Document:

Exhibit 1.01

Conflict Minerals Report

 

 

This Report has been prepared pursuant
to Rule 13p-1 of the Securities Exchange Act of 1934, as amended (“Rule 13p-1”) for the reporting period from January
1 to December 31, 2017. The Company is a leading supplier of oilfield services, products, and digital solutions and operates in
more than 120 countries around the world.

 

The Company’s supply chain is both
global and complex, and there are multiple tiers of suppliers between the Company and the original sources of minerals used in
the Company’s products. Therefore, the Company relied on its direct suppliers to provide information about the origin of
conflict minerals in the raw materials and components it purchased for use in the manufacture of, or contracts to manufacture,
products that the Company offers for sale. On July 3, 2017, we closed our business combination to combine the oil and gas business
(GE O&G) of General Electric Company and Baker Hughes Incorporated. In accordance with the Securities and Exchange Commission
(“SEC”) rules, this Report excludes GE O&G.

 

The Report contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, (each a “forward-looking statement”). The words “will,” “intend,” “anticipate,”
“believe,” “ensure,” “expect,” “if,” “estimate,” “project,”
“foresee,” “predict,” “outlook,” “aim,” “could,” “should,”
“potential,” “would,” “may,” “probable,” “likely,” and similar expressions,
and the negative thereof, are intended to identify forward-looking statements. These forward-looking statements are also affected
by the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, Quarterly
Report on Form 10-Q for the quarter ended March 31, 2018, recent Current Reports on Form 8-K, and other Securities and Exchange
Commission filings available through the Company’s website at: www.bhge.com/investor or through the SEC’s Electronic
Data Gathering and Analysis Retrieval (“EDGAR”) system at: www.sec.gov. The Company undertakes no obligation to publicly
update or revise any forward-looking statement.

 

Reasonable Country of Origin Inquiry

 

Management Systems

 

The Company is committed to the responsible
sourcing of raw materials and components necessary to the production or functionality of our products, and we have publicly posted
this policy. The policy, including the commitment to establishing a conflict-free supply chain, may be found at:

 

http://www.bakerhughes.com/company/corporate-social-responsibility/human-rights-and-security/conflict-minerals.

 

In accordance with Rule 13p-1, the Company
undertook a reasonable country of origin inquiry to determine the origin of the conflict minerals necessary to the production or
functionality of the products we offered for sale during the reporting period. The Company undertook the following as part of that
inquiry:

 

		·	established oversight of the processes and procedures of our program within our engineering and
supply chain organization;

 

		·	incorporated our Conflict Minerals policy in our master supplier agreement template for use with
new and renewed contracts with suppliers;

 

		·	utilized the Company’s existing mechanisms for reporting Conflict Minerals concerns, allowing
contact by telephone, email and online, for both the public and internal reporters;

 

		·	informed relevant suppliers of the Company’s expectations regarding supplier Conflict Minerals
policy, due diligence processes, and responses to the Company’s requests for information;

 

		·	identified those products we manufactured or contracted to manufacture that we reasonably believed
contained one or more conflict minerals (defined as cassiterite, columbite-tantalite, gold, wolframite, and their derivatives,
which are limited to tin, tantalum, tungsten, and gold collectively, the “Conflict Minerals” or sometimes “conflict
minerals” or ”3TGs”), by first eliminating those products that were not subject to Rule 13p-1, including tool
rentals, tools used in performance of our services, chemicals, and fluids;

 

		·	using lessons learned during the previous reporting period, we prioritized our project scoping
process to help identify relevant raw materials or components used in the manufacture or contract for manufacture of the products
specifically identified in the step above;

 

     

     

    

		·	identified 285 suppliers that provided the materials or components specifically identified and
prioritized in the previous step;

 

		·	engaged the services of a third-party conflict minerals service provider to create and maintain
a supplier engagement portal;

 

		·	using the third-party conflict minerals service provider’s technology platform, contacted
the identified suppliers;

 

		·	requested relevant suppliers to determine which of the materials or components they provided to
the Company contained one or more conflict minerals;

 

		·	requested these suppliers to in turn require their suppliers to comply with the Company’s
conflict minerals requirements;

 

		·	requested these suppliers to develop a policy and management system covering conflict minerals
and to require their suppliers to in turn adopt similar policies and systems;

 

		·	informed these suppliers of the informational and instructional materials available on our third-party
conflict minerals service provider’s Conflict Minerals Resource Center web page, the Conflict Minerals Reporting Template
(“CMRT”) questionnaire, and due diligence guidelines;

 

		·	requested confirmation from these suppliers of the presence of every necessary conflict mineral
in the raw materials or components they supplied to the Company, and information regarding the origin of those minerals;

 

		·	established a deadline of May 11th, 2018 to provide the requested conflict minerals
information and documentation;

 

		·	followed up with unresponsive suppliers to request compliance with the Company’s requests
for information and documentation, until the stated deadline by sending up to three e-mailed messages by the Company’s third-party
service provider;

 

		·	reviewed the responses compiled for each responding supplier to determine existence of a Conflict
Minerals policy, due diligence process, and pass-through requirements for successive supplier tiers;

 

		·	reviewed the responses compiled for each responding supplier to determine which smelters or refiners
(“SORs”) were the source of necessary conflict minerals contained in the raw materials or components supplied to the
Company;

 

		·	received completed questionnaires from 68% of the identified suppliers contacted by our third-party
conflict minerals service provider, an increase of 19% year-over-year; and

 

		·	identified six SORs that pose a high risk of obtaining 3TGs from non-conflict free sources in the
DRC Region.

 

The Company’s representatives have
also participated in monthly Responsible Minerals Initiative Multi-Stakeholder Group (MSG) calls, as well as attended various webinars,
to enable us to consider best practices and to explore opportunities to participate in responsible sourcing and supply chain transparency.
Additionally, a representative of the Company’s Conflict Minerals Management Team delivered presentations at various Conflict
Minerals and Supply Chain conferences, to offer insight into the continued development of best practices.

 

The Company’s responding relevant
suppliers identified 320 verified SORs believed to be the source of necessary conflict minerals contained in the raw materials
or components supplied to the Company. Of those supplier-identified SORs, 6 were identified as posing a high risk of sourcing from
mines supporting conflict in the DRC Region. These 6 SORs are more fully described in the table located in Schedule 2 below, and
were subject to due diligence measures on the source and chain of custody of conflict minerals as described below.

 

Design of Due Diligence

 

The Company’s due diligence was designed in conformance
with an internationally recognized due diligence framework, specifically, the Organization for Economic Cooperation and Development
(OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (Second Edition).
OECD Step 1 is addressed above, under the heading “Reasonable Country of Origin Inquiry.” and Steps 2 – 5 are
addressed below in the subheadings under “Due Diligence Measures Undertaken.”

 

On July 3, 2017, we closed our business combination to combine
the oil and gas business (GE O&G) of General Electric Company and Baker Hughes Incorporated. In accordance with the SEC rules,
this Report excludes GE O&G.

 

Due Diligence Measures Undertaken

 

Identification and Assessment of Risks
in the Supply Chain

 

    2 

     

    

The Company determined that approximately
2% of the identified SORs in our global supply chain required due diligence on source and chain of custody of the conflict minerals
provided to the Company that were necessary for the manufacture of its products, based upon the applicability of one or more of
the following criteria:

 

		·	reported sourcing conflict minerals from the conflict area;

 

		·	provided data on SORs that self-report sourcing from a mine located in the conflict area;

 

		·	provided data on SORs that were reported by independent entities to source from a mine located
in the conflict area;

 

		·	indicated that the SOR named by the supplier passed materials through a known or suspected country
for smuggling, export out of other countries, or the transit of materials containing conflict minerals; or

 

		·	provided information about an SOR indicating the origin of the materials was not from a country
known to hold reserves.

 

Response to Identified Risks

 

The Company undertook the following measures
during due diligence on the source and chain of custody of the conflict minerals:

 

		·	independently verified all SOR information submitted by suppliers in their CMRTs, checking against
the third-party conflict minerals service provider’s independent smelter research, including:

 

		o	merged duplicate submissions following verification of overlapping company information;

 

		o	eliminated submissions with garbage characters and obvious misspellings;

 

		o	validated named entities as actual SORs; and

 

		o	confirmed that each facility is a legitimate SOR of 3TGs;

 

		·	gathered information on legitimate SORs in the SOR databases from several sources, including without
limitation the third-party service provider’s independent research, Responsible Minerals Initiative (RMI), London Bullion
Market Association (LBMA), the Dubai Multi Commodities Centre (DMCC), the Responsible Jewellery Council (RJC), the US Department
of Commerce (DoC), and the US Geological Survey (USGS) (the “Third-Party Database”);

 

		·	if a supplier did not provide a proper identification number issued by a validating entity, such
as RMI or LBMA, we requested the supplier to provide the following information:

 

		o	the metal processed by the facility;

 

		o	the city, province/state and country where the facility is located;

 

		o	the name and email address for the designated contact at the facility;

 

		o	the recycled and scrap status of metals, minerals or ores processed by the facility;

 

		o	if the facility sources all of its metals, minerals or ores solely from recycled or scrap materials,
the country of origin of those materials; and

 

		o	if the facility does not source all materials solely from recycled or scrap providers, the location
of mines from which the facility sources its metals, minerals or ores;

 

		·	labeled as “Valid” those SOR submissions from suppliers that matched the Third-Party
Database of legitimate SORs and performed additional verification:

 

		o	inquired whether the SOR has been audited by one or more recognized certification entities, such
as RMI, LBMA, DMCC, or RJC, and if not, whether they undergo another form of an independent audit; and

 

		o	those SORs that have not undergone a certification audit were asked if they plan to undertake a
certification process in the future;

 

		·	labeled as "Invalid" those SORs submitted by a supplier that matched the Third-Party
Database list of facilities known not to be a legitimate facility, or a common erroneous or inoperative name;

 

		·	labeled as "Undetermined” those SORs submitted by a supplier that did not match either
the legitimate or non-legitimate lists in the Third-Party Database;

 

		·	identified suppliers that submitted SOR names determined to be Invalid or Undetermined for future
contact to correct or amend the pertinent information;

 

		·	for each Valid SOR, we assigned a risk rating of Low, Medium or High, based on the following factors:

 

		o	whether the facility has or has not already successfully undergone a certification audit by a recognized
entity;

 

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		o	whether the facility is registered with a certification body, and if so, is progressing toward
completing an audit process by that body;

 

		o	whether the facility is proximate to, conducts conflict mineral transactions with entities within,
or transports materials through any of the following:

 

		§	a Level 1 country, with known active ore production and not identified as either conflict regions
or plausible countries engaged in smuggling materials containing conflict minerals;

 

		§	a Level 2 country, known to or plausibly believed to be engaged in smuggling, export out of a Level
3 country, or as a transit for materials containing conflict minerals; or

 

		§	a Level 3 country, the DRC or one of its nine adjoining countries, Angola, Burundi, Central African
Republic, Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia, collectively referred to as "covered countries"
in Section 1502 of the Dodd Frank Act;

 

		·	for each supplier, calculated a cumulative SOR risk, either low, medium, or high, summarizing the
risk that the supplier poses to the Baker Hughes supply chain, based on the chances that the supplier furnishes 3TGs that may originate
from non-conflict free sources:

 

		o	obtained the value of the cumulative SOR risk for each supplier by collecting the risk ratings
of all SORs associated with the supplier, or in the case of parts-level responses, each product/part provided by the supplier;
and

 

		o	for each supplier, or, as applicable, each product/part, assigned the overall risk rating equal
to the risk rating level with the most SORs at that level;

 

Independent Audit of SOR Due Diligence
Practices

 

The Company became a participating member
of the Responsible Minerals Initiative (RMI) as of June, 2017, and supports efforts by the RMI to promote smelter and refiner registration,
audit and verification of conflict status.

 

Annual Report on Supply Due Diligence

 

The Company annually reports on our global
supply chain due diligence and makes the current and historical reports available on our public website at the following weblink:

 

http://www.bakerhughes.com/company/corporate-social-responsibility/human-rights-and-security/conflict-minerals.

 

Independent Private Sector Audit

 

The Company
is not subject to an independent private sector audit of the Report.

 

Results of Due Diligence Undertaken
and Processing Facilities

 

Based on the Company’s due diligence
efforts to date, the Company does not have sufficient information to fully determine each processing facility utilized to produce
the conflict minerals used in each of the Company's relevant products. However, Schedule 2 below lists the processing facilities
that source minerals from the DRC, for which the Company has been able to confirm the information provided by our suppliers.

 

Based on the Company’s due diligence
efforts to date, the Company does not have sufficient information to fully determine the country of origin of the conflict minerals
in each of our relevant products, or whether the conflict minerals in each of our products were from recycled or scrap sources.
However, Schedule 1 below lists the countries of origin, by pertinent mineral, for which the Company has been able to confirm the
information provided by our suppliers.

 

The efforts to determine the origin of
conflict minerals are more fully described in the section entitled “Due Diligence Measures Undertaken.”

 

    4 

     

    

Risk Mitigation

 

With respect to those products the Company
manufactures or contracts to be manufactured for sale that contain necessary conflict minerals, the Company plans to undertake
the following steps to mitigate the risk that our necessary conflict minerals could unintentionally benefit armed groups:

 

		·	improve processes to identify the presence of necessary conflict minerals in products we manufacture
or contract to be manufactured and offer for sale by:

 

		o	seeking to increase our supplier response rate in reporting period 2018, while recognizing that
response rates will depend on supplier cooperation, and

 

		o	incorporating a flow-down clause on all new or renewed Master Supplier Agreements, creating a contractual
obligation on the part of suppliers to comply with the Company’s conflict minerals requirements and to in turn require policy
and systems implementation by successive supply chain tiers;

 

		·	continue to assess the presence of necessary conflict minerals in our relevant supply chain;

 

		·	continue to perform due diligence on the necessary conflict minerals supplied to us, to determine
their origin;

 

		·	continue to clearly communicate to suppliers our expectations with regard to compliance with the
Company’s stated policies, performance, transparency and responsible sourcing practices;

 

		·	engage with our suppliers to properly identify and obtain relevant information from “Invalid”
or “Undetermined” SORs in our supply chain;

 

		·	engage with our suppliers identified as sourcing from high-risk SORs, involving senior management
as necessary, to encourage them to source from conflict-free SORs or mines and obtain from their applicable SORs or mines conflict-free
designations from recognized certification programs;

 

		·	continue to engage with suppliers that did not respond to our request for conflict minerals information
for reporting period 2017, ultimately seeking to engage as many of those suppliers as possible, to:

 

		o	determine reasons for past failures to respond,

 

		o	address supplier concerns and questions as appropriate, and

 

		o	offer suppliers resources, including educational and other guidance materials, to facilitate future
responses;

 

		·	follow up with all high and medium cumulative risk suppliers in order to assist them in understanding
their risk level and the future implications their risk level could have on the Company’s conflict minerals program;

 

		·	conduct analysis and verification of origin information provided by our suppliers;

 

		·	continue to actively participate in the RMI’s efforts to improve and expand engagement of
SORs by independent certifying organizations;

 

		·	monitor the activities, initiatives and programs of DRC regional governments and agencies, international
bodies, and non-governmental organizations that are aimed at minimizing or eliminating the benefit to relevant armed groups derived
from conflict minerals, and, where practicable, to support or implement those activities, initiatives or programs;

 

		·	seek, where practicable, alternative suppliers that responsibly source necessary conflict minerals,
which may include sources within the conflict area that do not benefit armed groups; and

 

		·	continue to participate in local and national industry groups, as well as non-governmental organizations,
such as the Responsible Sourcing Network Multi-Stakeholder Group and the Oil and Gas Services Working Group on conflict minerals,
to develop best practices regarding responsible sourcing and supply chain transparency.

 

Products Description

 

The Company’s products covered by
this Report that are considered to contain necessary conflict minerals include the following:

 

Drill Bits - includes TriconeTM,
PDC or “diamond”, and KymeraTM hybrid drill bits used for performance drilling, hole enlargement and coring.

 

Completion Systems - includes products
used to control the flow of hydrocarbons within a wellbore including sand control systems; liner hangers; wellbore isolation; expandable
tubulars; multilaterals; safety systems; packers and flow control; and tubing conveyed perforating.

 

    5 

     

    

Wellbore Intervention - includes
products used in existing wellbores to improve their performance including thru-tubing fishing; thru-tubing inflatables; conventional
fishing; casing exit systems; production injection packers; and remedial and stimulation tools.

 

Intelligent Production Systems -
includes products used to monitor and dynamically control the production from individual wells or fields including intelligent
well systems.

 

Artificial Lift - includes electric
submersible pump systems; progressing cavity pump systems; gas lift systems; and surface horizontal pumping systems used to lift
large volumes of oil and water when a reservoir is no longer able to flow on its own.

 

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Schedule 1

 

The information in this Schedule is solely an aggregation of
data provided by verified SORs identified by the Company’s suppliers. This is not a confirmation of conflict minerals actually
contained in the Company’s products. Additionally, since this aggregation depends on self-identification by SORs, the following
lists are not a confirmation or verification of every country of origin.

 

Countries
of Origin - Tantalum 

 

	Angola *

Argentina

Australia

Austria

Belarus

Belgium

Bolivia

Brazil

Burundi *

Cambodia

Canada

Central African Republic *

Chile

China

Colombia

Congo (Brazzaville) *

Czech Republic

Democratic Republic of Congo *

Djibouti

	Ecuador

Egypt

Estonia

Ethiopia

France

Germany

Ghana

Guinea

Guyana

Hungary

India

Indonesia

Ireland

Israel

Italy

Ivory Coast

Japan

Jersey

Kazakhstan

Kenya

	Korea, Republic of

Laos

Luxembourg

Madagascar

Malaysia

Mali

Mexico

Mongolia

Mozambique

Myanmar

Namibia

Netherlands

Niger

Nigeria

Peru

Philippines

Poland

Portugal

Russian Federation

Rwanda *

	Sierra Leone

Singapore

Slovakia

South Africa

South Sudan *

Spain

Suriname

Switzerland

Taiwan

Tanzania *

Thailand

Uganda *

United Kingdom

United States

Viet Nam

Zambia *

Zimbabwe

 

Recycle/Scrap

 

* = DRC Region countries

 

 

Countries
of Origin - Tin 

 

	Angola *

Argentina

Armenia

Australia

Austria

Belgium

Bolivia

Brazil

Burundi *

Cambodia

Canada

Central African Republic *

Chile

China

Colombia

Congo (Brazzaville) *

Czech Republic

Democratic Republic of Congo
*

Djibouti

Ecuador

 	Egypt

Estonia

Ethiopia

France

Germany

Guyana

Hong Kong

Hungary

India

Indonesia

Ireland

Israel

Ivory Coast

Japan

Jersey

Kazakhstan

Kenya

Korea, Republic of

Kyrgyzstan

Laos

Luxembourg

	Madagascar

Malaysia

Mexico

Mongolia 

Morocco

Mozambique 

Myanmar

Namibia 

Netherlands

Niger

Nigeria

Papua New Guinea

Peru

Philippines

Poland

Portugal

Russian Federation

Rwanda *

Sierra Leone

Singapore

Slovakia

	South Africa

South Sudan *

Spain

Suriname

Sweden

Switzerland

Taiwan

Tanzania *

Thailand

Turkey

Uganda *

United Kingdom

United States

Uzbekistan

Viet Nam

Zambia *

Zimbabwe

 

Recycle/Scrap

 

 

 

* = DRC Region countries

 

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Countries
of Origin - Tungsten 

 

	Angola *

Argentina

Australia

Austria

Belgium

Bolivia

Brazil

Burundi *

Cambodia

Canada

Central African Republic *

Chile

China

Colombia

Congo (Brazzaville) *

Czech Republic

Democratic Republic of Congo *

Djibouti 

	Ecuador

Egypt 

Estonia

Ethiopia 

France

Germany

Guinea

Guyana

Hungary

India

Indonesia

Ireland

Israel

Ivory Coast

Japan

Kazakhstan

Korea, Republic of

Laos

Luxembourg

	Madagascar

Malaysia

Mexico

Mongolia

Mozambique

Myanmar

Namibia

Netherlands

Niger

Nigeria

Papua New Guinea

Peru

Philippines

Portugal

Russian Federation

Rwanda *

Sierra Leone

Singapore

Slovakia

	South Africa

South Sudan *

Spain

Suriname

Switzerland

Taiwan

Tanzania *

Thailand

Uganda *

United Kingdom

United States

Viet Nam

Zambia *

Zimbabwe

 

Recycle/Scrap

 

 

 

 

* = DRC Region countries

 

 

Countries
of Origin - Gold 

 

	Argentina

Armenia

Australia

Austria

Belgium

Bermuda

Bolivia

Brazil

Burundi *

Cambodia

Canada

Chile

China

Colombia

Congo (Brazzaville) *

Czech Republic

Democratic Republic of Congo *

Djibouti

Ecuador

Egypt

Estonia

Ethiopia

	Finland

France

Germany

Ghana

Guinea

Guyana

Hong Kong

Hungary

India

Indonesia

Ireland

Israel

Italy

Ivory Coast

Japan

Jersey

Kazakhstan

Korea, Republic of

Kyrgyzstan

Laos

Luxembourg

	Madagascar

Malaysia

Mali

Mexico

Mongolia

Mozambique

Myanmar

Namibia

Netherlands

New Zealand

Niger

Nigeria

Papua New Guinea

Peru

Philippines

Poland

Portugal

Russian Federation

Rwanda *

Saudi Arabia

Sierra Leone

Singapore

Slovakia

	South Africa

Spain

Suriname

Sweden

Switzerland

Taiwan

Tajikistan

Tanzania *

Thailand

Turkey

United Arab Emirates

United Kingdom

United States

Uzbekistan

Viet Nam

Zambia *

Zimbabwe

 

Recycle/Scrap

 

 

 

 

 

* = DRC Region countries

 

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Schedule 2

 

Smelters or Refiners with Identified
Mineral Sources

 

The information in this Schedule is solely an aggregation of
data provided by verified SORs identified by the Company’s suppliers. This is not a confirmation of conflict minerals actually
contained in the Company’s products. Additionally, since this aggregation depends on self-identification by SORs, the following
lists are not a confirmation or verification of every country of origin.

 

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID002708	Abington Reldan Metals, LLC	Gold	Unknown	UNITED STATES	Unknown
	CID000015	Advanced Chemical Company	Gold	Yes	UNITED STATES	Unknown
	CID003185	African Gold Refinery **	Gold	Unknown	UGANDA	Unknown
	CID000019	Aida Chemical Industries Co., Ltd.	Gold	Yes	JAPAN	No
	CID002560	Al Etihad Gold LLC	Gold	Yes	UNITED ARAB EMIRATES	Unknown
	CID000035	Allgemeine Gold-und Silberscheideanstalt A.G.	Gold	Yes	GERMANY	Unknown
	CID000041	Almalyk Mining and Metallurgical Complex (AMMC)	Gold	Yes	UZBEKISTAN	Unknown
	CID000058	AngloGold Ashanti Córrego do Sítio Mineração	Gold	Yes	BRAZIL	Unknown
	CID000077	Argor-Heraeus S.A.	Gold	Yes	SWITZERLAND	Unknown
	CID000082	Asahi Pretec Corp.	Gold	Yes	JAPAN	No
	CID000924	Asahi Refining Canada Ltd.	Gold	Yes	CANADA	Unknown
	CID000920	Asahi Refining USA Inc.	Gold	Yes	UNITED STATES	Unknown
	CID000090	Asaka Riken Co., Ltd.	Gold	Yes	JAPAN	No
	CID000103	Atasay Kuyumculuk Sanayi Ve Ticaret A.S.	Gold	Unknown	TURKEY	Unknown
	CID002850	AU Traders and Refiners	Gold	Yes	SOUTH AFRICA	Unknown
	CID000113	Aurubis AG	Gold	Yes	GERMANY	Unknown
	CID002863	Bangalore Refinery	Gold	Unknown	INDIA	Unknown
	CID000128	Bangko Sentral ng Pilipinas (Central Bank of the Philippines)	Gold	Yes	PHILIPPINES	Unknown
	CID000157	Boliden AB	Gold	Yes	SWEDEN	Unknown
	CID000176	C. Hafner GmbH + Co. KG	Gold	Yes	GERMANY	Unknown
	CID000180	Caridad	Gold	Unknown	MEXICO	Unknown
	CID000185	CCR Refinery - Glencore Canada Corporation	Gold	Yes	CANADA	Unknown
	CID000189	Cendres + Métaux S.A.	Gold	Yes	SWITZERLAND	Unknown

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	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID000233	Chimet S.p.A.	Gold	Yes	ITALY	Unknown
	CID000264	Chugai Mining	Gold	Unknown	JAPAN	Unknown
	CID000328	Daejin Indus Co., Ltd.	Gold	Yes	KOREA, REPUBLIC OF	Unknown
	CID000343	Daye Non-Ferrous Metals Mining Ltd.	Gold	Unknown	CHINA	Unknown
	CID002867	Degussa Sonne / Mond Goldhandel GmbH	Gold	Unknown	GERMANY	Unknown
	CID000362	DODUCO Contacts and Refining GmbH	Gold	Yes	GERMANY	No
	CID000401	Dowa	Gold	Yes	JAPAN	No
	CID003195	DS PRETECH Co., Ltd.	Gold	Unknown	KOREA, REPUBLIC OF	Unknown
	CID000359	DSC (Do Sung Corporation)	Gold	Yes	KOREA, REPUBLIC OF	Unknown
	CID000425	Eco-System Recycling Co., Ltd.	Gold	Yes	JAPAN	No
	CID001322	Elemetal Refining, LLC	Gold	Unknown	UNITED STATES	Unknown
	CID002561	Emirates Gold DMCC	Gold	Yes	UNITED ARAB EMIRATES	Unknown
	CID002515	Fidelity Printers and Refiners Ltd. **	Gold	Unknown	ZIMBABWE	Unknown
	CID002852	GCC Gujrat Gold Centre Pvt. Ltd.	Gold	Unknown	INDIA	Unknown
	CID002459	Geib Refining Corporation	Gold	Yes	UNITED STATES	Unknown
	CID002243	Gold Refinery of Zijin Mining Group Co., Ltd.	Gold	Yes	CHINA	Unknown
	CID001909	Great Wall Precious Metals Co., Ltd. of CBPM	Gold	Unknown	CHINA	Unknown
	CID002312	Guangdong Jinding Gold Limited	Gold	Unknown	CHINA	Unknown
	CID000651	Guoda Safina High-Tech Environmental Refinery Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID000671	Hangzhou Fuchunjiang Smelting Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID000689	HeeSung	Gold	Yes	KOREA, REPUBLIC OF	Unknown
	CID000694	Heimerle + Meule GmbH	Gold	Yes	GERMANY	No
	CID000707	Heraeus Metals Hong Kong Ltd.	Gold	Yes	CHINA	Unknown
	CID000711	Heraeus Precious Metals GmbH & Co. KG	Gold	Yes	GERMANY	Unknown
	CID000767	Hunan Chenzhou Mining Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID000778	Hwasung CJ Co., Ltd.	Gold	Unknown	KOREA, REPUBLIC OF	Unknown
	CID000801	Inner Mongolia Qiankun Gold and Silver Refinery Share Co., Ltd.	Gold	Yes	CHINA	Unknown

    10 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID000807	Ishifuku Metal Industry Co., Ltd.	Gold	Yes	JAPAN	Unknown
	CID000814	Istanbul Gold Refinery	Gold	Yes	TURKEY	Unknown
	CID002765	Italpreziosi	Gold	Yes	ITALY	Unknown
	CID000823	Japan Mint	Gold	Yes	JAPAN	Unknown
	CID000855	Jiangxi Copper Co., Ltd.	Gold	Yes	CHINA	Unknown
	CID000927	JSC Ekaterinburg Non-Ferrous Metal Processing Plant	Gold	Yes	RUSSIAN FEDERATION	Unknown
	CID000929	JSC Uralelectromed	Gold	Yes	RUSSIAN FEDERATION	Unknown
	CID000937	JX Nippon Mining & Metals Co., Ltd.	Gold	Yes	JAPAN	Unknown
	CID002563	Kaloti Precious Metals **	Gold	Unknown	UNITED ARAB EMIRATES	Unknown
	CID000956	Kazakhmys Smelting LLC	Gold	Unknown	KAZAKHSTAN	Unknown
	CID000957	Kazzinc	Gold	Yes	KAZAKHSTAN	Unknown
	CID000969	Kennecott Utah Copper LLC	Gold	Yes	UNITED STATES	Unknown
	CID002511	KGHM Polska Miedz Spolka Akcyjna	Gold	Unknown	POLAND	Unknown
	CID000981	Kojima Chemicals Co., Ltd.	Gold	Yes	JAPAN	No
	CID002605	Korea Zinc Co., Ltd.	Gold	Yes	KOREA, REPUBLIC OF	Unknown
	CID001029	Kyrgyzaltyn JSC	Gold	Yes	KYRGYZSTAN	Unknown
	CID002865	Kyshtym Copper-Electrolytic Plant ZAO	Gold	Unknown	RUSSIAN FEDERATION	Unknown
	CID001032	L'azurde Company For Jewelry	Gold	Unknown	SAUDI ARABIA	Unknown
	CID001056	Lingbao Gold Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID001058	Lingbao Jinyuan Tonghui Refinery Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID002762	L'Orfebre S.A.	Gold	Unknown	ANDORRA	Unknown
	CID001078	LS-NIKKO Copper Inc.	Gold	Yes	KOREA, REPUBLIC OF	Unknown
	CID001093	Luoyang Zijin Yinhui Gold Refinery Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID002606	Marsam Metals	Gold	Yes	BRAZIL	Unknown
	CID001113	Materion	Gold	Yes	UNITED STATES	No
	CID001119	Matsuda Sangyo Co., Ltd.	Gold	Yes	JAPAN	Unknown
	CID001149	Metalor Technologies (Hong Kong) Ltd.	Gold	Yes	CHINA	Unknown
	CID001152	Metalor Technologies (Singapore) Pte., Ltd.	Gold	Yes	SINGAPORE	Unknown

    11 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID001147	Metalor Technologies (Suzhou) Ltd.	Gold	Yes	CHINA	Unknown
	CID001153	Metalor Technologies S.A.	Gold	Yes	SWITZERLAND	Unknown
	CID001157	Metalor USA Refining Corporation	Gold	Yes	UNITED STATES	Unknown
	CID001161	Metalúrgica Met-Mex Peñoles S.A. De C.V.	Gold	Yes	MEXICO	Unknown
	CID001188	Mitsubishi Materials Corporation	Gold	Yes	JAPAN	Unknown
	CID001193	Mitsui Mining and Smelting Co., Ltd.	Gold	Yes	JAPAN	Unknown
	CID002509	MMTC-PAMP India Pvt., Ltd.	Gold	Yes	INDIA	Unknown
	CID002857	Modeltech Sdn Bhd	Gold	Unknown	MALAYSIA	Unknown
	CID002282	Morris and Watson	Gold	Unknown	NEW ZEALAND	Unknown
	CID002866	Morris and Watson Gold Coast	Gold	Unknown	AUSTRALIA	Unknown
	CID001204	Moscow Special Alloys Processing Plant	Gold	Yes	RUSSIAN FEDERATION	Unknown
	CID001220	Nadir Metal Rafineri San. Ve Tic. A.S.	Gold	Yes	TURKEY	Unknown
	CID001236	Navoi Mining and Metallurgical Combinat	Gold	Unknown	UZBEKISTAN	Unknown
	CID003189	NH Recytech Company	Gold	Unknown	KOREA, REPUBLIC OF	Unknown
	CID001259	Nihon Material Co., Ltd.	Gold	Yes	JAPAN	Unknown
	CID002779	Ögussa Österreichische Gold- und Silber-Scheideanstalt GmbH	Gold	Yes	AUSTRIA	Unknown
	CID001325	Ohura Precious Metal Industry Co., Ltd.	Gold	Yes	JAPAN	No
	CID001326	OJSC "The Gulidov Krasnoyarsk Non-Ferrous Metals Plant" (OJSC Krastsvetmet)	Gold	Yes	RUSSIAN FEDERATION	Unknown
	CID000493	OJSC Novosibirsk Refinery	Gold	Yes	RUSSIAN FEDERATION	Unknown
	CID001352	PAMP S.A.	Gold	Yes	SWITZERLAND	Unknown
	CID002872	Pease & Curren	Gold	Unknown	UNITED STATES	Unknown
	CID001362	Penglai Penggang Gold Industry Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID002919	Planta Recuperadora de Metales SpA	Gold	Yes	CHILE	Unknown
	CID001386	Prioksky Plant of Non-Ferrous Metals	Gold	Yes	RUSSIAN FEDERATION	Unknown

    12 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID001397	PT Aneka Tambang (Persero) Tbk	Gold	Yes	INDONESIA	Unknown
	CID001498	PX Précinox S.A.	Gold	Yes	SWITZERLAND	Unknown
	CID001512	Rand Refinery (Pty) Ltd.	Gold	Yes	SOUTH AFRICA	Unknown
	CID000522	Refinery of Seemine Gold Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID002582	Remondis Argentia B.V.	Gold	Unknown	NETHERLANDS	Unknown
	CID002510	Republic Metals Corporation	Gold	Yes	UNITED STATES	Unknown
	CID001534	Royal Canadian Mint	Gold	Yes	CANADA	Unknown
	CID002761	SAAMP	Gold	Yes	FRANCE	Unknown
	CID001546	Sabin Metal Corp.	Gold	Unknown	UNITED STATES	Unknown
	CID002973	Safimet S.p.A	Gold	Yes	Italy	Unknown
	CID002290	SAFINA A.S.	Gold	Unknown	CZECH REPUBLIC	Unknown
	CID002853	Sai Refinery	Gold	Unknown	INDIA	Unknown
	CID001555	Samduck Precious Metals	Gold	Yes	KOREA, REPUBLIC OF	Unknown
	CID001562	SAMWON Metals Corp.	Gold	Unknown	KOREA, REPUBLIC OF	Unknown
	CID002777	SAXONIA Edelmetalle GmbH	Gold	Yes	GERMANY	Unknown
	CID001573	Schone Edelmetaal B.V.	Gold	Yes	NETHERLANDS	Unknown
	CID001585	SEMPSA Joyería Platería S.A.	Gold	Yes	SPAIN	Unknown
	CID001619	Shandong Tiancheng Biological Gold Industrial Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID001622	Shandong Zhaojin Gold & Silver Refinery Co., Ltd.	Gold	Yes	CHINA	Unknown
	CID001736	Sichuan Tianze Precious Metals Co., Ltd.	Gold	Yes	CHINA	Unknown
	CID002516	Singway Technology Co., Ltd.	Gold	Yes	TAIWAN	No
	CID001756	SOE Shyolkovsky Factory of Secondary Precious Metals	Gold	Yes	RUSSIAN FEDERATION	Unknown
	CID001761	Solar Applied Materials Technology Corp.	Gold	Yes	TAIWAN	No
	CID003153	State Research Institute Center for Physical Sciences and Technology	Gold	Unknown	LITHUANIA	Unknown
	CID002567	Sudan Gold Refinery **	Gold	Unknown	SUDAN	Unknown
	CID001798	Sumitomo Metal Mining Co., Ltd.	Gold	Yes	JAPAN	Unknown
	CID002918	SungEel HiTech	Gold	Yes	KOREA, REPUBLIC OF	Unknown

    13 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID002580	T.C.A S.p.A	Gold	Yes	ITALY	Unknown
	CID001875	Tanaka Kikinzoku Kogyo K.K.	Gold	Yes	JAPAN	Unknown
	CID001916	The Refinery of Shandong Gold Mining Co., Ltd.	Gold	Yes	CHINA	Unknown
	CID001938	Tokuriki Honten Co., Ltd.	Gold	Yes	JAPAN	Unknown
	CID001947	Tongling Nonferrous Metals Group Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID002587	Tony Goetz NV  **	Gold	Unknown	BELGIUM	Unknown
	CID002615	TOO Tau-Ken-Altyn	Gold	Unknown	KAZAKHSTAN	Unknown
	CID001955	Torecom	Gold	Yes	KOREA, REPUBLIC OF	Unknown
	CID001977	Umicore Brasil Ltda.	Gold	Yes	BRAZIL	Unknown
	CID002314	Umicore Precious Metals Thailand	Gold	Yes	THAILAND	Unknown
	CID001980	Umicore S.A. Business Unit Precious Metals Refining	Gold	Yes	BELGIUM	Unknown
	CID001993	United Precious Metal Refining, Inc.	Gold	Yes	UNITED STATES	No
	CID002854	Universal Precious Metals Refining Zambia  **	Gold	Unknown	ZAMBIA	Unknown
	CID002003	Valcambi S.A.	Gold	Yes	SWITZERLAND	Unknown
	CID002030	Western Australian Mint trading as The Perth Mint	Gold	Yes	AUSTRALIA	Unknown
	CID002778	WIELAND Edelmetalle GmbH	Gold	Yes	GERMANY	Unknown
	CID002100	Yamamoto Precious Metal Co., Ltd.	Gold	Yes	JAPAN	No
	CID002129	Yokohama Metal Co., Ltd.	Gold	Yes	JAPAN	No
	CID000197	Yunnan Copper Industry Co., Ltd.	Gold	Unknown	CHINA	Unknown
	CID002224	Zhongyuan Gold Smelter of Zhongjin Gold Corporation	Gold	Yes	CHINA	Unknown
	CID000092	Asaka Riken Co., Ltd.	Tantalum	Yes	JAPAN	Unknown
	CID000211	Changsha South Tantalum Niobium Co., Ltd.	Tantalum	Yes	CHINA	No
	CID002504	D Block Metals, LLC	Tantalum	Yes	UNITED STATES	No
	CID000410	Duoluoshan	Tantalum	Unknown	CHINA	Unknown
	CID000456	Exotech Inc.	Tantalum	Yes	UNITED STATES	No
	CID000460	F&X Electro-Materials Ltd.	Tantalum	Yes	CHINA	Yes
	CID002505	FIR Metals & Resource Ltd.	Tantalum	Yes	CHINA	No
	CID002558	Global Advanced Metals Aizu	Tantalum	Yes	JAPAN	Yes

    14 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID002557	Global Advanced Metals Boyertown	Tantalum	Yes	UNITED STATES	Yes
	CID000291	Guangdong Rising Rare Metals-EO Materials Ltd.	Tantalum	Yes	CHINA	Yes
	CID000616	Guangdong Zhiyuan New Material Co., Ltd.	Tantalum	Yes	CHINA	No
	CID002544	H.C. Starck Co., Ltd.	Tantalum	Yes	THAILAND	Yes
	CID002547	H.C. Starck Hermsdorf GmbH	Tantalum	Yes	GERMANY	No
	CID002548	H.C. Starck Inc.	Tantalum	Yes	UNITED STATES	No
	CID002549	H.C. Starck Ltd.	Tantalum	Yes	JAPAN	No
	CID002550	H.C. Starck Smelting GmbH & Co. KG	Tantalum	Yes	GERMANY	Yes
	CID002545	H.C. Starck Tantalum and Niobium GmbH	Tantalum	Yes	GERMANY	Yes
	CID002492	Hengyang King Xing Lifeng New Materials Co., Ltd.	Tantalum	Yes	CHINA	No
	CID002512	Jiangxi Dinghai Tantalum & Niobium Co., Ltd.	Tantalum	Yes	CHINA	No
	CID002842	Jiangxi Tuohong New Raw Material	Tantalum	Yes	CHINA	Unknown
	CID003191	Jiujiang Janny New Material Co., Ltd.	Tantalum	Yes	CHINA	Unknown
	CID000914	JiuJiang JinXin Nonferrous Metals Co., Ltd.	Tantalum	Yes	CHINA	Yes
	CID000917	Jiujiang Tanbre Co., Ltd.	Tantalum	Yes	CHINA	Yes
	CID002506	Jiujiang Zhongao Tantalum & Niobium Co., Ltd.	Tantalum	Yes	CHINA	No
	CID002539	KEMET Blue Metals	Tantalum	Yes	MEXICO	Yes
	CID002568	KEMET Blue Powder	Tantalum	Yes	UNITED STATES	No
	CID000973	King-Tan Tantalum Industry Ltd.	Tantalum	Yes	CHINA	No
	CID001076	LSM Brasil S.A.	Tantalum	Yes	BRAZIL	No
	CID001163	Metallurgical Products India Pvt., Ltd.	Tantalum	Yes	INDIA	No
	CID001175	Mineracao Taboca S.A.	Tantalum	Yes	BRAZIL	No
	CID001192	Mitsui Mining and Smelting Co., Ltd.	Tantalum	Yes	JAPAN	Yes
	CID001277	Ningxia Orient Tantalum Industry Co., Ltd.	Tantalum	Yes	CHINA	Yes
	CID001200	NPM Silmet AS	Tantalum	Yes	ESTONIA	No
	CID002847	Power Resources Ltd.	Tantalum	Yes	MACEDONIA	Unknown
	CID001508	QuantumClean	Tantalum	Yes	UNITED STATES	No

    15 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID002707	Resind Industria e Comercio Ltda.	Tantalum	Yes	BRAZIL	No
	CID001522	RFH Tantalum Smeltry Co., Ltd.	Tantalum	Yes	CHINA	No
	CID001769	Solikamsk Magnesium Works OAO	Tantalum	Yes	RUSSIAN FEDERATION	No
	CID001869	Taki Chemicals	Tantalum	Yes	JAPAN	Yes
	CID001891	Telex Metals	Tantalum	Yes	UNITED STATES	No
	CID001969	Ulba Metallurgical Plant JSC	Tantalum	Yes	KAZAKHSTAN	Yes
	CID002508	XinXing HaoRong Electronic Material Co., Ltd.	Tantalum	Yes	CHINA	No
	CID002307	Yichun Jin Yang Rare Metal Co., Ltd.	Tantalum	Yes	CHINA	No
	CID000292	Alpha	Tin	Yes	UNITED STATES	No
	CID002703	An Vinh Joint Stock Mineral Processing Company	Tin	Unknown	VIET NAM	Unknown
	CID000228	Chenzhou Yunxiang Mining and Metallurgy Co., Ltd.	Tin	Yes	CHINA	Unknown
	CID003190	Chifeng Dajingzi Tin Industry Co., Ltd.	Tin	Unknown	CHINA	Unknown
	CID001070	China Tin Group Co., Ltd.	Tin	Yes	CHINA	No
	CID000278	CNMC (Guangxi) PGMA Co., Ltd.	Tin	Unknown	CHINA	Unknown
	CID002570	CV Ayi Jaya	Tin	Yes	INDONESIA	No
	CID002592	CV Dua Sekawan	Tin	Yes	INDONESIA	Unknown
	CID000306	CV Gita Pesona	Tin	Yes	INDONESIA	No
	CID002593	CV Tiga Sekawan	Tin	Yes	INDONESIA	Unknown
	CID000315	CV United Smelting	Tin	Yes	INDONESIA	No
	CID002455	CV Venus Inti Perkasa	Tin	Yes	INDONESIA	No
	CID000402	Dowa	Tin	Yes	JAPAN	No
	CID002572	Electro-Mechanical Facility of the Cao Bang Minerals & Metallurgy Joint Stock Company	Tin	Unknown	VIET NAM	Unknown
	CID000438	EM Vinto	Tin	Yes	BOLIVIA	No
	CID000448	Estanho de Rondônia S.A.	Tin	Unknown	BRAZIL	Unknown
	CID000468	Fenix Metals	Tin	Yes	POLAND	No
	CID002848	Gejiu Fengming Metallurgy Chemical Plant	Tin	Yes	CHINA	Unknown
	CID002859	Gejiu Jinye Mineral Company	Tin	Yes	CHINA	Unknown
	CID000942	Gejiu Kai Meng Industry and Trade LLC	Tin	Yes	CHINA	Unknown

    16 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID000538	Gejiu Non-Ferrous Metal Processing Co., Ltd.	Tin	Yes	CHINA	No
	CID001908	Gejiu Yunxin Nonferrous Electrolysis Co., Ltd.	Tin	Yes	CHINA	Unknown
	CID000555	Gejiu Zili Mining And Metallurgy Co., Ltd.	Tin	Unknown	CHINA	Unknown
	CID003116	Guangdong Hanhe Non-ferrous Metal Limited Company	Tin	Yes	CHINA	Unknown
	CID002849	Guanyang Guida Nonferrous Metal Smelting Plant	Tin	Yes	CHINA	Unknown
	CID002844	HuiChang Hill Tin Industry Co., Ltd.	Tin	Yes	CHINA	Unknown
	CID000760	Huichang Jinshunda Tin Co., Ltd.	Tin	Yes	CHINA	Unknown
	CID000244	Jiangxi Ketai Advanced Material Co., Ltd.	Tin	Yes	CHINA	No
	CID001231	Jiangxi New Nanshan Technology Ltd.	Tin	Yes	CHINA	Unknown
	CID002468	Magnu's Minerais Metais e Ligas Ltda.	Tin	Yes	BRAZIL	No
	CID001105	Malaysia Smelting Corporation (MSC)	Tin	Yes	MALAYSIA	Yes
	CID002500	Melt Metais e Ligas S.A.	Tin	Yes	BRAZIL	No
	CID001142	Metallic Resources, Inc.	Tin	Yes	UNITED STATES	No
	CID002773	Metallo Belgium N.V.	Tin	Yes	BELGIUM	No
	CID002774	Metallo Spain S.L.U.	Tin	Yes	SPAIN	No
	CID001173	Mineracao Taboca S.A.	Tin	Yes	BRAZIL	No
	CID001182	Minsur	Tin	Yes	PERU	No
	CID001191	Mitsubishi Materials Corporation	Tin	Yes	JAPAN	No
	CID002858	Modeltech Sdn Bhd	Tin	Unknown	MALAYSIA	Unknown
	CID002573	Nghe Tinh Non-Ferrous Metals Joint Stock Company	Tin	Unknown	VIET NAM	Unknown
	CID001314	O.M. Manufacturing (Thailand) Co., Ltd.	Tin	Yes	THAILAND	No
	CID002517	O.M. Manufacturing Philippines, Inc.	Tin	Yes	PHILIPPINES	No
	CID001337	Operaciones Metalurgical S.A.	Tin	Yes	BOLIVIA	No
	CID003208	Pongpipat Company Limited	Tin	Unknown	MYANMAR	Unknown
	CID000309	PT Aries Kencana Sejahtera	Tin	Yes	INDONESIA	No

    17 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID001399	PT Artha Cipta Langgeng	Tin	Yes	INDONESIA	No
	CID002503	PT ATD Makmur Mandiri Jaya	Tin	Yes	INDONESIA	No
	CID001402	PT Babel Inti Perkasa	Tin	Yes	INDONESIA	No
	CID002776	PT Bangka Prima Tin	Tin	Yes	INDONESIA	No
	CID003205	PT Bangka Serumpun	Tin	Yes	INDONESIA	Unknown
	CID001419	PT Bangka Tin Industry	Tin	Yes	INDONESIA	No
	CID001421	PT Belitung Industri Sejahtera	Tin	Yes	INDONESIA	No
	CID001428	PT Bukit Timah	Tin	Yes	INDONESIA	No
	CID001434	PT DS Jaya Abadi	Tin	Yes	INDONESIA	No
	CID001438	PT Eunindo Usaha Mandiri	Tin	Yes	INDONESIA	No
	CID002530	PT Inti Stania Prima	Tin	Yes	INDONESIA	No
	CID001448	PT Karimun Mining	Tin	Yes	INDONESIA	Unknown
	CID002829	PT Kijang Jaya Mandiri	Tin	Yes	INDONESIA	Unknown
	CID002870	PT Lautan Harmonis Sejahtera	Tin	Yes	INDONESIA	Unknown
	CID002835	PT Menara Cipta Mulia	Tin	Yes	INDONESIA	Unknown
	CID001453	PT Mitra Stania Prima	Tin	Yes	INDONESIA	No
	CID002757	PT O.M. Indonesia	Tin	Yes	INDONESIA	Unknown
	CID001457	PT Panca Mega Persada	Tin	Yes	INDONESIA	No
	CID000313	PT Premium Tin Indonesia	Tin	Yes	INDONESIA	No
	CID001458	PT Prima Timah Utama	Tin	Yes	INDONESIA	No
	CID001460	PT Refined Bangka Tin	Tin	Yes	INDONESIA	No
	CID001463	PT Sariwiguna Binasentosa	Tin	Yes	INDONESIA	No
	CID001468	PT Stanindo Inti Perkasa	Tin	Yes	INDONESIA	No
	CID002816	PT Sukses Inti Makmur	Tin	Yes	INDONESIA	No
	CID001471	PT Sumber Jaya Indah	Tin	Yes	INDONESIA	No
	CID001477	PT Timah (Persero) Tbk Kundur	Tin	Yes	INDONESIA	No
	CID001482	PT Timah (Persero) Tbk Mentok	Tin	Yes	INDONESIA	No
	CID001490	PT Tinindo Inter Nusa	Tin	Yes	INDONESIA	No
	CID001493	PT Tommy Utama	Tin	Yes	INDONESIA	Unknown
	CID002706	Resind Industria e Comercio Ltda.	Tin	Yes	BRAZIL	No
	CID001539	Rui Da Hung	Tin	Yes	TAIWAN	No
	CID001758	Soft Metais Ltda.	Tin	Yes	BRAZIL	No
	CID002756	Super Ligas	Tin	Unknown	Brazil	Unknown

    18 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID001898	Thaisarco	Tin	Yes	THAILAND	Yes
	CID002574	Tuyen Quang Non-Ferrous Metals Joint Stock Company	Tin	Unknown	VIET NAM	Unknown
	CID002036	White Solder Metalurgia e Mineração Ltda.	Tin	Yes	BRAZIL	No
	CID002158	Yunnan Chengfeng Non-ferrous Metals Co., Ltd.	Tin	Yes	CHINA	Unknown
	CID002180	Yunnan Tin Company Limited	Tin	Yes	CHINA	No
	CID000004	A.L.M.T. TUNGSTEN Corp.	Tungsten	Yes	JAPAN	No
	CID002833	ACL Metais Eireli	Tungsten	Yes	BRAZIL	Unknown
	CID002502	Asia Tungsten Products Vietnam Ltd.	Tungsten	Yes	VIET NAM	Yes
	CID002513	Chenzhou Diamond Tungsten Products Co., Ltd.	Tungsten	Yes	CHINA	No
	CID000258	Chongyi Zhangyuan Tungsten Co., Ltd.	Tungsten	Yes	CHINA	No
	CID000499	Fujian Jinxin Tungsten Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002645	Ganzhou Haichuang Tungsten Co., Ltd.	Tungsten	Unknown	CHINA	Unknown
	CID000875	Ganzhou Huaxing Tungsten Products Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002315	Ganzhou Jiangwu Ferrotungsten Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002494	Ganzhou Seadragon W & Mo Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002536	Ganzhou Yatai Tungsten Co., Ltd.	Tungsten	Unknown	CHINA	Unknown
	CID000568	Global Tungsten & Powders Corp.	Tungsten	Yes	UNITED STATES	No
	CID000218	Guangdong Xianglu Tungsten Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002542	H.C. Starck Smelting GmbH & Co.KG	Tungsten	Yes	GERMANY	No
	CID002541	H.C. Starck Tungsten GmbH	Tungsten	Yes	GERMANY	No
	CID000766	Hunan Chenzhou Mining Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002579	Hunan Chuangda Vanadium Tungsten Co., Ltd. Wuji	Tungsten	Yes	CHINA	Unknown
	CID000769	Hunan Chunchang Nonferrous Metals Co., Ltd.	Tungsten	Yes	CHINA	No
	CID003182	Hunan Litian Tungsten Industry Co., Ltd.	Tungsten	Yes	CHINA	Unknown
	CID002649	Hydrometallurg, JSC	Tungsten	Yes	RUSSIAN FEDERATION	No

    19 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID000825	Japan New Metals Co., Ltd.	Tungsten	Yes	JAPAN	No
	CID002551	Jiangwu H.C. Starck Tungsten Products Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002647	Jiangxi Dayu Longxintai Tungsten Co., Ltd.	Tungsten	Unknown	CHINA	Unknown
	CID002321	Jiangxi Gan Bei Tungsten Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002313	Jiangxi Minmetals Gao'an Non-ferrous Metals Co., Ltd.	Tungsten	Unknown	CHINA	Unknown
	CID002318	Jiangxi Tonggu Non-ferrous Metallurgical & Chemical Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002317	Jiangxi Xinsheng Tungsten Industry Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002535	Jiangxi Xiushui Xianggan Nonferrous Metals Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002316	Jiangxi Yaosheng Tungsten Co., Ltd.	Tungsten	Yes	CHINA	Unknown
	CID000966	Kennametal Fallon	Tungsten	Yes	UNITED STATES	No
	CID000105	Kennametal Huntsville	Tungsten	Yes	UNITED STATES	No
	CID002319	Malipo Haiyu Tungsten Co., Ltd.	Tungsten	Yes	CHINA	No
	CID002845	Moliren Ltd	Tungsten	Yes	RUSSIAN FEDERATION	Unknown
	CID002589	Niagara Refining LLC	Tungsten	Yes	UNITED STATES	No
	CID002543	Nui Phao H.C. Starck Tungsten Chemicals Manufacturing LLC	Tungsten	Yes	VIET NAM	No
	CID002827	Philippine Chuangxin Industrial Co., Inc.	Tungsten	Yes	PHILIPPINES	Unknown
	CID002815	South-East Nonferrous Metal Company Limited of Hengyang City	Tungsten	Yes	CHINA	Unknown
	CID001889	Tejing (Vietnam) Tungsten Co., Ltd.	Tungsten	Yes	VIET NAM	No
	CID002724	Unecha Refractory metals plant	Tungsten	Yes	RUSSIAN FEDERATION	Unknown
	CID002011	Vietnam Youngsun Tungsten Industry Co., Ltd.	Tungsten	Yes	VIET NAM	Yes
	CID002044	Wolfram Bergbau und Hütten AG	Tungsten	Yes	AUSTRIA	Yes
	CID002843	Woltech Korea Co., Ltd.	Tungsten	Yes	KOREA, REPUBLIC OF	Unknown
	CID002320	Xiamen Tungsten (H.C.) Co., Ltd.	Tungsten	Yes	CHINA	Yes
	CID002082	Xiamen Tungsten Co., Ltd.	Tungsten	Yes	CHINA	No

    20 

     

    

	Smelter ID	Smelter or Refiner (Name)	3TG	Conflict Free *	Smelter Location	 Source from DRC?
	CID002830	Xinfeng Huarui Tungsten & Molybdenum New Material Co., Ltd.	Tungsten	Yes	CHINA	Unknown
	CID002095	Xinhai Rendan Shaoguan Tungsten Co., Ltd.	Tungsten	Yes	CHINA	No

 

* = SOR certified as conflict free by the Responsible Minerals
Initiative or an equivalent independent third party certification program during reporting period 2017.

 

** = SOR identified as posing a high risk of sourcing from mines
benefiting armed groups engaged in conflict in the DRC Region.

 

    21ex_115694.htm

Exhibit 10.1

 

 

 

Loan Agreement

 

 

By and among

 

 

Worthington Acquisition, LLC, Worthington MRO, LLC and Worthington Aviation, LLC, as the “Borrowers”

 

 

and

 

 

Minnesota Bank & Trust, as the “Lender”

 

dated as of

 

May __, 2018

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

 

	
			Article I Definitions and Interpretation

				1
	 	 
	
			Section 1.01 Definitions.

				1
	 	 
	
			Section 1.02 Interpretation

				17
	 	 
	
			Article II The Commitments and Loans

				18
	 	 
	
			Section 2.01 Term Loan Commitment.

				18
	 	 
	
			Section 2.02 Procedure for Term Loan Borrowing.

				18
	 	 
	
			Section 2.03 Revolving Credit Commitment.

				18
	 	 
	
			Section 2.04Procedures for Revolving Credit Borrowing.

				18
	 	 
	
			Section 2.05 Termination or Reduction of Revolving Credit Commitment.

				19
	 	 
	
			Section 2.06 Repayment of Loans; Evidence of Debt.

				19
	 	 
	
			Section 2.07 Optional Prepayments.

				20
	 	 
	
			Section 2.08 Mandatory Prepayments.

				20
	 	 
	
			Section 2.09 Application of Prepayments.

				20
	 	 
	
			Section 2.10 Interest.

				20
	 	 
	
			Article III Taxes, Etc.

				21
	 	 
	
			Section 3.01 Taxes.

				21
	 	 
	
			Section 3.02 Increased Costs; Capital Adequacy Requirements.

				22
	 	 
	
			Article IV Conditions Precedent

				23
	 	 
	
			Section 4.01 Conditions Precedent to Initial Loans.

				23
	 	 
	
			Section 4.02 Conditions Precedent to Each Loan.

				25
	 	 
	
			Article V Representations and Warranties

				26
	 	 
	
			Section 5.01 Existence; Compliance With Laws.

				26
	 	 
	
			Section 5.02 Power; Authorization; Enforceability.

				26
	 	 
	
			Section 5.03 No Contravention.

				27
	 	 
	
			Section 5.04 Financial Statements.

				27
	 	 
	
			Section 5.05 No Material Adverse Effect.

				27

 

 

 

 

	
			Section 5.06 No Litigation.

				27
	 	 
	
			Section 5.07 No Default.

				27
	 	 
	
			Section 5.08 Ownership of Property; Liens.

				28
	 	 
	
			Section 5.09 Environmental Matters.

				28
	 	 
	
			Section 5.10 Insurance.

				29
	 	 
	
			Section 5.11 Material Contracts.

				29
	 	 
	
			Section 5.12 Intellectual Property.

				29
	 	 
	
			Section 5.13 Taxes.

				29
	 	 
	
			Section 5.14 ERISA.

				30
	 	 
	
			Section 5.15 Margin Regulations.

				30
	 	 
	
			Section 5.16 Investment Company Act.

				30
	 	 
	
			Section 5.17 Subsidiaries; Equity Interests.

				30
	 	 
	
			Section 5.18 Labor Matters.

				30
	 	 
	
			Section 5.19 Accuracy of Information, Etc.

				30
	 	 
	
			Section 5.20 Security Documents.

				31
	 	 
	
			Section 5.21 Solvency.

				31
	 	 
	
			Section 5.22 PATRIOT Act; OFAC and Other Regulations.

				31
	 	 
	
			Section 5.23 Consummation of Worthington Acquisition; Transaction Documents.

				32
	 	 
	
			Article VI Affirmative Covenants

				33
	 	 
	
			Section 6.01 Financial Statements.

				33
	 	 
	
			Section 6.02 Certificates; Other Information.

				34
	 	 
	
			Section 6.03 Notices.

				35
	 	 
	
			Section 6.04 Maintenance of Existence; Compliance.

				35
	 	 
	
			Section 6.05 Performance of Material Contracts.

				36
	 	 
	
			Section 6.06 Maintenance of Property; Insurance.

				36
	 	 
	
			Section 6.07 Inspection of Property; Books and Records; Discussions.

				36
	 	 
	
			Section 6.08 Environmental Laws.

				36
	 	 
	
			Section 6.09 Use of Proceeds.

				37
	 	 
	
			Section 6.10 Additional Collateral; etc.

				37
	 	 
	
			Section 6.11 Further Assurances.

				38

 

 

 

 

	
			Section 6.12 Deposit Accounts.

				38
	 	 
	
			Article VII Negative Covenants

				39
	 	 
	
			Section 7.01 Limitation on Debt.

				39
	 	 
	
			Section 7.02 Limitation on Liens.

				40
	 	 
	
			Section 7.03 Mergers; Nature of Business.

				41
	 	 
	
			Section 7.04 Limitation on Investments.

				41
	 	 
	
			Section 7.05 Limitation on Dispositions.

				41
	 	 
	
			Section 7.06 Limitation on Sales and Leasebacks.

				41
	 	 
	
			Section 7.07 Limitation on Restricted Payments; Transfers to Non-Loan Parties.

				42
	 	 
	
			Section 7.08 Limitation on Prepayments of Debt and Amendments of Debt Instruments.

				42
	 	 
	
			Section 7.09 Limitation on Transactions With Affiliates.

				43
	 	 
	
			Section 7.09 Fiscal Year.

				43
	 	 
	
			Section 7.11 Limitation on Restrictive Agreements.

				43
	 	 
	
			Section 7.12 Limitation on Amendments of Material Contracts.

				43
	 	 
	
			Section 7.13 Financial Covenants.

				43
	 	 
	
			Section 7.14 Transaction Documents.

				43
	 	 
	
			Article VIII Events of Default and Remedies

				44
	 	 
	
			Section 8.01 Events of Default.

				44
	 	 
	
			Section 8.02 Remedies Upon Event of Default.

				46
	 	 
	
			Article IX Miscellaneous

				47
	 	 
	
			Section 9.01 Notices.

				47
	 	 
	
			Section 9.02 Amendments and Waivers.

				49
	 	 
	
			Section 9.03 Expenses; Indemnity; Damage Waiver.

				49
	 	 
	
			Section 9.04 Successors and Assigns.

				51
	 	 
	
			Section 9.05 Survival.

				52
	 	 
	
			Section 9.06 Counterparts; Integration; Effectiveness.

				52
	 	 
	
			Section 9.07 Severability.

				53
	 	 
	
			Section 9.08 Right of Setoff.

				53
	 	 
	
			Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process.

				54
	 	 
	
			Section 9.10 Waiver of Jury Trial.

				55

 

 

 

 

	
			Section 9.11 Headings.

				55
	 	 
	
			Section 9.12 Confidentiality.

				55
	 	 
	
			Section 9.13 USA PATRIOT Act.

				56
	 	 
	
			Section 9.14 Joint and Several Liability.

				56

 

 

 

 

Loan Agreement

 

This Loan Agreement (this “Agreement”), dated as of May __, 2018, is entered into by and among Worthington Acquisition, LLC, a North Carolina limited liability company (together with its successors and assigns, “Acquisition”), Worthington Aviation, LLC, a North Carolina limited liability company (together with its successors and assigns, “Aviation”), Worthington MRO, LLC, a North Carolina limited liability company (together with its successors and assigns, “MRO”; and together with Acquisition and Aviation being sometimes collectively referred to herein as, the “Borrowers” and individually as, a “Borrower”), and Minnesota Bank & Trust, a Minnesota state banking corporation (together with its successors and assigns, the “Lender”).

 

RECITALS

 

The Lender has agreed to make available to the Borrowers a revolving credit facility upon the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

Definitions and Interpretation

 

Section 1.01     Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

 

“Acquisition” has the meaning set forth in the preamble.

 

“Affiliate” as to any Person, means any other Person that, directly or indirectly through one or more intermediaries, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person, or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

 

“Air T” means Air T, Inc., a Delaware corporation.

 

“Air T Credit Agreement” means that certain Credit Agreement dated as of December 21, 2017, by and between Air T and the Lender , as amended to date and as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.

 

 

 

 

“Anti-terrorism Law” means any Requirement of Law related to money laundering or financing terrorism including the PATRIOT Act, The Currency and Foreign Transactions Reporting Act (31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959) (also known as the “Bank Secrecy Act”), the Trading With the Enemy Act (50 U.S.C. § 1 et seq.) and Executive Order 13224 (effective September 24, 2001).

 

“Asset Purchase Agreement” means, that certain Asset Purchase Agreement dated as of April 6, 2018, as amended by that certain Amendment No. to Asset Purchase Agreement dated as of April 27, 2018, by and among Air T, Aviation, Worthington Aviation Parts, Inc., a Minnesota corporation (“Seller”) and Churchill Industries, Inc., a Minnesota corporation.

 

“Aviation” has the meaning set forth in the preamble.

 

“Banking Services” means each and any of the following bank services provided to Borrowers by Lender or any of Lender’s Affiliates: (a) commercial credit cards, (b) stored value cards, and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

 

“Banking Services Liabilities” means any and all obligations of the Borrowers, 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 Banking Services.

 

“Bankruptcy Code” means Title 11 of the United States Code, as amended from time to time, or any similar federal or state law for the relief of debtors.

 

“Blocked Person” means any Person that (a) is publicly identified on the most current list of “Specially Designated Nationals and Blocked Persons” published by the Office of Foreign Assets Control of the US Department of the Treasury (“OFAC”) or resides, is organized or chartered, or has a place of business in a country or territory subject to OFAC sanctions or embargo programs, or (b) is publicly identified as prohibited from doing business with the United States under the International Emergency Economic Powers Act, the Trading With the Enemy Act, or any other Requirement of Law.

 

“Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor thereto).

 

“Borrower(s)” has the meaning set forth in the preamble.

 

2

 

 

“Borrowing Base” means, at any date of determination, the sum of: (a) 75% of Eligible Accounts; plus (b) 50% of Eligible Inventory; plus (c) the Guaranty Amount; minus (d) the aggregate amount of accounts payable owing by Borrower under consignment agreements; provided, however, that the Lender reserves the right, in its sole discretion, to adjust such borrowing base percentages and components based on its periodic evaluation of the Collateral. The amount of the Borrowing Base shall be determined periodically from the most recent Borrowing Base Certificate and supporting reports delivered to the Lender.

 

“Borrowing Date” means any Business Day specified by the Borrowers in a Borrowing Notice as a date on which the Borrowers request the Lender to make a Loan hereunder.

 

“Borrowing Notice” means any request for a borrowing of Loans hereunder by Borrowers, which may be submitted in writing or in electronic form.

 

“Business Day” means, a day other than a Saturday, Sunday or other day on which commercial banks in Minneapolis, Minnesota are authorized or required by law to close.

 

“Capital Expenditures” with respect to any Person, means the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets, software or additions to Equipment (including replacements, capitalized repairs and improvements) which are required to be capitalized under GAAP on the balance sheet of such Person.

 

“Capital Lease Obligations” with respect to any Person, means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases under GAAP on the balance sheet of such Person and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

“Cash Equivalents” as to any Person, means (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such Person, (b) time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States or any State thereof, having maturities of not more than one year from the date of acquisition by such Person, (c) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above, (d) commercial paper issued by any issuer rated at least A-1 by Standard & Poor’s Ratings Services, or at least P-1 by Moody’s Investors Service, Inc. (or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally), and in each case maturing not more than one year after the date of acquisition by such Person or (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above.

 

3

 

 

“Change in Law” means the occurrence after the date of this Agreement of (a) the adoption or effectiveness of any law, rule, regulation, judicial ruling, judgment or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation or treaty, or (c) the making or issuance by any Governmental Authority of any request, rule, guideline or directive, whether or not having the force of law; provided that, notwithstanding anything herein to the contrary (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Lender for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

 

“Change of Control” means (a) any Person or group of persons within the meaning of §13(d)(3) of the Securities Exchange Act of 1934 (other than one or more Continuing Directors or Affiliates of Continuing Directors) becomes the beneficial owner, directly or indirectly, of 50% or more of the outstanding Equity Interests of the Borrower, or (b) individuals who constitute the Continuing Directors cease for any reason to constitute at least a majority of the board of directors of the Borrower.

 

“Closing Date” means the date on which the conditions precedent set forth in Section 4.01 are satisfied or waived.

 

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

 

“Collateral” has the meaning for such term set forth in the Security Agreement.

 

“Collateral Assignment” means that certain Collateral Assignment of Purchase Agreement dated as of the Closing Date and executed by Air T and Aviation in favor of the Lender.

 

“Commitment” means the Revolving Credit Commitment.

 

“Consigned Inventory Eligibility Requirements”: As set forth on Exhibit D to this Agreement.

 

“Continuing Directors” means the directors of Air T on the Closing Date, and each other director, if in each case, such other director’s nomination for election to the board of directors of Air T is recommended by at least a 66 2/3%/a majority of the Continuing Directors.

 

4

 

 

“Contractual Obligation” of any Person, means any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound, other than the Obligations.

 

“Debt” of any Person at any date, without duplication, means (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services (other than (i) trade payables and accrued expenses incurred in the ordinary course of business and not past due for more than 61 days after the date on which each such trade payable or account payable was created and (ii) any earn-out, purchase price adjustment or similar obligation until such obligation appears in the liabilities section of the balance sheet of such Person; (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (e) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit or similar facilities in respect of obligations of the kind referred to in subsections (a) through (e) of this definition; (g) all Guaranty Obligations of such Person in respect of obligations of the kind referred to in subsections (a) through (f) above; and (h) all obligations of the kind referred to in subsections (a) through (g) above secured by (or which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation.

 

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

 

“Default” means any of the events specified in Section 8.01 which constitutes an Event of Default or which, upon the giving of notice, the lapse of time, or both pursuant to Section 8.01 would, unless cured or waived, become an Event of Default.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (whether in one transaction or in a series of transactions, and including any sale and leaseback transaction) of any property (including, without limitation, any Equity Interests) by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

5

 

 

“Dollars” means the lawful currency of the United States.

 

“Eligible Accounts” means, at any date of determination, the United States dollar value (net of deposits, finance charges and/or service charges) of only such accounts of the Borrowers arising from the rendering of services in the ordinary course of business in which the Lender holds a first priority security interest and as to which the Lender, in its reasonable business judgment, shall from time to time determine to be collectible in a timely manner in the ordinary course of business without dispute or set-off. Without limiting the Lender’s right, in its reasonable business judgment, to consider any account not to be an Eligible Account, and by way of example only of types of accounts that the Lender will consider not to be Eligible Accounts, the Lender, notwithstanding any earlier classification of eligibility, may consider any account not to be an Eligible Account if:

 

(a)     any warranty is breached as to the account or the account debtor disputes liability or makes any claim with respect to the account;

 

(b)     the account is not paid by the account debtor within 120 days after the date of the original invoice relating thereto; or (ii) the account is owed by any account debtor who has not paid 10% or more of such account debtor’s accounts within the relevant time period specified in subsection (b)(i) above;

 

(c)     a petition in bankruptcy or other application for relief under any insolvency law is filed with respect to the account debtor owing the account, or the account debtor owing the account assigns for the benefit of creditors, becomes insolvent, fails, suspends, or goes out of business, or the Lender, in its reasonable business judgment, shall become dissatisfied with the creditworthiness of an account debtor owing an account;

 

(d)     the account arises from a sale to an account debtor that is outside the United States unless payment thereof is either (i) secured by a valid and irrevocable transferable letter of credit issued by a lender reasonably acceptable to Lender for the full amount thereof or (ii) secured by an insurance policy on terms, and issued by EXIM Bank or another insurer, reasonably satisfactory to Lender (which in any event shall insure not less than ninety percent (90%) of the face amount of such account and shall be subject to such deductions as are acceptable to Lender), and in each case which has been assigned or transferred to Lender in a manner reasonably acceptable to Lender;

 

(e)     the account debtor is an Affiliate, supplier or creditor of a Loan Party;

 

6

 

 

(f)     the account debtor with respect thereto is the United States of America or any department, agency or instrumentality thereof (a “Federal Governmental Authority”), or any state, county or local governmental authority, or any department, agency or instrumentality thereof, unless the relevant Loan Party has assigned its right to payment of such account to the Lender pursuant to the Assignment of Claims Act of 1940 as amended in the case of the a Federal Governmental Authority, or pursuant to applicable state law, if any, in all other instances, and such assignment has been accepted and acknowledged by the appropriate government officers;

 

(g)     if the Lender, in its reasonable business judgment, has established a credit limit for the account debtor with respect thereto, the aggregate dollar amount of accounts due from such account debtor, including such account, exceeds such credit limit;

 

(h)     such Account is evidenced by chattel paper or instruments unless the original of such chattel paper or instruments is delivered to the Lender;

 

(i)     such account arises from a transaction for which surety or performance bonds are posted; or

 

(j)     any account for a customer deposit.

 

The amount of Eligible Accounts shall be computed on a monthly basis from the Borrowing Base Certificate and other information required to be delivered by the Borrowers to the Lender pursuant to Section 6.02.

 

“Eligible Assignee” has the meaning set forth in Section 9.04.

 

“Eligible Inventory” shall mean the book United States dollar value of the Borrowers’ raw materials and finished goods inventory, in which only the Lender holds a first priority security interest and as to which the Lender, in its reasonable business judgment, shall elect from time to time to constitute Eligible Inventory. Without limiting the Lender’s right, in its reasonable business judgment, to consider any inventory not to be Eligible Inventory, and by way of example only of types of inventory that the Lender will consider not to be Eligible Inventory, the Lender, notwithstanding any earlier classification of eligibility, may consider any inventory not to be Eligible Inventory if: (a) such inventory is discontinued inventory; (b) such inventory is not (i) located on premises owned by one or more of the Borrowers, (ii) located on premises leased or rented by one or more of the Borrowers, unless a fully-executed landlord waiver has been delivered to the Lender with regards to such premises in form reasonably satisfactory to the Lender; or (iii) is stored with a bailee or warehouseman unless an fully-executed bailee letter has been received by the Lender with respect thereto in form reasonably satisfactory to the Lender, (c) such inventory is consigned to a Borrower, or (d) such inventory is consigned by a Borrower, unless such Borrower has complied with all of the Consigned Inventory Eligibility Requirements. The value of Eligible Inventory shall be the lower of the cost or market value of the Eligible Inventory computed in accordance with GAAP.

 

7

 

 

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of violation or non-compliance, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any permit issued under any Environmental Law, or any Hazardous Material, or arising from alleged injury or threat to health, safety or the environment including (a) by any Governmental Authority for enforcement, clean-up, removal, response, remedial or other actions or damages and (b) any Governmental Authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

 

“Environmental Law” means any and all Federal, state, foreign, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) as now or may at any time hereafter be in effect, and any binding judicial or administrative interpretation thereof, including any binding judicial or administrative order, consent decree or judgment, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or, to the extent relating to exposure to substances that are harmful or detrimental to the environment, or human health or safety.

 

“Equipment” has the meaning for such term set forth in the Security Agreement.

 

“Equity Interests” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership (or profit) interests in a Person (other than a corporation), securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person, and any and all warrants, rights or options to purchase any of the foregoing, whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“ERISA Affiliate” means an entity, whether or not incorporated, that is under common control with any Borrower within the meaning of §4001 of ERISA or is part of a group that includes any Borrower and that is treated as a single employer under §414 of the Code.

 

“Eurodollar Rate Loan” means a Loan that accrues interest at the LIBOR Rate, as specified in the Note evidencing such Loan.

 

“Excess Capital” means, as of any date of determination, calculated on a consolidated basis for the Borrowers, the aggregate amount by which the Borrowers’ actual consolidated Tangible Assets exceeds the amount of Tangible Assets necessary to show proforma compliance with all financial covenants calculated as of such date, where the analysis supporting such proforma analysis is performed based on the consolidated balance sheet for the Borrowers then most-recently delivered to the Lender pursuant to Section 6.01(c).

 

8

 

 

“Excess Capital Certificate” means, a certificate in form and substance acceptable to the Lender and executed by a Responsible Officer of the Borrower, providing a detailed calculation of Excess Capital as of the date of a Restricted Payment pursuant to Section 7.07.

 

“Event of Default” has the meaning set forth in Section 8.01.

 

“Excluded Taxes” means any of the following Taxes, imposed on or with respect to the Lender (a) Taxes imposed on or measured by net income (however denominated), and franchise Taxes, (b) any branch profits Taxes imposed by the United States or any similar Tax imposed by any other jurisdiction.

 

“GAAP” means generally accepted accounting principles in the United States set forth 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 such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

 

“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, 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.

 

“Guarantor(s)” means, Air T, Inc., together with each other Person who now or hereafter executes a guaranty of the Obligations in favor of the Lender.

 

“Guaranty(ies)” means, individually or collectively, as the case may be, the Limited Guaranty executed by Air T, in favor of the Lender, dated as of the Closing Date, and each other guaranty now or hereafter executed by a Guarantor, in each case as amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under the Loan Documents.

 

“Guaranty Amount” means, (a) $3,000,000 during the period commencing on the Closing Date and ending on the Guaranty Amount Reduction Date, and (b) $1,500,000 on each subsequent date.

 

9

 

 

“Guaranty Amount Reduction Date” means the (a) first Business Day on which (i) there is no outstanding Default or Event of Default and (ii) the principal balance of the Term Loan and all accrued interest thereon has been paid in full; or (b) such earlier date on which the Lender, in its sole discretion, agrees to reduce the Guaranty Amount to $1,500,000.

 

“Guaranty Obligation” as to any Person, means any (a) obligation, contingent or otherwise, of such Person guaranteeing or having the effect of guaranteeing any Debt or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Debt or other obligation of the payment or performance of such Debt or other obligation, (iii) to maintain working capital, equity capital, net worth or solvency or liquidity or any level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Debt or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) Lien on any assets of such Person securing any Debt or other obligation of any other Person, whether or not such Debt or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Debt to obtain any such Lien). The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.

 

“Hazardous Materials” means (a) any gasoline, petroleum or petroleum products or by-products, radioactive materials, friable asbestos or asbestos-containing materials, urea-formaldehyde insulation, polychlorinated biphenyls and radon gas, and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

 

“Heartland” means Heartland Financial USA, Inc., a Delaware corporation.

 

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

 

“Insolvency” with respect to any Multiemployer Plan, means such Plan is insolvent within the meaning of §4245 of ERISA.

 

“Intangible Assets” means, at any date of determination, the sum, calculated on a consolidated basis in accordance with GAAP for the Borrowers, of (i) goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, covenants not to compete, training costs and other similar intangibles; (ii) deferred charges or unamortized debt discount and expense other than deferred income taxes; (iii) Investments which are not readily marketable; (iv) any write-up in the book value of any assets resulting from a reevaluation thereof subsequent to the Closing Date; (v) accounts receivable, notes receivable or other receivables or amounts owed by officers, shareholders or Affiliates of one or more Loan Parties; and (vii) any asset acquired subsequent to the date of this Agreement which the Lender, in its reasonable business judgment, determines to be an intangible asset.

 

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“Intellectual Property” means any and all intellectual property, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, all rights therein, and all rights to sue at law or in equity for any past, present, or future infringement, violation, misuse, misappropriation or other impairment thereof, whether arising under United States, multinational or foreign laws or otherwise, including the right to receive injunctive relief and all proceeds and damages therefrom.

 

“Investment(s)” has the meaning set forth in Section 7.04.

 

“Lender” has the meaning set forth in the preamble.

 

“Lien” means any mortgage, pledge, hypothecation, assignment (as security), deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest, or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever having substantially the same economic effect as any of the foregoing (including any conditional sale or other title retention agreement and any capital lease).

 

“Loan” means any Revolving Credit Loan or the Term Loan, as the context may require, and “Loans” means either Revolving Credit Loans or the Term Loan, as the context may require.

 

“Loan Documents” means, collectively, this Agreement, the Security Agreement, the Collateral Assignment, the Guaranty, the Pledge Agreement, the Revolving Credit Note, the Term Note and all other agreements, documents, certificates and instruments executed and delivered to the Lender by any Loan Party in connection therewith.

 

“Loan Parties” means the Borrowers, the Guarantor and the Pledgor.

 

“Loan Year” means the 12-month period commencing on the date of this Agreement (or the anniversary date thereof in any subsequent year) and ending on the day preceding the immediately following anniversary date of this Agreement.

 

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“Margin Stock” has the meaning specified in Regulation U of the Board as in effect from time to time.

 

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of any Borrower, individually, or of the Borrowers taken as a whole, (b) the validity or enforceability of any Loan Document, (c) the perfection or priority of any Lien purported to be created by any Loan Document, (d) the rights or remedies of the Lender under any Loan Document or (e) the ability of any Loan Party to perform any of its payment obligations under any Loan Document to which it is a party.

 

“Material Contracts” with respect to any Person, means each contract to which such Person is a party involving aggregate consideration payable by or to such Person equal to at least $100,000 annually or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of such Person.

 

“Maturity Date”: The earlier of: (a) the date on which the Loans become due and payable under Section 8.02 upon the occurrence of an Event of Default; or (b) (i) the Revolving Credit Termination Date for the Revolving Credit Loans; (ii) November 30, 2019 for the Term Loan.

 

“Measurement Date” means the last day of each fiscal year of the Borrowers, commencing with the fiscal year ending March 31, 2019.

 

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in § 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate makes or is obligated to make contributions.

 

“Note(s)” means, individually or collectively, as the case may be, the Revolving Credit Note, the Term Note and each other promissory note now or hereafter made by the Borrowers payable to the order of the Lender.

 

“Obligations” means all Loans, advances, debts, liabilities, obligations, Banking Services Liabilities, covenants and duties, owing by one or more of the Borrowers to the Lender or any Affiliate of Lender of any kind or nature, present or future, which arise under this Agreement, any other Loan Document or by operation of law, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, opening, guarantying or confirming of a letter of credit, guaranty, indemnification or in any other manner, whether joint, several, or joint and several, direct or indirect (including those acquired by assignment or purchases), absolute or contingent, due or to become due, and however acquired. The term includes, without limitation, all amounts owed by one or more of the Borrowers to the Lender at such date as a result of draws on letters of credit paid by the Lender for which the Borrowers have not reimbursed the Lender, all principal, interest, fees, charges, expenses, attorneys’ fees, and any other sum chargeable to any Loan Party under this Agreement or any other Loan Document.

 

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“Other Investments”: As defined in Section 7.04.

 

“Other Taxes” means any and all present or future stamp, court, recording, filing, intangible, documentary or similar Taxes or any other excise or property Taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement or registration of, or performance under, or from the receipt or perfection of a security interest under or otherwise with respect to this Agreement or any other Loan Document (other than Excluded Taxes imposed with respect to an assignment).

 

“Participant” has the meaning set forth in Section 9.04(c).

 

“Participant Register” has the meaning set forth in Section 9.04(c).

 

“PATRIOT Act” has the meaning set forth in Section 9.13.

 

“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor thereto).

 

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

 

“Plan” at any one time, means any “employee benefit plan” that is covered by ERISA and in respect of which any Borrower or an ERISA Affiliate is (or, if such plan were terminated at such time, would under §4062 or §4069 of ERISA be deemed to be) an “employer” as defined in §3(5) of ERISA.

 

“Pledge Agreement” means that certain Pledge Agreement dated as of even date herewith, executed by the Pledgor in favor of the Lender, as amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under the Loan Documents.

 

“Pledgor” means, Stratus Aero Partners, LLC, a Delaware limited liability company.

 

“Projections” has the meaning set forth in Section 6.02.

 

“Properties” has the meaning set forth in Section 5.09(a).

 

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“Recovery Event” means any settlement of or payment to any Loan Party in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any Loan Party.

 

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

 

“Reorganization” with respect to any Multiemployer Plan, means that such plan is in reorganization within the meaning of §4241 of ERISA.

 

“Reportable Event” means any of the events set forth in §4043© of ERISA, other than those events as to which the thirty day notice period is waived.

 

“Requirement of Law” as to any Person, means the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law (including common law), statute, ordinance, treaty, rule, regulation, order, decree, judgment, writ, injunction, settlement agreement, requirement or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Responsible Officer” with respect to any Person, means the chief executive officer, president or chief financial officer of such Person, except that with respect to financial matters, the Responsible Officer shall be the chief financial officer or treasurer of such Person.

 

“Restricted Payments” has the meaning set forth in Section 7.07.

 

“Revolving Credit Commitment” means the obligation of the Lender to make Revolving Credit Loans in an aggregate principal amount not to exceed $1,500,000, as the same may be changed from time to time pursuant to the terms hereof.

 

“Revolving Credit Commitment Period”  means the period from and including the Closing Date to the Revolving Credit Termination Date.

 

“Revolving Credit Loans” means any revolving credit loan made by the Lender under Section 2.04.

 

“Revolving Credit Note” means the promissory note of the Borrowers described in Section 2.06(a), substantially in the form of Exhibit A-1, as such promissory note may be amended, modified or supplemented from time to time, and such term shall include any substitutions for, or renewals of, such promissory note.

 

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“Revolving Credit Termination Date” means the earliest to occur of (a) November 30, 2019, (b) the date the Revolving Credit Commitment is reduced to zero pursuant to Section 2.05, and (c) the termination of the Revolving Credit Commitment pursuant to Section 8.02.

 

“SEC” means the Securities and Exchange Commission (or successors thereto or an analogous Governmental Authority).

 

“Securities Act” means, the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations thereunder which shall be in effect at the time.

 

“Security Agreement” means the Security Agreement executed by the Borrowers in favor of the Lender, dated as of the Closing Date, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under the Loan Documents.

 

“Single Employer Plan” means any Plan that is covered by Title IV of ERISA, other than a Multiemployer Plan.

 

“Solvent” with respect to any Person as of any date of determination, means that on such date (a) the present fair salable value of the property and assets of such Person exceeds the debts and liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the property and assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts and other liabilities, including contingent liabilities, as such debts and other liabilities become absolute and matured, (c) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts and liabilities, including contingent liabilities, beyond its ability to pay such debts and liabilities as they become absolute and matured, and (d) such Person does not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

“Subordination Agreement” means each subordination agreement now or hereafter executed by a creditor of one or more Borrowers in favor of the Lender.

 

“Subordinated Debt” means, all Debt of the Borrowers which is contractually subordinated in right of payment to the Obligations pursuant to a Subordination Agreement on a form acceptable to the Lender in its reasonable discretion.

 

“Subsidiary” as to any Person, means any corporation, partnership, limited liability company, joint venture, trust or estate of or in which more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class of such corporation may have voting power upon the happening of a contingency), (b) the interest in the capital or profits of such partnership, limited liability company, or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

 

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“Tangible Assets” means, at any date of determination, the sum, calculated on a consolidated basis in accordance with GAAP for the Borrowers, of (a) Total Assets minus (b) Intangible Assets.

 

“Taxes” means any and all present or future income, stamp or other taxes, levies, imposts, duties, deductions, charges, fees or withholdings imposed, levied, withheld or assessed by any Governmental Authority, together with any interest, additions to tax or penalties imposed thereon and with respect thereto.

 

“Term Loan”: means the Loan described in Section 2.01.

 

“Term Loan Commitment”: $3,400,000.00, and as the context may require, the agreement of the Lender to make the Term Loan to the Borrowers up to the amount of the Term Loan Commitment subject to the terms and conditions of this Agreement.

 

“Term Note”: means the promissory note of the Borrowers, substantially in the form of Exhibit A-2, as such promissory note may be amended, modified or supplemented from time to time, and such term shall include any substitutions for, or renewals of, such promissory note.

 

“Total Assets” means, at any date of determination, the aggregate amount of assets appearing on the consolidated balance sheet of the Borrowers at such date prepared in accordance with GAAP.

 

“Transactions” means, the following series of transactions: (a) Acquisitions’ purchase of substantially all of the assets and its assumption of certain of the liabilities of the Seller pursuant to the Asset Purchase Agreement (the “Worthington Acquisition”); (b) the incurrence of the Obligations; (c) the contribution by Acquisition of the assets of Seller’s Worthington Aviation Parts division to Aviation in return for all of the membership interest of Aviation; (d) the contribution by Acquisition of the assets of Seller’s Worthington MRO Center division to Aviation in return for all of the membership interest of Aviation; and (d) the consummation of the other transactions contemplated by the Transaction Documents.

 

“Transaction Documents” means, the documents listed on Schedule A attached hereto.

 

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“Uniform Commercial Code” means the Uniform Commercial Code as in effect in the state of Minnesota from time to time.

 

Section 1.02     Interpretation With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

(a)     The definitions of terms herein shall apply equally to 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 (i) any definition of or reference to any agreement, instrument or other document 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 or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) 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.

 

(b)     In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

 

(c)     Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in Dollars in full in cash or immediately available funds (and in the case of any other contingent Obligations, providing cash collateral or other collateral as may be requested by the Lender) of all of the Obligations other than unasserted contingent indemnification Obligations.

 

(d)     All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP as in effect from time to time, and applied on a consistent basis in a manner consistent with that used in preparing the Guarantor’s audited financial statements, except as otherwise specifically prescribed herein.

 

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ARTICLE II

The Commitments and Loans

 

Section 2.01     Term Loan Commitment.

 

Subject to the terms and conditions hereof and in reliance upon the warranties of the Borrowers herein, the Lender agrees to make a loan (the “Term Loan”) in the amount of the Term Loan Commitment to the Borrowers at the Lender’s principal office in Edina, Minnesota in immediately available funds on the Closing Date. Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed.

 

Section 2.02     Procedure for Term Loan Borrowing.

 

Unless the Lender determines that any applicable condition specified in Article IV has not been satisfied (in which case the Lender will promptly notify the Borrowers in writing of such determination), the Lender will make the amount of the Term Loan available to the Borrowers at the Lender’s principal office in Edina, Minnesota in immediately available funds on the Closing Date

 

Section 2.03     Revolving Credit Commitment. 

 

(a)     Subject to the terms and conditions of this Agreement, the Lender agrees to make Revolving Credit Loans to the Borrowers during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding not exceeding the lesser of (i) the amount of the Revolving Credit Commitment or (ii) the Borrowing Base. During the Revolving Credit Commitment Period the Borrowers may use the Revolving Credit Commitment by borrowing, prepaying the Revolving Credit Loans in whole or in part, and re-borrowing, all in accordance with the terms and conditions hereof.

 

(b)     The Borrowers shall jointly and severally repay all outstanding Revolving Credit Loans on the Revolving Credit Termination Date.

 

Section 2.04     Procedures for Revolving Credit Borrowing.  The Borrowers shall either (a) submit a draw request to the Lender in writing or telephonically; or (b) use the Lender’s electronic banking systems to request each proposed borrowing in accordance with the requirements of such systems as may be in effect from time to time. Each such notice shall be effective upon receipt by the Lender, shall be irrevocable, and shall specify the date and amount of borrowing requested. At the request of the Lender, a telephonic request must be confirmed in writing by the Borrowers within three (3) Business Days after such request So long as (a) all conditions precedent set forth in Article IV with respect to such borrowing have been satisfied, and (b) with respect to a request for a Revolving Credit Loan, the aggregate principal amount outstanding of all Revolving Credit Loans at such time does not exceed the lesser of (i) the amount of the Revolving Credit Commitment or (ii) the Borrowing Base, in each case after giving effect to such Revolving Credit Loan, the Lender shall provide immediately available funds to the Borrowers in the amount of such requested borrowing on the requested borrowing date by depositing such funds into depository account number 161011127, maintained by the Borrowers with the Lender. Each borrowing shall be on a Business Day

 

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Section 2.05     Termination or Reduction of Revolving Credit Commitment.

 

(a)     Upon not less than three Business Days’ notice to the Lender, the Borrowers shall have the right to terminate the Revolving Credit Commitment or, from time to time, to reduce the aggregate amount of the Revolving Credit Commitment; provided, that no such termination or reduction of Revolving Credit Commitment shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the aggregate principal amount then outstanding of all Revolving Credit Loans would exceed the Revolving Credit Commitment. Any such partial reduction shall be in an amount equal to $100,000, or a whole multiple thereof, and shall reduce permanently the Revolving Credit Commitment then in effect.

 

Section 2.06     Repayment of Loans; Evidence of Debt. 

 

(a)     Revolving Note. The Revolving Credit Loans made by the Lender shall be evidenced by a Revolving Credit Note in the initial amount of the Revolving Credit Commitment. The Revolving Credit Loans and the Revolving Credit Note shall mature and be payable at Maturity of the Revolving Credit Loans. The Lender shall enter in its records the amount of each of its Revolving Credit Loans, the rate of interest borne on such Revolving Credit Loans, and the payments of the Revolving Credit Loans received by the Lender, and such records shall be conclusive evidence of the subject matter thereof, absent manifest error.

 

(b)     Term Note A. The Term Loan made by the Lender shall be evidenced by the Term Note in the amount of Term Loan when made. Term Loan shall mature and be payable in accordance with the provisions of the Term Note. The Lender shall enter in its records the amount of Term Loan, the rate of interest borne on the Term Loan and the payments of Term Loan received by the Lender, and such records shall be conclusive evidence of the subject matter thereof, absent manifest error.

 

(c)     The Borrowers hereby jointly and severally unconditionally promise to pay to the Lender in full in cash, to the extent not previously paid, then-unpaid principal amount of each Loan on its Maturity Date.

 

(d)     The Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrowers to the Lender resulting from each Loan, including the amounts of principal and interest payable and paid to the Lender from time to time under this Agreement.

 

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Section 2.07     Optional Prepayments. 

 

(a)     Voluntary.

 

(i)     Revolving Credit Loans. The Borrowers shall have the right, by giving written notice to the Lender by not later than 3:00 p.m. (Minneapolis time) on the Business Day of such payment, to voluntarily prepay the Revolving Credit Loans in whole or in part at any time without premium or penalty.

 

(ii)    Term Loan. The Borrowers shall have the right, by giving written notice to the Lender by not later than 3:00 p.m. (Minneapolis time) on the Business Day of such payment, to voluntarily prepay the Term Loan in whole or in part at any time, subject to the contemporaneous payment of any premium or fees set forth in the Term Note.

 

Section 2.08     Mandatory Prepayments. 

 

(a)     Revolving Credit Loans. If, at any time, the aggregate principal amount then outstanding of all Revolving Credit Loans exceeds the lesser of the Revolving Credit Commitment or the Borrowing Base, then the Borrowers, upon demand, shall jointly and severally prepay the amount of such excess together with interest on the amount prepaid.

 

(b)     Term Loan. Upon the sale or other disposition (including, without limitation the loss or destruction of any asset due to accident, fire or other cause) of any item of the Borrowers assets (excluding sales of Inventory in the ordinary course of Borrowers’ business), the Borrowers shall jointly and severally make mandatory prepayments of the Term Loan to the extent of any cash proceeds received from such sale or disposition.

 

Section 2.09     Application of Prepayments. 

 

Any partial prepayment of the Term Loan shall be applied to installments due on the Term Loan in the inverse order of their maturities.

 

Section 2.10     Interest.    

 

(a)     Term Loans. The Borrowers jointly and severally agree to pay interest on the outstanding principal amount of the Term Loan from the date of the Term Loan until the Term Loan is paid at the rates and at the times specified in the Term Note.

 

(b)     Revolving Credit Loans. The Borrowers jointly and severally agree to pay interest on the outstanding principal amount of the Revolving Credit Loans at the rates and at the times specified in the Revolving Credit Note.

 

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ARTICLE III

Taxes, Etc.

 

Section 3.01     Taxes.

 

(a)     Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Taxes except as required by applicable law. If the Borrowers are required by applicable law to deduct or withhold any Taxes from such payments, then:

 

(i)     if such Tax is an Indemnified Tax, the amount payable by the Borrowers shall be increased so that after all such required deductions or withholdings are made (including deductions or withholdings applicable to additional amounts payable under this Section), the Lender receives an amount equal to the amount it would have received had no such deduction or withholding been made, and

 

(ii)     the Borrowers shall make such deductions or withholdings and timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law.

 

(b)     Without limiting the provisions of Section 3.01(a) above, the Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)     The Borrowers shall jointly and severally indemnify the Lender, within ten days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed on or attributable to amounts payable under this Section) paid or payable by the Lender, on or with respect to an amount payable by the Borrowers under or in respect of this Agreement or under any other Loan Document, together with any reasonable expenses arising in connection therewith and with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate from the Lender as to the amount of such payment or liability delivered to the Borrowers shall be conclusive absent manifest error.

 

(d)     As soon as practicable after any payment of Taxes by the Borrowers to a Governmental Authority pursuant to this Section 3.01, the Borrowers shall deliver to the Lender the original or certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the relevant return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.

 

(e)     If the Lender 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 by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section, it shall pay over such refund (or the amount of any credit in lieu of refund) to the Borrowers (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section with respect to the Taxes giving rise to such refund or credit in lieu of refund), net of all out-of-pocket expenses of the Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund or credit in lieu of refund); provided that, the Borrowers, upon the request of the Lender, jointly and severally agree to repay the amount paid over to the Borrowers (plus any interest, penalties or other charges imposed by the relevant Governmental Authority) to the Lender in the event the Lender is required to repay such refund or credit in lieu of refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (e), in no event will the Lender be required to pay any amount to the Borrowers pursuant to this paragraph if the payment of such amount would place the Lender in a less favorable net after-Tax position than it 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 with respect to such Tax had never been paid. Nothing in this paragraph (e) shall be construed to require the Lender to make available its tax returns or any other information relating to its taxes that it deems confidential to the Borrowers or any other Person.

 

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Section 3.02     Increased Costs; Capital Adequacy Requirements.

 

(a)     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 Lender;

 

(ii)     subject the Lender to any Taxes (other than Indemnified Taxes) on its loans, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)     impose on the Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Eurodollar Rate Loans made by the Lender;

 

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

 

(b)     If the Lender determines that any Change in Law affecting the Lender, or Heartland (if any), regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on the Lender’s capital or on the capital of Heartland, if any, as a consequence of this Agreement, the Revolving Credit Commitment, the Term Loan Commitment or the Loans, to a level below that which the Lender or Heartland could have achieved but for such Change in Law (taking into consideration the Lender’s policies and the policies of Heartland with respect to capital adequacy), then from time to time the Borrowers will jointly and severally pay to the Lender such additional amount or amounts as will compensate the Lender or Heartland for any such reduction suffered.

 

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(c)     A certificate from the Lender setting forth the amount or amounts necessary to compensate it or its holding company, as specified in paragraph (a) or (b) of this Section and delivered to the Borrowers, shall be conclusive absent manifest error. The Borrowers shall jointly and severally pay the Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

 

(d)     Failure or delay on the part of the Lender to demand compensation pursuant to this Section shall not constitute a waiver of the Lender’s right to demand such compensation; provided that, the Borrowers shall not be required to compensate the Lender pursuant to this Section for any increased costs incurred or reductions suffered more than 270 days prior to the date that the Lender notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of the Lender’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 270 day period referred to above shall be extended to include the period of such retroactive effect).

 

Article IV

Conditions Precedent

 

Section 4.01     Conditions Precedent to Initial Loans. The obligation of the Lender to make the initial Revolving Credit Loans and the Term Loan is subject to the satisfaction or the waiver by the Lender of the following conditions precedent:

 

(a)     The Lender shall have received:

 

(i)     this Agreement, duly executed and delivered by Responsible Officer of each Borrower;

 

(ii)     the Revolving Credit Note, the Term Note, the Security Agreement, the Pledge Agreement, the Collateral Assignment and the Guaranty, in each case executed and delivered by the Loan Parties party thereto;

 

(iii)     results of a recent lien searches in each of the jurisdictions where each Borrower is organized and its assets are located, and such searches reveal no Liens on any of the assets of the Borrowers, except for Liens permitted under this Agreement or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Lender;

 

(iv)     a payoff letter, in form and substance acceptable to the Lender in its sole and absolute discretion, executed by BMO Harris Bank N.A.; and

 

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(v)     fully-executed copies of each the Transaction Documents, each in form and substance satisfactory to the Lender and certified as a true and correct copy by the Secretary of Aviation;

 

(vi)     payment, in immediately available funds of a non-refundable origination fee in the amount of $24,500, together with reimbursement for all expenses for which invoices have been presented (including the fees and expenses of Lender’s legal counsel), on or before the Closing Date;

 

(vii)     an opinion of counsel to the Loan Parties, in form and substance acceptable to the Lender;

 

(viii)     evidence satisfactory to the Lender that: (i) all conditions precedent to the consummation of the Transactions have been satisfied or waived; (ii) all necessary regulatory approvals to the consummation of the Transactions have been obtained; (iii) no litigation exists relating to the Transactions; and (iv) contemporaneously with the Borrowers’ receipt of the proceeds of the initial Revolving Credit Loans, the Transactions will be consummated in full in accordance with the terms of the Transaction Documents;

 

(ix)     evidence that each document (including any Uniform Commercial Code financing statement and appropriate filings with the United States Patent and Trademark Office or United States Copyright Office) required by the Loan Documents or any Requirement of Law or reasonably requested by the Lender to be filed, registered or recorded in order to create in favor of the Lender a perfected first priority Lien on the Collateral described therein, prior and superior in right to any other Person shall have been properly filed (or provided to the Lender) or executed and delivered in each jurisdiction;

 

(x)     a Borrowing Base Certificate as of a date satisfactory to the Lender certified by a Responsible Officer of each Borrower;

 

(xi)     a pro forma balance sheet for the Borrowers prepared on a consolidated basis, satisfactory to the Lender, taking into account the consummation of the Transactions and the receipt of the proceeds of the initial Revolving Credit Loans, describing all significant assumptions employed in connection therewith and certifying that all accounting entries necessary to account for the Transactions are reflected therein;

 

(xii)     evidence of insurance coverage in form, scope and substance satisfactory to the Lender and otherwise in compliance with the terms of Section 5.10 and Section 6.06 of this Agreement; and

 

(xiii)     an appraisal of the assets being purchased pursuant to the Asset Purchase Agreement, prepared by an independent appraisal professional selected by the Lender, satisfactory in form and substance to the Lender;

 

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(xiv)     a certificate of each Loan Party, each in form and substance satisfactory to the Lender and certified by a secretary or assistant secretary of such Loan Party, dated the Closing Date, including:

 

(A)     a certificate of incorporation, of each Loan Party that is a corporation, certified by the Secretary of State of the state of its incorporation;

 

(B)     by-laws for each Loan Party that is a corporation as in effect on the date on which the resolutions referred to below were adopted;

 

(C)     a certification of formation, of each Loan Party that is a limited liability company, certified by the Secretary of State of the state of its organization;

 

(D)     limited liability agreement for each Loan Party that is a limited liability company as in effect on the date on which the resolutions referred to below were adopted;

 

(E)     resolutions of the board of directors or, as the case may be, sole member, of each Loan Party approving the transactions contemplated by this Agreement and each Loan Document to which it is or is to be a party;

 

(F)     a certification that the names and signatures of the officers of each Loan Party authorized to sign each Loan Document to which it is or is to be a party and other documents to be delivered hereunder and thereunder are true and correct;

 

(G)     evidence of good standing for each Loan Party from the State of its organization and each other state where it is qualified to do business; and

 

(xv)     Such other approvals, opinions or documents as the Lender may reasonably request;

 

(b)     The Lender or its agent shall have completed its survey of the business, operations and assets of the Seller and of the Borrowers, and such survey shall provide the Lender with results and information which, in the Lender’s determination, are satisfactory to the Lender.

 

(c)     There shall have occurred no Material Adverse Effect.

 

Section 4.02     Conditions Precedent to Each Loan. The obligation of the Lender to make each Loan hereunder (including, without limitation, its initial extension of credit), is subject to the satisfaction or the waiver by the Lender of the following conditions precedent:

 

(a)     Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date.

 

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(b)     No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date.

 

Each borrowing by the Borrowers hereunder shall constitute a joint and several representation and warranty by the Borrowers, as of the date such Loan is made, that the conditions contained in Article IV have been satisfied.

 

Article V

Representations and Warranties

 

To induce the Lender to enter into this Agreement and to make the Loans , the Borrowers hereby jointly and severally represent and warrant to the Lender that:

 

Section 5.01     Existence; Compliance With Laws. Each Loan Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (b) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to qualify in such jurisdiction could not reasonably be expected to have a Material Adverse Effect, and (c) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 5.02     Power; Authorization; Enforceability.

 

(a)     Each Loan Party has the power and authority, and the legal right, to own or lease and operate its property, and to carry on its business as now conducted and as proposed to be conducted, and to execute, deliver and perform the Loan Documents and the Transaction Documents to which it is a party and, in the case of the Borrowers, to obtain Loans hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents and the Transaction Documents to which it is a party and, in the case of the Borrowers, to authorize the borrowing of Loans on the terms and conditions contained herein. No consent or authorization of, filing with (except as required under the Securities Act), notice to or other act by, or in respect of, any Governmental Authority or any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents or any of the Transaction Documents, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect, and (ii) the filings referred to in Error! Reference source not found.. Each Loan Document and each Transaction Documents has been duly executed and delivered by each Loan Party that is a party thereto.

 

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(b)     This Agreement constitutes, and each other Loan Document when delivered hereunder will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

 

Section 5.03     No Contravention. The execution, delivery and performance of the Transaction Documents, this Agreement and the other Loan Documents, the borrowing of Loans hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Loan Party and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or assets pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Loan Documents). No Requirement of Law or Contractual Obligation applicable to any Loan Party could reasonably be expected to have a Material Adverse Effect.

 

Section 5.04     Financial Statements.

 

(a)     The pro forma unaudited balance sheet of the Borrowers delivered to the Lender pursuant to Section 4.01(a)(xi)has been prepared on a basis in conformity with GAAP (except for the omission of footnotes and prior period comparative data required by GAAP and for variations from GAAP which in the aggregate are not material and for reallocations of values with respect to categories of assets acquired in connection with, and adjustment for actual fees, expenses and transaction costs incurred in connection with, the Transactions) and presents fairly the financial condition of the Borrowers, assuming consummation of the Transactions.

 

Section 5.05     No Material Adverse Effect. Since March 31, 2018, no development or event has occurred that has had or could reasonably be expected to have a Material Adverse Effect.

 

Section 5.06     No Litigation.  Other than as disclosed on Schedule 5.06, no action, suit, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or threatened by or against any Loan Party or against any of its property or assets (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.

 

Section 5.07     No Default. No Default or Event of Default has occurred and is continuing and no default has occurred and is continuing under or with respect to any Contractual Obligation of any Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.

 

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Section 5.08     Ownership of Property; Liens.

 

(a)     Upon the consummation of the Transactions on the Closing Date in accordance with the Transaction Documents, each Borrower shall have a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.02.

 

(b)     None of the Borrowers owns any real property.

 

(c)     Schedule 5.08 sets forth a complete and accurate list as of the date hereof of all leases of real property under which each Borrower is the lessee, showing as of the date hereof, the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof.

 

Section 5.09     Environmental Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

 

(a)     none of the facilities or properties currently or formerly owned, leased or operated by Borrowers (the “Properties”) contain or previously contained, any Hazardous Materials in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could result in liability under, any Environmental Law;

 

(b)     No Borrower has received any notice of actual or alleged violation, non-compliance or liability regarding compliance with Environmental Laws or other environmental matters or with respect to any of the Properties or the business operated by the Borrowers, nor is there any reason to believe that any such notice will be received or is being threatened;

 

(c)     the Properties and all operations at the Properties are and formerly have been in compliance with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by Borrower;

 

(d)     Hazardous Materials have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could result in liability to any Loan Party under, any Environmental Law; no Hazardous Materials have been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could result in liability under, any applicable Environmental Law; and there has been no release or threat of release of Hazardous Materials at or from the Properties, or arising from or related to the operations of any Loan Party in connection with the Properties or the business operated by Borrower, in violation of or in amounts or in a manner that could result in liability under Environmental Laws;

 

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(e)     no administrative or governmental action or judicial proceeding is pending or, to the knowledge of the Borrowers, threatened, under any Environmental Law to which any Borrower is or will be a party with respect to the Properties or the business operated by any Borrower, nor are there any decrees or orders or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the business operated by any Borrower; and

 

(f)     No Borrower has assumed any liability of any other Person under Environmental Laws.

 

Section 5.10     Insurance. The properties of the Borrowers are insured with financially sound and reputable insurance companies which are not Affiliates of the Borrowers, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrowers operate. Schedule 5.10 sets forth a description of all insurance maintained by or on behalf of the Borrowers as of the Closing Date. Each insurance policy listed on Schedule 5.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid. 

 

Section 5.11     Material Contracts. Schedule 5.11 sets forth all Material Contracts to which any Borrower is a party or is bound as of the Closing Date. The Borrowers have delivered true, correct and complete copies of such Material Contracts to the Lender on or before the Closing Date. No Borrower is in breach or in default in any material respect of or under any Material Contract and no Borrower has received any notice of the intention of any other party thereto to terminate any Material Contract.

 

Section 5.12     Intellectual Property. The Borrowers owns, or are licensed to use, all Intellectual Property necessary for the conduct of their respective businesses as currently conducted or proposed to be conducted. No material claim has been asserted and is pending by any Person challenging the use, validity or effectiveness of any of Borrowers’ Intellectual Property, nor is any Borrower aware of any valid basis for any such claim. The use of Intellectual Property by Borrowers does not materially infringe on the rights of any Person. Schedule 5.12 attached hereto is a complete list of all intellectual property that is owned by, or licensed to, Borrowers.

 

Section 5.13     Taxes. Borrowers have filed all Federal, state and other tax returns that are required to be filed and have paid all taxes shown thereon to be due, together with applicable interest and penalties, and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (except those that are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrowers). No tax Lien has been filed, and, to the knowledge of the Borrowers, no claim is being asserted, with respect to any such tax, fee or other charge. No Borrower is a party to any tax sharing agreement.

 

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Section 5.14     ERISA. Each Plan is in compliance with ERISA, the Code and any Requirement of Law; neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of §412 or §430 of the Code or §302 of ERISA) has occurred (or is reasonably likely to occur) with respect to any Plan. No Single Employer Plan has terminated, and no Lien has been incurred in favor of the PBGC or a Plan. Based on the assumptions used to fund each Single Employer Plan, the present value of all accrued benefits under each such Plan did not materially exceed the value of the assets of such Plan allocable to such accrued benefit as of the last annual valuation date prior to the date on which this representation is made. Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability that could reasonably be expected to result in a material liability under ERISA, in connection with any Multiemployer Plan. No such Multiemployer Plan is (or is reasonably expected to be) terminated, in Reorganization, or insolvent (within the meaning of §4245 of ERISA).

 

Section 5.15     Margin Regulations. No Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

 

Section 5.16     Investment Company Act. No Loan Party is or is required to be registered as an “investment company” under the Investment Company Act of 1940, as amended.

 

Section 5.17     Subsidiaries; Equity Interests.

 

(a)     Aviation and MRO are the only Subsidiaries of Acquisition

 

(b)     Aviation and MRO do not have any Subsidiaries.

 

Section 5.18     Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect (a) there are no strikes, lockouts or other labor disputes pending or, to the knowledge of the Borrowers, threatened against any Loan Party, (b) hours worked by and wages paid to employees of each Loan Party have not violated the Fair Labor Standards Act or any other applicable Requirement of Law, and (c) all payments due in respect of employee health and welfare insurance from any Loan Party have been paid or properly accrued on the books of the relevant Loan Party.

 

Section 5.19     Accuracy of Information, Etc. The Borrowers have disclosed to the Lender all agreements, instruments and corporate or other restrictions to which any Borrwer is subject, and all other matters known to the Borrowers, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No statement or information contained in this Agreement, any other Loan Document, or any other document, certificate or statement furnished by or on behalf of the Borrowers to the Lender, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statement contained herein or therein not misleading. The Projections included in such materials are based upon good faith estimates and assumptions believed by the Borrowers to be reasonable at the time made; it being recognized by the Lender that such Projections as to future events are not to be viewed as fact and that actual results during the period or periods covered by the Projections may differ from such projected results and such differences may be material.

 

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Section 5.20     Security Documents.

 

(a)     The Security Agreement creates in favor of the Lender a legal, valid, continuing and enforceable security interest in the Collateral, the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. The financing statements, releases and other filings are in appropriate form and have been or will be filed in the offices of the Secretary of State in which each Borrower is organized. Upon such filings and/or the obtaining of “control” (as defined in the Uniform Commercial Code), the Lender will have a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Collateral that may be perfected by filing, recording or registering a financing statement or analogous document (including without limitation the proceeds of such Collateral subject to the limitations relating to such proceeds in the Uniform Commercial Code) or by obtaining control, under the Uniform Commercial Code (in effect on the date this representation is made) in each case prior and superior in right to any other Person, except for Liens permitted under Section 7.02.

 

Section 5.21     Solvency. Each of the Loan Parties is, and after giving effect to the consummation of the Transaction and the incurrence of all Debt and obligations incurred in connection herewith will be, Solvent.

 

Section 5.22     PATRIOT Act; OFAC and Other Regulations.

 

(a)     No Loan Party, any of its Subsidiaries or any of the Affiliates or respective officers, directors, brokers or agents of such Loan Party, Subsidiary or Affiliate:

 

(i)     has violated any Anti-terrorism Laws; or

 

(ii)     has engaged in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated by the Organization for Economic Co-operation and Development’s Financial Action Task Force on Money Laundering.

 

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(b)      No Loan Party, any of its Subsidiaries or any of the Affiliates or respective officers, directors, brokers or agents of such Loan Party, Subsidiary or Affiliate that is acting or benefiting in any capacity in connection with the Loans is a Blocked Person.

 

(c)     No Loan Party, any of its Subsidiaries or any of the Affiliates or respective officers, directors, brokers or agents of such Loan Party, Subsidiary or Affiliate acting or benefiting in any capacity in connection with the Loans:

 

(i)     conducts any business or engages in making or receiving any contribution of goods, services or money to or for the benefit of any Blocked Person;

 

(ii)     deals in, or otherwise engages in any transaction related to, any property or interests in property blocked pursuant to any Anti-terrorism Law; or

 

(iii)     engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-terrorism Law.

 

Section 5.23     The Worthington Acquisition has been consummated substantially in accordance with the terms of the Transaction Documents as of the Closing Date. As of the Closing Date, the Transaction Documents have not been altered, amended or otherwise modified or supplemented in any material respect or any material condition thereof waived without the prior written consent of the Lender. All representations and warranties made by the Loan Parties in any of the Transaction Documents or in the certificates delivered in connection therewith are true and correct in all material respects as of the date hereof with the same force and effect as though made on and as of the date hereof, and such representations and warranties of the Loan Parties are hereby confirmed to the Lender and made representations and warranties hereunder as fully as if set forth herein. No Borrower has any knowledge that any of the representations and warranties made in the Transaction Documents by or on behalf of any party thereto other than the Loan Parties are untrue or incorrect.

 

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Article VI

Affirmative Covenants

 

So long as the Lender has any Revolving Credit Commitment hereunder, or any Loans, or any other amounts payable to the Lender hereunder or under any other Loan Document have not been indefeasibly paid in full, each of the Borrowers shall, and shall cause each other Loan Party to furnish all applicable materials to the Lender:

 

Section 6.01     Financial Statements. Furnish to the Lender:

 

(a)     As soon as available, but in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the annual audit report of Air T and its Subsidiaries for such year including a copy of the audited consolidated balance sheet of Air T and its Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, together with an opinion as to such audit report of BDO USA, LLP or other independent certified public accountants of nationally recognized standing which does not contain a “going concern” or similar qualification or exception, or qualification arising out of the scope of the audit, together with related consolidating financial statements and a certificate of such accounting firm to the Lender stating that in the course of the regular audit of the business of Air T and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards; provided that, in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrowers shall also provide a reconciliation of such financial statements to GAAP,

 

(b)     As soon as available and in any event within 45 days after the end of each fiscal quarter of each fiscal year, a copy of the unaudited financial statements of Air T prepared in conformity with GAAP (except for the omission of footnotes and prior period comparative data required by GAAP and for variations from GAAP which in the aggregate are not material) consisting of a consolidated balance sheet as of the close of such fiscal quarter and related consolidated statements of operations and retained earnings and cash flow for such fiscal quarter and from the beginning of such fiscal year to the end of such fiscal quarter and comparative figures for the corresponding portion of the preceding fiscal year together with related consolidating financial statements, certified by a Responsible Officer of Air T; and

 

(c)     As soon as available and in any event within 30 days after the end of each fiscal month of each fiscal year, a copy of the unaudited financial statements of the Borrowers prepared in conformity with GAAP (except for the omission of footnotes and prior period comparative data required by GAAP and for variations from GAAP which in the aggregate are not material) consisting of a consolidated balance sheet as of the close of such fiscal month and related consolidated statements of operations and retained earnings and cash flow for such fiscal month and from the beginning of such fiscal year to the end of such fiscal month and comparative figures for the corresponding portion of the preceding fiscal year together with related consolidating financial statements, certified by a Responsible Officer of each Borrower.

 

All such financial statements shall be complete and correct and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or Responsible Officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

 

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Section 6.02     Certificates; Other Information. The Borrowers shall furnish the following to the Lender:

 

(a)     As soon as available, and in any event within 120 days after the end of each fiscal year of the Borrowers, a compliance certificate (the “Compliance Certificate”) in the form attached hereto as Exhibit B, signed by a Responsible Officer of each Borrower (i) containing all information and calculations necessary for determining compliance by the Loan Parties with the provisions of this Agreement as of the last day of such fiscal year of the Borrowers and (ii) stating that each Loan Party during such period has observed and performed all of the covenants and other agreements, and satisfied every condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such officer has not obtained any knowledge of any Default or Event of Default except as specified in such certificate; and

 

(b)     As soon as available, and in any event within 15 Business Days after the end of each month of each fiscal year, a borrowing base certificate (the “Borrowing Base Certificate”) in the form provided by the Lender attached hereto as Exhibit C showing the Borrowing Base as of the last Business Day of the previous month, accompanied by a detailed accounts receivable aging, a detailed inventory report (including an aging), a detailed accounts payable aging and other supporting reports as may be required by the Lender and the Borrowing Base Certificate and such supporting reports shall be in a form acceptable to the Lender and certified as accurate by a Responsible Officer of each Borrower;

 

(c)     Promptly, and in any event within 30 days thereafter, to the extent not previously disclosed to the Lender, a description of any change in the jurisdiction of organization of any Loan Party;

 

(d)     Promptly after the same are sent, copies of all proxy statements, financial statements and reports that any Loan Party sends to any of its securities holders, and copies of all reports and registration statements that any Loan Party files with the SEC or any national securities exchange;

 

(e)     Promptly upon receipt of the same, copies of all notices, requests and other documents received by any Loan Party under or pursuant to any Material Contract or instrument, indenture, loan agreement regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and copies of the foregoing and such information and reports regarding Material Contracts and such instruments, indentures, loan agreements as the Lender may reasonably request from time to time; and

 

(f)     Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party as the Lender may from time to time request.

 

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Section 6.03     Notices. Promptly and in any event within five days give notice to the Lender of:

 

(a)     The occurrence of any Default or Event of Default;

 

(b)     Any (i) default or event of default under any Material Contract of any Loan Party or (ii) litigation, investigation or proceeding that may exist at any time between any Loan Party and any Governmental Authority;

 

(c)     Any litigation or proceeding against any Loan Party (i) in which the amount involved is at least $500,000 and not covered in full by insurance, (ii) in which injunctive or similar relief is sought, or (iii) which relates to any Loan Document;

 

(d)     The following events, as soon as possible and in any event within five (5) days after any Borrower or any of the Borrowers’ ERISA Affiliates knows or has reason to know thereof:

 

(i)     the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or any Multiemployer Plan; or

 

(ii)     the institution of proceedings or the taking of any other action by the PBGC or any Borrower or any ERISA Affiliate or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan;

 

(e)     The occurrence of any Environmental Action against or of any noncompliance by any Loan Party with any Environmental Law or relevant permit; and

 

(f)     Any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

 

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of each Borrower setting forth details of the occurrence referred to therein and stating what action the relevant Loan Party proposes to take with respect thereto.

 

Section 6.04     Maintenance of Existence; Compliance.

 

(a)     (i) Preserve, renew and maintain in full force and effect its corporate or organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted under this Agreement.

 

(b)     Comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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Section 6.05     Performance of Material Contracts. Perform and observe all the terms and provisions of each Material Contract to be performed or observed by it, maintain each Material Contract in full force and effect, enforce each such Material Contract in accordance with its terms, take all such action to such end as may be from time to time requested by the Lender and, upon request of the Lender, make to each other party to each Material Contract such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Material Contract.

 

Section 6.06     Maintenance of Property; Insurance.

 

(a)     Maintain and preserve all of its property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

 

(b)     Maintain insurance with respect to its property and business (including without limitation, property, casualty and business interruption insurance) with financially sound and reputable insurance companies that are not Affiliates of a Borrower, in such amounts and covering such risks as are usually insured against by similar companies engaged in the same or a similar business. Each policy of liability insurance shall name the Lender as an additional insured and each policy of real property insurance shall name the Lender as mortgagee loss payee and each policy insuring any other Collateral shall name the Lender as lender loss payee.

 

Section 6.07     Inspection of Property; Books and Records; Discussions.

 

(a)     Keep proper books of records and accounts, in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions and assets in relation to its business and activities.

 

(b)     Permit the Lender and its representatives to (i) discuss Borrowers’ business operations, properties and financial and other condition with its officers and employees and its independent public accountants and (ii) upon reasonable notice to visit the Borrowers’ offices and inspect and make abstracts from any of its books and records including, without limitation, permitting the Lender to examine any Collateral securing the Loans and reimburse the Lender for all examination fees and expenses incurred in connection with such examinations at its then current rate for such services and for its out-of-pocket expenses incurred in connection therewith; provided, however that the Lender agrees that, so long as no Default or Event of Default has occurred and is continuing, the Borrowers’ obligations to reimburse the Lender for its examinations shall be limited to no more than one examination per any Loan Year plus its out-of-pocket expenses incurred in connection therewith.

 

Section 6.08     Environmental Laws.

 

(a)     Obtain, comply and maintain in all material respects, and ensure the same in all material respects by all tenants and subtenants, if any, with all applicable Environmental Laws, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.

 

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(b)     Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions necessary to remove and clean up all Hazardous Materials from any of its properties required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws.

 

Section 6.09     Use of Proceeds. Use the proceeds of the Loans (a) to finance the acquisition of assets by the Borrowers in the ordinary course of business, including the purchase of inventory and equipment, (b) to finance Capital Expenditures of the Borrowers, (c) to refinance Debt incurred by Air T from the Lender for the purpose of consummating the Transactions, and (d) for general corporate purposes of the Borrowers, in each case to the extent not prohibited under any Requirement of Law or the Loan Documents.

 

Section 6.10     Additional Collateral; etc. 

 

(a)     With respect to any property acquired after the Closing Date by any Borrower that is intended to be subject to a Lien created by any Loan Document, other than any property subject to a Lien expressly permitted by this Agreement, as to which the Lender, does not have a perfected Lien, promptly, and in any event within 30 days of acquiring such property:

 

(i)     execute and deliver to the Lender such supplements or amendments to the Security Agreement or such other documents as the Lender deems necessary or advisable to grant to the Lender a security interest in such property; and

 

(ii)     take all actions necessary or advisable to grant to the Lender a perfected first priority security interest in such property, including the filing of UCC-1 financing statements in such jurisdictions as may be required by the Security Agreement or by law or as may be requested by the Lender; and

 

(iii)     execute and deliver to the Lender such supplements or amendments to any Loan Document as the Lender deems necessary or advisable to grant to the Lender a perfected first priority security interest in the Equity Interests of any new Subsidiary;

 

(iv)     deliver to the Lender the certificates representing such Equity Interests, together with undated stock powers, in blank, executed by a duly authorized officer of the relevant Loan Party;

 

(v)     deliver to the Lender originals of any promissory notes evidencing intercompany loans provided by a Borrower to any Person that is not a Borrower, indorsed in blank by a duly authorized officer of the relevant Borrower; and

 

(vi)     cause such new Subsidiary of a Borrower to become a Loan Party (an “Additional Loan Party”) to: (A) execute and deliver a Guaranty and a joinder to the Security Agreement, each in the form provided by the Lender (B) take all actions necessary or desirable to grant to the Lender a perfected first priority security interest in the Collateral owned by such new Subsidiary, including the filing of UCC-1 financing statements in such jurisdictions as may be required by such security agreement or by law or as may be requested by the Lender; and (C) execute and deliver a secretary’s certificate of such new Loan Party, with charter documents, by-laws and appropriate resolutions attached.

 

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Section 6.11     Further Assurances. Promptly upon the request of the Lender:

 

(a)     Correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgement, filing or recordation thereof; and

 

(b)     Do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignments, transfers, certificates, assurances and other instruments as the Lender, may require from time to time in order to:

 

(i)     carry out more effectively the purposes of the Loan Documents;

 

(ii)     to the fullest extent permitted by applicable law, subject any Loan Party’s properties, assets, rights or interests to the Liens now or hereafter intended to be covered by the Security Agreement and the other Loan Documents;

 

(iii)     perfect and maintain the validity, effectiveness and priority of the Liens intended to be created under the Security Agreement and the other Loan Documents;

 

(iv)     each Borrower and each Subsidiary of a Borrower will execute and deliver, or cause to be executed and delivered, to the Lender such documents, agreements and instruments (including, without limitation, account control agreements, landlord waivers and bailee agreements), and will take or cause to be taken such further actions (including the filing and recording of financing statements, fixture filings, and other documents and such other actions or deliveries, as applicable), which may be required by law or which the Lender may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure perfection and priority of the Liens created or intended to be created by the Security Agreement, all in form and substance reasonably satisfactory to the Lender and all at the expense of the Borrower; and

 

(v)     assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively to the Lender, the rights granted or now or hereafter intended to be granted to the Lender under any Loan Document or under any other instruments executed in connection with any Loan Document to which any Loan Party is or is to be a party.

 

Section 6.12      Deposit Accounts. In order to facilitate the Lender’s maintenance and monitoring of its security interests in the Collateral, each Borrower shall maintain, and shall cause each of their respective Subsidiaries to maintain, all of its operating accounts, deposit accounts and securities accounts with the Lender or an Affiliate of the Lender; provided, however, as a matter of convenience, each Loan Party may maintain up to $75,000 in deposits in demand deposit accounts at other commercial banking institutions in locales where the Lender or an Affiliate of Lender does not maintain a banking branch; provided further that the Borrowers shall use commercially reasonable best efforts to cause such other banking institutions to execute control agreements in favor of the Lender on forms acceptable to Lender with regards to such deposit accounts.

 

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Article VII

Negative Covenants

 

So long as the Lender has any Revolving Credit Commitment hereunder, or any Loans or any other amounts payable to the Lender hereunder or under any other Loan Document have not been indefeasibly paid in full, the Borrowers shall not do any of the following without the prior written consent of the Lender:

 

Section 7.01     Limitation on Debt. Create, incur, assume, permit to exist or otherwise become liable with respect to any Debt, except:

 

(a)     Debt existing or arising under this Agreement and any other Loan Document;

 

(b)     Debt of:

 

(i)     a Borrower owed to any other Loan Party; and

 

(ii)     any Loan Party owed to a Borrower;

 

(c)     Debt incurred to finance the acquisition of fixed or capital assets (including Capital Lease Obligations) secured by a Lien permitted under Section 7.02(f); provided that, (i) such Debt is incurred simultaneously with such acquisition; (ii) such Debt when incurred shall not exceed the purchase price of the asset financed and (iii) the aggregate principal amount of Debt permitted by this Section 7.01(b), shall not exceed $50,000 in the aggregate at any time outstanding;

 

(d)     Subordinated Debt;

 

(e)     current liabilities (other than borrowed money) incurred in the ordinary course of business;

 

(f)     Debt in respect of taxes, assessments or government charges to the extent that payment thereof shall not at the time be required to be made under this Agreement; and

 

(g)     other unsecured Debt of the Borrowers in an aggregate principal amount not to exceed $50,000 at any time.

 

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Section 7.02     Limitation on Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests of any of its Subsidiaries) now owned or hereafter acquired by it or on any income or rights in respect of any thereof, except:

 

(a)     Liens created pursuant to or arising under any Loan Document;

 

(b)     Liens imposed by law for taxes, assessments or governmental charges not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted if adequate reserves with respect thereto are maintained in accordance with GAAP on the books of the applicable Person;

 

(c)     Carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other similar Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings diligently conducted;

 

(d)     Pledges and deposits and other Liens (i) made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, and (ii) securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrowers;

 

(e)     Liens (including deposits) to secure the performance of bids, tenders, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of like nature, in each case in the ordinary course of business;

 

(f)     Easements, zoning restrictions, rights-of-way, minor defects or irregularities in title and similar encumbrances on real property imposed by law or arising in the ordinary course of business which, in the aggregate, are not material in amount and which do not materially detract from the value of the affected property or interfere materially with the ordinary conduct of business of a Borrower or any of its Subsidiaries;

 

(g)     Liens on fixed or capital assets acquired by a Borrower after the date hereof; provided that (i) such security interests secure Debt permitted by Section 7.01(b), (ii) such Liens and the Debt secured thereby are incurred simultaneously with such acquisition, (iii) such Liens shall not apply to any other property or assets of the Borrowers, and (iv) the amount of Debt initially secured thereby is not more than 100% of the purchase price of such fixed or capital asset;

 

(h)     Liens on the personal property of any Borrower disclosed on Schedule 7.02 and

 

(i)     Judgment or other similar Liens in connection with legal proceedings in an aggregate principal amount net of amounts for which insurance providers have delivered written acknowledgements of coverage up to $500,000 in the aggregate, which, whether immediately or with the passage of time (i) do not give rise to an Event of Default under Section 8.01(g) and (ii) are being contested in good faith by appropriate proceedings diligently conducted.

 

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Section 7.03     Mergers; Nature of Business.

 

(a)     Merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, any Subsidiary of a Borrower that is a Loan Party may merge into such Borrower in a transaction in which such Borrower is the surviving corporation.

 

(b)     Engage in any business other than businesses of the type conducted by the Borrowers on the date hereof.

 

Section 7.04     Limitation on Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase, hold or acquire any Equity Interests, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, “Investments”), except:

 

(a)     Investments in Cash Equivalents;

 

(b)     Loans and advances to officers, directors, or employees of a Borrower in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount not to exceed $50,000 at any time outstanding;

 

(c)     Intercompany Investments by any Borrower in another Borrower; and

 

(d)     Extensions of trade credit in the ordinary course of business (including any instrument evidencing the same and any instrument, security or other asset acquired through bona fide collection efforts with respect to the same).

 

Section 7.05     Limitation on Dispositions. Dispose of any of its property, whether now owned or hereafter acquired, or issue or sell any Equity Interests to any Person, except:

 

(a)     The sale or Disposition of machinery and equipment no longer used or useful in the business of a Borrower;

 

(b)     The Disposition of obsolete or worn-out property of a Borrower in the ordinary course of its business; and

 

(c)     The sale or lease of inventory for fair value in the ordinary course of business of a Borrower.

 

Section 7.06     Limitation on Sales and Leasebacks. Enter into any arrangement with any Person whereby such Borrower shall sell or otherwise transfer any property owned by such Borrower to (a) such Person and thereafter rent or lease such Property from such Person or (b) any other Person to whom funds have been or are to be advanced by such Person on the security of such Property or rental obligations of such Loan Party.

 

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Section 7.07     Limitation on Restricted Payments; Transfers to non-Loan Parties. 

 

(a)     Declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Equity Interests of a Borrower or any of its Subsidiaries, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of such Borrower or any of its Subsidiaries (collectively, “Restricted Payments”), provided, that:

 

(i)     a Subsidiary of a Borrower may make a Restricted Payment to such Borrower;

 

(ii)     A Borrower may declare and pay dividends and make other distributions and payments with respect to its Equity Interests if payable solely in its Equity Interests; and

 

(iii)     Only so long as no Default or Event of Default has occurred and is continuing either before or following the making thereof, a Borrower may make Restricted Payments that would not otherwise be permitted by this Section 7.07, provided that such Restricted Payments shall be limited to the amount of Excess Capital as calculated on a pro forma basis as set forth on an Excess Capital Certificate delivered to the Lender prior to the making of any such Restricted Payment.

 

(b)     Transfer any asset of a Borrower to an Affiliate that is not a Borrower.

 

Section 7.08     Limitation on Prepayments of Debt and Amendments of Debt Instruments.

 

(a)     Make or offer to make any optional or voluntary payment or prepayment on or redemption, defeasance or purchase of any (whether principal or interest) Subordinated Debt; or

 

(b)     Amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to any Subordinated Debt, other than any amendment, modification, waiver or other change which (i) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon; and (ii) does not involve the payment of a consent fee.

 

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Section 7.09     Limitation on Transactions With Affiliates. Enter into or be a party to any transaction including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate unless such transaction is:

 

(a)     Otherwise permitted by the terms of this Agreement; or

 

(b)     In the ordinary course of business of a Borrower, and on fair and reasonable terms no less favorable to such Borrower, than those that would have been obtained in a comparable transaction on an arm’s length basis from an unrelated Person.

 

Section 7.10     Fiscal Year. Change the end of the Borrowers’ fiscal year to a date other than March 31.

 

Section 7.11     Limitation on Restrictive Agreements. Enter into or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of a Borrower to:

 

(a)     Make Restricted Payments in respect of any Equity Interests of such Subsidiary held by, or pay any Debt owed to, such Borrower or any other Subsidiary of a Borrower;

 

(b)     Make loans or advances to, or Investments in, a Borrower or any other Subsidiary of a Borrower; and

 

(c)     Transfer any of its assets to a Borrower or any other Subsidiary of a Borrower, except for such encumbrances or restrictions (i) existing under the Loan Documents, and (ii) with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Equity Interests or assets of such Subsidiary.

 

Section 7.12     Limitation on Amendments of Material Contracts. Amend, supplement or otherwise modify (pursuant to a waiver or otherwise):

 

(a)     Its articles of organization, certificate of designation, operating agreement, bylaws or other organizational document; or

 

(b)     The terms and conditions of any Material Contract;

 

in each case, in any respect materially adverse to the interests of the Lender, without the Lender’s prior written consent.

 

Section 7.13     Financial Covenants.  [Intentionally deleted].

 

Section 7.14     Transaction Documents. Amend, modify, or supplement any provision of, or waive any other party’s compliance with any of the terms of, any Transaction Document in any manner which: (a) requires the Loan Parties to pay any additional consideration under such Transaction Document or otherwise imposes any financial obligation or burden on the Borrowers; (b) could have a Material Adverse Effect; or (c) is materially adverse to the rights and benefits of the Lender under the Loan Documents.

 

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Article VIII

Events of Default and Remedies

 

Section 8.01     Events of Default. Each of the following events or conditions shall constitute an “Event of Default” (whether it shall be voluntary or involuntary or come about or be effected by any Requirement of Law or otherwise):

 

(a)     (i) the Borrowers fail to pay any principal of any Loan or any interest thereon when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or (ii) any fee or other amount payable hereunder or under any other Loan Document when due and such failure remains unremedied for a period of five (5) days of such due date;

 

(b)     any representation, warranty, certification or other statement of fact made or deemed made by or on behalf of any Loan Party herein or in any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder or in any certificate, document, report, financial statement or other document furnished by or on behalf of any Loan Party under or in connection with this Agreement or any other Loan Document, proves to have been false or misleading in any material respect on or as of the date made or deemed made;

 

(c)     any Loan Party fails to perform or observe any covenant, term, condition or agreement contained in Section 6.03, Section 6.04(a), Section 6.09, Section 6.11, or Article VII;

 

(d)     any Loan Party fails to perform or observe any other covenant, term, condition or agreement contained in this Agreement or any other Loan Document (other than as provided in subsections (a) through (c) of this Section 8.01, and such failure continues unremedied for a period of sixty (60) days after written notice to the Borrowers from the Lender;

 

(e)     Any Loan Party:

 

(i)     fails to pay any principal or interest in respect of any Debt in excess of $1,000,000 (including any Guaranty Obligation, but excluding any Debt outstanding under this Agreement) when due and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt;

 

(ii)     fails to perform or observe any other covenant, term, condition or agreement relating to any such Debt or contained in any instrument or agreement evidencing or relating thereto, or any other event occurs or condition exists, the effect of which failure or other event or condition is to cause, or to permit the holder or beneficiary of such Debt (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice, if required, such Debt to become due prior to its stated maturity (or, in the case of any such Debt constituting a Guaranty Obligation, to become payable); or any such Debt is declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption or as a mandatory prepayment), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof;

 

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provided that, a default, event or condition described in clause (i) or (ii) of this subsection (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i) and (ii) of this subsection (e) has occurred and is continuing with respect to Debt the outstanding principal amount of which exceeds in the aggregate $1,000,000.

 

(f)      

 

(i)     Any Loan Party: (x) commences any case, proceeding or other action under any existing or future Debtor Relief Law, seeking (A) to have an order for relief entered with respect to it, or (B) to adjudicate it as bankrupt or insolvent, or (C) reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (D) appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or (y) makes a general assignment for the benefit of its creditors;

 

(ii)     there is commenced against any Loan Party in a court of competent jurisdiction any case, proceeding or other action of a nature referred to in clause (i) above which (x) results in the entry of an order for relief or any such adjudication or appointment or (y) remains undismissed, undischarged, unstayed or unbonded for sixty (60) days;

 

(iii)     there is commenced against any Loan Party any case, proceeding or other action seeking issuance of a warrant of attachment, execution or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which has not been vacated, discharged, stayed or bonded pending appeal within (30) days from the entry thereof;

 

(iv)     any Loan Party is generally not, or is unable to, or admits in writing its inability to, pay its debts as they become due; or

 

(v)     any Loan Party takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above.

 

(vi)     (A) any Person shall engage in any “prohibited transaction” (as defined in §406 of ERISA or §4975 of the Code) involving any Plan; (B) any failure to satisfy the minimum funding standard (within the meaning of Sections §412 or §430 of the Code or §302 of ERISA) shall exist with respect to any Plan, or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Borrower or any ERISA Affiliate; (C) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of trustee is likely to result in the termination of such Plan for purposes of Title IV of ERISA; (D) any Single Employer Plan shall terminate for purposes of Title IV of ERISA; or (F) any Borrower or any ERISA Affiliate shall incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan.

 

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(g)     one or more final and non-appealable judgments or decrees is entered against any Loan Party by a court of competent jurisdiction involving, in the aggregate, a liability (not paid or fully covered by insurance from an insurer that is rated at least “A” by A.M. Best Company as to which the relevant insurance company has been notified and has not denied coverage) in an amount in excess of $150,000 and all such judgments or decrees have not been vacated, discharged, stayed or bonded pending appeal within sixty (60) days from the entry thereof;

 

(h)     the Security Agreement ceases for any reason to be valid, binding and in full force and effect or any Lien created by the Security Agreement ceases to be enforceable and of the same effect and priority purported to be created thereby, other than as expressly permitted hereunder or thereunder;

 

(i)     any provision of any Loan Document ceases for any reason to be valid, binding and in full force and effect, other than as expressly permitted hereunder or thereunder;

 

(ii)     any Loan Party contests in any manner the validity or enforceability of any provision of any Loan Document;

 

(iii)     any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Revolving Credit Commitment and the Term Loan Commitment) or purports to revoke, terminate or rescind any provision of any Loan Document;

 

(i)     any Change of Control occurs;

 

(j)     the occurrence of any “Event of Default” or the “Revolving Credit Termination Date” under the Air T Credit Agreement (as such terms in quotation marks are therein defined); or

 

(k)     there occurs in, the reasonable judgment of the Lender, a Material Adverse Effect.

 

Section 8.02     Remedies Upon Event of Default. If any Event of Default occurs and is continuing, then:

 

(a)     if such event is an Event of Default specified in Section 8.01(f) above with respect to any Borrower, the Commitments shall automatically and immediately terminate and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable;

 

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(b)     if such event is an Event of Default (other than an Event of Default under Section 8.01(f)), any or all of the following actions may be taken:

 

(i)     the Lender may, by notice to the Borrowers, declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate;

 

(ii)     the Lender may, by notice to the Borrowers, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable; and

 

(iii)     the Lender may exercise all rights and remedies available to it under the Security Agreement, the Guaranties and each other Loan Document.

 

Article IX

Miscellaneous

 

Section 9.01     Notices.

 

(a)     Except in the case of notices and other communications expressly permitted to be given by telephone (or by e-mail as provided in paragraph (b) below), all notices and other communications provided for herein shall be made in writing and mailed by certified or registered mail, delivered by hand or overnight courier service, or sent by facsimile as follows:

 

(i)           If to the Borrowers or any other Loan Party, to it at:

 

Worthington Acquisition, LLC

Worthington MRO, LLC

Worthington Aviation, LLC

c/o Air T, Inc.

5930 Balsom Ridge Road

Denver, North Carolina 28037

Attention: Candice L. Otey

 

with a copy to (which shall not consititute notice or service of process):

 

Winthrop & Weinstine, P.A.

225 S. 6th Street

Minneapolis, MN 55402

Attention: David E. Moran, Esq.

 

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(ii)          If to the Lender, to it at

 

Minnesota Bank & Trust

7701 France Avenue South, Suite 110

Edina, MN 55435

Attention: Mr. Eric P. Gundersen, SVP

 

with a copy to (which shall not constitute notice or service of process):

 

Fabyanske, Westra, Hart & Thomson, P.A.

333 South Seventh Street, Suite 2600

Minneapolis, MN 55402

Attention: Frederick H. Ladner, Esq.

Fax Number: 612-359-7602

 

Notices mailed by certified or registered mail or sent by hand or overnight courier service shall be deemed to have been given when received. Notices sent by facsimile during the recipient’s normal business hours shall be deemed to have been given when sent (and if sent after normal business hours shall be deemed to have been given at the opening of the recipient’s business on the next Business Day).

 

(b)     Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communications (including e-mail and internet or intranet websites) pursuant to procedures approved by the Lender. The Lender or the Borrowers may, in their 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.

 

(c)     Unless the Lender specifies otherwise:

 

(i)     notices and other communications sent by e-mail shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), 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, if such notice, e-mail or other communication is not sent during the recipient’s normal business hours, such notice, e-mail or communication shall be deemed to have been sent at the recipient’s opening of business on the next Business Day.

 

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(d)     Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties.

 

Section 9.02     Amendments and Waivers.

 

(a)     No failure to exercise and no delay in exercising, on the part of the Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall comply with paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Lender may have had notice or knowledge of such Default at the time.

 

(b)     Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (i) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by any Borrower and the Lender, or (ii) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Lender and the Loan Party or Loan Parties that are parties thereto.

 

Section 9.03     Expenses; Indemnity; Damage Waiver.

 

(a)     The Borrowers jointly and severally agree to pay:

 

(i)     all reasonable out-of-pocket expenses incurred by the Lender and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Lender, in connection with the preparation, negotiation, execution, delivery and administration of the Loan Documents and any amendments, waivers or other modifications of the provisions of any Loan Document (whether or not the transactions contemplated by the Loan Documents are consummated) and;

 

(ii)     all out-of-pocket expenses incurred by the Lender, including the fees, charges and disbursements of any counsel for the Lender, in connection with the enforcement or protection of its rights (i) in connection with the Loan Documents, including its rights under this Section 9.03, or (ii) in connection with the Loans issued under this Agreement, including all such out-of-pocket expenses incurred in connection with any restructuring, workout or negotiations in respect of the Loan Documents or such Loans.

 

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(b)     The Borrowers jointly and severally agree to indemnify and hold harmless the Lender and each of its Related Parties (each, an “Indemnified Party”) from and against, any and all claims, damages, losses, liabilities and related expenses (including the reasonable fees, charges and expenses of any counsel for any Indemnified Party, incurred by any Indemnified Party or asserted against any Indemnified Party by any Person (including the Borrowers or any other Loan Party) other than such Indemnified Party and its Related Parties arising out of, in connection with, or by reason of:

 

(i)     the execution or delivery of any Loan Document or any agreement or instrument contemplated in any Loan Document, the performance by the parties thereto of their respective obligations under any Loan Document or the consummation of the transactions contemplated by the Loan Documents;

 

(ii)     any Loan or the actual or proposed use of the proceeds therefrom;

 

(iii)     any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by any Borrower or any of its Subsidiaries, or any Environmental Liability related to the Borrowers or any of their Subsidiaries in any way; or

 

(iv)     any actual or prospective claim, investigation, litigation 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 a Borrower or any other Loan Party, and regardless of whether any Indemnified Party is a party thereto; provided that, such indemnity shall not be available to any Indemnified Party to the extent that such claims, damages, losses, liabilities or related expenses (A) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnified Party or (B) result from a claim brought by a Borrower or any other Loan Party against any Indemnified Party for breach in bad faith of such Indemnified Party’s obligations under any Loan Document, if a court of competent jurisdiction has rendered a final and non-appealable judgment in favor of such Borrower or such Loan Party on such claim. This Section 9.03 shall only apply to Taxes that represent losses, claims, damages or similar charges arising from a non-Tax claim.

 

(c)     The Borrowers jointly and severally agree, to the fullest extent permitted by applicable law, not to assert, and hereby waives, any claim against any Indemnified Party, on any theory of liability, for special, indirect, consequential or punitive damages (including, without limitation, any loss of profits or anticipated savings), as opposed to actual or direct damages, resulting from this Agreement or any other Loan Document or arising out of such Indemnified Party’s activities in connection herewith or therewith (whether before or after the Closing Date).

 

(d)     All amounts due under Section 9.03 shall be payable promptly after demand is made for payment by the Lender.

 

(e)     The Borrowers jointly and severally agree that no Borrower nor any of their respective Subsidiaries will settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification or contribution could be sought under Section 9.03 (whether or not any Indemnified Party is an actual or potential party to such claim, action or proceeding) without the prior written consent of the applicable Indemnified Party, unless such settlement, compromise or consent includes an unconditional release of such Indemnified Party from all liability arising out of such claim, action or proceeding.

 

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Section 9.04     Successors and Assigns.

 

(a)     The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender (and any attempted assignment or transfer by a Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of the Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)     The Lender may, at any time, without the consent of the Borrower, assign to one or more Eligible Assignees (as defined below) all or a portion of its rights and obligations under this Agreement (including all or a portion of the Commitments and the Loans at the time owing to it); provided, however, that Lender shall not, without any Borrower’s prior written consent (which consent shall not be unreasonably withheld or delayed), make any such assignment to a Person described in clauses (ii) or (iii) of the definition of “Eligible Assignee” at any time when there is no outstanding Default or Event of Default. For purposes of this Agreement, “Eligible Assignee” means any Person other than a natural Person that is (i) an Affiliate of the Lender (which term shall, in any event, include Heartland and Subsidiaries of Heartland), (ii) a commercial bank, insurance company, investment or mutual fund or other Person that is an “accredited investor” (as defined in Regulation D under the Securities Act) or (iii) a corporate entity that possesses financial sophistication and standing similar to that of the Lender. Subject to notification of an assignment, the assignee shall be a party hereto and, to the extent of the interest assigned, have the rights and obligations of the Lender under this Agreement, and the Lender shall, to the extent of the interest assigned, be released from its obligations under this Agreement (and, in the case of an assignment covering all of the Lender’s rights and obligations under this Agreement, the Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 3.01, Section 3.02 and Section 9.03. The Borrowers hereby jointly and severally agree to execute any amendment and/or any other document that may be necessary to effectuate such an assignment, including an amendment to this Agreement to provide for multiple lenders and an administrative agent to act on behalf of such lenders. Any assignment or transfer by the Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by the Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

 

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(c)     The Lender may, at any time, without the consent of any Borrower, sell participations to one or more banks or other entities (each, a “Participant”) in all or a portion of the Lender’s rights and obligations under this Agreement (including all or a portion of the Commitments and the Loans owing to it); provided, that so long as no Default or Event of Default is outstanding at the time of any such sale, Lender agrees that it will not sell a participation to any Person that is not an Affiliate of Lender (which term shall, in any event, include Heartland and Subsidiaries of Heartland) without Borrowers’ prior written consent, which consent shall not be unreasonably withheld or delayed.

 

Section 9.05     Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Lender may have notice or knowledge of any Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of, or any accrued interest on, any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Revolving Credit Commitment has not expired or terminated. The provisions of Section 3.01, Section 3.02 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof.

 

Section 9.06     Counterparts; Integration; Effectiveness.

 

(a)     This Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Lender constitute the entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received a counterpart hereof executed by the Borrowers. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic (“pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement and each other Loan Document has been reviewed by all parties hereto and incorporate the requirements of such parties. Each party waives the rule of construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement or any other Loan Document.

 

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(b)     The words “execution,” “signed,” “signature,” and words of similar import in any Loan Document shall be deemed to include electronic or digital signatures or the keeping of records in electronic form, each of which shall be of the same effect, validity and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be, to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC § 7001 et seq.), the Electronic Signatures and Records Act of 1999 (NY State Technology Law §§ 301-309), or any other similar state laws based on the Uniform Electronic Transactions Act.

 

Section 9.07     Severability. If any term or provision of any Loan Document is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision thereof or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify the applicable Loan Document so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 9.08     Right of Setoff. If an Event of Default shall have occurred and be continuing, the Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, and without prior notice to the Borrowers, any such notice being expressly waived by the Borrowers, to set off and appropriate 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 Lender or Affiliate to or for the credit or the account of any Borrower or any Loan Party against any and all of the obligations of the Borrowers or such Loan Party now or hereafter existing under the Loan Documents to the Lender or its Affiliates, whether direct or indirect, absolute or contingent, matured or unmatured, and irrespective of whether or not the Lender or any Affiliate shall have made any demand under the Loan Documents and although such obligations of such Loan Party are owed to a branch, office or Affiliate of the Lender different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness. The Lender agrees to notify the Borrowers promptly after any such set off and appropriation and application; provided that the failure to give such notice shall not affect the validity of such set off and appropriation and application. Each Borrower hereby authorize the Lender to make a Revolving Credit Loan, in the Lender’s SOLE AND ABSOLUTE DISCRETION, to pay, on behalf of the Borrowers, any amount due to the Lender under any Loan Document without further action on the part of any Borrower and regardless of whether the Borrowers are able to comply with the terms, conditions and covenants of this Agreement at the time of such Revolving Credit Loan.

 

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Section 9.09     Governing Law; Jurisdiction; Consent to Service of Process.

 

(a)     This Agreement and the other Loan Documents and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the laws of the State of Minnesota, without regard to conflicts of laws principles thereof.

 

(b)     AT THE OPTION OF THE LENDER, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH ANY BORROWER IS A PARTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND EACH BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT ANY BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

 

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

 

(d)     Each Loan Party irrevocably consents to the service of process in the manner provided for notices in Section 9.01 and agrees that nothing herein will affect the right of any party hereto to serve process in any other manner permitted by applicable law.

 

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Section 9.10     Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY. EACH PARTY HERETO (A) CERTIFIES THAT NO AGENT, ATTORNEY, REPRESENTATIVE OR ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF LITIGATION, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 9.11     Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

Section 9.12     Confidentiality.

 

(a)     The Lender agrees to maintain the confidentiality of all non-public information received from any Borrower or any other Loan Party relating to the Borrowers or their Subsidiaries or their respective businesses; provided that, in the case of information received from any Borrower or any Loan Party after the date hereof, such information is clearly identified at the time of delivery as being confidential information (the “Information”), except that Information may be disclosed:

 

(i)     to its Affiliates and its Related Parties in connection with the administration of this Agreement and the preservation, exercise or enforcement of the rights of the Lender under this Agreement, or to manage its and its Affiliates’ banking relationships with the Borrowers and their Subsidiaries (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);

 

(ii)     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);

 

(iii)     to the extent required by any Requirement of Law or regulations or by any subpoena, court order or similar legal process;

 

(iv)     in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of its rights hereunder or thereunder;

 

(v)     to (x) any actual or potential assignee, transferee or participant in connection with the assignment or transfer by the Lender of any Loans or any participations therein or (y) 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 any Borrower or any other Loan Party or any Subsidiary or any of their respective obligations, this Agreement or payments hereunder;

 

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(vi)     with the consent of the Borrowers; or

 

(vii)     to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) is available to the Lender on a non-confidential basis prior to disclosure by any Borrower or any of their Subsidiaries, or (z) becomes available to the Lender or any of its Affiliates on a non-confidential basis from a source other than any Borrower or any other Loan Party.

 

(b)     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.

 

Section 9.13     USA PATRIOT Act. The Lender hereby notifies each Loan Party that pursuant to the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “PATRIOT Act”), it is required to obtain, verify, and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow the Lender to identify such Loan Party in accordance with the PATRIOT Act, and the Borrowers jointly and severally agree to provide, or cause the other Loan Parties to provide, such information from time to time to the Lender.

 

Section 9.14      

 

(a)     Each Borrower acknowledges and agrees that it is jointly and severally liable with the other Borrowers for all obligations, liabilities and indebtedness created or arising hereunder and the release or substitution of any of the other Borrowers shall not release or diminish its liability hereunder. Each Borrower agrees that all obligations, liabilities and indebtedness are joint and several and the primary obligations of each of them, enforceable against each Borrower separately or all Borrowers collectively, notwithstanding any right or power of any party to assert any claim or defense as to the invalidity or unenforceability of any such obligations, liabilities and indebtedness.

 

(b)     Each Borrower hereby waives any defense it may claim as a guarantor, surety or accommodation party. The Lender may, from time to time, without notice to any Borrower, (i) obtain or release any security interest in any property to secure any of such obligations, liabilities and indebtedness; (ii) obtain or release the primary or secondary liability of any party or parties with respect to any of such obligations, liabilities and indebtedness (including, without limitation, the liability of any of the Borrowers); (iii) extend or renew for any period, alter or exchange any of such obligations, liabilities and indebtedness or release or compromise any of such obligations, liabilities and indebtedness of any obligor with respect to any thereof; or (iv) resort to any Borrower for payment of any such obligations, liabilities and indebtedness whether or not the Lender shall have resorted to any Collateral or to any other Borrower or any other party primarily or secondarily liable with respect to any such obligations, liabilities and indebtedness.

 

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(c)     Each Borrower expressly agrees that, to the extent permitted by applicable law, the liabilities and obligations of such Borrower under this Agreement shall not in any way be impaired or otherwise affected by the institution by or against any other Borrower or any other Person of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or any other similar proceedings for relief under any bankruptcy law or similar law for the relief of debtors and that any discharge of any of the Obligations pursuant to any such bankruptcy or similar law or other law shall not diminish, discharge or otherwise affect in any way the obligations of that Borrower under this Agreement or any other Loan Document, and that upon the institution of any of the above actions, such obligations shall be enforceable against that Borrower.

 

(d)     As used in this Section 9.14(d): (a) the term “Applicable Insolvency Laws” means the laws of the United States of America or of any State, province, nation or other governmental unit relating to bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances or other similar laws (including, without limitation, 11 U. S. C. §547, §548, §550 and other “avoidance” provisions of Title 11 of the United Stated Code) as applicable in any proceeding in which the validity and/or enforceability of this Agreement against any Borrower, or any Specified Lien is in issue; and (b) “Specified Lien” means any security interest, mortgage, lien or encumbrance granted by any Borrower securing the Obligations, in whole or in part. Notwithstanding any other provision of this Agreement, if, in any proceeding, a court of competent jurisdiction determines that with respect to any Borrower, this Agreement or any Specified Lien would, but for the operation of this Section, be subject to avoidance and/or recovery or be unenforceable by reason of Applicable Insolvency Laws, this Agreement and each such Specified Lien shall be valid and enforceable against such Borrower, only to the maximum extent that would not cause this Agreement or such Specified Lien to be subject to avoidance, recovery or unenforceability. To the extent that any payment to, or realization by, the Lender on the Obligations exceeds the limitations of this Section and is otherwise subject to avoidance and recovery in any such proceeding, the amount subject to avoidance shall in all events be limited to the amount by which such actual payment or realization exceeds such limitation, and this Agreement as limited shall in all events remain in full force and effect and be fully enforceable against such Borrower. This Section is intended solely to reserve the rights of the Lender hereunder against each Borrower, in such proceeding to the maximum extent permitted by Applicable Insolvency Laws and neither the Borrowers, any guarantor of the Obligations nor any other Person shall have any right, claim or defense under this Section that would not otherwise be available under Applicable Insolvency Laws in such proceeding.

 

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[SIGNATURE PAGE FOLLOWS]

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

	 	
			Worthington Acquisition, LLC

			 

			By:                                                   

			Name:  Nicholas J. Swenson

			Its:        President

			 

			 

			Worthington Aviation, LLC

			 

			By:                                                   

			Name:  Nicholas J. Swenson

			Its:        Chief Executive Officer

			 

			 

			Worthington MRO, LLC

			 

			By:                                                  

			Name:  Nicholas J. Swenson

			Its:        Chief Executive Officer

			 

			 

			Minnesota Bank & Trust, a Minnesota state banking corporation

			 

			By:     _____________________

			Name:  Eric P. Gundersen

			Title:    Senior Vice President

			

 

 

 

 

[Loan Agreement Signature Page]

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