)
delivering to Term B Lender, endorsed or accompanied by such instruments of
assignment as Term B Lender may specify, and stamping or marking, in such manner
as Term B Lender may specify, any and all chattel paper, instruments, letters of
credits and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into warehousing, lockbox and other custodial
arrangements satisfactory to Term B Lender, and (v) executing and delivering
financing statements, control agreements, instruments of pledge, mortgages,
notices and assignments, in each case in form and substance satisfactory to Term
B Lender, relating to the creation, validity, perfection, maintenance or
continuation of Term B Lender's security interest and Lien under the Uniform
Commercial Code or other Applicable Law. By its signature hereto, Borrower
hereby authorizes Term B Lender to file against Borrower, one or more financing,
continuation or amendment statements pursuant to the Uniform Commercial Code in
form and substance satisfactory to Term B Lender (which statements may have a
description of collateral which is broader than that set forth herein). All
charges, expenses and fees Term B Lender may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be added to the
Obligations, or, at Term B Lender's option, shall be paid to Term B Lender
immediately upon demand.
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4.3. Disposition of Collateral. Borrower will safeguard and protect all
Collateral for Term B Lender's general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
Ordinary Course of Business and (b) the disposition or transfer of obsolete and
worn-out Equipment in the Ordinary Course of Business during any fiscal year
having an aggregate fair market value of not more than $100,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Term B Lender's second priority
security interest or (ii) subject to the terms and provisions of the
Intercreditor Agreement, the proceeds of which are remitted to Term B Lender to
be applied pursuant to Section 2.7.
4.4. Preservation of Collateral. In addition to the rights and remedies
set forth in Section 11.1 hereof, Term B Lender: (a) may at any time take such
steps as Term B Lender deems necessary to protect Term B Lender's interest in
and to preserve the Collateral, including the hiring of such security guards or
the placing of other security protection measures as Term B Lender may deem
appropriate; (b) may employ and maintain at any of Borrower's premises a
custodian who shall have full authority to do all acts necessary to protect Term
B Lender's interests in the Collateral; (c) may lease warehouse facilities to
which Term B Lender may move all or part of the Collateral; (d) may use
Borrower's owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of Borrower's owned or leased
property. Borrower shall cooperate fully with all of Term B Lender's efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Term B Lender may direct. All of Term B Lender's expenses of preserving the
Collateral, including any expenses relating to the bonding of a custodian, shall
be added to the Obligations, or, at Term B Lender's option, shall be paid to
Term B Lender immediately upon demand.
4.5. Ownership of Collateral.
(a) With respect to the Collateral, at the time the Collateral
becomes subject to Term B Lender's security interest: (i) Borrower shall be the
sole owner of and fully authorized and able to sell, transfer, pledge and/or
grant a security interest in each and every item of the its respective
Collateral to Term B Lender; and, except for Permitted Encumbrances, the
Collateral shall be free and clear of all Liens and encumbrances whatsoever;
(ii) each document and agreement executed by Borrower or delivered to Term B
Lender in connection with this Agreement shall be true and correct in all
respects; (iii) all signatures and endorsements of Borrower that appear on such
documents and agreements shall be genuine and Borrower shall have full capacity
to execute same; and (iv) Borrower's Equipment and Inventory shall be located as
set forth on Schedule 4.5 and shall not be removed from such location(s) without
the prior written consent of Term B Lender except with respect to the sale of
Inventory in the Ordinary Course of Business and Equipment to the extent
permitted in Section 4.3 hereof.
(b) (i) There is no location at which Borrower has any Inventory
(except for Inventory in transit) other than those locations listed on Schedule
4.5; (ii) Schedule 4.5 hereto contains a correct and complete list, as of the
Closing Date, of the legal names and addresses of each warehouse at which
Inventory of Borrower is stored; (iii) Schedule 4.5 hereto sets forth a correct
and complete list as of the Closing Date of (A) each place of business of
Borrower and (B) the chief executive office of Borrower; and (iv) Schedule 4.5
hereto sets forth a correct and complete list as of the Closing Date of the
location, by state and street address, of all Real Property owned or leased by
Borrower, together with the names and addresses of any landlords.
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4.6. Defense of Term B Lender's Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Term B Lender's interests in the Collateral shall continue in full
force and effect. During such period Borrower shall not, without Term B Lender's
prior written consent, pledge, sell (except Inventory in the Ordinary Course of
Business and Equipment to the extent permitted in Section 4.3 hereof), assign,
transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Borrower shall defend Term B Lender's interests in the Collateral
against any and all Persons whatsoever. At any time following demand by Term B
Lender for payment of all Obligations, Term B Lender shall have the right to
take possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including: labels, stationery, documents, instruments
and advertising materials. If Term B Lender exercises this right to take
possession of the Collateral, Borrower shall, upon demand, assemble it in the
best manner possible and make it available to Term B Lender at a place
reasonably convenient to Term B Lender. In addition, with respect to all
Collateral, but subject to the Intercreditor Agreement, Term B Lender shall be
entitled to all of the rights and remedies set forth herein and further provided
by the Uniform Commercial Code or other Applicable Law. Subject to the
Intercreditor Agreement, Borrower shall, and Term B Lender may, at its option,
instruct all suppliers, carriers, forwarders, warehousers or others receiving or
holding cash, checks, Inventory, documents or instruments in which Term B Lender
holds a security interest to deliver same to Term B Lender and/or subject to
Term B Lender's order and if they shall come into Borrower's possession, they,
and each of them, shall be held by Borrower in trust as Term B Lender's trustee,
and Borrower will immediately deliver them to Term B Lender in their original
form together with any necessary endorsement.
4.7. Books and Records. Borrower shall (a) keep proper books of record and
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
consistently applied in the opinion of such independent public accountant as
shall then be regularly engaged by Borrower.
4.8. Financial Disclosure. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
Term to exhibit and deliver to Term B Lender copies of any of Borrower's
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to Term B Lender any
information such accountants may have concerning Borrower's financial status and
business operations provided, however, so long as no Default and/or Event of
Default has occurred, Term B Lender will attempt to obtain such information or
materials directly from Borrower prior to obtaining such information or
materials from such accountants and is hereby authorized to obtain such
information or materials from such accountants if the Borrower does not provide
such information and materials to the Term B Lender within ten (10) Business
Days of any request for such information and materials. Borrower hereby
authorizes all Governmental Bodies to furnish to Term B Lender copies of reports
or examinations relating to Borrower, whether made by Borrower or otherwise
provided, however, so long as no Default and/or Event of Default has occurred,
Term B Lender will attempt to obtain such information or materials directly from
Borrower prior to obtaining such information or materials from such Governmental
Bodies and is hereby authorized to obtain such information or materials from
such Governmental Bodies if the Borrower does not provide such information and
materials to Term B Lender within ten (10) Business Days of any request for such
information and materials.
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4.9. Compliance with Laws. Borrower shall comply with all Applicable Laws
with respect to the Collateral or any part thereof or to the operation of
Borrower's business the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. Borrower may, however, contest or dispute any
Applicable Laws in any reasonable manner, provided that any related Lien is
inchoate or stayed and sufficient reserves are established to the reasonable
satisfaction of Term B Lender to protect Term B Lender's Lien on or security
interest in the Collateral. The assets of Borrower at all times shall be
maintained in accordance with the requirements of all insurance carriers which
provide insurance with respect to the assets of Borrower so that such insurance
shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times Term B Lender shall
have full access to and the right to audit, check, inspect and make abstracts
and copies from Borrower's books, records, audits, correspondence and all other
papers relating to the Collateral and the operation of Borrower's business. Term
B Lender and its agents may enter upon any of Borrower's premises at any time
during business hours and at any other reasonable time, and from time to time,
for the purpose of inspecting the Collateral and any and all records pertaining
thereto and the operation of Borrower's business.
4.11. Insurance. The assets and properties of Borrower at all times shall
be maintained in accordance with the requirements of all insurance carriers
which provide insurance with respect to the assets and properties of Borrower so
that such insurance shall remain in full force and effect. Borrower shall bear
the full risk of any loss of any nature whatsoever with respect to the
Collateral. At Borrower's own cost and expense in amounts and with carriers
reasonably acceptable to Term B Lender, Borrower shall (a) keep all its
insurable properties and properties in which Borrower has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to Borrower's
including business interruption insurance; (b) maintain a bond in such amounts
as is customary in the case of companies engaged in businesses similar to
Borrower insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of Borrower
either directly or through authority to draw upon such funds or to direct
generally the disposition of such assets; (c) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (d) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which Borrower is engaged in business; (e) furnish Term B Lender with (i) copies
of all liability and property insurance policies and evidence of the maintenance
of such policies by the renewal thereof at least thirty (30) days before any
expiration date, and (ii) appropriate loss payable endorsements in form and
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substance satisfactory to Term B Lender, naming Term B Lender as an additional
insured, mortgagee and lender loss payee as its interests may appear with
respect to all insurance coverage referred to in clauses (a) and (c) above, and
providing (A) that all proceeds thereunder in excess of $100,000 shall be
payable to Term B Lender, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days' prior written notice is given to
Term B Lender. In the event of any loss thereunder in excess of $100,000, the
carriers named therein hereby are directed by Term B Lender and Borrower to make
payment for such loss to Term B Lender and not to Borrower and Term B Lender
jointly. If any insurance losses are paid by check, draft or other instrument
payable to Borrower and Term B Lender jointly, Term B Lender may endorse
Borrower's name thereon and do such other things as Term B Lender may deem
advisable to reduce the same to cash. Term B Lender is hereby authorized to
adjust and compromise claims under insurance coverage referred to in clauses (a)
and (b) above. So long as no Default and/or Event of Default has occurred, Term
B Lender shall consult the Borrower with regard to such adjustments and
compromises. All loss recoveries received by Term B Lender upon any such
insurance may be applied to the Obligations, in such order as Term B Lender in
its sole discretion shall determine. Any surplus shall be paid by Term B Lender
to Borrower or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by Borrower to Term B Lender, on demand. The rights of
Term B Lender under this Section 4.11 are subject to the terms and provisions of
the Intercreditor Agreement.
4.12. Failure to Pay Insurance. If Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Term B Lender, if Term B
Lender so elects, may obtain such insurance and pay the premium therefor on
behalf of Borrower, and such expenses so paid shall be part of the Obligations,
or, at Term B Lender's option, shall be paid to Term B Lender immediately upon
demand.
4.13. Payment of Taxes. Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon Borrower or any
of the Collateral including real and personal property taxes, assessments and
charges and all franchise, income, employment, social security benefits,
withholding, and sales taxes. If any tax by any Governmental Body is or may be
imposed on or as a result of any transaction between Borrower and Term B Lender
which Term B Lender may be required to withhold or pay or if any taxes,
assessments, or other Charges remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in Term B Lender's opinion, may
possibly create a valid Lien on the Collateral, Term B Lender may without notice
to Borrower pay the taxes, assessments or other Charges and Borrower hereby
indemnifies and holds Term B Lender harmless in respect thereof, subject to
Sections 3.5(a) and 3.9 herein. Term B Lender will not pay any taxes,
assessments or Charges to the extent that Borrower has contested or disputed
those taxes, assessments or Charges in good faith, by expeditious protest,
administrative or judicial appeal or similar proceeding provided that any
related tax lien is stayed and sufficient reserves are established to the
reasonable satisfaction of Term B Lender to protect Term B Lender's security
interest in or Lien on the Collateral. The amount of any payment by Term B
Lender under this Section 4.13 shall be added to the Obligations, or, at Term B
Lender's option, shall be paid to Term B Lender immediately upon demand, and,
until Borrower shall furnish Term B Lender with an indemnity therefor (or supply
Term B Lender with evidence satisfactory to Term B Lender that due provision for
the payment thereof has been made), Term B Lender may hold without interest any
balance standing to Borrower's credit and Term B Lender shall retain its
security interest in and Lien on any and all Collateral held by Term B Lender.
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4.14. Payment of Leasehold Obligations. Borrower shall at all times pay,
when and as due, its rental obligations under all leases under which it is a
tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Term B
Lender's request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a bona
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Borrower, or work, labor or services theretofore
rendered by Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrower to Term B Lender.
(b) Solvency of Customers. Each Customer, to the best of Borrower's
knowledge, as of the date each Receivable is created, is and will be solvent and
able to pay all Receivables on which the Customer is obligated in full when due
or with respect to such Customers of Borrower who are not solvent Borrower has
set up on its books and in its financial records bad debt reserves adequate to
cover such Receivables.
(c) Location of Borrower. Borrower's chief executive office is
located at 0000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx 00000. Until written notice
is given to Term B Lender by Borrower of any other office at which Borrower
keeps its records pertaining to Receivables, all such records shall be kept at
such executive office.
(d) Collection of Receivables. Until Borrower's authority to do so
is terminated by Term B Lender (which notice Term B Lender may give at any time
following the occurrence of an Event of Default or a Default or when Term B
Lender in its sole discretion deems it to be in its best interest to do so),
Borrower will, at Borrower's sole cost and expense, but on Term B Lender's
behalf and for Term B Lender's account, collect as Term B Lender's property and
in trust for Term B Lender all amounts received on Receivables, and shall not
commingle such collections with Borrower's funds or use the same except to pay
Obligations. Borrower shall deposit in the Blocked Account or, upon request by
Term B Lender, deliver to Term B Lender, in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any time Term B
Lender shall have the right to send notice of the assignment of, and Term B
Lender's security interest in and Lien on, the Receivables to any and all
Customers or any third party holding or otherwise concerned with any of the
Collateral. Thereafter, Term B Lender shall have the sole right to collect the
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Receivables, take possession of the Collateral, or both. Term B Lender's actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be added to the Obligations,
or, at Term B Lender's option, shall be paid to Term B Lender immediately upon
demand.
(f) Power of Term B Lender to Act on Borrower's Behalf. Term B
Lender shall have the right to receive, endorse, assign and/or deliver in the
name of Term B Lender or Borrower any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and Borrower
hereby waives notice of presentment, protest and non-payment of any instrument
so endorsed. Borrower hereby constitutes Term B Lender or Term B Lender's
designee as Borrower's attorney with power (i) to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment or Collateral; (ii) to sign Borrower's name on any invoice or xxxx of
lading relating to any of the Receivables, drafts against Customers, assignments
and verifications of Receivables; (iii) to send verifications of Receivables to
any Customer; (iv) to sign Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Term B Lender
to preserve, protect, or perfect Term B Lender's interest in the Collateral and
to file same; (v) to demand payment of the Receivables upon notice to the
Borrower; (vi) to enforce payment of the Receivables by legal proceedings or
otherwise upon notice to the Borrower; (vii) to exercise all of Borrower's
rights and remedies with respect to the collection of the Receivables and any
other Collateral upon notice to the Borrower; (viii) to settle, adjust,
compromise, extend or renew the Receivables upon notice to the Borrower; (ix) to
settle, adjust or compromise any legal proceedings brought to collect
Receivables upon notice to the Borrower; (x) to prepare, file and sign
Borrower's name on a proof of claim in bankruptcy or similar document against
any Customer upon notice to the Borrower; (xi) to prepare, file and sign
Borrower's name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables; and (xii) to do all other
acts and things necessary to carry out this Agreement. All acts of said attorney
or designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with gross
(not mere) negligence (as determined by a court of competent jurisdiction in a
final non-appealable judgment); this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Upon the occurrence of a
Default and/or an Event of Default, Term B Lender shall have the right at any
time to change the address for delivery of mail addressed to Borrower to such
address as Term B Lender may designate and to receive, open and dispose of all
mail addressed to Borrower.
(g) No Liability. Term B Lender shall not, under any circumstances
or in any event whatsoever, have any liability for any error or omission or
delay of any kind occurring in the settlement, collection or payment of any of
the Receivables or any instrument received in payment thereof, or for any damage
resulting therefrom. Term B Lender may, with notice to Borrower and without
consent from Borrower, xxx upon or otherwise collect, extend the time of payment
of, compromise or settle for cash, credit or upon any terms any of the
Receivables or any other securities, instruments or insurance applicable thereto
and/or release any obligor thereof. Term B Lender is authorized and empowered to
accept the return of the goods represented by any of the Receivables, with
notice to Borrower and without consent from Borrower, all without discharging or
in any way affecting Borrower's liability hereunder.
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(h) Establishment of a Lockbox Account, Dominion Account. All
proceeds of Collateral shall be deposited by Borrower into either (i) a lockbox
account, dominion account or such other "blocked account" ("Blocked Accounts")
established at a bank or banks (each such bank, a "Blocked Account Bank")
pursuant to an arrangement with such Blocked Account Bank as may be selected by
Borrower and be acceptable to Term B Lender or (ii) depository accounts
("Depository Accounts") established at the Term B Lender for the deposit of such
proceeds. Borrower, Term B Lender and each Blocked Account Bank shall enter into
a deposit account control agreement in form and substance satisfactory to Term B
Lender directing such Blocked Account Bank to transfer such funds so deposited
to Term B Lender, either to any account maintained by Term B Lender at said
Blocked Account Bank or by wire transfer to appropriate account(s) of Term B
Lender. All funds deposited in such Blocked Accounts shall immediately become
the property of Term B Lender and Borrower shall obtain the agreement by such
Blocked Account Bank to waive any offset rights against the funds so deposited.
Term B Lender does not assume any responsibility for such blocked account
arrangement, including any claim of accord and satisfaction or release with
respect to deposits accepted by any Blocked Account Bank thereunder. All deposit
accounts and investment accounts of Borrower and its Subsidiaries are set forth
on Schedule 4.15(h).
(i) Adjustments. Borrower will not, without Term B Lender's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore customary in the
business of Borrower.
(j) Intercreditor Agreement. The rights of Term B Lender with
respect to the Receivables under this Section 4.15 are subject to the
Intercreditor Agreement.
4.16. Inventory. To the extent Inventory held for sale or lease has been
produced by Borrower, it has been and will be produced by Borrower in accordance
with the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrower shall not use or operate the Equipment in violation of any law,
statute, ordinance, code, rule or regulation. Borrower shall have the right to
sell Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Term B Lender as Borrower's agent for any purpose
whatsoever, nor shall Term B Lender be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral wherever
the same may be located and regardless of the cause thereof. Term B Lender does
not, whether by anything herein or in any assignment or otherwise, assume any of
Borrower's obligations under any contract or agreement assigned to Term B
Lender, and Term B Lender shall not be responsible in any way for the
performance by Borrower of any of the terms and conditions thereof.
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4.19. Environmental Matters.
(a) Borrower shall ensure that the Real Property and all operations
and businesses conducted thereon remains in compliance with all Environmental
Laws and they shall not place or permit to be placed any Hazardous Substances on
any Real Property except as permitted by Applicable Law or appropriate
governmental authorities.
(b) Borrower shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.
(c) Borrower shall (i) employ in connection with the use of the Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrower shall use its best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrower
shall, within five (5) Business Days, give written notice of same to Term B
Lender detailing facts and circumstances of which Borrower is aware giving rise
to the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Term B Lender to protect its security interest in and Lien on
the Real Property and the Collateral and is not intended to create nor shall it
create any obligation upon Term B Lender with respect thereto.
(e) Borrower shall promptly forward to Term B Lender copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between Borrower and the Authority regarding such claims to
Term B Lender until the claim is settled. Borrower shall promptly forward to
Term B Lender copies of all documents and reports concerning a Hazardous
Discharge at the Real Property that Borrower is required to file under any
Environmental Laws. Such information is to be provided solely to allow Term B
Lender to protect Term B Lender's security interest in and Lien on the Real
Property and the Collateral. Term B Lender hereby acknowledges receipt of the
Existing Environmental Due Diligence.
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(f) Borrower shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If Borrower shall fail to respond promptly to any Hazardous Discharge
or Environmental Complaint or Borrower shall fail to comply with any of the
requirements of any Environmental Laws, Term B Lender may, but without the
obligation to do so, for the sole purpose of protecting Term B Lender's interest
in the Collateral: (A) give such notices or (B) enter onto the Real Property (or
authorize third parties to enter onto the Real Property) and take such actions
as Term B Lender (or such third parties as directed by Term B Lender) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Term B Lender (or such third parties)
in the exercise of any such rights, including any sums paid in connection with
any judicial or administrative investigation or proceedings, fines and
penalties, together with interest thereon from the date expended at the Default
Rate for Domestic Rate Loans shall be paid upon demand by Borrower, and until
paid shall be added to and become a part of the Obligations secured by the Liens
created by the terms of this Agreement or any other agreement between Term B
Lender and Borrower.
(g) Promptly upon the written request of Term B Lender from time to
time, Borrower shall provide Term B Lender, at Borrower's expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Term B
Lender, to assess with a reasonable degree of certainty the existence of a
Hazardous Discharge and the potential costs in connection with abatement,
cleanup and removal of any Hazardous Substances found on, under, at or within
the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee
the clean-up of such Hazardous Discharge shall be acceptable to Term B Lender.
If such estimates, individually or in the aggregate, exceed $100,000, Term B
Lender shall have the right to require Borrower to post a bond, letter of credit
or other security reasonably satisfactory to Term B Lender to secure payment of
these costs and expenses.
(h) Borrower shall defend and indemnify Term B Lender and hold Term
B Lender and its employees, agents, directors and officers harmless from and
against all loss, liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by Term B Lender
under or on account of any Environmental Laws, including the assertion of any
Lien thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of Term B Lender.
Borrower's obligations under this Section 4.19 shall arise upon the discovery of
the presence of any Hazardous Substances at the Real Property, whether or not
any federal, state, or local environmental agency has taken or threatened any
action in connection with the presence of any Hazardous Substances. Borrower's
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
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(i) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of Borrower's right, title and interest
in and to its owned and leased premises.
4.20. Financing Statements. Except the financing statements filed by Term
B Lender and the financing statements described on Schedule 1.2, no financing
statement covering any of the Collateral or any proceeds thereof is on file in
any public office.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1. Authority. Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement, the
Subordination Agreement and the Other Documents have been duly executed and
delivered by Borrower, and this Agreement, the Subordination Agreement and the
Other Documents constitute the legal, valid and binding obligation of Borrower
enforceable in accordance with their terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally. The execution, delivery and performance
of this Agreement and of the Other Documents (a) are within Borrower's corporate
powers, have been duly authorized by all necessary corporate action, are not in
contravention of law or the terms of Borrower's by-laws, certificate of
incorporation or other applicable documents relating to Borrower's formation or
to the conduct of Borrower's business or of any material agreement or
undertaking to which Borrower is a party or by which Borrower is bound,
including the Acquisition Agreement or the Subordination Agreement, (b) will not
conflict with or violate any law or regulation, or any judgment, order or decree
of any Governmental Body, (c) will not require the Consent of any Governmental
Body or any other Person, except those Consents set forth on Schedule 5.1
hereto, all of which will have been duly obtained, made or compiled prior to the
Closing Date and which are in full force and effect and (d) will not conflict
with, nor result in any breach in any of the provisions of or constitute a
default under or result in the creation of any Lien except Permitted
Encumbrances upon any asset of Borrower under the provisions of any agreement,
charter document, instrument, by-law or other instrument to which Borrower is a
party or by which it or its property is a party or by which it may be bound,
including under the provisions of the Subordinated Loan Documentation or the
Acquisition Agreement.
5.2. Formation and Qualification.
(a) Borrower is duly incorporated and in good standing under the
laws of the state listed on Schedule 5.2(a) and is qualified to do business and
is in good standing in the states listed on Schedule 5.2(a) which constitute all
states in which qualification and good standing are necessary for Borrower to
conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have a Material Adverse Effect. Borrower has
delivered to Term B Lender true and complete copies of its certificate of
incorporation and by-laws and will promptly notify Term B Lender of any
amendment or changes thereto.
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(b) The only Subsidiaries of Borrower are listed on Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement and the Other Documents shall
be true at the time of Borrower's execution of this Agreement and the Other
Documents, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.
5.4. Tax Returns. Borrower's federal tax identification number is set
forth on Schedule 5.4. Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid all taxes,
assessments, fees and other governmental charges that are due and payable.
Federal, state and local income tax returns of Borrower have been examined and
reported upon by the appropriate taxing authority or closed by applicable
statute and satisfied for all fiscal years prior to and including the fiscal
year ended December 31, 2006. Federal, state and local income tax returns of
Borrower have been filed for all fiscal years prior to and including the fiscal
year ended December 31, 2006. The provision for taxes on the books of Borrower
is adequate for all years not closed by applicable statutes, and for its current
fiscal year, and Borrower has no knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
5.5. Financial Statements. The consolidated and consolidating balance
sheets of Borrower, its Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of December 31, 2006, and the
related statements of income, changes in stockholder's equity, and changes in
cash flow for the period ended on such date, all accompanied by reports thereon
containing opinions without qualification by independent certified public
accountants, copies of which have been delivered to Term B Lender, have been
prepared in accordance with GAAP, consistently applied (except for changes in
application in which such accountants concur) and present fairly the financial
position of Borrower and its Subsidiaries at such date and the results of their
operations for such period. Since December 31, 2006, there has been no change in
the condition, financial or otherwise, of Borrower or its Subsidiaries as shown
on the consolidated balance sheet as of such date and no change in the aggregate
value of machinery, equipment and Real Property owned by Borrower and its
Subsidiaries, except changes in the Ordinary Course of Business, none of which
individually or in the aggregate has been materially adverse.
5.6. Entity Name. Borrower has not been known by any other corporate name
in the past five years and does not sell Inventory under any other name except
as set forth on Schedule 5.6, nor has Borrower been the surviving corporation of
a merger or consolidation or acquired all or substantially all of the assets of
any Person during the preceding five (5) years.
37
5.7. O.S.H.A. and Environmental Compliance.
(a) Except as set forth in the Existing Environmental Due Diligence,
Borrower has duly complied with, and its facilities, business, assets, property,
leaseholds, Real Property and Equipment are in compliance in all material
respects with, the provisions of the Federal Occupational Safety and Health Act,
the Environmental Protection Act, RCRA and all other Environmental Laws; there
have been no outstanding citations, notices or orders of non-compliance issued
to Borrower or relating to its business, assets, property, leaseholds or
Equipment under any such laws, rules or regulations.
(b) Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws
as set forth on Schedule 5.7(b) attached hereto.
(c) Borrower shall perform all testing and remediation recommended
and set forth in the Existing Environmental Due Diligence including, but not
limited to, as recommended in Section 10 of the 2005 Phase 1, in accordance with
the requirements of the Existing Environmental Due Diligence and all applicable
laws. Borrower shall provide to the Term B Lender copies of all documentation
with regard thereto.
(d) Except as set forth in the Existing Environmental Due Diligence,
(i) there are no visible signs of releases, spills, discharges, leaks or
disposal (collectively referred to as "Releases") of Hazardous Substances at,
upon, under or within any Real Property or any premises leased by Borrower; (ii)
there are no underground storage tanks or polychlorinated biphenyls on the Real
Property or any premises leased by Borrower; (iii) neither the Real Property nor
any premises leased by Borrower has ever been used as a treatment, storage or
disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any premises leased by Borrower, excepting such
quantities as are handled in accordance with all applicable manufacturer's
instructions and governmental regulations and in proper storage containers and
as are necessary for the operation of the commercial business of Borrower or of
its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
(a) Borrower is solvent, able to pay its debts as they mature, has
capital sufficient to carry on its business and all businesses in which it is
about to engage, and (i) as of the Closing Date, the fair present saleable value
of its assets, calculated on a going concern basis, is in excess of the amount
of its liabilities and (ii) subsequent to the Closing Date, the fair saleable
value of its assets (calculated on a going concern basis) will be in excess of
the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), Borrower has no (i)
pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect, and (ii)
liabilities or indebtedness for borrowed money other than the Obligations.
(c) Borrower is not in violation of any applicable statute, law,
rule, regulation or ordinance in any respect which could reasonably be expected
to have a Material Adverse Effect, nor is Borrower in violation of any order of
any court, Governmental Body or arbitration board or tribunal.
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(d) Neither Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. (i) No Plan has incurred any "accumulated funding deficiency," as
defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or
not waived, and Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of
each Plan; (ii) each Plan which is intended to be a qualified plan under Section
401(a) of the Code as currently in effect has been determined by the Internal
Revenue Service to be qualified under Section 401(a) of the Code and the trust
related thereto is exempt from federal income tax under Section 501(a) of the
Code; (iii) neither Borrower nor any member of the Controlled Group has incurred
any liability to the PBGC other than for the payment of premiums, and there are
no premium payments which have become due which are unpaid; (iv) no Plan has
been terminated by the plan administrator thereof nor by the PBGC, and there is
no occurrence which would cause the PBGC to institute proceedings under Title IV
of ERISA to terminate any Plan; (v) at this time, the current value of the
assets of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and neither Borrower nor any member of the Controlled
Group knows of any facts or circumstances which would materially change the
value of such assets and accrued benefits and other liabilities; (vi) neither
Borrower nor any member of the Controlled Group has breached any of the
responsibilities, obligations or duties imposed on it by ERISA with respect to
any Plan; (vii) neither Borrower nor any member of a Controlled Group has
incurred any liability for any excise tax arising under Section 4972 or 4980B of
the Code, and no fact exists which could give rise to any such liability; (viii)
neither Borrower nor any member of the Controlled Group nor any fiduciary of,
nor any trustee to, any Plan, has engaged in a "prohibited transaction"
described in Section 406 of the ERISA or Section 4975 of the Code nor taken any
action which would constitute or result in a Termination Event with respect to
any such Plan which is subject to ERISA; (ix) Borrower and each member of the
Controlled Group has made all contributions due and payable with respect to each
Plan; (x) there exists no event described in Section 4043(b) of ERISA, for which
the thirty (30) day notice period has not been waived; (xi) neither Borrower nor
any member of the Controlled Group has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than employees or former employees of Borrower and any member of the Controlled
Group; (xii) neither Borrower nor any member of the Controlled Group maintains
or contributes to any Plan which provides health, accident or life insurance
benefits to former employees, their spouses or dependents, other than in
accordance with Section 4980B of the Code; (xiii) neither Borrower nor any
member of the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980 and there exists no fact which would reasonably be
expected to result in any such liability; and (xiv) no Plan fiduciary (as
defined in Section 3(21) of ERISA) has any liability for breach of fiduciary
duty or for any failure in connection with the administration or investment of
the assets of a Plan.
5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower are set
forth on Schedule 5.9, are valid and have been duly registered or filed with all
appropriate Governmental Bodies and constitute all of the intellectual property
39
rights which are necessary for the operation of its business; there is no
objection to or pending challenge to the validity of any such patent, trademark,
copyright, design rights, tradename, trade secret or license and Borrower is not
aware of any grounds for any challenge, except as set forth in Schedule 5.9
hereto. Each patent, patent application, patent license, trademark, trademark
application, trademark license, service xxxx, service xxxx application, service
xxxx license, design rights, copyright, copyright application and copyright
license owned or held by Borrower and all trade secrets used by Borrower consist
of original material or property developed by Borrower or was lawfully acquired
by Borrower from the proper and lawful owner thereof. Each of such items has
been maintained so as to preserve the value thereof from the date of creation or
acquisition thereof. With respect to all software used by Borrower, Borrower is
in possession of all source and object codes related to each piece of software
or is the beneficiary of a source code escrow agreement, each such source code
escrow agreement being listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, Borrower
(a) is in compliance with and (b) has procured and is now in possession of, all
material licenses or permits required by any applicable federal, state,
provincial or local law, rule or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where the failure to procure such licenses or permits could have a Material
Adverse Effect.
5.11. Default of Indebtedness. Borrower is not in default in the payment
of the principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.
5.12. No Default. Borrower is not in default in the payment or performance
of any of its contractual obligations and no Default has occurred.
5.13. No Burdensome Restrictions. Borrower is not party to any contract or
agreement the performance of which could have a Material Adverse Effect.
Borrower has heretofore delivered to Term B Lender true and complete copies of
all material contracts to which it is a party or to which it or any of its
properties is subject. Borrower has not agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.
5.14. No Labor Disputes. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of Borrower's employees
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. Borrower is not engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of the Term Loan will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U of such
Board of Governors.
40
5.16. Investment Company Act. Borrower is not an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by Borrower in this
Agreement, the Subordinated Loan Documentation or in the Acquisition Agreement,
or in any financial statement, report, certificate or any other document
furnished in connection herewith or therewith contains any untrue statement of
fact or omits to state any fact necessary to make the statements herein or
therein not misleading. There is no fact known to Borrower or which reasonably
should be known to Borrower which Borrower has not disclosed to Term B Lender in
writing with respect to the transactions contemplated by the Acquisition
Agreement, the Subordinated Loan Documentation or this Agreement which could
reasonably be expected to have a Material Adverse Effect.
5.18. Delivery of Acquisition Agreement and Subordinated Loan
Documentation. Term B Lender has received complete copies of the Acquisition
Agreement and Subordinated Loan Documentation (including all exhibits, schedules
and disclosure letters referred to therein or delivered pursuant thereto, if
any) and all amendments thereto, waivers relating thereto and other side letters
or agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Term B Lender.
5.19. Swaps. Borrower is not a party to, nor will it be a party to, any
swap agreement whereby Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
5.20. Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or affecting
the Collateral conflicts with, or requires any Consent which has not already
been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.21. Application of Certain Laws and Regulations. Neither Borrower nor
any Affiliate of Borrower is subject to any law, statute, rule or regulation
which regulates the incurrence of any Indebtedness, including laws, statutes,
rules or regulations relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.22. Business and Property of Borrower. Upon and after the Closing Date,
Borrower does not propose to engage in any business other than the manufacturing
of aircraft structural parts and assemblies and activities necessary to conduct
the foregoing. On the Closing Date, Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of Borrower.
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5.23. Anti-Terrorism Laws.
(a) General. Neither Borrower nor any Affiliate of Borrower is in
violation of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.
(b) Executive Order No. 13224. Neither Borrower nor any Affiliate of
Borrower or their respective agents acting or benefiting in any capacity in
connection with the Term Loan or other transactions hereunder, is any of the
following (each a "Blocked Person"):
(i) a Person that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order No. 13224;
(ii) a Person owned or controlled by, or acting for or on
behalf of, any Person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order No.
13224;
(iii) a Person or entity with which Term B Lender is
prohibited from dealing or otherwise engaging in any transaction by
any Anti-Terrorism Law;
(iv) a Person or entity that commits, threatens or conspires
to commit or supports "terrorism" as defined in the Executive Order
No. 13224;
(v) a Person or entity that is named as a "specially
designated national" on the most current list published by the U.S.
Treasury Department Office of Foreign Asset Control at its official
website or any replacement website or other replacement official
publication of such list, or
(vi) a Person or entity who is affiliated or associated with a
Person or entity listed above.
(c) Neither Borrower or to the knowledge of Borrower, any of its
agents acting in any capacity in connection with the Term Loan or other
transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.
5.24. Trading with the Enemy. Borrower has not engaged, nor does it intend
to engage, in any business or activity prohibited by the Trading with the Enemy
Act.
5.25. Federal Securities Laws. Neither Borrower nor any of its
Subsidiaries (i) is required to file periodic reports under the Exchange Act,
(ii) has any securities registered under the Exchange Act or (iii) has filed a
registration statement that has not yet become effective under the Securities
Act.
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VI. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and termination
of this Agreement:
6.1. Payment of Fees. Pay to Term B Lender on demand all usual and
customary fees and expenses which Term B Lender incurs in connection with this
Agreement and the Other Documents.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof.
6.3. Violations. Promptly notify Term B Lender in writing of any violation
of any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to Borrower which could reasonably be expected to
have a Material Adverse Effect.
6.4. Government Receivables. Take all steps necessary to protect Term B
Lender's interest in the Collateral under the Federal Assignment of Claims Act,
the Uniform Commercial Code and all other applicable state or local statutes or
ordinances and deliver to Term B Lender appropriately endorsed, any instrument
or chattel paper connected with any Receivable arising out of contracts between
Borrower and the United States, any state or any department, agency or
instrumentality of any of them.
6.5. Financial Covenants.
(a) Tangible Net Worth. Maintain at all times a Tangible Net Worth
in an amount not less than (i) $9,000,000 from the Closing Date through and
including December 31, 2007 and (ii) as of December 31, 2008, an amount equal to
the Borrower's Tangible Net Worth for the fiscal year ended December 31, 2007
plus an amount equal to fifty (50%) percent of the Borrower's Net Income for
fiscal year ending December 31, 2008, which amount shall increase annually on
December 31st of each year thereafter by not less than an amount equal to fifty
(50%) percent of the Borrower's Net Income for the fiscal year ended, tested
annually on a consolidated basis.
43
(b) Fixed Charge Coverage Ratio. Maintain at all times a Fixed
Charge Coverage Ratio of not less than 1.25 to 1.00, tested monthly on a
consolidated, rolling twelve (12) month basis.
(c) Funded Debt Ratio. Maintain at all times a ratio of Funded Debt
to EBITDA of not greater than 2.75 to 1.0, tested monthly on a consolidated,
rolling twelve (12) month basis.
(d) EBITDA. Maintain EBITDA of not less than the amount set forth
below for the one month period ending on the last day of the corresponding month
set forth below:
Month Amount
----- ------
September 30, 2007 $450,000
October 31, 2007 $425,000
November 30, 2007 $425,000
December 30, 2007 $425,000
January 31, 2008 and as at the end of each $506,000
calendar month thereafter for the one month
period then ended
6.6. Execution of Supplemental Instruments. Execute and deliver to Term B
Lender from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Term B Lender may request, in order
that the full intent of this Agreement may be carried into effect.
6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower shall have provided for such reserves as Term B Lender
may reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement.
6.8. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
6.9. Federal Securities Laws. Promptly notify Term B Lender in writing if
Borrower or any of its Subsidiaries (i) is required to file periodic reports
under the Exchange Act, (ii) registers any securities under the Exchange Act or
(iii) files a registration statement under the Securities Act.
44
6.10. Exercise of Rights. Enforce all of its rights under the Acquisition
Agreement and the Indemnification Agreement executed in connection therewith
including, but not limited to, all indemnification rights and pursue all
remedies available to it with diligence and in good faith in connection with the
enforcement of any such rights.
6.11. Inventory Audits. Perform physical audits on its Inventory no less
than two (2) times each fiscal year until Term B Lender has approved in writing
a perpetual inventory accounting system acceptable to the Term B Lender in its
sole discretion and such perpetual inventory accounting system has been
implemented to the satisfaction of the Term B Lender.
VII. NEGATIVE COVENANTS.
Borrower shall not, until the indefeasible satisfaction in full in cash of
the Obligations and the irrevocable termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other reorganization
with or into any other Person or acquire all or a substantial portion of the
assets or Equity Interests of any Person or permit any other Person to
consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except (i) dispositions of Inventory and Equipment to the
extent expressly permitted by Section 4.3, and (ii) any other sales or
dispositions expressly permitted by this Agreement.
7.2. Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations or liabilities of any
Person by assumption, endorsement or guaranty thereof or otherwise (other than
to Senior Lender pursuant to the Senior Loan Documents) except the endorsement
of checks in the Ordinary Course of Business.
7.4. Investments. Purchase or acquire obligations or Equity Interests of,
or any other interest in, any Person, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b) commercial
paper with maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating), (c) certificates of time
deposit and bankers' acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency, and (d) U.S. money market
funds that invest solely in obligations issued or guaranteed by the United
States of America or an agency thereof.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
including any Parent, Subsidiary or Affiliate except with respect to (a) the
extension of commercial trade credit in connection with the sale of Inventory in
the Ordinary Course of Business and (b) loans to its employees in the Ordinary
Course of Business not to exceed the aggregate amount of $200,000 at any time
outstanding.
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7.6. Capital Expenditures. Contract for, purchase or make any expenditure
or commitments for Capital Expenditures in any fiscal year in an aggregate
amount in excess of $1,100,000.
7.7. Dividends. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of Borrower (other than dividends
or distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of Borrower
provided, however, that from and after January 1, 2009, dividends may be paid in
cash to the shareholders of the Borrower as long as (a) after payment of said
dividend, Undrawn Availability (as defined in the Senior Loan Agreement) is
equal to or greater than $3,000,000, (b) no Default and/or Event of Default
exists at the time of payment of any such dividend, and (c) no Default and/or
Event of Default shall exist after giving effect to the payment of any such
dividend.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Term B Lender; (ii) Indebtedness to Senior Lender pursuant to the Senior Loan
Documents; (iii) Indebtedness due under the Subordinated Loan Documentation;
(iv) Indebtedness to seller under the Acquisition Agreement; and (v)
Indebtedness incurred for Capital Expenditures permitted under Section 7.6
hereof.
7.9. Nature of Business. Substantially change the nature of the business
in which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the Ordinary Course of Business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise enter into any transaction or deal with, any Affiliate, except
transactions disclosed to Term B Lender, which are in the Ordinary Course of
Business, on an arm's-length basis on terms and conditions no less favorable
than terms and conditions which would have been obtainable from a Person other
than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $250,000 in any one fiscal year in the aggregate for
Borrower exclusive of any and all amounts paid by the Borrower as lease payments
with regard to the Sale and Lease-Back Premises.
7.12. Subsidiaries.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or similar
arrangement.
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7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
December 31st or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Term B Lender's credit on
any purchases or for any purpose whatsoever or use any portion of the Term Loan
in or for any business other than Borrower's business as conducted on the date
of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of Borrower or any member of the Controlled Group or the
imposition of a lien on the property of Borrower or any member of the Controlled
Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the
Controlled Group to assume, any obligation to contribute to any Multiemployer
Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the
Controlled Group to incur, any withdrawal liability to any Multiemployer Plan;
(vii) fail promptly to notify Term B Lender of the occurrence of any Termination
Event, (viii) fail to comply, or permit a member of the Controlled Group to fail
to comply, with the requirements of ERISA or the Code or other Applicable Laws
in respect of any Plan, (ix) fail to meet, or permit any member of the
Controlled Group to fail to meet, all minimum funding requirements under ERISA
or the Code or postpone or delay or allow any member of the Controlled Group to
postpone or delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. Except as permitted pursuant to Section
7.23 hereof, at any time, directly or indirectly, prepay any Indebtedness (other
than to Senior Lenders pursuant to the Senior Loan Documents), or repurchase,
redeem, retire or otherwise acquire any Indebtedness of Borrower.
7.18. Anti-Terrorism Laws. Borrower shall not, until indefeasible
satisfaction in full in cash of the Obligations and the irrevocable termination
of this Agreement, nor shall it permit any Affiliate or agent to:
(a) Conduct any business or engage in any transaction or dealing
with any Blocked Person, including the making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person.
(b) Deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order No.
13224.
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(c) Engage in or conspire to engage in any transaction that evades
or avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in the Executive Order No. 13224, the USA
PATRIOT Act or any other Anti-Terrorism Law. Borrower shall deliver to Term B
Lender any certification or other evidence requested from time to time by Term B
Lender in its sole discretion, confirming Borrower's compliance with this
Section.
7.19. Membership/Partnership Interests. Elect to treat or permit any of
its Subsidiaries to (x) treat its limited liability company membership interests
or partnership interests, as the case may be, as securities as contemplated by
the definition of "security" in Section 8-102(15) and by Section 8-103 of
Article 8 of Uniform Commercial Code or (y) certificate its limited liability
company membership interests or partnership interests, as the case may be.
7.20. Trading with the Enemy Act. Engage in any business or activity in
violation of the Trading with the Enemy Act.
7.21. Subordinated Note. At any time, directly or indirectly, pay, prepay,
repurchase, redeem, retire or otherwise acquire, or make any payment on account
of any principal of, interest on or premium payable in connection with the
repayment or redemption of the Subordinated Note, except as expressly permitted
in the Subordination Agreement.
7.22. Other Agreements. Enter into any material amendment, waiver or
modification of the Acquisition Agreement, the Subordinated Loan Documentation
or any related agreements.
7.23. Progress Payments. Allow the aggregate amount of progress payments
on Indebtedness not evidenced by invoices owed by the Borrower to exceed
$1,500,000 at any time.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Term Loan. The agreement of Term B Lender to make the
Term Loan requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Term B Lender, immediately prior to or concurrently
with the making of the Term Loan, of the following conditions precedent:
(a) Note. Term B Lender shall have received the Note duly executed
and delivered by an authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each document (including
any Uniform Commercial Code financing statement) required by this Agreement, any
related agreement or under law or reasonably requested by Term B Lender to be
filed, registered or recorded in order to create, in favor of Term B Lender, a
perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Term B
Lender shall have received an acknowledgment copy, or other evidence
satisfactory to it, of each such filing, registration or recordation and
satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;
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(c) Corporate Proceedings of Borrower. Term B Lender shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Term B Lender, of the Board of Directors of Borrower authorizing (i) the
execution, delivery and performance of this Agreement, the Subordinated Loan
Documentation, the Acquisition Agreement and the Other Documents (collectively
the "Documents") and (ii) the granting by Borrower of the security interests in
and liens upon the Collateral in each case certified by the Secretary or an
Assistant Secretary of Borrower as of the Closing Date; and, such certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower. Term B Lender shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower,
dated the Closing Date, as to the incumbency and signature of the officers of
Borrower executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Term B Lender shall have received a copy of the
Articles or Certificate of Incorporation of Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of
Borrower and all agreements of Borrower's shareholders certified as accurate and
complete by the Secretary of Borrower;
(f) Good Standing Certificates. Term B Lender shall have received
good standing certificates for Borrower dated not more than 30 days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
Borrower's jurisdiction of incorporation and each jurisdiction where the conduct
of Borrower's business activities or the ownership of its properties
necessitates qualification;
(g) Ownership and Capital Structure. Term B Lender shall be
satisfied with the ownership and capital structure of each of Air, Sigma and
WMI, in its sole discretion;
(h) WMI Merger. Prior to or simultaneously with the Closing Date,
Term B Lender shall have received, in form and substance satisfactory to Term B
Lender, (i) a copy of the Certificate of Merger in the form presented to the New
York Secretary of State for filing evidencing the merger of WMS Merger Corp. and
Welding Metallurgy, Inc., with WMI being the surviving entity, and (ii)
confirmation that such Certificate of Merger has been filed.
(i) Legal Opinion. Term B Lender shall have received the executed
legal opinion of Xxxxx & Xxx Xxxxxx LLP in form and substance satisfactory to
Term B Lender which shall cover such matters incident to the transactions
contemplated by this Agreement, the Subordination Agreement and the Other
Documents and related agreements as Term B Lender may reasonably require and
Borrower hereby authorizes and directs such counsel to deliver such opinions to
Term B Lender;
(j) No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Borrower or against the officers or directors of Borrower (A)
in connection with this Agreement, the Other Documents, the Subordinated Loan
Documents or any of the transactions contemplated thereby and which, in the
reasonable opinion of Term B Lender, is deemed material or (B) which could, in
the reasonable opinion of Term B Lender, have a Material Adverse Effect; and
(ii) no injunction, writ, restraining order or other order of any nature
materially adverse to Borrower or the conduct of its business or inconsistent
with the due consummation of the Transactions shall have been issued by any
Governmental Body. Term B Lender shall have received a summary of all existing
litigation regarding the Borrower;
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(k) Financial Condition Certificates. Term B Lender shall have
received an executed Financial Condition Certificate in the form of Exhibit
8.1(k).
(l) Fees. Term B Lender shall have received all fees payable to Term
B Lender on or prior to the Closing Date hereunder, including pursuant to
Article III hereof;
(m) Financial Statements. Term B Lender shall have received a copy
of the Borrower's most recent financial statements and federal and state income
tax returns and income tax reports (if any), which shall be satisfactory in all
respects to Term B Lender;
(n) Consolidating Interim Financial Statements. Term B Lender shall
have received a copy of the consolidating interim financial statements of Air,
Sigma and WMI for the three (3) month period ended March 31, 2006, which shall
be satisfactory in all respects to Term B Lender;
(o) Acquisition and Subordinated Loan Documents. Term B Lender shall
have received final executed copies of the Acquisition Agreement and the
Subordinated Loan Documentation, and all related agreements, documents and
instruments as in effect on the Closing Date, including, without limitation, an
opinion of counsel with respect to the Acquisition Agreement providing that the
same may be relied upon by Term B Lender, all of which shall be satisfactory in
form and substance to Term B Lender and the transactions contemplated by such
documentation shall be consummated prior to or simultaneously with the making of
the Term Loan;
(p) Senior Loan Documents. Term B Lender shall have received final
executed copies of the Senior Loan Agreement and all related agreements,
documents and instruments as in effect on the Closing Date all of which shall be
satisfactory in form and substance to Term B Lender;
(q) Intercreditor Agreement. Term B Lender shall have entered into
the Intercreditor Agreement with Senior Lender which shall be satisfactory in
form and substance to Term B Lender in its sole discretion;
(r) Subordination Agreement. Term B Lender shall have entered into a
Subordination Agreement with Borrower, Air Group and Subordinated Lender which
shall set forth the basis upon which the "Subordinated Lender" may receive, and
Air Group may make, payments under the Subordinated Note, which basis shall be
satisfactory in form and substance to Term B Lender in its sole discretion;
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(s) Fictitious, Assumed or Alternate Names. Term B Lender shall have
received certified copies of any fictitious, assumed or alternate names of the
Borrower;
(t) Insurance. Term B Lender shall have received in form and
substance satisfactory to Term B Lender, certified copies of Borrower's casualty
insurance policies, together with loss payable endorsements on Term B Lender's
standard form of loss payee endorsement, and certified copies of Borrower's
liability insurance and property insurance policies, together with endorsements
naming Term B Lender as additional insured, mortgagee and lender loss payee;
(u) Payment Instructions. Term B Lender shall have received written
instructions from Borrower directing the application of proceeds of the Term
Loan made pursuant to this Agreement;
(v) Consents. Term B Lender shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Term B Lender shall have received such
Consents and waivers of such third parties as might assert claims with respect
to the Collateral, as Term B Lender and its counsel shall deem necessary;
(w) No Adverse Material Change. (i) since December 31, 2006, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect (including with respect
to Welding Metals, Inc.), and (ii) no representations made or information
supplied to Term B Lender shall have been proven to be inaccurate or misleading
in any material respect;
(x) Leasehold Agreements. Term B Lender shall have received
landlord, mortgagee or warehouseman agreements satisfactory to Term B Lender
with respect to all premises leased by Borrower at which Inventory and books and
records are located;
(y) ERISA Compliance. Term B Lender shall have received in form and
substance satisfactory to Term B Lender evidence that Borrower is in compliance
with ERISA as required in Section 7.16 herein along with a certificate from
Borrower's accountant, attorney or actuary delineating all existing pension
and/or profit sharing plans, if any;
(z) Pledge Agreements and Other Documents. Term B Lender shall have
received (i) the executed Pledge Agreements, and (ii) the executed Other
Documents, all in form and substance satisfactory to Term B Lender;
(aa) Subordinated Note Documentation. Term B Lender shall have
received final executed copies of the Subordinated Note and all other
Subordinated Loan Documentation which shall contain such terms and provisions
including subordination terms, satisfactory to Term B Lender;
(bb) Projections. Term B Lender shall have received monthly and
annual projections of the Borrower for the immediately succeeding year
demonstrating Borrower's ability to make payments under this Agreement, and Term
B Lender shall have received satisfactory detail behind the Borrower's opening
pro forma balance sheet, all in form and substance satisfactory to Term B
Lender;
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(cc) Business Plan. Term B Lender shall received Borrower's business
plan, in form and substance satisfactory to Term B Lender, and be satisfied that
Borrower's management will be able to executed Borrower's business plan;
(dd) Contract Review. Term B Lender shall have received copies of
all material contracts of Borrower including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, management agreements,
option agreements, warrant agreements, royalty agreements, member agreements,
purchase agreements, warranty agreements, employment agreements, license
agreements and distributorship agreements and such contracts and agreements
shall be satisfactory in all reasonable respects to Term B Lender;
(ee) Closing Certificate. Term B Lender shall have received a
closing certificate signed by the Chief Financial Officer of Borrower dated as
of the date hereof, stating that (i) all representations and warranties set
forth in this Agreement and the Other Documents are true and correct on and as
of such date, (ii) Borrower is on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
(ff) Borrowing Base. Term B Lender shall have received a Borrowing
Base Certificate (as defined in the Senior Loan Agreement) from Borrower
evidencing that the Borrower will have a minimum aggregate Undrawn Availability
(as defined in the Senior Loan Agreement) under the Senior Loan Agreement of at
least $2,200,000 at closing (after all fees and expenses and subtraction of
trade payables 60 days or more past due and not otherwise on formal extended
terms);
(gg) Compliance with Laws. Term B Lender shall be reasonably
satisfied that Borrower is in compliance with all pertinent federal, state,
local or territorial regulations, including those with respect to the Federal
Occupational Safety and Health Act, the Environmental Protection Act, ERISA and
the Trading with the Enemy Act;
(hh) Searches. Term B Lender shall have received UCC searches,
Federal and State Litigation searches, Upper Court and Local Judgment searches,
franchise tax searches, bankruptcy searches, Federal and State Tax Lien searches
and any other Lien searches run against the names of the Borrower as well as any
previous, alternate and fictitious names, and against the names of all entities
which were acquired by or merged into the Borrower, or orders of applicable
bankruptcy courts reflecting lien releases (as applicable), showing no existing
security interests in or Liens on the Collateral other than Permitted
Encumbrances and other Liens permitted by Term B Lender;
(ii) Intellectual Property. Term B Lender shall have received a list
of intellectual property of the Borrower including trademarks and trademark
applications, patents and patent applications, copyrights and copyright
applications, together with a search/abstract relating to the same;
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(jj) Trade References. Receipt and satisfactory review by Term B
Lender of trade references with regard to the Borrower;
(kk) Review of Records. Term B Lender shall have reviewed to its
satisfaction all of Borrower's books and records;
(ll) Privity Letter. Term B Lender shall have received a privity
letter from Borrower's accountant authorizing the Term B Lender to rely on the
financial statements and other documentation prepared by such accountant;
(mm) Warrants. Term B Lender shall have received, in form and
substance satisfactory to Term B Lender, warrants exercisable into 100,000
shares of the capital stock of Air Group;
(nn) Evidence of Financial Compliance. Term B Lender shall have
received written evidence, in form and substance satisfactory to Term B Lender,
that (i) Borrower's EBITDA for the trailing twelve (12) month period ended on
March 31, 2007 is not less than $5,500,000, and (ii) Borrower's Funded Senior
Debt to EBITDA Ratio for the trailing twelve (12) month period ended on March
31, 2007 is less than 2.75 to 1.00;
(oo) Federal Acquisition Regulations. Satisfactory legal review by
Term B Lender of the Federal Acquisition Regulations requirements and customer
military contracts to confirm that no offset shall occur with regard to accounts
receivable availability based on advanced/progress xxxxxxxx;
(pp) Orderly Liquidation Valuation Appraisal. Satisfactory review by
Term B Lender of an Orderly Liquidation Valuation Appraisal of the Borrower's
machinery and equipment from Xxxxxx Xxxxxxxx;
(qq) Consulting Agreement. Term B Lender shall have received final
executed copies of the Consulting Agreement between Xxxx Xxxxx and WMI and all
related agreements, documents and instruments as in effect on the Closing Date,
all of which shall be satisfactory in form and substance to Term B Lender;
(rr) Background Checks. Term B Lender shall have received a copy of
the background searches conducted against key management personnel of Borrower,
each of which shall be satisfactory in form and substance to Term B Lender;
(ss) Reference Checks. Term B Lender shall have received favorable
references with respect to Borrower from each of Sikorsky and Northrop Grumman,
each of which shall be satisfactory in form and substance to Term B Lender; and
(tt) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Term B Lender and its counsel.
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IX. INFORMATION AS TO BORROWERS.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning thereof,
report to Term B Lender all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral, including
Borrower's reclamation or repossession of, or the return to Borrower of, a
material amount of goods or claims or disputes asserted by any Customer or other
obligor.
9.2. Schedules. Deliver to Term B Lender (a) on or before the fifteenth
(15th) day of each month as and for the prior month (x) accounts receivable
ageings and accounts payable ageings inclusive of reconciliations to the general
ledger, (y) Inventory reports, and (z) a Borrowing Base Certificate (as defined
in the Senior Loan Agreement) which shall be accompanied by a Compliance
Certificate and (b) on Tuesday of each week as and for the immediately preceding
week, sales, cash remittances, credits and collection reports. In addition,
Borrower will deliver to Term B Lender at such intervals as Term B Lender may
require: (i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Collateral as Term B
Lender may require including trial balances and test verifications. Term B
Lender shall have the right to confirm and verify all Receivables by any manner
and through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect its interests hereunder. The items to be
provided under this Section are to be in form satisfactory to Term B Lender and
executed by Borrower and delivered to Term B Lender from time to time solely for
Term B Lender's convenience in maintaining records of the Collateral, and
Borrower's failure to deliver any of such items to Term B Lender shall not
affect, terminate, modify or otherwise limit Term B Lender's Lien with respect
to the Collateral.
9.3. Environmental Reports. Furnish Term B Lender, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of Borrower stating, to the best of his
knowledge, that Borrower is in compliance in all material respects with all
federal, state and local Environmental Laws. To the extent Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action Borrower will
implement in order to achieve full compliance.
9.4. Litigation. Promptly notify Term B Lender in writing of any claim,
litigation, suit or administrative proceeding affecting Borrower, whether or not
the claim is covered by insurance, and of any litigation, suit or administrative
proceeding, which in any such case affects the Collateral or which could
reasonably be expected to have a Material Adverse Effect.
9.5. Material Occurrences. Promptly notify Term B Lender in writing upon
the occurrence of (a) any Event of Default or Default; (b) any event of default
under the Subordinated Loan Documentation; (c) any event which with the giving
of notice or lapse of time, or both, would constitute an event of default under
the Subordinated Loan Documentation; (d) any event, development or circumstance
whereby any financial statements or other reports furnished to Term B Lender
fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of Borrower
as of the date of such statements; (e) any accumulated retirement plan funding
deficiency which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject Borrower to a
54
tax imposed by Section 4971 of the Code; (f) each and every default by Borrower
which might result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (g) any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower propose to take with
respect thereto.
9.6. Government Receivables. Notify Term B Lender immediately if any of
its Receivables arise out of contracts between Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Term B Lender within ninety (90)
days after the end of each fiscal year of Borrower, audited financial statements
of Borrower including, but not limited to, statements of income and
stockholders' equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon without
qualification by an independent certified public accounting firm selected by
Borrower and satisfactory to Term B Lender (the "Accountants"). The report of
the Accountants shall be accompanied by a statement of the Accountants
certifying that (i) they have caused this Agreement to be reviewed, (ii) in
making the examination upon which such report was based either no information
came to their attention which to their knowledge constituted an Event of Default
or a Default under this Agreement or any related agreement or, if such
information came to their attention, specifying any such Default or Event of
Default, its nature, when it occurred and whether it is continuing, and such
report shall contain or have appended thereto calculations which set forth
Borrower's compliance with the requirements or restrictions imposed by Sections
6.5, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.11 hereof. In addition, the reports shall be
accompanied by a Compliance Certificate.
9.8. Quarterly Financial Statements. Furnish Term B Lender within 45 days
after the end of each fiscal quarter, an unaudited balance sheet of Borrower and
unaudited statements of income and stockholders' equity and cash flow of
Borrower reflecting results of operations from the beginning of the fiscal year
to the end of such quarter and for such quarter, prepared on a basis consistent
with prior practices and complete and correct in all material respects, subject
to normal and recurring year end adjustments that individually and in the
aggregate are not material to Borrower's business. The reports shall be
accompanied by a Compliance Certificate.
9.9. Monthly Financial Statements. Commencing with the month of August,
2007, furnish Term B Lender within thirty (30) days after the end of each month,
an unaudited balance sheet of Borrower and unaudited statements of income and
stockholders' equity and cash flow of Borrower reflecting results of operations
from the beginning of the fiscal year to the end of such month and for such
month, prepared on a basis consistent with prior practices and complete and
correct in all material respects, subject to normal and recurring year end
adjustments that individually and in the aggregate are not material to
Borrower's business. The reports shall be accompanied by a Compliance
Certificate.
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9.10. Other Reports. Furnish Term B Lender as soon as available, but in
any event within ten (10) days after the issuance thereof, (i) with copies of
such financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all notices, reports, financial statements and
other materials sent pursuant to the Subordinated Loan Documentation.
9.11. Additional Information. Furnish Term B Lender with such additional
information as Term B Lender shall reasonably request in order to enable Term B
Lender to determine whether the terms, covenants, provisions and conditions of
this Agreement have been complied with by Borrower including, without the
necessity of any request by Term B Lender, (a) copies of all environmental
audits and reviews, (b) at least thirty (30) days prior thereto, notice of
Borrower's opening of any new office or place of business or Borrower's closing
of any existing office or place of business, and (c) promptly upon Borrower's
learning thereof, notice of any labor dispute to which Borrower may become a
party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which Borrower is a
party or by which Borrower is bound.
9.12. Projected Operating Budget. Furnish Term B Lender, no later than
thirty (30) days prior to the beginning of Borrower's fiscal years commencing
with fiscal year 2008, a month by month projected operating budget and cash flow
of Borrower for such fiscal year (including an income statement for each month
and a balance sheet as at the end of the last month in each fiscal quarter),
such projections to be accompanied by a certificate signed by the President or
Chief Financial Officer of Borrower to the effect that such projections have
been prepared on the basis of sound financial planning practice consistent with
past budgets and financial statements and that such officer has no reason to
question the reasonableness of any material assumptions on which such
projections were prepared.
9.13. Variances From Operating Budget. Furnish Term B Lender, concurrently
with the delivery of the financial statements referred to in Section 9.7 and
each quarterly report, a written report summarizing all material variances from
budgets submitted by Borrower pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Term B Lender with prompt
written notice of (i) any lapse or other termination of any Consent issued to
Borrower by any Governmental Body or any other Person that is material to the
operation of Borrower's business, (ii) any refusal by any Governmental Body or
any other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by Borrower with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of Borrower, or if copies thereof are requested
by Term B Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
Borrower.
9.15. ERISA Notices and Requests. Furnish Term B Lender with immediate
written notice in the event that (i) Borrower or any member of the Controlled
Group knows or has reason to know that a Termination Event has occurred,
together with a written statement describing such Termination Event and the
action, if any, which Borrower or any member of the Controlled Group has taken,
is taking, or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, Department of Labor or PBGC
with respect thereto, (ii) Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
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describing such transaction and the action which Borrower or any member of the
Controlled Group has taken, is taking or proposes to take with respect thereto,
(iii) a funding waiver request has been filed with respect to any Plan together
with all communications received by Borrower or any member of the Controlled
Group with respect to such request, (iv) any increase in the benefits of any
existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) Borrower or any member of
the Controlled Group shall receive from the PBGC a notice of intention to
terminate a Plan or to have a trustee appointed to administer a Plan, together
with copies of each such notice, (vi) Borrower or any member of the Controlled
Group shall receive any favorable or unfavorable determination letter from the
Internal Revenue Service regarding the qualification of a Plan under Section
401(a) of the Code, together with copies of each such letter; (vii) Borrower or
any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice;
(viii) Borrower or any member of the Controlled Group shall fail to make a
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or payment; (ix) Borrower or any
member of the Controlled Group knows that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Term B Lender, upon
request, such documents and agreements as Term B Lender may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. Nonpayment. Failure by Borrower to pay any principal or interest on
the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
10.2. Breach of Representation. Any representation or warranty made or
deemed made by Borrower in this Agreement, any Other Document or any related
agreement or in any certificate, document or financial or other statement
furnished at any time in connection herewith or therewith shall prove to have
been misleading in any material respect on the date when made or deemed to have
been made;
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10.3. Financial Information. Failure by Borrower to (i) furnish financial
information when due or when requested which is unremedied for a period of
fifteen (15) days, or (ii) permit the inspection of its books or records as set
forth in Section 4.10 herein;
10.4. Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment against Borrower's Inventory or Receivables or against
a material portion of Borrower's other property which is not stayed or lifted
within thirty (30) days;
10.5. Noncompliance. Except as otherwise provided for in Sections 10.1,
10.3 and 10.5(ii), (i) failure or neglect of Borrower to perform, keep or
observe any term, provision, condition, covenant herein contained, or contained
in any Other Document or any other agreement or arrangement, now or hereafter
entered into between Borrower and Term B Lender, or (ii) failure or neglect of
Borrower to perform, keep or observe any term, provision, condition or covenant,
contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is
not cured within ten (10) days from the occurrence of such failure or neglect;
10.6. Judgments. Any judgment or judgments are rendered against Borrower
for an aggregate amount in excess of $250,000 which (i) is/are not contested in
good faith by the Borrower, (ii) the Borrower does not establish reserves with
regard thereto in an amount reasonably satisfactory to Term B Lender, unless any
such judgment is fully covered by insurance and evidence thereof acceptable to
Term B Lender in it sole discretion is provided to Term B Lender, and (iii) the
enforcement of such judgment or judgments is/are not continuously stayed,
satisfied or discharged of record within forty (40) days of such rendering;
10.7. Bankruptcy. Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. Inability to Play. Borrower shall admit in writing its inability, or
be generally unable, to pay its debts as they become due or cease operations of
its present business;
10.9. Affiliate Bankruptcy. Any Affiliate or any Subsidiary of Borrower
shall (i) apply for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
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10.10. Material Adverse Effect. Any change in Borrower's results of
operations or condition (financial or otherwise) which in Term B Lender's
opinion has a Material Adverse Effect;
10.11. Lien Priority. Any Lien created hereunder or provided for hereby or
under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a second priority interest subordinate only to the Liens
in favor Senior Lender;
10.12. Subordinated Loan Default. An event of default has occurred under
the Subordinated Loan Documentation or the Subordination Agreement, which
default shall not have been cured or waived within any applicable grace period;
10.13. Senior Loan Default. An event of default has occurred under the
Senior Loan Documents or the Intercreditor Agreement, which default shall not
have been cured or waived within any applicable grace period, or the aggregate
balance of Advances (as defined in the Senior Loan Agreement) outstanding at any
time is in excess of the maximum amount of Advances at any time permitted under
the Senior Loan Agreement;
10.14. Cross Default. A default of the obligations of Borrower under any
other agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period;
10.15. Change of Ownership. Any Change of Ownership or Change of Control
shall occur;
10.16. Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on Borrower, or
Borrower shall so claim in writing to Term B Lender;
10.17. Licenses. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of Borrower, or (B) commence proceedings to suspend, revoke, terminate or
adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Term B
Lender within thirty (30) days after the date of such revocation or termination,
and such revocation or termination and non-replacement would reasonably be
expected to have a Material Adverse Effect;
10.18. Seizures. Any portion of the Collateral shall be seized or taken by
a Governmental Body, or Borrower or the title and rights of Borrower or any
Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of claim, litigation, suit or other
proceeding which might, in the opinion of Term B Lender, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;
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10.19. Operations. The operations of Borrower's manufacturing facility are
interrupted at any time for more than twelve (12) hours during any period of ten
(10) consecutive days, unless Borrower shall (i) be entitled to receive for such
period of interruption, proceeds of business interruption insurance sufficient
to assure that its per diem cash needs during such period is at least equal to
its average per diem cash needs for the consecutive three month period
immediately preceding the initial date of interruption and (ii) receive such
proceeds in the amount described in clause (i) preceding not later than thirty
(30) days following the initial date of any such interruption; provided,
however, that notwithstanding the provisions of clauses (i) and (ii) of this
section, an Event of Default shall be deemed to have occurred if Borrower shall
be receiving the proceeds of business interruption insurance for a period of
thirty (30) consecutive days; or
10.20. Pension Plans. An event or condition specified in Sections 7.16 or
9.15 hereof shall occur or exist with respect to any Plan and, as a result of
such event or condition, together with all other such events or conditions,
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Term B Lender be reasonably likely to incur, a liability to a Plan or the PBGC
(or both) which, in the reasonable judgment of Term B Lender, would have a
Material Adverse Effect.
XI. TERM B LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable;
and, (ii) any of the other Events of Default and at any time thereafter (such
default not having previously been cured), at the option of Term B Lender all
Obligations shall be immediately due and payable, and (iii) a filing of a
petition against Borrower in any involuntary case under any state or federal
bankruptcy laws, all Obligations shall be immediately due and payable. Upon the
occurrence of any Event of Default, but subject to the Intercreditor Agreement,
Term B Lender shall have the right to exercise any and all rights and remedies
provided for herein, under the Other Documents, under the Uniform Commercial
Code and at law or equity generally, including the right to foreclose the
security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process. Term B Lender may enter any of
Borrower's premises or other premises without legal process and without
incurring liability to Borrower therefor, and Term B Lender may thereupon, or at
any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Term B Lender may deem advisable
and Term B Lender may require Borrower to make the Collateral available to Term
B Lender at a convenient place. With or without having the Collateral at the
time or place of sale, Term B Lender may sell the Collateral, or any part
thereof, at public or private sale, at any time or place, in one or more sales,
at such price or prices, and upon such terms, either for cash, credit or future
delivery, as Term B Lender may elect. Except as to that part of the Collateral
which is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Term B Lender shall give Borrower
reasonable notification of such sale or sales, it being agreed that in all
events written notice mailed to Borrower at least ten (10) days prior to such
sale or sales is reasonable notification. At any public sale Term B Lender may
bid for and become the purchaser, and Term B Lender or any other purchaser at
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any such sale thereafter shall hold the Collateral sold absolutely free from any
claim or right of whatsoever kind, including any equity of redemption and all
such claims, rights and equities are hereby expressly waived and released by
Borrower. In connection with the exercise of the foregoing remedies, including
the sale of Inventory, Term B Lender is granted a perpetual nonrevocable,
royalty free, nonexclusive license and Term B Lender is granted permission to
use all of Borrower's (a) trademarks, trade styles, trade names, patents, patent
applications, copyrights, service marks, licenses, franchises and other
proprietary rights which are used or useful in connection with Inventory for the
purpose of marketing, advertising for sale and selling or otherwise disposing of
such Inventory and (b) Equipment for the purpose of completing the manufacture
of unfinished goods. The cash proceeds realized from the sale of any Collateral
shall be applied to the Obligations in the order set forth in Section 11.5
hereof. Noncash proceeds will only be applied to the Obligations as they are
converted into cash. If any deficiency shall arise, Borrower shall remain liable
to Term B Lender therefor.
To the extent that Applicable Law imposes duties on Term B Lender to
exercise remedies in a commercially reasonable manner, Borrower acknowledges and
agrees that it is not commercially unreasonable for Term B Lender (i) to fail to
incur expenses reasonably deemed significant by Term B Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of Collateral to be
collected or disposed of, (iii) to fail to exercise collection remedies against
Customers or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (iv) to exercise collection remedies against
Customers and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as the Borrower, for expressions of
interest in acquiring all or any portion of such Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure Term B Lender against risks of loss, collection or
disposition of Collateral or to provide to Term B Lender a guaranteed return
from the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by Term B Lender, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist Term B Lender
in the collection or disposition of any of the Collateral. Borrower acknowledges
that the purpose of this Section 11.1(b) is to provide non-exhaustive
indications of what actions or omissions by Term B Lender would not be
commercially unreasonable in Term B Lender's exercise of remedies against the
Collateral and that other actions or omissions by Term B Lender shall not be
deemed commercially unreasonable solely on account of not being indicated in
this Section 11.1(b). Without limitation upon the foregoing, nothing contained
in this Section 11.1(b) shall be construed to grant any rights to Borrower or to
impose any duties on Term B Lender that would not have been granted or imposed
by this Agreement or by Applicable Law in the absence of this Section 11.1(b).
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11.2. Term B Lender's Discretion. Term B Lender shall have the right in
its sole discretion to determine which rights, Liens, security interests or
remedies Term B Lender may at any time pursue, relinquish, subordinate, or
modify or to take any other action with respect thereto and such determination
will not in any way modify or affect any of Term B Lender's rights hereunder.
11.3. Setoff. In addition to any other rights which Term B Lender may have
under Applicable Law, upon the occurrence of an Event of Default hereunder, Term
B Lender shall have a right, immediately and without notice of any kind, to
apply Borrower's property held by Term B Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
rights or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5. Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by Term B Lender on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Term B
Lender's discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including reasonable attorneys' fees) of Term B Lender in connection
with enforcing its rights under this Agreement and the Other Documents and any
protective advances made by Term B Lender with respect to the Collateral under
or pursuant to the terms of this Document;
SECOND, to payment of any fees owed to Term B Lender;
THIRD, to the payment of all of the Obligations consisting of
accrued fees and interest;
FOURTH, to the payment of the outstanding principal amount of the
Obligations;
FIFTH, to all other Obligations and other obligations which shall
have become due and payable under the Other Documents or otherwise and not
repaid pursuant to clauses "FIRST" through "FOURTH" above; and
SIXTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category.
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XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Borrower hereby waives notice of non-payment of
any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2. Delay. No delay or omission on Term B Lender's part in exercising
any right, remedy or option shall operate as a waiver of such or any other
right, remedy or option or of any Default or Event of Default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of Borrower and
Term B Lender, shall become effective on the date hereof and shall continue in
full force and effect until the Termination Date (the "Term") unless sooner
terminated as herein provided. Borrower may terminate this Agreement at any time
upon thirty (30) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full or in part prior
to the last day of the Term (the date of such prepayment hereinafter referred to
as the "Early Termination Date"), Borrower shall pay to Term B Lender an early
termination fee in an amount equal to (x) three percent (3.00%) of the prepaid
portion of the principal amount of the Obligations if the Early Termination Date
occurs on or after the Closing Date to and including the date immediately
preceding the first anniversary of the Closing Date, (y) two percent (2.00%) of
the prepaid portion of the principal amount of the Obligations if the Early
Termination Date occurs on or after the first anniversary of the Closing Date to
and including the date immediately preceding the second anniversary of the
Closing Date, and (z) one percent (1.00%) of the prepaid portion of the
principal amount of the Obligations if the Early Termination Date occurs on or
after the second anniversary of the Closing Date to and including the date
immediately preceding the third anniversary of the Closing Date.
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13.2. Termination. The termination of the Agreement shall not affect
Borrower's or Term B Lender's rights, or any of the Obligations having their
inception prior to the effective date of such termination, and the provisions
hereof shall continue to be fully operative until all transactions entered into,
rights or interests created or Obligations have been fully and indefeasibly
paid, disposed of, concluded or liquidated. The security interests, Liens and
rights granted to Term B Lender hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement, until all of the Obligations of Borrower have
been indefeasibly paid and performed in full in cash after the irrevocable
termination of this Agreement or Borrower has furnished Term B Lender with an
indemnification satisfactory to Term B Lender with respect thereto. Accordingly,
Borrower waives any rights which it may have under the Uniform Commercial Code
to demand the filing of termination statements with respect to the Collateral,
and Term B Lender shall not be required to send such termination statements to
Borrower, or to file them with any filing office, unless and until this
Agreement shall have been irrevocably terminated in accordance with its terms
and all Obligations have been indefeasibly paid in full in immediately available
funds. All representations, warranties, covenants, waivers and agreements
contained herein shall survive termination hereof until all Obligations are
indefeasibly paid and performed in full.
XIV. BORROWING AGENCY.
14.1. Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates Borrowing Agent to
be its attorney and agent and in such capacity to borrow, sign and endorse
notes, and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Term B Lender to pay over or credit all loan
proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility
with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Term B Lender shall not incur
liability to Borrowers as a result thereof. To induce Term B Lender to do so and
in consideration thereof, each Borrower hereby indemnifies Term B Lender and
holds Term B Lender harmless from and against any and all liabilities, expenses,
losses, damages and claims of damage or injury asserted against Term B Lender by
any Person arising from or incurred by reason of the handling of the financing
arrangements of Borrowers as provided herein, reliance by Term B Lender on any
request or instruction from Borrowing Agent or any other action taken by Term B
Lender with respect to this Section 14.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party (as determined by a court
of competent jurisdiction in a final and non-appealable judgment).
(c) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted to
Term B Lender to any Borrower, failure of Term B Lender to give any Borrower
notice of borrowing or any other notice, any failure of Term B Lender to pursue
or preserve its rights against any Borrower, the release by Term B Lender of any
Collateral now or thereafter acquired from any Borrower, and such agreement by
each Borrower to pay upon any notice issued pursuant thereto is unconditional
and unaffected by prior recourse by Term B Lender to the other Borrowers or any
Collateral for such Borrower's Obligations or the lack thereof. Each Borrower
waives all suretyship defenses.
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14.2. Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
XV. MISCELLANEOUS.
15.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against Borrower with respect to any of the Obligations, this Agreement,
the Other Documents or any related agreement may be brought in any court of
competent jurisdiction in the State of New York, United States of America, and,
by execution and delivery of this Agreement, Borrower accepts for itself and in
connection with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Borrower hereby
waives personal service of any and all process upon it and consents that all
such service of process may be made by registered mail (return receipt
requested) directed to Borrower at its address set forth in Section 15.6 and
service so made shall be deemed completed five (5) days after the same shall
have been so deposited in the mails of the United States of America. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Term B Lender to bring proceedings against Borrower in
the courts of any other jurisdiction. Borrower waives any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. Borrower waives the right to remove any judicial proceeding brought
against Borrower in any state court to any federal court. Any judicial
proceeding by Borrower against Term B Lender involving, directly or indirectly,
any matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of New York, State of New York.
15.2. Entire Understanding.
(a) This Agreement and the documents executed concurrently herewith
contain the entire understanding between Borrower and Term B Lender and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by Borrower's and Term B Lender's respective officers.
Neither this Agreement nor any portion or provisions hereof may be changed,
modified, amended, waived, supplemented, discharged, cancelled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged. Borrower acknowledges that it has
been advised by counsel in connection with the execution of this Agreement and
Other Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
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(b) Term B Lender and Borrower may from time to time enter into
written supplemental agreements to this Agreement or the Other Documents
executed by Borrower, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of Term B Lender
or Borrower thereunder or the conditions, provisions or terms thereof of waiving
any Event of Default thereunder, but only to the extent specified in such
written agreements. Any such supplemental agreement shall apply equally to, and
shall be binding upon Borrower, Term B Lender and all future holders of the
Obligations. In the case of any waiver, Borrower and Term B Lender shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
15.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrower Term B Lender, all future holders of the Obligations and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Term B Lender.
(b) Borrower acknowledges that in the regular course of commercial
banking business Term B Lender may at any time and from time to time sell
participating interests in the Term Loan to other financial institutions (each
such transferee or purchaser of a participating interest, a "Participant") and
shall provide notice to the Borrower thereof. Each Participant may exercise all
rights of payment (including rights of set-off) with respect to the portion of
the Term Loan held by it or other Obligations payable hereunder as fully as if
such Participant were the direct holder thereof provided that Borrower shall not
be required to pay to any Participant more than the amount which it would have
been required to pay to Term B Lender had Term B Lender retained such interest
in the Term Loan hereunder or other Obligations payable hereunder and in no
event shall Borrower be required to pay any such amount arising from the same
circumstances and with respect to the portion of the Term Loan or other
Obligations payable hereunder to both Term B Lender and such Participant.
Borrower hereby grants to any Participant a continuing security interest in any
deposits, moneys or other property actually or constructively held by such
Participant as security for the Participant's interest in the Term Loan.
(c) Term B Lender may sell, assign or transfer all or any part of
its rights and obligations under or relating to the Term Loan under this
Agreement and the Other Documents to one or more additional banks or financial
institutions (each a "Purchasing Lender"), in minimum amounts of not less than
$1,000,000, pursuant to a Commitment Transfer Supplement, executed by a
Purchasing Lender and Term B Lender and delivered to Term B Lender for
recording. Upon such execution, delivery, acceptance and recording, from and
after the transfer effective date determined pursuant to such Commitment
Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have the
rights and obligations of Term B Lender thereunder with a Commitment Percentage
as set forth therein, and (ii) Term B Lender thereunder shall, to the extent
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provided in such Commitment Transfer Supplement, be released from its
obligations under this Agreement, the Commitment Transfer Supplement creating a
novation for that purpose. Such Commitment Transfer Supplement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting adjustment of
the Commitment Percentages arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of Term B Lender under this
Agreement and the Other Documents. Borrower hereby consents to the addition of
such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of Term B Lender under this Agreement and
the Other Documents. Borrower shall execute and deliver such further documents
and do such further acts and things in order to effectuate the foregoing.
(d) Term B Lender may directly or indirectly sell, assign or
transfer all or any portion of its rights and obligations under or relating to
the Term Loan under this Agreement and the Other Documents to an entity, whether
a corporation, partnership, trust, limited liability company or other entity
that (i) is engaged in making, purchasing, holding or otherwise investing in
bank loans and similar extensions of credit in the ordinary course of its
business and (ii) is administered, serviced or managed by Term B Lender or an
Affiliate of Term B Lender (a "Purchasing CLO" and together with each
Participant and Purchasing Lender, each a "Transferee" and collectively the
"Transferees"), pursuant to a Commitment Transfer Supplement modified as
appropriate to reflect the interest being assigned ("Modified Commitment
Transfer Supplement"), executed by any intermediate purchaser, the Purchasing
CLO, and Term B Lender as appropriate and delivered to Term B Lender for
recording. Upon such execution and delivery, from and after the transfer
effective date determined pursuant to such Modified Commitment Transfer
Supplement, (i) Purchasing CLO thereunder shall be a party hereto and, to the
extent provided in such Modified Commitment Transfer Supplement, have the rights
and obligations of Term B Lender thereunder and (ii) Term B Lender thereunder
shall, to the extent provided in such Modified Commitment Transfer Supplement,
be released from its obligations under this Agreement, the Modified Commitment
Transfer Supplement creating a novation for that purpose. Such Modified
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing CLO. Borrower hereby consents to the addition of such Purchasing CLO.
Borrower shall execute and deliver such further documents and do such further
acts and things in order to effectuate the foregoing.
(e) Term B Lender shall maintain at its address a copy of each
Commitment Transfer Supplement and Modified Commitment Transfer Supplement
delivered to it and a register (the "Register") for the recordation of the names
and addresses of each Purchasing Lender and the outstanding principal, accrued
and unpaid interest and other fees due hereunder. The entries in the Register
shall be conclusive, in the absence of manifest error, and Borrower, Term B
Lender and Purchasing Lenders may treat each Person whose name is recorded in
the Register as the owner of the Term Loan recorded therein for the purposes of
this Agreement. The Register shall be available for inspection by Borrower or
any Purchasing Lender at any reasonable time and from time to time upon
reasonable prior notice. Term B Lender shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon
the effective date of each transfer or assignment (other than to an intermediate
purchaser) to such Purchasing Lender and/or Purchasing CLO.
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(f) Borrower authorizes Term B Lender to disclose to any Transferee
and any prospective Transferee any and all financial information in Term B
Lender's possession concerning Borrower which has been delivered to Term B
Lender by or on behalf of Borrower pursuant to this Agreement or in connection
with Term B Lender's credit evaluation of Borrower.
15.4. Application of Payments. Term B Lender shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or Term B Lender receives any payment or proceeds of
the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Term B Lender.
15.5. Indemnity. Borrower shall indemnify Term B Lender and each of its
officers, directors, Affiliates, attorneys, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against Term B Lender in any claim,
litigation, proceeding or investigation instituted or conducted by any
Governmental Body or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Other Documents, whether or not Term B Lender
is a party thereto, except to the extent that any of the foregoing arises out of
the willful misconduct of the party being indemnified (as determined by a court
of competent jurisdiction in a final and non-appealable judgment). Without
limiting the generality of the foregoing, this indemnity shall extend to any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including
fees and disbursements of counsel) asserted against or incurred by any of the
indemnitees described above in this Section 15.5 by any Person under any
Environmental Laws or similar laws by reason of Borrower's or any other Person's
failure to comply with laws applicable to solid or hazardous waste materials,
including Hazardous Substances and Hazardous Waste, or other Toxic Substances.
Additionally, if any taxes (excluding taxes imposed upon or measured solely by
the net income of Term B Lender, but including any intangibles taxes, stamp tax,
recording tax or franchise tax) shall be payable by Term B Lender or Borrower on
account of the execution or delivery of this Agreement, or the execution,
delivery, issuance or recording of any of the Other Documents, or the creation
or repayment of any of the Obligations hereunder, by reason of any Applicable
Law now or hereafter in effect, Borrower will pay (or will promptly reimburse
Term B Lender for payment of) all such taxes, including interest and penalties
thereon, and will indemnify and hold the indemnitees described above in this
Section 15.5 harmless from and against all liability in connection therewith.
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15.6. Notice. Any notice or request hereunder may be given to Borrower or
to Term B Lender at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice, request, demand, direction or
other communication (for purposes of this Section 15.6 only, a "Notice") to be
given to or made upon any party hereto under any provision of this Loan
Agreement shall be given or made by telephone or in writing (which includes by
means of electronic transmission (i.e., "e-mail") or facsimile transmission or
by setting forth such Notice on a site on the World Wide Web (a "Website
Posting") if Notice of such Website Posting (including the information necessary
to access such site) has previously been delivered to the applicable parties
hereto by another means set forth in this Section 15.6) in accordance with this
Section 15.6. Any such Notice must be delivered to the applicable parties hereto
at the addresses and numbers set forth under their respective names on Section
15.6 hereof or in accordance with any subsequent unrevoked Notice from any such
party that is given in accordance with this Section 15.6. Any Notice shall be
effective:
(a) In the case of hand-delivery, when delivered;
(b) If given by mail, four days after such Notice is deposited with
the United States Postal Service, with first-class postage prepaid, return
receipt requested;
(c) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);
(d) In the case of a facsimile transmission, when sent to the
applicable party's facsimile machine's telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;
(e) In the case of electronic transmission, when actually received;
(f) In the case of a Website Posting, upon delivery of a Notice of
such posting (including the information necessary to access such site) by
another means set forth in this Section 15.6; and
(g) If given by any other means (including by overnight courier),
when actually received.
(A) If to Term B Lender at: Steel City Capital Funding LLC
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention:Xxxxxx X. Xxxxxxx
Telephone:(000) 000-0000
Facsimile:(000) 000-0000
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with a copy to: Xxxx & Hessen LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention:Xxxxxx X. Xxxx, Esq.
Telephone:(000) 000-0000
Facsimile:(000) 000-0000
(B) If to Borrower: c/o Air Industries Machining, Corp.
0000 Xxxxxxx Xxxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Attention:Xxxxx Xxxxxx, Vice
Chairman & CFO
Telephone:(000) 000-0000
Facsimile:(000) 000-0000
with a copy to: Xxxxx & Xxx Xxxxxx LLP
0 Xxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention:Xxxxxxx Xxxxxx, Esq.
Telephone:(000) 000-0000
Facsimile:(000) 000-0000
15.7. Survival. The obligations of Borrower under Sections 2.2(f), 3.5,
3.6, 3.7, 4.19(h), and 15.5, shall survive termination of this Agreement and the
Other Documents and payment in full of the Obligations.
15.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under Applicable Laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.9. Expenses. All costs and expenses including reasonable attorneys'
fees (including the allocated costs of in house counsel) and disbursements
incurred by Term B Lender (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and enforcement of this
Agreement, the Subordination Agreement or any consents or waivers hereunder or
thereunder and all related agreements, documents and instruments, or (c) in
instituting, maintaining, preserving, enforcing and foreclosing on Term B
Lender's security interest in or Lien on any of the Collateral, or maintaining,
preserving or enforcing any of Term B Lender's rights hereunder, under the
Subordination Agreement and under all related agreements, documents and
instruments, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or relating
to Term B Lender's transactions with Borrower or any guarantor or any
Subordinated Lender or (e) in connection with any advice given to Term B Lender
with respect to its rights and obligations under this Agreement, the
Subordination Agreement and all related agreements, documents and instruments,
shall be part of the Obligations, or, at Term B Lender's option, shall be paid
to Term B Lender immediately upon demand.
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15.10. Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, or threatens to fail to perform, observe or discharge such
obligations or liabilities, any remedy at law may prove to be inadequate relief
to Term B Lender; therefore, Term B Lender, if Term B Lender so requests, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving that actual damages are not an adequate remedy.
15.11. Damages. Neither Term B Lender nor any agent or attorney for Term B
Lender, shall be liable to Borrower (or any Affiliate of any such Person) for
indirect, punitive, exemplary or consequential damages arising from any breach
of contract, tort or other wrong relating to the establishment, administration
or collection of the Obligations or as a result of any transaction contemplated
under this Agreement or any Other Document.
15.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.13. Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
15.15. Confidentiality; Sharing Information.
(a) Term B Lender and each Transferee shall hold all non-public
information obtained by Term B Lender and such Transferee pursuant to the
requirements of this Agreement in accordance with Term B Lender's and such
Transferee's customary procedures for handling confidential information of this
nature; provided, however, Term B Lender and each Transferee may disclose such
confidential information (a) to its examiners, Affiliates, outside auditors,
counsel and other professional advisors, (b) Term B Lender or any prospective
Transferee, and (c) as required or requested by any Governmental Body or
representative thereof or pursuant to legal process; provided, further that (i)
unless specifically prohibited by Applicable Law or court order, Term B Lender
and each Transferee shall use its reasonable best efforts prior to disclosure
thereof, to notify Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of Term B Lender or a Transferee by such Governmental Body) or (B)
pursuant to legal process and (ii) in no event shall Term B Lender or any
Transferee be obligated to return any materials furnished by Borrower other than
those documents and instruments in possession of Term B Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated.
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(b) Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to Borrower or
one or more of its Affiliates (in connection with this Agreement or otherwise)
by Term B Lender or by one or more Subsidiaries or Affiliates of Term B Lender
and Borrower hereby authorizes Term B Lender to share any information delivered
to Term B Lender by Borrower and its Subsidiaries pursuant to this Agreement, or
in connection with the decision of Term B Lender to enter into this Agreement,
to any such Subsidiary or Affiliate of Term B Lender, it being understood that
any such Subsidiary or Affiliate of Term B Lender receiving such information
shall be bound by the provisions of this Section 15.15 as if it were a party
hereto. Such authorization shall survive the repayment of the other Obligations
and the termination of this Agreement.
15.16. Publicity. Borrower hereby authorizes Term B Lender to make
appropriate announcements of the financial arrangement entered into among
Borrower and Term B Lender, including announcements which are commonly known as
tombstones, in such publications and to such selected parties as Term B Lender
shall in its sole and absolute discretion deem appropriate.
15.17. Certifications From Banks and Participants; US PATRIOT Act. Any
assignee or participant of Term B Lender that is not incorporated under the Laws
of the United States of America or a state thereof (and is not excepted from the
certification requirement contained in Section 313 of the USA PATRIOT Act and
the applicable regulations because it is both (i) an affiliate of a depository
institution or foreign bank that maintains a physical presence in the United
States or foreign country, and (ii) subject to supervision by a banking
authority regulating such affiliated depository institution or foreign bank)
shall deliver to Term B Lender the certification, or, if applicable,
recertification, certifying that such assignee or participant of Term B Lender
is not a "shell" and certifying to other matters as required by Section 313 of
the USA PATRIOT Act and the applicable regulations: (1) within 10 days after the
Closing Date, and (2) as such other times as are required under the USA PATRIOT
Act.
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Each of the parties has signed this Agreement as of the day and year first
above written.
AIR INDUSTRIES MACHINING, CORP.
By: /s/ Xxxxx X. Xxxxxxxxxx
------------------------------------
Name:Xxxxx X. Xxxxxxxxxx
Title:President
SIGMA METALS, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: President
WELDING METALLURGY, INC., as successor
by merger with WMS Merger Corp.
By: /s/ Xxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title:President
STEEL CITY CAPITAL FUNDING LLC
(AS TERM B LENDER)
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxx
Title: Managing Director
Signature Page to Loan and Security Agreement - 1248649
