Document:

Exh 10.1 Terex Corp Amended & Restated 2009 Omnibus Incentive Plan

 

 
 
 
 
Terex Corporation Amended and
Restated 2009 Omnibus Incentive Plan
 
Effective May 12, 2011

 

 
 
Contents

	
			
	Article 1. Establishment, Purpose, and Duration
	1
	 

	Article 2. Definitions
	1
	 

	Article 3. Administration
	7
	 

	Article 4. Shares Subject to This Plan and Maximum Awards
	9
	 

	Article 5. Eligibility and Participation
	11
	 

	Article 6. Stock Options
	11
	 

	Article 7. Stock Appreciation Rights
	14
	 

	Article 8. Restricted Stock and Restricted Stock Units
	15
	 

	Article 9. Performance Units/Performance Shares
	16
	 

	Article 10. Cash-Based Awards and Other Stock-Based Awards
	17
	 

	Article 11. Transferability of Awards and Shares
	18
	 

	Article 12. Performance Measures
	18
	 

	Article 13. Nonemployee Director Awards
	20
	 

	Article 14. Dividend Equivalents
	20
	 

	Article 15. Beneficiary Designation
	20
	 

	Article 16. Rights of Participants
	21
	 

	Article 17. Change of Control
	21
	 

	Article 18. Disability
	22
	 

	Article 19. Death
	22
	 

	Article 20. Amendment and Termination
	22
	 

	Article 21. Withholding
	23
	 

	Article 22. Successors
	23
	 

	Article 23. General Provisions
	24
	 

 
 
 

 

Terex Corporation Amended and Restated
2009 Omnibus Incentive Plan
Article 1. Establishment, Purpose, and Duration
1.1        Establishment. Terex Corporation, a Delaware corporation (hereinafter referred to as the “Company”), establishes an incentive compensation plan to be known as the Terex Corporation Amended and Restated 2009 Omnibus Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document. This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards. This Plan shall become effective upon stockholder approval (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof. 
1.2        Purpose of This Plan. The purpose of this Plan is to provide a means whereby Employees, Directors, and Third-Party Service Providers of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders. A further purpose of this Plan is to provide a means through which the Company may attract able individuals to become Employees or serve as Directors or Third-Party Service Providers of the Company and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company are of importance can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company.  The Company intends that certain compensation payable under this Plan will constitute “qualified performance-based compensation” under Section 162(m) of the Code.  This Plan shall be administratively interpreted and construed in a manner consistent with such intent.
1.3        Duration of This Plan. Unless sooner terminated as provided herein, this Plan shall terminate ten (10) years from the Effective Date. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan's terms and conditions. 
Article 2. Definitions
Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1    “Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited liability company) that is affiliated with the Company through stock or equity ownership or otherwise, and is designated as an Affiliate for purposes of this Plan by the Committee.
2.2    “Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3.
2.3    “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, or Other Stock-Based Awards, in each case subject to the terms of this Plan. 
 

 

 
2.4    “Award Agreement” means either: (a) a written or electronic agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, including any amendment or modification thereof, or (b) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. 
2.5    “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such terms in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2.6    “Board” or “Board of Directors” means the board of directors of the Company.
2.7    “Cash-Based Award” means an Award, denominated in cash, granted to a Participant as described in Article 10.
2.8    "Cause" shall mean:
		
	(a)
	Willful, substantial and continued failure to perform duties;

		
	(b)
	Willful engagement in conduct that is demonstrably and materially injurious to the Company; or

		
	(c)
	Entry by a court or quasi-judicial governmental agency of the United States or a political subdivision thereof of an order barring an Employee from serving as an officer or director of a public company. 

 
For the purposes of clauses, (a) and (b) of this definition, no act or failure to act shall be deemed "willful" (x) if caused by a Disability or (y) unless done, or omitted to be done, not in good faith or without reasonable belief that such act or omission was in the best interest of the Company.
2.9        "Change in Control” shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied:
(i)    any person or group (as described in regulations under Section 409A of the Code) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company) representing 
 
(A) more than 50% or more of the combined voting power of the Company's then outstanding securities, excluding any person or group who becomes such a Beneficial Owner in connection with transactions described in clauses (x), (y) or (z) of paragraph (iii) below and excluding the acquisition by a person or group holding more than 50 percent of such voting power or 
 
(B) 30 percent or more of the combined voting power of Terex's then outstanding securities during any twelve-month period;
 
(ii)    there is a change in the composition of the Board of Directors of the Company occurring during any twelve month period, as a result of which fewer than a majority of the directors are Incumbent Directors (“Incumbent Directors” shall mean directors who either (x) are members of the Board as of the date of this Agreement or (y) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination); or

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(iii)    there is consummated, in any transaction or series of transactions during a twelve-month period, a complete liquidation or dissolution of the Company or a merger, consolidation or sale of all or substantially all of the Company's assets (collectively, a “Business Combination”) other than a Business Combination after which (x)  the stockholders of the Company own more than 50 percent of the common stock or combined voting power of the voting securities of the company resulting from the Business Combination, (y) at least a majority of the board of directors of the resulting corporation were Incumbent Directors and (z) no individual, entity or group (excluding any corporation resulting from the Business Combination or any employee benefit plan of such corporation or of the Company) becomes the Beneficial Owner of 35 percent or more of the combined voting power of the securities of the resulting corporation, who did not own such securities immediately before the Business Combination.
 
This definition of “Change in Control” is intended to comply with the definition of “Change in Control” under Code Section 409A.  For purposes of this Section 2.9, any of the events described above shall in any case constitute a "change in the ownership or effective control" of the Company or a "change in the ownership of a substantial portion of the assets" of the Company, in each case, within the meaning of Code Section 409A in order to be a “Change in Control” hereunder.
 
For purposes of this Section 2.9, the rules of Code Section 318(a) and the regulations issued thereunder shall be used to determine stock ownership.
2.10    “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time or any successor statute thereto. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.
2.11    “Committee” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee designated by the Board to administer this Plan. The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board. Each member of the Committee shall be a Nonemployee Director and an Outside Director, except that if the Board determines that (i) the Plan cannot or need not satisfy the requirements of Rule 16b-3 of the Exchange Act (such that grants of Awards are not or need not be exempt from Section 16(b) of the Exchange Act), then there may be less than two members of the Committee, and the members of the Committee need not be Nonemployee Directors or (ii) they no longer want the Plan to comply with the requirements of Section 162(m) of the Code and the regulations thereunder, or the Plan need not comply with such requirements, then there may be less than two members of the Committee and the members of the Committee need not be Outside Directors.  If the Committee does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.  
2.12    “Company” means Terex Corporation, a Delaware corporation, and any successor thereto as provided in Article 20 herein. 
2.13    “Covered Employee” means any Employee who is or may become a “Covered Employee,” as defined in Code Section 162(m).
2.14    “Director” means any individual who is a member of the Board of Directors.
2.15    “Disability” means, subject to an examination as specified by the Committee, a Participant's inability to engage in any substantial gainful activity because of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of twelve (12) months or longer.

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2.16        “Dividend Equivalents” has the meaning set forth in Section 3.2(i).
2.17        “Effective Date” has the meaning set forth in Section 1.1.
2.18    “Employee” means any individual performing services for the Company, an Affiliate, or a Subsidiary and designated as an employee of the Company, a Subsidiary or an Affiliate on the payroll records thereof. An Employee shall not include any individual during any period he or she is classified or treated by the Company, Affiliate, or Subsidiary as an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company, Affiliate, or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company, Affiliate, or Subsidiary during such period. An individual shall not cease to be an Employee in the case of: (a) any leave of absence approved by the Company or (b) transfers between locations of the Company or between the Company, any Affiliates, or any Subsidiaries. Neither service as a Director nor payment of a Director's fee by the Company shall be sufficient to constitute "employment" by the Company.
2.19    “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.20    “Extraordinary Items” means (a) extraordinary, unusual, and/or nonrecurring items of gain or loss; (b) gains or losses on the disposition of a business; (c) changes in tax or accounting regulations or laws; or (d) the effect of a merger or acquisition.
2.21        “Fair Market Value” or “FMV” means:
(a)    If the Shares are listed or admitted to trading on a securities exchange registered under the Exchange Act, the "Fair Market Value" of a Share as of a specified date shall mean the per Share closing price of the Shares for the date as of which Fair Market Value is being determined (or if there was no reported closing price on such date, on the last preceding date on which the closing price was reported) on the principal securities exchange on which the Shares are listed or admitted to trading.   
(b)    If the Shares are not listed or admitted to trading on any such exchange but are listed as a national market security on the NASDAQ Stock Market, Inc. ("NASDAQ"), traded in the over-the-counter market or listed or traded on any similar system then in use, the Fair Market Value of a Share shall be the last sales price for the date as of which the Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) reported on such system.  If the Shares are not listed or admitted to trading on any such exchange, are not listed as a national market security on NASDAQ and are not traded in the over-the-counter market or listed or traded on any similar system then in use, but are quoted on NASDAQ or any similar system then in use, the Fair Market Value of a Share shall be the average of the closing high bid and low asked quotations on such system for the Shares on the date in question.  
(c)    In the event Shares are not publicly traded at the time a determination of their value is required to be made hereunder, the price of a Share as determined by the Committee in its sole discretion by application of a reasonable valuation method.  The Committee may, in its sole discretion, seek the advice of outside experts in connection with any such determination.  

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2.22    “Full-Value Award” means an Award other than in the form of an ISO, NQSO, or SAR, and which is settled by the issuance of Shares.
2.23    “Grant Date” means the date an Award is granted to a Participant pursuant to the Plan.
2.24    “Grant Price” means the price established at the time of grant of an SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.
2.25    “Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee and that is designated as an Incentive Stock Option that is intended to meet the requirements of Code Section 422 or any successor provision.
2.26    “Insider” shall mean an individual who is, on the relevant date, an officer or Director of the Company, or a Beneficial Owner of more than ten percent (10%) of any class of the Company's equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.
2.27     “Nonemployee Director” means a Director who is a “Non-Employee Director” within the meaning of Rule 16b-3(b)(3)(i) of the Exchange Act.
2.28    “Nonemployee Director Award” means any NQSO, SAR, or Full-Value Award granted, whether singly, in combination, or in tandem, to a Participant who is a Nonemployee Director pursuant to such applicable terms, conditions, and limitations as the Board or Committee may establish in accordance with this Plan.
2.29    “Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.
2.30    “Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.
2.31    “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.32    “Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.
2.33    “Outside Director” is a Director who is an “outside director” within the meaning of Section 162(m)(4)(C)(i) of the Code.
2.34    “Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted.
2.35    “Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.

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2.36    “Performance Measures” mean measures as described in Article 12 on which the performance goals are based and which are approved by the Company's stockholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.
2.37    “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.
2.38    “Performance Share” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
2.39    “Performance Unit” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
2.40    “Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.
2.41    “Plan” means the Terex Corporation Amended and Restated 2009 Omnibus Incentive Plan.
2.42    “Plan Year” means the Company's fiscal year which begins January 1 and ends December 31.
2.43    “Prior Plans” means the Terex Corporation 2000 Incentive Plan and the 1996 Terex Corporation Long Term Incentive Plan, as amended.
2.44    “Restricted Stock” means an Award granted to a Participant pursuant to Article 8.
2.45    “Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8, except no Shares are actually awarded to the Participant on the Grant Date.
2.46    “SEC” means the United States Securities and Exchange Commission.
2.47    “Share” means a share of common stock of the Company, no par value per share. 
2.48    “Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to the terms of Article 7 herein. 
2.49    “Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, an interest of more than fifty percent (50%) by reason of stock ownership or otherwise. 
2.50    “Third-Party Service Provider” means any consultant, agent, advisor, or independent contractor who renders services to the Company, a Subsidiary, or an Affiliate that: (a) are not in connection with the offer and sale of the Company's securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company's securities.

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Article 3. Administration
3.1        General. The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals. 
3.2        Authority of the Committee. Subject to any express limitations set forth in the Plan, the Committee shall have full and exclusive discretionary power and authority to take such actions as it deems necessary and advisable with respect to the administration of the Plan including, but not limited to, the following:
(a)    To determine from time to time which of the persons eligible under the Plan shall be granted Awards, when and how each Award shall be granted, what type or combination of types of Awards shall be granted, the provisions of each Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Shares pursuant to an Award, and the number of Shares subject to an Award;
(b)    To construe and interpret the Plan and Awards granted under it, and to establish, amend, and revoke rules and regulations for its administration. The Committee, in the exercise of this power, may correct any defect, omission, or inconsistency in the Plan or in an Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective;
(c)    To approve forms of Award Agreements for use under the Plan;
(d)    To determine Fair Market Value of a Share in accordance with Section 2.21 of the Plan;
(e)    To amend the Plan or any Award Agreement as provided in the Plan;
(f)    To adopt subplans and/or special provisions applicable to stock awards regulated by the laws of a jurisdiction other than and outside of the United States. Such subplans and/or special provisions may take precedence over other provisions of the Plan, but unless otherwise superseded by the terms of such subplans and/or special provisions, the provisions of the Plan shall govern;
(g)    To authorize any person to execute on behalf of the Company any instrument required to effect the grant of a stock award previously granted by the Committee or the Board;
(h)    To determine whether Awards will be settled in Shares of common stock, cash, or in any combination thereof;
(i)    To determine whether Awards will be adjusted for Dividend Equivalents, with “Dividend Equivalents” meaning a credit, made at the discretion of the Committee, to the account of a Participant in an amount equal to the cash dividends paid on one Share for each Share represented by an Award held by such Participant; provided, however, that Options and SARs may not be adjusted for Dividend Equivalents;

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(j)    To establish a program whereby Participants designated by the Committee may reduce compensation otherwise payable in cash in exchange for Awards under the Plan; 
(k)    To authorize a program permitting eligible Participants to surrender outstanding Awards in exchange for newly granted Awards; 
(l)    To impose such restrictions, conditions, or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares, including, without limitation: (i) restrictions under an insider trading policy and (ii) restrictions as to the use of a specified brokerage firm for such resales or other transfers; and
(m)    To provide, either at the time an Award is granted or by subsequent action, that an Award shall contain as a term thereof, a right, either in tandem with the other rights under the Award or as an alternative thereto, of the Participant to receive, without payment to the Company, a number of Shares, cash, or a combination thereof, the amount of which is determined by reference to the value of Shares.
3.3        Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company or any Subsidiary or Affiliate or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize one or more Directors or officers, in accordance with applicable law, of the Company to do one or both of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards; (b) determine the size of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such Director or officer for Awards granted to an Employee who is considered an Insider or whose compensation is subject to Section 162(m) of the Code; and (ii) the Director(s) or officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.

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Article 4. Shares Subject to This Plan and Maximum Awards
4.1        Number of Shares Authorized and Available for Awards. The number of Shares authorized and available for Awards under the Plan shall be determined in accordance with the following provisions:
(a)    Subject to adjustment as provided in Section 4.4 of the Plan, the maximum number of Shares available for issuance under the Plan shall be 5,000,000 shares, plus (i) the number of Shares remaining available for issuance under the Prior Plans that are not subject to outstanding Awards as of the Effective Date, and (ii) the number of Shares subject to Awards outstanding under the Prior Plans as of the Effective Date but only to the extent that such outstanding Awards are forfeited, expire, or otherwise terminate without the issuance of such Shares.
(b)    The maximum number of Shares that may be issued pursuant to ISOs under the Plan shall be 5,000,000.
4.2        Share Usage. Shares covered by an Award shall be counted as used only to the extent they are actually issued. Any Shares related to Awards under this Plan or under the Prior Plans that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of the Shares, or are settled in cash in lieu of Shares, or are exchanged with the Committee's permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under this Plan. Moreover, if the Option Price of any Option granted under this Plan or the tax withholding requirements with respect to any Award granted under this Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), the tendered Shares shall again be available for grant under this Plan. Furthermore, if an SAR is exercised and settled in Shares, the difference between the total Shares exercised and the net Shares delivered shall again be available for grant under this Plan, with the result being that only the number of Shares issued upon exercise of an SAR is counted against the Shares available for issuance under the Plan. The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury Shares. 
4.3        Annual Award Limits. Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an “Annual Award Limit” and, collectively, “Annual Award Limits”), as adjusted pursuant to Sections 4.4 and 20.2, shall apply to grants of such Awards under this Plan: 
(a)    Options and SARs: The maximum aggregate number of Shares subject to Options and SARs granted to any one Participant in any one Plan Year shall be 750,000.
(b)    Restricted Stock and Restricted Stock Units: The maximum aggregate number of Shares subject to Restricted Stock and Restricted Stock Units granted to any one Participant in any one Plan Year shall be 750,000.
(c)    Performance Units: The maximum aggregate amount awarded or credited with respect to Performance Units to any one Participant in any one Plan Year in respect of any performance period may not exceed $20,000,000, determined as of the date of grant. 
(d)    Performance Shares: The maximum aggregate number of Performance Shares that a Participant may receive in any one Plan Year in respect of any performance period shall be 750,000 Shares, determined as of the date of grant.

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(e)    Cash-Based Awards: The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Plan Year in respect of any performance period may not exceed $20,000,000, determined as of the date of grant.
(f)    Other Stock-Based Awards: The maximum aggregate amount awarded or credited with respect to Other Stock-Based Awards to any one Participant in any one Plan Year in respect of any performance period may not exceed 750,000 Shares, determined as of the date of grant.
4.4        Adjustments in Authorized Shares. Adjustment in authorized Shares available for issuance under the Plan or under an outstanding Award and adjustments in Annual Award Limits shall be subject to the following provisions:
(a)    In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in-kind, or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants' rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards, provided that the Committee, in its sole discretion, shall determine the methodology or manner of making such substitution or adjustment. 
(b)    The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under this Plan to reflect such changes or distributions described in Section 4.4(a). 
(c)    The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan. 
(d)    Subject to the provisions of Article 18 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with the rules under Code Sections 422 and 424, as and where applicable. 

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Article 5. Eligibility and Participation
5.1        Eligibility. Individuals eligible to participate in this Plan include all Employees, Directors, and Third-Party Service Providers.
5.2        Actual Participation. Subject to the provisions of this Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of any and all terms permissible by law and the amount of each Award. 
Article 6. Stock Options
6.1        Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Employees and Directors in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion. 
6.2        Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. 
6.3        Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price must be at least equal to one hundred percent (100%) of the FMV of a Share as of the Option's Grant Date.
6.4        Term of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 
6.5        Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.
6.6        Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any exercised Option shall be payable to the Company in accordance with one of the following methods: 
(a)    In cash or its equivalent; 
(b)    By tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price; 
(c)    By a cashless (broker-assisted) exercise; 
(d)    By any combination of (a), (b), and (c); or 
 
 

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(e)    Any other method approved or accepted by the Committee in its sole discretion. 
Subject to any governing rules or regulations, as soon as practicable, but in no event later than 45 days, after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares. Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars or Shares, as applicable.
6.7        Termination of Employment. Each Participant's Award Agreement may set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment or provision of services to the Company or any Affiliate or Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.  In the absence of a specific provision in a Participant's Award Agreement, in the event of the termination of employment of a Participant or the termination or separation from service of a Third-Party Service Provider or a Director for any reason (other than by reason of death, Disability or Change in Control), the term of any Options granted to such Participant outstanding and vested as of the date of (or as a result of) such termination or separation, shall expire six (6) months after the date of such termination or separation, provided, however, that in no instance may the term of an Award, as so extended, extend beyond the end of the original term of the Award Agreement.  Except as otherwise provided by the Committee, any unvested options held by such Participant under this Plan shall be forfeited upon such termination or separation.
6.8        Special Rules Regarding ISOs. Notwithstanding any provision of the Plan to the contrary, an ISO granted to a Participant shall be subject to the following rules:
(a)    Special ISO Definitions.
(i)    “Parent Corporation” shall mean as of any applicable date a corporation in respect of the Company that is a parent corporation within the meaning of Code Section 424(e).
(ii)    “ISO Subsidiary” shall mean as of any applicable date any corporation in respect of the Company that is a subsidiary corporation within the meaning of Code Section 424(f).
(iii)    A “10% Owner” is an individual who owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its Parent Corporation or any ISO Subsidiary. 
(b)    Eligible Employees. ISOs may be granted solely to eligible Employees of the Company, Parent Corporation, or ISO Subsidiary (as permitted under Code Sections 422 and 424).
 (c)    Option Price. The Option Price of an ISO granted under the Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price must at least equal one hundred percent (100%) of the Fair Market Value of a Share as of the ISO's Grant Date (in the case of 10% Owners, the Option Price may not be not less than 110% of such Fair Market Value).

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(d)    Right to Exercise. Any ISO granted to a Participant under the Plan shall be exercisable during his or her lifetime solely by such Participant.
(e)    Exercise Period. The period during which a Participant may exercise an ISO shall not exceed ten (10) years (five (5) years in the case of a Participant who is a 10% Owner) from the date on which the ISO was granted.
(f)    Termination of Employment. In the event a Participant terminates employment due to death or disability, as defined under Code Section 22(e)(3), the Participant (or his beneficiary, in the case of death) shall have the right to exercise the Participant's ISO Award during the period specified in the applicable Award Agreement solely to the extent the Participant had the right to exercise the ISO on the date of his death or disability, as applicable; provided, however that such period may not exceed one (1) year from the date of such termination of employment or, if shorter, the remaining term of the ISO. In the event a Participant terminates employment for reasons other than death or disability, as defined under Code Section 22(e)(3), the Participant shall have the right to exercise the Participant's ISO Award during the period specified in the applicable Award Agreement solely to the extent the Participant had the right to exercise the ISO on the date of such termination of employment; provided, however that such period may not exceed three (3) months from the date of such termination of employment or, if shorter, the remaining term of the ISO.
(g)    Dollar Limitation. To the extent that the aggregate Fair Market Value of: (i) the Shares with respect to which Options designated as Incentive Stock Options plus (ii) the Shares of common stock of the Company, Parent Corporation, and any Subsidiary with respect to which other Incentive Stock Options are exercisable for the first time by a holder of an ISO during any calendar year under all plans of the Company and any Affiliate and Subsidiary exceeds one hundred thousand dollars ($100,000), such Options shall be treated as Nonqualified Stock Options. For purposes of the preceding sentence, Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time the Option or other Incentive Stock Option is granted.
(h)    Duration of Plan. No Incentive Stock Options may be granted more than ten (10) years after the earlier of: (i) adoption of this Plan by the Board, or (ii) the Effective Date.
(i)    Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO, such Participant shall notify the Company of such disposition within thirty (30) days thereof. The Company shall use such information to determine whether a disqualifying disposition as described in Code Section 421(b) has occurred.
(j)    Transferability. No ISO granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided, however, at the discretion of the Committee, an ISO may be transferred to a grantor trust under which the Participant making the transfer is the sole beneficiary.

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Article 7. Stock Appreciation Rights
7.1        Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. Subject to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs. 
7.2        Grant Price. The Grant Price for each grant of an SAR shall be determined by the Committee and shall be specified in the Award Agreement; provided, however, the Grant Price must be at least equal to one hundred percent (100%) of the FMV of a Share as of the Grant Date.
7.3        SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.
7.4        Term of SAR. The term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary of its grant date. 
7.5        Exercise of SARs. SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.
7.6        Settlement of SARs. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company, within 45 days of the date of exercise, in an amount determined by multiplying:
(a)    The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by
(b)    The number of Shares with respect to which the SAR is exercised.
7.7        Form of Payment. Payment, if any, with respect to an SAR settled in accordance with Section 7.6 of the Plan shall be made in accordance with the terms of the applicable Award Agreement, in cash, Shares, or a combination thereof, as the Committee determines.
7.8        Termination of Employment. Each Award Agreement may set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with or provision of services to the Company, Affiliates, or Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.  In the absence of a specific provision in a Participant's Award Agreement, in the event of the termination of employment or separation from service of a Participant for any reason (other than by reason of death, Disability or Change in Control), the term of any SAR granted to such Participant outstanding and vested as of the date (or as a result of) such termination or separation, shall expire six (6) months after the date of such termination or separation, provided, however, that in no instance may the term of an Award, as so extended, extend beyond the end of the original term of the Award Agreement.  Except as otherwise provided by the Committee, any unvested SARs held by such Participant under this Plan shall be forfeited upon such termination or separation.

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7.9        Other Restrictions. The Committee shall impose such other conditions or restrictions on any Shares received upon exercise of an SAR granted pursuant to this Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.
Article 8. Restricted Stock and Restricted Stock Units
8.1        Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the Grant Date. 
8.2        Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock, or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine. 
8.3        Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units. To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion, shall determine. 
8.4        Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.3, each certificate representing Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion: The sale or transfer of Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Plan, and in the associated Award Agreement. A copy of this Plan and such Award Agreement may be obtained from Terex Corporation
8.5        Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant's Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.

15

 

 
 
8.6        Termination of Employment. Each Award Agreement may set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant's employment with or provision of services to the Company or any Affiliate or Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.  In the absence of a specific provision in a Participant's Award Agreement, in the event of the termination of employment of a Participant or the termination or separation from service of a Third-Party Service Provider or a Director for any reason (other than by reason of death, Disability or Change in Control), any unvested Restricted Stock and/or Restricted Stock Units granted to such Participant under this Plan shall be forfeited upon such termination or separation.
Article 9. Performance Units/Performance Shares
9.1        Grant of Performance Units/Performance Shares. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.
9.2        Value of Performance Units/Performance Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to 100% of Fair Market Value of a Share as of the Grant Date. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant. 
9.3        Earning of Performance Units/Performance Shares. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive a payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
9.4        Form and Timing of Payment of Performance Units/Performance Shares. Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares in accordance with the terms of the Award Agreement. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
9.5        Termination of Employment. Each Award Agreement may set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant's employment with or provision of services to the Company or any Affiliate or Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.  In the absence of a specific provision in a Participant's Award Agreement, in the event of the termination of employment of a Participant or the termination or separation from service of a Third-Party Service Provider or a

16

 

 
Director for any reason (other than by reason of death, Disability or Change in Control), any unvested Performance Units and/or Performance Shares granted to such Participant under this Plan shall be forfeited upon such termination or separation.
Article 10. Cash-Based Awards and Other Stock-Based Awards
10.1    Grant of Cash-Based Awards. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.
10.2    Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares, and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.3    Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
10.4    Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.  In the absence of an Award Agreement or a specific provision in a Participant's Award Agreement to the contrary, no Participant shall have any right to receive payment of any Cash-Based Award or Other Stock-Based Award unless such Participant remains in the employ of the Company at the time of payment of such Award.
10.5    Termination of Employment. The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards or Other Stock-Based Awards following termination of the Participant's employment with or provision of services to the Company or any Affiliate or Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.  In the absence of an Award Agreement or a specific provision in a Participant's Award Agreement, in the event of a Participant's termination of employment or separation from service for any reason (other than by reason of death, Disability or Change in Control), any unvested Cash-Based Awards or Other Stock-Based Awards granted to such Participant under this Plan shall be forfeited upon such termination or separation.

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Article 11. Transferability of Awards and Shares
11.1    Transferability of Awards. Except as provided in Section 6.8(j) and Section 11.2, during a Participant's lifetime, his or her Awards shall be exercisable only by the Participant. Awards shall not be transferable other than by will or the laws of descent and distribution or pursuant to a domestic relation order entered into by a court of competent jurisdiction; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation of this Section 11.1 shall be null and void; provided, however, Options or SARs that have vested may be transferred to a charitable organization or a Family Member of such Participant. The Committee may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable or Shares deliverable in the event of, or following, the Participant's death may be provided. For purposes of this provision, Family Member means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee's household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than 50% of the voting interests.
11.2    Committee Action. Except as provided in Section 6.8(j), the Committee may, in its discretion, determine that notwithstanding Section 11.1, any or all Awards shall be transferable to and exercisable by such transferees, and be subject to such terms and conditions as the Committee may deem appropriate; provided, however, no Award may be transferred for value without stockholder approval. 
11.3    Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired by a Participant under the Plan as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed or traded, or under any blue sky or state securities laws applicable to such Shares.
Article 12. Performance Measures
12.1    Performance Measures. The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be set within the shorter of: (a) ninety (90) days after the beginning of the Performance Period, or (b) twenty-five percent (25%) of the Performance Period has elapsed, and shall be limited to the following Performance Measures:
		
	(a)
	Net earnings or net income (before or after taxes);

		
	(b)
	Earnings per share;

		
	(c)
	Net sales or revenue growth;

		
	(d)
	Net operating profit or income;

		
	(e)
	Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);

		
	(f)
	Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);

		
	(g)
	Earnings before or after taxes, interest, depreciation, and/or amortization;

		
	(h)
	Gross or operating margins;

		
	(i)
	Productivity ratios;

		
	(j)
	Share price (including, but not limited to, growth measures and total stockholder return);

		
	(k)
	Cost control;

		
	(l)
	Margins;

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	(m)
	Operating efficiency;

		
	(n)
	Market share;

		
	(o)
	Customer satisfaction or employee satisfaction; 

		
	(p)
	Working capital; 

		
	(q)
	Economic value added or EVA® (net operating profit after tax minus the sum of capital multiplied by the cost of capital);

		
	(r)
	Management development;

		
	(s)
	Diversity;

		
	(t)
	Succession planning;

		
	(u)
	Financial controls;

		
	(v)
	Ethics;

		
	(w)
	Information technology;

		
	(x)
	Marketing initiatives;

		
	(y)
	Business development;

		
	(z)
	Financial structure;

		
	(aa)
	Taxes;

(bb) Depreciation and amortization; and
(cc) Total Stockholder Return.
 
Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate, or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (j) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 12, provided that any such acceleration  complies with Treasury Regulation 1.162-27(e)(2)(iii)(B). 

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12.2    Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) Extraordinary Items, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
12.3    Adjustment of Performance-Based Compensation. Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.
12.4    Committee Discretion. In the event that applicable tax or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 12.1.
Article 13. Nonemployee Director Awards
The Board or Committee shall determine and approve all Awards to Nonemployee Directors. The terms and conditions of any grant of any Award to a Nonemployee Director shall be set forth in an Award Agreement.
Article 14. Dividend Equivalents
Any Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests, or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding the foregoing, the Committee may not grant Dividend Equivalents based on the dividends declared on Shares that are subject to an Option, ISO, or SAR Award and further no dividends or Dividend Equivalents shall be paid out with respect to any unvested Performance Shares or Performance Units.
Article 15. Beneficiary Designation
Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant's death shall be paid to or exercised by the Participant's executor, administrator, or legal representative. 

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Article 16. Rights of Participants
16.1    Employment. Nothing in this Plan or an Award Agreement shall: (a) interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries to terminate any Participant's employment or service on the Board or to the Company at any time or for any reason not prohibited by law, or (b) confer upon any Participant any right to continue his employment or service as a Director or Third-Party Service Provider for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any Affiliate or Subsidiary and, accordingly, subject to Articles 3 and 18, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries. 
16.2    Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
16.3    Rights as a Stockholder. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 17. Change in Control
Notwithstanding any other provision of this Plan to the contrary, the provisions of this Article 17 shall apply in the event of a Change in Control, unless otherwise determined by the Committee in connection with the grant of an Award as reflected in the applicable Award Agreement.  In the event of a Change in Control, (i) any unvested Awards granted to a Participant shall immediately vest, including any Awards that are subject to Performance Measures, which shall vest at target, and (ii) such Participant shall have the unqualified right to exercise any Options or SARs that are outstanding as of the date of such Change in Control for a period of three (3) years after such Change in Control of the Company, provided, however, that in no instance may the term of the Awards, as so extended, extend beyond the end of the original term of the Award Agreement; provided, further, however that the accelerated vesting of any Award shall not effect the distribution date of any Award subject to Code Section 409A.

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Article 18. Disability
Except for ISOs covered by Section 6.8(f), in the absence of a specific provision in a Participant's Award Agreement, if a Participant terminates employment or separates from service due to Disability, (i) any unvested Awards granted to such Participant shall immediately vest and (ii) such Participant, or his guardian or legal representative, shall have the unqualified right to exercise any Options or SARs that are outstanding as of the date of such termination or separation for a period of one year after such termination or separation, provided, however, in no instance may the term of the Option or SAR, as so extended, extend beyond the end of the original term of the Award Agreement; provided, further, however that the accelerated vesting of any Award shall not effect the distribution date of any Award subject to Code Section 409A.
Article 19. Death
Except for ISOs covered by Section 6.8(f), in the absence of a specific provision in a Participant's Award Agreement, if a Participant dies while employed or otherwise engaged by or providing services to the Company or any of its Subsidiaries or Affiliates, as the case may be, (i) any unvested Awards granted to such Participant under the Plan shall immediately vest and (ii) any Options or SARs outstanding as of the date of such Participant's death shall be exercisable by the estate of such Participant or by any person who acquired such Award by bequest or inheritance, at any time within one year after the death of such Participant, provided, however, that in no instance may the term of the Option or SAR, as so extended, extend beyond the end of the original term of the Award Agreement.
Article 20. Amendment and Termination
20.1    Amendment and Termination of the Plan and Award Agreements. 
(a)    Subject to subparagraphs (b) and (c) of this Section 20.1 and Section 20.3 of the Plan, the Board may at any time alter, amend, suspend or terminate the Plan as it shall deem advisable and the Committee may, at any time and from time to time, amend an outstanding Award Agreement.
(b)    Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of an outstanding Award may not be amended to reduce the exercise price of outstanding Options or to reduce the Grant Price of outstanding SARs or cancel outstanding Options or SARs in exchange for cash, other Awards, or Options or SARs with an exercise price or Grant Price, as applicable, that is less than the exercise price of the cancelled Options or the Grant Price of the cancelled SARs without shareholder approval.
(c)    Notwithstanding the foregoing, no amendment of this Plan shall be made without stockholder approval if stockholder approval is required pursuant to rules promulgated by any stock exchange or quotation system on which Shares are listed or quoted or by applicable U.S. state corporate laws or regulations, applicable U.S. federal laws or regulations, and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

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20.2    Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. Subject to Section 12.3, the Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan. By accepting an Award under this Plan, a Participant agrees to any adjustment to the Award made pursuant to this Section 20.2 without further consideration or action.
20.3    Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary, other than Sections 20.2, 20.4, or 23.14, no termination or amendment of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.
20.4    Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Committee may amend the Plan or an Award Agreement, to take effect as deemed necessary or advisable for the purpose of conforming the Plan or an Award Agreement to any present or future law relating to plans of this or similar nature, and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 20.4 to any Award granted under the Plan without further consideration or action.
Article 21. Withholding
21.1    Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
21.2    Share Withholding. With respect to withholding required upon the exercise of Options or SARs, the lapse of restrictions on Restricted Stock, the delivery of cash or Shares in the settlement of Restricted Stock Units, or the achievement of performance goals related to Performance Units or Performance Shares, or any other taxable event arising as a result of an Award granted hereunder (collectively and individually referred to as a “Share Payment”), Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold from a Share Payment the number of Shares having a Fair Market Value on the date the withholding is to be determined equal to the minimum withholding requirement. All such elections shall be irrevocable, made electronically or in writing and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. 
Article 22. Successors
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

23

 

 
 
Article 23. General Provisions
23.1    Forfeiture Events.     
(a)    The Committee may specify in an Award Agreement that the Participant's rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for Cause, termination of the Participant's provision of services to the Company, Affiliate, or Subsidiary, violation of material Company, Affiliate, or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, any Affiliate, or Subsidiary. 
(b)    If a Participant fails to sign an Award Agreement within six (6) months of such Award Agreement being delivered to the Participant by the Company, the Award being granted pursuant to such Award Agreement shall be subject to forfeiture.
(c)    If any of the Company's financial statements are required to be restated resulting from errors, omissions, or fraud, the Committee may (in its sole discretion, but acting in good faith) direct that the Company recover all or a portion of any Award granted or paid to a Participant or make additional payments or grants to a Participant for any Award with respect to any fiscal year of the Company the financial results of which are affected by such restatement. The amount to be recovered from or paid to the Participant shall be the amount by which the Award differed from the amount that would have been payable to the Participant had the financial statements been initially filed as restated. In no event shall the amount to be recovered by the Company be less than the amount required to be repaid or recovered as a matter of law (including but not limited to amounts that are required to be recovered or forfeited under Section 304 of the Sarbanes-Oxley Act of 2002). The Committee shall determine the method of any recovery or payment pursuant to this provision.
23.2    Legend. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
23.3    Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
23.4    Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
23.5    Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 
23.6    Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to:

24

 

(a)    Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b)    Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
23.7    Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
23.8    Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
23.9    Employees Based Outside of the United States. Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees, Directors, or Third-Party Service Providers, the Committee, in its sole discretion, shall have the power and authority to:
(a)    Determine which Affiliates and Subsidiaries shall be covered by this Plan;
(b)    Determine which Employees, Directors, or Third-Party Service Providers outside the United States are eligible to participate in this Plan;
(c)    Modify the terms and conditions of any Award granted to Employees, Directors, or Third-Party Service Providers outside the United States to comply with applicable foreign laws;
(d)    Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 23.9 by the Committee shall be attached to this Plan document as appendices; and
(e)    Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.
23.10    Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
23.11    Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, its Subsidiaries, or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from

25

 

the Company or any Affiliate or Subsidiary under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or the Subsidiary or Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, or the Subsidiary or Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.
23.12    No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
23.13    Retirement and Welfare Plans. Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company's or any Subsidiary's or Affiliate's retirement plans (both qualified and nonqualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant's benefit. 
23.14    Deferred Compensation.
(a)    The Committee may grant Awards under the Plan that provide for the deferral of compensation within the meaning of Code Section 409A. It is intended that such Awards comply with the requirements Section 409A so that amounts deferred thereunder are not includible in income and are not subject to an additional tax of twenty percent (20%) at the time the deferred amounts are no longer subject to a substantial risk of forfeiture.
(b)    Notwithstanding any provision of the Plan or Award Agreement to the contrary, if one or more of the payments or benefits to be received by a Participant pursuant to an Award would constitute deferred compensation subject to Code Section 409A and would cause the Participant to incur any penalty tax or interest under Code Section 409A or any regulations or Treasury guidance promulgated thereunder, the Committee may reform the Plan and Award Agreement to comply with the requirements of Code Section 409A and to the extent practicable maintain the original intent of the Plan and Award Agreement. By accepting an Award under this Plan, a Participant agrees to any amendments to the Award made pursuant to this Section 21.14(b) without further consideration or action.
23.15    Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
23.16    No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company's or a Subsidiary's or an Affiliate's right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.
23.17    Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award

26

 

Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware to resolve any and all issues that may arise out of or relate to this Plan or any related Award Agreement.
23.18    Delivery and Execution of Electronic Documents. To the extent permitted by applicable law, the Company may: (a) deliver by email or other electronic means (including posting on a Web site maintained by the Company or by a third party under contract with the Company) all documents relating to the Plan or any Award thereunder (including without limitation, prospectuses required by the SEC) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements), and (b) permit Participants to electronically execute applicable Plan documents (including, but not limited to, Award Agreements) in a manner prescribed to the Committee.
23.19    No Representations or Warranties Regarding Tax Effect. Notwithstanding any provision of the Plan to the contrary, the Company, its Affiliates and Subsidiaries, the Board, and the Committee neither represent nor warrant the tax treatment under any federal, state, local, or foreign laws and regulations thereunder (individually and collectively referred to as the “Tax Laws”) of any Award granted or any amounts paid to any Participant under the Plan including, but not limited to, when and to what extent such Awards or amounts may be subject to tax, penalties and interest under the Tax Laws.
23.20    Indemnification. Subject to requirements of Delaware law, each individual who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Article 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his/her own behalf, unless such loss, cost, liability, or expense is a result of his/her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled under the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
 

27r8k05182011ex101.htm

 

 

AMENDED AND RESTATED LOAN AGREEMENT

 

 

BY AND BETWEEN

 

 

M&I MARSHALL & ILSLEY BANK

 

 

AND

 

 

TWIN DISC, INCORPORATED

 

 

DATED AS OF MAY 13, 2011

	
QB\12759948.5

	  	  

	  

  

  

  

TABLE OF CONTENTS

Page

ARTICLE 1

 

THE LOANS

 

	
1.1

	
Revolving Credit Loans

	
2

	
1.2

	
[Reserved]

	
2

	
1.3

	
Commitment Fee

	
2

	
1.4

	
Interest

	
2

	
1.5

	
Interest Options

	
2

	
1.6

	
Notice of Borrowing

	
3

	
1.7

	
Warranty

	
3

	
1.8

	
Payments

	
3

	
1.9

	
Use of Proceeds

	
4

	
1.10

	
Optional Prepayments; Reduction or Termination

	
4

	
1.11

	
Recordkeeping

	
5

	
1.12

	
Increased Costs

	
5

	
1.13

	
Deposits Unavailable or Interest Rate Unascertainable

	
6

	
1.14

	
Change in Law Rendering LIBOR Loans Unlawful

	
6

	
1.15

	
Discretion of M&I as to Manner of Funding

	
6

	
1.16

	
Letters of Credit

	
6

 

ARTICLE 2

 

 

CONDITIONS

 

	
2.1

	
General Conditions

	
7

	
2.2

	
Deliveries at Closing

	
7

 

ARTICLE 3

 

 

REPRESENTATIONS AND WARRANTIES

 

	
3.1

	
Organization and Qualification; Subsidiaries

	
8

	
3.2

	
Financial Statements

	
9

	
3.3

	
Authorization; Enforceability

	
9

	
3.4

	
Absence of Conflicting Obligations; Defaults

	
9

	
3.5

	
Taxes

	
9

	
3.6

	
Absence of Litigation

	
9

	
3.7

	
Indebtedness

	
10

	
3.8

	
Title to Property

	
10

	
3.9

	
ERISA

	
10

	
3.10

	
Fiscal Year

	
10

	
3.11

	
Compliance With Laws

	
10

	
3.12

	
Dump Sites

	
10

	
3.13

	
Tanks

	
11

	
3.14

	
Other Environmental Conditions

	
11

	
3.15

	
Environmental Judgments, Decrees and Orders

	
11

	
3.16

	
Environmental Permits and Licenses

	
11

	
3.17

	
Use of Proceeds; Margin Stock

	
11

	
3.18

	
Investment Company

	
11

	
3.19

	
Accuracy of Information

	
12

	
3.20

	
Offering of Notes

	
12

 

ARTICLE 4

 

 

NEGATIVE COVENANTS

 

	
4.1

	
Loans

	
12

	
4.2

	
Liens

	
12

	
4.3

	
Indebtedness

	
12

	
4.4

	
Consolidation or Merger

	
12

	
4.5

	
Disposition of Assets

	
12

	
4.6

	
Investments

	
13

	
4.7

	
Restricted Payments

	
13

	
4.8

	
Transactions with Affiliates

	
13

	
4.9

	
Guarantees

	
13

	
4.10

	
Change in Control

	
13

	
4.11

	
Capital Expenditures

	
13

 

ARTICLE 5

 

 

AFFIRMATIVE COVENANTS

 

	
5.1

	
Payment

	
13

	
5.2

	
Corporate Existence; Properties; Ownership

	
13

	
5.3

	
Licenses

	
14

	
5.4

	
Reporting Requirements

	
14

	
5.5

	
Taxes

	
15

	
5.6

	
Inspection of Properties and Records

	
15

	
5.7

	
Reference in Financial Statements

	
15

	
5.8

	
Compliance with Laws

	
15

	
5.9

	
Compliance with Agreements

	
15

	
5.10

	
Notices

	
16

	
5.11

	
Insurance

	
17

	
5.12

	
New Subsidiaries; Acquisitions

	
17

	
5.13

	
Financial Covenants

	
17

	
5.14

	
Most Favored Lender

	
18

 

ARTICLE 6

 

 

REMEDIES

 

	
6.1

	
Acceleration

	
19

	
6.2

	
M&I’s Right to Cure Default

	
19

	
6.3

	
Remedies Not Exclusive

	
19

	
6.4

	
Setoff

	
20

	
6.5

	
Cash Collateral

	
20

 

ARTICLE 7

 

 

DEFINITIONS

 

	
7.1

	
Definitions

	
20

	
7.2

	
Interpretation

	
31

 

ARTICLE 8

 

 

MISCELLANEOUS

 

	
8.1

	
Expenses and Attorneys’ Fees

	
32

	
8.2

	
Assignability; Successors

	
32

	
8.3

	
Survival

	
32

	
8.4

	
Governing Law

	
32

	
8.5

	
Counterparts; Headings

	
32

	
8.6

	
Entire Agreement

	
33

	
8.7

	
Notices

	
33

	
8.8

	
Amendment

	
33

	
8.9

	
Taxes

	
33

	
8.10

	
Severability

	
34

	
8.11

	
Indemnification

	
34

	
8.12

	
Participation

	
34

	
8.13

	
Inconsistent Provisions

	
34

	
8.14

	
WAIVER OF RIGHT TO JURY TRIAL

	
34

	
8.15

	
TIME OF ESSENCE

	
34

	
8.16

	
SUBMISSION TO JURISDICTION; SERVICE OF PROCESS

	
34

	
8.17

	
USA Patriot Act

	
35

	
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TABLE OF CONTENTS

(continued)

SCHEDULES

	
Schedule 3.1

	
Borrower’s Subsidiaries and the Borrower’s Percentage Ownership of Each

	
Schedule 3.6

	
Litigation

	
Schedule 3.12

	
Dump Sites

	
Schedule 3.13

	
Tanks

	
Schedule 3.14

	
Other Environmental Conditions

	
Schedule 3.15

	
Environmental Judgments, Decrees and Orders

	
Schedule 7.1

	
Existing Indebtedness and Liens

EXHIBITS

	
Exhibit A

	
Certificate of the Secretary of Borrower

	
Exhibit B

	
Officer’s Certificate

	
Exhibit C

	
Revolving Credit Note

	
QB\12759948.5

	
 

	  

  

  

  

 

AMENDED AND RESTATED LOAN AGREEMENT

 

THIS AMENDED AND RESTATED LOAN AGREEMENT is made as of May 13, 2011, by and between M&I MARSHALL & ILSLEY BANK, a Wisconsin banking corporation (“M&I”), and TWIN DISC, INCORPORATED, a Wisconsin corporation (“Borrower”).

 

This Amended and Restated Loan Agreement amends and restates in its entirety that Loan Agreement dated as of December 19, 2002, as amended prior to the date hereof (as so amended and restated, the “Existing Loan Agreement”), by and between M&I and Borrower.

 

This Amended and Restated Loan Agreement amends and restates and supersedes in its entirety the Existing Loan Agreement.  As of the Closing Date, all principal and all accrued and unpaid interest under the Existing Loan Agreement shall be refinanced and paid with the proceeds of the Loans under this Loan Agreement.  As of the Closing Date, provided all conditions set forth in Section 2.2 hereof are met, new Revolving Credit Loans shall be made by M&I to Borrower pursuant to this Loan Agreement and such new indebtedness shall be evidenced by the Revolving Credit Note issued under this Loan Agreement.

 

The Existing Loan Agreement is hereby amended by deleting all of the terms and provisions therein contained and placing in lieu thereof the terms and conditions contained in this Loan Agreement, it being expressly understood and agreed that all references to the “Loan Agreement” in all agreements, instruments and other documents shall hereafter refer to this Amended and Restated Loan Agreement.  The Note and the Loan Documents (as such terms are defined herein) and all other documents, instruments and materials heretofore executed and delivered pursuant to the Existing Loan Agreement are deemed amended hereby to refer to, and conform to the changes made by, this Loan Agreement, it being expressly understood and agreed that all references in such documents, instruments and materials to the Loan Agreement shall hereafter refer to this Amended and Restated Loan Agreement.  The terms of this Loan Agreement shall become effective as of the Closing Date.  Upon the Closing Date, any Letters of Credit outstanding under the Existing Loan Agreement shall be Letters of Credit outstanding under this Loan Agreement.  Substantially concurrently herewith, Borrower is executing and delivering to M&I the Note hereinafter identified and defined.  Upon satisfaction of the conditions precedent to effectiveness set forth herein (i) the existing loans evidenced by the note for the revolving credit loans under the Existing Loan Agreement shall be refinanced and paid by the new indebtedness being made under this Loan Agreement and shall be evidenced by the Revolving Credit Note issued under this Loan Agreement, (ii) in addition, the new indebtedness and the Revolving Credit Loans made pursuant to this Loan Agreement shall be evidenced by the Revolving Credit Note issued under this Loan Agreement, and (iii) the Letters of Credit issued and outstanding under the Existing Loan Agreement shall automatically, without further action on the part of M&I or Borrower, be deemed Letters of Credit issued under this Loan Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed that the Existing Loan Agreement is amended and restated in its entirety to read as follows:

 

ARTICLE 1                      

 

 

THE LOANS

 

1.1 Revolving Credit Loans.  From time to time on or after the Closing Date and prior to the Revolving Credit Termination Date and subject to the terms and conditions set forth in this Loan Agreement, M&I agrees to make Revolving Credit Loans to Borrower.  The aggregate amount of Revolving Credit Loans outstanding at any one time shall never exceed the Revolving Credit Commitment.  Upon request of M&I, Borrower shall confirm in writing the making of any and all Revolving Credit Loans.  All Revolving Credit Loans shall be evidenced by the Revolving Credit Note, Borrower being obligated, however, to pay the amount of Revolving Credit Loans actually made (including any over-advances), together with interest on the amount which remains outstanding from time to time.  Borrower may borrow, repay and reborrow under this Section 1.1 subject to the terms and conditions of this Loan Agreement.  The Revolving Credit Note shall mature on the Revolving Credit Termination Date.

 

1.2 [Reserved].

 

1.3 Commitment Fee.  As consideration for the Revolving Credit Commitment, Borrower agrees to pay to M&I on the last Business Day of each calendar quarter prior to the Revolving Credit Termination Date, commencing on June 30, 2011, and on the Revolving Credit Termination Date, an unused fee equal to the Add-On applicable to the Commitment Fee per year on the daily average unused amount of the Revolving Credit Commitment during the preceding quarter or other applicable period.

 

1.4 Interest.  (a) All Revolving Credit Loans shall be LIBOR Loans unless M&I elects to convert such LIBOR Loans to Prime Rate Loans pursuant to Section 1.13 or Section 1.14 of this Loan Agreement.

 

(b) In the event that any amount of the principal of, or interest on, the Note is not paid on the date when due (whether at stated maturity, by acceleration or otherwise), the entire principal amount outstanding under the Note shall bear interest, in addition to the interest otherwise payable under such Note and to the extent permitted by Law, at the additional annual rate of three percent (3%) from the day following the due date until all such overdue amounts have been paid in full.

 

(c) All interest, the unused fee and other amounts due under this Loan Agreement and the Note shall be computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.  All interest payable under this Loan Agreement and the Note is computed using this method.  This calculation method results in a higher effective interest rate than the numeric interest rate stated in this Loan Agreement or in the Note.

 

1.5 Interest Options.

 

(a) Prime Rate Loans.  The unpaid principal balance of Revolving Credit Loans which are Prime Rate Loans shall bear interest at the Prime Rate.  The Loans shall only be Prime Rate Loans upon M&I’s election under Section 1.13 or 1.14 hereof.  The interest rate for any outstanding Prime Rate Loans shall change on each day that the Prime Rate changes.

 

(b) LIBOR Loans.  The unpaid principal of Revolving Credit Loans which are LIBOR Loans shall bear interest at LIBOR quoted on the first Business Day of any calendar month (and such rate shall be the effective interest rate for the entire calendar month) plus the applicable Add-On for LIBOR Loans.  The interest rate for any outstanding Revolving Credit Loans which are LIBOR Loans shall change on each day that the applicable Add-On for LIBOR Loans changes (as set forth in the definition of Add-On for LIBOR Loans contained in this Loan Agreement) and also as of the first day of each calendar month.  The LIBOR interest rate established on the first Business Day of any calendar month shall apply to all LIBOR Loans during that calendar month, whether previously advanced or advanced thereafter.

 

1.6 Notice of Borrowing.

 

(a) Each Revolving Credit Loan shall be made on written notice or telephonic notice from an authorized representative of Borrower to the Person designated by M&I.  Such notice shall be given at least one (1) Business Day prior to the day of the requested borrowing date (which must be a Business Day).  Each notice shall specify the date and amount of such Revolving Credit Loan.  Each new Revolving Credit Loan shall be a LIBOR Loan unless such Loan has been converted by M&I to a Prime Rate Loan pursuant to Section 1.13 or Section 1.14 of this Loan Agreement.  Each such notice shall be effective upon receipt, provided that any notice received after 2:00 p.m., Milwaukee time, may be deemed by M&I, in its sole discretion, effective as of the next Business Day.  Borrower shall promptly confirm any such telephonic request in writing.

 

(b) LIBOR Rate Loans shall continue as such unless and until converted into Prime Rate Loans by M&I pursuant to Section 1.13 or 1.14 of this Loan Agreement or repaid.

 

1.7 Warranty.  Each notice of borrowing and each request for the issuance of a Letter of Credit, shall automatically constitute a warranty by Borrower to M&I that, on the date of the requested date of such borrowing or request for issuance of a Letter of Credit:  (a) all of the representations and warranties of Borrower contained in this Loan Agreement shall be true and correct on such date as though made on such date and (b) no Default or Event of Default shall exist on such date.

 

1.8 Payments.  (a) The outstanding unpaid principal balance plus all accrued and unpaid interest on the Revolving Credit Loans shall be paid in full on the Revolving Credit Termination Date.  In the event that the outstanding principal balance of the Revolving Credit Loans at any time exceeds the Revolving Credit Commitment, Borrower shall immediately pay the amount necessary to reduce such balance to be less than or equal to the then applicable Revolving Credit Commitment.

 

(b)           Interest accrued on all Revolving Credit Loans through the last day of each calendar month (including in the case of the first interest payment, interest accrued from the Closing Date) shall be payable on such last day of each calendar month, commencing on May 31, 2011 and continuing thereafter until all principal of and accrued interest on the Revolving Credit Loans are repaid in full.

 

(c)           All payments of principal and interest on account of the Note and all other payments made pursuant to this Loan Agreement shall be delivered to M&I, 770 North Water Street, Milwaukee, Wisconsin 53202, Attention:  Commercial Loan Department or at such other place as M&I or any holder of the Note shall designate in writing to Borrower, in immediately available funds by 12 noon, Milwaukee time on the date when due, and if received after such time on any day shall be deemed to have been made on the next Business Day.  Whenever any payment to be made under this Loan Agreement or under the Note shall be stated to be due on a day which is not a Business Day, the day for such payment shall be extended to the next succeeding Business Day, and such extension of time shall be included in the computation of interest.  Borrower hereby authorizes M&I to debit its deposit accounts at M&I for all payments of principal and interest due and owing on the Loans and for all other payments due and owing under this Loan Agreement.

 

(d)           All payments owed by Borrower to M&I under this Loan Agreement and the Note shall be made without any counterclaim and free and clear of any restrictions or conditions and free and clear of, and without deduction for or on account of, any present or future taxes, levies, imposts, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed on Borrower by any governmental or other authority.  If Borrower is compelled by Law to make any such deductions or withholdings it will pay such additional amounts as may be necessary in order that the net amount received by M&I after such deductions or withholding shall equal the amount M&I would have received had no such deductions or withholding been required to be made, and it will provide M&I with evidence satisfactory to M&I that it has paid such deductions or withholdings.

 

1.9 Use of Proceeds.  Borrower shall use the proceeds of the Loans for working capital and other general corporate purposes.  The proceeds of the borrowing of Loans on the Closing Date shall be used as provided in the introductory sections of this Agreement.

 

1.10 Optional Prepayments; Reduction or Termination.

 

(a) Borrower may, from time to time and without premium or penalty, prepay the Loans in whole or in part.  Each partial prepayment shall be in the minimum amount of $500,000 and in whole multiples of $100,000 in excess thereof.

 

(b) Borrower shall have the right, upon not less than five (5) Business Days irrevocable written notice to M&I, to terminate or permanently reduce the Revolving Credit Commitment; provided that (i) such termination or reduction shall be accompanied by a prepayment of Revolving Credit Loans to the extent that the outstanding principal of the Revolving Credit Loans exceeds the Revolving Credit Commitment, after giving effect to such termination or reduction and (ii) any such reduction shall be in the minimum amount of $500,000 and in whole multiples of $100,000 in excess thereof and (iii) any such reduction shall be a permanent reduction, and the Borrower shall have no right to thereafter increase the amount of the Revolving Credit Commitment.

 

1.11 Recordkeeping.  M&I shall record in its records the date and amount of each Loan and each repayment of the Loans.  The aggregate amounts so recorded shall be rebuttable presumptive evidence of the principal and interest owing and unpaid on the Note.  The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of Borrower under this Loan Agreement or under the Note to repay the principal amount of the Loans together with all interest accruing thereon.

 

1.12 Increased Costs.  If Regulation D of the Board of Governors of the Federal Reserve System, or the adoption of any applicable law, rule or regulation of general application, or any change therein, or any interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by M&I with any request or directive of general application (whether or not having the force of law) or any such authority, central bank or comparable agency:

 

(a) shall subject M&I to any tax, duty or other charge with respect to the Loans, the Note, any Letter of Credit or M&I’s obligation to make the Loans or issue Letters of Credit, or shall change the basis of taxation of payments to M&I of the principal of or interest on the Loans or any other amounts due under this Loan Agreement in respect of the Loans or Letters of Credit or M&I’s obligation to make the Loans or issue Letters of Credit (except for changes in the rate of tax on the overall net income of M&I); or

 

(b) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of interest rates pursuant to this Loan Agreement), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, M&I; or

 

(c) shall affect the amount of capital required or expected to be maintained by M&I or any corporation controlling M&I; or

 

(d) shall impose on M&I any other condition affecting the Loans, the Note or the Letters of Credit;

 

and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) M&I of making or maintaining any Loan or issuing Letters of Credit, or to reduce the amount of any sum received or receivable by M&I under this Loan Agreement or under the Note with respect thereto or with respect to Letters of Credit, then within ten (10) days after demand by M&I (which demand shall be accompanied by a statement setting forth the basis of such demand), Borrower shall pay directly to M&I such additional amount or amounts as will compensate M&I for such increased cost or such reduction.  Determinations by M&I for purposes of this Section of the effect of any change in applicable laws or regulations or of any interpretations, directives or requests thereunder on its costs of making or maintaining the Loans or issuing Letters of Credit hereunder, or sums receivable by it in respect of the Loans or Letters of Credit, and of the additional amounts required to compensate M&I in respect thereof, shall be conclusive, absent manifest error.

 

1.13 Deposits Unavailable or Interest Rate Unascertainable.

 

(a) If M&I is advised that deposits in dollars (in the applicable amount) are not being offered to banks in the relevant market for a one-month period, or M&I otherwise determines (which determination shall be binding and conclusive on all parties) that by reason of circumstances affecting the interbank London Eurodollar market adequate and reasonable means do not exist for ascertaining the applicable LIBOR; or

 

(b) If lenders similar to M&I have determined that the LIBOR will not adequately and fairly reflect the cost to such lenders of maintaining or funding such LIBOR Loans for a one-month period, or that the making or funding of such LIBOR Loans has become impracticable as a result of an event occurring after the date of this Loan Agreement which in the opinion of M&I materially affects such LIBOR Loans;

 

	
then so long as such circumstances shall continue, M&I shall not be under any obligation to make or continue LIBOR Loans and on the last day of the then-current Interest Period, such LIBOR Loans shall, unless then repaid in full, be converted to Prime Rate Loans.

 

1.14 Change in Law Rendering LIBOR Loans Unlawful.  In the event that any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the administration thereof, should make it unlawful for M&I to make, maintain or fund LIBOR Loans, then:  (a) M&I shall promptly notify Borrower; (b) the obligation of M&I to make or continue LIBOR Loans shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness; and (c) on the last day of the current Interest Period for LIBOR Loans (or, in any event, if M&I so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), the LIBOR Loans shall, unless then repaid in full, be converted to Prime Rate Loans.

 

1.15 Discretion of M&I as to Manner of Funding.  Notwithstanding any provision of this Loan Agreement to the contrary, M&I shall be entitled to fund and maintain its funding of all or any part of the Loans in any manner it sees fit.

 

1.16 Letters of Credit.  (a) From time to time prior to the Revolving Credit Termination Date, Borrower may request, and M&I may issue, Letters of Credit up to an aggregate undrawn face amount of $10,000,000.  The aggregate undrawn face amount of all Letters of Credit shall reduce the amount available for borrowing under the Revolving Credit Commitment.  In the event the Borrower does not reimburse M&I in full on the date M&I is required to make a payment with respect to any Letter of Credit, the Borrower shall be deemed to have borrowed, as of the date such payment is made, a Revolving Credit Loan bearing interest at the rate option applicable to other Revolving Credit Loans in an amount equal to the amount drawn under such Letter of Credit which shall be used to satisfy the Borrower’s reimbursement obligation with respect to such Letter of Credit.  No expiration date of any Letter of Credit shall be beyond the Revolving Credit Termination Date.

 

(b) Borrower shall pay to M&I upon issuance of each Letter of Credit all customary fees, commissions and charges as established by M&I and agreed to by Borrower and execute all letter of credit applications and other agreements as may be required by M&I in connection with the issuance of any letters of credit.

 

(c) As consideration for issuing Letters of Credit, the Borrower agrees to pay to M&I with respect to each Letter of Credit, a per annum letter of credit fee equal to the Add-On for LIBOR Loans on the undrawn face amount of each Letter of Credit, payable in advance upon the issuance of each Letter of Credit and, if applicable, upon each anniversary of the issuance date for each Letter of Credit.

 

ARTICLE 2                      

 

 

CONDITIONS

 

2.1 General Conditions.  The obligation of M&I to make any Loan or issue any Letter of Credit under this Loan Agreement is subject to the satisfaction, on the date hereof and on the date of making each Loan and issuing each Letter of Credit, of the following express conditions precedent:

 

(a) the representations and warranties of Borrower contained in this Loan Agreement shall be true and accurate on and as of such date;

 

(b) there shall not exist on such date any Default or Event of Default;

 

(c) the making of the relevant Loan or the issuance of the relevant Letter of Credit shall not be prohibited by any applicable Law and shall not subject M&I to any penalty under or pursuant to any applicable Law; and

 

(d) all proceedings to be taken in connection with the Loans or Letter of Credit and all documents incident thereto shall be reasonably satisfactory in form and substance to M&I and its counsel.

 

2.2 Deliveries at Closing.  The obligation of M&I to make the initial Loans is further subject the satisfaction on or before the Closing Date of each of the following express conditions precedent:

 

(a) M&I shall have received each of the following (each to be properly executed, dated and completed), in form and substance satisfactory to M&I:

 

(i) this Loan Agreement;

 

(ii) the Revolving Credit Note;

 

(iii) a certificate from an authorized officer of the Borrower, dated as of the Closing Date, certifying that (a) all of the representations and warranties contained in Article 3 of this Agreement are true and (b) no Default or Event of Default exists;

 

(iv) a certificate of the Secretary of Borrower, in the form of Exhibit A attached to this Loan Agreement, dated the Closing Date, as to:  (A) the incumbency and signature of the officers of the Borrower who have signed or will sign this Loan Agreement, the Revolving Credit Note and any other documents or materials to be delivered by Borrower to M&I pursuant to this Loan Agreement; (B) the adoption and continued effect of resolutions of the board of directors of Borrower authorizing the execution, delivery and performance of this Loan Agreement and the Revolving Credit Note, together with copies of those resolutions; and (C) the accuracy and completeness of copies of the articles of incorporation and bylaws of Borrower, as amended to date, attached thereto;

 

(b) M&I shall have received a certificate of the Wisconsin Department of Financial Institutions as to the existence of the Borrower dated as of a recent date;

 

(c) M&I shall have received a search of the Uniform Commercial Code records of the Wisconsin Department of Financial Institutions and of the real estate records for Racine county, against the name of the Borrower;

 

(d) M&I shall have received a favorable opinion of Borrower’s counsel, in form and substance satisfactory to M&I and its counsel;

 

(e) the Borrower shall have paid to M&I all accrued interest due under the Existing Loan Agreement and all unused commitment fees due under the Existing Loan Agreement; and

 

(f) M&I shall have received such other agreements, instruments, documents, certificates and opinions as M&I or its counsel may reasonably request.

 

ARTICLE 3                      

 

 

REPRESENTATIONS AND WARRANTIES

 

Borrower hereby represents and warrants to M&I as follows:

 

3.1 Organization and Qualification; Subsidiaries.  Borrower and each Subsidiary is a corporation duly and validly organized and existing under the Laws of the state of its incorporation and has the corporate power and all necessary licenses, permits and franchises to own its assets and properties and to carry on its business as now conducted or presently contemplated.  Each of Borrower and each Subsidiary is duly licensed or qualified to do business and is in active status or good standing in all jurisdictions in which failure to do so would have a material adverse effect on its business or financial condition.  All of the Subsidiaries of the Borrower, together with the Borrower’s percentage of ownership of each Subsidiary, are set forth on Schedule 3.1.

 

3.2 Financial Statements.  All of the financial statements of Borrower and its Subsidiaries heretofore furnished to M&I by Borrower are accurate and complete in all material respects and fairly present the financial condition and the results of operations of Borrower and its Subsidiaries for the periods covered thereby and as of the relevant dates thereof, all financial statements were prepared in accordance with GAAP, subject in the case of interim financial statements to audit and year-end adjustments.  There has been no material adverse change in the business, properties or condition (financial or otherwise) of Borrower and its Subsidiaries since the date of the latest of such financial statements.  Borrower has no knowledge of any material liabilities of any nature not disclosed in writing to M&I.

 

3.3 Authorization; Enforceability.  The making, execution, delivery and performance of this Loan Agreement and the Revolving Credit Note, and compliance with their respective terms, have been duly authorized by all necessary corporate action of Borrower.  This Loan Agreement and the Revolving Credit Note are the valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws generally affecting the rights of creditors and subject to general equity principles.

 

3.4 Absence of Conflicting Obligations; Defaults.  The making, execution, delivery and performance of this Loan Agreement and the Revolving Credit Note, and compliance with their respective terms, do not violate any presently existing provision of Law or the articles or certificate of incorporation or bylaws of Borrower or any agreement material to the business of Borrower or any Subsidiary to which either Borrower or any Subsidiary is a party or by which Borrower or any Subsidiary or any of their respective assets is bound.  Neither Borrower nor any Subsidiary is in default in the payment of the principal of or interest on any of its Indebtedness or in default under any instrument or instruments or agreements under and subject to which any Indebtedness has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with the lapse of time, or with the giving of notice, or both, would constitute an event of default thereunder or an Event of Default under this Loan Agreement.

 

3.5 Taxes.  Each of the Borrower and each Subsidiary has filed all federal, state, foreign and local tax returns which were required to be filed (subject to any valid extensions of the time for filing), the failure to file of which would have a material adverse effect on the Borrower’s or such Subsidiary’s business or financial condition, and has paid, or made provision for the payment of, all taxes owed by it, and no tax deficiencies have been assessed or, to Borrower’s knowledge, proposed against Borrower or any Subsidiary.

 

3.6 Absence of Litigation.  Except as set forth on Schedule 3.6, neither the Borrower nor any Subsidiary is a party to, and so far as is known to Borrower there is no threat of, any litigation or administrative proceeding which would, if adversely determined, impair the ability of Borrower to perform its obligations under this Loan Agreement or the Revolving Credit Note, cause any material adverse change in the assets and properties of Borrower or any Subsidiary, cause any material impairment of the right to carry on the business of Borrower or any Subsidiary, or cause any material adverse effect on the financial condition of Borrower or any Subsidiary.

 

3.7 Indebtedness.  Neither the Borrower nor any Subsidiary has incurred any Indebtedness except for Permitted Indebtedness.

 

3.8 Title to Property.  Each of Borrower and each Subsidiary has good title to, or a valid leasehold interest in, all assets and properties necessary to conduct its business as now conducted or proposed to be conducted, and there are no Liens on any of the assets or properties of Borrower or any Subsidiary other than Permitted Liens.  Each of Borrower and each Subsidiary has all licenses, permits, franchises, patents, copyrights, trademarks and trade names, or rights thereto, reasonably necessary to conduct its business as now conducted or proposed to be conducted, and Borrower does not know of any conflict with or violation of any valid rights of others with respect thereto.

 

3.9 ERISA.  Borrower has no knowledge that any Plan is in noncompliance in any material respect with the applicable provisions of ERISA or the Internal Revenue Code.  Borrower has no knowledge of any pending or threatened litigation or governmental proceeding or investigation against or relating to any Plan, and has no knowledge of any reasonable basis for any material proceedings, claims or actions against or relating to any Plan.  Borrower has no knowledge that Borrower has incurred any “accumulated funding deficiency” within the meaning of Section 302(a)(2) of ERISA in connection with any Plan.  Borrower has no knowledge that there has been any Reportable Event or Prohibited Transaction (as such terms are defined in ERISA) with respect to any Plan, the occurrence of which would have a material adverse effect on the business or condition (financial or otherwise) of Borrower or any Subsidiary, or both, or that Borrower or any Subsidiary, or both, has incurred any liability to the PBGC under Section 4062 of ERISA in connection with any Plan.

 

3.10 Fiscal Year.  The Borrower’s fiscal year ends on June 30.

 

3.11 Compliance With Laws.  Each of the Borrower and each Subsidiary is in compliance in all material respects with all Laws applicable to Borrower or any Subsidiary, their respective assets or operations, the failure to comply with which could have a material adverse effect on the Borrower’s or such Subsidiary’s business or financial condition.

 

3.12 Dump Sites.  To the Borrower’s knowledge after reasonable investigation, with respect to any period during which Borrower or any Subsidiary has occupied the Facilities and with respect to the time before Borrower or any Subsidiary occupied the Facilities, no Person has caused or permitted petroleum products or hazardous substances or other materials to be stored, deposited, treated, recycled or disposed of on, under or at the Facilities, which materials, if known to be present, might require investigation, clean-up, removal or some other remedial action under Environmental Laws except as set forth in Schedule 3.12 hereto, and the Borrower hereby certifies to M&I that all such petroleum products or hazardous substances or other materials are being stored, deposited, treated, recycled or disposed of in accordance with all applicable Environmental Laws and none of such items or matters shall have a material adverse effect upon the financial condition of the Borrower or any Subsidiary or any of their assets or properties.

 

3.13 Tanks.  There are not now nor, to Borrower’s knowledge after reasonable investigation, have there ever been tanks, containers or other vessels on, under or at the Facilities that contained petroleum products or hazardous substances or other materials which, if known to be present in soils or ground water, might require investigation, clean-up, removal or some other remedial action under Environmental Laws except for those tanks, containers or other vessels described in Schedule 3.13 hereto, and the Borrower hereby certifies to M&I that all such tanks, containers or other vessels are being treated or have been treated in accordance with all applicable Environmental Laws and have not caused and shall not cause any material adverse effect upon the financial condition of the Borrower or any Subsidiary or any of their assets or properties.

 

3.14 Other Environmental Conditions.  To the best of Borrower’s knowledge after reasonable investigation, there are no conditions existing currently or likely to exist during the term of this Loan Agreement that would subject Borrower or any Subsidiary to damages, penalties, injunctive relief or clean-up costs under any Environmental Laws, or that might require investigation, clean-up, removal or some other remedial action by Borrower or any Subsidiary under Environmental Laws except as set forth in Schedule 3.14 hereto, and the Borrower hereby certifies to M&I that none of such conditions would cause a material adverse effect upon the financial condition of Borrower or any Subsidiary or any of their properties or assets.

 

3.15 Environmental Judgments, Decrees and Orders.  No judgment, decree, order or citation related to or arising out of Environmental Laws is applicable to or binds Borrower, any Subsidiary, the Facilities or the owner of any of the Facilities except as set forth in Schedule 3.15 hereto and the Borrower hereby certifies to M&I that none of such matters shall have a material adverse affect upon the financial condition of the Borrower or any Subsidiary or any of their assets or properties.

 

3.16 Environmental Permits and Licenses.  All permits, licenses and approvals required under Environmental Laws necessary for each of Borrower and each Subsidiary to operate the Facilities and to conduct its business as now conducted or proposed to be conducted, which are currently obtainable have been obtained and are in full force and effect.

 

3.17 Use of Proceeds; Margin Stock.  Borrower shall use the proceeds of the Loans solely for the purposes set forth in Section 1.9 hereof.  No part of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or to extend credit to others for the purpose of purchasing or carrying any such margin stock.

 

3.18 Investment Company.  The Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

3.19 Accuracy of Information.  All information, certificates or statements by Borrower given in, or pursuant to, this Loan Agreement (whether in writing, by electronic messaging or otherwise) shall be accurate, true and complete when given.

 

3.20 Offering of Notes.  Neither Borrower nor any agent acting for Borrower has offered the Note or any similar obligation of Borrower for sale to, or solicited any offers to buy the Note or any similar obligation of Borrower from any Person other than M&I, and neither Borrower nor any agent acting for Borrower will take any action that would subject the sale of the Note to the registration provisions of the Securities Act of 1933, as amended.

 

ARTICLE 4                      

 

 

NEGATIVE COVENANTS

 

From and after the date of this Loan Agreement and until:  (i) the entire amount of principal of and interest due on the Loans, and all other amounts of fees and payments due under this Loan Agreement and the Note are paid in full; and (ii) the commitment of M&I to make Loans under Section 1.1 of this Loan Agreement has ended; and (iii) there are no outstanding Letters of Credit; and (iv) all other Obligations have been paid in full, Borrower shall not, and Borrower shall not permit any Subsidiary to, without the prior written consent of M&I, which consent shall not be unreasonably withheld:

 

4.1 Loans.  Permit the sum of the amount of outstanding Revolving Credit Loans to exceed the Revolving Credit Commitment.

 

4.2 Liens.  Incur, create, assume or permit to be created or allow to exist any Lien upon or in any of its real estate, assets or properties, except Permitted Liens.

 

4.3 Indebtedness.  Incur, create, assume, permit to exist, guarantee, endorse or otherwise become directly or indirectly or contingently responsible or liable for any Indebtedness, except Permitted Indebtedness.

 

4.4 Consolidation or Merger.  Consolidate with or merge into any other Person, or permit another Person to merge into it, or acquire substantially all of the assets of any other Person, whether in one or a series of transactions, except that (a) Borrower may permit any Subsidiary to merge into it or into a wholly owned Subsidiary, and (b) provided that (i) no Default or Event of Default then exists or would be created thereby and (ii) the Fixed Charge Coverage Ratio of the Borrower is at least 1.10:1 on an historical and pro forma basis taking into account such transaction, the Borrower may acquire substantially all of the assets or business or stock or other evidences of beneficial ownership of, any Person, provided further that the aggregate consideration paid and liabilities assumed for all such transactions may not exceed $10,000,000 in any fiscal year, on a non-cumulative basis.

 

4.5 Disposition of Assets.  Sell, lease, assign, transfer or otherwise dispose of any of its now owned or hereafter acquired assets or properties except, prior to the occurrence of an Event of Default:  (a) sales of inventory in the ordinary course of business; (b) sales or other disposition of equipment, provided that such equipment is replaced by equipment of a similar kind and equivalent value; (c) sales or other dispositions of any asset that is no longer used or useful in the business of the Borrower or any Subsidiary, and (d) other dispositions of assets provided that such assets, in the aggregate for all such dispositions after the Closing Date, (i) represent no more than 5% of the consolidated assets of the Borrower and its consolidated Subsidiaries and (ii) are responsible for no more than 5% of the consolidated net revenues or of the consolidated net income of the Borrower and its consolidated Subsidiaries, in both cases as of the end of the fiscal quarter preceding the disposition date.

 

4.6 Investments.  Make any new Investment in or to other Persons, except Permitted Investments.

 

4.7 Restricted Payments.  INTENTIONALLY DELETED.

 

4.8 Transactions with Affiliates.  Engage in any transaction with an Affiliate on terms materially less favorable to Borrower than would be available at the time from a Person who is not an Affiliate.

 

4.9 Guarantees.  Guarantee the Indebtedness of any Person, except guaranties in favor of M&I.

 

4.10 Change in Control.  Permit a Change in Control.

 

4.11 Capital Expenditures. INTENTIONALLY DELETED.

 

ARTICLE 5                      

 

 

AFFIRMATIVE COVENANTS

 

From and after the date of this Loan Agreement and unless otherwise consented to in writing by M&I, which consent shall not be unreasonably withheld, until:  (i) the entire amount of principal of and interest due on the Loans, and all other amounts of fees and payments due under this Loan Agreement and the Note are paid in full; and (ii) the commitment of M&I to make Loans under Section 1.1 of this Loan Agreement has ended; and (iii) there are no outstanding Letters of Credit; and (iv) all other Obligations have been paid in full:

 

5.1 Payment.  Borrower shall timely pay or cause to be paid the principal of and interest on the Loans and all other amounts due under this Loan Agreement, the Note and the Letters of Credit.

 

5.2 Corporate Existence; Properties; Ownership.  Borrower shall, and Borrower shall cause each Subsidiary to:  (a) maintain its corporate or limited liability company or other existence; except that Borrower may permit any Subsidiary to merge into it or into a wholly owned Subsidiary; (b) conduct its business substantially as now conducted or as described in any business plans delivered to M&I prior to the Closing Date; (c) maintain all assets (other than assets no longer used or useful in the conduct of its business) in good repair, working order and condition, ordinary wear and tear excepted; and (d) maintain accurate records and books of account in accordance with GAAP consistently applied throughout all accounting periods.

 

5.3 Licenses.  Borrower shall maintain in full force and effect each license, permit and franchise granted or issued by any federal, state or local governmental agency or regulatory authority that is reasonably necessary to or used in Borrower’s or any Subsidiary’s business.

 

5.4 Reporting Requirements.  Borrower shall furnish to M&I such information respecting the business, assets and financial condition of Borrower and its Subsidiaries as M&I may reasonably request and, without request:

 

(a) As soon as available, and in any event within thirty (30) days after the end of each fiscal quarter, (i) a consolidated balance sheet of Borrower and its consolidated Subsidiaries as of the end of each such fiscal quarter; and (ii) consolidated statements of income and surplus of the Borrower and its consolidated Subsidiaries for each such fiscal quarter, all in reasonable detail and certified as true and correct, subject to audit and normal year-end adjustments, by the vice president of finance or treasurer of the Borrower; and

 

(b) as soon as available, and in any event within ninety (90) days after the close of each fiscal year, a copy of the detailed annual audit report for such year and accompanying consolidated financial statements of Borrower and its consolidated Subsidiaries prepared in reasonable detail and in accordance with GAAP and audited by independent certified public accountants of recognized standing selected by Borrower, and reasonably satisfactory to M&I, which audit report shall be unqualified and shall be accompanied by:  (i) an unqualified opinion of such accountants, in form and substance reasonably satisfactory to M&I, to the effect that the same fairly presents the financial condition and the results of operations of Borrower and its consolidated Subsidiaries for the periods and as of the relevant dates thereof, and (ii) a certificate of such accountants setting forth their computations as to Borrower’s compliance with Section 5.13 of this Loan Agreement stating that in the ordinary course of their audit, conducted in accordance with generally accepted auditing practices, they did not become aware of any Event of Default or, if their audit disclosed an Event of Default, a specification of the Event of Default and the actions taken or proposed to be taken by Borrower with respect thereto; and

 

(c) within forty-five (45) days after the end of each fiscal quarter, an executed Officer’s Certificate, in the form of Exhibit B attached to this Loan Agreement; and

 

(d) promptly upon its becoming available, furnish to M&I one copy of each financial statement, report, notice, or proxy statement sent by the Borrower to its shareholders generally and of each regular or periodic report, registration statement or prospectus filed by the Borrower with any securities exchange or the Securities and Exchange Commission or any successor agency; and

 

(e) as soon as received, but in any event not later than ten (10) days after receipt, copies of all management letters and other reports submitted to Borrower by independent certified public accountants in connection with any examination of the financial statements of Borrower and notify M&I promptly of any change in any accounting method used by Borrower in the preparation of the financial statements to be delivered to M&I pursuant to this Section; and

 

(f) No later than June 30 of each year, a detailed forecast for the next fiscal year of the Borrower and its Subsidiaries in a form reasonably satisfactory to M&I.

 

5.5 Taxes.  Borrower shall, and Borrower shall cause each Subsidiary to, pay all taxes and assessments prior to the date on which penalties attach thereto, except for any tax or assessment which is either not delinquent or which is being contested in good faith and by proper proceedings and against which adequate reserves have been provided.

 

5.6 Inspection of Properties and Records.  Borrower shall, and Borrower shall cause each Subsidiary to, permit M&I or its agents or representatives to visit any of its properties and examine any of its books and records upon reasonable prior notice, at any reasonable time and as often as may be reasonably desired, and Borrower shall facilitate each such inspection, audit and examination; provided, however, that nothing in this Loan Agreement shall require the Borrower to disclose, or shall entitle M&I to examine, copy or otherwise have access to, the Borrower’s trade secrets, which Borrower has informed M&I are trade secrets of the Borrower, prior to any Event of Default nor thereafter, unless the Borrower and M&I shall enter into a confidentiality and nondisclosure agreement with respect to such trade secrets which agreement shall have terms reasonably acceptable to the Borrower.

 

5.7 Reference in Financial Statements.  Borrower shall include, to the extent required by applicable Law, or cause to be included, a reference to this Loan Agreement in all financial statements of Borrower which are furnished to stockholders, financial reporting services, creditors and prospective creditors.

 

5.8 Compliance with Laws.  Borrower shall, and Borrower shall cause each Subsidiary to:  (a) comply in all material respects with all applicable Environmental Laws, and orders of regulatory and administrative authorities with respect thereto, and, without limiting the generality of the foregoing, promptly undertake and diligently pursue to completion appropriate and legally authorized containment, investigation and clean-up action in the event of any release of petroleum products or hazardous materials or substances on, upon or into any real property owned, operated or within the control of Borrower or any Subsidiary; and (b) comply in all material respects with all other Laws applicable to Borrower, its Subsidiaries, or their respective assets or operations.

 

5.9 Compliance with Agreements.  Borrower shall, and Borrower shall cause each Subsidiary to, perform and comply in all respects with the provisions of any agreement (including without limitation any collective bargaining agreement), license, regulatory approval, permit and franchise binding upon Borrower or any Subsidiary or their respective assets or properties, if the failure to so perform or comply would have a material adverse effect on the condition (financial or otherwise) of the business, assets or properties of Borrower or any Subsidiary.

 

5.10 Notices.  Borrower shall:

 

(a) as soon as possible and in any event within five (5) Business Days after Borrower’s knowledge of the occurrence of any Default or Event of Default, notify M&I in writing of such Default or Event of Default and set forth the details thereof and the action which is being taken or proposed to be taken by Borrower with respect thereto;

 

(b) promptly notify M&I of the commencement of any litigation or administrative proceeding that would cause the representation and warranty of Borrower contained in Section 3.6 of this Loan Agreement to be untrue;

 

(c) promptly notify M&I:  (i) of the occurrence of any Reportable Event or Prohibited Transaction (as such terms are defined in ERISA) that has occurred with respect to any Plan; and (ii) of the institution by the PBGC or Borrower or any Subsidiary of proceedings under Title IV of ERISA to terminate any Plan;

 

(d) unless prohibited by applicable Law, notify M&I, and provide copies, immediately upon receipt but in any event not later than ten (10) days after receipt, of any notice, pleading, citation, indictment, complaint, order or decree from any federal, state or local government agency or regulatory body, or any other source, asserting or alleging a circumstance or condition that requires or may require a financial contribution in an amount of $1,000,000 or more by Borrower or any Subsidiary, or both, or an investigation, clean-up, removal, remedial action or other response by or on the part of Borrower or any Subsidiary, or both, under Environmental Laws which would cost $1,000,000 or more or which seeks damages or civil, criminal or punitive penalties in an amount of $1,000,000 or more from or against Borrower or any Subsidiary, or both, for an alleged violation of Environmental Laws; and provide M&I with written notice of any condition or event which would make the representations and warranties contained in Sections 3.11 through 3.16 of this Loan Agreement inaccurate, as soon as Borrower becomes aware of such condition or event;

 

(e) notify M&I at least thirty (30) days prior to any change of Borrower’s name or its use of any trade name;

 

(f) promptly notify M&I of any damage to, or loss of, any of the assets or properties of Borrower if the net book value of the damaged or lost asset or property at the time of such damage or loss exceeds $1,000,000;

 

(g) promptly notify M&I of the commencement of any investigation, litigation, or administrative or regulatory proceeding by, or the receipt of any notice, citation, pleading, order, decree or similar document issued by, any federal, state or local governmental agency or regulatory authority that results in, or may result in, the termination or suspension of any license, permit or franchise necessary to Borrower’s business, or that imposes, or may result in the imposition of, a fine or penalty in an amount of $1,000,000 or more on Borrower or both; and

 

(h) promptly notify M&I of any material adverse change in the business, operations, assets, property, prospects or financial condition of the Borrower.

 

5.11 Insurance.  Borrower shall, and Borrower shall cause each Subsidiary to obtain and maintain at its own expense the following insurance, which shall be with insurers satisfactory to M&I:  (a) “all risks” property insurance in amounts not less than the one hundred percent (100%) replacement cost of all buildings, improvements, fixtures, equipment and other real and personal property of Borrower or such Subsidiary, with a replacement cost agreed amount endorsement; (b) commercial general liability insurance covered under a commercial general liability policy including contractual liability in an amount not less than $1,000,000 combined single limit for bodily injury, including personal injury, and property damage; (c) product liability insurance in such amounts as is customarily maintained by companies engaged in the same or similar businesses; and (d) worker’s compensation insurance in amounts meeting all statutory state and local requirements.  The property and commercial general liability policies described above shall require the insurer to provide at least thirty (30) days’ prior written notice to M&I of any material change or cancellation of such policy.

 

5.12 New Subsidiaries; Acquisitions.  If the Borrower organizes one or more new Subsidiaries after the Closing Date in compliance with the terms of this Agreement, the Borrower shall promptly deliver to M&I an amended Schedule 3.1 listing all of the Subsidiaries of the Borrower, together with the Borrower’s Percentage of ownership of such Subsidiary.  Borrower agrees to give prior written notice to M&I of any such new Subsidiary and of any acquisition permitted under Section 4.4.

 

5.13 Financial Covenants.

 

(a) Minimum Net Worth.  Borrower and its consolidated Subsidiaries shall maintain at all times an aggregate Net Worth of at least $104,178,000 plus 35% of the positive consolidated Net Income for each fiscal quarter from and after December 31, 2010 on a cumulative basis.  For purposes of all computations made pursuant to this Section 5.13(a), the Borrower may exclude from Net Worth adjustments that result from (i) changes to the assumptions used by the Borrower in determining its pension liabilities or (ii) changes in the market value of plan assets up to an aggregate amount of adjustments equal to $34,000,000 for purposes of computing Net Worth at any time.  This covenant shall be tested quarterly at the end of each fiscal quarter.

 

The Borrower shall document such adjustments in the Officer’s Certificate delivered by the Borrower to M&I pursuant to Section 5.4(c) of this Loan Agreement.

 

(b) Minimum EBITDA.  Borrower and its consolidated Subsidiaries shall achieve EBITDA of at least $11,000,000 for the four fiscal quarters of the Borrower and its consolidated Subsidiaries ending on the date of determination.  This covenant shall be tested for the four fiscal quarters ending December 31, 2010, and at the end of each fiscal quarter thereafter.

 

This covenant shall be tested quarterly at the end of each fiscal quarter.

 

(c) Maximum Total Funded Debt to EBITDA Ratio.  Borrower and its consolidated Subsidiaries shall not permit the ratio of Total Funded Debt to EBITDA to exceed 3.00 to 1.00, tested at the end of each fiscal quarter of the Borrower, commencing December 31, 2010, all as determined, in the case of Total Funded Debt, on the date of determination, and in the case of EBITDA, for the preceding four fiscal quarters of the Borrower and its consolidated Subsidiaries ending on the date of determination.

 

This covenant shall be tested quarterly at the end of each fiscal quarter.

 

5.14 Most Favored Lender.  Borrower covenants that if, on any date, it or any Subsidiary enters into, assumes or otherwise becomes bound or obligated under any agreement evidencing, securing, guaranteeing or otherwise relating to any Indebtedness (other than the Indebtedness evidenced by this Loan Agreement) in excess of $1,000,000, or obligations in excess of $1,000,000 in respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries, that contains, or amends any such agreement to contain, one or more Additional Covenants or Additional Defaults, then on such date the terms of this Loan Agreement shall, without any further action on the part of the Borrower or M&I, be deemed to be amended automatically to include each Additional Covenant and each Additional Default contained in such agreement.  Borrower further covenants to promptly execute and deliver at its expense (including the reasonable fees and expenses of counsel for M&I) an amendment to this Agreement in form and substance satisfactory to M&I evidencing the amendment of this Agreement to include such Additional Covenants and Additional Defaults, provided that the execution and delivery of such amendment shall not be a precondition to the effectiveness of such amendment as provided for in this Section 5.14, but shall merely be for the convenience of the parties hereto.

 

“Additional Covenant” shall mean any affirmative or negative covenant or similar restriction applicable to Borrower or any Subsidiary (regardless of whether such provision is labeled or otherwise characterized as a covenant) the subject matter of which either (i) is similar to that of any covenant in Article 4 or 5 of this Agreement, or related definitions in Article 7 of this Agreement, but contains one or more percentages, amounts or formulas that is more restrictive than those set forth herein or more beneficial to the holders of any Indebtedness (other than the Indebtedness evidenced by this Loan Agreement), or obligations in respect of one or more Swap Agreements, of any one or more of Borrower and its Subsidiaries (and such covenant or similar restriction shall be deemed an Additional Covenant only to the extent that it is more restrictive or more beneficial) or (ii) is different from the subject matter of any covenants in Section 4 or 5 of this Agreement, or related definitions in Section 7 of this Agreement.

 

“Additional Default” shall mean any provision contained in any document evidencing Indebtedness (other than the Indebtedness evidenced by this Loan Agreement), or obligations in respect of one or more Swap Agreements, of any one or more of Borrower and its Subsidiaries, which permits the holder or holders of Indebtedness or obligations in respect of Swap Agreements to accelerate (with the passage of time or giving of notice or both) the maturity thereof, permits any such holder to terminate any such Swap Agreements or otherwise requires Borrower or any Subsidiary to purchase any such Indebtedness or obligations in respect of Swap Agreements, prior to the stated maturity thereof and which either (i) is similar to any Default or Automatic Event of Default or Event of Default defined in Section 7 of this Agreement, or related definitions in Section 7 of this Agreement, but contains one or more percentages, amounts or formulas that is more restrictive or has a shorter grace period than those set forth herein or is more beneficial to the holders of any such Indebtedness or obligations in respect of Swap Agreements (and such provision shall be deemed an Additional Default only to the extent that it is more restrictive, has a shorter grace period or is more beneficial) or (ii) is different from the subject matter of any Default or Automatic Event of Default or Event of Default contained in Section 7 of this Agreement, or related definitions in Section 7 of this Agreement.

 

ARTICLE 6                      

 

 

REMEDIES

 

6.1 Acceleration.  (a) Upon the occurrence of an Automatic Event of Default, then, without notice, demand or action of any kind by M&I:  (i) the obligation of M&I to make any Loans or to issue any Letters of Credit under this Loan Agreement shall automatically and immediately terminate and (ii) the entire unpaid principal of, and accrued interest on, the Note, and any other amount due under this Loan Agreement, shall be automatically and immediately due and payable.

 

(b) Upon the occurrence of a Notice Event of Default, M&I may, upon written notice and demand to Borrower:  (i) terminate its obligation to make any Loans or to issue any Letters of Credit under this Loan Agreement and (ii) declare the entire unpaid principal of, and accrued interest on, the Note, and any other amount due under this Loan Agreement immediately due and payable.

 

6.2 M&I’s Right to Cure Default.  In case of failure by Borrower to procure or maintain insurance, or to pay any fees, assessments, charges or taxes arising with respect to any properties and assets pledged under any collateral documents, M&I shall have the right, but shall not be obligated, to effect such insurance or pay such fees, assessments, charges or taxes, as the case may be, and, in that event, the cost thereof shall be payable by Borrower to M&I immediately upon demand together with interest at an annual rate equal to the Prime Rate plus three percent (3%) (to the extent permitted by applicable Law) from the date of disbursement by M&I to the date of payment by Borrower.

 

6.3 Remedies Not Exclusive.  No remedy herein conferred upon M&I is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan Agreement, the Note or the Loan Documents or now or hereafter existing at law or in equity.  No failure or delay on the part of M&I in exercising any right or remedy shall operate as a waiver thereof nor shall any single or partial exercise of any right preclude other or further exercise thereof or the exercise of any other right or remedy.

 

6.4 Setoff.  Borrower agrees that M&I and its affiliates shall have all rights of setoff and bankers’ Lien provided by applicable Law, and in addition thereto, Borrower agrees that if at any time any payment or other amount owing by Borrower under the Note or this Loan Agreement is then due to M&I, M&I may apply to the payment of such payment or other amount any and all balances, credits, deposits, accounts or moneys of Borrower then or thereafter with M&I or any affiliates of M&I.

 

6.5 Cash Collateral.  If an Event of Default has occurred and is continuing, M&I may make written demand upon Borrower, and Borrower will then immediately cause to be deposited with M&I, in immediately available funds, an amount equal to the maximum amount which could be drawn on all outstanding Letters of Credit, to be held in a special cash collateral account in the name of M&I.  Funds on deposit and interest accrued on such funds held in such special cash collateral account may be applied by M&I to the obligations of Borrower to M&I and shall not be subject to withdrawal by Borrower until all outstanding Letters of Credit are canceled or terminated and all obligations to M&I are paid in full, unless otherwise agreed to by M&I.

 

ARTICLE 7                      

 

 

DEFINITIONS

 

7.1 Definitions.  When used in this Loan Agreement, the following terms shall have the meanings specified:

 

“Affiliate” shall mean any Person:  (a) that directly or indirectly controls, or is controlled by, or is under common control with, Borrower or any Subsidiary; (b) that directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of Borrower or any Subsidiary; (c) five percent (5%) or more of the voting stock of which Person is directly or indirectly beneficially owned or held by Borrower or any Subsidiary; (d) that is an officer or director of Borrower or any Subsidiary; (e) of which an Affiliate is an officer or director; or (f) who is related by blood, adoption or marriage to an Affiliate.  The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Add-On” shall mean the following percentages for the following types of Loans and fees, based upon the Borrower’s ratio of Total Funded Debt to EBITDA, calculated on a consolidated basis:

 

	
Level:

	
Total Funded Debt to EBITDA Ratio:

	
Add-On for LIBOR Loans:

	
Commitment Fee:

	
I

	
greater than or equal to 2.5:1

	
2.50%

	
0.375%

	
II

	
less than 2.5.0:1, but greater than or equal to 2.0:1

	
2.25%

	
0.25%

	
III

	
less than 2.0:1, but greater than or equal to 1.5:1

	
1.90%

	
0.25%

	
IV

	
less than 1.5:1 but greater than or equal to 1.0:1

	
1.65%

	
0.25%

	
V

	
less than 1.0:1

	
1.50%

	
0.25%

 

The initial pricing shall be Level III.  Beginning with the date that the quarterly financial statements and Officer’s Certificate is to be delivered to M&I pursuant to Sections 5.4 (a) and 5.4(c) for the fiscal quarter ending on [June 30, 2011], the Add-On and Commitment Fee shall be adjusted by reference to the Total Funded Debt to EBITDA Ratio of Borrower at the end of the immediately preceding fiscal quarter as determined, in the case of Total Funded Debt, on the date of determination, and in the case of EBITDA, for the preceding four fiscal quarters of Borrower and its consolidated Subsidiaries ending on the date of determination.  Any change in the Add-On and Commitment Fee shall be effective as of the first day of the calendar month following M&I’s receipt of the quarterly financial statements and Officer’s Certificate required under Sections 5.4(a) and 5.4(c) of this Loan Agreement.  If the Borrower fails to deliver timely the financial information required by Section 5.4(a) and the Officer’s Certificate pursuant to Section 5.4(c), then for the period commencing on the date such information was due through the date that is five days after the date on which such information is delivered, the Add-On and Commitment Fee shall be based on pricing Level I.

 

“Adjusted Interbank Rate” shall mean an annual rate with respect to any Interest Period (rounded upwards, if necessary, to the nearest 1/100 of 1%), determined pursuant to the following formula:

 

Adjusted Interbank Rate =                                                   Interbank Rate                                                                

 

1 - Interbank Reserve Requirement

 

“Automatic Event of Default” shall mean any one or more of the following:

 

(a) Borrower or any Subsidiary shall become insolvent or generally not pay, or be unable to pay, or admit in writing its inability to pay, its debts as they mature; or

 

(b) Borrower or any Subsidiary shall make a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its assets; or

 

(c) Borrower or any Subsidiary shall become the subject of an “order for relief” within the meaning of the United States Bankruptcy Code, or shall file a petition in bankruptcy, for reorganization or to effect a plan or other arrangement with creditors; or

 

(d) Borrower or any Subsidiary shall have a petition or application filed against it in bankruptcy or any similar proceeding, or shall have such a proceeding commenced against it, and such petition, application or proceeding shall remain unstayed or undismissed for a period of sixty (60) days or more, or Borrower or any Subsidiary shall file an answer to such a petition or application, admitting the material allegations thereof; or

 

(e) Borrower or any Subsidiary shall apply to a court for the appointment of a receiver or custodian for any of its assets or properties, or shall have a receiver or custodian appointed for any of its assets or properties, with or without consent, and if appointed without consent, such receiver shall not be discharged or dismissed within sixty (60) days after his appointment; or

 

(f) Borrower or any Subsidiary shall adopt a plan of complete liquidation of its assets.

 

“Business Day” shall mean any day other than a Saturday, Sunday, public holiday or other day when commercial banks in Wisconsin are authorized or required by Law to close.

 

“Change in Control” shall mean (a) a change in the power to direct or cause the direction of management and policies of Borrower, either directly or indirectly, through the ownership of voting securities of Borrower or by contract or otherwise or (b) any Person or group (within the meaning of Rule 13d-5, (as in effect on the date hereof, under the Securities Exchange Act of 1934, as amended) shall become the beneficial owner of more than 50% of the outstanding capital stock of Borrower entitled to vote for the election of the board of directors or (c) during any period of twelve consecutive months individuals who at the beginning of such period constituted a majority of the board of directors of Borrower (together with new directors whose election by such board or whose nomination for the election by the shareholders of Borrower was approved by the majority of the directors still in office who were either directors at the beginning of such period or whose election was previously so approved) shall cease for any reason to constitute a majority of the board of directors of Borrower then in office or (d) any “Change of Control,” as defined in the Prudential Agreement, has occurred.

 

“Closing Date” shall mean May 13, 2011 or such later date on which all of the conditions precedent contained in Section 2.2 are satisfied or waived by M&I.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Default” shall mean any event which would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

 

“EBITDA” shall mean the sum of (i) Net Income plus, (ii) to the extent deducted in the calculation of Net Income, (a) interest expense, (b) depreciation and amortization expense, and (c) income tax expense; provided, however, such expenses are acceptable to M&I in its discretion; and EBITDA will be further adjusted to include EBITDA related to acquisitions which are permitted under Section 4.4 of this Loan Agreement with adjustments made by Borrower and approved by M&I and The Prudential Insurance Company of America in their judgment (which approval shall not be unreasonably withheld), all as determined for Borrower and its Subsidiaries on a consolidated basis for the four quarters ending on the date of determination, without duplication, and in accordance with GAAP applied on a consistent basis.

 

 “Environmental Laws” means any Law, including any common law, which relates to or otherwise imposes liability or standards of conduct concerning discharges, emissions, releases or threatened releases of noises, odors or any pollutants, contaminants or hazardous or toxic wastes, substances or materials, into air, water or groundwater, or land, or otherwise relating to the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of pollutants, contaminants, or hazardous or toxic wastes, substances or materials, including, but not limited to CERCLA as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, the Oil Pollution Act of 1990, as amended, any so-called “Superlien” law, and any other similar Federal, state or local statutes.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended and as in effect from time to time.

 

“Event of Default” shall mean any Automatic Event of Default or any Notice Event of Default.

 

“Facilities” shall mean all real property and improvements now or hereafter owned or occupied by Borrower or any of its Subsidiaries in the conduct of their respective business.

 

“Fixed Charge Coverage Ratio” shall mean the relationship, expressed as a numerical ratio of:

 

(a)           the result of (i) EBITDA, minus (i) income tax expense, minus (ii) capital expenditures not financed with Indebtedness (other than with proceeds of the Loans), minus (iii) the aggregate of cash dividends paid by Borrower to its shareholders minus (iv) the aggregate purchase price paid, or other consideration extended, by Borrower for purchases, redemptions, retirements or other acquisitions by Borrower of any of its stock; to

 

(b)           the sum of (i) interest expense, plus (ii) principal payments (including with respect to leases that have been or should be capitalized according to GAAP),

 

all as determined for Borrower and its consolidated Subsidiaries for the four quarter period ending on the date of determination, without duplication, and in accordance with GAAP applied on a consistent basis.

 

“GAAP” shall mean generally accepted accounting principles as in effect from time to time in the United States of America, applied by Borrower and its Subsidiaries on a basis consistent with the preparation of Borrower’s most recent financial statements furnished to M&I pursuant to Section 3.2 hereof.

 

“Indebtedness” shall mean all liabilities or obligations of Borrower or any Subsidiary, whether primary or secondary or absolute or contingent:  (a) for borrowed money or for the deferred purchase price of property or services (excluding trade obligations incurred in the ordinary course of business, which are not the result of any borrowing); (b) as lessee under leases that have been or should be capitalized according to GAAP; (c) evidenced by notes, bonds, debentures or similar obligations; (d) under any guaranty or endorsement (other than in connection with the deposit and collection of checks in the ordinary course of business), and other contingent obligations to purchase, provide funds for payment, supply funds to invest in any Person, or otherwise assure a creditor against loss; or (e) secured by any Liens on assets of either Borrower or any Subsidiary, whether or not the obligations secured have been assumed by Borrower or any Subsidiary.

 

“Interbank Rate” shall mean with respect to any Loan for any Interest Period, the rate per annum equal to the rate (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted as the rate at which dollar deposits in immediately available funds are offered on the first Business Day of each calendar month in the interbank Eurodollar market on or about 9:00 A.M. Milwaukee time for a period of one (1) calendar month as determined by the British Bankers Association and reported by a major news service selected by M&I (such as Reuters or Bloomberg).  Each such determination shall be conclusive and binding upon the parties hereto in the absence of demonstrable error.  M&I may change the service providing such information at any time.

 

“Interbank Reserve Requirement” shall mean a percentage (expressed as a decimal) equal to the aggregate reserve requirements in effect on the first day of each calendar month (including all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements during each calendar month) specified for “Eurocurrency Liabilities” under Regulation D of the Board of Governors of the Federal Reserve System, or any other regulation of the Board of Governors which prescribes reserve requirements applicable to “Eurocurrency Liabilities” as presently defined in Regulation D, as then in effect, as applicable to the class or classes of banks of which M&I is a member.  As of the date of this Loan Agreement, the Interbank Reserve Requirement is 0%.

 

“Interest Period” shall mean a period commencing on the first day of any calendar month and ending on the last day of that calendar month.

 

“Investment” shall mean:  (a) any transfer or delivery of cash, stock or other property or value by such Person in exchange for Indebtedness, stock or any other security of another Person; (b) any loan, advance or capital contribution to or in any other Person; (c) any guaranty, creation or assumption of any liability or obligation of any other Person; and (d) any investment in any fixed property or fixed assets other than fixed properties and fixed assets acquired and used in the ordinary course of the business of that Person.

 

“Law” shall mean any federal, state, local or other law, rule, regulation or governmental requirement of any kind, and the rules, regulations, written interpretations and orders promulgated thereunder.

 

“Letters of Credit” shall mean any letters of credit which are now or at any time hereafter issued by M&I at the request and for the account of Borrower pursuant to this Loan Agreement and which have not expired or been revoked or terminated.

 

“LIBOR” shall mean an annual rate of interest equal to the Adjusted Interbank Rate, which rate shall change on the first day of each calendar month.  Each change in any rate of interest computed by reference to LIBOR shall take effect on the first day of each calendar month.  In addition, any change in interest rate due to a change in the Add-On for LIBOR Loans shall be made as set forth in the definition of Add-On for LIBOR Loans contained in this Loan Agreement.

 

“LIBOR Loan” shall mean a Revolving Credit Loan bearing interest at a rate determined by reference to LIBOR.

 

“Lien” shall mean, with respect to any asset:  (a) any mortgage, pledge, lien, charge, security interest or encumbrance of any kind in respect of such asset or (b) the interest of a vendor or lessor under any conditional sale agreement, financing lease or other title retention agreement relating to such asset.

 

“Loan Agreement” shall mean this Amended and Restated Loan Agreement, together with the Exhibits and Schedules attached hereto, as the same shall be amended from time to time in accordance with the terms hereof.

 

“Loan Documents” shall mean the Loan Agreement, the Note and any other agreements with respect to any of the Obligations.

 

“Loans” shall mean the Revolving Credit Loans.

 

“M&I” shall mean M&I Marshall & Ilsley Bank, a Wisconsin banking corporation.

 

“Net Income” for any period shall mean the gross revenues of Borrower and its Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined in accordance with GAAP on a consolidated basis after eliminating earnings or losses attributable to outstanding minority interests, but excluding in any event:

 

(a) any gains or losses on the sale or other disposition of investments or fixed capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses;

 

(b) the proceeds of any life insurance policy;

 

(c) net earnings and losses of any Subsidiary accrued prior to the date it became a Subsidiary;

 

(d) net earnings and losses of any Person (other than a Subsidiary), substantially all the assets of which have been acquired in any manner by the Borrower or any Subsidiary, realized by such Person prior to the date of such acquisition;

 

(e) net earnings and losses of any Person (other than a Subsidiary) with which Borrower or a Subsidiary shall have consolidated or which shall have merged into or with Borrower or a Subsidiary prior to the date of such consolidation or merger;

 

(f) net earnings of any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has an ownership interest unless such net earnings shall have actually been received by Borrower or such Subsidiary in the form of cash distributions;

 

(g) any portion of the net earnings of any Subsidiary which for any reason is unavailable for payment of dividends to Borrower or any other Subsidiary;

 

(h) earnings resulting from any reappraisal, revaluation or write-up of assets;

 

(i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary;

 

(j) any gain arising from the acquisition of any securities of the Borrower or any Subsidiary; and

 

(k) any reversal of any contingency reserve, which reversal is required to be disclosed in the financial statements of the Borrower in accordance with GAAP, except to the extent that provision for such contingency reserve shall have been made from income arising during such period.

 

“Net Worth” shall mean the total amount of stockholders’ equity of Borrower and its consolidated Subsidiaries as determined without duplication and in accordance with GAAP consistently applied.

 

“Note” shall mean the Revolving Credit Note and all amendments and restatements of any such note and all extensions, renewals or refinancings thereof and substitutions therefor.

 

“Notice Event of Default” shall mean any one or more of the following:

 

(a) Borrower shall fail:  (i) to pay when due any installment of the principal of the Note; or (ii) to pay when due any interest on the Note or any fee, expense or other amount due under this Loan Agreement or the Note; or

 

(b) there shall be a default in the performance or observance of any of the covenants and agreements contained in Article IV or Sections 5.1, 5.2, 5.4, 5.6, 5.10, 5.11, 5.13 or 5.14 of this Loan Agreement; or

 

(c) there shall be a default in the performance or observance of any of the other covenants, agreements or conditions contained in this Loan Agreement or the Note, and such default shall have continued for a period of thirty (30) calendar days after written notice from M&I to Borrower specifying such default and requiring it to be remedied; or

 

(d) any representation or warranty made by Borrower in this Loan Agreement or in any document or financial statement delivered pursuant to this Loan Agreement shall prove to have been false in any material respect as of the time when made or given; or

 

(e) any final judgment shall be entered against Borrower or any Subsidiary which, when aggregated with other final judgments against Borrower and its Subsidiaries, exceeds $1,000,000 in amount, and shall remain outstanding and unsatisfied, unbonded or unstayed after sixty (60) days from the date of entry thereof; provided that no final judgment shall be included in the calculation under this subsection to the extent that the claim underlying such judgment is covered by insurance and defense of such claim has been tendered to and accepted by the insurer without reservation; or

 

(f) (i) any Reportable Event (as defined in ERISA) shall have occurred which constitutes grounds for the termination of any Plan by the PBGC or for the appointment of a trustee to administer any Plan, or any Plan shall be terminated within the meaning of Title IV of ERISA, or a trustee shall be appointed by the appropriate court to administer any Plan, or the PBGC shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan, or Borrower or any trade or business which together with Borrower would be treated as a single employer under Section 4001 of ERISA shall withdraw in whole or in part from a multi-employer Plan, and (ii) the aggregate amount of Borrower’s liability for all such occurrences, whether to a Plan, the PBGC or otherwise, may exceed $1,000,000, and such liability is not covered for the benefit of Borrower or its Subsidiaries by insurance; or

 

(g) Borrower or any Subsidiary shall:  (i) fail to pay any amount of principal or interest when due (whether by scheduled maturity, required prepayment, acceleration or otherwise) under any Indebtedness (other than the Note or as provided in (h) below) in an aggregate amount of $1,000,000 or more and such failure shall continue after the applicable grace period, if any, specified in any agreement or instrument relating to such Indebtedness; or (ii) fail to perform or observe any term, covenant or condition on its part to be performed or observed under any agreement or instrument relating to any such Indebtedness in an aggregate amount of $1,000,000 or more when required to be performed or observed, and such failure shall not be waived and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such failure to perform or observe is to accelerate, or to permit acceleration of, with the giving of notice if required, the maturity of such Indebtedness; or

 

(h) Borrower or any Subsidiary shall:  (i) fail to pay any amount of principal or interest when due (whether by scheduled maturity, required prepayment, acceleration or otherwise) under any Indebtedness to M&I (other than the Note) and such failure shall continue after the applicable grace period, if any, specified in any agreement or instrument relating to such Indebtedness; or (ii) fail to perform or observe any term, covenant or condition on its part to be performed or observed under any agreement or instrument relating to any such Indebtedness to M&I when required to be performed or observed, and such failure shall not be waived and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such failure to perform or observe is to accelerate, or to permit acceleration of, with the giving of notice if required, the maturity of such Indebtedness; or

 

(i) An “Event of Default” (as defined therein) under the Prudential Agreement has occurred.

 

“Obligations” shall mean:  (a) the outstanding principal of, and all interest on, the Note, and any renewals, extensions or refinancings thereof; (b) the Borrower’s obligations with respect to all outstanding Letters of Credit and all obligations of the Borrower under any Letter of Credit applications; (c) all other debts, liabilities, obligations, covenants and agreements of Borrower contained in this Loan Agreement and any Swap Agreements; and (d) any and all other debts, liabilities and obligations of Borrower to M&I.

 

“PBGC” shall mean Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

 

“Permitted Indebtedness” shall mean:  (a) Indebtedness of Borrower to M&I; (b) purchase money Indebtedness secured by Purchase Money Liens, which Indebtedness shall not exceed $1,000,000 per year on a non-cumulative consolidated basis; (c) unsecured accounts payable and other unsecured obligations of Borrower or any Subsidiary incurred in the ordinary course of business of Borrower or any Subsidiary and not as a result of any borrowing; (d) Indebtedness owed by the Borrower to a Subsidiary; (e) Indebtedness existing on the Closing Date and set forth on Schedule 7.1 and refinancings thereof which does not increase the principal amount thereof or accelerate the amortization thereof; and (f) Indebtedness of Borrower in an aggregate principal amount not to exceed $25,000,000 pursuant to the Prudential Agreement, provided that such Indebtedness is unsecured and provided further that any amendments to the Prudential Agreement shall require M&I’s consent (other than any amendment (1) with respect to (i) the rate of interest on the Notes (as defined in the Prudential Agreement), (ii) any fee payable with respect to the Notes (as defined in the Prudential Agreement) or (iii) any other amounts payable under the Prudential Agreement, the Notes (as defined in the Prudential Agreement) or with respect thereto or (2) occurring or entered into as a result of the application of paragraph 6J of the Prudential Agreement).

 

“Permitted Investments” shall mean:

 

(a) Investments in insured savings accounts and certificates of deposit;

 

(b) bankers’ acceptances if issued by a bank organized under the laws of the United States of America or any state having a combined capital and surplus in excess of $50,000,000 and having a maturity of not more than three months from the date of acquisition;

 

(c) Investments in prime commercial paper, rated either P-1 by Moody’s Investors Service or A-1 by Standard & Poor’s Rating Services, or “local rated” commercial paper from M&I, maturing within one year of the date of acquisition;

 

(d) marketable obligations issued or guaranteed by the United States of America or any agency thereof having a maturity of not more than one year from the date of acquisition;

 

(e) Investments in money market instruments or funds;

 

(f) Investments in Subsidiaries and other Investments (i) in existence on the Closing Date and, to the extent they consist of loans, refinancings thereof or amendments or modifications thereto which do not have the effect of increasing the principal amount thereof or accelerating the amortization thereof and (ii) to the extent permitted under Section 4.4 of this Loan Agreement; and

 

(g) Loans to Subsidiaries.

 

“Permitted Liens” shall mean:

 

(a) Liens in favor of M&I;

 

(b) Liens for taxes, assessments, or governmental charges, or levies that are not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established;

 

(c) easements, restrictions, minor title irregularities and similar matters which have no material adverse effect as a practical matter upon the ownership and use of the affected property;

 

(d) Liens or deposits in connection with workmen’s compensation, unemployment insurance, social security, ERISA or similar legislation or to secure customs’ duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or to secure performance of contracts or bids (other than contracts for the payment of borrowed money) or deposits required by law as a condition to the transaction of business or other liens or deposits of a like nature made in the ordinary course of business;

 

(e) Purchase Money Liens securing purchase money Indebtedness which is permitted hereunder; and

 

(f) Liens set forth on Schedule 7.1.

 

“Person” shall mean and include an individual, partnership, limited liability entity, corporation, trust, unincorporated association and any unit, department or agency of government.

 

“Plan” shall mean each pension, profit sharing, stock bonus, thrift, savings and employee stock ownership plan established or maintained, or to which contributions have been made, by Borrower or any Subsidiary or any trade or business which together with Borrower or any Subsidiary would be treated as a single employer under Section 4001 of ERISA.

 

“Prime Rate” shall mean the rate of interest adopted by M&I from time to time as its base rate for interest determinations.

 

“Prime Rate Loan” shall mean a Revolving Credit Loan bearing interest at a rate determined by reference to the Prime Rate.

 

“Prudential Agreement” shall mean that certain Note Agreement dated as of April 10, 2006, executed by Borrower and accepted by The Prudential Insurance Company of America, Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey, Security Benefit Life Insurance Company, Inc., American Skandia Life Assurance Corporation, and Mutual of Omaha Insurance Company, as Noteholders, as the same has been or may be amended, supplemented or otherwise modified from time to time.

 

“Purchase Money Liens” shall mean Liens securing purchase money Indebtedness incurred in connection with the acquisition of capital assets by Borrower or any Subsidiary in the ordinary course of business, provided that such Liens do not extend to or cover assets or properties other than those purchased in connection with the purchase in which such Indebtedness was incurred and that the obligation secured by any such Lien so created shall not exceed one hundred percent (100%) of the cost of the property covered thereby.

 

“Revolving Credit Commitment” shall mean the commitment of M&I to make Revolving Credit Loans to the Borrower up to a maximum principal amount of Forty Million Dollars ($40,000,000) minus the undrawn face amount of outstanding Letters of Credit.

 

“Revolving Credit Loans” shall mean the loans made from time to time to Borrower by M&I pursuant to Section 1.1 of this Loan Agreement.

 

“Revolving Credit Note” shall mean a promissory note from Borrower to M&I evidencing the Revolving Credit Loans and in substantially the form of Exhibit C attached to this Loan Agreement and all amendments thereto and all amendments and restatements thereof and all renewals, extensions or refinancings thereof.

 

“Revolving Credit Termination Date” shall mean the earlier of:  (a) May 31, 2015 and (b) the date that the Revolving Credit Commitment is terminated pursuant to Section 6.1 of this Loan Agreement.

 

“Subsidiary” shall mean any corporation, limited liability company or other Person, more than fifty percent (50%) of the outstanding stock or other equity interests of which (of any class or classes, however designated, having ordinary voting power for the election of at least a majority of the members of the board of directors or other governing body of such corporation or other Person, other than stock or equity interests having such power only by reason of the happening of a contingency) shall at all time be owned by Borrower directly or through one or more Subsidiaries.

 

“Swap Agreement” shall mean any agreement governing any transaction now existing or hereafter entered into between Borrower and M&I or any of M&I’s subsidiaries or affiliates or their successors, which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

 

“Total Funded Debt” shall mean (i) all Indebtedness for borrowed money (including without limitation, Indebtedness evidenced by promissory notes, bonds, debentures and similar interest-bearing instruments), plus (ii) all purchase money Indebtedness, plus (iii) the principal portion of capital lease obligations, plus (iv) the maximum amount which is available to be drawn under Letters of Credit then outstanding, all as determined for Borrower and its consolidated Subsidiaries as of the date of determination, without duplication, and in accordance with GAAP applied on a consistent basis.

 

7.2 Interpretation.  The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined.  The words “hereof”, “herein”, and “hereunder” as words of like import when used in this Loan Agreement shall refer to this Loan Agreement as a whole and not to any particular provision of this Loan Agreement.  Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Loan Agreement, it shall be done in accordance with GAAP except where such principles are inconsistent with the specific provisions of this Loan Agreement.

 

ARTICLE 8                      

 

 

MISCELLANEOUS

 

8.1 Expenses and Attorneys’ Fees.  Borrower shall pay all reasonable fees and expenses incurred by M&I and any loan participants, including the reasonable fees of counsel including in-house counsel, in connection with the preparation, issuance, maintenance and amendment of this Loan Agreement and the Note and the consummation of the transactions contemplated by this Loan Agreement, and the administration, protection and enforcement of M&I’s rights under this Loan Agreement, the Note and the other Loan Documents, including without limitation the protection and enforcement of such rights in any bankruptcy, reorganization or insolvency proceeding involving Borrower, both before and after judgment.  Borrower further agrees to pay on demand all internal audit fees and accountants’ fees incurred by M&I in connection with the maintenance and enforcement of this Loan Agreement, the Note, or any collateral security.

 

8.2 Assignability; Successors.  Borrower’s rights and liabilities under this Loan Agreement are not assignable or delegable, in whole or in part, without the prior written consent of M&I.  The provisions of this Loan Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties.

 

8.3 Survival.  All agreements, representations and warranties made in this Loan Agreement or in any document delivered pursuant to this Loan Agreement shall survive the execution and delivery of this Loan Agreement, the issuance of the Note and the delivery of any such document.

 

8.4 Governing Law.  This Loan Agreement, the Note, and the other instruments, agreements and documents issued pursuant to this Loan Agreement shall be governed by, and construed and interpreted in accordance with, the Laws of the State of Wisconsin applicable to agreements made and wholly performed within such state.

 

8.5 Counterparts; Headings.  This Loan Agreement may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same agreement.  The table of contents and article and section headings in this Loan Agreement are inserted for convenience of reference only and shall not constitute a part of this Loan Agreement.  Executed copies of the signature pages of this Agreement and the other Loan Documents sent by facsimile or transmitted electronically in either Tagged Image Format Files (“TIFF”), Portable Document Format (“PDF”), or any similar format, shall be treated as originals, fully binding and with full legal force and effect, and the parties waive any rights they may have to object to such treatment.  Any party delivering an executed counterpart of this Agreement or any other Loan Document by facsimile or transmitted electronically in TIFF, PDF or similar format, also shall deliver a manually executed counterpart of this Agreement and such other Loan Documents but the failure to deliver a manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement or any other Loan Document.

 

8.6 Entire Agreement.  This Loan Agreement, the Note, the Loan Documents and the other documents referred to herein and therein contain the entire understanding of the parties with respect to the subject matter hereof.  There are no restrictions, promises, warranties, covenants or undertakings other than those expressly set forth in this Loan Agreement.  This Loan Agreement supersedes all prior negotiations, agreements and undertakings between the parties with respect to such subject matter.

 

8.7 Notices.  All communications or notices required or permitted by this Loan Agreement shall be in writing and shall be deemed to have been given:  (a) upon delivery if hand delivered; or (b) two (2) Business Days following deposit in the United States mail, postage prepaid, or with a nationally recognized overnight commercial carrier, airbill prepaid; or (c) upon transmission if by facsimile, and each such communication or notice shall be addressed as follows, unless and until any party notifies the other in accordance with this Section 8.7 of a change of address:

 

If to Borrower:                                                      Twin Disc, Incorporated

1328 Racine Street

Racine, WI  53403

Attention:  Vice President - Finance

Fax No.:  (262) 638-4481

 

If to M&I:                                                      M&I Marshall & Ilsley Bank

770 North Water Street

Milwaukee, WI 53202

Attention:  Gina Peter

Fax No.:  (414) 765-7625

 

with a copy to:

 

Quarles & Brady LLP

411 East Wisconsin Avenue

Milwaukee, Wisconsin 53202

Attention:  Ann M. Murphy

Fax No.:  (414) 978-8825

 

8.8 Amendment.  No amendment of this Loan Agreement shall be effective unless in writing and signed by Borrower and M&I.

 

8.9 Taxes.  If any transfer or documentary taxes, assessments or charges levied by any governmental authority shall be payable by reason of the execution, delivery or recording of this Loan Agreement, the Note or any other document or instrument issued or delivered pursuant to this Loan Agreement, Borrower shall pay all such taxes, assessments and charges, including interest and penalties, and hereby indemnifies M&I against any liability therefor.

 

8.10 Severability.  Any provision of this Loan Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Loan Agreement in such jurisdiction or affecting the validity or enforceability of any provision in any other jurisdiction.

 

8.11 Indemnification.  Borrower hereby indemnifies, agrees to defend and holds M&I harmless from and against all loss, liability, damage and expense, including reasonable costs associated with administrative and judicial proceedings and reasonable attorneys’ fees, suffered or incurred by M&I on account of:  (i) Borrower’s or any Subsidiary’s failure to comply with any Environmental Law, or any order of any regulatory or administrative authority with respect thereto; (ii) any release of petroleum products or hazardous materials or substances on, upon or into real property owned, operated or controlled by Borrower or any Subsidiary; and (iii) any and all damage to natural resources or real property or harm or injury to Persons resulting or alleged to have resulted from any failure to comply or any release of petroleum products or hazardous materials or substances as described in clauses (i) and (ii) above.  All indemnities set forth in this Loan Agreement shall survive the execution and delivery of this Loan Agreement and the Note and the making and repayment of the Loans.

 

8.12 Participation.  M&I may, at any time and from time to time, grant to any bank or banks a participation in any part of the Loans.  All of the representations, warranties and covenants of Borrower in this Loan Agreement are also made to any participant with the same force and effect as if expressly so made.

 

8.13 Inconsistent Provisions.  The provisions of the Note and this Loan Agreement are not intended to supersede the provisions of each other or this Loan Agreement, but shall be construed as supplemental to this Loan Agreement and to each other.  In the event of any inconsistency between the provisions of the Note and this Loan Agreement, it is intended that the provisions of this Loan Agreement shall control.

 

8.14 WAIVER OF RIGHT TO JURY TRIAL.  M&I AND BORROWER ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS LOAN AGREEMENT OR THE NOTE OR WITH RESPECT TO THE TRANSACTION CONTEMPLATED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

8.15 TIME OF ESSENCE.  TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY BORROWER OF THE OBLIGATIONS SET FORTH IN THIS LOAN AGREEMENT AND THE NOTE.

 

8.16 SUBMISSION TO JURISDICTION; SERVICE OF PROCESS.  AS A MATERIAL INDUCEMENT TO M&I TO ENTER INTO THIS LOAN AGREEMENT:

 

(a) THE BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS IN ANY MANNER RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE NOTE MAY BE BROUGHT ONLY IN COURTS OF THE STATE OF WISCONSIN LOCATED IN MILWAUKEE COUNTY OR THE FEDERAL COURT FOR THE EASTERN DISTRICT OF WISCONSIN AND THE BORROWER CONSENTS TO THE JURISDICTION OF SUCH COURTS.  THE BORROWER WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH COURT AND ANY RIGHT IT MAY HAVE NOW OR HEREAFTER HAVE TO CLAIM THAT ANY SUCH ACTION OR PROCEEDING IS IN AN INCONVENIENT COURT; and

 

(b) The Borrower consents to the service of process in any such action or proceeding by certified mail sent to the address specified in Section 8.7.

 

(c) Nothing contained herein shall affect the right of M&I to serve process in any other manner permitted by law or to commence an action or proceeding in any other jurisdiction.

 

8.17 USA Patriot Act.  M&I hereby notifies Borrower and each of its Subsidiaries that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies Borrower and each of its Subsidiaries, which information includes the name and address of Borrower and each of its Subsidiaries and other information that will allow M&I to identify Borrower and each of its Subsidiaries in accordance with the Patriot Act and Borrower agrees to provide such information.

 

 

 

QB\12759948.5

  

  

  

IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as of the day and year first above written.

 

TWIN DISC, INCORPORATED

 

By:       _______________                                                         

Its:       _______________                                                         

 

 

 

[Signature Page to Amended and Restated Loan Agreement]

S-

QB\12759948.5

  

  

  

M&I MARSHALL & ILSLEY BANK

 

By:  _______________                                                              

Its:     _______________                                                      

 

By:    _______________                                                       

Its:  _______________                                                         

 

[Signature Page to Amended and Restated Loan Agreement]

S-

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SCHEDULE 3.1

Borrower’s Subsidiaries and the Borrower’s Percentage Ownership of Each

	
SUBSIDIARY

	
BORROWER’S OWNERSHIP

	
1. Twin Disc International, S.A. (a Belgian corporation)

 

	
100%

	
2. Twin Disc S.R.L. (an Italian corporation)

 

	
100%

	
3. Rolla SP Propellers S.A. (a Swiss corporation)

 

	
100%

	
4. Vetus Italia S.R.L. (an Italian corporation)

 

	
100%

	
5. Technodrive S.A.R.L. (a French corporation)

 

	
100%

	
6. Boat Equipment Ltd. (a Malta corporation)

 

	
100%

	
7. Twin Disc (Pacific) Pty. Ltd. (an Australian corporation)

 

	
100%

	
8. Twin Disc (Far East) Ltd. (a Delaware corporation operating in Singapore)

 

	
100%

	
9. Twin Disc (Far East) Pte. Ltd. (a Singapore corporation)

 

	
100%

	
10. Twin Disc Power Transmission Pvt. Ltd. (an Indian corporation)

 

	
100%

	
11. Mill-Log Equipment Co., Inc. (an Oregon corporation)

 

	
100%

	
12. Mill-Log Marine, Inc. (an Oregon corporation)

 

	
100%

	
13. Mill-Log Wilson Equipment Ltd. (a Canadian corporation)

 

	
100%

	
14. Twin Disc Southeast Inc. (a Florida corporation)

 

	
100%

	
15. Twin Disc Japan (a Japanese corporation)

 

	
100%

	
16. Twin Disc Nico Co. Ltd. (a Japanese corporation)

 

	
66%

SCHEDULE 3.6

Litigation

None

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SCHEDULE 3.12

Dump Sites

Plant 3 Broach Pit.  The Borrower has identified oil and VOC contamination of soil and groundwater immediately beneath the building identified as Plant 3.  This contamination is believed to be attributable to operation of the broach prior to December of 1995.  The Borrower is engaged in ongoing site investigation and remediation under the auspices of the Wisconsin Department of Natural Resources (“WDNR”), principally involving pumping of contaminated groundwater.

Plant 3 Coolant Release.  The Borrower has identified VOC contamination of soil at Plant 3 relating to an historical coolant release.  The Borrower is engaged in ongoing site investigation and sampling on a semi-annual basis, under the auspices of the WDNR.  The Borrower is in the process of determining whether further investigation is warranted as to the extent and degree of any vapor intrusion at the site.

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SCHEDULE 3.13

Tanks

The Borrower has several aboveground storage tanks (ASTs) at its Plant 1 location.  The ASTs are located in the waste storage room and contain waste coolant/washing solution, waste oil, and a series of tanks utilized for the make-up of fresh coolant.

The Borrower has approximately 22 ASTs at its Plant 3 site, ranging in size from 450 gallons up to approximately 2,250 gallons.  Included in these 22 tanks are nine 600-gallon storage tanks utilized for the storage of bulk liquids.  These nine ASTs contain:

	
M1 -

	
DTE 25 Lube Oil

	
M2 -

	
Omnicron Cutting Oil

	
M3 -

	
Metcut G Cutting fluid

	
M4 -

	
Delvac 10W Engine Oil

	
M5 -

	
Velocite 6 Hydraulic Fluid

	
M6 -

	
MobilMet Nu Cutting Oil

	
M1B -

	
DTE 25 Lube Oil

	
M2B -

	
Omnicron Cutting Oil

	
M3B -

	
Metcut G Cutting Fluid

The remaining Plant 3 ASTs contain waste coolant/washing solution, waste oil, and a series of tanks utilized for the make-up of fresh coolant.

The Borrower also maintains a 2,425-gallon diesel fuel tank located at its research and development facility.

QB\12759948.5

  

  

  

SCHEDULE 3.14

Other Environmental Conditions

None.

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SCHEDULE 3.15

Environmental Judgments, Decrees and Orders

None.

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SCHEDULE 7.1

Existing Indebtedness and Liens

Indebtedness of the Company and its Subsidiaries existing on the Closing Date is as follows:

	  	  	
Available

	
Outstanding

	  	
Name of Lender

	
Funds

	
April 29, 2011

	  	  	  	  
	
Twin Disc,

	
Prudential

	
$17,857,143

	
$17,857,143

	
Incorporated

	
(senior note)

	  	  
	  	  	  	  
	  	  	  	  
	
Twin Disc

	
ING Brussels

	
€2,628,000

	
None

	
International SA

	
(line of credit)

	  	  
	  	  	  	  
	  	  	  	  
	
Rolla SP

	
CreditSuisse

	
CHF650,000

	
None

	
Propellers SA

	
(line of credit)

	  	  
	  	  	  	  
	  	  	  	  
	
Twin Disc

	
Standard Chartered Bank

	
$1,500,000

	
$853,109

	
 (Far East) Ltd.

	
(guarantees)

	  	  
	  	
Standard Chartered Bank

	
SG$800,000

	
None

	  	
(line of credit)

	  	  
	  	  	  	  
	
Twin Disc SRL

	
CR Cento (Technodrive

	
N/A

	
€188,571

	  	
Notes Payable)

	  	  
	  	
Various (BCS capital

	
N/A

	
€122,996

	  	
leases)

	  	  
	  	
Various (Technodrive

	  	
€332,763

	
None

	  	  	  
	  	
overdraft protection)

	  	  
	  	
Various (BCS overdraft

	
€427,763

	
None

	  	
protection)

	  	  
	  	  	  	  
	
Twin Disc

	
Various

	
N/A

	
$A80,751

	
(Pacific) Pty. Ltd.

	
(capital leases)

	  	  

Liens of the Company and its Subsidiaries existing on the Closing Date are as follows:

Debenture registered in the amount of SG$3,500,000 executed by Twin Disc (Far East) Ltd. covering the assets of Twin Disc (Far East) Ltd.

QB\12759948.5

  

  

  

EXHIBIT A

SECRETARY’S CERTIFICATE

The undersigned does hereby certify that:

 

1.           I am the duly elected, qualified and acting Secretary of Twin Disc, Incorporated, a Wisconsin corporation (the “Company”).

 

2.           The resolutions attached hereto have been duly adopted by the board of directors of the Company, have not in any way been rescinded or amended and have been in full force and effect at all times since their adoption up to and including the date hereof and are now in full force and effect.

 

3.           Attached hereto is a true, complete and correct copy of the articles of incorporation of the Company, which have been duly adopted by the Company, have not in any way been rescinded or amended since adoption of the most recent amendment attached hereto, and which continue in full force and effect.

 

4.           Attached hereto is a true, complete and correct copy of the bylaws of the Company, which have been duly adopted by the Company, have not in any way been rescinded or amended since adoption of the most recent amendment attached hereto, and which continue in full force and effect.

 

5.           Each of the person(s) named below presently hold(s) the office in the Company set forth next to such person’s name and next to that is a genuine specimen of such person’s signature.

 

Name                                           Title                                                      Sample Signature

_______________    Vice President-Finance and       _______________

 

                    Treasurer                                           

 

_______________    Vice President-Administration      _______________  

 

                    & Secretary                                           

 

6.           This certificate is delivered to M&I Marshall & Ilsley Bank (“M&I”) pursuant to that certain Amended and Restated Loan Agreement dated as of May ___, 2011, as amended from time to time, by and between the Company and M&I.  M&I is entitled to rely on this certificate until canceled or amended by delivery to M&I of a further certificate of the Secretary or an Assistant Secretary of the Company.

 

Executed as of May ___, 2011.

 

_______________

Secretary

QB\12759948.5

  

  

  

 

EXHIBIT B

 

 

OFFICER’S CERTIFICATE

 

M&I Marshall & Ilsley Bank

 

Attention:  Gina A. Peter

 

770 North Water Street

 

Milwaukee, Wisconsin 53202

 

Re:           Twin Disc, Incorporated

 

Gentlemen:

 

This Officer’s Certificate is delivered to you pursuant to the terms of an Amended and Restated Loan Agreement dated as of May ___, 2011, as amended (as amended, the “Loan Agreement”) between Twin Disc, Incorporated (the “Borrower”) and M&I Marshall & Ilsley Bank (“M&I”).  Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement.

 

The undersigned hereby represents and warrants on behalf of the Borrower (and not in his individual capacity) to M&I that:

 

1.           The undersigned is an officer of the Borrower and is duly authorized to execute and deliver this Officer’s Certificate.

 

2.           The representations and warranties of the Borrower contained in the Loan Agreement are true and accurate in all material respects on and as of the date of this Officer’s Certificate.

 

3.           No Default or Event of Default under the Loan Agreement has occurred and is continuing.1

 

4.           Enclosed with this certificate are the financial statements described in Section 5.4(a) [or: 5.4(b)] of the Loan Agreement for the quarter [or: year] ended __________________, 20__ (the “Financials”).  To the best of our knowledge, the Financials were prepared in accordance with generally accepted accounting principles and fairly present, in all material respects, the financial condition and results of operations of the Borrower and an its Subsidiaries as of the date of, and for the period covered by, the Financials, subject to audit and normal year-end adjustments.2

 

5.           As determined pursuant to the Loan Agreement and based on the consolidated Financials for the Borrower and all consolidated Subsidiaries:

 

	
A.

	
the Total Funded Debt to EBITDA Ratio as of ____________________, 20___ is:

	
__________:1.0

	  	
the maximum Total Funded Debt to EBITDA Ratio covenant is 3.00 to 1.00 at the end of each fiscal quarter.

	  
	
B.

	
the Net Worth as of _________, 20___ is:

	
$_______________

	  	
the Net Worth covenant is $104,178,000 plus 35% of the positive consolidated Net Income for each fiscal quarter from and after December 31, 2010 on a cumulative basis.

[any adjustment for pension liabilities permitted by Section 5.13(a) is $______________.]

 

	  
	
C.

	
the EBITDA as of ____________________, 20___ is:

 

	
$_______________

	  	
the EBITDA covenant is at least $11,000,000 at the end of each fiscal quarter based upon the four fiscal quarters then ended.

 

	  

  
1           If a Default or an Event of Default exists, specify (a) the facts and circumstances of such Default or Event of Default, and (b) the actions that the Borrower has taken, is taking or proposes to take to remedy such Default or Event of Default.

  
2           For the certificate delivered with the annual financial statements, delete the phrase “subject to audit and normal year-end adjustments.”

QB\12759948.5

  

  

  

Dated: ___________, 20___.

 

TWIN DISC, INCORPORATED

 

By:   _______________                                                                        

 

Its:  Vice President-Finance, Chief Financial Officer 

 

          and Treasurer                                                                           

 

[Signature Page to Officer’s Certificate]

QB\12759948.5

  

  

  

 

EXHIBIT C

 

 

REVOLVING CREDIT NOTE

 

 

 

$40,000,000.00                                                                                                           Milwaukee, Wisconsin

May 13, 2011

FOR VALUE RECEIVED, TWIN DISC, INCORPORATED, a Wisconsin corporation (the “Borrower”), hereby promises to pay to the order of M&I MARSHALL & ILSLEY BANK, a Wisconsin banking corporation (“M&I”), on the Revolving Credit Termination Date (as defined in the Loan Agreement referred to below) (or such earlier maturity date resulting from acceleration) the principal sum of FORTY MILLION DOLLARS ($40,000,000.00) or such lesser amount of revolving credit loans which are owing from the Borrower to M&I under the Revolving Credit Commitment provided for in the Loan Agreement.

 

The unpaid principal shall bear interest from the date hereof until paid at an annual rate, computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.  All interest payable under the Loan Agreement and this Note is computed using this method.  This calculation method results in a higher effective interest rate than the numeric interest rate stated in the Loan Agreement or in this Note.  Interest accrued on the outstanding principal balance shall be payable on the last day of each month, commencing on May 31, 2011, and continuing thereafter until the outstanding principal balance is repaid in full, with all accrued interest paid with the final payment of principal.  Interest will be payable in the amounts in accordance with the terms of the Loan Agreement.  The Borrower hereby agrees to pay such interest.

 

In the event that any amount of the principal of, or interest on, this Note is not paid when due (whether at stated maturity, by acceleration or otherwise), the entire principal amount outstanding under this Note shall bear interest at the annual rate equal to the rate otherwise in effect under the Loan Agreement plus an additional three percent (3%) from the due date until all such overdue amounts have been paid in full.

 

Payments of both principal and interest and other amounts due hereunder are to be made in lawful money of the United States of America at the offices of M&I Marshall & Ilsley Bank, Attention:  Commercial Loan Department, 770 North Water Street, Wisconsin 53202, or at such other place as the holder shall designate in writing to the maker.

 

The makers and all endorsers hereby severally waive presentment for payment, protest and demand, notice of protest, demand and of dishonor and nonpayment of this Note.  The Borrower hereby agrees to pay all reasonable fees and expenses incurred by M&I or any subsequent holder, including the reasonable fees of counsel, in connection with the protection and enforcement of the rights of M&I or any subsequent holder of this Note, including without limitation, the collection of any amounts due under this Note and the protection and enforcement of such rights in any bankruptcy, reorganization or insolvency proceedings involving the Borrower, both before and after judgment.

 

This Note constitutes the Revolving Credit Note described in that certain Amended and Restated Loan Agreement (the “Loan Agreement”) dated as of the date hereof by and between M&I and the Borrower to which Loan Agreement reference is hereby made for a statement of the terms and conditions under which the Revolving Credit Loans evidenced hereby may be made and a description of the terms and conditions upon which this Note may be prepaid in whole or in part.  In case an Event of Default, as defined in the Loan Agreement, shall occur, the entire unpaid principal and accrued interest may be automatically due and payable or may be declared due and payable as provided in the Loan Agreement.

 

TWIN DISC, INCORPORATED

 

By:  _______________                                                                         

Its:  Vice President-Finance, Chief Financial Officer

          and Treasurer                                                                           

[Signature Page to Officer’s Certificate]

QB\12759948.5

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