Broadwind, Inc 8-K, filed Nov 2, 2026
Broadwind, Inc. (BWEN)
About this 8-K
Broadwind, Inc filed this 8-K on November 2, 2026, reporting on events of October 30, 2026.
Broadwind acquired MCM Acquisition Company Inc. for a base price of $18.0 million, paid approximately $21.5 million in cash at closing, and may owe up to $7.0 million in contingent consideration. Credit amendments extending maturity to January 1, 2028 financed part of the acquisition. AI summary
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 2.03: New debt or off-balance-sheet obligation
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
(State or Other Jurisdiction | (Commission | (I.R.S. Employer |
of Incorporation) | File Number) | Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
The |
Exhibit No. | Description |
|
10.1* | ||
10.2* | ||
99.1 | ||
99.2 | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
BROADWIND, INC. | |||
By: | /s/ Eric B. Blashford | ||
Eric B. Blashford | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
DATED AS OF OCTOBER 30, 2026
BY AND AMONG
MCM ACQUISITION COMPANY INC.,
THE SHAREHOLDERS OF
MCM ACQUISITION COMPANY INC.,
SUMMIT EQUITY GROUP, L.L.C.,
AS SHAREHOLDER REPRESENTATIVE
AND
BROADWIND, INC.
AS BUYER
TABLE OF CONTENTS |
||
|
||
ARTICLE I CERTAIN DEFINITIONS | 1 |
|
|
|
|
ARTICLE II PURCHASE; CLOSING | 16 |
|
Section 2.1 | Purchase and Sale of Shares | 16 |
Section 2.2 | Consideration | 16 |
Section 2.3 | Deliveries by Shareholders and Company | 17 |
Section 2.4 | Deliveries by Buyer | 19 |
Section 2.5 | Time and Place of Closing | 19 |
Section 2.6 | Purchase Price Adjustment | 20 |
Section 2.7 | Tax Withholding | 22 |
Section 2.8 | Payment to the Shareholder Account | 22 |
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING COMPANY | 23 |
|
Section 3.1 | Organization; Authorization; Etc. | 23 |
Section 3.2 | No Conflict | 24 |
Section 3.3 | Capitalization | 24 |
Section 3.4 | Joint Ventures | 25 |
Section 3.5 | Intentionally deleted | 25 |
Section 3.6 | Financial Statements | 25 |
Section 3.7 | Undisclosed Liabilities | 26 |
Section 3.8 | Absence of Certain Changes | 26 |
Section 3.9 | Real Property | 28 |
Section 3.10 | Other Properties and Assets | 29 |
Section 3.11 | Inventories | 29 |
Section 3.12 | Litigation; Orders | 30 |
Section 3.13 | Intellectual Property | 30 |
Section 3.14 | Privacy and Data Security Compliance | 32 |
Section 3.15 | Employment and Labor Matters | 33 |
Section 3.16 | Employee Benefits | 34 |
Section 3.17 | Compliance with Laws | 36 |
Section 3.18 | Contracts | 36 |
Section 3.19 | Licenses | 38 |
Section 3.20 | Environmental Matters | 38 |
Section 3.21 | Taxes | 40 |
Section 3.22 | Accounts Receivable and Accounts Payable | 41 |
Section 3.23 | Insurance | 42 |
Section 3.24 | Product and Service Warranty | 42 |
Section 3.25 | Product Liability | 43 |
Section 3.26 | Related Party Transactions | 43 |
Section 3.27 | Customers and Suppliers | 43 |
Section 3.28 | Directors and Officers; Bank Accounts; Powers of Attorney | 43 |
Section 3.29 | Anti-Bribery; Anti-Corruption | 44 |
Section 3.30 | Brokers, Finders, Etc | 44 |
Section 3.31 | CARES Act Programs | 44 |
Section 3.32 | EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES | 44 |
i
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS | 45 |
|
Section 4.1 | Authorization | 45 |
Section 4.2 | No Conflict | 46 |
Section 4.3 | Title to Shares | 46 |
Section 4.4 | EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES | 46 |
|
|
|
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER | 46 |
|
Section 5.1 | Organization; Authorization; Etc | 46 |
Section 5.2 | No Conflict | 47 |
Section 5.3 | Brokers, Finders, Etc. | 47 |
Section 5.4 | Investment | 47 |
Section 5.5 | Credit Agreement | 47 |
Section 5.6 | EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES | 47 |
|
|
|
ARTICLE VI COVENANTS OF THE PARTIES | 47 |
|
Section 6.1 | Public Announcements | 47 |
Section 6.2 | Closing Deliveries | 48 |
Section 6.3 | Further Assurances | 48 |
Section 6.4 | [Reserved] | 48 |
Section 6.5 | D&O Policy | 48 |
Section 6.6 | Shareholder Release | 48 |
Section 6.7 | Tax Matters. | 49 |
Section 6.8 | Related Party Agreements | 53 |
Section 6.9 | R&W Insurance Policy | 53 |
Section 6.10 | Subordination of Contingent Purchase Price | 53 |
|
|
|
ARTICLE VII INDEMNIFICATION | 55 |
|
Section 7.1 | Survival of Representations and Warranties | 55 |
Section 7.2 | Indemnification by Buyer | 55 |
Section 7.3 | Indemnification by Shareholders | 56 |
Section 7.4 | Third-Party Claims | 57 |
Section 7.5 | Procedures for Other Claims | 58 |
Section 7.6 | Payment of Losses. | 59 |
Section 7.7 | Adjustment to Losses | 59 |
Section 7.8 | Exclusive Remedy | 60 |
Section 7.9 | Release of Indemnification Escrow | 60 |
|
|
|
ARTICLE VIII MISCELLANEOUS | 60 |
|
Section 8.1 | Entire Agreement | 60 |
Section 8.2 | Amendment | 60 |
Section 8.3 | Third Parties | 60 |
Section 8.4 | Expenses | 60 |
Section 8.5 | Notices | 61 |
Section 8.6 | Successors and Assigns | 62 |
Section 8.7 | Construction | 62 |
Section 8.8 | Cumulative Remedies | 62 |
Section 8.9 | Waiver | 63 |
Section 8.10 | Severability | 63 |
ii
Section 8.11 | Representation of Parties | 63 |
Section 8.12 | Time of the Essence | 63 |
Section 8.13 | Specific Performance | 63 |
Section 8.14 | Execution of Agreement | 64 |
Section 8.15 | Governing Law; Jurisdiction; Venue | 64 |
Section 8.16 | Shareholder Representative | 65 |
Section 8.17 | Attorney Client Privilege Matters | 66 |
Section 8.18 | Financing Sources | 67 |
iii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of October 30, 2026, is made by and among MCM Acquisition Company Inc., an Iowa corporation (“Company”), each of the parties identified as a “Shareholder” on the signature pages hereto (individually, a “Shareholder” and collectively, “Shareholders”), Summit Equity Group, L.L.C., an Iowa limited liability company, solely in its capacity as Shareholder Representative as set forth in this Agreement (“Shareholder Representative”), and Broadwind, Inc., a Delaware corporation (“Buyer”).
RECITALS
WHEREAS, Company is engaged in the business of manufacturing precision-machined and fabricated metal components for customers across the electric utility, infrastructure, agricultural, and industrial OEM sectors at its facilities located in Northport, Alabama.
WHEREAS, Shareholders own all of the issued and outstanding fully-converted, fully-diluted, shares of capital stock of Company.
WHEREAS, Shareholders desire to sell to Buyer and Buyer desires to purchase from Shareholders, all of the issued and outstanding, fully-converted, fully-diluted shares of capital stock of Company on the terms and subject to the conditions stated herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following respective meanings:
“Acceleration Event” shall have the meaning set forth in Exhibit C.
“Accounting Principles” shall mean the accounting practices, policies, procedures and methodologies set forth in Exhibit A.
“Action” shall mean any action, suit, arbitration, notice, inquiry, charge, complaint, claim, demand, hearing, proceeding or investigation by or before any Governmental Authority.
“Adjusted Second Contingent Purchase Price Payment” shall have the meaning set forth in Exhibit C.
“Adjustment Escrow Amount” shall mean an amount equal to Two Hundred Fifty Thousand and 00/100 U.S. Dollars ($250,000.00).
1
“Affiliate” (and, with a correlative meaning, “Affiliated”) shall mean:
(a) With respect to Summit Equity Group, L.L.C., Wes Jones, Keegan Jones, and Paul Filasek:
(i) With respect to any individual, including as to any trust, the individual grantor of such trust: (i) each other member of such individual’s Family; (ii) any Person that is directly or indirectly controlled by any one or more members of such individual’s Family; (iii) any Person in which members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and (iv) any Person with respect to which one or more members of such individual’s Family serves as a director, officer, partner, executor or trustee (or in a similar capacity).
(ii) With respect to any Person other than an individual, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person.
(b) With respect to any Person other than the Shareholders identified in clause (a) of this definition of “Affiliate”:
(i) With respect to any individual, including as to any trust, the individual grantor of such trust: (i) such individual’s Spouse; (ii) any Person that is directly or indirectly controlled by such individual or their Spouse; and (iii) any Person in which such individual or their Spouse holds (individually or in the aggregate) a Material Interest.
(ii) With respect to any Person other than an individual, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person.
As used in this definition,
(a) “control” (including, with correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies of a Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).
(b) The “Family” of an individual includes (i) the individual, (ii) the individual’s Spouse, (iii) any other natural person who is related to the individual or the individual’s Spouse within the first degree.
(c) “Material Interest” shall mean direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least twenty-five percent (25%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least twenty-five percent (25%) of the outstanding equity securities or equity interests in a Person.
“Agreement” shall have the meaning set forth in the preamble.
“Alternative Arrangements” shall have the meaning set forth in Section 7.7.
2
“Ancillary Agreements” shall mean, collectively, any agreements, certificates or other documents required by this Agreement to be delivered between or among the parties at or prior to the Closing in connection with the transactions contemplated by this Agreement.
“Applicable Privacy and Data Security Requirements” shall mean all of the following, to the extent relating to privacy, security, data collection, data protection, data sharing, direct marketing, consumer protection, location tracking, customer tracking, behavioral marketing, and workplace privacy, including the collection, processing, storage, protection and disclosure of Personal Information: (a) applicable Laws, including the Federal Trade Commission’s regulations and those pertaining to unfair, deceptive or misleading trade practices; (b) industry standards, guidelines and practices applicable to the industry in which Company operates; (c) Company’s own rules, policies and procedures including Company’s privacy policy; and (d) Contracts to which Company is a party or by which Company or any of its assets or properties are otherwise bound.
“Authorized Action” shall have the meaning set forth in Section 8.16(b).
“Bankruptcy Law” shall have the meaning set forth in Exhibit C.
“Belin” shall have the meaning set forth in Section 8.17(a).
“Business Day” shall mean any day except Saturday, Sunday or any other day on which commercial banks located in the City of Chicago, Illinois are authorized or required by Law to be closed for business.
“Buyer” shall have the meaning set forth in the preamble.
“Buyer Fundamental Representations” shall mean the representations or warranties of Buyer contained in Sections 5.1 (Organization; Authorization; Etc.), 5.2 (No Conflict), and 5.3 (Brokers, Finders, Etc.).
“Buyer Indemnified Parties” shall have the meaning set forth in Section 7.3.
“Calculation Time” means 11:59 pm Eastern Time on the Closing Date.
“CARES Act” shall mean the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, March 27, 2020, as amended, and any administrative or other guidance published with respect thereto by any Governmental Authority, or any other Law intended to address the consequences of COVID-19.
“CARES Act Programs” shall have the meaning set forth in Section 3.31.
“Claim Notice” shall have the meaning set forth in Section 7.5.
“Claimed Amount” shall have the meaning set forth in Section 7.5.
“Closing” shall have the meaning set forth in Section 2.5.
3
“Closing Company Cash Amount” shall have the meaning set forth in Section 2.2(a)(iii).
“Closing Company Indebtedness Amount” shall have the meaning set forth in Section 2.2(a)(iv).
“Closing Company Transaction Expenses Amount” shall have the meaning set forth in Section 2.2(a)(v).
“Closing Date” shall have the meaning set forth in Section 2.5.
“Closing Financial Data” shall have the meaning set forth in Section 2.6(c).
“Closing Net Working Capital” shall have the meaning set forth in Section 2.2(a)(ii).
“Closing Statement” shall have the meaning set forth in Section 2.6(d).
“Code” shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto.
“Company” shall have the meaning set forth in the preamble.
“Company Cash” shall mean the sum of all cash and cash equivalents (in each case as determined in accordance with GAAP) that are immediately convertible into cash (net of cost, if any, of such conversion) held by Company, without limitation or restriction of any kind. For the avoidance of doubt, Company Cash will be calculated net of issued but uncleared checks and drafts and will include checks, wire transfers and drafts deposited or available for deposit for the account of Company.
“Company Indebtedness” shall mean all Liabilities of Company, without duplication, and to the extent not included in Net Working Capital or Company Transaction Expenses, (a) with respect to borrowed money, whether secured or unsecured (including, for the avoidance of doubt, the Cutlite Indebtedness), (b) with respect to the deferred purchase price of property or services (other than trade liabilities, accounts payable or accrued expenses incurred in the Ordinary Course of Business and payable in accordance with customary practices, and the Cutlite Payments), (c) represented by a note, bond, indenture or similar instrument, (d) with respect to any conditional sale or other title retention agreement, (e) secured by any Lien on any asset or property, (f) with respect to leases of any property (real, personal or mixed) which have been or should be, in accordance with GAAP, recorded as capital leases, together with all renewals of such leases, which for the avoidance of doubt do not include the Company Operating Leases; (g) of a type referred to in clauses (a) through (f) above which are directly or indirectly guaranteed by Company or which Company has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a credit against loss; (h) to any Person with respect to deferred compensation, severance, bonus, accrued bonus, incentive, or similar payments, including all Taxes that are payable by Company in connection with or as a result of the payment of such Liability; (i) to any Person with respect to any change of control, severance, bonus or similar payments and other accelerations or increases in rights or benefits which obligation, in each case (whether payable or occurring prior to, on or after the Closing Date), either (A) arises at or prior to the Closing or (B) is payable or becomes due in whole or in part as a result of the consummation of the transactions contemplated by, or otherwise pursuant to, this Agreement, in each case including all Taxes that are payable by Company in connection with or as a result of the payment of such Liability; (j) with respect to the amount of any Taxes the payment of which have been deferred as a result of COVID-19, including, without limitation, any employer’s portion of Social Security Taxes the deposit and payment of which has been deferred pursuant to Section 2302 of the CARES Act; and (k) for interest, termination fees, prepayment penalties, “breakage” costs or any other payments, fees or expenses owed with respect to the items identified in items (a) through (j) above.
4
“Company Operating Leases” means those leases designated as the Company Operating Leases on Schedule 3.18(a)(i).
“Company Transaction Expenses” shall mean (a) any obligations to pay any current or former directors, officers, employees or other service providers of Company any compensation or other benefit arising or resulting solely from or triggered by the execution of this Agreement or the transactions contemplated by this Agreement (including for any stay or retention bonuses or payments, sale bonuses or payments, change of control bonuses or payments, severance payments, retention bonuses or payments or similar bonuses or payments payable or arising in connection with or that may be triggered by the transactions contemplated by this Agreement to such current or former directors, officers, employees or other service providers, but excluding any Ordinary Course of Business salary), together with any Taxes relating thereto or arising therefrom that are properly payable by Company in connection with or as a result of the payment of such Company Transaction Expense; (b) any legal, accounting, financial advisory, investment banking, brokers’, finders’ or other advisory or consulting or similar fees, costs or expenses incurred by Company or any Shareholder in connection with the negotiation and consummation of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby (including fees payable to attorneys, accountants, investment bankers and financial advisors), (c) all costs and expenses of procuring the D&O Policy and the tail policy for Company’s employment practices liability policy, (d) fifty percent (50%) of the total premium and related fees paid or payable to obtain coverage under the R&W Insurance Policy, (e) fifty percent (50%) of the fees and expenses of the Escrow Agent, and (f) $14,300, representing the cost to prepare the reviewed financial statements for Company for 2025. For avoidance of doubt, fees and expenses of Warren Averett, CohnReznick, and any other third-party advisors engaged by Buyer or by Company at Buyer’s request for auditing, valuation, or similar services in connection with the transactions contemplated by this Agreement shall not constitute Company Transaction Expenses.
“Contingent Purchase Price” shall have the meaning set forth in Section 2.2(a)(vi).
“Contingent Purchase Price Payment” and “Contingent Purchase Price Payments” shall have the meanings set forth in Exhibit C.
“Contingent Purchase Price Period” shall have the meaning set forth in Exhibit C.
“Contingent Purchase Price Statement” shall have the meaning set forth in Exhibit C.
“Contract” shall mean, whether written or oral, any legally binding instrument, indenture, contract, agreement, authorization, license, lease, purchase order, sales order, proposal, bid, plan, arrangement or other commitment, obligation or understanding, express or implied, of any nature whatsoever to which a Person is a party or by which a Person or its assets or properties are bound.
5
“Cost of Goods Sold” shall have the meaning set forth in Exhibit C.
“COVID-19” shall mean SARS-CoV-2 or COVID-19, and any evolutions thereof or related or associated epidemics, pandemics or disease outbreaks.
“COVID-19 Measures” shall mean any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or any other Law, order, directive, guidelines or recommendations by any Governmental Authority in connection with or in response to COVID-19, including, but not limited to, the CARES Act.
“Credit Agreement” shall have the meaning set forth in Section 6.10(a).
“Cutlite Indebtedness” shall mean Liabilities of Company under that certain Business Loan Agreement, dated June 25, 2026, by and between Company and United Community Bank.
“Cutlite Payments” shall mean payments due to Cutlite America, LLC after the Closing under that certain Agreement #20260612-180813749 dated June 12, 2026.
“D&O Policy” shall have the meaning set forth in Section 6.5.
“Deductible” shall have the meaning set forth in Section 7.3.
“Downward Adjustment” shall have the meaning set forth in Section 2.6(f)(ii).
“Earnout Accounting Methodology” shall have the meaning set forth in Exhibit C.
“Earnout Escrow Account” shall mean the segregated escrow account established with the Escrow Agent under the Escrow Agreement to hold the Earnout Escrow Funds.
“Earnout Escrow Funds” shall mean, at any time, the Initial Earnout Escrow Amount and all Quarterly Escrow Contributions deposited into the Earnout Escrow Account under Exhibit C, together with all interest and other earnings thereon, less all amounts theretofore released from the Earnout Escrow Account in accordance with this Agreement and the Escrow Agreement.
“Earnout Information” shall have the meaning set forth in Exhibit C.
“Employee Benefit Plans” shall have the meaning set forth in Section 3.16(a).
“Employees” shall have the meaning set forth in Section 3.15(a).
“Employee Retention Credit” shall mean the employee retention credit provided under Section 2301 of the CARES Act, as amended.
“Employee Retention Credit Escrow Amount” shall mean an amount equal to One Million, Two Hundred Ninety Two Thousand Two Hundred and Fourteen and 04/100 U.S. Dollars ($1,292,214.04).
6
“Environmental, Health, and Safety Laws” shall mean all applicable Laws concerning pollution or protection of the environment, public health and safety (to the extent related to exposure to Hazardous Substances), or employee health and safety (to the extent related to exposure to Hazardous Substances), including Laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, petroleum or petroleum-based materials or wastes, or chemical, industrial, Hazardous Substances, or toxic substances or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, Hazardous Substances, or toxic materials or wastes. Without limiting the generality of the foregoing, such Environmental, Health, and Safety Laws include the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” shall mean any entity that is considered a single employer with Company under Section 414 of the Code.
“Escrow Agent” shall mean U.S. Bank, National Association.
“Escrow Agreement” shall mean the Escrow Agreement to be dated as of the Closing Date among Shareholder Representative, Buyer and Escrow Agent in the form attached as Exhibit B.
“Escrow Amount” means, collectively, the Adjustment Escrow Amount, the Indemnification Escrow Amount, the Employee Retention Credit Escrow Amount.
“Estimated Closing Company Cash Amount” shall have the meaning set forth in Section 2.6(a).
“Estimated Closing Company Indebtedness Amount” shall have the meaning set forth in Section 2.6(a).
“Estimated Closing Company Transaction Expenses Amount” shall have the meaning set forth in Section 2.6(a).
“Estimated Closing Net Working Capital” shall have the meaning set forth in Section 2.6(a).
“Estimated Purchase Price” shall have the meaning set forth in Section 2.6(a).
“Estimated Purchase Price Adjustment” shall have the meaning set forth in Section 2.6(a).
“Excess Earnout Amount” shall have the meaning set forth in Exhibit C.
“Exchange Act” shall mean the Securities Exchange Act of 1934.
7
“Final Closing Company Cash Amount” shall have the meaning set forth in Section 2.6(e).
“Final Closing Company Indebtedness Amount” shall have the meaning set forth in Section 2.6(e).
“Final Closing Company Transaction Expenses Amount” shall have the meaning set forth in Section 2.6(e).
“Final Closing Net Working Capital” shall have the meaning set forth in Section 2.6(e).
“Final Determination” shall have the meaning set forth in Section 7.6(c).
“Final Purchase Price” shall have the meaning set forth in Section 2.6(f).
“Final Purchase Price Adjustment” shall have the meaning set forth in Section 2.6(f).
“Financial Statements” shall have the meaning set forth in Section 3.6.
“Financing Sources” means the agents, the arrangers, the lenders and other entities that have committed to provide or arrange or otherwise entered into agreements in connection with all or any part of the financings in connection with the transactions contemplated hereby, including the parties to any joinder agreements, indentures or credit agreements entered pursuant thereto or relating thereto, together with their respective Affiliates and their and their respective Affiliates’ officers, directors, employees, controlling Persons, advisors, agents, attorneys and representatives and their respective successors and assigns, in each case in connection with all or any part of the financings in connection with the transactions contemplated hereby, it being understood that Buyer shall not be deemed a Financing Source for any purpose hereunder.
“First Contingent Purchase Price Payment” shall have the meaning set forth in Exhibit C.
“First Contingent Purchase Price Period” shall have the meaning set forth in Exhibit C.
“First ERC Release Date” shall have the meaning set forth in Section 6.7(h).
“Former Shareholder” shall have the meaning set forth in Section 8.16(a).
“Fraud” shall mean common law fraud that includes the element of scienter under applicable Law with respect to the making of, or with respect to facts in, the express representations and warranties set forth in this Agreement (as qualified by the Schedules) or in any certificate delivered pursuant to this Agreement. For avoidance of doubt, “Fraud” does not include constructive fraud or equitable fraud.
“Funds Flow Statement” shall mean the Funds Flow Statement to be dated as of the Closing Date between Shareholder Representative and Buyer, which shall include (i) each recipient of a payment and the amount thereof with respect to the Estimated Closing Company Indebtedness Amount, (ii) each recipient of a payment and the amount thereof with respect to the Estimated Closing Company Transaction Expenses Amount, (iii) the payment to be made at Closing to each Shareholder, and (iv) wire information for all Persons to whom amounts must be wired on the Closing Date.
8
“GAAP” shall mean United States generally accepted accounting principles, applied consistently with past practices.
“Governmental Authority” shall mean any domestic or foreign national, state, provincial, multi-state, multinational or municipal or other local government, any subdivision, agency, commission, department, instrumentality, board, bureau, body or authority thereof, any self-regulated organization or other non-governmental regulatory or administrative authority or quasi-governmental authority, or any arbitrator, court or tribunal of competent jurisdiction.
“Government Contract” means any Contract for the sale of supplies or services between Company on one hand and a Governmental Authority on the other hand, or entered into by Company as a subcontractor at any tier in connection with a Contract between another Person and a Governmental Authority.
“Gross Profit” shall have the meaning set forth in Exhibit C.
“Hazardous Substances” shall mean any substances, compounds, mixtures, wastes or materials that are defined to be, that are regulated as, that are listed as or that (because of their toxicity, concentration or quantity) have characteristics which are hazardous or toxic under any Environmental, Health and Safety Laws or under any other statute, ordinance, rule or regulation in effect at the locations at which any business of Company is conducted. Without limiting the generality of the foregoing, Hazardous Substances includes: (a) any article or mixture that contains a Hazardous Substance; (b) petroleum or petroleum products; (c) any substance the presence of which requires reporting, investigation, removal or remediation under any Environmental, Health and Safety Laws; (d) polychlorinated biphenyls; (e) asbestos containing materials; (f) urea formaldehyde; and (g) per- and poly-fluoroalkyl substances.
“Immigration Act” shall have the meaning set forth in Section 3.15(e).
“Improvements” shall have the meaning set forth in Section 3.9(b).
“Indemnification Escrow Amount” shall mean an amount equal to Eighty Seven Thousand Five Hundred and 00/100 U.S. Dollars ($87,500.00).
“Indemnified Party” shall have the meaning set forth in Section 7.4.
“Indemnifying Party” shall have the meaning set forth in Section 7.4.
“Indicated Contingent Purchase Price” shall have the meaning set forth in Exhibit C.
“Initial Earnout Escrow Amount” shall mean Three Million Five Hundred Thousand and 00/100 U.S. Dollars ($3,500,000.00).
9
“Information Security Incident” shall mean the compromise of Personal Information maintained, collected or received by Company, or any information or other material that can be used to access such Personal Information, in any manner; for purposes of this definition, “compromise” should be read most liberally to include: (a) any unauthorized access to Personal Information or any information or other material that can be used to access Personal Information, (b) any inadvertent disclosure of Personal Information or any information or other material that can be used to access Personal Information to any third party, (c) any known or suspected misuse of Personal Information or any information or other material that can be used to access Personal Information by any Person (even if such Person was authorized to access the Personal Information or such other information and materials), (d) any suspected use of Personal Information by any Person outside of the scope of that Person’s authority (even if such use does not result in harm to the individual data subject), (e) any known or suspected loss, alteration or destruction of Personal Information other than as contractually or legally required (or permitted), and (f) any ransomware attack, distributed denial-of-service attack or any other similar incident.
“Initial Purchase Price” shall mean Eighteen Million and 00/100 U.S. Dollars ($18,000,000.00).
“Intellectual Property” shall mean all of the following in any jurisdiction throughout the world: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade names, brand names, product names, corporate names, Internet domain names, web addresses, web pages, websites and related content, accounts with Twitter, Facebook and other social media companies and the content found thereon and related thereto, social media usernames, handles and similar identifiers, e-mail addresses, telephone numbers, and facsimile numbers, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all Software, (g) all other proprietary rights in any of the foregoing, (h) all copies and tangible embodiments of any of the foregoing (in whatever form or medium), (i) all goodwill associated with any of the foregoing, (j) all licenses and sublicenses granted and obtained with respect to any of the foregoing and all rights thereunder, (k) all remedies against infringement of any of the foregoing, and (l) all rights to protection of interests in any of the foregoing.
“Inventories” shall mean all inventory, including raw materials, components, work-in-progress, finished products, tooling, stores, stock, supplies, packaging and spare parts used or held for use by Company and existing as of the Closing, whether on hand or in transit.
“IRS” shall mean the United States Internal Revenue Service.
10
“IT Systems” shall mean all Software, computer systems, servers, hardware, network equipment, databases, websites, and other information technology systems of whatever type or kind that are used to process, store, maintain and operate data, information, and functions that are owned, leased or licensed by or to Company.
“Key Management Employment Agreements” shall mean the Employment Agreements between Company and each of Wes Jones, Paul Filasek and Keegan Jones to be executed and delivered at the Closing.
“Law” shall mean any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, administrative interpretation, sub-regulatory guidance, other requirement or rule of law of any Governmental Authority, including any COVID-19 Measures.
“Liability” shall mean any liability, commitment or obligation of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.
“Licenses” shall mean all licenses, permits, authorizations, approvals, consents, waivers, franchises, orders, registrations, accreditations, certificates, variances, clearances, privileges, exemptions, qualifications and similar rights from or issued by any Governmental Authority.
“Lien” shall mean any security interest, pledge, mortgage, lien, charge, deed of trust, option, right of first refusal or first offer, preemptive right, servitude, restriction (whether voting, transfer or otherwise), hypothecation, right-of-way or other encumbrance, including any Tax lien.
“Losses” shall mean any loss, cost, Liability, diminution of value, damage, penalty, fine, demand, claim, action or cause of action, judgment, award, assessment, settlement or expense (including interest, penalties, attorneys’ fees and expenses, court costs, and amounts paid in investigation, defense or settlement of any of the foregoing).
“Margin” shall have the meaning set forth in Exhibit C.
“Margin Amount” shall have the meaning set forth in Exhibit C.
“Marital Relationship” means a civil union, registered domestic partnership, marriage, or any other similar relationship that is legally recognized in any jurisdiction.
11
“Material Adverse Effect” or “Material Adverse Change” shall mean any effect, change, event, fact, condition or development that is or could be reasonably expected to have a materially adverse effect on the business of Company, assets, condition (financial or otherwise), operating results, or operations of Company, or on the ability of Shareholders or Company to consummate timely the transactions contemplated hereby (regardless of whether or not such adverse effect or change can be or has been cured at any time or whether Buyer has knowledge of such effect or change); provided, however, that “Material Adverse Change” and “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which Company operates; (iii) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of Buyer; (vi) any changes in applicable Laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (vii) the announcement, pendency or completion of the transactions contemplated by this Agreement, including losses or threatened losses of employees, customers, suppliers, distributors, or others having relationships with Company; (viii) any natural or man-made disaster or acts of God; (ix) any epidemics, pandemics, disease outbreaks, or other public health emergencies; or (x) any failure by Company to meet any internal or published projections, forecasts, or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded); provided further, that in the case of clauses (i) through (iv) and (vi) through (ix), such effect shall be taken into account in determining whether a Material Adverse Effect or Material Adverse Change has occurred if it has a disproportionate adverse effect on Company relative to other companies operating in industries in which Company does business.
“Maximum Contingent Purchase Price Amount” shall have the meaning set forth in Exhibit C.
“MCM” means MCM Holding Company, Inc., an Alabama corporation (f/k/a Metal Component Manufacturers, Inc.)
“Measurement Quarter” shall have the meaning set forth in Exhibit C.
“Most Recent Financial Statements” shall have the meaning set forth in Section 3.6.
“Most Recent Fiscal Month End” shall have the meaning set forth in Section 3.6.
“Most Recent Fiscal Year End” shall have the meaning set forth in Section 3.6.
“Net Sales” shall have the meaning set forth in Exhibit C.
“Net Working Capital” shall mean the current assets of Company that are included in the line-items set forth on Exhibit A less the current liabilities of Company that are included in the line-items set forth on Exhibit A, in each case as determined in accordance with the Accounting Principles, as of the Calculation Time; An illustrative calculation of Net Working Capital is set forth on Exhibit A.
“Neutral Auditors” shall have the meaning set forth in Section 2.6(e).
“Off-The-Shelf Software” means any shrinkwrap, clickwrap or other commercially available Software that has not been modified or customized by a third party for Company and is licensed to Company pursuant to a Contract that does not require any future payment(s), including any applicable maintenance or supporting fees, in excess of $10,000 per year per Contract.
12
“Open Source Software” shall mean any Software that meets one or more of the following criteria: (a) is subject to, distributed, transmitted, licensed or otherwise made available under any so-called “public license,” “open source license,” “free license,” “industry standard license,” “intellectual property pool license” or similar license, or is otherwise publicly distributed or made generally available in source code or equivalent terms with the intention to permit the public use, modification, distribution, incorporation and/or exploitation of the Software without conveying an exclusive or proprietary interest in such licensed Software (although certain other conditions may be imposed by such license), or (b) is subject to, distributed, transmitted, licensed or otherwise made available under any version of any of the following licenses: GNU General Public License, GNU Library or “Lesser” Public License, BSD license, MIT license, Mozilla Public License, IBM Public License, Apache Software License, Sun Industry Standards Source License, Intel Open Source License, Apple Public Source License, or any substantially similar license, or any license that has been approved by the Open Source Initiative.
“Ordinary Course of Business” shall mean an action taken by a Person that is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person.
“Organizational Documents” shall mean the articles of incorporation, bylaws, certificate of formation, operating agreement and/or articles of organization or similar governing documents of a Person.
“Owned Real Property” shall have the meaning set forth in Section 3.9(a).
“Payment Conditions” shall have the meaning given to such term in the Credit Agreement.
“Pending Claim” shall have the meaning set forth in Section 7.9.
“Permitted Liens” shall mean all Liens (a) that arise out of Taxes not yet due and payable or being contested in good faith by appropriate procedures, (b) that are statutory liens of carriers, warehousemen, mechanics, materialmen and other similar Persons or otherwise imposed by Law which are incurred in the Ordinary Course of Business for sums not yet due and payable, (c) that are easements or rights of way of legal record affecting the Owned Real Property, or (d) solely with respect to the Owned Real Property, that are otherwise listed as exceptions in Schedule B, Part II of an ALTA Title Commitment for Title Insurance obtained in connection with the transaction.
“Person” shall mean any individual, firm, corporation, partnership, limited liability company, joint venture, association, estate, trust, Governmental Authority or other entity.
“Personal Information” shall mean any data or other information that constitutes “personal data,” “personal information,” “nonpublic personal information,” or similar term under any Applicable Privacy and Data Security Requirement.
“PPP” means the Paycheck Protection Program pursuant to Section 1102 of the CARES Act.
13
“PPP Loan” means that certain loan granted to MCM by SmartBank under the PPP that (a) was in the principal amount of Two Hundred Twenty-Nine Thousand Six Hundred and 0/100 U.S. Dollars ($229,600.00), (b) was not secured by any collateral, (c) had an interest rate of 1.00% per annum, and (d) had a stated maturity of two (2) years from the first disbursement thereof.
“Pre-Closing Returns” shall have the meaning set forth in Section 6.7(d).
“Pre-Closing Tax Period” shall have the meaning set forth in Section 6.7(a).
“Pro Rata Share” shall mean, with respect to each Shareholder, the percentage set forth opposite such Shareholder’s name on Schedule 3.3(a), which percentage equals the quotient (expressed as a percentage) of (a) the aggregate number of Shares owned by such Shareholder immediately prior to the Closing, divided by (b) the aggregate number of Shares of all Series owned by all Shareholders immediately prior to the Closing. The sum of the Pro Rata Shares of all Shareholders shall equal one hundred percent (100%).
“Quarterly Escrow Contribution” shall have the meaning set forth in Exhibit C.
“Quarterly Gross Profit Statement” shall have the meaning set forth Exhibit C.
“Quarterly Objection Notice” shall have the meaning set forth in Exhibit C.
“R&W Insurance Policy” shall have the meaning set forth in Section 6.9.
“Related Party Agreements” shall have the meaning set forth in Section 3.26.
“Resolution Period” shall have the meaning set forth in Section 2.6(d).
“Restrictive Covenant Agreements” shall mean the Restrictive Covenant Agreement of each Shareholder to be executed and delivered at the Closing.
“Returns” shall mean all returns, reports, statements, notices, forms or other documents or information required to be filed with any Taxing Authority in connection with the determination, assessment, collection or payment of any Taxes or in connection with the administration, implementation or enforcement of or compliance with any legal requirement relating to any Tax.
“Second Contingent Purchase Price Payment” shall have the meaning set forth in Exhibit C.
“Second Contingent Purchase Price Period” shall have the meaning set forth in Exhibit C.
“Second ERC Release Date” shall have the meaning set forth in Section 6.7(h).
“Senior Debt” shall have the meaning set forth in Section 6.10(a).
“Senior Lender” shall have the meaning set forth in Section 6.10(a).
“Shareholder(s)” shall have the meaning set forth in the preamble.
14
“Shareholder Account” shall mean a single account designated in writing by the Shareholder Representative on the Funds Flow Statement that will receive all payments from Buyer on behalf of the Shareholders.
“Shareholder Indemnified Parties” shall have the meaning set forth in Section 7.2.
“Shareholder Fundamental Representations” shall mean the representations or warranties of Shareholders contained in Sections 3.1 (Organization; Authorization; Etc.), 3.2 (No Conflict), 3.3 (Capitalization), 3.10(a) (Other Properties and Assets; Title), 3.21 (Taxes), 3.26 (Related Party Transactions), 3.30 (Brokers; Finders; Etc.) and 3.31 (CARES Act Programs) and Article IV (Representations and Warranties Regarding the Shareholders).
“Shareholder Group” shall mean, collectively, Shareholders, Shareholder Representative and each of their respective former, current, or future Affiliates, direct or indirect equity owners, officers, directors, and representatives (and each of the foregoing Persons shall be a “Shareholder Group Member”).
“Shareholder Representative” shall have the meaning set forth in the preamble.
“Shareholders’ knowledge,” “knowledge of Shareholders” and words of similar import shall mean the knowledge of Wes Jones, Paul Filasek, Keegan Jones, Emily Jones, and, solely with respect to Section 3.7, Angie Macke, of a fact or matter to the extent that any of such individuals is actually aware of that fact or matter after reasonable inquiry of the employees having responsibility for the applicable matter.
“Shares” shall have the meaning set forth in Section 2.1.
“Software” shall mean any and all (a) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code, object code or other form, including firmware, operating systems and specifications; (b) data files, databases and compilations of data files, whether machine readable or otherwise; (c) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, development tools, and templates; and (d) specifications, documentation and other materials related to any of the foregoing, including user manuals and training materials.
“Spouse” shall mean, with respect to any individual, a spouse, a party to a civil union, a registered domestic partner, or any natural person in a Marital Relationship with such individual.
“Straddle Period” shall have the meaning set forth in Section 6.7(b).
“Subordinated Obligations” shall have the meaning set forth in Section 6.10(b).
“Successor Shareholder” shall have the meaning set forth in Section 8.16(a).
“Supporting Documentation” shall have the meaning set forth in Exhibit C.
“Synergi” means Synergi Partners, Inc., a South Carolina corporation.
15
“Synergi Partners Agreement” means the Client Services Agreement, dated September 9, 2022, between Synergi and Company.
“Target Net Working Capital” shall mean Three Million Two Hundred Thirty-Four Thousand and 00/100 U.S. Dollars ($3,234,000).
“Tax” or “Taxes” shall mean all taxes, charges, fees, levies or like other assessments (whether U.S. federal, state, local or foreign) including estimated, single business, gross receipts, profits, premium, sales, use, production, capital gains, occupation, value added, ad valorem, transfer, franchise, registration, withholding, social security (or similar), disability, payroll, employment, unemployment, excise, windfall profits, severance, service, service use, lease, license, occupation, tariffs, customs, duties, unclaimed property, escheat, real or personal property taxes, or assessments, together with any interest, penalties or additions to tax resulting from, attributable to, or incurred in connection with any such taxes or any contest or dispute thereof.
“Tax Notice” shall have the meaning set forth in Section 6.7(g).
“Taxing Authority” shall mean any taxing authority of any Governmental Authority.
“Third-Party Claim” shall have the meaning set forth in Section 7.4.
ARTICLE II
PURCHASE; CLOSING
Section 2.1 Purchase and Sale of Shares. On the terms and subject to the conditions contained in this Agreement, at the Closing, Shareholders shall sell, transfer, convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from Shareholders, free and clear of all Liens, 2,055,000 shares of Series A Common Stock of Company and 295,000 shares of Series B Common Stock of Company (collectively, the “Shares”), all of which Shares shall have been duly authorized and validly issued and are fully paid and nonassessable. The Shares equal 100% of the total issued and outstanding, fully-converted, fully-diluted shares of capital stock of Company.
Section 2.2 Consideration.
(a) Subject to Section 2.6, the aggregate consideration for the Shares shall be determined as set forth below:
(i) the Initial Purchase Price;
(ii) plus the Net Working Capital as of the Closing (the “Closing Net Working Capital”) minus the Target Net Working Capital;
(iii) plus the amount of Company Cash as of the Closing (the “Closing Company Cash Amount”);
(iv) minus the amount required at Closing to discharge in full the Company Indebtedness (the “Closing Company Indebtedness Amount”);
16
(v) minus the amount required at Closing to discharge in full the Company Transaction Expenses (the “Closing Company Transaction Expenses Amount”);
(vi) plus up to Seven Million U.S. Dollars ($7,000,000), plus interest, if any, payable, to the extent earned, as provided on Exhibit C (the “Contingent Purchase Price”).
(b) Subject to delivery of the items set forth in Section 2.3, at the Closing, Buyer shall make the following payments to Shareholders or such other Person as indicated below:
(i) Buyer shall pay, on behalf of Company, the Estimated Closing Company Indebtedness Amount to the holders of Company Indebtedness by wire transfer of immediately available funds in accordance with the wire instructions set forth in the Funds Flow Statement, in each case in the amount due and owing from Company to such holder of Company Indebtedness as set forth in the Funds Flow Statement;
(ii) Buyer shall pay, on behalf of Company, the Estimated Closing Company Transaction Expenses Amount to third parties by wire transfer of immediately available funds in accordance with the wire instructions set forth in the Funds Flow Statement, in each case in the amount due and owing from Company to such third parties for Estimated Closing Company Transaction Expenses Amount as set forth in the Funds Flow Statement;
(iii) Buyer shall pay the Estimated Purchase Price to Shareholders as follows:
(A) Buyer shall pay to the Escrow Agent by wire transfer of immediately available funds in accordance with the wire instructions set forth in the Funds Flow Statement an amount equal to (I) the Adjustment Escrow Amount, plus (II) the Indemnification Escrow Amount plus (III) the Employee Retention Credit Escrow Amount;
(B) Buyer shall pay to the Shareholder Account by wire transfer of immediately available funds in accordance with the wire instructions set forth in the Funds Flow Statement an amount equal to the balance of the Estimated Purchase Price payable to the Shareholders;
(iv) Buyer shall pay to the Escrow Agent by wire transfer of immediately available funds in accordance with the wire instructions set forth in the Funds Flow Statement an amount equal to the Initial Earnout Escrow Amount.
Section 2.3 Deliveries by Shareholders and Company. At the Closing, Shareholders and Company, as applicable, shall deliver, or cause to be delivered, the following to Buyer:
(a) (i) certificates representing the Shares, (ii) a stock power with respect to the transfer of the Shares, executed by each Shareholder and, if Shareholder resides in a community property state, such Shareholder’s spouse, substantially in the form attached hereto as Exhibit 2.3(a)(ii) (the “Stock Power”), and (iii) such other instruments of transfer and assignment as shall be necessary to vest in Buyer as of the Closing Date, all right, title and interest in and to the Shares free and clear of any Liens;
17
(b) the minute books, stock record books and other corporate records of Company;
(c) a certificate of the Secretary of Company, in form and substance reasonably satisfactory to Buyer, certifying as to (1) a good standing certificate of Company as certified by the Secretary of State of the State of Iowa no more than ten (10) days prior to Closing; (2) the Amended and Restated Articles of Incorporation of Company as certified by the Secretary of State of the State of Iowa no more than ten (10) days prior to Closing; (3) the Bylaws of Company that are in effect as of the Closing Date; and (4) true and complete copies of the resolutions adopted by the board of directors of Company that authorize and approve the execution, delivery and performance of this Agreement and the Ancillary Agreements to which Company is a party and the consummation of the transactions contemplated hereby and thereby, and that all authorizing resolutions are in full force and effect as of the date hereof and are the only resolutions adopted in connection with the transactions contemplated hereby and thereby; and (5) the names and signatures of the officers of Company authorized to sign this Agreement, any Ancillary Agreements and the other documents to be delivered hereunder and thereunder;
(d) the Funds Flow Statement;
(e) the Escrow Agreement;
(f) the Key Management Employment Agreements;
(g) the Restrictive Covenant Agreements;
(h) the written consents of the Persons identified on Schedule 2.3(h);
(i) payoff letters for all Company Indebtedness and final invoices for the Company Transaction Expenses (or other evidence reasonably satisfactory to Buyer), which shall include the amounts necessary to pay off all Company Indebtedness and Company Transaction Expenses as of the Closing, along with the per diem interest amount with respect thereto, if applicable, and the agreement of each holder of Company Indebtedness that, upon receipt of such specified amount, the Company Indebtedness payable to it shall be paid in full, and the agreement of each holder of Company Indebtedness to, upon receipt of such specified amount, release all Liens, if any, that such holder may hold on any assets of Company on the Closing Date;
(j) an IRS Form W-9 dated as of the Closing Date duly executed by each Shareholder and each recipient of payment with respect to the Estimated Closing Company Transaction Expenses;
(k) duly signed resignations and releases effective as of the Closing, of each officer and/or director of Company whom Buyer shall have specified in writing to Shareholder Representative prior to the Closing;
18
(l) a certificate, duly completed and executed by each Shareholder pursuant to Section 1.1445-2(b) of the Treasury Regulations, certifying that such Shareholder is not a foreign person within the meaning of Section 1445 of the Code; and
(m) (i) an owner’s affidavit and (ii) a non-imputation affidavit satisfactory to the title company providing title insurance in connection with the transactions contemplated hereby;
(n) all other certificates, instruments, assignments and documents required, or as reasonably may be requested by Buyer, to be delivered by Shareholders or Company at or prior to the Closing or otherwise required in connection herewith.
Section 2.4 Deliveries by Buyer. At the Closing, Buyer shall deliver, or cause to be delivered, the following to Shareholders or such other Person, as applicable:
(a) the amount of the Estimated Closing Company Indebtedness Amount, Estimated Closing Company Transaction Expenses Amount, Adjustment Escrow Amount, Indemnification Escrow Amount, Employee Retention Credit Escrow Amount, the balance of the Estimated Purchase Price, and the Initial Earnout Escrow Amount, each as set forth in the Funds Flow Statement;
(b) the Funds Flow Statement;
(c) the Escrow Agreement;
(d) the Key Management Employment Agreements;
(e) the Restrictive Covenant Agreements;
(f) a certificate of the Secretary of Buyer, in form and substance reasonably satisfactory to Shareholder Representative, certifying as to (1) true and complete copies of the resolutions adopted by the board of directors of Buyer that authorize and approve the execution, delivery and performance of this Agreement and the Ancillary Agreements to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby, and that all authorizing resolutions are in full force and effect as of the date hereof and are the only resolutions adopted in connection with the transactions contemplated hereby and thereby; and (2) the names of the officers of Buyer authorized to sign this Agreement, any Ancillary Agreements and the other documents to be delivered hereunder and thereunder; and
(g) evidence that the R&W Insurance Policy has been bound as of the Closing.
Section 2.5 Time and Place of Closing. Subject to the conditions set forth in this Agreement, the consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place on the date of execution of this Agreement (the “Closing Date”) by exchange of closing deliveries by email and release of signatures by conference call. The Closing shall be deemed effective as of the Calculation Time.
19
Section 2.6 Purchase Price Adjustment.
(a) As of the Closing, Shareholder Representative and Buyer shall have agreed to a written estimate of the amount of (i) the Closing Net Working Capital (the “Estimated Closing Net Working Capital”), (ii) the Closing Company Cash Amount (the “Estimated Closing Company Cash Amount”), (iii) the Closing Company Indebtedness Amount (the “Estimated Closing Company Indebtedness Amount”), (iv) the Closing Company Transaction Expenses Amount (the “Estimated Closing Company Transaction Expenses Amount”), and (v) the Estimated Purchase Price Adjustment. The “Estimated Purchase Price Adjustment” shall equal the Estimated Closing Net Working Capital minus the Target Net Working Capital plus the Estimated Closing Company Cash Amount minus the Estimated Closing Company Indebtedness Amount minus the Estimated Closing Company Transaction Expenses Amount. For the avoidance of doubt, the Estimated Purchase Price Adjustment can be a positive or a negative amount. The Initial Purchase Price plus the Estimated Purchase Price Adjustment is referred to as the “Estimated Purchase Price.”
(b) As soon as practicable, but in no event later than ninety (90) days following the Closing Date, Buyer shall prepare a calculation of (i) the Closing Net Working Capital, (ii) the Closing Company Cash Amount, (iii) the Closing Company Indebtedness Amount, (iv) the Closing Company Transaction Expenses Amount, and (v) the resulting Purchase Price.
(c) During the period of Buyer’s calculation of the Closing Net Working Capital, Closing Company Cash Amount, Closing Company Indebtedness Amount and Closing Company Transaction Expenses Amount (collectively, the “Closing Financial Data”) and the period of any dispute within the contemplation of this Section 2.6, Shareholder Representative shall cooperate with Buyer’s and Buyer’s authorized representatives’ reasonable requests with respect to the calculation of the Closing Financial Data, including by providing on a timely basis all information necessary or useful in calculating the Closing Financial Data. During such period, Buyer shall provide Shareholder Representative and Shareholder Representative’s authorized representatives with reasonable access during normal business hours to all relevant books and records of Company to the extent reasonably required to verify the calculation of the Closing Financial Data.
(d) Buyer shall deliver to Shareholder Representative a written statement of the Closing Financial Data (the “Closing Statement”), no later than ninety (90) days following the Closing Date. After receipt of the Closing Statement, Shareholder Representative shall have forty-five (45) days to review the Closing Statement. Shareholder Representative and Shareholder Representative’s authorized representatives shall have reasonable access during normal business hours to all relevant books and records of Buyer and Company to the extent required to complete their review of the Closing Statement. Unless Shareholder Representative delivers written notice to Buyer on or prior to the forty fifth (45th) day after Shareholder Representative’s receipt of the Closing Statement specifying in reasonable detail the amount, nature and basis of all disputed items, Shareholder Representative shall be deemed to have accepted and agreed to the calculation of the Closing Financial Data. If Shareholder Representative timely notifies Buyer of its objection to the calculation of the Closing Financial Data, Buyer and Shareholder Representative shall, within sixty (60) days (or such longer period as the parties may agree in writing) following such notice (the “Resolution Period”), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive.
20
(e) If, at the conclusion of the Resolution Period, there are any amounts remaining in dispute, then such amounts remaining in dispute shall be submitted to Grant Thornton or another firm of nationally recognized independent public accountants selected by Shareholder Representative and Buyer within ten (10) days after the expiration of the Resolution Period (the “Neutral Auditors”). If Grant Thornton is unable to serve, and Shareholder Representative and Buyer are unable to agree on the Neutral Auditors, then each of Shareholder Representative and Buyer shall have the right to request the office of the American Arbitration Association to appoint the Neutral Auditors, which Neutral Auditors shall not have had a material relationship with Shareholder Representative, Company, Buyer or any of their respective Affiliates within the past two (2) years. Each party agrees to execute, if requested by the Neutral Auditors, a reasonable engagement letter, including customary indemnities. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne pro rata as between Shareholder Representative and Buyer in proportion to the allocation of the dollar amount of the amounts remaining in dispute between Shareholder Representative and Buyer made by the Neutral Auditors such that the prevailing party pays the lesser proportion of the fees and expenses. The Neutral Auditors shall act as an expert and not an arbitrator to determine, based solely on the provisions of this Section 2.6 and the presentations by Shareholder Representative and Buyer, and not by independent review, only those issues still in dispute. The Neutral Auditors’ determination shall be made within thirty (30) days of their selection, shall be set forth in a written statement delivered to Shareholder Representative and Buyer and shall be deemed a final, binding and conclusive arbitration award. A judgment of a court of competent jurisdiction may be entered upon the Neutral Auditors’ determination. The terms “Final Closing Net Working Capital”, “Final Closing Company Cash Amount”, “Final Closing Company Indebtedness Amount”, and “Final Closing Company Transaction Expenses Amount” shall mean the definitive Closing Net Working Capital, Closing Company Cash Amount, Closing Company Indebtedness Amount and Closing Company Transaction Expenses Amount agreed to (or deemed to be agreed to) by Buyer and Shareholder Representative in accordance with Section 2.6(d) or resulting from the determinations made by the Neutral Auditors in accordance with this Section 2.6(e) (in addition to those items theretofore agreed to by Shareholder Representative and Buyer).
(f) The “Final Purchase Price Adjustment” shall equal the Final Closing Net Working Capital minus the Target Net Working Capital plus the Final Closing Company Cash Amount minus the Final Closing Company Indebtedness Amount minus the Final Closing Company Transaction Expenses Amount.
(i) If the Final Purchase Price Adjustment exceeds the Estimated Purchase Price Adjustment, within five (5) Business Days after the Final Purchase Price Adjustment is agreed to by Buyer and Shareholder Representative or any remaining disputed items are ultimately determined by the Neutral Auditors, (A) Buyer will pay to Shareholder Representative (on behalf of Shareholders) by wire transfer of immediately available funds to the account specified by Shareholder Representative an amount equal to such excess and (B) Buyer and Shareholder Representative will arrange for the release of the entire Adjustment Escrow Amount in accordance with the terms of the Escrow Agreement to Shareholder Representative (on behalf of Shareholders);
21
(ii) If the Final Purchase Price Adjustment is less than the Estimated Purchase Price Adjustment (such shortfall, the “Downward Adjustment”), within five (5) Business Days after the Final Purchase Price Adjustment is agreed to by Buyer and Shareholder Representative or any remaining disputed items are ultimately determined by the Neutral Auditors, (A) if the Downward Adjustment is less than the Adjustment Escrow Amount, (I) Buyer and Shareholder Representative will arrange for the release of the Downward Adjustment from the Adjustment Escrow Amount in accordance with the terms of the Escrow Agreement to Buyer and (II) Buyer and Shareholder Representative will arrange for the release of the balance of the Adjustment Escrow Amount after giving effect to the distribution contemplated by the foregoing clause (I) in accordance with the terms of the Escrow Agreement to Shareholder Representative (on behalf of Shareholders), (B) if the Downward Adjustment is equal to the Adjustment Escrow Amount, Buyer and Shareholder Representative will arrange for the release of the entire Adjustment Escrow Amount in accordance with the terms of the Escrow Agreement to Buyer or (C) if the Downward Adjustment is greater than the Adjustment Escrow Amount, (I) Buyer and Shareholder Representative will arrange for the release of the entire Adjustment Escrow Amount in accordance with the terms of the Escrow Agreement to Buyer and (II) Shareholder Representative (on behalf of Shareholders) will pay to Buyer by wire transfer of immediately available funds to the account specified by Buyer an amount equal to the balance of the Downward Adjustment after giving effect to the distribution contemplated by the foregoing clause (I); or
(iii) If the Final Purchase Price Adjustment is equal to the Estimated Purchase Price Adjustment, Buyer and Shareholder Representative will arrange for the release of the entire Adjustment Escrow Amount in accordance with the terms of the Escrow Agreement to Shareholder Representative (on behalf of Shareholders).
The Estimated Purchase Price minus the Estimated Purchase Price Adjustment plus the Final Purchase Price Adjustment is referred to herein as “Final Purchase Price”.
Section 2.7 Tax Withholding. Notwithstanding anything in this Agreement to the contrary, each of Buyer, Company, their respective Affiliates and the Escrow Agent, shall be entitled to deduct and withhold (or cause to be deducted and withheld) from any amount payable to any Person pursuant to this Agreement such amounts as are required to be deducted and withheld under the Code or any Tax or other Law. Any such amounts deducted or withheld shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 2.8 Payment to the Shareholder Account.
(a) Each Shareholder hereby irrevocably authorizes and directs Buyer to pay, and agrees that Buyer shall pay, all amounts payable to the Shareholders under this Agreement (including any disbursements from the Escrow Amount or any Contingent Purchase Price payable to the Shareholders) to the Shareholder Account, for further allocation and disbursement by the Shareholder Representative to the Shareholders.
22
(b) Each Shareholder hereby irrevocably appoints the Shareholder Representative as such Shareholder’s agent and attorney-in-fact for the purpose of receiving, holding, and disbursing all such amounts, and agrees that the Shareholder Account shall serve as the sole account for receipt of all consideration payable to the Shareholders hereunder.
(c) Each Shareholder acknowledges and agrees that any payment made by Buyer (or by the Escrow Agent at the direction of Buyer) to the Shareholder Account shall constitute payment to, and receipt by, the Shareholders of such amount for all purposes under this Agreement, and shall fully and finally satisfy and discharge Buyer’s obligation to pay such amount to the Shareholders, in each case as if such amount had been paid directly to each Shareholder in accordance with its respective allocation. Buyer shall have no obligation or responsibility with respect to (i) the allocation of any amount among the Shareholders, (ii) the calculation, timing, or manner of any disbursement from the Shareholder Account, or (iii) the acts or omissions of the Shareholder Representative in administering the Shareholder Account.
(d) Effective upon Buyer’s payment of any amount to the Shareholder Account, each Shareholder, on behalf of itself and its successors, assigns, heirs, and representatives, hereby irrevocably and unconditionally releases and forever discharges Buyer and its Affiliates (and their respective officers, directors, employees, and agents) from any and all claims, demands, liabilities, and causes of action, whether known or unknown, arising out of or relating to (i) the payment of such amount to the Shareholder Account rather than directly to such Shareholder, and (ii) the subsequent allocation, disbursement, retention, or handling of any amount in the Shareholder Account by the Shareholder Representative.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING COMPANY
The Shareholders, jointly and severally, hereby represent and warrant to Buyer that the following representations and warranties are true and correct as of the Closing:
Section 3.1 Organization; Authorization; Etc.
(a) Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Iowa. Company has all requisite power and authority to own or use the properties and assets that it purports to own or use and to conduct its business as it is now being conducted. Schedule 3.1 sets forth a list of each jurisdiction in which Company is required, based on the property owned, leased or operated by Company, the nature of the business conducted by Company, or for any other reason, to be authorized to conduct business as a foreign corporation. Company is duly authorized to conduct business as a foreign corporation and is in good standing in each such jurisdiction. Shareholders and Company have delivered to Buyer true and complete copies of the Organizational Documents of Company (as amended to date) and the minute books of Company and such minute books contain accurate records of all meetings of and resolutions of, or written consents by, the shareholders and directors of Company since the date of Company’s organization.
23
(b) Company has full power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements, the performance of Company’s obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary proceedings on the part of Company. This Agreement and the Ancillary Agreements to which Company is a party have been duly executed and delivered by Company and constitute the legal, valid and binding obligations of Company, enforceable against Company in accordance with their terms.
Section 3.2 No Conflict. Except as set forth on Schedule 3.2, the execution, delivery and performance of this Agreement and the Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby and the compliance with the terms of this Agreement and the Ancillary Agreements do not and will not: (a) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any Contract of any kind to which Company is a party or to which Company or any of its property is subject; (b) result in the creation of any Lien upon, or any Person obtaining the right to acquire any properties, assets or rights of Company; (c) violate or conflict with any Law to which Company or any of its property is subject; (d) require Company to obtain any authorization, consent, order, permit or approval of, or make any notice to, or filing, registration or qualification with, any Governmental Authority; or (e) conflict with or result in any breach of any of the provisions of the Organizational Documents of Company.
Section 3.3 Capitalization.
(a) The authorized capital stock of Company consists solely of 5,000,000 shares of common stock, no par value, of which 4,000,000 shares are designated as Series A shares, no par value, and 1,000,000 shares are designated as Series B shares, no par value. Of the authorized capital stock of Company, 2,055,000 Series A shares are outstanding and 295,000 Series B shares are outstanding. All such outstanding shares of Company’s capital stock are duly authorized, validly issued, fully paid and nonassessable and all are owned, beneficially and of record, as set forth on Schedule 3.3(a). Schedule 3.3(a) also sets forth the state of residence of each Shareholder.
(b) Company does not own or hold the right to acquire any stock, limited liability company interest, partnership interest, joint venture interest or other equity ownership interest in any other Person.
(c) Except as set forth on Schedule 3.3(c), there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, preemptive rights or other Contracts that could require Company or any equity holder of Company to issue, sell, or otherwise cause to become outstanding any equity interest or ownership right of Company. There are no outstanding or authorized equity appreciation, phantom equity, profit participation, or similar rights with respect to Company.
24
(d) Except as set forth on Schedule 3.3(d), there are no Contracts, commitments or understandings to which Company or any equity holder of Company is a party with respect to the transfer, disposition, repurchase, redemption or other acquisition of any outstanding shares of capital stock or other equity interests or ownership rights of Company. There are no voting trusts, proxies, or other Contracts, commitments or understandings with respect to any voting rights of Company or dividends or other distributions of Company. Company does not have any Liability to any former equity holder of Company in connection with or arising out of the consummation of the transactions contemplated by this Agreement.
Section 3.4 Joint Ventures. There are no corporations, limited liability companies, partnerships, joint ventures, or other entities through which any part of the business of Company or any related business is conducted by Company or any Shareholder.
Section 3.5 Intentionally deleted.
Section 3.6 Financial Statements.
(a) Schedule 3.6(a)(i) contains true and complete copies of the following financial statements (collectively, the “Financial Statements”): (a) the reviewed balance sheets and related statements of income, shareholder’s equity and cash flows of Company for the fiscal years ended December 31, 2023 and December 31, 2024, (b) the internally prepared balance sheet and related statement of income, and cash flows of Company for the fiscal year ended December 31, 2025 (the “Most Recent Fiscal Year End”) and (c) the internally prepared balance sheet and related statements of income, and cash flows of Company (the “Most Recent Financial Statements”) as of and for the seven month period ended July 31, 2026 (the “Most Recent Fiscal Month End”). All Financial Statements are in accordance with the books and records of Company, and such books and records of Company are true and complete in all material respects. Each of the balance sheets included in the Financial Statements fairly presents in all material respects the financial position of Company as of its date, and each of the related statements of income and cash flows included within the Financial Statements fairly presents in all material respects the results of operations and cash flows of Company as of its date, subject, in the case of the Most Recent Financial Statements, to normal recurring year-end adjustments and the absence of notes. Except as set forth on Schedule 3.6(a)(ii), all Financial Statements have been prepared in conformity with GAAP (except that the Most Recent Financial Statements are subject to normal year-end adjustments and lack footnotes required by GAAP, none of which adjustments or footnotes would be material). Company maintains accurate books and records reflecting its assets, liabilities, revenues and expenses and maintains proper and adequate internal accounting controls which provide reasonable assurance that (i) transactions are executed in accordance with management’s authorization, (ii) except as set forth on Schedule 3.6(a)(ii), transactions are recorded as necessary to permit preparation of financial statements in conformity with the GAAP (provided that no representation is made that transactions are recorded in a manner sufficient to support auditing procedures), and (iii) accounts, notes and other receivables are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.
(b) Schedule 3.6(b) is a true and correct detailed listing of all of the accrued expenses of Company as of the Most Recent Fiscal Month End which listing sets forth the book value of the accrued expenses determined in accordance with GAAP, as modified by Schedule 3.6(a)(ii), showing separately the due date for each.
25
(c) Schedule 3.6(c) is a true and correct detailed listing of all of the Company Indebtedness and Company Transaction Expenses as of the Closing, which listing sets forth the name of the applicable lender or vendor, the amount necessary to be paid as of the Closing in order to discharge in full such indebtedness or expenses (including any prepayment premium, late charge or other similar amount associated therewith) and payment instructions.
Section 3.7 Undisclosed Liabilities. Except as disclosed on Schedule 3.7, Company does not have any Liability, nor is there any Liability for which Company is or may become liable, contingently or otherwise, which is not accrued or reserved against in the Most Recent Financial Statements, except for current Liabilities which were incurred in the Ordinary Course of Business after the Most Recent Fiscal Month End and which are consistent in nature and amount with the Liabilities shown on the Most Recent Financial Statements. To Shareholders’ knowledge, there is no circumstance, condition, event or arrangement that would hereafter give rise to any Liabilities of Company except in the Ordinary Course of Business.
Section 3.8 Absence of Certain Changes. Except as expressly contemplated by this Agreement or as disclosed on Schedule 3.8, since the Most Recent Fiscal Year End, there has not been any Material Adverse Change with respect to Company. Without limiting the generality of the foregoing, since that date, except as expressly contemplated by this Agreement or as disclosed on Schedule 3.8, Company has not done any of the following:
(a) sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business;
(b) entered into any Contract (or series of related Contracts) either involving more than $25,000 or outside the Ordinary Course of Business, nor has any party (including Company) accelerated, terminated, modified, or cancelled any Contract (or series of related Contracts) involving more than $25,000 to which Company is a party or by which Company is bound or receives benefits under;
(c) imposed any Liens upon any of its assets, tangible or intangible;
(d) made any capital expenditure (or series of related capital expenditures) either involving more than $25,000 or outside the Ordinary Course of Business;
(e) made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions);
(f) issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation involving more than $25,000 in the aggregate;
(g) accelerated the invoicing of customers or the collection of accounts receivable;
(h) delayed or postponed the payment of accounts payable or any other Liabilities;
26
(i) cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) either involving more than $25,000 or outside the Ordinary Course of Business;
(j) made or authorized any change in its Organizational Documents;
(k) issued, sold, or otherwise disposed of any of its capital stock or other equity interests, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock or other equity interests;
(l) declared, set aside, or paid any dividend or made any distribution (whether in cash or in kind) with respect to its capital stock or redeemed, purchased, or otherwise acquired any of its capital stock;
(m) experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property;
(n) made any loan to, or entered into any other transaction with, any of its directors, officers or employees other than routine travel or expense advances made in the Ordinary Course of Business;
(o) entered into any employment Contract or collective bargaining Contract, written or oral, amended or modified the terms of any existing such Contract;
(p) granted any increase in the compensation of any of its directors, officers or employees;
(q) adopted, amended, modified, or terminated any bonus, profit sharing, incentive, severance, or other plan, Contract, or commitment for the benefit of any of its directors, officers or employees (or taken any such action with respect to any other Employee Benefit Plan);
(r) made any other change in employment terms for any of its directors, officers or employees;
(s) made or pledged to make any charitable or other capital contribution;
(t) discharged a material Liability or Lien outside the Ordinary Course of Business;
(u) made any loans or advances of money;
(v) made any change in any of its accounting (or tax accounting) policies, practices or procedures; or
(w) committed to do any of the foregoing.
27
Section 3.9 Real Property.
(a) Company does not lease any real property. Schedule 3.9(a)(i) sets forth the address of each parcel of real property owned by Company that is used in connection with Company’s business (together with the Improvements thereon, the “Owned Real Property”) and Schedule 3.9(a)(ii) sets forth the address of each parcel of real property where Company has previously conducted business and whether such real property was leased or owned by Company.
(b) Company has good and marketable indefeasible fee simple title to the Owned Real Property, free and clear of all Liens, except Permitted Liens. Company has not leased or otherwise granted to any Person the right to use or occupy the Owned Real Property or any portion thereof, and there are no outstanding options, rights of first offer or rights of first refusal to purchase the Owned Real Property or any portion thereof or interest therein. Company has all Licenses required for the current use and operation of the Owned Real Property (all of which are in full force and effect), and Company has complied in all material respects with all conditions of such Licenses. Except as set forth on Schedule 3.9(b), no notice of violation of any such License has been received, and to Shareholders’ knowledge, there is no event that, with or without the giving of notice or lapse of time or both, is reasonably likely to result in the revocation, suspension, lapse, limitation, default or violation, of any such License.
(c) The Owned Real Property comprises all of the real property used in, or otherwise related to, the business conducted by Company. All buildings, structures, fixtures, building systems and equipment, and all components thereof, including the roof, foundation, load-bearing walls and other structural elements thereof, heating, ventilation, air conditioning, mechanical, electrical, plumbing and other building systems, environmental control, remediation and abatement systems, sewer, storm and waste water systems, irrigation and other water distribution systems, parking facilities, fire protection, security and surveillance systems, and telecommunications, computer, wiring and cable installations, included in the Owned Real Property (the “Improvements”) are in good condition and repair and sufficient for the operation of the business conducted by Company. There are no structural deficiencies or latent defects affecting any of the Improvements and there are no facts or conditions affecting any of the Improvements that would, individually or in the aggregate, interfere in any respect with the use or occupancy of the Improvements or any portion thereof in the operation of the business of Company as currently conducted thereon. Except for any Permitted Liens, no part of the Owned Real Property is subject to any building, health, environmental, safety, sanitation or use restrictions that prevent the use of the Owned Real Property for the operation of the business of Company as currently conducted thereon. The Owned Real Property is adequately serviced by utilities for the operation of the business of Company as currently conducted thereon. Company has not received written notice of violation from any city or county asserting any Owned Real Property is in violation of any zoning ordinances. There is no condemnation, expropriation or other proceeding in eminent domain, pending or, to the knowledge of Shareholders, threatened, affecting any parcel of Owned Real Property or any portion thereof or interest therein.
(d) Company has not received any notice that the Owned Real Property or any portion thereof is situated, used, or operated in violation of and, to the knowledge of Shareholders, the Owned Real Property is not situated, used, or operated in violation of, any law, court order, regulation, ordinance or requirement of any Governmental Authority.
28
(e) No commitments have been made to any Governmental Authority, utility company or other organization which would impose an obligation on Company to make any contributions or dedications of money or land or to construct, install or maintain any improvements of a public or private nature on or off the Owned Real Property, and no Governmental Authority has imposed any requirement that any developer of the Owned Real Property pay directly or indirectly any special fees, charges or contributions (including impact fees) in connection with the development of the Owned Real Property.
(f) There are no property tax appeals pending with respect to all or any part of the Owned Real Property.
Section 3.10 Other Properties and Assets.
(a) Except as set forth on Schedule 3.10(a), Company has good, valid and marketable title to, or a valid leasehold interest in, all of the properties and assets used or held for use by Company, located on Company’s premises, or shown on the Most Recent Financial Statements or acquired after the date thereof, free and clear of all Liens other than Permitted Liens, except for properties and assets disposed of in the Ordinary Course of Business since the date of the Most Recent Financial Statements.
(b) Company owns or leases all machinery, equipment, and other tangible assets necessary for the conduct of its business as presently conducted. Schedule 3.10(b) is a true and correct detailed listing of all equipment, furniture, fixtures and other fixed assets of Company as of the Most Recent Fiscal Month End, which listing sets forth the book value of such assets determined in accordance with GAAP. Without limiting the generality of the foregoing, no Affiliate of Company and no Shareholder or any Affiliate of any Shareholder (other than Company) employs any individual, is a party to any Contract, or owns, leases or licenses any assets, rights or properties that are used by Company to conduct, or which are otherwise necessary for Company to conduct its business.
(c) Each such tangible asset is free from defects (patent and latent), has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is lawful and suitable for the purposes for which it presently is used and presently is proposed to be used.
Section 3.11 Inventories. All of the Inventories of Company, whether or not reflected in the Financial Statements, consist of a quality and quantity usable and, with respect to finished products, saleable, in the Ordinary Course of Business and none of the Inventories is slow-moving, obsolete, damaged or defective, except for obsolete items that have been written off or written down to net realizable value in the Most Recent Financial Statements. All Inventories have been purchased or acquired by Company in the Ordinary Course of Business, are not excessive in amount, but are reasonable given the present circumstances of Company, and are valued according to GAAP, at the lower of cost or market on an average cost basis. The Inventories of Company are not subject to consignment or any other arrangement.
29
Section 3.12 Litigation; Orders. Schedule 3.12 sets forth a true and complete description of all Actions involving Company or any Shareholder (with respect to such Shareholder’s interest in Company) existing at any time during the five (5) year period immediately preceding the date of this Agreement. Except as disclosed on Schedule 3.12, neither Company nor any Shareholder (with respect to such Shareholder’s interest in Company) is a party to or engaged in any Action, and there is no Action (including any workers compensation claims) pending or, to Shareholders’ knowledge, threatened against Company or any Shareholder and to Shareholders’ knowledge, there is no basis in fact for any such Action. Except as disclosed on Schedule 3.12, there are no judgments or outstanding orders, injunctions, decrees, stipulations or awards (whether rendered by a court or administrative agency, or by arbitration) against Company or any Shareholder that would interfere with the conduct of the business of Company as presently conducted or prevent or delay the transactions contemplated in this Agreement.
Section 3.13 Intellectual Property.
(a) Company owns or possesses or has the right to use pursuant to a valid and enforceable, written license, sublicense, or other Contract all Intellectual Property necessary for the operation of its business as presently conducted, in each case, free and clear of all Liens. Except as disclosed on Schedule 3.13(a), each item of Intellectual Property owned or used by Company immediately prior to the Closing will be owned or available for use by Company on identical terms and conditions immediately subsequent to the Closing. Company has taken all necessary action to maintain and protect each item of Intellectual Property that it owns or uses. All of Company’s Intellectual Property is valid and enforceable.
(b) Company has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with, and the operation of Company’s business does not interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property rights of third parties, and to Shareholders’ knowledge there has been no charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that Company must license or refrain from using any Intellectual Property rights of any third party). To Shareholders’ knowledge, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of Company.
(c) Schedule 3.13(c) identifies each United States and foreign patent or registration which has been issued to Company with respect to any Intellectual Property, identifies each United States and foreign pending patent application or application for registration which Company has made with respect to any Intellectual Property, and identifies each license, sublicense, or other Contract which Company has granted to any third party with respect to any Intellectual Property (together with any exceptions). Shareholders and Company have delivered to Buyer correct and complete copies of all such patents, registrations, applications, licenses, sublicenses, and other Contracts (as amended to date) and all other written documentation evidencing ownership and prosecution (if applicable) of each such item. Schedule 3.13(c) also identifies each unregistered trademark, service mark, trade name, corporate name or Internet domain name, each social media account, each Software item (other than Off-the-Shelf Software) and each material unregistered copyright used by Company.
(d) Schedule 3.13(d) identifies each item of Intellectual Property that any third party owns and that Company uses pursuant to license, sublicense, or other Contract excepting Off-the-Shelf Software. Company has delivered to Buyer correct and complete copies of all such licenses, sublicenses, and other Contracts (as amended to date).
30
(e) Except as set forth on Schedule 3.13(e), all Software used by Company: (i) is operative for its intended purpose free of any material defects or deficiencies and does not contain any viruses, worms, Trojan horses or similar programs, (ii) has been upgraded as necessary so that it is fully functional in every material respect on currently available platforms, and (iii) has been maintained by Company in accordance with industry standards in all material respects. Except as set forth on Schedule 3.13(e), no Open Source Software is incorporated (either directly by Company, or indirectly, by the incorporation of third-party Software that itself incorporates Open Source Software) into Software owned by Company or was used to develop such Software. All Software used by Company is sufficient in all material respects for the operation of Company’s business as presently conducted and as presently proposed to be conducted, and Company has purchased a sufficient number of license seats for all Software. Company is in actual possession and control of Company’s source code, object code, code writes, noted documentation, programmers’ notes, source code annotations, user manuals and know-how with respect to all Software owned by Company. Company has not disclosed, and Company is not under any current or future obligation (including any contingent obligation pursuant to an escrow arrangement or otherwise) to disclose, any source code of Company to any Person.
(f) Company owns or has a valid right to access and use the IT Systems and the IT Systems are adequate for, and operate and perform in all material respects as required in connection with, the operation of Company’s business as presently conducted. All material IT Systems owned by Company are listed on Schedule 3.13(f)(i) and all other material IT Systems are listed on Schedule 3.13(f)(ii) which listing includes a description of the Contract pursuant to which Company has the right to access and use such IT System. Shareholders and Company have delivered to Buyer correct and complete copies of all such Contracts. Except as set forth on Schedule 3.13(f)(iii), no Affiliate of Company, any Shareholder or any Affiliate of any Shareholder (other than Company) has any interest in any IT Systems used by Company and all such IT Systems used by Company can be operated and maintained by Company on a stand-alone basis without any products or services being provided by any Affiliate of Company, any Shareholder or any Affiliate of any Shareholder. Company has taken reasonable measures to maintain the performance and security of the IT Systems and, in the past five (5) years, there have been no failures, breakdowns, continued substandard performance or other adverse events affecting any IT Systems that have caused or could reasonably be expected to result in any material disruption or interruption in or to the use of such IT Systems or the conduct of the business of Company. Company has reasonable back-up and disaster recovery arrangements in the event of a failure of the IT Systems.
(g) Company owns and has the unrestricted right to use the know-how and trade secrets (including formulas, forms, samples, lists, technical descriptions, drawings, equipment and tools) it needs to operate the business of Company consistent with past practice. Company owns and has the unrestricted right to all inventions and research findings and results of its officers, directors and employees and, with respect to the applicable contracted matters, its independent contractors. To Shareholders’ knowledge, no current or former officer, director, employee, independent contractor or consultant of Company is in violation of such confidential information and invention assignment agreement or any prior employment or proprietary information agreement with any other Person.
31
Section 3.14 Privacy and Data Security Compliance
(a) Company is, and at all times since January 1, 2021, has been in compliance in all material respects with all Applicable Privacy and Data Security Requirements, and no written notices have been received by, and no claims, charges or complaints have been made against, Company alleging a violation of any Applicable Privacy and Data Security Requirements, and, to Shareholders’ knowledge, Company is not and has not been subject to any investigation, audit or inquiry with regard to any Applicable Privacy and Data Security Requirements. Company has undertaken administrative, technical, and physical measures as are required to ensure continued compliance with all Applicable Privacy and Data Security Requirements and to protect and maintain the security, integrity and confidential nature of the Personal Information maintained, collected, or received by Company, and has implemented all necessary procedures designed to prevent unauthorized access to Personal Information.
(b) Company has at all times collected, stored, maintained, used, shared and processed Personal Information in accordance with all Applicable Privacy and Data Security Requirements and taken reasonable steps, in accordance with industry standards to protect against any anticipated or actual threats or hazards to the security or integrity of Personal Information, and from the unauthorized access, disclosure, use or loss of Personal Information. Company does not process credit card transactions.
(c) Except as set forth on Schedule 3.14(c), Company has not suffered a breach or compromise of Personal Information.
(d) Company has taken commercially reasonable steps to maintain the safety and security of the IT Systems and prevent any Information Security Incidents and to Shareholders’ knowledge, the IT Systems do not have any material security vulnerabilities and no Information Security Incident has occurred.
(e) Company has taken, and is currently taking, reasonable measures in accordance with industry standards to detect Information Security Incidents, and maintain and train applicable personnel on policies and procedures to escalate any such Information Security Incidents to the attention of Company’s executives.
(f) Company has written agreements with each third party service provider (including vendors and marketing partners) or partner receiving or otherwise having access to Personal Information requiring (i) compliance with Applicable Privacy and Data Security Requirements and (ii) the use of commercially reasonable efforts to protect such Personal Information against unauthorized access or use.
(g) Neither the execution, delivery nor performance of this Agreement nor the consummation of the transactions contemplated hereby will constitute a violation of any Applicable Privacy and Data Security Requirements. Company has the necessary rights to Personal Information to grant the rights and transfers thereof pursuant to this Agreement and the consummation of the transactions contemplated hereby.
32
(h) Company maintains records of its customers’ communications preferences, such as opt-ins and opt-outs for various forms of direct marketing, behavioral advertising, and customer tracking, sufficient for Company to honor such preferences and comply with all Applicable Privacy and Data Security Requirements.
(i) Company is and at all times has been in compliance with Company’s published privacy policies in all material respects. Company’s privacy policies regarding Company’s collection, storage, use and distribution of the Personal Information of visitors to Company’s websites and mobile applications, are and have been posted and accessible to individuals at all relevant times on each of Company’s websites and mobile applications, and all such posted policies are accurate and have not contained any material omissions of Company’s privacy practices or practices concerning the collection, use, storage, registration and disclosure of Personal Information.
Section 3.15 Employment and Labor Matters.
(a) Schedule 3.15(a) sets forth, with respect to each current employee of Company (collectively, the “Employees”): (i) the name of such Employee, (ii) the date as of which such Employee was originally hired by Company, (iii) whether the Employee is on an active or inactive status, (iv) such Employee’s title, (v) such Employee’s annualized compensation as of the date of this Agreement, including base salary, vacation and/or paid time off accrual amounts, bonus and/or commission potential, severance pay potential, (vi) the full amount of all remuneration paid to each Employee, during the twelve-month period ending December 31, 2025, (vii) classification as exempt or non-exempt for wage and hour purposes, (viii) full time or part time status, (ix) whether such Employee is not fully available to perform work because of a disability or other leave and, if applicable, the basis of such disability or leave and the anticipated date of return to full service and (x) each current Employee Benefit Plan in which such Employee participates.
(b) Except as specifically identified on Schedule 3.15(b), there are no employment agreements with any employee of Company. Each current employment relationship between Company and its employees is employment at-will, and no employee is employed under a Contract which cannot be terminated by Buyer (i) upon written notice or (ii) without severance obligations.
(c) Company is not a party to or subject to any collective bargaining agreement or other Contract with a labor union. No work stoppage against Company is pending or, to Shareholders’ knowledge, threatened. Company is not involved in nor, to Shareholders’ knowledge, threatened with any labor dispute, arbitration, lawsuit or administrative proceeding relating to labor matters involving employees of Company (excluding routine workers’ compensation claims).
33
(d) Company has complied since January 1, 2021, with and currently is in compliance in all material respects with all applicable Laws pertaining to employment, employment practices and terms of conditions of employment including all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence, and unemployment insurance. All employees of Company classified as exempt under the Fair Labor Standards Act and state and local wage and hour Laws are properly classified. There are no Actions against Company pending, or to Shareholders’ knowledge, threatened to be brought or filed, by or with any Governmental Authority in connection with the employment of any current or former applicant, employee, consultant or independent contractor of Company, including any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wage and hours or any other employment related matter arising under applicable Laws.
(e) Company has complied since January 1, 2021, with all relevant provisions of the Immigration and Nationality Act, as amended, and the Immigration Reform and Control Act of 1986, as amended (collectively, the “Immigration Act”). Without limiting the foregoing: (i) each “employee” (as that term is defined in the Immigration Act) of Company is permitted to be so employed in the United States under the Immigration Act; (ii) Company has examined (and made copies of, if applicable) the documents presented by such employee to establish appropriate employment eligibility under the Immigration Act; (iii) Company has completed and required each employee to complete a Form I-9 verifying employment eligibility under the Immigration Act; (iv) Company has retained each such respective completed Form I-9 for the length of time required under the Immigration Act; and (v) no monetary penalties have been assessed against Company for violation of the Immigration Act.
(f) Schedule 3.15(f)(i) sets forth each natural person independent contractor who is currently engaged by or performing services for Company as of the date set forth in the Schedule, along with the position and, as of the most recent practicable date, rate of remuneration for each such independent contractor. All individuals characterized and treated by Company as independent contractors or consultants are properly treated as independent contractors under all applicable Laws. Schedule 3.15(f)(ii) sets forth each Person employed by a temporary employee or employee staffing agency who is currently engaged by or performing services for Company as of the date set forth in the Schedule, along with the position and, as of the most recent practicable date, rate of remuneration for each such independent contractor or worker.
(g) To the Shareholders’ knowledge, no employee of Company intends to terminate their employment with Company, nor does Company have a present intention to terminate the employment of any employee of Company.
Section 3.16 Employee Benefits.
(a) Schedule 3.16 lists all compensation and benefit plans, Contracts and other arrangements maintained, sponsored or participated in by Company in effect as of the date hereof including all pension (including all such employee pension benefit plans as defined in Section 3(2) of ERISA), profit-sharing, savings and thrift, fringe benefit, bonus, commission, equity or equity-based compensation, vacation, paid time off, change in control, incentive or deferred compensation, severance pay and medical and life insurance plans and employee welfare benefit plans as defined in Section 3(1) of ERISA that are sponsored by Company and in which any current or former employees, contractors, officers or directors of Company participate (collectively, “Employee Benefit Plans”).
34
(b) With respect to each Employee Benefit Plan, Shareholders and Company have delivered to Buyer copies of: (i) all the plan documents, together with all amendments thereto (or, if not reduced to writing, a summary of the material terms thereof), (ii) if applicable, any trust agreements, custodial agreements, insurance policies or Contracts, administrative agreements, and investment management or investment advisory agreements, (iii) the most recently filed Form 5500 series, if applicable, for each Employee Benefit Plan, with schedules attached, (iv) the most recent IRS determination letter (or opinion letter, if applicable) obtained or application for an IRS determination letter submitted with respect to each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code and each related trust intended to be exempt under Section 501(a) of the Code, (v) the most recent summary plan description, employee handbook or similar employee communication, (vi) the three (3) most recent compliance and nondiscrimination tests performed under the Code, as applicable, (vii) the most recent actuarial reports, if applicable, and any non-routine written notices, letters or other correspondence from the IRS, U.S. Department of Labor or any other Governmental Authority relating to such Employee Benefit Plan within the last three (3) years, and (viii) Forms 1094-C and 1095-C for the three (3) previous years.
(c) As to Employee Benefit Plans sponsored by Company which are “employee pension benefit plans” as defined in Section 3(2) of ERISA, such plans are tax qualified under Section 401(a) of the Code, are not currently under examination by, nor are any matters pending before, the IRS, the Employee Benefits Security Administration or any other Governmental Authority, are not subject to any claim, suit or arbitration (other than routine claims for benefits), are not subject to the minimum funding standards of Code Section 412, are in compliance with and have been administered in accordance with their terms and in compliance with all applicable requirements of Law, including the Code and ERISA, and there have been no prohibited transactions as defined in Code Section 4975 or ERISA Section 406 with respect to such plans which could subject Company to a tax or penalty under Code Section 4975 or ERISA Section 502(i).
(d) Company has not incurred any Liability under Title IV of ERISA that has or could, after the Closing Date, become a Lien upon any properties or assets of Company pursuant to ERISA Section 4068.
(e) Company is not and has never been required to contribute to any “multiemployer plan,” as such term is defined in Section 4001(a)(3) of ERISA, in which employees of Company participate.
(f) Except as set forth in Schedule 3.16(f), no Employee Benefit Plan provides medical, surgical, hospitalization, death or similar benefits (whether or not insured) for employees for periods extending beyond their retirement or other termination of service, other than (i) coverage mandated by COBRA or other applicable Law, or (ii) death benefits under any pension plan.
35
(g) Company and any ERISA Affiliates have complied, in all material respects, with the requirements of COBRA.
(h) Except as set forth on Schedule 3.16(h), the execution of, and performance of this Agreement, and the transactions contemplated hereby, will not (either alone or in conjunction with any other event) constitute an event under any Employee Benefit Plan that will (i) result in any payment becoming due (whether as severance pay, unemployment compensation, golden parachute, or otherwise), (ii) result in any acceleration in the time of payment or vesting of any compensation or benefits with respect to any director, officer, employee, consultant or agent of Company, (iii) increase any benefits otherwise payable, or (iv) result in any lost deduction under Section 280G of the Code, provided that, for purposes of this Section 3.16(h), no action taken by the Buyer or its Affiliates (or Company at Buyer direction) on or following the Closing Date shall be taken into account, other than those actions contemplated by this Agreement.
(i) Except as otherwise set forth on Schedule 3.16(i), all contributions, premiums, or payments due under or with respect to each Employee Benefit Plan have been paid or will have been paid as of the Closing Date or otherwise accrued.
(j) For the purposes of this Section 3.16, Company shall include all trades or businesses under common control with Company as provided in the regulations under Code Section 414(c).
Section 3.17 Compliance with Laws. Since January 1, 2021, Company has complied and is currently in compliance, in all material respects, with all applicable Laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of every Governmental Authority having jurisdiction, and, since January 1, 2021, no Action has been filed or commenced against Company alleging any failure so to comply.
Section 3.18 Contracts.
(a) Schedule 3.18 lists the following Contracts to which Company is a party or is otherwise bound or has rights or receives benefits under (including the title, date and name of the parties to each such Contract):
(i) any Contract (or group of related Contracts) for the lease or use of equipment or other personal property to or from any Person;
(ii) any Contract (or group of related Contracts) with a customer of Company listed on Schedule 3.27(a);
(iii) any Contract (or group of related Contracts) with a supplier of Company listed on Schedule 3.27(b);
(iv) any other Contract (or group of related Contracts) for the purchase or sale of materials, commodities, supplies, products, equipment, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year, result in a loss to Company, provide for material discounts or allowances, or involve consideration in excess of $25,000 per year;
36
(v) any Contract concerning a partnership or joint venture;
(vi) any Contract (or group of related Contracts) with respect to any Company Indebtedness or under which Company has imposed a Lien on any of its assets, tangible or intangible;
(vii) any Contract concerning noncompetition or nonsolicitation, or that contains any covenant that purports to restrict the business activity of Company, grants exclusive rights to any Person, or limits the freedom of Company to engage in any line of business or to compete with any Person;
(viii) any Contract with any officer, director, shareholder or employee of Company or any Affiliate of such Persons;
(ix) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers or employees;
(x) any Contract for the employment or other engagement of any individual on a full-time, part-time, consulting, or other basis (including any Contract with any temporary employee or employee staffing agency);
(xi) any sales representative or agency agreement, brokers agreement or dealer agreement or other Contract relating to the sale or distribution of products or services to or by other Persons;
(xii) any Contract that (A) provides any customer of Company with pricing, discounts or benefits that change based on the pricing, discounts or benefits offered to other customers of Company, including any Contract containing “most favored nation” provisions or (B) provides any supplier of Company with exclusivity, minimum volume requirements, or any similar requirement;
(xiii) any Contract that contains any provision(s) requiring Company to indemnify any Person or guaranty any obligations of any third party (other than standard indemnification provisions of general scope that may be contained in Contracts entered into by Company in the Ordinary Course of Business);
(xiv) any Contract under which Company lends or advances funds to any Person;
(xv) any Contract for the license of any Intellectual Property and/or IT System to or from Company, excluding Off-the-Shelf Software;
(xvi) any Government Contract or other Contract with any Governmental Authority;
(xvii) any equity purchase agreement, asset purchase agreement involving the sale of all or substantially all of a Person’s assets, merger agreement or other acquisition or divestiture Contract to which Company is a party or is otherwise bound and entered into by Company during the past five (5) years;
37
(xviii) each Contract for capital expenditures or the acquisition or construction of fixed assets requiring future payments by Company in excess of $25,000;
(xix) any Contract (i) for the employment of any officer, director or employee of Company with annual compensation (salary and bonus) in excess of $100,000 or (ii) for the engagement of any independent contractor or consultant;
(xx) each Contract that provides for retention, change in control bonus, severance or other termination payments or benefits, in each case, pursuant to which Company has any unperformed obligations or owes any unpaid amounts; and
(xxi) any other Contract (or group of related Contracts) the performance of which involves consideration in excess of $50,000.
(b) Shareholders and Company have delivered to Buyer a true and complete copy of each written Contract (as amended to date) listed in Schedule 3.18 and a written summary setting forth the terms and conditions of each oral Contract referred to in Schedule 3.18. With respect to each such Contract: (i) the Contract is legal, valid, binding, enforceable, and in full force and effect, except as such enforceability may be limited by Laws affecting creditors’ rights generally and by general principles of equity; (ii) Company has fulfilled all of its obligations under the Contract; (iii) except as set forth on Schedule 3.18 and subject to the qualifications set forth in the preceding clause (i), the Contract will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (iv) neither Company nor, to Shareholders’ knowledge, any other Person is in breach or default, or has alleged a breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the Contract; and (v) no Person has repudiated any provision of the Contract. There have been no material disputes under any such Contract in the last twelve (12) months.
Section 3.19 Licenses. Company possesses or has been granted all Licenses necessary for the conduct of Company’s business as presently conducted, including all Licenses necessary for the ownership, use, development, maintenance or operation of any properties or assets of Company, and all such Licenses are listed on Schedule 3.19. Except as noted on Schedule 3.19, all such Licenses are in full force and effect. Except as noted on Schedule 3.19, no Action is pending or, to Shareholders’ knowledge, threatened seeking the termination, revocation, modification, limitation or impairment of any License. Except as set forth on Schedule 3.19, the execution, delivery and performance of this Agreement, the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby and thereby will not result in the revocation, suspension, limitation or adverse modification of any such Licenses.
Section 3.20 Environmental Matters. Except as set forth in Schedule 3.20:
(a) Company at all times has complied with and currently is in compliance in all material respects with all Environmental, Health, and Safety Laws.
38
(b) The business of Company has been conducted by Company, and the condition of the properties and assets owned by Company or used by it in its business is, and at all times has been, in compliance with all requirements of all Environmental, Health, and Safety Laws.
(c) Schedule 3.20 contains a listing of all data, test results, environmental site assessments, compliance audits, notices of violation, consent orders and other material environmental reports or correspondence received by Company (copies of all of which have been provided to Buyer) regarding any Hazardous Substances which either in the past were or at present are located at, or emanating from any portion of the Owned Real Property or any real property previously owned or operated by Company.
(d) Without limiting the generality of the foregoing, Company has obtained, currently possesses and is and has been in compliance with, all terms and conditions of all Licenses that are required pursuant to applicable Environmental, Health, and Safety Laws for the occupation of the Owned Real Property, the ownership and use of its other properties and assets and otherwise for the conduct of its business, and all such Licenses will remain in full force and effect on and after the Closing Date without further action by any Person, all of which Licenses are listed on Schedule 3.20.
(e) Company has not received any written or oral notice, report or other information alleging that the operation of its business or condition of its properties or assets is in violation of any of the Environmental, Health, and Safety Laws, or that Company has any Liabilities or potential Liabilities, including any investigatory, remedial or corrective obligations, relating to Company or its facilities arising under Environmental, Health, and Safety Laws;
(f) None of the following exists at, on, in or under any portion of the Owned Real Property or any other property or facility owned or operated now or in the past by Company: (i) underground storage tanks, (ii) asbestos-containing material in any form or condition requiring abatement under Environmental, Health and Safety Laws, (iii) polychlorinated biphenyls, or (iv) landfills, surface impoundments, or disposal areas.
(g) Company has not treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including any Hazardous Substance, exposed any employee or other individual to any substance or condition, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to Liabilities, including any Liability for investigatory or response costs, corrective action costs, personal injury, property damage, fines, or penalties, natural resources damages or attorney fees, pursuant to any Environmental, Health, and Safety Laws.
(h) Company has not, either expressly or by operation of law, assumed or undertaken any Liability, including any obligation for corrective or remedial action, of any other Person relating to Environmental, Health, and Safety Laws.
39
(i) No facts, events or conditions relating to the Owned Real Property or relating to past or present facilities, properties or operations of Company, in each case existing as of the Closing Date, will prevent, hinder or limit continued compliance with Environmental, Health, and Safety Laws, give rise to any investigatory, remedial or corrective obligations pursuant to Environmental, Health, and Safety Laws, or give rise to any other Liabilities pursuant to Environmental, Health, and Safety Laws, including any relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage.
Section 3.21 Taxes.
(a) Company has duly filed all Returns required to be filed by Company. All such Returns are true and correct in all material respects, and all Taxes (whether or not shown on any Return) due in connection with such Returns or otherwise due have been paid in full or provision for their payment has been made in the Most Recent Financial Statements. The reserves for Taxes reflected in the Most Recent Financial Statements are adequate for the payment of all Taxes of Company due or to become due in respect of all periods through the date of the Most Recent Financial Statements.
(b) None of the properties or assets of Company is encumbered by any Liens arising out of any unpaid Taxes (except for Taxes that are not yet due and payable) and to Shareholders’ knowledge there are no grounds for the assertion or assessment of any Liens against any of the properties or assets of Company in respect of any Taxes (other than Liens for Taxes, if payment thereof is not yet due).
(c) There is no Action for assessment or collection, pending or, to Shareholders’ knowledge, threatened, by, or present dispute with, the United States or any other Taxing Authority for assessment or collection from Company of any Taxes of any nature (or any Shareholder with respect to Tax matters relating to Company).
(d) No issue has been raised by any Taxing Authority in connection with an audit or examination of any Return, which if raised with regard to any other Return not so audited or examined, would reasonably be expected to result in a proposed deficiency with respect to the period covered by such other Return. No Taxing Authority in a jurisdiction where Company does not file Returns has made a claim, assertion or threat that Company is or may be subject to taxation in such jurisdiction.
(e) Company has properly claimed any Tax incentives, credits, abatements, or exemptions that it has been granted by a Taxing Authority, and Company is and at all times has been in compliance with the terms and conditions of any such Tax incentives, credits, abatements, or exemptions.
(f) Company has collected and remitted all applicable sales and use taxes in all jurisdictions where such taxes were required to be collected and remitted. To the extent Company has not collected sales or use taxes, Company has been furnished properly completed exemption certificates in respect of which adequate records have been maintained.
(g) All Taxes that Company has been required to collect or withhold for, including any employee, independent contractor, creditor, equityholder or other Person, have been duly withheld or collected and, to the extent required, have been paid to the proper Taxing Authority. Company has not received any reports or other written assertions by agents of any Taxing Authority of any deficiencies or other Liabilities for Taxes with respect to taxable periods for which the limitations period has not run. Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.
40
(h) Neither Company nor any Shareholder is a “foreign person” within the meaning of Code Section 1445(f)(3).
(i) There is no Contract, plan or arrangement covering any employee or former employee or independent contractor or former independent contractor of Company that, individually or collectively, could give rise to a (or already has resulted in a) payment by Company (or the provision by Company of any other benefit such as accelerated vesting) that would not be deductible by reason of Code Section 280G or subject to an excise Tax under Code Section 4999. Company does not have any indemnity obligation for any excise Taxes imposed under Code Section 4999.
(j) No “nonqualified deferred compensation plans” within the meaning of Code Section 409A of Company will result in a participant’s incurring income acceleration or penalties under Code Section 409A. Company does not have any indemnity obligation for any Taxes imposed under Code Section 409A.
(k) Company is not, and has not within the past six (6) years been, a party to or bound by any Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement, or similar Contract, and Company has no Liability to any other Person under any such Contract.
(l) Company has not received notice of any, and to the Shareholders’ knowledge there are no, special assessments affecting the Owned Real Property and no Taxing Authority has asserted any Tax deficiency, lien or assessment against the Owned Real Property which has not been paid or the payment for which adequate provision has not been made, other than current real estate Taxes which shall be paid by Company at or prior to the Closing. The Owned Real Property is not subject to any Tax abatements, including abatements as qualified agriculture property.
(m) Company has not extended, deferred, or delayed the payment of any Taxes under the CARES Act or otherwise as a result of COVID-19.
Section 3.22 Accounts Receivable and Accounts Payable.
(a) All accounts receivable of Company are reflected properly on its books and records, are valid obligations arising from bona fide sales actually made or services actually performed in the Ordinary Course of Business, are subject to no setoffs, counterclaims or disputes, and are current and collectible in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts set forth in the Most Recent Financial Statements. Schedule 3.22(a) is a true and correct detailed listing of all of the accounts receivable of Company as of the close of business on the day three Business Days prior to the Closing, which listing sets forth the book value of the accounts receivable determined in accordance with GAAP, showing separately those receivables that as of such date had been outstanding (i) current, (ii) 1-30 days, (iii) 31-60 days, (iv) 61-90 days and (v) more than 90 days.
41
(b) All accounts payable of Company are reflected properly on its books and records, are valid obligations arising from bona fide purchases actually made or services actually obtained in the Ordinary Course of Business and are current and payment thereof has not been deferred. Schedule 3.22(b) is a true and correct detailed listing of all of the accounts payable of Company as of the close of business on the day three Business Days prior to the Closing which listing sets forth the book value of the accounts payable determined in accordance with the GAAP, showing separately those payables that as of such date had been outstanding (i) current, (ii) 1-30 days, (iii) 31-60 days, (iv) 61-90 days and (v) more than 90 days.
Section 3.23 Insurance. Schedule 3.23 sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and workers’ compensation coverage and bond and surety arrangements) maintained by Company as of the Closing Date: the name of the insurer, the name of the policyholder, the policy number and the period of coverage, the type and scope of coverage (including an indication of whether the coverage is on a claims made, occurrence or other basis), and a description of any retroactive premium adjustments or other loss-sharing arrangements. Except as disclosed on Schedule 3.23, with respect to each such insurance policy: (i) the policy is legal, valid, binding, enforceable, and in full force and effect; (ii) the consummation of the transactions contemplated hereby will not cause the policy to cease to be legal, valid, binding, enforceable, and in full force and effect on identical terms immediately following; (iii) neither Company nor, to Shareholders’ knowledge, any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and, to Shareholders’ knowledge, no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy; and (iv) no party to the policy has repudiated any provision thereof. Such insurance policies are sufficient for compliance with all requirements of Law and of all Contracts to which Company is a party and insure Company’s business against such casualties and contingencies in such amounts, types and forms as are appropriate for Company’s business and as are usual and customary in the industry of which it is a part. Except as set forth on Schedule 3.23, there are no outstanding claims by Company under any such insurance policies. Company has not been refused any insurance nor has Company’s coverage been limited by any insurance carrier to which it has applied for any insurance or with which it has carried insurance during the last three (3) years. Company has timely and duly given all notices required to have been given to any insurance company, and no insurance company has asserted in writing that any claim by Company is not covered by the applicable policy relating to such claim. Schedule 3.23 describes any self-insurance arrangements affecting Company.
Section 3.24 Product and Service Warranty. Since January 1, 2021, each product designed, manufactured, assembled, sold, leased or delivered or service provided by Company has been in material conformity with all applicable contractual commitments and all applicable express and implied warranties, and Company does not have any Liability (and there is no basis for any Action against Company giving rise to any Liability) for replacement or repair thereof or the provision of additional products or services or other damages in connection therewith. Schedule 3.24(b) lists all payments made, credits issued and discounts granted by Company or any of its Affiliates since January 1, 2021 with respect to actual or alleged defective or nonconforming products or services of Company, including as a result of product or service warranties, guaranty or indemnity obligations, product liability or product recalls.
42
Section 3.25 Product Liability. Company does not have any Liability (and to Shareholders’ knowledge there is no basis for any Action against Company giving rise to any Liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product designed, manufactured, assembled, sold, leased, or delivered by Company.
Section 3.26 Related Party Transactions. Except as set forth on Schedule 3.26, and other than accrued but unpaid salary due from the end of the last pay period, routine employee benefits, and ordinary course business expense reimbursement, there are no amounts owing from Company to any present or former shareholder, officer, director or employee of Company or any of their respective Affiliates, nor are there any amounts owing from any such Person to Company, nor have there been during the past twelve (12) months, nor are there currently pending, any transactions between Company and any such Person. Except as set forth on Schedule 3.26, no present or former shareholder, officer, director or employee of Company or any of their respective Affiliates, has been involved in any business agreement, arrangement or relationship with Company (expressly excluding employment Contracts disclosed on Schedule 3.18) within the past twelve (12) months (the “Related Party Agreements”), and no present or former shareholder, officer, director or employee of Company or any of their respective Affiliates owns any asset, tangible or intangible, that is used in Company’s business.
Section 3.27 Customers and Suppliers. Schedule 3.27(a) lists the top ten (10) customers of Company for each of the two (2) most recent fiscal years and for the current fiscal year and sets forth opposite the name of each such customer the dollar amount and percentage of net sales of Company attributable to such customer. Schedule 3.27(b) lists the top ten (10) suppliers to Company for each of the two (2) most recent fiscal years and for the current fiscal year and sets forth opposite the name of each such supplier the dollar amount of purchases attributable to such supplier. During the two (2) most recent fiscal years and since the Most Recent Fiscal Year End, no supplier identified on Schedule 3.27(b) has indicated to Company or any Shareholder that it will stop, or materially decrease the rate of, supplying materials, products or services to Company or has requested a material price increase or other concessions from Company. During the two (2) most recent fiscal years and since the Most Recent Fiscal Year End, no customer identified on Schedule 3.27(a) has indicated to Company or any Shareholder that it will stop, or materially decrease the rate of, purchasing materials, products or services from Company, has requested a material price reduction or other concessions from Company, or has indicated that it will otherwise market test, re-source or in-source, re-price, re-bid, conduct a cost analysis of or fulfill through other means any material amount of such customer’s business with Company. Except as set forth on Schedule 3.27(c), there are no outstanding or accrued discounts, rebates, incentives, price givebacks, customer deductions, or similar price reduction programs in effect or scheduled to be in effect with respect to any customer of Company.
Section 3.28 Directors and Officers; Bank Accounts; Powers of Attorney contains a complete and accurate list of (a) all directors and officers of Company, (b) all bank accounts, brokerage accounts, securities accounts, lock boxes and safe deposit boxes used in the conduct of the business of Company (including the name of the bank or other institution where such account or box is located, account number, and the name of each authorized signatory thereto) and the cash balance in each such account or box as of the Most Recent Fiscal Month End, and (c) the name and address of each Person who has a power of attorney to act on behalf of Company or the business of Company.
43
Section 3.29 Anti-Bribery; Anti-Corruption. Neither Company nor any representative of Company has, to obtain or retain business, directly or indirectly offered, paid or promised to pay, or authorized the payment of, any money or other thing of value (including any fee, gift, sample, travel expense or entertainment with a value in excess of Fifty Dollars ($50.00) in the aggregate to any one individual in any year) to: (a) any Person who is an official, officer, agent, employee or representative of any Governmental Authority or of any existing or prospective customer (whether government owned or nongovernment owned); (b) any political party or official thereof; (c) any candidate for political or political party office; or (d) any other Person; while knowing or having reason to believe that all or any portion of such money or thing of value would be offered, given, or promised, directly or indirectly, to any such official, officer, agent, employee, representative, political party, political party official, candidate, individual, or any entity affiliated with such customer, political party or official or political office.
Section 3.30 Brokers, Finders, Etc. Except as set forth on Schedule 3.30, neither Company nor any Shareholder has employed any broker or finder, or incurred any Liability for a brokerage fee, commission or finder’s fee in connection with the transactions contemplated by this Agreement.
Section 3.31 CARES Act Programs. The only CARES Act stimulus or relief programs (the “CARES Act Programs”) in which Company or MCM has participated were (i) the Employee Retention Credit and (ii) the PPP, pursuant to which MCM received the PPP Loan. All Indebtedness with respect to the PPP Loan has been forgiven. The proceeds of the PPP Loan were not used by MCM in violation of the CARES Act. Company has maintained accounting and other records relating to the PPP Loan and the use thereof that comply with the CARES Act (including records that track the costs and other expenses for which the proceeds of the PPP Loan have been used). Except for the PPP Loan and the Employee Retention Credit, neither Company nor MCM has participated in any CARES Act Program, including, without limitation: (a) deferring payment of the employer portion of the United States Federal Insurance Contributions Act, as amended (FICA), and Medicare Tax pursuant to Section 2302 of the CARES Act; or (b) having employees teleworking from a state other than their regular work location on a regular and consistent basis as part of any COVID-19 Measure.
Section 3.32 EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES.
(a) NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO BUYER OR ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS, OR REPRESENTATIVES OF ANY DOCUMENTATION, PROJECTIONS, FORECASTS, BUSINESS PLANS, BUDGETS, ESTIMATES, MANAGEMENT PRESENTATIONS, DATA ROOM MATERIALS, DUE DILIGENCE RESPONSES, OR OTHER INFORMATION OR SUPPLEMENTAL DATA OF ANY KIND, AND NOTWITHSTANDING ANY STATEMENT, REPRESENTATION, OR OMISSION MADE OR FAILED TO BE MADE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ANCILLARY AGREEMENTS, AND ANY CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY SHAREHOLDERS OR COMPANY PURSUANT TO THIS AGREEMENT, NEITHER SHAREHOLDERS NOR COMPANY NOR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES MAKES, AND SHAREHOLDERS AND COMPANY EXPRESSLY DISCLAIM, ANY OTHER REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY (INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE).
44
(b) BUYER ACKNOWLEDGES AND AGREES THAT IT IS NOT RELYING ON, AND HAS NOT RELIED ON, ANY REPRESENTATION, WARRANTY, STATEMENT, OR INFORMATION OF ANY KIND OTHER THAN THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ANCILLARY AGREEMENTS, AND ANY CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY SHAREHOLDERS OR COMPANY PURSUANT TO THIS AGREEMENT.
(c) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 3.32, NOTHING IN THIS SECTION 3.32 SHALL LIMIT A CLAIM AGAINST A SHAREHOLDER FOR FRAUD IN THE MAKING OF THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND ANY CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY SHAREHOLDERS OR COMPANY PURSUANT TO THIS AGREEMENT.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS
Each Shareholder, severally as to itself and not jointly, hereby represents and warrants to the Buyer that the following representations and warranties are true and correct as of the Closing:
Section 4.1 Authorization. Such Shareholder has full power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements, the performance of such Shareholder’s obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary proceedings on the part of such Shareholder. This Agreement and the Ancillary Agreements to which such Shareholder is a party have been duly executed and delivered by such Shareholder and constitute the legal, valid and binding obligations of such Shareholder, enforceable against such Shareholder in accordance with their terms, except as limited by Laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
45
Section 4.2 No Conflict. The execution, delivery and performance of this Agreement and the Ancillary Agreements, the consummation of the transactions contemplated hereby and thereby and the compliance with the terms of this Agreement and the Ancillary Agreements do not and will not: (a) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any Contract of any kind to which such Shareholder is a party or to which such Shareholder or any of its property is subject; (b) result in the creation of any Lien upon, or any Person obtaining the right to acquire any properties, assets or rights of such Shareholder; (c) violate or conflict with any Law to which such Shareholder or any of its property is subject; (d) require such Shareholder to obtain any authorization, consent, order, permit or approval of, or make any notice to, or filing, registration or qualification with, any Governmental Authority; or (e) if applicable, conflict with or result in any breach of any of the provisions of the Organizational Documents of such Shareholder.
Section 4.3 Title to Shares. Such Shareholder has, and upon Closing Buyer will acquire, good, valid and marketable title to Shareholder’s Shares, free and clear of any and all Liens other than any Liens imposed by Applicable Law related to securities or Liens ongoing by or through the Buyer.
Section 4.4 EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES. NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO BUYER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL DATA), EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND ANY CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY SHAREHOLDERS PURSUANT TO THIS AGREEMENT, SHAREHOLDERS EXPRESSLY DISCLAIM ANY OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 4.4, NOTHING IN THIS SECTION 4.4 SHALL LIMIT A CLAIM AGAINST A SHAREHOLDER FOR FRAUD IN THE MAKING OF THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND ANY CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY SHAREHOLDERS OR COMPANY PURSUANT TO THIS AGREEMENT; PROVIDED THAT NO SHAREHOLDER SHALL HAVE ANY LIABILITY FOR THE FRAUD OF ANY OTHER SHAREHOLDER IN THE MAKING OF THE REPRESENTATIONS AND WARRANTIES UNDER THIS ARTICLE IV.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Shareholders that the following representations and warranties are true and correct as of the Closing:
Section 5.1 Organization; Authorization; Etc. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which it is a party, the performance of Buyer’s obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate proceedings on the part of Buyer. This Agreement and the Ancillary Agreements to which Buyer is a party have been duly executed and delivered by Buyer and constitute the legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms.
46
Section 5.2 No Conflict. The execution, delivery and performance of this Agreement and the Ancillary Agreements to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby will not (a) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any Contract of any kind to which Buyer is a party or to which Buyer or any of its property is subject; (b) violate or conflict with any Law to which Buyer or any of its property is subject; (c) require Buyer to obtain any authorization, consent, order, permit or approval of, or make any notice to, or filing, registration or qualification with, any Governmental Authority; or (d) conflict with or result in any breach of any of the provisions of any Organizational Documents of Buyer.
Section 5.3 Brokers, Finders, Etc. Buyer has not employed any broker or finder, or incurred any Liability for a brokerage fee, commission or finder’s fee in connection with the transactions contemplated by this Agreement.
Section 5.4 Investment. Buyer is not acquiring the Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended.
Section 5.5 Credit Agreement. Buyer has delivered to Shareholder Representative a true and complete copy of the Credit Agreement and all amendments thereto, in each case exclusive of the schedules to such Credit Agreement or amendments, as of the date hereof.
Section 5.6 EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO SHAREHOLDERS, COMPANY OR THEIR AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY FINANCIAL PROJECTIONS OR OTHER SUPPLEMENTAL DATA), EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ANCILLARY AGREEMENTS AND ANY CERTIFICATE OR OTHER INSTRUMENT DELIVERED BY BUYER PURSUANT TO THIS AGREEMENT, BUYER EXPRESSLY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 5.6, CLAIMS AGAINST BUYER OR ANY OTHER PERSON SHALL NOT BE LIMITED IN ANY RESPECT IN THE EVENT OF FRAUD.
ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.1 Public Announcements. No Shareholder shall issue, or permit any agent or Affiliate to issue, any press releases or otherwise make, or permit any agent or Affiliate to make, any public statements or disclosures with respect to this Agreement or the transactions contemplated hereby. Buyer and its Affiliates (including Company) will have the exclusive right to freely disclose information with respect to this Agreement and the transactions contemplated hereby at such time(s) and in such manner as Buyer or its Affiliates shall determine in its or their sole and absolute discretion. Notwithstanding the foregoing, Buyer and its Affiliates (including Company) shall not disclose the individual consideration received by any Shareholder under this Agreement except to the extent required by applicable Law.
47
Section 6.2 Closing Deliveries. At Closing, each Shareholder, Company and Buyer shall execute and deliver, or cause to be executed and delivered, the applicable documents referenced in Sections 2.3 and 2.4.
Section 6.3 Further Assurances. Each Shareholder and Buyer agrees that, from time to time for a reasonable period after the Closing, each of them will, and will cause their employees and Affiliates to, execute and deliver such further instruments and promptly take such other action as may be reasonably requested by the other party to carry out the purposes and intents of this Agreement and the transactions contemplated hereby.
Section 6.5 D&O Policy. Prior to the Closing Date but effective as of the Closing, Company shall have purchased a six (6) year prepaid, irrevocable policy for directors’, officers’ and employees’ liability insurance with a coverage period ending not prior to the six (6) year anniversary after the Closing Date, covering those Persons who are covered by Company’s directors’, officers’ and employees’ liability insurance policy immediately prior to the Closing in an amount and on terms no less favorable than coverage under such policies in effect immediately prior to the Closing, and with the same or better credit rating as Company’s insurance carrier with respect to directors’, officers’ and employees’ liability insurance immediately prior to the Closing (“D&O Policy”). The cost and related expenses of procuring the D&O Policy shall be included in Company Transaction Expenses.
Section 6.6 Shareholder Release
(a) Except with respect to a Shareholder’s rights arising under this Agreement or any Ancillary Agreement, each Shareholder, on behalf of such Shareholder and each of such Shareholder’s heirs, administrators, representatives, predecessors, successors and assigns (collectively, the “Releasing Parties”), hereby releases and discharges Company and its Affiliates and each of their respective former, current and future direct or indirect shareholders, officers, directors, employees, managers, partners, agents, successors and assigns (collectively, the “Released Parties”) from any and all obligations (including indemnification obligations) and claims, known and unknown, that have accrued or may accrue and that relate to acts or omissions prior to the Closing, including any and all Losses, whether such obligations, claims or Losses arise in tort, Contract or under statute, including obligations, claims or Losses (a) arising under any Organizational Documents of Company, any Contract or any other legal requirements and (b) relating to actions or omissions of Company, or any acts or omissions of the directors, officers, shareholders, equity holders or employees (former or present) of Company, including those committed while serving in their capacity as directors, officers, shareholders, equity holders, employees or similar capacities of Company, and including in each case any and all claims that such Releasing Party does not know or suspect to exist in its favor as of the date of this Agreement (the “Released Claims”). Notwithstanding the foregoing, no Shareholder releases any other Shareholder from their respective obligations under the Contribution Agreement among Shareholders as of even date herewith or any acts or omissions not related to Company.
48
(b) Each Shareholder, for itself and its Releasing Parties, irrevocably covenants to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any Action of any kind against any Released Party, based on any Released Claim.
(c) THE RELEASES CONTAINED IN THIS SECTION 6.6 APPLY TO ALL RELEASED CLAIMS, AND EACH RELEASING PARTY HEREBY WAIVES THE BENEFITS OF ANY LAWS (INCLUDING PRINCIPLES OF COMMON LAW) OF ANY STATE OR TERRITORY OR OTHER JURISDICTION OF THE UNITED STATES OR OF ANY JURISDICTION OUTSIDE OF THE UNITED STATES THAT PROVIDES THAT A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN THE CREDITOR’S FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY THE CREDITOR MUST HAVE MATERIALLY AFFECTED THE CREDITOR’S SETTLEMENT WITH THE DEBTOR.
Section 6.7 Tax Matters.
(a) Tax Indemnification. Shareholders shall be jointly and severally liable for and shall jointly and severally indemnify and hold harmless the Buyer Indemnified Parties from and against any and all Losses incurred by or asserted against any of the Buyer Indemnified Parties in connection with or arising from (i) any Taxes of Company for all taxable periods ending on or before the Closing Date and the portion of any Straddle Period through the Closing Date (“Pre-Closing Tax Period”); (ii) all Taxes of any other Person that Company is liable for as a result of joint and several liability, transferee liability, successor liability, or a contractual obligation, in each case, that is attributable to a Pre-Closing Tax Period; (iii) any costs and expenses of preparing, filing or defending any Return of or with respect to Company for any Pre-Closing Tax Period (including such costs and expenses of any Return allocable to the portion of any Straddle Period ending on the Closing Date); (iv) without limiting any of the foregoing, Taxes related to or arising from any denial, disallowance, recapture, adjustment or redetermination of, or Action involving, any Employee Retention Credit (or similar Tax credits) claimed by or with respect to Company; and (v) any and all transfer Taxes imposed on any Buyer Indemnified Party as a result of any transaction contemplated by this Agreement. Any payment made pursuant to this Section 6.7(a) shall be treated by Shareholders and Buyer as an adjustment to the Estimated Purchase Price (or Final Purchase Price, if applicable), and Shareholders and Buyer agree not to take any position inconsistent therewith for any purpose.
(b) Liability for Pre-Closing Taxes. In determining Shareholders’ requirement to indemnify for Taxes under Section 6.7(a):
(i) Intentionally deleted;
49
(ii) In the case of Taxes (other than transfer Taxes) that are payable with respect to any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the portion of any such Tax that is attributable to the portion of the Straddle Period ending on the Closing Date shall be: (A) in the case of any Taxes based on or measured by income or receipts of Company for the Pre-Closing Tax Period, determined based on an interim closing of the books and records as of the close of business on the Closing Date and (B) in the case of other Taxes of Company, the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the total number of days in the Straddle Period. For purposes of clause (A), any item determined on an annual or periodic basis (including amortization and depreciation deductions and the effects of graduated rates) shall be allocated to the portion of the Straddle Period ending on the Closing Date based on the relative number of days in such portion of the Straddle Period as compared to the number of days in the entire Straddle Period.
(c) Termination of Tax Sharing Agreements. Except as otherwise provided in this Section 6.7, all Tax sharing agreements, arrangements, policies and guidelines, formal or informal, express or implied, that may exist between Company, on the one hand, and any Shareholder or its Affiliates, on the other hand, and all obligations thereunder shall terminate as of the Closing, and Company shall not have any liability thereunder for any and all amounts due in respect of periods prior to the Closing.
(d) Preparation of Pre-Closing Returns. Shareholders shall prepare and timely file all pre-closing Returns which are required for Company (the “Pre-Closing Returns”) due on or prior to the Closing Date, in accordance with existing procedures and practices with respect to the treatment of specific items on the Returns, and shall timely remit, or cause to be remitted, to the appropriate Governmental Authority all Taxes reflected on such Pre-Closing Returns.
(e) Preparation of Post-Closing Returns. To the extent not filed prior to the Closing, Shareholders shall prepare or cause to be prepared, for timely filing by Company, all Returns of Company for any Pre-Closing Tax Period, the due date of which (taking into account extensions of time to file) is after the Closing Date. Shareholder Representative shall provide a copy of each such Return to Buyer for Buyer’s review and comment not later than thirty (30) days prior to the deadline for filing each such Return and shall consider any reasonable and timely comments from Buyer. Such Returns shall be prepared on a basis consistent with existing procedures for preparing such Returns and in a manner consistent with prior practice with respect to the treatment of specific items on the Returns, unless such treatment does not have sufficient legal support to avoid the imposition of penalties, fines, or similar amounts. In the event Shareholders are liable under Section 6.7(a) hereof for Taxes due in connection with any Return filed after the Closing Date, Shareholders shall pay the amount of such Liability to Buyer immediately upon request or at least three (3) Business Days prior to the filing of such Returns, whichever is later. For the avoidance of doubt, all management bonuses, phantom equity plans, Company Transaction Expenses and other transaction costs accrued by Company on or before the Closing Date shall be included in the Pre-Closing Tax Period.
(f) Tax Cooperation. Each party shall cooperate with the other as reasonably requested in connection with any Tax filing, investigation, audit or other proceeding. The parties shall preserve and cause to be preserved all information, returns, books, records and documents relating to any Liabilities for Taxes with respect to a taxable period until the later of the expiration of all applicable statutes of limitation and extensions thereof, or the conclusion of all litigation with respect to Taxes for such period.
50
(g) Audits. Notwithstanding any other provisions hereof, if, after the Closing Date, any Buyer Indemnified Party receives any notice, letter, correspondence, claim or decree relating to Taxes for any Pre-Closing Tax Period from any Taxing Authority (“Tax Notice”), upon receipt of such Tax Notice, Buyer shall promptly deliver such Tax Notice to Shareholder Representative; provided, however, that the failure of Buyer to promptly provide the Tax Notice to Shareholder Representative shall not affect the indemnification rights of any Buyer Indemnified Party pursuant to this Section 6.7, except to the extent that Shareholders are actually prejudiced by Buyer’s failure to deliver such Tax Notice. Notwithstanding any provision of Article VI to the contrary, Buyer shall have the right to handle, defend, conduct and control any Tax audit or other proceeding involving Company that relates to such Tax Notice, but Shareholder Representative shall have the right to participate in such Tax audit or proceeding at Shareholder Representative’s expense; including with respect to any disputes related to an Employee Retention Credit (or similar Tax benefit under the CARES Act) or similar program or Law. At the request of Shareholder Representative, Buyer and Company shall resolve and settle any issue related to Taxes for any Pre-Closing Tax Period on terms acceptable to Shareholder Representative and the applicable Governmental Authority provided that (i) Shareholders shall have paid to Company or Buyer prior to entering into the settlement or other resolution all Taxes (and other amounts) that Shareholders are liable for under this Agreement as a result of such settlement or other resolution; and (ii) the settlement or other resolution could not result in any Buyer Indemnified Party paying any Taxes (or other amounts) that Shareholders are not required to fully indemnify the Buyer Indemnified Parties for under this Agreement.
(h) Employee Retention Credit Escrow.
(i) The Employee Retention Credit Escrow Amount shall be released as follows: (i) on October 31, 2028 (the “First ERC Release Date”) the parties shall instruct the Escrow Agent to release Six Hundred Thirty-Nine Thousand Sixty-Nine and 69/100 U.S. Dollars ($639,069.69) of the Employee Retention Credit Escrow Amount, representing the Employee Retention Credits claimed by Company for the second, third and fourth calendar quarters of 2020 and (ii) on December 2, 2030 (the “Second ERC Release Date”, the First ERC Release Date and the Second ERC Release Date referred to generally as the “ERC Release Date”), the parties shall instruct the Escrow Agent to release the balance of the Employee Retention Credit Escrow Amount, representing the Employee Retention Credits claimed by Company for the first and second calendar quarters of 2021, provided, however that (A) if an ERC Notice (as defined below) has been provided to Shareholder Representative with respect to Employee Retention Credits related to the applicable ERC Release Date, the amount related to such ERC Release Date will be held in escrow until the challenge specified in such ERC Notice is resolved and (B) the existence of any pending audit, examination, inquiry, review or redetermination by the IRS shall be deemed sufficient grounds to continue such escrow.
51
(ii) If any amount of any Employee Retention Credit received by Company is subsequently challenged or disallowed by any Governmental Authority prior to the applicable ERC Release Date, Buyer shall give Shareholder Representative prompt written notice of such challenge or disallowance (an “ERC Notice”). Buyer shall have the right to handle, defend, conduct and control any Tax audit or other proceeding involving the Employee Retention Credit, including the right to settle any such proceeding; provided that Buyer shall not settle, compromise or otherwise resolve any such proceeding without the prior written consent of Shareholder Representative, which consent shall not be unreasonably withheld, conditioned or delayed. Upon resolution of any such proceeding, Buyer and Shareholder Representative shall issue a joint written instruction to the Escrow Agent directing the Escrow Agent to (a) release to Buyer any and all Losses related to such proceeding, including any disallowed Employee Retention Credits, overpayments, amounts required to be repaid, penalties, interest, additions to Tax and all out-of-pocket costs, Taxes, professional fees and expenses (including attorneys’, accountants’ and consultants’ fees) incurred in defending any such proceeding and (b) release the remainder of the escrow related to the applicable ERC Release Date, if any, to Shareholder Representative. For the avoidance of doubt, Buyer shall be entitled to recover from the Employee Retention Credit Escrow Amount on a dollar-for-dollar basis for any Losses without any deductible basket, or cap. In the event a Governmental Authority extends the statute of limitations applicable to Employee Retention Credits, the ERC Release Dates shall automatically extend to the end of such statute of limitations plus ninety (90) days.
(iii) In the event of challenges to or disallowance of any Employee Retention Credit received by Company, Buyer shall use commercially reasonable efforts to provide Synergi with notice of any audit or challenge to the Employee Retention Credit and provide an opportunity for Synergi to provide support regarding such audit. Buyer and its Affiliates are under no obligation to (A) follow Synergi’s recommendations with respect to the Employee Retention Credit (and will have no liability to the Shareholders for failure to do so or for Synergi’s refusal to issue any refund of fees) or (B) commence any litigation against Synergi regarding any refund of fees payable under the Synergi Partners Agreement. If Synergi refuses to issue a refund of fees, upon written request from Shareholder Representative, Buyer shall use commercially reasonable efforts to cause Company to assign the Synergi Partners Agreement to Shareholder Representative. Upon receipt of any funds from Synergi in connection with the Synergi Partners Agreement, Buyer shall promptly remit such funds to the Shareholder Representative, net of any taxes applicable to such funds.
(i) Tax Treatment of Contingent Purchase Price. The parties intend that all Contingent Purchase Price payments made pursuant to Exhibit C constitute additional purchase price paid in consideration for the Shares and not compensation for services. The parties acknowledge and agree that the Contingent Purchase Price constitutes contingent sales consideration payable with respect to the sale of the Shares and shall report all such payments consistently for all federal, state, local and foreign Tax purposes, including, to the extent applicable, pursuant to Section 453 of the Code, unless otherwise required by a Final Determination or applicable Law. No Shareholder’s entitlement to any Contingent Purchase Price payment shall be conditioned upon such Shareholder's continued employment, service, or other relationship with Buyer, Company or any Affiliate thereof, and no termination of any such employment, service, or other relationship shall, by itself, reduce, eliminate, or otherwise adversely affect such Shareholder’s right to receive any Contingent Purchase Price payment otherwise payable pursuant to this Agreement. The Contingent Purchase Price shall be allocated among the Shareholders in accordance with their respective Pro Rata Shares and not by reference to any employment, consulting, management, or other service relationship with Buyer, Company, or any Affiliate. No portion of any Contingent Purchase Price payment shall be treated as wages, compensation, bonus, severance, deferred compensation, or other remuneration for services.
52
(j) Section 6.7 vs. Article VII. The provisions of this Section 6.7 shall not be governed by any of the limitations contained in Article VII and to the extent of any inconsistency between this Section 6.7 and Article VII, the provisions of this Section 6.7 shall control.
Section 6.8 Related Party Agreements. Shareholders and Company shall, and Shareholders shall cause Company to, prior to the Closing terminate, effective as of the Closing, at the written request of Buyer, any Related Party Agreements set forth on Schedule 3.26, such that Company shall not have any Liability following the Closing related to such Related Party Agreements.
Section 6.9 R&W Insurance Policy. Effective as of the Closing, Buyer shall cause a buyer’s representations and warranty insurance policy to be bound insuring Buyer Indemnified Parties for Losses due to breaches of representations and warranties of Shareholders under this Agreement, providing coverage in the amount and on the terms and conditions and in the form as set forth on Exhibit 6.9 (the “R&W Insurance Policy”). Shareholders, on the one hand, and Buyer, on the other hand, shall each pay fifty percent (50%) of the total premium and related fees to obtain coverage under the R&W Insurance Policy, which fifty percent (50%) payable by Shareholders shall be included in Company Transaction Expenses. The coverages provided under the R&W Insurance Policy have been made at the sole election, determination, and discretion of Buyer on its behalf and on behalf of the Buyer Indemnified Parties, at their own risk. The limitations and other provisions set forth in Article VII shall still apply if the R&W Insurance Policy is later revoked, cancelled or modified in any manner after issuance. Following the Closing, Buyer shall not amend, waive or otherwise modify the R&W Insurance Policy in any manner that would (a) allow the insurer thereunder or any other Person to subrogate or otherwise make or bring any claim or other Action against any Shareholder thereof based upon, arising out of, or related to this Agreement or the negotiation, execution or performance thereof (other than for Fraud), (b) more generally amend the waiver of subrogation set forth therein in a manner adverse to the Seller or any Seller Related Party (as defined in the R&W Insurance Policy) or (c) reduce or eliminate coverage in a manner that would increase the personal liability of Shareholders or the Seller Related Parties beyond what is expressly set forth in this Agreement. The R&W Insurance Policy shall provide that the insurer thereunder shall irrevocably waive any right of subrogation or contribution against any Shareholder or any Seller Related Party with respect to any Losses paid or payable under the R&W Insurance Policy, except in the case of Fraud by such Shareholder.
Section 6.10 Subordination of Contingent Purchase Price.
(a) Buyer and Shareholders acknowledge that Buyer has entered into the Credit Agreement dated August 4, 2022 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Buyer, certain of Buyer’s Affiliates, and Wells Fargo Bank, National Association, as lender (the “Senior Lender”), pursuant to which the Senior Lender has made certain loans and financial accommodations to Buyer and its Affiliates (all obligations thereunder, the “Senior Debt”).
53
(b) All obligations of Buyer to pay the Contingent Purchase Price under Section 2.2(a)(vi) and Exhibit C (collectively, the “Subordinated Obligations”), including any payment into the Earnout Escrow Account other than the Initial Earnout Escrow Amount, are subordinate and junior in right and time of payment to the prior indefeasible payment in full in cash of all Senior Debt and the termination of all lending commitments under the Credit Agreement.
(c) No Contingent Purchase Price Payment, payment into the Earnout Escrow Account, or other distribution on account of the Subordinated Obligations shall be made by Buyer or its Affiliates, and no such payment shall be accepted by Shareholder Representative or any Shareholder, unless the Payment Conditions have been satisfied with respect to such payment. Notwithstanding the foregoing, the payment of the Initial Earnout Escrow Amount at the Closing to the Escrow Agent and the release of the Earnout Escrow Funds to the Shareholder Account in accordance with Exhibit C (but, with respect to such release of the Earnout Escrow Funds, only after and to the extent such have been funded to the Earnout Escrow Account in accordance with this Agreement, including, without limitation, this Section 6.10) shall not be subject to the Payment Conditions and shall not constitute Subordinated Obligations.
(d) Buyer shall resume Contingent Purchase Price Payments or payments to the Earnout Escrow Account (and may make any payments missed due to the preceding paragraph) to the extent payment is no longer prohibited by Section 6.10(c), with each subsequent payment subject to the provisions of Section 6.10(c). The failure of Buyer to make any Contingent Purchase Price Payment by reason of the restrictions in this Section 6.10 shall not constitute a breach of this Agreement or give rise to any claim by Shareholder Representative or any Shareholder against Buyer.
(e) In the event of any insolvency, bankruptcy, receivership, liquidation, reorganization, assignment for the benefit of creditors, or other similar proceeding involving Buyer: (i) all Senior Debt shall first be paid in full in cash before any distribution shall be made to Shareholder Representative or any Shareholder on account of the Subordinated Obligations; and (ii) any distribution which would otherwise be payable to Shareholder Representative or any Shareholder in respect of the Subordinated Obligations shall be paid directly to Senior Lender for application to the Senior Debt until the Senior Debt is paid in full in cash and all lending commitments under the Credit Agreement have been terminated.
(f) Until the Senior Debt has been paid in full in cash and all lending commitments under the Credit Agreement have been terminated, neither Shareholder Representative nor any Shareholder shall, without the prior written consent of Senior Lender: (i) commence any legal proceeding or take any enforcement action against Buyer to collect all or any part of the Subordinated Obligations (other than the delivery of written notices of non-payment); (ii) accelerate the Subordinated Obligations; or (iii) exercise any right of setoff against Buyer with respect to the Subordinated Obligations.
(g) The Subordinated Obligations shall at all times remain unsecured obligations of Buyer. Neither Shareholder Representative nor any Shareholder shall accept any Lien, security interest, or guaranty from Buyer or any of Buyer’s Affiliates in respect of the Subordinated Obligations. Neither Shareholder Representative nor any Shareholder shall sell, assign, pledge, or otherwise transfer all or any portion of the Subordinated Obligations without the prior written consent of Senior Lender. Notwithstanding the foregoing, the Earnout Escrow Funds are held for the benefit of the Shareholders without any Lien by Senior Lender.
54
(h) Neither Shareholder Representative nor any Shareholder shall, without the prior written consent of Senior Lender, agree to any amendment, modification, or supplement to the Contingent Purchase Price provisions of this Agreement (including Section 2.2(a)(vi), this Section 6.10 and Exhibit C) to the extent the same would (i) increase the amount of or accelerate the timing of any Contingent Purchase Price Payment, (ii) add any events of default, remedies, or enforcement rights in favor of Shareholder Representative or any Shareholder, or (iii) otherwise be adverse to the interests of Senior Lender.
(i) If any payment on account of the Subordinated Obligations not permitted hereunder is received by Shareholder Representative or any Shareholder, such payment shall be held in trust for the benefit of Senior Lender and shall be promptly paid over to Senior Lender for application to the Senior Debt in accordance with the Credit Agreement.
(j) Senior Lender is an intended third-party beneficiary of this Section 6.10 and shall be entitled to enforce the provisions hereof directly against Shareholder Representative and the Shareholders. The provisions of this Section 6.10 shall remain in full force and effect until the Senior Debt is paid in full in cash and all lending commitments under the Credit Agreement have been terminated, after which this Section 6.10 shall be of no further force or effect.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Survival of Representations and Warranties. All representations and warranties of the parties contained in this Agreement shall survive the Closing until the eighteen (18) month anniversary of the Closing Date; provided, however, (a) the Shareholder Fundamental Representations (other than Section 3.21) and the Buyer Fundamental Representations shall survive the Closing until the six (6) year anniversary of the Closing Date, and (b) representations and warranties that are the basis for claims asserted under this Agreement prior to the expiration of such applicable time periods shall also survive until the final resolution of those claims, and (c) the representations and warranties set forth in Section 3.21 (Taxes) shall survive the Closing until the date that is sixty (60) days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof) with respect to the Tax or Tax matter to which such representation or warranty relates. Covenants and agreements contained in this Agreement shall survive the Closing in accordance with their respective terms.
Section 7.2 Indemnification by Buyer. From and after the Closing, Buyer shall indemnify and hold harmless Shareholders and their Affiliates, each of their respective shareholders, members, directors, officers, managers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Shareholder Indemnified Parties”) from and against any and all Losses incurred by or asserted against any of the Shareholder Indemnified Parties in connection with or arising from (a) any breach or nonfulfillment of any covenant, agreement, or obligation to be performed by Buyer under this Agreement; or (b) any inaccuracy in or breach of any representation or warranty of Buyer under this Agreement. Any payment made pursuant to this Section 7.2 shall be treated by Shareholders and Buyer as an adjustment to the Estimated Purchase Price (or Final Purchase Price, if applicable), and Shareholders and Buyer agree not to take any position inconsistent therewith for any purpose.
55
Section 7.3 Indemnification by Shareholders. From and after the Closing, Shareholders, jointly and severally (except Shareholders’ obligations under this Section 7.3 shall be several in connection with Losses connected to or arising from any inaccuracy in or breach of the representations and warranties contained in Article IV hereof), shall indemnify and hold harmless Buyer and its Affiliates, each of their respective shareholders, members, directors, officers, managers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Buyer Indemnified Parties”) from and against any and all Losses incurred by or asserted against any of the Buyer Indemnified Parties in connection with or arising from
(a) any breach or nonfulfillment of any covenant, agreement, or obligation to be performed by any Shareholder or by Shareholder Representative under this Agreement;
(b) any inaccuracy in or breach of any Shareholder Fundamental Representation;
(c) any inaccuracy in or breach of any representation or warranty of any Shareholder under this Agreement, other than Shareholder Fundamental Representations (it being agreed that, for any and all purposes of this Section 7.3, all qualifications and exceptions relating to materiality, Material Adverse Effect, or words of similar import shall be disregarded, including for purposes of determining whether or not a breach of a representation or warranty has occurred and/or determining the amount of any Losses);
(d) any Company Indebtedness or Company Transaction Expenses, in each case, to the extent not paid at Closing or taken into account in the Final Purchase Price;
(e) any claim made by any Shareholder relating to such Shareholder’s rights with respect to the calculations and determinations set forth in the Funds Flow Statement; or
(f) the matters disclosed in Schedule 7.3(f).
Notwithstanding the foregoing, except in the case of Fraud, (A) Shareholders shall not be required to indemnify the Buyer Indemnified Parties pursuant to Sections 7.3(b) and/or (c) until the aggregate Losses indemnifiable pursuant to Section 7.3(b) and/or (c), taken together, exceed $87,500 (the “Deductible”), at which point Shareholders shall be required to indemnify the Buyer Indemnified Parties only for Losses in excess of the Deductible subject to the terms hereof, (B) the aggregate liability of the Shareholders for all Losses pursuant to Section 7.3(b) and/or (c), taken together, shall not in the aggregate exceed $87,500 (the “General Cap”), and Buyer shall first seek to satisfy such liability from the Indemnification Escrow Amount, and (C) the aggregate liability of the Shareholders for Losses for claims pursuant to Section 7.3(a) and/or 7.3(f) shall not exceed the Final Purchase Price plus the amount of any Contingent Purchase Price paid to Shareholder Representative (the “Aggregate Cap”). The Shareholders shall not be entitled to the benefit of the Deductible, the General Cap, the Aggregate Cap, or any of the other limitations set forth in clauses (A) through (C) with respect to any claims for indemnification for Losses arising out of or resulting from Fraud except that no Shareholder shall be liable for Fraud of any other Shareholder with respect to the representations set forth in Article IV. Any payment made pursuant to this Section 7.3 shall be treated by Shareholders and Buyer as an adjustment to the Estimated Purchase Price (or Final Purchase Price, if applicable), and Shareholders and Buyer agree not to take any position inconsistent therewith for any purpose.
56
Section 7.4 Third-Party Claims. Promptly after receipt by a Shareholder Indemnified Party or a Buyer Indemnified Party (an “Indemnified Party”) of notice of any matter or the commencement of any Action by a third party in respect of which the Indemnified Party will seek indemnification hereunder (a “Third-Party Claim”), the Indemnified Party shall notify each Person that is obligated to provide such indemnification (an “Indemnifying Party”) thereof in writing but any failure to so notify the Indemnifying Party shall not relieve it from any liability that it may have to the Indemnified Party other than to the extent the Indemnifying Party is actually and materially prejudiced by such failure. The Indemnifying Party shall be entitled to participate in the defense of such Third-Party Claim and, provided that within fifteen (15) days after receipt of such written notice the Indemnifying Party confirms in writing its responsibility therefor, to assume control of such defense with counsel reasonably satisfactory to such Indemnified Party; provided, however, that:
(a) the Indemnified Party shall be entitled to participate in the defense of such Third-Party Claim and to employ counsel at its own expense to assist in the handling of such matter or claim;
(b) the Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into any settlement of such Third-Party Claim or ceasing to defend against such matter or claim (with such approval not to be unreasonably withheld);
(c) no Indemnifying Party shall consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by each claimant or plaintiff to each Indemnified Party of a full and complete release from all liability in respect of such Third-Party Claim; and
(d) the Indemnifying Party shall not be entitled to control (but shall be entitled to participate at its own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement of any Third-Party Claim to the extent the matter or claim (i) involves Losses that could reasonably be expected to exceed the maximum amount for which the Indemnifying Party is required to indemnify the Indemnified Party under this Article VII, or (ii) seeks an order, injunction, non-monetary or other equitable relief against the Indemnified Party which, if successful, could materially adversely interfere with the business, operations, assets, condition (financial or otherwise) or prospects of the Indemnified Party.
57
After written notice by the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of any such Third-Party Claim, the Indemnifying Party shall not be liable to such Indemnified Party hereunder for any legal expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation and of liaison counsel for the Indemnified Party; provided, however, that the Indemnifying Party shall be liable for such legal expenses if the Indemnified Party determines in good faith upon the advice of outside counsel that the incurrence of the same is appropriate in light of defenses not available to the Indemnifying Party or conflicts of interest. If the Indemnifying Party does not assume control of the defense of such Third-Party Claim as provided in this Section 7.4, the Indemnified Party shall have the right to defend such Third-Party Claim in such manner as it may deem appropriate at the cost and expense of the Indemnifying Party, and the Indemnifying Party will promptly reimburse the Indemnified Party therefor in accordance with this Article VII. The reimbursement of fees, costs and expenses required by this Article VII shall be made by periodic payments during the course of the investigations or defense, as and when bills are received or expenses incurred. Notwithstanding anything to the contrary in this Section 7.4, with respect to any Third-Party Claim that is or may be covered (in whole or in part) by the R&W Insurance Policy, (x) the provisions of this Section 7.4 governing control of, and participation in, the defense, and the reimbursement of defense fees, costs and expenses, shall be subject and subordinate to the claims-handling and defense-control provisions of the R&W Insurance Policy, and (y) no Shareholder shall have any obligation to assume or control the defense of, or to reimburse on a current basis any defense costs of, such Third-Party Claim.
Section 7.5 Procedures for Other Claims. An Indemnified Party wishing to assert a claim for indemnification under this Article VII that is not subject to Section 7.4 shall deliver to the Indemnifying Party a prompt written notice (a “Claim Notice”) which contains (a) a description of the amount (or if the amount is unknown, an estimate of the amount) (the “Claimed Amount”) of any Losses incurred by the Indemnified Party, (b) a statement that the Indemnified Party has incurred Losses or anticipates that it will incur Losses for which such Indemnified Party is entitled to indemnification under this Article VII, (c) a statement that the Indemnified Party is entitled to indemnification under this Article VII and a reasonable explanation of the basis therefor (including the nature of the breach of representation or warranty, breach of covenant or agreement, or other matter to which each such claim is related), and (d) a demand for payment in the amount of such Losses. Within thirty (30) days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a written response in which the Indemnifying Party shall: (i) agree that it is responsible for the claim under the Claim Notice and that the Indemnified Party is entitled to receive all of the Claimed Amount (in which case such amount shall be paid to the Indemnified Party in accordance with Section 7.6 promptly upon delivery of such written response); provided, however, that payment of the Claimed Amount shall not be deemed full satisfaction of the claim if the Claimed Amount was an estimate of the amount of Losses incurred by the Indemnified Party in connection therewith, or (ii) contest that the Indemnified Party is entitled to receive the Claimed Amount in whole or in part; provided, that if the Indemnifying Party fails to deliver a written response to a Claim Notice within such thirty (30) day period, the Indemnifying Party shall be deemed to have contested the Claimed Amount in full, and the Indemnifying Party and the Indemnified Party shall resolve such dispute in accordance with this Agreement. If the Indemnifying Party in its response contests the payment of all or part of the Claimed Amount, the Indemnifying Party and the Indemnified Party shall resolve such dispute in accordance with the provisions of this Agreement; provided that the uncontested part of the Claimed Amount shall be paid to the Indemnified Party in accordance with Section 7.6 promptly upon delivery of such written response.
58
Section 7.6 Payment of Losses.
(a) Where a Final Determination has been made that a Buyer Indemnified Party is entitled to indemnification under this Article VII, the Buyer Indemnified Party’s right to receive payment for any Losses for which Shareholders are liable shall be paid as a reduction to the Estimated Purchase Price (or Final Purchase Price, if applicable) (i) from the Indemnification Escrow Amount to the extent that there is some portion of the Indemnification Escrow Amount that has not yet been released or that is not otherwise the subject of a pending claim by Buyer under this Article VII, and (ii) in the event the amount to which the Buyer Indemnified Party is entitled in respect of such Losses exceeds the funds available for distribution from the Indemnification Escrow Amount, Shareholders shall pay to the applicable Buyer Indemnified Party the amount of any Loss for which Shareholders are liable hereunder, in immediately available funds, to the account(s) specified by the applicable Buyer Indemnified Party no later than five (5) Business Days following such Final Determination of such Loss and Shareholders’ liability therefor.
(b) Where a Final Determination has been made that a Shareholder Indemnified Party is entitled to indemnification from Buyer under this Article VII, Buyer shall pay to the applicable Shareholder Indemnified Party the amount of any Loss for which it is liable hereunder, in immediately available funds, to the account(s) specified by the applicable Shareholder Indemnified Party no later than five (5) Business Days following such Final Determination of such Loss and Buyer’s liability therefor.
(c) A “Final Determination” shall exist when (i) the parties to the dispute have reached an agreement in writing, (ii) the Indemnifying Party fails to object to a claim by an Indemnified Party within the time period and in accordance with any objection procedure specified in this Agreement, (iii) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment or (iv) an arbitration or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit thereto.
Section 7.7 Adjustment to Losses. In calculating the amount of any Loss, any amounts actually received by the Indemnified Party under any insurance policy or pursuant to any indemnification right or reimbursement arrangement with, by or against any other Person (collectively, “Alternative Arrangements”), in each case relating to a Third-Party Claim or other indemnification claim hereunder, net of any actual costs and expenses incurred in connection with securing or obtaining such proceeds (including any increase in insurance premiums), shall be deducted. Each Indemnified Party shall seek recovery under Alternative Arrangements covering any Losses as provided in this Section 7.7. The Indemnified Party shall file all claims under applicable insurance policies (other than self-insurance policies), indemnification right or reimbursement arrangement; provided that, other than using commercially reasonable efforts to file a claim for covered Losses and to use commercially reasonable efforts to follow-up on such initial filing, the Indemnified Party shall not be required to pursue collection or recovery of any amounts from an insurer or other Person whether by litigation or otherwise. In the event of any breach giving rise to an indemnification obligation under Section 7.3, Buyer shall take, and cause its Affiliates (including, without limitation and from and after the Closing, Company) to take reasonable measures to mitigate any Losses arising from such breach.
59
Section 7.8 Exclusive Remedy. Buyer and Shareholders acknowledge and agree that, from and after the Closing, the sole and exclusive remedy of the Indemnified Parties with respect to any and all Losses or claims relating to a breach of representation, warranty or covenant under this Agreement, regardless of the legal theory under which such liability or obligation may be sought to be imposed, whether sounding in contract or tort, or whether at law or in equity, or otherwise, shall be indemnification pursuant to the provisions set forth in this Article VII and in Section 6.7 and the Indemnified Parties shall have no other remedy or recourse with respect to any of the foregoing other than (a) injunctive or other equitable relief to specifically enforce the provisions of this Agreement; and (b) any action based on Fraud.
Section 7.9 Release of Indemnification Escrow. On the first Business Day following the date that is eighteen (18) months after the Closing Date, Buyer and Shareholder Representative shall submit joint written instructions to the Escrow Agent instructing the Escrow Agent to distribute the balance of the Indemnification Escrow Amount to Shareholder Representative, provided, however, that if any claim pursuant to this Article VII has been properly asserted by any Buyer Indemnified Party in accordance with this Agreement on or prior to the eighteen (18) month anniversary of the Closing Date and remains unresolved as of such date (any such claim, a “Pending Claim”), then (a) the amount released to Shareholder Representative on such date shall equal the Indemnification Escrow Amount then remaining in escrow minus the aggregate amount reserved in respect of all Pending Claims; and (b) any Indemnification Escrow Amount retained in escrow in respect of any Pending Claim shall be released to Shareholder Representative or Buyer promptly following the final resolution of such Pending Claim in accordance with this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Entire Agreement. This Agreement (including all Exhibits, Schedules or other attachments hereto) and the Ancillary Agreements constitute the complete and exclusive statement of the terms of the agreement among the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings, promises, and arrangements, oral or written, among the parties with respect to the subject matter hereof and thereof.
Section 8.2 Amendment. This Agreement may be amended or modified only by an instrument in writing signed by each of Company, Buyer and Shareholder Representative (acting on behalf of all Shareholders).
Section 8.3 Third Parties. Except as otherwise expressly provided under this Agreement, nothing in this Agreement, express or implied, is intended to or shall be construed to confer upon or give any Person other than the parties and their respective successors and permitted assigns, any legal or equitable right, remedy or claim under or with respect to this Agreement; provided, however, that the Senior Lender is an express third-party beneficiary of Section 6.10 and shall be entitled to enforce Section 6.10 directly and the Seller Related Parties (as defined in the R&W Insurance Policy) shall be entitled to enforce Section 6.9.
Section 8.4 Expenses. Except as otherwise expressly provided in this Agreement, each party shall pay its own fees and expenses (including the fees of any attorneys, accountants, investment bankers or others engaged by such party) incurred in connection with the preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated.
60
Section 8.5 Notices. All notices, consents, waivers and other communications required or permitted to be given hereunder shall be in writing and may be delivered by hand, by electronic transmission in .pdf format or similar format, by nationally recognized private courier, or by United States mail. Notices delivered by mail shall be deemed given on the third (3rd) Business Day after being deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested. Notices delivered by hand shall be deemed delivered when actually delivered. Notices given by nationally recognized private courier shall be deemed delivered on the date delivery is promised by the courier. Notices given by electronic transmission shall be deemed given on the date of transmission if transmitted during normal business hours of the recipient, and on the first (1st) Business Day following transmission if transmitted after normal business hours of the recipient. All notices shall be addressed as follows:
If to any Shareholder:
c/o Summit Equity Group, L.L.C., Shareholder Representative
801 Grand Avenue, Suite 3560
Des Moines, Iowa 50309
Attn: Dennis Bailey
Email: [redacted]
with a mandatory copy to:
Belin McCormick, P.C.
606 Walnut Street, Suite 2000
Des Moines, IA 50309
Attn: Garth D. Adams
Email: [redacted]
If to Buyer:
Broadwind, Inc.
3240 South Central Avenue
Cicero, Illinois 60804
Attn: Eric Blashford, President & CEO
Email: [redacted]
with a mandatory copy to:
Bodman PLC
1901 St. Antoine Street
6th Floor at Ford Field
Detroit, MI 48226
Attn: Joseph J. Shannon, Kenneth R. Powell
Email: [redacted]
61
and/or to such other respective addresses and/or addressees as may be designated by notice given in accordance with the provisions of this Section 8.5.
Section 8.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns; provided, however, that no party shall assign its rights or delegate its obligations under this Agreement without the express prior written consent of each other party, including Shareholder Representative (acting on behalf of all Shareholders) except that (a) Buyer may transfer or assign any or all of its rights and obligations hereunder to one or more Affiliates of Buyer without the consent of any other party, provided that no such transfer or assignment shall relieve Buyer of its obligations hereunder, and (b) Buyer may grant, mortgage, pledge, assign and hypothecate to its secured lender(s), a continuing security interest in and lien upon all of Buyer’s right, title and interest in, to and under this Agreement. Any purported assignment of rights or delegation of obligations in violation of this Section, whether voluntary or involuntary, by merger, consolidation, dissolution, operation of law, or otherwise, is void.
Section 8.7 Construction. Captions, titles and headings to articles, sections or paragraphs of this Agreement are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement. All references in this Agreement to “Article” or “Section” refer to the corresponding articles or sections of this Agreement unless otherwise stated and, unless the context otherwise specifically requires, refer to all subsections or subparagraphs thereof. All references in this Agreement to “Schedule” or “Exhibit” refer to the corresponding Schedules or Exhibits to this Agreement unless otherwise stated. All references in this Agreement to a “party” or “parties” refer to the parties signing this Agreement unless the context otherwise specifically requires. All defined terms and phrases used in this Agreement are equally applicable to both the singular and plural forms of such terms. Nouns and pronouns will be deemed to refer to the masculine, feminine or neuter, singular and plural, as the identity of the Person or Persons may in the context require. All references in this Agreement to any Person shall include such Person’s predecessors in interest, whether by conversion, merger or otherwise. As used in this Agreement, the words “including” and “include” are intended by the parties to be by way of example rather than limitation and the word “or” is not intended to be exclusive unless expressly indicated otherwise. If the last day for the giving of any notice or the performance of any act required or permitted under this Agreement is a day that is not a Business Day, then the time for the giving of such notice or the performance of such action shall be extended to the next succeeding Business Day. As used in this Agreement, the term “made available” or “delivered” with respect to any document or information shall mean that the document or information referred to has been physically or electronically delivered to the applicable party, but in the case of “made available” or “delivered” to Buyer or similar phrases with respect to the representations and warranties herein, the term “made available” or “delivered” with respect to any document or information shall mean that at least two (2) Business Days prior to the date hereof and through the date hereof the document or information referred to has been posted, retained, viewable and thereby made available to Buyer and its applicable representatives through the Box-hosted “Project Spark” virtual data exchange established by or on behalf of Company.
Section 8.8 Cumulative Remedies. Except as otherwise expressly provided in this Agreement, the rights and remedies of the parties under this Agreement are cumulative and not alternative and are in addition to any other right or remedy set forth in any other agreement between the parties, or that may now or subsequently exist at law or in equity, by statute or otherwise.
62
Section 8.9 Waiver. Neither any failure nor any delay by any party in exercising any right, power or privilege under this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable Law, (a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by each party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.
Section 8.10 Severability. In the event that a court or arbitral body of competent jurisdiction holds any provision of this Agreement invalid, illegal or unenforceable, such decision shall not affect the validity or enforceability of any of the other provisions of this Agreement, which other provisions shall remain in full force and effect, and the application of such invalid, illegal or unenforceable provision to Persons or circumstances other than those as to which it is held invalid, illegal or unenforceable shall be valid and be enforced to the fullest extent permitted by Law. To the extent permitted by applicable Law, each party waives any provision of Law that renders any provision of this Agreement invalid, illegal or unenforceable in any respect.
Section 8.11 Representation of Parties. The parties acknowledge that they have been represented by competent counsel of their own choice and that this Agreement has been the product of negotiation between them. Accordingly, the parties agree that in the event of any ambiguity in any provision of this Agreement, this Agreement shall not be construed against a party regardless of which party was responsible for the drafting thereof.
Section 8.12 Time of the Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.
Section 8.13 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to injunctive relief to prevent breaches of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. In particular, the parties acknowledge that Company and its business are unique and recognize and affirm that in the event any party breaches this Agreement, money damages would be inadequate and the other parties would have no adequate remedy at law, so that the non-breaching parties shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and the obligations of the other parties hereunder not only by action for damages, but also by action for specific performance, injunctive, and/or other equitable relief.
63
Section 8.14 Execution of Agreement. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. This Agreement shall become effective when one or more counterparts have been executed by each of the parties and delivered to the other party. The exchange of copies of this Agreement and of signature pages by electronic transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or by other electronic means shall be deemed to be their original signatures for all purposes.
Section 8.15 Governing Law; Jurisdiction; Venue.
(a) This Agreement and the Ancillary Agreements shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the choice of law principles thereof.
(b) Each Shareholder, Company and Buyer irrevocably submits to the jurisdiction of the Courts of the State of Illinois and the United States District Court for the Northern District of Illinois in any Action arising out of or relating to this Agreement, and hereby irrevocably agrees that all claims in respect of such Action may be heard and determined in such state or federal court. Each Shareholder, Company and Buyer hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such Action. The parties further agree, to the fullest extent permitted by Law, that a final and unappealable judgment against any of them in any Action contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the fact and amount of such judgment.
(c) To the extent that any Shareholder, Company or Buyer has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, each Shareholder, Company and Buyer hereby irrevocably waives such immunity in respect of its obligations under this Agreement.
(d) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY AGREEMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
64
Section 8.16 Shareholder Representative.
(a) By the execution of this Agreement, each Shareholder hereby irrevocably constitutes and appoints Shareholder Representative as Shareholder Representative, agent, proxy, and attorney‑in‑fact for each of the Shareholder Group Members for all purposes authorized under this Agreement, including the full power and authority on behalf of the Shareholder Group Members (i) to disburse any funds received hereunder to the applicable Shareholder Group Members; (ii) to endorse and deliver any certificates or instruments representing the Shares and execute such further instruments of assignment as Buyer shall reasonably request; (iii) to execute and deliver on behalf of such Shareholder Group Member any amendment or waiver hereto; (iv) (A) to dispute or refrain from disputing, or to deliver instructions, on behalf of such Shareholder Group Member relative to any amounts to be received by such Shareholder Group Member under this Agreement or any other agreement contemplated hereby, any claim made by Buyer under this Agreement or any other agreement contemplated hereby, (B) to negotiate and compromise, on behalf of any Shareholder Group Member, any dispute that may arise under, and exercise or refrain from exercising any remedies available under, this Agreement or any other agreement contemplated hereby, and (C) to execute, on behalf of each Shareholder Group Member, any settlement agreement, release or other document with respect to such dispute or remedy; (v) to engage attorneys, accountants, agents or consultants on behalf of the Shareholder Group Members in connection with this Agreement or any other agreement contemplated hereby and pay any fees related thereto; (vi) to take all other actions to be taken by or on behalf of such Shareholder Group Member in connection herewith; and (vii) to do each and every act and exercise any and all rights which such Shareholder Group Member individually or collectively with the other Shareholder Group Members are permitted or required to do or exercise under this Agreement or any other document contemplated hereby. Each of the Shareholder Group Members agrees that such agency and proxy are coupled with an interest, are therefore irrevocable without the consent of Shareholder Representative and shall survive the death, incapacity, bankruptcy, dissolution or liquidation of any such Shareholder Group Member. If any Shareholder Group Member dies or becomes incapacitated, disabled or incompetent (such deceased, incapacitated, disabled or incompetent Shareholder Group Member being a “Former Shareholder”) and, as a result, the agency and power of attorney conferred by this Section 8.16 is revoked by operation of law, it shall not be a breach by such Former Shareholder under this Agreement if the heirs, beneficiaries, estate, administrator, executor, guardian, conservator or other legal representative of such Former Shareholder (each a “Successor Shareholder”) confirms the appointment of Shareholder Representative as agent and attorney-in-fact for such Successor Shareholder. All decisions and actions by Shareholder Representative (to the extent authorized by this Agreement) shall be binding upon all of the Shareholder Group Members, and no Shareholder Group Member shall have the right to object, dissent, protest or otherwise contest the same.
(b) Each Shareholder Group Member agrees that Buyer and Company shall be entitled to rely on any action taken by Shareholder Representative, on behalf of such Shareholder Group Member, pursuant to Section 8.16(a) (an “Authorized Action”), and that each Authorized Action shall be binding on each such Shareholder Group Member as fully as if such Shareholder Group Member had taken such Authorized Action.
65
(c) Shareholder Representative shall not have by reason of this Agreement a fiduciary relationship in respect of any Shareholder Group Member, except in respect of amounts received on behalf of such Shareholder Group Member. Shareholder Representative shall not be liable to any Shareholder Group Member for any action taken or omitted by it or any agent employed by it hereunder or under any other document entered into in connection herewith, except that Shareholder Representative shall not be relieved of any liability imposed by law for willful misconduct. Shareholder Representative shall not be liable to the Shareholder Group Members for any apportionment or distribution of payments made by Shareholder Representative in good faith, and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Shareholder Group Member to whom payment was due, but not made, shall be to recover from the other Shareholder Group Members any payment in excess of the amount to which they are determined to have been entitled. Any act taken or omitted to be taken pursuant to the advice of counsel will be conclusive evidence of such good faith. Shareholder Representative shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement. Neither Shareholder Representative nor any agent employed by it shall incur any liability to any Shareholder Group Member by virtue of the failure or refusal of Shareholder Representative for any reason to consummate the transactions contemplated hereby or relating to the performance of its other duties hereunder, except for actions or omissions constituting Fraud. Shareholder Representative will be indemnified and held harmless by the Shareholders jointly and severally for all Losses, except to the extent that it is finally determined by a court of competent jurisdiction that the actions or omissions of Shareholder Representative constituted Fraud. The limitation of liability provisions of this Section 8.16(c) will survive the termination of this Agreement and the resignation of Shareholder Representative. Shareholder Representative shall not be required to make any inquiry of any Shareholder Group Member concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement.
(d) Shareholder Representative may resign at any time upon notice to Buyer. In the event Shareholder Representative resigns, declines to serve, or becomes incapacitated, then the Shareholders shall, by written consent of Shareholders whose Pro Rata Shares total more than Fifty Percent (50%), appoint a replacement to serve as Shareholder Representative and give written notice of such appointment to Buyer.
Section 8.17 Attorney Client Privilege Matters. Each of the parties hereto acknowledges and agrees, on its own behalf and on behalf of its directors, members, shareholders, partners, officers, employees and Affiliates that:
(a) Belin McCormick, P.C., an Iowa professional corporation (“Belin”) has acted as counsel to (i) the Shareholder Group and (ii) Company, in connection with the negotiation, preparation, execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby.
(b) Buyer agrees, and shall cause Company and their respective Affiliates to agree, that, following the Closing, such representation and any prior representation of Company by Belin shall not preclude Belin (or any successor thereto) from serving as counsel to the Shareholder Group (either as a whole or to various Persons among the Shareholder Group), in connection with any litigation, claim or obligation arising out of or relating to this Agreement, the Ancillary Agreements, the transactions contemplated hereby and thereby, or any matter related thereto. Buyer shall not, and shall cause Company and their respective Affiliates not to, seek to have Belin disqualified from any such representation of all or any subset of the Shareholder Group (excluding, for the avoidance of doubt, Company) based on Belin’s prior representation of Company.
66
(c) Each of the parties hereto hereby consents to Belin’s representation of the Shareholder Group as described above and waives any conflict of interest arising from Belin’s prior representation of Company, and each of the parties hereto shall cause its Affiliates to consent to waive any conflict of interest arising from such representation. Each of the parties acknowledges that such consent and waiver is voluntary, that it has been carefully considered, and that the parties have consulted with counsel or have been advised they should do so in connection herewith.
(d) All communications between the Shareholder Group or Company, on the one hand, and Belin, on the other hand, relating to the negotiation, preparation, execution and delivery of this Agreement, the Ancillary Agreements, and the transactions contemplated hereby and thereby (such communications, the “Privileged Communications”) shall be deemed to be attorney-client privileged and the expectation of client confidence relating thereto shall belong solely to the Shareholder Group and shall not pass to or be claimed by Buyer or Company so long as such communications would be subject to a privilege or protection if they were being requested in a proceeding by an unrelated third party. Accordingly, Belin and the Shareholder Group are not obligated to grant Buyer or Company access to any Privileged Communications. Without limiting the generality of the foregoing, from and after the Closing, the Shareholder Group (and not Buyer or Company) shall be the sole holders of the attorney-client privilege with respect to the Privileged Communications, and neither Buyer nor Company nor their respective Affiliates shall be a holder thereof. Belin shall have no duty whatsoever to reveal or disclose any Privileged Communications to Buyer or Company by reason of any attorney-client relationship between Belin and Company or otherwise.
(e) This Section 8.17 is intended for the benefit of the Shareholder Group and Belin and may be enforced by the Shareholder Group (or any Person therein) and Belin.
Section 8.18 Financing Sources. Notwithstanding anything herein to the contrary, each Shareholder (on behalf of itself and, as applicable, each of its shareholders, partners, members, Affiliates, directors, officers, employees, agents and representatives) hereby waives any rights or claims against any Financing Source in connection with this Agreement, whether at law or equity, in contract, in tort or otherwise, and each Shareholder (on behalf of itself and, as applicable, each of its shareholders, partners, members, Affiliates, directors, officers, employees, agents and representatives) agrees not to commence (and if commenced agrees to dismiss or otherwise terminate) any action or proceeding against any Financing Source in connection with this Agreement or any transaction contemplated hereby or thereby. In furtherance and not in limitation of the foregoing waiver, it is agreed that no Financing Source shall have any liability for any claims, losses, settlements, liabilities, damages, costs, expenses, fines or penalties to any Shareholder (or, as applicable, any of its shareholders, partners, members, Affiliates, directors, officers, employees, agents and representatives) in connection with this Agreement or any transaction contemplated hereby or thereby. Nothing in this Section 8.18 shall in any way expand the circumstances in which the Buyer may be liable under this Agreement or as a result of the transactions contemplated hereby. No amendment or waiver of this Section 8.18, Section 8.6 (Successors and Assigns), or Section 8.15 (Governing Law; Jurisdiction; Venue), or Section 6.10 (Subordination of Contingent Purchase Price) that is materially adverse to the Financing Sources in their capacity as such shall be effective without the prior written consent of the Financing Sources. The Financing Sources are express and intended third party beneficiaries of this Section 8.18, Section 8.6 and Section 8.15.
67
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| COMPANY |
|
|
|
|
|
|
| MCM ACQUISITION COMPANY Inc. |
||
|
|
|
|
|
|
|
|
| By: | /s/ Dennis Bailey |
|
|
| Name: Dennis Bailey |
|
|
| Title: Vice President |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDER REPRESENTATIVE |
||
|
|
|
|
| SUMMIT EQUITY GROUP, L.L.C. |
|
|
|
|
|
|
|
|
|
|
| By: | /s/ Dennis Bailey |
|
|
| Name: Dennis Bailey |
|
|
| Title: Manager |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
| SUMMIT EQUITY GROUP, L.L.C. |
|
|
| a Iowa limited liability company |
|
|
|
|
|
|
|
|
|
|
| By: | /s/ Dennis Bailey |
|
| Name: Dennis Bailey |
|
|
| Title: Manager |
|
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| BUYER |
|
|
|
|
|
|
| Broadwind, Inc., a Delaware corporation |
||
|
|
|
|
|
|
|
|
| By: | /s/ Eric B. Blashford |
|
|
| Name: Eric B. Blashford |
|
|
| Title: President and Chief Executive Officer |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
| CARLOS AND TIFFANY LAVASTIDA |
|
| REVOCABLE TRUST |
|
|
|
|
|
|
|
| By: | /s/ Tiffany Lavastida |
| Name: Tiffany Lavastida |
|
| Title: Co-Trustee |
|
|
|
|
|
|
|
| By: | /s/ Carlos Lavastida |
| Name: Carlos Lavastida |
|
| Title: Co-Trustee |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
| ESTES LIVING TRUST |
|
|
|
|
|
|
|
| By: | /s/ Richard K. Flaugh |
| Name: Richard K. Flaugh |
|
| Title: Trustee |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
| GLENN H. DESTIGTER REVOCABLE TRUST |
|
|
|
|
|
|
|
| By: | /s/ Glenn H. DeStigter |
| Name: Glenn H. DeStigter |
|
| Title: Trustee |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
| GREGORY T. LAMAIR TRUST |
|
|
|
|
|
|
|
| By: | /s/ Gregory LaMair |
| Name: Gregory T. LaMair |
|
| Title: Trustee |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ James Wesley Jones II |
| Name: James Wesley Jones II |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ Jonathan Houghton |
| Name: Jonathan Houghton |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ Barbara Houghton |
| Name: Barbara Houghton |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ Keegan Jase Jones |
| Name: Keegan Jase Jones |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
| NUSS REVOCABLE TRUST DTD 8-6-14 |
|
|
|
|
|
|
|
| By: | /s/ Mark D. Nuss |
| Name: Mark D. Nuss |
|
| Title: Trustee |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ Paul Derek Filasek |
| Name: Paul Derek Filasek |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
| R&S LEGACY VENTURES, LLC a |
|
| Florida limited liability company |
|
|
|
|
|
|
|
| By: | /s/ Richard G. Schultze |
| Name: Richard G. Schultze |
|
| Title: President |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ Randall Forburger |
| Name: Randall Forburger |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ Bonnie Forburger |
| Name: Bonnie Forburger |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
|
|
|
| By: | /s/ Gregory Wesley Rubio |
| Name: Gregory Wesley Rubio |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| SHAREHOLDERS |
|
|
|
|
| UMB BANK NA, CUSTODIAN, FBO THE |
|
| MARK D. NUSS SELF DIRECTED |
|
| TRADITIONAL IRA [redacted] |
|
|
|
|
|
|
|
| By: | /s/ Seth George |
| Name: Seth George |
|
| Title: Vice President |
|
IN WITNESS WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each of the parties as of the day first above written.
| BUYER |
|
|
|
|
| Broadwind, Inc., a Delaware corporation | |
|
|
|
|
|
|
| By: | /s/ Eric B. Blashford |
| Name: Eric B. Blashford |
|
| Title: President and Chief Executive Officer |
|
EXHIBIT A
Accounting Principles; Net Working Capital
[OMITTED]
EXHIBIT B
Form of Escrow Agreement
[OMITTED]
EXHIBIT C
Contingent Purchase Price
Upon the terms and subject to the conditions set forth elsewhere in that certain Stock Purchase Agreement, dated as of October 30, 2026 (the “Agreement”), of which this Exhibit C is a part, and in partial consideration for the sale of the Shares purchased pursuant to the Agreement, Buyer shall pay, or cause to be paid, to the extent earned, the Contingent Purchase Price. The Contingent Purchase Price shall be payable pursuant to each of the First Contingent Purchase Price Payment (as defined below) and Second Contingent Purchase Price Payment (as defined below) to the Shareholder Account in accordance with Section 2.8 of the Agreement. The First Contingent Purchase Price Payment and Second Contingent Purchase Price Payment are sometimes referred to individually in the Agreement or this Exhibit C as a “Contingent Purchase Price Payment” or collectively as the “Contingent Purchase Price Payments.” The Contingent Purchase Price Payments shall be funded and paid as provided in this Exhibit C, as follows:
1. | Definitions. All capitalized terms used in this Exhibit C and not otherwise defined in this Exhibit C shall have the meaning specified elsewhere in the Agreement. For purposes of this Exhibit C, each of the following terms shall have the following meanings: |
| (a) | “Acceleration Event” has the meaning set forth in Section 6 of this Exhibit C. |
| (b) | “Change of Control” means any transaction or series of related transactions resulting in (i) the sale, transfer, or other disposition of all or substantially all of the equity interests or assets of Company or Buyer to any Person other than an Affiliate of Buyer or (ii) the merger or consolidation of Company or Buyer with any Person other than an Affiliate of Buyer. A Change of Control of Buyer with respect to the acquisition of Buyer’s equity will not be deemed to have occurred under clause (i) unless a Person or group (as defined in Section 13(d)(3) of the Exchange Act) acquires a majority of Buyer’s issued and outstanding shares. |
| (c) | “Contingent Purchase Price Period” means each of the First Contingent Purchase Price Period and the Second Contingent Purchase Price Period. |
| (d) | “Cost of Goods Sold” means direct material costs, release of capitalized labor and overhead from inventory as goods are sold, production labor costs, subcontracted labor, galvanizing processing costs, outside processing costs, and manufacturing overhead spend including depreciation recorded in natural spend accounts within operating expenses that are reclassified to cost of goods sold (including equipment rent, tools and equipment, repairs and maintenance, freight, shop supplies and indirect overhead costs), in accordance with the Earnout Accounting Methodology. Cost of Goods Sold shall exclude any corporate, shared-service, or administrative costs charged by Buyer or its Affiliates that are in excess of fees for similar services negotiated on arm’s length terms; provided that any increase to such costs as a result of Company transitioning to Buyer’s health and welfare benefits and commercial insurance policies will be deemed to be on arm’s length terms. The Parties agree to the following practices for the calculation of Cost of Goods Sold: |
| i. | When calculating depreciation, Buyer will (A) apply the straight-line depreciation method for any capital expenditures and (B) for all assets in place, utilize a useful life consistent with Company’s historical practices, including a fifteen-year useful life for lasers, in each case to the extent permitted by GAAP. |
| ii. | Cost of Goods Sold shall also be adjusted to exclude the following, in each case only on a post-Closing basis and only to the extent that such expenses would otherwise adjust or impact Cost of Goods Sold: |
| 1. | To the extent Company receives any actual reimbursement or can accrue for any reimbursement related to an expense in Cost of Goods Sold, such actual or accrued reimbursement shall offset Cost of Goods Sold if allowed under GAAP. |
| 2. | Any integration such as costs for data migration, hardware, training time and cutover downtime or idle capacity, and costs or expenses to implement or modify existing manufacturing system or related systems, an integration manager, manufacturing system implementation manager, consultant or other personnel engaged to oversee or implement post-Closing integration activities or systems implementations or enhancements. |
| 3. | Any expenses related to moving to Buyer’s wage scales, shift premiums or bonus plans, any one-time PTO accrual true-ups when the PTO policy changes, any richer 401(k) match, stock-based compensation or transaction bonuses, provided that (A) increased expenses related to employment agreements entered into at Closing will not be excluded from Costs of Goods Sold and (B) transaction bonuses paid in connection with Closing will only be excluded from Cost of Goods Sold to the extent that such bonuses are taken into account in the Final Purchase Price. For the avoidance of doubt, any expenses related to increases in employee compensation that are not a result of moving to Buyer’s policies, including without limitation any increases to compensation due to market conditions or for retention purposes, will not be excluded from Cost of Goods Sold. |
| 4. | Any expenses related to inventory policy changes, including, without limitation, new excess and obsolete reserve methods, standard costing and capitalizing variances, lower-of-cost-or-market (LCM/NRV) write-downs, and count or shrink true-ups, except to the extent that such adjustments are required by GAAP. |
| 5. | Any expenses related to raising the capitalization threshold, and depreciation on capex Buyer requires that doesn't generate revenue (safety, IT, office), except to the extent that such adjustments are required by GAAP. |
| 6. | Any expenses from moving production or equipment, and abnormal idle-capacity charges caused by Buyer decisions. |
| 7. | Any expenses arising out of required use of Buyer supplier contracts, markups on intercompany purchases, steel hedging losses allocated from Buyer, and freight routed through Buyer carriers, unless approved by the Seller Representative. |
| 8. | Any general and administrative costs, including but not limited to expenses related to preparing or disputing the earnout, transaction costs, severance costs, any costs related to public-company status such as SOX 404 work, Buyer’s auditor fees, internal audit, and upgrades to Buyer’s quality and safety standards or new certifications and quality & safety standards/certifications. |
| iii. | Cost of Goods Sold shall be further adjusted to exclude any benefits, including any cost savings, resulting from any expenses adjusted out of Cost of Goods Sold, or contemplated to be adjusted out of Cost of Goods Sold, under Section 1(d)(ii). |
| iv. | The following line-item accounts are currently utilized by Company to calculate Cost of Goods Sold. For the avoidance of doubt, Buyer may use additional accounts to calculate Cost of Goods Sold as required by GAAP, without reclassifying items from selling, general and administrative expense. By way of example only, to the extent there are warranty claims, workers compensation claims or customer disputes, additional accounts may be added and utilized to calculate Cost of Goods Sold. Buyer agrees to allocate overhead consistent with the percentages set forth below, which represent the historical practices of Company, provided that Buyer will deviate from such percentages if required by GAAP. |
|
|
| (e) | “Earnout Accounting Methodology” means GAAP, applied consistently with the Company's historical policies, classifications and estimates, and in accordance with the definitions set forth in this Exhibit C. No effect shall be given in calculating Net Sales, Cost of Goods Sold, Gross Profit or any Contingent Purchase Price Payment to any purchase accounting, acquisition accounting, fair value or similar adjustment arising from or relating to the transactions contemplated by the Agreement. Without limiting the foregoing, the calculation shall exclude any increase or decrease in revenue, Cost of Goods Sold, depreciation, amortization or other income or expense resulting from any write-up, write-down or revaluation of inventory, property, equipment, intangible assets, liabilities or any other assets or obligations. Each such amount shall be calculated as if such adjustment had not been made. |
| (f) | “First Contingent Purchase Price Period” means the twelve (12) month period beginning January 1, 2026, and ending on December 31, 2026. |
| (g) | “Gross Profit” means Net Sales of Company minus Cost of Goods Sold. |
| (h) | “Margin” means (i)(A) the Daily Simple SOFR plus the Applicable Margin for a Revolving Loan (each as defined in the Credit Agreement) under Buyer’s Credit Agreement calculated the day after the Closing Date, less (B) the interest rate payable on the Earnout Escrow Account as of the day after the Closing Date. |
| (i) | “Margin Amount” means (i) the Margin, multiplied by (ii) $3,500,000, multiplied by (iii) 0.675. |
| (j) | “Maximum Contingent Purchase Price Amount” means Seven Million U.S. Dollars ($7,000,000), less the Margin Amount, plus any interest payable on an unpaid amount of Contingent Purchase Price. |
| (k) | “Net Sales” means gross sales minus discounts, in accordance with the Earnout Accounting Methodology. The following line-item accounts are currently utilized by Company to calculate Net Sales. For the avoidance of doubt, Buyer may add or remove accounts to calculate Net Sales as required by GAAP. |
| (l) | “Second Contingent Purchase Price Period” means the twelve (12) month period beginning January 1, 2027, and ending on December 31, 2027. |
2. | Calculating the Contingent Purchase Price Payments. The Contingent Purchase Price shall be payable as the sum of the First Contingent Purchase Price Payment plus the Second Contingent Purchase Price Payment, determined as follows: |
| (a) | First Contingent Purchase Price Payment. For the First Contingent Purchase Price Period, Shareholders can earn a Contingent Purchase Price Payment (the “First Contingent Purchase Price Payment”) up to the Maximum Contingent Purchase Price Amount based on the following calculation: |
| (i) | If Gross Profit is less than or equal to $4,145,000, the Contingent Purchase Price Payment will be $0. |
| (ii) | If Gross Profit is greater than $4,145,000 but not more than $5,221,000, the Contingent Purchase Price Payment will equal (A) $5,000,000, multiplied by (B)(I) Gross Profit, less $4,145,000, divided by (II) $1,076,000. |
| (iii) | If Gross Profit is greater than $5,221,000 but not more than $6,021,000, the Contingent Purchase Price Payment will equal (A) $5,000,000, plus (B)(I) $2,000,000, multiplied by (II)(x) Gross Profit, less $5,221,000, divided by (y) $800,000. |
| (iv) | If Gross Profit is greater than $6,021,000, the Contingent Purchase Price Payment will be the Maximum Contingent Purchase Price Amount. |
The foregoing calculation applies to both the First Contingent Purchase Price Payment and the Second Contingent Purchase Price Payment, in each case based on Gross Profit for the applicable Contingent Purchase Price Period.
By way of example only, if, in the First Contingent Purchase Price Period, Company generates $4,600,000 in Gross Profit, Buyer shall pay, or cause to be paid, $2,114,312 to the Shareholder Account.
| (b) | Second Contingent Purchase Price Payment. Assuming Shareholders have not already received the Maximum Contingent Purchase Price Amount per the terms of the First Contingent Purchase Price Payment in Section 2(a) of this Exhibit C, for the Second Contingent Purchase Price Period, Shareholders can earn a Contingent Purchase Price Payment (the “Second Contingent Purchase Price Payment”) up to an amount equal to the Maximum Contingent Purchase Price Amount calculated using the Section 2(a) calculation schedule based on Gross Profit for the Second Contingent Purchase Price Period, plus (i) any interest payable on any unpaid amount of Contingent Purchase Price minus (ii) the amount of the First Contingent Purchase Price Payment and minus (iii) the Margin Amount, provided that in no event shall the sum of the First Contingent Purchase Price Payment and the Second Contingent Purchase Price Payment exceed the Maximum Contingent Purchase Price Amount. |
By way of example only, assuming Company generates Gross Profit of $4,400,000 in the First Contingent Purchase Price Period, Company generates Gross Profit of $4,800,000 in the Second Contingent Purchase Price Period, the Margin Amount is equal to $100,000, and the interest payable on any unpaid amount of Contingent Purchase Price is equal to $50,000, the First Contingent Purchase Price Payment will be equal to $1,184,944, and the Second Contingent Purchase Price Payment will be equal to $1,808,736 ($3,043,680 less the First Contingent Purchase Price Payment of $1,184,944, less the Margin Amount of $100,000 plus the interest payable on any unpaid amount of Contingent Purchase Price of $50,000).
By way of example only, assuming Company generates Gross Profit of $4,400,000 in the First Contingent Purchase Price Period, Company generates Gross Profit of $5,800,000 in the Second Contingent Purchase Price Period and the Margin Amount is equal to $100,000, the First Contingent Purchase Price Payment will be equal to $1,184,944, and the Second Contingent Purchase Price Payment will be equal to $5,162,556 ($6,447,500 less the First Contingent Purchase Price Payment of $1,184,944 and less the Margin Amount of $100,000).
3. | Calculation and Payment of the Contingent Purchase Price Payments. |
| (a) | Within ninety (90) days after the end of the applicable Contingent Purchase Price Period, Buyer shall prepare and deliver to Shareholder Representative its good faith calculation of (i) Net Sales, Cost of Goods Sold, and Gross Profit, and (ii) the earned portion of the applicable Contingent Purchase Price Payment for such period (a “Contingent Purchase Price Statement”). Buyer shall deliver, together with each Contingent Purchase Price Statement, reasonable supporting documentation for the calculations set forth therein, including, without limitation, (A) the Company’s general ledger detail for the applicable period, (B) a line-item build-up of Net Sales and Cost of Goods Sold, (C) a schedule of any allocation, adjustment, reclassification, or elimination applied in the calculation, together with an explanation of the basis therefor, and (D) a reconciliation of Gross Profit to the Company’s financial statements for the applicable period (collectively, the “Supporting Documentation”). |
| (b) | After receipt of a Contingent Purchase Price Statement and the Supporting Documentation, Shareholder Representative shall have forty-five (45) days to review the Contingent Purchase Price Statement. Shareholder Representative and Shareholder Representative’s authorized representatives shall have reasonable access during normal business hours to all relevant books and records of Company to the extent required to complete their review of the Contingent Purchase Price Statement. Unless Shareholder Representative delivers written notice to Buyer on or prior to the forty-fifth (45th) day after Shareholder Representative’s receipt of the Contingent Purchase Price Statement and the Supporting Documentation of Shareholder Representative’s objection to the calculation of the applicable Contingent Purchase Price Payment, Shareholder Representative shall be deemed to have accepted and agreed to the calculation of the applicable Contingent Purchase Price Payment. Shareholder Representative’s objections shall be limited to: (i) Buyer’s determination of Net Sales, Cost of Goods Sold, or Gross Profit, (ii) whether the applicable amounts set forth on the Contingent Purchase Price Statement were prepared in a manner consistent with the provisions of the Agreement, including this Exhibit C and the Earnout Accounting Methodology, or (iii) whether there were mathematical errors in the computation of any amount set forth in the Contingent Purchase Price Statement, as applicable. |
| (c) | If Shareholder Representative timely notifies Buyer of its objection to the calculation of the applicable Contingent Purchase Price Payment, Buyer and Shareholder Representative shall, within thirty (30) days (or such longer period as the parties may agree in writing) following such notice, attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive. If Buyer and Shareholder Representative cannot reasonably resolve all objections by Shareholder Representative, then the disputed items shall be submitted to the Neutral Auditors for resolution consistent with the principles set forth in Section 2.6(e) of the Agreement, mutatis mutandis. |
| (d) | The payment of any Contingent Purchase Price Payment shall be due not later than five (5) Business Days following final determination of Gross Profit and the corresponding Contingent Purchase Price Payment for the applicable Contingent Purchase Price Period. The Contingent Purchase Price Payments shall be funded first from the Earnout Escrow Funds and then by Buyer, in accordance with Section 4. |
| (e) | Buyer may set off against any Contingent Purchase Price Payment on account of a claim that has been finally determined by a final, non-appealable judgment of a court of competent jurisdiction, resolved by a final and binding arbitral award, or resolved by written agreement of Buyer and Shareholder Representative. |
| 4. | Earnout Escrow Account Contributions and Release. |
| (a) | Delivery of Quarterly Gross Profit Statements. On or before (i) the date that the Buyer files its Form 10-Q for the second and third quarters of the Second Contingent Purchase Price Period and (ii) the date that the Buyer files its Form 10-K for the fourth fiscal quarter of the Second Contingent Purchase Price Period (each such quarter, a “Measurement Quarter”), Buyer shall cause Company to prepare and deliver to Shareholder Representative (i) a written statement (each, a “Quarterly Gross Profit Statement”) setting forth in reasonable detail (A) Gross Profit for such Measurement Quarter and (B) the resulting escrow contribution calculated in accordance with Section 4(c) (the “Quarterly Escrow Contribution”) and (ii) Supporting Documentation for the calculation of the Gross Profit for such Measurement Quarter. |
| (b) | Disputes Regarding Quarterly Gross Profit Statements. Shareholder Representative shall have thirty (30) days after delivery of each Quarterly Gross Profit Statement and Supporting Documentation to deliver to Buyer a written notice of disagreement specifying in reasonable detail each disputed item and Shareholder Representative’s calculation of the Gross Profit for the Measurement Quarter and the Quarterly Escrow Contribution (a “Quarterly Objection Notice”). Shareholder Representative and Shareholder Representative’s authorized representatives shall have reasonable access during normal business hours to all relevant books and records of Company to the extent required to complete their review of the Quarterly Gross Profit Statement. If Shareholder Representative timely delivers a Quarterly Objection Notice, Buyer and Shareholder Representative shall, within thirty (30) days (or such longer period as the parties may agree in writing) following such notice, attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive. If Buyer and Shareholder Representative cannot reasonably resolve all objections by Shareholder Representative, then the disputed items shall be submitted to the Neutral Auditors for resolution consistent with the principles set forth in Section 2.6(e) of the Agreement, mutatis mutandis. At its option, Shareholder Representative may designate disputes under a Quarterly Objection Notice to be consolidated for resolution with any prior Quarterly Objection Notice that remains pending. |
| (c) | Escrow Contributions. Within five (5) Business Days of the final determination of the Gross Profit for the applicable quarter under Section 4(b), provided that the conditions set forth in Section 6.10 of the Agreement are met, Buyer will make the following payments to the Earnout Escrow Account: |
| (i) | With respect to the second quarter of the Second Contingent Purchase Price Period, the greater of (x) $0 or (y) (A) product of (I) the hypothetical First Contingent Purchase Price Payment if the Gross Profit was the annualized Gross Profit for the first two quarters of the Second Contingent Purchase Price Period less the Initial Earnout Escrow Amount, multiplied by (II) 0.5, less (B) the Margin Amount. By way of example only, assuming Company generates Gross Profit of $2,750,000 in the first two quarters of the Second Contingent Purchase Price Period, the escrow deposit would be $1,098,750, less the Margin Amount. |
| (ii) | With respect to the third quarter of the Second Contingent Purchase Price Period, the greater of (x) $0 or (y) (A) the product of (I) the hypothetical First Contingent Purchase Price Payment if the Gross Profit was the annualized Gross Profit for the first three quarters of the Second Contingent Purchase Price Period less the Initial Earnout Escrow Amount, multiplied by (II) 0.75, less (B) any escrow contributions made subsequent to the Closing, less (C) the Margin Amount. |
| (iii) | With respect to the fourth quarter of the Second Contingent Purchase Price Period, the greater of (x) $0 or (y) (A) the hypothetical First Contingent Purchase Price Payment if the Gross Profit were equal to the first four quarters of the Second Contingent Purchase Price Period less the Initial Earnout Escrow Amount, less (B) any escrow contributions made subsequent to the Closing, less (C) the Margin Amount. |
Notwithstanding the foregoing, in no event will Buyer be obligated to fund an amount to the Earnout Escrow Account that would cause the Earnout Escrow Account to exceed the Maximum Contingent Purchase Price Amount, less the amount of the First Contingent Purchase Price Payment.
| (d) | Release of Earnout Escrow Funds. Upon the final determination of the applicable Contingent Purchase Price Payment under Section 3, the parties will deliver joint written instructions to the Escrow Agent releasing the Earnout Escrow Funds as follows: |
| (i) | If the First Contingent Purchase Price Payment is less than the Earnout Escrow Funds, then within five (5) Business Days after the First Contingent Purchase Price Payment is finally determined, Buyer and Shareholder Representative will arrange for the release from the Earnout Escrow Funds (A) an amount equal to the First Contingent Purchase Price Payment to the Shareholder Account and (B) the balance of the Earnout Escrow Funds to be retained as Earnout Escrow Funds until released as set forth in this Exhibit C. |
| (ii) | If the First Contingent Purchase Price Payment exceeds the Earnout Escrow Funds, then within five (5) Business Days after the First Contingent Purchase Price Payment is finally determined, (A) Buyer and Shareholder Representative will arrange for the release of the entirety of the Earnout Escrow Funds to the Shareholder Account and (B) Buyer will pay the amount of the First Contingent Purchase Price Payment in excess of the Earnout Escrow Funds (the “First Payment Excess Earnout Amount”) to the Shareholder Account by wire transfer of immediately available funds. If Buyer fails to pay or cause to be paid the First Payment Excess Earnout Amount (net of any applicable setoff) within five (5) Business Days following the date the First Contingent Purchase Price Payment is finally determined, the delinquent portion of such payment shall bear simple interest at a rate of 7.0% per annum, with such simple interest rate increasing to 9.0% per annum if the delinquent portion of such payment remains unpaid after ninety (90) days of such date. |
| (iii) | If the Second Contingent Purchase Price Payment exceeds the Earnout Escrow Funds, then within five (5) Business Days after the Second Contingent Purchase Price Payment is finally determined, (A) Buyer and Shareholder Representative will arrange for the release of the entirety of the Earnout Escrow Funds to the Shareholder Account and (B) Buyer will pay the amount of the Second Contingent Purchase Price Payment in excess of the Earnout Escrow Funds (the “Second Payment Excess Earnout Amount”) to the Shareholder Account by wire transfer of immediately available funds. If Buyer fails to pay or cause to be paid the Second Payment Excess Earnout Amount (net of any applicable setoff) within five (5) Business Days following date the Second Contingent Purchase Price Payment is finally determined, the delinquent portion of such payment shall bear simple interest at a rate of 7.0% per annum, with such simple interest rate increasing to 9.0% per annum if the delinquent portion of such payment remains unpaid after ninety (90) days of such date. |
| (iv) | If the Second Contingent Purchase Price Payment is less than the Earnout Escrow Funds, then within five (5) Business Days after the Second Contingent Purchase Price Payment is finally determined, Buyer and Shareholder Representative will arrange for the release from the Earnout Escrow Funds (A) an amount equal to the Second Contingent Purchase Price Payment to the Shareholder Account and (B) the balance of the Earnout Escrow Funds to an account designated by Buyer. |
| (v) | If the Second Contingent Purchase Price Payment is finally determined to be zero, then within five (5) Business Days after the Second Contingent Purchase Price Payment is finally determined, Buyer and Shareholder Representative will arrange for the release of the entirety of the Earnout Escrow Funds to an account designated by Buyer. |
| 5. | Clawback of First Contingent Purchase Price Payment. If the Second Contingent Purchase Price Payment is equal to or less than $0 and the First Contingent Purchase Price Payment is greater than $0, then Buyer will calculate the amount that would have been paid in the Second Contingent Purchase Price Period if each of the First Contingent Purchase Price Payment and the Margin Amount were equal to $0 (the “Adjusted Second Contingent Purchase Price Payment”). To the extent the Adjusted Second Contingent Purchase Price Payment, less the First Contingent Purchase Price Payment, less the Margin Amount is a negative number, Shareholders will, on a joint and several basis, pay the absolute value of such negative number to Buyer within fifteen (15) Business Days after the Second Contingent Purchase Price Payment has been finally determined. |
| 6. | Acceleration Events. In the event that, prior to the end of a Contingent Purchase Price Period, Company is subject to any of the criteria set forth in Section 6(a) through Section 6(c) (each, an “Acceleration Event”), then (a) the Buyer shall cause to be paid an amount calculated by annualizing Company’s Gross Profit through the elapsed portion of the Contingent Purchase Price Period ending on the quarter-end immediately prior to the Acceleration Event, less the amount of any Contingent Purchase Price Payment previously paid to the Shareholder Account, less the Margin Amount and (b) the Earnout Escrow Account shall be released consistent with Section 4(d). For the avoidance of doubt, any such payment upon an Acceleration Event is a Subordinated Obligation, except to the extent of funds available in the Earnout Escrow Account. |
| (a) | Company undergoes a dissolution or other termination of business other than in connection with any transaction effected for the purpose of changing, directly or indirectly, the form of organization or the organizational structure of Buyer or any of its Affiliates (including Company). |
| (b) | If Company, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors (a “Bankruptcy Law”), (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due. |
| (c) | A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Company in an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for Company or substantially all Company’s properties, or (iii) orders the liquidation of Company, and in each case the order or decree is not dismissed within 90 days. |
7. | Change of Control. In the event that, prior to the end of the Second Contingent Purchase Price Period, Company undergoes a Change of Control, the acquirer in such Change of Control shall assume any remaining obligations of Buyer under this Exhibit C. |
8. | Operation of Company Following the Closing. From and after the Closing, Buyer shall have sole discretion with regard to all matters relating to the operation of Company. Buyer covenants and agrees that from the Closing until the end of the Second Contingent Purchase Price Period: |
| (a) | it shall not take or cause to be taken, any action with respect to the business, operations, or affairs of the business of Company with the primary purpose or intended effect of reducing the size of the applicable Contingent Purchase Price Payment, provided that Buyer may take any action reasonably required to comply with applicable Law; |
| (b) | it shall not transfer or allocate to Buyer or any Affiliate of Buyer any revenue that would have been generated by Company or that is properly the benefit, opportunity or responsibility of Company; |
| (c) | it shall use commercially reasonable efforts to operate Company in the ordinary course of business consistent with Buyer’s past practices (provided that in the event of a conflict between Buyer’s past practices and Company’s past practices, Buyer shall consider in good faith Company’s past practices); |
| (d) | it shall not, and shall cause its Affiliates not to, without the prior written consent of Shareholder Representative, cause or permit Company to enter into or engage in any transaction with Buyer or any of its Affiliates other than on arm’s length terms no less favorable to Company than those obtainable from an unaffiliated third party; and |
| (e) | it shall keep separate accounting books and financial records related to the business of Company to ensure that adequate records exist to enable the determination of Gross Profit and the preparation of Supporting Documentation for the First Contingent Purchase Price Period and the Second Contingent Purchase Price Period. |
9. | Funding; Subordination. The Contingent Purchase Price, any Contingent Purchase Price Payment and the funding of the Earnout Escrow Account shall be subject in all respects to the subordination, payment restrictions and other terms and conditions set forth in Section 6.10 of the Agreement. The Contingent Purchase Price is and shall remain an unsecured obligation of Buyer. If Buyer is prohibited by Senior Lender from making all or any portion of any Contingent Purchase Price Payment when due by reason of Section 6.10 of the Agreement, Buyer shall notify Shareholder Representative in writing within five (5) Business Days of receiving notice from Senior Lender of such prohibition. |
10. | Confidentiality. The Shareholder Representative shall not provide the Contingent Purchase Price Statement, Quarterly Gross Profit Statement, the Supporting Documentation or any information received from Company, Buyer or their Affiliates in connection with the review of the calculations in this Exhibit C (the “Earnout Information”) to the Shareholders, and the Shareholders agree and acknowledge that they shall not have access to the Earnout Information, except (x) as required to be disclosed under applicable Law, or (y) for summary information regarding the amount of any Contingent Purchase Price Payment earned (or not earned) and any material disputes regarding the same, provided that any Shareholder receiving such summary information agrees to be bound by the confidentiality obligations of this Section 10. Shareholder Representative agrees that it shall keep all Earnout Information strictly confidential, provided that Shareholder Representative may disclose the Earnout Information to its directors, officers, employees and advisors, including attorneys, accountants, consultants, bankers and other financial advisors who have a need to know Earnout Information (“Representatives”) solely in connection with the calculation and payments of the Contingent Purchase Price Payments and enforcement of its rights hereunder. Shareholder Representative acknowledges and agrees that the Earnout Information may contain or constitute material non-public information concerning Buyer, and that trading in the Buyer’s securities while in possession of material nonpublic information or communicating that information to any other person or entity who trades in such securities could subject the Shareholder Representative or its Representatives to liability under the United States federal and state securities laws and the rules and regulations promulgated thereunder. Shareholder Representative shall make its Representatives who have access to the Earnout Information aware of such restrictions. Furthermore, Shareholder Representative agrees that it and its Affiliates will not trade in Buyer’s securities while in possession of material nonpublic information or at all until the Shareholder Representative and such Affiliates can do so in compliance with all applicable laws and without breach of this Section 10. |
EXHIBIT 2.3(a)(ii)
Form of Stock Power
[OMITTED]
EXHIBIT 6.9
R&W Insurance Policy
[OMITTED]
DISCLOSURE SCHEDULE
[OMITTED]
Exhibit 10.2
Execution Version
JOINDER AND AMENDMENT NO. 5
TO CREDIT AGREEMENT
This Joinder and Amendment No. 5 to Credit Agreement dated as of October 30, 2026 (the “Agreement”) is among WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender (the “Lender”), BROADWIND, INC., a Delaware corporation (“Company”) and certain Subsidiaries of the Company from time to time party to the Credit Agreement as Borrowers (together with Company, “Borrowers” and each a “Borrower”) and certain Subsidiaries of the Company from time to time party to the Credit Agreement as Guarantors (collectively, the “Guarantors” and each a “Guarantor” and together with the Borrowers, the “Loan Parties” and each a “Loan Party”).
RECITALS
The Lender and the Loan Parties are party to a Credit Agreement dated as of August 4, 2022 (as amended, restated, supplemented, or otherwise modified before the date of this Agreement, the “Credit Agreement”).
The Loan Parties have advised the Lender that the Loan Parties will acquire the equity interests of MCM Acquisition Company, Inc., an Iowa corporation (“MCM”) (such transaction, the “MCM Acquisition”).
Separately, the Loan Parties plan to form a new Subsidiary, BWEN Clean Fuels Inc., a Delaware corporation (“BWEN”).
The Lender and the Loan Parties desire to join MCM and BWEN, as Borrowers, under the Credit Agreement and modify the Credit Agreement in certain respects as set forth in this Agreement.
The parties therefore agree as follows:
1. Joinder of MCM and BWEN to Credit Agreement. Effective (i) in the case of MCM, concurrently with the consummation of MCM Acquisition and (ii) in the case of BWEN, on the date hereof, and, in each case, subject to the terms and conditions set forth herein and in reliance upon representations and warranties set forth herein, MCM and BWEN are each joined to the Credit Agreement as a Borrower and agree to be bound by the Credit Agreement as if an original party thereunder.
2. Joinder of MCM and BWEN to Intercompany Subordination Agreement and Master Intercompany Demand Note. Effective concurrently with the consummation of the MCM Acquisition or the date hereof, as applicable, MCM and BWEN are each hereby joined (a) as an Obligor under the Intercompany Subordination Agreement dated as of August 4, 2022 (as amended, restated, supplemented, or otherwise modified from time to time, the “Intercompany Subordination Agreement”), among the Obligors party thereto in favor of the Lender, and (b) as a Debtor Obligor and Creditor Obligor under the Master Intercompany Demand Note dated as of August 4, 2022 (as amended, restated, supplemented, or otherwise modified from time to time, the “Master Intercompany Note”), and in each case MCM and BWEN both agree to be bound by the Intercompany Subordination Agreement and the Master Intercompany Note, respectively, as if an original party thereunder.
3. Amendment and Restatement of Schedules to Security Agreement. Effective as of the Fifth Amendment Effective Date in the case of BWEN, and as of the consummation of the MCM Acquisition with respect to MCM, each of the Schedules to the Security Agreement is hereby amended and restated in its entirety in the form attached hereto as Exhibit B, and all references in the Security Agreement and the other Loan Documents to any such Schedule shall be deemed to refer to such Schedule as so amended and restated.
4. Definitions. Defined terms used but not defined in this Agreement are as defined in the Credit Agreement. Terms defined in the Recitals hereto shall have the meanings assigned thereto when used herein.
5. Amendments to Credit Agreement. The Credit Agreement (exclusive of all Schedules and all Exhibits thereto) is hereby amended such that, after giving effect to all such amendments, the Credit Agreement, as amended by this Agreement (exclusive of all Schedules and all Exhibits thereto), will read in its entirety as set forth in Exhibit A to this Agreement.
6. Representations. To induce Lender to enter into this Agreement, Loan Parties hereby represent to Lender as follows:
(a) that each Loan Party is duly authorized to execute and deliver this Agreement and is and will continue to be duly authorized to borrow monies under the Credit Agreement, as amended by this Agreement, and to perform its obligations under the Credit Agreement, as amended by this Agreement;
(b) that the execution and delivery of this Agreement and the performance by each Loan Party of its obligations under the Credit Agreement, as amended by this Agreement, do not and will not (i) violate any provision of Federal, State, or local law or regulation applicable to any Loan Party, the Governing Documents of any Loan Party, or any order, judgment, or decree of any court or other Governmental Authority binding on any Loan Party, except in each case, violations which would not reasonably be expected to have a Material Adverse Effect, (ii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any assets of any Loan Party, other than Permitted Liens, or (iii) require any approval of any holder of Equity Interests of a Loan Party, other than consents or approvals that have been obtained and that are still in force and effect;
(c) that the Credit Agreement, as amended by this Agreement, is the legally valid and binding obligation of each Loan Party, enforceable against each Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally;
(d) that the representations and warranties set forth in Section 4 of the Credit Agreement, as amended by this Agreement, are true and correct in all material respects (but if any representation or warranty is by its terms qualified by concepts of materiality, that representation or warranty is true and correct in all respects), in each case with the same effect as if such representations and warranties had been made on the date of this Agreement, with the exception that all references to the financial statements mean the financial statements most recently delivered to Lender except for such changes as are specifically permitted under the Credit Agreement and except to the extent that any such representation or warranty expressly relates to an earlier date; and
(e) that as of the date of this Agreement, after giving effect to the amendments to the Credit Agreement occurring in connection with this Agreement, no Default or Event of Default has occurred and is continuing.
7. Conditions. This Agreement shall become effective as of the date of this Agreement upon the satisfaction of the following conditions:
(a) that Lender receives this Agreement and a Mortgage on the Alabama Eligible Real Property executed by Lender and Loan Parties, as applicable; and
(b) that Lender shall have received payment in immediately available funds of an amendment fee in an amount equal to $75,000, which fee shall be deemed fully earned and due on the date hereof, shall be nonrefundable and shall, at the sole option of Lender, be charged to the Loan Account and become an additional interest bearing Obligation under the Credit Agreement; and
(c) that Lender shall received evidence satisfactory to it that following the MCM Acquisition, Excess Availability shall not be less than $10,000,000; and
(d) that Lender shall have received, all in form and substance, and with conclusions satisfactory to, Lender: (i) a field exam of MCM and its Affiliates, (ii) an inventory appraisal of the inventory of MCM and its Affiliates, (iii) an equipment appraisal of the equipment of MCM and its Affiliates, (iv) appraisals of all real property owned by MCM and its Affiliates, (v) an updated inventory appraisal for the inventory of Company and its Affiliates, and (vi) copies of all applicable purchase documentation related to the MCM Acquisition; and
(e) that Lender shall have received such title insurance with respect to the Alabama Eligible Real Property as required by Lender, and such other environmental reports, surveys, affidavits, certificates, information, permits, instruments of indemnification and third-party consents as shall be reasonably requested by the Lender or required to induce the applicable title company to issue the title policies and endorsements contemplated above (including using commercially reasonable efforts to deliver such consents, subordinations, estoppels, permits and other documents of any lessor with respect any leasehold interest in the real property requested by Lender or the applicable title company.
8. Release. Each Loan Party hereby waives and releases any and all current existing claims Loan Parties have or may have had through and including the date of this Agreement, counterclaims, defenses, or set-offs of every kind and nature known to such Loan Party which it has or might have against Lender arising out of, pursuant to, or pertaining in any way to the Credit Agreement, any and all documents and instruments delivered in connection with or relating to the foregoing, or this Agreement, other than as arising in respect of gross negligence or willful misconduct on the part of Lender. Each Loan Party hereby further covenants and agrees not to sue Lender or assert any claims, defenses, demands, actions, or liabilities against Lender known to such Loan Party which occurred prior to or as of the date of this Agreement arising out of, pursuant to, or pertaining in any way to the Credit Agreement, any and all documents and instruments delivered in connection with or relating to the foregoing, or this Agreement, other than as arising in respect of gross negligence or willful misconduct on the part of Lender.
9. Miscellaneous.
(a) This Agreement is governed by, and is to be construed in accordance with, the laws of the State of Illinois. Each provision of this Agreement is severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
(b) This Agreement binds Lender and each Loan Party and their respective successors and assigns, and will inure to the benefit of Lender and each Loan Party and the successors and assigns of Lender.
(c) Except as specifically modified or amended by the terms of this Agreement, all other terms and provisions of the Credit Agreement and the other Loan Documents are incorporated by reference in this Agreement and in all respects continue in full force and effect. Each Loan Party, by execution of this Agreement, hereby reaffirms, assumes, and binds itself to all of the obligations, duties, rights, covenants, terms, and conditions that are contained in the Credit Agreement and the other Loan Documents.
(d) Each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like import, and each reference to the Credit Agreement in any and all instruments or documents delivered in connection therewith, will be deemed to refer to the Credit Agreement, as amended by this Agreement.
(e) This Agreement is a Loan Document. Each Loan Party acknowledges that Lender’s reasonable costs and out‑of‑pocket expenses (including reasonable attorneys’ fees) incurred in drafting this Agreement and in amending the Loan Documents as provided in this Agreement constitute Lender Expenses.
(f) The parties may sign this Agreement in several counterparts, each of which will be deemed to be an original but all of which together will constitute one instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.
[Signature pages to follow]
The parties are signing this Joinder and Amendment No. 5 to Credit Agreement as of the date stated in the introductory clause.
| LOAN PARTIES:
BROADWIND, INC., as Administrative Borrower and a Borrower
By/s/ Thomas Ciccone Name: Thomas Ciccone Title: Vice President
BRAD FOOTE GEAR WORKS, INC., as a Borrower
By /s/ Thomas Ciccone Name: Thomas Ciccone Title: Treasurer
BROADWIND HEAVY FABRICATIONS, INC., as a Borrower
By /s/ Thomas Ciccone Name: Thomas Ciccone Title: Treasurer
BROADWIND INDUSTRIAL SOLUTIONS, LLC., as a Borrower
By /s/ Thomas Ciccone Name: Thomas Ciccone Title: Treasurer
5100 NEVILLE ROAD, LLC., as a Guarantor
By: BRAD FOOTE GEAR WORKS, INC. Its: Manager
By /s/ Thomas Ciccone Name: Thomas Ciccone Title: Treasurer: |
[Signature Page to Joinder and Amendment No. 5 to Credit Agreement]
Concurrently with the consummation of the MCM Acquisition, the following entity is joined to the Credit Agreement as a Borrower:
| MCM ACQUISITION COMPANY, INC., an Iowa corporation, as a Borrower
By /s/ Eric B. Blashford Name: Eric B. Blashford Title: President |
[Signature Page to Joinder and Amendment No. 5 to Credit Agreement]
On the date hereof, the following entity is joined to the Credit Agreement as a Borrower:
| BWEN CLEAN FUELS INC., a Delaware corporation, as a Borrower
By /s/ Thomas Ciccone Name: Thomas Ciccone Title: Vice President |
[Signature Page to Joinder and Amendment No. 5 to Credit Agreement]
| LENDER:
WELLS FARGO BANK,
By: /s/ David Evans
Its: Authorized Signatory |
[Signature Page to Joinder and Amendment No. 5 to Credit Agreement]
EXHIBIT A
As-Amended Credit Agreement
(See attached.)
Exhibit A to Fifth Amendment
CREDIT AGREEMENT
by and among
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Lender
BROADWIND, INC.,
as Administrative Borrower,
the other parties named herein as Borrowers
and,
the parties named herein as Guarantors
1. | DEFINITIONS AND CONSTRUCTION | 1 |
|
|
|
|
|
| 1.1 | Definitions | 1 |
| 1.2 | Accounting Terms | 38 |
| 1.3 | UCC Terms | 39 |
| 1.4 | Construction | 39 |
| 1.5 | Time References | 40 |
| 1.6 | Payment in Full | 40 |
| 1.7 | Rounding | 40 |
| 1.8 | Resolution of Drafting Ambiguities | 40 |
2. | CREDIT FACILITY | 41 |
|
|
|
|
|
| 2.1 | Revolving Loans; Term Loan. | 41 |
| 2.2 | Borrowing Procedures | 42 |
| 2.3 | Letter of Credit Facility | 43 |
| 2.4 | Payments; Prepayments. | 43 |
| 2.5 | Interest and Fees | 47 |
| 2.6 | Intent to Limit Charges to Maximum Lawful Rate | 48 |
| 2.7 | Illegality; Market Conditions | 48 |
| 2.8 | Increased Costs | 48 |
| 2.9 | Capital Requirements | 48 |
| 2.10 | Certificates for Reimbursement | 49 |
| 2.11 | Delay in Requests | 49 |
| 2.12 | Incremental Facilities. | 49 |
3. | CONDITIONS; TERM OF AGREEMENT | 50 |
|
|
|
|
|
| 3.1 | Conditions Precedent to the Initial Revolving Loan and the Term Loan | 50 |
| 3.2 | Conditions Precedent to all Revolving Loans and the Term Loan | 50 |
| 3.3 | Maturity | 51 |
| 3.4 | Effect of Maturity | 51 |
| 3.5 | Early Termination by Borrowers | 51 |
4. | REPRESENTATIONS AND WARRANTIES | 52 |
|
|
|
|
|
| 4.1 | Due Organization and Qualification | 52 |
| 4.2 | Due Authorization; No Conflict | 52 |
| 4.3 | Binding Obligations; Perfected Liens. | 52 |
| 4.4 | Title to Assets; No Encumbrances | 52 |
| 4.5 | Litigation | 53 |
| 4.6 | Compliance with Laws | 53 |
| 4.7 | No Material Adverse Effect | 53 |
| 4.8 | Solvency | 53 |
| 4.9 | Environmental Condition | 53 |
| 4.10 | Complete Disclosure; Projections | 53 |
| 4.11 | Taxes | 54 |
| 4.12 | Margin Stock; Investment Company Act, Etc | 54 |
| 4.13 | OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws; Patriot Act | 54 |
| 4.14 | Employee and Labor Matters | 55 |
| 4.15 | ERISA | 55 |
| 4.16 | Capitalization and Subsidiaries | 55 |
| 4.17 | Brokers | 55 |
| 4.18 | Dormant Subsidiaries | 55 |
| 4.19 | . Broadwind Services, LLC, is a Dormant Subsidiary. | 55 |
5. | AFFIRMATIVE COVENANTS | 56 |
|
|
|
|
|
| 5.1 | Financial Statements; Borrowing Base Certificate; Other Information | 56 |
| 5.2 | Notices of Material Events | 56 |
| 5.3 | Existence | 56 |
| 5.4 | Maintenance of Properties | 57 |
| 5.5 | Taxes | 57 |
| 5.6 | Insurance | 57 |
| 5.7 | Field Examinations; Appraisals | 58 |
| 5.8 | Compliance with Laws; OFAC; Sanctions, Etc | 58 |
| 5.9 | Cash Management; Collection of Proceeds of Collateral. | 59 |
| 5.10 | Further Assurances | 60 |
| 5.11 | End of Fiscal Years; Fiscal Quarters | 60 |
| 5.12 | Costs and Expenses | 60 |
| 5.13 | Formation of Subsidiaries | 61 |
| 5.14 | Permitted Supplier Financing Transaction | 61 |
| 5.15 | Post-Closing Obligations | 61 |
6. | NEGATIVE COVENANTS | 61 |
|
|
|
|
|
| 6.1 | Indebtedness | 61 |
| 6.2 | Liens | 62 |
| 6.3 | Restrictions on Fundamental Changes | 62 |
| 6.4 | Asset Dispositions | 62 |
| 6.5 | Nature of Business | 62 |
| 6.6 | Prepayments and Amendments | 62 |
| 6.7 | Restricted Payments | 63 |
| 6.8 | Accounting Methods | 63 |
| 6.9 | Investments | 63 |
| 6.10 | Transactions with Affiliates | 64 |
| 6.11 | Use of Proceeds | 64 |
| 6.12 | Dormant Subsidiaries | 64 |
| 6.13 | New Equipment Lease and Financing Agreements | 64 |
7. | FINANCIAL COVENANTS | 65 |
|
|
|
|
|
| 7.1 | Fixed Charge Coverage Ratio | 65 |
| 7.2 | Minimum Excess Availability | 65 |
8. | EVENTS OF DEFAULT AND REMEDIES | 65 |
|
|
|
|
|
| 8.1 | Events of Default | 65 |
| 8.2 | Remedies. | 67 |
9. | NOTICES, AMENDMENTS, WAIVERS, INDEMNIFICATION, ETC. | 67 |
|
|
|
|
|
| 9.1 | Demand; Protest; Counterclaims, Etc | 67 |
| 9.2 | Indemnification | 68 |
| 9.3 | Notices | 68 |
| 9.4 | Assignments; Successors | 69 |
| 9.5 | Amendments; Waivers | 69 |
10. | JURY TRIAL WAIVER; OTHER WAIVERS CONSENTS; GOVERNING LAW. | 69 |
|
|
|
|
|
| 10.1 | GOVERNING LAW | 69 |
| 10.2 | FORUM NON CONVENIENS | 69 |
| 10.3 | WAIVER OF JURY TRIAL | 70 |
| 10.4 | SUBMISSION TO JURISDICTION | 70 |
| 10.5 | WAIVER OF CLAIMS | 70 |
11. | GENERAL PROVISIONS | 71 |
|
|
|
|
|
| 11.1 | Effectiveness; Section Headings; Severability | 71 |
| 11.2 | Counterparts; Electronic Execution | 71 |
| 11.3 | Patriot Act | 71 |
| 11.4 | Integration | 71 |
| 11.5 | Disclosure | 72 |
| 11.6 | Broadwind, Inc. as Agent for Borrowers | 72 |
| 11.7 | Acknowledgement Regarding Any Supported QFCs | 72 |
Annexes and Schedules
Annex LPA | Lender’s Payment Account [redacted] |
Schedule 1.1(c) | List of Freight Forwarders [OMITTED] |
Schedule 2.5 | Fees |
Schedule 2.7 | SOFR Replacement |
Schedule 3.1 | Conditions Precedent to Initial Revolving Loans |
Schedule 4.5 | Pending Litigation [OMITTED] |
Schedule 4.9 | Environmental Matters [OMITTED] |
Schedule 4.14 | Collective Bargaining Agreements, Etc. [OMITTED] |
Schedule 4.16 | Subsidiaries [OMITTED] |
Schedule 4.21 | Other Financing Arrangements [OMITTED] |
Schedule 5.1 | Financial and Collateral Reporting |
Schedule 5.9 | Deposit Accounts and Securities Accounts [OMITTED] |
Schedule 6.1 | Existing Indebtedness [OMITTED] |
Schedule 6.2 | Existing Liens [OMITTED] |
Schedule 6.9 | Exiting Investments [OMITTED] |
Schedule 5.15 | Post-Closing Matters |
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of August 4, 2022 by and among BROADWIND, INC., a Delaware corporation (the “Company”), BRAD FOOTE GEAR WORKS, INC., an Illinois corporation (“BFGW”), BROADWIND INDUSTRIAL SOLUTIONS, LLC, a North Carolina limited liability company (“BIS”), BROADWIND HEAVY FABRICATIONS, INC., a Wisconsin corporation (“BHF”), MCM ACQUISITION COMPANY, INC., an Iowa corporation (“MCM”), BWEN CLEAN FUELS, INC., a Delaware corporation (“BWEN” and together with the Company, BFGW, BIS, BHF, MCM, and any entity that may hereafter become party hereto as a Borrower, individually, a “Borrower” and collectively, “Borrowers”), 5100 Neville Road, LLC, a Delaware limited liability company (“5100 Neville Road”, and together with any entity that may hereafter become party hereto as a Guarantor, individually, a “Guarantor” and collectively, “Guarantors”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions:
“Accounting Changes” means changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions).
“Administrative Borrower” has the meaning set forth in Section 11.6.
“Advanced Deposit Customer” has the meaning ascribed to such term in the definition of Advanced Deposit Overage.
“Advanced Deposit Overage” means, with respect to any account debtor which has provided a Borrower with a deposit or other advanced payment prior to completion and delivery of the goods and/or rendering of services ordered by such account debtor which has not yet been applied as payment upon completion of such order (an “Advanced Deposit” and such account debtor, an “Advanced Deposit Customer”), the lesser of (x) the amount by which such Advanced Deposit exceeds the sum of accounts owing by such Advanced Deposit Customer which are excluded from being Eligible Accounts under clause (i) of the definition thereof and (y) the Gross Availability of Advanced Deposit Inventory applicable to such Advanced Deposit Customer.
“Advanced Deposit Reserve” means a Reserve established by Lender in its Permitted Discretion in an amount equal to the sum of the Advanced Deposit Overage for all Advanced Deposit Customers
“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Equity Interests, by contract, or otherwise; provided, that, for purposes of the definition of Eligible Accounts and Section 6.10: (a) if any Person owns directly or indirectly 10% or more of the Equity Interests having ordinary voting power for the election of directors or equivalent governing body of a Person, then both such Persons shall be Affiliates of each other, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership in which a Person is a general partner shall be deemed an Affiliate of such Person.“Advanced Deposit” has the meaning ascribed to such term in the definition of Advanced Deposit Overage.
1
“Agreement” means this Credit Agreement.
“Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act of 2010, as amended, and all other applicable laws and regulations or ordinances concerning or relating to bribery or corruption in any jurisdiction in which any Loan Party or any of its Subsidiaries or Affiliates is located or is doing business.
“Anti-Money Laundering Laws” means applicable laws or regulations in any jurisdiction in which any Loan Party or any of its Subsidiaries or Affiliates is located or is doing business that relates to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto.
“Applicable Concentration Percentage” means (i) 50% for General Electric Company, its Subsidiaries and/or its Permitted Affiliates, (ii) 50% for Siemens AG, its Subsidiaries and/or its Permitted Affiliates, (iii) 30% for MacLean Power Systems, its Subsidiaries and/or Permitted Affiliates, and (iv) 25% for any other account debtor and its Subsidiaries (with each such percentage in (i)-(iv), as applied to a particular account debtor, being subject to reduction by Lender in its Permitted Discretion if the creditworthiness of such account debtor deteriorates).
“Applicable Margin” means (a) in the case of a Base Rate Loan that is a Term Loan, 1.50% (the “Term Loan Base Rate Margin”); (b) in the case of a SOFR Loan that is a Term Loan, 2.75% (the “Term Loan SOFR Rate Margin”); and (c) with respect to Base Rate Loans or SOFR Loans that are Revolving Loans, as applicable, as of any date of determination, the applicable margin set forth in the following table that corresponds to the Average Excess Availability of Borrowers for the most recently completed month; provided, that for the period from the Closing Date through and including the last day of the first full calendar quarter immediately following the Closing Date, the Applicable Margin shall be set at the margin in the row styled “Level II”; provided further, that upon written notice by Lender to Borrowers on and after an Event of Default has occurred and is continuing, the Applicable Margin shall be set at the margin in the row styled “Level III”:
2
Level | Average Excess Availability | Applicable Margin for Base Rate Loans which are Revolving Loans (the “Revolving Loan Base Rate Margin”) | Applicable Margin for SOFR Loans which are Revolving Loans (the “Revolving Loan SOFR Margin”) |
I | > 2/3rd of the Revolving Loan Limit | 1.00 percentage points | 2.00 percentage points |
II | > 1/3rd of the Revolving Loan Limit | 1.25 percentage points | 2.25 percentage points |
III | < 1/3rds of the Revolving Loan Limit | 1.50 percentage points | 2.50 percentage points |
The Applicable Margin shall be re-determined as of the first day of each month.
“Authorized Person” means any one of the individuals identified as an officer of a Loan Party or any other individual identified by Administrative Borrower in writing as an authorized person and authenticated through Lender’s electronic platform or portal in accordance with its procedures for such authentication.
“Available Increase Amount” means, as of any date of determination, an amount equal to the result of (a) $10,000,000, minus (b) the aggregate principal amount of Increases to the Commitments previously made pursuant to Section 2.12 of this Agreement.
“Average Excess Availability” means, for any one calendar month period commencing on the first day of the month of such period, the daily average of the Excess Availability for such period.
“Bank Product” means any one or more of the following financial products or accommodations provided by Lender or its Affiliates to a Loan Party: (a) credit cards (including commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”)), (b) payment card processing services, (c) debit cards, (d) stored value cards, (e) any cash management or related services, including treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements, or (f) transactions under Hedge Agreements.
3
“Bank Product Obligations” means all obligations, liabilities, reimbursement obligations, fees, or expenses owing by a Loan Party to Lender or any of its Affiliates pursuant to or in connection with a Bank Product and irrespective of whether for the payment of money, and whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.
“Bankruptcy Code” means Title 11 of the United States Code.
“Base Rate” means, for any day, the greatest of (a) zero percent per annum, (b) the Federal Funds Rate in effect on such day plus 1/2%, (c) Daily Simple SOFR in effect on such day, plus 1%; provided, that this clause (c) shall not be applicable during any period in which Daily Simple SOFR is unavailable or unascertainable, and (d) the rate of interest announced, from time to time, within Wells Fargo at its principal office in San Francisco as its “prime rate” in effect on such day, with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate.
“Base Rate Loan” means each portion of the Revolving Loans or the Term Loan that bears interest at a rate determined by reference to the Base Rate.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which any Loan Party or any of its Subsidiaries or ERISA Affiliates has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years.
“BHC Act Affiliate” of a Person means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such Person.
“Borrower” and “Borrowers” have the respective meanings set forth in the preamble to this Agreement.
“Borrowing Base” means, as of any date of determination, the Dollar amount result of:
(a) 90% of the amount of Eligible Investment Grade Accounts less the applicable amount, if any, of the Dilution Reserve, plus
(b) 85% of the amount of Eligible Accounts, less the applicable amount, if any, of the Dilution Reserve, plus
(c) the lesser of
(i) $4,000,000 , and
4
(ii) the sum of
(1) 90% of the amount of Eligible GE/Siemens Extended Terms Accounts, less the applicable amount, if any, of the Dilution Reserve, and
(2) 85% of the amount of Eligible Other Extended Terms Accounts, less the applicable amount, if any, of the Dilution Reserve, plus
(d) the lesser of (i) the product of 70% multiplied by the Value of Eligible Finished Goods Inventory at such time, and (ii) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent appraisal of Inventory, that is acceptable to Lender in the exercise of its Permitted Discretion, multiplied by the Value of Eligible Finished Goods Inventory at such time, plus
(e) the lesser of (i) the product of 70% multiplied by the Value of Eligible Raw Materials Inventory at such time, and (ii) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent appraisal of such Eligible Inventory that is acceptable to Lender in the exercise of its Permitted Discretion, multiplied by the Value of Eligible Raw Materials Inventory at such time, plus
(f) the lesser of
(i) $2,500,000, and
(ii) the lesser of (A) the product of 70% multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of Eligible Work-In-Process Inventory at such time, and (B) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent appraisal of such Eligible Inventory that is acceptable to Lender in the exercise of its Permitted Discretion, multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of Eligible Work-In-Process Inventory at such time, plus
(g) the lesser of
(i) $3,000,000, and
(ii) the lesser of (A) the product of 70% multiplied by the Value of Eligible In-Transit Inventory at such time, and (B) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent appraisal of such Eligible Inventory that is acceptable to Lender in the exercise of its Permitted Discretion, multiplied by the Value of Eligible In-Transit Inventory at such time, plus
(h) the lesser of
(i) the Real Property Subline Amount; and
5
(ii) the product of 60% multiplied by the fair market value of Eligible Real Property as such fair market value is identified in the most recent appraisal of Eligible Real Property that is acceptable to Lender in the exercise of its Permitted Discretion at such time, minus
(i) the aggregate amount of Reserves, if any, established by Lender from time to time under Section 2.1(b) of this Agreement.
“Borrowing Base Certificate” means a certificate setting forth the calculation of the Borrowing Base in the form provided by Lender to a Borrower, as such form, subject to the terms hereof, may from time to time be modified by Lender, which is duly completed (including all schedules thereto) and delivered by or on behalf of Borrowers to Lender.
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the State of Illinois.
“Capital Expenditures” means, with respect to any Person for any period, the amount of all expenditures by such Person during such period that are capital expenditures as determined in accordance with GAAP.
“Capex Bucket” means each of the following exclusion categories for purposes of the definition of Unfinanced Capital Expenditures: (a) the "Cash Capex Bucket" being the exclusion for Capital Expenditures paid in cash during the period commencing January 1, 2026 and ending December 31, 2026 in an aggregate amount not to exceed $1,000,000, and (b) the "PRS Reclassification Bucket" being the exclusion for Capital Expenditures resulting from the reclassification of finished goods inventory constituting natural gas pressure reducing system units into rental fleet units as non-cash plant, repair and safety reclassifications designated by a Borrower on or before December 31, 2026, in an aggregate amount (together with the Cash Capex Bucket) not to exceed $3,000,000.
“Capex Designation Report” means a report in form and substance satisfactory to Lender setting forth the designations of Capital Expenditures to each applicable Capex Bucket for the applicable reporting period, together with the cumulative amounts designated to each Capex Bucket since January 1, 2026 and the remaining amounts available for designation under each Capex Bucket.
“Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.
"Cash Capex Bucket" has the meaning ascribed to such term in the definition of Capex Bucket.
“Cash Management Bank” has the meaning set forth in Section 5.9.
6
“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, judicial ruling, judgment or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation, guideline or treaty, (c) any new, or adjustment to, requirements prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Board of Governors of the Federal Reserve System), requirements imposed by the Federal Deposit Insurance Corporation, or similar requirements imposed by any domestic or foreign governmental authority or resulting from compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority and related in any manner to SOFR, or (d) 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 in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith, and (ii) all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.
“Change of Control” means that: (a) any “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) (but excluding any employee benefit plan of such person or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), becomes the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of 30%, or more, of the Equity Interests of the Company entitled (without regard to the occurrence of any contingency) to vote for the election of members of the board of directors or equivalent governing body of the Company, or (c) the Company fails to own and control, directly or indirectly, 100% of the Equity Interests of each other Loan Party.
“Closing Date” means the earlier of the date of the making of the initial Revolving Loan and the Term Loan or issuance of the initial Letter of Credit under this Agreement.
“Collateral” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by any Person in or upon which a Lien is granted, or is purported to be granted, by such Person to Lender under any of the Loan Documents.
“Collateral Access Agreement” means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, mortgagee, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the books, equipment, accounts or inventory of any Loan Party or any of its Subsidiaries, in each case, in favor of Lender with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, mortgagee, warehouseman, processor, consignee or other Person and in form and substance reasonably satisfactory to Lender.
“Collection Account” means each deposit account of a Borrower identified on Schedule 5.9 as a collection account and such other deposit accounts as may be established after the Closing Date in accordance with the terms hereof in each case used exclusively to receive payments on accounts and proceeds of other Collateral.
“Commitment” means the commitment of Lender to make Revolving Loans or otherwise provide any credit or services to a Borrower under this Agreement.
7
“Compliance Certificate” means a certificate in the form provided by Lender to a Borrower, as such form, subject to the terms hereof, may from time to time be modified by Lender, which is duly completed (including all schedules thereto), and delivered by or on behalf of Borrowers to Lender.
“Control Agreement” means a control agreement, in form and substance reasonably satisfactory to Lender, executed and delivered by a Loan Party, Lender, and the applicable securities intermediary (with respect to a securities account) or bank (with respect to a deposit account).
“Covered Entity” means any of the following: (a) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (b) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (c) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning set forth in Section 11.7.
“Credit Facility” means the Revolving Loans and the Term Loan provided to or for the benefit of each Borrower pursuant to Section 2.1 or other financial accommodations provided for under the Loan Documents.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal to the greater of (a) SOFR for the day (such day, a “SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website; provided, that, if Daily Simple SOFR determined as provided above would be less than zero, then Daily Simple SOFR shall be deemed to be zero. If by 5:00 p.m. (New York City time) on the second (2nd) U.S. Government Securities Business Day immediately following any SOFR Determination Day, SOFR in respect of such SOFR Determination Day has not been published on the SOFR Administrator’s Website and a Benchmark Replacement Date with respect to Daily Simple SOFR has not occurred, then SOFR for such SOFR Determination Day will be SOFR as published in respect of the first preceding U.S. Government Securities Business Day for which SOFR was published on the SOFR Administrator’s Website; provided that any SOFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple SOFR for no more than three (3) consecutive SOFR Rate Days. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower.
“Default Rate” means, for any Obligation (including, to the extent permitted by law, interest not paid when due), two percent plus the interest rate otherwise applicable thereto, or in the case of the Letter of Credit fee, two percent above the per annum rate otherwise applicable thereto.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
8
“Deferred CIBC Account” has the meaning set forth in Section 5.9(a).
“Dilution” means (a) with respect to accounts of Borrowers (other than Eligible GE/Siemens Extended Terms Accounts and Eligible Investment Grade Accounts), as of any date of determination, a percentage, based upon the experience of the immediately prior 12 months, that is the result of dividing the Dollar amount of (i) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to Borrowers’ accounts (other than Eligible GE/Siemens Extended Terms Accounts and Eligible Investment Grade Accounts) during such period, by (ii) Borrowers’ billings with respect to accounts (other than Eligible GE/Siemens Extended Terms Accounts and Eligible Investment Grade Accounts) during such period, (b) with respect to Eligible GE/Siemens Extended Terms Accounts, Extended GE/Siemens Terms Accounts Dilution, and (c) with respect to Eligible Investment Grade Accounts, Investment Grade Accounts Dilution.
“Dilution Reserve” means, as of any date of determination, an amount sufficient to reduce the advance rate against (a) Eligible Accounts by the extent to which Dilution for such accounts is in excess of 5%, (b) Eligible GE/Siemens Extended Terms Accounts by 1 percentage point (or fraction thereof, rounding to the nearest one-tenth of 1 percentage point) for each percentage point (or fraction thereof, rounding to the nearest one-tenth of 1 percentage point) by which Extended GE/Siemens Terms Accounts Dilution is in excess of 2.50%, (c) Eligible Other Extended Terms Accounts by 1 percentage point (or fraction thereof, rounding to the nearest one-tenth of 1 percentage point) for each percentage point (or fraction thereof, rounding to the nearest one-tenth of 1 percentage point) by which Extended Other Terms Accounts Dilution is in excess of 5.00%, or (d) Eligible Investment Grade Accounts the extent to which Investment Grade Accounts Dilution for such accounts is in excess of 2.5%.
“Dollars” or “$” means United States dollars.
“Dormant Subsidiary” means a Subsidiary of one or more of the Loan Parties which does not and will not have any liabilities of any material nature, own any material assets or engage itself in any operations or businesses.
“Earn-Outs” means unsecured liabilities of a Loan Party arising under an agreement to make any deferred payment as a part of the consideration payable in respect of a Permitted Acquisition, including performance bonuses or consulting payments in any related services, employment or similar agreement, in an amount that is subject to or contingent upon the revenues, income, cash flow or profits (or the like) of the target of such Permitted Acquisition. For the avoidance of doubt, the MCM Contingent Purchase Price constitutes Earn-Outs.
“EBITDA” means, with respect to any fiscal period and with respect to Borrowers determined, in each case, on a consolidated basis in accordance with GAAP, (a) the consolidated net income (or loss), for such period, minus (b) without duplication, the sum of the following amounts for such period to the extent included in determining consolidated net income (or loss) for such period: (i) unusual or non-recurring gains, and (ii) interest income, plus (c) without duplication, the sum of the following amounts for such period to the extent deducted in determining consolidated net income (or loss) for such period: (i) non-cash stock compensation and any other non-cash unusual or non-cash non-recurring losses, (ii) Interest Expense, (iii) income taxes, and (iv) depreciation and amortization. For the purposes of calculating EBITDA for any period of twelve consecutive months (each, a “Reference Period”), if at any time during such Reference Period (and after the Closing Date), any Loan Party shall have made a Permitted Acquisition, EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto (including pro forma adjustments arising out of events which are directly attributable to such Permitted Acquisition), are factually supportable, and are expected to have a continuing impact, in each case acceptable to Lender as if any such Permitted Acquisition or adjustment occurred on the first day of such Reference Period.
9
“Eligible Accounts” means accounts (other than Eligible Investment Grade Accounts, Eligible GE/Siemens Extended Terms Accounts and Eligible Other Extended Terms Accounts) created by a Borrower in the ordinary course of its business that arise out of such Borrower’s sale of goods or rendition of services that in each case at the time of creation and at all times thereafter satisfy the criteria set forth below as determined by Lender in its Permitted Discretion. Except as otherwise agreed by Lender, Eligible Accounts shall not include the following:
(a) accounts that the account debtor has failed to pay within 90 days of original invoice date or 60 days of due date;
(b) accounts owed by an account debtor (or its Affiliates) where 50% or more of all accounts owed by that account debtor (or its Affiliates) are deemed ineligible under clause (a) above;
(c) accounts with selling terms of more than 90 days (provided that until any such accounts which otherwise qualify as Eligible GE/Siemens Extended Terms Accounts and/or Eligible Other Extended Terms Accounts remain outstanding for more than 90 days of original invoice date, the terms of this clause (c) shall not be applicable to exclude such accounts as Eligible Accounts);
(d) accounts with respect to which the account debtor is an Affiliate of any Borrower or an employee or agent of any Borrower or any Affiliate of any Borrower;
(e) accounts (i) arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold (other than Permitted bill and Hold Accounts), or any other terms by reason of which the payment by the account debtor may be conditional, or (ii) with respect to which the payment terms are “C.O.D.”, cash on delivery or other similar terms;
(f) accounts that are not payable in Dollars;
(g) except for accounts owing by foreign Subsidiaries of General Electric Company, its Subsidiaries and/or its Permitted Affiliates domiciled in the countries of Hungary, France, Saudi Arabia and/or Japan, accounts with respect to which the account debtor either (i) does not maintain its chief executive office in the United States or Canada, (ii) is not organized under the laws of the United States or Canada or any State or province thereof, or (iii) is the government of any foreign country or sovereign state, or of any State, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (A) the account is supported by an irrevocable letter of credit reasonably satisfactory to Lender (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Lender and, if requested by Lender, is directly drawable by Lender, or (B) the account is covered by credit insurance in form, substance, and amount, and by an insurer, reasonably satisfactory to Lender;
10
(h) except for accounts not exceeding $250,000 in the aggregate at any time, accounts with respect to which the account debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of accounts with respect to which Borrowers have complied, to the reasonable satisfaction of Lender, with the Assignment of Claims Act, 31 USC §3727), or (ii) any State of the United States or any other Governmental Authority;
(i) accounts with respect to which the account debtor is a creditor of a Borrower, has or has asserted a right of recoupment or setoff, or has disputed its obligation to pay all or any portion of the account, to the extent of such claim, right of recoupment or setoff, or dispute;
(j) accounts with respect to an account debtor whose Eligible Accounts owing to Borrowers exceed the Applicable Concentration Percentage of all Eligible Accounts, to the extent of the obligations owing by such account debtor in excess of such percentage; provided, that, in each case, the amount of Eligible Accounts that are excluded because they exceed the foregoing percentage shall be determined by Lender based on all of the otherwise Eligible Accounts prior to giving effect to any eliminations based upon the foregoing concentration limit;
(k) accounts with respect to which the account debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which any Loan Party or Lender has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such account debtor;
(l) accounts, the collection of which, Lender, in its Permitted Discretion, believes to be doubtful, including by reason of the account debtor’s financial condition;
(m) accounts that are not subject to a valid and perfected first priority Lender’s Lien;
(n) accounts with respect to which (i) other than Permitted Bill and Hold Accounts, the goods giving rise to such account have not been shipped and billed to the account debtor, or (ii) the services giving rise to such account have not been performed and billed to the account debtor;
(o) accounts with respect to which the account debtor is a Sanctioned Person or Sanctioned Entity;
(p) accounts (i) that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by the applicable Borrower of the subject contract for goods or services, or (ii) that represent credit card sales;
11
(q) accounts which are sold pursuant to a Permitted Supplier Financing Transaction;
(r) accounts that do not comply with the representations and warranties in the Loan Documents with respect to Eligible Accounts; or
(s) accounts owned by a Person acquired in connection with a Permitted Acquisition that is joined to this Agreement as a Borrower, until the completion of a field examination with respect to such accounts satisfactory to Lender in its Permitted Discretion.
In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits, unapplied cash, taxes, finance charges, service charges, discounts, credits, allowances, and rebates.
“Eligible Equipment” means equipment of each Borrower designated by Lender as eligible from time to time in its Permitted Discretion, but excluding equipment having any of the following characteristics:
(a) equipment at premises other than those owned or leased and controlled by any Borrower, unless Lender shall have entered into a Collateral Access Agreement with the owner or operator of such premises and shall have received such other documents, instruments and agreements as Lender may request;
(b) equipment that is subject to any Lien other than in favor of Lender;
(c) equipment located outside the United States;
(d) equipment that is not subject to the first priority, valid and perfected security interest of Lender;
(e) damaged or defective equipment or equipment not used or usable in the ordinary course of Borrowers’ business as presently conducted or equipment which is obsolete or not currently saleable or has been removed from service.
(f) equipment that is not covered by “all risk” hazard insurance for an amount equal to its replacement cost;
(g) equipment that requires proprietary software in order to operate in the manner in which it is intended when such software is not freely assignable to Lender or any potential purchaser of such equipment;
(h) equipment consisting of computer hardware, software, tooling, or molds;
(i) equipment as to which an appraisal acceptable to Lender has not been completed; or
(j) equipment otherwise deemed unacceptable by Lender in its Permitted Discretion.
12
Any equipment which is not Eligible Equipment shall nonetheless constitute Collateral.
“Eligible GE/Siemens Extended Terms Accounts” means those accounts owing by General Electric Company, its Subsidiaries and/or Permitted Affiliates or Siemens AG, its Subsidiaries and/or Permitted Affiliates created by a Borrower in the ordinary course of its business, that arise out of such Borrower’s sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made in the Loan Documents, and that would be Eligible Accounts but for their being excluded as ineligible by virtue of being an Eligible GE/Siemens Extended Terms Account or the excluding criteria set forth in clauses (a) and (c) of the definition of Eligible Accounts so long as the case of (a) in the case of General Electric Company, its Subsidiaries and/or its Permitted Affiliates such accounts (i) remain unpaid for no more than 180 days past original invoice date and are not more than 60 days past due and (ii) have selling terms of no greater than 180 days and (b) in the case of Siemens AG, its Subsidiaries and/or its Permitted Affiliates, such accounts (i) remain unpaid for no more than 150 days past original invoice date and are not more than 60 days past due and (ii) have selling terms of no greater than 180 days, in each case, as such criteria in (a)-(b) may be modified from time to time by Lender in the exercise of its Permitted Discretion. For purposes of clarity, accounts which may ultimately constitute Eligible GE/Siemens Extended Terms Accounts may initially be included as Eligible Accounts and/or Eligible Investment Grade Accounts until the same cease to satisfy the excluding criteria set forth under clauses (a) and (c) of the definition of Eligible Accounts.
“Eligible Finished Goods Inventory” means inventory that qualifies as Eligible Inventory and consists of first quality finished goods held for sale in the ordinary course of the Loan Parties’ business.
“Eligible In-Transit Inventory” means those items of inventory that do not constitute Eligible Inventory solely because they are not in a location set forth on the schedule of locations to the Security Agreement or in transit among such locations and a Borrower does not have actual and exclusive possession thereof, but as to which,
(a) such inventory currently is in transit in the continental United States by rail or truck to a location set forth on the schedule of locations to the Security Agreement;
(b) title to such inventory has passed to a Borrower and Lender shall have received such evidence thereof as it may from time to time require,
(c) such inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Lender in its Permitted Discretion, and Lender shall have received a copy of the certificate of marine cargo insurance in connection therewith in which it has been named as an additional insured and loss payee in a manner acceptable to Lender,
(d) unless Lender otherwise agrees in writing, such inventory either:
(i) is the subject of a negotiable bill of lading governed by the laws of a state within the United States (A) that is consigned to Lender or a Freight Forwarder (either directly or by means of endorsements), (B) that was issued by the carrier in possession of the inventory that is subject to such bill of lading, and (C) that either is in the possession of Lender or a Freight Forwarder (in each case in the continental United States), or
13
(ii) is the subject of a negotiable forwarder’s cargo receipt governed by the laws of a state within the United States and is not the subject of a bill of lading (other than a negotiable bill of lading consigned to, and in the possession of, a consolidator or Lender, or their respective agents) and such negotiable cargo receipt on its face indicates the name of the Freight Forwarder as a carrier or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf of the carrier or multimodal transport operator, in any case respecting such inventory (A) consigned to Lender or one of its Freight Forwarders that is handling the importing, shipping and delivery of such inventory (either directly or by means of endorsements), (B) that was issued by a consolidator respecting the subject inventory, and (C) that is in the possession of Lender or a Freight Forwarder (in each case in the continental United States),
(e) such inventory is in the possession of a common carrier that has issued the bill of lading or other document of title with respect thereto or the Freight Forwarder handling the importing, shipping and delivery of such inventory;
(f) the documents of title related thereto are subject to the valid and perfected first priority Lien of Lender;
(g) Lender determines that such inventory is not subject to (i) any Person’s right of reclamation, repudiation, stoppage in transit or diversion or (ii) any other right or claim of any other Person which is (or is capable of being) senior to, or pari passu with, the Lien of Lender or Lender determines that any Person’s right or claim impairs, or interferes with, directly or indirectly, the ability of Lender to realize on, or reduces the amount that Lender may realize from the sale or other disposition of such inventory;
(h) a Borrower has provided (i) a certificate to Lender that certifies that, to the best knowledge of such Borrower, such inventory meets all of the representations and warranties in the Loan Documents concerning Eligible In-Transit Inventory, and that the shipment as evidenced by the documents conforms to the related order documents, and (ii) upon Lender’s request, a copy of the invoice, packing slip and manifest with respect thereto, or
(i) such inventory shall not have been in transit for more than thirty (30) days.
“Eligible Inventory” means inventory of a Borrower consisting of raw materials, work-in-process, and finished goods held for resale in the ordinary course of the business of such Borrower that at all times satisfy the criteria set forth below as determined by Lender in its Permitted Discretion. Except as otherwise agreed by Lender, any inventory shall not be included in Eligible Inventory if:
(a) a Borrower does not have good, valid, and marketable title thereto;
(b) a Borrower does not have exclusive legal possession thereof (either directly or through a bailee or agent of a Borrower);
(c) it is not located at one of the locations in the continental United States set forth on the schedule of locations to the Security Agreement, as supplemented in accordance with the terms thereof;
14
(d) it is stored at locations holding less than $100,000 of the aggregate value of such Borrower’s inventory;
(e) it is in-transit from a location of a Loan Party set forth on the schedule of locations to the Security Agreement (other than in-transit from one location of a Loan Party set forth on such schedule of locations to another location of a Loan Party set forth on such schedule);
(f) it is located on Real Property leased by a Borrower or in a contract warehouse or with a bailee, in each case, unless either, at Lender’s option, (A) it is subject to a Collateral Access Agreement with the owner and lessor of such Real Property or such warehouseman or bailee, as applicable, or (B) Lender has established a Reserve with respect to amounts payable to the owner and lessor of such premises or warehouse or bailee in an amount not less than three months’ rent, storage charges, fees or other amounts under the lease or other applicable agreement relative to such location;
(g) it is the subject of a bill of lading or other document of title;
(h) it is not subject to a valid and perfected first priority security interest of Lender;
(i) it consists of goods returned or rejected by a Borrower’s customers;
(j) it consists of goods that are obsolete, slow moving (consisting of any type or category of inventory at any time in excess of the amount of such type or category sold in the immediately preceding six month period), spoiled or are otherwise past the stated expiration, “sell-by” or “use by” date applicable thereto, restrictive or custom items or items otherwise manufactured in accordance with customer-specific requirements, work-in-process, raw materials, or goods that constitute spare parts, packaging and shipping materials, supplies used or consumed in the business of a Borrower, bill and hold goods, defective goods, “seconds,” or inventory acquired on consignment;
(k) it is subject to third party intellectual property, licensing or other proprietary rights, unless Lender is satisfied in its Permitted Discretion that such inventory can be freely sold by Lender on and after the occurrence of an Event of Default despite such third party rights;
(l) it does not comply with the representations and warranties in the Loan Documents with respect to Eligible Inventory; or
(m) it was acquired in connection with a Permitted Acquisition, or such inventory is owned by a Person that is joined to this Agreement as a Borrower, until the completion of an appraisal of such inventory that is acceptable to Lender and the completion of a field examination with respect to such inventory that is satisfactory to Lender in its Permitted Discretion.
Notwithstanding anything to the contrary contained herein, Eligible Inventory will be calculated without consideration of any contract liabilities resulting from over time recognition of revenue allowed per GAAP.
15
“Eligible Investment Grade Accounts” means those accounts owing by an Investment Grade Account Debtor created by a Borrower in the ordinary course of its business, that (i) arise out of such Borrower’s sale of goods or rendition of services, (ii) comply with each of the representations and warranties respecting Eligible Accounts made in the Loan Documents, and (iii) are not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible Accounts other than being an Eligible Investment Grade Account. In determining the amount to be included, Eligible Investment Grade Accounts shall be calculated net of customer deposits, unapplied cash, taxes, finance charges, service charges, discounts, credits, allowances, and rebates.
“Eligible Other Extended Terms Account Debtor” means any of (a) Gardner Denver (Ingersoll Rand Inc.) and/or its Subsidiaries, (b) Metso Outotec USA Inc. and/or its Subsidiaries (including without limitation, Metso Oyj and Metso Minerals Industries, Inc.), and/or (c) US Steel Corporation and/or its Subsidiaries.
“Eligible Other Extended Terms Accounts” means those accounts owing by an Eligible Other Extended Terms Account Debtor created by a Borrower in the ordinary course of its business, that arise out of such Borrower’s sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made in the Loan Documents, and that would be Eligible Accounts but for their being excluded as ineligible by virtue of being an Eligible Other Extended Terms Account or the excluding criteria set forth in clauses (a) and (c) of the definition of Eligible Accounts so long as the case of (a) Gardner Denver (Ingersoll Rand Inc.) and/or its Subsidiaries, such accounts (i) remain unpaid for no more than 135 days past original invoice date and are not more than 60 days past due and/or (ii) have selling terms of no greater than 105 days, (b) Metso Outotec USA Inc. and/or its Subsidiaries (including without limitation, Metso Oyj and Metso Minerals Industries, Inc.), such accounts (i) remain unpaid for no more than 120 days past original invoice date and are not more than 60 days past due and/or (ii) have selling terms of no greater than 120 days, and/or (c) US Steel Corporation and/or its Subsidiaries, such accounts remain unpaid for no more than 120 days past original invoice date and are not more than 60 days past due. For purposes of clarity, accounts which may ultimately constitute Eligible Other Extended Terms Accounts may initially be included as Eligible Accounts and/or Eligible Investment Grade Accounts (to the extent applicable) until the same cease to satisfy the excluding criteria set forth under clauses (a) and (c) of the definition of Eligible Accounts in each case, as such criteria in (a)-(c) may be modified from time to time by Lender in the exercise of its Permitted Discretion.
“Eligible Raw Material Inventory” means inventory that qualifies as Eligible Inventory and consists of goods that are first quality raw materials.
“Eligible Real Property” means Real Property subject to a Mortgage located at 12160 Tierce Patton Road, Northport, AL 35475.
“Eligible Work-in-Process Inventory” means inventory that qualifies as Eligible Inventory and consists of goods that are first quality work-in-process; provided, that anything to the contrary contained herein notwithstanding, the value of such inventory shall not include the value of any labor or other services rendered to produce such inventory.
16
“Equity Interests” means, with respect to a Person, all of the shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in such Person, whether voting or nonvoting, including capital stock or partnership, limited liability company or other equity ownership or profit interests or units, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Securities Exchange Act of 1934).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.
“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which any Loan Party or any of its Subsidiaries is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with any Loan Party or any of its Subsidiaries and whose employees are aggregated with the employees of such Loan Party or its Subsidiaries under IRC Section 414(o).
“Event of Default” has the meaning set forth in Section 8.1.
“Excess Availability” means, as of any date of determination, the amount, as determined by Lender, equal to: (a) the lesser of: (i) the Borrowing Base and (ii) the Revolving Loan Limit, minus, without duplication, (b) the amount of Revolving Loans and Letter of Credit Usage.
“Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act (7 U.S.C. § 1 et seq.), and any successor statute or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) due to such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (7 U.S.C. § 1 et seq.), and any successor statute and the regulations thereunder at the time the guaranty of such Loan Party or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guaranty or security interest is or becomes illegal.
“Extended GE/Siemens Terms Accounts Dilution” means, for any period, the fraction, expressed as a percentage, the numerator of which is the aggregate amount of reductions in the Eligible GE/Siemens Extended Terms Accounts of all Borrowers, as applicable, for such period (including bad debt write-downs, discounts, advertising allowances and credits) other than by reason of dollar for dollar cash payment and the denominator of which is the aggregate dollar amount of the billings of all Borrowers with respect to such Eligible GE/Siemens Extended Terms Accounts for such period.
17
“Extended Other Terms Accounts Dilution” means, for any period, the fraction, expressed as a percentage, the numerator of which is the aggregate amount of reductions in the Eligible Other Extended Terms Accounts of all Borrowers, as applicable, for such period (including bad debt write-downs, discounts, advertising allowances and credits) other than by reason of dollar for dollar cash payment and the denominator of which is the aggregate dollar amount of the billings of all Borrowers with respect to such Eligible Other Extended Terms Accounts for such period.
“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and (a) any current or future regulations or official interpretations thereof, (b) any agreements entered into pursuant to Section 1471(b)(1) of the IRC, and (c) any intergovernmental agreement entered into by the United States (or any fiscal or regulatory legislation, rules, or practices adopted pursuant to any such intergovernmental agreement entered into in connection therewith).
“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal to, for each day during such period, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Lender from three Federal funds brokers of recognized standing selected by it (and, if any such rate is below zero, then the rate determined pursuant to this definition shall be deemed to be zero).
“Fixed Charge Coverage Ratio” means, with respect to any fiscal period and with respect to any Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP, the ratio of (a) EBITDA for such period minus Unfinanced Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, to (b) Fixed Charges for such period. For the purposes of calculating Fixed Charge Coverage Ratio for any Reference Period, if at any time during such Reference Period (and after the Closing Date), any Loan Party or any of its Subsidiaries shall have made a Permitted Acquisition, Fixed Charges and Unfinanced Capital Expenditures for such Reference Period shall be calculated after giving pro forma effect thereto or in such other manner acceptable to Lender as if any such Permitted Acquisition occurred on the first day of such Reference Period.
“Fixed Charges” means, with respect to any fiscal period and with respect to any Person and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) Interest Expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense) during such period, (b) scheduled principal payments in respect of Indebtedness that are required to be paid during such period, (c) all Federal, State, and local income taxes required to be paid during such period, (d) all Restricted Payments paid (whether in cash or other property, other than common Equity Interests) during such period, and (e) all amounts deposited by any Loan Party into the MCM Earnout Escrow Account during such period (but excluding, (i) the $3,500,000 deposit made on the Fifth Amendment Effective and (ii) any release or distribution of MCM Earnout Escrow Funds from the MCM Earnout Escrow Account to sellers or their representatives, which release or distribution shall not constitute a Fixed Charge).
18
“Fifth Amendment” means the Joinder and Amendment No. 5 to Credit Agreement dated as of the Fifth Amendment Effective Date, among the Loan Parties party thereto and Lender.
“Fifth Amendment Acquisition” means Broadwind’s acquisition of all issued and outstanding shares of capital stock of MCM pursuant to that certain Stock Purchase Agreement, dated as of the Fifth Amendment Effective Date, among MCM, certain shareholders of MCM, as the sellers, and Broadwind as the buyer.
“Fifth Amendment Effective Date” means October 30, 2026, which is the effective date of the Fifth Amendment.
“Fourth Amendment” means the Amendment No. 4 to Credit Agreement dated as of the Fourth Amendment Effective Date, among the Loan Parties party thereto and Lender.
“Fourth Amendment Effective Date” means February 04, 2026, which is the effective date of the Fourth Amendment.
“Freight Forwarders” shall mean the Persons listed on Schedule 1.1(c) hereto or such other Person or Persons as may be selected by a Borrower after the date hereof and after written notice by a Borrower to Lender who are reasonably acceptable to Lender to handle the receipt of inventory within the United States or to clear inventory through the Bureau of Customs and Border Protection or other domestic or foreign export control authorities or otherwise perform port of entry services to process inventory imported by a Borrower from outside the United States (such Persons sometimes being referred to herein individually as a “Freight Forwarder”), provided, that, as to each such Person, (a) Lender shall have received a Freight Forwarder agreement by such Person in favor of Lender (in form and substance satisfactory to Lender) duly authorized, executed and delivered by such Person, (b) such agreement shall be in full force and effect and (c) such Person shall be in compliance in all material respects with the terms thereof.
“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.
“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, certificate of formation, by-laws, limited liability company agreement, operating agreement or other organizational or governing documents of such Person.
“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, county, 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 (including any supra-national bodies such as the European Union or the European Central Bank).
“Gross Availability” means, as of any date of determination, the sum of (a) the Borrowing Base plus (b) any Reserves deducted in computing the Borrowing Base.
19
“Gross Availability of Advanced Deposit Inventory” means, as of any date of determination, for any particular Advanced Deposit Customer, the Gross Availability attributable to the Eligible Finished Goods Inventory, Eligible In-Transit Inventory and Eligible Work-in-Process Inventory included in the Borrowing Base which has been purchased by any Borrower for the purpose of completing an order or project for such Advanced Deposit Customer.
“Guarantor” means each Person (other than an individual) that at any time guaranties all or any portion of the Obligations.
“Guaranty” means the Guaranty, dated of even date herewith, by each Loan Party in favor of Lender and any other guarantee of the Obligations at any time executed and delivered by a Loan Party in favor of Lender.
“Hedge Agreement” means a “swap agreement” as that term is defined in Section 101(53B)(A) of the Bankruptcy Code.
“Increase” has the meaning set forth in Section 2.12.
“Indebtedness” as to any Person means (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and, other than royalty payments payable in the ordinary course of business in respect of non-exclusive licenses), (f) all monetary obligations of such Person owing under Hedge Agreements (which amount shall be calculated based on the amount that would be payable by such Person if the Hedge Agreement were terminated on the date of determination), and (g) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (f) above. For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation.
“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other Federal or State bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.
“Interest Expense” means, for any period, the aggregate of the interest expense of a Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
20
“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide accounts receivable arising in the ordinary course of business), or acquisitions of Indebtedness, Equity Interests, or all or substantially all of the assets of such other Person (or of any division or business line of such other Person), and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustment for increases or decreases in value, or write-ups, write-downs, or write-offs with respect to such Investment.
“Investment Grade Account Debtor” means, any account debtor with rating equal to or higher than Baa3 (or the equivalent) by Moody’s or BBB- (or the equivalent) by S&P, or an equivalent rating by any other nationally recognized statistical rating agency selected by Borrowers.
“Investment Grade Accounts Dilution” means, for any period, the fraction, expressed as a percentage, the numerator of which is the aggregate amount of reductions in the Eligible Investment Grade Accounts of all Borrowers, as applicable, for such period (including bad debt write-downs, discounts, advertising allowances and credits) other than by reason of dollar for dollar cash payment and the denominator of which is the aggregate dollar amount of the billings of all Borrowers with respect to such Eligible Investment Grade Accounts for such period.
“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.
“Lender” has the meaning set forth in the preamble to this Agreement.
“Lender Insurance” has the meaning set forth in Section 5.6(b).
“Lender Expenses” has the meaning set forth in Section 5.12.
“Lender Payment Account” means such account of Lender described on Annex LPA hereto or such other account as Lender may from time to time designate in writing to a Borrower as the Lender Payment Account for purposes of the Loan Documents.
“Letter of Credit” has the meaning set forth in Section 2.3.
“Letter of Credit Usage” means, as of any date, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit, and (b) the aggregate amount of outstanding reimbursement obligations with respect to Letters of Credit which remain unreimbursed or which have not been paid through a Revolving Loan.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.
21
“Loan Account” has the meaning set forth in Section 2.4(a).
“Loan Documents” means this Agreement, the Control Agreements, each Borrowing Base Certificate, each Security Agreement, each Guaranty, any note or notes executed by a Borrower in connection with this Agreement and payable to Lender, any subordination agreement, and any other instrument or agreement entered into, now or in the future, by any Loan Party in connection with this Agreement (but specifically excluding agreements for Bank Products).
“Loan Manager Service” means Lender’s proprietary automated loan management program that may from time to time be entered into between a Borrower at such time and Lender.
“Loan Party” means any Borrower or any Guarantor.
“Margin Stock” as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
“Material Adverse Effect” means (a) a material adverse effect in the business, operations, results of operations, assets, liabilities or financial condition of the Loan Parties, taken as a whole, (b) a material impairment of the ability of Loan Parties to perform their obligations under the Loan Documents to which they are a party or of Lender’s ability to enforce the Obligations or realize upon the Collateral (other than as a result of an action taken or not taken that is solely in the control of Lender), or (c) a material impairment of the enforceability or priority of the Liens of Lender with respect to all or a material portion of the Collateral.
“Material Amount” means $500,000.
“Material Indebtedness” means Indebtedness (other than the Revolving Loans and the Term Loan) of a Loan Party in an aggregate principal amount exceeding the Material Amount. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of a Loan Party in respect of any Hedge Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that a Loan Party would be required to pay if such Hedge Agreement were terminated at such time.
“Material Intellectual Property” means any intellectual property owned by or licensed to any Loan Party or any of its Subsidiaries that is material to the conduct of the business of the Loan Parties and their Subsidiaries, taken as a whole, including all proprietary software used by or on behalf of such Person or offered, marketed, or licensed (including software as a service) by such Person to third parties for generating material revenue for Loan Parties or any of their Subsidiaries (“Proprietary Software”). Notwithstanding the foregoing, Material Intellectual Property shall not include any software licensed (including software as a service) to any Borrower or any of its Affiliates from any third party, which is Shrink-wrap Software, unless such software is incorporated into and material to, necessary for and material to the operation of, or used for purposes of providing and material to the provision of, any Proprietary Software, and not readily replaceable by any Borrower or any of its Affiliates.
“Maturity Date” means January 1, 2028.
“Maximum Credit” means $42,578,000.
22
“MCM Contingent Purchase Price” means the contingent purchase price payable by Broadwind pursuant to Section 2.2(a)(vi) and Exhibit C of the MCM Stock Purchase Agreement, in an aggregate amount not to exceed $7,000,000 (as reduced by the Margin Amount (as defined in the MCM Stock Purchase Agreement)).
“MCM Earnout Escrow Account” means the escrow account established pursuant to the MCM Escrow Agreement for the deposit of funds in respect of the MCM Contingent Purchase Price.
“MCM Earnout Escrow Funds” means the funds on deposit in the MCM Earnout Escrow Account from time to time, together with any interest and other income thereon.
“MCM Escrow Agreement” means that certain Escrow Agreement, dated as of the Fifth Amendment Effective Date, by and among Broadwind, Summit Equity Group, L.L.C., as Shareholder Representative, and U.S. Bank National Association, as escrow agent, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof.
“MCM Stock Purchase Agreement” means that certain Stock Purchase Agreement, dated as of the Fifth Amendment Effective Date, among MCM, certain shareholders of MCM, Summit Equity Group, L.L.C., as Shareholder Representative, and Broadwind, as buyer, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof.
“Mortgages” means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a Loan Party in favor of Lender, in form and substance reasonably satisfactory to Lender, that encumber the Collateral consisting of Real Property.
“Net Orderly Liquidation Value” shall mean, as to Eligible Equipment, at any time, the value of such Eligible Equipment, determined on an orderly liquidation basis, reduced by commissions, fees, costs, and expenses reasonably contemplated in connection with the liquidation thereof, as set forth in the most recent appraisal of the Eligible Equipment delivered, at the sole cost and expense of Borrowers, to Lender in the exercise of its Permitted Discretion.
“Net Recovery Percentage” means, as of any date of determination, the percentage of the book value of the inventory of a Borrower that is estimated to be recoverable in an orderly liquidation of such inventory net of all associated costs and expenses of such liquidation, such percentage to be determined as to each category of inventory and to be as specified in the most recent appraisal that is received by, and acceptable to, Lender in the exercise of its Permitted Discretion.
23
“Obligations” means (a) all loans (including the Revolving Loans and the Term Loan), debts, principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), premiums, liabilities (including all amounts charged to any Loan Account), obligations (including reimbursement and indemnification obligations with respect to Letters of Credit whether or not contingent), fees, expenses (and any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), guaranties, and all covenants and duties of any other kind and description owing by any Loan Party arising out of, under, pursuant to, in connection with, or evidenced by any Loan Document and whether or not for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due, and all other expenses or other amounts that any Loan Party is required to pay or reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents, and (b) all Bank Product Obligations, provided, that, notwithstanding anything to the contrary contained herein, the Obligations shall exclude any Excluded Swap Obligation. Without limiting the generality of the foregoing, the Obligations include the obligation to pay (i) the principal of the Revolving Loans and the Term Loan, (ii) interest accrued on the Revolving Loans and the Term Loan, (iii) the amount necessary to reimburse Lender for amounts paid or payable pursuant to Letters of Credit, (iv) Letter of Credit commissions, fees (including fronting fees) and charges, (v) Lender Expenses, (vi) fees payable under any Loan Document, and (vii) indemnities and other amounts payable by any Loan Party under any Loan Document. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations of the Obligations, both prior and subsequent to any Insolvency Proceeding.
“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.
“Off-Balance Sheet Financing” means, with respect to any Loan Party or any of its Subsidiaries, any transaction, obligation, or arrangement (including any synthetic lease, operating lease that would have been classified as such under GAAP prior to ASC 842, sale-leaseback transaction, receivables facility, factoring arrangement, securitization transaction, or similar structured financing) that (a) is not or may not be required to be reflected as Indebtedness on the balance sheet of the Loan Parties and their Subsidiaries under GAAP, but (b) involves the incurrence of a reimbursement, repurchase, payment, performance, sale, commitment, or similar obligation by such Loan Party or its Subsidiary, whether contingent or otherwise. For the avoidance of doubt, “Off-Balance Sheet Financing” includes any obligations of a Loan Party or one of its Subsidiaries under any special purpose or variable interest entity that is not consolidated with such Person under GAAP.
“Patriot Act” has the meaning specified therefor in Section 4.20 of this Agreement.
“Payment Conditions” means, at the time of determination with respect to any specified transaction or payment, the following:
(a) as of the date of any such transaction or payment, and after giving effect thereto, no Event of Default shall exist;
(b) as of the date of any such transaction or payment, and after giving effect thereto, both (A) the Excess Availability for the immediately preceding 30 consecutive day period shall be not less than 17.5% of the Revolving Loan Limit, and after giving effect to the transaction or payment, on a pro forma basis using the most recent calculation of the Borrowing Base immediately prior to any such payment or transaction, the Excess Availability shall be not less than the greater of such amounts, and (B) as of the date of any such transaction or payment, and after giving effect thereto, on a pro forma basis, the Fixed Charge Coverage Ratio for the immediately preceding 12 consecutive fiscal month ending on the last day of the applicable fiscal period prior to the date of such payment or transaction for which financial statements are required to have been delivered to Lender (with any such payment treated as a Fixed Charge as of the last day of the applicable 12 month period for purposes of calculating the Fixed Charge Coverage Ratio under this clause (b) and as calculated for any subsequent proposed payment) shall be at least 1.10 to 1.00:
24
(c) Lender shall have received not less than five Business Days’ prior written notice of the proposed payment or transaction (or such shorter period as determined by Lender) and such information with respect thereto as Lender may reasonably request, including (i) the proposed date and amount of the payment and (ii) a description of the transaction or event giving rise to such payment and the proposed date of the consummation of such payment or transaction; and
(d) Lender shall have received a certificate of an Authorized Person of a Borrower certifying as to compliance with the preceding clauses and demonstrating (in reasonable detail) the calculations required thereby.
“Permitted Acquisition” means any acquisition by a Person of all or substantially all of the assets of (or of any division or business line of) any other Person, or the acquisition by a Person of all of the Equity Interests of any other Person (whether by means of a merger, consolidation, or otherwise), provided, that, as to any such acquisition, each of the following conditions is satisfied:
(a) as of the date of such acquisition and after giving effect thereto, no Event of Default exists or would exist and the proposed acquisition is consensual;
(b) Lender shall have received from a Borrower a written certificate, in form and substance satisfactory to Lender, showing that the Loan Parties (i) would be in compliance with the financial covenant(s) in Section 7 of this Agreement for the fiscal month ended immediately prior to the proposed date of consummation of such proposed acquisition regardless of whether such financial covenant(s) are required to be tested for such fiscal month, and (ii) are projected to be in compliance with the financial covenant(s) in Section 7 of this Agreement for each of the 12 fiscal months in the period ended one year after the proposed date of consummation of such proposed acquisition assuming that such financial covenant(s) will be required to be tested in each such fiscal month, provided, that, such certificate shall include reasonably detailed calculations with respect to such financial covenant(s) and the calculation of the financial covenant(s) shall be on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to such proposed acquisition, are factually supportable, and are expected to have a continuing impact, in each case, determined as if the acquisition had been effective at the beginning of the relevant period and as are acceptable to Lender) created by adding the historical financial statements of Borrowers to the historical consolidated financial statements of the Person to be acquired (or the historical financial statements related to the assets to be acquired) pursuant to the proposed acquisition;
25
(c) Lender shall have received forecasted balance sheets, profit and loss statements, and cash flow statements of the Person or assets to be acquired, all prepared on a basis consistent with such Person’s (or assets’) historical financial statements, together with appropriate supporting details and a statement of underlying assumptions for the one year period following the date of the proposed acquisition, on a quarter by quarter basis, in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Lender;
(d) as of the date of any such acquisition, each of the Payment Conditions shall be satisfied;
(e) the assets being acquired or the Person whose Equity Interests are being acquired did not have negative EBITDA during the 12 consecutive month period most recently ended prior to the date of the proposed acquisition for which financial statements are then available;
(f) Lender shall have received written notice from a Borrower of the proposed acquisition at least 15 Business Days prior to the anticipated closing date of the proposed acquisition and, not later than five Business Days prior to the anticipated closing date of the proposed acquisition (or such shorter period of time to which Lender may consent), copies of the acquisition agreement and other material documents relative to the proposed acquisition, which agreement and documents shall be reasonably acceptable to Lender;
(g) the assets being acquired, or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the business of the Loan Parties or a business reasonably related thereto;
(h) the assets being acquired are located within the United States, or the Person whose Equity Interests are being acquired is organized in a jurisdiction located within the United States; and
(i) the purchase consideration payable in respect of all Permitted Acquisitions (including the proposed acquisition and including deferred payment obligations) shall not exceed $40,000,000 in the aggregate.
“Permitted Affiliate” which will mean (i) any Affiliate of General Electric Company and/or Siemens AG as of the Closing Date, and any Affiliate of MacLean Power Systems as of the Fifth Amendment Effective Date, and (ii) any Affiliate of any of the entities described in clause (i) which has been identified in writing by the Borrower Representative to the Lender for inclusion as a Permitted Affiliate and has been approved in writing by Lender as a Permitted Affiliate in the exercise of its Permitted Discretion.
“Permitted Bill and Hold Accounts” means accounts owing by General Electric Company, its Subsidiaries and/or its Permitted Affiliates or Siemens AG, its Subsidiaries and/or its Permitted Affiliates which expressly permit any Borrower to bill such account debtor for goods vended by such Borrower which are stored at a location of any Borrower prior to being transported to such account debtor.
“Permitted Discretion” means a determination made in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.
26
“Permitted Dispositions” means each of the following:
(a) sales, abandonment, or other dispositions of equipment that is substantially worn, damaged, or obsolete or no longer used or useful in the ordinary course of business and leases or subleases of Real Property not useful in the conduct of the business of a Loan Party;
(b) sales of inventory to buyers in the ordinary course of business;
(c) the use or transfer of money in a manner that is not prohibited by the terms of any Loan Document;
(d) the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business;
(e) the granting of Permitted Liens;
(f) the sale or discount, in each case without recourse, of accounts receivable (other than Eligible Accounts) arising in the ordinary course of business, but only in connection with the compromise or collection thereof;
(g) any involuntary loss, damage or destruction of property;
(h) any involuntary condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, or confiscation or requisition of use of property;
(i) the making of Restricted Payments that are expressly permitted to be made pursuant to this Agreement;
(j) the making of Permitted Investments;
(k) the lapse, abandonment or other disposition of patents, trademarks, copyrights, and other intellectual property rights that are not material and are no longer used or useful in any material respect in the business of a Loan Party and do not appear on and are not otherwise affixed to or incorporated in any inventory or necessary in connection with the books and records of a Loan Party or do not have any material value;
(l) sales or other dispositions of assets of a Loan Party not otherwise described in the provisions set forth in this definition, provided, that, as to any such sale or other disposition, each of the following conditions is satisfied: (i) as of the date of such sale or other disposition, and after giving effect thereto, no Event of Default exists, (ii) each such sale is an arms’ length transaction and the applicable Loan Party receives at least the fair market value of the assets disposed of, (iii) the consideration received by the applicable Loan Party consists of at least 75% cash and is paid at the time of the consummation of the transaction, (iv) the aggregate amount of the consideration received from all assets sold or disposed of permitted under this clause (l) shall not exceed the Material Amount in any fiscal year of a Loan Party, (v) such transaction does not involve the sale or other disposition of any accounts, inventory, intellectual property or Equity Interests, and (vi) the cash proceeds from any such sale or other disposition (net only of reasonable and customary direct costs related thereto and amounts required to be applied to any Permitted Indebtedness secured by such assets as a result of such sale or other disposition) shall be paid to Lender for application to the Obligations;
27
(m) a sale or other disposition of accounts in connection with a Permitted Supplier Financing Transaction;
(n) dispositions of assets acquired by a Loan Party pursuant to a Permitted Acquisition consummated within 12 months of the date of the proposed disposition so long as (i) the consideration received for the assets to be so disposed is at least equal to the fair market value of such assets, (ii) the assets to be so disposed are not necessary or economically desirable in connection with the business of Loan Parties, and (iii) the assets to be disposed of are readily identifiable as assets acquired pursuant to the subject Permitted Acquisition; and
(o) sales, transfers, or other dispositions of assets by a Loan Party to another Loan Party.
“Permitted Indebtedness” means:
(a) the Obligations;
(b) Indebtedness as of the Closing Date set forth on Schedule 6.1;
(c) Indebtedness (including under any Capital Lease) arising after the Closing Date to the extent secured by Liens on equipment or Real Property acquired after the Closing Date in an aggregate outstanding principal amount not to exceed $5,000,000 at any time; provided, that, (i) such Liens do not apply to any property of a Loan Party other than specific items of equipment or Real Property, (ii) the Indebtedness secured thereby does not exceed the cost of the applicable equipment or Real Property, as the case may be and (iii) as of the date any such Indebtedness is incurred and after giving effect thereto, no Event of Default shall exist;
(d) Indebtedness arising in connection with the endorsement of instruments or other payment items for deposit and unsecured Indebtedness incurred in respect of netting services, overdraft protection, and other like services, in each case, incurred in the ordinary course of business;
(e) Indebtedness of a Loan Party in respect of bid, payment and performance bonds, workers’ compensation claims, unemployment insurance, health, disability and other employee benefits or property, casualty or liability insurance, or guarantees of the foregoing types of Indebtedness, including guaranties by Company of any Loan Party’s performance under contracts in the ordinary course of business and consistent with current practices as of the Closing Date;
(f) the incurrence by any Loan Party of Indebtedness under Hedge Agreements that is incurred for the bona fide purpose of hedging the interest rate, commodity, or foreign currency risks associated with such Loan Party's operations and not for speculative purposes;
(g) Indebtedness incurred in the ordinary course of business in respect of credit cards, credit card processing services, debit cards, stored value cards, commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”), or any cash management or related services;
28
(h) Subordinated Indebtedness; provided, that, the aggregate principal amount of such Indebtedness shall not exceed $1,500,000 outstanding at any time;
(i) unsecured Indebtedness incurred after the Closing Date and not otherwise specifically described in this definition so long as the aggregate principal amount of all such Indebtedness outstanding at any time shall not exceed $500,000; and
(j) contingent liabilities in respect of any indemnification obligation, adjustment of purchase price, non-compete, or similar obligation of any Loan Party incurred in connection with the consummation of one or more Permitted Acquisitions;
(k) unsecured Indebtedness of any Loan Party in respect of Earn-Outs owing to sellers of assets or Equity Interests to such Loan Party that is incurred in connection with the consummation of one or more Permitted Acquisitions so long as such unsecured Indebtedness is subordinated on terms and conditions reasonably acceptable to Lender;
(k-1) unsecured Indebtedness of any Loan Party in respect of the MCM Contingent Purchase Price, so long as such Indebtedness (i) does not exceed $7,000,000 in the aggregate (as reduced by the Margin Amount (as defined in the MCM Stock Purchase Agreement)), (ii) is subordinated pursuant to Section 6.10 of the MCM Stock Purchase Agreement on terms and conditions satisfactory to Lender, and (iii) no Loan Party shall amend, modify, supplement or waive any provision of the MCM Stock Purchase Agreement relating to the MCM Contingent Purchase Price (including Section 2.2(a)(vi), Section 6.10 and Exhibit C thereof) or the MCM Escrow Agreement without the prior written consent of Lender;
(l) Indebtedness of a Person whose assets or Equity Interests are acquired by a Loan Party in a Permitted Acquisition; provided, that, such Indebtedness (i) is either purchase money Indebtedness or a Capital Lease with respect to Equipment or mortgage financing with respect to Real Property, (ii) was in existence prior to the date of such Permitted Acquisition, and (iii) was not incurred in connection with, or in contemplation of, such Permitted Acquisition;
(m) unsecured Indebtedness solely to finance insurance premiums under insurance policies maintained by such Loan Party in the ordinary course of business for insurance required under this Agreement; and
(n) Indebtedness pursuant to extensions, renewals and refinancings of the Indebtedness set forth in clauses (b), (c), (h) and (l) above so long as the principal amount of such Indebtedness is not increased (and any terms with respect to clause (h) above are permitted by the applicable subordination agreement).
29
“Permitted Investments” means each of the following:
(a) Investments of a Loan Party consisting of cash at any time no Revolving Loans are outstanding; except that notwithstanding that any Revolving Loans are outstanding at any time, a Loan Party may from time to time in the ordinary course of business consistent with its current practice as of the Closing Date make deposits of cash or other immediately available funds in operating demand deposit accounts used for disbursements to the extent required to provide funds for amounts drawn or anticipated to be drawn shortly on such accounts and such funds may be held in overnight investments until so drawn (so long as such funds and overnight investments are not held more than two Business Days from the date of the initial deposit thereof);
(b) Investments in negotiable instruments deposited or to be deposited for collection in the ordinary course of business;
(c) advances made in connection with purchases of goods or services in the ordinary course of business;
(d) Investments received in settlement of amounts due to any Loan Party effected in the ordinary course of business or owing to any Loan Party as a result of Insolvency Proceedings involving an account debtor or upon the foreclosure or enforcement of any Lien in favor of a Loan Party;
(e) Investments owned by any Loan Party on the Closing Date and set forth on Schedule 6.9;
(f) Equity Interests or other securities acquired in connection with the satisfaction or enforcement of Indebtedness or claims due or owing to a Loan Party (in bankruptcy of customers or suppliers or otherwise outside the ordinary course of business) or as security for any such Indebtedness or claims;
(g) deposits of cash made in the ordinary course of business to secure performance of operating leases;
(h) loans and advances to employees and officers of a Loan Party in the ordinary course of business for any business purpose and in an aggregate amount not to exceed the Material Amount outstanding at any one time;
(i) Investments resulting from Bank Products permitted under clause (f) and clause (g) of the definition of Permitted Indebtedness;
(j) Investments made with cash after the Closing Date by a Loan Party in or to any Person not otherwise described in the provisions above; provided, that, (i) as of the date of any such Investment and after giving effect thereto, each of the Payment Conditions is satisfied, and (ii) the Investment shall be in or to a Person that engages in a line of business substantially similar to, or ancillary or related to, or used in or useful to, the business that a Loan Party is engaged in on the Closing Date;
(k) Permitted Acquisitions;
(l) Investments held by a Person acquired in a Permitted Acquisition to the extent that such Investments were not made in contemplation of or in connection with such Permitted Acquisition and were in existence on the date of such Permitted Acquisition; and
30
(m) Investments by a Loan Party in another Loan Party.
(n) deposits by any Loan Party into the MCM Earnout Escrow Account in accordance with the MCM Stock Purchase Agreement and the MCM Escrow Agreement; provided, that, (i) as of the date of any such deposit and after giving effect thereto, each of the Payment Conditions is satisfied (and for purposes of calculating the Fixed Charge Coverage Ratio under the Payment Conditions, such deposit shall be treated as a Fixed Charge), (ii) the initial deposit of $3,500,000 into the MCM Earnout Escrow Account on the Fifth Amendment Effective Date shall be permitted without regard to clause (i) above (for avoidance of doubt, such $3,500,000 deposit shall not be subject to the satisfaction of Payment Conditions and shall not count as a Fixed Charge), and (iii) Lender shall have no Lien on or right of control over the MCM Earnout Escrow Funds while held in the MCM Earnout Escrow Account; provided, further, that any MCM Earnout Escrow Funds released or distributed to any Loan Party (including any excess funds returned to Broadwind pursuant to Section 4(d) of Exhibit C to the MCM Stock Purchase Agreement) shall promptly be deposited into a Deposit Account subject to a Control Agreement in favor of Lender and shall constitute Collateral upon receipt by such Loan Party;
“Permitted Liens” means:
(a) Liens granted to, or for the benefit of, Lender to secure the Obligations;
(b) Liens for unpaid taxes, assessments, or other governmental charges or levies that either (i) are not yet past due, or (ii) do not have priority over the Liens of Lender and the underlying taxes, assessments, or charges or levies are being contested in good faith by appropriate proceedings diligently pursued and available to a Loan Party, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien and with respect to which adequate reserves have been set aside on its books in accordance with GAAP;
(c) judgment Liens in connection with court proceedings that do not constitute an Event of Default; provided, that, (i) such Liens are being contested in good faith by appropriate proceedings diligently pursued and available to a Loan Party, in each case prior to the commencement of foreclosure or other similar proceedings, which proceedings (or orders entered in connection with such proceeding) have the effect of preventing the forfeiture or sale of the property subject to any such Lien, and (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor;
(d) Liens set forth on Schedule 6.2;
(e) the interests of lessors under operating leases and non-exclusive licensors under license agreements;
(f) Liens on equipment and Real Property arising after the Closing Date to secure Indebtedness permitted under clause (c) of the definition of Permitted Indebtedness, whether such Indebtedness is assumed or incurred by a Loan Party;
31
(g) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet past due, or (ii) are being contested in good faith by appropriate proceedings diligently pursued and available to a Loan Party, in each case prior to the commencement of foreclosure or other similar proceedings, which proceedings (or orders entered in connection with such proceeding) have the effect of preventing the forfeiture or sale of the property subject to any such Lien and with respect to which adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor;
(h) Liens on cash deposited to secure a Loan Party’s obligations in connection with worker's compensation or other unemployment insurance, or to secure obligations in connection with the making or entering into of bids, tenders, contracts or leases in the ordinary course of business and not in connection with the borrowing of money or Liens on cash deposited to secure its reimbursement obligations with respect to surety or appeal bonds obtained in the ordinary course of business;
(i) with respect to any Real Property, easements, rights of way, and zoning restrictions that do not materially interfere with or impair the use or operation thereof;
(j) non-exclusive licenses of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business;
(k) rights of setoff or bankers’ liens upon deposits of funds in favor of banks or other depository institutions, solely to the extent incurred in connection with the maintenance of such deposit accounts in the ordinary course of business;
(l) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(m) Liens upon the accounts of any Permitted Supplier Financing Account Debtor so long as such Liens are subject to an intercreditor agreement, in form and substance reasonably satisfactory to Lender with the holder(s) of such Liens;
(n) Liens solely on any cash earnest money deposits made by a Loan Party in connection with any letter of intent or purchase agreement with respect to a Permitted Acquisition; and
(o) Liens assumed by any Loan Party in connection with a Permitted Acquisition that secure Indebtedness of a Person whose assets or Equity Interests are acquired by a Loan Party in a Permitted Acquisition which Indebtedness is permitted under clause (l) of the definition of Permitted Indebtedness.
“Permitted Supplier Financing Account Debtor” means any of (i) Siemens Gamesa Renewable Energy, S.A. and /or Siemens Gamesa Renewable Energy, A/S and/or any one or more of their permitted affiliates, (ii) General Electric Company, its Subsidiaries and affiliates; (iii) Metso Oyj and Metso Minerals Industries, Inc. and their various subsidiaries and affiliates located in Canada and the United States, (iv) Caterpillar Inc. and its designated Subsidiaries and affiliates, (v) Hubbell Incorporated, and its designated Subsidiaries and affiliates, and (vi) any other account debtor of any Borrower approved in writing by Lender from time to time in the exercise of its Permitted Discretion at the written request of Administrative Borrower.
32
“Permitted Supplier Financing Transaction” means any transaction in which any Borrower may, from time to time, sell to a financial buyer accounts of such Borrower in the ordinary course of business on a non-recourse and true sale basis so long as (i) the account debtor of such accounts is a Permitted Supplier Financing Account Debtor, (ii) such sale is made pursuant to documentation (including, without limitation, intercreditor arrangements) in form and substance reasonably satisfactory to Lender and (iii) each Deposit Account into which proceeds of each such Permitted Supplier Financing Transaction are deposited shall be identified in writing by the Administrative Borrower to Lender and at all times from and after 30 days (or such longer period as Lender may agree in writing) following the Closing Date (or, solely with respect to the proceeds from the sale of the Hubbell Incorporated accounts, 30 days (or such longer period as Lender may agree in writing) following the Fifth Amendment Effective Date), shall be subject to a Control Agreement.
“Permitted Tax Distribution” means that if the Equity Interests of a Loan Party are owned by a Person that is not a Loan Party and such Loan Party has been converted to a pass-through entity for tax purposes, distributions by such Loan Party solely for the payment of income taxes by any Person as a result of its direct or indirect ownership of the Equity Interests of such Loan Party in an amount not to exceed the Federal and State income tax paid or to be paid by the owner of Equity Interests in a Loan Party on taxable income earned by such Loan Party and attributable to such owner as a result of such Loan Party’s “pass-through” tax status, assuming the highest marginal income tax rate for Federal and State (for the State or States in which any equity owner is liable for income taxes with respect to such income) income tax purposes, after taking into account any deduction for State income taxes in calculating the Federal income tax liability and all other deductions, credits, deferrals and other reductions available to such owners from or through such Loan Parties.
“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.
“Projections” means forecasted balance sheets, profit and loss statements, and cash flow statements with respect to a Loan Party, all prepared on a basis consistent with its historical financial statements, and projected amounts available under the Borrowing Base, together with appropriate supporting details and a statement of underlying assumptions.
"PRS Reclassification Bucket" has the meaning ascribed to such term in the definition of Capex Bucket.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. § 5390(c)(8)(D).
“QFC Credit Support” has the meaning set forth in Section 11.7.
33
“Real Property” means any estates or interests in real property now owned or hereafter acquired by any Loan Party and the improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located.
“Real Property Subline Amount” means $1,575,000; provided, that such amount shall be permanently reduced by an amount equal to 1/180th of that initial amount on November 1, 2026, and on the first day of each month ending thereafter.
“Reserves” means, as of any date of determination, the Special Reserve, the Advanced Deposit Reserve, any reserve established pursuant to Section 2.4(d)(iii) and those other reserves that Lender deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(b), to establish and maintain (including reserves with respect to (a) sums that any Loan Party is required to pay under any Loan Document (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay, (b) amounts owing by any Loan Party to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than a Permitted Lien), which Lien or trust, in the Permitted Discretion of Lender likely would be pari passu or have a priority superior to Lender’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral), (c) estimated costs relating to unpaid freight charges, warehousing or storage charges, taxes, duties, and other similar unpaid costs associated with the acquisition and import of Eligible In-Transit Inventory and estimated reclamation claims of unpaid sellers of Eligible In-Transit Inventory and (d) obligations in respect of Bank Products.
“Restricted Payment” means any (a) dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests of a Loan Party, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or on account of any return of capital to the stockholders, partners or members (or the equivalent Person thereof) of a Loan Party, or payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any Equity Interests of a Loan Party, or any setting apart of funds or property for any of the foregoing, or (b) the payment by a Loan Party of any management, advisory or consulting fee to any Person or the payment of any extraordinary salary, bonus or other form of compensation to any Person who is directly or indirectly a significant partner, shareholder, owner or executive officer of any such Person, to the extent such extraordinary salary, bonus or other form of compensation is not included in the corporate overhead of a Loan Party.
“Revolving Loan Limit” means $35,000,000.
“Revolving Loans” means the revolving loans made by Lender to a Borrower under this Agreement.
“Sanctioned Entity” means (a) a country or territory or a government of a country or territory, (b) an agency of the government of a country or territory, (c) an organization directly or indirectly controlled by a country or territory or its government, or (d) a Person resident in or determined to be resident in a country or territory, in each case of clauses (a) through (d) that is a target of Sanctions, including a target of any country sanctions program administered and enforced by OFAC.
34
“Sanctioned Person” means, at any time (a) any Person named on the list of Specially Designated Nationals and Blocked Persons maintained by OFAC, OFAC’s consolidated Non-SDN list or any other Sanctions-related list maintained by any Governmental Authority, (b) a Person or legal entity that is a target of Sanctions, (c) any Person operating, organized or resident in a Sanctioned Entity, or (d) any Person directly or indirectly owned or controlled (individually or in the aggregate) by or acting on behalf of any such Person or Persons described in clauses (a) through (c) above.
“Sanctions” means individually and collectively, respectively, any and all economic sanctions, trade sanctions, financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes, anti-terrorism laws and other sanctions laws, regulations or embargoes, including those imposed, administered or enforced from time to time by: (a) the United States of America, including those administered by OFAC, the U.S. Department of State, the U.S. Department of Commerce, or through any existing or future executive order, (b) the United Nations Security Council, (c) the European Union or any European Union member state, (d) His Majesty’s Treasury of the United Kingdom, or (e) any other Governmental Authority with jurisdiction over Lender or any Loan Party or any of their respective Subsidiaries or Affiliates
“Second Amendment” means the Amendment No. 2 to Credit Agreement dated as of December 19, 2024, among the Loan Parties party thereto and Lender.
“Second Amendment Effective Date” means December 19, 2024, which is the effective date of the Second Amendment.
“Security Agreement” means the Security Agreement, dated of even date herewith, by and among each Loan Party and Lender, and any other agreement or instrument at any time executed by a Loan Party or any other Person in connection with this Agreement that is intended to (or purports to) create, perfect or evidence a Lien to secure the Obligations.
“Shrink-wrap Software” means commercially available, off-the-shelf software licensed on standard terms that is not customized for any Loan Party.
“SOFR” means a rate per annum equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SOFR Loans” means each portion of a Revolving Loan or the Term Loan that bears interest at a rate determined by reference to Daily Simple SOFR.
35
“Solvent” means, with respect to any Person as of any date of determination, that (a) at fair valuations, the sum of such Person’s debts (including contingent liabilities) is less than all of such Person’s assets, (b) such Person is not engaged or about to engage in a business or transaction for which the remaining assets of such Person are unreasonably small in relation to the business or transaction or for which the property remaining with such Person is an unreasonably small capital, (c) such Person has not incurred and does not intend to incur, or reasonably believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (d) such Person is “solvent” or not “insolvent”, as applicable within the meaning given those terms and similar terms under applicable laws relating to voidable transfers, fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).
“Special Reserve” means, (i) $1,000,000 from and after the Closing Date until the Special Reserve Release Date and (ii) $0 (zero) at all times thereafter.
“Special Reserve Release Date” means the first date following the end of the monthly period ended January 31, 2024 on which each of the following requirements are met: (i) no Default or Event of Default shall have occurred and be continuing, (ii) Borrowers are in compliance with Fixed Charge Coverage Ratio covenant set forth in Section 7 and (iii) Lender has received a Compliance Certificate signed by an Authorized Person in accordance with Section 5.01 and Schedule 5.01 accompanied by all financial statements required by Section 5.01 and Schedule 5.01 for the most recently completed month.
“Structured Payables” means any accounts payable or similar obligations of any Loan Party or any of its Subsidiaries that, pursuant to any arrangement or agreement, have payment terms that are extended, modified, or financed in a manner inconsistent with the Loan Party’s ordinary-course trade terms with the applicable supplier (including pursuant to any Supply Chain Financing Arrangement), and, in each case, regardless of whether the arrangement or agreement is committed or uncommitted.
“Subordinated Indebtedness” means any Indebtedness of any Loan Party incurred from time to time that is subordinated in right of payment to the Obligations and is subject to a subordination agreement in form and substance satisfactory to Lender, and is otherwise on terms (including maturity, interest, fees, repayment, covenants and subordination) satisfactory to Lender.
“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the Equity Interests having ordinary voting power to elect a majority of the board of directors (or equivalent) of such corporation, partnership, limited liability company, or other entity.
36
“Supply Chain Financing Arrangement” means any arrangement, program, or facility (including any supplier finance program, supply chain finance services, reverse factoring program, structured payable program, trade payable services, supplier accounts receivable purchases, inventory financing arrangement, or similar arrangement), in each case, pursuant to which (a) trade payables or obligations of any Loan Party or any of its Subsidiaries owing to one or more suppliers or vendors are paid or purchased (whether directly or indirectly) by a third-party finance provider prior to the stated maturity of such payables, or inventory purchases by a Loan Party or any of its Subsidiaries are financed by a third-party finance provider, and (b) the applicable Loan Party or Subsidiary agrees, undertakes, or is otherwise obligated to repay such third-party finance provider (or extend payment terms with suppliers in connection with such program). For the avoidance of doubt, (i) “Supply Chain Financing Arrangement” includes any arrangement that may cause trade payables to be recharacterized as Indebtedness under GAAP, irrespective of how such obligations are classified on the balance sheet, and (ii) “Supply Chain Financing Arrangement” does not include the financing provided under this Agreement.
“Supported QFC” has the meaning set forth in Section 11.7.
“Swap Obligation” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“Term Loan” means the term loan(s) made by Lender to Borrowers under Section 2.1(c) of this Agreement.
“Termination Date” means the earliest to occur of (a) the Maturity Date, (b) the date on which the maturity of the Obligations is accelerated (or deemed accelerated) and the Commitment is terminated (or deemed terminated), or (c) the termination of the Commitment in accordance with the provisions of Section 3.5.
“UCC” means the Uniform Commercial Code as in effect in the State of Illinois and any successor statute, as in effect from time to time (except that terms used herein which are not otherwise defined herein and defined in the Uniform Commercial Code as in effect in the State of Illinois on the Closing Date shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Lender may otherwise determine).
“Unfinanced Capital Expenditures” means Capital Expenditures (a) not financed with the proceeds of any incurrence of Indebtedness (other than the incurrence of any Revolving Loans), the proceeds of any sale or issuance of Equity Interests or equity contributions, the proceeds of any asset sale (other than the sale of inventory in the ordinary course of business), or any insurance proceeds, and (b) that are not reimbursed by a third Person (excluding any Loan Party or any of its Affiliates) in the period such expenditures are made pursuant to a written agreement; provided, however, that Unfinanced Capital Expenditures shall exclude Capital Expenditures in an aggregate amount up to $3,000,000 consisting of (i) up to $1,000,000 in the aggregate of Capital Expenditures paid in cash during the period commencing January 1, 2026 and ending December 31, 2026 and (ii) Capital Expenditures resulting from the reclassification of finished goods inventory constituting natural gas pressure reducing system units (“PRS units”) into rental fleet units so long as such reclassification of PRS units from inventory to Unfinanced Capital Expenditures is made by a Borrower on or before December 31, 2026; provided, further, that the exclusion of any Capital Expenditure from Unfinanced Capital Expenditures pursuant to clause (i) or (ii) above shall be conditioned upon the Borrowers having properly designated such Capital Expenditure to the applicable Capex Bucket by delivering a Capex Designation Report to Lender in accordance with Schedule 5.1.
37
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Special Resolution Regimes” has the meaning set forth in Section 11.7.
“Value” means, the lower of (a) cost computed on a first-in first-out basis in accordance with GAAP or (b) market value; provided, that, for purposes of the calculation of the Borrowing Base, (i) the Value of the inventory shall not include: (A) the portion of the value of inventory equal to the profit earned by any Affiliate on the sale thereof to a Borrower or (B) write-ups or write-downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the inventory shall be computed in the same manner and consistent with the most recent appraisal of the inventory that is received by, and acceptable to, Lender prior to the Closing Date, if any.
1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP; provided, that, if a Borrower notifies Lender that Borrowers request an amendment to any provision hereof to eliminate the effect of any Accounting Changes occurring after the Closing Date or in the application thereof on the operation of such provision (or if Lender requests an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such Accounting Change or in the application thereof, then Lender and Borrowers agree that they will negotiate in good faith amendments to the provisions of this Agreement that are directly affected by such Accounting Change with the intent of having the respective positions of Lender and Borrowers after such change conform as nearly as possible to their respective positions immediately before such Accounting Change took effect and, until any such amendments have been agreed upon and agreed to by Lender, the provisions in this Agreement shall be calculated as if no such Accounting Change had occurred. A Loan Party shall deliver to Lender at the same time as the delivery of any financial statements given in accordance with the provisions of Section 5.1, (a) a description in reasonable detail of any material change in the application of accounting principles employed in the preparation of such financial statements from those applied in the most recently preceding monthly, quarterly or annual financial statements and (b) a reasonable estimate of the effect on the financial statements on account of such changes in application. When used herein, the term “financial statements” shall include the notes and schedules thereto. Notwithstanding anything to the contrary contained herein, (i) all financial statements delivered hereunder shall be prepared, and all financial covenants contained herein shall be calculated, without giving effect to any election under the Statement of Financial Accounting Standards Board’s Accounting Standards Codification Topic 825 (or any similar accounting principle) permitting a Person to value its financial liabilities or Indebtedness at the fair value thereof, and (ii) the term “unqualified opinion” as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is (A) unqualified, and (B) does not include any explanation, supplemental comment, or other comment concerning the ability of the applicable Person to continue as a going concern or concerning the scope of the audit.
38
1.3 UCC Terms. Any terms used in this Agreement that are defined in the UCC shall be construed and defined as set forth in the UCC unless otherwise defined herein; provided, that, to the extent that the UCC is used to define any term herein and such term is defined differently in different Articles of the UCC, the definition of such term contained in Article 9 of the UCC shall govern.
1.4 Construction. 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” and vice-versa Unless the context requires otherwise, (a) 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, modified, supplemented, extended, renewed, restated or replaced (subject to any restrictions on such amendments, supplements or modifications set forth in any Loan Document), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import 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, (d) all references in a Loan Document to Sections, Exhibits and Schedules shall be construed to refer to Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (e) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing 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 (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Section headings in any Loan Document are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. Each schedule and exhibit to this Agreement is incorporated by reference herein and is made a part of this Agreement. Any capitalized term used in any schedule or exhibit to this Agreement shall have the meaning assigned to such term herein, unless otherwise defined in such schedule or exhibit. An Event of Default shall exist or continue until such Event of Default is waived in accordance with Section 9.5 in accordance with the terms hereof. Each Loan Party shall have the burden of establishing any alleged negligence, misconduct or lack of good faith by Lender under any Loan Document. Any reference to an obligation of a Borrower or a Loan Party or to Borrowers or Loan Parties, or to any Borrower or any Loan Party, as the case may be, shall mean that each Borrower or each Loan Party, as the case may be, is jointly and severally liable with each other Borrower or Loan Party in respect of such obligation. In connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (i) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (ii) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time. Any reference in any Loan Document to a merger, transfer, consolidation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability company (or the unwinding of such a division or allocation), as if it were a merger, transfer, consolidation, assignment, sale, disposition or transfer, or similar term, as applicable, to, of or with a separate Person. No provision of any Loan Documents shall be construed against any party by reason of such party having, or being deemed to have, drafted the provision. Any reference to an agreement or other matter being “reasonably satisfactory” to Lender shall mean a determination made in the exercise of reasonable judgment from the perspective of a secured asset-based lender. Any reference to expenses of Lender in any Loan Document shall include all Lender Expenses. Reference to a Loan Party’s “knowledge” or similar concept means actual knowledge of an Authorized Person, or knowledge that an Authorized Person would have obtained if he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employees or agents and a good faith attempt to ascertain the matter.
39
1.5 Time References. Unless the context of this Agreement or any other Loan Document clearly requires otherwise, all references to time of day refer to Central Time, as in effect in Chicago, Illinois on such day. For purposes of the computation of a period of time from a specified date to a later specified date, unless otherwise expressly provided, the word “from” means “from and including” and the words “to” and “until” each means “to and including”; provided, that, with respect to a computation of fees or interest payable to Lender, such period shall in any event consist of at least one full day.
1.6 Payment in Full. Any reference in any Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean (a) the payment in full in cash of the principal and accrued and unpaid interest with respect to the Revolving Loans and the Term Loan, (b) the payment in full in cash of all fees, charges and expenses that have accrued and are unpaid regardless of whether payment has been demanded or is otherwise due, (c) the delivery to Lender of cash collateral, or at Lender’s option, a letter of credit payable to Lender issued by a bank acceptable to Lender and in form and substance satisfactory to Lender, in either case in respect of (i) 105% of the then existing Letter of Credit Usage, (ii) contingent Obligations for which a claim or demand for payment has been made at such time or in respect of matters or circumstances known to Lender at the time, and which are reasonably expected to result in any loss, cost, damage or expense (including attorneys’ fees and legal expenses) to Lender for which Lender would be entitled to indemnification by a Loan Party hereunder and (iii) an amount determined by Lender equal to the reasonably estimated credit exposure, operational risk or processing risk with respect to the then existing Bank Product Obligations, and (d) the termination of the Commitment and the financing arrangements provided by Lender to each Borrower hereunder.
1.7 Rounding. Any financial ratios required to be maintained by a Loan Party pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
1.8 Resolution of Drafting Ambiguities. Each Loan Party acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of the Loan Documents, that it and its counsel reviewed and participated in the preparation and negotiation of the Loan Documents and that any rule of construction to the effect that ambiguities are to be resolved against Lender as the drafting party shall not be applicable in the interpretation of the Loan Documents.
40
2. CREDIT FACILITY
2.1 Revolving Loans; Term Loan.
(a) Revolving Loans and Revolving Loan Limit. Subject to, and upon the terms and conditions contained herein, on and after the Closing Date until the Termination Date, Lender agrees to make Revolving Loans to a Borrower from time to time in amounts requested by or on behalf of such Borrower, provided, that, after giving effect to any such Revolving Loan, the aggregate principal amount of the Revolving Loans outstanding plus the Letter of Credit Usage shall not exceed the lesser of the Borrowing Base at such time or the Revolving Loan Limit.
(b) Reserves. Lender shall have the right (but not the obligation) at any time, in its Permitted Discretion, to establish and increase or decrease Reserves, provided, that, the amount of any Reserve established by Lender shall have a reasonable relationship to the event, condition, other circumstance, or fact that is the basis for such Reserve. To the extent that an event, condition or circumstance as to any eligible asset is addressed pursuant to the treatment thereof within the applicable definition of such terms, Lender shall not also establish a Reserve to address the same event, condition or circumstance. Lender shall notify a Borrower of the establishment of any new categories of Reserves, or any change in the methodology for the calculation of an existing Reserve (in each case after the Closing Date except that such notice shall not be required at any time an Event of Default exists or at any time if Lender, in its Permitted Discretion, determines that it is necessary to act sooner to preserve or protect the Collateral or its value or the rights of Lender therein). In such event, Lender shall be available to discuss the change. A Borrower may take such action as may be required so that the event, condition, circumstance, or fact that is the basis for such Reserve no longer exists. If Lender determines in its Permitted Discretion that the event, condition, other circumstance or fact that is the basis for the establishment or change to such Reserve no longer exists or has otherwise been adequately addressed by a Borrower, Lender shall adjust or eliminate the Reserve accordingly. At any time that the Revolving Loan Limit is less than the amount of the Borrowing Base, Reserves in respect of amounts that may be payable to third parties may be deducted from the Revolving Loan Limit.
(c) Term Loan.
Subject to, and upon the terms and conditions contained herein, on the Closing Date, Lender made an initial Term Loan to Borrowers in the amount of $7,578,000.
Immediately prior to the Second Amendment Effective Date, the outstanding principal balance of the Term Loan initially advanced on the Closing Date equaled $5,051,999.88. On the Second Amendment Effective Date, subject to and upon the conditions set forth in the Second Amendment, Lender agreed to make an additional advance in respect of the Term Loan in the principal amount of $2,526,000.12 so that the initial principal balance of the Term Loan as of the Second Amendment Effective Date shall equal $7,578,000.
41
Immediately prior to the Fifth Amendment Effective Date, the outstanding principal balance of the Term Loan equaled $2,948,253.18. On the Fifth Amendment Effective Date, subject to and upon the conditions set forth in the Fifth Amendment, Lender agreed to make an additional advance in respect of the Term Loan in the principal amount of $1,796,050.00 (which will be used to finance the purchase price of the Fifth Amendment Acquisition) so that the initial principal balance of the Term Loan as of the Fifth Amendment Effective Date shall equal $4,744,303.18.
The principal amount of the Term Loan shall be repaid in 84 consecutive monthly installments (or earlier as provided herein) payable on the first day of each calendar month commencing on November 1, 2026, and each installment shall be in the amount of $56,479.80. The outstanding unpaid principal balance and all accrued and unpaid interest on the Term Loan shall be due and payable on the earlier of (i) the Maturity Date and (ii) the date on which the Term Loan otherwise becomes due and payable pursuant to the terms of this Agreement. Any principal amount of the Term Loan that is repaid or prepaid may not be reborrowed.
2.2 Borrowing Procedures.
(a) Each Revolving Loan shall be made by a written request by or on behalf of a Borrower delivered to Lender (which may be delivered through Lender’s electronic platform or portal) and received by Lender no later than 11:00 a.m. on the Business Day that is the requested date that the Revolving Loan be made, specifying (i) the amount of such Revolving Loan, and (ii) the date of such Revolving Loan, which shall be a Business Day; provided, that, Lender may, in its discretion, elect to accept as timely requests that are received later than 11:00 a.m. on the applicable Business Day, subject to Section 2.2(c). All borrowing requests which are not made on-line via Lender’s electronic platform or portal or pursuant to the Loan Manager Service shall be subject to (and unless Lender elects otherwise in its discretion, such Revolving Loans shall not be made until the completion of) Lender’s authentication process (with results satisfactory to Lender) prior to the funding of any such requested Revolving Loan.
(b) All Revolving Loans shall be conclusively presumed to have been made to, and at the request of and for the benefit of, a Borrower when deposited to the credit of a Borrower or otherwise disbursed or established in accordance with the instructions of a Borrower to the deposit account specified to Lender for such purpose (which shall be at a bank acceptable to Lender) or in accordance with the terms and conditions of this Agreement.
(c) If Lender has separately agreed that a Borrower may use the Loan Manager Service, Revolving Loans (i) will be made solely by the Loan Manager Service, and (ii) will be initiated by Lender and credited to a Borrower’s operating account maintained with Lender as Revolving Loans as of the end of each Business Day in an amount sufficient to maintain an agreed upon ledger balance in such Borrower’s operating account maintained with Lender, subject to Excess Availability. Lender may terminate a Borrower’s access to the Loan Manager Service at any time in its discretion. If Lender terminates a Borrower’s access to the Loan Manager Service, each Borrower may continue to request Revolving Loans as provided herein so long as no Event of Default exists. Lender will have no obligation to make a Revolving Loan through the Loan Manager Service in an amount in excess of Excess Availability or if an Event of Default exists or any of the other conditions set forth in Section 3.2 are not satisfied.
42
2.3 Letter of Credit Facility. As a subfacility under the Credit Facility, subject to, and upon the terms and conditions contained herein, on and after the Closing Date until the Termination Date, Lender agrees to issue or cause an Affiliate to issue standby letters of credit or sight commercial letters of credit for the account of a Borrower for purposes acceptable to Lender (each a “Letter of Credit” and collectively, “Letters of Credit”); provided, that, (a) the aggregate Letter of Credit Usage will not at any time exceed $5,000,000 and (b) as of the date of the issuance of any Letter of Credit, and after giving effect thereto, the aggregate amount of the Revolving Loans and the Letter of Credit Usage will not exceed the lesser of the Borrowing Base or the Revolving Loan Limit. The form and substance of each Letter of Credit will be subject to approval by Lender and each Borrower shall execute and deliver such additional letter of credit agreements, applications and other documents required by Lender as a condition to the issuance, amendment, extension or renewal of any Letter of Credit. Each Letter of Credit will be issued for a term not to exceed 365 days, as designated by a Borrower; provided, that, no Letter of Credit will have an expiration date after the Maturity Date. Each Letter of Credit will be issued under, and subject to, the additional terms and conditions of the letter of credit agreements, applications and any related documents required by Lender. Each drawing paid under a Letter of Credit will be deemed a Revolving Loan and will be repaid by Borrowers in accordance with the terms and conditions of this Agreement applicable to Revolving Loans; provided, that, if Revolving Loans are not available for any reason at the time any drawing is paid by Lender, then Borrowers will immediately pay to Lender the full amount drawn, together with interest on such amount from the date such drawing is paid to the date such amount is fully repaid by Borrowers, at the rate of interest then applicable to Revolving Loans. In such event Borrowers agree that Lender may charge the Loan Account or debit any deposit account maintained by any Loan Party for the amount of any such drawing.
2.4 Payments; Prepayments.
(a) Payments by Borrowers. Except as otherwise expressly provided herein, all payments by a Borrower shall be made to the Lender Payment Account or such other place as Lender may designate in writing to a Borrower from time to time and shall be made in immediately available funds, no later than 1:30 p.m. on the date specified herein. Any payment received by Lender later than 1:30 p.m. shall be deemed to have been received (unless Lender, in its discretion, elects to credit it on the date received) on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day. All payments of Obligations shall be made in Dollars, without offset, counterclaim or defense of any kind, free and clear of (and without deduction for) any taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein, and all interest, penalties or similar liabilities with respect thereto. No Loan Party will fund any repayment of the Credit Facility with proceeds, or provide as Collateral any property, that is directly or indirectly derived from any transaction or activity that is prohibited by Sanctions, Anti-Money Laundering Laws or Anti-Corruption Laws, or that could otherwise cause Lender or any other party to any Loan Document to be in breach of Sanctions, Anti-Money Laundering Laws or Anti-Corruption Laws.
(b) Application of Payments. Subject to the other terms and conditions contained herein, Lender shall apply payments received or collected from a Borrower or for the account of a Borrower (including the monetary proceeds of collections or of realization upon any Collateral) as follows, so long as no Event of Default exists: first, to the payment in full of any fees, indemnities, or expense reimbursements then due to Lender; second, to the payment in full of interest then due in respect of any Revolving Loans and the Term Loan; third, to the payment of principal in respect of the Term Loan then due; fourth, to the payment in full of principal in respect of the Revolving Loans, whether or not then due; and fifth, at any time an Event of Default exists (or as otherwise required by Lender), as cash collateral in an amount up to 105% of the Letter of Credit Usage; and sixth, to pay or prepay any other Obligations, whether or not then due, in such order and manner as Lender directs. Such payments shall be applied as Lender determines at any time an Event of Default exists, including to be used as cash collateral in respect of Obligations related to Letters of Credit (in an amount up to 105% of the Letter of Credit Usage) or such other Obligations as Lender may determine, on such terms as Lender may require.
43
(c) Optional Prepayments.
(i) Each Borrower may prepay the principal of any Revolving Loan at any time in whole or in part, without premium or penalty.
(ii) Each Borrower may, upon at least 10 Business Days prior written notice to Lender, prepay the principal of the Term Loan, in whole or in part. Each prepayment made pursuant to this Section shall be accompanied by the payment of accrued interest to the date of such payment on the amount prepaid. Each such prepayment shall be applied against the remaining installments of principal due on the Term Loan in the inverse order of maturity (and including for this purpose any amount that is due and payable on the Maturity Date as an installment).
(d) Mandatory Prepayments.
(i) If, at any time, the aggregate principal amount of the Revolving Loans outstanding plus the Letter of Credit Usage exceeds the lesser of the Borrowing Base or the Revolving Loan Limit, then a Borrower shall promptly, but in any event, within one Business Day prepay the Obligations in an aggregate amount equal to the amount of such excess (or after the prepayment of all Revolving Loans, upon Lender’s demand, immediately provide cash collateral up to 105% of the Letter of Credit Usage as required to address such excess, even if amounts greater than such excess are required as a result of the amount of any Letters of Credit then outstanding).
44
(ii) Within one Business Day of the date of receipt by any Loan Party of the cash proceeds of any voluntary or involuntary sale or other disposition of assets of any Loan Party permitted under clauses (d), (g), (h) or (l) of the definition of the term Permitted Dispositions, Borrowers shall prepay the outstanding principal amount of the Obligations in an amount equal to 100% of such net cash proceeds received by such Person in connection with such sales or other disposition cash proceeds, net of Indebtedness secured by a Permitted Lien on the asset sold or otherwise disposed of, fees and expenses related to such sale, and taxes paid or payable in connection therewith; provided, that with respect to any net cash proceeds of a disposition arising as a result of any condemnation or casualty loss, so long as (A) no Event of Default shall have occurred and is continuing or would result therefrom, (B) Borrower Representative shall have given Lender prior written notice of Borrowers’ intention to apply such monies to the costs of repair or replacement of the properties or assets that are the subject of such disposition, (C) the monies are held in a deposit account in which Lender has a perfected first-priority security interest, and (D) such Loan Party or its Subsidiary, as applicable, completes such repair, replacement, purchase, or construction within 180 days after the initial receipt of such monies (or such longer period of time as Lender shall agree in writing), then the Loan Party or such Loan Party’s Subsidiary whose assets were the subject of such disposition shall have the option to apply such monies to the costs of repair and/or replacement of the assets that are the subject of such disposition. All such net cash proceeds received in connection with any such sale or disposition (including any unused net cash proceeds remaining after such 180 day period in clause (D) above (or such longer period of time as Lender shall agree in writing) expires without such repair, replacement, purchase, or construction being made or completed) shall be paid to Lender and applied (i) in the case of any such sale or disposition of Eligible Real Property, to the Revolving Loans with a permanent reduction in the Real Property Subline Amount equal to the greater of (x) 60% of the appraised fair market value of the Eligible Real Property so sold or disposed and (y) the net cash proceeds of the Eligible Real Property so sold or disposed until the Real Property Subline Amount is reduced to zero (whereupon any such remaining proceeds will be applied to the Revolving Loans without any further reduction in availability) and (ii) in the case of any such sale or disposition of any other assets, to the Term Loan in the inverse order of maturity (including for this purpose the amount due and payable on the Maturity Date as an installment) until paid in full and thereafter to the Revolving Loans; provided, that no Loan Party nor any of its Subsidiaries shall have the right to use such net cash proceeds of such sale or disposition to make such repairs, replacements, purchases, or construction in excess of $1,000,000 in any given fiscal year without the prior written consent of Lender. Nothing contained in this Section 2.4(d)(ii) shall permit any Loan Party or any of its Subsidiaries to sell or otherwise dispose of any assets other than in accordance with Section 6.4.
(iii) If Lender obtains an appraisal of the Eligible Equipment at any time as permitted under this Agreement, and such appraisal shows the aggregate unpaid principal amount of the Term Loan to exceed 85% of the Net Orderly Liquidation Value of Eligible Equipment, then Lender may (1) require Borrowers to immediately prepay the unpaid principal of the Term Loan in the amount of such excess or (2) establish and maintain a Reserve in the amount of such excess
(iv) Each of the mandatory prepayments described in this Section 2.4(d) shall be made without premium or penalty and shall not result in a permanent reduction in the Revolving Loan Limit.
(e) Maintenance of Loan Account; Statements of Obligations. Lender shall maintain an account on its books in the name of each Borrower (the “Loan Account”) evidencing the Obligations, including Revolving Loans, Letters of Credit, the Term Loan, interest, fees and Lender Expenses. Any such records shall be presumptively correct, absent manifest error, provided, that, the failure to make any such entry or the existence of any error in such records, shall not affect any of the Obligations. Lender shall make available to a Borrower monthly statements regarding the Loan Account, including the principal amount of the Revolving Loans and the Term Loan, interest, fees and Lender Expenses. Each such statement, absent manifest error, shall be conclusively presumed to be correct and accurate and constitute an account stated between each Borrower and Lender unless, within 30 days after Lender first makes such a statement available to a Borrower, such Borrower shall deliver to Lender written objection thereto describing any error contained in such statement.
45
(f) Evidence of Debt. Lender may request that Revolving Loans made by it be evidenced by a promissory note. In such event, each Borrower shall execute and deliver to Lender a promissory note payable to the order of Lender (or, if requested by Lender, to Lender and its registered assigns) and in a form approved by Lender. Thereafter, the Revolving Loans evidenced by such promissory note and interest thereon shall at all times be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
(g) Charges to Loan Account. At the election of Lender, all payments of principal, interest, fees, expenses and other amounts payable under the Loan Documents may be paid from the proceeds of Revolving Loans made hereunder whether made following a request by a Borrower or a deemed request as provided in this Section or may be deducted from any deposit account of any Borrower maintained with Lender. Each Borrower is hereby irrevocably deemed to request that Lender, and Lender is hereby authorized to, (i) make a Revolving Loan for the purpose of paying each payment of principal, interest, fees, expenses and other amounts as it becomes due under any Loan Document and agrees that all such amounts charged shall constitute Revolving Loans, (ii) make a Revolving Loan to preserve or protect the Collateral, or any portion thereof, and (iii) charge any deposit account of any Borrower maintained with Lender for each payment of principal, interest, fees, expenses and other amounts due under any Loan Document.
(h) Repayment on Termination Date. Each Borrower shall make payment in full of the Obligations on the Maturity Date or if earlier, any other Termination Date.
(i) Indemnity for Returned Payments. If after any payment, or proceeds of Collateral, are applied to the payment of any of the Obligations, Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Lender. Each Loan Party shall be liable to pay to Lender, and does hereby agree to indemnify and hold Lender harmless for, the amount of any payments or proceeds surrendered or returned. This Section shall remain effective notwithstanding any contrary action which may be taken by Lender in reliance upon such payment or proceeds. This Section shall survive the payment in full of the Obligations and the termination of this Agreement.
(j) Crediting Payments. The receipt of any payment item by Lender shall not be required to be considered a payment on account unless such payment item is a wire transfer of immediately available funds made to the Lender Payment Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then a Loan Party shall be deemed not to have made such payment. Notwithstanding anything to the contrary contained herein, any payment item shall be deemed received by Lender only if it is received into the Lender Payment Account on a Business Day on or before 1:30 p.m. If any payment item is received into the Lender Payment Account on a non-Business Day or after 1:30 p.m. on a Business Day (unless Lender, in its discretion, elects to credit it on the date received), it shall be deemed to have been received by Lender as of the opening of business on the immediately following Business Day.
46
(k) FATCA Documentation. If a payment made to Lender (or any assignee or participant) under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Person were to fail to comply with the applicable due diligence and reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the IRC, as applicable), such Person shall deliver to Administrative Borrower (or, in the case of a participant, to Lender only) at the time or times prescribed by law and at such time or times reasonably requested by Administrative Borrower (or, in the case of a participant, Lender) such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the IRC) and such additional documentation reasonably requested by Administrative Borrower (or, in the case of a participant, Lender) as may be necessary for Lender or Borrowers to comply with their obligations under FATCA and to determine that such Person has complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause, “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
2.5 Interest and Fees.
(a) Rates and Payment of Interest.
(i) All Obligations (except for the undrawn amount of any issued and outstanding Letters of Credit) shall bear interest at Daily Simple SOFR in effect from time to time, plus the Applicable Margin, except (A) Obligations shall bear interest at the Default Rate (whether before or after any judgment) automatically on and after an Event of Default under Section 8.1(d) and upon written notice by Lender to a Borrower on and after any other Event of Default, and (B) as otherwise provided in Section 2.7.
(ii) Interest shall accrue from the date a Revolving Loan is made or Obligation is incurred or payable, as the case may be, until paid in full by a Borrower. If a Revolving Loan is repaid on the same day made, one day’s interest shall accrue. Interest accrued on Revolving Loans and the Term Loan shall be due and payable in arrears, on the first day of each calendar month, and in each case, in any event on the Termination Date. Interest accrued on any other Obligations shall be due and payable as provided in the Loan Documents and, if no payment date is specified, shall be due and payable on earlier of the first day of the calendar month after incurred or demand or the Termination Date. Notwithstanding the foregoing, interest accrued at the Default Rate shall be due and payable on demand.
(b) Computation of Interest and Fees. Interest and fees calculated on a per annum basis shall be calculated on the basis of a 360 day year and actual days elapsed. The interest rate on non-contingent Obligations shall increase or decrease by an amount equal to each increase or decrease in Daily Simple SOFR in the case of SOFR Loans effective on the date of any change in Daily Simple SOFR, and if at any time there are Base Rate Loans, an amount equal to each increase or decrease in the Base Rate effective on the date of any change in the Base Rate. Each determination by Lender of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absent manifest error. All fees shall be fully earned when due and shall not be subject to rebate, refund or proration.
47
(c) Fees; Expenses. Each Borrower shall pay to Lender the fees and Lender Expenses in the amounts and at the time specified in Schedule 2.5.
2.6 Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under any Loan Document, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. If at any time the interest rate set forth in any of the Loan Documents exceeds the maximum interest rate allowable under applicable law, the interest rate will be deemed to be such maximum interest rate allowable under applicable law.
2.7 Illegality; Market Conditions. Notwithstanding anything to the contrary contained herein, subject to the occurrence of a Benchmark Transition Event, as such terms are defined in Schedule 2.7, if (a) any Change in Law has made it unlawful, or any Governmental Authority has asserted that it is unlawful, for Lender to make or maintain a SOFR Loan or to maintain the Commitment with respect to a SOFR Loan, or to determine or charge interest rates based on Daily Simple SOFR or SOFR or (b) Lender determines in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that Daily Simple SOFR cannot be determined pursuant to the definition thereof other than as a result of a Benchmark Transition Event, then Lender shall give notice thereof to a Borrower and may (A) declare that SOFR Loans will not thereafter be made by Lender, such that any request for a SOFR Loan from Lender shall be deemed to be a request for a Base Rate Loan unless Lender’s declaration has been withdrawn (and it shall be withdrawn promptly upon the cessation of the circumstances described in clause (a) or (b) above) and (B) require that all outstanding SOFR Loans made by Lender be converted to Base Rate Loans immediately, in which event all outstanding SOFR Loans shall be so converted and all Obligations (except for the undrawn amount of any issued and outstanding Letters of Credit) shall bear interest at the Base Rate in effect from time to time, plus the Applicable Margin.
2.8 Increased Costs. If any Change in Law shall: (a) 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, Lender; (b) subject Lender to any taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein, and all interest, penalties or similar liabilities with respect thereto of any kind whatsoever with respect to any Loan Document or any SOFR Loan made by it, or change the basis of taxation of payments to Lender in respect thereof; or (c) impose on Lender any other condition, cost or expense affecting any Loan Document or SOFR Loans, and the result of any of the foregoing shall be to increase the cost to Lender of making or maintaining any SOFR Loan (or of maintaining its obligation to make any such Revolving Loan), or to increase the cost to Lender or to reduce the amount of any sum received or receivable by Lender hereunder (whether of principal, interest or any other amount) then, upon request of Lender, each Borrower will pay to Lender, such additional amount or amounts as will compensate Lender, as the case may be, for such additional costs incurred or reduction suffered.
2.9 Capital Requirements. If Lender determines that any Change in Law affecting Lender or any lending office of Lender or Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on Lender’s capital or on the capital of Lender’s holding company, if any, as a consequence of any Loan Document, the Commitment or the Revolving Loans, to a level below that which Lender or Lender’s holding company could have achieved but for such Change in Law (taking into consideration Lender’s policies and the policies of Lender’s holding company with respect to capital adequacy), then from time to time each Borrower will pay to Lender such additional amount or amounts as will compensate Lender or Lender’s holding company for any such reduction suffered.
48
2.10 Certificates for Reimbursement. A certificate of Lender setting forth the amount or amounts necessary to compensate Lender or its holding company, as the case may be, as specified in Sections 2.8 or 2.9 and delivered to any Borrower shall be conclusive absent manifest error. Each Borrower shall pay Lender the amount shown as due on any such certificate within 30 days after receipt thereof.
2.11 Delay in Requests. Failure or delay on the part of Lender to demand compensation pursuant to Sections 2.8 or 2.9 shall not constitute a waiver of Lender’s right to demand such compensation, provided that a Borrower shall not be required to compensate Lender pursuant to this Section for any increased costs incurred or reductions occurring more than 180 days prior to the date that Lender becomes aware of the event giving rise to Lender’s claim for compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180 day period referred to above shall be extended to include the period of retroactive effect thereof).
2.12 Incremental Facilities.
(a) At any time during the period from and after the Closing Date through but excluding the date that is the 4 year anniversary of the Closing Date, at the option of Borrowers (but subject to the conditions set forth in clause (b) below), the Commitments and the Revolving Loan Limit may be increased by an amount in the aggregate for all such increases of the Commitments and the Revolving Loan Limit not to exceed the Available Increase Amount (each such increase, an “Increase”). In response to a request for an Increase, Lender, in its sole and absolute discretion, may choose to increase its Commitments and the Revolving Loan Limit or decline such Increase, in whole or in part (it being understood that the Lender shall not be obligated to increase its Commitments or Revolving Loan Limit) in connection with any such proposed Increase. Any Increase shall be in an amount of at least $4,000,000 and integral multiples of $1,000,000 in excess thereof. In no event may the Commitments and the Revolving Loan Limit be increased pursuant to this Section 2.12 on more than 2 occasions in the aggregate for all such Increases. Additionally, for the avoidance of doubt, it is understood and agreed that in no event shall the aggregate amount of the Increases to the Commitments exceed $10,000,000.
(b) Each of the following shall be conditions precedent to any Increase of the Commitments and the Revolving Loan Limit in connection therewith:
(i) Lender shall have agreed in writing to provide the applicable Increase in an amendment to this Agreement,
(ii) each of the conditions precedent set forth in Section 3.2 are satisfied,
49
(iii) in connection with any Increase, if any Loan Party or any of its Subsidiaries owns or will acquire any Margin Stock, Borrowers shall deliver to Lender an updated Form U-1, duly executed and delivered by the Borrowers, together with such other documentation as Lender shall reasonably request, in order to enable Lender to comply with any of the requirements under Regulations T, U or X of the Board of Governors,
(iv) Borrowers have delivered to Lender updated pro forma Projections (after giving effect to the applicable Increase) for the Loan Parties and their Subsidiaries evidencing compliance on a pro forma basis with Section 7 for the twelve months (on a month-by-month basis) immediately following the proposed date of the applicable Increase, and
(v) Unless otherwise agreed in writing between the Borrowers and Lender, the interest rate margins with respect to the Revolving Loans to be made pursuant to the increased Commitments shall be the same as the interest rate margin applicable to Revolving Loans hereunder immediately prior to the applicable date of the effectiveness of the increased Commitments and Revolving Loan Limit.
(c) Unless otherwise specifically provided herein, all references in this Agreement and any other Loan Document to Revolving Loans shall be deemed, unless the context otherwise requires, to include Revolving Loans made pursuant to the increased Commitments and Revolving Loan Limit pursuant to this Section 2.12.
(d) The Revolving Loans, Commitments, and Revolving Loan Limit established pursuant to this Section 2.12 shall constitute Revolving Loans, Commitments, and Revolving Loan Limit under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from any guarantees and the security interests created by the Loan Documents. Borrowers shall take any actions reasonably required by Lender to ensure and demonstrate that the Liens and security interests granted by the Loan Documents continue to be perfected under the UCC or otherwise after giving effect to the establishment of any such new Commitments and Revolving Loan Limit.
3. CONDITIONS; TERM OF AGREEMENT
3.1 Conditions Precedent to the Initial Revolving Loan and the Term Loan. The obligation of Lender to make the initial Revolving Loan or the initial Term Loan or issue the initial Letter of Credit is subject to the satisfaction of each of the conditions precedent set forth on Schedule 3.1.
3.2 Conditions Precedent to all Revolving Loans and the Term Loan. The obligation of Lender to make any Revolving Loans or Term Loan or issue, amend, renew or extend any Letter of Credit at any time shall be subject to the following conditions precedent:
(a) the representations and warranties of each Loan Party contained in the Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date of such Revolving Loan or Term Loan, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof));
50
(b) as of the date of any such Revolving Loan, Term Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, or the use of the proceeds thereof, and after giving effect to any of the foregoing, no Event of Default, or event or condition which with notice, or passage of time, or both, would constitute an Event of Default, shall exist;
(c) Lender shall have received a request for such Revolving Loan or such Letter of Credit (or for the amendment, renewal or extension thereof) in accordance with the requirements of the Loan Documents; and
(d) as of the date of any such Revolving Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, or the use of the proceeds thereof, and after giving effect to any of the foregoing, the aggregate principal amount of the Revolving Loans and the Letter of Credit Usage shall not exceed the lesser of the Revolving Loan Limit or the Borrowing Base.
Each request for a Revolving Loan or the issuance, amendment, renewal or extension of any Letter of Credit delivered by a Borrower shall be deemed to be a representation and warranty by each Borrower that the conditions specified in Section 3.2 have been satisfied on and as of the date of the applicable Revolving Loan or issuance, amendment, renewal or extension of a Letter of Credit and after giving effect thereto. The making of any Revolving Loan or Term Loan or the issuance, amendment, renewal or extension of any Letter of Credit shall not be deemed a modification or waiver by Lender of any of the terms of any Loan Document or any Event of Default or event or condition which with notice, or passage of time, or both, would constitute an Event of Default.
3.3 Maturity. The Commitment shall continue in full force and effect for a term ending on the Maturity Date (unless terminated earlier in accordance with the terms hereof).
3.4 Effect of Maturity. On the Maturity Date, the Commitment shall automatically terminate and all of the Obligations shall become due and payable without notice or demand and each Borrower shall be required to pay in full all of the Obligations. No termination of the Commitment shall relieve or discharge any Loan Party of its duties, obligations, or covenants under any Loan Document and the Liens of Lender in the Collateral shall continue to secure the Obligations and shall remain in effect until payment in full of all Obligations.
3.5 Early Termination by Borrowers. A Borrower has the option, at any time upon 10 Business Days prior written notice to Lender, to make payment in full of all of the Obligations. The foregoing notwithstanding, a Borrower may rescind such written notice if it states that the proposed payment in full of the Obligations is to be made with the proceeds of third party Indebtedness and if the closing for such incurrence does not happen on or before the date of the proposed termination set forth in such notice (in which case, a new notice shall be required to be sent in connection with any subsequent termination). For the avoidance of doubt, nothing in this Section 3.5 shall effect a termination of any Hedge Agreement or other agreement for Bank Products, which may only be terminated in accordance with their respective terms.
51
4. REPRESENTATIONS AND WARRANTIES
Each Loan Party represents and warrants to Lender the following:
4.1 Due Organization and Qualification. Each Loan Party (a) is duly organized and existing and in good standing under the laws of the jurisdiction of its organization, (b) is qualified to do business in any State where the failure to be so qualified could reasonably be expected to have a Material Adverse Effect, and (c) has all requisite power and authority to own and operate its assets, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby.
4.2 Due Authorization; No Conflict. The execution, delivery, and performance by each Loan Party of the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Loan Party. The execution, delivery, and performance by each Loan Party of the Loan Documents to which it is a party do not and will not (a) violate any provision of Federal, State, or local law or regulation applicable to any Loan Party, the Governing Documents of any Loan Party, or any order, judgment, or decree of any court or other Governmental Authority binding on any Loan Party, except in each violations which would not reasonably be expected to have a Material Adverse Effect, (b) result in or require the creation or imposition of any Lien of any nature whatsoever upon any assets of any Loan Party, other than Permitted Liens, or (c) require any approval of any holder of Equity Interests of a Loan Party, other than consents or approvals that have been obtained and that are still in force and effect.
4.3 Binding Obligations; Perfected Liens.
(a) Each Loan Document has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.
(b) The Liens of Lender are validly created, perfected and first priority Liens, subject as to priority, only to Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens, or the interests of lessors under Capital Leases, except for Liens in respect of (i) motor vehicles that are subject to a certificate of title, (ii) money, (iii) letter-of-credit rights (other than supporting obligations), (iv) commercial tort claims (other than those that, by the terms of any Loan Document, are required to be perfected), and (v) any deposit accounts and securities accounts not subject to a Control Agreement as permitted by any Loan Document, and subject only to the filing of financing statements in the appropriate filing offices.
4.4 Title to Assets; No Encumbrances. Each Loan Party has (a) good, sufficient and legal title to (in the case of fee interests in Real Property), (b) valid leasehold interests in (in the case of leasehold interests in real or personal property), and (c) good and marketable title to (in the case of all other personal property), all of its assets reflected in its most recent financial statements delivered to Lender, in each case except for assets disposed of since the date of such financial statements to the extent permitted by any Loan Document. All of such assets are free and clear of Liens except for Permitted Liens.
52
4.5 Litigation. Except as set forth on Schedule 4.5, there are no actions, suits, proceedings or investigations pending or, to the knowledge of a Loan Party, threatened in writing against a Loan Party, that (a) relate to any Loan Document or transaction contemplated thereby or (b) either individually or in the aggregate has or could reasonably be expected to have a Material Adverse Effect.
4.6 Compliance with Laws. No Loan Party (a) is in violation of any applicable laws, rules, regulations, executive orders, or codes that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No inventory has been produced in violation of the Fair Labor Standards Act of 1938.
4.7 No Material Adverse Effect. All historical financial statements relating to each Loan Party that have been delivered by a Loan Party to Lender have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, the financial condition of such Loan Party as of the date thereof and results of operations for the period then ended. Since April 22, 2022, no event, circumstance, or change has occurred that has or could reasonably be expected to have a Material Adverse Effect.
4.8 Solvency. Each Loan Party is Solvent.
4.9 Environmental Condition. Except as set forth on Schedule 4.9 and except for any noncompliance which would not reasonably be expected to have a Material Adverse Effect, each Loan Party and its Subsidiaries are in compliance with all applicable Federal, State and local environmental, hazardous waste, health and safety statutes, and any rules or regulations related to such statutes, which govern or affect the operations or properties of such Loan Party and its Subsidiaries. None of the operations of any Loan Party or its Subsidiaries is the subject of any Federal, State or local investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. No Loan Party has any material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.
4.10 Complete Disclosure; Projections. All factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about each Loan Party) furnished by or on behalf of any Loan Party in writing to Lender in connection with any Loan Document, and all other such factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about any Loan Party) hereafter furnished by or on behalf of a Loan Party in writing to Lender will be true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. Projections delivered to Lender represent the good faith estimate of each Loan Party, on the date such Projections are delivered, of the future performance of such Loan Party for the periods covered thereby based upon assumptions believed by such Loan Party to be reasonable at the time of the delivery thereof to Lender (it being understood that such Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of a Loan Party, and no assurances can be given that such Projections will be realized). As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.
53
4.11 Taxes. Except as otherwise permitted under Section 5.5, all tax returns and reports of each Loan Party required to be filed by it have been timely filed, and all taxes shown on such tax returns to be due and payable and all other taxes upon a Loan Party and upon its assets, income, businesses and franchises that are due and payable have been paid when due and payable. Each Loan Party has made adequate provision in accordance with GAAP for all taxes not yet due and payable. To the knowledge of any Loan Party, there is no proposed tax assessment against a Loan Party that is not being contested in good faith by appropriate proceedings diligently pursued and available to a Loan Party, in each case prior to the commencement of foreclosure or other similar proceedings, which proceedings (or orders entered in connection with such proceeding), and adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor.
4.12 Margin Stock; Investment Company Act, Etc. No Loan Party or any of its Subsidiaries owns any Margin Stock or engages principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Revolving Loans, the Term Loan or any Letter of Credit 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 or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System. No Loan Party or any of its Subsidiaries expects to acquire any Margin Stock. No Loan Party is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or under any other Federal or State statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. No Loan Party is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.
4.13 OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws. No Loan Party or any of its Subsidiaries is in violation of any Sanctions. No Loan Party nor any of its Subsidiaries nor, to the knowledge of such Loan Party, any director, officer, employee, agent or Affiliate of such Loan Party or such Subsidiary (a) is a Sanctioned Person or a Sanctioned Entity, (b) has any assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. Each of the Loan Parties and its Subsidiaries has implemented and maintains in effect policies and procedures reasonably designed to ensure compliance with Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. Each of the Loan Parties and its Subsidiaries, and to the knowledge of each such Loan Party, each director, officer, employee, agent and Affiliate of each such Loan Party and each such Subsidiary, is in compliance with all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. No proceeds of any Loan made or Letter of Credit issued hereunder will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity, or otherwise used in any manner that would result in a violation of any Sanction, Anti-Corruption Law or Anti-Money Laundering Law by any Person (including any Lender, Bank Product Provider, or other individual or entity participating in any transaction).
54
4.14 Employee and Labor Matters. There is (a) no unfair labor practice complaint pending or, to the knowledge of any Loan Party, threatened against any Loan Party before any Governmental Authority and no grievance or arbitration proceeding pending or threatened against any Loan Party which arises out of or under any collective bargaining agreement and that could reasonably be expected to result in a material liability, and (b) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened in writing against any Loan Party that could reasonably be expected to result in a material liability. Except as described on Schedule 4.14, no Loan Party is party to or bound by any collective bargaining agreement, management agreement or consulting agreement. No Loan Party has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or similar State law, which remains unpaid or unsatisfied.
4.15 ERISA. No Loan Party, nor any of its Subsidiaries, nor any of its ERISA Affiliates, maintains or contributes to any Benefit Plan.
4.16 Capitalization and Subsidiaries. Schedule 4.16 sets forth (a) a correct and complete list of the name and entity type of each Subsidiary of each Loan Party and each such Subsidiary’s relationship to each Loan Party, and (b) a true and complete list of each class of the authorized Equity Interests of each Loan Party, all of which issued Equity Interests are validly issued, outstanding, fully paid and non-assessable, and owned beneficially and of record by the Persons identified on Schedule 4.16.
4.17 Brokers. There are no brokerage commissions, finder’s fees or investment banking fees payable in connection with any transactions contemplated by the Loan Documents.
4.18 Dormant Subsidiaries. Broadwind Services, LLC, is a Dormant Subsidiary.
4.20 Patriot Act. To the extent applicable, each Loan Party is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001, as amended) (the “Patriot Act”).
4.21 Other Financing Arrangements
As of the Fifth Amendment Effective Date, no Loan Party nor any of its Subsidiaries is party to or otherwise obligated under any Supply Chain Financing Arrangement, Off-Balance Sheet Financing, or Structured Payables, except for (a) Permitted Supplier Financing Transactions and (b) those set forth on Schedule 4.21.
55
5. AFFIRMATIVE COVENANTS
Unless otherwise hereafter agreed in writing by Lender:
5.1 Financial Statements; Borrowing Base Certificate; Other Information. Each Loan Party (a) will deliver to Lender each of the financial statements, reports, and other items set forth on Schedule 5.1 no later than the times specified therein, (b) will maintain a system of accounting that enables each Loan Party to produce financial statements in accordance with GAAP, and (c) will (i) keep a reporting system that shows all additions, sales, claims, returns, and allowances with respect to its sales, and (ii) maintain its billing systems and practices substantially as in effect as of the Closing Date and will only make material modifications thereto with notice to, and with the consent of, Lender.
5.2 Notices of Material Events. A Loan Party will promptly (but in any event within three Business Days) notify Lender in writing of: (a) any event, condition or circumstance that, with the giving of notice, the passage of time, or both, would be an Event of Default or the occurrence of any Event of Default, (b) any matter that has, or could reasonably be expected to have, a Material Adverse Effect, (c) any breach of Section 4.13 or Section 6.11, (d) any dispute, litigation, investigation, proceeding or suspension between a Loan Party and any Governmental Authority or the commencement of, or any material development in, any litigation or proceeding affecting a Loan Party stating a claim in excess of the Material Amount, (e) any material change in accounting policies or financial reporting practices of a Loan Party, (f) any change in the senior executive officers of a Loan Party, (g) the discharge by a Loan Party of its independent accountants or any withdrawal or resignation by such accountants, (h) except as publicly disclosed prior to the Closing Date, any collective bargaining agreement or other labor contract (or material amendment to any of the foregoing) to which a Loan Party becomes a party, or the application for the certification of a collective bargaining agent, (i) the filing of any Lien for unpaid taxes against any Loan Party in excess of 50% of the Material Amount, (j) any termination or cancellation of insurance which a Loan Party is required to maintain under the Loan Documents (other than insurance which is replaced as of the date of termination or cancellation), or any loss, damage, or destruction to, or commencement of any action or proceeding for the taking under eminent domain, condemnation or similar proceeding, of Collateral in the amount of 50% of the Material Amount or more, whether or not covered by insurance, and (k) any dispute or claims by any customers of a Loan Party exceeding the Material Amount individually or in the aggregate during any fiscal year or any inventory returned to or recovered by a Loan Party outside of the ordinary course of business with a fair market value that exceeds 50% of the Material Amount individually or in the aggregate. Each notice pursuant to this Section will be accompanied by a statement of an Authorized Person of a Loan Party setting forth details of the occurrence referred to therein and stating what action each Loan Party has taken and proposes to take with respect thereto.
5.3 Existence. Each Loan Party will preserve and keep in full force and effect such Person’s valid existence and good standing in its jurisdiction of organization and, except as could not reasonably be expected to have a Material Adverse Effect, good standing with respect to all other jurisdictions in which it is qualified to do business and any rights, franchises, permits, licenses, accreditations, authorizations, or other approvals material to their businesses.
56
5.4 Maintenance of Properties. Each Loan Party will maintain and preserve all of its assets that are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear, tear, casualty, and condemnation and Permitted Dispositions excepted.
5.5 Taxes. Each Loan Party will pay in full before delinquency or before the expiration of any extension period all taxes imposed, levied, or assessed against it, or any of its assets or in respect of any of its income, businesses, or franchises (including taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or subsequently imposed by any Governmental Authority and all related interest, penalties or similar liabilities), except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, and (b) such Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP and none of the Collateral would become subject to forfeiture or loss; provided, that, each Loan Party will make timely payment or deposit of all withholding taxes and other payroll taxes to the appropriate Governmental Authority as and when claimed to be due, notwithstanding the foregoing exceptions, and will, upon request, furnish Lender with proof reasonably satisfactory to Lender indicating that such Loan Party has made such payments or deposits.
5.6 Insurance. (a) Each Loan Party will maintain with financially sound and reputable carriers (i) insurance in such amounts (with no greater risk retention) and against such risks and such other hazards, as is customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (ii) all insurance required pursuant to the Loan Documents. Each Loan Party will from time to time upon Lender’s request furnish to Lender correct and complete copies of any insurance policies and such other information in reasonable detail as to the insurance so maintained as Lender may request. (b) Unless Borrowers provide Lender with evidence of the continuing insurance coverage required by this Agreement, Lender may purchase insurance at Borrowers’ expense to protect Lender’s interests in the Collateral (“Lender Insurance”). This insurance may, but need not, protect each Borrower’s and each other Loan Party’s interests. The coverage that Lender purchases may, but need not, pay any claim that is made by or against any Borrower or any other Loan Party in connection with the Collateral. Borrowers may later cancel any insurance purchased by Lender, but only after providing Lender with evidence that Borrowers have obtained the insurance coverage required by this Agreement. If Lender purchases insurance for the Collateral, as set forth above, Borrowers will be responsible for the costs of that insurance, including interest and any other charges that may be imposed in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance shall be due and payable by Borrowers on demand, and may be added to Borrowers’ total outstanding Obligations. The costs of the insurance may be more than the cost of insurance Borrowers may be able to obtain on their own.
57
5.7 Field Examinations; Appraisals. Upon the request of Lender after reasonable prior notice to any Borrower, each Borrower will permit Lender or a firm engaged by Lender for such purpose to (a) conduct field examinations, including with respect to such Borrower’s practices in the calculation of the Borrowing Base and the assets included in the Borrowing Base and related financial information such as, but not limited to, sales, gross margins, payables, accruals and reserves, provided, that, commencing after the Closing Date, (i) Lender shall not conduct, at the expense of a Borrower, more than 1 field examinations in any 12 month period so long as Excess Availability during such 12 month period is at all times not less than 15% of the Revolving Loan Limit and no Event of Default exists, (ii) Lender may conduct, at the expense of a Borrower, such other field examinations as Lender may request at any time as may be required by law or regulation or when an Event of Default exists or when Excess Availability during any 12 month period is at any time less than 15% of the Revolving Loan Limit or in connection with a Permitted Acquisition (including the Fifth Amendment Acquisition) and (iii) Lender may conduct additional field examinations at any time at its own expense and (b) conduct appraisals of the Collateral in form, scope and methodology acceptable to Lender, provided, that, (i) Lender shall not conduct, at the expense of a Borrower, more than 1 appraisal of each of the inventory, equipment and real property of Borrowers in any 12 month period (or solely with respect to Fiscal Year 2026, more than 2 inventory appraisals) so long as Excess Availability during such 12 month period is at all times not less than 15% of the Revolving Loan Limit and no Event of Default exists, (ii) Lender may conduct, at the expense of a Borrower, such other appraisals as Lender may request at any time as required by law or regulation, when an Event of Default exists or when Excess Availability during any 12 month period is at any time less than 15% of the Revolving Loan Limit or in connection with a Permitted Acquisition (including the Fifth Amendment Acquisition), and (iii) Lender may conduct additional appraisals at any time at its own expense. Upon the request of Lender, after reasonable prior notice to a Borrower when no Event of Default exists, as part of any field examination or at other reasonable times during normal business hours when no Event of Default exists or such other times as Lender may request otherwise, each Loan Party will permit representatives and other professionals (including investment bankers, consultants, accountants, and lawyers) engaged by Lender for such purpose to visit and inspect any of its properties and to discuss its affairs, finances and accounts with its directors, officers, and accountants, at the expense of a Borrower.
5.8 Compliance with Laws; OFAC; Sanctions, Etc. Each Loan Party will subject to the terms below, comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Each Loan Party will, and will cause each of its Subsidiaries to, comply with all applicable Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. Each of the Loan Parties and its Subsidiaries shall implement and maintain in effect policies and procedures reasonably designed to ensure compliance by the Loan Parties and their Subsidiaries and their respective directors, officers, employees, agents and Affiliates with Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws.
58
5.9 Cash Management; Collection of Proceeds of Collateral.
(a) Each Loan Party will establish and may maintain, at its expense, deposit accounts and cash management services of a type and on terms, and with the banks, set forth on Schedule 5.9 and, subject to Section 5.9(b), such other banks as a Loan Party may hereafter select (such other banks, together with the banks set forth on Schedule 5.9, collectively, the “Cash Management Banks” and individually, a “Cash Management Bank”), provided, that, the Loan Parties shall (i) establish their primary depository and treasury management relationships with Wells Fargo or one or more of its Affiliates on or before the date that is 120 days after the Closing Date (or such longer period as Lender may agree) and will maintain such depository and treasury management relationships at all times during the term of this Agreement, except as Lender may otherwise hereafter specifically agree in writing and (ii) (A) not later than January 21, 2024 cause to be closed Borrower’s deposit account number ending in ‘2440784 with CIBC Bank USA (the “Deferred CIBC Account”) and deliver written confirmation of such closure to Lender and (B) not later than October 31, 2023 (or such longer period not exceeding 20 additional days as Lender may agree) cause to be closed all deposit accounts at CIBC Bank USA other than the Deferred CIBC Account and deliver written confirmation of such closure to Lender. Each Loan Party will deliver, or cause to be delivered to Lender, a Control Agreement with respect to each of its deposit accounts duly authorized, executed and delivered by each Cash Management Bank where a deposit account is maintained, such Loan Party and Lender; provided, that, a Loan Party will not be required to deliver a Control Agreement with a Cash Management Bank as to any deposit account that is specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of the salaried employees of a Loan Party. Each Loan Party will direct all account debtors or other obligors in respect of any amounts payable to a Loan Party to make payment of all such amounts to a Collection Account and otherwise take all reasonable actions to cause such payments to be made to a Collection Account. Each Loan Party and its respective employees, agents and Affiliates will, acting as trustee for Lender, receive, as the property of Lender, any monies, checks, notes, drafts or any other payment relating to, or proceeds of, accounts or other Collateral which come into its possession or under its control and promptly upon receipt thereof, will deposit or cause the same to be deposited in a Collection Account, or remit the same or cause the same to be remitted, in kind, to Lender. In no event will the same be commingled with a Loan Party’s own funds or the funds of any other Person. Each Loan Party shall cause all amounts in each Collection Account (including, without limitation, all Collection Accounts at CIBC Bank USA) to be transferred on a daily basis (or with such other frequency as Lender may otherwise specifically agree) to the Lender Payment Account; provided that Loan Parties may, at the end of each calendar quarter, deposit up to $1,500,000 of immediately available funds in any Deposit Account established at Lender and subject to a Control Agreement so long as such funds are transferred to the Payment Account within one Business Day following the end of such calendar quarter (provided, however, if such Wells Fargo Account is an operating account of Loan Parties against which presentments and other charges are deducted, the amount of funds which must be transferred to the Payment Account shall be net of any such presentments or other charges so assessed prior to such transfer).
(b) So long as no Event of Default exists, upon not less than five Business Days’ prior written notice to Lender, a Loan Party may amend Schedule 5.9 to add or replace a deposit account or Cash Management Bank and will upon such addition or replacement provide to Lender an amended Schedule 5.9; provided, that, (i) such prospective Cash Management Bank shall be satisfactory to Lender in its Permitted Discretion, and (ii) at or prior to the time of the opening of such deposit account a Loan Party and such prospective Cash Management Bank will have executed and delivered to Lender a Control Agreement. A Loan Party will close any of its deposit accounts (and establish replacement deposit accounts in accordance with the foregoing sentence) as promptly as practicable and in any event within 45 days after notice from Lender that the operating performance, funds transfer, or availability procedures or performance of the Cash Management Bank with respect to deposit accounts or Lender’s liability under any Control Agreement with such Cash Management Bank is no longer satisfactory to Lender in its Permitted Discretion.
59
5.10 Further Assurances. Without limiting the foregoing, each Loan Party will take such actions and execute and deliver to Lender such instruments and documents as Lender may from time to time request in its Permitted Discretion (including obtaining agreements from third parties) to create, maintain, perfect, establish, preserve and protect Lender’s Liens in the Collateral (and the priority thereof) and rights in the Collateral and to carry out the terms and conditions of the Loan Documents. Notwithstanding anything to the contrary contained herein, Lender shall not accept a Lien on Real Property from any Loan Party unless Lender has completed its flood insurance diligence, has received copies of all flood insurance documentation and has confirmed that flood insurance compliance has been completed as required by applicable laws or as otherwise satisfactory to Lender and Lender shall not accept delivery of any joinder to any Loan Document with respect to any Subsidiary of any Loan Party that is not a Loan Party, if such Subsidiary qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, unless such Subsidiary has delivered a Beneficial Ownership Certification in relation to such Subsidiary and Lender has completed its Patriot Act searches, OFAC/PEP searches and customary individual background checks for such Subsidiary, the results of which shall be satisfactory to Lender.
5.11 End of Fiscal Years; Fiscal Quarters. Each Loan Party will, for financial reporting purposes, cause its fiscal year to end on December 31 of each year, and fiscal quarters to end on the last day of each of March, June, September and December of each year.
5.12 Costs and Expenses. Each Loan Party will pay to Lender at the time specified in Schedule 2.5 all reasonable costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender’s rights in the Collateral, the Loan Documents and all other documents related thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect thereof (all of the foregoing being referred to herein collectively, as “Lender Expenses”), including: (a) all costs and expenses of filing or recording (including UCC financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable), (b) costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, publication, courier and similar out-of-pocket charges, background checks and OFAC/PEP searches, costs and expenses of remitting loan proceeds, collecting checks and other items of payment (including charges resulting from the dishonor of checks), together with Lender’s customary charges and fees with respect thereto, (c) costs and expenses of preserving and protecting the Collateral, (d) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the Liens of Lender in the Collateral, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of the Loan Documents or defending any claims made or threatened against Lender arising out of the transactions contemplated thereby (including preparations for and consultations concerning any such matters), (e) subject to the limitations set forth in Section 5.7, all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Lender during the course of periodic field examinations, plus a per diem charge at Lender’s then standard rate for Lender’s examiners in the field and office and (f) the reasonable fees and disbursements of counsel (including legal assistants), accountants, consultants and other advisors to Lender (including in connection with any workout, restructuring or Insolvency Proceeding) in connection with any of the foregoing.
60
5.13 Formation of Subsidiaries. In the event that any Loan Party forms or acquires any direct or indirect Subsidiary, after the Closing Date, within thirty days of such event (and in the event of formation of a subsidiary for purposes of any acquisition, thirty days after the target acquisition), such Loan Party will (a) cause such new Subsidiary to (i) be joined as a Borrower hereunder if requested by such Loan Party, and subject to the consent of Lender, pursuant to an agreement in form and substance satisfactory to Lender, and (ii) cause such new Subsidiary to authorize, execute and deliver a joinder to the Guaranty and such Security Agreements as Lender may specify all in form and substance reasonably satisfactory to Lender; (b) authorize, execute and deliver to Lender such Security Agreements (or an addendum to a Security Agreement) in each case as Lender may specify and appropriate certificates and powers or financing statements, granting a security interest in all of the Equity Interests in such new Subsidiary of such Loan Party in form and substance reasonably satisfactory to Lender; and (c) deliver to Lender (and authorize and execute as applicable) all other documentation, including the Governing Documents of such Subsidiary and if requested by Lender, an opinion of counsel reasonably satisfactory to Lender, which, in its opinion, is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 5.13 shall constitute a Loan Document.
5.14 Permitted Supplier Financing Transaction. At all times from and after 30 days following the Closing Date (or, solely with respect to the proceeds from the sale of the Hubbell Incorporated accounts, at all times from and after 30 days following the Fifth Amendment Effective Date) (or such longer period as Lender may agree in writing)), each Loan Party shall cause all proceeds of each Permitted Supplier Financing Transaction to be deposited into a Deposit Account of a Borrower which is subject to a Control Agreement.
5.15 Post-Closing Obligations. Complete each of the tasks and other items set forth on Schedule 5.15 no later than the times specified therein or such later date as Lender may agree in writing.
5.16 MCM Earnout Escrow
Each Loan Party shall (a) promptly deliver to Lender copies of (i) all Joint Written Directions (as defined in the MCM Escrow Agreement) delivered to the escrow agent thereunder, (ii) monthly account statements received from the escrow agent under the MCM Escrow Agreement, and (iii) any notices of disputes, interpleader actions, or resignation or removal of the escrow agent under the MCM Escrow Agreement, (b) cause any MCM Earnout Escrow Funds released or distributed to any Loan Party to be deposited into a Deposit Account subject to a Control Agreement in favor of Lender within one (1) Business Day of receipt, and (c) not amend, modify, supplement, or waive any provision of the MCM Escrow Agreement relating to the deposit, disbursement, or investment of the MCM Earnout Escrow Funds without the prior written consent of Lender.
6. NEGATIVE COVENANTS
6.1 Indebtedness. Each Loan Party will not create, incur, assume, suffer to exist, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except for Permitted Indebtedness.
61
6.2 Liens. Each Loan Party will not create, incur, assume, or suffer to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens. Without limiting any of the foregoing restrictions on creating or permitting Liens on the assets of any of the Loan Parties other than Permitted Liens, no Loan Party shall permit any deed of trust, mortgage or similar Lien upon the owned Real Property commonly known as 5100 Neville Road, Pittsburgh, PA 15225.
6.3 Restrictions on Fundamental Changes. Each Loan Party will not (a) enter into any merger, consolidation, reorganization, recapitalization, division or plan of division, or reclassify its Equity Interests, except for (i) any merger between Loan Parties, provided, that, a Borrower must be the surviving entity of any such merger to which it is a party and (ii) in connection with a Permitted Acquisition, (b) directly or indirectly, purchase or otherwise acquire all or substantially all of the assets of (or any division or business line of) any other Person, or 50% or more of any class of Equity Interests of any other Person, except pursuant to a Permitted Acquisition (c) liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution), (d) suspend or cease operating a substantial portion of its business, or (e) change its classification/status for U.S. Federal income tax purposes.
6.4 Asset Dispositions. Each Loan Party will not convey, sell, lease, license, assign, transfer, or otherwise dispose of any of its assets (including by an allocation of assets among newly divided limited liability companies pursuant to a “plan of division”), except for Permitted Dispositions and transactions permitted under Section 6.3.
6.5 Nature of Business. Each Loan Party will not (a) engage in any business other than the business of such Loan Party on the Closing Date and any business reasonably related or ancillary to such business of such Loan Party on the Closing Date or (b) acquire any properties or assets that are not reasonably related or ancillary thereto.
6.6 Prepayments and Amendments. Each Loan Party will not:
(a) prepay, redeem, defease, purchase or otherwise acquire any Indebtedness of any Loan Party or make, directly or indirectly, any optional or voluntary payment in respect of any such Indebtedness, except for payments of: (i) the Obligations; (ii) obligations under Hedge Agreements; (iii) secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the assets securing such Indebtedness to the extent such sale or transfer is permitted hereunder; (iv) Indebtedness owing to another Loan Party; and (v) other Permitted Indebtedness in cash (other than releases or distributions permitted under clause (vi) below), provided, that, as of the date of any such payment under this clause (v) and after giving effect thereto, each of the Payment Conditions is satisfied (and in the case of any Subordinated Indebtedness, in any event only to the extent permitted under the terms of the subordination thereof); and (vi) releases or distributions of MCM Earnout Escrow Funds from the MCM Earnout Escrow Account to the Shareholder Representative or Shareholders (as defined in the MCM Stock Purchase Agreement) in accordance with the MCM Stock Purchase Agreement and the MCM Escrow Agreement, which releases or distributions shall be permitted without regard to the Payment Conditions; provided, that, any direct payment by a Loan Party of any MCM Contingent Purchase Price (other than from the MCM Earnout Escrow Funds) shall remain subject to clause (v) above; provided, further, that, for the avoidance of doubt, deposits into the MCM Earnout Escrow Account shall be subject to the conditions set forth in clause (n) of the definition of Permitted Investments and Section 5.16;
62
(b) directly or indirectly, amend, modify, or change any of the terms or provisions of:
(i) any agreement, instrument, document or other writing evidencing or concerning Permitted Indebtedness except (A) the Obligations in accordance with this Agreement, (B) obligations under Hedge Agreements, (C) Indebtedness permitted under clauses (c), (d), (e), (f) and (g) of the definition of Permitted Indebtedness, (D) Subordinated Indebtedness to the extent permitted under the subordination agreement with respect thereto, or (E) in the case of any other Material Indebtedness, after prior written notice to Lender, to amend or modify the terms thereof to forgive or cancel any portion of such Indebtedness (other than pursuant to payment thereof) or to reduce the interest rate or any fees in connection therewith, or to make the terms thereof less restrictive or burdensome to such Loan Party or if the effect thereof, either individually or in the aggregate, could reasonably be expected to be materially adverse to the interests of Lender; or
(ii) the Governing Documents of any Loan Party if the effect thereof, either individually or in the aggregate, could reasonably be expected to be materially adverse to the interests of Lender.
6.7 Restricted Payments. Each Loan Party will not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except (a) a Loan Party may declare and make dividend payments or other distributions payable solely in the Equity Interests of such Loan Party, (b) a Loan Party may make Restricted Payments pursuant to and in accordance with any management equity subscription agreement, employee agreement or stock option agreement or other agreement with such officer, director or employee or former officer, director or employee; provided, that, the aggregate cash consideration paid for all such payments, repurchases or redemptions shall not in any fiscal year of such Loan Party exceed $1,000,000, (c) a Loan Party may make Permitted Tax Distributions, (d) a Loan Party may make a Restricted Payment to another Loan Party, (e) a Loan Party may make payments with respect to Subordinated Debt to the extent such payments are permitted pursuant to the subordination agreement or other subordination terms applicable thereto; and (f) a Loan Party may make other Restricted Payments not otherwise expressly provided for in this Section, provided, that, as of the date of any such Restricted Payment and after giving effect thereto, each of the Payment Conditions is satisfied.
6.8 Accounting Methods. Each Loan Party will not modify or change its fiscal year or its method of accounting (other than as may be required to conform to GAAP).
6.9 Investments. Each Loan Party will not, directly or indirectly, make or acquire any Investment or incur any liabilities (including contingent obligations) for or in connection with any Investment except for Permitted Investments.
63
6.10 Transactions with Affiliates. Each Loan Party will not, directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director or other Affiliate of a Loan Party, except pursuant to the reasonable requirements of the business of such Loan Party and upon fair and reasonable terms no less favorable to such Loan Party than such Loan Party would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate, except for: (a) the payment of reasonable compensation, severance, or employee benefit arrangements to employees, officers, and outside directors of a Loan Party, and any indemnity provided for the benefit of directors (or comparable managers) of a Loan Party, (b) transactions among Loan Parties, and (c) Restricted Payments permitted under Section 6.7.
6.11 Use of Proceeds. Each Loan Party will not use the proceeds of any Revolving Loans, Letter of Credit or the Term Loan for any purpose other than (a) on the Closing Date, payments to each of the Persons listed in the disbursement direction letter furnished by a Borrower to Lender on or about the Closing Date and to pay the fees, costs and expenses in connection with the Loan Documents and the transactions contemplated thereby and (b) thereafter, consistent with the terms hereof, for working capital, capital expenditures and other general corporate purposes of Borrowers, provided, that, no part of the proceeds of the Revolving Loans or the Term Loan will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors; provided, that (y) no part of the proceeds of any Loan or Letter of Credit will be used, directly or indirectly, to make any payments to a Sanctioned Entity or a Sanctioned Person, to fund any investments, loans or contributions in, or otherwise make such proceeds available to, a Sanctioned Entity or a Sanctioned Person, to fund any operations, activities or business of a Sanctioned Entity or a Sanctioned Person, or in any other manner that would result in a violation of Sanctions by any Person, and (z) no part of the proceeds of any Loan or Letter of Credit will be used, directly or indirectly, in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Sanctions, Anti-Corruption Laws or Anti-Money Laundering Laws.
6.12 Dormant Subsidiaries. Borrower will not permit any Dormant Subsidiary to incur liabilities of any material nature, own any material assets or engage itself in any operations or businesses unless the same is joined as a Guarantor and Loan Party and has delivered a guaranty and such additional Loan Documents as Lender may reasonably request.
6.13 New Equipment Lease and Financing Agreements. Not engage in any new or amended lease or financing agreement (each a “New Financing Agreement”) with Liberty Commercial Finance LLC and/or Prime Alliance Bank (collectively, the “Liberty Group”), unless each of the following conditions are satisfied: (i) no New Financing Agreement shall grant a lien or security interest upon any asset of any Loan Party other than specific items of personal property (excluding accounts) which are being leased from, acquired with financing by or the subject of a purchase money security interest financing provided by a member of the Liberty Group and (ii) not later than 10 Business Days (or such longer period as Lender may agree in writing) following the consummation of any such New Financing Agreement, Borrowers have delivered to Lender (a) copies of all such New Financing Agreements and (b) evidence that a new UCC-1 financing statement or a UCC-3 financing statement amendment has been filed by or on behalf of applicable member of the Liberty Group which contains a specific listing of the items of personal property that are the subject of such New Financing Agreement.
64
6.14 Material Intellectual Property. Notwithstanding anything to the contrary in this Agreement or any other Loan Document, (i) all Material Intellectual Property shall be owned by a Loan Party organized or located in the United States and no other Person shall own any Material Intellectual Property, and (ii) no Loan Party shall dividend, distribute, invest, sell, license (other than on a non-exclusive basis) or otherwise transfer any Material Intellectual Property, or otherwise dispose of the Equity Interests in any Subsidiary that is the legal owner or exclusive licensee of any Material Intellectual Property, other than any dividend, distribution, investment or sale to, or disposition of Equity Interests that results in the transfer to, a Loan Party organized or located in the United States.
7. FINANCIAL COVENANTS
7.1 Fixed Charge Coverage Ratio. Commencing with the fiscal month ending March 31, 2027 and for each fiscal month ending thereafter, Borrowers and its Subsidiaries, on a consolidated basis, shall have a Fixed Charge Coverage Ratio of not less than 1.10 to 1.00, determined as follows: (a) for each fiscal month ending March 31, 2027 through and including December 31, 2027, such Fixed Charge Coverage Ratio shall be calculated on a year-to-date basis for the period commencing January 1, 2027 and ending on the last day of the applicable fiscal month, and (b) for each fiscal month ending after December 31, 2027, such Fixed Charge Coverage Ratio shall be calculated for the most recently ended twelve (12) consecutive fiscal months.
7.2 Minimum Excess Availability. At all times during the period commencing on the Fifth Amendment Effective Date and ending on March 31, 2027, Borrowers shall maintain Excess Availability equal to or greater than seventeen and one-half percent (17.5%) of the Revolving Loan Limit.
8. EVENTS OF DEFAULT AND REMEDIES
8.1 Events of Default. The occurrence of any of the following will constitute an “Event of Default” under any Loan Document:
(a) Payments. A Borrower (i) fails to make any payment of principal or interest hereunder when due or (ii) fails to pay fees, Lender Expenses or any of the other Obligations within three Business Days after the due date thereof.
(b) Covenants. (i) a Loan Party fails to perform any of the covenants contained in Sections 5.1, 5.2, 5.3, 5.6, 5.8, 5.9, 6 and 7, or (ii) a Loan Party fails to perform any of the terms, covenants, conditions or provisions contained in any Loan Document other than those otherwise described in this Article 8 and such failure shall continue for 30 days; provided, that, such 30 day period shall not apply in the case of any failure to observe any such covenant which is not capable of being cured at all or within such 30 day period or which has been the subject of a prior failure within a six month period.
65
(c) Judgments. One or more judgments, orders, or awards for the payment of money in excess of $1,000,000 in any one case or in the aggregate (except to the extent fully covered (other than to the extent of customary deductibles) by insurance pursuant to which the insurer has not denied or disputed coverage) is entered or filed against a Loan Party, or with respect to any of its assets, and either (a) there is a period of 45 consecutive days at any time after the entry of any such judgment, order, or award during which (i) the same is not discharged, satisfied, vacated, or bonded pending appeal, or (ii) a stay of enforcement thereof is not in effect, or (b) enforcement proceedings are commenced upon such judgment, order, or award or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against a Loan Party or any of the Collateral having a value in excess of $1,000,000 in any one case or in the aggregate and a stay of enforcement thereof is not in effect.
(d) Voluntary Bankruptcy, Involuntary Bankruptcy, Etc. (i) An Insolvency Proceeding is commenced by a Loan Party or (ii) an Insolvency Proceeding is commenced against a Loan Party or all or any part of its properties and such petition or application is not dismissed within 60 days after the date of its filing or such Loan Party shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner.
(e) Default Under Other Agreements. (i) A default in one or more agreements to which a Loan Party or any of its Subsidiaries is a party with one or more third Persons relative to a Loan Party’s or any of its Subsidiaries’ Indebtedness occurs involving an aggregate amount of $1,000,000 or more, and such default (A) occurs at the final maturity of the obligations thereunder, or (B) results in a right by such third Person, irrespective of whether exercised, to accelerate the maturity of such Loan Party’s or its Subsidiary’s obligations thereunder, or (ii) the subordination provisions contained in any agreement related to any Subordinated Indebtedness shall cease to be in full force and effect or to give Lender the rights purported to be created thereby.
(f) Representations, Etc. Any warranty, representation, certificate or statement made in any Loan Document or delivered in writing to Lender in connection with any Loan Document proves to be untrue in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality or Material Adverse Effect) as of the date of issuance or making or deemed making thereof.
(g) Guaranty. If the obligation of any Loan Party under a Guaranty, or other Person under any guaranty of any Obligations, is limited or terminated by operation of law or by such Loan Party or other Person (other than in accordance with the terms of any Loan Document) or any Loan Party or such other Person repudiates or revokes or purports to repudiate or revoke such Guaranty or any such guaranty.
(h) Loan Documents. (i) The validity or enforceability of any Loan Document shall at any time for any reason (other than solely as the result of an action or failure to act on the part of Lender) be declared to be null and void, or a proceeding shall be commenced by a Loan Party, or by any Governmental Authority having jurisdiction over a Loan Party, seeking to establish the invalidity or unenforceability of any Loan Document, or a Loan Party shall deny that such Loan Party has any liability or obligation purported to be created under any Loan Document or (ii) any Loan Document that purports to create a Lien shall, for any reason, fail or cease to create a valid and perfected and (except to the extent of Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens or the interests of lessors under Capital Leases) first priority Lien on the Collateral covered thereby, except (A) as a result of a disposition of the applicable Collateral in a transaction permitted under any Loan Document, or (B) as the result of an action or failure to act on the part of Lender.
66
(i) Change of Control. A Change of Control shall occur, whether directly or indirectly.
8.2 Remedies.
(a) At any time an Event of Default exists, Lender shall have any and all rights and remedies provided in any Loan Document, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by a Loan Party, except as such notice or consent is expressly provided for under any applicable Loan Document or required by applicable law. All rights, remedies and powers granted to Lender under any Loan Document, the UCC or other applicable law are cumulative, are not exclusive and are enforceable, in Lender’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by a Loan Party of any Loan Document. Lender may, at any time, an Event of Default exists, proceed directly against one or more Loan Party to collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the generality of the foregoing, at any time an Event of Default exists, Lender may (i) accelerate the payment of all or any portion of the Obligations and demand immediate payment thereof to Lender (provided, that, upon the occurrence of any Event of Default described in Sections 8.1(d), all Obligations shall automatically become immediately due and payable), (ii) by written notice to a Loan Party, require Loan Parties to provide cash collateral in an amount equal to 105% of the Letter of Credit Usage, (iii) terminate the Commitment (provided, that, upon the occurrence of any Event of Default described in Sections 8.1(d), the Commitment and any other obligation of Lender under any Loan Document shall automatically terminate), (iv) cease making Revolving Loans or providing Letters of Credit or reduce the lending formulas or amounts of Revolving Loans or (v) establish such Reserves as Lender determines, without limitation or restriction, notwithstanding anything to the contrary contained herein.
9. NOTICES, AMENDMENTS, WAIVERS, INDEMNIFICATION, ETC.
9.1 Demand; Protest; Counterclaims, Etc. Each Loan Party waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by Lender on which any Loan Party may in any way be liable. No notice to or demand on a Loan Party which Lender may elect to give shall entitle a Loan Party to any other or further notice or demand in the same, similar or other circumstances. Each Loan Party waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other than compulsory counterclaims) in any action or proceeding with respect to any Loan Document, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.
67
9.2 Indemnification. Each Loan Party shall pay, indemnify, defend, and hold Lender and its Affiliates, officers, directors, employees, attorneys, and agents (each, an “Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties, and damages, and all reasonable fees and disbursements of attorneys, experts, or consultants and all other costs and expenses actually incurred in connection therewith or in connection with the enforcement of this indemnification (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution and delivery, enforcement, performance, or administration (including any restructuring or workout with respect hereto) of any Loan Document, or the transactions contemplated thereby, (b) with respect to any actual or prospective investigation, litigation, or proceeding related to any Loan Document, the making of any Revolving Loans or Term Loan, the issuance of any Letter of Credit or the use of the proceeds of any Revolving Loan, Term Loan or Letter of Credit (whether or not any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto, and (c) in connection with or arising out of any presence or release of hazardous materials at, on, under, to or from any assets or properties owned, leased or operated by any Loan Party or otherwise related to compliance with applicable environmental laws (each and all of the foregoing, the “Indemnified Liabilities”). The foregoing to the contrary notwithstanding, no Loan Party shall have any obligation to any Indemnified Person under this Section with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person or its officers, directors, employees, attorneys, or agents. This provision shall survive the termination of this Agreement and the repayment in full of the Obligations. If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which a Loan Party was required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by each Loan Party with respect thereto. THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
9.3 Notices. Unless otherwise provided in this Agreement, all notices or demands relating to any Loan Document shall be in writing and shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, or electronic mail (at such email addresses as a party may designate in accordance herewith). In the case of notices or demands to any Loan Party or Lender, as the case may be, they shall be sent to the address set forth next to its signature hereto. Any party hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other parties. All notices or demands sent in accordance with this Section shall be deemed received on the earlier of the date of actual receipt or three Business Days after the deposit thereof in the mail; provided, that, (a) notices sent by overnight courier service shall be deemed to have been given when received, (b) notices by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient) and (c) notices by electronic 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 email or other written acknowledgment).
68
9.4 Assignments; Successors. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, that, no Loan Party may assign this Agreement or any rights or duties hereunder without Lender’s prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by Lender shall release any Loan Party from its Obligations. Lender may assign the Loan Documents in whole or in part and its rights and duties thereunder or grant participations in the Obligations and no consent or approval by any Loan Party is required in connection with any such assignment or participation.
9.5 Amendments; Waivers. No amendment or modification of any Loan Document shall be effective unless it has been agreed to by Lender in a writing that specifically states that it is intended to amend or modify such Loan Document. No failure by Lender to exercise any right, remedy, or option under any Loan Document, or delay by Lender in exercising the same, will operate as a waiver thereof. No waiver by Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Lender on any occasion shall affect or diminish Lender’s rights thereafter to require strict performance by any Loan Party of any provision of any Loan Document. Lender’s rights under the Loan Documents will be cumulative and not exclusive of any other right or remedy that Lender may have.
10. JURY TRIAL WAIVER; OTHER WAIVERS CONSENTS; GOVERNING LAW.
10.1 GOVERNING LAW. THE VALIDITY OF THE LOAN DOCUMENTS (UNLESS EXPRESSLY OTHERWISE PROVIDED THEREIN), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT THEREOF, THE RIGHTS OF THE PARTIES THERETO WITH RESPECT TO ALL MATTERS ARISING THEREUNDER OR RELATED THERETO, AND ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING THEREUNDER OR RELATED THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. NOTWITHSTANDING THE FOREGOING, SOLELY FOR PURPOSES OF SECTION 5.6(b) AND ANY RELATED STATE NOTICE REQUIREMENTS, THE PARTIES HERETO AGREE: (I) FOR REAL PROPERTY SUBJECT TO A MORTGAGE (INCLUSIVE OF ANY FIXTURES), THE LAWS OF THE STATE WHERE THE REAL PROPERTY SUBJECT TO A MORTGAGE IS LOCATED SHALL APPLY; AND (II) FOR ALL COLLATERAL OTHER THAN REAL PROPERTY SUBJECT TO A MORTGAGE, THE LAWS OF THE STATE OF ORGANIZATION OF THE ADMINISTRATIVE BORROWER SHALL APPLY.
10.2 FORUM NON CONVENIENS. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, THAT, ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH LOAN PARTY AND LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
69
10.3 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH LOAN PARTY AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A “CLAIM”). EACH LOAN PARTY AND LENDER REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.4 SUBMISSION TO JURISDICTION. EACH LOAN PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF COOK AND THE STATE OF ILLINOIS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN ANY LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO ANY LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
10.5 WAIVER OF CLAIMS. NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST LENDER OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OR LOSSES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY ANY LOAN DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
70
11. GENERAL PROVISIONS
11.1 Effectiveness; Section Headings; Severability. This Agreement shall be binding and deemed effective when executed by each Loan Party and Lender whose signature is provided for on the signature pages hereof. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
11.2 Counterparts; Electronic Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Execution of any such counterpart may be by means of (a) an electronic signature that complies with the federal Electronic Signatures in Global and National Commerce Act, state enactments of the Uniform Electronic Transactions Act, or any other relevant and applicable electronic signatures law; (b) an original manual signature; or (c) a faxed, scanned, or photocopied manual signature. Each electronic signature or faxed, scanned, or photocopied manual signature shall for all purposes have the same validity, legal effect, and admissibility in evidence as an original manual signature. Lender reserves the right, in its discretion, to accept, deny, or condition acceptance of any electronic signature on this Agreement. Any party delivering an executed counterpart of this Agreement by faxed, scanned or photocopied manual signature shall also deliver an original manually executed counterpart, but the failure to deliver an original manually executed counterpart shall not affect the validity, enforceability and binding effect of this Agreement. The foregoing shall apply to each other Loan Document, and any notice delivered hereunder or thereunder, mutatis mutandis.
11.3 Patriot Act; Due Diligence. Lender hereby notifies each Loan Party that pursuant to the requirements of the Patriot Act it is required to obtain, verify and record information that identifies each Person or corporation who opens an account or enters into a business relationship with it, which information includes the name and address of such Loan Party and other information that will allow Lender to identify such Person in accordance with the Patriot Act and any other applicable law. Each Loan Party is hereby advised that any Revolving Loans or Letters of Credit are subject to satisfactory results of such verification. Lender shall have the right to periodically conduct due diligence on each Loan Party, its senior management and key principals and legal and beneficial owners. Each Loan Party agrees to cooperate in respect of the conduct of such due diligence and further agrees that the reasonable costs and charges for any such due diligence by Lender shall constitute Lender Expenses for which Lender is entitled to reimbursement as provided herein and be for the account of Borrowers.
11.4 Integration. The Loan Documents reflect the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the Closing Date. The foregoing to the contrary notwithstanding, all agreements for Bank Products, if any, are independent agreements governed by the written provisions of the agreements for them, which will remain in full force and effect, unaffected by any repayment, prepayments, acceleration, reduction, increase, or change in the terms of any credit extended hereunder, except as otherwise expressly provided in such agreement.
71
11.5 Disclosure. Lender may disclose information concerning the terms and conditions of the Loan Documents in its marketing or promotional materials, with such information to consist of deal terms and other information customarily found in such marketing or promotional materials and may otherwise use the name, logos, and other insignia of any Loan Party and the Commitment provided hereunder in any “tombstone” or other advertisements, on its website or in other marketing materials of Lender, the content and timing of publication of which has been approved by Administrative Borrower in its reasonable discretion.
11.6 Broadwind, Inc. as Agent for Borrowers. Each Loan Party hereby irrevocably appoints Broadwind, Inc. as the borrowing agent and attorney-in-fact for all Loan Parties (the “Administrative Borrower”) which appointment shall remain in full force and effect unless and until Lender shall have received prior written notice signed by each Loan Party that such appointment has been revoked and that another Loan Party has been appointed Administrative Borrower. Each Loan Party hereby irrevocably appoints and authorizes Administrative Borrower (a) to provide Lender with all notices with respect to Revolving Loans, Letters of Credit and all other notices and instructions under the Loan Documents (and any notice or instruction provided by Administrative Borrower shall be deemed to be given by Loan Parties hereunder and shall bind each Loan Party), (b) to receive all notices, instructions and other information from Lender (and any notice, instructions or other information provided by Lender to Administrative Borrower shall be deemed to have been given to each Loan Party), and (c) to take such action as Administrative Borrower deems appropriate on its behalf to obtain Revolving Loans and Letters of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement. Each Loan Party agrees that the handling of the Credit Facility, with Loan Parties and Collateral in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Loan Parties in order to utilize the collective borrowing powers of Borrowers in the most efficient and economical manner and at their request, and that Lender shall not incur liability to any Loan Party as a result hereof. Each Loan Party expects to derive benefit, directly or indirectly, from the handling of the Credit Facility, with Loan Parties and Collateral in a combined fashion, since the successful operation of each Loan Party is dependent on the continued successful performance of the integrated group. Each Loan Party hereby agrees to indemnify Lender and hold Lender harmless against any and all liability, expense, loss or claim of damage or injury, made against Lender by any Loan Party or by any third party whosoever, arising from or incurred by reason of (i) the handling of the Credit Facility as herein provided, or (ii) Lender relying on any instructions of Administrative Borrower. This Section shall survive the termination of this Agreement and the payment in full of the Obligations.
11.7 Acknowledgement Regarding Any Supported QFC.
To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York or of the United States or any other state of the United States): In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States.
In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States.
72
The parties have caused this Agreement to be executed as of the date set forth above.
LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By ______________ Name: Anwar Young Title: Authorized Signatory
Address: Wells Fargo Bank, National Association 10 S. Wacker Drive, 26th Floor Chicago, Illinois 60606 Attention: Loan Portfolio Manager (Broadwind) Email: [redacted] |
| LOAN PARTIES
BROADWIND, INC., as Administrative Borrower and a Borrower
By _________________ Name: Thomas Ciccone Title: Vice President
BRAD FOOTE GEAR WORKS, INC., as a Borrower
By _________________ Name: Thomas Ciccone Title: Treasurer
BROADWIND HEAVY FABRICATIONS, INC., as a Borrower
By _________________ Name: Thomas Ciccone Title: Treasurer
BROADWIND INDUSTRIAL SOLUTIONS, LLC., as a Borrower
By _________________ Name: Thomas Ciccone Title: Treasurer
MCM ACQUISITION COMPANY, INC., as a Borrower
By_________________ Name: Eric B. Blashford Title: President |
73
|
| BWEN CLEAN FUELS, INC., a Delaware corporation, as a Borrower
By ________________ Name: Thomas Ciccone Title: Treasurer
5100 NEVILLE ROAD, LLC., as a Guarantor
By: BRAD FOOTE GEAR WORKS, INC. Its: Manager
By _________________ Name: Thomas Ciccone Title: Treasurer
Address for Notices to any Loan Party:
Broadwind, Inc. 3450 South Central Ave Cicero, IL 60804 Attention: Arlene McKenzie Email: [redacted] |
74
Annex LPA
Lender’s Payment Account
[OMITTED]
SCHEDULE 2.5
TO
CREDIT AGREEMENT
Fees and Expenses
1. Unused Line Fee. Borrowers shall pay to Lender monthly an unused line fee equal to 0.375% (on a per annum basis) multiplied by the amount by which the Revolving Loan Limit as then in effect exceeds the daily average of the principal balance of the outstanding Revolving Loans and the Letters of Credit during the immediately preceding month (or part thereof) until payment in full of the Obligations. Such fees shall be payable on the first day of each calendar month in arrears and on the Termination Date.
2. Servicing Fee. Borrowers shall pay to Lender a monthly servicing fee in the amount of $1,000 in respect of Lender’s services for each month (or part thereof) which servicing fee shall be payable monthly in advance beginning on the Closing Date and on the first day of each month thereafter until payment in full of the Obligations.
3. Closing Fee. Borrowers shall pay to Lender a closing fee in an amount equal to 0.25% of the Maximum Credit. The entire closing fee shall be deemed fully earned by Lender and shall be due and payable in full on the Closing Date.
4. Letter of Credit Related Fees. Borrowers shall pay to Lender a Letter of Credit fee at a rate equal to the Applicable Margin for SOFR Loans that are Revolving Loans per annum times the average amount of the Letter of Credit Usage during the immediately preceding month (calculated on the basis of a 360-day year and the actual number of days elapsed), payable monthly in arrears on the first Business Day of each month and on the Termination Date and continuing until all undrawn Letters of Credit have expired or have been returned for cancellation in a manner satisfactory to Lender; provided that upon the occurrence and during the continuation of an Event of Default, the Letter of Credit fee shall be increased to two percentage points above the per annum rate otherwise applicable hereunder.
Borrowers shall also pay to Lender (i) a fronting fee equal to .125% per annum times the average amount of the Letter of Credit Usage during the immediately preceding month (or portion thereof), plus (ii) any and all other customary commissions, fees and charges then in effect imposed by, and any and all expenses incurred by, Lender, or by any adviser, confirming institution or entity or other nominated person, relating to Letters of Credit, at the time of issuance of any Letter of Credit and upon the occurrence of any other activity with respect to any Letter of Credit (including transfers, assignments of proceeds, amendments, drawings, extensions or cancellations).
5. Lender Expenses. Borrowers shall pay to Lender the Lender Expenses on the earlier of (a) the first day of the month following the date on which the applicable Lender Expenses were first incurred, or (b) the date on which demand therefor is made by Lender (it being acknowledged and agreed that any charging of such costs, expenses or Lender Expenses to the Loan Account shall be deemed to constitute a demand for payment thereof for the purposes hereof). Borrowers agree that their obligations contained in this Section shall survive payment in full of all other Obligations.
Schedule 2.5
SCHEDULE 2.7
TO
CREDIT AGREEMENT
SOFR Replacement
Defined terms used in this Schedule 2.7 that are not otherwise defined in this Agreement are set forth at the end of this Schedule 2.7.
1. Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, Lender may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment will become effective at 5:00 p.m. on the fifth Business Day after Lender has provided such amendment to Administrative Borrower without any further action or consent of any Loan Party.
2. Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement, Lender will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any Loan Party.
3. Notices; Standards for Decisions and Determinations. Lender will promptly notify Administrative Borrower of (a) the implementation of any Benchmark Replacement and (b) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by Lender pursuant to this Schedule 2.7, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in Lender’s sole discretion and without consent from any Loan Party, except, in each case, as expressly required pursuant to this Schedule 2.7.
4. Benchmark Unavailability Period. Upon Administrative Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, Lender may (a) declare that SOFR Loans will not thereafter be made by Lender, such that any request for a SOFR Loan from Lender shall be deemed to be a request for a Base Rate Loan and (b) require that all outstanding SOFR Loans made by Lender be converted to Base Rate Loans immediately, in which event all outstanding SOFR Loans shall be so converted and shall bear interest at the Base Rate in effect from time to time, plus the Applicable Margin. The Base Rate in effect from time to time plus the Applicable Margin shall replace the then-current Benchmark for any determination of interest hereunder or under any other Loan Document during a Benchmark Unavailability Period.
5. Certain Defined Terms. As used in this Schedule 2.7:
“Benchmark” means, initially, Daily Simple SOFR, provided, that, if a Benchmark Transition Event, has occurred with respect to Daily Simple SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become effective pursuant to the provisions of this Schedule 2.7.
Schedule 2.7-1
“Benchmark Administrator” means, initially, the Federal Reserve Bank of New York, or any successor administrator of the then-current Benchmark or any insolvency or resolution official with authority over such administrator.
“Benchmark Replacement” means the sum of: (a) the alternate rate of interest that has been selected by Lender as the replacement for the then-current Benchmark; and (b) the spread adjustment or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by Lender, in each case, giving due consideration to (i) any selection or recommendation by the Relevant Governmental Body at such time for a replacement rate, the mechanism for determining such a rate, the methodology or conventions applicable to such rate, or the spread adjustment, or method for calculating or determining such spread adjustment, for such rate, or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the then-current Benchmark, the methodology or conventions applicable to such rate, or the spread adjustment, or method for calculating or determining such spread adjustment, for such alternate rate for U.S. dollar-denominated syndicated or bilateral credit facilities at such time; provided, that, if the Benchmark Replacement as determined as provided above would be less than zero, then the Benchmark Replacement shall be deemed to be zero.
“Benchmark Replacement Conforming Changes” means, with respect to either the use or administration of Daily Simple SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, and other technical, administrative or operational matters) that Lender decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by Lender in a manner substantially consistent with market practice (or, if Lender decides that adoption of any portion of such market practice is not administratively feasible or if Lender determines that no market practice for the administration of any such rate exists, in such other manner of administration as Lender decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the Benchmark Administrator permanently or indefinitely ceases to provide the Benchmark; or
(b) in the case of clause (b) of the definition of “Benchmark Transition Event”, the first date on which the Benchmark has been determined and announced by the regulatory supervisor for the Benchmark Administrator to be no longer representative of underlying markets; provided, that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (b) and even if the Benchmark continues to be provided on such date.
Schedule 2.7-2
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark: a public statement or publication of information by or on behalf of the Benchmark Administrator or a regulatory supervisor for the Benchmark Administrator announcing that (a) the Benchmark Administrator has ceased or will cease to provide the Benchmark permanently or indefinitely or (b) the Benchmark is no longer representative.
“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the then-current Benchmark and solely to the extent that the Benchmark has not been replaced with a Benchmark Replacement, the period (a) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the Benchmark for all purposes hereunder in accordance with this Schedule 2.7 and (b) ending at the time that a Benchmark Replacement has replaced the Benchmark for all purposes hereunder pursuant to this Schedule 2.7.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System and/or the Federal Reserve Bank of New York, or any successor thereto.
Schedule 2.7-3
SCHEDULE 3.1
TO
CREDIT AGREEMENT
Conditions Precedent to Initial Revolving Loans, the initial Term Loan and Letter of Credit
The obligation of Lender to make its initial Revolving Loans (or issue any Letter of Credit) or to make the initial Term Loan on the Closing Date is subject to the satisfaction of the conditions precedent to all Revolving Loans, the initial Term Loan and all Letters of Credit provided for in Section 3.2 and each of the following conditions precedent (except as Lender may otherwise agree in writing):
1. Closing Excess Availability. The amount equal to (a) the Excess Availability as of the Closing Date plus unrestricted cash on the balance sheet of the Borrowers minus (b) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of each Borrower which are outstanding more than 30 days past due as of the end of the immediately preceding month (other than trade payables or other obligations being contested or disputed by a Borrower in good faith) and without duplication, all book overdrafts of Borrowers, shall be not less than $10,000,000 after giving effect to the initial Term Loan, the initial Revolving Loans and Letters of Credit made in connection with the initial transactions hereunder and after payment of all fees and expenses payable on the Closing Date (or any Reserves in respect thereof).
2. Field Examination. Lender shall have conducted, or received the final report of a firm engaged by Lender to conduct, a field examination of the Collateral, the books and records and other matters relating to the operation of the business of Borrowers the results of which are reasonably satisfactory to Lender, and Lender (or a firm engaged by Lender for such purpose) shall have completed an updated field review of the books and records of Borrowers and such other updated information with respect to the accounts and inventory as Lender may require to determine the amount of Revolving Loans available to Borrowers (including roll-forwards of accounts), with results as of a date not more than five Business Days prior to the Closing Date (or such earlier date as may be acceptable to Lender), the results of which shall be reasonably satisfactory to Lender.
3. Appraisals. Lender shall have received the final report of third party appraisals with respect to inventory, equipment and real property of Borrowers, in form and containing assumptions and appraisal methods reasonably satisfactory to Lender by an appraiser acceptable to Lender, addressed to Lender and on which Lender is expressly permitted to rely, with results as of a date not more than 60 days prior to the Closing Date (or such earlier date as may be acceptable to Lender).
4. Know Your Customer; Patriot Act. Lender shall have received at least 10 Business Days prior to the Closing Date (a) all documentation and information as is requested by Lender in connection with applicable “know your customer” and anti-money-laundering rules and regulations, (b) customary individual background searches for each Loan Party’s senior management and key principals, and (c) for each Loan Party that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, a Beneficial Ownership Certification in form and substance reasonably satisfactory to Lender and in the case of (a), (b) and (c),which certification shall be complete and accurate in all respects, and the results of which are reasonably satisfactory to Lender.
Schedule 3.1-1
5. Financial Statements. Lender shall have received at least Ten (10) Business Days prior to the Closing Date: (a) audited financial statements of Borrowers for each of the three fiscal years immediately preceding the Closing Date, and (b) interim unaudited financial statements of Borrowers as of the most recent month end that is 30 days prior to the Closing Date for the fiscal year to date since the last audited financial statements received by Lender.
6. Projections. Lender shall have received Projections, certified by an Authorized Person of a Borrower as complying with the requirements of this Agreement, set forth on a monthly basis for the period through the end of the 2022 and through June of 2023 and on an annual basis thereafter through the end of 2025, in each case with the results and assumptions in such projections in form and substance reasonably satisfactory to Lender, which Projections are as of a date not more than 30 Business Days prior to the Closing Date.
7. Payment of Fees and Expenses. Lender shall have received payment of all fees due and payable by Borrowers on the Closing Date and reimbursement for all Lender Expenses incurred in connection with the transactions evidenced by any Loan Document invoiced or demanded on or before the Closing Date.
8. Legal Due Diligence. Lender and its counsel shall have completed all legal due diligence, the results of which shall be reasonably satisfactory to Lender.
9. Borrowing Base Certificate and Request. Lender shall have received a borrowing request and a Borrowing Base Certificate which calculates the Borrowing Base as of the end of the month immediately preceding the Closing Date completed in a manner reasonably satisfactory to Lender and duly authorized and delivered by or on behalf of a Borrower to Lender (in accordance with the provisions of Schedule 5.2).
10. Good Standing Certificates. Lender shall have received a certificate of status with respect to each Loan Party, dated within 30 days of the Closing Date (or such earlier date as is acceptable to Lender), issued by the appropriate officer of the jurisdiction of organization of such Loan Party and each other jurisdiction where the failure to be duly qualified or licensed would constitute a Material Adverse Effect, in each case which certificate shall indicate that such Loan Party is in good standing in such jurisdiction.
11. Certificate of Directors’ Resolutions, Incumbency, Etc. Lender shall have received a certificate of an Authorized Person of a Borrower, in form and substance reasonably satisfactory to it, certifying (a) that attached copies of the Governing Documents of each Loan Party are true and complete, and in full force and effect, without amendment except as shown; (b) that an attached copy of resolutions authorizing execution, delivery and performance of the Loan Documents is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not been amended, modified or revoked, and constitute all resolutions adopted with respect to this Credit Facility; and (c) to the title, name and signature of each Person authorized to sign the Loan Documents.
Schedule 3.1-2
12. Lien Searches. Lender shall have received the results of a recent Lien search in each jurisdiction where each Loan Party is organized and to the extent requested by Lender, where the assets of such Loan Party are located, and such search shall reveal no Liens on any of the assets of a Loan Party except for Permitted Liens or Liens to be discharged on or prior to the Closing Date pursuant to a pay-off letter or other documentation reasonably satisfactory to Lender.
13. Pay-Off Letter. Lender shall have received pay-off letters, in form and substance reasonably satisfactory to Lender, for all existing Indebtedness to be repaid from the proceeds of the initial Revolving Loans confirming that all Liens upon any of the assets of each Loan Party constituting Collateral will be terminated concurrently with such payment and all letters of credit issued or guaranteed as part of such Indebtedness shall have been cash collateralized or supported by a letter of credit.
14. Pledged Equity Interests; Stock Powers; Pledged Notes. Lender shall have received (a) the original certificates representing Equity Interests pledged pursuant to any Loan Document, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (b) each original promissory note (if any) pledged to Lender pursuant to any Loan Document endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.
15. Insurance. Lender shall have received certificates of insurance policies and such other evidence of insurance coverage in form, scope and substance reasonably satisfactory to Lender, and all lender’s loss payee and any other endorsements required under the Loan Documents, in form and substance reasonably satisfactory to Lender.
16. Tax Withholding. Lender shall have received a properly completed and signed IRS Form W-8 or W-9, as applicable, for each Loan Party.
17. Perfected Security Interest. Lender shall have received (a) a letter duly executed by each Loan Party authorizing Lender to file appropriate financing statements in such office or offices as may be necessary or, in the opinion of Lender, desirable to perfect the security interests to be created by the Loan Documents and (b) evidence that appropriate financing statements have been duly filed in such office or offices.
18. No Material Adverse Change. No material adverse change in the business, operations, profits, assets or prospects of a Loan Party shall have occurred since April 22, 2022.
19. Loan Documents. Lender shall have received the following documents, in form and substance reasonably satisfactory to Lender, duly executed and delivered, and each such document shall be in full force and effect and each Loan Party shall be in compliance with the terms thereof:
(a) this Agreement,
(b) the Security Agreement,
(c) the Guaranty,
Schedule 3.1-3
(d) Subject to Section 5.15, the Control Agreements,
(e) the Mortgage;
(f) a disbursement letter executed and delivered by Borrowers to Lender regarding the extensions of credit to be made on the Closing Date,
(g) Subject to Section 5.15, Collateral Access Agreement from any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the location of the books and records or inventory or equipment, in each case, in form and substance reasonably satisfactory to Lender, duly authorized, executed and delivered by the parties thereto, with respect to each of the following locations: (i) 3250 South Central Avenue, Cicero, IL 60804, (ii) 1824 Boone Trail Road, Sanford, NC 27330, (iii) 101 South 16th Street, P.O. Box 1957, Manitowoc, WI 54221, and
(h) opinion letters of counsel to Borrowers with respect to the Loan Documents and such other matters as Lender may reasonably request.
20. The Closing Date shall have occurred on or before September 30, 2022.
21. Real Estate Matters. Subject to Section 5.15, Lender shall have received the following, in form and substance reasonably satisfactory to Lender:
(a) commitment for mortgagee title insurance policies issued by a title insurance company reasonably satisfactory to Lender in amounts reasonably satisfactory to Lender (but in no event less than the fair market value thereof) assuring Lender that the Mortgages on such Real Property are valid and enforceable first priority mortgage Liens on such Real Property free and clear of all defects and encumbrances except Permitted Liens, and otherwise in form and substance reasonably satisfactory to Lender,
(b) ALTA surveys in form and substance reasonably satisfactory to Lender,
(c) phase-I environmental reports with respect to each parcel of Real Property subject to a Mortgage by environmental consultants reasonably satisfactory to Lender, the scope and results of which shall be reasonably satisfactory to Lender, and
(d) flood certifications (and, if applicable, acceptable flood insurance and FEMA form acknowledgements of insurance).
Schedule 3.1-4
SCHEDULE 5.1
TO
CREDIT AGREEMENT
Financial and Collateral Reporting
Each Loan Party will deliver, or cause to be delivered, to Lender each of the following:
1. Annual Financial Statement. As soon as available, but in any event within 120 days after the end of each fiscal year of Loan Parties, audited consolidated and consolidating balance sheet, income statement, statement of cash flow and statement of equity of Loan Parties as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and results of operations of such Loan Parties, together with a management discussion and analysis of such financial statements.
2. Monthly Financial Statements. As soon as available, but in any event within 30 days after the end of each fiscal month of Loan Parties, its consolidated and consolidating balance sheet, income statement, statement of cash flow and statement of equity as of the end of and for such fiscal month, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Loan Parties as of the end of and through such fiscal month, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, subject to normal year-end audit adjustments and the absence of footnotes.
3. Accountant’s Certificate. Concurrently with the delivery of the financial statements referred to in Section 1 above, the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which independent accounting firm will be selected by a Borrower and reasonably acceptable to Lender and Lender hereby acknowledges that Company’s current independent accounting firm is acceptable, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of Loan Parties as of the end of and for the fiscal year then ended and stating that in making the examination necessary therefor no knowledge was obtained of any Event of Default, or if any such Event of Default shall exist, stating the nature and status of such event.
4. Compliance Certificate. Concurrently with the delivery of the financial statements referred to in Section 1 and Section 2 above, a Compliance Certificate by or on behalf of a Borrower, along with a schedule in form reasonably satisfactory to Lender of the calculations used in determining, as of the end of such month, the ratio and amounts set forth in Section 7 of this Agreement for such month and a written summary of material changes in GAAP and in the consistent application thereof that materially affected the financial covenant calculations for the applicable period.
Schedule 5.1-1
5. Capex Designation Report. As soon as possible after the end of each calendar month (but in any event within 30 calendar days after the end thereof), commencing the first calendar monthly period ending January 31, 2026 and continuing through and including the calendar monthly period ending December 31, 2026, a Capex Designation Report, duly completed and executed by an Authorized Person of a Borrower, setting forth with respect to such calendar month and cumulatively since January 1, 2026:
| a) | the amount of Capital Expenditures designated by the Borrowers to the Cash Capex Bucket during such calendar month; |
| b) | The amount of Capital Expenditures designated by the Borrowers to the PRS Reclassification Bucket during such calendar month; |
| c) | The cumulative amount of Capital Expenditures designated by the Borrowers to each Capex Bucket since January 1, 2026; and |
| d) | The remaining availability under each Capex Bucket as of the end of such calendar month. |
5. Annual Projections. As soon as available, but in any event no later than the end of, and no earlier than 30 days prior to the end of, each fiscal year of Loan Parties, Projections on a monthly basis for each month of the upcoming fiscal year in form reasonably satisfactory to Lender.
6. Borrowing Base Certificate. As soon as possible after the end of each calendar month (but in any event within 30 calendar days after the end thereof), or more frequently as Lender may require at any time an Event of Default exists or Excess Availability shall be less than 25% of the Revolving Loan Limit and thereafter (until such time as such Event of Default shall not exist for a period of 60 consecutive days or Excess Availability shall be greater than such amount for a period of 60 consecutive days) (any such period, an “Increased Reporting Period”), a Borrowing Base Certificate setting forth the calculation of the Borrowing Base as of the last Business Day of the immediately preceding period, duly completed and delivered by or on behalf of a Borrower (and nothing contained in any Borrowing Base Certificate shall be deemed to limit, impair or otherwise affect the rights of Lender contained herein and in the event of any conflict or inconsistency between the calculation of the Borrowing Base as set forth in any Borrowing Base Certificate and as determined by Lender in its Permitted Discretion, the determination of Lender shall govern and, absent manifest error, be conclusive and binding upon Borrowers). Without limiting the right of the Lender to request more frequent Borrowing Base Certificates during any Increased Reporting Period, Loan Parties shall, during any Increased Reporting Period, provide Lender weekly (no later than the third Business Day of each week in respect of the immediately preceding week) a Borrowing Base Certificate as of the last Business Day of the immediately preceding week.
7. Collateral Reports.
(a) As soon as possible after the end of each calendar month (but in any event within 30 calendar days after the end thereof), or more frequently as Lender may require during any Increased Reporting Period:
(i) a detailed aging of accounts receivable (together with a reconciliation to the previous period’s aging and the general ledger) including all invoices aged by invoice date and due date (with an explanation of the terms offered), prepared in a manner reasonably acceptable to Lender, together with a summary specifying the name, address, and balance due for each account debtor (and including a list of all claims, offsets, or disputes asserted by account debtors with respect to each Borrower's accounts), and a monthly (or such other applicable period) accounts receivable roll-forward in a format acceptable to Lender tied to the beginning and ending accounts receivable balances of each Borrower’s general ledger;
Schedule 5.1-2
(ii) a schedule or perpetual reports detailing the inventory, in form satisfactory to Lender, by location (and including the amounts of inventory and the value thereof that is in-transit and at any leased locations and premises of warehouses, processors or other third parties or consignees) by category (raw material, work-in-process, finished goods), by product type, and by volume on hand, specifying the cost and the wholesale market value thereof, with additional detail showing additions to and deletions therefrom, together with a reconciliation to each Borrower’s general ledger; and
(iii) agings of outstanding accounts payable by vendor (and including information indicating the amounts owing to owners and lessors of leased premises, warehouses, processors, and other third parties from time to time in possession of any Collateral) and any book overdraft and held checks.
Without limiting the right of the Lender to request more frequent inventory reporting of the type described in Section 7(a)(ii) above, Loan Parties shall, during any Increased Reporting Period, provide Lender (i) weekly (no later than the first Business Day of each week in respect of the immediately preceding week) all reports required above in Section 7(a)(i) {Accounts Receivable Reporting} and Section 7(a)(iii) {Accounts Payable Reporting} and (ii) monthly (no later than 30 days after the end of the immediately preceding month) all reports required above in Section 7(a)(ii) {Inventory Reporting}.
(b) Concurrently with the delivery of the monthly financial statements under Section 2 above, a reconciliation of accounts payable, accounts receivable and inventory between (i) the amounts shown in a Borrower’s general ledger and financial statements and the reports delivered pursuant to clauses (i) and (ii) of Section 7(a) above, and (ii) the amounts and dates shown in the reports delivered pursuant to clauses (i) and (ii) of Section 7(a) above and the Borrowing Base Certificate delivered as of such date.
8. Additional Collateral Items. Promptly upon Lender’s request:
(a) copies of invoices issued by a Borrower in connection with any accounts receivable, credit memos, shipping and delivery documents, and other information related thereto;
(b) copies of purchase orders, invoices, and shipping and delivery documents in connection with any inventory or equipment purchased by a Borrower; and
(c) commencing upon such request, weekly or at such other times as may be requested by Lender, as soon as available but in any event within five (5) days of the end of each calendar week and at such other times, as of the period then ended, each Borrower’s sales journal, cash receipts journal (identifying trade and non-trade cash receipts) and debit memo/credit memo journal.
Schedule 5.1-3
9. Tax Returns. As soon as possible and in any event within 10 Business Days of filing thereof, copies of all tax returns filed by each Loan Party with the U.S. Internal Revenue Service.
10. Management Letters, Etc. Promptly (but in any event within 10 Business Days after receipt by any Loan Party), copies of any detailed audit reports, management letters or recommendations submitted to the board of directors or equivalent governing body (or the audit committee of the board of directors or such equivalent governing body) of a Loan Party by independent accountants in connection with the accounts or books of each Loan Party, or any audit of any of them.
11. Insurance. As soon as possible after the annual renewal, replacement or modification by each Loan Party of its insurance (and in any event within 10 Business Days thereafter), a certificate by an Authorized Person of a Borrower attaching the insurance binder or other evidence of insurance for any insurance coverage of each Loan Party that was renewed, replaced or modified.
12. Additional Information.
(a) as soon as possible after the end of each calendar month (but in any event within 10 Business Days after the end thereof), on a monthly basis or more frequently as Lender may request, a certificate by an Authorized Person of a Borrower consisting of: (i) the addresses of all locations of each Loan Party acquired or opened since the date of the most recent certificate delivered to Lender containing the information required under this clause, (ii) a report of any new deposit account or securities account established or used by each Loan Party with any bank or other financial institution and any existing deposit account or securities account currently established or used by each Loan Party with any bank or other financial institution that is at any time identified after the Closing Date and was not set forth in Schedule 5.9 or in the schedules to the Security Agreement, including in each case, the account number, the name and address of the financial institution at which such account is maintained, the purpose of such account and, if any, the amount held in such account on or about the date of such report, and (iii) a list of (A) all applications, if any, for intellectual property made since the date of the prior certificate (or, in the case of the first such certificate, the Closing Date), and (B) all issuances of registrations or letters on existing applications for Intellectual Property received since the date of the prior certificate (or, in the case of the first such certificate, the Closing Date);
(b) as soon as possible after the end of each calendar quarter (but in any event within 10 Business Days after the end thereof), on a quarterly basis or more frequently as Lender may request a detailed list of the customers of each Loan Party with address and contact information (provided, that, in any event such list shall be provided to Lender annually at the same time as the delivery of the annual financial statements as set forth in Section 1 above);
(c) upon Lender’s request, (i) reports of sales for each category of inventory, (ii) summary reports on sales and use tax collections, deposits and payments, including monthly sales and use tax accruals, and (iii) true, correct and complete copies of all agreements, documents or instruments evidencing or otherwise related to Indebtedness that Lender has not otherwise received; and
Schedule 5.1-4
(d) promptly following any request therefor, such other information regarding the operations, business affairs, financial condition and Collateral of a Loan Party or compliance with the terms of the Agreement.
Any documents, schedules, invoices or other papers delivered to Lender may be destroyed or otherwise disposed of by Lender one year after the same are delivered to Lender.
Each Loan Party and Lender agree that the delivery of a Borrowing Base Certificate through Lender’s electronic platform or portal, subject to Lender’s authentication process, or by such other electronic method as may be directed by Lender from time to time, or by such other electronic input of information necessary to calculate the Borrowing Base as may be directed by Lender from time to time, shall in each case be used for purposes of the obligations of Borrowers to deliver Borrowing Base Certificates hereunder, with the same legal effect as if such Borrowing Base Certificate had been manually executed by a Borrower and delivered to Lender.
13. Public Reporting
Promptly upon the filing thereof, Borrower shall deliver to Lender copies of all registration statements and annual, quarterly, monthly or other regular reports which Company or any of its Subsidiaries files with the SEC, as well as promptly providing to each Lender copies of any reports and proxy statements delivered to its shareholders.
Documents required to be delivered pursuant to Section 1, 2, 3, 12 or 13 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which Company posts such documents, or provides a link thereto on Company’s website; provided that Company shall notify Lender (by facsimile or electronic mail) of the posting of any such documents.
Schedule 5.1-5
14. Other Financing Arrangements.
Within 5 Business Days after any Loan Party or any of its Subsidiaries (a) enters into any Supply Chain Financing Arrangement, Off-Balance Sheet Financing, or Structured Payables (other than a Permitted Supplier Financing Transaction), written notice thereof describing the counterparties, the program or facility size and the material terms thereof, or (b) amends or modifies any such arrangement on terms that, taken as a whole, are materially less favorable to the Loan Parties and their Subsidiaries or to Lender, written notice of such amendment or modification.
SCHEDULE 5.15
Post-Closing Matters
Complete each of the tasks and other items set forth below at the following times (or such later date as Lender may agree in writing) in a manner satisfactory to Lender:
Due Date | Deliverable |
No later than November 2, 2026 (or such later date in Lender’s sole discretion) | Deliver to Lender evidence that the Mortgage and Assignment of Rents and Leases, and Fixture Filing, executed by MCM Acquisition Company, Inc. in favor of Lender and encumbering the Real Property located at 12160 Tierce Patton Road, Northport, Alabama 35475, has been duly recorded in the Office of the Judge of Probate of Tuscaloosa County, Alabama, together with a copy of the recorded Mortgage when available. |
No later than 5 Business Days after the Fifth Amendment Effective Date (or such later date in Lender’s sole discretion) | Provide Lender with amended and restated articles of incorporation for MCM Acquisition Company, Inc. reflecting the creation of a single class of common stock. |
No later than 14 days after the Fifth Amendment Effective Date (or such later date in Lender’s sole discretion) | Deliver to Lender, in each case in form and substance reasonably satisfactory to Lender, (a) a certificate of liability insurance and (b) a certificate of property insurance, each evidencing that MCM Acquisition Company, Inc. and BWEN Clean Fuels, Inc. have been added as named insureds under the liability and property insurance policies maintained by the Loan Parties pursuant to Section 5.6. |
No later than 30 days after the Fifth Amendment Effective Date (or such later date in Lender's sole discretion) | With respect to the Supplier Agreement, dated December 4, 2020, between MCM Acquisition Company, Inc. and Citibank, N.A. (as amended, the "Citi Supplier Agreement"), MCM Acquisition Company, Inc. shall deliver to Lender (a) a lien release letter, in form and substance reasonably satisfactory to Lender, executed by Citibank, N.A., with respect to the accounts owing by Hubbell Incorporated and its Subsidiaries and affiliates that are sold to Citibank, N.A. pursuant to the Citi Supplier Agreement), and (b) evidence reasonably satisfactory to Lender that all proceeds payable to MCM Acquisition Company, Inc. by Citibank, N.A. under the Citi Supplier Agreement are paid directly into a Deposit Account maintained with Wells Fargo that is subject to a Control Agreement in favor of Lender. |
No later than 30 days after the Fifth Amendment Effective Date (or such later date in Lender's sole discretion) | Deliver to Lender a commercial letter of credit agreement, in form and substance reasonably satisfactory to Lender, duly executed by each Borrower, governing the issuance of commercial Letters of Credit under the Agreement, together with such applications and other documents related thereto as Lender may require. |
No later than 120 days after the Fifth Amendment Effective Date (or such later date in Lender’s sole discretion) | MCM Acquisition Company, Inc. shall (a) cause to be closed each deposit account maintained by it with United Community Bank, so that its primary depository and treasury management relationships are established with Wells Fargo in accordance with Section 5.9(a), and deliver written confirmation of each such closure to Lender, and (b) direct all account debtors and other obligors in respect of amounts payable to it to make payment of all such amounts to its Collection Account maintained with Wells Fargo, and deliver evidence of such direction to Lender in form and substance reasonably satisfactory to Lender. |
EXHIBIT B
As-Amended Schedules to Security Agreement
(omitted)
Exhibit 99.1
BROADWIND ACQUIRES MCM, EXPANDING ITS PRECISION MANUFACTURING PLATFORM WITHIN THE POWER GENERATION AND CRITICAL INFRASTRUCTURE MARKET PROVIDING STRATEGIC ENTRY INTO ELECTRICAL TRANSMISSION AND DISTRIBUTION
Adds high-growth revenue streams, enhances margin profile and expands capabilities
Broadwind to host investor conference call and webcast on Tuesday, November 3, 2026 at 11:00 a.m. ET
CICERO, Ill., Nov. 2, 2026 -- Broadwind (Nasdaq: BWEN, or the “Company”), a diversified precision manufacturer of specialized components and solutions serving global markets, today announced that on October 30, 2026 the Company acquired 100% of the shares of privately held MCM Acquisition Company, Inc. (“MCM”) for a base purchase price of $18 million, in addition to up to a $7 million performance-based earnout, subject to achieving financial milestones within 14 months of the transaction date.
MCM is an Alabama-based precision manufacturer with a 30-year track record of designing, engineering, and fabricating metal components for the electric utility and critical infrastructure markets. From its 37,000 square foot facility in Northport, MCM supplies mission-critical hardware to some of the nation's leading utilities and their suppliers, with products engineered to meet stringent standards for corrosion resistance, conductivity, and performance under extreme weather conditions in high-power transmission line applications.
Through a vertically integrated offering that spans machining, fabrication, assembly, kitting, and delivery, MCM has established itself as a leading component provider to the domestic electrical Transmission and Distribution ("T&D") sector. The company holds sole-source or preferred supplier status across many of its key customer relationships, with average tenure exceeding 20 years among its top ten customers. MCM is 100% U.S.-based and sources all raw materials exclusively through an established domestic procurement network, creating surety of supply for customers on an on-demand basis.
MCM’s approximately 50 employees, including its senior leadership team, joined Broadwind on October 30.
MANAGEMENT COMMENTARY
“The acquisition of MCM represents a defining milestone in Broadwind’s transformation into a leading solutions provider to the power generation and critical infrastructure markets, stated Eric Blashford, President and CEO of Broadwind. “Over the past several years, we’ve deliberately reshaped our business by divesting non-core assets, exiting underperforming business lines, and strengthening our balance sheet, while accelerating our strategic shift toward higher-value, more durable revenue streams supported by differentiated capabilities, defensible competitive advantages, and compelling long-term growth fundamentals.”
“MCM expands our domestic manufacturing capacity and skilled workforce in support of the electrical transmission and distribution market, an industry benefiting from record investment in grid modernization, capacity expansion, hardening, and resilience,” continued Blashford. “Growing domestic electricity demand from data centers is a key contributor to load growth, reinforcing the need for sustained investment in transmission infrastructure. With approximately 95% of its trailing-twelve-month revenue through June 30, 2026, generated by T&D component manufacturing, MCM provides Broadwind with an immediate and compelling entry into this growing market. MCM’s seasoned team of precision manufacturing professionals, 30-year history of value creation, deep technical expertise, longstanding customer relationships, fully domestic production base, and proven record of profitable growth position the business as a strong strategic fit for Broadwind.”
“MCM is immediately accretive to Broadwind, adds a higher-margin revenue stream to our portfolio, and enhances the quality of our earnings within our targeted vertical markets,” continued Blashford. “MCM introduces an entirely complementary customer base, providing meaningful diversification in new markets, while the company’s sole-source and preferred supplier positions underscore the strength of its customer relationships as an incumbent supplier. At a strategic level, MCM aligns with the key priorities we’ve outlined in our acquisition strategy, as it provides exposure to attractive end markets, an accretive margin profile, consistent profitability, and a fully domestic operating footprint. This acquisition exemplifies the lower-risk, value-creating bolt-on acquisitions we expect to define our growth strategy, over time.”
“We are excited to join the Broadwind team and begin this next chapter of growth and transformation,” stated Wes Jones, Founder and CEO of MCM. “Together, we will offer our customers greater scale and expanded capabilities while preserving the differentiated value proposition that has defined MCM for three decades, including a commitment to exceptional quality, deep technical expertise, and responsive, on-demand service. Broadwind shares our commitment to operational excellence and customer service, and its platform will enable us to serve our customers even more effectively. I am proud of what our team has built and confident in what we will accomplish together.”
TRANSACTION DETAILS
On a trailing twelve-month basis through June 30, 2026, MCM generated total revenue of approximately $16.5 million and adjusted EBITDA of approximately $3.7 million, or ~23% of revenue. The transaction price, excluding any financial incentives that may be earned by MCM in the future upon achieving specified performance milestones, is 4.8x trailing-twelve months adjusted EBITDA as of June 30, 2026. The acquisition of MCM is expected to be accretive to Broadwind on both a margin rate and diluted earnings per share basis upon the closing of the transaction.
As of June 30, 2026, the combined Broadwind and MCM businesses generated pro forma trailing twelve-month revenue of $90 million and adjusted EBITDA of $3.6 million, representing 4.0% of revenue. Pro forma net debt to trailing twelve-month adjusted EBITDA for the combined businesses was approximately 3.7x as of June 30, 2026.
COMPELLING TRANSACTION RATIONALE
● | Provides strategic entry into high-growth power and critical infrastructure markets. MCM positions Broadwind to capitalize on a multi-year investment cycle in domestic grid modernization, capacity expansion, hardening, and resilience, driven by rising electricity demand and the need for a more reliable transmission network. |
● | Capitalizes on a structural, multi-year investment cycle in transmission infrastructure. The U.S. transmission network spans more than 600,000 miles and continues to require substantial investment to support rising load growth, reliability, and resilience. Industry estimates indicate that data centers will be among the largest drivers of U.S. electricity-demand growth. |
● | Adds a higher-value revenue stream within targeted vertical markets. MCM delivered a four-year revenue CAGR of 25% through year-end 2025, reflective of increasing customer demand and recent capacity investments that position the business to convert a growing backlog. For the trailing twelve months ended June 30, 2026, MCM generated an adjusted EBITDA margin of 23%, well above Broadwind’s comparable margin. With approximately 95% of its trailing-twelve-month revenue derived from the domestic T&D market, MCM meaningfully accelerates Broadwind’s revenue mix shift toward power and critical infrastructure, directly advancing the Company’s stated strategic priorities. |
2
● | Expands Broadwind’s domestic manufacturing footprint and skilled workforce. The acquisition adds approximately 50 skilled, non-union employees and MCM’s 37,000-square-foot design, engineering, and manufacturing facility in Northport, Alabama, to Broadwind’s operating platform. As of September 30, the addition of MCM increases Broadwind’s total employee base by more than 20%. |
● | Adds longstanding customer relationships supported by sole-source and preferred supplier positions. MCM introduces an entirely complementary customer base, meaningfully expanding and diversifying the combined company’s commercial relationships. MCM differentiates itself through short lead times, daily delivery capabilities, and the ability to consistently meet demanding utility-grade specifications. These capabilities have earned MCM sole-source or preferred supplier status across many key accounts, with average tenure among its top ten customer relationships exceeding 20 years. |
● | Provides a clear pathway to reduce net leverage. At closing, Broadwind expects pro forma net debt to trailing-twelve-month adjusted EBITDA, based on results through June 30, 2026, to be approximately 3.7x. The Company plans to reduce net leverage to 2.0x or less by year-end 2028 through a combination of earnings growth and debt repayment. |
Northland Capital Markets acted as the advisor to Broadwind in the transaction.
BROADWIND ACQUISITION OF MCM CONFERENCE CALL
A conference call will be held tomorrow, November 3, 2026, at 11:00 a.m. ET to review Broadwind’s acquisition of MCM.
A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of Broadwind’s website at https://www.bwen.com/. Individuals can also participate by teleconference dial-in. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time to register, download and install any necessary audio software.
Details of the conference call are as follows:
Live Call Dial-In: | 877-407-0792 |
To listen to a replay of the teleconference, which subsequently will be available through Tuesday, November 17, 2026:
Call Replay: | 844-512-2921 |
Replay ID: | 13763646 |
ABOUT BROADWIND
Broadwind (Nasdaq: BWEN) is a precision manufacturer of structures, equipment and components for power generation, critical infrastructure, and other specialized applications. With facilities throughout the U.S., our talented team is committed to helping customers maximize performance of their investments—quicker, easier and smarter. Find out more at www.bwen.com
ABOUT MCM ACQUISITION COMPANY
Founded in 1995, MCM is an Alabama-based precision manufacturer specializing in machined and fabricated metal components for the electric utility and critical infrastructure markets. Operating from its facility in Northport, MCM offers a vertically integrated suite of capabilities spanning machining, fabrication, assembly, kitting, and delivery, producing mission-critical components for extra-high voltage ("EHV") power transmission and other diverse applications. For more information, visit www.mcmacq.com.
3
NON-GAAP FINANCIAL MEASURES
The Company provides non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation and other stock payments, restructuring costs, impairment charges, other non-cash gains and losses and transaction costs) and adjusted EBITDA margin (adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenues) as supplemental information regarding the Company’s business performance. The Company’s management uses this supplemental information when it internally evaluates its performance, reviews financial trends and makes operating and strategic decisions. The Company believes that these non-GAAP financial measures are useful to investors because they provide investors with a better understanding of the Company’s past financial performance and future results, which allows investors to evaluate the Company’s performance using the same methodology and information as used by the Company’s management. The Company's definitions of adjusted EBITDA and adjusted EBITDA margin may be different from similar non-GAAP financial measures used by other companies and/or analysts.
FORWARD-LOOKING STATEMENTS
This release contains “forward-looking statements”—that is, statements related to future, not past, events—as defined in Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), that reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “plan” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements include any statement that does not directly relate to a current or historical fact. Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following: (i) acquisition of MCM on our business and our ability to integrate MCM’s operations into our existing business efficiently, (ii) our expectations and beliefs with respect to our financial guidance as set forth in our press releases from time to time, (iii) the impact of global health concerns on the economies and financial markets and the demand for our products; (iv) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related phase out, extension, continuation or renewal of federal tax incentives and grants, including the advanced manufacturing tax credits, and state renewable portfolio standards as well as new or continuing tariffs on steel or other products imported into the United States; (v) our customer relationships and our substantial dependency on a few significant customers and our efforts to diversify our customer base and sector focus and leverage relationships across business units; (vi) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow; (vii) the economic and operational stability of our significant customers and suppliers, including their respective supply chains, and the ability to source alternative suppliers as necessary; (viii) our ability to continue to grow our business organically and through acquisitions; (ix) the production, sales, collections, customer deposits and revenues generated by new customer orders and our ability to realize the resulting cash flows; (x) information technology failures, network disruptions, cybersecurity attacks or breaches in data security; (xi) the sufficiency of our liquidity and alternate sources of funding, if necessary; (xii) our ability to realize revenue from customer orders and backlog; (xiii) the economy and the potential impact it may have on our business, including our customers; (xiv) the state of the energy and industrial markets generally, including the impact of competition and economic volatility in those markets; (xv) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (xvi) competition from new or existing industry participants; (xvii) the effects of the change of administrations in the U.S. federal government; (xviii) our ability to successfully integrate and operate acquired companies and to identify, negotiate and execute future acquisitions; (xix) the potential loss of tax benefits if we experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended; (xx) the effects of proxy contests and actions of activist stockholders; (xxi) the limited trading market for our securities and the volatility of market price for our securities; (xxii) our outstanding indebtedness and its impact on our business activities (including our ability to incur additional debt in the future); and (xxiii) the impact of future sales of our common stock or securities convertible into our common stock on our stock price. These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements including, but not limited to, those set forth under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. We are under no duty to update any of these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.
4
INVESTOR CONTACT
Noel Ryan or Brian Hawthorne
BWEN@val-adv.com
BROADWIND, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
Consolidated | | Trailing Twelve Months Ended June 30, 2026 | |
|||||||||
| | BWEN | | | MCM | | | Total | |
|||
Income (Loss) From Continuing Operations | | $ | (7,123 | ) | | $ | 2,251 | | | $ | (4,872 | ) |
Interest Expense | | | 1,974 | | | | 185 | | | | 2,160 | |
Income Tax Provision | | | 105 | | | | 306 | | | | 410 | |
Depreciation and Amortization | | | 3,014 | | | | 830 | | | | 3,844 | |
Share-based Compensation and Other Stock Payments | | | 1,147 | | | | - | | | | 1,147 | |
Transaction Costs | | | 747 | | | | - | | | | 747 | |
Diligence Adjustments | | | - | | | | 144 | | | | 144 | |
Adjusted EBITDA (Non-GAAP) | | $ | (135 | ) | | $ | 3,716 | | | $ | 3,580 | |
Revenues | | $ | 73,612 | | | $ | 16,505 | | | $ | 90,116 | |
Adjusted EBITDA margin | | | (0.2% | ) | | | 22.5 | % | | | 4.0 | % |
5
Exhibit 99.2
