Document:

Exhibit 10.11

 

MANAGEMENT SHAREHOLDER AGREEMENT

 

This Management Shareholder Agreement, dated as of December 1, 2013 (this “Agreement”), is entered into by and between Interpool, Inc., d/b/a TRAC Intermodal, a Delaware corporation (the “Company”), SCT Chassis Inc., a Marshall Islands corporation (“SCT Chassis”), and VAL T. NOEL (the “Management Investor”).

 

WHEREAS, the Company desires to grant to the Management Investor certain restricted shares of the common stock of SCT Chassis (the “Common Stock”) on the date hereof, effective as provided herein;

 

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                      Grant of Common Stock.

 

(a)                                 On December 1, 2013 (the “Grant Date”), the Company shall grant to the Management Investor, and the Management Investor hereby accepts, effective as of the date of such grant, a number of restricted shares of Common Stock set forth on Appendix A, attached hereto with the Fair Market Value (as defined below) per share of Common Stock set forth on Appendix A (the “Initial Granted Shares”).

 

(b)                                 For the avoidance of doubt, the Initial Granted Shares shall be considered to be “Common Stock” hereunder upon grant (including prior to the vesting of any Initial Granted Shares).

 

(c)                                  Subject to the terms of Section 1(e) below and the other terms and provisions of this Agreement, the Initial Granted Shares shall vest in one-fourth (1/4) increments Beginning on January 1, 2014 and thereafter on January 1st of each of the three years following such date (each such date, a “Vesting Date”), in each case provided that the Management Investor is still employed by the Company on such date;

 

(d)                                 The Company hereby agrees to grant to the Management Investor additional shares of Common Stock in connection with the occurrence of any of the following events (each such event, an “Additional Granting Event”):

 

(i)                                     if, at the end of any fiscal quarter following January 1, 2012, but on or before December 31, 2013, the Pre-Tax Earnings (as defined below) per share of Common Stock equals or exceeds $0.75 measured over the immediately prior trailing twelve month period, then within five (5) business days following receipt by the Company of a SAS 100 quarterly review prepared by a third party firm validating the achievement of the performance target (such date, the “Tranche 1 Grant Date”), the Company shall grant to the Management Investor, as of such date, a number of shares of restricted Common Stock equal to fifty percent (50%) of the Initial Granted Shares (the “Tranche 1 Shares”); One-fourth (1/4) of the Tranche 1 Shares shall vest on each of the first four anniversaries of the Tranche 1 Grant Date, provided that the Management Investor is still employed by the Company on such date;

 

 

(ii)                                  if, at the end of any fiscal quarter following January 1, 2012, but on or before December 31, 2014, the Pre-Tax Earnings per share of Common Stock equals or exceeds $1.38 measured over the immediately prior trailing twelve month period, then within five (5) business days following receipt by the Company of a SAS 100 quarterly review prepared by a third party firm validating the achievement of the performance target (such date, the “Tranche 2 Grant Date”), the Company shall grant to the Management Investor, as of such date, a number of shares of restricted Common Stock equal to fifty percent (50%) of the Initial Granted Shares (the “Tranche 2 Shares”); One-fourth (1/4) of the Tranche 2 Shares shall vest on each of the first four anniversaries of the Tranche 2 Grant Date, provided that the Management Investor is still employed by the Company on such date; and

 

(iii)                               if, at the end of any fiscal quarter following January 1, 2012, but on or before December 31, 2015, (i) the Pre-Tax Earnings per share of Common Stock equals or exceeds $2.04 measured over the immediately prior trailing twelve month period, or (ii) upon the realization of a full or partial equity valuation (whether by SCT Chassis or any Fortress Entity with respect to the common stock of SCT Chassis or any of its subsidiaries) equal to or in excess of $24.09 per share (subject to a minimum realization of $100 million), then within five (5) business days following receipt by the Company of a SAS 100 quarterly review prepared by a third party firm validating the achievement of the performance target with respect to clause (i) above (but in no event later than seventy (70) days following the end of the fiscal quarter in which such performance criteria is met), or within five (5) business days following the achievement of the performance target with respect to clause (ii) above, (such date in each case, the “Tranche 3 Grant Date”),  in addition to receiving an award of any Tranche 1 Shares and/or Tranche 2 Shares to the extent not previously awarded, Management Investor will receive an additional grant of shares of restricted Common Stock equal to one hundred percent (100%) of the Initial Granted Shares (the “Tranche 3 Shares”, together with the Tranche 1 Shares and Tranche 2 Shares, the “Additional Granted Shares”). The Tranche 3 Shares will vest immediately upon grant.  For the avoidance of doubt, any Tranche 1 Shares or Tranche 2 Shares granted pursuant to this Section 1(d)(iii) shall vest immediately upon grant.

 

(iv)                              Notwithstanding anything contained herein to the contrary, if at any time during the four (4) year period commencing January 1, 2012 and ending on December 31, 2015, an Additional Granting Event shall occur during the six (6) month period immediately following the termination of the Management Investor’s employment by the Company without Cause (as defined below), then the Company shall nonetheless be obligated hereunder to grant to the Management Investor the Additional Granted Shares in accordance herewith as though the Management Investor were an employee in good standing on the date of such Additional Granting Event.  Except as set forth in the preceding sentence, the Management Investor must be employed (and not have given or received notice of termination) on the applicable grant date in order to be eligible for a grant of any Additional Granted Shares. Any Additional Granted Shares granted pursuant to this Section 1(d)(iv) shall vest immediately upon grant. For the avoidance of doubt, the Management Investor will have no entitlement to grants pursuant to this Section 1(d)(iv)

 

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if the Company does not achieve the relevant performance target on or prior to December 31, 2015.

 

(e)                                  Without limiting any of the other terms and provisions of this Agreement, the Initial Granted Shares and Additional Granted Shares (collectively, the “Restricted Shares”) shall be subject to the following terms:

 

(i)                                     Except as provided in Section 1(e)(ii)(A) below, if (A) other than for death or Disability, the Management Investor’s employment is terminated by the Company without Cause and (B) a waiver and release reasonably acceptable to the Company (a “Release”) is executed by the Management Investor within the time period prescribed therein after the date of such termination and becomes effective in accordance with its terms, the Management Investor shall immediately vest (upon the expiration of any revocation period applicable to such Release) as the owner of each tranche of Restricted Shares that would have vested under Section 1(c)) above, as the case may be, on the next succeeding Vesting Date applicable thereto following such termination.

 

(ii)                                  The Management Investor shall immediately vest as the owner of all Restricted Shares that have not theretofore vested upon the occurrence of any of the following:

 

A.                                    the termination of the Management Investor’s employment by the Company without Cause within twelve (12) months after a Change of Control (as defined below), subject to the Management Investor’s execution and non-revocation of a Release within the time period prescribed therein after the date of such termination; or

 

B.                                    the termination of the Management Investor’s employment due to the Management Investor’s death or Disability (as defined below), subject to the Management Investor’s (or if applicable, the Management Investor’s representative) execution and non-revocation of a Release within the time period prescribed therein after the date of such termination; or

 

C.                                    the granting to the Management Investor of Tranche 3 Shares.

 

(iii)                               Except as provided in Sections 1(e)(i) and 1(e)(ii) above, all of the unvested Restricted Shares shall be automatically forfeited, and be deemed to have been repurchased by the Company at a purchase price of zero dollars, upon the Management Investor ceasing to be an employee of the Company (whether as a result of termination for Cause, termination without Cause, resignation, death, Disability or otherwise).

 

(iv)                              For purposes of clarification, except as otherwise expressly provided in this Agreement, the Management Investor will have all of the rights of a shareholder with respect to all of the Restricted Shares granted hereunder, including, without limitation, the right to vote such shares (subject to Section 1(e)(vi) below) and the right to receive all dividends or other distributions with respect to such shares; provided, however, any dividends or other distributions paid with respect to any Restricted Shares which have not previously vested shall be withheld by the Company and shall be paid to the Management

 

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Investor only when, and if, such Restricted Shares shall become fully vested pursuant to Section 1.

 

(v)                                 The Restricted Shares shall be registered in the Management Investor’s name, but any certificates evidencing such Restricted Shares shall be retained by SCT Chassis during the period prior to the vesting of such shares as set forth herein.  The Management Investor shall execute a share transfer substantially in the form of Exhibit A attached hereto, in blank, with respect to such Restricted Shares and deliver the same to SCT Chassis.  Upon vesting in accordance with the terms of this Agreement, the Restricted Shares shall be issued to the Management Investor free and clear of all liens, other than restrictions and legends required pursuant to federal and state securities laws and the terms of this Agreement.

 

(vi)                              To the fullest extent permitted by applicable law, the Management Investor hereby appoints FIG LLC (“FIG LLC”) as its proxy with respect to all vested and unvested Restricted Shares of which the Management Investor may be the record holder from time to time to (A) attend all meetings of the holders of the Common Stock, with full power to vote and act for the Management Investor with respect to such Restricted Shares in the same manner and to the same extent that the Management Investor might were the Management Investor personally present at such meetings, and (B) execute and deliver, on behalf of the Management Investor, any written consent in lieu of a meeting of the holders of the Common Stock in the same manner and to the same extent that the Management Investor might but for the proxy granted pursuant to this sentence.  The proxy hereby granted by the Management Investor is, and shall be, irrevocable by the Management Investor (until the closing of an IPO (as defined below) upon which such proxy shall automatically terminate with respect to the Restricted Shares).  FIG LLC shall have full power to substitute another person as the Management Investor’s proxy and to revoke the appointment of any such substitute proxy.  Concurrently herewith, the Management Investor is hereby executing and delivering to SCT Chassis an irrevocable proxy in the form of Exhibit B attached hereto, and the Management Investor hereby agrees that it shall execute and deliver any further instrument, and take all other actions, reasonably requested by FIG LLC from time to time to evidence or otherwise give effect to the provisions of this Section 1(e)(vi).

 

(f)                                   Anything herein to the contrary notwithstanding, the Restricted Shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated or encumbered (each such action, a “Transfer”) until the applicable restrictions set forth herein are removed or expire or are expressly waived by SCT Chassis in writing, and any additional requirements or restrictions contained in this Agreement have been satisfied, terminated or expressly waived by SCT Chassis in writing.  Any purported or attempted Transfer that does not comply with the terms of this Agreement shall be null and void and the purported transferee shall not be deemed to be a shareholder of SCT Chassis and shall not be entitled to receive a stock certificate (if any) or any dividends or other distributions on or in respect of the Restricted Shares subject to such purported or attempted Transfer.

 

(g)                                  In connection with the payment of any dividends, distributions or other type of payment to the Management Investor in respect of the Restricted Shares, the Company,

 

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as applicable law may provide, shall be entitled to deduct any taxes or other amounts required by any governmental authority to be withheld and paid over to such authority for the Management Investor’s account.

 

(h)                                 For the purposes of this Agreement, the following terms have the respective meanings set forth below:

 

(i)                                     “Act” means the Securities Act of 1933, as amended.

 

(ii)                                  An “affiliate” of, or a person “affiliated” with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

 

(iii)                               A termination for “Cause” shall mean termination of the Management Investor’s employment with the Company and its subsidiaries as a result of any of the following:

 

(A)                               the Management Investor commits any act of fraud, intentional misrepresentation or serious misconduct in connection with the business of the Company or any of its affiliates, including, but not limited to, falsifying any documents or agreements (regardless of form); or

 

(B)                               the Management Investor violates any rule or policy of the Company or any of its affiliates (I) for which violation an employee may be terminated pursuant to the written policies of the Company or any of its affiliates reasonably applicable to such an employee or (II) which violation results in material damage to the Company or any of its affiliates or (III) which, after written notice to do so, the Management Investor fails to correct within 30 days; or

 

(C)                               the Management Investor willfully breaches or habitually neglects any aspect of the Management Investor’s duties assigned to the Management Investor by the Company or any of its affiliates, which assignment was reasonable in light of the Management Investor’s position with the Company or its subsidiaries (all of the foregoing duties, “Duties”); or

 

(D)                               the Management Investor fails adequately to perform any Duties (which failure has not been cured within thirty (30) days after a written demand for substantial performance has been delivered to the Management Investor) and such failure is reasonably likely to have a material adverse impact upon the Company or any of its affiliates or the operations of any of them; or

 

(E)                                the Management Investor fails to comply with a specific directive from the board of directors (or similar body) of the Company (the “Board of Directors”) or any of its affiliates with respect to a material matter, which directive is made specifically to the Management Investor and was reasonable in light of the Management Investor’s position with the Company or its subsidiaries; or

 

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(F)                                 while employed by the Company or its subsidiaries, and without the written approval of the Board of Directors, the Management Investor performs services for any other corporation or person which competes with the Company or any of its subsidiaries or otherwise violates Section 5 or 6 hereof; or

 

(G)                               the Management Investor is convicted by a court of competent jurisdiction of, or enters a plea of nolo contendere to, a felony (other than a traffic or moving violation) or any crime involving dishonesty; or

 

(H)                              any other action or condition that may result in termination of an employee for cause pursuant to any generally applied standard, of which standard the Management Investor knew or reasonably should have known, adopted in good faith by the Company or any of its subsidiaries from time to time prior to the occurrence of such action or condition.

 

In the event that there is a dispute between the Management Investor and the Company as to whether “Cause” for termination exists:  (x) such termination shall nonetheless be effective, and (y) the payments or deliveries, if any, to be made by the Company or any Fortress Entity in connection with a sale or purchase of the Common Stock held by the Management Investor pursuant to Section 4 of this Agreement shall be delayed until the final resolution of such dispute.

 

(iv)                              “Change of Control” means an event or series of events by which one or more Fortress Entities collectively directly or indirectly legally or beneficially own less than 50% of the voting stock (or other equity interest) of the Company, in each case adjusted pursuant to any stock (or share) split, stock (or share) dividend, recapitalization or reclassification of the capital of the Company; provided, however, that a “Change of Control” shall not be deemed to occur:

 

(A)                               upon an acquisition, merger, amalgamation, continuation into another jurisdiction or other business combination involving the Company, including the sale of all or substantially all of the assets of the Company (each, a “Business Combination”), if one or more Fortress Entities collectively (I) directly or indirectly legally or beneficially own at least 30% of the voting stock (or other equity interest) of the Company or the surviving/acquiring entity, as the case may be, and (II) continue to be the largest shareholder (or other holder of equity) of the Company or the surviving/acquiring entity, as the case may be, following such Business Combination, and a “Change of Control” will not result after any such Business Combination so long as the conditions set forth in clauses (I) and (II) continue to be satisfied; or

 

(B)                               (I) upon an IPO (without regard to the percentage of voting stock (or other equity interest) of SCT Chassis or any of its subsidiaries, as applicable, directly or indirectly legally or beneficially owned by the Fortress Entities immediately after such IPO) or (II) without limiting clause (I), if at any time following an IPO one or more Fortress Entities collectively directly or indirectly legally or beneficially own at least 30% of the voting stock (or other equity

 

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interest) of the Company or SCT Chassis, as applicable, and are the largest shareholder (or other holder of equity) of the Company or SCT Chassis, as applicable.

 

(v)                                 “Disability” means, as determined by the Board of Directors in good faith, the Management Investor’s inability, due to disability or incapacity, to perform all of the Management Investor’s Duties on a full-time basis for (A) periods aggregating one hundred eighty (180) days, whether or not continuous, in any continuous period of three hundred and sixty five (365) days or, (B) where the Management Investor’s absence is adversely affecting the performance of the Company in a significant manner, periods greater than ninety (90) days and the Management Investor is unable to resume the Management Investor’s Duties on a full time basis within ten (10) days after receipt of written notice of the Board of Directors’ determination under this clause (v).

 

(vi)                              “Fair Market Value” of each share of Common Stock shall be determined as of the time of the event requiring valuation of such stock hereunder by the board of directors (or similar body) of SCT Chassis (“SCT Chassis Board”) in good faith; provided, however, that such determination shall be based upon the Company or SCT Chassis, as the case may be, as a going concern and shall not discount the value of such shares either because they are subject to the restrictions set forth in this Agreement, or because they constitute only a minority interest in the Company or SCT Chassis, as the case may be.

 

(vii)                           “Fortress Entity” means (A) any private equity fund managed by an affiliate of FIG LLC (or its successors or assigns) or any affiliate of any such fund, (B) any investment vehicle (whether formed as a private investment fund, stock company or otherwise) managed directly or indirectly by FIG LLC (or its successors or assigns) or any of its affiliates or (C) any general partner, limited partner, managing member or person occupying a similar role of or with respect to any of the foregoing.

 

(viii)                        “IPO” means a firmly underwritten initial public offering pursuant to a registration statement declared effective under the Act covering the offer and sale of the common stock of SCT Chassis or any of its subsidiaries to the public generally in which the net proceeds to either SCT Chassis or such subsidiary, as applicable are not less than US$50,000,000.

 

(ix)                              “Pre-Tax Earnings” shall be measured in accordance with Generally Accepted Accounting Principles (“GAAP”) as in effect on the Grant Date.  For purposes of determining the achievement of the performance targets set forth above, “Pre-Tax Earnings” shall exclude the following: non-cash interest and one-time charges resulting from the termination or modification of interest rate swaps; losses related to the acceleration of amortization of deferred debt issue costs; and gains or losses resulting from other onetime events as determined by the board of directors of SCT Chassis.

 

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2.                                      Transfers of Stock.

 

(a)                                 Resale of Stock.  Subject to the provisions of Sections 2(c) and 4, the Management Investor shall not Transfer the Restricted Shares or any other shares of Common Stock or other shares or capital of SCT Chassis now or hereinafter owned by the Management Investor, other than in accordance with both the provisions of this Section 2 and the federal and state securities laws.

 

(b)                                 Tag-Along Right; Drag-Along Right.

 

(i)                                     As used in this Agreement, the term “Holder” means the Management Investor or a Related Transferee (as defined below) of the Management Investor, and the term “Holder’s Shares” means all shares of Common Stock held by a Holder at any time of determination, which shall include any Additional Granted Shares to be granted to such Holder upon the consummation of any Third Party Sale that qualifies as an Additional Granting Event.

 

(ii)                                  Tag-Along Right.  Notwithstanding any other provision hereof, prior to one or more Fortress Entities selling more than fifty percent (50%) of the outstanding Common Stock (such selling entities, the “Selling Fortress Entities”) to one or more third persons who are not a Fortress Entity (collectively, a “Third Party”) pursuant to a single transaction or a series of related transactions (such sale, a “Third Party Sale”), the Selling Fortress Entities shall deliver a written notice (a “Tag-Along Notice”) to the Management Investor and each Related Transferee (or if any such individual is deceased, to the decedent’s personal representative) which satisfies the requirements of Section 2(b)(ii)(A) below.  Such Tag-Along Notice shall be so delivered not less than forty (40) days prior to the respective Third Party Sale.

 

(A)                               Tag-Along Notice.  Each Tag-Along Notice shall set forth:  (i) the name and address of the Third Party; (ii) the proposed amount and form of consideration to be paid per share of Common Stock and the terms and conditions of payment offered by the Third Party; (iii) the aggregate number of shares of Common Stock held by the Selling Fortress Entities as of the date that the Tag-Along Notice is first delivered, mailed or sent by courier or facsimile to the Management Investor and each Related Transferee (or if any such individual is deceased, the decedent’s personal representative); (iv) the Tag-Along Sale Percentage (as defined below); (v) the proposed date of the Third Party Sale (the “Third Party Sale Date”); and (vi) confirmation that the proposed Third Party has agreed to purchase the Holder’s Shares in accordance with the terms hereof.

 

(B)                               Exercise of Tag-Along Right.  Upon the receipt of a Tag-Along Notice by the Management Investor or a Related Transferee (or if any such individual is deceased, to the decedent’s personal representative), each Holder shall have the right (such right, a “Tag-Along Right”), exercisable in its sole discretion, to sell to the respective Third Party up to the same percentage of the total number of Holder’s Shares held by such Holder on the date of the Tag-Along Notice (whether or not the restrictions on Transfer of Common Stock have lapsed)

 

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as the percentage of the total number of shares of Common Stock held by the Selling Fortress Entities as of the date of the Tag-Along Notice that such Selling Fortress Entities are selling in the Third Party Sale (the “Third Party Sale Percentage”), at the same price and on the same terms and conditions as such Selling Fortress Entities have agreed to with such Third Party; provided, however, that each such Holder shall not be permitted to sell any unvested Holder’s Shares; provided further, such Selling Fortress Entities shall use their reasonable, good faith efforts to provide (I) that the only representation and warranty which such Holder shall be required to make in connection with the Third Party Sale is a representation and warranty with respect to such Holder’s own ownership of the Holder’s Shares to be sold by it and its ability to convey title thereto free and clear of liens, encumbrances and adverse claims, (II) that the liability of such Holder with respect to any representation and warranty made in connection with the Third Party Sale is the several liability of such Holder (and not joint with any other person) and that such liability is limited to the amount of proceeds actually received by such Holder in the Third Party Sale and (III) each Holder with either an opinion of counsel to the effect that the Third Party Sale is not in violation of applicable federal and state securities or other laws or, if such Holder is not provided with an opinion with respect to the matters contemplated by this clause (III), an indemnity from such Selling Fortress Entities for any such violation.  If any Third Party Sale in respect of which a Holder has exercised its Tag-Along Right is in the form of a merger transaction, such Holder agrees to vote its Holder’s Shares in favor of such merger and not to exercise any rights of appraisal or dissent afforded under applicable law.

 

(C)                               Tag-Along Exercise Notice.  Each Holder may exercise the Tag-Along Right by providing the Selling Fortress Entities with written notice (a “Tag-Along Exercise Notice”) thereof not less than twenty-five (25) days prior to the proposed Third Party Sale Date specified in the respective Tag-Along Notice.  Such Tag-Along Exercise Notice must affirmatively state that such Holder is irrevocably exercising its Tag-Along Right and shall specify the number of vested Holder’s Shares held by it which it desires to sell to the Third Party pursuant to the Third Party Sale (which number shall in no event be greater than the product of (x) the number of Holder’s Shares held by such Holder and (y) the Third Party Sale Percentage specified in the respective Tag-Along Notice).  If the Selling Fortress Entities receive a Tag-Along Exercise Notice no later than the twenty-fifth (25th) day prior to the proposed Third Party Sale Date specified in the respective Tag-Along Notice, none of the Selling Fortress Entities to which the Tag-Along Exercise Notice relates shall consummate the respective Third Party Sale unless the Third Party also purchases the number of vested Holder’s Shares specified in such Tag Along Exercise Notice (in accordance with the terms of Section 2(b)(ii)(B) above).  If the Selling Fortress Entities have not received a Tag-Along Exercise Notice from a Holder by the twenty-fifth (25th) day prior to the proposed Third Party Sale Date specified in the respective Tag-Along Notice, such Holder shall be deemed to have waived its Tag-Along Right with respect to the Third Party Sale to which such Tag-Along Notice relates.

 

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(D)                               Authority to Record Transfer/Delivery of Certificates.  SCT Chassis (or SCT Chassis’s transfer agent, if any) shall record in SCT Chassis’s books and records the transfer of the number of vested Holder’s Shares subject to a Tag-Along Exercise Notice which is not represented by one or more certificates issued by SCT Chassis, from the respective Holder to the Third Party, on the Third Party Sale Date.  If any part of such Holder’s Shares is represented by one or more certificates issued by SCT Chassis, the Holder shall deliver such certificate or certificates for such shares, duly endorsed for transfer with signatures guaranteed, to such Third Party on the Third Party Sale Date in the manner and at the address indicated in the Tag-Along Notice against delivery of the purchase price for the shares; provided, however, that in the event SCT Chassis has possession of any such certificate(s) pursuant to this Agreement, upon the written request of the Holder at least five (5) business days in advance of the Third Party Sale Date, SCT Chassis shall deliver such certificate(s) to the Third Party at the time and in the manner described above.

 

(iii)                               Drag-Along Right.  Notwithstanding any other provision hereof, if any Holder has not exercised its Tag-Along Right with respect to the maximum number of Holder’s Shares for which such Holder is permitted (pursuant to Section 2(b)(ii)(B) above) to exercise such Tag-Along Right in respect of a Third Party Sale, then, upon the demand of any Selling Fortress Entity participating in such Third Party Sale (in each such entity’s sole discretion), such Holder shall sell to the respective Third Party the number of whole Holder’s Shares (rounded upwards or downwards, as applicable), whether or not the restrictions on Transfer of Common Stock have lapsed, equal to the product of (x) the total number of Holder’s Shares held by such Holder on the date of the Drag-Along Notice (as defined below) and (y) the Third Party Sale Percentage, at the same price and on the same terms and conditions as such Selling Fortress Entity has agreed to with such Third Party; provided, however, that each such Holder shall not be permitted to sell any unvested Holder’s Shares (provided that the Company may, in its sole discretion, accelerate the vesting of any unvested Holder’s Shares); provided further that such Selling Fortress Entity shall use its reasonable, good faith efforts to provide that (A) the only representation and warranty which such Holder shall be required to make in connection with the Third Party Sale is a representation and warranty with respect to such Holder’s own ownership of the Holder’s Shares to be sold by it and its ability to convey title thereto free and clear of liens, encumbrances and adverse claims and (B) the liability of such Holder with respect to any representation and warranty made in connection with the Third Party Sale is the several liability of such Holder (and not joint with any other person) and that such liability is limited to the amount of proceeds actually received by such Holder in the Third Party Sale; provided further, that a Holder shall not be obligated to participate in any Third Party Sale pursuant to this Section 2(b)(iii) unless such Holder is provided an opinion of counsel to the effect that the Third Party Sale is not in violation of applicable federal and state securities or other laws or, if such Holder is not provided with an opinion with respect to the matters contemplated by this proviso, each Selling Fortress Entity who has delivered a Drag-Along Notice to such Holder shall indemnify such Holder for any such violation.  If the Third Party Sale is in the form of a merger transaction, each Holder agrees to vote its Holder’s Shares in favor of such merger and not to exercise any rights of appraisal or dissent afforded under applicable law.

 

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(A)                               Drag-Along Notice.  If a Selling Fortress Entity elects (in its sole discretion) to exercise the option described in this Section 2(b)(iii), such Selling Fortress Entity shall provide the Holder(s) with written notice (the “Drag-Along Notice”) thereof not more than twenty-four (24) nor less than ten (10) days prior to the proposed date of the Third Party Sale Date.  The Drag-Along Notice shall set forth:  (i) the name and address of the Third Party; (ii) the proposed amount and form of consideration to be paid per share and the terms and conditions of payment offered by the Third Party; (iii) the aggregate number of shares of Common Stock held by such Selling Fortress Entity as of the date that the Drag-Along Notice is first delivered, mailed or sent by courier or facsimile to the Holder; (iv) the Third Party Sale Percentage; (v) the proposed Third Party Sale Date; and (vi) confirmation that the proposed Third Party has agreed to purchase vested Holder’s Shares held by such Holder in accordance with the terms hereof.

 

(B)                               Authority to Record Transfer/Delivery of Certificates.  If a Selling Fortress Entity elects (in its sole discretion) to exercise the option described in this Section 2(b)(iii), SCT Chassis (or SCT Chassis’s transfer agent, if any) shall record in SCT Chassis’s books and records the transfer of the number of vested Holder’s Shares subject to the Drag-Along Notice which is not represented by one or more certificates issued by SCT Chassis, from the Holder to the Third Party, on the Third Party Sale Date.  If any part of such Holder’s Shares is represented by one or more certificates issued by SCT Chassis, the Holder shall deliver such certificate or certificates for such shares, duly endorsed for transfer with signatures guaranteed, to such Third Party on the Third Party Sale Date in the manner and at the address indicated in the Drag-Along Notice against delivery of the purchase price for the shares; provided, however, that in the event that SCT Chassis has possession of any such certificate(s) pursuant to this Agreement, SCT Chassis shall deliver such certificate(s) to the Third Party at the time and in the manner described above.

 

(iv)                              Consideration.  The provisions of this Section 2(b) shall apply regardless of the form of consideration received in the Third Party Sale.

 

(c)                                  Transfer to Related Transferees.  Notwithstanding anything to the contrary contained in Section 1(f) and this Section 2, the Management Investor may Transfer shares of Common Stock without restriction to the Management Investor’s Related Transferees; provided that each such Related Transferee shall first (i) execute a written consent in form and substance satisfactory to the Company to be bound by all of the provisions of this Agreement and (ii) give a duplicate original of such consent to the Company.  The “Related Transferees” of the Management Investor shall consist of his spouse, his adult lineal descendants, the adult spouses of such lineal descendants, trusts solely for the benefit of the Management Investor’s spouse or his minor or adult lineal descendants and, in the event of death, his personal representatives (in their capacities as such), estate and named beneficiaries.  In the event of any Transfer by the Management Investor to his Related Transferees of all or any part of the shares of Common Stock owned by him (or in the event of any subsequent Transfer of such shares by any such Related Transferee to another Related Transferee of the Management Investor), such Related Transferees shall receive and hold said Common Stock subject to (and shall be bound by) the

 

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terms of this Agreement and the rights and obligations hereunder of the Management Investor, from whom such Common Stock was originally transferred, as though said Common Stock was still owned by the Management Investor, and such Related Transferees shall be treated as if they were the Management Investor for the purposes their stock-related rights and obligations under this Agreement.  There shall be no further Transfer of such Common Stock by a Related Transferee except between and among such Related Transferee, the Management Investor and the other Related Transferees of the Management Investor, or except as may otherwise be permitted by this Agreement.

 

(d)                                 Termination.  This Section 2 shall terminate upon the closing of an IPO; provided, however, the restrictions set forth in Section 2(a) shall continue to apply with respect to unvested Restricted Shares.

 

3.                                      The Management Investor’s Representations; Legends on Certificates.

 

(a)                                 Investment Risk.  The Management Investor represents and acknowledges that:  (i) as a result of the Management Investor’s experience in financial matters, the Management Investor is properly able (on his own) to evaluate the capital structure of SCT Chassis and its subsidiaries, the business of SCT Chassis and its subsidiaries and the risks inherent therein; (ii) the Management Investor has been given the opportunity to obtain any additional information or documents from and to ask questions, and receive answers of, the officers and representatives of SCT Chassis and its subsidiaries to the extent necessary to evaluate the merits and risks related to an investment in SCT Chassis; (iii) the Management Investor has been and will be, to the extent he deems necessary, advised by legal counsel of his choice at his expense in connection with this Agreement and the grant of the Restricted Shares hereunder; and (iv) the grant of the Restricted Shares hereunder will be consistent, in both nature and amount, with the Management Investor’s overall investment program and financial condition, and his financial condition will be such that he will be able to bear the economic risk of holding unregistered Common Stock for which there is no market and to suffer a complete loss of his investment therein.  The Management Investor further acknowledges that investment in the Restricted Shares involves significant risks and that these risks include, without limitation, the fact that SCT Chassis and its subsidiaries may have a leveraged financial structure.

 

(b)                                 Acquired for Investment.

 

(i)                                     The Management Investor represents and warrants that:  (A)  Restricted Shares will be acquired for his own account for investment, without any present intention of selling or further distributing the same, and he does not have any reason to anticipate any change in his circumstances or any other particular occasion or event which would cause him to sell any of such Common Stock; and (B) he is fully aware that in agreeing to grant such Common Stock to him, the Company and SCT Chassis will be relying upon the truth and accuracy of these representations and warranties.  The Management Investor agrees that he will not Transfer any Restricted Shares prior to an IPO, except to a Related Transferee in accordance with the terms of this Agreement or as otherwise may be permitted or required under this Agreement.  Any such Transfer must be in compliance with the Act, the rules and regulations of the Securities and Exchange Commission

 

12

 

thereunder, the relevant state securities laws applicable to the Management Investor’s action and the terms of this Agreement.

 

(ii)                                  The Management Investor acknowledges that no trading market for the Common Stock exists currently and that there is no assurance that one will exist at any time in the foreseeable future (if at all) and that, as a result, the Management Investor may be unable to sell any of the Common Stock acquired hereunder for an indefinite period.  Further, SCT Chassis has no obligation to register any of the Common Stock (including any of the Restricted Shares) for sale or resale under the Act or any other applicable law (including any “blue sky” law).

 

(iii)                               The Management Investor acknowledges and agrees that nothing herein, including the provisions of Section 1 of this Agreement or the opportunity to make an investment in SCT Chassis, shall be deemed to create any implication concerning the adequacy of the Management Investor’s services to the Company or any of its affiliates.

 

(c)                                  Legend on Certificates.  If, in the sole discretion of SCT Chassis, share certificates are issued to the Management Investor prior to the closing of an IPO, each share certificate issued to the Management Investor representing Common Stock issued hereunder shall bear the following (or substantially equivalent) legends on the face or reverse side thereof:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR ANY SUCCESSOR RULE UNDER THE ACT OR SCT CHASSIS INC. (THE “COMPANY”) RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.  THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MANAGEMENT SHAREHOLDER AGREEMENT DATED DECEMBER 1, 2013, BY AND BETWEEN VAL T. NOEL, INTERPOOL, INC., D/B/A TRAC INTERMODAL AND THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOTED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH VOTING, TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF SUCH AGREEMENT.

 

Any share certificate issued at any time in exchange or substitution for any certificates bearing such legends (except a new certificate issued upon the completion of a public distribution of Common Stock represented thereby) shall also bear such (or substantially equivalent) legends, unless the Common Stock represented by such certificate is no longer subject to the provisions of this Agreement and, in the opinion of counsel for SCT Chassis, the Common Stock represented

 

13

 

thereby need no longer be subject to restrictions pursuant to the Act or applicable state securities law.  SCT Chassis shall not be required to transfer on its books any certificate for Common Stock in violation of the provisions of this Agreement.

 

4.                                      Company “Call” Option.

 

(a)                                 Upon the termination of the Management Investor’s employment with the Company for any reason (including if the Management Investor dies while an employee of the Company) prior to the effective date of an IPO (a “Call Purchase Event”), subject to the provisions of this Section 4, the Company may, at its sole option exercisable by written notice (a “Purchase Notice”) delivered to the Management Investor (or in the case of a deceased Management Investor, the Management Investor’s personal representative) within ninety (90) days after the applicable Call Purchase Event (or, in the event the applicable Call Purchase Event is the death of the Management Investor, within thirty (30) days after the appointment and qualification of the deceased Management Investor’s personal representative, if later), elect to purchase and, upon the giving of such notice, the Company shall be obligated to purchase, and the Management Investor (and the Related Transferees, if any, of the Management Investor or, in the case of a deceased Management Investor, his personal representative) (the Management Investor or his personal representative and each Related Transferee being referred to herein as a “Seller”) shall be obligated to sell, all, or any lesser portion indicated in the Purchase Notice, of the Common Stock held by the Sellers (which shall include, if such Call Purchase Event qualifies as an Additional Granting Event, any Additional Granted Shares to be granted to Sellers in connection therewith) at a per share price equal to:

 

(i)                                     in the case of vested Restricted Shares, if the Management Investor’s employment is terminated by the Company for Cause or the Management Investor resigns as an employee of the Company, the lesser of (x) the Fair Market Value thereof as of the applicable date of grant hereunder of the Restricted Shares or (y) the Fair Market Value thereof as of the date of the Call Purchase Event; or

 

(ii)                                  in the case of vested Restricted Shares, if the Management Investor’s employment is terminated by the Company without Cause, or due to the Management Investor death or Disability while an employee of the Company, the Fair Market Value thereof as of the date of the Call Purchase Event.

 

(b)                                 If the Company does not elect to exercise its option set forth in Section 4(a) above, the Company shall give written notice that it is not so electing to each Fortress Entity owning Common Stock within the time periods specified in Section 4(a) for the giving of the Purchase Notice.  Upon receipt of such notice from the Company, each Fortress Entity owning Common Stock shall have the option, exercisable by written notice (a “Fortress Entity Purchase Notice”) delivered to the Sellers within fifteen (15) days after receipt of such notice from the Company, to purchase from the Sellers (and, upon the giving of the Fortress Entity Purchase Notice, such Fortress Entity shall be obligated to purchase and the Sellers shall be obligated to sell) all, or any lesser portion indicated in the Fortress Entity Purchase Notice, of the Common Stock held by the Sellers (which shall include, if such Call Purchase Event qualifies as an Additional Granting Event, any Additional Granted Shares to be granted to Sellers in connection therewith); provided, however, if oversubscribed by more than one such Fortress Entity

 

14

 

providing a Fortress Entity Purchase Notice, each such Fortress Entity shall purchase a pro rata portion of such Common Stock held by Sellers determined by its pro rata portion of all shares of Common Stock owned by such subscribing Fortress Entities) at the per share price determined in accordance with paragraph (a) of this Section 4.

 

(c)                                  In the event a purchase of shares of Common Stock pursuant to this Section 4 shall be prohibited by law or would cause a default under the terms of any indenture or loan agreement or other instrument to which the Company or any of its affiliates may be a party, the obligations of the Sellers and the Company pursuant to this Section 4 shall be suspended and no such default shall be caused; provided, however, that (x) the purchase price to be paid by the Company for the shares shall accrue interest at the lowest rate necessary to prevent the imputation of interest or original issue discount under the Internal Revenue Code of 1986, as amended (the “Code”), reduced by any dividends or distributions received by the Management Investor (but not to an amount less than zero) on such Common Stock during the period of such suspension, which interest shall likewise be paid when such prohibition first lapses or is waived and no such default would be caused and (y) in the event of any such suspension, if one or more Fortress Entities so elect and no violation of law would be caused and no default under the terms of any indenture or loan agreement or other instrument to which the Company or any of its affiliates may be a party would result, the Company shall transfer its obligations under this Section 4 to such Fortress Entities, in which case such Fortress Entities and the Sellers shall be obligated to complete the purchase of shares of Common Stock pursuant to this Section 4.

 

5.                                      Restrictive Covenants.  The Management Investor acknowledges that during the period of the Management Investor’s employment with the Company the Management Investor shall have access to secret and confidential information, knowledge and/or data relating to the Company and its businesses, and will meet and develop relationships with potential and existing suppliers, financing sources, clients, customers and employees of the Company.

 

(a)                                 Noncompetition; Nonsolicitation.  The Management Investor agrees that during the period of the Management Investor’s employment with the Company, and for the one (1) year period immediately following termination of such employment (whether as a result of termination for Cause, termination other than for Cause, resignation, death, Disability or otherwise), the Management Investor shall not:

 

(i)                                     directly or indirectly (whether as principal, agent, independent contractor, partner, member, manager, officer, director or otherwise) own, manage, operate, control, participate in, perform services for, make any investment in or otherwise carry on, any business that is competitive with any business engaged in or conducted by the Company, or any business that the Company proposes or contemplates to engage in or conduct, at such time, including, but not limited to, the business of owning, leasing (as lessor, sublessor, lessee or sublessee) or managing intermodal chassis; or

 

(ii)                                  directly or indirectly, engage in the recruiting, soliciting or inducing of any nonclerical employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company, or in hiring or assisting another person or entity to hire any nonclerical employee of the Company or any person who within six (6) months before had been a nonclerical employee of the Company and

 

15

 

were recruited or solicited for such employment or other retention while an employee of the Company (other than any of the foregoing activities engaged in with the prior written approval of the Company); or

 

(iii)                               directly or indirectly solicit, induce or encourage or attempt to persuade any agent, supplier or customer of the Company to terminate such agency or business relationship.

 

Nothing contained in this Agreement shall limit or otherwise affect the ability of the Management Investor to own not more than one percent (1.0%) of the outstanding capital stock of any entity that is engaged in a business competitive with the Company, provided that such investment is a passive investment and such Management Investor is not directly or indirectly involved in the management or operation of such business or otherwise providing consulting services to such business.  In the event that the Management Investor inadvertently accumulates more than one percent (1.0%) of such competitive entity, provided the Management Investor gives the Company immediate written notice thereof and divests himself of such passive investment within thirty (30) days of his accumulating more than one percent (1.0%) of such competitive entity, the Company will not seek any other relief for violation of this provision.

 

(b)                                 Disparaging Comments.  The Management Investor and the Company agree that both during and after the Management Investor’s employment with the Company, the Management Investor and the Company shall not make any disparaging or defamatory comments regarding the other, or make any disparaging or defamatory comments concerning any aspect of the termination of the employment relationship.  The obligations of the Management Investor and the Company under this subparagraph shall not apply to disclosures required by applicable law, regulation or order of any court or governmental agency.

 

Nothing contained in this Section 5 shall limit any common law or statutory obligation that the Management Investor may have to the Company.  For purposes of the foregoing provisions of this Section 5, each reference to “the Company” shall be deemed to include any incorporated or unincorporated affiliates of the Company (including, without limitation, subsidiaries), including any entity which becomes the Management Investor’s employer as a result of any business transaction, reorganization or restructuring of the Company for any reason.

 

The Company shall be entitled, in connection with tax planning or other reasons, to terminate the Management Investor’s employment (which termination shall not be considered a termination without Cause for purposes of this Agreement or otherwise) in connection with an invitation from another affiliate of the Company to accept employment with such affiliate in which case the terms and conditions hereof shall apply to the Management Investor’s employment relationship with such entity mutatis mutandis.

 

6.                                      Confidentiality.  During employment and following termination of employment, the Management Investor will hold and keep confidential all secret and confidential information, knowledge or data relating to the Company and its businesses, including any confidential information as to customers of the Company (i) obtained by the Management Investor during employment by the Company, and (ii) not otherwise public knowledge or known within the applicable industry.  Upon termination of employment with the Company, or at any time as the

 

16

 

Company may request, the Management Investor will promptly deliver to the Company, as requested, all documents (whether prepared by the Company, the Management Investor or a third party) relating to the Company or any of its businesses or property which the Management Investor may possess or have under the Management Investor’s direction or control other than documents provided to the Management Investor as a participant in any employee benefit plan, policy or program of the Company or any agreement by and between the Management Investor, SCT Chassis and/or the Company with regard to the Management Investor’s employment or severance.  For purposes of the foregoing provisions of this Section 6, each reference to “the Company” shall be deemed to include any incorporated or unincorporated affiliates of the Company (including, without limitation, subsidiaries), including any entity which becomes the Management Investor’s employer as a result of any business transaction, reorganization or restructuring of the Company for any reason.

 

The Management Investor shall not, without prior written consent of the Company, unless compelled pursuant to the order of a court or other governmental or legal body having jurisdiction over such matter, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it.  In the event the Management Investor is compelled by order of a court or other governmental or legal body to communicate or divulge any such information, knowledge or data to anyone other than the foregoing, the Management Investor will promptly notify the Company of any such order and will cooperate fully with the Company in protecting such information to the extent possible under applicable law.  The Company agrees to reimburse the Management Investor for all reasonable expenses actually incurred and paid in connection with such cooperation, including reasonable attorneys’ fees for separate counsel for the Management Investor, which counsel the Management Investor may select in his sole reasonable discretion.

 

7.                                      Notices.  All notices or other communications under this Agreement shall be given in writing and shall be deemed duly given and received on the third full business day following the day of the mailing thereof by registered or certified mail or when delivered personally or sent by facsimile transmission as follows:

 

(a)                                 if to the Management Investor, at the address of the Management Investor as it appears on the signature page to this Agreement or at such other place as the Management Investor shall have designated by notice as herein provided to the Company; and

 

(b)                                 if to the Company or SCT Chassis, at 211 College Road East, Princeton, New Jersey 08540, Attention: General Counsel; and

 

(c)                                  if to any Fortress Entity, at Fortress Investment Group LLC, 1345 Avenue of the Americas, 46th Floor, New York, New York 10105, Attention:  Randal A. Nardone, or at such other place as such person shall have designated by notice as herein provided to the Management Investor.

 

8.                                      Specific Performance, Forfeiture, Right to Repurchase.

 

(a)                                 Specific Performance.  Due to the fact that the securities of SCT Chassis cannot be readily purchased or sold in the open market and because damages to the Company, its

 

17

 

subsidiaries and affiliates will be difficult to ascertain and remedies at law to the Company, its subsidiaries and affiliates will be inadequate and for other reasons, the parties will be irreparably damaged in the event that this Agreement is not specifically enforced.  In the event of a breach or threatened breach of the terms, covenants and/or conditions of this Agreement by any of the parties hereto, the other parties shall, in addition to all other remedies, be entitled (without any bond or other security being required) to a temporary and/or permanent injunction, without showing any actual damage or that monetary damages would not provide an adequate remedy, and/or a decree for specific performance, in accordance with the provisions hereof.

 

(b)                                 Forfeiture, Right to Repurchase.  The Management Investor acknowledges that if (x) the Management Investor breaches any term or condition contained in Section 5 or 6 of this Agreement and (y) the Company provides the Management Investor with written notice of such breach:

 

(i)                                     if such notice is given prior to the effective date of an IPO, (A) all of the Restricted Shares shall be automatically forfeited, and be deemed to have been repurchased by the Company at a purchase price of zero dollars, upon the giving of such notice as such breach of Section 5 or 6, together with the giving of such notice, shall be deemed a Call Purchase Event (as of the date of such notice) due to a termination for Cause; and

 

(ii)                                  if such notice is given after the effective date of an IPO, all of the Restricted Shares that have not vested prior to the date of such notice shall be automatically forfeited, and be deemed to have been repurchased by the Company at a purchase price of zero dollars, upon the giving of such notice.

 

9.                                      Further Assurances in Connection with an IPO.  The Management Investor agrees that he will, to the extent requested by the Company, reasonably cooperate with and provide assistance to SCT Chassis and its affiliates in connection with an IPO or other offering of securities by SCT Chassis or an affiliate thereof, and any restructuring necessary in connection with an IPO including but not limited to the exchange of vested or unvested Restricted Shares for shares in an affiliate of the Company, including, without limitation, by executing and delivering reasonably requested certificates, instruments and other documents.  Without limiting the foregoing, the Management Investor agrees that he will execute and deliver a lock-up agreement with respect to any or all of the Common Stock (or any such shares of an affiliate of the Company issued in exchange therefor) owned by the Management Investor in connection with an IPO or other offering of securities by SCT Chassis or any of its affiliates, in form and substance reasonably requested by any underwriter or by SCT Chassis or any affiliate thereof, as applicable, provided that such lock-up agreement shall not be more onerous in its terms than the lock-up agreements provided by other senior executive officers of the Company in accordance with the requirements of the underwriter.

 

10.                               Miscellaneous.

 

(a)                                 This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and may not be modified or amended except by a written agreement signed by the Company, SCT Chassis and the Management Investor.  This Agreement

 

18

 

supersedes any prior agreements or understandings between the parties with respect to the subject matter hereof.  The Management Investor represents that he is free to enter into this Agreement without violating any agreement or covenant with, or obligation to, any other entity or individual.

 

(b)                                 In the event any capital stock of the Company or any other corporation shall be distributed on, with respect to, or in exchange for shares of Common Stock as a stock (or share) dividend, stock (or share) split, spin-off, reclassification or recapitalization in connection with any merger, amalgamation, continuation into another jurisdiction or reorganization, the restrictions, rights and options set forth in this Agreement shall apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Common Stock acquired hereunder on, or with respect to, which such other capital stock was distributed.

 

(c)                                  No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature.  Anything in this Agreement to the contrary notwithstanding, any waiver, consent or other instrument under or pursuant to this Agreement signed by, or binding upon, the Management Investor shall be valid and binding upon any and all persons or entities (other than the Company and its affiliates, including the Fortress Entities) who may, at any time, have or claim any rights under or pursuant to this Agreement in respect of the Restricted Shares.

 

(d)                                 Except as otherwise expressly provided herein, this Agreement shall be binding upon and inure to the benefit of the Company, SCT Chassis and their respective affiliates, including the Fortress Entities, and their respective successors and assigns and the Management Investor and the Management Investor’s heirs, personal representatives, successors and assigns; provided, however, that nothing contained herein shall be construed as granting the Management Investor the right to Transfer any of the Restricted Shares, except in accordance with this Agreement and any transferee shall hold the Restricted Shares having only those rights, and being subject to the restrictions, provided for in this Agreement.  Except as specified herein, this Agreement shall not be assignable.

 

(e)                                  Any provision hereof 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 hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the fullest extent permitted by applicable law, the parties hereby waive any provision of law which may render any provision hereof prohibited or unenforceable in any respect.

 

(f)                                   Should any party to this Agreement be required to commence any litigation concerning any provision of this Agreement or the rights and duties of the parties hereunder, the prevailing party in such proceeding shall be entitled, in addition to such other relief as may be granted, to the reasonable attorneys’ fees and court costs incurred by reason of such litigation.

 

19

 

(g)                                  The section headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said sections.

 

(h)                                 Words in the singular shall be read and construed as though in the plural and words in the plural shall be read and construed as though in the singular in all cases where they would so apply.  Words herein of any gender are deemed to include each other gender.

 

(i)                                     This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same agreement, and all signatures need not appear on any one counterpart.

 

(j)                                    The Management Investor agrees that, subsequent to any termination of his employment, he will continue to cooperate with the Company and SCT Chassis in the prosecution and/or defense of any claim in which the Company or SCT Chassis may have an interest (with the right of reimbursement for reasonable out-of-pocket expenses (including reasonable attorneys’ fees) actually incurred) which may include, without limitation, being available to participate in any proceeding involving the Company or SCT Chassis, permitting interviews with representatives of the Company or SCT Chassis, appearing for depositions and trial testimony, and producing and/or providing any documents or names of other persons with relevant information in the Management Investor’s possession or control arising out of his employment in a reasonable time, place and manner.

 

(k)                                 All payments pursuant to this Agreement shall be subject to regular withholding and deductions.  The Management Investor shall pay the applicable entity promptly upon request, and in any event at the time he recognizes taxable income in respect to any Restricted Shares which vest pursuant to this Agreement or otherwise, an amount equal to the taxes the Company determines it is required to withhold.  The Company may, in its sole discretion, permit the Management Investor to elect to pay a portion or all of such withholding taxes (i) in cash (ii) by delivery of shares of Common Stock or (iii) by having shares of Common Stock withheld by the Company from any shares of Common Stock that would have otherwise been received by the Management Investor.

 

(l)                                     The Management Investor hereby irrevocably consents and agrees that any legal action, suit or proceeding against him with respect to his obligations or liabilities or any other matter under or arising out of or in connection with this Agreement shall be brought in the United States District Court of the Southern District of New York or in the courts of the State of New York, sitting in New York County and, by execution and delivery of this Agreement, the Management Investor, to the fullest extent permitted by applicable law, hereby (i) irrevocably accepts and submits to the exclusive jurisdiction of each of the aforesaid courts, in person, generally and unconditionally with respect to any such action, suit or proceeding, (ii) agrees not to commence any such action, suit or proceeding in any jurisdiction other than those of the aforesaid courts, (iii) waives any objection to the laying of venue of any such action, suit or proceeding therein, (iv) agrees not to plead or claim that such action, suit or proceeding has been brought in an inconvenient forum and (v) consents to service of process in connection with an such action, suit or proceeding by the delivery of notice to such Management Investor’s address set forth in this Agreement.

 

20

 

(m)                             The terms of this Agreement have been designed to be exempt from, or, where applicable, to comply with, the requirements of Section 409A of the Code and shall be interpreted and administered in a manner consistent with such intent.

 

(n)                                 This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without regard to any choice-of-law rules thereof which might apply the laws of any other jurisdiction.

 

(o)                                 WAIVER OF JURY TRIAL.  EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF.  EACH PARTY ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MIGHT BE FILED IN ANY COURT AND THAT MAY RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING ALL COMMON LAW AND STATUTORY CLAIMS.  EACH PARTY FURTHER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, MODIFICATIONS, SUPPLEMENTS OR RESTATEMENTS HEREOF.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

[signature page follows]

 

21

 

IN WITNESS WHEREOF, the parties have executed this Management Shareholder Agreement as of the first date written above.

 

	
 
    	
INTERPOOL, INC.,
    
	
 
    	
d/b/a TRAC INTERMODALTM
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gregg F. Carpene
    
	
 
    	
 
    	
Name:   Gregg F. Carpene
    
	
 
    	
 
    	
Title:   Chief Legal Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SCT   CHASSIS INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gregg F. Carpene
    
	
 
    	
 
    	
Name:   Gregg F. Carpene
    
	
 
    	
 
    	
Title:   Vice President, Secretary, General Counsel 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MANAGEMENT   INVESTOR
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   [Illegible]
    
	
 
    	
 
    
	
 
    	
Address:
    	
[Illegible]
    
	
 
    	
 
    
	
 
    	
 
    
				

 

 

Appendix A

 

Initial Granted Shares

 

	
Number of shares of Common   Stock:
    	
 
    	
50,000
    	
 
    
	
Price per share:
    	
 
    	
$
    	
11.59
    	
 
    
					

 

 

Exhibit A

 

SHARE TRANSFER

 

FOR VALUE RECEIVED, VAL T. NOEL hereby sells, assigns and transfers unto                                                                                    (            ) shares of the Common Stock of SCT Chassis Inc. (“SCT Chassis”) standing in his name on the books of SCT Chassis represented by Certificate No(s).              herewith, and does hereby irrevocably constitute and appoint                                                                as attorney-in-fact to transfer the shares on the books of SCT Chassis with full power of substitution in the premises.

 

	
Dated:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signed   by:
    	
 
    	
In   the presence of:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Witness
    

 

 

Exhibit A - Page 1

 

Exhibit B

 

Irrevocable Proxy pursuant to

Section 1(e)(vi) of the Management

Shareholder Agreement

Dated December 1, 2013 (the “Agreement”)

 

Proxy

 

SCT Chassis Inc. (“SCT Chassis”)

 

I, VAL T. NOEL, being a shareholder of SCT Chassis, HEREBY APPOINT FIG LLC, to be my proxy for and in my name, place and stead to attend all meetings of the shareholders of SCT Chassis and to vote any and all Restricted Shares in SCT Chassis at the time standing in my name and to exercise all consensual rights in respect of such shares (including without limitation giving or withholding written consents of shareholders and calling special general meetings of shareholders) within the scope and pursuant to terms set out in Section 1(e)(vi) of the Agreement.  This proxy shall automatically terminate upon the closing of an IPO.

 

Signed as of the          day of                 , 2013.

 

	
 
    	
 
    
	
Name:
    	
 
    
	
Address:
    	
 
    

 

Exhibit B - Page 1Exhibit 10.1

	
 
    

 

CREDIT AGREEMENT

 

DATED AS OF MARCH 24, 2014,

 

AMONG

 

WILLDAN GROUP, INC.,

 

THE GUARANTORS FROM TIME TO TIME PARTY HERETO,

 

AND

 

BMO HARRIS BANK N.A.

	
 
    

 

 

TABLE OF CONTENTS

 

	
SECTION
    	
 
    	
HEADING
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 1.
    	
 
    	
DEFINITIONS; INTERPRETATION
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 1.1.
    	
 
    	
Definitions
    	
 
    	
1
    
	
Section 1.2.
    	
 
    	
Interpretation
    	
 
    	
29
    
	
Section 1.3.
    	
 
    	
Change in Accounting Principles
    	
 
    	
29
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 2.
    	
 
    	
THE FACILITIES
    	
 
    	
30
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 2.1.
    	
 
    	
Delayed Draw Term Loan Facility
    	
 
    	
30
    
	
Section 2.2.
    	
 
    	
Revolving Facility
    	
 
    	
30
    
	
Section 2.3.
    	
 
    	
Letters of Credit
    	
 
    	
30
    
	
Section 2.4.
    	
 
    	
Applicable Interest Rates
    	
 
    	
32
    
	
Section 2.5.
    	
 
    	
Minimum Borrowing Amounts;   Maximum Eurodollar Loans
    	
 
    	
33
    
	
Section 2.6.
    	
 
    	
Manner of Borrowing Loans and   Designating Applicable Interest Rates
    	
 
    	
33
    
	
Section 2.7.
    	
 
    	
Maturity of Loans
    	
 
    	
34
    
	
Section 2.8.
    	
 
    	
Prepayments
    	
 
    	
35
    
	
Section 2.9.
    	
 
    	
Default Rate
    	
 
    	
37
    
	
Section 2.10.
    	
 
    	
Evidence of Indebtedness
    	
 
    	
38
    
	
Section 2.11.
    	
 
    	
Commitment Terminations
    	
 
    	
38
    
	
Section 2.12.
    	
 
    	
Extension of Revolving Credit   Termination Date
    	
 
    	
39
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 3.
    	
 
    	
FEES
    	
 
    	
39
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 3.1.
    	
 
    	
Fees
    	
 
    	
39
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 4.
    	
 
    	
TAXES; CHANGE IN CIRCUMSTANCES, INCREASED COSTS, AND   FUNDING INDEMNITY
    	
 
    	
40
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 4.1.
    	
 
    	
Taxes
    	
 
    	
40
    
	
Section 4.2.
    	
 
    	
Change of Law
    	
 
    	
41
    
	
Section 4.3.
    	
 
    	
Unavailability of Deposits or   Inability to Ascertain, or Inadequacy of, LIBOR
    	
 
    	
41
    
	
Section 4.4.
    	
 
    	
Increased Costs
    	
 
    	
42
    
	
Section 4.5.
    	
 
    	
Funding Indemnity
    	
 
    	
43
    
	
Section 4.6.
    	
 
    	
Discretion of the Bank as to   Manner of Funding
    	
 
    	
43
    
	
Section 4.7.
    	
 
    	
Lending Offices; Mitigation   Obligations
    	
 
    	
44
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 5.
    	
 
    	
PLACE AND APPLICATION OF PAYMENTS
    	
 
    	
44
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 5.1.
    	
 
    	
Place and Application of Payments
    	
 
    	
44
    
	
Section 5.2.
    	
 
    	
Non-Business Days
    	
 
    	
44
    
	
Section 5.3.
    	
 
    	
Payments Set Aside
    	
 
    	
44
    
	
Section 5.4.
    	
 
    	
Account Debit
    	
 
    	
45
    

 

i

 

	
SECTION 6.
    	
 
    	
REPRESENTATIONS AND WARRANTIES
    	
 
    	
45
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 6.1.
    	
 
    	
Organization and Qualification
    	
 
    	
45
    
	
Section 6.2.
    	
 
    	
Subsidiaries
    	
 
    	
45
    
	
Section 6.3.
    	
 
    	
Authority and Validity of   Obligations
    	
 
    	
45
    
	
Section 6.4.
    	
 
    	
Use of Proceeds; Margin Stock
    	
 
    	
46
    
	
Section 6.5.
    	
 
    	
Financial Reports
    	
 
    	
46
    
	
Section 6.6.
    	
 
    	
No Material Adverse Change
    	
 
    	
47
    
	
Section 6.7.
    	
 
    	
Full Disclosure
    	
 
    	
47
    
	
Section 6.8.
    	
 
    	
Trademarks, Franchises, and   Licenses
    	
 
    	
47
    
	
Section 6.9.
    	
 
    	
Governmental Authority and   Licensing
    	
 
    	
47
    
	
Section 6.10.
    	
 
    	
Good Title
    	
 
    	
47
    
	
Section 6.11.
    	
 
    	
Litigation and Other   Controversies
    	
 
    	
47
    
	
Section 6.12.
    	
 
    	
Taxes
    	
 
    	
48
    
	
Section 6.13.
    	
 
    	
Approvals
    	
 
    	
48
    
	
Section 6.14.
    	
 
    	
Affiliate Transactions
    	
 
    	
48
    
	
Section 6.15.
    	
 
    	
Investment Company
    	
 
    	
48
    
	
Section 6.16.
    	
 
    	
ERISA
    	
 
    	
48
    
	
Section 6.17.
    	
 
    	
Compliance with Laws
    	
 
    	
48
    
	
Section 6.18.
    	
 
    	
OFAC
    	
 
    	
49
    
	
Section 6.19.
    	
 
    	
Labor Matters
    	
 
    	
49
    
	
Section 6.20.
    	
 
    	
Other Agreements
    	
 
    	
50
    
	
Section 6.21.
    	
 
    	
Solvency
    	
 
    	
50
    
	
Section 6.22.
    	
 
    	
No Default
    	
 
    	
50
    
	
Section 6.23.
    	
 
    	
No Broker Fees
    	
 
    	
50
    
	
Section 6.24.
    	
 
    	
Security Documents
    	
 
    	
50
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 7.
    	
 
    	
CONDITIONS PRECEDENT
    	
 
    	
51
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 7.1.
    	
 
    	
All Credit Events
    	
 
    	
51
    
	
Section 7.2.
    	
 
    	
Initial Credit Event
    	
 
    	
52
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 8.
    	
 
    	
COVENANTS
    	
 
    	
54
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 8.1.
    	
 
    	
Maintenance of Business
    	
 
    	
54
    
	
Section 8.2.
    	
 
    	
Maintenance of Properties
    	
 
    	
54
    
	
Section 8.3.
    	
 
    	
Taxes and Assessments
    	
 
    	
55
    
	
Section 8.4.
    	
 
    	
Insurance
    	
 
    	
55
    
	
Section 8.5.
    	
 
    	
Financial Reports
    	
 
    	
55
    
	
Section 8.6.
    	
 
    	
Inspection; Field Audits
    	
 
    	
58
    
	
Section 8.7.
    	
 
    	
Borrowings and Guaranties
    	
 
    	
58
    
	
Section 8.8.
    	
 
    	
Liens
    	
 
    	
59
    
	
Section 8.9.
    	
 
    	
Investments, Acquisitions, Loans   and Advances
    	
 
    	
61
    
	
Section 8.10.
    	
 
    	
Mergers, Consolidations and Sales
    	
 
    	
62
    
	
Section 8.11.
    	
 
    	
Maintenance of Subsidiaries
    	
 
    	
63
    
	
Section 8.12.
    	
 
    	
Dividends and Certain Other   Restricted Payments
    	
 
    	
63
    
	
Section 8.13.
    	
 
    	
ERISA
    	
 
    	
63
    

 

ii

 

	
Section 8.14.
    	
 
    	
Compliance with Laws
    	
 
    	
63
    
	
Section 8.15.
    	
 
    	
Compliance with OFAC Sanctions   Programs
    	
 
    	
64
    
	
Section 8.16.
    	
 
    	
Burdensome Contracts With   Affiliates
    	
 
    	
65
    
	
Section 8.17.
    	
 
    	
No Changes in Fiscal Year
    	
 
    	
65
    
	
Section 8.18.
    	
 
    	
Formation of Subsidiaries;   Guaranty Requirements
    	
 
    	
65
    
	
Section 8.19.
    	
 
    	
Change in the Nature of Business
    	
 
    	
65
    
	
Section 8.20.
    	
 
    	
Use of Proceeds
    	
 
    	
65
    
	
Section 8.21.
    	
 
    	
No Restrictions
    	
 
    	
65
    
	
Section 8.22.
    	
 
    	
Subordinated Debt
    	
 
    	
66
    
	
Section 8.23.
    	
 
    	
Financial Covenants
    	
 
    	
66
    
	
Section 8.24.
    	
 
    	
Modification of Certain Documents
    	
 
    	
66
    
	
Section 8.24.
    	
 
    	
Post-Closing Covenant
    	
 
    	
66
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 9.
    	
 
    	
EVENTS OF DEFAULT AND REMEDIES
    	
 
    	
67
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 9.1.
    	
 
    	
Events of Default
    	
 
    	
67
    
	
Section 9.2.
    	
 
    	
Non-Bankruptcy Defaults
    	
 
    	
69
    
	
Section 9.3.
    	
 
    	
Bankruptcy Defaults
    	
 
    	
69
    
	
Section 9.4.
    	
 
    	
Collateral for Undrawn Letters of   Credit
    	
 
    	
70
    
	
Section 9.5.
    	
 
    	
Post-Default Collections
    	
 
    	
70
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 10.
    	
 
    	
THE GUARANTEES
    	
 
    	
70
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 10.1.
    	
 
    	
The Guarantees
    	
 
    	
70
    
	
Section 10.2.
    	
 
    	
Guarantee Unconditional
    	
 
    	
71
    
	
Section 10.3.
    	
 
    	
Discharge Only upon Payment in Full;   Reinstatement in Certain Circumstances
    	
 
    	
72
    
	
Section 10.4.
    	
 
    	
Subrogation
    	
 
    	
72
    
	
Section 10.5.
    	
 
    	
Subordination
    	
 
    	
72
    
	
Section 10.6.
    	
 
    	
Waivers
    	
 
    	
73
    
	
Section 10.7.
    	
 
    	
Limit on Recovery
    	
 
    	
73
    
	
Section 10.8.
    	
 
    	
Stay of Acceleration
    	
 
    	
73
    
	
Section 10.9.
    	
 
    	
Benefit to Guarantors
    	
 
    	
73
    
	
Section 10.10.
    	
 
    	
Keepwell
    	
 
    	
73
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 11.
    	
 
    	
COLLATERAL
    	
 
    	
74
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 11.1.
    	
 
    	
Collateral
    	
 
    	
74
    
	
Section 11.2.
    	
 
    	
Depository Banks
    	
 
    	
74
    
	
Section 11.3.
    	
 
    	
Liens on Real Property
    	
 
    	
75
    
	
Section 11.4.
    	
 
    	
Further Assurances
    	
 
    	
75
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SECTION 12.
    	
 
    	
MISCELLANEOUS
    	
 
    	
75
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Section 12.1.
    	
 
    	
Notices
    	
 
    	
75
    
	
Section 12.2.
    	
 
    	
Amendments, Etc
    	
 
    	
76
    
	
Section 12.3
    	
 
    	
Costs and Expenses;   Indemnification
    	
 
    	
76
    
	
Section 12.4.
    	
 
    	
No Waiver, Cumulative Remedies
    	
 
    	
78
    

 

iii

 

	
Section 12.5.
    	
 
    	
Right of Setoff
    	
 
    	
78
    
	
Section 12.6.
    	
 
    	
Survival of Representations
    	
 
    	
78
    
	
Section 12.7.
    	
 
    	
Survival of Indemnities
    	
 
    	
78
    
	
Section 12.8.
    	
 
    	
Counterparts, Integration; Effectiveness
    	
 
    	
79
    
	
Section 12.9.
    	
 
    	
Headings
    	
 
    	
79
    
	
Section 12.10.
    	
 
    	
Severability of Provisions
    	
 
    	
79
    
	
Section 12.11.
    	
 
    	
Construction
    	
 
    	
79
    
	
Section 12.12
    	
 
    	
Excess Interest
    	
 
    	
79
    
	
Section 12.13.
    	
 
    	
No Advisory or Fiduciary   Responsibility
    	
 
    	
80
    
	
Section 12.14.
    	
 
    	
Binding Nature; Governing Law;   Jurisdiction; Consent to Service of Process
    	
 
    	
80
    
	
Section 12.15.
    	
 
    	
Waiver of Jury Trial
    	
 
    	
81
    
	
Section 12.16.
    	
 
    	
USA Patriot Act
    	
 
    	
82
    
	
Section 12.17.
    	
 
    	
Confidentialilty
    	
 
    	
82
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature   Page
    	
 
    	
 
    	
 
    	
S-1
    

 

	
EXHIBIT A
    	
—
    	
Notice   of Borrowing
    
	
EXHIBIT B
    	
—
    	
Notice   of Continuation/Conversion
    
	
EXHIBIT C-1
    	
—
    	
Delayed   Draw Term Note
    
	
EXHIBIT C-2
    	
—
    	
Revolving   Note
    
	
EXHIBIT D
    	
—
    	
Borrowing   Base Certificate
    
	
EXHIBIT E
    	
—
    	
Compliance   Certificate
    
	
EXHIBIT F
    	
—
    	
Additional   Guarantor Supplement
    
	
SCHEDULE 1.1
    	
—
    	
Fiscal   Quarters
    
	
SCHEDULE 6.2
    	
—
    	
Subsidiaries
    
	
SCHEDULE 8.9
    	
—
    	
Permitted   Investments
    

 

iv

 

CREDIT AGREEMENT

 

This Credit Agreement is entered into as of March 24, 2014, by and among WILLDAN GROUP, INC., a Delaware corporation (the “Borrower”), the direct and indirect Subsidiaries of the Borrower from time to time party to this Agreement, as Guarantors, and BMO HARRIS BANK N.A., a national banking association (the “Bank”), as the lender as provided herein.

 

PRELIMINARY STATEMENT

 

The Borrower has requested, and the Bank has agreed to extend, certain credit facilities on the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

SECTION 1.                                             DEFINITIONS; INTERPRETATION.

 

Section 1.1.                                Definitions.  The following terms when used herein shall have the following meanings:

 

“Account Debtor” means any Person obligated to make payment on any Receivable.

 

“Acquired Business” means the entity or assets acquired by the Borrower or another Loan Party in an Acquisition, whether before or after the date hereof.

 

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person (other than a Person that is a Subsidiary), or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Borrower or another Loan Party is the surviving entity.

 

“Adjusted LIBOR” means, for any Borrowing of Eurodollar Loans, a rate per annum determined in accordance with the following formula:

 

	
Adjusted   LIBOR
    	
=
    	
LIBOR
    
	
 
    	
 
    	
1 - Eurodollar Reserve Percentage
    

 

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided that, in any event for purposes of this definition, any Person that owns, directly or indirectly, 5% or more of the securities having the ordinary voting power for the election of directors or governing body of a corporation or 5% or more of the partnership or other ownership interest of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person.

 

 

“Agreement” means this Credit Agreement, as the same may be amended, modified, restated or supplemented from time to time pursuant to the terms hereof.

 

“Applicable Margin” means, with respect to Loans, Reimbursement Obligations, Letter of Credit Fees, and the commitment fees payable under Section 3.1(a), until the first Pricing Date, the rates per annum shown opposite Level I below, and thereafter from one Pricing Date to the next the Applicable Margin means the rates per annum determined in accordance with the following schedule:

 

	
LEVEL
    	
 
    	
TOTAL
   LEVERAGE
   RATIO FOR
   SUCH PRICING
   DATE
    	
 
    	
APPLICABLE
   MARGIN FOR BASE
   RATE LOANS
   UNDER REVOLVING
   FACILITY AND
   REIMBURSEMENT
   OBLIGATIONS
   SHALL BE:
    	
 
    	
APPLICABLE
   MARGIN FOR
   BASE RATE
   LOANS UNDER
   DELAYED
   DRAW TERM
   LOAN FACILITY
   SHALL BE:
    	
 
    	
APPLICABLE
   MARGIN FOR
   EURODOLLAR
   LOANS UNDER
   REVOLVING
   FACILITY AND
   FINANCIAL
    LETTER OF
   CREDIT FEES
   SHALL BE:
    	
 
    	
APPLICABLE
   MARGIN FOR
   EURODOLLAR
   LOANS UNDER
   DELAYED
   DRAW TERM
   LOAN
   FACILITY
   SHALL BE:
    	
 
    	
APPLICABLE
   MARGIN FOR
   PERFOR-
   MANCE
   LETTER OF
   CREDIT FEES
   SHALL BE:
    	
 
    	
APPLICABLE
   MARGIN FOR
   COMMITMENT
   FEE SHALL
   BE:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
I
    	
 
    	
Less   than 0.75 to 1.0
    	
 
    	
0.75
    	
%
    	
1.00
    	
%
    	
1.75
    	
%
    	
2.00
    	
%
    	
1.31
    	
%
    	
0.20
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
II
    	
 
    	
Less   than 1.50 to 1.0, but greater than or equal to 0.75 to 1.0
    	
 
    	
1.00
    	
%
    	
1.25
    	
%
    	
2.00
    	
%
    	
2.25
    	
%
    	
1.50
    	
%
    	
0.25
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
III
    	
 
    	
Greater   than or equal to 1.50 to 1.0
    	
 
    	
1.25
    	
%
    	
1.50
    	
%
    	
2.25
    	
%
    	
2.50
    	
%
    	
1.69
    	
%
    	
0.30
    	
%
    

 

For purposes hereof, the term “Pricing Date” means, for any Fiscal Quarter ending on or after the first Fiscal Quarter of 2014, the date on which the Bank is in receipt of the Borrower’s most recent financial statements (and, in the case of the Fiscal Year-end financial statements, audit report) for the Fiscal Quarter then ended, pursuant to Section 8.5.  The Applicable Margin shall be established based on the Total Leverage Ratio for the most recently completed Fiscal Quarter and the Applicable Margin established on a Pricing Date shall remain in effect until the next Pricing Date.  If the Borrower has not delivered its financial statements by the date such financial statements (and, in the case of the Fiscal Year-end financial statements, audit report) are required to be delivered under Section 8.5, until such financial statements and audit report are delivered, the Applicable Margin shall be the highest Applicable Margin (i.e., Level III shall apply).  If the Borrower subsequently delivers such financial statements before the next Pricing Date, the Applicable Margin shall be determined on the date of delivery of such financial statements and remain in effect until the next Pricing Date.  In all other circumstances, the Applicable Margin shall be in effect from the Pricing Date that occurs immediately after the end of the Fiscal Quarter covered by such financial statements until the next Pricing Date.  Each determination of the Applicable Margin made by the Bank in accordance with the foregoing shall be conclusive and binding on the Borrower if reasonably determined.

 

2

 

“Application” is defined in Section 2.3(b).

 

“Assigned Accounts” is defined in Section 11.2.

 

“Authorized Representative” means those persons shown on the list of officers provided by the Borrower pursuant to Section 7.2 or on any update of any such list provided by the Borrower to the Bank, or any further or different officers of the Borrower so named by any Authorized Representative of the Borrower in a written notice to the Bank.

 

“Bank” means BMO Harris Bank N.A., in its capacity as the lender hereunder, and any successor in such capacity.

 

“Bank Products” means each and any of the following bank products and services provided to any Loan Party by the Bank or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards), (b) stored value cards, and (c) depository, cash management, and treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

 

“Bank Product Obligations” of the Loan Parties means any and all of their obligations, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Bank Products.

 

“Base Rate” means, for any day, the rate per annum equal to the greatest of:  (a) the rate of interest announced or otherwise established by the Bank from time to time as its prime commercial rate as in effect on such day, with any change in the Base Rate resulting from a change in said prime commercial rate to be effective as of the date of the relevant change in said prime commercial rate (it being acknowledged and agreed that such rate may not be the Bank’s best or lowest rate), (b) the sum of (i) the rate determined by the Bank to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to the Bank at approximately 10:00 a.m. (Chicago time) (or as soon thereafter as is practicable) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) by two or more Federal funds brokers selected by the Bank for sale to the Bank at face value of Federal funds in the secondary market in an amount equal or comparable to the principal amount for which such rate is being determined, plus (ii) 1/2 of 1%, and (c) the LIBOR Quoted Rate for such day plus 1.00%.  As used herein, the term “LIBOR Quoted Rate” means, for any day, the rate per annum equal to the quotient of (i) the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a one-month interest period which appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) divided by (ii) one (1) minus the Eurodollar Reserve Percentage.

 

3

 

“Base Rate Loan” means a Loan bearing interest at a rate specified in Section 2.4(a).

 

“Borrower” is defined in the introductory paragraph of this Agreement.

 

“Borrowing” means the total of Loans of a single type advanced, continued for an additional Interest Period, or converted from a different type into such type by the Bank under a Facility on a single date and, in the case of Eurodollar Loans, for a single Interest Period.  A Borrowing is “advanced” on the day the Bank advances funds comprising such Borrowing to the Borrower, is “continued” on the date a new Interest Period for the same type of Loans commences for such Borrowing, and is “converted” when such Borrowing is changed from one type of Loans to the other, all as determined pursuant to Section 2.6.

 

“Borrowing Base” means, as of any time it is to be determined, the sum of:

 

(a)                           75% of the then outstanding unpaid amount of Eligible Receivables and the Eligible Retainage Base; plus

 

(b)                           50% of the value (computed at the lower of market or cost using the first-in/first-out method of inventory valuation applied in accordance with GAAP) of Eligible Inventory;

 

provided that (i) the Bank shall have the right upon five (5) Business Days’ notice to the Borrower to reduce the advance rates against Eligible Receivables and Eligible Inventory in its Permitted Discretion based on results from any field audit or appraisal of the Collateral and (ii) the Borrowing Base shall be computed only as against and on so much of such Collateral as is included on the Borrowing Base Certificates furnished from time to time by the Borrower pursuant to this Agreement and, if required by the Bank pursuant to any of the terms hereof or any Collateral Document, as verified by such other evidence reasonably required to be furnished to the Bank pursuant hereto or pursuant to any such Collateral Document.

 

“Borrowing Base Certificate” means the certificate in the form of Exhibit D hereto, or in such other form acceptable to the Bank, to be delivered to the Bank pursuant to Section 8.5.

 

“Business Day” means any day (other than a Saturday or Sunday) on which banks are not authorized or required to close in Chicago, Illinois and, if the applicable Business Day relates to the advance or continuation of, or conversion into, or payment of a Eurodollar Loan, on which banks are dealing in U.S. Dollar deposits in the interbank eurodollar market in London, England.

 

“Capital Expenditures” means, with respect to any Person for any period, the aggregate amount of all expenditures (whether paid in cash or accrued as a liability) by such Person during that period for the acquisition or leasing (pursuant to a Capital Lease) of fixed or capital assets or additions to property, plant, or equipment (including replacements, capitalized repairs, and improvements) which should be capitalized on the balance sheet of such Person in accordance with GAAP.

 

4

 

“Capital Lease” means any lease of Property which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee.

 

“Capitalized Lease Obligation” means, for any Person, the amount of the liability shown on the balance sheet of such Person in respect of a Capital Lease determined in accordance with GAAP.

 

“Cash Collateralize” means, to pledge and deposit with or deliver to the Bank, as collateral for L/C Obligations, cash or deposit account balances subject to a first priority perfected security interest in favor of the Bank or, if the Bank agrees in its sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Bank.

 

“Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

 

“Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one (1) year from the date of acquisition thereof, (b) marketable direct obligations issued or fully guaranteed by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one (1) year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s, (c) commercial paper maturing within one (1) year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances maturing within one (1) year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof or the District of Columbia having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000, (e) deposit accounts maintained with (i) any bank that satisfies the criteria described in clause (d) above, or (ii) any other bank organized under the laws of the United States or any state thereof so long as the full amount maintained with any such other bank is fully insured by the Federal Deposit Insurance Corporation, (f) repurchase obligations of any commercial bank satisfying the requirements of clause (d) of this definition or recognized securities dealer having combined capital and surplus of not less than $250,000,000, having a term of not more than seven (7) days, with respect to securities satisfying the criteria in clauses (a) or (d) above, provided all such agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System, and (g) investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (f) above.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§9601 et seq., and any future amendments.

 

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“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Change of Control” means any of (a) the acquisition by any “person” or “group” (as such terms are used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) at any time of beneficial ownership of 25% or more of the outstanding capital stock or other equity interests of the Borrower on a fully-diluted basis, (b) the failure of individuals who are members of the board of directors (or similar governing body) of the Borrower on the Closing Date (together with any new or replacement directors whose initial nomination for election was approved by a majority of the directors who were either directors on the Closing Date or previously so approved) to constitute a majority of the board of directors (or similar governing body) of the Borrower, or (c) any “Change of Control” (or words of like import), as defined in any agreement or indenture relating to any issue of Material Indebtedness of any Loan Party or any Subsidiary of a Loan Party, shall occur.

 

“Closing Date” means the date of this Agreement or such later Business Day upon which each condition described in Section 7.2 shall be satisfied or waived in a manner acceptable to the Bank in its discretion.

 

“Code” means the Internal Revenue Code of 1986, as amended, and any successor statute thereto.

 

“Collateral” means all properties, rights, interests, and privileges from time to time subject to the Liens granted to the Bank, or any security trustee therefor, by the Collateral Documents.

 

“Collateral Account” is defined in Section 9.4(b).

 

“Collateral Access Agreement” means any landlord waiver, warehouse, processor or other bailee letter or other agreement, in form and substance satisfactory to the Bank, between the Bank and any third party (including any bailee, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of the Borrower or any Subsidiary for any real property where any Collateral is located, as such landlord waiver, bailee letter or other agreement may be amended, restated, or otherwise modified from time to time.

 

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“Collateral Documents” means the Mortgages, the Security Agreement, and all other mortgages, deeds of trust, security agreements, pledge agreements, assignments, financing statements, control agreements, and other documents as shall from time to time secure or relate to the Secured Obligations or any part thereof.

 

“Commitments” means the Revolving Credit Commitment and the Delayed Draw Term Loan Commitment.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profit Taxes.

 

“Constituent Documents” means, with respect to any Person, collectively and, in each case, together with any modification of any term thereof, (a) the articles of incorporation, certificate of incorporation, constitution or certificate of formation of such Person, (b) the bylaws, operating agreement or joint venture agreement of such Person, (c) any other constitutive, organizational or governing document of such Person, whether or not equivalent, and (d) any other document setting forth the manner of election or duties of the directors, officers or managing members of such Person or the designation, amount or relative rights, limitations and preferences of any Voting Stock of such Person.

 

“Construction Joint Venture” means an investment made in the ordinary course of business in connection with joint ventures (including legal entity joint ventures) or a similar pooling of efforts in respect of a specific project or series of related specific projects for a limited or fixed duration which is formed to conduct business of the type in which any Loan Party is presently engaged and which procures the services necessary to conduct its business (other than incidental services) through the owners of such joint venture or pooling of efforts or through subcontractors to the owners of such joint venture.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

 

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with any Loan Party, are treated as a single employer under Section 414 of the Code.

 

“Credit Event” means the advancing of any Loan, or the issuance of, or extension of the expiration date or increase in the amount of, any Letter of Credit.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors,  moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

 

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“Default” means any event or condition which constitutes an Event of Default or any event or condition the occurrence of which would, with the passage of time or the giving of notice, or both, constitute an Event of Default.

 

“Delayed Draw Term Loan Availability Period” means the period from and including the Closing Date to, but not including, 30 days prior to the Delayed Draw Term Loan Maturity Date, or such earlier date on which (x) Delayed Draw Term Loans have been advanced by the Bank in an amount equal to the Delayed Draw Term Loan Commitment or (y) the Delayed Draw Term Loan Commitment is terminated in whole pursuant to Sections 2.11, 9.2 or 9.3 hereof.

 

“Delayed Draw Term Loan Commitment” means the obligation of the Bank to make the Delayed Draw Term Loan during the Delayed Draw Term Loan Availability Period in the principal amount not to exceed the amount set forth in Section 2.1.

 

“Delayed Draw Term Loan” is defined in Section 2.1 and, as so defined, includes a Base Rate Loan or a Eurodollar Loan, each of which is a “type” of Delayed Draw Term Loan hereunder.

 

“Delayed Draw Term Loan Facility” means the credit facility for the Delayed Draw Term Loans described in Section 2.1 hereof.

 

“Delayed Draw Term Loan Maturity Date” means (i) March 24, 2016 or (ii) such later date to which the Delayed Draw Term Loan Maturity Date is extended in whole pursuant to Section 2.12.

 

“Delayed Draw Term Note” is defined in Section 2.10 hereof.

 

“Designated Disbursement Account” means the account of the Borrower maintained with the Bank or its Affiliate and designated in writing to the Bank as the Borrower’s Designated Disbursement Account (or such other account as the Borrower and the Bank may otherwise agree).

 

“Disposition” means the sale, lease, conveyance or other disposition of Property, other than (a) the sale or lease of inventory in the ordinary course of business, and (b) the sale, transfer, lease or other disposition of Property of a Loan Party to another Loan Party in the ordinary course of its business.

 

“Domestic Subsidiary” means a Subsidiary that is not a Foreign Subsidiary.

 

“Earn Out Obligations” means and includes any cash earn out obligations, performance payments or similar obligations of the Borrower or any Guarantor to any sellers arising out of or in connection with an Acquisition, but excluding any working capital adjustments or payments for services or licenses provided by such sellers.

 

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“EBITDA” means, with reference to any period, (i) Net Income for such period (consistently determined in accordance with the Fiscal Year of 2012 audited financial statements delivered to the Bank (the “2012 Audited Financials”)) plus all amounts deducted in arriving at such Net Income amount in respect of (a) Interest Expense for such period, (b) federal, state, and local income taxes for such period, (c) depreciation of fixed assets and amortization of intangible assets for such period, and (d) non-cash charges and other pro forma adjustments for such period deducted in the determination of Net Income for such period and reasonably acceptable to the Bank, minus (ii) all amounts included in the calculation of Net Income with respect to such period in respect of non-cash gains and other pro forma adjustments included in the calculation of Net Income with respect to such period (calculated consistent with GAAP in effect as of the 2012 Audited Financials).  EBITDA shall be calculated on a pro forma basis giving effect to any Permitted Acquisition or disposition of a Subsidiary or business segment during such period and including pro forma cost savings to the extent such cost savings are approved in the reasonable discretion of the Bank.

 

“Eligible Inventory” means finished goods inventory of the Borrower or any Guarantor that:

 

(a)                           is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of the Bank free and clear of any other Liens (other than Liens permitted by Section 8.8(a) or (b) arising by operation of law which are subordinate to the Liens in favor of the Bank);

 

(b)                           is located in the United States of America at a Permitted Collateral Location as set forth in the Security Agreement and, in the case of any location not owned by such Person, which is at all times subject either to a Collateral Access Agreement or, in the absence of such Collateral Access Agreement and the Bank so agrees in its sole discretion, reserves established to the satisfaction of the Bank;

 

(c)                            is not bill-and-hold inventory or otherwise so identified to a contract to sell that it constitutes a Receivable;

 

(d)                           is not obsolete or slow moving, and is of good and merchantable quality conforming to all standards imposed by any Governmental Authority free from any defects which might adversely affect the market value thereof;

 

(e)                            is not covered by a warehouse receipt or similar document;

 

(f)                             does not constitute spare or replacement parts, subassemblies, packaging and shipping material, manufacturing supplies, samples, prototypes, displays or display items, bill-and-hold goods, goods that are returned or marked for return (except to the extent such goods may be resold in the ordinary course of business), repossessed goods, defective or damaged goods, goods that have been discontinued or components thereof, goods held on consignment, or goods which are not of a type held for sale in the ordinary course of business;

 

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(g)                            does not contain or bear any intellectual property rights licensed to the Borrower or such Guarantor unless the Bank is satisfied that it may sell or otherwise dispose of such inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such licensor, or (iii) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such inventory under the current licensing agreement;

 

(h)                            all representations and warranties set forth in this Agreement and the Collateral Documents are true and correct with respect thereto; and

 

(i)                            is not otherwise deemed to be ineligible in the reasonable judgment of the Bank (it being acknowledged and agreed that with five (5) Business Days prior written notice any inventory or categories thereof of the Borrower or any Guarantor may be deemed ineligible by the Bank acting in is reasonable judgment).

 

“Eligible Line of Business” means any business engaged in as of the date of this Agreement by the Borrower or any other Loan Party or any business reasonably related thereto.

 

“Eligible Receivables” means any Receivable of the Borrower or any Guarantor that:

 

(a)                            (i) arises out of the sale of goods or the performance of services in the ordinary course of business that is not contingent upon the completion of any further performance by the Borrower or any Guarantor or any other Person on its/their behalf, (ii) does not represent a retainage amount, (iii) does not relate to the payment of interest, and (iii) is net of any deposits made by or for the account of the relevant Account Debtor;

 

(b)                            is payable in U.S. Dollars and the Account Debtor on such Receivable is located within the United States of America or, if such right has arisen out of the sale of such goods shipped to, or out of the rendition of services to, an Account Debtor located in any other country, such right is secured by a valid and irrevocable transferable letter of credit issued by a lender reasonably acceptable to the Bank for the full amount thereof which has been assigned or transferred to the Bank in a manner acceptable to the Bank;

 

(c)                             is the valid, binding and legally enforceable obligation of the Account Debtor obligated thereon and such Account Debtor (i) is not a Subsidiary or an Affiliate of any Loan Party, (ii) is not a shareholder, director, officer, or employee of any Loan Party or of any of its Subsidiaries, (iii) is not the United States of America, or any state or political subdivision thereof, or any department, agency or instrumentality of any of the foregoing, unless the Assignment of Claims Act, or any similar state or local statute, as the case may be, is complied with to the satisfaction of the Bank, (iv) is not a debtor under any proceeding under any Debtor Relief Law, (v) is not an assignor for the benefit of creditors, or (vi) has not sold all or substantially all of its assets;

 

(d)                            is not evidenced by an instrument or chattel paper unless the same has been endorsed and delivered to the Bank;

 

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(e)                             is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of the Bank free and clear of any other Liens (other than Liens permitted by Section 8.8(a) or (b) arising by operation of law which are subordinate to the Liens in favor of the Bank);

 

(f)                           is not subject to any counterclaim or defense asserted by the Account Debtor or subject to any offset or contra account payable to the Account Debtor (unless the amount of such Receivable is net of such contra account established to the reasonable satisfaction of the Bank);

 

(g)                             no surety bond was required or given in connection with said Receivable or the contract or purchase order out of which the same arose;

 

(h)                            it is evidenced by an invoice to the Account Debtor dated not more than thirty (30) days subsequent to the shipment date of the relevant inventory or completion of performance of the relevant services and is issued on ordinary trade terms requiring payment within 30 days of invoice date, and has not been invoiced more than once;

 

(i)                            is not unpaid more than 90 days after the original due date, and which has not been written off the books of the Borrower of such Guarantor or otherwise designated as uncollectible;

 

(j)                           is not owed by an Account Debtor who is obligated on Receivables more than 20% of the aggregate unpaid balance of which have been past due for longer than the relevant period specified in subsection (i) above unless the Bank has approved the continued eligibility thereof;

 

(k)                            would not cause the total Receivables owing from any one Account Debtor and its Affiliates to exceed 20% of all Eligible Receivables;

 

(l)                            would not cause the total Receivables owing from any one Account Debtor and its Affiliate to exceed any credit limit established for purposes of determining eligibility hereunder by the Bank in its Permitted Discretion for such Account Debtor and for which the Bank has given the Borrower at least five (5) Business Days prior notice of the establishment of any such credit limit;

 

(m)                            is not owed by an Account Debtor located in any jurisdiction which requires filing of a “Notice of Business Activities Report” or other similar report in order to permit the Borrower or such Guarantor to seek judicial enforcement in such jurisdiction of payment of such Receivable, unless the Borrower or such Guarantor has filed such report or qualified to do business in such jurisdiction;

 

(n)                            complies in all material respects with the requirements of all applicable laws and regulations, whether Federal, state or local, including without limitation the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board;

 

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(o)                            all representations and warranties set forth in this Agreement and the Collateral Documents are true and correct with respect thereto;

 

(p)                            does not arise from a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment, or any other repurchase or return basis; and

 

(q)                            is not otherwise deemed to be ineligible in the reasonable judgment of the Bank (it being acknowledged and agreed that with five (5) Business Days prior written notice any Receivable of the Borrower or any Guarantor may be deemed ineligible by the Bank acting in its reasonable judgment).

 

“Eligible Retainage” means, as of any date of determination, retainage amounts owing to any Loan Party arising from the sale of goods or performance of services in the ordinary course of business that would constitute an Eligible Receivable if such amounts were not retainage amounts and the contingencies necessary for the release of such retainage amounts were satisfied pursuant to the terms of the underlying contract under which such retainage amount arose.  For the avoidance of doubt, clauses (f), (h), (i) and (j) of the definition of Eligible Receivable need not be satisfied with respect to such retainage amounts.

 

“Eligible Retainage Base” means 50% of the amount of Eligible Retainage.

 

“Environmental Claim” means any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding or claim (whether administrative, judicial or private in nature) arising (a) pursuant to, or in connection with an actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Material, (c) from any abatement, removal, remedial, investigative, corrective or response action in connection with a Hazardous Material, Environmental Law or order of a Governmental Authority or (d) from any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

 

“Environmental Law” means any current or future Legal Requirement pertaining to (a) the protection of health, safety and the indoor or outdoor environment, (b) the conservation, management, protection or use of natural resources and wildlife, (c) the protection or use of surface water or groundwater, (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, investigation, remediation or handling of, or exposure to, any Hazardous Material or (e) pollution (including any Release to air, land, surface water or groundwater), and any amendment, rule, regulation, order or directive issued thereunder.

 

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, costs of compliance, penalties or indemnities), of any Loan Party or any Subsidiary of a Loan Party directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any  Hazardous Materials into the environment or (e) any contract, agreement or other legally enforceable consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute thereto.

 

“Eurodollar Loan” means a Loan bearing interest at the rate specified in Section 2.4(b).

 

“Eurodollar Reserve Percentage” means the maximum reserve percentage, expressed as a decimal, at which reserves (including, without limitation, any emergency, marginal, special, and supplemental reserves) are imposed by the Board of Governors of the Federal Reserve System (or any successor) on “eurocurrency liabilities”, as defined in such Board’s Regulation D (or any successor thereto), subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto.  For purposes of this definition, the relevant Loans shall be deemed to be “eurocurrency liabilities” as defined in Regulation D without benefit or credit for any prorations, exemptions or offsets under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any such reserve percentage.

 

“Event of Default” means any event or condition identified as such in Section 9.1.

 

“Event of Loss” means, with respect to any Property, any of the following:  (a) any loss, destruction or damage of such Property or (b) any condemnation, seizure, or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such Property or the requisition of the use of such Property.

 

“Excess Availability” means, as of any time the same is to be determined, the amount (if any) by which (a) the lesser of the Borrowing Base as then determined and computed or the Revolving Credit Commitment as then in effect exceeds (b) the aggregate principal amount of Revolving Loans and L/C Obligations then outstanding.

 

“Excess Interest”  is defined in Section 12.12 hereof.

 

“Excluded Deposit Account” means a deposit account the balance of which consists exclusively of (and is identified when established as an account established solely for the purposes of) (a) withheld income Taxes and federal, state, local or foreign employment Taxes in such amounts as are required in the reasonable judgment of a Loan Party to be paid to the Internal Revenue Service or any other U.S., federal, state or local or foreign government agencies within the following month with respect to employees of such Loan Party, (b) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3-102 on behalf of or for the benefit of employees of any Loan Party, (c) amounts which are required to be pledged or otherwise provided as security pursuant to any requirement of any Governmental Authority or foreign pension requirement, (d) amounts to be used to fund payroll obligations (including, but not limited to, amounts payable to any employment contracts between any Loan Party and their respective employees), and (e) other deposit accounts maintained in the ordinary course of business containing cash amounts that do not exceed at any time $100,000 for any such account and $250,000 in the aggregate for all such accounts under this clause (e), unless requested by the Bank after the occurrence and during the continuation of an Event of Default.

 

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“Excluded Equity Issuances” means (a) the issuance by any Subsidiary of equity securities to the Borrower or any Guarantor, as applicable, (b) the issuance of equity securities by the Borrower to any Person that is an equity holder of the Borrower prior to such issuance (a “Subject Holder”) so long as such Subject Holder did not acquire any equity securities of the Borrower so as to become a Subject Holder concurrently with, or in contemplation of, the issuance of such equity securities to such Subject Holder, (c) the issuance of equity securities of the Borrower to directors, officers and employees of the Borrower and its Subsidiaries pursuant to employee stock option plans (or other employee incentive plans or other compensation arrangements) approved by the Borrower’s Board of Directors, and (d) the issuance of equity securities of the Borrower in order to finance the purchase consideration (or a portion thereof) in connection with a Permitted Acquisition or Capital Expenditures.

 

“Excluded Property” means (a) any fee-owned real property with a fair market value of less than $500,000 in the aggregate, unless requested by the Bank after the occurrence and during the continuation of an Event of Default; (b) any leased real property; (c) any equipment securing purchase money indebtedness or Capitalized Lease Obligations if the granting of a Lien to any third party is prohibited by the agreement(s) setting forth the terms and conditions applicable to such Indebtedness but only if such Indebtedness and the Liens securing the same are permitted by Sections 8.7(b) and 8.8(d) of the Credit Agreement, provided that if and when the prohibition which prevents the granting of a Lien in any such Property is removed, terminated or otherwise becomes unenforceable as a matter of law (including, without limitation, the termination of any such security interest resulting from the satisfaction of the Indebtedness secured thereby), and notwithstanding any previous release of Lien provided by the Bank requested in connection with respect to any such Indebtedness, the Excluded Property will no longer include such Property and the Bank will be deemed to have, and at all times to have had, a security interest in such property and the Collateral will be deemed to include, and at all times to have included, such Property without further action or notice by any Person; (d) any permit or license issued to any Loan Party as the permit holder or licensee thereof or any lease to which any Loan Party is lessee thereof, in each case only to the extent and for so long as the terms of such permit, license, or lease effectively (after giving effect to Sections 9-406 through 9-409, inclusive, of the Uniform Commercial Code in the applicable state (or any successor provision or provisions) or any other applicable law) prohibit the creation by such Loan Party of a security interest in such permit, license, or lease in favor of the Bank or would result in an effective invalidation, termination or breach of the terms of any such permit, license or lease (after giving effect to Sections 9-406  through 9-409, inclusive, of the Uniform Commercial Code in the applicable state (or any successor provision or provisions) or any other applicable law), in each case unless and until any required consents are obtained, provided that the Excluded Property will not include, and the Collateral shall include and the security interest granted in the Collateral shall attach to, (x) all proceeds, substitutions or replacements of any such excluded items referred to herein unless such proceeds, substitutions or replacements would constitute excluded items hereunder, (y) all rights to payment due or to become due under any such excluded items referred to herein, and (z) if and when the prohibition which prevents the granting of a security interest in any such Property is removed, terminated, or otherwise becomes unenforceable as a matter of law, the Bank will be 

 

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deemed to have, and at all times to have had, a security interest in such property, and the Collateral will be deemed to include, and at all times to have included, such Property without further action or notice by any Person; (e) equity interests of any Foreign Subsidiary which, if granted, would cause a material adverse effect on the Borrower’s federal income tax liability, unless requested by the Bank after the occurrence and during the continuation of an Event of Default, provided that Excluded Property shall not include, and the Collateral shall include, (x) non-voting equity interests of a first-tier Foreign Subsidiary owned by any Loan Party and (y) voting equity interests of a first-tier Foreign Subsidiary owned by any Loan Party representing not more than 66% of the total voting power of all outstanding voting equity interests of such Foreign Subsidiary, with equity interests of such Foreign Subsidiary constituting “stock entitled to vote” within the meaning of Treasury regulation section 1.956-2(c)(2) being treated as voting equity interests of such Foreign Subsidiary for purposes of this clause (e); and (f) Excluded Deposit Accounts.

 

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason not to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such related Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a the Bank or required to be withheld or deducted from a payment to the Bank, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of the Bank being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of the Bank with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) the Bank acquires such interest in the Loan or Commitment or (ii) the Bank changes its lending office, except in each case to the extent that, pursuant to Section 4.1 amounts with respect to such Taxes were payable to the Bank immediately before it changed its lending office, and (c) any U.S. federal withholding Taxes imposed under FATCA.

 

“Extension Period” has the meaning set forth in Section 2.12 hereof.

 

“Extension Request Date” has the meaning set forth in Section 2.12 hereof.

 

“Facility” means any of the Revolving Facility or Delayed Draw Term Loan Facility.

 

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“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, and any agreements entered into pursuant to Section 1471(b)(1) of the Code

 

“Federal Funds Rate” means the fluctuating interest rate per annum described in part (i) of clause (b) of the definition of Base Rate.

 

“Financial Officer” of any Person means the chief financial officer, principal accounting officer, treasurer or controller of such Person.

 

“Financial Standby Letters of Credit” shall mean letters of credit and bank guarantees in which the underlying performance being supported thereby is financial in nature, as determined by the Bank, which determination shall be conclusive and binding upon the Borrower absent manifest error.

 

“Fiscal Month” means, for the first and second Fiscal Month in any Fiscal Quarter, a four-week period of the Borrower, and for the third Fiscal Month in any Fiscal Quarter, a five-week period of the Borrower, where such week begins on Saturday.

 

“Fiscal Quarter” means a three—Fiscal Month period of the Borrower.  For the sake of clarity, the last day of each Fiscal Quarter shall be those dates set forth on Schedule 1.1, which schedule shall be updated by the Borrower from time to time upon request of the Bank.

 

“Fiscal Year” means a four Fiscal Quarter period of the Borrower, which period commences on the first Saturday after the last Fiscal Month of the Fiscal Year.  For the sake of clarity, the Fiscal Year of 2014 commences on December 28, 2013.

 

“Fixed Charge Coverage Ratio” means, at any time the same is to be determined, the ratio of (a) EBITDA for the four (4) consecutive Fiscal Quarters most recently then ended plus Rent Expense of the Loan Parties and their Subsidiaries during such period less Unfinanced Capital Expenditures of the Loan Parties and their Subsidiaries during such period to (b) the sum of Fixed Charges for the same four (4) consecutive Fiscal Quarters then ended.

 

“Fixed Charges” means, with reference to any period, the sum of (a) all scheduled payments of principal paid or required to be paid during such period with respect to Indebtedness of the Loan Parties and their Subsidiaries, (b) Interest Expense paid or required to be paid in cash for such period, (c) federal, state, and local income taxes (and franchise taxes in lieu of income taxes) paid or required to be paid in cash by the Loan Parties and their Subsidiaries during such period, (d) Restricted Payments paid in cash by the Loan Parties and their Subsidiaries during such period, and (e) Rent Expense of the Loan Parties and their Subsidiaries during such period.

 

“Foreign Subsidiary” means each Subsidiary that (a) is organized under the laws of a jurisdiction other than the United States of America or any state thereof or the District of Columbia, (b) conducts substantially all of its business outside of the United States of America, and (c) has substantially all of its assets outside of the United States of America.

 

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“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

 

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

 

“Guaranty Agreements” means and includes the Guarantee of the Loan Parties provided for in Section 10, and any other guaranty agreement executed and delivered in order to guarantee the Secured Obligations or any part thereof in form and substance acceptable to the Bank.

 

“Guarantors” means and includes each Subsidiary of the Borrower, and the Borrower, in its capacity as a guarantor of the Secured Obligations of another Loan Party; provided, however, that unless otherwise required by the Bank during the existence of any Event of Default, a Foreign Subsidiary shall not be required to be a Guarantor hereunder if providing such Guaranty Agreement would cause a material adverse effect on the Borrower’s federal income tax liability.

 

“Hazardous Material” means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or material which is hazardous, toxic, or a pollutant and includes, without limitation, (a)  asbestos, polychlorinated biphenyls and petroleum (including crude oil or any fraction thereof) and (b) any material classified or regulated as “hazardous,” “toxic,” or a “pollutant” or words of like import pursuant to an Environmental Law.

 

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“Hazardous Material Activity” means any activity, event or occurrence involving a Hazardous Material, including, without limitation, the manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation, handling of or corrective or response action to any Hazardous Material.

 

“Hedging Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of any Loan Party or its Subsidiaries shall be a Hedging Agreement.

 

“Hedging Liability” means the liability of any Loan Party to the Bank or any Affiliates of the Bank in respect of any Hedging Agreement as such Loan Party may from time to time enter into with the Bank or its Affiliates, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor); provided, however, that, with respect to any Guarantor, Hedging Liability Guaranteed by such Guarantor shall exclude all Excluded Swap Obligations.

 

“Hostile Acquisition” means the acquisition of the capital stock or other equity interests of a Person through a tender offer or similar solicitation of the owners of such capital stock or other equity interests which has not been approved (prior to such acquisition) by resolutions of the Board of Directors of such Person or by similar action if such Person is not a corporation, or as to which such approval has been withdrawn.

 

“Indebtedness” means for any Person (without duplication) (a) all indebtedness created, assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debt securities), (b) all indebtedness for the deferred purchase price of property or services (including any Earn Out Obligations but excluding trade accounts payable arising in the ordinary course of business which are not more than sixty (60) days past due), (c) all indebtedness secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (d) all Capitalized Lease Obligations of such Person, (e) all obligations of such Person on or with respect to letters of credit, bankers’ acceptances and other extensions of credit whether or not representing obligations for borrowed money, (f) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any equity interest in such Person or any other Person or any warrant, right or option to acquire such equity interest, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (g) all net obligations (determined as of any time based on the termination value thereof) of such Person under any interest rate, foreign currency, and/or commodity swap, exchange, cap, collar, floor, forward, future or option agreement, or any other similar interest rate, currency or commodity hedging arrangement; and (h) all Guarantees of such Person in respect of any of the foregoing.  For all purposes hereof, the Indebtedness of any

 

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Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

 

“Indemnified Taxes” means (a) all Taxes other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

 

“Information” is defined in Section 12.17 hereof.

 

“Interest Expense” means, with reference to any period, the sum of all interest charges (including imputed interest charges with respect to Capitalized Lease Obligations and all amortization of debt discount and expense) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.

 

“Interest Payment Date” means (a) with respect to any Eurodollar Loan, the last day of each Interest Period with respect to such Eurodollar Loan and on the maturity date and, if the applicable Interest Period is longer than three (3) three months, on each day occurring every three (3) months after the commencement of such Interest Period, and (b) with respect to any Base Rate Loan, the last day of every calendar month and on the maturity date.

 

“Interest Period” means the period commencing on the date a Borrowing of Eurodollar Loans is advanced, continued, or created by conversion and ending in the case of Eurodollar Loans, one (1), two (2), three (3), or six (6) months thereafter, provided, however, that:

 

(i)                            no Interest Period shall extend beyond the final maturity date of the relevant Loans;

 

(ii)                              no Interest Period with respect to any portion of the Delayed Draw Term Loan shall extend beyond a date on which the Borrower is required to make a scheduled payment of principal on the Delayed Draw Term Loan, unless the sum of (a) the aggregate principal amount of the Delayed Draw Term Loan that constitutes Base Rate Loans plus (b) the aggregate principal amount of the Delayed Draw Term Loan that constitutes Eurodollar Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount to be paid on the Delayed Draw Term Loan, on such payment date;

 

(iii)                               whenever the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period shall be extended to the next succeeding Business Day, provided that, if such extension would cause the last day of an Interest Period for a Borrowing of Eurodollar Loans to occur in the following calendar month, the last day of such Interest Period shall be the immediately preceding Business Day; and

 

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(iv)                             for purposes of determining an Interest Period for a Borrowing of Eurodollar Loans, a month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month; provided, however, that if there is no numerically corresponding day in the month in which such an Interest Period is to end or if such an Interest Period begins on the last Business Day of a calendar month, then such Interest Period shall end on the last Business Day of the calendar month in which such Interest Period is to end.

 

“IRS” means the United States Internal Revenue Service.

 

“L/C Obligations” means the aggregate undrawn face amounts of all outstanding Letters of Credit and all unpaid Reimbursement Obligations.

 

“L/C Sublimit” means $5,000,000, as reduced or otherwise amended pursuant to the terms hereof.

 

“Legal Requirement” means any treaty, convention, statute, law, common law, rule regulation, ordinance, license, permit, governmental approval, injunction, judgment, order, consent decree or other requirement of any Governmental Authority, whether federal, state, or local.

 

“Lending Office” is defined in Section 4.7.

 

“Letter of Credit” is defined in Section 2.3(a).

 

“Letter of Credit Fee” is defined in Section 3.1(b).

 

“LIBOR” means, for an Interest Period for a Borrowing of Eurodollar Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds are offered to the Bank at 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such Interest Period by three (3) or more major banks in the interbank eurodollar market selected by the Bank for delivery on the first day of and for a period equal to such Interest Period and in an amount equal or comparable to the principal amount of the Eurodollar Loan scheduled to be made as part of such Borrowing.

 

“LIBOR Index Rate” means, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period, which appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on the day two (2) Business Days before the commencement of such Interest Period.

 

“LIBOR01 Page” means the display designated as “LIBOR01 Page” on the Reuters Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market).

 

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“Lien” means any mortgage, lien, security interest, pledge, charge or encumbrance of any kind in respect of any Property, including the interests of a vendor or lessor under any conditional sale, Capital Lease or other title retention arrangement.

 

“Loan” means any Revolving Loan or Delayed Draw Term Loan, whether outstanding as a Base Rate Loan or Eurodollar Loan or otherwise, each of which is a “type” of Loan hereunder.

 

“Loan Documents” means this Agreement, the Notes (if any), the Applications, the Collateral Documents, the Guaranty Agreements, and each other instrument or document to be delivered hereunder or thereunder or otherwise in connection therewith.

 

“Loan Party” means the Borrower and each of the Guarantors.

 

“Material Adverse Effect” means (a) a material adverse change in, or material adverse effect upon, the operations, business, Property, condition (financial or otherwise) or prospects of the Borrower or of the Loan Parties and their Subsidiaries taken as a whole, (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document or (c) a material adverse effect upon (i) the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document or the rights and remedies of the Bank thereunder or (ii) the perfection or priority of any Lien granted under any Collateral Document.

 

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Loan Parties and its Subsidiaries in an aggregate principal amount exceeding $500,000.  For purposes of determining Material Indebtedness, the “obligations” of any Loan Party or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Loan Party or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

 

“Material Plan” is defined in Section 9.1(h) hereof.

 

“Maximum Rate” is defined in Section 12.12 hereof.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Mortgages” means, collectively, each mortgage or deed of trust delivered to the Bank pursuant to Section 11.3 from time to time, as the same may be amended, modified, supplemented or restated from time to time.

 

“Net Cash Proceeds” means, as applicable, (a) with respect to any Disposition by a Person, cash and cash equivalent proceeds received by or for such Person’s account, net of (i) reasonable direct costs relating to such Disposition, (ii) sale, use or other transactional taxes paid or payable by such Person as a direct result of such Disposition, and (iii) the principal

 

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amount of any Indebtedness permitted hereby which is secured by a prior perfected Lien on the asset subject to such Disposition and is required to be repaid in connection with such Disposition, (b) with respect to any Event of Loss of a Person, cash and cash equivalent proceeds received by or for such Person’s account (whether as a result of payments made under any applicable insurance policy therefor or in connection with condemnation proceedings or otherwise), net of reasonable direct costs incurred in connection with the collection of such proceeds, awards or other payments, and (c) with respect to any offering of equity securities of a Person or the issuance of any Indebtedness by a Person,  cash and cash equivalent proceeds received by or for such Person’s account, net of reasonable legal, underwriting, and other fees and expenses incurred as a direct result thereof.

 

“Net Income” means, with reference to any period, the net income (or net loss) of the Borrower and its Subsidiaries for such period computed on a consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income (a) the net income (or net loss) of any Person accrued prior to the date it becomes a Subsidiary of, or has merged into or consolidated with, the Borrower or another Subsidiary, (b) the net income (or net loss) of any Person (other than a Subsidiary) in which the Borrower or any of its Subsidiaries has an equity interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries during such period, and (c) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation (other than under any Loan Document) or requirement of law applicable to such Subsidiary.

 

“Net Worth” means, for any Person and at any time the same is to be determined, total shareholder’s equity (including capital stock, additional paid-in capital, and retained earnings after deducting treasury stock) which would appear on the balance sheet of such Person in accordance with GAAP.

 

“Note” and “Notes” each is defined in Section 2.10.

 

“Obligations” means all obligations of the Borrower to pay principal and interest on the Loans, all Reimbursement Obligations owing under the Applications, all fees and charges payable hereunder, and all other payment obligations of the Borrower or any other Loan Party arising under or in relation to any Loan Document, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired.

 

“OFAC” means the United States Department of Treasury Office of Foreign Assets Control.

 

“OFAC Event” means the event specified in Section 8.15(c).

 

“OFAC Sanctions Programs” means all laws, regulations, and Executive Orders administered by OFAC, including without limitation, the Bank Secrecy Act, anti-money laundering laws (including, without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a the USA Patriot Act)), and all economic and trade sanction programs administered by OFAC, any and all similar United States federal laws, regulations or Executive Orders, and any similar laws, regulations or orders adopted by any State within the United States.

 

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“OFAC SDN List” means the list of the Specially Designated Nationals and Blocked Persons maintained by OFAC.

 

“Other Connection Taxes” means, with respect to the Bank, Taxes imposed as a result of a present or former connection between the Bank and the jurisdiction imposing such Tax (other than connections arising from the Bank having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any Person succeeding to any or all of its functions under ERISA.

 

“Perfection Certificate” means that certain Perfection Certificate dated as of the Closing Date from the Borrower to the Bank.

 

“Performance Standby Letters of Credit” shall mean all standby letters of credit and bank guarantees other than Financial Standby Letters of Credit, as determined by the Bank, which determination shall be conclusive and binding upon the Borrower and the Lenders absent manifest error.

 

“Permitted Acquisition” means any Acquisition with respect to which all of the following conditions shall have been satisfied:

 

(a)                            the Acquired Business is in an Eligible Line of Business and has its primary operations within the United States of America;

 

(b)                            such Acquisition shall be structured as (1) an asset acquisition by a Borrower or Guarantor of all or substantially all of the assets of the Person whose assets are being acquired (or all or substantially all of a line or lines of business of such Person), (2) a merger of the Person to be acquired and into a Borrower or a Guarantor, with such Borrower or Guarantor as the surviving corporation in such merger, or (3) a purchase of no less than 100% of the equity interests of the Person to be acquired by a Borrower or Guarantor;

 

(c)                             the Acquisition shall not be a Hostile Acquisition;

 

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(d)                            the Total Consideration for the Acquired Business shall not exceed $750,000 and, when taken together with the Total Consideration for all Acquired Businesses during the term of this Agreement, shall not exceed $2,500,000 in the aggregate;

 

(e)                             the Borrower shall have notified the Bank and Lenders not less than thirty (30) days prior to any such Acquisition and furnished to the Bank and Lenders at such time details as to such Acquisition as are reasonably satisfactory to the Bank;

 

(f)                           if a new Subsidiary is formed or acquired as a result of or in connection with the Acquisition, the Borrower shall have complied with the requirements of Section 8.18, Section 10 and Section 11 in connection therewith;

 

(g)                             the Borrower shall have delivered to the Bank a certificate with covenant compliance calculations reasonably satisfactory to the Bank demonstrating that after giving effect to the Acquisition and any Credit Event in connection therewith, (i) no Default or Event of Default shall exist, and (ii) the Borrower shall be in compliance with the financial covenants contained in Section 8.23 on a pro forma basis (for the four (4) consecutive Fiscal Quarters most recently then ended as if the Acquisition occurred on the first day of such period and after giving effect to the payment of the purchase price for the Acquired Business and, in the case of the Total Leverage Ratio, the Total Leverage Ratio before and after giving effect to the Acquisition shall not exceed the covenant compliance level set forth in Section 8.23 for the prevailing period, less 0.50);

 

(h)                            after giving effect to the Acquisition and any Credit Event in connection therewith, the Borrower shall have not less than $2,000,000 of Unused Revolving Credit Commitments;

 

(i)                            the Acquired Business must have a positive EBITDA for the twelve most recently completed calendar months; and

 

(j)                           there shall not have been more than four (4) Permitted Acquisitions in the twelve consecutive Fiscal Month period ended as of the date of such Acquisition.

 

“Permitted Discretion” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

 

“Person” means any natural Person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

“Plan” means any employee pension benefit plan covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code that either (a) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group or (b) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

 

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“Premises” means the real property owned or leased by any Loan Party or any Subsidiary of a Loan Party, including without limitation the real property and improvements thereon owned by any Loan Party subject to the Lien of the Mortgages or any other Collateral Documents.

 

“Property” means, as to any Person, all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent balance sheet of such Person and its subsidiaries under GAAP.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“RCRA” means the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§6901 et seq., and any future amendments.

 

“Receivables” means all rights to the payment of a monetary obligation, now or hereafter owing, whether evidenced by accounts, instruments, chattel paper, or general intangibles.

 

“Reimbursement Obligation” is defined in Section 2.3(c).

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, dumping, or disposing into the indoor or outdoor environment, including, without limitation, the abandonment or discarding of barrels, drums, containers, tanks or other receptacles containing or previously containing any Hazardous Material.

 

“Rent Expense” is defined as, with reference to any period, all rent expense payable under leases and other similar agreements for the use of real or personal property that are classified as “operating leases” under GAAP of the Loan Parties and their Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, excluding real and personal property acquired for the execution of a project and charged directly to such project.

 

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“Responsible Officer” of any person means any executive officer or Financial Officer of such Person and any other officer, general partner or managing member or similar official thereof with responsibility for the administration of the obligations of such person in respect of this Agreement whose signature and incumbency shall have been certified to the Bank on or after the Closing Date pursuant to an incumbency certificate of the type contemplated by Section 7.2.

 

“Restricted Payments” has the meaning set forth in Section 8.12 hereof.

 

“Revolving Facility” means the credit facility for making Revolving Loans and issuing Letters of Credit described in Sections 2.2 and 2.3.

 

“Revolving Credit Commitment” means the obligation of the Bank to make Revolving Loans and to participate in Letters of Credit issued for the account of the Borrower hereunder in an aggregate principal or face amount at any one time outstanding not to exceed the amount set forth in Section 2.2, as the same may be reduced or modified at any time or from time to time pursuant to the terms hereof.

 

“Revolving Credit Exposure” means, at any time, the aggregate principal amount at such time of the Bank’s outstanding Revolving Loans and L/C Obligations at such time.

 

“Revolving Credit Termination Date” means March 24, 2016, or (i) such earlier date on which the Revolving Credit Commitment is terminated in whole pursuant to Section 2.11, 9.2 or 9.3, or (ii) such later date to which the Revolving Credit Commitment is extended in whole pursuant to Section 2.12.

 

“Revolving Loan” is defined in Section 2.2 and, as so defined, includes a Base Rate Loan or a Eurodollar Loan, each of which is a “type” of Revolving Loan hereunder.

 

“Revolving Note” is defined in Section 2.10.

 

“S&P” means Standard & Poor’s Ratings Services Group, a Standard & Poor’s Financial Services LLC business.

 

“Secured Obligations” means the Obligations, Hedging Liability, and Bank Product Obligations, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired (including all interest, costs, fees, and charges after the entry of an order for relief against any Loan Party in a case under the United States Bankruptcy Code or any similar proceeding, whether or not such interest, costs, fees and charges would be an allowed claim against such Loan Party in any such proceeding); provided, however, that, with respect to any Guarantor, Secured Obligations Guaranteed by such Guarantor shall exclude all Excluded Swap Obligations.

 

“Security Agreement” means that certain Security Agreement dated the date of this Agreement among the Loan Parties and the Bank, as the same may be amended, modified, supplemented or restated from time to time.

 

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“Subordinated Debt” means Indebtedness which is subordinated in right of payment to the prior payment of the Secured Obligations pursuant to subordination provisions approved in writing by the Bank and is otherwise pursuant to documentation that is, which is in an amount that is, and which contains interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies and other material terms that are in form and substance, in each case satisfactory to the Bank.

 

“Subsidiary” means, as to any particular parent corporation or organization, any other corporation or organization more than 50% of the outstanding Voting Stock of which is at the time directly or indirectly owned by such parent corporation or organization or by any one or more other entities which are themselves subsidiaries of such parent corporation or organization.  Unless otherwise expressly noted herein, the term “Subsidiary” means a Subsidiary of the Borrower or of any of its direct or indirect Subsidiaries.

 

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

“Tangible Net Worth” means, for any Person and at any time the same is to be determined, Net Worth of such Person at such time, minus the sum of (a) all assets which would be classified as intangible assets under GAAP, including, without limitation, goodwill, patents, trademarks, trade names, copyrights, franchises and deferred charges (including, without limitation, unamortized debt discount and expense, organization costs and deferred research and development expense) and similar assets, and (b) receivables (whether an account receivable, loan receivable, note receivable or otherwise) from shareholders, officers and Affiliates of such Person and its Subsidiaries.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Total Consideration” means, with respect to an Acquisition, the sum (but without duplication) of (a) cash paid or payable in connection with any Acquisition, whether paid at or prior to or after the closing thereof, (b) indebtedness payable to the seller in connection with such Acquisition, including all “earn-out” and other future payment obligations subject to the occurrence of any contingency (provided that, in the case of any future payment subject to a contingency, such shall be considered part of the Total Consideration to the extent of the reserve, if any, required under GAAP to be established in respect thereof by any Loan Party or any Subsidiary of a Loan Party), (c) the fair market value of any equity securities, including any warrants or options therefor, delivered in connection with any Acquisition, (d) the present value of covenants not to compete entered into in connection with such Acquisition or other future payments which are required to be made over a period of time and are not contingent upon any Loan Party or its Subsidiary meeting financial performance objectives (exclusive of salaries paid in the ordinary course of business) (discounted at the Base Rate), but only to the extent not included in clause (a), (b) or (c) above, and (e) the amount of indebtedness assumed in connection with such Acquisition.

 

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“Total Credit Exposure” means, at any time, the unused Commitments, Revolving Credit Exposure and outstanding Delayed Draw Term Loan of the Bank at such time.

 

“Total Funded Debt” means, at any time the same is to be determined, the sum (but without duplication) of (a) all Indebtedness of the Borrower and its Subsidiaries at such time described in clauses (a)-(f), both inclusive, of the definition thereof, and (b) all Indebtedness of any other Person which is directly or indirectly Guaranteed by the Borrower or any of its Subsidiaries or which the Borrower or any of its Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which the Borrower or any of its Subsidiaries has otherwise assured a creditor against loss, provided, however, that for the avoidance of doubt, obligations of the Borrower or any of its Subsidiaries with respect to Performance Standby Letters of Credit shall be excluded from the calculation of Total Funded Debt.

 

“Total Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (a) Total Funded Debt of the Borrower and its Subsidiaries as of the last day of such Fiscal Quarter to (b) EBITDA of the Borrower and its Subsidiaries for the period of four (4) consecutive Fiscal Quarters then ended.

 

“TTM EBITDA” means EBITDA of the Loan Parties and their Subsidiaries for the twelve consecutive Fiscal Month period ended as of the date so specified.

 

“Unfinanced Capital Expenditures” means, with respect to any period, the aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries during such period to the extent permitted by this Agreement and not financed with proceeds of Indebtedness; provided that any Capital Expenditures financed under the Revolving Facility shall be considered Unfinanced Capital Expenditures.

 

“Unfunded Vested Liabilities” means, for any Plan at any time, the amount (if any) by which the present value of all vested nonforfeitable accrued benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.

 

“U.S. Dollars” and “$” each means the lawful currency of the United States of America.

 

“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

 

“Voting Stock” of any Person means capital stock or other equity interests of any class or classes (however designated) having ordinary power for the election of directors or other similar governing body of such Person, other than stock or other equity interests having such power only by reason of the happening of a contingency.

 

“Welfare Plan” means a “welfare plan” as defined in Section 3(1) of ERISA.

 

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“Wholly-owned Subsidiary” means a Subsidiary of which all of the issued and outstanding shares of capital stock (other than directors’ qualifying shares as required by law) or other equity interests are owned by the Borrower and/or one or more Wholly-owned Subsidiaries within the meaning of this definition.

 

“Withholding Agent” means any Loan Party and the Bank.

 

Section 1.2.                                Interpretation.  The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.  All references to time of day herein are references to Chicago, Illinois, time unless otherwise specifically provided.  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 Agreement, it shall be done in accordance with GAAP except where such principles are inconsistent with the specific provisions of this Agreement.  The Borrower covenants and agrees with the Bank that whether or not the Borrower may at any time adopt Accounting Standards Codification 825 or account for assets and liabilities acquired in an acquisition on a fair value basis pursuant to Accounting Standards Codification 805, all determinations of compliance with the terms and conditions of this Agreement shall be made on the basis that the Borrower has not adopted Accounting Standards Codification 825 or Accounting Standards Codification 805.

 

Section 1.3.                                Change in Accounting Principles.  If, after the date of this Agreement, there shall occur any change in GAAP from those used in the preparation of the financial statements referred to in Section 6.5 and such change shall result in a change in the method of calculation of any financial covenant, standard or term found in this Agreement, either the Borrower or the Bank may by notice to the Bank or the Borrower, respectively, require that the Bank and the Borrower negotiate in good faith to amend such covenants, standards, and terms so as equitably to reflect such change in accounting principles, with the desired result being that the criteria for evaluating the financial condition of the Borrower and its Subsidiaries shall be the same as if such change had not been made.  No delay by the Borrower or the Bank in requiring such

 

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negotiation shall limit their right to so require such a negotiation at any time after such a change in accounting principles.  Until any such covenant, standard, or term is amended in accordance with this Section, financial covenants shall be computed and determined in accordance with GAAP in effect prior to such change in accounting principles.  Without limiting the generality of the foregoing, the Borrower shall neither be deemed to be in compliance with any financial covenant hereunder nor out of compliance with any financial covenant hereunder if such state of compliance or noncompliance, as the case may be, would not exist but for the occurrence of a change in accounting principles after the date hereof.

 

SECTION 2.                                             THE FACILITIES.

 

Section 2.1.                                Delayed Draw Term Loan Facility.  Subject to the terms and conditions hereof, the Bank agrees to make  one or more loans (the “Delayed Draw Term Loan”) in U.S. Dollars to the Borrower at any time during the Delayed Draw Term Loan Availability Period up to $2,500,000, subject to any reductions thereof pursuant to the terms hereof.  The Borrower may request Borrowings under the Delayed Draw Term Loans during the Delayed Draw Term Loan Availability Period provided that there shall be allowed no more than four (4) such Borrowings in the twelve consecutive calendar month period ended as of the date of such Borrowing; any unfunded Delayed Draw Term Loan Commitment shall expire on the last day of the Delayed Draw Term Loan Availability Period.  As provided in Section 2.6(a), the Borrower may elect that the Delayed Draw Term Loan be outstanding as Base Rate Loans or Eurodollar Loans.  No amount repaid or prepaid on the Delayed Draw Term Loan may be borrowed again.

 

Section 2.2.                                Revolving Facility.  Subject to the terms and conditions hereof, the Bank agrees to make a loan or loans (individually a “Revolving Loan” and collectively, the “Revolving Loans”) in U.S. Dollars to the Borrower from time to time on a revolving basis up to $7,500,000, subject to any reductions thereof pursuant to the terms hereof, before the Revolving Credit Termination Date.  The sum of the aggregate principal amount of Revolving Loans and L/C Obligations at any time outstanding shall not exceed the lesser of (i) the Revolving Credit Commitment in effect at such time and (ii) the Borrowing Base as then determined and computed.  As provided in Section 2.6(a), the Borrower may elect that each Borrowing of Revolving Loans be either Base Rate Loans or Eurodollar Loans.  Revolving Loans may be repaid and the principal amount thereof reborrowed before the Revolving Credit Termination Date, subject to the terms and conditions hereof.

 

Section 2.3.                                Letters of Credit.  (a) General Terms.  Subject to the terms and conditions hereof, as part of the Revolving Facility, the Bank (or one of its Affiliates) shall issue standby and commercial letters of credit (each a “Letter of Credit”) for the account of the Borrower and one or more of its Subsidiaries in an aggregate undrawn face amount up to the L/C Sublimit.  Letters of Credit shall constitute usage of the Revolving Credit Commitment in an amount equal to the L/C Obligations then outstanding.

 

(b)                                       Applications.  At any time before the Revolving Credit Termination Date, the Bank (or one of its Affiliates) shall, at the request of the Borrower, issue one or more Letters of Credit in U.S. Dollars, in a form satisfactory to the Bank, with expiration dates no later than the earlier of 12 months from the date of issuance (or which are cancelable not later than 12 months from

 

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the date of issuance and each renewal) in an aggregate face amount as set forth above, upon the receipt of an application duly executed by the Borrower and, if such Letter of Credit is for the account of one of its Subsidiaries, such Subsidiary for the relevant Letter of Credit in the form then customarily prescribed by the Bank for the Letter of Credit requested (each an “Application”).  The Borrower agrees that if ten (10) days prior to the Revolving Credit Termination Date any Letters of Credit remain outstanding the Borrower shall then deliver to the Bank, without notice or demand, Cash Collateral in an amount equal to 105% of the aggregate amount of each Letter of Credit then outstanding (which shall be held by the Bank pursuant to the terms of Section 9.4).  Notwithstanding anything contained in any Application to the contrary: (i) the Borrower shall pay fees in connection with each Letter of Credit as set forth in Section 3.1(b), (ii) except as otherwise provided herein or in Section 2.8, unless an Event of Default exists, the Bank will not call for the funding by the Borrower of any amount under a Letter of Credit before being presented with a drawing thereunder, and (iii) if the Bank is not timely reimbursed for the amount of any drawing under a Letter of Credit on the date such drawing is paid, except as otherwise provided for in Section 2.6(b), the Borrower’s obligation to reimburse the Bank for the amount of such drawing shall bear interest (which the Borrower hereby promises to pay) from and after the date such drawing is paid at a rate per annum equal to the sum of the Applicable Margin plus the Base Rate from time to time in effect (computed on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed).  If the Bank issues any Letter of Credit with an expiration date that is automatically extended unless the Bank gives notice that the expiration date will not so extend beyond its then scheduled expiration date, the Bank will give such notice of non-renewal before the time necessary to prevent such automatic extension if before such required notice date:  (i) the Revolving Credit Commitment has been terminated, or (ii) an Event of Default exists.  The Bank agrees to issue amendments to the Letter(s) of Credit increasing the amount, or extending the expiration date, thereof at the request of the Borrower subject to the conditions of Section 7 and the other terms of this Section.

 

(c)                                        The Reimbursement Obligations.  Subject to Section 2.3(b), the obligation of the Borrower to reimburse the Bank for all drawings under a Letter of Credit (a “Reimbursement Obligation”) shall be governed by the Application related to such Letter of Credit, except that reimbursement shall be made by no later than 12:00 Noon (Chicago time) on the date when each drawing is to be paid if the Borrower has been informed of such drawing by the Bank on or before 11:00 a.m. (Chicago time) on the date when such drawing is to be paid or, if notice of such drawing is given to the Borrower after 11:00 a.m. (Chicago time) on the date when such drawing is to be paid, by no later than 12:00 Noon (Chicago time) on the following Business Day, in immediately available funds at the Bank’s principal office in Chicago, Illinois, or such other office as the Bank may designate in writing to the Borrower (who shall thereafter cause to be distributed to the Bank such amount(s) in like funds).

 

(d)                                       Obligations Absolute.  The Borrower’s obligation to reimburse L/C Obligations shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and the relevant Application under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement

 

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therein being untrue or inaccurate in any respect, (iii) payment by the Bank under a Letter of Credit against presentation of a draft or other document that does not strictly comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. The Bank shall not have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Bank; provided that the foregoing shall not be construed to excuse the Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower and each other Loan Party to the extent permitted by applicable law) suffered by the Borrower or any Loan Party that are caused by the Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Bank (as determined by a court of competent jurisdiction by final and nonappealable judgment), the Bank shall be deemed to have exercised care in each such determination.  In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

 

(e)                                        Manner of Requesting a Letter of Credit.  The Borrower shall provide at least five (5) Business Days’ advance written notice to the Bank of each request for the issuance of a Letter of Credit, such notice in each case to be accompanied by an Application for such Letter of Credit properly completed and executed by the Borrower and, in the case of an extension or amendment or an increase in the amount of a Letter of Credit, a written request therefor, in a form acceptable to the Bank, in each case, together with the fees called for by this Agreement.

 

Section 2.4.                                Applicable Interest Rates.  (a) Base Rate Loans.  Each Base Rate Loan made or maintained by the Bank shall bear interest (computed on the basis of a year of 360 days and the actual days elapsed on the unpaid principal amount thereof from the date such Loan is advanced, or created by conversion from a Eurodollar Loan, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus the Base Rate from time to time in effect, payable by the Borrower on each Interest Payment Date and at maturity (whether by acceleration or otherwise).

 

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(b)                                       Eurodollar Loans.  Each Eurodollar Loan made or maintained by the Bank shall bear interest during each Interest Period it is outstanding (computed on the basis of a year of 360 days and actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced or continued, or created by conversion from a Base Rate Loan, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus the Adjusted LIBOR applicable for such Interest Period, payable by the Borrower on each Interest Payment Date and at maturity (whether by acceleration or otherwise).

 

(c)                                        Rate Determinations.  The Bank shall determine each interest rate applicable to the Loans and the Reimbursement Obligations hereunder, and its determination thereof shall be conclusive and binding except in the case of manifest error.

 

Section 2.5.                                Minimum Borrowing Amounts; Maximum Eurodollar Loans.  Each Borrowing of Base Rate Loans advanced under a Facility shall be in an amount not less than $50,000.  Each Borrowing of Eurodollar Loans advanced, continued or converted under a Facility shall be in an amount equal to $150,000 or such greater amount which is an integral multiple of $150,000.  Without the Bank’s consent, there shall not be more than five (5) Borrowings of Eurodollar Loans outstanding hereunder at any one time.

 

Section 2.6.                                Manner of Borrowing Loans and Designating Applicable Interest Rates.  (a) Notice to the Bank.  The Borrower shall give notice to the Bank by no later than 12:00 Noon (Chicago time):  (i) at least three (3) Business Days before the date on which the Borrower requests the Bank to advance a Borrowing of Eurodollar Loans and (ii) on the date the Borrower requests the Bank to advance a Borrowing of Base Rate Loans.  The Loans included in each Borrowing shall bear interest initially at the type of rate specified in such notice of a new Borrowing.  Thereafter, subject to the terms and conditions hereof, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Borrowing or, subject to the minimum amount requirement for each outstanding Borrowing set forth in Section 2.5, a portion thereof, as follows:  (i) if such Borrowing is of Eurodollar Loans, on the last day of the Interest Period applicable thereto, the Borrower may continue part or all of such Borrowing as Eurodollar Loans or convert part or all of such Borrowing into Base Rate Loans or (ii) if such Borrowing is of Base Rate Loans, on any Business Day, the Borrower may convert all or part of such Borrowing into Eurodollar Loans for an Interest Period or Interest Periods specified by the Borrower.  The Borrower shall give all such notices requesting the advance, continuation or conversion of a Borrowing to the Bank by telephone, telecopy, or other telecommunication device acceptable to the Bank (which notice shall be irrevocable once given and, if by telephone, shall be promptly confirmed in writing in a manner acceptable to the Bank), substantially in the form attached hereto as Exhibit A (Notice of Borrowing) or Exhibit B (Notice of Continuation/Conversion), as applicable, or in such other form acceptable to the Bank.  Notice of the continuation of a Borrowing of Eurodollar Loans for an additional Interest Period or of the conversion of part or all of a Borrowing of Base Rate Loans into Eurodollar Loans must be given by no later than 12:00 Noon (Chicago time) at least three (3) Business Days before the date of the requested continuation or conversion.  All such notices concerning the advance, continuation or conversion of a Borrowing shall specify the date of the requested advance, continuation or conversion of a Borrowing (which shall be a Business Day), the amount of the requested Borrowing to be advanced, continued or converted, the type of Loans to comprise such new, continued or converted Borrowing and, if such Borrowing is to be comprised of Eurodollar Loans, the Interest Period applicable thereto.  Upon notice to the Borrower by the Bank (or, in the case of an Event of Default under Section 9.1(j) or 9.1(k) with respect to the Borrower,

 

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without notice), no Borrowing of Eurodollar Loans shall be advanced, continued, or created by conversion if any Default then exists.  The Borrower agrees that the Bank may rely on any such telephonic, telecopy or other telecommunication notice given by any person the Bank in good faith believes is an Authorized Representative without the necessity of independent investigation, and in the event any such notice by telephone conflicts with any written confirmation such telephonic notice shall govern if the Bank has acted in reliance thereon.

 

(b)                                       Borrower’s Failure to Notify.  If the Borrower fails to give notice pursuant to Section 2.6(a) above of the continuation or conversion of any outstanding principal amount of a Borrowing of Eurodollar Loans before the last day of its then current Interest Period within the period required by Section 2.6(a) and such Borrowing is not prepaid in accordance with Section 2.8(a), such Borrowing shall automatically be converted into a Borrowing of Base Rate Loans.  In the event the Borrower fails to give notice pursuant to Section 2.6(a) above of a Borrowing equal to the amount of a Reimbursement Obligation and has not notified the Bank by 12:00 noon (Chicago time) on the day such Reimbursement Obligation becomes due that it intends to repay such Reimbursement Obligation through funds not borrowed under this Agreement, the Borrower shall be deemed to have requested a Borrowing of Base Rate Loans under the Revolving Facility on such day in the amount of the Reimbursement Obligation then due, which Borrowing shall be applied to pay the Reimbursement Obligation then due.

 

(c)                                        Disbursement of Loans.  The Bank shall make the proceeds of each new Borrowing available to the Borrower at the Bank’s principal office in Chicago, Illinois (or at such other location as the Bank shall designate), by depositing or wire transferring such proceeds to the credit of the Borrower’s Designated Disbursement Account or as the Borrower and the Bank may otherwise agree.

 

Section 2.7.                                Maturity of Loans.  (a) Scheduled Payments of Delayed Draw Term Loan.  The Borrower shall make principal payments on each Delayed Draw Term Loan in installments on the last day of each March, June, September, and December in each year, commencing with the first calendar quarter ending after any Delayed Draw Term Loan is advanced hereunder, with the amount of each such principal installment equal to: (i) 2.5% of the original principal amount of such Delayed Draw Term Loan on the last day of each of the first four calendar quarters ending after such Delayed Draw Term Loan was advanced, (ii) 3.75% of the original principal amount of such Delayed Draw Term Loan on the last day of each of the four calendar quarters ending during the second year after such Delayed Draw Term Loan was advanced, and (iii) 5.0% of the original principal amount of such Delayed Draw Term Loan on the last day of each of the four calendar quarters ending during the third year after such Delayed Draw Term Loan was advanced, it being agreed that a final payment of all principal and interest not sooner paid on each Delayed Draw Term Loan shall be due and payable on the Delayed Draw Term Loan Maturity Date.

 

(b)                                       Revolving Loans.  Each Revolving Loan, both for principal and interest not sooner paid, shall mature and be due and payable by the Borrower on the Revolving Credit Termination Date.

 

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Section 2.8.                                Prepayments.  (a) Optional.  The Borrower may prepay in whole or in part (but, if in part, then: (i) if such Borrowing is of Base Rate Loans, in an amount not less than $100,000, (ii) if such Borrowing is of Eurodollar Loans, in an amount not less than $500,000, and (iii) in each case, in an amount such that the minimum amount required for a Borrowing pursuant to Section 2.5 remains outstanding) upon not less than three (3) Business Days prior notice by the Borrower to the Bank in the case of any prepayment of a Borrowing of Eurodollar Loans and notice delivered by the Borrower to the Bank no later than 12:00 Noon (Chicago time) on the date of prepayment in the case of a Borrowing of Base Rate Loans (or, in any case, such shorter period of time then agreed to by the Bank), such prepayment to be made by the payment of the principal amount to be prepaid and, in the case of the Delayed Draw Term Loan or any Eurodollar Loans, accrued interest thereon to the date fixed for prepayment plus any amounts due the Bank under Section 4.5.

 

(b)                                       Mandatory.  (i) The Borrower shall, on each date the Revolving Credit Commitment is reduced pursuant to Section 2.11, prepay the Revolving Loans, and, if necessary, prefund the L/C Obligations by the amount, if any, necessary to reduce the sum of the aggregate principal amount of Revolving Loans and L/C Obligations then outstanding to the amount to which the Revolving Credit Commitment has been so reduced.

 

(ii)                If at any time the sum of the unpaid principal balance of the Revolving Loans and the L/C Obligations then outstanding shall be in excess of the Borrowing Base as then determined and computed, the Borrower shall immediately and without notice or demand pay over the amount of the excess to the Bank as and for a mandatory prepayment on such Obligations, with each such prepayment first to be applied to the Revolving Loans until paid in full with any remaining balance to be held by the Bank in the Collateral Account as security for the Obligations owing with respect to the Letters of Credit.

 

(iii)             If the Borrower or any Subsidiary shall at any time or from time to time make or agree to make a Disposition or shall suffer an Event of Loss with respect to any Property, then the Borrower shall promptly notify the Bank of such proposed Disposition or Event of Loss (including the amount of the estimated Net Cash Proceeds to be received by the Borrower or such Subsidiary in respect thereof) and, promptly upon receipt by the Borrower or such Subsidiary of the Net Cash Proceeds of such Disposition or Event of Loss, the Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of all such Net Cash Proceeds; provided that (x) so long as no Default then exists, this subsection shall not require any such prepayment with respect to Net Cash Proceeds received on account of an Event of Loss so long as such Net Cash Proceeds are applied to replace or restore the relevant Property in accordance with the relevant Collateral Documents, (y) this subsection shall not require any such prepayment with respect to Net Cash Proceeds received on account of Dispositions during any Fiscal Year of the Borrower not exceeding $200,000 in the aggregate so long as no Default then exists, and (z) in the case of any Disposition not covered by clause (y) above, so long as no Default then exists, if the Borrower states in its notice of such event that the Borrower or the relevant Subsidiary intends to reinvest, within 90 days of the applicable Disposition, the Net Cash Proceeds thereof in assets similar to the assets which were subject to such Disposition, then the Borrower shall not be required to make a mandatory prepayment under this subsection in respect of such Net Cash Proceeds to the extent such Net Cash Proceeds are actually reinvested in such

 

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similar assets with such 90-day period.  Promptly after the end of such 90-day period, the Borrower shall notify the Bank whether the Borrower or such Subsidiary has reinvested such Net Cash Proceeds in such similar assets, and, to the extent such Net Cash Proceeds have not been so reinvested, the Borrower shall promptly prepay the Obligations in the amount of such Net Cash Proceeds not so reinvested.  The amount of each such prepayment shall be applied first to the outstanding Delayed Draw Term Loan until paid in full and then to the Revolving Facility, provided that proceeds relating to Eligible Inventory and Eligible Receivables then included in the Borrowing Base shall first be applied to the Revolving Facility.  If the Bank so requests, all proceeds of such Disposition or Event of Loss shall be deposited with the Bank (or its agent) and held by it in the Collateral Account.  So long as no Default exists, the Bank is authorized to disburse amounts representing such proceeds from the Collateral Account to or at the Borrower’s direction for application to or reimbursement for the costs of replacing, rebuilding or restoring such Property.

 

(iv)               If after the Closing Date the Borrower or any Subsidiary shall issue new equity securities (whether common or preferred stock or otherwise), other than Excluded Equity Issuances, the Borrower shall promptly notify the Bank of the estimated Net Cash Proceeds of such issuance to be received by or for the account of the Borrower or such Subsidiary in respect thereof.  Promptly upon receipt by the Borrower or such Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds.  The amount of each such prepayment shall be applied first to the outstanding Delayed Draw Term Loan until paid in full and then to the Revolving Facility.  The Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of the Bank for any breach of Section 8.11 (Maintenance of Subsidiaries) or Section 9.1(i) (Change of Control) or any other terms of the Loan Documents.

 

(v)              If after the Closing Date the Borrower or any Subsidiary shall issue any Indebtedness, other than Indebtedness permitted by Section 8.7(a)-(j), the Borrower shall promptly notify the Bank of the estimated Net Cash Proceeds of such issuance to be received by or for the account of the Borrower or such Subsidiary in respect thereof.  Promptly upon receipt by the Borrower or such Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds.  The amount of each such prepayment shall be applied first to the outstanding Delayed Draw Term Loan until paid in full and then to the Revolving Facility.  The Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of the Bank for any breach of Section 8.7 or any other terms of the Loan Documents.

 

(vi)               If after the Closing Date the Borrower or any Subsidiary shall issue any Subordinated Debt, the Borrower shall promptly notify the Bank of the estimated Net Cash Proceeds of such issuance to be received by or for the account of the Borrower or such Subsidiary in respect thereof.  Promptly upon receipt by the Borrower or such Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay the Obligations in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds.  The amount of each such prepayment shall be applied first to the outstanding Delayed Draw Term Loan until paid in full and then to the Revolving Facility.  The Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of the Bank for any breach of Section 8.7 or any other terms of the Loan Documents.

 

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(vii)                Unless the Borrower otherwise directs, prepayments of Loans under this Section 2.8(b) shall be applied first to Borrowings of Base Rate Loans until payment in full thereof with any balance applied to Borrowings of Eurodollar Loans in the order in which their Interest Periods expire.  Each prepayment of Loans under this Section 2.8(b) shall be made by the payment of the principal amount to be prepaid and, in the case of the Delayed Draw Term Loan or any Eurodollar Loans, accrued interest thereon to the date of prepayment together with any amounts due the Bank under Section 4.5.  Each prefunding of L/C Obligations shall be made in accordance with Section 9.4.

 

(c)                Any amount of Revolving Loans paid or prepaid before the Revolving Credit Termination Date may, subject to the terms and conditions of this Agreement, be borrowed, repaid and borrowed again.  No amount of the Delayed Draw Term Loan paid or prepaid may be reborrowed, and, in the case of any partial prepayment, such prepayment shall be applied to the remaining payments on the relevant Loans on a ratable basis among all such remaining amortization payments based on the principal amounts thereof.

 

Section 2.9.                                Default Rate.  Notwithstanding anything to the contrary contained herein, while any Event of Default exists or after acceleration, the Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all Loans and Reimbursement Obligations, letter of credit fees and other amounts at a rate per annum equal to:

 

(a)                                 for any Base Rate Loan, the sum of 2.0% plus the Applicable Margin plus the Base Rate from time to time in effect;

 

(b)                                 for any Eurodollar Loan, the sum of 2.0% plus the rate of interest in effect thereon at the time of such Event of Default until the end of the Interest Period applicable thereto and, thereafter, at a rate per annum equal to the sum of 2.0% plus the Applicable Margin for Base Rate Loans plus the Base Rate from time to time in effect;

 

(c)                                  for any Reimbursement Obligation, the sum of 2.0% plus the amounts due under Section 2.3 with respect to such Reimbursement Obligation;

 

(d)                                 for any Letter of Credit, the sum of 2.0% plus the Letter of Credit Fee due under Section 3.1(b) with respect to such Letter of Credit; and

 

(e)                                  for any other amount owing hereunder not covered by clauses (a) through (d) above, the sum of 2% plus the Applicable Margin plus the Base Rate from time to time in effect;

 

provided, however, that in the absence of acceleration pursuant to Section 9.2 or 9.3, any adjustments pursuant to this Section shall be made at the election of the Bank, with written notice to the Borrower (which election may be retroactively effective to the date of such Event of Default).  While any Event of Default exists or after acceleration, interest shall be paid on demand of the Bank.

 

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Section 2.10.                                 Evidence of Indebtedness.  (a) The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from each Loan made by the Bank from time to time, including the amounts of principal and interest payable and paid to the Bank from time to time hereunder.

 

(b)               The Bank shall also maintain accounts in which it will record (i) the amount of each Loan made hereunder, the type thereof and the Interest Period with respect thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to the Bank hereunder and (iii) the amount of any sum received by the Bank hereunder from the Borrower.

 

(c)                The entries maintained in the accounts maintained pursuant to subsections (a) and (b) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Bank to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms.

 

(d)               The Borrower shall prepare, execute and deliver to the Bank a promissory note or notes payable to the Bank or its registered assigns in the forms of Exhibit C-1 (in the case of the Delayed Draw Term Loan and referred to herein as a “Delayed Draw Term Note”) and C-2 (in the case of the Revolving Loans and referred to herein as a “Revolving Note”) (the Delayed Draw Term Note and  Revolving Note being hereinafter referred to collectively as the “Notes” and individually as a “Note”).

 

Section 2.11.                                 Commitment Terminations. (a) Optional Terminations.  The Borrower shall have the right at any time and from time to time, upon five (5) Business Days prior written notice to the Bank (or such shorter period of time agreed to by the Bank), to terminate the Delayed Draw Term Loan Commitment (prior to the expiration of the Delayed Draw Term Loan Availability Period) or Revolving Credit Commitment without premium or penalty and in whole or in part, any partial termination to be in an amount not less than $500,000, provided that the Revolving Credit Commitment may not be reduced to an amount less than the sum of the aggregate principal amount of Revolving Loans and L/C Obligations then outstanding.  Any termination of the Revolving Credit Commitment below the L/C Sublimit then in effect shall reduce the L/C Sublimit by a like amount.

 

(b)               Mandatory Revolving Credit Termination.  If at any time Net Cash Proceeds or other amounts remain after the prepayment of the Delayed Draw Term Loan in full pursuant to Section 2.8(b)(iii), (iv), (v), (vi) or (vii) hereof, the Revolving Credit Commitment shall ratably terminate by an amount equal to 100% of such excess.

 

(c)                Any termination of the Commitments pursuant to this Section may not be reinstated.

 

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Section 2.12.                          Extension of Revolving Credit Termination Date.  At any time following the delivery of the financial statements required by Section 8.5(b) and/or (c) for the Fiscal Month ended September 25, 2015 and third Fiscal Quarter of 2015 but no later than thirty (30) days prior to the Revolving Credit Termination Date as in effect on the Closing Date, the Borrower may request (the “Extension Request Date”) the Bank to extend the then current Revolving Credit Termination Date and Delayed Draw Term Loan Maturity Date for a period of one year (the “Extension Period”).  The effectiveness of such extension of the Revolving Credit Termination Date and Delayed Draw Term Loan Maturity Date shall be conditioned upon the Bank’s satisfaction that the following conditions shall have been satisfied: (a) each of the representations and warranties set forth herein and in the other Loan Documents shall be and remain true and correct in all material respects as of said time (where not already qualified by materiality, otherwise in all respects), except to the extent the same expressly relate to an earlier date, in which case they shall be true and correct in all material respects (where not already qualified by materiality, otherwise in all respects) as of such earlier date, (b) no Default shall have occurred and be continuing as of the Extension Request Date, (c) such financial statements shall evidence that the TTM EBITDA as of the third Fiscal Quarter of 2015 is not less than $5,000,000 and shall demonstrate compliance as of the date of such financial statements with the financial covenants set forth in Section 8.23 hereof, and (d) the payment of any fees and expenses of the Bank in connection therewith.  Any date to which the Revolving Credit Termination Date or Delayed Draw Term Loan Maturity Date has been extended in accordance with this Section 2.12 may not be extended in like manner.  For the avoidance of doubt, the financial covenants set forth in Section 8.23(b) hereof shall apply during the Extension Period.

 

SECTION 3.                                             FEES.

 

Section 3.1.                                Fees.  (a) Commitment Fees.  The Borrower shall pay to the Bank a commitment fee at the rate per annum equal to the Applicable Margin (computed on the basis of a year of 360 days and the actual number of days elapsed) times the daily amount by which (i) the Revolving Credit Commitment exceeds the principal amount of Revolving Loans and L/C Obligations then outstanding and (ii) the Delayed Draw Term Loan Credit Commitment exceeds the principal amount of the Delayed Draw Term Loan(s) advanced pursuant to Section 2.1.  Such commitment fee shall be payable quarterly in arrears on the last day of each March, June, September, and December in each year (commencing on the first such date occurring after the Closing Date) and on the Revolving Credit Termination Date, unless the Revolving Credit Commitment or the Delayed Draw Term Loan Commitment is terminated in whole on an earlier date, in which event the commitment fee for the period to the date of such termination in whole shall be paid on the date of such termination.

 

(b)               Letter of Credit Fees.   Quarterly in arrears, on the last day of each March, June, September, and December, commencing on the first such date occurring after the Closing Date, the Borrower shall pay to the Bank a letter of credit fee (the “Letter of Credit Fee”) at a rate per annum equal to the Applicable Margin (computed on the basis of a year of 360 days and the actual number of days elapsed) in effect during each day of such quarter applied to the daily average face amount of Letters of Credit outstanding during such quarter.  In addition, the Borrower shall pay to the Bank the Bank’s standard issuance, drawing, negotiation, amendment, assignment, and other administrative fees for each Letter of Credit as established by the Bank from time to time.

 

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(c)                Closing Fee.  The Borrower shall pay to the Bank the fees set forth in that certain Fee Letter dated as of January 31, 2014.

 

SECTION 4.                                             TAXES; CHANGE IN CIRCUMSTANCES, INCREASED COSTS, AND FUNDING INDEMNITY.

 

Section 4.1.                                Taxes.  (a) Certain Defined Terms.  For purposes of this Section, the term “applicable law” includes FATCA.

 

(b)               Payments Free of Taxes.  Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law.  If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the Bank receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

(c)                Payment of Other Taxes by the Loan Parties.  The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Bank timely reimburse it for the payment of, any Other Taxes.

 

(d)               Indemnification by the Loan Parties.  The Loan Parties shall jointly and severally indemnify the Bank, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by the Bank or required to be withheld or deducted from a payment to the Bank and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by the Bank shall be conclusive absent manifest error.

 

(e)                Evidence of Payments.  As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section, such Loan Party shall deliver to the Bank the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Bank.

 

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(f)                 Treatment of Certain Refunds.  If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section (including by the payment of additional amounts pursuant to this Section), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this subsection (f) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this subsection (f), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this subsection (f) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts giving rise to such refund had never been paid.  This subsection shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

(g)                Survival.  Each party’s obligations under this Section shall survive any assignment of rights by the Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

 

Section 4.2.                                Change of Law.  Notwithstanding any other provisions of this Agreement or any other Loan Document, if at any time any Change in Law makes it unlawful for the Bank to make or continue to maintain any Eurodollar Loans or to perform its obligations as contemplated hereby, the Bank shall promptly give notice thereof to the Borrower and the Bank’s obligations to make or maintain Eurodollar Loans under this Agreement shall be suspended until it is no longer unlawful for the Bank to make or maintain Eurodollar Loans.  The Borrower shall prepay on demand the outstanding principal amount of any such affected Eurodollar Loans, together with all interest accrued thereon and all other amounts then due and payable to the Bank under this Agreement; provided, however, subject to all of the terms and conditions of this Agreement, the Borrower may then elect to borrow the principal amount of the affected Eurodollar Loans from the Bank by means of Base Rate Loans.

 

Section 4.3.                                Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR.  If on or prior to the first day of any Interest Period for any Borrowing of Eurodollar Loans:

 

(a)                                 the Bank determines that deposits in U.S. Dollars (in the applicable amounts) are not being offered to it in the interbank eurodollar market for such Interest Period, or that by reason of circumstances affecting the interbank eurodollar market adequate and reasonable means do not exist for ascertaining the applicable LIBOR, or

 

(b)                                 the Bank determines that (i) LIBOR as determined by the Bank will not adequately and fairly reflect the cost to the Bank of funding Eurodollar Loans for such Interest Period or (ii) that the making or funding of Eurodollar Loans become impracticable,

 

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then the Bank shall forthwith give notice thereof to the Borrower, whereupon until the Bank notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Bank to make Eurodollar Loans shall be suspended.

 

Section 4.4.                                Increased Costs.  (a) Increased Costs Generally.  If any Change in Law shall:

 

(i)                            impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, the Bank (except any reserve requirement reflected in the Adjusted LIBOR);

 

(ii)                              subject the Bank to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)                               impose on the Bank or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by the Bank or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to the Bank of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to the Bank of issuing or maintaining any Letter of Credit (or of maintaining its obligation to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by the Bank hereunder (whether of principal, interest or any other amount) then, upon request of the Bank, the Borrower will pay to the Bank such additional amount or amounts as will compensate the Bank for such additional costs incurred or reduction suffered.

 

(b)               Capital Requirements.  If the Bank determines that any Change in Law affecting the Bank or any lending office of the Bank or the Bank’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on the Bank’s capital or on the capital of the Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of the Bank or the Loans made by, or the Letters of Credit issued by the Bank, to a level below that which the Bank or the Bank’s holding company could have achieved but for such Change in Law (taking into consideration the Bank’s policies and the policies of the Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to the Bank, as the case may be, such additional amount or amounts as will compensate the Bank or the Bank’s holding company for any such reduction suffered.

 

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(c)                Certificates for Reimbursement.  A certificate of the Bank setting forth the amount or amounts necessary to compensate the Bank or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower, shall be conclusive absent manifest error.  The Borrower shall pay the Bank the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

(d)               Delay in Requests.  Failure or delay on the part of the Bank to demand compensation pursuant to this Section shall not constitute a waiver of the Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate the Bank pursuant to this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that the Bank notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of the Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

Section 4.5.                                Funding Indemnity.  If the Bank shall incur any loss, cost or expense (including, without limitation, any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by the Bank to fund or maintain any Eurodollar Loan or the relending or reinvesting of such deposits or amounts paid or prepaid to the Bank) as a result of:

 

(a)                                 any payment, prepayment or conversion of a Eurodollar Loan on a date other than the last day of its Interest Period,

 

(b)                                 any failure (because of a failure to meet the conditions of Section 7 or otherwise) by the Borrower to borrow or continue a Eurodollar Loan, or to convert a Base Rate Loan into a Eurodollar Loan on the date specified in a notice given pursuant to Section 2.6(a) or 2.2(b),

 

(c)                                  any failure by the Borrower to make any payment of principal on any Eurodollar Loan when due (whether by acceleration or otherwise), or

 

(d)                                 any acceleration of the maturity of a Eurodollar Loan as a result of the occurrence of any Event of Default hereunder,

 

then, upon the demand of the Bank, the Borrower shall pay to the Bank such amount as will reimburse the Bank for such loss, cost or expense.  If the Bank makes such a claim for compensation, it shall provide to the Borrower a certificate setting forth the amount of such loss, cost or expense in reasonable detail and the amounts shown on such certificate shall be conclusive absent manifest error.

 

Section 4.6.                                Discretion of the Bank as to Manner of Funding.  Notwithstanding any other provision of this Agreement, the Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder with respect to Eurodollar Loans shall be made as if the Bank had actually funded and maintained each Eurodollar Loan through the purchase of deposits in the interbank eurodollar market having a maturity corresponding to such Loan’s Interest Period, and bearing an interest rate equal to LIBOR for such Interest Period.

 

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Section 4.7.                                Lending Offices; Mitigation Obligations.  The Bank may, at its option, elect to make its Loans hereunder at the branch, office or affiliate specified on the appropriate signature page hereof (each a “Lending Office”) for each type of Loan available hereunder or at such other of its branches, offices or affiliates as it may from time to time elect and designate in a written notice to the Borrower.  If the Bank requests compensation under Section 4.4, or requires the Borrower to pay any Indemnified Taxes or additional amounts to the Bank or any Governmental Authority for the account of the Bank pursuant to Section 4.1, then the Bank shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of the Bank, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 4.1 or 4.4, as the case may be, in the future, and (ii) would not subject the Bank to any unreimbursed cost or expense and would not otherwise be disadvantageous to the Bank.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by the Bank in connection with any such designation or assignment.

 

SECTION 5.                                             PLACE AND APPLICATION OF PAYMENTS.

 

Section 5.1.                                Place and Application of Payments.  All payments of principal of and interest on the Loans and the Reimbursement Obligations, and all other Obligations payable by the Borrower under this Agreement and the other Loan Documents, shall be made by the Borrower to the Bank by no later than 12:00 Noon (Chicago time) on the due date thereof at the office of the Bank in Chicago, Illinois (or such other location as the Bank may designate to the Borrower).  Any payments received after such time shall be deemed to have been received by the Bank on the next Business Day.  All such payments shall be made in U.S. Dollars, in immediately available funds at the place of payment, in each case without set-off or counterclaim.

 

Section 5.2.                                Non-Business Days.  Subject to the definition of Interest Period, if any payment hereunder becomes due and payable on a day which is not a Business Day, the due date of such payment shall be extended to the next succeeding Business Day on which date such payment shall be due and payable.  In the case of any payment of principal falling due on a day which is not a Business Day, interest on such principal amount shall continue to accrue during such extension at the rate per annum then in effect, which accrued amount shall be due and payable on the next scheduled date for the payment of interest.

 

Section 5.3.                                Payments Set Aside. To the extent that any payment by or on behalf of the Borrower or any other Loan Party is made to the Bank or the Bank exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred

 

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Section 5.4.                                Account Debit.  The Borrower hereby irrevocably authorizes the Bank to charge any of the Borrower’s deposit accounts maintained with the Bank for the amounts from time to time necessary to pay any then due Obligations; provided that the Bank acknowledges and agrees that the Bank shall not be under an obligation to do so and the Bank shall not incur any liability to the Borrower or any other Person for the Bank’s failure to do so.

 

SECTION 6.                                             REPRESENTATIONS AND WARRANTIES.

 

Each Loan Party represents and warrants to the Bank as follows:

 

Section 6.1.                                Organization and Qualification.  Each Loan Party is duly organized, validly existing, and in good standing as a corporation, limited liability company, or partnership, as applicable, under the laws of the jurisdiction in which it is organized, has full and adequate power to own its Property and conduct its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except where the failure to do so would not have a Material Adverse Effect.

 

Section 6.2.                                Subsidiaries.  Each Subsidiary that is not a Loan Party is duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is organized, has full and adequate power to own its Property and conduct its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except where the failure to do so would not have a Material Adverse Effect.  Schedule 6.2 hereto identifies each Subsidiary (including Subsidiaries that are Loan Parties), the jurisdiction of its organization, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned by any Loan Party and its Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares of each class issued and outstanding.  All of the outstanding shares of capital stock and other equity interests of each Subsidiary are validly issued and outstanding and fully paid and nonassessable and all such shares and other equity interests indicated on Schedule 6.2 as owned by the relevant Loan Party or another Subsidiary are owned, beneficially and of record, by such Loan Party or such Subsidiary free and clear of all Liens other than the Liens granted in favor of the Bank pursuant to the Collateral Documents or otherwise permitted by this Agreement.  There are no outstanding commitments or other obligations of any Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Subsidiary.

 

Section 6.3.                                Authority and Validity of Obligations.  Each Loan Party has full right and authority to enter into this Agreement and the other Loan Documents executed by it, to make the borrowings herein provided for (in the case of the Borrower), to guarantee the Secured Obligations (in the case of each Guarantor), to grant to the Bank the Liens described in the

 

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Collateral Documents executed by such Loan Party, and to perform all of its obligations hereunder and under the other Loan Documents executed by it.  The Loan Documents delivered by the Loan Parties and their Subsidiaries have been duly authorized, executed, and delivered by such Persons and constitute valid and binding obligations of such Loan Parties and their Subsidiaries enforceable against each of them in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors’ rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and this Agreement and the other Loan Documents do not, nor does the performance or observance by any Loan Party or any Subsidiary of any of the matters and things herein or therein provided for, (a) contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon any Loan Party or any Subsidiary of a Loan Party or any provision of the organizational documents (e.g., charter, certificate or articles of incorporation and by-laws, certificate or articles of association and operating agreement, partnership agreement, or other similar organizational documents) of any Loan Party or any Subsidiary of a Loan Party, (b) contravene or constitute a default under any covenant, indenture or agreement of or affecting any Loan Party or any Subsidiary of a Loan Party or any of their respective Property, in each case where such contravention or default, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (c) result in the creation or imposition of any Lien on any Property of any Loan Party or any Subsidiary of a Loan Party other than the Liens granted in favor of the Bank pursuant to the Collateral Documents.

 

Section 6.4.                   Use of Proceeds; Margin Stock.  The Borrower shall use the proceeds of the Delayed Draw Term Loan to finance Permitted Acquisitions and to pay transaction expenses related to Permitted Acquisitions; and the Borrower shall use the proceeds of the Revolving Facility to refinance existing Indebtedness outstanding on the Closing Date, pay the transaction expenses related to the Loan Documents, finance Capital Expenditures and for its general working capital purposes and for such other legal and proper purposes as are consistent with all applicable laws.  No Loan Party nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan or any other extension of credit made hereunder will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.  Margin stock (as hereinabove defined) constitutes less than 25% of the assets of the Loan Parties and their Subsidiaries which are subject to any limitation on sale, pledge or other restriction hereunder.

 

Section 6.5.                   Financial Reports.   The consolidated balance sheet of the Loan Parties and their Subsidiaries as at December 28, 2012, and the related consolidated statements of income, retained earnings and cash flows of the Loan Parties and their Subsidiaries for the Fiscal Year then ended, and accompanying notes thereto, which financial statements are accompanied by the audit report of Ernst & Young LLP, independent public accountants, and the unaudited interim consolidated balance sheet of the Loan Parties and their Subsidiaries as at the Fiscal Month ended November 22, 2013, and the related consolidated statements of income, retained earnings and cash flows of the Loan Parties and their Subsidiaries for the 11 Fiscal Months then ended, heretofore furnished to the Bank, fairly present the consolidated financial condition of the Loan

 

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Parties and their Subsidiaries as at said dates and the consolidated results of their operations and cash flows for the periods then ended in conformity with GAAP applied on a consistent basis.  No Loan Party nor any of its Subsidiaries has contingent liabilities which are material to it other than as indicated on such financial statements or, with respect to future periods, on the financial statements furnished pursuant to Section 8.5.

 

Section 6.6.                   No Material Adverse Change.  Since December 28, 2012, there has been no change in the condition (financial or otherwise) or business prospects of any Loan Party or any Subsidiary of a Loan Party except those occurring in the ordinary course of business, none of which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

 

Section 6.7.                   Full Disclosure.  The statements and information furnished to the Bank in connection with the negotiation of this Agreement and the other Loan Documents and the commitment by the Bank to provide all or part of the financing contemplated hereby do not contain any untrue statements of a material fact or omit a material fact necessary to make the material statements contained herein or therein not misleading, the Bank acknowledging that as to any projections furnished to the Bank, the Loan Parties only represent that the same were prepared on the basis of information and estimates the Loan Parties believed to be reasonable.

 

Section 6.8.                   Trademarks, Franchises, and Licenses.  The Loan Parties and their Subsidiaries own, possess, or have the right to use all necessary patents, licenses, franchises, trademarks, trade names, trade styles, copyrights, trade secrets, know how, and confidential commercial and proprietary information to conduct their businesses as now conducted, without known conflict with any patent, license, franchise, trademark, trade name, trade style, copyright or other proprietary right of any other Person.

 

Section 6.9.                   Governmental Authority and Licensing.  The Loan Parties and their Subsidiaries have received all licenses, permits, and approvals of all federal, state, and local governmental authorities, if any, necessary to conduct their businesses, in each case where the failure to obtain or maintain the same could reasonably be expected to have a Material Adverse Effect.  No investigation or proceeding which, if adversely determined, could reasonably be expected to result in revocation or denial of any material license, permit or approval is pending or, to the knowledge of the any Loan Party, threatened.

 

Section 6.10.                    Good Title.  The Loan Parties and their Subsidiaries have good and defensible title (or valid leasehold interests) to their assets as reflected on the most recent consolidated balance sheet of the Loan Parties and their Subsidiaries furnished to the Bank (except for sales of assets in the ordinary course of business), subject to no Liens other than such thereof as are permitted by Section 8.8.

 

Section 6.11.                    Litigation and Other Controversies.  There is no litigation or governmental or arbitration proceeding or labor controversy pending, nor to the knowledge of any Loan Party threatened, against any Loan Party or any Subsidiary of a Loan Party or any of their respective Property which if adversely determined, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

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Section 6.12.                    Taxes.  All Tax returns required to be filed by any Loan Party or any Subsidiary of a Loan Party in any jurisdiction have, in fact, been filed, and all Taxes upon any Loan Party or any Subsidiary of a Loan Party or upon any of their respective Property, income or franchises, which are shown to be due and payable in such returns, have been paid, except such Taxes, if any, as are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves established in accordance with GAAP have been provided.  No Loan Party knows of any proposed additional Tax assessment against it or its Subsidiaries for which adequate provisions in accordance with GAAP have not been made on their accounts.  Adequate provisions in accordance with GAAP for Taxes on the books of each Loan Party and each of its Subsidiaries have been made for all open years, and for its current fiscal period.

 

Section 6.13.                    Approvals.  No authorization, consent, license or exemption from, or filing or registration with, any court or governmental department, agency or instrumentality, nor any approval or consent of any other Person, is or will be necessary to the valid execution, delivery or performance by any Loan Party or any Subsidiary of a Loan Party of any Loan Document, except for (i) such approvals which have been obtained prior to the date of this Agreement and remain in full force and effect and (ii) filings which are necessary to perfect the security interests under the Collateral Documents.

 

Section 6.14.                    Affiliate Transactions.  No Loan Party nor any of its Subsidiaries is a party to any contracts or agreements with any of its Affiliates on terms and conditions which are less favorable to such Loan Party or such Subsidiary than would be usual and customary in similar contracts or agreements between Persons not affiliated with each other.

 

Section 6.15.                    Investment Company.  No Loan Party nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 6.16.                    ERISA.  Each Loan Party and each other member of its Controlled Group has fulfilled its obligations under the minimum funding standards of and is in compliance in all material respects with ERISA and the Code to the extent applicable to it and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.  No Loan Party nor any of its Subsidiaries has any contingent liabilities with respect to any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in article 6 of Title I of ERISA.

 

Section 6.17.                    Compliance with Laws.  (a) The Loan Parties and their Subsidiaries are in compliance with all Legal Requirements applicable to or pertaining to their Property or business operations, where any such non-compliance, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(b)              Except for such matters, individually or in the aggregate, which could not reasonably be expected to result in a Material Adverse Effect, the Loan Parties represent and warrant that:  (i) the Loan Parties and their Subsidiaries, and each of the Premises, comply in all material respects with all applicable Environmental Laws; (ii) the Loan Parties and their

 

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Subsidiaries have obtained, maintain and are in compliance with all approvals, permits, or authorizations of Governmental Authorities required for their operations and each of the Premises; (iii) the Loan Parties and their Subsidiaries have not, and no Loan Party has knowledge of any other Person who has, caused any Release, threatened Release or disposal of any Hazardous Material at, on, or from any of the Premises in any material quantity and, to the knowledge of each Loan Party, none of the Premises are adversely affected by any such Release, threatened Release or disposal of a Hazardous Material; (iv) the Loan Parties and their Subsidiaries are not subject to and have no notice or knowledge of any Environmental Claim involving any Loan Party or any Subsidiary of a Loan Party or any of the Premises, and there are no conditions or occurrences at any of the Premises which could reasonably be anticipated to form the basis for such an Environmental Claim; (v) none of the Premises contain and have contained any:  (1) underground storage tanks, (2) material amounts of asbestos containing building material, (3) landfills or dumps, (4) hazardous waste management facilities as defined pursuant to any Environmental Law, or (5) sites on or nominated for the National Priority List or similar state list; (vi) the Loan Parties and their Subsidiaries have not used a material quantity of any Hazardous Material and have conducted no Hazardous Material Activity at any of the Premises;(vii) none of the Premises are subject to any, and no Loan Party has knowledge of any imminent restriction on the ownership, occupancy, use or transferability of the Premises in connection with any (1) Environmental Law or (2) Release, threatened Release or disposal of a Hazardous Material; and (viii) there are no conditions or circumstances at any of the Premises which pose an unreasonable risk to the environment or the health or safety of Persons; and (ix) the Loan Parties and their Subsidiaries have no knowledge of any capital expenditures necessary to bring the Premises or their respective business or equipment into compliance with Environmental Laws.  The Loan Parties have delivered to the Bank complete and accurate copies of all material environmental reports, studies, assessments and investigation results in the Loan Parties’ possession or control and that relate to any Loan Party’s or Subsidiary’s operations or to any of the Premises.

 

Section 6.18.                    OFAC.  (a) Each Loan Party is in compliance  in all material respects with the requirements of all OFAC Sanctions Programs applicable to it, (b) each Subsidiary of each Loan Party is in compliance in all material respects with the requirements of all OFAC Sanctions Programs applicable to such Subsidiary, (c) each Loan Party has provided to the Bank all information requested by them regarding such Loan Party and its Affiliates and Subsidiaries necessary for the Bank to comply with all applicable OFAC Sanctions Programs, and (d) to the best of each Loan Party’s knowledge, no Loan Party nor any of its Affiliates or Subsidiaries is, as of the date hereof, named on the current OFAC SDN List.

 

Section 6.19.                    Labor Matters.  There are no strikes, lockouts or slowdowns against any Loan Party or any Subsidiary of a Loan Party pending or, to the knowledge of any Loan Party, threatened.  There are no collective bargaining agreements in effect between any Loan Party or any Subsidiary of a Loan Party and any labor union; and no Loan Party nor any of its Subsidiaries is under any obligation to assume any collective bargaining agreement to or conduct any negotiations with any labor union with respect to any future agreements.  Each Loan Party and its Subsidiaries have remitted on a timely basis all amounts required to have been withheld and remitted (including withholdings from employee wages and salaries relating to income tax, employment insurance, and pension plan contributions), goods and services tax and all other amounts which if not paid when due could result in the creation of a Lien against any of its Property, except for Liens permitted by Section 8.8.

 

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Section 6.20.                    Other Agreements.  No Loan Party nor any of its Subsidiaries is in default under the terms of any covenant, indenture or agreement of or affecting such Person or any of its Property, which default if uncured could reasonably be expected to have a Material Adverse Effect.

 

Section 6.21.                    Solvency.  The Loan Parties and their Subsidiaries are solvent, able to pay their debts as they become due, and have sufficient capital to carry on their business and all businesses in which they are about to engage.

 

Section 6.22.                    No Default.  No Default has occurred and is continuing.

 

Section 6.23.                    No Broker Fees. No broker’s or finder’s fee or commission will be payable with respect hereto or any of the transactions contemplated thereby; and the Loan Parties hereby agree to indemnify the Bank against, and agree that they will hold the Bank harmless from, any claim, demand, or liability for any such broker’s or finder’s fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable attorneys’ fees) arising in connection with any such claim, demand, or liability.

 

Section 6.24.                    Security Documents.  (a) The Security Agreement is effective to create in favor of the Bank legal, valid and enforceable Liens on, and security interests in, the Collateral (as defined in the Security Agreement) and, (i) when financing statements and other filings in appropriate form are filed in the appropriate offices, and (ii) upon the taking of possession or control by the Bank of the Collateral (as defined in the Security Agreement) with respect to which a security interest may be perfected only by possession or control, the Liens created by the Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Collateral (as defined in the Security Agreement) (other than (A) the patents, trademarks, tradestyles, copyrights, and other intellectual property rights (including all registrations and applications therefor) and (B) such Collateral (as defined in the Security Agreement) in which a security interest cannot be perfected under the UCC as in effect at the relevant time in the relevant jurisdiction or in respect of which perfection is not required at such time by this Agreement or the Security Agreement), in each case subject to no Liens other than those permitted by Section 8.8 hereof.

 

(b)              When (i) the Security Agreement or a short form thereof is filed in the United States Patent and Trademark Office and the United States Copyright Office, as applicable, and (ii) financing statements and other filings in appropriate form are filed in the applicable offices, the Liens created by such Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in the patents, trademarks, tradestyles, copyrights, and other intellectual property rights (including all registrations and applications therefor), in each case subject to no Liens other than those permitted by Section 8.8 hereof.

 

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SECTION 7.                                             CONDITIONS PRECEDENT.

 

Section 7.1.                   All Credit Events.  At the time of each Credit Event hereunder:

 

(a)                            each of the representations and warranties set forth herein and in the other Loan Documents shall be and remain true and correct in all material respects as of said time (where not already qualified by materiality, otherwise in all respects), except to the extent the same expressly relate to an earlier date, in which case they shall be true and correct in all material respects (where not already qualified by materiality, otherwise in all respects) as of such earlier date;

 

(b)                            no Default shall have occurred and be continuing or would occur as a result of such Credit Event;

 

(c)                             after giving effect to such extension of credit the aggregate principal amount of all Revolving Loans and L/C Obligations outstanding under this Agreement shall not exceed the lesser of (i) the Revolving Credit Commitment and (ii) the Borrowing Base as then determined and computed;

 

(d)                            in the case of a Borrowing the Bank shall have received the notice required by Section 2.6, in the case of the issuance of any Letter of Credit the Bank shall have received a duly completed Application for such Letter of Credit together with any fees called for by Section 3.1, and, in the case of an extension or increase in the amount of a Letter of Credit, a written request therefor in a form acceptable to the Bank together with fees called for by Section 3.1;

 

(e)                             in the case of any Delayed Draw Term Loan, the Borrower shall be in compliance on a  pro forma basis with Section 8.23(a) after giving effect to such Borrowing; and

 

(f)                              such Credit Event shall not violate any order, judgment or decree of any court or other authority or any provision of law or regulation applicable to the  Bank (including, without limitation, Regulation U of the Board of Governors of the Federal Reserve System) as then in effect.

 

Each request for a Borrowing hereunder and each request for the issuance of, increase in the amount of, or extension of the expiration date of, a Letter of Credit shall be deemed to be a representation and warranty by the Borrower on the date on such Credit Event as to the facts specified in subsections (a) through (d), both inclusive, of this Section; provided, however, that the Bank may continue to make advances under the Revolving Facility in its sole discretion, notwithstanding the failure of the Borrower to satisfy one or more of the conditions set forth above and any such advances so made shall not be deemed a waiver of any Default or other condition set forth above that may then exist.

 

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Section 7.2.                   Initial Credit Event.  Before or concurrently with the initial Credit Event:

 

(a)                            the Bank shall have received this Agreement duly executed by the Borrower and its Domestic Subsidiaries, as Guarantors, and the Bank;

 

(b)                            the Bank shall have received duly executed Notes of the Borrower dated the date hereof and otherwise in compliance with the provisions of Section 2.10;

 

(c)                             the Bank shall have received the Security Agreement duly executed by the Loan Parties, together with (i) original stock certificates or other similar instruments or securities representing all of the issued and outstanding shares of capital stock or other equity interests in each Subsidiary (limited in the case of any first tier Foreign Subsidiary to 66% of the Voting Stock and 100% of any other equity interests as provided in Section 11.1) as of the Closing Date, (ii) stock powers executed in blank and undated for the Collateral consisting of the stock or other equity interest in each Subsidiary, (iii) UCC financing statements to be filed against each Loan Party, as debtor, in favor of the Bank, as secured party, (iv) patent, trademark, and copyright collateral agreements to the extent requested by the Bank, (v) deposit account, securities account, and commodity account control agreements to the extent requested by the Bank, (vi) Collateral Access Agreements to the extent requested by the Bank, and (vii) a duly completed and executed Perfection Certificate;

 

(d)                            the Bank shall have received evidence of insurance required to be maintained under the Loan Documents, naming the Bank as mortgagee/lender’s loss payee and as an additional insured, as applicable;

 

(e)                             the Bank shall have received copies of each Loan Party’s articles of incorporation and bylaws (or comparable organizational documents) and any amendments thereto, certified in each instance by its Secretary or Assistant Secretary (or comparable Responsible Officer);

 

(f)                           the Bank shall have received copies of resolutions of each Loan Party’s Board of Directors (or similar governing body) authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby, together with specimen signatures of the persons authorized to execute such documents on each Loan Party’s behalf, all certified in each instance by its Secretary or Assistant Secretary (or comparable Responsible Officer);

 

(g)                             the Bank shall have received copies of the certificates of good standing for each Loan Party (dated no earlier than 30 days prior to the date hereof) from the office of the secretary of the state of its incorporation or organization and of each state in which it is qualified to do business as a foreign corporation or organization;

 

(h)                            the Bank shall have received a list of the Borrower’s Authorized Representatives;

 

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(i)                            the Bank shall have received a certificate as to the Borrower’s Designated Disbursement Account;

 

(j)                           the Bank shall have received the initial fees called for by Section 3.1;

 

(k)                            the capital and organizational structure of the Loan Parties and their Subsidiaries shall be satisfactory to the Bank;

 

(l)                            the Bank shall have received such evaluations and certifications as it may reasonably require in order to satisfy itself as to the value of the Collateral, including but not limited to completion of a field audit;

 

(m)                            the Bank shall have received (i) audited financial statements (including an income statement, a balance sheet, and a cash flow statement) of the Loan Parties for the Fiscal Year ended December 28, 2012, (ii) unaudited Fiscal Month financial statements (including an income statement and a balance sheet) of the Loan Parties for the Fiscal Year-to-date period ended November 22, 2013 and for the most recent Fiscal Month ended prior to the Closing Date, (iii) substantially complete draft unaudited financial statements (including an income statement and a balance sheet) of the Loan Parties for the Fiscal Year ended December 27, 2013 and (iv) 1-year projected financial statements of the company as of November 22, 2013, in each case in form and substance reasonably acceptable to the Bank and certified to by a Financial Officer of the Borrower;

 

(n)                            the Bank shall have received a Borrowing Base Certificate prepared by the Borrower and certified to by a Financial Officer of the Borrower evidencing Excess Availability of at least $5,000,000 as of the Closing Date after giving effect to the initial Credit Event and the transactions contemplated hereby and payment of all costs and expenses in connection therewith;

 

(o)                            the Bank shall have received a certificate from a Responsible Officer of the Borrower certifying that (i) the solvency of the Loan Parties and their Subsidiaries as of the Closing Date after giving effect to the initial Credit Event and the transactions contemplated hereby and payment of all costs and expenses in connection therewith; (ii) since December 28, 2012, no Material Adverse Effect has occurred; (iii) the TTM EBITDA as of the Fiscal Month ended November 22, 2013, is not less than $3,000,000 and (iv) the Total Leverage Ratio is not greater than 0.75 to 1.00, on a pro forma basis calculated based on TTM EBITDA as of the Fiscal Month ended November 22, 2013, and after giving effect to all extensions of Credit made on the Closing Date;

 

(p)                            the Bank shall have received financing statement, tax, and judgment lien search results against each Loan Party and its Property evidencing the absence of Liens thereon except as permitted by Section 8.8;

 

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(q)                            the Bank shall have received pay-off and lien release letters from secured creditors of the Loan Parties (other than secured parties intended to remain outstanding after the Closing Date with Indebtedness and Liens permitted by Sections 8.7 and 8.8) setting forth, among other things, the total amount of indebtedness outstanding and owing to them (or outstanding letters of credit issued for the account of any Loan Party or its Subsidiaries) and containing an undertaking to cause to be delivered to the Bank UCC termination statements and any other lien release instruments necessary to release their Liens on the assets of any Loan Party or any Subsidiary of a Loan Party, which pay-off and lien release letters shall be in form and substance acceptable to the Bank;

 

(r)                            the Bank shall have received the favorable written opinion of counsel to each Loan Party, in form and substance satisfactory to the Bank;

 

(s)                            the Bank shall have received, sufficiently in advance of the Closing Date, all documentation and other information requested by the Bank required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation, the United States Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) including, without limitation, the information described in Section 12.16; and the Bank shall have received a fully executed Internal Revenue Service Form W-9 (or its equivalent) for the Borrower and each other Loan Party; and

 

(t)                           the Bank shall have received such other agreements, instruments, documents, certificates, and opinions as the Bank may reasonably request.

 

SECTION 8.                                             COVENANTS.

 

Each Loan Party agrees that, so long as any credit is available to or in use by the Borrower hereunder, except to the extent compliance in any case or cases is waived in writing by the Bank:

 

Section 8.1.                                Maintenance of Business.  Each Loan Party shall, and shall cause each of its Subsidiaries to, preserve and maintain its existence, except as otherwise provided in Section 8.10(c); provided, however, that nothing in this Section shall prevent the Borrower from dissolving any of its Subsidiaries if such action is, in the reasonable business judgment of the Borrower, desirable in the conduct of its business and is not disadvantages in any material respect to the Bank.  Each Loan Party shall, and shall cause each of its Subsidiaries to, preserve and keep in force and effect all licenses, permits, franchises, approvals, patents, trademarks, trade names, trade styles, copyrights, and other proprietary rights necessary to the proper conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect.

 

Section 8.2.                                           Maintenance of Properties.  Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain, preserve, and keep its property, plant, and equipment in good repair, working order and condition (ordinary wear and tear excepted), and shall from time to time make all needful and proper repairs, renewals, replacements, additions, and betterments thereto so that at all times the efficiency thereof shall be fully preserved and maintained, except to the extent that, in the reasonable business judgment of such Person, any such Property is no longer necessary for the proper conduct of the business of such Person.

 

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Section 8.3.                                           Taxes and Assessments.  Each Loan Party shall duly pay and discharge, and shall cause each of its Subsidiaries to duly pay and discharge, all Taxes, rates, assessments, fees, and governmental charges upon or against it or its Property, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.

 

Section 8.4.                                           Insurance.  Each Loan Party shall insure and keep insured, and shall cause each of its Subsidiaries to insure and keep insured, with good and responsible insurance companies, all insurable Property owned by it which is of a character usually insured by Persons similarly situated and operating like Properties against loss or damage from such hazards and risks (including flood insurance with respect to any improvements on real Property consisting of building or parking facilities in an area designated by a governmental body as having special flood hazards), and in such amounts, as are insured by Persons similarly situated and operating like Properties, but in no event at any time in an amount less than the replacement value of the Collateral.  Each Loan Party shall also maintain, and shall cause each of its Subsidiaries to maintain, insurance with respect to the business of such Loan Party and its Subsidiaries, covering commercial general liability, statutory worker’s compensation and occupational disease, statutory structural work act liability, and business interruption and such other risks with good and responsible insurance companies, in such amounts and on such terms as the Bank shall reasonably request, but in any event as and to the extent usually insured by Persons similarly situated and conducting similar businesses.  The Loan Parties shall in any event maintain insurance on the Collateral to the extent required by the Collateral Documents.  All such policies of insurance shall contain satisfactory mortgagee/lender’s loss payable endorsements, naming the Bank (or its security trustee) as mortgagee or a loss payee, assignee or additional insured, as appropriate, as its interest may appear, and showing only such other loss payees, assignees and additional insureds as are satisfactory to the Bank.  Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than thirty (30) days’ (ten (10) days’ in the case of nonpayment of insurance premiums) prior written notice to the Bank in the event of cancellation of the policy for any reason whatsoever and a clause specifying that the interest of the Bank shall not be impaired or invalidated by any act or neglect of any Loan Party or any Subsidiary of a Loan Party, or the owner of the premises or Property or by the occupation of the premises for purposes more hazardous than are permitted by said policy.  The Borrower shall deliver to the Bank (a) on the Closing Date and at such other times as the Bank shall reasonably request, certificates evidencing the maintenance of insurance required hereunder, (b) prior to the termination of any such policies, certificates evidencing the renewal thereof, and (c) promptly following request by the Bank, copies of all insurance policies of the Loan Parties and their Subsidiaries.  The Borrower also agrees to deliver to the Bank, promptly as rendered, true copies of all reports made in any reporting forms to insurance companies.

 

Section 8.5.                                           Financial Reports.  The Loan Parties shall, and shall cause each of their Subsidiaries to, maintain proper books of records and accounts reasonably necessary to prepare financial statements required to be delivered pursuant to this Section in accordance with GAAP and shall furnish to the Bank:

 

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(a)                            as soon as available, and in any event no later than 30 days after the last day of each Fiscal Month, a Borrowing Base Certificate showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of such Fiscal Month, together with an accounts receivable and accounts payable aging, prepared by the Borrower and certified to by a Financial Officer of the Borrower; provided, however, that no Borrowing Base Certificate shall be required to be delivered pursuant to this Section 8.5(a) if as of last day of each Fiscal Month then ended, there are no Revolving Loans outstanding or the L/C Obligations then outstanding is less than $500,000;

 

(b)                            as soon as available, and in any event no later than 30 days after the last day of each Fiscal Month, a copy of the consolidated balance sheet of the Loan Parties and their Subsidiaries as of the last day of such Fiscal Month and the consolidated statement of income of the Loan Parties and their Subsidiaries for the Fiscal Month and for the Fiscal Year-to-date period then ended, each in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous Fiscal Year, prepared by the Borrower in accordance with GAAP (subject to the absence of footnote disclosures and Fiscal Year-end audit adjustments) and certified to by a Financial Officer of the Borrower together with Fiscal Month backlog reports; provided that so long as no Default or Event of Default shall have occurred and be continuing and upon the Borrower’s receipt of written notice from the Bank as set forth in clause (c) below, this Section 8.5(b) shall only apply during the first twelve Fiscal Months of the Borrower ending after the Closing Date;

 

(c)                             upon receipt by the Borrower of written notice from the Bank that it will no longer require the Fiscal Month financial statements required pursuant to clause (b) above, commencing with the first Fiscal Quarter of 2015, as soon as available, and in any event no later than 45 days after the last day of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a copy of the consolidated balance sheet of the Loan Parties and their Subsidiaries as of the last day of such Fiscal Quarter and the consolidated statements of income, retained earnings, and cash flows of the Loan Parties and their Subsidiaries for the Fiscal Quarter and for the Fiscal Year-to-date period then ended, each in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous Fiscal Year, prepared by the Borrower in accordance with GAAP (subject to the absence of footnote disclosures and Fiscal Year-end audit adjustments) and certified to by a Financial Officer of the Borrower together with Fiscal Month backlog reports;

 

(d)                            as soon as available, and in any event no later than 90 days after the last day of each Fiscal Year of the Borrower, a copy of the consolidated and consolidating balance sheet of the Loan Parties and their Subsidiaries as of the last day of the Fiscal Year then ended and the consolidated and consolidating statements of income, retained earnings, and cash flows of the Loan Parties and their Subsidiaries for the Fiscal Year then ended, and accompanying notes thereto, each in reasonable detail showing in comparative form the figures for the previous Fiscal Year, accompanied in the case of the consolidated financial statements by an unqualified opinion of Ernst & Young LLP or

 

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another firm of independent public accountants of recognized standing, selected by the Borrower and reasonably satisfactory to the Bank, to the effect that the consolidated financial statements have been prepared in accordance with GAAP and present fairly in accordance with GAAP the consolidated financial condition of the Loan Parties and their Subsidiaries as of the close of such Fiscal Year and the results of their operations and cash flows for the Fiscal Year then ended and that an examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, such examination included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances, together with Fiscal Month backlog reports;

 

(e)                             promptly after receipt thereof, any additional written reports, management letters or other detailed information contained in writing concerning significant aspects of any Loan Party’s or any of its Subsidiary’s operations and financial affairs given to it by its independent public accountants;

 

(f)                           promptly after receipt thereof, a copy of each audit made by any regulatory agency of the books and records of any Loan Party or any Subsidiary of a Loan Party or of notice of any material noncompliance with any applicable law, regulation or guideline relating to any Loan Party or any Subsidiary of a Loan Party or their respective business;

 

(g)                             as soon as available, and in any event no later than 30 days after the end of each Fiscal Year of the Borrower, a copy of the consolidated and consolidating business plan for the Loan Parties and their Subsidiaries for following Fiscal Year, such business plan to show the projected consolidated and consolidating revenues, expenses and balance sheet of the Loan Parties and their Subsidiaries on a Fiscal Month-by-Fiscal Month basis, such business plan to be in reasonable detail prepared by the Borrower and in form satisfactory to the Bank (which shall include a summary of all assumptions made in preparing such business plan);

 

(h)                            notice of any Change of Control;

 

(i)                            promptly after knowledge thereof shall have come to the attention of any Responsible Officer of any Loan Party, written notice of (i) any threatened or pending litigation or governmental or arbitration proceeding or labor controversy against any Loan Party or any Subsidiary of a Loan Party or any of their Property which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, (ii) the occurrence of any Material Adverse Effect or (iii) the occurrence of any Default;

 

(j)                           with each of the financial statements delivered pursuant to subsections (b) (if such financial statements delivered pursuant to subsection (b) are delivered as of the last day of a Fiscal Quarter), (c) and (d) above, a written certificate in the form attached hereto as Exhibit E signed by a Financial Officer of the Borrower to the effect that to the best of such officer’s knowledge and belief no Default has occurred during the period covered by such statements or, if any such Default has occurred during such period, setting forth a description of such Default and specifying the action, if any, taken by the 

 

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relevant Loan Party or its Subsidiary to remedy the same.  Such certificate shall also set forth the calculations supporting such statements in respect of Section 8.23 (Financial Covenants) in the form attached as Schedule I to such Exhibit E hereto and shall be accompanied by a work-in-process report detailing the aging of current underbillings; and

 

(k)                            promptly, from time to time, such other information regarding the operations, business affairs and financial condition of any Loan Party or any Subsidiary of a Loan Party, or compliance with the terms of any Loan Document.

 

Section 8.6.                                           Inspection; Field Audits.  Each Loan Party shall, and shall cause each of its Subsidiaries to, permit the Bank and each of their duly authorized representatives and agents to visit and inspect any of its Property, corporate books, and financial records, to examine and make copies of its books of accounts and other financial records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers, employees and independent public accountants (and by this provision the Loan Parties hereby authorize such accountants to discuss with the Bank the finances and affairs of the Loan Parties and their Subsidiaries) at such reasonable times and intervals as the Bank may designate and, so long as no Default exists, with reasonable prior notice to the Borrower.  The Borrower shall pay to the Bank charges for field audits of the Collateral, inspections and visits to Property, inspections of corporate books and financial records, examinations and copies of books of accounts and financial record and other activities permitted in this Section performed by the Bank or its agents or third party firms, in such amounts as the Bank may from time to time request (the Bank acknowledging and agreeing that any internal charges for such audits and inspections shall be computed in the same manner as it at the time customarily uses for the assessment of charges for similar collateral audits); provided, however, that in the absence of any Default, the Borrower shall not be required to pay the Bank for more than one (1) such audit per Fiscal Year.

 

Section 8.7.                                           Borrowings and Guaranties.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, issue, incur, assume, create or have outstanding any Indebtedness, or incur liabilities under any Hedging Agreement, or be or become liable as endorser, guarantor, surety or otherwise for any Indebtedness or undertaking of any Person, or otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein or otherwise assure a creditor of another against loss, or apply for or become liable to the issuer of a letter of credit which supports an obligation of another, or subordinate any claim or demand it may have to the claim or demand of any Person; provided, however, that the foregoing shall not restrict nor operate to prevent:

 

(a)                            the Secured Obligations of the Loan Parties and their Subsidiaries owing to the Bank (and its Affiliates);

 

(b)                            purchase money indebtedness and Capitalized Lease Obligations of the Loan Parties and their Subsidiaries in an amount not to exceed $500,000 in the aggregate at any one time outstanding;

 

(c)                             obligations of the Loan Parties and their Subsidiaries arising out of interest rate, foreign currency, and commodity Hedging Agreements entered into with financial institutions in connection with bona fide hedging activities in the ordinary course of business and not for speculative purposes;

 

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(d)                            endorsement of items for deposit or collection of commercial paper received in the ordinary course of business;

 

(e)                             intercompany advances from time to time owing between the Loan Parties in the ordinary course of business to finance their working capital needs;

 

(f)                           indebtedness owed to any Person providing workers’ compensation, health, disability or other employee benefits (including contractual and statutory benefits) or property, casualty, liability or credit insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;

 

(g)                             indebtedness in respect of bids, trade contracts (other than for debt for borrowed money), leases (other than Capitalized Lease Obligations), statutory obligations, surety, stay, customs and appeal bonds, performance, performance and completion and return of money bonds, government contracts and similar obligations, in each case, provided in the ordinary course of business;

 

(h)                            indebtedness in respect of netting services, overdraft protection and similar arrangements, in each case, in connection with cash management and deposit accounts;

 

(i)                            indebtedness arising from agreements of a Loan Party or its Subsidiary providing for indemnification, adjustment of purchase or acquisition price or similar obligations, in each case, incurred or assumed in connection with a Permitted Acquisition;

 

(j)                           indebtedness owed to Wells Fargo Bank, National Association with respect to certain existing letter of credit obligations in an amount not to exceed $76,000; and

 

(k)                            unsecured indebtedness of the Loan Parties and their Subsidiaries not otherwise permitted by this Section in an amount not to exceed $250,000 in the aggregate at any one time outstanding.

 

Section 8.8.                                           Liens.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, create, incur or permit to exist any Lien of any kind on any Property owned by any such Person; provided, however, that the foregoing shall not apply to nor operate to prevent:

 

(a)                            Liens arising by statute in connection with worker’s compensation, unemployment insurance, old age benefits, social security obligations, Taxes, assessments, statutory obligations or other similar charges (other than Liens arising under ERISA), good faith cash deposits in connection with tenders, contracts or leases to which any Loan Party or any Subsidiary of a Loan Party is a party or other cash deposits 

 

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required to be made in the ordinary course of business, provided in each case that the obligation is not for borrowed money and that the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves have been established therefor;

 

(b)                            mechanics’, workmen’s, materialmen’s, landlords’, carriers’ or other similar Liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest;

 

(c)                             judgment liens and judicial attachment liens not constituting an Event of Default under Section 9.1(g) and the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal proceeding, provided that the aggregate amount of such judgment liens and attachments and liabilities of the Loan Parties and their Subsidiaries secured by a pledge of assets permitted under this subsection, including interest and penalties thereon, if any, shall not be in excess of $250,000 at any one time outstanding;

 

(d)                            Liens on equipment of any Loan Party or any Subsidiary of a Loan Party created solely for the purpose of securing indebtedness permitted by Section 8.7(b), representing or incurred to finance the purchase price of such Property; provided that no such Lien shall extend to or cover other Property of such Loan Party or such Subsidiary other than the respective Property so acquired, and the principal amount of indebtedness secured by any such Lien shall at no time exceed the purchase price of such Property, as reduced by repayments of principal thereon;

 

(e)                             any interest or title of a lessor under any operating lease, including the filing of Uniform Commercial Code financing statements solely as a precautionary measure in connection with operating leases entered into by any Loan Party or any Subsidiary of a Loan Party in the ordinary course of its business;

 

(f)                              easements, rights-of-way, restrictions, and other similar encumbrances against real property incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of any Loan Party or any Subsidiary of a Loan Party;

 

(g)                             bankers’ Liens, rights of setoff and other similar Liens (including under Section 4-210 of the Uniform Commercial Code) in one or more deposit accounts maintained by any Loan Party or any Subsidiary of a Loan Party, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that, unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

 

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(h)                            Liens granted in favor of the Bank pursuant to the Collateral Documents;

 

(i)                                Liens granted in favor of Wells Fargo Bank, National Association to cash collateralize existing letter of credit obligations in an amount not to exceed $76,000; and

 

(j)                               non-exclusive licenses of intellectual property granted in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of any Loan Party or any Subsidiary of a Loan Party.

 

Section 8.9.                                           Investments, Acquisitions, Loans and Advances.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to (other than for travel advances and other similar cash advances made to employees in the ordinary course of business), any other Person, or acquire all or any substantial part of the assets or business of any other Person or division thereof; provided, however, that the foregoing shall not apply to nor operate to prevent:

 

(a)                            Cash Equivalents;

 

(b)                            the Loan Parties’ existing investments in their respective Subsidiaries outstanding on the Closing Date;

 

(c)                             intercompany advances made from time to time between the Loan Parties in the ordinary course of business to finance their working capital needs;

 

(d)                            intercompany advances from time to time owing between a Loan Party and any Subsidiary that is not a Guarantor hereunder in the ordinary course of business to finance their working capital needs, provided that the aggregate amount of such advances to any Subsidiaries that are not Guarantors hereunder together with any investments therein do not exceed $100,000 at any one time outstanding;

 

(e)                             Permitted Acquisitions;

 

(f)                              other investments existing on the Closing Date not otherwise permitted above and listed and identified on Schedule 8.9;

 

(g)                             investments in Construction Joint Ventures which are made in the ordinary course of business; provided, however, that the aggregate investments in Construction Joint Ventures shall not at any time exceed 15% of the combined consolidated Net Worth of the Borrower and its Subsidiaries;

 

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(h)                            loans and advances to employees of the Loan Parties for relocation expenses and other related costs in an amount not to exceed $500,000 in the aggregate at any one time outstanding; and

 

(i)                                other investments, loans, and advances in addition to those otherwise permitted by this Section in an amount not to exceed $100,000 in the aggregate at any one time outstanding.

 

In determining the amount of investments, acquisitions, loans, and advances permitted under this Section, investments and acquisitions shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein), and loans and advances shall be taken at the principal amount thereof then remaining unpaid.

 

Section 8.10.                                            Mergers, Consolidations and Sales.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, be a party to any merger or consolidation or amalgamation, or sell, transfer, lease or otherwise dispose of all or any part of its Property, including any disposition of Property as part of a sale and leaseback transaction, or in any event sell or discount (with or without recourse) any of its notes or accounts receivable; provided, however, that this Section shall not apply to nor operate to prevent:

 

(a)                            the sale or lease of inventory in the ordinary course of business;

 

(b)                            the sale, transfer, lease or other disposition of Property of any Loan Party to one another in the ordinary course of its business;

 

(c)                             the merger of any Loan Party with and into the Borrower or any other Loan Party, provided that, in the case of any merger involving the Borrower, the Borrower is the corporation surviving the merger;

 

(d)                            the sale of delinquent notes or accounts receivable in the ordinary course of business for purposes of collection only (and not for the purpose of any bulk sale or securitization transaction);

 

(e)                             the sale, transfer or other disposition of any tangible personal property that, in the reasonable business judgment of the relevant Loan Party or its Subsidiary, has become obsolete or worn out, and which is disposed of in the ordinary course of business; and

 

(f)                              the Disposition of Property of any Loan Party or any Subsidiary of a Loan Party (including any Disposition of Property as part of a sale and leaseback transaction) aggregating for all Loan Parties and their Subsidiaries not more than $500,000 during any Fiscal Year of the Borrower, provided that (i) each such Disposition shall be made for fair value and (ii) at least 80% of the total consideration received at the closing of such Disposition shall consist of cash and at least 80% of the total consideration received after taking into account all final purchase price adjustments and/or contingent payments (including working capital adjustment or earn-out provisions) expressly contemplated by the transaction documents, when received shall consist of cash.

 

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Section 8.11.                                            Maintenance of Subsidiaries.  No Loan Party shall assign, sell or transfer, nor shall it permit any of its Subsidiaries to issue, assign, sell or transfer, any shares of capital stock or other equity interests of a Subsidiary; provided, however, that the foregoing shall not operate to prevent (a) the issuance, sale, and transfer to any person of any shares of capital stock of a Subsidiary solely for the purpose of qualifying, and to the extent legally necessary to qualify, such person as a director of such Subsidiary, (b) any transaction permitted by Section 8.10(c) above, and (c) Liens on the capital stock or other equity interests of Subsidiaries granted to the Bank pursuant to the Collateral Documents.

 

Section 8.12.                                            Dividends and Certain Other Restricted Payments.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, (a) declare or pay any dividends on or make any other distributions in respect of any class or series of its capital stock or other equity interests (other than dividends or distributions payable solely in its capital stock or other equity interests), or (b) directly or indirectly purchase, redeem, or otherwise acquire or retire any of its capital stock or other equity interests or any warrants, options, or similar instruments to acquire the same (collectively referred to herein as “Restricted Payments”); provided, however, that the foregoing shall not operate to prevent the making of dividends or distributions by any Subsidiary to any Borrower.

 

Section 8.13.                                            ERISA.  Each Loan Party shall, and shall cause each of its Subsidiaries to, promptly pay and discharge all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed could reasonably be expected to result in the imposition of a Lien against any of its Property.  Each Loan Party shall, and shall cause each of its Subsidiaries to, promptly notify the Bank of:  (a) the occurrence of any reportable event (as defined in ERISA) with respect to a Plan, (b) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, (c) its intention to terminate or withdraw from any Plan, and (d) the occurrence of any event with respect to any Plan which would result in the incurrence by any Loan Party or any Subsidiary of a Loan Party of any material liability, fine or penalty, or any material increase in the contingent liability of any Loan Party or any Subsidiary of a Loan Party with respect to any post-retirement Welfare Plan benefit.

 

Section 8.14.                                            Compliance with Laws.  (a) Each Loan Party shall, and shall cause each of its Subsidiaries to, comply in all respects with all Legal Requirements applicable to or pertaining to its Property or business operations, where any such non-compliance, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or result in a Lien upon any of its Property.

 

(b)              Without limiting Section 8.14(a) above, each Loan Party shall, and shall cause each of its Subsidiaries to, at all times, do the following to the extent the failure to do so, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect:  (i) comply in all material respects with, and maintain each of the Premises in compliance in all material respects with, all applicable Environmental Laws; (ii) require that each tenant and subtenant, if any, of any of the Premises or any part thereof comply in all material respects with all applicable

 

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Environmental Laws; (iii) obtain and maintain in full force and effect all material governmental approvals required by any applicable Environmental Law for the operation of their business and each of the Premises; (iv) cure any material violation by it or at any of the Premises of applicable Environmental Laws; (v) not allow the presence or operation at any of the Premises of any (1) landfill or dump or (2) hazardous waste management facility or solid waste disposal facility as defined pursuant to applicable Environmental Law; (vi) not manufacture, use, generate, transport, treat, store, Release, dispose or handle any Hazardous Material (or allow any tenant or subtenant to do any of the foregoing) at any of the Premises except in the ordinary course of its business, in de minimis amounts, and in compliance with all applicable Environmental Laws; (vii) within ten (10) Business Days notify the Bank in writing of and provide any reasonably requested documents upon learning of any of the following in connection with any Loan Party or any Subsidiary of a Loan Party or any of the Premises:  (1) any material Environmental Liability; (2) any material Environmental Claim; (3) any material violation of an Environmental Law or material Release, threatened Release or disposal of a Hazardous Material; (4) any restriction on the ownership, occupancy, use or transferability of any Premises arising from or in connection with any (x) Release, threatened Release or disposal of a Hazardous Material or (y) Environmental Law; or (5) any environmental, natural resource, health or safety condition, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; (viii) conduct at its expense any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other corrective or response action necessary to remove, remediate, clean up, correct or abate any material Release, threatened Release or violation of any applicable Environmental Law, (ix) abide by and observe any restrictions on the use of the Premises imposed by any Governmental Authority as set forth in a deed or other instrument affecting any Loan Party’s or any of its Subsidiary’s interest therein; (x) promptly provide or otherwise make available to the Bank any reasonably requested environmental record concerning the Premises which any Loan Party or any Subsidiary of a Loan Party possesses or can reasonably obtain; and (xi) perform, satisfy, and implement any operation, maintenance or corrective actions or other requirements of any Governmental Authority or Environmental Law, or included in any no further action letter or covenant not to sue issued by any Governmental Authority under any Environmental Law.

 

Section 8.15.                                            Compliance with OFAC Sanctions Programs.  (a) Each Loan Party shall at all times comply with the requirements of all OFAC Sanctions Programs applicable to such Loan Party and shall cause each of its Subsidiaries to comply with the requirements of all OFAC Sanctions Programs applicable to such Subsidiary.

 

(b)              Each Loan Party shall provide the Bank any information regarding the Loan Parties, their Affiliates, and their Subsidiaries necessary for the Bank to comply with all applicable OFAC Sanctions Programs; subject however, in the case of Affiliates, to such Loan Party’s ability to provide information applicable to them.

 

(c)               If any Loan Party obtains actual knowledge or receives any written notice that any Loan Party, any Affiliate or any Subsidiary of any Loan Party is named on the then current OFAC SDN List (such occurrence, an “OFAC Event”), such Loan Party shall promptly (i) give written notice to the Bank of such OFAC Event, and (ii) comply in all material respects with all applicable laws with respect to such OFAC Event (regardless of whether the party included on

 

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the OFAC SDN List is located within the jurisdiction of the United States of America), including the OFAC Sanctions Programs, and each Loan Party hereby authorizes and consents to the Bank taking any and all steps the Bank deems necessary, in their sole but reasonable discretion, to avoid violation of all applicable laws with respect to any such OFAC Event, including the requirements of the OFAC Sanctions Programs (including the freezing and/or blocking of assets and reporting such action to OFAC).

 

Section 8.16.                                            Burdensome Contracts With Affiliates.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, enter into any contract, agreement or business arrangement with any of its Affiliates on terms and conditions which are less favorable to such Loan Party or such Subsidiary than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other; provided that the foregoing restriction shall not apply to transactions between or among the Loan Parties.

 

Section 8.17.                                            No Changes in Fiscal Year.  The Borrower shall not, nor shall it permit any Subsidiary to, change its current Fiscal Year reporting method.

 

Section 8.18.                                            Formation of Subsidiaries; Guaranty Requirements.  Promptly upon the formation or acquisition of any Subsidiary, the Loan Parties shall provide the Bank notice thereof (at which time Schedule 6.2 shall be deemed amended to include reference to such Subsidiary).  The payment and performance of the Secured Obligations of the Borrower shall at all times be guaranteed by the Subsidiaries of the Borrower pursuant to Section 11 hereof or pursuant to one or more Guaranty Agreements in form and substance reasonably acceptable to the Bank, as the same may be amended, modified or supplemented from time to time.  The Loan Parties shall, and shall cause their Subsidiaries to, timely comply with the requirements of Sections 10 and 11 with respect to any Subsidiary that is required to become a Guarantor hereunder.  Except for Foreign Subsidiaries existing on the Closing Date and identified on Schedule 6.2, no Loan Party, nor shall it permit any of its Subsidiaries to, form or acquire any Foreign Subsidiary.

 

Section 8.19.                                            Change in the Nature of Business.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, engage in any business or activity if as a result the general nature of the business of such Loan Party or any of its Subsidiaries would be changed in any material respect from the general nature of the business engaged in by it as of the Closing Date.

 

Section 8.20.                                            Use of Proceeds.  The Borrower shall use the credit extended under this Agreement solely for the purposes set forth in, or otherwise permitted by, Section 6.4.

 

Section 8.21.                                            No Restrictions.  Except as provided herein, no Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Loan Party or any Subsidiary of a Loan Party to:  (a) pay dividends or make any other distribution on any Subsidiary’s capital stock or other equity interests owned by such Loan Party or any other Subsidiary, (b) pay any indebtedness owed to any Loan Party or any other Subsidiary, (c) make loans or advances to any Loan Party or any Subsidiary, (d) transfer any of its Property to any Loan Party or any other Subsidiary, or (e) guarantee the Secured Obligations and/or grant Liens on its assets to the Bank as required by the Loan Documents.

 

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Section 8.22.                 Subordinated Debt.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, (a) amend or modify any of the terms or conditions relating to Subordinated Debt, (b) make any voluntary prepayment of Subordinated Debt or effect any voluntary redemption thereof, or (c) make any payment on account of Subordinated Debt which is prohibited under the terms of any instrument or agreement subordinating the same to the Obligations.  Notwithstanding the foregoing, the Loan Parties may agree to a decrease in the interest rate applicable thereto or to a deferral of repayment of any of the principal of or interest on the Subordinated Debt beyond the current due dates therefor.

 

Section 8.23.                 Financial Covenants.  (a) Total Leverage Ratio.  As of the last day of each Fiscal Quarter, the Borrower shall not permit the Total Leverage Ratio to be greater than 2.00 to 1.00.

 

(b)              Tangible Net Worth.  The Borrower shall at all times maintain Tangible Net Worth of the Borrower and its Subsidiaries determined on a consolidated basis in an amount not less than (i) $16,472,908 plus (ii) for the first Fiscal Quarter of 2014, 50% of Net Income, and for each Fiscal Quarter thereafter, 50% of Net Income if such Net Income is a positive amount (i.e., there shall be no reduction to the minimum amount of Tangible Net Worth required to be maintained hereunder for any Fiscal Quarter in which Net Income is less than zero).

 

(c)              Fixed Charge Coverage Ratio.  As of the last day of each Fiscal Quarter, the Borrower shall maintain a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00.

 

Section 8.24.                 Modification of Certain Documents.  No Loan Party shall do any of the following:

 

(a)                           waive or otherwise modify any term of any Constituent Document of, or otherwise change the capital structure of, any Loan Party (including the terms of any of their outstanding Voting Stock), in each case except for those modifications and waivers that (x) do not elect, or permit the election, to treat the Voting Stock of any limited liability company (or similar entity) as certificated unless such certificates are delivered to the Bank to the extent they represent Voting Stock pledged under the Security Agreement and (y) do not affect the interests of the Bank under the Loan Documents or in the Collateral in a materially adverse manner; and

 

(b)                            permit the Obligations to cease qualifying as “Senior Debt”, “Designated Senior Debt” or a similar term under and as defined in any documentation governing any Subordinated Debt.

 

Section 8.24.                 Post-Closing Covenant.  Notwithstanding anything to the contrary contained in any Loan Document, the Borrower shall deliver, upon request of the Bank, landlord’s waivers, in form and substance reasonably satisfactory to the Bank, with respect to the Loan Parties’ leased property.

 

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SECTION 9.                                             EVENTS OF DEFAULT AND REMEDIES.

 

Section 9.1.                Events of Default.  Any one or more of the following shall constitute an “Event of Default” hereunder:

 

(a)                            default in the payment when due of all or any part of the principal of any Loan (whether at the stated maturity thereof or at any other time provided for in this Agreement) or of any Reimbursement Obligation, or default for a period of three (3) Business Days in the payment when due of any interest, fee or other Obligation payable hereunder or under any other Loan Document;

 

(b)                            default in the observance or performance of any covenant set forth in Sections 8.1, 8.5, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14, 8.15, 8.17, 8.18, 8.19, 8.21, 8.22, 8.23 or 8.24 of this Agreement or of any provision in any Loan Document dealing with the use, disposition or remittance of the proceeds of Collateral or requiring the maintenance of insurance thereon;

 

(c)                             default in the observance or performance of any other provision hereof or of any other Loan Document which is not remedied within thirty (30) days after the earlier of (i) the date on which such failure shall first become known to any Responsible Officer of any Loan Party or (ii) written notice thereof is given to the Borrower by the Bank;

 

(d)                            any representation or warranty made herein or in any other Loan Document or in any certificate furnished to the Bank pursuant hereto or thereto or in connection with any transaction contemplated hereby or thereby proves untrue in any material respect as of the date of the issuance or making or deemed making thereof;

 

(e)                             (i) any event occurs or condition exists (other than those described in subsections (a) through (d) above) which is specified as an event of default under any of the other Loan Documents, or (ii) any of the Loan Documents shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void, or (iii) any of the Collateral Documents shall for any reason fail to create a valid and perfected first priority Lien in favor of the Bank in any Collateral purported to be covered thereby except as expressly permitted by the terms hereof, or (iv) any Loan Party takes any action for the purpose of terminating, repudiating or rescinding any Loan Document executed by it or any of its obligations thereunder, or (v) any Loan Party or any Subsidiary of a Loan Party makes any payment on account of any Subordinated Debt which is prohibited under the terms of any instrument subordinating such Subordinated Debt to any Secured Obligations, or any subordination provision in any document or instrument (including, without limitation, any intercreditor or subordination agreement) relating to any Subordinated Debt shall cease to be in full force and effect, or any Person (including the holder of any Subordinated Debt) shall contest in any manner the validity, binding nature or enforceability of any such provision;

 

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(f)                             default shall occur under any Material Indebtedness issued, assumed or guaranteed by any Loan Party or any Subsidiary of a Loan Party, or under any indenture, agreement or other instrument under which the same may be issued, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Material Indebtedness (whether or not such maturity is in fact accelerated), or any such Material Indebtedness shall not be paid when due (whether by demand, lapse of time, acceleration or otherwise);

 

(g)                             (i) any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, shall be entered or filed against any Loan Party or any Subsidiary of a Loan Party, or against any of their respective Property, in an aggregate amount for all such Persons in excess of $250,000 (except to the extent fully covered by insurance pursuant to which the insurer has accepted liability therefor in writing), and which remains undischarged, unvacated, unbonded or unstayed for a period of 30 days, or any action shall be legally taken by a judgment creditor to attach or levy upon any Property of any Loan Party or any Subsidiary of a Loan Party to enforce any such judgment, or (ii) any Loan Party or any Subsidiary of a Loan Party shall fail within thirty (30) days to discharge one or more non-monetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgments or orders, in any such case, are not stayed on appeal or otherwise being appropriately contested in good faith by proper proceedings diligently pursued;

 

(h)                            any Loan Party or any Subsidiary of a Loan Party, or any member of its Controlled Group, shall fail to pay when due an amount or amounts aggregating for all such Persons in excess of $250,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $250,000 (collectively, a “Material Plan”) shall be filed under Title IV of ERISA by any Loan Party or any Subsidiary of a Loan Party, or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any Loan Party or any Subsidiary of a Loan Party, or any member of its Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated;

 

(i)                            any Change of Control shall occur;

 

(j)                           any Loan Party or any Subsidiary of a Loan Party shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any 

 

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proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate or similar action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 9.1(k); or

 

(k)                            a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for any Loan Party or any Subsidiary of a Loan Party, or any substantial part of any of its Property, or a proceeding described in Section 9.1(j)(v) shall be instituted against any Loan Party or any Subsidiary of a Loan Party, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 days.

 

Section 9.2.                Non-Bankruptcy Defaults.  When any Event of Default (other than those described in subsection (j) or (k) of Section 9.1 with respect to the Borrower) has occurred and is continuing, the Bank may, by written notice to the Borrower: (a) terminate the remaining Commitments and all other obligations of the Bank hereunder on the date stated in such notice (which may be the date thereof); (b) declare the principal of and the accrued interest on all outstanding Loans to be forthwith due and payable and thereupon all outstanding Loans, including both principal and interest thereon, shall be and become immediately due and payable together with all other amounts payable under the Loan Documents without further demand, presentment, protest or notice of any kind; and (c) demand that the Borrower immediately deliver to the Bank Cash Collateral in an amount equal to 105% of the aggregate amount of each Letter of Credit then outstanding, and the Borrower agrees to immediately make such payment and acknowledges and agrees that the Bank would not have an adequate remedy at law for failure by the Borrower to honor any such demand and that the Bank shall have the right to require the Borrower to specifically perform such undertaking whether or not any drawings or other demands for payment have been made under any Letter of Credit.  In addition, the Bank may exercise all rights and remedies available to it under the Loan Documents or applicable law or equity when any such Event of Default has occurred and is continuing.

 

Section 9.3.                Bankruptcy Defaults.  When any Event of Default described in subsections (j) or (k) of Section 9.1 with respect to the Borrower has occurred and is continuing, then all outstanding Loans shall immediately become due and payable together with all other amounts payable under the Loan Documents without presentment, demand, protest or notice of any kind, the obligation of the Bank to extend further credit pursuant to any of the terms hereof shall immediately terminate and the Borrower shall immediately deliver to the Bank Cash Collateral in an amount equal to 105% of the aggregate amount of each Letter of Credit then outstanding, the Borrower acknowledging and agreeing that the Bank would not have an adequate remedy at law for failure by the Borrower to honor any such demand and that the Bank shall have the right to require the Borrower to specifically perform such undertaking whether or not any draws or other demands for payment have been made under any of the Letters of Credit. In addition, the Bank may exercise all rights and remedies available to it under the Loan Documents or applicable law or equity when any such Event of Default has occurred and is continuing.

 

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Section 9.4.                Collateral for Undrawn Letters of Credit.  (a) If the prepayment of the amount available for drawing under any or all outstanding Letters of Credit is required under any of Sections 2.3(b), 2.8(b), 9.2 or 9.3 above, the Borrower shall forthwith pay the amount required to be so prepaid, to be held by the Bank as provided in subsection (b) below.

 

(b)              All amounts prepaid pursuant to subsection (a) above shall be held by the Bank in one or more separate collateral accounts (each such account, and the credit balances, properties, and any investments from time to time held therein, and any substitutions for such account, any certificate of deposit or other instrument evidencing any of the foregoing and all proceeds of and earnings on any of the foregoing being collectively called the “Collateral Account”) as security for, and for application by the Bank (to the extent available) to, the reimbursement of any payment under any Letter of Credit then or thereafter made by the Bank, and to the payment of the unpaid balance of all other Secured Obligations.  The Collateral Account shall be held in the name of and subject to the exclusive dominion and control of the Bank.  If and when requested by the Borrower, the Bank shall invest funds held in the Collateral Account from time to time in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America with a remaining maturity of one year or less, provided that the Bank is irrevocably authorized to sell investments held in the Collateral Account when and as required to make payments out of the Collateral Account for application to amounts due and owing from the Borrower to the Bank.  If the Borrower shall have made payment of all obligations referred to in subsection (a) above required under Section 2.8(b), at the request of the Borrower the Bank shall release to the Borrower amounts held in the Collateral Account so long as at the time of the release and after giving effect thereto no Default exists.  After all Letters of Credit have expired or been cancelled and the expiration or termination of all Commitments, at the request of the Borrower, the Bank shall release any remaining amounts held in the Collateral Account following payment in full in cash of all Secured Obligations.

 

Section 9.5.                Post-Default Collections.  Anything contained herein or in the other Loan Documents to the contrary notwithstanding (including, without limitation, Section 2.8(b)), all payments and collections received in respect of the Obligations and all proceeds of the Collateral and payments made under or in respect of the Guaranty Agreements received, in each instance, by the Bank after acceleration or the final maturity of the Obligations or termination of the Commitments as a result of an Event of Default shall be remitted to the Bank and applied in the Bank’s discretion.

 

SECTION 10.                                      THE GUARANTEES.

 

Section 10.1.                 The Guarantees.  To induce the Bank to provide the credits described herein and in consideration of benefits expected to accrue to the Borrower by reason of the Commitments and for other good and valuable consideration, receipt of which is hereby acknowledged, the Borrower and each Subsidiary party hereto (including any Subsidiary executing an Additional Guarantor Supplement in the form attached hereto as Exhibit F or such other form acceptable to the Bank) and the Borrower (as to the Secured Obligations of another 

 

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Loan Party) hereby unconditionally and irrevocably guarantees jointly and severally to the Bank and its Affiliates, the due and punctual payment of all present and future Secured Obligations, including, but not limited to, the due and punctual payment of principal of and interest on the Loans, the Reimbursement Obligations, and the due and punctual payment of all other Obligations now or hereafter owed by the Borrower under the Loan Documents and the due and punctual payment of all Hedging Liability and Bank Product Obligations, in each case as and when the same shall become due and payable, whether at stated maturity, by acceleration, or otherwise, according to the terms hereof and thereof (including all interest, costs, fees, and charges after the entry of an order for relief against the Borrower or such other obligor in a case under the United States Bankruptcy Code or any similar proceeding, whether or not such interest, costs, fees and charges would be an allowed claim against the Borrower or any such obligor in any such proceeding); provided, however, that, with respect to any Guarantor, its Guarantee of Hedging Liability of any Loan Party shall exclude all Excluded Swap Obligations.  In case of failure by the Borrower or other obligor punctually to pay any Secured Obligations guaranteed hereby, each Guarantor hereby unconditionally agrees to make such payment or to cause such payment to be made punctually as and when the same shall become due and payable, whether at stated maturity, by acceleration, or otherwise, and as if such payment were made by the Borrower or such obligor.

 

Section 10.2.                 Guarantee Unconditional.  The obligations of each Guarantor under this Section 10 shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged, or otherwise affected by:

 

(a)                            any extension, renewal, settlement, compromise, waiver, or release in respect of any obligation of any Loan Party or other obligor or of any other guarantor under this Agreement or any other Loan Document or by operation of law or otherwise;

 

(b)                            any modification or amendment of or supplement to this Agreement or any other Loan Document or any agreement relating to Hedging Liability or Bank Product Obligations;

 

(c)                             any change in the corporate existence, structure, or ownership of, or any insolvency, bankruptcy, reorganization, or other similar proceeding affecting, any Loan Party or other obligor, any other guarantor, or any of their respective assets, or any resulting release or discharge of any obligation of any Loan Party or other obligor or of any other guarantor contained in any Loan Document;

 

(d)                            the existence of any claim, set-off, or other rights which any Loan Party or other obligor or any other guarantor may have at any time against the Bank or any other Person, whether or not arising in connection herewith;

 

(e)                             any failure to assert, or any assertion of, any claim or demand or any exercise of, or failure to exercise, any rights or remedies against any Loan Party or other obligor, any other guarantor, or any other Person or Property;

 

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(f)                           any application of any sums by whomsoever paid or howsoever realized to any obligation of any Loan Party or other obligor, regardless of what obligations of any Loan Party or other obligor remain unpaid;

 

(g)                             any invalidity or unenforceability relating to or against any Loan Party or other obligor or any other guarantor for any reason of this Agreement or of any other Loan Document or any agreement relating to Hedging Liability or Bank Product Obligations or any provision of applicable law or regulation purporting to prohibit the payment by any Loan Party or other obligor or any other guarantor of the principal of or interest on any Loan or any Reimbursement Obligation or any other amount payable under the Loan Documents or any agreement relating to Hedging Liability or Bank Product Obligations; or

 

(h)                            any other act or omission to act or delay of any kind by the Bank or any other Person or any other circumstance whatsoever that might, but for the provisions of this subsection, constitute a legal or equitable discharge of the obligations of any Guarantor under this Section 10.

 

Section 10.3.                 Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances.  Each Guarantor’s obligations under this Section 10 shall remain in full force and effect until the Commitments are terminated, all Letters of Credit have expired, and the principal of and interest on the Loans and all other amounts payable by the Borrower and the other Loan Parties under this Agreement and all other Loan Documents and, if then outstanding and unpaid, all Hedging Liability and Bank Product Obligations shall have been paid in full.  If at any time any payment of the principal of or interest on any Loan or any Reimbursement Obligation or any other amount payable by any Loan Party or other obligor or any guarantor under the Loan Documents or any agreement relating to Hedging Liability or Bank Product Obligations is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy, or reorganization of such Loan Party or other obligor or of any guarantor, or otherwise, each Guarantor’s obligations under this Section 10 with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time.

 

Section 10.4.                 Subrogation.  Each Guarantor agrees it will not exercise any rights which it may acquire by way of subrogation by any payment made hereunder, or otherwise, until all the Secured Obligations shall have been paid in full subsequent to the termination of all the Commitments and expiration of all Letters of Credit.  If any amount shall be paid to a Guarantor on account of such subrogation rights at any time prior to the later of (x) the payment in full of the Secured Obligations and all other amounts payable by the Loan Parties hereunder and the other Loan Documents and (y) the termination of the Commitments and expiration of all Letters of Credit, such amount shall be held in trust for the benefit of the Bank (and its Affiliates) and shall forthwith be paid to the Bank (and its Affiliates) or be credited and applied upon the Secured Obligations, whether matured or unmatured, in accordance with the terms of this Agreement.

 

Section 10.5.                 Subordination.  Each Guarantor (each referred to herein as a “Subordinated Creditor”) hereby subordinates the payment of all indebtedness, obligations, and liabilities of the 

 

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Borrower or other Loan Party owing to such Subordinated Creditor, whether now existing or hereafter arising, to the indefeasible payment in full in cash of all Secured Obligations.  During the existence of any Event of Default, subject to Section 10.4, any such indebtedness, obligation, or liability of the Borrower or other Loan Party owing to such Subordinated Creditor shall be enforced and performance received by such Subordinated Creditor as trustee for the benefit of the holders of the Secured Obligations and the proceeds thereof shall be paid over to the Bank for application to the Secured Obligations (whether or not then due), but without reducing or affecting in any manner the liability of such Guarantor under this Section 10.

 

Section 10.6.                 Waivers.  Each Guarantor irrevocably waives acceptance hereof, presentment, demand, protest, and any notice not provided for herein, as well as any requirement that at any time any action be taken by the Bank or any other Person against the Borrower or any other Loan Party or other obligor, another guarantor, or any other Person.

 

Section 10.7.                    Limit on Recovery.  Notwithstanding any other provision hereof, the right of recovery against each Guarantor under this Section 10 shall not exceed $1.00 less than the lowest amount which would render such Guarantor’s obligations under this Section 10 void or voidable under applicable law, including, without limitation, fraudulent conveyance law.

 

Section 10.8.                 Stay of Acceleration.  If acceleration of the time for payment of any amount payable by the Borrower or other Loan Party or other obligor under this Agreement or any other Loan Document, or under any agreement relating to Hedging Liability or Bank Product Obligations, is stayed upon the insolvency, bankruptcy or reorganization of the Borrower or such other Loan Party or obligor, all such amounts otherwise subject to acceleration under the terms of this Agreement or the other Loan Documents, or under any agreement relating to Hedging Liability or Bank Product Obligations, shall nonetheless be payable by the Guarantors hereunder forthwith on demand by the Bank.

 

Section 10.9.                 Benefit to Guarantors.  The Loan Parties are engaged in related businesses and integrated to such an extent that the financial strength and flexibility of the Borrower and the other Loan Parties has a direct impact on the success of each other Loan Party.  Each Guarantor will derive substantial direct and indirect benefit from the extensions of credit hereunder, and each Guarantor acknowledges that this guarantee is necessary or convenient to the conduct, promotion and attainment of its business.

 

Section 10.10.                  Keepwell.  Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under this Guaranty in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section, or otherwise under this Guaranty, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until discharged in accordance with Section 10.3.  Each Qualified ECP Guarantor intends that this Section constitute, and this Section shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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SECTION 11.                                      COLLATERAL.

 

Section 11.1.                 Collateral.  The Secured Obligations shall be secured by valid, perfected, and enforceable Liens on all right, title, and interest of each Loan Party in all of its real property, personal property, and fixtures, whether now owned or hereafter acquired or arising, and all proceeds thereof; provided, however, that:  (i) the Collateral shall not include Excluded Property, (ii) until an Event of Default has occurred and is continuing and thereafter until otherwise required by the Bank, Liens on vehicles or other goods which are subject to a certificate of title law need not be perfected provided that the total value of such property at any one time not so perfected shall not exceed $500,000 in the aggregate, and (iii) the Collateral need not include (or be perfected if a Lien is granted) those assets of any Loan Party as to which the Bank in its sole discretion determines that the cost of obtaining a security interest in or perfection thereof are excessive in relation to the value of the security to be afforded thereby.  Each Loan Party acknowledges and agrees that the Liens on the Collateral shall be granted to the Bank and shall be valid and perfected first priority Liens (to the extent perfection by filing, registration, recordation, possession or control is required herein or in any other Loan Document) subject to the proviso appearing at the end of the preceding sentence and to Liens permitted by Section 8.8, in each case pursuant to one or more Collateral Documents from such Persons, each in form and substance satisfactory to the Bank.

 

Section 11.2.                 Depository Banks.  Within one hundred eighty (180) days of the Closing Date, each Loan Party shall maintain the Bank (or one of its Affiliates) as its primary depository bank, including for its principal operating, administrative, cash management, lockbox arrangements, collection activity, and other deposit accounts for the conduct of its business.  Except for Excluded Deposit Accounts, all deposit accounts shall be maintained with the Bank or such other bank(s) reasonably acceptable to the Bank subject to deposit account control agreements in favor of the Bank on terms reasonably satisfactory to the Bank (all such deposit accounts maintained with the Bank or with such other bank(s) subject to a deposit account control agreement being hereinafter collectively referred to as the “Assigned Accounts”).  Each Loan Party shall make such arrangements as may be reasonably requested by the Bank to assure that all proceeds of the Collateral are deposited (in the same form as received) in one or more Assigned Accounts.  Any proceeds of Collateral received by any Loan Party shall be promptly deposited into an Assigned Account and, until so deposited, shall be held by it in trust for the Bank.  Each Loan Party acknowledges and agrees that the Bank has (and is hereby granted to the extent it does not already have) a Lien on each Assigned Account and all funds contained therein to secure the Secured Obligations.  The Bank agrees with the Loan Parties that if and so long as no Default has occurred or is continuing, amounts on deposit in the Assigned Accounts will (subject to the rules and regulations as from time to time in effect applicable to such demand deposit accounts) be made available to the relevant Loan Party for use in the conduct of its business.  Upon the occurrence of a Default, the Bank may apply the funds on deposit in any and all such Assigned Accounts to the Secured Obligations (whether or not then due).

 

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Section 11.3.                 Liens on Real Property.  In the event that any Loan Party owns or hereafter acquires any real property (other than Excluded Property), such Loan Party shall execute and deliver to the Bank a mortgage or deed of trust acceptable in form and substance to the Bank for the purpose of granting to the Bank (or a security trustee therefor) a Lien on such real property to secure the Secured Obligations, shall pay all taxes, costs, and expenses incurred by the Bank in recording such mortgage or deed of trust, and shall supply to the Bank at the Borrower’s cost and expense a survey, environmental report, hazard insurance policy, appraisal report, and a mortgagee’s policy of title insurance from a title insurer acceptable to the Bank insuring the validity of such mortgage or deed of trust and its status as a first Lien (subject to Liens permitted by this Agreement) on the real property encumbered thereby and such other instrument, documents, certificates, and opinions reasonably required by the Bank in connection therewith.

 

Section 11.4.                 Further Assurances.  Each Loan Party agrees that it shall, from time to time at the request of the Bank, execute and deliver such documents and do such acts and things as the Bank may reasonably request in order to provide for or perfect or protect such Liens on the Collateral.  In the event any Loan Party forms or acquires any other Subsidiary after the date hereof, except as otherwise provided in the definition of Guarantor, the Loan Parties shall promptly upon such formation or acquisition cause such newly formed or acquired Subsidiary to execute a Guaranty Agreement and such Collateral Documents as the Bank may then require, and the Loan Parties shall also deliver to the Bank, or cause such Subsidiary to deliver to the Bank, at the Borrower’s cost and expense, such other instruments, documents, certificates, and opinions reasonably required by the Bank in connection therewith.

 

SECTION 12.                                      MISCELLANEOUS.

 

Section 12.1.                 Notices.  (a) Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or email as follows:

 

(i)                            if to the Borrower or any other Loan Party, to it at Willdan Group, Inc., 2401 East Katella Avenue, Suite 300, Anaheim, California 92806, Attention of Stacy McLaughlin (Telephone No. (714) 940-6349), email: smclaughlin@willdan.com; and

 

(ii)                              if to the Bank, to BMO Harris Bank N.A. at 111 West Monroe, Chicago, Illinois 60603, Attention of Jennifer Guidi (Telephone No. (312) 461-2272), email: Jennifer.Guidi@bmo.com.

 

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).  Notices delivered through electronic communications, to the extent provided in subsection (b) below, shall be effective as provided in said subsection (b).

 

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(b)              Electronic Communications.  The Bank or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.  Unless the Bank otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 

(c)              Change of Address, etc.  Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.

 

Section 12.2.                 Amendments, Etc.  No amendment, modification, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Bank.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

 

Section 12.3.                 Costs and Expenses; Indemnification.  (a) Costs and Expenses.  The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Bank and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Bank), and shall pay all fees and time charges and disbursements for attorneys who may be employees of the Bank, in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), including, without limitation, such fees and expenses incurred in connection with (x) the creation, perfection or protection of the Liens under the Loan Documents (including all title insurance fees and all search, filing and recording fees) and (y) environmental assessments, insurance reviews, collateral audits and valuations, and field exams as provided herein, (ii) all reasonable out-of-pocket expenses incurred by the Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, and (iii) all out-of-pocket expenses incurred by the Bank (including the fees, charges and disbursements of any counsel for the Bank), and shall pay all fees and time charges for attorneys who may be employees of the Bank, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit (including all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving the Borrower or any other Loan Party as a debtor thereunder).

 

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(b)              Indemnification by the Loan Parties.  Each Loan Party shall indemnify the Bank and its Related Parties (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any third party or the Borrower or any other Loan Party) arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, the administration and enforcement of this Agreement and the other Loan Documents (including all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving the Borrower or any other Loan Party as a debtor thereunder), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any Environmental Claim or Environmental Liability, including with respect to the actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by any Loan Party or any of its Subsidiaries, related in any way to any Loan Party or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto (including, without limitation, any settlement arrangement arising from or relating to the foregoing); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.  This subsection (b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

(c)              Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable law, the Loan Parties shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit, or the use of the proceeds thereof.  No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

 

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(d)              Payments.  All amounts due under this Section shall be payable promptly after demand therefor.

 

(e)              Survival.  Each party’s obligations under this Section shall survive the termination of the Loan Documents and payment of the obligations hereunder.

 

Section 12.4.                 No Waiver, Cumulative Remedies.  No delay or failure on the part of the Bank or on the part of the holder or holders of any of the Obligations in the exercise of any power or right under any Loan Document shall operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right.  The rights and remedies hereunder of the Bank and of the holder or holders of any of the Obligations are cumulative to, and not exclusive of, any rights or remedies which any of them would otherwise have.

 

Section 12.5.                 Right of Setoff.  In addition to any rights now or hereafter granted under the Loan Documents or applicable law and not by way of limitation of any such rights, if an Event of Default shall have occurred and be continuing, the Bank and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time owing, by the Bank or any such Affiliate, to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such the Bank or their its Affiliates, irrespective of whether or not the Bank or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch, office or Affiliate of the Bank different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness.  The rights of the Bank and its respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that the Bank or its respective Affiliates may have.  The Bank agrees to notify the Borrower promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

Section 12.6.                 Survival of Representations.  All representations and warranties made herein or in any other Loan Document or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder.

 

Section 12.7.                 Survival of Indemnities.  All indemnities and other provisions relative to reimbursement to the Bank of amounts sufficient to protect the yield of the Bank with respect to the Loans and Letters of Credit, including, but not limited to, Sections 4.1, 4.4, 4.5, and 12.3, shall survive the termination of this Agreement and the other Loan Documents and the payment of the Obligations.

 

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Section 12.8.                 Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Bank, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 7.2, this Agreement shall become effective when it shall have been executed by the Bank and when the Bank shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.

 

Section 12.9.                 Headings. Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.

 

Section 12.10.                  Severability of Provisions.  Any provision of any Loan Document which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.  All rights, remedies and powers provided in this Agreement and the other Loan Documents may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement and other Loan Documents are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement or the other Loan Documents invalid or unenforceable.

 

Section 12.11.                  Construction.  The parties acknowledge and agree that the Loan Documents shall not be construed more favorably in favor of any party hereto based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation of the Loan Documents.  The provisions of this Agreement relating to Subsidiaries shall only apply during such times as the Borrower has one or more Subsidiaries.  NOTHING CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED TO PERMIT ANY ACT OR OMISSION WHICH IS PROHIBITED BY THE TERMS OF ANY COLLATERAL DOCUMENT, THE COVENANTS AND AGREEMENTS CONTAINED HEREIN BEING IN ADDITION TO AND NOT IN SUBSTITUTION FOR THE COVENANTS AND AGREEMENTS CONTAINED IN THE COLLATERAL DOCUMENTS.

 

Section 12.12.                  Excess Interest.  Notwithstanding any provision to the contrary contained herein or in any other Loan Document, no such provision shall require the payment or permit the collection of any amount of interest in excess of the maximum amount of interest permitted by applicable law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the Loans or other obligations outstanding under this Agreement or any other Loan Document (“Excess Interest”).  If any Excess Interest is provided for, or is adjudicated to be provided for, herein or in any other Loan Document, then in such event (a) the provisions of this Section shall govern and control, (b) neither the Borrower nor any guarantor or endorser shall be obligated to pay any Excess Interest, (c) any Excess Interest that the Bank may have received 

 

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hereunder shall, at the option of the Bank, be (i) applied as a credit against the then outstanding principal amount of Obligations hereunder and accrued and unpaid interest thereon (not to exceed the maximum amount permitted by applicable law), (ii) refunded to the Borrower, or (iii) any combination of the foregoing, (d) the interest rate payable hereunder or under any other Loan Document shall be automatically subject to reduction to the maximum lawful contract rate allowed under applicable usury laws (the “Maximum Rate”), and this Agreement and the other Loan Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in the relevant interest rate, and (e) neither the Borrower nor any guarantor or endorser shall have any action against the Bank for any damages whatsoever arising out of the payment or collection of any Excess Interest.  Notwithstanding the foregoing, if for any period of time interest on any of Borrower’s Obligations is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on the Borrower’s Obligations shall remain at the Maximum Rate until the Bank has received the amount of interest which the Bank would have received during such period on the Borrower’s Obligations had the rate of interest not been limited to the Maximum Rate during such period.

 

Section 12.13.                  No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Loan Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (a) (i) no fiduciary, advisory or agency relationship between any Loan Party and its Subsidiaries and the the Bank is intended to be or has been created in respect of the transactions contemplated hereby or by the other Loan Documents, irrespective of whether the Bank has advised or is advising any Loan Party or any of its Subsidiaries on other matters, (ii) the arranging and other services regarding this Agreement provided by the Bank are arm’s-length commercial transactions between such Loan Parties and their Affiliates, on the one hand, and the Bank, on the other hand, (iii) each Loan Party has consulted its own legal, accounting, regulatory and tax advisors to the extent that it has deemed appropriate and (iv) each Loan Party is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; and (b) (i) the Bank is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any Loan Party or any of its Affiliates, or any other Person; (ii) the Bank has no obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Bank and its respective Affiliates may be engaged, for their own accounts or the accounts of customers, in a broad range of transactions that involve interests that differ from those of any Loan Party and its Affiliates, and the Bank has no obligation to disclose any of such interests to any Loan Party or its Affiliates.  To the fullest extent permitted by law, each Loan Party hereby waives and releases any claims that it may have against the Bank with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

 

Section 12.14.                  Binding Nature; Governing Law; Jurisdiction; Consent to Service of Process.  (a) THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS (EXCEPT AS OTHERWISE SPECIFIED THEREIN), AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

80

 

(b)              Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the United States District Court for the Northern District of Illinois and of any Illinois State court sitting in the City of Chicago,and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each party hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Illinois State court or, to the extent permitted by applicable Legal Requirements, in such federal court.  Each party hereto hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Legal Requirements.  Nothing in this Agreement or any other Loan Document or otherwise shall affect any right that the Bank may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any Guarantor or its respective properties in the courts of any jurisdiction.

 

(c)              Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirements, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 12.14(b).  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable Legal Requirements, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d)              Each party to this Agreement irrevocably consents to service of process in any action or proceeding arising out of or relating to any Loan Document, in the manner provided for notices (other than telecopy or e-mail) in Section 12.1.  Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by applicable Legal Requirements.

 

Section 12.15.                  Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

81

 

Section 12.16.                  USA Patriot Act.  The Bank hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify, and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Bank to identify the Borrower in accordance with the Act.

 

Section 12.17.                  Confidentiality.  The Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners); (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to the Borrower and its obligations, this Agreement or payments hereunder; (g) on a confidential basis to (i) any rating agency in connection with rating any Loan Party or its Subsidiaries or the Facilities or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the Facilities; (h) with the consent of the Borrower; or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section, or (y) becomes available to the Bank or any of its respective Affiliates on a nonconfidential basis from a source other than the Borrower.  For purposes of this Section, “Information” means all information received from a Loan Party or any of its Subsidiaries relating to a Loan Party or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Bank on a nonconfidential basis prior to disclosure by a Loan Party or any of its Subsidiaries; provided that, in the case of information received from a Loan Party or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

[SIGNATURE PAGES TO FOLLOW]

 

82

 

This Credit Agreement is entered into between us for the uses and purposes hereinabove set forth as of the date first above written.

 

 

	
 
    	
“BORROWER”
    
	
 
    	
 
    
	
 
    	
WILLDAN   GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
President   and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
“GUARANTORS”
    
	
 
    	
 
    
	
 
    	
ELECTROTEC   OF NY ELECTRICAL INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    	
 
    
	
 
    	
PUBLIC   AGENCY RESOURCES
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
WILLDAN   ENERGY SOLUTIONS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
WILLDAN   ENGINEERING
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    

 

[Signature Page to Credit Agreement]

 

 

	
 
    	
WILLDAN   ENGINEERS AND CONSTRUCTORS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
WILLDAN   FINANCIAL SERVICES
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
WILLDAN   HOMELAND SOLUTIONS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
WILLDAN   INFRASTRUCTURE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
WILLDAN   LIGHTING & ELECTRIC, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
WILLDAN   LIGHTING & ELECTRIC OF CALIFORNIA
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    

 

[Signature Page to Credit Agreement]

 

 

	
 
    	
WILLDAN LIGHTING & ELECTRIC OF   WASHINGTON, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Thomas D. Brisbin
    
	
 
    	
 
    	
Name   
    	
Thomas   D. Brisbin
    
	
 
    	
 
    	
Title
    	
Chairman   of the Board
    

 

[Signature Page to Credit Agreement]

 

 

	
 
    	
“BANK”
    
	
 
    	
 
    
	
 
    	
BMO HARRIS   BANK N.A.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/   Brian Russ
    
	
 
    	
 
    	
Name
    	
Brian   Russ
    
	
 
    	
 
    	
Title
    	
Vice   President
    

 

[Signature Page to Credit Agreement]

 

 

EXHIBIT A

 

NOTICE OF BORROWING

 

Date:                       ,       

 

	
To:
    	
BMO   Harris Bank N.A., as lender under the Credit Agreement dated as of   March 24, 2014 (as extended, renewed, amended or restated from time to   time, the “Credit Agreement”), by and among   Willdan Group, Inc. (the “Borrower”),   the Guarantors party thereto, and BMO Harris Bank N.A. (the “Bank”)
    	
 
    

 

Ladies and Gentlemen:

 

The Borrower refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives the Bank notice irrevocably, pursuant to Section 2.6 of the Credit Agreement, of the Borrowing specified below:

 

1.                          The Business Day of the proposed Borrowing is                       ,         .

 

2.                          The aggregate amount of the proposed Borrowing is $                            .

 

3.                          The Borrowing is being advanced under the [Revolving] [Delayed Draw Term Loan] Facility.

 

4.                          The Borrowing is to be comprised of $                       of [Base Rate] [Eurodollar] Loans.

 

[5.                      The duration of the Interest Period for the Eurodollar Loans included in the Borrowing shall be                          months.]

 

The Borrower hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom:

 

(a)                            the representations and warranties contained in Section 6 of the Credit Agreement are true and correct in all material respects (where not already qualified by materiality, otherwise in all respects) as though made on and as of such date (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct in all material respects (where not already qualified by materiality, otherwise in all respects) as of such earlier date); and

 

 

(b)                            no Default has occurred and is continuing or would result from such proposed Borrowing.

 

	
 
    	
WILLDAN   GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name
    	
 
    
	
 
    	
 
    	
Title
    	
 
    

 

2

 

EXHIBIT B

 

NOTICE OF CONTINUATION/CONVERSION

 

Date:  March 24, 2014

 

	
To:
    	
BMO   Harris Bank N.A., as lender under the Credit Agreement dated as of   March 24, 2014 (as extended, renewed, amended or restated from time to   time, the “Credit Agreement”), by and among   Willdan Group, Inc. (the “Borrower”),   the Guarantors party thereto, and BMO Harris Bank N.A. (the “Bank”)
    	
 
    

 

Ladies and Gentlemen:

 

The Borrower refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives the Bank notice irrevocably, pursuant to Section 2.6 of the Credit Agreement, of the [conversion] [continuation] of the Loans specified herein, that:

 

1.                          The conversion/continuation Date is                     , 201 .

 

2.                          The aggregate amount of the [Revolving] [Delayed Draw Term] Loans to be [converted] [continued] is $                            .

 

3.                          The Loans are to be [converted into] [continued as] [Eurodollar] [Base Rate] Loans.

 

4.                          [If applicable:]  The duration of the Interest Period for the [Revolving] [Delayed Draw Term] Loans included in the [conversion] [continuation] shall be                    months.

 

	
 
    	
WILLDAN   GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name
    	
 
    
	
 
    	
 
    	
Title
    	
 
    

 

 

EXHIBIT C-1

 

DELAYED DRAW TERM NOTE

 

	
U.S.   $2,500,000
    	
March 24, 2014
    

 

FOR VALUE RECEIVED, the undersigned, WILLDAN GROUP, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to BMO Harris Bank N.A. (the “Lender”) or its registered assigns at the principal office of the Lender in Chicago, Illinois (or such other location as the Lender may designate to the Borrower), in immediately available funds, the principal sum of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000) or, if less, the aggregate unpaid principal amount of all Delayed Draw Term Loans made or maintained by the Lender to the Borrower pursuant to the Credit Agreement, in installments in the amounts called for by Section 2.7(a) of the Credit Agreement, together with interest on the principal amount of such Delayed Draw Term Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates, specified in the Credit Agreement.

 

This Delayed Draw Term Note (this “Note”) is the Delayed Draw Term Note referred to in the Credit Agreement dated as of March 24, 2014, by and among the Borrower, the Guarantors party thereto, and the Lender (as extended, renewed, amended or restated from time to time, the “Credit Agreement”), and this Note and the holder hereof are entitled to all the benefits and security provided for thereby or referred to therein, to which Credit Agreement reference is hereby made for a statement thereof.  All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as in the Credit Agreement.  This Note shall be governed by and construed in accordance with the internal laws of the State of Illinois.

 

Voluntary prepayments may be made hereon, certain prepayments are required to be made hereon, and this Note may be declared due prior to the expressed maturity hereof, all in the events, on the terms and in the manner as provided for in the Credit Agreement.

 

The Borrower hereby waives demand, presentment, protest or notice of any kind hereunder.

 

	
 
    	
WILLDAN   GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name
    	
 
    
	
 
    	
 
    	
Title
    	
 
    

 

 

EXHIBIT C-2

 

REVOLVING NOTE

 

	
U.S.   $7,500,000
    	
March 24, 2014
    

 

FOR VALUE RECEIVED, the undersigned, WILLDAN GROUP, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to BMO Harris Bank N.A. (the “Lender”) or its registered assigns on the Revolving Credit Termination Date of the hereinafter defined Credit Agreement, at the principal office of the Lender in Chicago Illinois (or such other location as the Lender may designate to the Borrower), in immediately available funds, the principal sum of Seven Million Five Hundred Thousand and 00/100 Dollars ($7,500,000) or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, together with interest on the principal amount of each Revolving Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates, specified in the Credit Agreement.

 

This Revolving Note (this “Note”) is the Revolving Note referred to in the Credit Agreement dated as of March 24, 2014, by and among the Borrower, the Guarantors party thereto, and the Lender (as extended, renewed, amended or restated from time to time, the “Credit Agreement”), and this Note and the holder hereof are entitled to all the benefits and security provided for thereby or referred to therein, to which Credit Agreement reference is hereby made for a statement thereof.  All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as in the Credit Agreement.  This Note shall be governed by and construed in accordance with the internal laws of the State of Illinois.

 

Voluntary prepayments may be made hereon, certain prepayments are required to be made hereon, and this Note may be declared due prior to the expressed maturity hereof, all in the events, on the terms and in the manner as provided for in the Credit Agreement.

 

The Borrower hereby waives demand, presentment, protest or notice of any kind hereunder.

 

	
 
    	
WILLDAN   GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name
    	
 
    
	
 
    	
 
    	
Title
    	
 
    

 

 

EXHIBIT D

 

WILLDAN GROUP, INC.

 

BORROWING BASE CERTIFICATE

 

	
To:
    	
BMO   Harris Bank N.A., as lender under the Credit Agreement dated as of   March 24, 2014 (as extended, renewed, amended or restated from time to   time, the “Credit Agreement”), by and among   Willdan Group, Inc. (the “Borrower”),   the Guarantors party thereto, and BMO Harris Bank N.A. (the “Bank”)
    	
 
    

 

This Borrowing Base Certificate is furnished to the Bank pursuant to the Credit Agreement.  Unless otherwise defined herein, the terms used in this Borrowing Base Certificate and on any attachments to this Borrowing Base Certificate shall have the meanings ascribed thereto in the Credit Agreement.

 

The computations set forth in this Borrowing Base Certificate and on any attachments to this Borrowing Base Certificate are, to the knowledge of the Borrower, true, complete and correct as of the date of this Certificate and have been made in accordance with the relevant sections of the Credit Agreement.

 

SEE ATTACHED WORKSHEET FOR BORROWING BASE CALCULATION.

 

In the event of a conflict between the attached calculations and any certifications relating thereto and the Credit Agreement and related definitions used in calculating the Borrowing Base, the Credit Agreement and such related definitions shall govern and control.

 

Dated as of this              day of                           , 201 .

 

	
 
    	
WILLDAN   GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name
    	
 
    
	
 
    	
 
    	
Title
    	
 
    

 

 

WILLDAN GROUP, INC.

 

BORROWING BASE CERTIFICATE WORKSHEET

FOR CREDIT AGREEMENT DATED AS OF MARCH 24, 2014

 

CALCULATIONS AS OF                           , 201 

 

A.                        RECEIVABLES IN BORROWING BASE

 

	
1.
    	
Gross   Receivables
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Less
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Ineligible sales
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Owed   by an account debtor who is an Affiliate
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Owed   by an account debtor who is in an insolvency or reorganization proceeding
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(d)
    	
Credits/allowances
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(e)
    	
Unpaid more than 90 days   from due date
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(f)
    	
Otherwise ineligible
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Total   Deductions (sum of lines A1a - A1f)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Eligible   Receivables (line A1 minus line A2)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Eligible   Receivables in Borrowing Base (line A3 x .75)
    	
 
    	
 
    

 

B.                        INVENTORY IN BORROWING BASE

 

	
1.
    	
Gross   inventory of Finished Goods
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Less
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Finished   Goods not located at approved locations
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Obsolete, slow moving, or   not merchantable
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Otherwise ineligible 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Total   Deductions (sum of lines B2a - B2c above)
    	
 
    	
 
    

 

 

	
4.
    	
Eligible   Inventory (line B1 minus line B3)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Eligible   Inventory in Borrowing Base (line B4 x .50)
    	
 
    	
 
    

 

C.                        RETAINAGE IN BORROWING BASE

 

	
1.
    	
Eligible   Retainage
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Eligible   Retainage Base (line C1 x .50)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Eligible   Retainage Base in Borrowing Base (line C2 x .75)
    	
 
    	
 
    

 

D.                        TOTAL BORROWING BASE

 

	
1.
    	
Line   A4
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Line   B5
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Line   C3
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Sum   of Lines D1, D2 and D3 (Borrowing Base)
    	
 
    	
 
    

 

E.                         REVOLVING FACILITY ADVANCES

 

	
1.
    	
Revolving   Loans
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Letters   of Credit
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Total   Outstandings (Sum of lines E1 and E2)
    	
 
    	
 
    

 

E.                         AVAILABLE BORROWING BASE COLLATERAL

 

	
 
    	
(line   D4 minus line E3)
    	
 
    	
 
    

 

2

 

EXHIBIT E

 

WILLDAN GROUP, INC.

 

COMPLIANCE CERTIFICATE

 

	
To:
    	
BMO   Harris Bank N.A., as lender under the Credit Agreement dated as of   March 24, 2014 (as extended, renewed, amended or restated from time to   time, the “Credit Agreement”), by and among   Willdan Group, Inc. (the “Borrower”),   the Guarantors party thereto, and BMO Harris Bank N.A. (the “Bank”)
    	
 
    

 

This Compliance Certificate is furnished to the Bank pursuant to the Credit Agreement.  Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Credit Agreement.

 

THE BORROWER HEREBY CERTIFIES THAT:

 

1.                                      I am the duly elected                          of Willdan Group, Inc.;

 

2.                                      I have reviewed the terms of the Credit Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements;

 

3.                                      The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which constitutes a Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Compliance Certificate, except as set forth below;

 

4.                                      The financial statements required by Section 8.5 of the Credit Agreement and being furnished to the Bank concurrently with this Compliance Certificate are true, correct and complete as of the date and for the periods covered thereby; and

 

5.                                      The Schedule I hereto sets forth financial data and computations evidencing the Borrower’s compliance with certain covenants of the Credit Agreement, all of which data and computations are, to the best of my knowledge, true, complete and correct and have been made in accordance with the relevant Sections of the Credit Agreement.

 

 

Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

 

 

The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Compliance Certificate in support hereof, are made and delivered this              day of                                      201    .

 

	
 
    	
WILLDAN   GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name
    	
 
    
	
 
    	
 
    	
Title
    	
 
    

 

 

SCHEDULE I

TO COMPLIANCE CERTIFICATE

 

WILLDAN GROUP, INC.

 

COMPLIANCE CALCULATIONS

FOR CREDIT AGREEMENT DATED AS OF MARCH 24, 2014

 

CALCULATIONS AS OF                           , 201 

 

	
A.
    	
Total   Leverage Ratio (Section 8.23(a))
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
1.
    	
Total   Funded Debt
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.
    	
Net   Income for past 4 quarters
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.
    	
Interest   Expense for past 4 quarters
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.
    	
Income   taxes for past 4 quarters
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.
    	
Depreciation   and Amortization Expense for past 4 quarters
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.
    	
Non-cash   charges acceptable to Bank for past 4 quarters
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.
    	
Non-cash   charges acceptable to Bank for past 4 quarters
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.
    	
Sum   of Lines A2, A3, A4, A5 and A6 minus Line A7 (“EBITDA”)
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.
    	
Ratio   of Line A1 to A8
    	
     :1.0
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.
    	
Line   A9 ratio must not exceed
    	
2.00:1.0
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.
    	
The   Borrower is in compliance (circle yes or no)
    	
yes/no
    
	
 
    	
 
    	
 
    	
 
    
	
B.
    	
Tangible   Net Worth (Section 8.23(b))
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
1.
    	
Tangible   Net Worth
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.
    	
Line   B1 shall not be less than
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.
    	
The   Borrower is in compliance (circle yes or no)
    	
yes/no
    

 

 

	
C.
    	
Fixed   Charge Coverage Ratio (Section 8.23(c))
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
1.
    	
Line   A8 above
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.
    	
Rent   Expense for past 4 quarters
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.
    	
Unfinanced   Capital Expenditures for past 4 quarters
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.
    	
Line   C1 plus Line C2 minus Line C3
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.
    	
Principal   payments for past 4 quarters
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.
    	
Interest   Expense paid in cash for past 4 quarters
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
7.
    	
Income   taxes paid in cash for past 4 quarters
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.
    	
Restricted   Payments paid in cash for past 4 quarters
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.
    	
Rent   Expense for past 4 quarters
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
10.
    	
Sum   of Lines C5, C6, C7, C8 and C9
    	
$            
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
11.
    	
Ratio   of Line C4 to Line C10
    	
     :1.0
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
12.
    	
Line   C11 ratio must not be less than
    	
1.25:1.0
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.
    	
The   Borrower is in compliance (circle yes or no)
    	
yes/no
    

 

2

 

EXHIBIT F

 

ADDITIONAL GUARANTOR SUPPLEMENT

 

Date:                          , 201 

 

	
To:
    	
BMO   Harris Bank N.A., as lender under the Credit Agreement dated as of   March 24, 2014 (as extended, renewed, amended or restated from time to   time, the “Credit Agreement”), by and among   Willdan Group, Inc. (the “Borrower”),   the Guarantors party thereto, and BMO Harris Bank N.A. (the “Bank”)
    	
 
    

 

Ladies and Gentlemen:

 

Reference is made to the Credit Agreement described above.  Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein.  The undersigned, [name of Subsidiary Guarantor], a [jurisdiction of incorporation or organization] hereby elects to be a “Guarantor” for all purposes of the Credit Agreement, effective from the date hereof.  The undersigned confirms that the representations and warranties set forth in Section 6 of the Credit Agreement are true and correct [in all material respects (where not already qualified by materiality, otherwise in all respects)] as to the undersigned as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct in all material respects (where not already qualified by materiality, otherwise in all respects) as of such earlier date) and the undersigned shall comply with each of the covenants set forth in Section 8 of the Credit Agreement applicable to it.

 

Without limiting the generality of the foregoing, the undersigned hereby agrees to perform all the obligations of a Guarantor under, and to be bound in all respects by the terms of, the Credit Agreement, including without limitation Section 10 thereof, to the same extent and with the same force and effect as if the undersigned were a signatory party thereto.

 

The undersigned acknowledges that this Agreement shall be effective upon its execution and delivery by the undersigned to the Bank, and it shall not be necessary for the Bank or any of its Affiliates entitled to the benefits hereof, to execute this Agreement or any other acceptance hereof.  [This Agreement may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement.  Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original.]  Delivery of a counterpart [hereof/this Agreement] by facsimile transmission or by e-mail transmission of an Adobe portable document format file (also known as a “PDF” file) shall be effective as delivery of a manually executed counterpart hereof.  This Agreement shall be construed in accordance with and governed by the internal laws of the State of Illinois.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
[NAME   OF SUBSIDIARY GUARANTOR]
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name
    	
 
    
	
 
    	
 
    	
Title
    	
 
    

 

2

 

SCHEDULE 1.1

 

FISCAL QUARTERS

 

	
FISCAL QUARTER
    	
 
    	
LAST DAY OF SUCH FISCAL QUARTER
    
	
4th Fiscal Quarter of 2013
    	
 
    	
December 27, 2013
    
	
1st Fiscal Quarter of 2014
    	
 
    	
March 28, 2014
    
	
2nd Fiscal Quarter of 2014
    	
 
    	
June 27, 2014
    
	
3rd Fiscal Quarter of 2014
    	
 
    	
September 26, 2014
    
	
4th Fiscal Quarter of 2014
    	
 
    	
January 2, 2015
    

 

 

SCHEDULE 6.2

 

SUBSIDIARIES

 

	
NAME
    	
 
    	
JURISDICTION OF
   ORGANIZATION
    	
 
    	
PERCENTAGE
   OWNERSHIP
    	
 
    	
OWNER
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Electrotec   of NY Electrical Inc.
    	
 
    	
New York
    	
 
    	
100%
    	
 
    	
Willdan Lighting & Electric, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Public   Agency Resources
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Group, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Energy Solutions
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Group, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Engineering
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Group, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Engineers and Constructors
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Group, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Financial Services
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Group, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Homeland Solutions
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Group, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Infrastructure
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Group, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Lighting & Electric, Inc.
    	
 
    	
Delaware
    	
 
    	
100%
    	
 
    	
Willdan Energy Solutions
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Lighting & Electric of California
    	
 
    	
California
    	
 
    	
100%
    	
 
    	
Willdan Lighting & Electric, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Willdan   Lighting & Electric of Washington, Inc.
    	
 
    	
Washington
    	
 
    	
100%
    	
 
    	
Willdan Lighting & Electric, Inc.
    

 

 

SCHEDULE 6.2

 

PERMITTED INVESTMENTS

 

None.

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