Exhibit 10.1

 

Execution version

 

SEVENTEENTH AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT

 

THIS SEVENTEENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND SECURITY AGREEMENT (this “Seventeenth Amendment”) is entered effective
December 31, 2018 by and among AIR INDUSTRIES MACHINING, CORP. (as successor by
merger with Gales Industries Acquisition Corp., Inc.) (“Air”), a corporation
organized under the laws of the State of New York, NASSAU TOOL WORKS, INC.
(formerly known as NTW Operating Inc.) (“Nassau”), a corporation organized under
the laws of the State of New York, EUR-PAC CORPORATION (“EUR-PAC”), a
corporation organized under the laws of the State of Connecticut, ELECTRONIC
CONNECTION CORPORATION (“ECC”), a corporation organized under the laws of the
State of Connecticut, and THE STERLING ENGINEERING CORPORATION (“STERLING”), a
corporation organized under the laws of the State of Connecticut, (“Sterling,”
and collectively with Air, Nassau, EUR-PAC and ECC, the “Borrower”), AIR
INDUSTRIES GROUP (as successor by merger with Air Industries Group, Inc. f/k/a
Gales Industries Incorporated, a Delaware corporation)(“AIR GROUP”) a
corporation organized under the laws of the State of Nevada and AIR REALTY
GROUP, LLC, (“REALTY”), a limited liability company organized under the laws of
the State of Connecticut, (REALTY collectively with AIR GROUP, “Guarantor”),
(collectively, Borrower and Guarantor, each an “Obligor”), and PNC BANK,
NATIONAL ASSOCIATION (“PNC”), the various financial institutions named therein
or which hereafter become a party thereto, (together with PNC, collectively,
“Lenders”) and PNC as agent for Lenders (in such capacity, “Agent”).

 

RECITALS

 

WHEREAS, Obligor and PNC entered into a certain Amended and Restated Revolving
Credit, Term Loan and Security Agreement dated June 27, 2013 (which has been, is
being and may be further amended, replaced, restated, modified and/or extended,
the “Loan Agreement”);

 

WHEREAS, Obligor and PNC have agreed to modify the terms of the Loan Agreement
as set forth in this Seventeenth Amendment.

 

WHEREAS, Air Group sold all of the issued and outstanding Shares of Welding
Metallurgy, Inc. and, by virtue thereof, its Subsidiary Stock in and to Compac
Development Corp. pursuant to Stock Purchase Agreement dated March 21, 2018 to
CPI Aerostructures, Inc. and the Net Proceeds thereof having been paid to and
applied by Agent pursuant to that payoff letter dated December 20, 2018 (the “WM
Sale”).

 

 

 

 

NOW, THEREFORE, in consideration of PNC’s continued extension of credit and the
agreements contained herein, the parties agree as follows:

 

AGREEMENT

 

1)ACKNOWLEDGMENT OF BALANCE. Obligor acknowledges that the most recent statement
of account sent to Obligor with respect to the Obligations is correct.

 

2)MODIFICATIONS. The Loan Agreement be and hereby is modified as follows:

 

(a)Effective as of the closing of the WM Sale, the definition of “Borrower” in
the Loan Agreement and the Other Documents is hereby amended to be Air, Nassau,
EUR-PAC, ECC and Sterling only.

 

(b)The following definitions are hereby amended and restated or added to Section
1.2 of the Loan Agreement to read as follows:

 

“Letter of Credit Sublimit” shall mean $250,000.

 

“Obligor” shall mean each Borrower and each Guarantor, either separately or
collectively.

 

“Original Owners” shall mean with regard to Air, Nassau, EUR-PAC and ECC and
Sterling: Air Group and all issued and outstanding shares of Air, Nassau,
Sterling, EUR-PAC and ECC are Subsidiary Stock of Air Group.

 

“Other Documents” shall mean the Note, the Guaranty, any Lender-Provided
Interest Rate Hedge, the Escrow Agreement executed in connection with the WM
Sale, and any and all other agreements, instruments and documents, including
guaranties, pledges, powers of attorney, consents, interest or currency swap
agreements or other similar agreements and all other writings heretofore, now or
hereafter executed by Borrower or any Guarantor and/or delivered to Agent or any
Lender in respect of the transactions contemplated by this Agreement.

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus four percent (4.00%) with respect to
Domestic Rate Loans and (b) effective on the Seventeenth Amendment Closing Date
and thereafter, Advances will no longer be repayable as Eurodollar Rate Loans.

 

“Seventeenth Amendment Closing Date” shall mean December 31, 2018.

 

“Subsidiary Stock” shall mean (a) with respect to the Equity Interests issued to
a Borrower or an Obligor by any Subsidiary (other than a Foreign Subsidiary),
100% of such issued and outstanding Equity Interests, and (b) with respect to
any Equity Interests issued to a Borrower or an Obligor by any Foreign
Subsidiary (i) 100% of such issued and outstanding Equity Interests not entitled
to vote (within the meaning of Treas. Reg. Section 1.956(c)(2)) and (ii) 66% (or
such greater percentage that, due to a change in an Applicable Law after June
27, 2013, (x) could not reasonably be expected to cause the undistributed
earnings of such  Foreign Subsidiary as determined for United States federal
income tax purposes to be treated as a deemed dividend to such Borrower or
Obligor and (y) could not reasonably be expected to cause any material adverse
tax consequences) of such issued and outstanding Equity Interests entitled to
vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)).

 

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“Term Loan Rate” shall mean an interest rate per annum equal to (a) the sum of
the Alternate Base Rate plus four percent (4.00%) with respect to Domestic Rate
Loans and (b) effective on the Seventeenth Amendment Closing Date and
thereafter, Eurodollar Rate Loans will be treated as Domestic Rate Loans and
repayable at the sum of the Alternate Base Rate plus four percent (4.00%).

 

“Termination Date” shall mean December 31, 2019 or such other date as the
Lenders may agree in writing to extend the Termination Date until, without there
being any obligation on the part of the Lenders to extend the Termination Date.

 

“WM Sale” shall have the meaning in the third “WHEREAS” clause on the first page
of the Seventeenth Amendment.

 

(c)Subsection 2.1(a)(ii) is hereby amended to read as follows:

 

(ii)  up to the lesser of (A) 75%, subject to the provisions of Section 2.1(b)
hereof, of the value of the Eligible Inventory, (B) 90% of the appraised net
orderly liquidation value of Eligible Inventory (as evidenced by an Inventory
appraisal satisfactory to Agent in its sole discretion exercised in good faith),
or (C) the Inventory Sublimit in the aggregate at any one time (“Inventory
Advance Rate” and together with the Receivables Advance Rate, collectively, the
“Advance Rates”), minus

 

(d)Section 6.5 is hereby amended to read as follows:

 

Minimum EBITDA. Maintain EBITDA at such levels as shall be determined by Agent
not later than January 15, 2019 but which shall not be less than that which will
generate “break even” EBITDA on a fixed charge basis during fiscal year 2019.

 

(e)Section 7.6 is hereby amended to read as follows:

 

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 $1,000,000.

 

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(f)Subsection 16.2(e) is hereby amended to read as follows:

 

(e) Notwithstanding (i) the existence of a Default or an Event of Default, (ii)
that any of the other applicable conditions precedent set forth in Section 8.2
hereof have not been satisfied or the commitments of Lenders to make Revolving
Advances hereunder have been terminated for any reason, or (iii) any other
contrary provision of this Agreement, Agent has at its discretion and without
the consent of any Lender, agreed to permit the outstanding Revolving Advances
to exceed the Formula Amount by up to $1,100,000 above the Formula Amount as of
the Seventeenth Amendment Closing Date (the “Out-of-Formula Loans”), provided
that the Borrower shall repay to Agent not less than $25,000 per week on account
of the outstanding balance of the Out-of-Formula Loans commencing April 1, 2019
through December 30, 2019 with the unpaid balance payable in full on the
Termination Date. Lenders holding the Revolving Commitments shall be obligated
to fund such Out-of-Formula Loans in accordance with their respective Revolving
Commitment Percentages, and such Out-of-Formula Loans shall be payable as
provided and shall bear interest at the Contract Rate; provided that, neither
Agent nor Lenders shall be deemed thereby to have changed the limits of Section
2.1(a) nor shall any Lender be obligated to fund Revolving Advances in excess of
its Revolving Commitment Amount. For purposes of this paragraph, the discretion
granted to Agent hereunder shall not preclude involuntary overadvances that may
result from time to time due to the fact that the Formula Amount was
unintentionally exceeded for any reason, including, but not limited to,
Collateral previously deemed to be either “Eligible Receivables” or “Eligible
Inventory”, as applicable, becomes ineligible, collections of Receivables
applied to reduce outstanding Revolving Advances are thereafter returned for
insufficient funds or overadvances are made to protect or preserve the
Collateral. In the event Agent involuntarily permits the outstanding Revolving
Advances to exceed the Formula Amount by more than ten percent (10%), Agent
shall use its efforts to have Obligors decrease such excess in as expeditious a
manner as is practicable under the circumstances and not inconsistent with the
reason for such excess. Revolving Advances made after Agent has determined the
existence of involuntary overadvances shall be deemed to be involuntary
overadvances and shall be decreased in accordance with the preceding sentence.
To the extent any Out-of-Formula Loans are not actually funded by the other
Lenders as provided for in this Section 16.2(e), Agent may elect in its
discretion to fund such Out-of-Formula Loans and any such Out-of-Formula Loans
so funded by Agent shall be deemed to be Revolving Advances made by and owing to
Agent, and Agent shall be entitled to all rights (including accrual of interest)
and remedies of a Lender holding a Revolving Commitment under this Agreement and
the Other Documents with respect to such Revolving Advances. Failure by Borrower
to repay any of such Out-of-Formula Loans as herein provided is an Event of
Default.

 

(g)Section 16.6 is hereby amended to read as follows:

 

(A)If to Agent or PNC at:

 

PNC Bank, National Association

40 Madison Avenue, 11th Floor

New York, NY 10173

Attention: Victor Alarcon, SVP

Telephone: (212) 752-6098

Facsimile: (212) 303-0060

 

with a copy to:

 

PNC Bank, National Association

PNC Agency Services

PNC Firstside Center

500 First Avenue, 4th Floor

Pittsburgh, Pennsylvania 15219

Attention: Lisa Pierce

Telephone: (412) 762-6442

Facsimile: (412) 762-8672

 

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with an additional copy to:

 

Wilentz, Goldman & Spitzer, P.A.

14 Wall Street

New York, New York 10005

Attention: Paul H. Shur, Esq.

Telephone: (646) 746-8910

 

(B)If to a Lender other than Agent, as specified on the signature pages hereof

 

(C)If to Borrowing Agent or any Obligor:

 

Air Industries Machining, Corp. 

360 Motor Parkway – Suite 100 

Hauppauge, New York 11788-5182 

Attention: Mr. Lou Melluzzo, President 

Telephone: (631) 252-1375 

Facsimile: (631) 514-5424

 

with a copy to:

 

Mandelbaum Salsburg, P.C.

1270 Avenue of the Americas

Suite 1808

New York, New York 10020

Attention: Vincent J. McGill, Esq.

Telephone: (212) 324-1876

Facsimile: (917) 383-1228

 

3)GUARANTOR’S RATIFICATION. (A) AIR GROUP hereby reaffirms its continuing
obligations under the terms of that certain Guaranty and Suretyship Agreement
dated August 24, 2007 executed by Air Industries Group, Inc. f/k/a Gales
Industries Incorporated, a Delaware corporation, and (B) Air Realty Group, LLC,
a Connecticut limited liability company, hereby reaffirms its continuing
obligations under the terms of that certain Continuing Unlimited Guaranty dated
March 9, 2015 (collectively, the “Guaranty”), and each acknowledges that (i) it
has read this Seventeenth Amendment, (ii) the Obligations under the Loan
Agreement are secured by the Guaranty, and (iii) they make such reaffirmation
with full knowledge of the terms thereof.

 

4)EQUITY INTERESTS. Obligor hereby represents, warrants, and covenants that no
Obligor or Subsidiary thereof (a) which is a corporation has designated or
permitted, nor shall designate or permit, any of its Equity Interests to be
treated as other than as “uncertificated securities” as contemplated by  Section
8-102 (18) of Article 8 of the Uniform Commercial Code except as permitted by
Agent, or (b) which is a limited liability company has designated or permitted,
nor shall designate or permit, any of its Equity Interests to be treated as a
“security” as contemplated by  Section 8-103 (c) of Article 8 of the Uniform
Commercial Code.  Obligor further represents, warrants, and covenants that by
virtue of the foregoing, Agent and Lenders have a first and only perfected
security interest in all such Equity interests by virtue of the Loan Agreement
grant of a security interest in all investment property and Subsidiary Stock and
Uniform Commercial Code financing statements filed as consistent with the Loan
Agreement and Other Documents.

 

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5)ACKNOWLEDGMENTS. Obligor acknowledges and represents that:

 

(A) the Loan Agreement and Other Documents, as amended hereby, are in full force
and effect without any defense, claim, counterclaim, right or claim of set-off;

 

(B) to the best of its knowledge, no default by the Agent or Lenders in the
performance of their duties under the Loan Agreement or the Other Documents has
occurred;

 

(C) all representations and warranties of each Obligor contained herein, in the
Loan Agreement and in the Other Documents are true and correct in all material
respects as of this date, except for any representation or warranty that
specifically refers to an earlier date;

 

(D) Obligor has taken all necessary action to authorize the execution and
delivery of this Seventeenth Amendment; and

 

(E) this Seventeenth Amendment is a modification of an existing obligation and
is not a novation.

 

6)CONDITIONS. As conditions to the effectiveness of any of the modifications,
consents, or waivers contained herein, all of the following shall be satisfied:

 

(A) Obligor shall provide the Agent with this Seventeenth Amendment, properly
executed on the Seventeenth Amendment Closing Date;

 

(B) Obligor shall pay to Agent an extension fee in the following amounts on the
following dates: (i) $250,000 on the earlier of (a) the date that the
Obligations are indefeasibly paid in full or (b) June 30, 2019, which amount is
deemed earned in full upon the Seventeenth Amendment Closing Date, (ii) $125,000
on the earlier of (a) the date that the Obligations are indefeasibly paid in
full or (b) December 31, 2019, which amount is deemed earned in full as of July
1, 2019, (iii) $125,000 on the earlier of (a) the date that the Obligations are
indefeasibly paid in full or (b) December 31, 2019, which amount is deemed
earned in full as of October 1, 2019 (iv) $500,000 on December 31, 2019, which
amount is deemed earned in full as of December 31, 2019;

 

(C) Michael Taglich (i) has loaned not less than Two Million Dollars
($2,000,000) to Borrower and not later than January 15, 2019 shall execute a
subordination agreement in form and substance acceptable to Agent and (ii) shall
make a capital infusion to Borrower in the amount of not less than Eight Hundred
Thousand Dollars ($800,000) not later than January 15, 2019 both to support
working capital of Borrower;

 

(D) Obligor shall pay all legal fees incurred by the Agent in entering into this
Seventeenth Amendment to Wilentz, Goldman & Spitzer, P.A. on the Seventeenth
Amendment Closing Date; and

 

(E) Obligor shall pay all other fees and costs incurred by the Agent in entering
into this Seventeenth Amendment on the Seventeenth Amendment Closing Date.

 

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7)MISCELLANEOUS. This Seventeenth Amendment shall be construed in accordance
with and governed by the laws of the State of New York, without reference to
that state’s conflicts of law principles. This Seventeenth Amendment, the Loan
Agreement and the Other Documents constitute the sole agreement of the parties
with respect to the subject matter thereof and supersede all oral negotiations
and prior writings with respect to the subject matter thereof. No amendment of
this Seventeenth Amendment, and no waiver of any one or more of the provisions
hereof shall be effective unless set forth in writing and signed by the parties
hereto. The illegality, unenforceability or inconsistency of any provision of
this Seventeenth Amendment shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Seventeenth
Amendment, the Loan Agreement or the Other Documents. This Seventeenth
Amendment, the Loan Agreement and the Other Documents are intended to be
consistent. However, in the event of any inconsistencies among this Seventeenth
Amendment, the Loan Agreement and/or any of the Other Documents, the terms of
this Seventeenth Amendment, then the Loan Agreement, shall control. This
Seventeenth Amendment may be executed in any number of counterparts and by the
different parties on separate counterparts. Each such counterpart shall be
deemed an original, but all such counterparts shall together constitute one and
the same agreement.

 

8)DEFINITIONS. The terms used herein and not otherwise defined or modified
herein shall have the meanings ascribed to them in the Loan Agreement. The terms
used herein and not otherwise defined or modified herein or defined in the Loan
Agreement shall have the meanings ascribed to them by the Uniform Commercial
Code as enacted in State of New York.

 

(SIGNATURES ON NEXT PAGE)

 

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IN WITNESS WHEREOF, the undersigned have signed and sealed this Seventeenth
Amendment the day and year above written.

 

ATTEST:   AIR INDUSTRIES MACHINING, CORP.           By: /s/ Michael Recca   By:
/s/ Luciano Melluzzo Name: MICHAEL RECCA   Name: LUCIANO MELLUZZO Title: Chief
Financial Officer   Title: Chief Executive Officer           ATTEST:   NASSAU
TOOL WORKS, INC.       (formerly known as NTW Operating Inc.)           By: /s/
Michael Recca   By: /s/ Luciano Melluzzo Name: MICHAEL RECCA   Name: LUCIANO
MELLUZZO Title: Chief Financial Officer   Title: Chief Executive Officer        
  ATTEST:   EUR-PAC CORPORATION           By: /s/ Michael Recca   By: /s/
Luciano Melluzzo Name: MICHAEL RECCA   Name: LUCIANO MELLUZZO Title: Chief
Financial Officer   Title: Chief Executive Officer           ATTEST:  
ELECTRONIC CONNECTION CORPORATION           By: /s/ Michael Recca   By: /s/
Luciano Melluzzo Name: MICHAEL RECCA   Name: LUCIANO MELLUZZO Title: Chief
Financial Officer   Title: Chief Executive Officer           ATTEST:   THE
STERLING ENGINEERING CORPORATION           By: /s/ Michael Recca   By: /s/
Luciano Melluzzo Name: MICHAEL RECCA   Name:   LUCIANO MELLUZZO Title: Chief
Financial Officer   Title: Chief Executive Officer

 

ATTEST:   AIR INDUSTRIES GROUP           By: /s/ Michael Recca   By: /s/ Luciano
Melluzzo Name:   MICHAEL RECCA   Name:   LUCIANO MELLUZZO Title: Chief Financial
Officer   Title: Chief Executive Officer           ATTEST:   AIR REALTY GROUP,
LLC           By: /s/ Michael Recca   By: /s/ Luciano Melluzzo Name:   MICHAEL
RECCA   Name: LUCIANO MELLUZZO Title: Chief Financial Officer   Title: Chief
Executive Officer

  

(SIGNATURE PAGE TO SEVENTEENTH AMENDMENT –

CONTINUED ON NEXT PAGE)

 

 

 

 

  PNC BANK, NATIONAL ASSOCIATION   Lender and as Agent         By: /s/ Victor
Alarcon   Name:   VICTOR ALARCON   Title: Senior Vice President

 

 

(END OF SIGNATURE PAGES TO SEVENTEENTH AMENDMENT)